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Rule2024-08001

Energy Conservation Program: Energy Conservation Standards for Miscellaneous Refrigeration Products

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Published

May 7, 2024

Effective

September 4, 2024

Issuing agencies

Energy Department

Abstract

The Energy Policy and Conservation Act, as amended ("EPCA"), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including miscellaneous refrigeration products. In this direct final rule, the U.S. Department of Energy ("DOE") is adopting amended energy conservation standards for miscellaneous refrigeration products. DOE has determined that the amended energy conservation standards for these products would result in significant conservation of energy, and are technologically feasible and economically justified.

Full Text

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[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Rules and Regulations]
[Pages 38762-38835]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08001]

[[Page 38761]]

Vol. 89

Tuesday,

No. 89

May 7, 2024

Part VIII

Department of Energy

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10 CFR Part 430

Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products; Direct Final Rule

Federal Register / Vol. 89 , No. 89 / Tuesday, May 7, 2024 / Rules
and Regulations

[[Page 38762]]

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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2020-BT-STD-0039]
RIN 1904-AF62

Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.

ACTION: Direct final rule.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''),
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including
miscellaneous refrigeration products. In this direct final rule, the
U.S. Department of Energy (``DOE'') is adopting amended energy
conservation standards for miscellaneous refrigeration products. DOE
has determined that the amended energy conservation standards for these
products would result in significant conservation of energy, and are
technologically feasible and economically justified.

DATES: The effective date of this rule is September 4, 2024. If adverse
comments are received by August 26, 2024 and DOE determines that such
comments may provide a reasonable basis for withdrawal of the direct
final rule under 42 U.S.C. 6295(o), a timely withdrawal of this rule
will be published in the Federal Register. If no such adverse comments
are received, compliance with the amended standards established for
miscellaneous refrigeration products in this direct final rule is
required on and after January 31, 2029. Comments regarding the likely
competitive impact of the standards contained in this direct final rule
should be sent to the Department of Justice contact listed in the
ADDRESSES section on or before June 6, 2024.

ADDRESSES: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
comments, and other supporting documents/materials, is available for
review at <a href="http://www.regulations.gov">www.regulations.gov</a>. All documents in the docket are listed
in the <a href="http://www.regulations.gov">www.regulations.gov</a> index. However, not all documents listed in
the index may be publicly available, such as information that is exempt
from public disclosure.
The docket web page can be found at <a href="http://www.regulations.gov/docket/EERE-2020-BT-STD-0039">www.regulations.gov/docket/EERE-2020-BT-STD-0039</a>. The docket web page contains instructions on how
to access all documents, including public comments, in the docket.
For further information on how to submit a comment or review other
public comments and the docket, contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
<a href="/cdn-cgi/l/email-protection#aceddcdcc0c5cdc2cfc9ffd8cdc2c8cddec8dffdd9c9dfd8c5c3c2dfecc9c982c8c3c982cbc3da">[email&#160;protected]</a>.
The U.S. Department of Justice Antitrust Division invites input
from market participants and other interested persons with views on the
likely competitive impact of the standards contained in this direct
final rule. Interested persons may contact the Antitrust Division at
<a href="/cdn-cgi/l/email-protection#fb8c8c8cd59e959e899c82d5888f9a959f9a899f88bb8e889f9491d59c948d">[email&#160;protected]</a> on or before the date specified in the
DATES section. Please indicate in the ``Subject'' line of your email
the title and Docket Number of this direct final rule.

FOR FURTHER INFORMATION CONTACT:
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-5904. Email: <a href="/cdn-cgi/l/email-protection#400130302c29212e23251334212e24213224331135253334292f2e330025256e242f256e272f36">[email&#160;protected]</a>.
Ms. Kristin Koernig, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (240) 243-3383. Email:
<a href="/cdn-cgi/l/email-protection#91fae3f8e2e5f8ffbffafef4e3fff8f6d1f9e0bff5fef4bff6fee7">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Direct Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. Current Test Procedures
3. History of Standards Rulemaking for MREFs
4. The Joint Agreement
III. General Discussion
A. Scope of Coverage
B. Fairly Representative of Relevant Point of View
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Product Classes
a. Product Classes With Automatic Icemakers
b. Addition of Product Class C-5-BI
2. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Analysis
a. Built-In Classes
b. Baseline Efficiency/Energy Use
c. Higher Efficiency Levels
d. Variable-Speed Compressor Supply Chain
2. Cost Analysis
3. Cost-Efficiency Results
D. Markups Analysis
E. Energy Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Manufacturer Markup Scenarios
3. Discussion of MIA Comments
K. Emissions Analysis
1. Air Quality Regulations Incorporated in DOE's Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous Oxide
c. Sensitivity Analysis Using Updated 2023 SC-GHG Estimates
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
O. Other Comments
V. Analytical Results and Conclusions
A. Trial Standard Levels

[[Page 38763]]

B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Direct Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for MREF Standards
2. Annualized Benefits and Costs of the Adopted Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563, and 14094
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Information Quality
M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Synopsis of the Direct Final Rule

The Energy Policy and Conservation Act, Public Law 94-163, as
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency
of a number of consumer products and certain industrial equipment. (42
U.S.C. 6291-6317, as codified) Title III, Part B of EPCA \2\
established the Energy Conservation Program for Consumer Products Other
Than Automobiles. (42 U.S.C. 6291-6309, as codified) These products
include miscellaneous refrigeration products (``MREFs''), the subject
of this direct final rule.
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\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\2\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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Pursuant to EPCA, any new or amended energy conservation standard
must, among other things, be designed to achieve the maximum
improvement in energy efficiency that DOE determines is technologically
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A))
Furthermore, the new or amended standard must result in significant
conservation of energy. (42 U.S.C. 6295(o)(3)(B))
In light of the statutory authority above and under the authority
provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule
amending the energy conservation standards for MREFs.
The adopted standard levels in this direct final rule were proposed
in a letter submitted to DOE jointly by groups representing
manufacturers, energy and environmental advocates, consumer groups, and
a utility. This letter, titled ``Energy Efficiency Agreement of 2023''
(hereafter, the ``Joint Agreement'' \3\), recommends specific energy
conservation standards for MREFs that, in the commenters' view, would
satisfy the EPCA requirements in 42 U.S.C. 6295(o). DOE subsequently
received letters of support from states, including California,
Massachusetts, and New York,\4\ as well as San Diego Gas and Electric
(``SDG&E'') and Southern California Edison (``SCE'') advocating for the
adoption of the recommended standards.\5\
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\3\ This document is available in the docket at:
<a href="http://www.regulations.gov/document/EERE-2020-BT-STD-0039-0034">www.regulations.gov/document/EERE-2020-BT-STD-0039-0034</a>.
\4\ This document is available in the docket at:
<a href="http://www.regulations.gov/document/EERE-2020-BT-STD-0039-0035">www.regulations.gov/document/EERE-2020-BT-STD-0039-0035</a>.
\5\ This document is available in the docket at:
<a href="http://www.regulations.gov/document/EERE-2020-BT-STD-0039-0036">www.regulations.gov/document/EERE-2020-BT-STD-0039-0036</a>.
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In accordance with the direct final rule provisions at 42 U.S.C.
6295(p)(4), DOE has determined that the recommendations contained
therein are compliant with 42 U.S.C. 6295(o). As required by 42 U.S.C.
6295(p)(4)(A)(i), DOE is also simultaneously publishing a notice of
proposed rulemaking (``NOPR'') that contains the identical standards to
those adopted in this direct final rule. Consistent with the statute,
DOE is providing a 110-day public comment period on the direct final
rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any comments
received may provide a reasonable basis for withdrawal of the direct
final rule under 42 U.S.C. 6295(o), or any other applicable law, DOE
will publish the reasons for withdrawal and continue the rulemaking
under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A of this
document for more details on DOE's statutory authority.
The amended standards that DOE is adopting in this direct final
rule are the efficiency levels recommended in the Joint Agreement
(shown in Table I.1) expressed in terms of kilowatt hours per year
(``kWh/yr'') as measured according to DOE's current MREF test procedure
codified at title 10 of the Code of Federal Regulations (``CFR'') part
430, subpart B, appendix A (``appendix A'').
The amended standards recommended in the Joint Agreement are
represented as trial standard level (``TSL'') 4 in this document
(hereinafter the ``Recommended TSL'') and are described in section V.A
of this document. The Joint Agreement's standards for MREFs apply to
all products listed in Table I.1 and manufactured in or imported into
the United States starting on January 31, 2029.
BILLING CODE 6450-01-P

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A. Benefits and Costs to Consumers

Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted standards on consumers of MREFs, as measured by the average
life-cycle cost (``LCC'') savings and the simple payback period
(``PBP'') \6\ The average LCC savings are positive for all product
classes, and the PBP is less than the average lifetime of MREFs, which
varies by product class (see section IV.F of this document).
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\6\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of new or amended standards
(see section IV.F.9 of this document). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline product (see section IV.C of this document).
[GRAPHIC] [TIFF OMITTED] TR07MY24.002

BILLING CODE 6450-01-C
DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document.

B. Impact on Manufacturers \7\
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\7\ All monetary values in this document are expressed in 2022
dollars. unless indicated otherwise. For purposes of discounting
future monetary values, the present year in the analysis was 2024.
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The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the base year through the
end of the analysis period (2024-2058). Using a real discount rate of
7.7 percent, DOE estimates that the INPV for manufacturers of MREFs in
the case without amended standards is $807.7 million. Under the adopted
standards, which align with the Recommended TSL (i.e., TSL 4) for
MREFs, DOE estimates the change in INPV to range

[[Page 38765]]

from -11.4 percent to -7.5 percent, which is approximately -$92.1
million to -$60.3 million. In order to bring products into compliance
with amended standards, it is estimated that industry will incur total
conversion costs of $130.7 million.
DOE's analysis of the impacts of the adopted standards on
manufacturers is described in sections IV.J and V.B.2 of this document.

C. National Benefits and Costs

DOE's analyses indicate that the adopted energy conservation
standards for MREFs would save a significant amount of energy. Relative
to the case without amended standards, the lifetime energy savings for
MREFs purchased in the 30-year period that begins in the anticipated
year of compliance with the amended standards (2029-2058) amount to
0.32 quadrillion British thermal units (``Btu''), or quads.\8\ This
represents a savings of 26 percent relative to the energy use of these
products in the case without amended standards (referred to as the
``no-new-standards case'').
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\8\ The quantity refers to full-fuel-cycle (``FFC'') energy
savings. FFC energy savings includes the energy consumed in
extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and, thus, presents a more complete
picture of the impacts of energy efficiency standards. For more
information on the FFC metric, see section IV.H.1 of this document.
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The cumulative net present value (``NPV'') of total consumer
benefits of the standards for MREFs ranges from $0.17 billion (at a 7-
percent discount rate) to $0.77 billion (at a 3-percent discount rate).
This NPV expresses the estimated total value of future operating-cost
savings minus the estimated increased product costs for MREFs purchased
in 2029-2058.
In addition, the adopted standards for MREFs are projected to yield
significant environmental benefits. DOE estimates that the standards
will result in cumulative emission reductions (over the same period as
for energy savings) of 5.85 million metric tons (``Mt'') \9\ of carbon
dioxide (``CO<INF>2</INF>''), 1.84 thousand tons of sulfur dioxide
(``SO<INF>2</INF>''), 10.77 thousand tons of nitrogen oxides
(``NO<INF>X</INF>''), 48.64 thousand tons of methane
(``CH<INF>4</INF>''), 0.06 thousand tons of nitrous oxide
(``N<INF>2</INF>O''), and 0.01 tons of mercury (``Hg'').\10\
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\9\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO<INF>2</INF> are presented in short tons.
\10\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2023 (``AEO2023''). AEO2023 represents current Federal and
State legislation and final implementation of regulations as of the
time of its preparation. See section IV.K of this document for
further discussion of AEO2023 assumptions that affect air pollutant
emissions.
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DOE estimates the value of climate benefits from a reduction in
greenhouse gases (``GHG'') using four different estimates of the social
cost of CO<INF>2</INF> (``SC-CO<INF>2</INF>''), the social cost of
methane (``SC-CH<INF>4</INF>''), and the social cost of nitrous oxide
(``SC-N<INF>2</INF>O''). Together these represent the social cost of
GHG (``SC-GHG''). DOE used interim SC-GHG values (in terms of benefit
per ton of GHG avoided) developed by an Interagency Working Group on
the Social Cost of Greenhouse Gases (``IWG'').\11\ The derivation of
these values is discussed in section IV.L of this document. For
presentational purposes, the climate benefits associated with the
average SC-GHG at a 3-percent discount rate are estimated to be $0.32
billion. DOE does not have a single central SC-GHG point estimate and
it emphasizes the value of considering the benefits calculated using
all four sets of SC-GHG estimates. DOE notes, however, that the adopted
standards would be economically justified even without inclusion of the
estimated monetized benefits of reduced GHG emissions.
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\11\ To monetize the benefits of reducing GHG emissions this
analysis uses the interim estimates presented in the Technical
Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide
Interim Estimates Under Executive Order 13990 published in February
2021 by the IWG. (``February 2021 SC-GHG TSD''). <a href="http://www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf">www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf</a>
(last accessed November 29, 2023.)
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DOE estimated the monetary health benefits of SO<INF>2</INF> and
NO<INF>X</INF> emissions reductions, using benefit per ton estimates
from the Environmental Protection Agency (``EPA''),\12\ as discussed in
section IV.L of this document. DOE estimated the present value of the
health benefits would be $0.24 billion using a 7-percent discount rate,
and $0.62 billion using a 3-percent discount rate.\13\ DOE is currently
only monetizing health benefits from changes in ambient fine
particulate matter (``PM<INF>2.5</INF>'') concentrations from two
precursors (SO<INF>2</INF> and NO<INF>X</INF>), and from changes in
ambient ozone from one precursor (for NO<INF>X</INF>), but will
continue to assess the ability to monetize other effects such as health
benefits from reductions in direct PM<INF>2.5</INF> emissions.
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\12\ U.S. EPA. Estimating the Benefit per Ton of Reducing
Directly Emitted PM<INF>2.5</INF>, PM<INF>2.5</INF> Precursors and
Ozone Precursors from 21 Sectors. Available at <a href="http://www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors">www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors</a> (last
accessed November 29, 2023.)
\13\ DOE estimates the economic value of these emissions
reductions resulting from the considered TSLs for the purpose of
complying with the requirements of Executive Order 12866.
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Table I.3 summarizes the monetized benefits and costs expected to
result from the amended standards for MREFs. There are other important
unquantified effects, including certain unquantified climate benefits,
unquantified public health benefits from the reduction of toxic air
pollutants and other emissions, unquantified energy security benefits,
and distributional effects, among others.
BILLING CODE 6450-01-P

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[GRAPHIC] [TIFF OMITTED] TR07MY24.004

The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The monetary values for the
total annualized net benefits are (1) the reduced consumer operating
costs, minus (2) the increase in product purchase prices and
installation costs, plus (3) the value of climate and health benefits
of emission reductions, all annualized.\14\
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\14\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2022, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2030), and then discounted the present value from each year
to 2022. Using the present value, DOE then calculated the fixed
annual payment over a 30-year period, starting in the compliance
year, that yields the same present value.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products and are measured for the lifetime of MREFs shipped
during the period 2029-2058. The benefits associated with reduced
emissions achieved as a result of the adopted standards are also
calculated based on the lifetime of MREFs shipped during the period
2029-2058. Total benefits for both the 3-percent and 7-percent cases
are presented using the average GHG social costs with 3-percent
discount rate. Estimates of SC-GHG values are presented for all four
discount rates in section IV.L of this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the standards adopted in this direct final rule,
expressed in terms of annualized values. The results under the primary
estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NO<INF>X</INF> and SO<INF>2</INF>
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated cost of the standards adopted
in this direct final rule is $72.7 million per year in increased
equipment costs, while the estimated annual benefits are $90.6 million
in reduced equipment operating costs, $18.3 million in climate
benefits, and $25.6 million in health benefits. In this case, the net
benefit would amount to $61.7 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the standards is $70.8 million per year in increased
equipment costs, while the estimated annual benefits are $115 million
in reduced operating costs, $18.3 million in climate benefits, and
$35.6 million in health benefits. In this case, the net benefit amounts
to $98.0 million per year.

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[[Page 38769]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.006

BILLING CODE 6450-01-C
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE has determined that the Joint Agreement was submitted jointly
by interested persons that are fairly representative of relevant points
of view, in accordance with 42 U.S.C. 6295(p)(4)(A). After considering
the analysis and weighing the benefits and burdens, DOE has determined
that the recommended standards are in accordance with 42 U.S.C.
6295(o), which contains the criteria for prescribing new or amended
standards. Specifically, the Secretary has determined that the adoption
of the recommended standards would result in the significant
conservation of energy and is technologically feasible and economically
justified. In determining whether the recommended standards are
economically justified, the Secretary has determined that the benefits
of the recommended standards exceed the burdens. The Secretary has
concluded that the recommended standards, when considering the benefits
of energy savings, positive NPV of consumer benefits, emission
reductions, the estimated monetary value of the emissions reductions,
and positive average LCC savings, would yield benefits outweighing the
negative impacts on some consumers and on manufacturers, including the
conversion costs that could result in a reduction in INPV for
manufacturers.
Using a 7-percent discount rate for consumer benefits and costs and
NOx and SO<INF>2</INF> reduction benefits, and a 3-percent discount
rate case for GHG social costs, the estimated cost of the standards for
MREFs is $72.7 million per year in increased product costs, while the
estimated annual benefits are $90.6 million in reduced product
operating costs, $18.3 million in climate benefits, and $25.6 million
in health benefits. The net benefit amounts to $61.7 million per year.
DOE notes that the net benefits are substantial even in the absence of
the climate benefits,\15\ and DOE would adopt the same standards in the
absence of such benefits.
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\15\ The information on climate benefits is provided in
compliance with Executive Order 12866.
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The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\16\ For
example, some covered products and equipment have most of their energy
consumption occur during periods of peak energy demand. The impacts of
these products on the energy infrastructure can be more pronounced than
products with relatively constant demand. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis.
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\16\ Procedures, Interpretations, and Policies for Consideration
in New or Revised Energy Conservation Standards and Test Procedures
for Consumer Products and Commercial/Industrial Equipment, 86 FR
70892, 70901 (Dec. 13, 2021).
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As previously mentioned, the standards are projected to result in
estimated national energy savings of 0.32 quads full-fuel-cycle
(``FFC''), the equivalent of the primary annual energy use of 2.1
million homes. In addition, they are projected to reduce cumulative
CO<INF>2</INF> emissions by 5.85 million metric tons. Based on these
findings, DOE has determined the energy savings from the standard
levels adopted in this direct final rule are ``significant'' within the
meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the
basis for

[[Page 38770]]

these conclusions is contained in the remainder of this document and
the accompanying technical support document (``TSD'').\17\
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\17\ The direct final rule TSD is available in the docket for
this rulemaking at <a href="http://www.regulations.gov/docket/EERE-2020-BT-STD-0039/document">www.regulations.gov/docket/EERE-2020-BT-STD-0039/document</a>.
---------------------------------------------------------------------------

Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule amending the energy conservation
standards for MREFs. Consistent with this authority, DOE is also
simultaneously publishing elsewhere in this issue of the Federal
Register a NOPR proposing standards that are identical to those
contained in this direct final rule. See 42 U.S.C. 6295(p)(4)(A)(i).

II. Introduction

The following section briefly discusses the statutory authority
underlying this direct final rule, as well as some of the relevant
historical background related to the establishment of standards for
MREFs.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA \18\ established the Energy Conservation Program for Consumer
Products Other Than Automobiles, which, in addition to identifying
particular consumer products and commercial equipment as covered under
the statute, permits the Secretary of Energy to classify additional
types of consumer products as covered products. (42 U.S.C. 6292(a)(20))
DOE added MREFs as covered products through a final determination of
coverage published in the Federal Register on July 18, 2016 (the ``July
2016 Final Coverage Determination''). 81 FR 46768. MREFs are consumer
refrigeration products other than refrigerators, refrigerator-freezers,
or freezers, which include coolers and combination cooler refrigeration
products. 10 CFR 430.2. MREFs include refrigeration products such as
coolers (e.g., wine chillers and other specialty products) and
combination cooler refrigeration products (e.g., wine chillers and
other specialty compartments combined with a refrigerator,
refrigerator-freezers, or freezers). EPCA further provides that, not
later than 6 years after the issuance of any final rule establishing or
amending a standard, DOE must publish either a notice of determination
that standards for the product do not need to be amended, or a NOPR
including new proposed energy conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C. 6295(m)(1)) Not later than 3
years after issuance of a final determination not to amend standards,
DOE must publish either a notice of determination that standards for
the product do not need to be amended, or a NOPR including new proposed
energy conservation standards (proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(3)(B))
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\18\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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The energy conservation program under EPCA, consists essentially of
four parts: (1) testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of the EPCA specifically include
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293),
labeling provisions (42 U.S.C. 6294), energy conservation standards (42
U.S.C. 6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal
preemption in limited instances for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under EPCA. (See 42 U.S.C. 6297(d))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use
these test procedures to determine whether the products comply with
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test
procedure for MREFs appears at appendix A (Uniform Test Method for
Measuring the Energy Consumption of Refrigerators, Refrigerator-
Freezers, and Miscellaneous Refrigeration Products).
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including MREFs. Any new or
amended standard for a covered product must be designed to achieve the
maximum improvement in energy efficiency that the Secretary of Energy
determines is technologically feasible and economically justified. (42
U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may
not adopt any standard that would not result in the significant
conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard (1) for certain
products, including MREFs, if no test procedure has been established
for the product, or (2) if DOE determines by rule that the standard is
not technologically feasible or economically justified. (42 U.S.C.
6295(o)(3)(A)-(B)) In deciding whether a proposed standard is
economically justified, DOE must determine whether the benefits of the
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make
this determination after receiving comments on the proposed standard,
and by considering, to the greatest extent practicable, the following
seven statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (``Secretary'') considers
relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified if the Secretary finds that
the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))

[[Page 38771]]

EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe
an amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
EPCA specifies requirements when promulgating an energy
conservation standard for a covered product that has two or more
subcategories. A rule prescribing an energy conservation standard for a
type (or class) of product must specify a different standard level for
a type or class of products that has the same function or intended use
if DOE determines that products within such group (A) consume a
different kind of energy from that consumed by other covered products
within such type (or class); or (B) have a capacity or other
performance-related feature which other products within such type (or
class) do not have and such feature justifies a higher or lower
standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-
related feature justifies a different standard for a group of products,
DOE considers such factors as the utility to the consumer of such a
feature and other factors DOE deems appropriate. (Id.) Any rule
prescribing such a standard must include an explanation of the basis on
which such higher or lower level was established. (42 U.S.C.
6295(q)(2))
Additionally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, final rules for new or amended energy conservation standards
promulgated after July 1, 2010, are required to address standby mode
and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedure for MREFs addresses
standby mode and off mode energy use, as do the amended standards
adopted in this direct final rule.
Finally, EISA 2007 amended EPCA, in relevant part, to grant DOE
authority to issue a final rule (i.e., a ``direct final rule'')
establishing an energy conservation standard upon receipt of a
statement submitted jointly by interested persons that are fairly
representative of relevant points of view (including representatives of
manufacturers of covered products, States, and efficiency advocates),
as determined by the Secretary, that contains recommendations with
respect to an energy or water conservation standard. (42 U.S.C.
6295(p)(4)) Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also
determine whether a jointly-submitted recommendation for an energy or
water conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C.
6313(a)(6)(B), as applicable.
The direct final rule must be published simultaneously with a NOPR
that proposes an energy or water conservation standard that is
identical to the standard established in the direct final rule, and DOE
must provide a public comment period of at least 110 days on this
proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) While DOE typically provides a
comment period of 60 days on proposed standards, for a NOPR
accompanying a direct final rule, DOE provides a comment period of the
same length as the comment period on the direct final rule--i.e., 110
days. Based on the comments received during this period, the direct
final rule will either become effective, or DOE will withdraw it not
later than 120 days after its issuance if: (1) one or more adverse
comments is received, and (2) DOE determines that those comments, when
viewed in light of the rulemaking record related to the direct final
rule, may provide a reasonable basis for withdrawal of the direct final
rule under 42 U.S.C. 6295(o). (42 U.S.C. 6295(p)(4)(C)) Receipt of an
alternative joint recommendation may also trigger a DOE withdrawal of
the direct final rule in the same manner. (Id.)
DOE has previously explained its interpretation of its direct final
rule authority. In a final rule amending the Department's ``Procedures,
Interpretations and Policies for Consideration of New or Revised Energy
Conservation Standards for Consumer Products'' at 10 CFR part 430,
subpart C, appendix A (``Process Rule''), DOE noted that it may issue
standards recommended by interested persons that are fairly
representative of relative points of view as a direct final rule when
the recommended standards are in accordance with 42 U.S.C. 6295(o) or
42 U.S.C. 6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13,
2021). But the direct final rule provision in EPCA does not impose
additional requirements applicable to other standards rulemakings,
which is consistent with the unique circumstances of rules issued as
consensus agreements under DOE's direct final rule authority. Id. DOE's
discretion remains bounded by its statutory mandate to adopt a standard
that results in the maximum improvement in energy efficiency that is
technologically feasible and economically justified--a requirement
found in 42 U.S.C. 6295(o). Id. As such, DOE's review and analysis of
the Joint Agreement is limited to whether the recommended standards
satisfy the criteria in 42 U.S.C. 6295(o).

B. Background

1. Current Standards
In a direct final rule published on October 28, 2016 (``October
2016 Final Rule''), DOE prescribed the current energy conservation
standards for MREFs manufactured on and after October 28, 2019. 81 FR
75194. These standards are set forth in DOE's regulations at 10 CFR
430.32(aa)(1)-(2). These standards are consistent with a negotiated
term sheet submitted to DOE by interested parties representing
manufacturers, energy and environmental advocates, and consumer
groups.\19\
---------------------------------------------------------------------------

\19\ The negotiated term sheets are available in docket ID EERE-
2011-BT-STD-0043 on <a href="http://www.regulations.gov">www.regulations.gov</a>.
---------------------------------------------------------------------------

2. Current Test Procedures
On October 12, 2021, DOE published a test procedure final rule
(``October 2021 TP Final Rule'') amending the test procedure for MREFs,
at appendix A. 86 FR 56790. The test procedure amendments included
adopting the latest version of the relevant industry standard published
by the Association of Home Appliance Manufacturers (``AHAM''), updated
in 2019, AHAM Standard HRF-1, ``Energy and Internal Volume of
Refrigerating Appliances'' (``HRF-1-2019''). 10 CFR 430.3(i)(4). The
standard levels adopted in this direct final rule are based on the
annual energy use (``AEU'') metrics as measured according to appendix
A.

[[Page 38772]]

3. History of Standards Rulemaking for MREFs
On April 1, 2015, DOE published a notice announcing its intention
to establish a negotiated rulemaking working group under the Appliance
Standards Rulemaking Advisory Committee (``ASRAC'') to negotiate energy
conservation standards for refrigeration products such as wine
chillers. 80 FR 17355. DOE then created a working group of interested
parties to develop a series of recommended energy conservation
standards for MREFs. On July 18, 2016, DOE published the July 2016
Final Coverage Determination that added MREFs as covered products. 81
FR 46768. In that determination, DOE noted that MREFs, on average,
consume more than 150 kilowatt hours per year (``kWh/yr'') and that the
aggregate annual national energy use of these products exceeds 4.2
terawatt hours (``TWh''). 81 FR 46768, 46775. In addition to
establishing coverage, the July 2016 Final Coverage Determination
established definitions for ``miscellaneous refrigeration products,''
``coolers,'' and ``combination cooler refrigeration products'' in 10
CFR 430.2. 81 FR 46768, 46791-46792.
On October 28, 2016, a negotiated term sheet containing a series of
recommended standards and other related recommendations were submitted
to ASRAC for approval and, subsequently, DOE published the October 2016
Direct Final Rule adopting energy conservation standards consistent
with the recommendations contained in the term sheet. 81 FR 75194.
Concurrent with the October 2016 Direct Final Rule, DOE published a
NOPR in which it proposed and requested comments on the standards set
forth in the direct final rule. 81 FR 74950. On May 26, 2017, DOE
published a notice in the Federal Register in which it determined that
the comments received in response to the October 2016 Direct Final Rule
did not provide a reasonable basis for withdrawing the rule and,
therefore, confirmed the adoption of the energy conservation standards
established in that direct final rule. 82 FR 24214.
4. The Joint Agreement
On September 25, 2023, DOE received a joint statement of
recommended standards (i.e., the Joint Agreement) for various consumer
products, including MREFs, submitted jointly by groups representing
manufacturers, energy and environmental advocates, consumer groups, and
a utility.\20\ In addition to the recommended standards for MREFs, the
Joint Agreement also included separate recommendations for several
other covered products.\21\ And, while acknowledging that DOE may
implement these recommendations in separate rulemakings, the Joint
Agreement also stated that the recommendations were recommended as a
complete package and each recommendation is contingent upon the other
parts being implemented. DOE understands this to mean that the Joint
Agreement is contingent upon DOE initiating rulemaking processes to
adopt all of the recommended standards in the agreement. That is
distinguished from an agreement where issuance of an amended energy
conservation standard for a covered product is contingent on issuance
of amended energy conservation standards for the other covered
products. If the Joint Agreement were so construed, it would conflict
with the anti-backsliding provision in 42 U.S.C. 6295(o)(1), because it
would imply the possibility that, if DOE were unable to issue an
amended standard for a certain product, it would have to withdraw a
previously issued standard for one of the other products. The anti-
backsliding provision, however, prevents DOE from withdrawing or
amending an energy conservation standard to be less stringent. As a
result, DOE will be proceeding with individual rulemakings that will
evaluate each of the recommended standards separately under the
applicable statutory criteria. The Joint Agreement recommends amended
standard levels for MREFs as presented in Table II.3. (Joint Agreement,
No. 34 at p. 4) Details of the Joint Agreement recommendations for
other products are provided in the Joint Agreement posted in the
docket.\22\
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\20\ The signatories to the Joint Agreement include AHAM,
American Council for an Energy-Efficient Economy, Alliance for Water
Efficiency, Appliance Standards Awareness Project, Consumer
Federation of America, Consumer Reports, Earthjustice, National
Consumer Law Center, Natural Resources Defense Council, Northwest
Energy Efficiency Alliance, and Pacific Gas and Electric Company.
Members of AHAM's Major Appliance Division that manufacture the
affected products include: Alliance Laundry Systems, LLC; Asko
Appliances AB; Beko US Inc.; Brown Stove Works, Inc.; BSH; Danby
Products, Ltd.; Electrolux Home Products, Inc.; Elicamex S.A. de
C.V.; Faber; Fotile America; GEA, a Haier Company; L'Atelier Paris
Haute Design LLG; LGEUSA; Liebherr USA, Co.; Midea America Corp.;
Miele, Inc.; Panasonic Appliances Refrigeration Systems (PAPRSA)
Corporation of America; Perlick Corporation; Samsung; Sharp
Electronics Corporation; Smeg S.p.A; Sub-Zero Group, Inc.; The
Middleby Corporation; U-Line Corporation; Viking Range, LLC; and
Whirlpool.
\21\ The Joint Agreement contained recommendations for 6 covered
products: refrigerators, refrigerator-freezers, and freezers;
clothes washers; clothes dryers; dishwashers; cooking products; and
miscellaneous refrigeration products.
\22\ The term sheet is available in the docket at:
<a href="http://www.regulations.gov/document/EERE-2020-BT-STD-0039-0034">www.regulations.gov/document/EERE-2020-BT-STD-0039-0034</a>.
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BILLING CODE 6450-01-P

[[Page 38773]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.007

BILLING CODE 6450-01-C
When the Joint Agreement was submitted, DOE was conducting a
rulemaking to consider amending the standards for MREFs. As part of
that process, DOE published a NOPR and announced a public meeting on
March 31, 2023 (``March 2023 NOPR'') seeking comment on its proposed
amended standards to inform its decision consistent with its
obligations under EPCA and the Administrative Procedure Act (``APA'').
88 FR 19382. DOE held a public webinar on May 2, 2023, to discuss and
receive comments on the March 2023 NOPR and NOPR TSD (``May 2, 2023,
public meeting''). The NOPR TSD is available at: <a href="http://www.regulations.gov/document/EERE-2020-BT-STD-0039-0026">www.regulations.gov/document/EERE-2020-BT-STD-0039-0026</a>. The March 2023 NOPR proposed
amended standards defined in terms of the AEU metrics as measured
according to appendix A. Id. at 88 FR 19383-19384.
Although DOE is adopting the Joint Agreement as a direct final rule
and no longer proceeding with its prior rulemaking, DOE did consider
relevant comments, data, and information obtained during that
rulemaking process in determining whether the recommended standards
from the Joint Agreement are in accordance with 42 U.S.C. 6295(o). Any
discussion of comments, data, or information in this direct final rule
that were obtained during DOE's prior rulemaking will include a
parenthetical reference that provides the location of the item in the
public record.\23\
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\23\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for MREFs. (Docket No. EERE-2020-BT-
STD-0039, which is maintained at <a href="http://www.regulations.gov">www.regulations.gov</a>). The
references are arranged as follows: (commenter name, comment docket
ID number, page of that document).
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III. General Discussion

DOE is issuing this direct final rule after determining that the
recommended standards submitted in the Joint Agreement meet the
requirements in 42 U.S.C. 6295(p)(4). More specifically, DOE has
determined that the recommended standards were submitted by interested
persons that are fairly representative of relevant points of view and
the recommended standards satisfy the criteria in 42 U.S.C. 6295(o).

A. Scope of Coverage

This direct final rule covers those consumer products that meet the
definition of ``miscellaneous refrigeration product,'' as codified at
10 CFR 430.2, which states that it is a consumer refrigeration product
other than a refrigerator, refrigerator-freezer, or freezer, which
includes coolers and combination cooler refrigeration products.
The differences between miscellaneous refrigeration products and
other consumer refrigeration products, which were addressed in a
separate rulemaking for refrigerators, refrigerator-freezers, and
freezers, are largely in compartment temperature capability.
Refrigerators are broadly defined as a cabinet capable of maintaining a
compartment temperature above 32 [deg]F and below 39 [deg]F. Freezers
are broadly defined as a cabinet capable of maintaining compartment
temperature of 0 [deg]F or below. Refrigerator-freezers have two or
more compartments, with one capable of maintaining compartment
temperatures above 32 [deg]F and below 39 [deg]F (i.e., a fresh food or
refrigerator compartment), and the other capable of maintaining a
compartment temperature of 8 [deg]F with adjustability down to 0 [deg]F
or below (i.e., a frozen food or freezer compartment). Miscellaneous
refrigeration products generally include a cooler compartment that is
incapable of maintaining the low temperatures achieved by
refrigerators, refrigerator-freezers, and freezers.

[[Page 38774]]

Coolers (and cooler compartments) have temperature ranges that either
extend no lower than 39 [deg]F, or no lower than 37 [deg]F but at least
as high as 60 [deg]F. Combination-coolers contain a fresh food and/or
frozen food compartment in addition to one or more cooler compartments.
See 10 CFR 430.2 for more information regarding consumer refrigeration
products definitions.
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used, or by capacity, or based upon performance-related features that
justify a higher or lower standard. (42 U.S.C. 6295(q)) In making a
determination whether a performance-related feature justifies a
different standard, DOE must consider such factors as the utility of
the feature to the consumer and other factors DOE determines are
appropriate. (Id.)
The Joint Agreement proposed approach for MREF product classes
embeds within the energy use equations the difference between classes
for MREFs that are otherwise identical except for presence of an
icemaker, using a logical variable I (equal to 1 for a product with an
icemaker and equal to 0 for a product without an icemaker) multiplied
by the constant icemaker energy use adder.
The product class representation simplification in the Joint
Agreement is consistent with what was proposed by DOE in the March 2023
NOPR. Based on the comments received in response to the March 2023 NOPR
and DOE's evaluation of the Joint Agreement, this direct final rule
adopts this change. See section IV.A.1 of this document for further
detail and discussion regarding the product classes analyzed in this
direct final rule.

B. Fairly Representative of Relevant Point of View

Under the direct final rule provision in EPCA, recommended energy
conservation standards must be submitted by interested persons that are
fairly representative of relevant points of view (including
representatives of manufacturers of covered products, States, and
efficiency advocates) as determined by DOE. (42 U.S.C. 6295(p)(4)(A))
With respect to this requirement, DOE notes that the Joint Agreement
included a trade association, AHAM, which represents 15 manufacturers
of MREFs.\24\ The Joint Agreement also included environmental and
energy-efficiency advocacy organizations, consumer advocacy
organizations, and a gas and electric utility company. As a result, DOE
has determined that the Joint Agreement was submitted by interested
persons who are fairly representative of relevant points of view.
Additionally, DOE received a letter in support of the Joint Agreement
from the States of New York, California, and Massachusetts. (See
NYSERDA, et al., No. 35 at p. 2) DOE also received a letter in support
of the Joint Agreement from the gas and electric utility, SDG&E, and
the electric utility, SCE (See SDG&E, et al., No. 36 at p. 1).
---------------------------------------------------------------------------

\24\ Manufacturers listed in the Joint Agreement include: Asko
Appliances AB, BSH Home Appliances Corporation, Danby Products,
Ltd., Electrolux Home Products, Inc, GE Appliances, a Haier Company,
Liebherr USA, Co., Electronics America Inc., LG Electronics, Midea
America Corp., Miele, Inc., Panasonic Appliances Refrigeration
Systems (PAPRSA) Corporation of America, Smeg S.p.A, Sub-Zero Group,
Inc., The Middleby Corporation (listed with subsidiaries U-Line
Corporation and Viking Range, LLC).
---------------------------------------------------------------------------

C. Technological Feasibility

1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially available products or in working prototypes to be
technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A
to 10 CFR part 430, subpart C (``Process Rule'').
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; (3) adverse impacts on
health or safety and (4) unique-pathway proprietary technologies.
Sections 7(b)(2)-(5) of the Process Rule. Section IV.B of this document
discusses the results of the screening analysis for MREFs, particularly
the designs DOE considered, those it screened out, and those that are
the basis for the standards considered in this rulemaking. For further
details on the screening analysis for this rulemaking, see chapter 4 of
the direct final rule TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt a new or amended standard for a type or
class of covered product, it must determine the maximum improvement in
energy efficiency or maximum reduction in energy use that is
technologically feasible for such product. (42 U.S.C. 6295(o)(2)(A))
Accordingly, in the engineering analysis, DOE determined the maximum
technologically feasible (``max-tech'') improvements in energy
efficiency for MREFs, using the design parameters for the most
efficient products available on the market or in working prototypes.
The max-tech levels that DOE determined for this rulemaking are
described in section IV.C of this document and in chapter 5 of the
direct final rule TSD.

D. Energy Savings

1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to MREFs purchased in the 30-year period that begins in the year of
compliance with the amended standards (2029-2058).\25\ The savings are
measured over the entire lifetime of products purchased in the 30-year
analysis period. DOE quantified the energy savings attributable to each
TSL as the difference in energy consumption between each standards case
and the no-new-standards case. The no-new-standards case represents a
projection of energy consumption that reflects how the market for a
product would likely evolve in the absence of amended energy
conservation standards.
---------------------------------------------------------------------------

\25\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

DOE used its national impact analysis (``NIA'') spreadsheet models
to estimate national energy savings (``NES'') from potential amended
standards for MREFs. The NIA spreadsheet model (described in section
IV.H of this document) calculates energy savings in terms of site
energy, which is the energy directly consumed by products at the
locations where they are used. For electricity, DOE reports national
energy savings in terms of primary energy savings, which is the savings
in the energy that is used to generate and transmit the site
electricity. For natural gas, the primary energy savings are considered
to be equal to the site energy savings. DOE also calculates NES in
terms of FFC energy savings. The FFC metric includes the energy
consumed in

[[Page 38775]]

extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards.\26\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products or equipment. For more
information on FFC energy savings, see section IV.H.2 of this document.
---------------------------------------------------------------------------

\26\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking. For example,
some covered products and equipment have most of their energy
consumption occur during periods of peak energy demand. The impacts of
these products on the energy infrastructure can be more pronounced than
products with relatively constant demand. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis, taking into
account the significance of cumulative FFC national energy savings, the
cumulative FFC emissions reductions, and the need to confront the
global climate crisis, among other factors.
As stated, the standard levels adopted in this direct final rule
are projected to result in national energy savings of 0.32 quads (FFC),
the equivalent of the primary annual energy use of 2.1 million homes.
Based on the amount of FFC savings, the corresponding reduction in
emissions, and need to confront the global climate crisis, DOE has
determined the energy savings from the standard levels adopted in this
direct final rule are ``significant'' within the meaning of 42 U.S.C.
6295(o)(3)(B).

E. Economic Justification

1. Specific Criteria
As noted previously, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of potential amended standards on
manufacturers, DOE conducts an MIA, as discussed in section IV.J of
this document. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include (1) INPV, which
values the industry on the basis of expected future cash flows; (2)
cash flows by year; (3) changes in revenue and income; and (4) other
measures of impact, as appropriate. Second, DOE analyzes and reports
the impacts on different types of manufacturers, including impacts on
small manufacturers. Third, DOE considers the impact of standards on
domestic manufacturer employment and manufacturing capacity, as well as
the potential for standards to result in plant closures and loss of
capital investment. Finally, DOE takes into account cumulative impacts
of various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and PBP associated with new or amended standards. These
measures are discussed further in the following section. For consumers
in the aggregate, DOE also calculates the national net present value of
the consumer costs and benefits expected to result from particular
standards. DOE also evaluates the impacts of potential standards on
identifiable subgroups of consumers that may be affected
disproportionately by a standard.
b. Savings in Operating Costs Compared to Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels are calculated relative to the case that reflects projected
market trends in the absence of new or amended standards. DOE's LCC and
PBP analysis is discussed in further detail in section IV.F of this
document.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section IV.H of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes, and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards adopted in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the

[[Page 38776]]

Attorney General, that is likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine
the impact, if any, of any lessening of competition likely to result
from a standard and to transmit such determination to the Secretary
within 60 days of the publication of a proposed rule, together with an
analysis of the nature and extent of the impact. (42 U.S.C.
6295(o)(2)(B)(ii)) DOE will transmit a copy of this direct final rule
to the Attorney General with a request that the Department of Justice
(``DOJ'') provide its determination on this issue. DOE will consider
DOJ's comments on the rule in determining whether to withdraw the
direct final rule. DOE will also publish and respond to the DOJ's
comments in the Federal Register in a separate notice.
f. Need for National Energy Conservation
DOE also considers the need for national energy and water
conservation in determining whether a new or amended standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy
savings from the adopted standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
system. DOE conducts a utility impact analysis to estimate how
standards may affect the Nation's needed power generation capacity, as
discussed in section IV.M of this document.
DOE finds that environmental and public health benefits associated
with the more efficient use of energy are important to take into
account when considering the need for national energy conservation. The
adopted standards are likely to result in environmental benefits in the
form of reduced emissions of air pollutants and greenhouse gases
(``GHGs'') associated with energy production and use. DOE conducts an
emissions analysis to estimate how potential standards may affect these
emissions, as discussed in section IV.K of this document; the estimated
emissions impacts are reported in section V.B.6 of this document. DOE
also estimates the economic value of emissions reductions resulting
from the considered TSLs, as discussed in section IV.L of this
document.
g. Other Factors
In determining whether an energy conservation standard is
economically justified, DOE may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent DOE identifies any relevant information regarding economic
justification that does not fit into the other categories described
previously, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effect potential amended
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F of this document.

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
rulemaking with regard to MREFs. Separate subsections address each
component of DOE's analyses, including relevant comments DOE received
in its separate rulemaking to amend the energy conservation standards
for MREFs prior to receiving the Joint Agreement.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended energy
conservation standards. The national impacts analysis uses a second
spreadsheet set that provides shipments projections and calculates
national energy savings and net present value of total consumer costs
and savings expected to result from potential energy conservation
standards. DOE uses the third spreadsheet tool, the Government
Regulatory Impact Model (``GRIM''), to assess manufacturer impacts of
potential standards. These three spreadsheet tools are available on the
DOE website for this rulemaking: <a href="http://www.regulations.gov/docket/EERE-2020-BT-STD-0039">www.regulations.gov/docket/EERE-2020-BT-STD-0039</a>. Additionally, DOE used output from the latest version of
the Energy Information Administration's (``EIA's'') Annual Energy
Outlook (``AEO'') for the emissions and utility impact analyses.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include (1) a determination of the scope
of the rulemaking and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends, and (6) technologies or design options
that could improve the energy efficiency of MREFs. The key findings of
DOE's market assessment are summarized in the following sections. See
chapter 3 of the direct final rule TSD for further discussion of the
market and technology assessment.
1. Product Classes
The Joint Agreement specifies 11 product classes for MREFs. (Joint
Agreement, No. 34 at p. 7) In particular, the Joint Agreement
recommends a consolidated product class representation, which
incorporates icemaker energy adders and door allowances into the energy
use equations for product classes in which they are applicable. As
discussed further in section IV.A.1.a of this document, DOE notes that
the consolidation of product class representation in the Joint
Agreement does not combine the product classes, but rather serves to
simplify the list of classes, in particular for those product classes
with and without icemakers, and facilitates the implementation of a
single equation for representation of their maximum allowable energy
use. In this direct final rule, DOE is adopting the product classes
from the Joint Agreement, as listed in Table IV.1.

[[Page 38777]]

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DOE further notes that product classes established through EPCA's
direct final rule authority are not subject to the criteria specified
at 42 U.S.C. 6295(q)(1) for establishing product classes. Nevertheless,
in accordance with 42 U.S.C. 6295(o)(4)--which is applicable to direct
final rules--DOE has concluded that the standards adopted in this
direct final rule will not result in the unavailability in any covered
product type (or class) of performance characteristics, features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States currently.\27\ DOE's findings
in this regard are discussed in detail in section V.B.4 of this
document.
---------------------------------------------------------------------------

\27\ EPCA specifies that DOE may not prescribe an amended or new
standard if the Secretary finds (and publishes such finding) that
interested persons have established by a preponderance of the
evidence that the standard is likely to result in the unavailability
in the United States in any covered product type (or class) of
performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as
those generally available in the United States at the time of the
Secretary's finding. (42 U.S.C. 6295(o)(4))
---------------------------------------------------------------------------

a. Product Classes With Automatic Icemakers
The Joint Agreement includes a proposed simplification of maximum
allowable energy and expresses the maximum allowable energy use for
both icemaking and non-icemaking classes in the same equation, thus
consolidating the presentation of classes and their energy conservation
standards. The energy use equations will, for those classes that may or
may not have an icemaker, include a term equal to the icemaking energy
use adder multiplied by a factor that is defined to equal 1 for
products with icemakers and to equal 0 for products without icemakers.
This approach does not combine classes that are the same other than the
presence of an icemaker but does simplify the list of classes and
representation of their maximum allowable energy use, providing for
each set of classes with and without ice makers a single equation for
maximum energy use. This simplification is consistent with the approach
proposed in the March 2023 NOPR. See 88 FR 19382, 19395.
In this direct final rule, DOE is adopting the Joint Agreement
proposal to express the maximum allowable energy use for any set of
classes differing only in whether the class includes an icemaker or not
within a single equation. The single equation does this by including
the icemaker energy use adder multiplied by logical variable I that is
set equal to 1 for a product with an icemaker present and 0 for a
product without an icemaker.
b. Addition of Product Class C-5-BI
The Joint Agreement recommends the addition of a new product class
C-5-BI (i.e., built-in combination cooler-refrigerator-freezers with
bottom-mounted freezers and automatic icemakers) and specific energy
efficiency standards for the new product class (``PC''). (Joint
Agreement, No. 34 at p. 7) The current energy conservation standards
for MREFs do not include a separate product class for products of this
configuration. However, DOE has previously proposed establishing a
separate product class for C-5-BI configurations in the March 2023
NOPR, with a baseline level of 6.08AV + 246 kWh/yr, based in part on
input from commenters, and considered increased efficiency levels using
PC C-3A-BI as a proxy. 88 FR 19382, 19395.
The Joint Agreement recommends a standard equation of 5.47AV +
196.2 + 28I kWh/yr for product class C-5-BI. DOE notes that this
recommended level is consistent with the level proposed in the March
2023 NOPR for product class C-5-BI, which represents a 10 percent more
stringent level than the baseline level identified in the March 2023
NOPR.
Considering that the recommendation is consistent with the proposed
level in the March 2023 NOPR and carries support from a broad cross-
section of interests, including trade associations representing these
manufactures, environmental and energy-efficiency advocacy
organizations, consumer advocates, and electric utility providers as
well as the support of several States, DOE believes it appropriate to
adopt this new product class, C-5-BI, and the recommended standard
equation. DOE's direct rulemaking authority under 42 U.S.C. 6295(p)(4)
is constrained only by the requirements of 42 U.S.C. 6295(o), which
does not include the product class requirements in 42 U.S.C. 6295(q).
However, DOE notes that the addition of a PC C-5-BI is warranted as the
application of bottom-mounted freezer and icemaker on a built-in cooler
with refrigerator-freezer provides consumers the utility of storage
compartments at freezing, fresh food, and cooler temperature levels,
whereas the current classes combine a cooler compartment with either a
freezer or fresh food compartment, but not both. In addition,
establishing separate classes of this configuration both with and
without automatic icemaking addresses the unique utility of icemaking
that may be

[[Page 38778]]

included as part of the product. As a result of this additional
utility, the application of a bottom-mounted freezer and icemaker
constitutes a performance related feature.
Given the indication from the Joint Agreement that such a product
class standard would be beneficial in its implementation, the
classification of a bottom-mounted freezer and icemaker as performance
related features, and the recommendation's consistency with the other
adopted standards, DOE is adopting a PC C-5-BI standard in this direct
final rule.
See section V of this document for more information regarding the
TSL configuration and discussion of the adopted level for this product
class. See chapter 5 of the direct final rule TSD for more discussion
regarding the addition of this product class.
2. Technology Options
In the preliminary market analysis and technology assessment, DOE
identified 36 technology options initially determined to improve the
efficiency of MREFs, as measured by the DOE test procedure. In this
direct final rule, DOE considered the technology options listed in
Table IV.2, consistent with the table of technology options presented
in the March 2023 NOPR. 88 FR 19382, 19395-19396. Chapter 3 of the
direct final rule TSD includes a detailed list and descriptions of all
technology options identified for MREFs.
BILLING CODE 6450-01-P

[[Page 38779]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.009

BILLING CODE 6450-01-C

[[Page 38780]]

B. Screening Analysis

DOE uses the following five screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in commercially viable, existing
prototypes will not be considered further.
(2) Practicability to manufacture, install, and service. If it is
determined that mass production of a technology in commercial products
and reliable installation and servicing of the technology could not be
achieved on the scale necessary to serve the relevant market at the
time of the projected compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility. If a technology is determined to
have a significant adverse impact on the utility of the product to
subgroups of consumers, or result in the unavailability of any covered
product type with performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as products generally available in the United States at the time,
it will not be considered further.
(4) Safety of technologies. If it is determined that a technology
would have significant adverse impacts on health or safety, it will not
be considered further.
(5) Unique-pathway proprietary technologies. If a technology has
proprietary protection and represents a unique pathway to achieving a
given efficiency level, it will not be considered further, due to the
potential for monopolistic concerns.

10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).

In sum, if DOE determines that a technology, or a combination of
technologies, fails to meet one or more of the listed five criteria, it
will be excluded from further consideration in the engineering
analysis. The reasons for eliminating any technology are discussed in
the following sections.
The subsequent sections include DOE's evaluation of each technology
option against the screening analysis criteria and whether DOE
determined that a technology option should be excluded (``screened
out'') based on the screening criteria.
1. Screened-Out Technologies
In this direct final rule, DOE screened out the technologies
presented in Table IV.3 on the basis of technological feasibility,
practicability to manufacture, install, and service, adverse impacts on
utility or availability, adverse impacts on health and safety, and/or
unique-pathway proprietary technologies. Chapter 4 of the direct final
rule TSD includes a detailed description of the screening analysis for
each of these technology options.
[GRAPHIC] [TIFF OMITTED] TR07MY24.010

2. Remaining Technologies
Through a review of each technology, DOE concludes that all of the
other identified technologies listed in section IV.B.2 of this document
met all five screening criteria to be examined further as design
options in DOE's direct final rule analysis. In summary, DOE did not
screen out the following technology options:

[[Page 38781]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.011

BILLING CODE 6450-01-C
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture, install, and service and do
not result in adverse impacts on consumer utility, product
availability, health, or safety). For additional details, see chapter 4
of the direct final rule TSD.

C. Engineering Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of MREFs. There are two
elements to consider in the engineering analysis; the selection of
efficiency levels to analyze (i.e., the ``efficiency analysis'') and
the determination of product cost at each efficiency level (i.e., the
``cost analysis''). In determining the performance of higher-efficiency
products, DOE considers technologies and design option combinations not
eliminated by the screening analysis. For each product class, DOE
estimates the baseline cost, as well as the incremental cost for the
product/equipment at efficiency levels above the baseline. The output
of the engineering analysis is a set of cost-efficiency ``curves'' that
are used in downstream analyses (i.e., the LCC and PBP analyses and the
NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the

[[Page 38782]]

incremental efficiency improvements associated with incorporating
specific design options to a baseline model (i.e., the design-option
approach). Using the efficiency-level approach, the efficiency levels
established for the analysis are determined based on the market
distribution of existing products (in other words, based on the range
of efficiencies and efficiency level ``clusters'' that already exist on
the market). Using the design option approach, the efficiency levels
established for the analysis are determined through detailed
engineering calculations and/or computer simulations of the efficiency
improvements from implementing specific design options that have been
identified in the technology assessment. DOE may also rely on a
combination of these two approaches. For example, the efficiency-level
approach (based on actual products on the market) may be extended using
the design option approach to interpolate to define ``gap fill'' levels
(to bridge large gaps between other identified efficiency levels) and/
or to extrapolate to the ``max-tech'' level (particularly in cases
where the ``max-tech'' level exceeds the maximum efficiency level
currently available on the market).
The approach used for this direct final rule to define the
efficiency levels for analysis is largely the same as the approach DOE
had used for the March 2023 NOPR analysis.
For its analysis in this direct final rule, DOE used a combined
efficiency level and design option approach to directly analyze five
products classes: freestanding compact coolers, freestanding coolers,
and combination cooler classes C-13A, C-3A, and C-9. First, an
efficiency-level approach was used to establish an analysis tied to
existing products on the market. Several products from the cooler class
(compact and standard size) and one product from the combination cooler
class (C-13A) were used in physical teardowns. Additional analyses were
conducted on classes C-3A and C-9; however, a lack of physical teardown
products for these classes led DOE to rely heavily on adjusted analyses
from the consumer refrigerator, refrigerator-freezer, and freezers
(``RF'') classes 3 and 9, respectively. Then, a design option approach
was used to extend the analysis through ``built-down'' efficiency
levels and ``built-up'' efficiency levels where there were gaps in the
range of efficiencies of products that were reverse engineered. As
discussed in the section that follows, DOE applied its direct analyses
of freestanding products to the corresponding built-in product classes.
DOE's direct analysis informed the adopted standards for those product
classes that were not directly analyzed. See section 5.4.1 of the
direct final rule TSD for more discussion on DOE's efficiency analysis.
a. Built-in Classes
In this direct final rule analysis, DOE used the freestanding MREF
classes as proxies for built-in classes. DOE conducted analysis of the
current market for miscellaneous refrigeration products and found that
built-in and freestanding products occupy the same range of
efficiencies, and DOE did not identify any unique characteristic that
would inhibit efficiency improvements for built-in products relative to
freestanding products based on a review on the market. As a result, DOE
chose to apply its freestanding products analyses to built-in classes.
In response to the March 2023 NOPR, AHAM and Sub-zero Group Inc.
(``Sub-zero'') argued that freestanding product classes are not a proxy
for built-in product classes and DOE should evaluate them separately.
(AHAM, No. 31 at p. 6; Sub-zero, No. 30 at p. 1) AHAM and Sub-zero
stated that built-in products have constraints, such as incorporation
into kitchen designs and needing to be flush with cabinetry, that
affect that the technology options for achieving higher efficiency
levels. (AHAM, No. 31 at pp. 6-7; Sub-zero, No. 30 at p. 2) AHAM and
Sub-Zero also stated that different testing requirements for built-ins
(e.g., two inches or less of rear clearance for freestanding products
as opposed to no rear clearance for built-in products) creates inherent
design differences between the freestanding and built-in products. Id.
AHAM and Sub-zero encouraged DOE to revise its analysis to separately
analyze freestanding and built-in products, contending that these
products are fundamentally different. (AHAM, No. 31 at p. 7; Sub-zero,
No. 30 at p. 2)
As discussed in section IV.C.1.c of this document, the efficiency
levels analyzed for this direct final rule represent a percentage
reduction in energy use below the currently applicable standard for
each product class. DOE's analysis of the freestanding product classes
as a proxy for the built-in product classes does not presume that the
two product types have the same nominal costs at each higher efficiency
level, but rather reflects that incremental design changes associated
with reducing energy use on a percentage basis--relative to the
currently applicable standard for each respective product type--are
substantially similar between freestanding and built-in products. To
reflect the inherent design differences between built-in products
compared to free-standing products, as described by commenters, DOE
applied a $30, $50, or $150 adder (depending on product size) to the
baseline costs for the built-in product classes compared to their
freestanding counterparts. See chapter 5 of the direct final rule TSD
for further details regarding the engineering analysis conducted for
each product class.
b. Baseline Efficiency/Energy Use
For each product class, DOE generally selects a baseline model as a
reference point for each class, and measures changes resulting from
potential energy conservation standards against the baseline. The
baseline model in each product class represents the characteristics of
a product/equipment typical of that class (e.g., capacity, physical
size). Generally, a baseline model is one that just meets current
energy conservation standards, or, if no standards are in place, the
baseline is typically the most common or least efficient unit on the
market. When selecting units for the analysis, DOE selects units at
baseline from various manufacturers for each directly analyzed product
class.
For this direct final rule, DOE chose baseline efficiency levels
represented by the current Federal energy conservation standards,
expressed as maximum annual energy consumption as a function of the
product's adjusted volume. The baseline levels differ for coolers and
combination coolers to account for design differences; all coolers
share the same baseline level, i.e., the baseline is the same function
of adjusted volume for both freestanding and built-in models, for both
compact and standard-size models. The current standards incorporate an
allowance of a constant 84 kWh/yr icemaker adder for product classes
with automatic icemakers, consistent with the current test procedure,
which requires adding this amount of annual energy use to the products
tested performance if the product has an automatic icemaker. DOE
adjusted the baseline energy usage levels for each class to account for
the planned revision in the test procedure to reduce the icemaker
energy use adder to 28 kWh/yr.\28\
---------------------------------------------------------------------------

\28\ See the October 12, 2021, test procedure final rule for
refrigeration products for more information regarding the adoption
of the 28 kWh/yr icemaker adder. 86 FR 56790.

---------------------------------------------------------------------------

[[Page 38783]]

DOE directly analyzed a sample of market representative models from
within five product classes from multiple manufacturers. Directly
analyzed classes include three different AV coolers (AVs of 3 ft\3\, 5
ft\3\, and 15 ft\3\) and three combination cooler classes (C-13A, C-9
and C-3A). In conducting these analyses, eight teardown units were used
in construction of cost curves, and their characteristics were
determined in large part by testing and reverse-engineering. Further
information on the design characteristics of specific analyzed baseline
models is summarized in section 5.4.1 of the direct final rule TSD.
c. Higher Efficiency Levels
As part of DOE's analysis, the maximum available efficiency level
is the highest efficiency unit currently available on the market. DOE
also defines a ``max-tech'' efficiency level to represent the maximum
possible efficiency for a given product.
For this direct final rule, DOE analyzed up to five incremental
efficiency levels beyond the baseline for each of the analyzed product
classes. The efficiency levels begin at EL 1, which was 10 percent more
efficient than the current MREF energy conservation standards. For the
compact coolers analysis, DOE extended the efficiency levels in steps
of 10 percent of the current energy conservation standard up to EL 4 at
40 percent; for full-size coolers, EL 4 is analyzed at 35 percent. For
combination coolers (excluding C-9) efficiency levels above EL 1 are in
steps of roughly 5 percent up to EL 4. Finally, EL 5 represents maximum
technology (``max-tech''), which uses design option analysis to extend
the analysis beyond EL 4 by using all applicable design options,
including max efficiency variable-speed compressors and maximum
practical use of vacuum-insulated panels (``VIPs''). For compact
coolers, max tech stands at either 59 percent or 50 percent for the two
directly analyzed AVs--3.1 ft\3\ and 5.1 ft\3\ respectively; full-size
coolers max-tech stands at 38 percent. For combination coolers C-13A
and C-3A, max tech stands at 28 percent and 24 percent, respectively.
DOE conducted analysis for product class C-9 starting with analysis
for a class 9 upright freezer with comparable total refrigerated
volume. In its analysis, DOE concluded that application of all of the
design options being considered at max-tech would be required for the
product to be compliant with the current energy conservation standards.
Currently, the Compliance Certification Database (``CCD'') includes
only one product that is certified as C-9--an LG product certified with
energy use 17 percent below the standard. DOE did not purchase, test,
and reverse-engineer this product, in-part because of the limited
product offering and expected insignificant potential for energy
savings for the class. Thus, DOE is relying primarily on its analysis
of the RF product class 9 freezer, to suggest that opportunities for
energy savings are likely limited and likely not cost-effective, even
if improved efficiency is technically feasible. DOE has not analyzed
efficiency levels beyond baseline for this product class in this direct
final rule but has taken into consideration all design options applied
at max-tech in its analysis.
DOE notes the current Energy Star specifications correspond to EL 1
for freestanding full-size coolers (10 percent), EL 2 for freestanding
compact coolers (20 percent), and EL 3 for both classes of built-in
coolers (30 percent).\29\
---------------------------------------------------------------------------

\29\ See EnergyStar, ``Refrigerators & Freezers Key Product
Criteria,'' Available at <a href="http://www.energystar.gov/products/appliances/refrigerators/key_product_criteria">www.energystar.gov/products/appliances/refrigerators/key_product_criteria</a> (last accessed July 14, 2023).
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The efficiency levels analyzed beyond the baseline are shown in
Table IV.5 as follows.
[GRAPHIC] [TIFF OMITTED] TR07MY24.012

d. Variable-Speed Compressor Supply Chain
In response to the March 2023 NOPR, AHAM suggested that DOE
evaluate the robustness of the supply chains for variable-speed
compressors (``VSCs'') while considering the growing demand given more
stringent standards for cooling appliances, including both air
conditioning and refrigeration. (AHAM, No. 31 at p. 5)
In considering this comment and comments provided in response to
the RF rulemaking, DOE interviewed relevant compressor manufacturers to
gather information regarding the level of VSC implementation that would
be required at the efficiency levels analyzed in this direct final
rule, the current and predicted supply of VSCs into the U.S. market,
the predicted time to ramp up production of VSCs, and pricing of VSCs
and components. None of the compressor manufacturers interviewed
expressed any concerns regarding the ability to ramp-up VSC capacity in
response to more stringent MREF standards. Compressor manufacturers
additionally noted that any previous bottlenecks in the VSC supply
chain are no longer a factor at this time, and that they have been
modifying sourcing strategies to ensure a reliable supply of VSCs going
forward. DOE concluded from these interviews that compressor
manufacturers will be able to readily meet any increased demand for
VSCs as a result of the adopted standards within the 5-year

[[Page 38784]]

timeframe between publication of this direct final rule and the
compliance date. DOE further notes that the amended standards adopted
in this final rule reflect the recommendations of the Joint Agreement,
of which AHAM was a signatory.
2. Cost Analysis
The cost analysis portion of the engineering analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
product, the availability and timeliness of purchasing the product on
the market. The cost approaches are summarized as follows:
[ballot] Physical teardowns: Under this approach, DOE physically
dismantles a commercially available product, component-by-component, to
develop a detailed bill of materials for the product.
[ballot] Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the bill of materials for the product.
[ballot] Price surveys: If neither a physical nor catalog teardown
is feasible (for example, for tightly integrated products such as
fluorescent lamps, which are infeasible to disassemble and for which
parts diagrams are unavailable) or cost-prohibitive and otherwise
impractical (e.g., large commercial boilers), DOE conducts price
surveys using publicly available pricing data published on major online
retailer websites and/or by soliciting prices from distributors and
other commercial channels.
In the present case, DOE conducted the analysis using primarily
physical teardowns. Where possible, physical teardowns were used to
provide a baseline of technology options and pricing for a specific
product class at a specific EL. Then with technology option
information, DOE estimated the cost of various design options including
compressors, VIPs, and insulation, by extrapolating the costs from
price surveys. With specific costs for technology options, DOE was then
able to ``build-up'' or ``build-down'' from the various teardown models
to finish the cost-efficiency curves. DOE used this approach to
calibrate the analysis to certified or measured energy use of specific
available models where possible, while allowing a broader range of
potential efficiency levels to be considered.
The resulting bill of materials provides the basis for the
manufacturer production cost (``MPC'') estimates.
To account for manufacturers' non-production costs and profit
margin, DOE applies a multiplier (the manufacturer markup) to the MPC.
The resulting manufacturer selling price (``MSP'') is the price at
which the manufacturer distributes a unit into commerce. DOE developed
an average manufacturer markup by examining corporate annual reports
and Securities and Exchange Commission (``SEC'') 10-K reports \30\
filed by publicly traded manufacturers in primarily engaged in
appliance manufacturing and whose combined product range includes
MREFs. DOE then compared the manufacturer markups derived from the
financials to the manufacturer markups estimated in the October 2016
Direct Final Rule. 81 FR 75194, 75224-75225. See chapter 12 of the
direct final rule TSD for additional detail on the manufacturer markup.
---------------------------------------------------------------------------

\30\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. Available at
<a href="http://www.sec.gov/edgar/search/">www.sec.gov/edgar/search/</a> (last accessed January 30, 2024).
---------------------------------------------------------------------------

3. Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of AEU (in kWh) versus MPC
(in dollars), which form the basis for subsequent analyses.
DOE developed estimates of MPCs for each unit in the teardown
sample, and also performed additional modeling for each of the teardown
samples, to extend the analysis to cover the range of efficiency levels
appropriate for a representative product. To estimate the MPCs
necessary to achieve higher efficiency levels, in particular those
beyond the highest-efficiency products in the test sample, DOE
considered design options that were most likely to be considered and
implemented by manufacturers to achieve the higher efficiency levels.
Based on input from manufacturers and an understanding of the markets,
DOE then estimated the costs associated with those design options to
determine the MPCs at each of the analyzed efficiency levels.
The resulting weighted average incremental design option by
efficiency level and cost curves for each directly analyzed product
class are (i.e., the additional costs manufacturers would likely incur
by producing miscellaneous refrigeration products at each efficiency
level compared to the baseline) are provided in Tables IV.6 and IV.7 as
follows. See chapter 5 of the direct final rule TSD for additional
detail on the engineering analysis and formulation of cost curves.
BILLING CODE 6450-01-P

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[[Page 38786]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.014

[GRAPHIC] [TIFF OMITTED] TR07MY24.015

[[Page 38787]]

BILLING CODE 6450-01-C

D. Markups Analysis

The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices, which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin.
For MREFs, DOE identified two distribution channels: (1)
manufacturers to retailers to consumers, and (2) manufacturers to
wholesalers to dealers/retailers to consumers. The parties involved in
the distribution channel are retailers, wholesalers, and dealers.
DOE developed baseline and incremental markups for each actor in
the distribution chain. Baseline markups are applied to the price of
products with baseline efficiency, while incremental markups are
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental
markup is typically less than the baseline markup and is designed to
maintain similar per-unit operating profit before and after new or
amended standards.\31\
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\31\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that in markets that are reasonably
competitive it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

DOE relied on economic data from the U.S. Census Bureau to estimate
average baseline and incremental markups. Specifically, DOE used the
2017 Annual Retail Trade Survey for the ``electronics and appliance
stores'' sector to develop retailer markups,\32\ and the 2017 Annual
Wholesaler Trade Survey for the ``household appliances, and electrical
and electronics goods merchant wholesalers'' sector to estimate
wholesaler markups.\33\ For the wholesaler to dealer/retailer channel,
DOE assumed that the dealer markups are half of the retailer markups in
the retailer channel.
---------------------------------------------------------------------------

\32\ U.S. Census Bureau, Annual Retail Trade Survey. 2017.
Available at <a href="http://www.census.gov/programs-surveys/arts.html">www.census.gov/programs-surveys/arts.html</a>.
\33\ U.S. Census Bureau, Annual Wholesale Trade Survey. 2017.
Available at <a href="http://www.census.gov/awts">www.census.gov/awts</a>.
---------------------------------------------------------------------------

For this direct final rule, DOE considered comments it had received
regarding the markups analysis conducted for the March 2023 NOPR. The
approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented on DOE's
reliance on the concept of incremental markups, stating that it is
based on discredited theory, and it is in contradiction to empirical
evidence provided by AHAM during a 2014 proposed rulemaking for energy
conservation standards for residential dishwashers. (AHAM, No. 31 at p.
9)
DOE's incremental markup approach assumes that an increase in
profitability, which is implied by keeping a fixed markup when the
product price goes up due to higher efficiency standards, is unlikely
to be viable over time in a reasonably competitive market like
household appliance retailers. The Herfindahl-Hirschman Index (``HHI'')
reported by the 2017 Economic Census indicates that the household
appliance stores sector (NAICS 443141) is a highly competitive
marketplace.\34\ DOE recognizes that actors in the distribution chains
are likely to seek to maintain the same markup on appliances in
response to changes in manufacturer selling prices after an amendment
to energy conservation standards. However, DOE believes that retail
pricing is likely to adjust over time as those actors are forced to
readjust their markups to reach a medium-term equilibrium in which per-
unit profit is relatively unchanged before and after standards are
implemented.
---------------------------------------------------------------------------

\34\ 2017 Economic Census, Selected sectors: Concentration of
largest firms for the U.S. Available at <a href="http://www.census.gov/data/tables/2017/econ/economic-census/naics-sector-44-45.html">www.census.gov/data/tables/2017/econ/economic-census/naics-sector-44-45.html</a>. The Herfindahl-
Hirschman Index value can be found by navigating to the
``Concentration of largest firms for the U.S.'' table and then
filtering the industry code to NAICS 443141.The Herfindahl-Hirschman
Index reported for the largest 50 firms in household appliance
stores sector, is 123.8. Generally, a market with an HHI value of
under 1,000 is considered to be competitive.
---------------------------------------------------------------------------

DOE acknowledges that markup practices in response to amended
standards are complex and vary with business conditions. However, DOE's
analysis necessarily only considers changes in appliance offerings that
occur in response to amended standards and isolate the effect of
amended standards from other factors. Obtaining data on markup
practices in the situation described previously is very challenging.
Hence, DOE continues to maintain that its assumption that standards do
not facilitate a sustainable increase in profitability is reasonable.
Chapter 6 of the direct final rule TSD provides details on DOE's
development of markups for MREFs.

E. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual
energy consumption of MREFs at different efficiencies in representative
U.S. households, and to assess the energy savings potential of
increased MREF efficiency. The energy use analysis estimates the range
of energy use of MREFs in the field (i.e., as they are actually used by
consumers). The energy use analysis provides the basis for other
analyses DOE performed, particularly assessments of the energy savings
and the savings in consumer operating costs that could result from
adoption of amended or new standards.
DOE determined a range of annual energy use of MREFs as a function
of unit volume. As shown in Table IV.8, DOE developed distributions of
adjusted volume of product classes with more than one representative
unit base on the capacity distributions reported in the
TraQline[supreg] wine chiller data spanning from 2020 Q1 to 2022
Q1.\35\ DOE also developed a sample of households that use MREFs based
on the TraQline wine chiller data (see section IV.F of this document
for details). For each volume and considered efficiency level, DOE
derived the energy consumption as measured by the DOE MREF test
procedure at appendix A.
---------------------------------------------------------------------------

\35\ TraQline is a market research company that specialized in
tracking consumer purchasing behavior across a wide range of
products using quarterly online surveys.

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[[Page 38788]]

[GRAPHIC] [TIFF OMITTED] TR07MY24.016

For this direct final rule, DOE considered comments it had received
regarding the energy use analysis conducted for the March 2023 NOPR.
The approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented that DOE relies
heavily on the EIA's Residential Energy Consumption Survey (``RECS'')
data for estimating energy use and how consumption varies at the
household level. Specifically, AHAM expressed concern that the use of
RECS data to estimate energy consumption at the household level may
introduce ``outlier values,'' resulting in uncertainty and inaccuracies
(AHAM, No. 31 at p. 11) In this direct final rule, as well as in the
March 2023 NOPR, DOE did not tie the energy consumption of MREFs to
RECS survey data. 87 FR 35678. No household or demographic information
from RECS was used in the energy use analysis for MREFs. Instead, as
mentioned above, DOE used the TraQline wine chiller data to develop a
sample of households representing MREF purchasers and derived the
energy consumption of MREFs as measured by the DOE MREF test procedure.
DOE further notes that AHAM is a party to the Joint Agreement and is
supportive of the recommended standards adopted in this direct final
rule.
Chapter 7 of the direct final rule TSD provides details on DOE's
energy use analysis for MREFs.

F. Life-Cycle Cost and Payback Period Analysis

DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
MREFs. The effect of new or amended energy conservation standards on
individual consumers usually involves a reduction in operating cost and
an increase in purchase cost. DOE used the following two metrics to
measure consumer impacts:

[squ] The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). To compute the operating costs, DOE
discounts future operating costs to the time of purchase and sums them
over the lifetime of the product.
[squ] The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of MREFs in the absence of new or
amended energy conservation standards. In contrast, the PBP for a given
efficiency level is measured relative to the baseline product.
For this direct final rule, DOE considered comments it had received
regarding the LCC analysis conducted for the March 2023 NOPR. The LCC
approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
During the May 2, 2023, public meeting, Edison Electric Institute
(``EEI'') questioned the cost-effectiveness of the proposed TSL (TSL
4), due to the high percentage of consumers experiencing a net LCC cost
and the simple payback period results ranging from 6.8 to 8 years, and
urged DOE to consider selecting another TSL that may be more cost-
effective for consumers. (May 2, 2023, Public Meeting Transcript, No.
33 at pp. 5-6). In response, DOE notes that when deciding whether a
proposed standard is economically justified, DOE determines whether the
benefits of the standard exceed its burdens by considering the seven
statutory factors discussed in section II.A of this document. DOE
considered the seven statutory factors when evaluating the Recommended
TSL in the Joint Agreement. As discussed in section V.C.1 of this
document, overall, the LCC savings would be positive for all MREF
product classes, and, while 43.7 percent of MREF consumers would
experience a net cost, slightly more than half of MREF consumers would
experience a net benefit (52.9 percent). DOE provides a detailed
comparative discussion and rigorous justification on the adopted

[[Page 38789]]

TSL (the Recommended TSL) in section V.C.1 of this document.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of MREF
purchasers. As stated previously, DOE developed purchaser samples based
on TraQline wine chiller survey data. The survey panel is weighted
against the U.S. Census based on their demographic characteristics to
make the sample representative of the U.S. population. The wine chiller
survey asked respondents about the product features of the wine
chillers they recently purchased, as well as the purchasing channel of
the products. To account for the more recent MREF consumers, DOE used
the last 2 years of survey data (2020 Q1 to 2022 Q1) to construct the
household sample used in this direct final rule.
For each sample purchaser, DOE determined the energy consumption
for the MREFs and the appropriate energy price. By developing a
representative sample of purchasers, the analysis captured the
variability in energy consumption and energy prices associated with the
use of MREFs.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability.
The computer model DOE uses to calculate the LCC relies on a Monte
Carlo simulation to incorporate uncertainty and variability into the
analysis. The Monte Carlo simulations randomly sample input values from
the probability distributions and MREF user samples. The model
calculated the LCC for products at each efficiency level for 10,000
MREF purchasers per simulation run. The analytical results include a
distribution of 10,000 data points showing the range of LCC savings for
a given efficiency level relative to the no-new-standards case
efficiency distribution. In performing an iteration of the Monte Carlo
simulation for a given consumer, product efficiency is chosen based on
its probability. If the chosen product efficiency is greater than or
equal to the efficiency of the standard level under consideration, the
LCC calculation reveals that a consumer is not impacted by the standard
level. By accounting for consumers who already purchase more-efficient
products, DOE avoids overstating the potential benefits from increasing
product efficiency.
DOE calculated the LCC for consumers of MREFs as if each were to
purchase a new product in the first year of required compliance with
amended standards. As discussed earlier in this document, the
compliance date of amended standards is January 31, 2029, for TSL 4
(the Recommended TSL detailed in the Joint Agreement). For all other
TSLs considered in this direct final rule, standards apply to MREFs
manufactured 5 years after the date on which any amended standard is
published. (42 U.S.C. 6295(l)(2)) Therefore, DOE used 2029 as the first
year of compliance with any amended standards for MREFs for all TSLs.
Table IV.9 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the direct final rule TSD and its appendices.
[GRAPHIC] [TIFF OMITTED] TR07MY24.017

In response to the March 2023 NOPR, AHAM commented that should be
conducting a purchase decision analysis in its LCC model to reflect the
actual conditions and expectations of the purchaser rather than relying
on an outcome modeling approach. (AHAM, No. 31 at pp. 8-9) In the
current setup of LCC analysis, DOE is not explicitly modeling the
purchase decision made by purchasers when the standard becomes
effective. DOE's analysis is intended to model the range of individual
outcomes likely to result from a hypothetical amended energy

[[Page 38790]]

conservation standard at various levels of efficiency. DOE does not
discount the consumer decision theory established in the broad
behavioral economics field but rather notes that its methodological
decision was made after considering the existence of various systematic
market failures and their implication in rational versus actual
purchase behavior. Furthermore, the outcome of the LCC is not
considered in isolation, but in the context of the broader set of
analyses, including the NIA. Moreover, the type of data required to
facilitate a robust consumer choice modeling of a specific household
appliance at the individual household level is currently lacking and
AHAM did not provide much data. DOE further notes that AHAM is a party
to the Joint Agreement and is supportive of the recommended standard
adopted in this direct final rule.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described
previously (along with sales taxes). DOE used different markups for
baseline products and higher-efficiency products, because DOE applies
an incremental markup to the increase in MSP associated with higher-
efficiency products.
Economic literature and historical data suggest that the real costs
of many products may trend downward over time according to ``learning''
or ``experience'' curves. Experience curve analysis implicitly includes
factors such as efficiencies in labor, capital investment, automation,
materials prices, distribution, and economies of scale at an industry-
wide level.\36\ In the experience curve method, the real cost of
production is related to the cumulative production or ``experience''
with a manufactured product. As MREFs use similar technologies to RF,
DOE applied the same experience curve developed for RF to MREFs. DOE
used inflation-adjusted historical Producer Price Index (``PPI'') data
for ``household refrigerator and home freezer manufacturing'' from the
Bureau of Labor Statistics' (``BLS'') spanning the time period between
1981 and 2022,\37\ along with the cumulative production of RF to derive
the experience curve. The estimated learning rate (defined as the
fractional reduction in price expected from each doubling of cumulative
production) is 39.4 <plus-minus> 1.9 percent.
---------------------------------------------------------------------------

\36\ Taylor, M. and Fujita, K.S. Accounting for Technological
Change in Regulatory Impact Analyses: The Learning Curve Technique.
LBNL-6195E. Lawrence Berkeley National Laboratory, Berkeley, CA.
April 2013. Available at <a href="http://escholarship.org/uc/item/3c8709p4#page-1">escholarship.org/uc/item/3c8709p4#page-1</a>.
\37\ Household refrigerator and home freezer manufacturing PPI
series ID: PCU3352203352202. Available at <a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a>.
---------------------------------------------------------------------------

DOE included variable-speed compressors as a technology option for
higher efficiency levels. To develop future prices specific for that
technology, DOE applied a different price trend to the controls portion
of the variable-speed compressor, which represents part of the price
increment when moving from an efficiency level achieved with the
highest efficiency single-speed compressor to an efficiency level with
variable-speed compressor. DOE used PPI data on ``semiconductors and
related device manufacturing'' between 1967 and 2022 to estimate the
historic price trend of electronic components in the control.\38\ The
regression, performed as an exponential trend line fit, results in an
R-square of 0.99, with an annual price decline rate of 6.3 percent. See
chapter 8 of the TSD for further details on this topic.
---------------------------------------------------------------------------

\38\ Semiconductors and related device manufacturing PPI series
ID: PCU334413334413. Available at <a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a>.
---------------------------------------------------------------------------

In response to the March 2023 NOPR, AHAM commented that there is no
theoretical underpinning for the implementation of an experience or
learning curve and the functional form it should take. In addition,
AHAM stated that the data that DOE used merely represents an empirical
relationship, and a clear connection between the actual products in
question and the data used needs to be made. AHAM noted that there is
little reason to support the concept that price learning through
manufacturing efficiencies should extend beyond the labor and materials
in the product itself, and that such a relationship should not hold for
other cost components. (AHAM, No. 31 at p. 10)
DOE notes that there is considerable empirical evidence of
consistent price declines for appliances in the past few decades.
Several studies examined retail prices of a wide range of household
appliances during different periods of time and showed that prices had
been steadily falling while efficiency had been increasing, for example
Dale, et al. (2009) \39\ and Taylor, et al. (2015).\40\ As mentioned in
Taylor and Fujita (2013),\41\ Federal agencies have adopted different
approaches to account for ``the changing future compliance costs that
might result from technological innovation or anticipated behavioral
changes.'' Given the limited data availability on historical
manufacturing costs broken by different components, DOE utilized the
PPI published by the BLS as a proxy for manufacturing costs to
represent the analyzed product as a whole.\42\ While products may
experience varying degrees of price learning during different product
stages, given that MREFs share similar cooling technologies with RF,
DOE applied the same learning rate developed for RF to MREFs. DOE
modeled the average learning rate based on the full historical PPI
series for ``household refrigerator and home freezer manufacturing'' to
capture the overall price evolution in relation to the cumulative
shipments. DOE also conducted sensitivity analyses that are based on a
particular segment of the PPI data to investigate the impact of
alternative product price projections (low price learning and high
price learning) in the NIA of this direct final rule. DOE further notes
that AHAM is a party to the Joint Agreement and is supportive of the
recommended standard adopted in this direct final rule.
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\39\ Dale, L., C. Antinori, M. McNeil, James E. McMahon, and
K.S. Fujita. Retrospective evaluation of appliance price trends.
Energy Policy. 2009. 37 pp. 597-605.
\40\ Taylor, M., C.A. Spurlock, and H.-C. Yang. Confronting
Regulatory Cost and Quality Expectations. An Exploration of
Technical Change in Minimum Efficiency Performance Standards. 2015.
Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United
States). Report No. LBNL-1000576. (last accessed June 30, 2023.)
Available at <a href="http://www.osti.gov/biblio/1235570/">www.osti.gov/biblio/1235570/</a> (last accessed June 30,
2023).
\41\ Taylor, M. and K.S. Fujita. Accounting for Technological
Change in Regulatory Impact Analyses: The Learning Curve Technique.
2013. Lawrence Berkeley National Lab (LBNL), Berkeley, CA (United
States). Report No. LBNL-6195E. Available at <a href="https://escholarship.org/uc/item/3c8709p4">https://escholarship.org/uc/item/3c8709p4</a> (last accessed March 24, 2024).
\42\ PPI is a proxy for manufacturing costs as certain effects
(such as market structure and competitive effects) could influence
PPI in a way that would not be reflected in manufacturing costs.
---------------------------------------------------------------------------

2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE is not aware of
any data that suggest the cost of installation changes as a function of
efficiency for MREFs. DOE therefore assumed that installation costs are
the same regardless of EL and do not impact the LCC or PBP. As a
result, DOE did not include installation costs in the LCC and PBP
analysis.
3. Annual Energy Consumption
For each sampled consumer, DOE determined the energy consumption
for MREFs at different efficiency levels using the approach described
previously in section IV.E of this document.

[[Page 38791]]

4. Energy Prices
Because marginal electricity price more accurately captures the
incremental savings associated with a change in energy use from higher
efficiency, it provides a better representation of incremental change
in consumer costs than average electricity prices. Therefore, DOE
applied average electricity prices for the energy use of the product
purchased in the no-new-standards case, and marginal electricity prices
for the incremental change in energy use associated with the other
efficiency levels considered.
DOE derived electricity prices in 2022 using data from EEI Typical
Bills and Average Rates reports. Based upon comprehensive, industry-
wide surveys, this semi-annual report presents typical monthly electric
bills and average kilowatt-hour costs to the customer as charged by
investor-owned utilities. For the residential sector, DOE calculated
electricity prices using the methodology described in Coughlin and
Beraki (2018).\43\
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\43\ Coughlin, K. and B. Beraki.2018. Residential Electricity
Prices: A Review of Data Sources and Estimation Methods. Lawrence
Berkeley National Lab. Berkeley, CA. Report No. LBNL-2001169.
Available at <a href="https://ees.lbl.gov/publications/residential-electricity-prices-review">https://ees.lbl.gov/publications/residential-electricity-prices-review</a>.
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DOE's methodology allows electricity prices to vary by sector,
region, and season. In the analysis, variability in electricity prices
is chosen to be consistent with the way the consumer economic and
energy use characteristics are defined in the LCC analysis. See chapter
8 of the direct final rule TSD for details.
To estimate energy prices in future years, DOE multiplied the 2022
energy prices by the projection of annual average price changes from
the Reference case in AEO2023, which has an end year of 2050.\44\ To
estimate price trends after 2050, the 2046-2050 average was used for
all years.
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\44\ EIA. Annual Energy Outlook 2023. Available at <a href="http://www.eia.gov/outlooks/aeo/">www.eia.gov/outlooks/aeo/</a> (last accessed November 29, 2023).
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5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance; maintenance costs are
associated with maintaining the operation of the product. Typically,
small incremental increases in product efficiency entail no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products. DOE is not aware of any data that suggest the cost
of repair or maintenance for MREFs changes as a function of efficiency.
DOE therefore assumed that these costs are the same regardless of EL
and do not impact the LCC or PBP. As a result, DOE did not include
maintenance and repair costs in the LCC and PBP analysis.
6. Product Lifetime
For MREFs, DOE used lifetime estimates from products that operate
using the same refrigeration technology: covered refrigerators and
refrigerator-freezers, based on the Refrigerators, Refrigerator-
Freezers, and Freezers direct final rule analysis. 89 FR 3026 (January
17, 2024). DOE estimated a maximum lifetime of 40 years for all product
classes and an average lifetime of 10.6 years for compact coolers and
14.6 years for full-size coolers. The weighted average lifetime over
the sample population, considering the market distribution, was 12.6
years. DOE also assumed that the probability function for the annual
survival of MREFs would take the form of a Weibull distribution. See
chapter 8 of the direct final rule TSD for a more detailed discussion.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households to estimate the present value of future operating cost
savings. DOE estimated a distribution of discount rates for MREFs based
on consumer financing costs and the opportunity cost of consumer funds.
DOE applies weighted average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\45\ The LCC analysis estimates net present value over the
lifetime of the product, so the appropriate discount rate will reflect
the general opportunity cost of household funds, taking this time scale
into account. Given the long-time horizon modeled in the LCC, the
application of a marginal interest rate associated with an initial
source of funds is inaccurate. Regardless of the method of purchase,
consumers are expected to continue to rebalance their debt and asset
holdings over the LCC analysis period, based on the restrictions
consumers face in their debt payment requirements and the relative size
of the interest rates available on debts and assets. DOE estimates the
aggregate impact of this rebalancing using the historical distribution
of debts and assets.
---------------------------------------------------------------------------

\45\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: transaction costs; risk premiums and
response to uncertainty; time preferences; interest rates at which a
consumer is able to borrow or lend. The implicit discount rate is
not appropriate for the LCC analysis because it reflects a range of
factors that influence consumer purchase decisions, rather than the
opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------

To establish residential discount rates for the LCC analysis, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
energy cost savings. It estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's triennial Survey of Consumer Finances
\46\ (``SCF'') starting in 1995 and ending in 2019. Using the SCF and
other sources, DOE developed a distribution of rates for each type of
debt and asset by income group to represent the rates that may apply in
the year in which amended standards would take effect. DOE assigned
each sample household a specific discount rate drawn from one of the
distributions. The average rate across all types of household debt and
equity and income groups, weighted by the shares of each type, is 4.2
percent. See chapter 8 of the direct final rule TSD for further details
on the development of consumer discount rates.
---------------------------------------------------------------------------

\46\ U.S. Board of Governors of the Federal Reserve System.
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010,
2013, 2016, and 2019. Available at <a href="https://www.federalreserve.gov/econresdata/scf/scfindex.htm">https://www.federalreserve.gov/econresdata/scf/scfindex.htm</a> (last accessed November 29, 2023).
---------------------------------------------------------------------------

8. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards).
For this direct final rule, DOE is using the efficiency
distribution by product class as provided by AHAM in response to a
notice of public meeting and availability of the preliminary technical
support document for MREFS. 87 FR 3229 (Jan. 21, 2022) (See AHAM, No.
18, pp. 2-5) DOE understands that this approach inherently assumes that
the rest of the MREF market has a similar distribution of efficiencies.
However, due to lack of efficiency data from non-AHAM members, DOE has
no reason to question that assumption. DOE also assumed that the
current distribution of product efficiencies would remain constant in
2029, and during the

[[Page 38792]]

analysis period, in the no-new-standards case.
The estimated market shares for the no-new-standards case for MREFs
are shown in Table IV.10. See chapter 8 of the direct final rule TSD
for further information on the derivation of the efficiency
distributions.
[GRAPHIC] [TIFF OMITTED] TR07MY24.018

The LCC Monte Carlo simulations draw from the efficiency
distributions and randomly assign an efficiency to the MREF purchased
by each sample household in the no-new-standards case. The resulting
percent shares within the sample match the market shares in the
efficiency distributions.
9. Payback Period Analysis
The payback period is the amount of time (expressed in years) it
takes the consumer to recover the additional installed cost of more-
efficient products, compared to baseline products, through energy cost
savings. Payback periods that exceed the life of the product mean that
the increased total installed cost is not recovered in reduced
operating expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first-year annual operating expenditures relative to the baseline. DOE
refers to this as a ``simple PBP'' because it does not consider changes
over time in operating cost savings. The PBP calculation uses the same
inputs as the LCC analysis when deriving first-year operating costs.
As noted previously, EPCA establishes a rebuttable presumption that
a standard is economically justified if the Secretary finds that the
additional cost to the consumer of purchasing a product complying with
an energy conservation standard level will be less than three times the
value of the first year's energy savings resulting from the standard,
as calculated under the applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE
determined the value of the first year's energy savings by calculating
the energy savings in accordance with the applicable DOE test
procedure, and multiplying those savings by the average energy price
projection for the year in which compliance with the amended standards
would be required.

G. Shipments Analysis

DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\47\
The shipments model takes an accounting approach, tracking market
shares of each product class and the vintage of units in the stock.
Stock accounting uses product shipments as inputs to estimate the age
distribution of in-service product stocks for all years. The age
distribution of in-service product stocks is a key input to
calculations of both the NES and NPV, because operating costs for any
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

\47\ DOE uses data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general,
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

DOE defined two broad MREF product categories (coolers and
combination cooler refrigeration products) and developed models to
estimate shipments for each category. DOE used various data and
assumptions to develop the shipments for each product class considered
in this rulemaking.
Given the limited available data sources on historical shipments of
coolers, DOE assumed a constant penetration rate of 13.3 percent in the
U.S. households throughout the analysis period based on online surveys
\48\ to estimate the annual shipments starting from
2016.49 50 DOE multiplied the estimated penetration by the
total number of households from the AEO2023, and then determined the
number of new shipments by dividing the total stock by the mean product
lifetime. DOE projected the annual shipments by incorporating the
lifetime distributions by product class and assuming that the growth of
new sales is consistent with the housing

[[Page 38793]]

projections from AEO2023. To estimate shipments prior to 2016, DOE
assumed a flat historical shipment trend at the 2016 level. With even
more limited available data sources on historical shipments of
combination cooler refrigeration products, DOE estimated total
shipments of combination cooler refrigeration products in 2014 to be
36,000 units, based on feedback from manufacturers from the October
2016 Direct Final Rule. DOE assumed sales would increase in line with
the increase in the number of households in AEO2023. Finally, DOE
incorporated the 2021 shipment data provided by AHAM (see AHAM, No. 18
at pp. 3, 5) \51\ to re-calibrate total shipments for each product
class considered in this rulemaking.
---------------------------------------------------------------------------

\48\ DOE also reviewed the recent release of the EIA 2020 RECS
(``RECS 2020''), which identified wine chillers in representative
U.S. households. DOE found that the penetration rate of wine
chillers in RECS 2020 is significantly lower compared to that
estimated by DOE for MREFs based on previous market surveys. Due to
the uncertainty on the breakdown of MREFs between wine chillers and
other miscellaneous refrigeration applications in the U.S. market,
DOE continued to use the 13.3 percent penetration rate for MREFs in
this direct final rule. However, DOE also modeled an alternative
shipments scenario based on the lower penetration rate of MREFs in
American homes derived from the RECS 2020 data. For more details on
this alternative scenario and the resulting NES and NPV results, see
chapter 9 and appendix 10C of the direct final rule TSD,
respectively.
\49\ Greenblatt, J.B., S.J. Young, H.-C. Yang, T. Long, B.
Beraki, S.K. Price, S. Pratt, H. Willem, L.-B. Desroches, and S.M.
Donovan. U.S. Residential Miscellaneous Refrigeration Products:
Results from Amazon Mechanical Turk Surveys. 2014. Lawrence Berkeley
National Laboratory: Berkeley, CA. Report No. LBNL-6537E.
\50\ Donovan, S.M., S.J. Young, and J.B. Greenblatt. Ice-Making
in the U.S.: Results from an Amazon Mechanical Turk Survey. Lawrence
Berkeley National Laboratory. Report No. LBNL-183899.
\51\ This shipments information was provided by AHAM in a
confidential document. The reference points to the public version of
this document, where confidential business information is redacted.
---------------------------------------------------------------------------

DOE used the efficiency distributions by product class to match the
data submitted by AHAM. DOE also assumed that the market share of each
product class (in relation to the total MREF shipments) matched the
market shares provided by AHAM. To estimate total MREF shipments, DOE
utilized the AHAM shipments data and AHAM-member information and
reviewed the TraQline data from 2020 Q1 to 2022 Q1 to estimate non-
AHAM-member shipments.\52\ Based on this approach, DOE's estimate of
the MREF shipments for the whole market was consistent with the total
number of shipments estimated using DOE's approach discussed earlier
and used in the March 2023 NOPR. Hence, DOE continued using the same
approach to develop the total MREF shipments in this direct final rule
but incorporated the product class breakdown provided by AHAM to re-
distribute the total shipments by product class.
---------------------------------------------------------------------------

\52\ DOE also collected and reviewed manufacturer interview data
but was unable to collect a representative sample that would allow
it to estimate non-AHAM-member shipments data.
---------------------------------------------------------------------------

H. National Impact Analysis

The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific efficiency levels.\53\
(``Consumer'' in this context refers to consumers of the product being
regulated.) DOE calculates the NES and NPV for the potential standard
levels considered based on projections of annual product shipments,
along with the annual energy consumption and total installed cost data
from the energy use and LCC analyses. For the present analysis, DOE
projected the energy savings, operating cost savings, product costs,
and NPV of consumer benefits over the lifetime of MREFs sold from 2029
through 2058.
---------------------------------------------------------------------------

\53\ The NIA accounts for impacts in the United States and U.S.
territories.
---------------------------------------------------------------------------

DOE evaluates the impacts of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each
product class in the absence of new or amended energy conservation
standards. DOE compares the no-new-standards case with projections
characterizing the market for each product class if DOE adopted new or
amended standards at specific energy efficiency levels (i.e., the TSLs
or standards cases) for that class. For the standards cases, DOE
considers how a given standard would likely affect the market shares of
products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses typical values
(as opposed to probability distributions) as inputs.
Table IV.11 summarizes the inputs and methods DOE used for the NIA
analysis for this direct final rule. Discussion of these inputs and
methods follows the table. See chapter 10 of the direct final rule TSD
for further details.
[GRAPHIC] [TIFF OMITTED] TR07MY24.019

1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.8 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes for the year of anticipated compliance with
an amended standard.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the

[[Page 38794]]

shipment-weighted efficiency for the year that standards are assumed to
become effective (2029). In this scenario, the market shares of
products in the no-new-standards case that do not meet the standard
under consideration would ``roll up'' to meet the new standard level,
and the market share of products above the standard would remain
unchanged.
In the absence of data on trends in efficiency, DOE assumed no
efficiency trend over the analysis period for both the no-new-standards
and standards cases. For a given case, market shares by efficiency
level were held fixed to their 2029 distribution.
2. National Energy Savings
The NES analysis involves a comparison of national energy
consumption of the considered products between each potential standards
case (``TSL'') and the case with no new or amended energy conservation
standards. DOE calculated the national energy consumption by
multiplying the number of units (stock) of each product (by vintage or
age) by the unit energy consumption (also by vintage). DOE calculated
annual NES based on the difference in national energy consumption for
the no-new-standards case and for each higher efficiency standard case.
DOE estimated energy consumption and savings based on site energy and
converted the electricity consumption and savings to primary energy
(i.e., the energy consumed by power plants to generate site
electricity) using annual conversion factors derived from AEO2023.
Cumulative energy savings are the sum of the NES for each year over the
timeframe of the analysis.
Use of higher-efficiency products is sometimes associated with a
direct rebound effect, which refers to an increase in utilization of
the product due to the increase in efficiency. DOE did not find any
data on the rebound effect specific to MREFs that would indicate that
consumers would alter their utilization of their product due to an
increase in efficiency. MREFs are typically plugged in and operate
continuously; therefore, DOE assumed a rebound rate of 0. DOE did not
receive any comments regarding this assumption in response to the March
2023 NOPR.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and
greenhouse gas and other emissions in the national impact analyses and
emissions analyses included in future energy conservation standards
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the
approaches discussed in the August 18, 2011 notice, DOE published a
statement of amended policy in which DOE explained its determination
that EIA's National Energy Modeling System (``NEMS'') is the most
appropriate tool for its FFC analysis and its intention to use NEMS for
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain,
multi-sector, partial equilibrium model of the U.S. energy sector \54\
that EIA uses to prepare its Annual Energy Outlook. The FFC factors
incorporate losses in production and delivery in the case of natural
gas (including fugitive emissions) and additional energy used to
produce and deliver the various fuels used by power plants. The
approach used for deriving FFC measures of energy use and emissions is
described in appendix 10B of the direct final rule TSD.
---------------------------------------------------------------------------

\54\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009.
Available at <a href="http://www.eia.gov/analysis/pdfpages/0581">www.eia.gov/analysis/pdfpages/0581</a>(2009)index.php (last
accessed November 29, 2023).
---------------------------------------------------------------------------

3. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are (1) total annual installed cost, (2) total
annual operating costs (energy costs and repair and maintenance costs),
and (3) a discount factor to calculate the present value of costs and
savings. DOE calculates net savings each year as the difference between
the no-new-standards case and each standards case in terms of total
savings in operating costs versus total increases in installed costs.
DOE calculates operating cost savings over the lifetime of each product
shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed MREF
price trends based on an experience curve calculated using historical
PPI data. DOE applied the same trends to project prices for each
product class at each considered efficiency level including baseline.
By 2058, which is the end date of the projection period, the average
price of single-speed compressor MREFs is projected to drop 33.2
percent and the average price of MREFs with a variable-speed compressor
is projected to drop about 33.8 percent relative to 2029.
To evaluate the effect of uncertainty regarding the price trend
estimates, DOE investigated the impact of different product price
projections on the consumer NPV for the considered TSLs for MREFs. In
addition to the default price trend, DOE considered high and low-price-
decline sensitivity cases. For the single-speed compressor MREFs and
the non-variable- speed controls portion of MREFs, DOE estimated the
high- price- decline and the low- price- decline scenarios based on
household refrigerator and home freezer PPI data limited to the period
between the period 1981-2008 and 2009-2022, respectively. For the
variable-speed controls portion of MREFs, DOE estimated the high price
decline and the low- price- decline scenarios based on an exponential
trend line fit of the semiconductor PPI between the period 1994-2022
and 1967-1993, respectively. The derivation of these price trends is
described in Chapter 8 and the results of these sensitivity cases are
given in appendix 10C of the direct final rule TSD.
The energy cost savings are calculated using the estimated energy
savings in each year and the projected price of the appropriate form of
energy. To estimate energy prices in future years, DOE multiplied the
average regional energy prices by the projection of annual national-
average residential energy price changes in the Reference case from
AEO2023, which has an end year of 2050. To estimate price trends after
2050, the 2046-2050 average was used for all years. As part of the NIA,
DOE also analyzed scenarios that used inputs from variants of the
AEO2023 Reference case that have lower and higher economic growth.
Those cases have lower and higher energy price trends compared to the
Reference case. The resulting consumer NPV for the low-economic growth
scenario, combined with the low-price-decline scenario is up to 24%
lower compared to the Reference case scenario, while the consumer NPV
for the high-economic growth scenario combined with the high-price-
decline scenario is up to 12% higher compared to the Reference case.
See appendix 10C of the direct final rule TSD for more details.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
direct final rule, DOE estimated the NPV of consumer benefits using
both a 3-percent and a 7-percent real discount rate. DOE uses these
discount rates in accordance with guidance provided by the Office of
Management and Budget (``OMB'') to Federal agencies on the development
of regulatory analysis.\55\

[[Page 38795]]

The discount rates for the determination of NPV are in contrast to the
discount rates used in the LCC analysis, which are designed to reflect
a consumer's perspective. The 7-percent real value is an estimate of
the average before-tax rate of return to private capital in the U.S.
economy. The 3-percent real value represents the ``social rate of time
preference,'' which is the rate at which society discounts future
consumption flows to their present value.
---------------------------------------------------------------------------

\55\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at
<a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf</a> (last accessed November 10, 2023).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

In analyzing the potential impact of new or amended energy
conservation standards on consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a new or amended national standard. The purpose of a
subgroup analysis is to determine the extent of any such
disproportional impacts. DOE evaluates impacts on particular subgroups
of consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. For this direct final rule,
DOE analyzed the impacts of the considered standard levels on senior-
only households. Low-income consumers were not considered in the
subgroup analysis, as MREFs are not products generally used by this
subgroup. Based on the TraQline wine chiller data, less than 4 percent
of MREF owners are below the Federal household income threshold for
poverty. The analysis used a subset of the TraQline consumer sample
composed of households that meet the criteria for this subgroup. DOE
used the LCC and PBP computer model to estimate the impacts of the
considered efficiency levels on senior-only households. Chapter 11 in
the direct final rule TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on manufacturers of MREFs and to estimate
the potential impacts of such standards on employment and manufacturing
capacity. The MIA has both quantitative and qualitative aspects and
includes analyses of projected industry cash flows, the INPV,
investments in research and development (``R&D'') and manufacturing
capital, and domestic manufacturing employment. Additionally, the MIA
seeks to determine how amended energy conservation standards might
affect manufacturing employment, capacity, and competition, as well as
how standards contribute to overall regulatory burden. Finally, the MIA
serves to identify any disproportionate impacts on manufacturer
subgroups, including small business manufacturers.
The quantitative part of the MIA primarily relies on the GRIM, an
industry cash flow model with inputs specific to this rulemaking. The
key GRIM inputs include data on the industry cost structure, unit
production costs, product shipments, manufacturer markups, and
investments in R&D and manufacturing capital required to produce
compliant products. The key GRIM outputs are the INPV, which is the sum
of industry annual cash flows over the analysis period, discounted
using the industry-weighted average cost of capital, and the impact on
domestic manufacturing employment. The model uses standard accounting
principles to estimate the impacts of more-stringent energy
conservation standards on a given industry by comparing changes in INPV
and domestic manufacturing employment between a no-new-standards case
and the various standards cases (i.e., ``TSLs''). To capture the
uncertainty relating to manufacturer pricing strategies following
amended standards, the GRIM estimates a range of possible impacts under
different manufacturer markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as a potential standard's impact on manufacturing capacity,
competition within the industry, the cumulative impact of other DOE and
non-DOE regulations, and impacts on manufacturer subgroups. The
complete MIA is outlined in chapter 12 of the direct final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the MREF manufacturing industry
based on the market and technology assessment and publicly-available
information. This included a top-down analysis of MREF manufacturers
that DOE used to derive preliminary financial inputs for the GRIM
(e.g., revenues; materials, labor, overhead, and depreciation expenses;
selling, general, and administrative expenses (``SG&A''); and R&D
expenses). DOE also used public sources of information to further
calibrate its initial characterization of the MREF manufacturing
industry, including corporate annual reports filed by publicly traded
manufacturers in primarily home appliance manufacturing and MREFs, the
U.S. Census Bureau's Annual Survey of Manufactures (``ASM''),\56\ and
reports from D&B Hoovers.\57\
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\56\ U.S. Census Bureau, Annual Survey of Manufactures.
``Summary Statistics for Industry Groups and Industries in the U.S.
(2021).'' Available at <a href="http://www.census.gov/programs-surveys/asm/data.html">www.census.gov/programs-surveys/asm/data.html</a>
(last accessed July 5, 2023).
\57\ The D&B Hoovers login is available at <a href="http://app.dnbhoovers.com">app.dnbhoovers.com</a>
(last accessed November 29, 2023).
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In Phase 2 of the MIA, DOE prepared a framework industry cash-flow
analysis to quantify the potential impacts of amended energy
conservation standards. The GRIM uses several factors to determine a
series of annual cash flows starting with the announcement of the
standard and extending over a 30-year period following the compliance
date of the standard. These factors include annual expected revenues,
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures.
In general, energy conservation standards can affect manufacturer cash
flow in three distinct ways: (1) creating a need for increased
investment, (2) raising production costs per unit, and (3) altering
revenue due to higher per-unit prices and changes in sales volumes.
In addition, during Phase 2, DOE developed interview guides to
distribute to manufacturers of MREFs in order to develop other key GRIM
inputs, including product and capital conversion costs, and to gather
additional information on the anticipated effects of energy
conservation standards on revenues, direct employment, capital assets,
industry competitiveness, and subgroup impacts.
In Phase 3 of the MIA, DOE conducted structured, detailed
interviews with representative manufacturers. During these interviews,
DOE discussed engineering, manufacturing, procurement, and financial
topics to validate assumptions used in the GRIM and to identify key
issues or concerns. As part of Phase 3, DOE also evaluated subgroups of
manufacturers that may be disproportionately impacted by amended
standards or that may not be accurately represented by the average cost
assumptions used to develop the industry cash flow analysis. Such
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers, niche players, and/or manufacturers exhibiting a
cost structure that largely differs from the industry average. DOE
identified one subgroup for a separate impact analysis:

[[Page 38796]]

small business manufacturers. The small business subgroup is discussed
in chapter 12 of the direct final rule TSD.
2. Government Regulatory Impact Model and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to new
or amended standards that result in a higher or lower industry value.
The GRIM uses a standard, annual discounted cash-flow analysis that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from an amended energy conservation standard. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2024 (the base year of the analysis) and continuing to
2058. DOE calculated INPVs by summing the stream of annual discounted
cash flows during this period. For manufacturers of MREFs, DOE used a
real discount rate of 7.7 percent, which was derived from industry
financials and then modified according to feedback received during
manufacturer interviews.
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. The difference in INPV between the no-new-standards
case and a standards case represents the financial impact of the new or
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis, results of the shipments analysis, and information gathered
from industry stakeholders during the course of manufacturer
interviews. The GRIM results are presented in section V.B.2 of this
document. Additional details about the GRIM, the discount rate, and
other financial parameters can be found in chapter 12 of the direct
final rule TSD.
a. Manufacturer Production Costs
Manufacturing more efficient products is typically more expensive
than manufacturing baseline products due to the use of more complex
components, which are typically more costly than baseline components.
The changes in the MPCs of covered products can affect the revenues,
gross margins, and cash flow of the industry. For its analysis in this
direct final rule, DOE used a combined efficiency level and design
option approach. First, an efficiency-level approach was used to
establish an analysis tied to existing products on the market. A design
option approach was then used to extend the analysis through ``built-
down'' efficiency levels and ``built-up'' efficiency levels where there
were gaps in the range of efficiencies of products that were reverse
engineered.
For a complete description of the MPCs, see section IV.C of this
document and chapter 5 of the direct final rule TSD.
b. Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments by
efficiency level. Changes in sales volumes and efficiency mix over time
can significantly affect manufacturer finances. For this analysis, the
GRIM uses the NIA's annual shipment projections derived from the
shipments analysis from 2024 (the base year) to 2058 (the end year of
the analysis period). See section IV.G of this document and chapter 9
of the direct final rule TSD for additional details.
c. Product and Capital Conversion Costs
New or amended energy conservation standards could cause
manufacturers to incur conversion costs to bring their production
facilities and product designs into compliance. DOE evaluated the level
of conversion-related expenditures that would be needed to comply with
each considered efficiency level in each product class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
product conversion costs; and (2) capital conversion costs. Product
conversion costs are investments in research, development, testing,
marketing, and other non-capitalized costs necessary to make product
designs comply with new or amended energy conservation standards.
Capital conversion costs are investments in property, plant, and
equipment necessary to adapt or change existing production facilities
such that new compliant product designs can be fabricated and
assembled.
Product Conversion Costs
DOE based its estimates of the product conversion costs necessary
to meet the varying efficiency levels on information from manufacturer
interviews, the design paths analyzed in the engineering analysis, the
prior MREF rulemaking analysis (see 81 FR 75194), and market share and
model count information. Generally, manufacturers indicated a
preference to meet amended standards with design options that were
direct and relatively straightforward component swaps. However, at
higher efficiency levels, manufacturers anticipated the need for
platform redesigns. Efficiency levels that significantly altered
cabinet construction would require very large investments to update
designs. Manufacturers noted that increasing foam thickness would
require complete redesign of the cabinet, liner, and shelving due to
loss of interior volume. Additionally, extensive use of VIPs would
require redesign of the cabinet to maximize the benefits of VIPs.
Capital Conversion Costs
DOE relied on information from manufacturer interviews and the
engineering analysis to evaluate the level of capital conversion costs
would likely incur at the considered standard levels. During
interviews, manufacturers provided estimates and descriptions of the
required tooling changes that would be necessary to upgrade product
lines to meet the various efficiency levels. Based on these inputs, DOE
modeled incremental capital conversion costs for efficiency levels that
could be reached with individual components swaps. However, based on
feedback, DOE modeled higher capital conversion costs when
manufacturers would have to redesign their existing product platforms.
DOE used information from manufacturer interviews to determine the cost
of the manufacturing equipment and tooling necessary to implement
complete redesigns.
Increases in foam thickness require either reductions to interior
volume or increases to exterior volume. Many MREFs are sized to fit
standard widths, meaning any increase in foam thickness would likely
result in the loss of interior volume. Additionally, many MREFs are
sized to maximize storage of specific products (e.g., canned beverages
or wine bottles) and small changes in wall thickness could dramatically
decrease the unit storage capacity for those products. The reduction of
interior volume has significant consequences for manufacturing.
Redesigning the cabinet to increase the effectiveness of insulation
likely requires manufacturers to update designs and tooling associated
with the interior of the product. This could require investing in new
tooling to accommodate changes to the liner, shelving, drawers, and
doors.
To minimize reductions to interior volume, manufacturers may choose
to adopt VIP technology. Extensive incorporation of VIPs into designs
requires significant upfront capital due to differences in the
handling, storing, and manufacturing of VIPs as compared to typical
polyurethane foams. VIPs are

[[Page 38797]]

relatively fragile and must be protected from punctures and rough
handling. If VIPs have leaks of any size, the panel will eventually
lose much of its thermal insulative properties and structural strength.
If already installed within a cabinet wall, a punctured VIP may
significantly reduce the structural strength of the MREF cabinet. As a
result, VIPs require careful handling and installation. Manufacturers
noted the need to allocate special warehouse space to ensure the VIPs
are not jostled or roughly handled in the manufacturing environment.
VIPs require significantly more warehouse space than polyurethane
foams. The application of VIPs can be difficult and may require
investment in hard-tooling or robotic systems to ensure the panels are
positioned properly within the cabinet or door. Manufacturers noted
that producing cabinets with VIPs are much more labor and time
intensive than producing cabinets with typical polyurethane foams and
the increase in labor can affect total production capacity.
To develop industry conversion cost estimates, DOE estimated the
number of product platforms in DOE's CCD \58\ and California Energy
Commission's Modernized Appliance Efficiency Database System
(``MAEDbS'') \59\ and scaled up the product and capital conversion
costs associated with the number of product platforms that would
require updating at each efficiency level. DOE adjusted the conversion
cost estimates developed in support of the March 2023 NOPR to 2022$ for
this analysis.
---------------------------------------------------------------------------

\58\ U.S. Department of Energy's Compliance Certification
Database is available at <a href="http://www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A*">www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A*</a> (last accessed August 17, 2023).
\59\ California Energy Commission's Modernized Appliance
Efficiency Database System is available at
<a href="http://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx">cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx</a> (last
accessed August 17, 2023). DOE used this database to gather product
information not provided in DOE's CCD (e.g., manufacturer names).
---------------------------------------------------------------------------

DOE acknowledges that manufacturers may follow different design
paths to reach the various efficiency levels analyzed. An individual
manufacturer's investments depend on a range of factors, including the
company's current product offerings and product platforms, existing
production facilities and infrastructure, and make vs. buy decisions
for components. DOE's conversion cost methodology incorporated feedback
from all manufacturers that took part in interviews and extrapolated
industry values. While industry average values may not represent any
single manufacturer, DOE's model provides reasonable estimates of
industry-level investments.
In general, DOE assumes all conversion-related investments occur
between the year of publication of the direct final rule and the year
by which manufacturers must comply with the new standard. The
conversion cost figures used in the GRIM can be found in section V.B.2
of this document. For additional information on the estimated product
and capital conversion costs, see chapter 12 of the direct final rule
TSD.
d. Manufacturer Markup Scenarios
MSPs include direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs) and all non-production
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate
the MSPs in the GRIM, DOE applied manufacturer markups to the MPCs
estimated in the engineering analysis for each product class and
efficiency level. Modifying these manufacturer markups in the standards
case yields different sets of impacts on manufacturers. For the MIA,
DOE modeled two standards case scenarios to represent uncertainty
regarding the potential impacts on prices and profitability for
manufacturers following the implementation of amended energy
conservation standards: (1) a preservation-of-gross-margin-percentage
scenario; and (2) a preservation-of-operating-profit scenario. These
scenarios lead to different manufacturer markup values that, when
applied to the MPCs, result in varying revenue and cash flow impacts.
Under the preservation-of-gross-margin-percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within a product class. As manufacturer production
costs increase with efficiency, this scenario implies that the per-unit
dollar profit will increase. DOE assumed a gross margin percentage of
20 percent for FCC and 28 percent for all other product classes.\60\
Manufacturers tend to believe it is optimistic to assume that they
would be able to maintain the same gross margin percentage as their
production costs increase, particularly for minimally efficient
products. Therefore, this scenario represents a high bound of industry
profitability under an amended energy conservation standard.
---------------------------------------------------------------------------

\60\ The gross margin percentages of 20 percent and 28 percent
are based on manufacturer markups of 1.25 and 1.38 percent,
respectively.
---------------------------------------------------------------------------

In the preservation-of-operating-profit scenario, as the cost of
production goes up under a standards case, manufacturers are generally
required to reduce their manufacturer markups to a level that maintains
base-case operating profit. DOE implemented this scenario in the GRIM
by lowering the manufacturer markups at each TSL to yield approximately
the same earnings before interest and taxes in the standards case as in
the no-new-standards case in the year after the expected compliance
date of the amended standards. The implicit assumption behind this
scenario is that the industry can only maintain its operating profit in
absolute dollars after the standard takes effect.
A comparison of industry financial impacts under the two
manufacturer markup scenarios is presented in section V.B.2.a of this
document.
3. Discussion of MIA Comments
For this direct final rule, DOE considered comments it had received
regarding its MIA presented in the March 2023 NOPR. The approach used
for this direct final rule is largely the same approach DOE had used
for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM stated that it cannot
comment on the accuracy of DOE's approach for including how
manufacturers might or might not recover potential investments (i.e.,
the accuracy of DOE's manufacturer markup scenarios) but that AHAM
supports DOE's intent in the microwave ovens supplemental notice of
proposed rulemaking (``SNOPR'') (``August 2022 SNOPR'') energy
conservation standards rulemaking to include those costs and
investments in the actual costs of products and retail prices. (AHAM,
No. 31 at p. 12) AHAM urged DOE to apply the same conceptual approach
used in the August 2022 SNOPR in the MREF rulemaking and all future
rulemakings (i.e., to analyze a conversion-cost-recovery manufacturer
markup scenario). (Id.)
As discussed in section IV.J.2.d of this document, DOE modeled two
standards-case manufacturer markup scenarios to represent the
uncertainty regarding the potential impacts on prices and profitability
for manufacturers following the implementation of amended energy
conservation standards. For the March 2023 NOPR, DOE applied the
preservation-of-gross-margin-percentage scenario to reflect an upper
bound of industry profitability and a preservation-of-operating-profit
scenario

[[Page 38798]]

to reflect a lower bound of industry profitability under amended
standards. DOE used these scenarios to reflect the range of realistic
profitability impacts under more stringent standards. Manufacturing
more efficient MREFs is generally more expensive than manufacturing
baseline MREFs, as reflected by the MPCs estimated in the engineering
analysis. Under the preservation-of-gross-margin scenario for MREFs,
incremental increases in MPCs at higher efficiency levels result in an
increase in per-unit dollar profit per unit sold. In interviews,
manufacturers stated the industry relies on competitive pricing, so
they would likely not increase their manufacturer markups that would
allow them to recover their full investments. The preservation-of-
gross-margin-scenario reflects an upper bound of industry profitability
in which manufacturers would be able to maintain the same amount of
profit as a percentage of revenues at all efficiency levels within a
product class. Applying the approach used in the August 2022 SNOPR
(i.e., a conversion-cost-recovery scenario) would result in the MREF
industry increasing manufacturer markups under amended standards. Based
on information gathered during confidential interviews in support of
the March 2023 NOPR, DOE does not expect that the MREF industry would
increase manufacturer markups under an amended standard. Furthermore,
in response to the March 2023 NOPR, DOE did not receive any public or
confidential data indicating that industry would increase manufacturer
markups in response to more stringent standards. Therefore, DOE used
the same manufacturer markup scenarios from the March 2023 NOPR for
this direct final rule analysis.
In response to the March 2023 NOPR, AHAM commented the cumulative
regulatory burden is significant for home appliance manufacturers when
needing to redesign products and product lines for the proposed levels
for MREFs, for consumer clothes dryers, residential clothes washers,
consumer conventional cooking products, dishwashers, RF, and the
finalized levels for room air conditioners and microwave ovens. (Id. at
p. 13). AHAM asserted that engineers will therefore need to spend all
their time redesigning products to meet more stringent energy
efficiency standards, pulling resources from other development efforts
and business priorities. AHAM suggested that DOE could reduce
cumulative regulatory burden by spacing out the timing of final rules,
allowing more lead time by delaying the publication of final rules in
the Federal Register after they have been issued, and reducing the
stringency of standards such that fewer products would require
redesign. (Id. at p. 14)
DOE analyzes cumulative regulatory burden in accordance with
section 13(g) of the Process Rule. DOE details the rulemakings and
expected conversion expenses of Federal energy conservation standards
that could impact MREF original equipment manufacturers (``OEMs'') that
take effect approximately 3 years before and after the 2029 compliance
date in section V.B.2.e of this document. As shown in Table V.23 in
section V.B.2.e of this document, DOE considers the potential
cumulative regulatory burden from other DOE energy conservation
standard rulemakings for consumer clothes dryers, residential clothes
washers, consumer conventional cooking products, dishwashers, RF, room
air conditioners, and microwave ovens in this direct final rule
analysis.
Regarding AHAM's suggestion about spacing out the timing of final
rules for home appliance rulemakings, DOE has statutory requirements
under EPCA on the timing of rulemakings. For consumer clothes dryers,
residential clothes washers, consumer conventional cooking products,
dishwashers, RF, room air conditioners, and microwave ovens, amended
standards apply to covered products manufactured 3 years after the date
on which any new or amended standards are published. (42 U.S.C.
6295(m)(4)(A)(i)) For MREFs, amended standards apply 5 years after the
date on which any new or amended standard is published. (42 U.S.C.
6295(l)(2)) And the multi-product Joint Agreement, where stakeholders
can recommend different compliance dates under DOE's direct final rule
authority, stated ``jointly recommended compliance dates will achieve
the overall energy and economic benefits of this agreement while
allowing necessary lead-times for manufacturers to redesign products
and retool manufacturing plants to meet the recommended standards
across product categories.'' (Joint Agreement, No. 34 at p. 2) The
staggered compliance dates between the statutorily-required dates and
the dates recommended in the Joint Agreement help mitigate
manufacturers' concerns resource allocation and concurrent amended
standards. See section II.B.4 of this document for compliance dates of
rulemakings recommended in the Joint Agreement.
In response to the March 2023 NOPR, the Appliance Standards
Awareness Project (``ASAP'') et al.\61\ commented that DOE may have
overestimated the decrease in INPV, and described some perceived
inconsistencies. ASAP et al. pointed out that although DOE estimated a
10 percent reduction in shipments based on a 10 percent increase in
production cost, ignoring the efficiency elasticity, the shipments
decline should be no more than 4.5 percent at the compliance year.
(ASAP et al., No. 32 at pp. 1-2) In response to this comment, DOE re-
evaluated its base assumptions and corrected its shipments estimates.
The reduction in shipments in the projected compliance year for the
Recommended TSL (i.e., TSL 4) is now estimated to be 3.4 percent. For
more details, see chapter 9 of the direct final rule TSD.
---------------------------------------------------------------------------

\61\ ``ASAP et al.'' refers to a joint comment from Appliance
Standards Awareness Project, American Council for an Energy-
Efficient Economy, National Consumer Law Center, New York State
Energy Research and Development Authority, and Northwest Energy
Efficiency Alliance.
---------------------------------------------------------------------------

K. Emissions Analysis

The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO<INF>2</INF>, NO<INF>X</INF>, SO<INF>2</INF>, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH<INF>4</INF> and
N<INF>2</INF>O, as well as the reductions in emissions of other gases
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion.
The analysis of electric power sector emissions of CO<INF>2</INF>,
NO<INF>X</INF>, SO<INF>2</INF>, and Hg uses emissions intended to
represent the marginal impacts of the change in electricity consumption
associated with amended or new standards. The methodology is based on
results published for the AEO, including a set of side cases that
implement a variety of efficiency-related policies. The methodology is
described in appendix 13A in the direct final rule TSD. The analysis
presented in this document uses projections from AEO2023. Power sector
emissions of CH<INF>4</INF> and N<INF>2</INF>O from fuel combustion are
estimated using Emission Factors for Greenhouse Gas Inventories
published by the EPA.\62\
---------------------------------------------------------------------------

\62\ Available at <a href="http://www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf">www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf</a> (last accessed November 12,
2023).
---------------------------------------------------------------------------

FFC upstream emissions, which include emissions from fuel
combustion during extraction, processing, and transportation of fuels,
and ``fugitive''

[[Page 38799]]

emissions (direct leakage to the atmosphere) of CH<INF>4</INF> and
CO<INF>2</INF>, are estimated based on the methodology described in
chapter 15 of the direct final rule TSD.
The emissions intensity factors are expressed in terms of physical
units per MWh or MMBtu of site energy savings. For power sector
emissions, specific emissions intensity factors are calculated by
sector and end use. Total emissions reductions are estimated using the
energy savings calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
DOE's no-new-standards case for the electric power sector reflects
the AEO, which incorporates the projected impacts of existing air
quality regulations on emissions. AEO2023 reflects, to the extent
possible, laws and regulations adopted through mid-November 2022,
including the emissions control programs discussed in the following
paragraphs, and the Inflation Reduction Act.\63\ SO<INF>2</INF>
emissions from affected electric generating units (``EGUs'') are
subject to nationwide and regional emissions cap-and-trade programs.
Title IV of the Clean Air Act sets an annual emissions cap on
SO<INF>2</INF> for affected EGUs in the 48 contiguous States and the
District of Columbia (``DC''). (42 U.S.C. 7651 et seq.) SO<INF>2</INF>
emissions from numerous States in the eastern half of the United States
are also limited under the Cross-State Air Pollution Rule (``CSAPR'').
76 FR 48208 (Aug. 8, 2011). CSAPR requires these States to reduce
certain emissions, including annual SO<INF>2</INF> emissions, and went
into effect as of January 1, 2015.\64\ The AEO incorporates
implementation of CSAPR, including the update to the CSAPR ozone season
program emission budgets and target dates issued in 2016. 81 FR 74504
(Oct. 26, 2016). Compliance with CSAPR is flexible among EGUs and is
enforced through the use of tradable emissions allowances. Under
existing EPA regulations, for states subject to SO<INF>2</INF>
emissions limits under CSAPR, any excess SO<INF>2</INF> emissions
allowances resulting from the lower electricity demand caused by the
adoption of an efficiency standard could be used to permit offsetting
increases in SO<INF>2</INF> emissions by another regulated EGU.
---------------------------------------------------------------------------

\63\ For further information, see the Assumptions to AEO2023
report that sets forth the major assumptions used to generate the
projections in the Annual Energy Outlook. Available at <a href="http://www.eia.gov/outlooks/aeo/assumptions/">www.eia.gov/outlooks/aeo/assumptions/</a> (last accessed Nov. 22, 2023).
\64\ CSAPR requires states to address annual emissions of
SO<INF>2</INF> and NO<INF>X</INF>, precursors to the formation of
fine particulate matter (``PM<INF>2.5</INF>'') pollution, in order
to address the interstate transport of pollution with respect to the
1997 and 2006 PM<INF>2.5</INF> National Ambient Air Quality
Standards (``NAAQS''). CSAPR also requires certain states to address
the ozone season (May-September) emissions of NO<INF>X</INF>, a
precursor to the formation of ozone pollution, in order to address
the interstate transport of ozone pollution with respect to the 1997
ozone NAAQS. 76 FR 48208 (Aug. 8, 2011). EPA subsequently issued a
supplemental rule that included an additional five states in the
CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011)
(Supplemental Rule), and EPA issued the CSAPR Update for the 2008
ozone NAAQS. 81 FR 74504 (Oct. 26, 2016).
---------------------------------------------------------------------------

However, beginning in 2016, SO<INF>2</INF> emissions began to fall
as a result of the Mercury and Air Toxics Standards (``MATS'') for
power plants.\65\ 77 FR 9304 (Feb. 16, 2012). The final rule
establishes power plant emission standards for mercury, acid gases, and
non-mercury metallic toxic pollutants. Because of the emissions
reductions under the MATS, it is unlikely that excess SO<INF>2</INF>
emissions allowances resulting from the lower electricity demand would
be needed or used to permit offsetting increases in SO<INF>2</INF>
emissions by another regulated EGU. Therefore, energy conservation
standards that decrease electricity generation will generally reduce
SO<INF>2</INF> emissions. DOE estimated SO<INF>2</INF> emissions
reduction using emissions factors based on AEO2023.
---------------------------------------------------------------------------

\65\ In order to continue operating, coal power plants must have
either flue gas desulfurization or dry sorbent injection systems
installed. Both technologies, which are used to reduce acid gas
emissions, also reduce SO<INF>2</INF> emissions.
---------------------------------------------------------------------------

CSAPR also established limits on NO<INF>X</INF> emissions for
numerous States in the eastern half of the United States. Energy
conservation standards would have little effect on NO<INF>X</INF>
emissions in those States covered by CSAPR emissions limits if excess
NO<INF>X</INF> emissions allowances resulting from the lower
electricity demand could be used to permit offsetting increases in
NO<INF>X</INF> emissions from other EGUs. In such case, NO<INF>X</INF>
emissions would remain near the limit even if electricity generation
goes down. Depending on the configuration of the power sector in the
different regions and the need for allowances, however, NO<INF>X</INF>
emissions might not remain at the limit in the case of lower
electricity demand. That would mean that standards might reduce
NO<INF>X</INF> emissions in covered States. Despite this possibility,
DOE has chosen to be conservative in its analysis and has maintained
the assumption that standards will not reduce NO<INF>X</INF> emissions
in States covered by CSAPR. Standards would be expected to reduce
NO<INF>X</INF> emissions in the States not covered by CSAPR. DOE used
AEO2023 data to derive NO<INF>X</INF> emissions factors for the group
of States not covered by CSAPR.
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, DOE's energy conservation
standards would be expected to slightly reduce Hg emissions. DOE
estimated mercury emissions reduction using emissions factors based on
AEO2023, which incorporates the MATS.

L. Monetizing Emissions Impacts

As part of the development of this direct final rule, for the
purpose of complying with the requirements of Executive Order 12866,
DOE considered the estimated monetary benefits from the reduced
emissions of CO<INF>2,</INF> CH<INF>4</INF>, N<INF>2</INF>O,
NO<INF>X,</INF> and SO<INF>2</INF> that are expected to result from
each of the TSLs considered. In order to make this calculation
analogous to the calculation of the NPV of consumer benefit, DOE
considered the reduced emissions expected to result over the lifetime
of products shipped in the projection period for each TSL. This section
summarizes the basis for the values used for monetizing the emissions
benefits and pr

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