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Rule2024-23906

Energy Conservation Program: Energy Conservation Standards for Oil, Electric, and Weatherized Gas Consumer Furnaces

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Published

October 18, 2024

Effective

November 18, 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 non- weatherized oil-fired furnaces ("NWOFs"), mobile home oil-fired furnaces ("MHOFs"), weatherized gas furnaces ("WGFs"), weatherized oil-fired furnaces ("WOFs"), and electric furnaces ("EFs"). EPCA also requires the U.S. Department of Energy ("DOE") to periodically review its existing standards to determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would result in significant energy savings. In this final determination, DOE has determined that the energy conservation standards for EFs, NWOFs, MHOFs, WOFs, and WGFs do not need to be amended.

Full Text

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[Federal Register Volume 89, Number 202 (Friday, October 18, 2024)]
[Rules and Regulations]
[Pages 84028-84063]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23906]

[[Page 84027]]

Vol. 89

Friday,

No. 202

October 18, 2024

Part IV

Department of Energy

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10 CFR Part 430

Energy Conservation Program: Energy Conservation Standards for Oil,
Electric, and Weatherized Gas Consumer Furnaces; Final Rule

Federal Register / Vol. 89 , No. 202 / Friday, October 18, 2024 /
Rules and Regulations

[[Page 84028]]

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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2021-BT-STD-0031]
RIN 1904-AF19

Energy Conservation Program: Energy Conservation Standards for
Oil, Electric, and Weatherized Gas Consumer Furnaces

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

ACTION: Final determination.

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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 non-
weatherized oil-fired furnaces (``NWOFs''), mobile home oil-fired
furnaces (``MHOFs''), weatherized gas furnaces (``WGFs''), weatherized
oil-fired furnaces (``WOFs''), and electric furnaces (``EFs''). EPCA
also requires the U.S. Department of Energy (``DOE'') to periodically
review its existing standards to determine whether more-stringent,
amended standards would be technologically feasible and economically
justified, and would result in significant energy savings. In this
final determination, DOE has determined that the energy conservation
standards for EFs, NWOFs, MHOFs, WOFs, and WGFs do not need to be
amended.

DATES: The effective date of this final determination is November 18,
2024.

ADDRESSES: The docket for this activity, 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-2021-BT-STD-0031">www.regulations.gov/docket/EERE-2021-BT-STD-0031</a>. The docket web page contains instructions on how
to access all documents, including public comments, in the docket.

FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, 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:
(240) 597-6737. Email: <a href="/cdn-cgi/l/email-protection#f9b88989959098979a9caa8d98979d988b9d8ac598d9918b9c9fc4" mailto:Questions@ee.doe.gov">[email&#160;protected]</a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#3667435345425f5958457653531852595318515940">[email&#160;protected]</a></a>.
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-4798. Email: <a href="/cdn-cgi/l/email-protection#6326110a004d30170210230b124d070c064d040c15">[email&#160;protected]</a>.
For further information on how to review the docket, contact the
Appliance and Equipment Standards Program staff at (202) 287-1445 or by
email: <a href="/cdn-cgi/l/email-protection#9fdeefeff3f6fef1fcfaccebfef1fbfeedfbeca3febff7edfaf9a2" mailto:Questions@ee.doe.gov">[email&#160;protected]</a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#80d1f5e5f3f4e9efeef3c0e5e5aee4efe5aee7eff6">[email&#160;protected]</a></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Final Determination
II. Introduction
A. Authority
B. Background
1. Current Standards
2. Current Rulemaking History
III. General Discussion and Rationale
A. General Comments
1. Comments Supporting Proposed Determination
2. Comments Opposing Proposed Determination
3. Other Topics
B. Scope of Coverage and Product Classes
C. Test Procedure
D. Standby Mode and Off Mode
E. Technological Feasibility
1. General Considerations
2. Maximum Technologically Feasible Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Cost-Effectiveness
H. Further Considerations
1. Economic Impact on Manufacturers and Consumers
2. Savings in Operating Costs Compared To Increase in Price
3. Energy Savings
4. Lessening of Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need for National Energy Conservation
7. Other Factors
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage
a. Electric Furnaces
b. Weatherized Oil-Fired Furnaces
2. Product Classes
3. Technology Options
4. Screening Analysis
a. Screened-Out Technologies
b. Remaining Technologies
5. Impact From Other Rulemakings
B. Engineering and Cost Analysis
1. Efficiency Analysis
a. Baseline Efficiency
b. Intermediate Efficiency Levels
c. Maximum Technology (``Max-Tech'') Efficiency Levels
d. Summary of Efficiency Levels Analyzed
2. Cost Analysis
a. Teardown Analysis
b. Cost Estimation Method
3. Cost-Efficiency Results
C. Markups Analysis
D. Energy Use Analysis
E. 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
F. Shipments Analysis
G. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
V. Analytical Results and Conclusions
A. Economic Impacts on Individual Consumers
B. National Impact Analysis
1. National Energy Savings
2. Net Present Value of Consumer Costs and Benefits
C. Final Determination
1. Technological Feasibility
2. Cost-Effectiveness
3. Significant Conservation of Energy
4. Further Considerations
a. Oil Furnaces
b. Weatherized Gas Furnaces
5. Summary
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 of 1995
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. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Synopsis of the Final Determination

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

[[Page 84029]]

EPCA \2\ established the Energy Conservation Program for Consumer
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products
include oil, electric, and weatherized gas consumer furnaces, the
subject of this final determination. (42 U.S.C. 6292(a)(5))
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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 reflects 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, DOE is required to review its existing energy
conservation standards for covered consumer products no later than six
years after issuance of any final rule establishing or amending a
standard. (42 U.S.C. 6295(m)(1)) Pursuant to that statutory provision,
DOE must publish either a notification of determination that standards
for the product do not need to be amended, or a notice of proposed
rulemaking (``NOPR'') including new proposed energy conservation
standards (proceeding to a final rule, as appropriate). (Id.) DOE has
conducted this review of the energy conservation standards for oil,
electric, and weatherized gas consumer furnaces under EPCA's six-year-
lookback authority described herein.
For this final determination, DOE analyzed oil, electric, and
weatherized gas consumer furnaces subject to energy conservation
standards specified in the Code of Federal Regulations (``CFR'') at 10
CFR 430.32(e)(1). DOE first analyzed the technological feasibility of
more energy-efficient oil, electric, and weatherized gas furnaces and
determined that amended standards for electric furnaces are not
technologically feasible. For those oil and weatherized gas furnaces
for which DOE determined higher standards to be technologically
feasible, DOE evaluated whether higher standards would be cost-
effective by conducting life-cycle cost (``LCC'') and payback period
(``PBP'') analyses. In addition, DOE estimated energy savings that
would result from potential energy conservation standards by conducting
a national impacts analysis (``NIA''), in which it estimated the net
present value (``NPV'') of the total costs and benefits experienced by
consumers.
Based on the results of the analyses, summarized in section V of
this document, DOE has determined that the current standards for oil,
electric, and weatherized gas furnaces do not need to be amended and is
issuing this final determination accordingly.

II. Introduction

The following sections briefly discuss the statutory authority
underlying this final determination, as well as some of the historical
background relevant to the establishment of energy conservation
standards for oil, electric, and weatherized gas furnaces.

A. Authority

Among other things, EPCA 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
\3\ established the Energy Conservation Program for Consumer Products
Other Than Automobiles. These products include consumer furnaces, the
subject of this document. (42 U.S.C. 6292(a)(5))
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\3\ As noted previously, 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 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 circumstances for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under EPCA. (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 product complies with the applicable energy
conservation standards and as the basis for any representations
regarding the energy use or energy efficiency of the product. (42
U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these
test procedures to evaluate whether a basic model complies with the
applicable energy conservation standard(s). (42 U.S.C. 6295(s)) The DOE
test procedures for consumer furnaces appear at title 10 of the Code of
Federal Regulations (``CFR'') part 430, subpart B, appendix N.
EPCA prescribed energy conservation standards for consumer furnaces
(42 U.S.C. 6295(f)(1)-(2)) and directed DOE to conduct future
rulemakings to determine whether to amend these standards. (42 U.S.C.
6295(f)(4) and 42 U.S.C. 6295(m)(1)) As explained in section II.B of
this document, DOE has completed its rulemaking obligations pursuant to
EPCA under 42 U.S.C. 6295(f)(4) for the subject consumer furnaces.
However, DOE has ongoing rulemaking obligations under 42 U.S.C.
6295(m)(1) (i.e., the six-year-lookback review requirement). More
specifically, and as noted previously, not later than six years after
the issuance of any final rule establishing or amending a standard, DOE
must publish either a notice of proposed determination (``NOPD'') 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) and (3)) DOE must
make the analysis on which a NOPD or NOPR is based publicly available
and provide an opportunity for written comment. (42 U.S.C. 6295(m)(2))
A determination that amended standards are not needed must be based
on consideration of whether amended standards will result in
significant conservation of energy, are technologically feasible, and
are cost-effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
Additionally, any new or amended energy conservation standard
prescribed by the Secretary for any type (or class) of covered product
shall be designed to achieve the maximum improvement in energy
efficiency which the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) Among the factors
DOE considers in evaluating whether a proposed standard level is
economically justified includes whether the proposed standard at that
level is cost-effective, as defined under 42 U.S.C.
6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an
evaluation of cost-effectiveness requires DOE to consider 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. (42 U.S.C. 6295(n)(2) and 42
U.S.C. 6295(o)(2)(B)(i)(II))

[[Page 84030]]

Finally, pursuant to the amendments to EPCA contained in the Energy
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is 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 procedures and standards for
oil, electric, and weatherized gas furnaces address standby mode and
off mode energy use. DOE's energy conservation standards address
standby mode and off mode energy use only for non-weatherized oil-fired
furnaces (``NWOFs'') (including mobile home furnaces) and electric
furnaces (``EFs''). 10 CFR 430.32(e)(1)(iv). In this analysis, DOE
considers such energy use in its determination of whether energy
conservation standards need to be amended.
DOE is publishing this final determination pursuant to the six-
year-lookback review requirement in EPCA.

B. Background

1. Current Standards
DOE most recently completed a review of the subject consumer
furnace standards in a direct final rule (``DFR'') published in the
Federal Register on June 27, 2011 (``June 2011 DFR''), through which
DOE prescribed amended energy conservation standards for non-
weatherized gas furnaces (``NWGFs''), mobile home gas furnaces
(``MHGFs''), weatherized gas furnaces (``WGFs''), non-weatherized oil-
fired furnaces (``NWOFs''), mobile home oil furnaces (``MHOFs''), and
weatherized oil furnaces (``WOFs'').\4\ 76 FR 37408. The June 2011 DFR
amended the existing energy conservation standards for NWGFs, MHGFs,
and NWOFs (which are specified in terms of annual fuel utilization
efficiency (``AFUE'')) and amended the compliance date (but left the
existing standards in place) for WGFs. The June 2011 DFR also
established electrical standby mode and off mode standards for NWGFs,
MHGFs, NWOFs, MHOFs, and electric furnaces. As a result of a settlement
agreement approved by the Court of Appeals for the District of Columbia
(``D.C.'') Circuit, the standards established by the June 2011 DFR for
NWGFs and MHGFs did not go into effect.\5\ However, the court order
left in place the standards for WGFs, NWOFs, MHOFs, WOFs, and EFs,
which are the subject of this final determination. These standards are
set forth in DOE's regulations at 10 CFR 430.32(e)(1)(ii) and
(e)(1)(iv) and are shown in Table II.1 and Table II.2.
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\4\ This rulemaking was undertaken pursuant to the voluntary
remand in State of New York, et al. v. Department of Energy, et al.,
08-311-ag(L); 08-312-ag(con) (2d Cir. filed Jan. 17, 2008).
\5\ DOE confirmed the standards and compliance dates promulgated
in the June 2011 DFR in a notice of effective date and compliance
dates published in the Federal Register on October 31, 2011
(``October 2011 notice''). 76 FR 67037. After publication of the
October 2011 notice, the American Public Gas Association (``APGA'')
sued DOE to invalidate the rule as it pertained to NWGFs and MHGFs.
Petition for Review, American Public Gas Association, et al. v.
Department of Energy, et al., No. 11-1485 (D.C. Cir. filed Dec. 23,
2011). On April 24, 2014, the Court granted a motion that approved a
settlement agreement that was reached between DOE, APGA, and the
various intervenors in the case, in which DOE agreed to a remand of
the NWGF and MHGF portions of the June 2011 DFR in order to conduct
further notice-and-comment rulemaking. Accordingly, the Court's
order vacated the June 2011 DFR in part (i.e., those portions
relating to NWGFs and MHGFs) and remanded to the agency for further
rulemaking. DOE addressed NWGFs and MHGFs in a separate rulemaking
proceeding (see Docket No. EERE-2014-BT-STD-0031). DOE published a
final rule in the Federal Register on December 18, 2023 amending the
energy conservation standards for NWGFs and MHGFs. 88 FR 87502.

Table II.1--Federal AFUE Energy Conservation Standards for Oil,
Electric, and Weatherized Gas Furnaces
------------------------------------------------------------------------
Product class AFUE (percent) Compliance date
------------------------------------------------------------------------
Non-weatherized oil-fired 83 May 1, 2013.
furnaces (not including
mobile home furnaces).
Mobile home oil-fired 75 September 1, 1990.
furnaces.
Weatherized gas furnaces.... 81 January 1, 2015.
Weatherized oil-fired 78 January 1, 1992.
furnaces.
Electric furnaces........... 78 January 1, 1992.
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Table II.2--Federal Standby Mode and Off Mode Energy Conservation Standards for Oil and Electric Furnaces
----------------------------------------------------------------------------------------------------------------
Maximum standby
mode electrical Maximum off mode
power electrical power
Product class consumption, PW, consumption, PW, Compliance date
SB (watts) OFF (watts)

----------------------------------------------------------------------------------------------------------------
Non-weatherized oil-fired furnaces 11 11 May 1, 2013.
(including mobile home furnaces).
Electric furnaces....................... 10 10 May 1, 2013.
----------------------------------------------------------------------------------------------------------------

2. Current Rulemaking History
Amendments to EPCA in the National Appliance Energy Conservation
Act of 1987 (``NAECA''; Pub. L. 100-12) established EPCA's original
energy conservation standards for furnaces, consisting of the minimum
AFUE levels for mobile home furnaces and for all other furnaces except
``small'' gas furnaces. (42 U.S.C. 6295(f)(1)-(2)) The original
standards established a minimum AFUE of 75 percent for mobile home
furnaces and 78 percent for all other furnaces. Pursuant to authority
conferred under 42 U.S.C. 6295(f)(1)(B), DOE subsequently adopted a
mandatory minimum AFUE level for ``small'' furnaces through a final
rule published in the Federal Register on November 17, 1989 (``the

[[Page 84031]]

November 1989 Final Rule''). 54 FR 47916. The standards established by
NAECA and the November 1989 Final Rule for ``small'' gas furnaces are
still in effect for MHOFs, WOFs, and EFs.
Pursuant to EPCA, DOE was required to conduct two rounds of
rulemaking to consider amended energy conservation standards for all
consumer furnaces, and an additional round of rulemaking for mobile
home furnaces. (42 U.S.C. 6295(f)(4)(A), (B), and (C)) In satisfaction
of the first round of amended standards rulemaking under 42 U.S.C.
6295(f)(4)(B), on November 19, 2007, DOE published in the Federal
Register a final rule (``November 2007 Final Rule'') that revised the
standards for most furnaces but left them in place for two product
classes (i.e., MHOFs and WOFs).\6\ The standards amended in the
November 2007 Final Rule were to apply to furnaces manufactured or
imported on and after November 19, 2015. 72 FR 65136 (Nov. 19, 2007).
The energy conservation standards in the November 2007 Final Rule
consist of a minimum AFUE level for each of the six classes of
furnaces. Id. at 72 FR 65169. Based on the market analysis for the
November 2007 Final Rule and the standards established under that rule,
the November 2007 Final Rule eliminated the distinction between
furnaces based on their certified input capacity (i.e., the standards
applicable to ``small'' furnaces were established at the same level and
as part of their appropriate class of furnace generally). Id.
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\6\ The November 2007 Final Rule adopted amended standards for
``oil-fired furnaces'' generally. However, on July 28, 2008, DOE
published a technical amendment final rule in the Federal Register
that clarified that the amended standards adopted in the November
2007 Final Rule for oil-fired furnaces did not apply to MHOFs and
WOFs; rather, they were only applicable for NWOFs. 73 FR 43611,
43613 (July 28, 2008).
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Following DOE's adoption of the November 2007 Final Rule, several
parties jointly sued DOE in the United States Court of Appeals for the
Second Circuit (``Second Circuit'') to invalidate the rule. Petition
for Review, State of New York, et al. v. Department of Energy, et al.,
Nos. 08-0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The
petitioners asserted that the standards for furnaces promulgated in the
November 2007 Final Rule did not reflect the ``maximum improvement in
energy efficiency'' that ``is technologically feasible and economically
justified'' under 42 U.S.C. 6295(o)(2)(A). On April 16, 2009, DOE filed
with the Court a motion for voluntary remand that the petitioners did
not oppose. The motion did not state that the November 2007 Final Rule
would be vacated, but it indicated that DOE would revisit its initial
conclusions outlined in the November 2007 Final Rule in a subsequent
rulemaking action. DOE also agreed that the final rule in that
subsequent rulemaking action would address both regional standards for
furnaces and the effects of alternate standards on natural gas prices.
The Second Circuit granted DOE's motion on April 21, 2009. DOE notes
that the Second Circuit's order did not vacate the energy conservation
standards set forth in the November 2007 Final Rule, and during the
remand, the standards went into effect as originally scheduled.
On June 27, 2011, DOE published a direct final rule (``DFR'') in
the Federal Register (``June 2011 DFR'') revising the energy
conservation standards for residential furnaces pursuant to the
voluntary remand in State of New York, et al. v. Department of Energy,
et al. 76 FR 37408. In the June 2011 DFR, DOE considered the amendment
of the same six product classes considered in the November 2007 Final
Rule analysis plus electric furnaces. As discussed previously, the June
2011 DFR amended the existing AFUE energy conservation standards for
NWGFs, MHGFs, and NWOFs and amended the compliance date (but left the
existing standards in place) for WGFs. The June 2011 DFR also
established electrical standby mode and off mode energy conservation
standards for NWGFs, MHGFs, NWOFs, MHOFs, and EFs. DOE confirmed the
standards and compliance dates promulgated in the June 2011 DFR in a
notice of effective date and compliance dates published in the Federal
Register on October 31, 2011 (``October 2011 Notice''). 76 FR 67037.
The November 2007 Final Rule and the June 2011 DFR represented the
first and the second rounds, respectively, of the two rulemakings
required under 42 U.S.C. 6295(f)(4)(B)-(C) to consider amending the
energy conservation standards for consumer furnaces.
The June 2011 DFR and October 2011 Notice amended, in relevant
part, the AFUE energy conservation standards and compliance dates for
three product classes of consumer furnaces (i.e., NWGFs, MHGFs, and
NWOFs).\7\ The existing AFUE standards were left in place for three
classes of consumer furnaces (i.e., WOFs, MHOFs, and EFs). For WGFs,
the existing standard was left in place, but the compliance date was
amended. Electrical standby mode and off mode energy consumption
standards were established for non-weatherized gas and oil-fired
furnaces (including mobile home furnaces) and EFs. Compliance with the
energy conservation standards promulgated in the June 2011 DFR was to
be required on May 1, 2013 for NWGFs, MHGFs, and NWOFs, and on January
1, 2015, for weatherized furnaces. 76 FR 37408, 37547-37548 (June 27,
2011); 76 FR 67037, 67051 (Oct. 31, 2011). The amended energy
conservation standards and compliance dates in the June 2011 DFR
superseded those standards and compliance dates promulgated by the
November 2007 Final Rule for NWGFs, MHGFs, and NWOFs. Similarly, the
amended compliance date for WGFs in the June 2011 DFR superseded the
compliance date in the November 2007 Final Rule.
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\7\ For NWGFs and MHGFs, the standards were amended to a level
of 80-percent AFUE nationally with a more-stringent 90-percent AFUE
requirement in the Northern Region. For NWOFs, the standard was
amended to 83-percent AFUE nationally. 76 FR 37408, 37410 (June 27,
2011).
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Following DOE's adoption of the June 2011 DFR, APGA filed a
petition for review with the United States Court of Appeals for the
District of Columbia Circuit (``D.C. Circuit'') to invalidate the DOE
rule as it pertained to NWGFs and MHGFs. Petition for Review, American
Public Gas Association, et al. v. Department of Energy, et al., No. 11-
1485 (D.C. Cir. filed Dec. 23, 2011). The parties to the litigation
engaged in settlement negotiations, which ultimately led to filing of
an unopposed motion on March 11, 2014, seeking to vacate DOE's rule in
part and to remand to the agency for further rulemaking.
On April 24, 2014, the Court granted the motion and ordered that
the standards established for NWGFs and MHGFs be vacated and remanded
to DOE for further rulemaking. As a result, the standards established
by the June 2011 DFR for NWGFs and MHGFs did not go into effect, and,
thus, required compliance with the standards established in the
November 2007 Final Rule for these products began on November 19, 2015.
As stated previously, the AFUE standards for WOFs, MHOFs, and EFs were
unchanged, and as such, the original standards for those product
classes remain in effect. Further, the amended standard for NWOFs was
not subject to the Court order and went into effect as specified in the
June 2011 DFR. The AFUE standards currently applicable to all
residential furnaces,\8\ including the

[[Page 84032]]

five product classes for which DOE is analyzing amended standards
leading to this final determination, are set forth in DOE's regulations
at 10 CFR 430.32(e)(1)(ii).
---------------------------------------------------------------------------

\8\ DOE divides consumer furnaces into seven classes for the
purpose of setting energy conservation standards: (1) NWGFs, (2)
MHGFs, (3) WGFs, (4) NWOFs, (5) MHOFs, (6) WOFs, and (7) EFs. 10 CFR
430.32(e)(1)(ii). As noted previously, DOE analyzed amended
standards for NWGFs and MHGFs as part of a separate rulemaking (see
Docket No. EERE-2014-BT-STD-0031). DOE published a final rule in the
Federal Register on December 18, 2023 amending the energy
conservation standards for NWGFs and MHGFs. 88 FR 87502.
---------------------------------------------------------------------------

On January 28, 2022, DOE published in the Federal Register a
request for information (``January 2022 RFI'') to initiate a review to
determine whether any new or amended standards would satisfy the
relevant requirements of EPCA for a new or amended energy conservation
standard for oil, electric, and weatherized gas consumer furnaces. 87
FR 4513. On November 29, 2022, DOE published in the Federal Register a
notice of availability of a preliminary technical support document
(``TSD'') (``the November 2022 Preliminary Analysis'') and the
accompanying preliminary TSD (``the November 2022 Preliminary Analysis
TSD'') that presented initial technical analyses in the following
areas: (1) market and technology; (2) screening; (3) engineering; (4)
markups to determine product price; (5) energy use; (6) LCC and PBP,
and (7) national impacts. 87 FR 73259. DOE held a public meeting
webinar on December 19, 2022, in order to receive public input and
information related to the November 2022 Preliminary Analysis for the
subject furnaces. On November 29, 2023, DOE published a NOPD (``the
November 2023 NOPD'') in the Federal Register, which tentatively
determined that current standards for oil, electric, and weatherized
gas furnaces do not need to be amended.\9\ 88 FR 83426.
---------------------------------------------------------------------------

\9\ No stakeholders requested that a public meeting webinar be
held in response to the November 2023 NOPD, and, therefore, DOE did
not elect to host a webinar for this NOPD.
---------------------------------------------------------------------------

DOE received comments in response to the November 2023 NOPD from
the interested parties listed in Table II.3.

Table II.3--List of Commenters With Written Submissions in Response to the November 2023 NOPD
----------------------------------------------------------------------------------------------------------------
Comment No. in
Commenter(s) Abbreviation the docket Commenter type
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating, and AHRI...................... 36 Trade Association.
Refrigeration Institute.
American Gas Association, American Joint Commenters.......... 33 Trade Association.
Public Gas Association, National
Propane Gas Association.
Andrew Chiafullo........................ Chiafullo................. 31 Individual.
Appliance Standards Awareness Project, Joint Advocates........... 34 Efficiency Organization.
American Council for an Energy-
Efficient Economy, Natural Resources
Defense Council, New York State Energy
Research and Development Authority,
Northwest Energy Efficiency Alliance.
Daikin Comfort Technologies North Daikin.................... 35 Manufacturer.
America, Inc..
Lennox International.................... Lennox.................... 32 Manufacturer.
Michael Ravnitzky....................... Ravnitzky................. 30 Individual.
----------------------------------------------------------------------------------------------------------------

A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\10\
---------------------------------------------------------------------------

\10\ The parenthetical reference provides a reference for
information located in the docket. (Docket No. EERE-2021-BT-STD-
0031, 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).
---------------------------------------------------------------------------

III. General Discussion and Rationale

DOE developed this final determination after a review of the market
for the subject oil, electric, and weatherized gas consumer furnaces.
DOE also considered comments, data, and information from interested
parties that represent a variety of interests. This final determination
addresses issues raised by these commenters.

A. General Comments

This section summarizes general comments received from interested
parties.
1. Comments Supporting Proposed Determination
Daikin supported DOE's conclusion in the November 2023 NOPD that
the current standards for oil, electric, and weatherized gas consumer
furnaces do not need to be amended based on the results of the analyses
that assessed impacts on manufacturers and product availability.
(Daikin, No. 35 at p. 1) AHRI supported DOE's determination not to
amend energy conservation standards for oil and weatherized gas
consumer furnaces due to the small markets for these products, the
minimal energy savings potential at the efficiency levels analyzed, and
the problems consumers would face from lack of product availability. In
addition, AHRI agreed with DOE's conclusion that amended energy
standards for electric furnaces are not technologically feasible.
(AHRI, No. 36 at p. 1) Ravnitzky supported DOE's conclusion regarding
energy conservation standards for oil, electric, and weatherized gas
consumer furnaces due to DOE's analysis of the technological
feasibility, economic justification, and potential for significant
energy savings. (Ravnitzky, No. 30 at p. 1)
Lennox supported DOE's conclusion that no new standards are
appropriate for oil and weatherized gas consumer furnaces. (Lennox, No.
32 at pp. 1-2) The commenter agreed with DOE's conclusion that oil-
fired and weatherized gas furnaces are niche products with flat or
declining sales; Lennox added that consumer cost and utility issues for
weatherized gas products--including costs and physical challenges
regarding condensate management that would be required if standards
were tightened--provide additional support to DOE's conclusion that
more-stringent standards for weatherized gas products are not
justified. (Id. at p. 3) Lennox further agreed with DOE's conclusion
that more-stringent energy conservation standards for electric furnaces
are not technologically feasible for the niche electric furnace market.
(Id. at p. 2) Lennox recommended that DOE continue to refrain from
increasing furnace equipment costs by imposing new efficiency standards
because they cannot be justified due to impacts resulting from the
COVID-19 pandemic and the rise of inflation. (Id. at pp. 2, 4)
The Joint Commenters supported DOE's proposed determination that
amended standards for weatherized gas consumer furnaces are not
statutorily justified at this time because they are not economically
justified and because they have relatively small or declining

[[Page 84033]]

markets. (Joint Commenters, No. 33 at p. 2)
2. Comments Opposing Proposed Determination
The Joint Advocates recommended that DOE reconsider its proposed
determination that amended AFUE standards for oil and weatherized gas
consumer furnaces are not needed despite their technological
feasibility. The Joint Advocates commented that DOE did not complete a
manufacturer impact analysis (``MIA'') for the November 2023 NOPD,
despite claiming that amended standards would not be economically
justified due to potential manufacturer challenges that may impact the
market for those products. These commenters stated that, according to
DOE's data, strengthening standards for these products would result in
considerable cost savings for consumers, as outlined in the LCC and NIA
results presented in the November 2023 NOPD. The Joint Advocates
commented that amending the standards for NWOFs in particular could
provide significant benefits for consumers. (Joint Advocates, No. 34 at
pp. 1-2)
In response, as discussed in section II.A of this document, DOE is
directed by EPCA to conduct periodic rulemakings to determine whether
to amend the current energy conservation standards for various
products, including consumer furnaces. (42 U.S.C. 6295(m)(1)) In
determining whether a potential more-stringent 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 seven statutory
factors, which include the economic impacts to both consumers and
manufacturers. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) Section IV of this
document outlines DOE's approach to analyzing various potential amended
standard levels, including a discussion of market trends and
qualitative market impacts in section IV.F of this document. Section V
of this document provides a qualitative discussion of the potential
impacts to manufacturers, as well as a detailed explanation of DOE's
weighing of the benefits and burdens (including consumer cost savings
as noted by the Joint Advocates) and the rationale for not amending the
existing standards for oil, electric, and weatherized gas furnaces.
DOE assessed in the November 2023 NOPD the market size and
manufacturer landscape for NWOFs and MHOFs and concluded that these
products make up less than one percent of the U.S. residential furnace
market. With this small market size and expected diminishing sales,
cost recovery could be challenging for manufacturers. In the case of
WGFs, manufacturers would need to redesign 99 percent of products on
the market today to meet a standard set at EL 1 for those products, and
all but one OEM would need to design new condensing products. Given the
dynamics of both the oil and weatherized gas furnace market, amending
standards may result in shifts in market competition impacting
availability of products that cover the full range of capacities. With
this understanding of the manufacturer and market landscape, DOE is
unable to conclude that any of the efficiency levels analyzed for these
categories of furnaces would meet the statutory criteria required to
amend energy conservation standards.
3. Other Topics
Ravnitzky recommended that DOE consider establishing a series of
incentives and challenges designed to encourage technological
advancements in furnace designs that improve both the function and
energy efficiency of consumer furnaces. (Ravnitzky, No. 30 at pp. 1-2)
The commenter stated that incentivizing innovation offers a way to
develop better and more affordable high-efficiency furnaces and
suggested that prize contests have resulted in technological
advancement while simultaneously fostering energy conservation and
affordability. Ravnitzky commented that such a program could spur
participants to surpass energy efficiency benchmarks (e.g., AFUE
ratings), innovate in the area of emissions reduction, develop
materials that enhance heat transfer efficiency and durability, and
lead to furnace designs that are both innovative and cost-effective.
Ravnitzky argued that an added benefit to an approach incentivizing
advancements would be the resulting likelihood of contributing to
national energy independence and forming new business opportunities and
job creation in the energy sector. (Id.) Ravnitzky further commented
that incentives and challenges could foster collaboration and
competition among manufacturers, universities, independent investors,
and other stakeholders. Finally, the commenter recommended that the
program be administered by DOE offices, including the Advanced Research
Projects Agency--Energy, and structured to reward innovations in
design, manufacturing processes, or materials that make high-efficiency
furnaces more cost-effective and accessible to consumers. (Id.)
In response, DOE notes that its authority to regulate the energy
efficiency of consumer products (including consumer furnaces) is
outlined in EPCA, as discussed in section II.A of this document. Any
incentive programs or prize contests are outside of the scope of that
authority and this rulemaking. However, DOE further notes that there
are voluntary energy efficiency appliance programs for consumer
products, including furnaces, such as the ENERGY STAR[supreg] Program
administered by the U.S. Environmental Protection Agency (``EPA'') or
other DOE-funded initiatives such as the American-Made Challenges
program.\11\
---------------------------------------------------------------------------

\11\ For more information, see <a href="http://www.energy.gov/eere/funding/eere-prizes-and-competitions">www.energy.gov/eere/funding/eere-prizes-and-competitions</a>.
---------------------------------------------------------------------------

The Joint Commenters encouraged DOE to implement the
recommendations from the National Academy of Sciences' (``NAS's'')
December 2021 report (``the NAS Report'') into its appliance
rulemakings, including for WGFs. These commenters stated that the NAS
Report identified several suggestions to improve DOE's rulemaking
process, including ones related to economic modeling and providing data
for public review to ensure transparency. (Joint Commenters, No. 33 at
p. 2) The Joint Commenters recommended that DOE should ensure the
public has sufficient notice and comment opportunity in the separate
rulemaking proceeding mentioned in the November 2023 NOPD so as to
confirm that the NAS Report's recommendations are appropriately
implemented in all future appliance rulemakings, including this oil,
electric, and weatherized gas furnace rulemaking. (Id. at p. 3)
The Joint Commenters reiterated the earlier comments of the
American Gas Association, et al. in response to DOE's request for
information regarding energy conservation standards for consumer
boilers in May 2021, particularly regarding concerns about the
following: (1) DOE's reliance on flawed projections of natural gas
price trends and marginal residential natural gas prices, and (2)
systemic problems with the agency's economic analysis of standards. The
Joint Commenters stated that, like the recommendations in the NAS
Report, these earlier comments highlight flaws in DOE's process that
must be addressed to better model consumer purchasing decisions, future
fuel prices, and more. (Id.)

[[Page 84034]]

In response, DOE notes that the rulemaking evaluating DOE's
analytical methodologies and whether any modifications are warranted in
relation to the NAS Report will be handled separately from individual
product rulemakings, as stated in section VI.L of this document. As
discussed in section V.C of this document, DOE is not amending the
current energy conservation standards for the subject oil, electric,
and weatherized gas consumer furnaces, and DOE has made this
determination consistent with EPCA's requirements, including evaluation
of economic justification of standards, and applicable executive
orders.

B. Scope of Coverage and Product Classes

This final determination covers certain product classes of consumer
furnaces (i.e., ones for oil, electric, and weatherized gas furnaces)
that meet the following definition of consumer ``furnace'' as codified
at 10 CFR 430.2:

A ``furnace'' is defined as a product which utilizes only
single-phase electric current, or single-phase electric current or
DC current in conjunction with natural gas, propane, or home heating
oil, and which--
(A) Is designed to be the principal heating source for the
living space of a residence;
(B) Is not contained within the same cabinet with a central air
conditioner whose rated cooling capacity is above 65,000 Btu per
hour;
(C) Is an electric central furnace, electric boiler, forced-air
central furnace, gravity central furnace, or low-pressure steam or
hot water boiler; and
(D) Has a heat input rate of less than 300,000 Btu per hour for
electric boilers and low-pressure steam or hot water boilers and
less than 225,000 Btu per hour for forced-air central furnaces,
gravity central furnaces, and electric central furnaces.

10 CFR 430.2. As noted previously, this final determination applies
only to oil, electric, and weatherized gas consumer furnaces. The scope
of coverage is discussed in further detail in section IV.A.1 of this
document.
When evaluating and establishing/amending energy conservation
standards, DOE divides covered products into product classes by the
type of energy used or by capacity or other performance-related
features that justify differing standards. In making a determination on
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. (42 U.S.C.
6295(q)) The product classes for this final determination are discussed
in further detail in section IV.A.2 of this document.

C. Test Procedure

EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
quantify the efficiency of their product and as the basis for
certifying to DOE that their product complies with the applicable
energy conservation standards and as the basis for any representations
regarding the energy use or energy efficiency of the product. (42
U.S.C. 6295(s) and 42 U.S.C. 6293(c)). Similarly, DOE must use these
test procedures to evaluate whether a basic model complies with the
applicable energy conservation standard(s) adopted pursuant to EPCA.
(42 U.S.C. 6295(s); 10 CFR 429.110(e))
The test procedure for determining AFUE, P<INF>W, SB</INF>, and
P<INF>W, OFF</INF> is established at 10 CFR part 430, subpart B,
appendix N. AFUE is an annualized fuel efficiency metric that accounts
for fossil fuel consumption in active, standby, and off modes.
P<INF>W, SB</INF> and P<INF>W, OFF</INF> are measurements of the
standby mode and off mode electrical power consumption, respectively,
in watts. The test procedure for consumer furnaces was last amended by
a final rule published in the Federal Register on January 15, 2016
(``January 2016 TP Final Rule''). 81 FR 2628.\12\
---------------------------------------------------------------------------

\12\ On March 13, 2023, DOE published in the Federal Register a
test procedure final rule for consumer boilers, which are a type of
furnace under EPCA (see 42 U.S.C. 6291(23)) but are not included
within the scope of this rulemaking (see section IV.A.1 of this
document). 88 FR 15510. This test procedure final rule separated the
test method for consumer boilers from the test method for other
types of furnaces and moved the boilers test method to a new
appendix EE to 10 CFR part 430, subpart B. Accordingly, it amended
appendix N so as to remove provisions applicable only to boilers,
but it did not materially change the test method for the oil,
electric, and weatherized gas furnaces that are the subject of this
rulemaking.
---------------------------------------------------------------------------

The revisions to the consumer furnaces test procedure in the
January 2016 TP Final Rule included:
<bullet> Clarification of the electrical power term ``PE'';
<bullet> Adoption of a smoke stick test for determining use of
minimum default draft factors;
<bullet> Allowance for the measurement of condensate under steady-
state conditions;
<bullet> Reference to manufacturer's installation and operation
manual and clarifications for when that manual does not specify test
set-up;
<bullet> Specification of duct-work requirements for units that are
installed without a return duct;
<bullet> Specification of testing requirements for units with
multi-position configurations; and
<bullet> Revision of the requirements regarding AFUE reporting
precision.

81 FR 2628, 2629-2630 (Jan. 15, 2016).
The changes in the January 2016 TP Final Rule were mandatory for
representations of furnace efficiency made on or after July 13, 2016.
As such, the most current version of the test procedure (published in
January 2016) has now been in place for several years.

D. Standby Mode and Off Mode

As discussed in section II.A of this document, EPCA requires any
final rule for new or amended energy conservation standards promulgated
after July 1, 2010, to address standby mode and off mode energy use.
(42 U.S.C. 6295(gg)(3))
``Standby mode'' and ``off mode'' energy use are defined in the DOE
test procedure for residential furnaces (i.e., ``Uniform Test Method
for Measuring the Energy Consumption of Consumer Furnaces Other Than
Boilers,'' 10 CFR part 430, subpart B, appendix N; ``appendix N''). In
that test procedure, DOE defines ``standby mode'' as any mode in which
the furnace is connected to a main power source and offers one or more
of the following space heating functions that may persist: (a) to
facilitate the activation of other modes (including activation or
deactivation of active mode) by remote switch (including thermostat or
remote control), internal or external sensors, and/or timer; and (b)
continuous functions, including information or status displays or
sensor-based functions. 10 CFR part 430, subpart B, appendix N, section
2. ``Off mode'' for consumer furnaces is defined as a mode in which the
furnace is connected to a main power source and is not providing any
active mode or standby mode function, and where the mode may persist
for an indefinite time. The existence of an off switch in off position
(a disconnected circuit) is included within the classification of off
mode. 10 CFR part 430, subpart B, appendix N, section 2. An ``off
switch'' is defined as the switch on the furnace that, when activated,
results in a measurable change in energy consumption between the
standby and off modes. 10 CFR part 430, subpart B, appendix N, section
2. Currently, the standby mode and off mode energy conservation
standards for NWOFs and EFs are outlined in 10 CFR 430.32(e)(1)(iv) and
are shown in Table II.2 of this document. Compliance with

[[Page 84035]]

the Federal standards for standby mode and off mode electricity
consumption for NWOFs, MHOFs, and EFs, as measured by standby power
consumption in watts (``P<INF>W, SB</INF>'') and off mode power
consumption in watts (``P<INF>W, OFF</INF>''), was required on May 1,
2013.
In the November 2022 Preliminary Analysis, DOE analyzed amended
standby/off mode standards for NWOFs, MHOFs, and EFs. DOE did not
consider amended standby mode and off mode standards for WGFs and WOFs,
because DOE has previously concluded in a DFR published in the Federal
Register on June 27, 2011 that these products are packaged with either
an air conditioner or a heat pump and that the standards for those
products, specified in terms of power consumption in watts and seasonal
energy efficiency ratio (``SEER''), already account for the standby
mode and off mode energy consumption for these classes of furnaces. 76
FR 37408, 37433. Based on market analysis conducted for the November
2022 Preliminary Analysis and updated for this final determination, DOE
concludes that WGFs and WOFs continue to be packaged with an air
conditioner or heat pump.
In the analysis for the November 2022 Preliminary Analysis, DOE
established the baseline for NWOFs, MHOFs, and EFs as the current
Federal standby mode and off mode standards (see Table II.2). DOE also
defined and identified baseline components as those that consumed the
most electricity during standby mode and off mode operation. For
intermediate efficiency levels, DOE utilized a design-option approach
to identify design options that could be applied to the baseline design
to reduce standby mode and off mode energy consumption. Above the
baseline efficiency level, DOE implemented design options in the order
of incremental energy savings relative to baseline until all available
design options were employed (i.e., at a max-tech level). DOE
identified two design options between the baseline and max-tech designs
that were used as the basis for intermediate standby mode and off mode
design options. Specifically, DOE replaced the linear transformer found
in models at the baseline with a low-loss transformer (``LL-LTX'') for
the first intermediate efficiency level and replaced the linear power
supply found in baseline models with a switching mode power supply
(``SMPS'') for the second intermediate efficiency level.
The max-tech standby mode and off mode efficiency level in the
November 2022 Preliminary Analysis was based on a combination of the
two design options that were analyzed for the intermediate efficiency
levels. To reach max-tech, DOE analyzed using an LL-LTX in combination
with an SMPS to reach the minimum standby mode or off mode power
consumption (without eliminating other consumer- or performance-related
electronic features). For this design option, a transformer is only
needed to step down the voltage for the thermostat because the SMPS is
able to step down the voltage for the other components of the furnace.
As such, a smaller, lower-cost LL-LTX is used at the max-tech level, as
compared to the LL-LTX used at EL 1 (i.e., the first intermediate
efficiency level). Since the November 2022 Preliminary Analysis, DOE
has not identified any additional design options that could reduce
standby mode and off mode energy consumption.
In the November 2023 NOPD, DOE found that there was some degree of
uncertainty with respect to the appropriateness of the standby mode/off
mode efficiency levels analyzed in the November 2022 Preliminary
Analysis--particularly for products that are in development but also
possibly in some products already on the market. There was also
uncertainty related to the potential impacts that standby mode and off
mode power consumption standards could have on overall system energy
consumption, taking into account the power needs for features such as
safety sensors or other improvements to functionality that would
benefit the consumer. Consequently, DOE determined that it lacked the
necessary information and requisite evidence to amend the standby mode
and off mode standards and did not propose to amend the standby mode/
off mode power standards for NWOFs, MHOFs, and EFs. 88 FR 83426, 83433-
83434 (Nov. 29, 2023). This assessment has not materially changed since
the time of the November 2023 NOPD.
Lennox agreed with DOE's conclusion that no new standards for
standby mode and off mode are appropriate. The commenter stated that
increasing the stringency of standby power levels would inhibit
innovations that benefit consumers, save more significant amounts of
energy, and implement additional safety features. (Lennox, No. 32 at
pp. 1-3) Lennox also agreed with DOE's conclusion that separate standby
mode and off mode power standards are not appropriate for weatherized
gas furnace products, as these products are packaged with air
conditioners or heat pumps that account for standby mode and off mode
energy use in the respective energy conservation standards for those
products. (Id. at p. 3)
In this final determination, for reasons similar to those explained
in the November 2023 NOPD, DOE concludes that amended standby mode/off
mode standards for NWOFs, MHOFs, and EFs are not justified at this
time.

E. Technological Feasibility

1. General Considerations
As discussed, a determination that amended energy conservation
standards are not needed must be based on consideration of whether
amended standards would result in significant conservation of energy,
are technologically feasible, and are cost-effective. (42 U.S.C.
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
To determine whether potential amended standards would be
technologically feasible, DOE first develops a list of all known
technologies and design options that could improve the efficiency of
the products that are the subject of the determination. DOE considers
technologies incorporated in commercially-available products or in
working prototypes to be ``technologically feasible.'' 10 CFR part 430,
subpart C, appendix A, sections 6(b)(3)(i) and 7(b)(1). Section IV.A.3
of this document discusses the technology options identified and
considered by DOE for this analysis for oil, electric, and weatherized
gas furnaces.
After DOE has determined which, if any, technologies and design
options are technologically feasible, it further evaluates each
technology and design 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. 10 CFR part 430, subpart C, appendix A, sections
6(b)(3)(ii)-(v) and 7(b)(2)-(5). Those technology options that are
``screened out'' based on these criteria are not considered further.
Those technology and design options that are not screened out are
considered as the basis for higher efficiency levels that DOE could
consider for potential amended standards. Section IV.A.4 of this
document discusses the results of this screening analysis conducted for
this final determination.

[[Page 84036]]

2. Maximum Technologically Feasible Levels
EPCA requires that for any proposed rule that prescribes an amended
or new energy conservation standard or prescribes no amendment or no
new standard for a type (or class) of covered product, DOE must
determine the maximum improvement in energy efficiency or maximum
reduction in energy use that is technologically feasible for each type
(or class) of covered products. (42 U.S.C. 6295(p)(1)) Accordingly, in
the engineering analysis, DOE identifies the maximum technologically
feasible efficiency level currently available on the market for oil,
electric, and weatherized gas furnaces. DOE also defines such ``max-
tech'' efficiency level, representing the maximum theoretical
efficiency that can be achieved through the application of all
available technology options retained from the screening analysis.\13\
In many cases, the max-tech efficiency level is not commercially
available because it is not currently economically feasible. The max-
tech levels that DOE determined for this analysis are described in
section IV.B.1.c of this final determination.
---------------------------------------------------------------------------

\13\ In applying these design options, DOE would only include
those that are compatible with each other that when combined, would
represent the theoretical maximum possible efficiency.
---------------------------------------------------------------------------

F. Energy Savings

1. Determination of Savings
For each efficiency level (``EL'') evaluated, DOE projects
anticipated energy savings from application of the EL to the oil,
electric, and weatherized gas furnace products purchased during the 30-
year period that begins in the assumed year of compliance with
potential amended standards (2030-2059).\14\ The savings are measured
over the entire lifetime of products purchased during the 30-year
analysis period. DOE quantifies the energy savings attributable to each
EL 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 such
products would likely evolve in the absence of amended energy
conservation standards.
---------------------------------------------------------------------------

\14\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a nine-year period.
---------------------------------------------------------------------------

DOE uses its NIA spreadsheet models to estimate national energy
savings from potential amended standards for the products analyzed. The
NIA spreadsheet model (described in section IV.G of this document)
calculates energy savings in terms of site energy, which is the energy
directly consumed by the 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 national energy savings (``NES'') in terms
of full-fuel-cycle (``FFC'') energy savings. The FFC metric 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 conservation
standards.\15\ DOE's approach is based on the calculation of an FFC
multiplier for each of the energy types used by covered products.
Section IV.G of this document provides more information on FFC energy
savings.
---------------------------------------------------------------------------

\15\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51281 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
As discussed, a determination that amended standards are not needed
must be based on consideration of whether amended standards will result
in significant conservation of energy, among other factors. (42 U.S.C.
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
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, for some covered products, most of the energy consumption
occurs during periods of peak energy demand. The impacts of these
products on the energy infrastructure can be more pronounced than the
impacts of products with relatively constant demand. Accordingly, DOE
evaluates the significance of energy savings on a case-by-case basis.
The significance of energy savings is further discussed in section
V.B.1 of this final determination.
---------------------------------------------------------------------------

\16\ The numeric threshold for determining the significance of
energy savings established in a final rule published on February 14,
2020 (85 FR 8626, 8670) was subsequently eliminated in a final rule
published on December 13, 2021 (86 FR 70892).
---------------------------------------------------------------------------

G. Cost-Effectiveness

As discussed, a determination that amended standards are not needed
must be based on consideration of whether amended standards would be
cost-effective, among other factors. (42 U.S.C. 6295(m)(1)(A) and 42
U.S.C. 6295(n)(2))
In evaluating cost-effectiveness, EPCA requires DOE to consider
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, initial charges, or maintenance expenses for the covered product
that are likely to result from the standard. (42 U.S.C. 6295(n)(2)(c)
and 42 U.S.C. 6295(o)(2)(B)(i)(II)) Cost-effectiveness is also one of
the factors that DOE considers under 42 U.S.C. 6295(o)(2)(B) in
determining whether new or amended standards are economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(II))
In determining cost-effectiveness of potential amended standards
for covered products, DOE generally conducts LCC and PBP analyses that
estimate the costs and benefits to users from potential standards.
Section IV.E of this document provides more information on the LCC and
PBP analyses conducted for this final determination. To further inform
DOE's consideration of the cost-effectiveness of potential amended
standards, DOE considered the NPV of total costs and benefits estimated
as part of the NIA. 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. The results of this analysis
are discussed in section V.C.2 of this document.

H. Further Considerations

In determining whether a potential, more-stringent 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 product subject to the standard;
(2) 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, initial charges for, or maintenance
expenses of the covered product that are likely to result from the
standard;
(3) The total projected amount of energy (or as applicable,
water) savings likely to result from the standard;
(4) Any lessening of the utility or the performance of the
covered product 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;

[[Page 84037]]

(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.

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

The following sections discuss how DOE has addressed each of these
seven factors in this final determination.
1. Economic Impact on Manufacturers and Consumers
In determining the impacts of a potential new or amended standard
on manufacturers, DOE conducts an MIA. 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) industry net present value, 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. Since DOE has determined not to amend standards for oil,
electric, and weatherized gas furnaces, this final determination will
have no cash-flow impacts on manufacturers. Accordingly, DOE did not
conduct an MIA for this final determination.
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 NPV 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. Since DOE has determined not to amend standards for oil,
electric, and weatherized gas furnaces, this final determination will
have no disproportionate impact on identifiable subgroups of consumers.
Accordingly, DOE did not conduct a subgroup analysis for this final
determination.
2. Savings in Operating Costs Compared To Increase in Price
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(m)(1); 42
U.S.C. 6295(n)(2), and 42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts
this comparison in its LCC and PBP analyses.
For its LCC and PBP analyses, DOE assumes that consumers will
purchase the covered product 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 analyses are discussed in further detail in section IV.E of this
document.
3. Energy Savings
EPCA requires DOE, in determining the economic justification of an
amended 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.G of this document, DOE uses the NIA
spreadsheet models to project national energy savings that are expected
to result directly from an amended standard.
4. 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 product. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Since DOE has
determined not to amend standards for oil, electric, and weatherized
gas furnaces, this final determination will not impact the utility of
such products.
5. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) Since
DOE has determined not to amend standards for oil, electric, and
weatherized gas furnaces, DOE did not transmit a copy of its
determination to the Attorney General for anti-competitive review.
6. Need for National Energy Conservation
DOE also considers the need for national energy 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
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 generally conducts
a utility impact analysis to estimate how standards may affect the
Nation's needed power generation capacity. However, since DOE has
determined not to amend standards for oil, electric, and weatherized
gas furnaces, DOE did not conduct this analysis.
DOE maintains 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. Amended standards are likely to result in environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases associated with energy production and use. DOE
generally conducts an emissions analysis to estimate how amended
standards may affect these emissions. DOE also generally estimates the
economic value of emissions reductions resulting from an amended
standard. However, since DOE has determined not to amend standards for
oil, electric, and weatherized gas furnaces, DOE did not conduct this
analysis.
7. 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.''

IV. Methodology and Discussion of Related Comments

The following sections of this document address each key component
of the analyses DOE has performed for this final determination with
respect to oil, electric, and weatherized gas furnaces. Comments
received from interested parties are addressed in each relevant
section.

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

[[Page 84038]]

qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this final determination include: (1) a determination of
the scope and identification of 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 for improving efficiency. The key findings of DOE's
market assessment are summarized in the following sections.
1. Scope of Coverage
As mentioned in section III.B of this document, in assessing the
scope of this rulemaking, DOE relied on the definition of ``furnace''
in 10 CFR 430.2. Any product meeting the definition of a ``furnace''
that is also an oil, electric, and weatherized gas furnace was included
in the scope of DOE's analysis for this final determination. Non-
weatherized gas furnaces and mobile home gas furnaces were considered
in a separate rulemaking.\17\
---------------------------------------------------------------------------

\17\ See Docket No. EERE-2014-BT-STD-0031, which can be accessed
at <a href="http://www.regulations.gov">www.regulations.gov</a>.
---------------------------------------------------------------------------

a. Electric Furnaces
A basic EF is composed of an electric resistance heating element
and blower assembly. (Additionally, there are products that include
electrically powered heat pumps, but these are separately covered
products not addressed here.) The electric resistance heating elements
of EFs are highly efficient, and the efficiency of these units already
approaches 100 percent. DOE is unaware of any technology options that
can improve the efficiency of electric furnaces, so DOE has determined
that more-stringent standards for EFs would not be technologically
feasible. Therefore, DOE concludes that the energy savings potential
from amended standards for EFs would be minimal. Consequently, DOE did
not consider amended AFUE standards for EFs in this rulemaking.
b. Weatherized Oil-Fired Furnaces
DOE is not aware of any WOFs on the market, and, therefore, DOE did
not analyze amended standards for that product class. DOE has concluded
that because there are no WOFs on the market, there would be no
potential energy savings from amended standards.
2. Product Classes
When evaluating and establishing or amending energy conservation
standards, DOE may establish separate standards for a group of covered
products (i.e., establish a separate product class) if DOE determines
that separate standards are justified based on the type of energy used,
or if DOE determines that the product's capacity or other performance-
related feature justifies a different standard. (42 U.S.C. 6295(q)) In
making a determination whether a performance-related feature justifies
a different standard, DOE considers such factors as the utility of the
feature to the consumer and other factors DOE determines are
appropriate. (Id.)
In this case, DOE divides furnaces into seven product classes based
on fuel type (gas, oil, or electric), whether the furnace is
weatherized or not, and whether the furnace is designed for use only in
mobile homes or not. The current product classes for furnaces are (1)
NWGFs, (2) MHGFs, (3) NWOFs, (4) MHOFs, (5) WGFs, (6) WOFs, and (7)
EFs. 10 CFR 430.32(e)(1)(ii). As noted previously, NWGFs and MHGFs are
being addressed in a separate rulemaking process.\18\ Therefore, the
product classes that DOE considered for this final determination are
NWOFs, MHOFs, WGFs, WOFs, and EFs. However, for the reasons discussed
in sections IV.A.1.a and IV.A.1.b of this document, amended energy
conservation standards were not analyzed for EFs or WOFs.
---------------------------------------------------------------------------

\18\ See Docket No. EERE-2014-BT-STD-0031.
---------------------------------------------------------------------------

In summary, DOE assessed amended energy conservation standards in
terms of AFUE for the NWOF, MHOF, and WGF product classes in this final
determination. Again, for the reasons discussed in section III.D of
this document, DOE did not analyze new or amended standby mode/off mode
power standards for any product classes this time.
This final determination maintains the product classes currently
established for oil, electric, and weatherized gas furnaces.
3. Technology Options
DOE develops information in the technology assessment that
characterizes the technologies and design options that manufacturers
may use to attain higher-efficiency performance.
In the November 2023 NOPD, DOE identified several technology
options that would be expected to improve the efficiency of oil and
weatherized gas furnaces in terms of AFUE, as measured by the DOE test
procedure. To develop a list of technology options, DOE examined the
efficiency-improving technologies used in consumer furnaces today.
These technology options provide insight into the technological
improvements typically used to increase the energy efficiency of
consumer furnaces.
For this final determination, DOE has reviewed the consumer
furnaces market and confirmed that the technology options identified in
the November 2023 NOPD continue to reflect the market. The identified
technology options are shown in Table IV.1.

[[Page 84039]]

Table IV.1--List of Technology Options Considered for This Final
Determination
------------------------------------------------------------------------
Technology option Description
------------------------------------------------------------------------
Condensing Secondary Heat The secondary heat exchanger allows more
Exchanger. heat to be extracted from the flue gases
before the products of combustion exit
through the flue to the vent system by
condensing any water vapor and releasing
the resulting latent heat.
Heat Exchanger Improvements.. Improvements to the heat exchanger can be
achieved by modifying baseline designs
of standard furnaces to incorporate any
combination of: (1) increased heat
exchanger surface area, (2) heat
exchanger surface features, and/or (3)
heat exchanger baffles and turbulators.
Improving the heat exchanger for fossil
fuel-fired furnaces can increase the
rate of heat transfer from the hot
combustion gases to the circulation air
that is distributed to the heated space.
This improved heat transfer increases
thermal efficiency and AFUE.
Two-Stage and Modulating Two-stage and modulating combustion allow
Combustion. furnaces to meet heating load
requirements more precisely. When low
heating load conditions exist, a two-
stage or modulating furnace can operate
at a reduced input rate for an extended
period of burner on-time to meet the
reduced heating load. This improves
comfort by reducing large fluctuations
in room temperature. Because burner on-
time increases, however, fuel use does
not drastically decrease, so efficiency
gains are typically small.
Pulse Combustion............. Pulse combustion burners operate on self-
sustaining resonating pressure waves
that alternately rarefy the combustion
chamber (drawing a fresh fuel-air
mixture into the chamber) and pressurize
it (causing ignition by compression
heating of the mixture to its flash
point). Pulse combustion systems feature
high heat transfer rates, can self-vent,
and can operate as isolated combustion
systems. Because the pulse combustion
process is highly efficient, the burners
are generally used with condensing
appliances.
Premix Burners............... Premix burners completely premix the
primary air and fuel prior to
combustion, thereby eliminating the need
for secondary air. These burners allow
for more precise control over the air-
fuel ratio, so that the level of excess
air can be set for optimal performance.
Premix burners are often utilized to
control production of emissions, in
particular NOX. The premix burners used
in consumer furnaces on the market today
are capable of achieving ``ultra-low
NOX'' levels.
Burner Derating.............. Burner derating (i.e., reducing burner
firing rate while keeping heat exchanger
geometry and surface area the same) will
increase the ratio of heat transfer
surface area to energy input, thereby
increasing the AFUE.
Insulation Improvements...... If the jacket loss test is performed,
insulation improvements would reduce
jacket losses and increase AFUE.
Insulation can be improved by modifying
the baseline furnace design through the
use of increased jacket insulation or
advanced forms of insulation.
Off-Cycle Dampers............ Off-cycle (which refers to the burner off-
cycle) dampers restrict the intake and
exhaust airflow through the venting
system during standby mode by closing
when the burner is not operating,
thereby trapping residual heat in the
heat exchanger. During the burner off-
cycle, a furnace can lose heat by
natural convection and conduction
through the combustion air inlet and
flue. Installing a damper at these
points can prevent heat from escaping
and minimize off-cycle heat losses.
Dampers have no effect on the steady-
state performance of the furnace;
however, they can reduce standby losses.
The AFUE metric captures both steady-
state and standby performance of the
furnace, and thus any heated air that is
retained in the system during the
standby mode improves the furnace's
AFUE.
Off-cycle dampers include: (1) electro-
mechanical flue dampers, which are
installed downstream of the heat
exchanger, are activated by an external
source of electricity, and open and
close immediately when combustion starts
and stops, (2) electro-mechanical burner
inlet dampers, which are installed at
the combustion-air inlet to the burner
box and are designed to automatically
close off the air passage and restrict
the airflow through the heat exchanger
when the burner is off.
Direct Venting............... A direct venting system consists of a
pipe that provides the burner with a
direct connection to a combustion air
source on the exterior of the building.
This external connection allows the
furnace to utilize outdoor air for
combustion, which could result in an
improvement in AFUE.
Concentric Venting........... Concentric venting is accomplished by
running the inlet and exhaust vents
concentrically. The flue gases are
exhausted through a central vent pipe,
and the intake combustion air passes
through a concentric duct surrounding
it. This arrangement creates a counter-
flow heat exchanger that recovers some
heat from the flue gases to preheat the
combustion air. It provides an
efficiency advantage compared to non-
concentric venting systems, as the
concentric vent essentially serves as a
shell-in-tube heat exchanger to recover
heat.
Low-Pressure, Air-Atomized To overcome the low input limitations of
Oil Burner. conventional oil burners, Brookhaven
National Laboratory developed a low-
pressure, air-atomized oil burner that
can operate at firing rates as low as
0.25 gallons of oil per hour (10 kW). In
addition, it can operate with low levels
of excess combustion air (less than 10
percent) for lean-burning, ultra-clean
combustion. A lower level of excess air
generally improves AFUE rating. This
single-stage burner design is also
capable of firing fuel at high and low
input rates, which are manually actuated
by a switch, allowing it to closely
match the smaller heating loads of well-
insulated modern homes. The ability to
derate the flame also greatly enhances
the effectiveness of the heat exchanger,
which improves steady-state efficiency.

[[Page 84040]]

High-Static Oil Burner....... A modification of the conventional flame
retention head burner is the high-static
pressure flame retention head oil
burner. These burners employ an air
guide to direct air onto the optimal
point on the blower wheel and a scroll
insert to create high static pressure in
the combustion chamber while maintaining
consistent airflow. This higher pressure
enables the furnace to overcome
restrictive flow passages in compact,
more efficient heat exchangers. These
types of burners are also able to
operate at lower levels of excess air,
giving them a nearly five-percent AFUE
advantage over flame retention head
burners.
Delayed-Action Oil Pump A delayed-action oil pump solenoid valve
Solenoid Valve. is installed between the oil pump and
the burner nozzle to supplement the fuel
pump regulator by delaying the fuel
release by 3 to 6 seconds after the
igniter and burner blower start until
the oil pressure reaches the level
required to fully discharge the oil into
the combustion chamber without dripping.
This ensures that the oil burns more
completely. Testing at Brookhaven
National Laboratory indicates that the
typical efficiency benefit of delayed-
action solenoid valves is expected to be
less than one-percent AFUE.
------------------------------------------------------------------------

As detailed in section IV.A.5 of this document, for each technology
option identified, DOE applies screening criteria before considering it
further in the analysis.
4. Screening Analysis
As discussed, DOE conducts a screening analysis to evaluate whether
to further consider each identified technology and design option. 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 commercially-available 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 commercially-
available 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.

See 10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and
7(b).
If DOE determines that a technology fails to meet one or more of
these listed criteria, it is excluded from further consideration in the
engineering analysis. The following sections include DOE's evaluation
of each technology option against the screening analysis criteria.
a. Screened-Out Technologies
Based on DOE's research, DOE screened out the technology options on
the basis of each screening criteria shown in Table IV.2 from further
consideration as options to improve the AFUE (as measured by the DOE
test procedure) of NWOFs, MHOFs, and WGFs. The reasons for exclusion
associated with each technology are marked in the table with an X.
Additional details about the reasons for exclusion are discussed in
this section.

Table IV.2--Technology Options Screened Out
--------------------------------------------------------------------------------------------------------------------------------------------------------
Screening criteria (X = basis for screening out)
------------------------------------------------------------------------------------
Applicable product Practicability Impacts on Adverse
Excluded technology option class(es) Technological to install, product utility impacts on Unique- pathway
feasibility manufacture, or product health or proprietary
and service availability safety technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pulse combustion....................... WGF....................... ............... ............... ............... X ...............
Burner derating........................ WGF, NWOF, MHOF........... ............... ............... X ............... ...............
Low-pressure, air-atomized oil burner.. NWOF, MHOF................ X ............... ............... ............... ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------

Pulse Combustion
In contrast to natural draft and induced draft furnaces, pulse
combustion furnaces generate positive pressure in the heat exchanger.
Although these products are generally safe, this could create a
potential safety problem if the heat exchanger breaches, because
combustion products can contaminate the circulation airstream.
Pulse combustion gas furnaces were available in the United States
for more than two decades. However, they were withdrawn from the market
within the past 20 years because manufacturers found that competing
technologies, such as condensing secondary heat exchangers, cost
significantly less to manufacture and operate. In light of the ability
of furnace manufacturers to cost-effectively achieve high efficiencies
without the use of pulse combustion, the technology's risks do not
outweigh its benefits for consumer furnace applications. Accordingly,
DOE did not

[[Page 84041]]

further analyze this technology option as part of this final
determination.
Burner Derating
Because heat output rate is directly related to burner size, burner
derating reduces the amount of heated air available to the consumer.
This reduction in heat output rate adversely affects the utility to
consumers. Therefore, DOE did not consider this technology option.
Low-Pressure, Air-Atomized Oil Burner
While tests performed at the Brookhaven National Laboratory seem to
have successfully demonstrated enhanced AFUE performance under the DOE
test procedure in oil boilers that employed prototype low-pressure air-
atomized burners, the prototype burner was never tested on a furnace.
Therefore, the technological feasibility of the burner prototype for
incorporation into a residential oil-fired furnace remains unknown, so
DOE did not consider low-pressure, air-atomized oil burners to be a
viable technology for efficiency improvement for this final
determination.
b. Remaining Technologies
After a thorough review of each technology, DOE concludes that all
of the remaining identified technologies not ``screened out'' meet all
of the screening criteria. In summary, DOE retained (i.e., did not
screen out) the technology options listed below:

<bullet> Condensing secondary heat exchanger
<bullet> Heat exchanger improvements
<bullet> Two-stage and modulating combustion
<bullet> Premix burners
<bullet> Insulation improvements
<bullet> Off-cycle dampers
<bullet> Direct venting
<bullet> Concentric venting
<bullet> High-static oil burner
<bullet> Delayed-action oil pump solenoid valve

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/service; do not
result in adverse impacts on product utility, product availability,
health, or safety; and do not utilize unique-pathway proprietary
technologies). DOE considers these remaining technology options as the
basis for higher efficiency levels that DOE could consider for
potential amended standards.
5. Impact From Other Rulemakings
Lennox commented that manufacturers are facing unprecedented
regulatory change elsewhere and significant cumulative regulatory
burdens, which further supports DOE's determination not to increase the
AFUE efficiency standards and not to increase standby and off mode
standards for oil, electric, and weatherized gas consumer furnaces.
(Lennox, No. 32 at pp. 3-4) Lennox stated that the related rulemakings
include the EPA phasedown to lower-global warming potential (``GWP'')
refrigerants, the energy conservation standards final rule for NWGFs/
MHGFs, the National and Regional Cold Climate Heat Pump Specifications,
the DOE energy conservation standards for air-cooled, three-phase air
conditioners and heat pumps below 65,000 Btu/h and air-cooled, three-
phase, variable refrigerant flow (``VRF'') air conditioners and heat
pumps below 65,000 Btu/h, the DOE test procedure for VRF systems, and
the EPA ENERGY STAR 4.0 for Light Commercial Heating, Ventilation, and
Air Conditioning (``HVAC''). (Id. at p. 4) AHRI commented that most of
the consumer furnace market (i.e., NWGFs) is obligated to increase
efficiency to 95-percent AFUE by December 2028, which is one step below
max-tech and which is expected to place a significant economic burden
on the industry. (AHRI, No. 36 at p. 2)
In response, DOE notes that the Department is not amending the
energy conservation standards for oil, electric, and weatherized gas
consumer furnaces, and, therefore, it does not expect this rulemaking
to contribute to the cumulative regulatory burden on manufacturers.

B. Engineering and Cost Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and manufacturer production cost
(``MPC'') of the subject products (i.e., NWOFs, MHOFs, and WGFs). There
are two elements to consider in the engineering analysis: (1) the
selection of efficiency levels to analyze (i.e., the ``efficiency
analysis''), and (2) the determination of product cost at each
efficiency level (i.e., the ``cost analysis''). In determining the
performance of higher-efficiency products, DOE considers those
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 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).
DOE recently conducted an engineering analysis to determine the
cost-efficiency relationship for oil and weatherized gas consumer
furnaced for the November 2023 NOPD. 88 FR 83426, 83439-83446 (Nov. 29,
2023). For this final determination, DOE analyzed cost trends across
the consumer oil and weatherized gas furnace market as part of the
market and technology assessment (see section IV.A of this document)
and found that oil and weatherized gas consumer furnace efficiencies
have not changed substantially since the NOPD analysis. Thus, as
discussed in section IV.B.1 of this document, DOE maintained the
efficiency levels from the November 2023 NOPD in the final
determination analysis. Additionally, DOE examined its most recent
inputs to its manufacturing cost analysis (e.g., raw material prices,
component prices, labor rates) and found that, although MPC values for
each efficiency level may have increased, the incremental MPCs would
not significantly change from those in the November 2023 NOPD.
Therefore, DOE concludes that an updated cost analysis would not impact
the results of this final determination, so the Department is using the
same methodology and analytical results as those described in the
November 2023 NOPD engineering and cost analysis. Further information
on this analytical methodology used in the November 2023 NOPD is
presented in the following subsections.
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 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

[[Page 84042]]

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). For this final determination analysis, DOE used the
efficiency-level approach.
a. Baseline Efficiency
For each product class, DOE generally selects a baseline model as a
reference point for each class, and measures anticipated changes to the
product resulting from potential energy conservation standards against
the baseline model. The baseline model in each product class represents
the characteristics of products 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.
A basic consumer gas furnace comprises a hot surface or direct
spark ignition system, tubular in-shot burners, a noncondensing heat
exchanger, a blower assembly (including motor and forward-swept fan
blade), a mechanical draft combustion fan assembly, and automatic
controls. A basic consumer oil-fired furnace comprises an interrupted
spark ignition system, power burner, noncondensing heat exchanger, and
blower assembly. Details and descriptions of each of these components
can be found in chapter 3 of the November 2022 Preliminary Analysis
TSD.
The identification of baseline units requires establishing the
baseline efficiency level. In cases where there is an existing
standard, DOE typically defines ``baseline units'' as units with
efficiencies equal to the current Federal energy conservation
standards. However, for the MHOF product class, DOE did not identify
any currently available units at the minimum standard level (75-percent
AFUE), and, therefore, DOE analyzed 80-percent AFUE as the baseline
level for MHOFs, as it was the lowest efficiency available on the
market.
In the November 2023 NOPD, DOE used the baseline levels presented
in Table IV.3 as the baseline efficiency AFUE levels for oil, electric,
and weatherized gas furnaces, along with the typical characteristics of
a baseline unit.

Table IV.3--Baseline Efficiency Levels
------------------------------------------------------------------------
Baseline AFUE
Product class level (%) Typical characteristics
------------------------------------------------------------------------
NWOF........................... 83 --Single-stage burner.
--Electronic ignition.
--Aluminized-steel heat
exchanger.
--Indoor blower fan
including PSC motor *
and forward-curved
blower impeller blade.
MHOF........................... 80 --Single-stage burner.
--Electronic ignition.
--Aluminized-steel heat
exchanger.
--Indoor blower fan
including PSC motor *
and forward-curved
blower impeller blade.
--Direct venting
system.
--Built-in evaporator
coil cabinet.
WGF............................ 81 --Draft inducer.
--Single-stage burner.
--Electronic ignition.
--Aluminized-steel
tubular heat
exchanger.
--Indoor blower fan
including BPM * motor
and forward-curved
blower impeller blade.
------------------------------------------------------------------------
* Consumer furnace fans incorporated into NWOFs, MHOFs, and WGFs
manufactured on and after July 3, 2019 must meet fan energy rating
(``FER'') standards specified in 10 CFR 430.32(y). The blower fan
motor (among other factors) can affect FER. Brushless permanent magnet
(``BPM'') motors have become the predominant motor type at the
baseline AFUE levels for WGFs, and permanent split capacitor (``PSC'')
motors, which are less efficient than BPM motors, are common for NWOFs
and MHOFs.

Typically, baseline units are representative of the minimum
technology and lowest-cost product that manufacturers can produce.
Accordingly, in the teardown analysis, DOE examined a variety of
baseline units that incorporate the various baseline design options for
furnace components.
As stated previously, for this final determination, DOE used the
baseline efficiency levels as presented in the November 2023 NOPD.
b. Intermediate Efficiency Levels
In the November 2023 NOPD, DOE also analyzed intermediate
efficiency levels for NWOFs and MHOFs. 88 FR 83426, 83440-83441 (Nov.
29, 2023). However, for WGFs, DOE did not find any models on the market
between the baseline (81-percent AFUE) and max-tech level (95-percent
AFUE) and, therefore, did not analyze any intermediate efficiency
levels for this product class. The intermediate efficiency levels
analyzed for NWOFs were 85-percent and 87-percent AFUE, and the
intermediate efficiency levels analyzed for MHOFs were 83-percent and
85-percent AFUE. To improve efficiency from the baseline to these
intermediate efficiency levels, manufacturers generally increase the
surface area of the heat exchanger, which increases the heat transfer
area and, thus, allows manufacturers to achieve higher efficiencies.
The intermediate efficiency levels analyzed were representative of
common efficiency levels available on the market. DOE reviewed its own
Compliance Certification Database (``CCD''), as well as AHRI's product

[[Page 84043]]

certification directories,\19\ California Energy Commission's
database,\20\ manufacturer catalogs, and other publicly-available
literature to inform its selection of intermediate efficiency levels.
---------------------------------------------------------------------------

\19\ AHRI's Directory of Certified Product Performance
(Available at: <a href="http://www.ahridirectory.org/Search/SearchHome">www.ahridirectory.org/Search/SearchHome</a>) (last
accessed May 6, 2024).
\20\ California Energy Commission's MAEDbs (Available at:
<a href="http://cacertappliances.energy.ca.gov/Pages/Search/AdvancedSearch.aspx">cacertappliances.energy.ca.gov/Pages/Search/AdvancedSearch.aspx</a>)
(last accessed May 6, 2024).
---------------------------------------------------------------------------

As stated previously, for this final determination, DOE used the
intermediate efficiency levels as presented in the November 2023 NOPD.
c. Maximum Technology (``Max-Tech'') Efficiency Levels
As noted, EPCA requires that any new or amended energy conservation
standard be designed to achieve the maximum improvement in energy
efficiency that is technologically feasible. (42 U.S.C. 6295(o)(2)(A))
As part of its analysis, DOE identifies the ``maximum available''
efficiency level, representing the highest efficiency unit currently
available on the market. DOE also defines a ``max-tech'' efficiency
level, representing the maximum theoretical efficiency that can be
achieved through the application of all available technology options
retained from the screening analysis. In many cases, the max-tech
efficiency level is not commercially available because it is not
currently economically feasible.
In the November 2023 NOPD, DOE conducted an analysis of the market
and a technology assessment and researched current product offerings to
determine the max-tech efficiency levels. 88 FR 83426, 83441 (Nov. 29,
2023). The max-tech level identified in each product class corresponded
to the highest-AFUE furnace available on the market, which DOE found to
correspond to the maximum technologically feasible levels at this time.
For NWOFs, DOE identified a design that achieves a max-tech efficiency
level of 96-percent AFUE. For MHOFs, the maximum efficiency level that
DOE identified was 87-percent AFUE. For WGFs, DOE identified a max-tech
efficiency level design that achieves 95-percent AFUE. For WGFs and
NWOFs, the max-tech efficiency level is currently achieved by use of a
condensing secondary heat exchanger. A constant-airflow BPM (``CA-
BPM'') indoor blower motor was also implemented as the motor design
option for the max-tech efficiency level for NWOFs, because the only
NWOF model on the market available at this level includes a CA-BPM
motor, and it was unclear if this level is achievable without using a
CA-BPM fan motor. For MHOFs, the max-tech efficiency level is currently
achieved by use of a heat exchanger with increased surface area.
As stated previously, for this final determination, DOE used the
max-tech efficiency levels as presented in the November 2023 NOPD.
d. Summary of Efficiency Levels Analyzed
The AFUE efficiency levels analyzed along with the technologies
that are expected to be used to increase energy efficiency above the
baseline efficiency level for NWOFs, MHOFs, and WGFs are presented in
Table IV.4, Table IV.5, and Table IV.6, respectively.

Table IV.4--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for NWOFs
------------------------------------------------------------------------
Description of
Efficiency level AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 83 See Table IV.3 for
baseline features.
1.............................. 85 Baseline EL + Increased
heat exchanger area.
2.............................. 87 EL 1 + Increased heat
exchanger area.
3--Max-tech.................... 96 EL 2 + Addition of
condensing secondary
heat exchanger (and
associated components,
sensors, etc.) + CA-
BPM motor.
------------------------------------------------------------------------

Table IV.5--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for MHOFs
------------------------------------------------------------------------
Description of
Efficiency level AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 80 See Table IV.3 for
baseline features.
1.............................. 83 Baseline EL + Increased
heat exchanger area.
2.............................. 85 EL 1 + Increased heat
exchanger area.
3--Max-tech.................... 87 EL 2 + Increased heat
exchanger area.
------------------------------------------------------------------------

Table IV.6--AFUE Efficiency Levels and Technologies Used at Each
Efficiency Level Above Baseline for WGFs
------------------------------------------------------------------------
Description of
Efficiency level AFUE (%) technologies typically
incorporated
------------------------------------------------------------------------
0--Baseline.................... 81 See Table IV.3 for
baseline features.
1--Max-tech.................... 95 Baseline EL + Addition
of condensing
secondary heat
exchanger (and
associated components,
sensors, etc.).
------------------------------------------------------------------------

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, and the availability and timeliness of purchasing the product
on the market.

[[Page 84044]]

The cost approaches generally used by DOE are summarized as follows:
[ballot] Physical teardowns: Under this approach, DOE physically
dismantles commercially-available products, component-by-component, to
develop a detailed bill of materials for the products.
[ballot] Catalog teardowns: In lieu of physically deconstructing
products, 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 a catalog
teardown is feasible (e.g., for tightly integrated products such as
fluorescent lamps, which are infeasible to disassemble and for which
parts diagrams are unavailable), cost-prohibitive, or 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 November 2023 NOPD, DOE conducted the cost analysis using a
combination of physical and catalog teardowns. 88 FR 83426, 83443 (Nov.
29, 2023). DOE estimated the MPC associated with each efficiency level
to characterize the cost-efficiency relationship of improving consumer
furnace performance, in terms of AFUE.
The units selected for the teardown analysis for the November 2023
NOPD and used in this final determination spanned a range of
manufacturers and efficiencies for commercially-available products that
are the subject of this rulemaking. Products were selected that have
characteristics of typical products on the market at a representative
input capacity. Based on information gathered as part of the market and
technology assessment (see section IV.A of this document), as well as
discussions with manufacturers, DOE determined that 80 kBtu/h and 105
kBtu/h were representative input capacities for WGFs and oil furnaces,
respectively. Where possible, DOE selected teardowns at those
representative capacities. Where needed, catalog teardowns were also
conducted to supplement the physical teardowns. DOE estimated the
manufacturing cost for each furnace selected for teardown by
disassembling the furnace and developing a bill of materials (``BOM'').
The resulting BOM provides the basis for the MPC estimates for products
at various efficiency levels spanning the full range of efficiencies
from the baseline to max-tech.
To account for manufacturers' non-production costs and profit
margin, DOE applies a non-production cost 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 the
annual Securities and Exchange Commission (``SEC'') 10-K reports filed
by publicly-traded manufacturers primarily engaged in HVAC
manufacturing whose combined product range includes oil and weatherized
gas furnaces. The manufacturer markup estimates are consistent with the
manufacturer markups developed for a final rule for furnace fan energy
conservation standards published in the Federal Register on July 3,
2014. 79 FR 38130. Specifically, DOE estimates the industry average
manufacturer markup to be 1.35 for NWOFs, 1.29 for MHOFs, and 1.27 for
WGFs.
In this final determination, DOE used the same cost analysis as in
the November 2023 NOPD.
a. Teardown Analysis
For the November 2023 NOPD teardown analysis, DOE used a total of
31 teardowns of consumer furnaces as the basis for calculating industry
MPCs. The units DOE selected for teardown are manufactured in
considerable volume, are commonly available, and have features that DOE
believes are representative of the most common characteristics (i.e.,
input capacity, configuration, and heat exchanger type) of each product
class. As discussed previously, most physical teardown units had input
capacities of approximately 80 kBtu/h for WGFs or 105 kBtu/h for NWOFs
and MHOFs, which DOE considers to be representative of those furnace
product classes. For units that were not at the representative
capacity, an adjustment was developed to normalize all units to the
representative capacity. To the extent possible, all major efficiency
levels and technologies were captured in the selection of models for
the teardown analysis. WGF and oil furnace teardowns were considered
separately.
Whenever possible, DOE examined multiple models from a given
manufacturer that capture different design options and used them as
direct points of comparison. The teardown selections also minimized the
incorporation of non-efficiency-related premium features, which
otherwise could inflate the incremental manufacturing cost of achieving
higher efficiency levels.
For the November 2023 NOPD, DOE examined products with a variety of
indoor blower motor technologies and combustion systems (i.e., single-
stage, two-stage, or modulating). DOE also examined products with PSC,
constant-torque BPM (``CT-BPM''), and CA-BPM indoor blower motors. As
further discussed in section IV.B.2.b of this document, DOE determined
the cost of including these technologies and applied the costs in the
downstream analyses to estimate the manufacturing cost of going from
one technology to another with higher efficiency (e.g., using a CA-BPM
instead of a CT-BPM, or two-stage combustion instead of single-stage
combustion). Although such changes are not necessarily required due to
changes in the AFUE level, DOE included these costs to better reflect
the products available on the market such that it represents the
products expected to be available in a scenario where the standard were
set at that level.
Due to the similarity observed in NWOF and MHOF designs available
in the market, DOE has found that the costs associated with increasing
the energy efficiency of MHOFs are equivalent to the costs for NWOFs. A
MHOF teardown was used to examine key differences between NWOFs and
MHOFs and confirmed that the MPCs of MHOFs could be estimated based on
the NWOF teardowns. Therefore, in the November 2023 NOPD, DOE based MPC
estimates for MHOFs at each efficiency level analyzed largely on
teardowns of NWOFs at that efficiency level by determining the
differences between the NWOF and MHOF product classes and estimating
the costs associated with those differences.
b. Cost Estimation Method
In the November 2023 NOPD, DOE assigned costs of labor, materials,
and overhead to each part, whether purchased or produced in-house. DOE
then aggregated single-part costs into major assemblies (e.g.,
packaging, cabinet assembly, heat exchanger, burner system/gas train,
exhaust subassembly, fan system, controls) and summarized these costs
in a spreadsheet BOM. DOE repeated this same process for every physical
and catalog teardown in the engineering analysis.
Analytical inputs related to manufacturer practices and cost
structure play an important role in estimating the final cost of a
product. DOE used inputs regarding the manufacturing process parameters
(e.g., equipment use, labor rates, tooling depreciation, and cost of
purchased raw materials) to determine the value for each furnace
component. DOE collected

[[Page 84045]]

information on labor rates, tooling costs, raw material prices, and
other factors to use as inputs into the cost estimates. DOE determined
values for these parameters using internal expertise and confidential
information available to its contractors, some of which was obtained
via confidential interviews with manufacturers. For purchased parts,
DOE estimated the purchase price based on volume-variable price
quotations and detailed discussions with manufacturers and component
suppliers. DOE then summed the values of the furnace components into
assembly costs and, finally, the total MPC for the entire furnace.
The MPC includes material, labor, and depreciation costs, as well
as the overhead costs associated with the manufacturing facility.
Material costs include both raw materials and purchased-part costs.
Labor costs include fabrication, assembly, and indirect and overhead
(burdened) labor rates. Depreciation costs include production equipment
depreciation, tooling depreciation, and building depreciation. The
overhead costs associated with the manufacturing facility include
indirect process costs, utilities, equipment and building maintenance,
and reworking of defective parts/units.
DOE determined the costs of raw materials based on manufacturer
interviews, quotes from suppliers, and secondary research. Past results
are updated periodically and/or inflated to present-day prices using
indices from resources such as MEPS International,\21\
PolymerUpdate,\22\ the U.S. Geologic Survey (``USGS''),\23\ and the
U.S. Bureau of Labor Statistics (``BLS'').\24\ Raw material prices for
metals, such as those of stainless steel and other sheet metals, are
estimated on the basis of five-year averages to smooth out spikes in
demand. For other ``raw'' materials such as plastic resins, insulation
materials, etc., DOE used prices based on current market data (as of
December 2022) rather than a five-year average, because non-metal raw
materials have not experienced the same level of price volatility in
recent years as metal raw materials.
---------------------------------------------------------------------------

\21\ For more information on MEPS International, please visit
<a href="http://www.meps.co.uk/">www.meps.co.uk/</a> (last accessed April 15, 2024).
\22\ For more information on PolymerUpdate, please visit
<a href="http://www.polymerupdate.com">www.polymerupdate.com</a> (last accessed May 9, 2024).
\23\ For more information on the USGS metal price statistics,
please visit <a href="http://www.usgs.gov/centers/nmic/commodity-statistics-and-information">www.usgs.gov/centers/nmic/commodity-statistics-and-information</a> (last accessed May 9, 2024).
\24\ For more information on the BLS producer price indices,
please visit <a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a> (last accessed May 9, 2024).
---------------------------------------------------------------------------

DOE characterized parts based on whether manufacturers fabricated
them in-house or purchased them from outside suppliers. For fabricated
parts, DOE estimated the price of intermediate materials (e.g., tube,
sheet metal) and the cost of forming them into finished parts. For
purchased parts, DOE estimated the purchase prices paid to the original
equipment manufacturers (``OEMs'') of these parts, based on discussions
with manufacturers during confidential interviews. Whenever possible,
DOE obtained price quotes directly from the component suppliers used by
furnace manufacturers whose products were examined in the engineering
analysis. DOE determined that the components in Table IV.7 are
generally purchased from outside suppliers.

Table IV.7--Purchased Furnace Components
------------------------------------------------------------------------
Assembly Purchased subassemblies
------------------------------------------------------------------------
Burner/Exhaust............................ Gas valve.
Spark igniter.
Draft inducer assembly.
Blower.................................... Indoor blower fan blade.
Indoor blower fan motor.
Controls.................................. Control boards.
Capacitors, transformers,
contactors, switches, etc.
------------------------------------------------------------------------

Certain factory parameters, such as fabrication rates, labor rates,
and wages, also affect the cost of each unit produced. DOE factory
parameter assumptions were based on internal expertise and manufacturer
feedback. Table IV.8 lists the factory parameter assumptions used in
the analysis. For the engineering analysis, these factory parameters,
including production volume, are the same at every efficiency level.
The production volume used at each efficiency level corresponds with
the average production volume, per manufacturer, if 100 percent of all
units manufactured were at that efficiency level. This production
volume was estimated based on historical shipments. These assumptions
are generalized to represent typical production and are not intended to
model a specific factory.

Table IV.8--Factory Parameter Assumptions
------------------------------------------------------------------------
Oil furnace
Parameter estimate WGF estimate
------------------------------------------------------------------------
Actual Annual Production Volume 5,000 units/year.. 500,000 units/
(units/year). year.
Purchased Parts Volume.......... 5,000 units/year.. 100,000 units/
year.
Workdays Per Year (days)........ 250............... 250.
Assembly Shifts Per Day (shifts) 1................. 2.
Fabrication Shifts Per Day 2................. 2.
(shifts).
Fabrication Labor Wages ($/h)... 16................ 16.
Assembly Labor Wages ($/h)...... 16................ 16.
Length of Shift (h)............. 8................. 8.
Average Equipment Installation 10%............... 10%.
Cost (% of purchase price).
Fringe Benefits Ratio........... 50%............... 50%.
Indirect to Direct Labor Ratio.. 33%............... 33%.
Average Scrap Recovery Value.... 30%............... 30%.
Worker Downtime................. 10%............... 10%.
Burdened Assembly Labor Wage ($/ 24................ 24.
h).
Burdened Fabrication Labor Wage 24................ 24.
($/h).
Supervisor Span (workers/ 25/1.............. 25/1.
supervisor).
Supervisor Wage Premium (over 30%............... 30%.
fabrication and assembly wage).
------------------------------------------------------------------------

[[Page 84046]]

Indoor Blower Motor Costs
As discussed in section IV.B.1.a of this document, the baseline
design for WGFs includes a BPM motor. DOE research suggests that the
predominant BPM indoor blower motors sold on the market today are
either a CT-BPM or a CA-BPM design. Both types of motors rely on
electronic variable-speed motor systems that are typically mounted in
an external chassis to the back of the motor. CA-BPM motors utilize
feedback control to adjust torque based on external static pressure
(``ESP'') in order to maintain a desired airflow. This differentiates
them from CT-BPM motors, which will maintain torque and likely decrease
airflow output in environments with high ESPs. CT-BPMs are capable of
achieving airflows similar to CA-BPMs but are generally less expensive.
Therefore, for the November 2023 NOPD, DOE considered the baseline
design to include a CT-BPM motor for the WGF product class and
determined the incremental cost of a CA-BPM motor.
DOE's review of the market for the November 2023 NOPD showed that
PSC motors are still being used in some NWOFs and MHOFs, so the final
MPC results are presented based on a PSC motor at the baseline through
87-percent AFUE. To account for the variety of motor technologies
available on the market, DOE determined the incremental cost associated
with use of various types of more-efficient BPM fan motors as compared
to baseline PSC motors for NWOFs and MHOFs. Additionally, for NWOFs, a
CA-BPM indoor blower motor was implemented as the motor design option
for the max-tech efficiency level because the only NWOF model on the
market available at this level includes a CA-BPM motor, and it is
unclear if this level is achievable without a constant-airflow fan. For
the NWOF efficiency levels below max-tech and for all MHOF efficiency
levels, DOE calculated the additional cost to switch from a PSC blower
motor to either a CT-BPM motor or a CA-BPM motor. As discussed in
Chapter 8 of the November 2022 Preliminary Analysis TSD, these costs
are applied in the LCC and PBP analyses to determine the MPC of a
furnace with each motor technology in order to better represent typical
costs to consumers for NWOFs and MHOFs. CA-BPM blower motors are
sometimes used as a utility-enhancing feature on units below the max-
tech efficiency level. The incremental cost increases for using CT-BPM
or CA-BPM motors, as compared to PSC motors, are outlined in Table
IV.9.

Table IV.9--Cost Increases for BPM Blower Motors as Compared to PSC Motors
----------------------------------------------------------------------------------------------------------------
Incremental cost Incremental cost
Product class Input capacity increase for CT- increase for CA-
(kBtu/h) BPM (2022$) BPM (2022$)
----------------------------------------------------------------------------------------------------------------
NWOF, MHOF.............................................. 105 $30.65 $80.48
WGF..................................................... 80 37.94 59.92
----------------------------------------------------------------------------------------------------------------

Multi-Stage Furnaces
As explained in the November 2023 NOPD (see 88 FR 83426, 83445
(Nov. 29, 2023)), the market for WGFs contains a significant number of
two-stage furnaces that are rated at the same efficiency as single-
stage furnaces. DOE believes consumers sometimes choose to purchase
two-stage products for the additional thermal comfort offered by
furnaces with multiple stages of heating output. As such, in order to
better represent typical costs to consumers, DOE analyzed the cost of
multiple burner stages for WGFs. DOE determined that oil units with
multi-staging were rare and, thus, not representative of the market, so
DOE did not analyze the cost of multiple stages for the NWOF and MHOF
product classes. Where applicable, the additional cost to change to a
two-stage furnace includes the added cost of a two-stage gas valve, a
two-speed inducer assembly, an additional pressure switch, and
additional controls and wiring. The additional cost to change to a
modulating furnace includes the added cost of a modulating gas valve,
an inducer assembly, an upgraded pressure switch, and additional
controls and wiring. The incremental costs to implement multi-staging
in WGFs are outlined in Table IV.10

Table IV.10--Multi-Stage Burner Incremental Cost Increase as Compared to
Single-Stage Burner
------------------------------------------------------------------------
Incremental cost
increase for multi-
Adder stage burners
(2022$)
------------------------------------------------------------------------
Two-Stage........................................... $21.07
Modulating.......................................... 75.36
------------------------------------------------------------------------

Low-NO<INF>X</INF> and Ultralow-NO<INF>X</INF> Furnaces
Some furnaces are marketed as ``low-NO<INF>X</INF>,'' which
indicates that their NO<INF>X</INF> emissions are less than 40
nanograms of NO<INF>X</INF> per joule of useful heat energy (``ng/J'').
Certain local jurisdictions require natural gas furnaces to comply with
NO<INF>X</INF> emissions restrictions as low as 14 ng/J,\25\ which is
referred to as ``ultralow-NO<INF>X</INF>.'' A common method of reducing
furnace NO<INF>X</INF> emissions is to slightly delay the natural gas
combustion process, which in turn produces a cooler flame and results
in suppressed formation of NO<INF>X</INF>.\26\ DOE has observed during
its teardown analysis that to achieve low-NO<INF>X</INF> operation,
manufacturers implement low-NO<INF>X</INF> baffles. For ultralow-
NO<INF>X</INF> operation, DOE used NWGF teardowns to approximate the
cost to implement this technology option in WGFs, as DOE understands
that the methodology would be the same for both product classes.
Through these teardowns of NWGFs, DOE has observed that in order to
achieve ultralow-NO<INF>X</INF> operation, the in-shot burners
typically used in residential furnaces were replaced with a mesh premix
burner. In addition, the model used a variable-speed BPM inducer fan
motor. DOE identified an ultralow-NO<INF>X</INF> WGF on the market and
compared the burner construction for the torn-down NWGF and the
ultralow-NO<INF>X</INF> WGF. DOE found that the approach used for
achieving ultralow-NO<INF>X</INF> in WGFs is similar to that used in
NWGFs. DOE also determined that oil units with ultralow-NO<INF>X</INF>
operation were rare and, thus, not representative of the market, so the
Department did not

[[Page 84047]]

analyze the cost of ultralow-NO<INF>X</INF> for the NWOF and MHOF
product classes.
---------------------------------------------------------------------------

\25\ Rule 1111 of the South Coast Air Quality Management
District of Southern California currently requires that all NWGFs
and MHGFs not exceed a 14 ng/J restriction on NO<INF>X</INF>
emissions. For more information on Rule 1111, see <a href="http://www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4">www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4</a> (last
accessed June 28, 2024).
\26\ U.S. Environmental Protection Agency, Natural Gas
Combustion (available at <a href="http://www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf">www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf</a>) (last accessed June 28, 2024).
---------------------------------------------------------------------------

Using raw material price data, teardown data from NWGFs, and
manufacturing expertise, DOE estimated the manufacturing cost
difference between standard NO<INF>X</INF> burners and low-
NO<INF>X</INF> and ultralow-NO<INF>X</INF> burners. For low-
NO<INF>X</INF>, MPC cost values were developed for the implementation
of low-NO<INF>X</INF> baffles in WGFs at the representative input
capacity of 80 kBtu/h. For ultralow-NO<INF>X</INF>, MPC values were
developed for the implementation of a mesh premix burner and variable-
speed BPM inducer fan (along with other related components necessary).
The resulting MPC estimates to achieve low-NO<INF>X</INF> and ultralow-
NO<INF>X</INF> operation are shown in Table IV.11.
In the LCC and PBP analyses (see section IV.E of this document),
DOE estimated the fractions of furnaces that are installed in
jurisdictions that require low-NO<INF>X</INF> or ultralow-
NO<INF>X</INF> compliance and applied these cost adders to those
fractions of furnace installations accordingly. The application of
these adders is discussed in more detail in Chapter 8 of the November
2022 Preliminary Analysis TSD.

Table IV.11--Increase in MPCs for Low-NOX and Ultralow-NOX WGFs
------------------------------------------------------------------------
Adder Value (2022$)
------------------------------------------------------------------------
Low-NOX................................................. $3.10
Ultralow-NOX............................................ 113.68
------------------------------------------------------------------------

Shipping Cost
Freight is not a manufacturing cost, but because it is a
substantial cost incurred by the manufacturer, DOE accounts for
shipping costs separately from other costs. For the November 2023 NOPD,
DOE calculated shipping costs based on a typical 53-foot straight-frame
trailer with a storage volume of 4,240 cubic feet.
DOE first calculated the cost per cubic foot of space on a trailer
based on a cost of $3,643 per shipping load and the standard dimensions
of a 53-foot trailer. This cost was determined based on a combination
of full truck load freight quotations, manufacturer feedback, and BLS
producer price indices for the ``fuels and related products and power''
grouping.\27\ Then, DOE examined the average sizes of products in each
product class at each efficiency and capacity combination analyzed. DOE
estimated the shipping costs by multiplying the product volume by the
cost per cubic foot of space on the trailer. Furnace dimensions
typically do not change as a result of increases in efficiency, and
accordingly, DOE's shipping costs show no change across efficiency
levels. In determining volumetric shipping costs, DOE also used
manufacturer feedback regarding product mix on each trailer, packing
efficiency, and methods and equipment used to load the trailers to
revise the shipping costs. Table IV.12 shows the shipping costs for the
products analyzed in this rulemaking.
---------------------------------------------------------------------------

\27\ U.S. Department of Labor, Bureau of Labor Statistics,
Producer Price Indices (available at: <a href="http://data.bls.gov/timeseries/WPU057303?data_tool=XGtable">data.bls.gov/timeseries/WPU057303?data_tool=XGtable</a>) (last accessed June 28, 2024).

Table IV.12--Shipping Costs Per Unit
------------------------------------------------------------------------
Representative Per-unit
Product class capacity (kBtu/ shipping cost
h) (2022$)
------------------------------------------------------------------------
WGF................................. 80 $55.69
NWOF................................ 105 19.92
MHOF................................ 105 19.92
------------------------------------------------------------------------

3. Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency relationships (or ``curves'') in the form of aggregated MPCs
for each product class. The final results of the AFUE engineering
analysis are the MPCs for WGFs, NWOFs, and MHOFs at each efficiency
level. The cost-efficiency results are shown in tabular form in Table
IV.13 through Table IV.15 as efficiency versus MPC and MSP. These
results include the furnace fan and combustion system staging
incorporated into most furnace designs.

Table IV.13--Cost-Efficiency Data for WGFs With a Constant-Torque BPM
Indoor Blower Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
81...................................... $1,412.32 $1,793.65
95...................................... 1,505.40 1,911.85
------------------------------------------------------------------------

Table IV.14--Cost-Efficiency Data for NWOFs With a PSC Indoor Blower
Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
83...................................... $700.73 $945.98
85...................................... 730.94 986.77
87...................................... 761.16 1,027.57
96...................................... 1,334.85 1,802.05
------------------------------------------------------------------------

Table IV.15--Cost-Efficiency Data for MHOFs With a PSC Indoor Blower
Motor and a Single-Stage Burner
------------------------------------------------------------------------
AFUE MPC (2022$) MSP (2022$)
------------------------------------------------------------------------
80...................................... $664.47 $857.16
83...................................... 709.79 915.63
85...................................... 740.01 954.61
87...................................... 770.23 993.59
------------------------------------------------------------------------

DOE did not receive comments in response to the engineering and
cost analysis methodology in the November 2023 NOPD and maintains the
same methodology for the final determination.

C. Markups Analysis

The markups analysis develops appropriate markups (e.g.,
distributor markups, retailer 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 analyses. At each step in the distribution channel,
companies mark up the price of the product to cover business costs and
profit margin.
As part of the analysis, DOE identifies key market participants and
distribution channels. For the subject consumer furnaces, the main
parties in the distribution chains are: (1) manufacturers; (2)
wholesalers or distributors; (3) retailers; (4) mechanical contractors;
(5) builders; (6) manufactured home manufacturers, and (7) manufactured
home dealers/retailers. For this final determination, DOE

[[Page 84048]]

maintained the same approach as in the NOPD. DOE characterized two
distribution channel market segments to describe how NWOFs, MHOFs, and
WGFs pass from the manufacturer to residential and commercial
consumers: \28\ (1) replacements and new owners \29\ and (2) new
construction.
---------------------------------------------------------------------------

\28\ DOE estimates that five percent of WGFs and three percent
of NWOFs are installed in commercial buildings.
\29\ New owners are new furnace installations in buildings that
did not previously have a NWOF, MHOF, or WGF, or existing owners
that are adding an additional consumer furnace. They primarily
consist of households that add or switch to these furnaces during a
major remodel.
---------------------------------------------------------------------------

In the replacement and new owner market, the primary distribution
channel for NWOFs, MHOFs, and WGFs is characterized as follow:

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

DOE estimates that the above distribution channel applies to the
majority of the shipments of the subject consumer furnaces.\30\ As
retail, including internet sales, grew significantly in the last five
years (previously it was negligible) and some consumers purchase the
appliance directly and then have contractors install it, DOE considered
additional distribution channels as follows: \31\
---------------------------------------------------------------------------

\30\ In the residential sector, DOE estimates that this
distribution channel is applicable to 90 percent of the shipments
for NWOFs and MHOFs and 80 percent for WGFs; in the commercial
sector, it is applied to 75 percent of NWOF and 70 percent of WGF
distributions.
\31\ In the residential sector, DOE estimates that these two
distribution channels combined are applicable to five percent of the
shipments for NWOFs and MHOFs, and 15 percent for WGFs (in mobile
home applications, 10 percent of WGFs distributed to mobile homes is
assumed to go through these channels); in the commercial sector,
they are applied to 10 percent of NWOF and 15 percent of WGF
distributions.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Retailer
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Retailer
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

For mobile home applications, there is another distribution channel
considered on top of the aforementioned channels, where the MHOF or WGF
is purchased via a mobile home specialty retailer or dealer: \32\
---------------------------------------------------------------------------

\32\ DOE estimates that five percent of MHOFs and 10 percent of
WGFs that go to mobile homes are distributed through this channel.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home
Specialty Retailer/Dealer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar><
---------------------------------------------------------------------------
Consumer

In the new construction market, DOE identified three primary
distribution channels that involve builders, or manufactured home
builders when considering mobile home applications:

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Builder [rarr] Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Builder
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home
Dealer [rarr] Consumer

For both the replacements and new owners/new construction markets,
DOE additionally considered the national accounts or direct-from-
manufacturer distribution channel, where the manufacturer through a
wholesaler sells directly consumers.\33\
---------------------------------------------------------------------------

\33\ The national accounts channel where the buyer is the same
as the consumer is mostly applicable to NWOFs and WGFs installed in
small to mid-size commercial buildings, where on-site contractors
purchase equipment directly from wholesalers at lower prices due to
the large volume of equipment purchased and perform the installation
themselves. DOE's analysis assumes that approximately 5 and 15
percent of NWOFs and WGFs installed in the residential and
commercial sector, respectively, use the national accounts
distribution channel for replacements. For new construction, DOE
assumes 10 percent of the subject furnaces installed in the
residential sector and 20 percent installed in the commercial sector
are distributed through national accounts.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler
(National Account) ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Buyer
---------------------------------------------------------------------------
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

DOE developed baseline and incremental markups for each actor in
the distribution chain to ultimately determine the consumer purchase
cost. 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
(i.e., 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.\34\
---------------------------------------------------------------------------

\34\ 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 did not receive comments in response to the markups methodology
in the November 2023 NOPD and maintains the same methodology for this
final determination.

D. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual
energy consumption of oil and weatherized gas consumer furnaces at
different efficiencies in representative U.S. homes and commercial
buildings, and to assess the energy savings potential of increased oil
and weatherized gas consumer furnace efficiency. The energy use
analysis estimates the range of energy use of the subject products in
the field (i.e., as the products are actually used by consumers). The
energy use analysis provides the basis for other analyses DOE
performed, particularly assessments of the potential energy savings and
the savings in consumer operating costs that could result from adoption
of amended or new standards.
DOE estimated the annual energy consumption of oil and weatherized
gas consumer furnaces at specific energy efficiency levels across a
range of climate zones, building characteristics, and space heating
needs. The annual energy consumption includes the natural gas, liquid
petroleum gas (``LPG''), oil, and electricity, as applicable, used by
the furnace.
For the November 2023 NOPD, DOE developed a building sample based
on the Energy Information Administration's (``EIA's'') 2015 Residential
Energy Consumption Survey (``RECS 2015'') \35\ and 2012 Commercial
Building Energy Consumption Survey (``CBECS 2012'').\36\ DOE used RECS
2015-reported or CBECS 2012-reported heating energy consumption (based
on the existing heating system) to calculate the heating load of each
household or building. The heating load represents the amount of
heating required to keep a housing unit or building comfortable
throughout an average year. DOE assigned the energy efficiency of
existing systems based on the design of the distribution systems, a
historical distribution of energy efficiencies for NWOFs, MHOFs, and
WGFs, and data about the age of the existing furnace. The estimation of
heating loads also required calculating the electricity consumption of
the blower, because heat from the operation of the blower contributes
to space heating. In addition, DOE made adjustments based on historical
weather data, projections of building shell efficiency, and building
square footage, as well as for homes that had secondary heating
equipment that used the same fuel as the furnace. To complete the
analysis, DOE calculated the anticipated energy consumption of
alternative (more energy-efficient) products if they were to replace
existing systems in each housing unit or commercial building.
---------------------------------------------------------------------------

\35\ Energy Information Administration (``EIA''), 2015
Residential Energy Consumption Survey (RECS) (available at:
<a href="http://www.eia.gov/consumption/residential/data/2015">www.eia.gov/consumption/residential/data/2015</a>) (last accessed June
28, 2024).
\36\ EIA, 2012 Commercial Buildings Energy Consumption Survey
(CBECS) (available at: <a href="http://www.eia.gov/consumption/commercial/">www.eia.gov/consumption/commercial/</a>) (last
accessed June 28, 2024).
---------------------------------------------------------------------------

In the November 2023 NOPD, DOE also included the electricity use of
auxiliary equipment, such as condensate pumps and heat tape, which

[[Page 84049]]

are sometimes installed with higher-efficiency products. The
electricity consumption of the auxiliary equipment is added to the
total electricity consumption.
EIA recently published the microdata for the 2020 edition of
RECS.\37\ To assess the impact of using RECS 2020, DOE compared the LCC
consumer sample in the July 2022 Consumer Furnace NOPR, which used RECS
2015, (see 87 FR 40590, 40624 (July 7, 2022)) to the consumer sample
used in the December 2023 Consumer Furnace final rule consumer sample,
which used RECS 2020 (see 88 FR 87502, 87547 (Dec. 18, 2023)). DOE
assumed that changes in annual energy heating use between the two RECS
editions for those consumer furnaces (i.e., NWGFs and MHGFs) serve as a
reasonable proxy for the relative change in oil and weatherized gas
furnace energy use. As can be seen by comparing Table 7.4.1 of the TSDs
for that NOPR and final rule, the reported estimated annual heating
energy consumption by region and efficiency level is similar between
the two versions of RECS for households with furnaces, with RECS 2020
showing a slightly lower energy consumption. Given in the space-heating
end use for NWGFs compared with NWOFs, MHOFs, WOFs, WGFs, and EFs, and
given that the estimated furnace energy use declines when updating to
RECS 2020 for consumer furnaces, DOE has concluded that updating the
consumer sample to RECS 2020 would not alter but only strengthen the
conclusions of this final determination. Therefore, DOE continued to
use RECS 2015 as the basis for its consumer sample, as was done in the
November 2023 NOPD.
---------------------------------------------------------------------------

\37\ EIA, 2020 Residential Energy Consumption Survey (RECS)
(available at: <a href="http://www.eia.gov/consumption/residential/data/2020/index.php/">www.eia.gov/consumption/residential/data/2020/index.php/</a>) (last accessed June 11, 2024).
---------------------------------------------------------------------------

A similar comparison of commercial installations of oil and weather
gas furnaces found similar energy use between CBECS 2012 used in the
July 2022 Consumer Furnace NOPR (see 87 FR 40590, 40624 (July 7, 2022))
and CBECS 2018 used in the December 2023 Consumer Furnace final rule
(see 88 FR 87502, 87547 (Dec. 18, 2023)). DOE also notes that
commercial installations of oil and weatherized gas furnaces account
for approximately five percent or less of total installations, as show
in Table 6.2.1 of the Preliminary Analysis TSD. Given the relatively
small number of installations in the commercial sector relative to the
residential sector, DOE has concluded that changes between CBECS 2012
and 2018 would not significantly impact overall analytical conclusions.
Therefore, for this final determination, DOE continued to use CBECS
2012 as the basis of its commercial consumer sample, as was done in the
November 2023 NOPD.
Chapter 7 of the November 2022 Preliminary Analysis TSD provides
details on DOE's energy use analysis for oil and weatherized gas
furnaces. DOE did not receive comments on its energy use analysis
methodology in response to the November 2023 NOPD.

E. Life-Cycle Cost and Payback Period Analysis

DOE conducts LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential amended energy conservation
standards for oil and weatherized gas furnaces. 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 typically uses the following two metrics to measure consumer
impacts:
[ballot] Life-Cycle Cost (LCC) is the total consumer expense of
operating the product over the lifetime of that product, consisting of
total installed cost (which includes manufacturer selling price,
distribution chain markups, sales tax, and installation costs) plus
operating costs (e.g., 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.
[ballot] Payback Period (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 the product 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 each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units and, where appropriate, commercial buildings. As stated
previously, DOE developed household and commercial building samples
from the from RECS 2015 and CBECS 2012. For each sample household or
commercial building, DOE determined the energy consumption for the oil
and weatherized gas furnaces and the appropriate energy price. By
developing a representative sample of households and commercial
buildings, the analysis captured the variability in energy consumption
and energy prices associated with the use of oil and weatherized gas
furnaces.
Inputs to the LCC calculation include the installed cost to the
consumer, operating expenses, the lifetime of the product, and a
discount rate. 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 (where
applicable)--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. Inputs to the PBP calculation include the installed
cost to the consumer and first-year operating expenses. DOE created
distributions of values for installation cost, repair and maintenance,
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 product user samples. For this
proceeding, the Monte Carlo approach is implemented in MS Excel
together with the Crystal BallTM add-on.\38\ The model
calculated the LCC for products at each efficiency level for 10,000
housing units or commercial buildings 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

[[Page 84050]]

not impacted by the standard level. By accounting for consumers who are
already projected to purchase more-efficient products than the baseline
product in a given case, DOE avoids overstating the potential benefits
from increasing product efficiency.
---------------------------------------------------------------------------

\38\ Crystal BallTM is a commercially-available
software tool to facilitate the creation of these types of models by
generating probability distributions and summarizing results within
Excel (available at: <a href="http://www.oracle.com/middleware/technologies/crystalball.html">www.oracle.com/middleware/technologies/crystalball.html</a>) (last accessed June 11, 2024).
---------------------------------------------------------------------------

DOE calculated the LCC and PBP for consumers of oil and weatherized
gas furnaces as if each were to purchase a new product in the expected
first year of required compliance with new or amended standards. Any
amended standards would apply to oil and weatherized gas furnaces
manufactured five years after the date on which any new or amended
standard is published in the Federal Register. (42 U.S.C.
6295(m)(4)(A)(ii)) Therefore, DOE used 2030 as the first year of
compliance with any amended standards.
Table IV.16 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP analyses. The subsections that follow provide
further discussion. Details of the spreadsheet model, and how all
inputs to the LCC and PBP analyses are applied, are contained in
chapter 8 of the November 2022 Preliminary Analysis TSD and its
appendices.

Table IV.16--Summary of Inputs and Methods for the LCC and PBP Analyses
*
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost...................... Derived by multiplying MPCs by
manufacturer and distribution chain
markups and sales tax, as
appropriate. Used historical data
to derive a price-scaling index to
project product costs.
Installation Costs................ Baseline installation cost
determined with data from RS Means
2023, manufacturer literature, and
expert consultant. DOE assumed
increased installation costs for
condensing furnaces.
Annual Energy Use................. The annual energy consumption per
unit at each efficiency level (see
section IV.D of this document).
Variability: Based on RECS 2015 and
CBECS 2012.
Energy Prices..................... Natural Gas: Based on EIA's Natural
Gas Navigator data for 2022 and
RECS 2015 and CBECS 2012 billing
data.
Propane and Fuel Oil: Based on EIA's
State Energy Data System (``SEDS'')
for 2021.
Electricity: Based on EIA's Form 861
data for 2022 and RECS 2015 and
CBECS 2012 billing data.
Variability: State energy prices
determined for residential and
commercial applications.
Marginal prices used for natural
gas, propane, and electricity
prices.
Energy Price Trends............... Residential and commercial prices
were escalated by using EIA's 2023
Annual Energy Outlook (AEO 2023)
forecasts to estimate future energy
prices. Escalation was performed at
the Census Division level.
Repair and Maintenance Costs...... Baseline installation cost
determined with data from RSMeans
2023, manufacturer literature, and
expert consultant. DOE assumed
increased repair and maintenance
costs for condensing furnaces.
Product Lifetime.................. Based on shipments data, multi-year
RECS, American Housing Survey,
American Home Comfort Survey data.
Average: 20.2-22.5 years.
Discount Rates.................... For residential end users, approach
involves identifying all possible
debt or asset classes that might be
used to purchase the considered
appliances or might be affected
indirectly. Primary data source was
the Federal Reserve Board's Survey
of Consumer Finances. For
commercial end users, DOE
calculates commercial discount
rates as the weighted-average cost
of capital using various financial
data.
Compliance Date................... 2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the November
2022 Preliminary Analysis TSD. Energy price trends, product lifetimes,
and discount rates are not used for the PBP calculation.

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.
For the November 2023 NOPD, DOE estimated product prices in the
year of compliance by using a least-squares power-law fit on the
inflation-adjusted, unified price index (historical Producer Price
Index (``PPI'') data) for warm-air furnaces from BLS spanning the time
period 1990-2018 versus cumulative shipments.\39\ DOE did not receive
comments on its price learning methodology in response to the November
2023 NOPD and maintains this methodology for this final determination.
---------------------------------------------------------------------------

\39\ U.S. Department of Labor, Bureau of Labor Statistics,
Produce Price Indices Series ID PCU333415333415C (available at:
<a href="http://www.bls.gov/ppi/">www.bls.gov/ppi/</a>) (last accessed June 28, 2024).
---------------------------------------------------------------------------

2. Installation Cost
The installation cost is the expense to the consumer of installing
the furnace, in addition to the cost of the furnace itself.
Installation cost includes all labor, overhead, and any miscellaneous
materials and parts needed that are associated with the replacement of
an existing furnace or the installation of a furnace in a new home, as
well as delivery of the new furnace, removal of the existing furnace,
and any applicable permit fees. Higher-efficiency furnaces may require
a consumer to incur additional installation costs.
For the November 2023 NOPD, DOE used data from RSMeans,\40\
manufacturer literature, and expert consultants to estimate the
installation cost, including labor costs, for oil and weatherized gas
furnaces. DOE's analysis of installation costs accounted for regional
differences in labor costs by aggregating city-level labor rates from
RSMeans into the 50 distinct States plus Washington, DC to match RECS
2015 and CBECS 2012 data. The installation cost methodology accounts
for all potential installation cases, including when a noncondensing
furnace is replaced with a condensing furnace, with particular
attention to venting issues in replacement applications (see
descriptions that follow). The installation cost also depends on the
furnace installation location, which DOE determined using information
from RECS 2015 and CBECS 2012.
---------------------------------------------------------------------------

\40\ RSMeans Company Inc., RSMeans Cost Data, Kingston, MA
(2023) (available at: <a href="http://www.rsmeans.com/products/online/">www.rsmeans.com/products/online/</a>) (last
accessed June 11, 2024).
---------------------------------------------------------------------------

For NWOF replacement installations, DOE included a number of
additional costs (``adders'') for a fraction of the sample households
that have particular features. For noncondensing furnaces, these
additional costs included updating flue vent connectors, vent resizing,
and chimney relining. For condensing furnaces, these additional costs
included adding a new flue vent (polyvinyl chloride (``PVC'')), adding

[[Page 84051]]

combustion air vents for direct vent installations (PVC), adding
concealing vent pipes for indoor installations, addressing an orphaned
water heater (by updating flue vent connectors, vent resizing, or
chimney relining), and removing condensate, all based on manufacturer
installation manuals and expert consultant input. Freeze protection
(heat tape) is accounted for in the cost of condensate removal for a
fraction of NWOFs installed in unconditioned attics.
For WGF installations, DOE included additional cost adders for
condensing WGFs to dispose of the condensate created and to prevent
freezing of the condensate, as the entire product is outdoors based on
manufacturer installation manuals, field study reports, and expert
consultant input. DOE also accounted for a fraction of installations in
colder climates that could require freeze protection (heat tape), a
condensate line being buried below the frost line, or a condensate
pump.
DOE did not receive comments regarding its installation cost
analysis in response to the November 2023 NOPD. Accordingly, DOE has
maintained the same approach for this final determination.
For further information on the derivation of installation costs,
see chapter 7 of the November 2022 Preliminary Analysis TSD.
3. Annual Energy Consumption
For each sampled household or commercial building, DOE determined
the energy consumption for oil and weatherized gas furnaces at
different efficiency levels using the approach described previously in
section IV.D of this document.
4. Energy Prices
Energy bills to consumers typically include fixed costs (i.e.,
costs that do not depend on consumption) and costs that depend on the
level of consumption. To estimate the impact of standards on consumer
operating costs, DOE calculated average energy prices, which represent
the typical cost for a consumer to use energy, including fixed costs,
and marginal energy prices, which represent the energy price consumers
would pay for reduced consumption. Because marginal energy 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. DOE applied average energy 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.
For the November 2023 NOPD, DOE derived 2022 annual residential and
commercial electricity prices by State from EIA Form 861M data.\41\ DOE
obtained 2022 annual residential and commercial natural gas prices by
State from EIA's Natural Gas Navigator.\42\ DOE collected 2021 average
LPG and fuel oil prices by State from EIA's 2021 State Energy
Consumption, Price, and Expenditures Estimates and scaled to 2022
prices using AEO 2023 data.\43\ To determine monthly prices for use in
the analysis, DOE developed monthly energy price factors for each fuel
based on long-term monthly price data. Monthly electricity and natural
gas prices were adjusted using seasonal marginal price factors to
determine monthly marginal electricity and natural gas prices. These
marginal energy prices were used to determine the cost to the consumer
of the change in energy consumed. Because marginal price data is only
available for residential electricity and natural gas, DOE only
developed marginal monthly prices for these fuels. For LPG and fuel
oil, DOE used average monthly prices.
---------------------------------------------------------------------------

\41\ EIA, Form EIA-861M (formerly EIA-826) detailed data (2022)
(available at: <a href="http://www.eia.gov/electricity/data/eia861m/">www.eia.gov/electricity/data/eia861m/</a>) (last accessed
June 1, 2024).
\42\ EIA, Natural Gas Navigator (2022) (available at:
<a href="http://www.eia.gov/naturalgas/data.php">www.eia.gov/naturalgas/data.php</a>) (last accessed June 1, 2024).
\43\ EIA, 2021 State Energy Data System (2021) (available at:
<a href="http://www.eia.gov/state/seds/">www.eia.gov/state/seds/</a>) (last accessed June 1, 2024).
---------------------------------------------------------------------------

To estimate energy prices in future years, DOE multiplied the 2022
energy prices by the projection of annual average price changes for
each State from the Reference case in AEO 2023, which has an end year
of 2050.\44\ To estimate price trends after 2050, DOE used the average
annual rate of change in prices from 2046 through 2050. See chapter 8
of the November 2022 Preliminary Analysis TSD for details.
---------------------------------------------------------------------------

\44\ EIA, Annual Energy Outlook 2023 with Projections to 2050
(available at: <a href="http://www.eia.gov/forecasts/aeo/">www.eia.gov/forecasts/aeo/</a>) (last accessed June 1,
2024).
---------------------------------------------------------------------------

To assess the impact of updated energy price estimates, DOE
compared the energy price estimates in 2030 from the November 2023 NOPD
to the projected estimates using updated EIA energy price data from
2023. The results of this comparison are presented in Table IV.17.

Table IV.17--Summary of Energy Price Comparison of 2023 EIA Data
Relative to November 2023 NOPD
------------------------------------------------------------------------
Percent change
Energy type in 2030 energy
price
------------------------------------------------------------------------
Electricity............................................. -20
Natural Gas............................................. +1
LPG..................................................... +1
Fuel Oil................................................ -16
------------------------------------------------------------------------

Based upon this review, DOE has determined that energy prices have
either not changed significantly, as in the case of natural gas and
LPG, or have decreased, as in the case of electricity and fuel oil,
relative to the energy prices used in the November 2023 NOPD.
Consequently, updating energy prices would either have no impact on
analytical results or decrease operating cost savings, thereby further
justifying DOE's decision to not amend the existing energy conservation
standards for oil and weatherized gas furnaces. DOE did not receive
comments regarding energy prices in response to the November 2023 NOPD.
As a result, DOE has continued to use the energy prices from the
November 2023 NOPD in this determination.
5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance, whereas maintenance costs
are associated with maintaining the operation of the product. The
maintenance and repair costs (including labor hours, component costs,
and frequency) at each considered efficiency level are derived based on
2023 RSMeans Facilities Maintenance and Repair Data,\45\ manufacturer
literature, consultant input, and industry reports. DOE also accounted
for regional differences in labor costs based on these 2023 RSMeans
data.
---------------------------------------------------------------------------

\45\ RSMeans Company Inc., RSMeans Facilities Maintenance &
Repair Cost Data (2023) (available at: <a href="http://www.rsmeans.com/">www.rsmeans.com/</a>) (last
accessed June 11, 2024).
---------------------------------------------------------------------------

DOE assumes that condensing furnaces have a higher maintenance cost
than noncondensing furnaces, but that this maintenance cost is the same
at all noncondensing or condensing efficiency levels within each
product class. The additional maintenance cost for condensing furnaces
includes maintenance tasks related to the condensate withdrawal system
(such as condensate pump or condensate neutralizer filter) and
additional

[[Page 84052]]

maintenance related to the cleaning or checking of the heat exchanger
(in particular, for condensing oil-fired furnaces using high-sulfur
fuel oil).
DOE also assumes that condensing furnaces have a higher repair cost
than noncondensing furnaces, but the repair cost is the same at all
noncondensing or condensing efficiency levels within each product
class.
DOE did not receive comments on its maintenance and repair cost
methodology in response to the November 2023 NOPD, and accordingly, the
Department has maintained the same methodology for this final
determination.
For more details on DOE's methodology for calculating maintenance
and repair costs, including all online resources reviewed, see appendix
8E of the November 2022 Preliminary Analysis TSD.
6. Product Lifetime
Product lifetime is the age at which an appliance is retired from
service. DOE conducted an analysis of furnace lifetimes based on the
methodology described in a journal paper.\46\ For the November 2023
NOPD, DOE relied on RECS 1990, 1993, 2001, 2005, 2009, and 2015.\47\
DOE also used the U.S. Census's biennial American Housing Survey
(``AHS'') from 1974 to 2021, which surveys all housing, noting the
presence of a range of appliances.\48\ DOE used the appliance age data
from these surveys, as well as the historical furnace shipments, to
generate an estimate of the survival function. The survival function
provides a lifetime range from minimum to maximum, as well as an
average lifetime. For oil and weatherized gas furnaces, DOE developed
Weibull distributions resulting in an average lifetime of 20.2 to 22.5
years (based on region).
---------------------------------------------------------------------------

\46\ Lutz, J., et al., ``Using National Survey Data to Estimate
Lifetimes of Residential Appliances,'' HVAC&R Research (2011) 17(5):
p. 28 (available at: <a href="http://www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166">www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166</a>) (last accessed June 1, 2024).
\47\ EIA, Residential Energy Consumption Survey (``RECS''),
Multiple Years (1990, 1993, 1997, 2001, 2005, 2009, and 2015)
(available at: <a href="http://www.eia.gov/consumption/residential/">www.eia.gov/consumption/residential/</a>) (last accessed
June 1, 2024).
\48\ U.S. Census Bureau: Housing and Household Economic
Statistics Division, American Housing Survey, Multiple Years (1974,
1975, 1976, 1977, 1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989,
1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 2007, 2009, 2011,
2013, 2015, 2017, 2019, and 2021) (available at: <a href="http://www.census.gov/programs-surveys/ahs/">www.census.gov/programs-surveys/ahs/</a>) (last accessed June 1, 2024).
---------------------------------------------------------------------------

DOE did not receive any comments on the lifetime distributions used
in the November 2023 NOPD. As oil and weatherized gas furnaces have not
changed significantly since the November 2023 NOPD, DOE maintains the
same lifetime distribution in this final determination.
Appendix 8F of the November 2022 Preliminary Analysis TSD provides
further details on the methodology and sources DOE used to develop the
subject furnace lifetimes.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to estimate the present value of future expenditures and savings. DOE
estimated a distribution of discount rates for oil and weatherized gas
furnaces based on the opportunity cost of funds. DOE estimates discount
rates separately for residential and commercial end users.
For residential end users, DOE applies weighted-average discount
rates calculated from consumer debt and asset data, rather than
marginal or implicit discount rates.\49\ 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 timescale into account. Given the long time horizon
modeled in the LCC analysis, 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.
---------------------------------------------------------------------------

\49\ 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, and 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
\50\ (``SCF''). 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.
---------------------------------------------------------------------------

\50\ The Federal Reserve Board, Survey of Consumer Finances
(1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019)
(available at: <a href="http://www.federalreserve.gov/econres/scfindex.htm">www.federalreserve.gov/econres/scfindex.htm</a>) (last
accessed June 11, 2024).
---------------------------------------------------------------------------

For commercial end users, DOE estimated the weighted-average cost
of capital using data from various financial sources. The weighted-
average cost of capital is commonly used to estimate the present value
of cash flows to be derived from a typical company project or
investment. Most companies use both debt and equity capital to fund
investments, so their cost of capital is the weighted average of the
cost to the firm of equity and debt financing.
DOE did not receive comments on its discount rate distribution
methodology in response to the November 2023 NOPD, and accordingly, the
Department has maintained the same methodology for this final
determination.
See appendix 8G of the November 2022 Preliminary Analysis TSD for
further details on the development of discount rates.
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 (i.e., market shares) of product efficiencies under the
no-new-standards case (i.e., the case without amended or new energy
conservation standards) in the compliance year (2030). This approach
reflects the fact that some consumers may purchase products with
efficiencies greater than the baseline levels, even in the absence of
new or amended standards.
For consumer furnaces, DOE had limited historical-shipments data by
efficiency level. For NWOFs/MHOFs, DOE reviewed market shares from
HARDI 2013-2022 data and BRG 2007-2022 data.51 52 The
shipments data are not disaggregated between NWOFs and

[[Page 84053]]

MHOFs, but DOE assigned all shipments data below 83-percent AFUE to
MHOFs. For WGFs, DOE had insufficient historical shipments data by
efficiency level to develop a reliable efficiency distribution. To
cover the lack of available shipments data, DOE referred to CCD \53\
for furnaces to develop efficiency distributions based on available
models for WGFs.
---------------------------------------------------------------------------

\51\ Heating, Air-conditioning and Refrigeration Distributors
International (HARDI), DRIVE portal (HARDI Visualization Tool
managed by D+R International until 2022), proprietary Gas Furnace
Shipments Data from 2013-2022 provided to Lawrence Berkeley National
Laboratory (LBNL).
\52\ BRG Building Solutions. The North American Heating &
Cooling Product Markets (2022 Edition) (Available at:
<a href="http://www.brgbuildingsolutions.com/reports-insights">www.brgbuildingsolutions.com/reports-insights</a>) (last accessed June
28, 2024).
\53\ U.S. Department of Energy Compliance Certification Database
(``CCD'') (Available at: <a href="http://www.regulations.doe.gov/certification-data/">www.regulations.doe.gov/certification-data/</a>
) (last accessed June 28, 2024).
---------------------------------------------------------------------------

DOE did not receive additional data or comments on estimated market
shares in the no-new-standard case in response to the November 2023
NOPD. Accordingly, DOE used estimates from the November 2023 NOPD for
this final determination.
The estimated market shares for the no-new-standards case for oil
and weatherized gas furnaces are shown in Table IV.18 of this document.
See chapter 8 of the November 2022 Preliminary Analysis TSD for further
information on the derivation of the efficiency distributions.

Table IV.18--No-New-Standards Case Efficiency Distributions in 2030 for
Oil and Weatherized Gas Furnaces
------------------------------------------------------------------------
Distribution
Product class Efficiency level (%)
------------------------------------------------------------------------
NWOF.............................. Baseline............

[…truncated; see source link]

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