[Federal Register: August 29, 2007 (Volume 72, Number 167)] [Rules and Regulations] [Page 49947-49997] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr29au07-13] [[Page 49947]] ----------------------------------------------------------------------- Part III Federal Trade Commission ----------------------------------------------------------------------- 16 CFR Part 305 Rule Concerning Disclosures Regarding Energy Consumption and Water Use of Certain Home Appliances and other Products Required Under the Energy Policy and Conservation Act (``Appliance Labeling Rule''); Final Rule [[Page 49948]] ----------------------------------------------------------------------- FEDERAL TRADE COMMISSION 16 CFR Part 305 [RIN 3084-AB03] Rule Concerning Disclosures Regarding Energy Consumption and Water Use of Certain Home Appliances and other Products Required Under the Energy Policy and Conservation Act (``Appliance Labeling Rule'') AGENCY: Federal Trade Commission (``FTC'' or ``Commission''). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: Section 137 of the Energy Policy Act of 2005 (Pub. L. 109-58) requires the Commission to conduct a rulemaking to examine the effectiveness of current energy efficiency labeling requirements for consumer products covered by the Energy Policy and Conservation Act. The Commission has completed the required rulemaking and is publishing final amendments to the Appliance Labeling Rule (16 CFR Part 305). DATES: The amendments published in this notice will become effective February 29, 2008. ADDRESSES: Requests for copies of this document should be sent to: Public Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. The complete record of this proceeding is also available at that address. Relevant portions of the proceeding, including this document, are available at http://www.ftc.gov . FOR FURTHER INFORMATION CONTACT: Hampton Newsome, (202) 326-2889, Attorney, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Room NJ-2122, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. SUPPLEMENTARY INFORMATION: Table Of Contents I. Introduction II. Energy Policy and Conservation Act Labeling Requirements III. FTC's Appliance Labeling Rule IV. Procedural History V. Section-by-Section Description of Final Amendments VI. Effectiveness and Benefits of the Current Label VII. Discussion of Comments and Final Amendments A. New Label Designs B. ENERGY STAR Logo Placement C. Requirements for Heating and Cooling Equipment D. Refrigerator Categories E. Revisions to Ranges of Comparability and Energy Price Information F. MEF Descriptor for Clothes Washers G. Placement of the EnergyGuide Label on Covered Products H. Catalog Requirements I. Fuel Cycle Energy Consumption J. Clothes Washer Labels L. Television Labeling M. Miscellaneous Amendments and Issues VIII. Paperwork Reduction Act IX.Regulatory Flexibility Act X. Final Rule Language I. Introduction Section 137 of the Energy Policy Act of 2005 (EPACT 2005) (Pub. L. 109-58) amends the Energy Policy and Conservation Act of 1975 (EPCA)\1\ to require the Commission to initiate a rulemaking to consider ``the effectiveness of the consumer products labeling program in assisting consumers in making purchasing decisions and improving energy efficiency.'' As part of this effort, the Act directs the Commission to consider ``changes to the labeling rules (including categorical labeling) that would improve the effectiveness of consumer product labels.'' The Act directs the Commission to complete the rulemaking within two years. Following that law's enactment on August 8, 2005, the Commission published an Advance Notice of Proposed Rulemaking (ANPR), held a workshop, conducted consumer research, and published a Notice of Proposed Rulemaking (NPRM).\2\ Based on comments received and the FTC's own consumer research, the Commission is now publishing final amendments to the Appliance Labeling Rule (16 CFR Part 305). The amendments implement a new design for EnergyGuide labels and make several other changes to update and improve the Rule. --------------------------------------------------------------------------- \1\42 U.S.C. 6291 et seq. \2\ANPR (66 FR 66307 (Nov. 2, 2005)); Workshop Notice (71 FR 18023 (April 10, 2006)); Research Notice (71 FR 36088 (June 23, 2006)); and NPRM (72 FR 6836 (Feb. 13, 2007)). --------------------------------------------------------------------------- II. Energy Policy and Conservation Act Labeling Requirements Section 324 of EPCA requires the FTC to prescribe labeling rules for: (1) the disclosure of estimated annual energy cost or alternative energy consumption information for a variety of products covered by the statute, including home appliances (e.g., refrigerators, dishwashers, air conditioners, and furnaces), and lighting products, and (2) the disclosure of water use information for certain plumbing products.\3\ Labels for appliances covered under EPCA must disclose the estimated annual operating cost of such products, as determined by the Department of Energy (DOE) test procedures (42 U.S.C. 6294(c)).\4\ The Commission, however, may require a different measure of energy consumption if DOE determines that a cost disclosure is not technologically feasible, or if the Commission determines a cost disclosure is not likely to assist consumers in making purchasing decisions or is not economically feasible (42 U.S.C. 6294(c)(1)). Section 324(c) also requires that the label for appliances contain information about the range of estimated annual operating costs (or energy consumption) for covered products. The Commission may require the disclosure of energy information found on the label in any printed material displayed or distributed at the point of sale (42 U.S.C. 6294(c)(4)). In addition, the Commission may direct manufacturers to provide additional energy-related disclosures on the label (or information shipped with the product) including instructions for the maintenance, use, or repair of the covered product (42 U.S.C. 6294(c)(5)). --------------------------------------------------------------------------- \3\42 U.S.C. 6294. For most products, the Commission must prescribe labeling rules unless it determines that labeling is not technologically or economically feasible (42 U.S.C. 6294(a)(1)). The statute requires labels for central air conditioners, heat pumps, furnaces, and clothes washers unless the Commission finds that labeling is not technologically or economically feasible or is not likely to assist consumers in making purchasing decisions (42 U.S.C. 6294(a)(2)(A)). Pursuant to Sec. 6294(a)(1), the Commission previously determined not to require labeling for television sets, kitchen ranges, ovens, clothes dryers, humidifiers, dehumidifiers, and certain home heating equipment other than furnaces. See 44 FR 66466, 66468-66469 (Nov. 19, 1979). \4\Section 323 of EPCA (42 U.S.C. 6293) directs DOE to develop test procedures for major household appliances. Manufacturers must follow these test procedures to determine their products' compliance with DOE's energy conservation standards (required by 42 U.S.C. 6295) and to derive the energy consumption or efficiency values to disclose on required labels. --------------------------------------------------------------------------- III. FTC's Appliance Labeling Rule The Commission's Appliance Labeling Rule implements the requirements of EPCA by directing manufacturers to disclose energy information about major household appliances. This information enables consumers to compare the energy use or efficiency of competing models.\5\ When initially published in 1979,\6\ the Rule applied to eight appliance categories: refrigerators, refrigerator-freezers, freezers, dishwashers, water heaters, clothes washers, room air conditioners, and furnaces. Subsequently, the Commission expanded the Rule's coverage to include central air conditioners, heat pumps, fluorescent lamp ballasts, plumbing products, [[Page 49949]] lighting products, and certain types of water heaters.\7\ --------------------------------------------------------------------------- \5\More information about the Rule can be found at: http://www.ftc.gov/appliances . \6\44 FR 66466 (Nov. 19, 1979). \7\See 52 FR 46888 (Dec. 10, 1987) (central air conditioners and heat pumps); 54 FR 28031 (July 5, 1989) (fluorescent lamp ballasts); 58 FR 54955 (Oct. 25, 1993) (certain plumbing products); 59 FR 25176 (May 13, 1994) (lighting products); and 59 FR 49556 (Sept. 28, 1994) (pool heaters). --------------------------------------------------------------------------- Under the Rule, manufacturers must disclose specific energy information about their appliances at the point of sale in the form of a yellow EnergyGuide label affixed to each unit. The information on the label also must appear in catalogs from which covered products can be ordered. Manufacturers of furnaces, central air conditioners, and heat pumps also must provide energy information in either fact sheets or an industry directory. Required labels for appliances contain three key pieces of information. First, the labels disclose the energy consumption or energy efficiency rating of the appliance, as determined from standard DOE tests. Second, some labels include a ``range of comparability'' (published by the Commission) that shows the highest and lowest energy consumption or efficiencies for all similar models. Third, labels for most appliances must provide the product's estimated annual operating cost. Manufacturers calculate these costs using national average energy cost (i.e., representative average energy cost) figures published by DOE. The Rule contains specific requirements for the content and format of the EnergyGuide labels. Manufacturers must use a yellow label with the EnergyGuide headline and must provide information in the format and type prescribed. Additionally, manufacturers cannot place any information on the label other than that specifically allowed by the Rule. In 2000, the Commission issued an exemption allowing manufacturers to include the ``ENERGY STAR'' logo on the EnergyGuide label for covered appliances (65 FR 17554 (Apr. 3, 2000)).\8\ --------------------------------------------------------------------------- \8\ENERGY STAR, which is administered by the Environmental Protection Agency (EPA) and DOE, is a voluntary U.S. Government labeling program to identify and promote energy-efficient products. See http://www.energystar.gov. --------------------------------------------------------------------------- The Commission's Rule also requires certain reporting requirements that direct manufacturers of most covered products to file reports with the FTC both annually and when they begin manufacturing new models. These reports must contain the estimated annual energy consumption or energy efficiency ratings for the appliances derived from tests conducted pursuant to the DOE procedures (16 CFR Sec. 305.8(b)). Energy information submitted pursuant to these requirements is available on the Commission's website at http://www.ftc.gov/appliances. Finally, the Rule has different labeling requirements for non- appliance consumer products (16 CFR Sec. 305.11(d), (e), & (f)). Manufacturers of showerheads, faucets, toilets, and urinals must disclose water usage information on their products, packaging, and labeling. Manufacturers of certain incandescent bulbs, spot and flood bulbs, and screw-base compact fluorescent bulbs must disclose light output in lumens, energy used in watts, voltage, average life, and number of bulbs on their packaging. They also must explain how purchasers can select the most energy efficient bulb for their needs. IV. Procedural History The Commission initiated this proceeding on November 2, 2005 with the publication of an ANPR that sought comments on the effectiveness of the FTC's energy labeling regulations. (70 FR 66307). The ANPR also announced that the Commission would conduct its periodic regulatory review as part of this rulemaking. In response, the Commission received 28 comments.\9\ Following the receipt of ANPR comments, the Commission announced plans to conduct consumer research on various label designs to examine the effectiveness of the current label and to obtain information about alternatives (March 15, 2006 (71 FR 13398)). Based on the comments received in response to the ANPR, the Commission then conducted a Public Workshop (``Workshop'') on May 3, 2006 to discuss a variety of issues associated with the labeling program, including: (1) EnergyGuide label design, (2) refrigerator comparability ranges, (3) labels for heating and cooling equipment, and (4) television labeling. After conducting the Workshop, the Commission received ten additional written comments.\10\ --------------------------------------------------------------------------- \9\Comments on the ANPR are available at: http://www.ftc.gov/os/comments/energylabeling/index.htm . \10\The Commission announced the Workshop in an April 10, 2006 Federal Register notice (71 FR 18023). Written comments related to the Workshop are available at: http://www.ftc.gov/os/comments/energylabeling-workshop/index.htm. A copy of the Workshop transcript is available at: http://www.ftc.gov/os/comments/energylabeling-workshop/060503wrkshoptrnscript.pdf . --------------------------------------------------------------------------- Using information adduced at the workshop, the Commission published an additional notice containing details about its planned consumer research project, including drafts of the appliance labels that the Commission planned to use in the project. (June 23, 2006 (71 FR 36088)). The Commission received eight comments in response to that notice.\11\ Armed with all this information, the FTC staff conducted consumer research on various label designs in October 2006. --------------------------------------------------------------------------- \11\Comments submitted in response to the June notice are available at: http://www.ftc.gov/os/comments/appliancelabelingresearch/index.htm . --------------------------------------------------------------------------- Based on all the comments, the Workshop, and the FTC's consumer research, the Commission published a NPRM.\12\ The NPRM contained a variety of proposed amendments, including a new EnergyGuide label design and significant changes to the disclosure requirements for heating and cooling equipment. The NPRM also contained detailed information about the design and the results of the FTC's consumer research.\13\ The Commission received 17 comments in response to the NPRM.\14\ Based on our review of these comments and all other information submitted during the course of this rulemaking, the Commission is now issuing final amendments to the Rule. --------------------------------------------------------------------------- \12\72 FR 6836 (Feb. 13, 2007). \13\This information can be found at: http://www.ftc.gov/opa/2007/01/fyi0714.htm . \14\Comments submitted in response to the NPRM are available at: http://www.ftc.gov/os/comments/appliancelabel-energyguidereview/index.shtm . --------------------------------------------------------------------------- V. Section-by-Section Description of Final Amendments The following are brief descriptions of the final amendments set out in this Notice. Section 305.2 Definitions: To make section 305.2 more user- friendly, the Final Rule places the definitions in alphabetical order. In addition, the definition of catalog has been amended to clarify that the term covers both paper and Internet-based catalogs. Section 305.3 Description of covered products: The Final Rule amends the description of refrigerators and refrigerator freezers to make it consistent with DOE regulations. Section 305.4 Prohibited acts: The Final Rule contains nonsubstantive, conforming changes to several citations in this section. Section 305.5 Determinations of estimated annual energy consumption, estimated annual operating cost, energy efficiency rating, and water use rate: The Final Rule clarifies that this section does not apply to covered appliances for which DOE has not issued test procedures. Section 305.7 Determinations of capacity: Under the Final Rule, manufacturers must determine refrigerator and refrigerator-freezer [[Page 49950]] capacity using DOE standards.\15\ Manufacturers must report this information to the FTC pursuant to section 305.8 of the Rule. --------------------------------------------------------------------------- \15\The Rule will continue to require only the disclosure of total refrigerated volume for the EnergyGuide label. --------------------------------------------------------------------------- Section 305.8 Submission of data: The Final Rule clarifies that required reports for appliances include the brand name of the reported model, if it is different from the name of the manufacturer. Section 305.9 Representative average unit energy cost: The Final Rule removes and reserves this section. The information previously provided by section 305.9 is now published in Appendix K of the Final Rule. Section 305.10 Ranges of comparability on the required labels: The Final Rule changes this section to direct the Commission to amend range of comparability and representative average energy cost information every five years. Redesignation of sections 305.13, 305.14, 305.15, 305.16, 305.17, 305.18 and 305.19: The Final Rule divides section 305.11 into several smaller, less cluttered sections. To make room for these new sections, the Final Rule redesignates these sections as 305.19, 305.20, 305.21, 305.22, 305.23, 305.24 and 305.25, respectively. Requirements for lighting and plumbing products (newly designated sections 305.15 and 305.16): Under the Final Rule, the labeling and marking requirements for lighting and plumbing products previously in section 305.11 have been moved to redesignated sections 305.15 (lighting) and 305.16 (plumbing). The Final Rule contains no substantive change to existing requirements for these products. Section 305.11 Labeling for refrigerators, refrigerator-freezers, freezers, dishwashers, clothes washers, water heaters, room air conditioners, and pool heaters: The Final Rule amends this section to require operating cost as the primary disclosure on the EnergyGuide label for all these products except pool heaters. The Final Rule also requires new language to clarify the scope of the comparison ranges on the labels. Additionally, the Final Rule modifies and clarifies requirements related to the label placement on covered products. Sections 305.12 (newly designated) Labeling for Central Air Conditioners, Heat Pumps, and Furnaces\16\ : The Final Rule requires manufacturers to label heating and cooling equipment with energy efficiency information using a new label design. --------------------------------------------------------------------------- \16\We note that the Final Rule eliminates existing section 305.12 (``Additional information relating to energy consumption''). This provision was unnecessary because it contained no substantive requirements and was simply a placeholder for future disclosure requirements. --------------------------------------------------------------------------- Section 305.14 (newly designated) Energy information disclosures for heating and cooling equipment: The Final Rule streamlines requirements related to the disclosure and distribution of energy information for central air conditioners and furnaces.\17\ --------------------------------------------------------------------------- \17\The Final Rule also removes an incorrect reference to ``energy cost'' in section 305.14(a)(8) of the Proposed Rule. --------------------------------------------------------------------------- Sec. 305.19 (newly designated) Promotional material displayed or distributed at point of sale: The Final Rule contains a conforming change related to operating costs in the required disclosures in paragraph (a)(1) of section 305.19. Section 305.20 (newly designated) Paper catalogs and websites: The Final Rule requires the disclosure of annual estimated operating costs for certain products in paper and Internet-based catalogs. Under the Final Rule, catalog sellers are no longer required to provide range of comparability information. The Final Rule also contains conforming changes to cross-references in this section. Section 305.24 (newly designated) Exemptions: The Final Rule incorporates the exemption permitting the inclusion of ENERGY STAR logos on EnergyGuide labels into section 305.11. Section 305.24 is, therefore, reserved. Appendices: The Final Rule amends the Appendices to include range of comparability information in the form of estimated yearly operating costs for refrigerators, refrigerator-freezers, freezers, clothes washers, dishwashers, room air conditioners, and water heaters. The amendments also eliminate fact sheet information in the Appendices for heating and cooling equipment. In addition, we have eliminated the sample reporting format in Appendix K. The Final Rule redesignates the remaining appendices accordingly. Finally, the amendments add a new Appendix K that contains national average energy cost information for use on EnergyGuide labels.\18\ --------------------------------------------------------------------------- \18\The Final Rule also removes an incorrect cross-reference to section 305.14 in the cost table at Appendix K. --------------------------------------------------------------------------- VI. Effectiveness and Benefits of the Current Label In our ANPR, the Commission asked a series of questions related to the effectiveness of the current EnergyGuide label. As discussed in more detail in the NPRM (72 FR 6840-6841 (Feb. 13, 2007)), most comments indicated that the current label provides consumer benefits. At the same time, many commenters thought that there was room for improvement in the label's design. A few commenters urged the Commission to consider changes to increase the label's effectiveness, such as improving its readability. Others identified specific concerns such as the ``directionality'' of the label's comparison graphic and the division of some products into multiple categories. Several comments on the ANPR suggested the Commission consider changes to the label in light of the policy goals of the EnergyGuide program. The nature of those policy goals, however, was a point of disagreement among commenters. According to some industry members, the FTC's labeling program should provide useful information about the energy usage of home appliance products. (See, e.g., Association of Home Appliance Manufacturers (AHAM) (522148-00007)). They questioned, however, the role the label should play in promoting energy savings and in creating incentives for market transformation. Whirlpool (522148-00005), for example, pointed to DOE's efficiency standards program and the ENERGY STAR program as the appropriate entities for energy efficiency promotion. It urged the FTC to focus instead on providing ``meaningful, helpful information to consumers to assist them in the purchase decision'' through ``clear, fair, and unbiased'' disclosures. Other commenters believed that the label's effectiveness should be judged in part by its effectiveness in encouraging consumers to purchase high-efficiency products and manufacturers to bring more high efficiency products to the marketplace. (See, e.g., American Council for an Energy-Efficient Economy (ACEEE) 519870-00021 and Payne 519870-00024). As ACEEE (519870-00021) observed, amendments to EPCA set forth in the Energy Policy Act of 2005 direct the FTC to initiate a rulemaking to consider the effectiveness of the appliance labeling program ``in assisting consumers in making purchasing decisions and improving energy efficiency.'' In our NPRM (72 FR 6841 (Feb. 13, 2007)), the Commission responded to these various comments by noting the following Commission statement when we first promulgated the Rule (44 FR 66466 (Nov. 19, 1979)): ``The primary purpose of the Commission's Rule is to encourage consumers to comparison-shop for energy-efficient household appliances. By mandating a uniform disclosure scheme for energy [[Page 49951]] consumption information, the Rule will permit consumers to compare the energy efficiency of competing appliances and to weigh this attribute against other product features in making their purchasing decisions. If the labeling program works as expected, the availability of this new information should enhance consumer demand for appliances that save energy. In turn, competition should be generated among manufacturers to meet this demand by producing more energy-efficient appliances.'' In the NPRM, the Commission stated that we continue to believe this 1979 statement accurately describes the role of the FTC's energy labeling program. The Commission further explained that the label serves two important purposes. First, the detailed operating cost and energy consumption information on the label allows consumers to compare the total cost of competing models. Second, the label aids consumers who are seeking to buy high-efficiency products that reduce energy use and thus help the environment. (72 FR 6841). No comments have altered our views on this issue. In addition to providing this general guidance, the Commission, in our NPRM, also discussed some of the results of the FTC's 2006 consumer research related to the label's effectiveness. In brief, the research indicated that consumers find the label much more useful than has been suggested by past research. More than 85% of recent appliance purchasers who visited a retail showroom recalled seeing a label with energy characteristics. Of those respondents, 58% correctly recalled that the label was yellow with black letters. Fifty-nine percent of respondents who recalled seeing a label scored the usefulness of the label at a seven or higher on a scale of zero to ten. In the NPRM, the Commission also proposed several changes to improve the effectiveness of the label. Section VII. of this Notice contains a discussion of comments received in response to these proposals and the final amendments to the Rule. VII. Discussion of Comments and Final Amendments A. New Label Design Background: In our NPRM, the Commission proposed a new design for the EnergyGuide label, prominently featuring yearly operating cost. The proposed label's comparison range disclosed energy cost information in dollars per year. The draft label also provided consumers with information about the product's energy use (e.g., kWh/year) as a secondary disclosure. Energy-related labels generally fall into one of two categories: ``continuous'' bar graph and ``categorical'' designs. Labels using a continuous design, such as the current EnergyGuide label, graphically display information without discrete ranks or categories. Labels under a categorical approach employ discrete categories, using a step ranking system such as stars or letters to indicate relative energy use. The Commission's 2006 consumer research, therefore, tested four label designs: the existing continuous label, a modified version of the existing label, a categorical (star-based) label, and a continuous label that used yearly operating cost as the main descriptor. The results yielded several general conclusions. First, all four designs performed well in the objective tasks of identifying and ranking operating costs (in dollars) and energy use (in kilowatt-hours), suggesting that any of the designs should help consumers compare operating costs and energy use. The categorical label, however, was somewhat more effective for some objective tasks, particularly when compared to the modified version of the current energy use label. Second, the categorical label, which was the only label to include the term ``energy efficient,'' was generally more effective at aiding respondents in ranking products by energy efficiency than the labels more prominently featuring operating costs or energy use. Third, respondents viewing the categorical design were much more likely to identify models as ENERGY STAR-qualified when none of those viewed contained ENERGY STAR logos. Fourth, the results suggest that respondents viewing the categorical labels were somewhat more likely to misidentify quality differences between models. Fifth, the research indicated that the categorical label had a substantially greater impact on respondents' reported willingness to pay for differences in energy performance between models. Finally, the study suggested that the respondents under all label conditions have a preference for the communication of energy characteristics in the form of operating costs over either electricity usage or a five-star categorical scale.\19\ --------------------------------------------------------------------------- \19\See 72 FR 6841-6851 for a detailed discussion of the consumer research results and conclusions. --------------------------------------------------------------------------- After considering ANPR and Workshop comments, as well as the results of both previous consumer research (see 72 FR 6838-6839) and the FTC's own study, the Commission proposed changing the label design to require operating costs as the primary disclosure. Section 324(a) of EPCA directs the Commission to require annual operating costs on the label, unless the Commission determines that such disclosures are not likely to assist consumers in making purchasing decisions. (42 U.S.C. Sec. 6294(c)). The FTC's consumer research clearly indicates that cost information is likely to assist consumers in making purchasing decisions. While each of the designs considered has strengths and weaknesses, on balance, the Commission believed that the adoption of a design that presents cost as the primary disclosure would best serve consumers. In addition, the research indicated that respondents clearly identified operating costs as the preferred method for communicating energy performance in the marketplace. The NPRM, therefore, proposed requiring the operating cost design for refrigerators, refrigerator- freezers, freezers, clothes washers, dishwashers, room air conditioners, pool heaters,\20\ and water heaters. --------------------------------------------------------------------------- \20\When the Commission first issued pool heater label requirements in 1994, the DOE test procedure did not contain a final procedure for measuring annual operating costs for these products. (See 10 CFR Part 430, Appendix P; and 59 FR 49556,49558 (Sept. 28, 1994)). DOE amended the procedure to allow manufacturers to calculate annual energy use and operating cost for pool heaters. (62 FR 26140 (May 12, 1997)). Accordingly, in the NPRM, the Commission proposed to require the disclosure of estimated annual operating costs on pool heaters. --------------------------------------------------------------------------- The Commission also explained why it was not proposing a categorical label. Although the research identified some benefits associated with the categorical label, the results strongly suggested that the five-star categorical label design would confuse a significant number of consumers with regard to the well-established ENERGY STAR program and tended to convey inaccurate product quality messages more often than other tested designs. The Commission explained that, in its view, the EnergyGuide label should complement, not detract from, the ENERGY STAR program. (72 FR 6844-6845). In our NPRM, we also requested comment on the conclusions derived from the consumer research, including the operating cost label proposal and the Commission's concerns with the categorical label. Additionally, we sought comment on questions related to the proposed operating cost label. In particular, we asked whether frequent changes to average energy cost figures could lead to inconsistent labels for models displayed in the showroom. In addition, we asked whether the regional variability of energy costs is a [[Page 49952]] significant issue for implementing the energy cost label. The NPRM also sought comments on a variation of the operating cost label that would display energy costs over a five-year period as the primary disclosure. Comments: Several commenters supported the FTC's proposal to require annual operating cost as the primary disclosure on the label.\21\ For example, Consumers Union (527896-00012) stated that it ``strongly supported'' the proposed label. Whirlpool (527896-00004) explained that ``estimated annual operating cost is the factor that consumers are most interested in when comparing models.'' In its view, it is unrealistic to expect consumers ``to understand some other `alphabet soup' (kWh, AFUE, MEF, EF, etc.) and to know if a higher value or a lower value is better.'' AHAM (527896-00006) added that an ``average national energy cost estimate will permit consumers to easily compare products by using one specific measurement.'' --------------------------------------------------------------------------- \21\See Consumers Union (527896-00012), AHAM (527896-00006), Whirlpool (527896-00004), EEI (527896-00005), and EPA (527896-00018) (``EPA is supportive of FTC's decision to develop a modified version of the current Energy Guide label . . .''). --------------------------------------------------------------------------- Some commenters, however, argued that the use of operating cost as the primary disclosure would not be helpful for many consumers.\22\ ACEEE (527896-00015) explained that energy costs vary widely across the country and that many ``consumers may find the range of operating costs displayed on the label to be unrealistic and unreasonable based on their experience and discount the label altogether.'' ACEEE (527896-00015) also indicated that the results of FTC's research did not provide information on the ability of consumers ``to relate the reported cost values to the specific circumstances of their own appliance purchase or how relevant and believable they would find the information when shopping for appliances.'' According to ACEEE (527896-00015), research on vehicle labeling has demonstrated that consumers' stated preferences for label information do not often correspond to information that exhibits the highest levels of comprehension in practice. ACEEE (527896-00015) recommended that the FTC retain the current label format which provides energy consumption as the primary disclosure. CEE (527896-00016) echoed ACEEE's concerns, adding that wide fluctuations in energy prices across the country could lead to consumer confusion and create the potential for ``misrepresentations'' on the label. --------------------------------------------------------------------------- \22\See ACEEE (527896-00015), CEE (527896- 00016), and Brand Source (527896-00003). --------------------------------------------------------------------------- Other commenters did not believe that regional variability in energy prices created a decisive obstacle to the proposed label. According to Whirlpool (527896-00004), shoppers are primarily concerned about ``the relative, not the absolute, operating cost.'' In its view, consumers understand that the energy costs on the EnergyGuide label are ``estimates and national averages'' and ``that their own experience will vary.'' AHAM (527896-00006) indicated that employing national average energy cost information allows consumers to compare products according to energy usage despite the fact that actual costs for individual consumers may vary across the country. Similarly, Consumers Union (527896-00012) argued that ``the value of the EnergyGuide to consumers stems from the fact that it is for comparative purposes'' and ``not necessarily to reflect the product's actual cost to the consumer.'' At the same time, Consumers Union (527896- 00012) suggested that the label should provide a better explanation that the displayed cost may not reflect a consumer's actual cost. Several commenters supported the Commission's decision to discontinue its consideration of a categorical design in light of the FTC's consumer research. EPA (527896-00018) concurred with the FTC's conclusion regarding the significant concerns the categorical design raises for the ENERGY STAR program, including the confusion such a design could cause consumers in identifying ENERGY STAR products. EPA (527896-00018) also agreed with the FTC's concerns about the tendency of the categorical label to convey inaccurate product quality messages. Whirlpool (527896-00004) echoed EPA comments, indicating that the FTC's study clearly demonstrated that the categorical label frequently conveys messages to the consumer about product quality and that the ``opportunity for confusion with the ENERGY STAR program is significant.'' CEE (527896-00016) expressed appreciation for the FTC's efforts to research and analyze the interaction between the ENERGY STAR and EnergyGuide labels. Other comments raised concerns with the Commission's decision not to pursue a categorical label. ACEEE (527896-00015) concluded that the FTC's research confirmed earlier work indicating that ``categorical labels rate well in terms of consumer comprehension, appeal, and motivating ability.'' In its view, ``the categorical label outperformed other label designs.'' At the same time, ACEEE (527896-00015) acknowledged that more effort is necessary to develop and implement a categorical labeling program. It suggested that the FTC ``work together [with stakeholders] to develop a categorical EnergyGuide label that coordinates well with the ENERGY STAR label.'' Christopher Payne (527896-00014) argued that the analysis in the NPRM understated the performance of the categorical label on key questions related to consumer understanding. He noted that small increments of consumer comprehension improvement can have significant effects on total energy use. In his view, ``even a 1% difference in comprehension among consumers can have substantial energy and cost savings nationwide.'' He estimated that, for refrigerators alone, such a difference in comprehension could lead to a cumulative impact of $100,000 annually in energy use. Payne urged the Commission to continue consideration of the categorical label. Though comments varied on the adoption of annual operating cost as the primary disclosure, almost all commenters opposed disclosing operating costs over a multi-year period. Brand Source (527896-00003), an appliance buying group, warned that any type of life expectancy figure on the label will be unrealistic and undesirable for manufacturers and retailers. Whirlpool (527896-00004) indicated that the ``use of a five or 10 year time frame may imply a product lifetime or even a warranty commitment- items which are not within the scope of this label (in addition to being inaccurate in this case).''\23\ AHAM (527896-00006) suggested that a change to a five-year operating cost may confuse consumers, making them think that costs have risen abruptly. Christopher Payne (527896-00014) concluded that more research would be necessary to adopt a multi-year label. ACEEE (527896- 00015) commented that a multi-year label would require ``yet another set of assumptions, thereby introducing additional opportunities for consumer confusion and skepticism about the label.'' It also indicated that a multi-year label would require more explanatory language, and noted that ``[r]esearch conducted by ACEEE and many others show that consumers are less likely to read and/or believe labels with extensive text, too many technical details, or multiple levels of assumptions.'' CEE (527896-00016) raised similar concerns and also urged the Commission not to use a five-year [[Page 49953]] operating cost and a single year energy use figure on the same label.\24\ --------------------------------------------------------------------------- \23\See also EEI (527896-00005). \24\Consumers Union (527896-00012) did not object to a multi-year label but noted that most appliances have an average life of about ten years. --------------------------------------------------------------------------- Finally, we note that several commenters\25\ expressed support for the Commission's efforts to change the general appearance of the label by clearly grouping information and changing the font size of some of the disclosures. AHAM (527896-00006), for example, indicated that the ``changes to the EnergyGuide label make it easier for consumers to identify the information most important to them and provide a better presentation of relevant information in an easier to read format.'' One commenter (Deumling (527896-00002)), however, asked why the statement ``Compare the Energy Use of this [product] with Others Before You Buy?'' had been eliminated from the proposed label. --------------------------------------------------------------------------- \25\ACEEE (527896-00015), EEI (527896-00005), and AHAM (527896-00006). --------------------------------------------------------------------------- Discussion: In response to commenters' concerns, the final version of the label contains a number of wording and format changes, but retains operating cost as the primary descriptor for most labeled products. The research suggests that the operating cost disclosure provides a clear, understandable tool to allow consumers to compare the energy performance of different models. The operating cost design not only performed well on objective tasks in the research but research participants identified the design as the most useful method for communicating energy information. The disclosure also provides a clear context from which consumers can compare the energy efficiency of various appliances, and allows them to assess trade-offs between energy efficiency and other expenditures. An operating cost range also provides an energy efficiency descriptor that is consistent across appliance types appearing together in showrooms (e.g., refrigerators, dishwashers, clothes washers, and room air conditioners), and addresses the ``directionality'' problem identified by comments (i.e., more efficient models are always lower on the range across appliance types).\26\ --------------------------------------------------------------------------- \26\As explained in Section VII.C. of this Notice, the Rule will continue to require the disclosure of efficiency ratings on labels for heating and cooling equipment. --------------------------------------------------------------------------- For all of these reasons, the Commission continues to believe that consumers are best served with operating cost as the primary descriptor on the EnergyGuide label. We recognize commenter concerns about the variability of energy costs, but we agree with Consumers Union (527896-00012) and other commenters that ``the value of the EnergyGuide to consumers stems from the fact that it is for comparative purposes.'' The EnergyGuide label's ability to predict an individual's actual energy use is limited. Regardless of its design, the label only can provide consumers with a general idea of the energy they will consume. Any model-specific energy use disclosure, whether in dollars, kilowatt-hours, or a star rating, is merely an estimate based on assumptions regarding use conditions and patterns.\27\ The lack of uniformity in energy prices across the country is another factor added to this set of existing variables. On balance, we believe that the benefits of having a prominent, simple operating cost to allow consumers to compare the relative energy use of various product models outweigh concerns raised by the variability in regional energy prices. --------------------------------------------------------------------------- \27\Manufacturers must derive the energy information provided on the label from standard DOE test procedures which mandate specific test conditions (e.g., air temperature, water temperature) and usage assumptions (e.g., number of washloads per week) that will not necessarily apply to all consumers. --------------------------------------------------------------------------- Although we have decided to use operating cost as the primary disclosure, we agree with commenters that the label provide a more prominent explanation that consumers' actual operating costs will vary. Accordingly, in the final version of the label, we increased the size and prominence of the statement informing consumers that their own operating cost will depend on their utility rates and product use. This change should help consumers understand that the operating cost figure on the label is simply an estimate based on national averages.\28\ --------------------------------------------------------------------------- \28\Based on recommendations by ACEEE, we have sought to minimize the amount of text on the label (see, e.g., Thorne, Jennifer and Egan, Christine, ``An Evaluation of the Federal Trade Commission's EnergyGuide Label: Final Report and Recommendations,'' ACEEE, August 2002). As proposed in the NPRM, we have eliminated phrases such as ``Compare the Energy Use of this . . .'' because such language is either redundant or unnecessary to the label's effectiveness. --------------------------------------------------------------------------- Given our decision to adopt operating cost as the label's primary disclosure, the Commission does not plan to pursue the categorical label further at this time. Our consumer research suggests that there are significant benefits to the categorical label design, and we recognize, as Christopher Payne (527896-00014) explained, that even small differences in comprehension may affect consumer buying behavior. The magnitude of such effects, however, is extremely difficult to quantify because rates of label comprehension do not necessarily translate directly into buying behavior. Most important, however, the FTC's study identified substantial problems with the categorical design, particularly as it may impact consumer comprehension of the ENERGY STAR program. As explained in the NPRM, this problematic interaction with the ENERGY STAR program and the quality-related results for the categorical design convinced us not to adopt the categorical label at this time.\29\ --------------------------------------------------------------------------- \29\Other concerns also exist with the categorical label. For example, the FTC's study did not test conditions in which categorical labels had the same number of stars but different energy use and operating cost figures. We expect such a scenario would be quite common under a categorical labeling scheme. The inclusion of such a scenario in any future research may provide additional information about the performance of a categorical design on the types of objective tasks involved in the study. In addition, the FTC's study did not address the feasibility (i.e., the technical and administrative considerations) of implementing a categorical label, including the alignment of FTC energy rating categories with ENERGY STAR criteria, a concern raised by commenters earlier in the proceeding (see, e.g., EPA (519870-00007)). --------------------------------------------------------------------------- Although we have adopted operating cost as the primary descriptor, the Commission does not plan to pursue a multi-year cost disclosure on the label. We agree with the commenters that such a design raises a host of unresolved questions. The final label, therefore, mandates a one year cost figure. The Final Rule requires an operating cost label for most appliances including refrigerators, refrigerator-freezers, freezers, clothes washers, dishwashers, room air conditioners, and water heaters. The appendices to the Final Rule contain updated range information based on the most recent annual reports submitted by manufacturers to the Commission.\30\ In drafting the new labels, manufacturers must use the range information and the 2007 national average energy cost information at Appendix K. --------------------------------------------------------------------------- \30\The range data in the appendices excludes models identified as ``discontinued'' in manufacturer reports. In addition, given the staggered annual reporting dates set out in the Rule section 305.8, the new range data for clothes washers and refrigerators is based on the annual reports submitted in 2006 and new model reports submitted since that time. --------------------------------------------------------------------------- We note that the NPRM also proposed to require an operating cost disclosure for pool heaters (see 72 FR 6846, n. 54). The current DOE test procedure (10 CFR Part 430, Appendix P) contains a method for calculating annual energy consumption for pool heaters. This method, however, does not take into account a model's energy performance (i.e., thermal efficiency), but instead provides annual energy consumption information based on a model's capacity. As a result, the annual energy [[Page 49954]] consumption derived from the test procedure does not reflect relative energy efficiency differences among models. Without information about the relative energy performance of similar capacity models, it is unclear whether such disclosures would be helpful to consumers. Accordingly, the pool heater label will continue to disclose the thermal efficiency of each model as required under the current rule. B. ENERGY STAR Logo Placement Background: In the NPRM, the Commission proposed directing manufacturers to place the ENERGY STAR logo in the lower right-hand corner of the label for qualified products, instead of above the range of comparability bar as currently required. Under the proposal, the logo would be up to one inch by one inch in size. Comments: Comments were generally supportive of a change to the ENERGY STAR logo placement. For example, EEI (527896-00005) indicated that placement of the logo in the bottom corner of the label will ``help customers who are looking for more energy efficient appliances.'' Some commenters, however, suggested changes in the placement and prominence of the ENERGY STAR logo. AHAM (527896-00006), for instance, asked the Commission to consider allowing placement of the logo in the top third of the label. EPA supported any changes that would ``improve the prominence and visibility of the ENERGY STAR logo without undermining the general purpose of the EnergyGuide label.'' A few commenters believed the Commission should allow a larger ENERGY STAR logo than the one inch by one inch size proposed in the NPRM. Whirlpool (527896-00004) supported the placement of the logo in the lower right corner, but commented that the proposed size would be ``fairly small'' and suggested that the FTC allow a larger logo (e.g., 1.25 to 1.5-inches square). AHAM (527896-00006) also suggested an increase in the logo's allowable size. EPA (527896-00018) indicated that the proposed logo size of ``one inch by one inch is the minimum effective size for use of the ENERGY STAR logo for qualifying products on the EnergyGuide label.'' Discussion: Under the final amendments, manufacturers using the ENERGY STAR logo on their labels must place it in the lower right-hand corner. The Commission has decided to retain this proposed placement requirement because it will ensure that the ENERGY STAR logo is presented consistently across all labels in a location away from other energy performance measures. The Final Rule also requires a uniform one inch size for the logo on all applicable labels. This will provide the ENERGY STAR logo with a consistent size and location across all EnergyGuide labels. We do not believe that the label can reasonably accommodate a larger logo and still clearly provide all the information necessary to serve its purpose. We note that although the Proposed Rule indicated the logo could be ``up to'' one inch in size, the logo appearing on Sample Label 2 of the NPRM was approximately 1/2 inch in size (on an actual size label). C. Requirements for Heating and Cooling Equipment Background: The current labeling requirements for furnaces, boilers, central air conditioners, and heat pumps provide little value to consumers prior to purchase because these products generally do not appear in showrooms. At the same time, the record indicated that the information on the label provides benefits to consumers and energy auditors in the use of existing, installed units and in the purchase of replacement products. The labels may also provide information allowing consumers to confirm that the model they ordered is the model that has been installed by the contractor. The Commission, therefore, proposed requiring manufacturers to mark their units permanently with certain energy information in lieu of labeling. The Commission expected that marking requirements would be a more durable and less expensive means of making information available to consumers. Under the proposal, the Rule would have continued to require EnergyGuide labeling for water heaters because these products appear in showrooms. In addition to the marking proposal, the Commission sought to streamline and improve the Rule's fact sheet and directory provisions (i.e., pre-purchase disclosure requirements) by removing complicated equations and charts from fact sheets, eliminating operating cost calculation information, and providing manufacturers and contractors with new options, such as online sources, for providing energy information. The Proposed Rule would have required manufacturers to provide the following pre-purchase disclosures in fact sheets, directories, or another medium: (1) the name of manufacturer or private labeler; (2) the trade (brand) name; (3) model number(s); (4) capacity determined in accordance with section 305.7; (5) energy efficiency rating as determined in accordance with section 305.5; (6) a statement that the energy efficiency ratings are based on U.S. Government standard tests; and (7) in the case of, information about efficiency ratings of split system central air conditioners for specific condenser/coil combinations or, alternatively, for the ``most common'' condenser-evaporator coil combinations, as currently required by the Rule. The Commission also asked whether the Rule should require manufacturers to provide an estimated national average operating cost for their models. Comments: The comments addressed both the permanent marking and pre-purchase information requirements proposed in the NPRM. Marking The comments contained mixed views on the proposed permanent marking requirements. Several supported the proposal.\31\ For example, EEI (527896-00005) indicated that paper labels can be lost or discarded and that permanent marking will ``allow consumers and entities offering incentive programs to be sure that they are `getting what they paid for.''' First Company (527896-00008), a manufacturer of air handling systems and evaporator coils, supported the marking proposal, but suggested the Rule clarify that marking should be placed on the condenser (or outdoor heating pump) as currently required for EnergyGuide labeling. Burnham (527896- 00001), a boiler manufacturer, agreed with the proposal, but requested that the Commission provide manufacturers with at least six months to implement the change. --------------------------------------------------------------------------- \31\See Consumers Union (527896-00012), EEI (527896-00005), and First Company (527896-00008). --------------------------------------------------------------------------- GAMA (527896-00007) did not oppose marking for boilers, but raised concerns with such a requirement for furnaces. It explained that current multi-position furnaces allow installers to select particular airflow configurations that affect the product's actual Annual Fuel Utilization Efficiency (AFUE). Because manufacturers cannot determine the configuration of the equipment installed in the field, GAMA (527896-00011) contended that a single rating on the product would be ``problematic.'' As GAMA has explained in the past, the disclosure of more than one rating for multi-positions provides more precise information to consumers about the expected efficiency of the product under different airflow configurations.\32\ As GAMA (527896-00011) noted in its [[Page 49955]] comments, the FTC staff has interpreted the Appliance Labeling Rule to permit the disclosure of multiple ratings for multi-position furnaces on the current EnergyGuide label.\33\ GAMA (527896-00011) implied that space constraints on the nameplate may make it difficult to provide such multiple ratings. GAMA (527896-00011) also raised concerns about the efficacy of placing the efficiency information on the furnace nameplate because the nameplates generally appear on the product's interior. --------------------------------------------------------------------------- \32\See FTC Staff Opinion Letter from James G. Mills, FTC, to Joseph M. Mattingly, GAMA, April 13, 1999. \33\Id. --------------------------------------------------------------------------- ARI (527896-00010), which concluded that a marking requirement would not be more effective than the current label, also raised a series of concerns.\34\ First, it stated that, because energy ratings only reflect the performance of the most common condenser/coil combination, the rated information on a permanent mark may be different from the actual system purchased by the consumer. Moreover, ARI (527896-00010) asserts this information is best provided through fact sheets or industry directories. Second, ARI (527896-00010) indicated that a permanent mark is not necessary to allow consumers to confirm that the model ordered is the one that has been installed. ARI (527896-00010) argued that this ``can easily be verified today by checking the model number on the product nameplate against the manufacturer's fact sheet or the information in the ARI directory of certified products.'' Third, ARI (527896-00010) argued that the Commission should not consider the needs of energy auditors because, in its view, the intent of EPCA is to aid consumers in their purchasing decisions, not energy auditors in conducting audits. Moreover, ARI (527896-00010) believes the needs of auditors are best met by industry fact sheets and directories. Fourth, ARI (527896-00010) stated that a permanent marking requirement would be more expensive to implement than the current EnergyGuide label. It noted that California's marking requirements do not apply to residential heating and cooling products. Therefore, manufacturers are not currently marking these products, contrary to the discussion in the NPRM.\35\ Finally, ARI (527896-00010) indicated that it would support maintaining the current EnergyGuide label ``if FTC strongly believes that a label of some sort is necessary.'' --------------------------------------------------------------------------- \34\See GAMA (527896-00011), Fujitsu (527896- 00007), and CEE (527896-00016). \35\See also Fujitsu (527896-00007) and GAMA (527896-00007). --------------------------------------------------------------------------- No commenter opposed the proposal to retain EnergyGuide labels for water heaters. GAMA (527896-00011) supported the Commission's decision to maintain separate range categories for storage and tankless water heaters. Pre-Purchase Information Disclosures The comments presented a variety of opinions regarding the Commission's proposal to simplify the requirements for the disclosure of efficiency information. Several commenters generally supported the Commission's proposal to simplify the fact sheet requirements and provide more flexibility to manufacturers.\36\ For example, First Company (527896-00008) explained that it supports ``giving manufacturers the flexibility to provide energy information to distributors and retailers through fact sheets, directories or product brochures and to make the information available electronically via websites or e-mails.'' --------------------------------------------------------------------------- \36\Fujitsu (527896-00007), GAMA (527896- 00011), Rheem (527896-00013), EEI (527896-00005), and First Company (527896-00008). --------------------------------------------------------------------------- While no commenters opposed the Commission's proposal in its entirety, some urged the Commission to require the disclosure of additional information. For example, ACEEE (527896-00015) suggested capacity should be added to the labeling or marking requirements and that, for furnaces and boilers, capacity should be based on ``output,'' not ``input'' as required by current regulations. ACEEE (527896-00015) also raised concerns about disclosures for split system central air conditioners. Such systems contain two components: a condenser (usually installed outdoors) and a coil (installed indoors). Different combinations of condensers and coils usually yield different efficiency ratings. Manufacturers under the FTC's current Rule must label only the condenser. In addition, the Rule requires that the rating for a particular condenser be either: 1) the system efficiency rating using the most common coil sold with that condenser; or 2) the system efficiency ratings of each separate coil/ condenser combination sold by the manufacturer. To help consumers and installers with matching condensers and coils at the time of purchase, ACEEE (527896-00015) urged the Commission to require a table of information designating the capacity or other performance parameters required so that the system will provide the certified performance promised by the condenser label. Similarly, Consumers Union (527896-00012) urged the Commission to require comparative energy information online noting that most consumers do not go to showrooms to compare these products. CEE (527896-00016) also recommended that the FTC require equipment manufacturers to disclose the energy efficiency range of ratings of a given condenser when combined with various matching coils (and furnaces, if applicable). It also urged the Commission to require a statement about the importance of matched systems in achieving energy efficiency. In addition, CEE (527896-00016) urged the Commission to work with ARI and GAMA to ensure that efficiency information (e.g., the Seasonal Energy Efficiency Ratio (the ``SEER'' rating)) is available online. Some comments addressed whether operating cost information disclosures should be required for central air conditioners and furnaces. In particular, Rheem (527896-00013) supported the FTC's proposal to eliminate required cost disclosures and noted that ``the determination of operating costs is complicated by regional climate and energy costs.'' First Company (527896-00008) also indicated that operating cost information for these particular products is ``of little value to consumers because these costs are highly dependent on a number of variables . . . .'' ARI (527896- 00010) agreed that average cost information for heating and cooling equipment would be of limited use to consumers on labels. ARI (527896-00010), however, plans to provide average operating cost information as part of its online directory. Neither ARI nor other entities provided any detailed comments on whether the FTC should require some sort of national average cost information (and what methodology should be used for such calculations). Several commenters addressed how sellers should provide the required information. Some supported the Commission's proposal to provide sellers with more flexibility in the dissemination of this information, including electronic distribution.\37\ Fujitsu (527896-00007) supported allowing the provision of information over the Internet. CEE (527896-00016), however, raised concerns with the proposal. It suggested that the FTC require contractors to present energy information at the time of sale to consumers because not all consumers have access to the Internet. --------------------------------------------------------------------------- \37\See GAMA (527896-00011), Fujitsu (527896- 00007), and Burnham (527896-00001). --------------------------------------------------------------------------- Discussion: The comments addressed the two primary issues raised in the NPRM: the proposed marking [[Page 49956]] requirements and the proposed pre-purchase information requirements. With regard to the marking requirements, the Final Rule continues to require manufacturers of central air conditioners and furnaces to place EnergyGuide labels on their products. The Rule also will continue to require EnergyGuide labeling for water heaters. With regard to pre- purchase energy information, the Final Rule contains the simplified point of sale information requirements contained in the Propos