Energy Conservation Program for Consumer Products: Energy Conservation Standards for Residential Furnaces and Boilers, 59204-59259 [06-8431]

Agencies

• DEPARTMENT OF ENERGY
• Office of Energy Efficiency and Renewable Energy
• Energy Efficiency and Renewable Energy Office

[Federal Register Volume 71, Number 194 (Friday, October 6, 2006)]
[Proposed Rules]
[Pages 59204-59259]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-8431]



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Part II





Department of Energy





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Office of Energy Efficiency and Renewable Energy



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10 CFR Part 430



Energy Conservation Program for Consumer Products: Energy Conservation 
Standards for Residential Furnaces and Boilers; Proposed Rule

Federal Register / Vol. 71, No. 194 / Friday, October 6, 2006 / 
Proposed Rules

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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket Number EE-RM/STD-01-350]
RIN 1904-AA78


Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Residential Furnaces and Boilers

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

ACTION: Notice of proposed rulemaking and public meeting.

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SUMMARY: The Energy Policy and Conservation Act (EPCA or the Act) 
prescribes energy conservation standards for various consumer products 
and commercial and industrial equipment, and requires the Department of 
Energy (DOE or the Department) to determine if amendments to increase 
the stringency of the standards are technologically feasible and 
economically justified, and if they would save a significant amount of 
energy. In this notice, the Department is proposing to amend the energy 
conservation standards for residential furnaces and boilers and is 
announcing a public meeting.

DATES: The Department will hold a public meeting on October 30, 2006, 
from 9 a.m. to 4 p.m., in Washington, DC. The Department must receive 
requests to speak at the public meeting before 4 p.m., October 16, 
2006. The Department must receive a signed original and an electronic 
copy of statements to be given at the public meeting before 4 p.m., 
October 16, 2006.
    The Department will accept comments, data, and information 
regarding the notice of proposed rulemaking (NOPR) before and after the 
public meeting, but no later than January 15, 2007. See section VII, 
``Public Participation,'' of this notice for details.

ADDRESSES: You may submit comments, identified by docket number EE-RM/
STD-01-350 and/or regulatory information number (RIN) 1904-AA78, by any 
of the following methods:
    1. Federal eRulemaking Portal: https://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. E-mail: ResidentialFBNOPRComments@ee.doe.gov. Include 
docket number EE-RM/STD-01-350 and/or RIN number 1904-AA78 in the 
subject line of the message.
    3. Mail: Ms. Brenda Edwards-Jones, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, NOPR for Residential 
Furnaces and Boilers, Docket Number EE-RM/STD-01-350 and/or RIN number 
1904-AA78, 1000 Independence Avenue, SW., Washington, DC 20585-0121. 
Please submit one signed original paper copy.
    4. Hand Delivery/Courier: Ms. Brenda Edwards-Jones, U.S. Department 
of Energy, Building Technologies Program, Room 1J-018, 1000 
Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 
586-2945. Please submit one signed original paper copy.
    Instructions: All submissions received must include the agency name 
and Docket Number or RIN for this rulemaking. For detailed instructions 
on submitting comments and additional information on the rulemaking 
process, see section VII, ``Public Participation,'' of this notice for 
details.
    Docket: For access to the docket to read background documents or 
comments received, visit the U.S. Department of Energy, Forrestal 
Building, Room 1J-018 (Resource Room of the Building Technologies 
Program), 1000 Independence Avenue, SW., Washington, DC 20585-0121, 
(202) 586-2945, between 9 a.m. and 4 p.m., Monday through Friday, 
except Federal holidays. Please call Ms. Brenda Edwards-Jones at the 
above telephone number for additional information regarding visiting 
the Resource Room. Please note: The Department's Freedom of Information 
Reading Room (formerly Room 1E-190 at the Forrestal Building) is no 
longer housing rulemaking materials.

FOR FURTHER INFORMATION CONTACT: Mohammed Khan, Project Manager, Energy 
Conservation Standards for Residential Furnaces and Boilers, U.S. 
Department of Energy, Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, 
DC 20585-0121, (202) 586-7892, e-mail: Mohammed.Khan@ee.doe.gov.
    Francine Pinto, Esq., U.S. Department of Energy, Office of the 
General Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 
20585-0121, (202) 586-9507, e-mail: Francine.Pinto@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Proposed Rule
II. Introduction
    A. Consumer Overview
    B. Authority
    C. Background
    1. Current Standards
    2. History of Standards Rulemaking for Residential Furnaces and 
Boilers
    3. Process Improvement
    D. Negotiated Boiler Standards Agreement
III. General Discussion
    A. General Issues
    1. Impact of Furnace and Boiler Standards on Future Natural Gas 
Prices
    2. Inclusion of Electricity Consumption in Furnace and Boiler 
Standards
    3. Separate Standards for Equipment Installed in New Homes and 
as Replacements
    4. Separate Standards for Different Regions
    B. Test Procedures
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Life-Cycle Costs
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition f. Need of the Nation 
to Conserve Energy
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
    A. Product Classes
    B. Engineering Analysis
    1. Manufacturing Costs
    2. Markups
    3. Installation Costs
    a. Non-Weatherized Gas Furnaces
    b. Other Product Classes
    4. Maintenance Costs
    5. Rebuttable-Presumption Payback Period
    C. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Prices
    2. Installation Costs
    3. Household Annual Energy Consumption
    4. Energy Prices
    5. Maintenance Costs
    6. Equipment Lifetime
    7. Discount Rates
    8. Effective Date of the New Standards
    9. Inputs to Payback Period Analysis
    10. Base-Case Equipment
    D. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Shipments, National Energy Savings, and Net Present Value
    2. Annual Unit Energy Consumption
    3. Site-to-Source Conversion Factors
    4. Installed Equipment Costs
    5. Maintenance Costs
    6. Energy Prices
    7. Discount Rates
    E. Consumer Subgroup Analysis
    F. Manufacturer Impact Analysis
    1. General Description
    2. Industry Profile
    3. Industry Cash Flow Analysis
    4. Subgroup Impact Analysis

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    5. Government Regulatory Impact Model Analysis
    6. Manufacturer Interviews
    a. Issues
    b. GRIM Scenarios and Key Inputs
    1. Shipments Forecast
    2. Markups
    3. Product and Capital Conversion Costs
    G. Employment Impact Analysis
    H. Utility Impact Analysis
    I. Environmental Analysis
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable-Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    i. Non-Weatherized Gas Furnaces
    ii. Weatherized Gas Furnaces
    iii. Mobile Home Gas Furnaces
    iv. Oil-Fired Furnaces
    v. Gas Boilers
    vi. Oil-Fired Boilers
    b. Impacts on Manufacturing Capacity
    c. Impacts on Subgroups of Manufacturers
    d. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value
    c. Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    C. Proposed Standard
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    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 of 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act of 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    M. Review Under Executive Order 12898
VII. Public Participation
    A. Attendance at Public Meeting
    B. Procedure for Submitting Requests to Speak
    C. Conduct of Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

    The Energy Policy and Conservation Act (EPCA or the Act), as 
amended, specifies that any new or amended energy conservation standard 
the Department of Energy (DOE or the Department) prescribes for 
consumer products 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)) Furthermore, the new or amended standard must ``result 
in significant conservation of energy.'' (42 U.S.C. 6295(o)(3)(B)) In 
accordance with these and other statutory criteria discussed in this 
notice, the Department proposes to amend the residential furnace and 
boiler energy conservation standards and raise efficiency levels as 
shown in Table I.1. The proposed standards would apply to all covered 
furnaces and boilers offered for sale in the United States, effective 
on January 1, 2015.

      Table I.1.--Proposed Standard Levels for Furnaces and Boilers
------------------------------------------------------------------------
                        Product class                           AFUE (%)
------------------------------------------------------------------------
Non-weatherized gas furnaces.................................         80
Weatherized gas furnaces.....................................         83
Mobile home gas furnaces.....................................         80
Oil-fired furnaces...........................................         82
Gas boilers..................................................         84
Oil-fired boilers............................................         83
------------------------------------------------------------------------
AFUE = annual fuel utilization efficiency.

    The Department's analyses indicate that the proposed standards 
would save a significant amount of energy--an estimated 0.41 
quadrillion British thermal units (Btu), or quads, of cumulative energy 
over 24 years (2015-2038). For comparison, approximately six quads are 
used annually for space heating in U.S. homes. The economic impacts on 
consumers--i.e., the average life-cycle cost (LCC) savings--are 
positive.
    The cumulative national net present value (NPV) of total consumer 
costs and savings of the proposed standard (DOE's trial standard level 
2, or TSL2) from 2015 to 2038, in 2004$, ranges from $650 million 
(seven-percent discount rate) to $2.48 billion (three-percent discount 
rate). This is the estimated total value of future operating-cost-
savings minus the estimated increased equipment costs, discounted to 
2004. The Department estimated the furnace and boiler industry net 
present value (INPV) to be approximately $1.6 billion in 2004$. If the 
Department adopts the proposed standard, it expects manufacturers will 
lose 4.1 to 7 percent of the INPV, which is approximately $65-114 
million. The NPV for consumers (at the seven-percent discount rate) 
exceeds industry losses due to energy efficiency standards by about 
seven times.
    The proposed standard will lead to reductions in greenhouse gas 
emissions, resulting in cumulative (undiscounted) emission reductions 
of 19.6 million tons (Mt) of carbon dioxide (CO2) from 2015 
to 2038. Additionally, the standard would result in 13.0 thousand tons 
(kt) of nitrogen oxides (NOX) emissions reductions or 
generate a similar amount of NOX emissions allowance credits 
in areas where such emissions are subject to emissions caps. The 
standard would also generate 1.5 kt of sulfur dioxide (SO2) 
emissions reductions from 2015 to 2038. Most of the energy saved is 
natural gas. In addition, the Department expects the energy savings 
from the proposed standards to eliminate the need for approximately 14 
megawatts (MW) of generating capacity by 2030.
    The above results reflect the Department's use of energy price 
projections from the U.S. Energy Information Administration (EIA)'s 
Annual Energy Outlook 2005 (AEO2005). In addition, the Department 
performed a sensitivity analysis to assess the impacts of the standard 
using the Annual Energy Outlook 2006 (AEO2006) energy price forecasts. 
In this sensitivity analysis, the proposed standards would save the 
same amount of energy (0.41 quads) over 2015-2038. The cumulative NPV 
of total consumer costs and savings of the proposed standard from 2015 
to 2038, in 2004$, ranges from $820 million (seven-percent discount 
rate) to $3.02 billion (three-percent discount rate). The other results 
are approximately the same as in the analysis using AEO2005.
    The Department has found the proposed standard represents the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified. The Department found the benefits 
to the Nation of the proposed standard (energy savings, consumer 
average LCC savings, national NPV increase, and emission reductions) 
outweigh the costs (loss of manufacturer NPV, and LCC increases for 
some consumers). The Department considered higher energy efficiency 
levels as trial standard levels; however, it found the burdens of the 
higher efficiency levels (loss of manufacturer NPV, LCC increases for 
some consumers, and safety concerns) outweigh the benefits (energy 
savings, LCC savings for some consumers, national NPV increase, and 
emission reductions). The Department concludes that the proposed 
standard is economically justified. Furthermore, DOE has found that the 
proposed standard is technologically feasible since products achieving 
these

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efficiencies already are commercially available.

II. Introduction

A. Consumer Overview

    The Department is proposing to raise the energy conservation 
standard levels for residential furnaces and boilers as shown above in 
Table II.1. The proposed efficiency standard would apply to all covered 
furnaces and boilers offered for sale in the United States, effective 
on January 1, 2015. Relative to the current standard levels, the 
proposed levels for residential furnaces and boilers represent an 
improvement in energy efficiency of one to five percent, depending on 
the product class.

     Table II.1.--Proposed Standard Levels for Furnaces and Boilers
------------------------------------------------------------------------
                                                                   AFUE
                         Product class                             (%)
------------------------------------------------------------------------
Non-weatherized gas furnaces...................................       80
Weatherized gas furnaces.......................................       83
Mobile home gas furnaces.......................................       80
Oil-fired furnaces.............................................       82
Gas boilers....................................................       84
Oil-fired boilers..............................................      83
------------------------------------------------------------------------
AFUE = annual fuel utilization efficiency.

B. Authority

    Title III of EPCA sets forth a variety of provisions designed to 
improve energy efficiency. Part B of title III (42 U.S.C. 6291-6309) 
provides for the Energy Conservation Program for Consumer Products 
other than Automobiles. The program covers consumer products (referred 
to hereafter as ``covered products''), including residential furnaces 
and boilers. (42 U.S.C. 6292(a)(5))
    Under the Act, the program consists essentially of these parts: 
Testing, labeling, and Federal energy conservation standards. The 
Federal Trade Commission (FTC) is responsible for labeling, and DOE 
implements the remainder of the program. Section 323 of the Act 
authorizes the Department, with assistance from the National Institute 
of Standards and Technology (NIST) and subject to certain criteria and 
conditions, to develop test procedures to measure the energy 
efficiency, energy use, or estimated annual operating cost of each 
covered product. (42 U.S.C. 6293) The furnace and boiler test 
procedures appear at Title 10 of the Code of Federal Regulations (CFR) 
part 430, subpart B, Appendix N.
    EPCA provides criteria for prescribing new or amended standards for 
covered products. As indicated above, any new or amended standard for a 
covered product must be designed to achieve the maximum improvement in 
energy efficiency that is technologically feasible and economically 
justified. (42 U.S.C. 6295(o)(2)(A)) EPCA precludes the Department from 
adopting any standard that would not result in significant conservation 
of energy. (42 U.S.C. 6295(o)(3)(B)) Moreover, the Department may not 
prescribe a standard: (1) For certain products, if no test procedure 
has been established for the product, or (2) if DOE determines by rule 
that the standard is not technologically feasible or economically 
justified. (42 U.S.C. 6295(o)(3)(B) The Act (42 U.S.C. 
6295(o)(2)(B)(i)) also provides that, in deciding whether a standard is 
economically justified, DOE must, after receiving comments on the 
proposed standard, determine whether the benefits of the standard 
exceed its burdens by considering, to the greatest extent practicable, 
the following seven factors:

    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price, initial charges, or maintenance 
expenses for the covered products that are likely to result from the 
imposition of the standard;
    (3) The total projected amount of energy savings likely to 
result directly from the imposition of the standard;
    (4) Any lessening of the utility or the performance of the 
covered products likely to result from the imposition of 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 
imposition of the standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary considers relevant.

    EPCA contains what is commonly known as an ``anti-backsliding'' 
provision. (42 U.S.C. 6295(o)(1)) This provision mandates that the 
Secretary not prescribe any amended standard that either increases the 
maximum allowable energy use or decreases the minimum required energy 
efficiency of a covered product. Also, the Secretary may not prescribe 
an amended or a new standard if interested persons have established by 
a preponderance of the evidence that the standard is likely to result 
in the unavailability in the United States of any covered product type 
(or class) with performance characteristics, features, sizes, 
capacities, and volume that are substantially the same as those 
generally available in the United States. (42 U.S.C. 6295 (o)(4))
    In addition, section 325(o)(2)(B)(iii) of EPCA establishes a 
rebuttable-presumption that a standard is economically justified if the 
Secretary finds that ``the additional cost to the consumer of 
purchasing a product complying with an energy efficiency standard level 
will be less than three times the value of the energy * * * savings 
during the first year that the consumer will receive as a result of the 
standard, as calculated under the applicable test procedure * * *.'' 
The rebuttable-presumption test is an alternative path to establishing 
economic justification. (42 U.S.C. 6295(o)(2)(B)(iii))
    Section 325(q)(1) of EPCA is applicable to promulgating a standard 
for a type or class of covered product that has two or more 
subcategories. The Department must specify a different standard level 
than that which applies generally to such type or class of products 
``for any group of covered products which have the same function or 
intended use, if * * * products within such group--(A) Consume a 
different kind of energy from that consumed by other covered products 
within such type (or class); or (B) have a capacity or other 
performance-related feature which other products within such type (or 
class) do not have and such feature justifies a higher or lower 
standard'' that applies or will apply to the other products. (42 
U.S.C.6295(q)(l)) In determining whether a performance-related feature 
justifies such a different standard for a group of products, the 
Department must consider ``such factors as the utility to the consumer 
of such a feature'' and other factors DOE deems appropriate. Any rule 
prescribing such a standard must include an explanation of the basis on 
which such higher or lower level was established. (42 U.S.C. 
6295(q)(2))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297 (a)-(c)) The Department can, however, 
grant waivers of preemption for particular State laws or regulations, 
in accordance with the procedures and other provisions of section 
327(d) of the Act. (42 U.S.C. 6297(d)) Specifically, States with a 
regulation that provides for an energy conservation standard for any 
type of covered product for which there is a Federal energy 
conservation standard may petition the Secretary for a DOE rule that 
allows the State regulation to become effective with respect to such 
covered product. The Department must prescribe a rule granting the 
petition if the State establishes by a preponderance

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of the evidence that its regulation is needed to meet ``unusual and 
compelling State or local energy * * * interests.'' (42 U.S.C. 
6297(d)(1)(B))

C. Background

1. Current Standards
    EPCA established an energy conservation standard for residential 
furnaces and boilers.\1\ It set the standard in terms of the annual 
fuel utilization efficiency (AFUE) descriptor at a minimum value of 78 
percent for most furnaces. It set the minimum AFUE at 75 percent for 
gas steam boilers and 80 percent for other boilers. For mobile home 
furnaces, EPCA set the minimum AFUE at 75 percent. These standards 
became effective on January 1, 1992, with the exception of the standard 
for mobile home furnaces, for which the effective date was September 1, 
1990. (42 U.S.C. 6295(f)(1)-(2))
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    \1\ EPCA states that a ``furnace'' includes forced-air and 
gravity central furnaces and low-pressure steam and hot water 
boilers, and that it must have a heat input rate of less than 
225,000 Btu/h for forced-air and gravity central furnaces, and less 
than 300,000 Btu/h for boilers. (42 U.S.C. 6291(23)) However, in 
this notice, DOE has adopted the terminology used in the heating, 
ventilating, and air conditioning industry, which considers furnaces 
and boilers as separate categories.
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2. History of Standards Rulemaking for Residential Furnaces and Boilers
    For ``small'' gas furnaces (those having an input rate of less than 
45,000 Btu per hour), the Department published a final rule on November 
17, 1989, in which it set the minimum AFUE for these products at 78 
percent, effective January 1, 1992. 54 FR 47916.
    For mobile home furnaces, the Department issued an advance notice 
of proposed rulemaking (ANOPR) on September 28, 1990 (55 FR 39624), 
followed by a proposed rule on March 4, 1994. 59 FR 10464. The Interior 
and Related Agencies Appropriations for Fiscal Year 1996 (Pub. L. 104-
34) included a moratorium on appliance standards rulemakings, 
preventing DOE from finalizing the standards on mobile home furnaces. 
The Department responded to the moratorium by developing an improved 
process, known as the Process Rule, for its energy conservation 
standards rulemakings (Procedures for Consideration of New or Revised 
Energy Conservation Standards for Consumer Products, Title 10 CFR part 
430, Subpart C, Appendix A). 61 FR 36974. The Process Rule provided 
guidance on how DOE prioritizes its standards rulemakings. As a result, 
the Department pursued standards rulemakings for other products rather 
than finalizing the proposed standard for mobile home furnaces. 
Therefore, the Department did not publish a final rule for amending 
mobile home furnace standards and the minimum energy conservation 
standard remained at 75 percent AFUE.
    The Act also directed the Department to publish a final rule to 
determine whether the standards should be amended for all furnaces and 
boilers. (42 U.S.C. 6295(f)(3)(B)) On September 8, 1993, the Department 
published an ANOPR (hereafter referred to as the September 1993 ANOPR) 
in which it presented the product classes for furnaces that it planned 
to analyze, and a detailed discussion of the analytical methodology 
that it expected to use in this rulemaking. 58 FR 47326. The Department 
invited stakeholders to submit comments and data on the planned 
methodology. However, the 1996 moratorium on appliance standards 
rulemakings prevented DOE from proceeding further with the rulemaking 
process.\2\
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    \2\ Pub. L. 104-34, the Department of the Interior and Related 
Agencies Appropriations Act for Fiscal Year 1996 which included a 
moratorium on proposing or issuing energy conservation appliance 
standard for FY 1996.
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    In the fiscal year 2001 Priority Setting for the Appliance 
Rulemaking Process, DOE assigned a high level of priority to a 
rulemaking to consider amendments to the energy conservation standards 
for residential furnaces and boilers, including mobile home furnaces. 
On June 13, 2001, DOE published a Framework Document for Residential 
Furnaces and Boilers Standards Rulemaking (Framework Document). The 
Department held a public meeting on July 17, 2001, to discuss the 
procedural and analytical approaches in this rulemaking, and to seek 
stakeholder comments on the Framework Document.
    The Department held another public meeting on May 8, 2002, to 
receive and discuss comments on issues related to venting 
installations. In June 2002, the Gas Appliance Manufacturers 
Association (GAMA) commented on DOE's analysis of manufacturing costs. 
In August 2002, GAMA convened a meeting with DOE and the American 
Council for an Energy-Efficient Economy (ACEEE) to discuss approaches 
for analyzing electricity use in furnaces. In September 2002, the 
Department posted its engineering analysis and received stakeholder 
comments. The Department published an ANOPR on July 29, 2004 (hereafter 
referred to as the 2004 ANOPR), and held a public meeting on September 
29, 2004, to present the methodology and results of the ANOPR analyses. 
69 FR 45419.
    As set forth in the updated rulemaking timeline published in the 
Department's Semi-annual Regulatory Agenda on December 13, 2004, DOE 
expects to issue a final rule in 2007. 69 FR 72713. The effective date 
for any new standards for furnaces and boilers published in 2007 would 
be 2015, or eight years after publication as a final rule in the 
Federal Register. (42 U.S.C. 6295 (f)(3)(B))
3. Process Improvement
    The Process Rule applies to the development of energy conservation 
standards for all consumer products, including those for residential 
furnaces and boilers. 61 FR 36974. In this notice, the Department 
describes the framework and methodologies by which it is developing the 
standard. The framework and methodologies reflect improvements made and 
steps taken in accordance with the Process Rule, including the use of 
improved economic models and analytical tools. The rulemaking process 
is dynamic, and as timely new data, models, or tools that enhance the 
development of standards become available, the Department will 
incorporate them into the rulemaking.
    In response to the DOE's 2004 ANOPR, the American Gas Association 
(AGA) asserted that the spreadsheets used by the Department do not meet 
the requirements of the Process Rule, which specifies the use of 
transparent and robust analytical methods ``that are fully documented 
for the public and that produce results that can be explained and 
reproduced * * *.'' AGA suggested that DOE (1) explore simpler 
analytical methods for its analyses, or (2) provide stakeholders with 
more direct means of testing alternate assumptions and sensitivities. 
(AGA, No. 78 at p. 2) \3\ Southern Company (Southern) commented that it 
would be helpful if DOE provided tools for the review of its analysis 
results that could be used more easily. (Southern, No. 71 at p. 3) 
After the 2004 ANOPR, DOE improved the design and user-friendliness of 
the analytical spreadsheets by creating process diagrams and by adding 
additional summary worksheets, help screens to assist the user, and 
input screens to allow the testing of alternate assumptions. The 
Department also expanded its documentation by adding

[[Page 59208]]

appendices that explain in detail the design and use of the 
spreadsheets.
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    \3\ A notation in the form ``AGA, No. 78 at p. 2'' identifies a 
written comment the Department has received and has included in the 
docket of this rulemaking. This particular notation refers to a 
comment (1) By the American Gas Association (AGA), (2) in the 
document number 78 in the docket of this rulemaking (maintained in 
the Resource Room of the Building Technologies Program), and (3) 
appear on page 2 of document number 78.
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    GAMA commented that there should be more informal communication 
between DOE and the furnace industry during the course of the 
rulemaking. (GAMA, No. 67 at p. 8) In accordance with the Process Rule, 
DOE sought stakeholder review at several points in the rulemaking and 
organized public meetings, webcasts, and conference calls to discuss 
important issues. The Department recognizes the value of having 
informal, open communication with stakeholders, as stakeholder input 
can contribute significantly to the quality of the Department's 
analyses and improve the Department's decision making. However, the 
open nature of the process has introduced substantial delays in the 
Department's rulemaking schedules. Such delays have been an unintended 
consequence of the Process Rule. The Department therefore, recognizes 
the need for a balance in the allowance of stakeholder input and 
maintaining rulemaking schedules, and will better integrate stakeholder 
input and expert review within the scope of the structured notice-and-
comment rulemaking process.

D. Negotiated Boiler Standards Agreement

    On July 14, 2006, GAMA and ACEEE, on behalf of 28 residential 
boiler manufacturers and four energy efficiency organizations, 
submitted a negotiated agreement recommending new national standards 
for residential boilers that would consist of a performance requirement 
(minimum AFUE levels) and design requirements. The recommended 
performance levels are the maximum that the industry feels would 
safeguard against corrosion and ensure safe venting. Both GAMA and 
ACEEE believe that the design requirements would bring about 
additional, non-trivial energy savings.
    For gas-fired boilers, both water and steam types, the agreement 
calls for a ban on standing pilots. For gas-fired water boilers only, 
there are two design requirements. In addition to the ban on standing 
pilots, the agreement also requires a ``temperature reset'' feature 
that automatically adjusts the boiler output according to the outdoor 
ambient air temperature. For oil-fired water boilers, the agreement 
contains the design requirement for the same ``temperature reset'' 
feature.
    The Department sincerely appreciates the effort stakeholders have 
made to propose an agreement for the boiler portion of this rulemaking. 
However, the Department has determined that the recommended standards 
in the negotiated agreement are beyond the scope of its legal 
authority. The Energy Policy and Conservation Act (EPCA) authorizes the 
Secretary to amend energy conservation standards for specified 
products. (42 U.S.C. 6295) Section 321(6) of the EPCA defines the term 
``energy conservation standard'' as
    (A) A performance standard which prescribes a minimum level of 
energy efficiency or a maximum quantity of energy use, * * * or
    (B) A design requirement for the products specified in paragraphs 
(6), (7), (8), (10), (15), (16), (17), and (19) of section 322(a) * * * 
[of this title.]

(42 U.S.C. 6291(6))

    The language of EPCA authorizes the Department to establish a 
performance standard or a single design standard. EPCA's list of 
specified products for which a design standard can be established does 
not include residential furnaces and boilers. As such, a standard that 
establishes both a performance standard and a design requirement is 
beyond the scope of the Department's legal authority. In the case of 
gas-fired water boilers, the agreement recommends two design 
requirements which is contrary to EPCA's limit of one design 
requirement for the specified covered products.
    The Department's staff met with representatives from GAMA and ACEEE 
on August 1, 2006, and August 7, 2006, respectively, to discuss the 
Department's legal position on the negotiated agreement. The Department 
regrets that this negotiated agreement does not meet the statutory 
criteria in EPCA and therefore cannot be accepted. The Department 
strongly encourages stakeholders to continue to work together to 
propose agreements to the Department in the future, understanding that 
the Department must comply with EPCA's statutory requirements.

III. General Discussion

A. General Issues

    The Department received comments on several general issues related 
to the furnace and boiler rulemaking. Those issues are related to the 
impact of the standards on future natural gas prices, furnace 
electricity consumption, separate standards for equipment in new homes 
and replacements, and separate standards for different regions.
1. Impact of Furnace and Boiler Standards on Future Natural Gas Prices
    The Natural Resources Defense Council (NRDC), American Chemistry 
Council (ACC), ACEEE, and Dow Chemical Company commented that more 
stringent furnace and boiler standards may result in lower natural gas 
prices in the future, and that DOE should account for the associated 
benefit for all gas consumers. (NRDC, No. 52 at p. 2; ACC, No. 62 at p. 
3; ACEEE, No. 84 at p. 9; and Joint Comment by NRDC and Dow, No. 64 at 
p. 3) The impact of appliance standards on energy prices has not 
historically been a part of DOE's analysis. Estimating such impacts 
would require new analytical methods. The Department evaluated a recent 
study that includes consideration of the impacts of furnace and boiler 
standards on natural gas prices.\4\ While this study finds that 
standards could result in a small decrease in natural gas prices, the 
Department's review of the study reveals that there is no conclusive 
evidence that furnace and boiler standards will affect overall natural 
gas prices. If the stakeholders' assertion is correct, then consumer 
gas prices will decrease, in turn decreasing the income of gas 
utilities--resulting in a transfer of benefits from the natural gas 
producers to the consumers. However, on a societal level, there is no 
clear evidence that there will be any impact on natural gas prices 
resulting from the furnace and boiler standards. Furthermore, DOE 
believes it is currently impossible, within the framework of a 
standards rulemaking, to estimate the possible impact of energy 
conservation standards on utility prices. Therefore, the Department did 
not consider these impacts in the current rulemaking.
---------------------------------------------------------------------------

    \4\ Wiser, R., M. Bolinger, M. St. Clair. Easing the Natural Gas 
Crisis: Reducing Natural Gas Prices through Increased Deployment of 
Renewable Energy and Energy Efficiency. LBNL. January 2005. (https://
eetd.lbl.gov/EA/EMP/reports/56756.pdf).
---------------------------------------------------------------------------

2. Inclusion of Electricity Consumption in Furnace and Boiler Standards
    The Department received a number of comments regarding the 
inclusion of furnace and boiler electricity consumption in amended 
standards for furnaces and boilers. The Department was recently given 
authority to regulate the electricity consumed by furnaces for the 
purposes of circulating air by the Energy Policy Act of 2005, Pub. L. 
104-58 (EPACT 2005). EPACT 2005, section 135(c), amended section 325 of 
EPCA (42 U.S.C. 6295(f)(3)) to include the following: ``[T]he Secretary 
may consider and prescribe energy conservation standards or energy use 
standards for electricity used for purposes of circulating air through 
duct work.'' However, at the November 15, 2005, public meeting to 
discuss DOE's appliance-standards-program schedule-setting, the 
Department received comments from GAMA and the

[[Page 59209]]

Appliance Standards Awareness Project (ASAP) urging the Department to 
complete the AFUE standard rulemaking as soon as possible. Furthermore, 
GAMA and ASAP expressed their preference that DOE address furnace 
blower electricity consumption separately from the AFUE standard 
rulemaking. Since adding electricity consumption standards to this 
rulemaking would likely cause further substantial delay in the 
rulemaking process, the Department accepts the recommendations from 
GAMA and ASAP and has decided not to address furnace electricity 
consumption in this rulemaking. It will consider furnace electricity 
consumption separately to enable it complete the furnace and boiler 
AFUE rulemaking as expeditiously as possible.
3. Separate Standards for Equipment Installed in New Homes and as 
Replacements
    ACEEE suggested that DOE consider separate standards for new 
construction and retrofits. (ACEEE, No. 53 at p. 5) EPCA directs the 
Department to establish performance standards that prescribe minimum 
levels of energy efficiency or maximum levels of energy use for covered 
products. The Act does not authorize DOE to set multiple levels of 
efficiency for a given covered product, depending on where the product 
is installed--either in terms of a given region of the country or in 
terms of home type, i.e., new or existing. (42 U.S.C. 6291(6)(A)) The 
Department believes it does not have the authority to set separate 
standards for furnaces and boilers for new homes and for existing homes 
and, therefore, rejects the suggestion that it consider separate 
standards for new construction and retrofits.
4. Separate Standards for Different Regions
    The Department received numerous comments regarding the setting of 
separate furnace and boiler standards for different regions of the 
country. Some of the commentators expressed reasons why separate 
standards would be beneficial or asked if DOE had the authority to set 
regional standards. (Ohio Consumers' Counsel (OCC), No. 70 at p. 5; 
Individuals, No. 73 at p. 1; Baltimore Gas and Electricity (BGE), No. 
75 at p. 1; National Association of Regulatory Utility Commissioners 
(NARUC), No. 77 at p. 5; ACEEE, No. 59.8 at pp. 36 \5\ and 165; 
Individual, No. 87 at p. 1; Northeast Energy Efficiency Partnerships 
(NEEP), No. 55 at pp. 2 and 3; NRDC, No. 59.8 at pp. 29 and 33, and No. 
63 at p. 9; Oregon Department of Energy (ODOE), No. 61 at p. 2; 
National Consumer Law Center (NCLC), No. 66 at pp. 7 and 8; New Jersey 
Board of Public Utilities (NJBPU), No. 83 at p. 1; Izaak Walton League 
of America (IWL), No. 88 at p. 1; Southern, No. 71 at p. 21 and No. 
59.8 at p. 219; Trane, No. 59.8 at p. 207; GAMA, No. 59.8 at pp. 206 
and 217; York, No. 65 at p. 2; Edison Electric Institute (EEI), No. 69 
at p. 2; Manufactured Housing Institute (MHI), No. 89 at p. 2; National 
Propane Gas Association (NPGA), No. 72 at p. 2; AGA, No. 59.8 at p. 40; 
Alliance to Save Energy (ASE), No. 80 at p. 2; North American 
Insulation Manufacturers Association (NAIMA), No. 60 at p. 1; and 
Lennox, No. 79 at p. 3)
---------------------------------------------------------------------------

    \5\ A notation in the form ``ACEEE, No. 59.8 at p. 36,'' 
identifies a comment in the transcript of the Public Meeting on 
Standards for Furnaces and Boilers held in Washington, DC, 9/29/
2004, which is document number 59.8 in the docket of this 
rulemaking. This particular notation refers to a comment (1) by the 
American Council for an Energy-Efficient Economy (ACEEE), (2) in the 
document number 59.8 in the docket of this rulemaking (maintained in 
the Resource Room of the Building Technologies Program), and (3) 
appearing on page 36 of document number 59.8.
---------------------------------------------------------------------------

    As discussed in the 2004 ANOPR, the Department has determined that 
EPCA does not authorize DOE to set regional energy conservation 
standards; instead, the Department can only establish national 
standards. 69 FR 45419. None of the comments received in response to 
the 2004 ANOPR provided a basis for changing that determination.
    However, the Department notes that EPCA allows states to seek from 
the Department a waiver of Federal preemption of state or local energy 
conservation standards. Section 327(d) of EPCA, ``Waiver of Federal 
Preemption,'' states that, ``Any State * * * with a State regulation 
which provides for any energy conservation standard * * * for any type 
* * * of covered product for which there is a Federal energy 
conservation standard * * * may file a petition with the Secretary 
requesting a rule that such State regulation become effective with 
respect to such covered product.'' (42 U.S.C. 6297(d)(1)(A)) Within a 
maximum of one year, DOE must act on any such petition. (42 U.S.C. 
6297(d)(2))
    The Department must prescribe a rule granting a waiver from Federal 
preemption if, subject to the condition specified in section 327(d), 
the State establishes by a preponderance of the evidence that its 
regulation is needed to meet ``unusual and compelling State or local 
energy * * * interests.'' (42 U.S.C. 6297(d)(1)(B)) The statute states 
that the phrase ``unusual and compelling State or local energy * * * 
interests'' means interests which:

    (i) Are substantially different in nature or magnitude than 
those prevailing in the United States generally; and (ii) are such 
that the costs, benefits, burdens, and reliability of energy * * * 
savings resulting from the State regulation make such regulation 
preferable or necessary when measured against the costs, benefits, 
burdens, and reliability of alternative approaches to energy * * * 
savings or production, including reliance on reasonably predictable 
market-induced improvements in efficiency of all products subject to 
the State regulation.
    The factors described in clause (ii) shall be evaluated within 
the context of the State's energy plan and forecast, and, with 
respect to a State regulation for which a petition has been 
submitted to the Secretary * * * [42 U.S.C. 6297(d)(1)(c)]

    In evaluating the evidence that a State regulation is needed to 
meet unusual and compelling State energy interests, the Department will 
consider the factors described in 42 U.S.C. 6297(d)(1)(C)(i) and (ii). 
It appears to the Department that in the context of residential 
furnaces and boilers, where regional climatic effects can have 
significant impact on whether a specified energy conservation standard 
would be technologically feasible and economically justified in that 
region, such regional climatic effects will be important in DOE's 
assessment of whether there are ``unusual and compelling State or local 
energy interests'' for State energy conservation standards. States 
having higher-than-average, population-weighted heating degree days 
(HDDs) based on long-term National Oceanic and Atmospheric 
Administration data \6\ would seem to have the best prospects for 
demonstrating ``unusual and compelling'' interests to support a waiver 
of preemption in the particular circumstances presented here.\7\ (In 
conducting its analysis, the Department used average heating degree 
days within a State to divide States into groups for purposes of 
assessing standards.) States with significantly higher heating 
requirements have significantly higher furnace use. This may indicate 
that, for

[[Page 59210]]

those States, a State energy conservation standard which is higher than 
the Federal standard would be cost-effective and would provide 
significantly more energy savings than the Federal standard. If those 
States, particularly the ones most severely affected, adopted standards 
higher than DOE's proposed standards, and sought waivers, it could 
result in certain contiguous States with higher requirements, which 
would lessen the impact on manufacturers.
---------------------------------------------------------------------------

    \6\ State, Regional, And National Monthly Heating Degree Days 
Weighted By Population (2000 Census), 1971--2000 (and previous 
normal periods). Historical Climatography Series No. 5-1. National 
Environmental Satellite, Data, and Information Service, National 
Oceanic and Atmospheric Administration. Available at: https://
www5.ncdc.noaa.gov/climatenormals/hcs/HCS_51.pdf.
    \7\ Nationwide, the U.S. averages 5528 HDDs. The following 
States average 6000 or more HDDs: Alaska, Colorado, Connecticut, 
Idaho, Illinois, Iowa, Maine, Massachusetts, Michigan, Minnesota, 
Montana, Nebraska, New Hampshire, New York, North Dakota, South 
Dakota, Utah, Vermont, Wisconsin, and Wyoming.
---------------------------------------------------------------------------

    Another way to address the benefits and costs of proposed State 
regulations with higher energy conservation standards would be for a 
State in its application for a waiver of preemption to identify the 
saturation of homes with products that already meet those higher 
standards. For example, a State could provide evidence that a 
significant percentage of gas furnaces sold today in that State already 
meets, for example, a 90-percent-AFUE condensing standard.
    A State applying to DOE for a preemption waiver also could identify 
any subsidies and/or incentives, such as tax rebates or purchase price 
rebates, that the State or other entities are offering. To the extent 
States demonstrate that these programs have not worked, they may be 
able to show that ``the costs, benefits, burdens, and reliability'' of 
energy savings from mandatory State energy conservation regulations 
make such regulations preferable to their voluntary programs.
    EPCA section 327(d)(3) further provides that DOE may not grant a 
waiver if interested persons establish by a preponderance of the 
evidence that the State regulation would significantly burden 
manufacturing, marketing, distribution, sale, or servicing of the 
covered product on a national basis. (42 U.S.C. 6297(d)(3)) In 
determining whether the State regulation meets this criterion, the 
Department must consider the extent to which the State regulation 
addresses several factors.
    The first factor is ``the extent to which the State regulation will 
increase manufacturing or distribution costs of manufacturers, 
distributors, and others * * *.'' (42 U.S.C. 6297(d)(3)(A)) In 
addressing this factor, a State seeking a waiver of federal preemption 
likely would want to address the extent to which manufacturers already 
produce and sell products that would meet the State's proposed 
standard. This description also could include information describing 
how efficiencies of shipments to that State already vary from current 
DOE efficiency levels.
    The second factor is ``the extent to which the State regulation 
will disadvantage smaller manufacturers, distributors, or dealers or 
lessen competition in the sale of the covered product in the State * * 
*.'' (42 U.S.C. 6297(d)(3)(B)) Similar to the prior factor, in 
addressing this factor, a State seeking a waiver of federal preemption 
might wish to provide evidence with its petition that demonstrates that 
there are no, or just insignificant, differences between small and 
large manufacturers with respect to producing and selling furnaces in 
that State. A State also could offer other evidence as to why its 
regulation would not disadvantage these entities or lessen competition, 
based on the particular circumstances in that State. For example, a 
State could seek to demonstrate that the differences (or lack of 
differences) between small and large manufacturers, with respect to 
producing and selling furnaces in that State, indicate that the 
regulation would not disadvantage the smaller manufacturers.
    The third factor is ``the extent to which the State regulation 
would cause a burden to manufacturers to redesign and produce the 
covered product type * * *, taking into consideration the extent to 
which the regulation would result in a reduction (i) in the current 
models, or in the projected availability of models, that could be 
shipped on the effective date of the regulation to the State and within 
the United States; or (ii) in the current or projected sales volume of 
the covered product type * * * in the State and the United States * * 
*.'' (42 U.S.C. 6297(d)(3)(c)) In addressing this factor, a State 
seeking a waiver of federal preemption might seek to demonstrate that 
high-efficiency heating equipment, such as condensing furnaces, already 
have achieved significant market shares in that State. In some 
relatively cold States with significant heating requirements, sales of 
condensing furnaces are reported to be on the order of 50 percent. A 
State also might wish to submit other information that addresses why it 
believes its regulation would not affect sales volumes or the number of 
models available (except for elimination of lower efficiency models).
    The fourth factor is ``the extent to which the State regulation is 
likely to contribute significantly to a proliferation of State 
appliance efficiency requirements and the cumulative impact such 
requirements would have.'' (42 U.S.C. 6297(d)(3)(D)) In addressing this 
factor, a State seeking a waiver from DOE may wish to seek to 
demonstrate, for example, the extent to which it has chosen identical 
standard levels as other States that have developed proposed 
regulations or States that have regulations already in place.
    An additional factor DOE must consider is the extent to which ``the 
State regulation is likely to result in the unavailability in the State 
of any covered product type * * * of performance characteristics 
(including reliability), features, sizes, capacities, and volumes that 
are substantially the same as those generally available in the State * 
* *.'' (42 U.S.C. 6297(d)(4)) A State seeking preemption waiver may 
wish to explain in its petition or accompanying documents why it 
believes its regulation would not affect the characteristics and 
features (other than efficiency) of the furnaces that would be offered 
for sale in that State. It might seek to demonstrate, for example, that 
among products currently offered for sale in that or other States, high 
efficiency furnaces already have all of the characteristics and 
features available in less efficient furnaces sold in that State.
    The Department recognizes that States have set, or are considering, 
standards for furnaces and that some may wish to seek a determination 
from DOE that their standards are needed to meet ``unusual and 
compelling State or local energy interests.'' The Department encourages 
States to coordinate among themselves the submission of any waiver 
petitions they may wish to file. The Department will consider an 
aggregate petition from multiple States as long as the petition 
individually addresses the statutory criteria for each of the States. 
The Department believes the approach taken in evaluating the regional 
impacts of standards in its analysis represents a reasonable approach 
for estimating the national impacts of having a Federal standard and 
one or more higher State energy conservation standards for furnaces and 
boilers. All petitions for waivers also must comply with requirements 
as described in 10 CFR Part 430.41(a)(1).

B. Test Procedures

    Section 7(b) of the Process Rule provides that the Department will 
propose necessary modifications to the test procedures for a product 
before issuing the proposed rule concerning energy conservation 
standards for that product. For furnaces and boilers, the Department 
believes modifications are not currently necessary, so it has not 
proposed to modify the existing test procedure.

C. Technological Feasibility

1. General
    The Department considers a design option to be technologically 
feasible if it is in use by the respective industry or

[[Page 59211]]

if research has progressed to the development of a working prototype. 
The Process Rule sets forth a definition of technological feasibility 
as follows: ``Technologies incorporated in commercial products or in 
working prototypes will be considered technologically feasible.'' 10 
CFR part 430, Subpart C, Appendix A, section 4(a)(4)(i).
    In each standards rulemaking, the Department conducts a screening 
analysis, which it bases on information gathered regarding existing 
technology options and prototype designs. In consultation with 
manufacturers, design engineers, and other stakeholders, the Department 
develops a list of design options for consideration in the rulemaking. 
Once the Department has determined that a particular design option is 
technologically feasible, it further evaluates each design option in 
light of the other three criteria in the Process Rule. 10 CFR part 430, 
Subpart C, Appendix A, section 4(a)(3) and (4). The three additional 
criteria are: (a) Practicability to manufacture, install, and service, 
(b) adverse impacts on product utility or availability, or (c) health 
or safety concerns that cannot be resolved. All design options that 
pass these screening criteria are candidates for further assessment.
    As discussed in the 2004 ANOPR, the Department is not considering 
the following design options because they do not meet one or more of 
the screening criteria: self-generation of electric power, fuel-driven 
heat pumps, flue-gas recirculation, and smart valves. 69 FR 45387. In 
this notice, DOE has not changed the list of technology options that it 
screened out of the analysis. (See the Technical Support Document (TSD) 
accompanying this notice, Chapter 4.)
    Lennox, Carrier, Trane, York, NPGA, Alagasco, and MHI commented 
that the maximum efficiency level considered for non-condensing, non-
weatherized gas furnaces should be 80-percent AFUE. They contended 
that, at 81-percent AFUE, there would be a significant increase of risk 
to the consumer because of an increased potential for vent-system 
failure. These comments cited concerns regarding corrosion in vents 
from condensation, and noted that conditions under which consumers use 
the product are much more severe than lab conditions. (Lennox, Public 
Meeting Transcript, No. 59.8 at p. 27 and No. 79 at p. 1; Carrier, 
Public Meeting Transcript, No. 59.8 at p. 188 and No. 68 at p. 1; 
Trane, Public Meeting Transcript, No. 59.8 at p. 227; York, No. 65 at 
p. 7; NPGA, No. 72 at p. 3; Alagasco, No. 82 at p. 2; and MHI, No. 89 
at p. 4) NAIMA, OCC, and NJBPU disagreed with limiting consideration to 
an 80-percent-AFUE level. (NAIMA, No. 60 at p. 1; OCC, No. 70 at p. 5; 
and NJBPU, No. 83 at p. 2) The Department has reviewed the manufacturer 
literature and found that products at 81-percent AFUE are available for 
sale. It believes the fact that such products are being offered for 
sale demonstrates that they are practicable to manufacture, install, 
and service and cannot be excluded from consideration in this 
rulemaking.
    The Department recognizes that this AFUE level of 81 percent may 
pose health or safety concerns in certain conditions, but it believes 
that the concerns can likely be resolved with proper equipment and 
venting system design, as discussed in section IV.B.3. Therefore, DOE 
considered 81-percent AFUE in its analysis for non-weatherized gas 
furnaces, and took into account the stakeholders' concerns.
    The 2004 ANOPR analysis included non-weatherized gas furnaces at 82 
and 83-percent AFUE. However, because it is well understood that 
significant vent system corrosion problems, which can lead to potential 
safety issues, may exist at these efficiency levels for non-weatherized 
gas furnaces, the Department does not believe these products can be 
mass-produced and be reliable to install and service on the scale 
necessary to serve the relevant market by the effective date of the 
proposed standard. Therefore, DOE did not consider non-weatherized gas 
furnaces at 82 and 83-percent AFUE in the analysis for today's proposed 
rule.
    The evaluated technologies all have been used (or are being used) 
in commercially available products or working prototypes. The designs 
all incorporate materials and components that are commercially 
available in today's furnace and boiler supply market. The Department 
believes all of the efficiency levels evaluated in this notice are 
technologically feasible.
2. Maximum Technologically Feasible Levels
    In developing today's proposed rule, the Department followed the 
provisions of section 325(p)(2) of the Act, which states that, when the 
Department proposes to adopt, or to decline to adopt, an amended or new 
standard for each type (or class) of covered product, ``the Secretary 
shall determine the maximum improvement in energy efficiency or maximum 
reduction in energy use that is technologically feasible * * * .'' The 
Department determined the maximum technologically feasible (``max 
tech'') efficiency level in the engineering analysis using the most 
efficient design parameters that lead to the creation of the highest 
equipment efficiencies achievable. (See TSD Chapter 6.) Table III.1 
lists the max tech levels that the Department determined for this 
rulemaking.

     Table III.1.--Max Tech Levels Considered in Furnace and Boiler
                               Rulemaking
------------------------------------------------------------------------
                        Product class                           AFUE (%)
------------------------------------------------------------------------
Non-weatherized gas furnaces.................................         96
Weatherized gas furnaces.....................................         83
Mobile home gas furnaces.....................................         90
Oil-fired furnaces...........................................         85
Gas boilers..................................................         99
Oil-fired boilers............................................         95
------------------------------------------------------------------------

    For all product classes, products with these efficiency levels 
already are being sold in small quantities. (There is one weatherized 
gas furnace listed in the GAMA directory at 82.8-percent AFUE.) No 
production models or prototypes of equipment at higher efficiency 
levels are currently available. For weatherized gas furnaces, the 
Department recognizes that the 83-percent-AFUE level may pose health or 
safety concerns in certain installations. DOE believes these concerns 
can be resolved with proper equipment and system design and proper 
installation.

D. Energy Savings

1. Determination of Savings
    The Department used its national energy savings (NES) spreadsheet 
to estimate energy savings from amended standards for furnaces and 
boilers. (The NES Spreadsheet Model is described in section IV.D of 
this notice.) The Department forecasted energy savings over the period 
of analysis (beginning with 2015, the year that amended standards would 
go into effect, and ending in 2038) for each trial standard level, 
relative to the base case. It quantified the energy savings 
attributable to amended energy conservation standards as the difference 
in energy consumption between the standards case and the base case. The 
base case represents the forecast of energy consumption in the absence 
of amended energy conservation standards. The base case considers 
market demand for more-efficient products; for example, in the case of 
non-weatherized gas furnaces, the base case forecasts an increase in 
the market share of condensing furnaces by 2015.
    The NES Spreadsheet Model calculates the electricity savings in 
``site energy'' expressed in kilowatt-hours

[[Page 59212]]

(kWh). Site energy is the energy directly consumed on location by the 
furnace or boiler. The Department reports national energy savings in 
terms of the source energy savings, which is the savings of the energy 
that is used to generate and transmit the energy consumed at the site. 
(See TSD, Chapter 10.) The Department derived these conversion factors, 
which change with time, from the EIA's AEO2005.\8\
---------------------------------------------------------------------------

    \8\ The Department conducted an energy price sensitivity 
analysis using EIA's AEO2006. Section IV.C.4 provides further 
explanation and details of the energy price sensitivity analysis.
---------------------------------------------------------------------------

    AGA commented that DOE should consider the ``rebound effect'' that 
may occur as a result of more intensive use of a more energy-efficient 
appliance, leading to higher energy consumption. (AGA, No. 54 at p. 3) 
ACEEE stated that the rebound effect has often been hypothesized, but 
actual field experience indicates that there is rarely a rebound effect 
resulting from use of more-efficient appliances. (ACEEE, No. 84 at p. 
13)
    The Department examined a summary of the literature regarding the 
rebound effect in relation to space heating equipment.\9\ Based on five 
studies chosen for their robust methodology, the summary concluded 
that, for a 100 percent increase in fuel efficiency, values of ``take-
back'' or rebound for space heating are between 10 and 30 percent of 
the energy consumption savings. The National Energy Modeling System 
(NEMS), which is used for developing EIA's AEO, incorporates a rebound 
effect for space heating. According to an EIA report,\10\ the rebound 
effect for the residential module in NEMS results in a 0.15 percent 
increase in energy consumption for a 1 percent increase in efficiency. 
In keeping with EIA's approach, the Department chose to apply a rebound 
effect of 15 percent (for a 100 percent increase in efficiency) in its 
an