Energy Conservation Program for Appliance Standards: Energy Conservation Standards for Residential Furnaces and Commercial Water Heaters, 73947-73969 [2021-28007]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
[Rules and Regulations]
[Pages 73947-73969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28007]



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Rules and Regulations
                                                Federal Register
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The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / 
Rules and Regulations

[[Page 73947]]



DEPARTMENT OF ENERGY

10 CFR Parts 430 and 431

[EERE-2018-BT-STD-0018]
RIN 1904-AE39


Energy Conservation Program for Appliance Standards: Energy 
Conservation Standards for Residential Furnaces and Commercial Water 
Heaters

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

ACTION: Notification of final interpretive rule.

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SUMMARY: On August 27, 2021, the U.S. Department of Energy (DOE or 
Department) published in the Federal Register for public comment a 
proposed interpretive rule to reinstate a long-standing interpretation 
under which, in the context of residential furnaces, commercial water 
heaters, and similarly-situated products or equipment, the heat 
exchanger technology (and associated venting) used to supply heated air 
or hot water is not a performance-related ``feature'' that provides a 
distinct consumer utility under the Energy Policy and Conservation Act, 
as amended (EPCA). The August 27, 2021 proposed interpretive rule set 
forth the basis and rationale for this final interpretive rule, in 
which DOE responds to public comments and ultimately reinstates its 
long-standing interpretation as proposed.

DATES: This final interpretive rule is effective December 29, 2021.

ADDRESSES: The docket for this activity, which includes Federal 
Register notices, public comments, and other supporting documents/
materials, is available for review at www.regulations.gov. All 
documents in the docket are listed in the www.regulations.gov index. 
However, not all documents listed in the index may be publicly 
available, such as information that is exempt from public disclosure.
    The docket web page can be found at: www.regulations.gov/#!docketDetail;D=EERE-2018-BT-STD-0018. The docket web page contains 
instructions on how to access all documents, including public comments, 
in the docket.
    For further information on how to review the docket, contact the 
Appliance and Equipment Standards Program staff at (202) 586-6636 or by 
email: [email protected].

FOR FURTHER INFORMATION CONTACT: Ms. Julia Hegarty, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 
20585-0121. Telephone: (240) 597-6737. Email: 
[email protected].
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-5827. Email: [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Background
    A. Authority
    B. Historical Interpretation of the ``Features'' Provision
    C. January 2021 Final Interpretive Rule
    D. August 2021 Proposed Interpretive Rule
II. Final Interpretive Rule and Response to Comments
    A. ``Features'' Provision and Utility
    B. Cost and Installation Considerations
    C. Purposes of EPCA
    D. Other Topics
III. Conclusion
IV. Approval of the Office of the Secretary

I. Introduction and Background

    The following sections discuss the statutory authority underlying 
this final interpretive rule, as well as the relevant background 
related to determination of what constitutes a ``feature'' for the 
purpose of establishing energy conservation standards under EPCA. 
Additionally, these sections address: DOE's historical interpretation 
of what constitutes a ``feature'' for the purpose of establishing 
energy conservation standards under EPCA; DOE's interpretation in the 
January 15, 2021 final interpretive rule (86 FR 4776; January 2021 
Final Interpretive Rule); the issuance of Executive Order (E.O.) 13990; 
and the proposed interpretation in the August 27, 2021 notice of 
proposed interpretive rule (NOPIR) (86 FR 48049; August 2021 NOPIR). 
The following discussion provides the background for the final 
interpretive rule presented in this document addressing whether non-
condensing technology (and associated venting) constitutes a 
performance-related ``feature'' under EPCA which may not be eliminated 
by an energy conservation standard.

A. Authority

    EPCA,\1\ Public Law 94-163 (42 U.S.C. 6291 et seq.), as amended, 
authorizes DOE to regulate the energy efficiency of a number of 
consumer products and certain industrial equipment. When establishing 
new or amended standards for covered products, DOE is directed to 
consider any lessening of the utility or the performance of covered 
products likely to result from the imposition of the standard. (42 
U.S.C. 6295(o)(2)(B)(i)(IV)) Moreover, the Secretary of Energy 
(Secretary) may not prescribe an amended or new standard if the 
Secretary finds (and publishes such finding) that interested persons 
have established by a preponderance of the evidence that the standard 
is likely to result in the unavailability in the United States in any 
covered product type (or class) of performance characteristics 
(including reliability), features, sizes, capacities, and volumes 
(collectively referred to hereafter as ``features'') that are 
substantially the same as those generally available in the United 
States at the time of the Secretary's finding. (42 U.S.C. 6295(o)(4); 
the ``features'' provision)
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    \1\ All references to EPCA in this document refer to the statute 
as amended through the Energy Act of 2020, Public Law 116-260 (Dec. 
27, 2020).
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    EPCA provides a companion provision at 42 U.S.C. 6295(q)(1), which 
requires that a rule prescribing an energy conservation standard for a 
type of covered products shall specify a level of energy use or 
efficiency higher or lower than that which applies (or would apply) to 
any group of covered products that have the same function or intended 
use, if the Secretary determines that covered products within such 
group:

[[Page 73948]]

    (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 that other 
products within such type (or class) do not have and such feature 
justifies a higher or lower standard from that which applies (or will 
apply) to other products within such type (or class).
    In making a determination of whether a performance-related feature 
justifies the establishment of a higher or lower standard, the 
Secretary must consider such factors as the utility to the consumer of 
such a feature, and such other factors as the Secretary deems 
appropriate. (42 U.S.C. 6295(q)(1))
    These provisions apply generally to covered commercial and 
industrial equipment, other than ASHRAE equipment,\2\ through the 
crosswalk provision at 42 U.S.C. 6316(a). ASHRAE equipment has its own 
separate statutory scheme under EPCA, with the default situation being 
that DOE must adopt the level set forth in ASHRAE Standard 90.1 unless 
the Department has clear and convincing evidence to adopt a more 
stringent standard (see 42 U.S.C. 6313(a)(6)). Under 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa), there is a provision similar to the 
``features'' provision previously discussed that states that the 
Secretary may not prescribe an amended standard under this subparagraph 
if the Secretary finds (and publishes the finding) that interested 
persons have established by a preponderance of the evidence that a 
standard is likely to result in the unavailability in the United States 
of any product type (or class) of performance characteristics 
(including reliability, features, sizes, capacities, and volumes) that 
are substantially the same as those generally available in the United 
States at the time of the finding of the Secretary. However, it is 
noted that this provision contains the specific limitation that it 
applies to an amended standard prescribed under this subparagraph 
(i.e., when DOE is acting under its authority to set a more-stringent 
standard). There is no companion ``features'' provision under 42 U.S.C. 
6313(a)(6)(A), which is the provision that would apply when DOE is 
triggered to adopt the levels set by ASHRAE. There is likewise no 
companion provision to 42 U.S.C. 6295(q)(1) for ASHRAE equipment.
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    \2\ ``ASHRAE'' refers to the American Society of Heating, 
Refrigerating and Air-Conditioning Engineers. Under EPCA, ``ASHRAE 
equipment'' refers to small commercial package air conditioning and 
heating equipment, large commercial package air conditioning and 
heating equipment, very large commercial package air conditioning 
and heating equipment, packaged terminal air conditioners, packaged 
terminal heat pumps, warm-air furnaces, packaged boilers, storage 
water heaters, instantaneous water heaters, and unfired hot water 
storage tanks, which are addressed by ASHRAE in ASHRAE Standard 
90.1, Energy Standard for Buildings Except Low-Rise Residential 
Buildings. (See 42 U.S.C. 6313(a)(6))
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    On January 20, 2021, the White House issued E.O. 13990, 
``Protecting Public Health and the Environment and Restoring Science to 
Tackle the Climate Crisis.'' 86 FR 7037 (Jan. 25, 2021). Section 1 of 
that Order lists several policies related to the protection of public 
health and the environment, including reducing greenhouse gas emissions 
and bolstering the Nation's resilience to climate change. Id. at 86 FR 
7037, 7041. Section 2 of the Order also instructs all agencies to 
review ``existing regulations, orders, guidance documents, policies, 
and any other similar agency actions (agency actions) promulgated, 
issued, or adopted between January 20, 2017, and January 20, 2021, that 
are or may be inconsistent with, or present obstacles to, [these 
policies].'' Id. Agencies are then directed, as appropriate and 
consistent with applicable law, to consider suspending, revising, or 
rescinding these agency actions and to immediately commence work to 
confront the climate crisis. Id.
    As noted in the August 2021 NOPIR, DOE undertook a review of the 
final interpretation and withdrawal of proposed rulemakings published 
in the Federal Register on January 15, 2021, in response to E.O. 13990. 
86 FR 48049, 48051 (August 27, 2021). While E.O. 13990 triggered the 
Department's re-evaluation, DOE is relying on the analysis and 
reasoning presented in the August 2021 NOPIR and in this document, 
based upon EPCA, to withdraw the January 2021 Final Interpretive Rule 
and to re-instate its historical interpretation of the ``features'' 
provision as applied to non-condensing technology, because DOE believes 
the historical interpretation reflects the better reading of the 
requirements in EPCA.

B. Historical Interpretation of the ``Features'' Provision

    As discussed previously in this document, when evaluating and 
establishing energy conservation standards, DOE is required to divide 
covered products into product classes by the type of energy used, by 
capacity, or by other performance-related features that DOE determines 
justify a different standard. In making a determination of whether a 
performance-related feature justifies a different standard, the 
Department must consider factors such as the utility to the consumer of 
the feature and other factors DOE determines are appropriate. (42 
U.S.C. 6295(q)) As the product class provision is complementary to the 
``features'' provision, consideration of what constitutes a feature and 
what constitutes utility for the purpose of establishing a product 
class is germane to the application of the ``features'' provision.
    At a basic level, a ``feature'' is a trait, attribute, or function 
of a product. The usefulness and benefit provided to a consumer by a 
feature is the feature's ``utility.'' Given the multitude of covered 
products and equipment for which DOE is responsible, the Department has 
found the concept of ``feature'' to be very case-specific. 86 FR 4776, 
4797 (Jan. 15, 2021). No single definition could effectively capture 
the potential for features across the broad array of consumer products 
and commercial equipment subject to EPCA's regulatory scheme. Id. That 
is why DOE developed the concept of consumer utility and how the 
consumer interacts with the product/equipment for when DOE is assessing 
``features.'' Id.
    Historically, DOE has viewed utility as an aspect of the product 
that is accessible to the layperson and is based on user operation and 
interaction with the product. This interpretation has been applied in 
DOE's previous rulemakings by determining utility based on the 
usefulness or value of the specific feature to the consumer, rather 
than based on considerations (including design parameters) that do not 
impact what the consumer perceives as the function of the product, or 
costs that anyone, including the consumer, manufacturer, installer, or 
utility companies, may bear. DOE reasoned that this approach is 
consistent with EPCA's requirement for a separate and extensive 
analysis of economic justification for the adoption of any new or 
amended energy conservation standard (see 42 U.S.C. 6295(o)(2)(A)-(B) 
and (3)). Examples of prior consideration of the ``features'' 
provision, utility, and product/equipment classes are provided in the 
following paragraphs.
    In a final rule addressing energy conservation standards for 
cooking products, DOE did not consider a design option that eliminated 
oven door windows. 63 FR 48038, 48041 (Sept. 8, 1998). A number of 
commenters asserted that the oven door window provides consumer utility 
by alleviating the need for users to open the oven door to check on the 
contents. Id. DOE agreed with commenters that the removal of the

[[Page 73949]]

oven door window would increase the frequency with which consumers open 
the oven door. Id. DOE also found this increased opening would have the 
potential to increase energy usage. Id. DOE also indicated that it 
would re-evaluate oven door window designs should a window material 
with higher thermal insulation properties become a proven technology. 
Id.
    In the case of residential clothes washers, DOE has maintained a 
product class distinction based on axis of loading (i.e., front-loading 
and top-loading units). Based on comments received during rulemakings, 
DOE identified axis of loading as a feature that impacts consumer 
utility (i.e., the longer cycle times of front-loading residential 
clothes washers versus cycle times for top-loaders are likely to impact 
consumer utility). 77 FR 32307, 32319 (May 31, 2012). Conversely, DOE 
eliminated the suds-saving product class because the market had 
changed, and, at the time of the rulemaking, DOE did not identify any 
suds-saving residential clothes washers on the market in the United 
States. 77 FR 32307, 32317 (May 31, 2012).
    In a 2011 rulemaking, DOE created separate product classes for 
vented and ventless residential clothes dryers based on DOE's 
recognition of the ``unique utility'' that ventless clothes dryers 
offer to consumers. 76 FR 22454, 22485 (April 21, 2011). This utility 
could be characterized as the ability to have a clothes dryer in a 
living area where vents are impossible to install (i.e., an apartment 
in a high-rise building). As explained in the accompanying technical 
support document (TSD), ventless dryers can be installed in locations 
where venting dryers would be precluded due to venting restrictions.\3\
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    \3\ See pp. 3-59 of the technical support document, available at 
www.regulations.gov/document/EERE-2007-BT-STD-0010-0053.
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    In a rulemaking for consumer water heaters, DOE found that water 
heaters that utilize heat pump technology did not need to be placed in 
a separate product class from conventional types of hot water heaters 
that utilize electric resistance technology, even though water heaters 
utilizing heat pumps require the additional installation of a 
condensate drain that a hot water heater utilizing electric resistance 
technology does not require. 75 FR 20112, 20135 (April 16, 2010). 
Regardless of the installation factors, DOE did not find the mode of 
heating water to be a performance-related feature or provide a unique 
utility. Id. DOE also noted comments stating that, in the then-current 
market, water heaters that employed heat pump technology were 
advertised as replacements for water heaters that employed electric 
resistance technology. Id.
    However, DOE has cautioned that disparate products may have very 
different consumer utilities, thereby making direct comparisons 
difficult and potentially misleading. 76 FR 22454, 22485 (April 21, 
2011).

C. January 2021 Final Interpretive Rule

    On March 12, 2015, DOE published a notice of proposed rulemaking 
(NOPR) in the Federal Register proposing to amend energy conservation 
standards for residential non-weatherized gas furnaces and mobile home 
furnaces, in furtherance of its statutory obligation to determine 
whether more stringent amended standards would be technologically 
feasible and economically justified and would save a significant amount 
of energy. 80 FR 13120 (March 2015 Furnaces NOPR). To provide further 
consideration of comments suggesting a separate product class for 
furnaces based on input capacity and in order to mitigate some of the 
negative impacts of the proposed standards, DOE published a notice of 
data availability in the Federal Register on September 14, 2015. 80 FR 
55038. DOE subsequently published a supplemental notice of proposed 
rulemaking (SNOPR) for this rulemaking in the Federal Register on 
September 23, 2016, in which DOE proposed to establish capacity-based 
product classes. 81 FR 65720 (September 2016 Furnaces SNOPR). In a 
separate rulemaking for commercial water heaters, on May 31, 2016, DOE 
published in the Federal Register a proposal to amend the energy 
conservation standards for commercial water heaters. 81 FR 34440 (May 
2016 Commercial Water Heaters NOPR).
    In both the residential furnaces rulemaking and the commercial 
water heaters rulemaking, DOE proposed amended energy conservation 
standards that would effectively require products/equipment in certain 
classes to use condensing technology to meet the proposed amended 
standards, if adopted. See 81 FR 65720, 65852 (Sept. 23, 2016); 81 FR 
34440, 34503-34504 (May 31, 2016). For the product/equipment classes 
where such standards were proposed, if finalized, the amended standards 
would have effectively eliminated all non-condensing products/equipment 
that are currently on the market in those classes.
    In the March 2015 Furnaces NOPR, DOE tentatively concluded that the 
methods by which a furnace is vented, which are significantly different 
for condensing and non-condensing furnaces,\4\ do not provide any 
separate performance-related impacts. Therefore, DOE had no statutory 
basis for defining a separate class based on venting and condensate 
drainage characteristics because venting methods do not provide unique 
utility to consumers beyond the basic function of providing heat, which 
all furnaces perform. 80 FR 13120, 13138 (March 12, 2015). In the 
September 2016 Furnaces SNOPR, DOE reiterated its tentative conclusion 
that methods of venting do not provide any performance-related utility 
separate from the basic function of a furnace. 81 FR 65720, 65753 
(Sept. 23, 2016). Similarly, in the May 2016 Commercial Water Heaters 
NOPR, DOE tentatively concluded that both non-condensing and condensing 
gas-fired commercial water heating equipment provide the same hot water 
for use by commercial consumers, and, therefore, separate equipment 
classes could not be justified. 81 FR 34440, 34463 (May 31, 2016).
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    \4\ Non-condensing furnaces typically use a ``category I'' vent 
system, which is designed to operate with a non-positive pressure in 
the vent system and is not designed to withstand condensate. 
Condensing furnaces, on the other hand, are typically designed for 
``category IV'' vent systems, which operate with a positive pressure 
in the vent system and are designed to withstand condensate.
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    On October 18, 2018, DOE received a petition for rulemaking 
submitted by the American Public Gas Association, Spire, Inc., the 
Natural Gas Supply Association, the American Gas Association, and the 
National Propane Gas Association, collectively referred to as the ``Gas 
Industry Petitioners,'' asking DOE to: (1) Issue an interpretive rule 
stating that DOE's proposed energy conservation standards for 
residential furnaces and commercial water heaters would result in the 
unavailability of ``performance characteristics'' within the meaning of 
EPCA, specifically by eliminating from the market units utilizing non-
condensing technology; and (2) withdraw the proposed energy 
conservation standards for residential furnaces and commercial water 
heaters based upon such findings. DOE published the notice of petition 
in the Federal Register on November 1, 2018 and requested public 
comment.\5\ 83 FR 54883.
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    \5\ In response to requests submitted by two stakeholders, DOE 
extended the initial 90-day comment period for an additional 30 
days. 84 FR 449 (Jan. 29, 2019).
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    Following consideration of the comments on the petition, DOE 
published a NOPIR on July 11, 2019, presenting DOE's tentative

[[Page 73950]]

interpretation that, in the context of residential furnaces, commercial 
water heaters, and similarly-situated products/equipment, use of non-
condensing technology (and associated venting) would constitute a 
performance-related ``feature'' under EPCA that cannot be eliminated 
through adoption of an energy conservation standard. 84 FR 33011 (July 
2019 Proposed Interpretive Rule).\6\ DOE also provided that, if such 
interpretation were to be finalized, it anticipated developing 
supplemental notices of proposed rulemaking that would implement the 
new legal interpretation for the subject residential furnaces and 
commercial water heaters. 84 FR 33011, 33021 (July 11, 2019).
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    \6\ The July 2019 Proposed Interpretive Rule granted the request 
for an interpretive rule but initially denied the Gas Industry 
Petitioners' request to withdraw DOE's earlier proposed rules for 
residential furnaces and commercial water heaters. 84 FR 33011, 
33021 (July 11, 2019).
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    DOE published a supplemental notice of proposed interpretation in 
the Federal Register on September 24, 2020, which proposed alternative 
approaches to product/equipment class setting in this context. 85 FR 
60090. The supplemental proposed interpretive rule was in response to 
comments expressing concern with the proposed focus on ``non-
condensing'' technology as the performance-related feature. 85 FR 
60090, 60094-60095 (Sept. 24, 2020). Alternatively, the supplemental 
notice of proposed interpretation considered venting compatibility as a 
possible ``feature.'' 85 FR 60095 (Sept. 24, 2020). DOE requested 
comment on this alternative approach. Id.
    On January 15, 2021, DOE published in the Federal Register a final 
interpretive rule determining that, in the context of residential 
furnaces, commercial water heaters, and similarly-situated products/
equipment, use of non-condensing technology (and associated venting) 
constitutes a performance-related ``feature'' under EPCA that cannot be 
eliminated through adoption of an energy conservation standard. 86 FR 
4776. Following consideration of comments and data submitted by 
stakeholders in response to the proposed interpretation and 
supplemental proposal, DOE found that when used by the appliances in 
question, non-condensing technology (and associated venting) 
constitutes a performance-related feature that provides consumer 
utility distinct from that provided by such appliances that employ 
condensing technology. More specifically, in contrast to condensing 
units, DOE stated that non-condensing units: (1) Avoid complex 
installations in certain locations constrained by space, existing 
venting, and available drainage; (2) avoid the encroachment on usable 
space that would occur in certain installations; and (3) do not enhance 
the level of fuel switching that might accompany standard setting 
absent a separate product/equipment class for non-condensing appliance. 
86 FR 4776, 4816 (Jan. 15, 2021). DOE stated that such interpretation 
would extend to all relevant/applicable cases involving consumer 
products, non-ASHRAE commercial equipment, and ASHRAE equipment where 
DOE adopts a level more stringent than the ASHRAE level. 86 FR 4776, 
4816-4817 (Jan. 15, 2021).
    In light of this final interpretation, DOE withdrew its March 12, 
2015 proposed rule and September 23, 2016 supplemental proposed rule 
for energy conservation standards for non-weatherized gas furnaces and 
mobile home gas furnaces, as well as its May 31, 2016 proposed rule for 
energy conservation standards for commercial water heating equipment. 
86 FR 3873 (Jan. 15, 2021). However, DOE has not implemented the 
January 15, 2021 final interpretation in the context of any individual 
energy conservation standards rulemakings for affected covered 
products/equipment.

D. August 2021 Proposed Interpretive Rule

    On August 27, 2021, DOE published a proposed interpretative rule in 
the Federal Register (the August 2021 NOPIR), in which DOE re-examined 
the conclusions reached in the January 2021 Final Interpretive Rule. 86 
FR 48049 (August 27, 2021). Based on DOE's reconsideration of the 
January 2021 Final Interpretative Rule, the Department proposed to 
revise its interpretation of EPCA's ``features'' provision in the 
context of condensing and non-condensing technology used in furnaces, 
water heating equipment, and similarly-situated appliances. 86 FR 
48049, 48053 (August 27, 2021). DOE tentatively concluded that, in the 
context of residential furnaces, commercial water heaters, and 
similarly-situated products or equipment, use of non-condensing 
technology (and associated venting) is not a performance-related 
``feature'' for the purpose of the EPCA prohibitions at 42 U.S.C. 
6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa). Id. DOE initially 
found that non-condensing technology (and the associated venting) does 
not provide unique utility to consumers separate from an appliance's 
function of providing heated air or water, as applicable. Id.
    DOE initially found this interpretation to be the best reading of 
the relevant provisions of EPCA, which is consistent with the intent 
and purposes of the statute. Id. Specifically, the proposed 
interpretation would align better with EPCA's goals of increasing the 
energy efficiency of covered products and equipment through the 
establishment and amendment of energy conservation standards and 
promoting conservation measures when feasible. (See id. (citing 42 
U.S.C. 6291 et seq., as amended)). Furthermore, DOE initially 
determined that the proposed interpretation would avoid requiring 
separate product or equipment classes to preserve less efficient 
technologies, while maintaining consideration of installation costs as 
part of the extensive analysis of economic justification for the 
adoption of any new or amended energy conservation standard (see id. at 
86 FR 48049, 48054 (citing 42 U.S.C. 6295(o)(2)-(3); 42 U.S.C. 
6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)). (The complete discussion of 
DOE's rationale for the August 2021 NOPIR is set forth at 86 FR 48049, 
48053-48057 (August 27, 2021).)
    DOE requested comment on the proposed interpretation, which would 
reinstate DOE's prior reading of EPCA's ``features'' provision in the 
context of residential furnaces, commercial water heaters, and 
similarly-situated products. 86 FR 48049, 48057-48058 (August 27, 
2021). The comment period was scheduled to close on September 27, 2021. 
However, in response to a request from a number of stakeholders,\7\ DOE 
subsequently extended the comment period until October 12, 2021. 86 FR 
53014 (Sept. 24, 2021).
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    \7\ See comment period extension request submitted by American 
Gas Association, American Public Gas Association, Spire Inc. and 
Spire Missouri, Inc., and the National Propane Gas Association, 
Docket No. EERE-2018-BT-STD-0018-0125.
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    DOE received comments in response to the August 2021 NOPIR from the 
interested parties listed in Table I.1.

[[Page 73951]]



                 Table I.1--List of Commenters With Written Submissions on the August 2021 NOPIR
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                                                           Abbreviation in this
                     Commenter(s)                                document                   Commenter type
----------------------------------------------------------------------------------------------------------------
A.O. Smith Corporation...............................  A.O. Smith..................  Manufacturer.
Air-Conditioning, Heating & Refrigeration Institute..  AHRI........................  Manufacturer Trade
                                                                                      Association.
American Gas Association, Natural Gas Supply           AGA et al...................  Utility & Business Trade
 Association, U.S. Chamber of Commerce.                                               Associations.
American Public Gas Association, Spire, Inc.,          APGA et al..................  Utility & Installer Trade
 National Propane Gas Association, and Plumbing,                                      Associations.
 Heating-Cooling Contractors--National Association.
American Gas Association, American Public Gas          [*].........................  Utility Trade Associations.
 Association, Spire Inc. and Spire Missouri, Inc.,
 and the National Propane Gas Association.
Appliance Standards Awareness Project, American        ASAP et al..................  Advocacy Groups.
 Council for an Energy-Efficiency Economy, Consumer
 Federation of America, Evergreen Action, Fsi
 Engineers, Green Energy Consumers Alliance, Midwest
 Energy Efficiency Alliance, National Consumer Law
 Center, Rocky Mountain Institute, Southwest Energy
 Efficiency Project.
Attorneys General of New York, Colorado, Illinois,     State Attorneys General.....  State, Local Governments.
 Maine, Maryland, Michigan, Minnesota, Nevada, New
 Jersey, New Mexico, Oregon, Vermont, Washington, The
 Commonwealth of Massachusetts, The District of
 Columbia, and the City of New York.
Bradford White Corporation...........................  Bradford White..............  Manufacturer.
California Energy Commission.........................  CEC.........................  State.
California Investor-Owned Utilities (Pacific Gas and   CA IOUs.....................  Utilities.
 Electric Company, San Diego Gas and Electric, and
 Southern California Edison).
Crown Boiler Company.................................  Crown Boiler................  Manufacturer.
Gas End Use Advocacy Group...........................  GEUAG.......................  Advocacy Group.
Heating, Air-Conditioning, & Refrigeration             HARDI.......................  Trade Association.
 Distributors International.
Institute for Energy Research........................  IER.........................  Advocacy Group.
Institute for Policy Integrity--New York University    Institute for Policy          Academic Institution.
 School of Law.                                         Integrity.
Natural Resources Defense Council, Sierra Club,        NRDC et al..................  Advocacy Groups.
 Earthjustice.
New Buildings Institute..............................  NBI.........................  Advocacy Group.
New Yorker Boiler Company............................  New Yorker Boiler...........  Manufacturer.
Northwest Energy Efficiency Alliance.................  NEEA........................  Advocacy Group.
Regal Beloit Americas, Inc...........................  Regal Beloit................  Manufacturer.
Steven Kramer........................................  Kramer......................  Individual.
U.S. Boiler Company..................................  U.S. Boiler.................  Manufacturer.
----------------------------------------------------------------------------------------------------------------
* Commenters submitting a request for an extension of the NOPIR public comment period, as discussed previously.

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\8\
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    \8\ The parenthetical reference provides a reference for 
information located in the docket for the development of this final 
interpretive rule. (Docket No. EERE-2018-BT-STD-0018, which is 
maintained at www.regulations.gov). The references are arranged as 
follows: (Commenter name, comment docket ID number, page of that 
document).
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II. Final Interpretive Rule and Response to Comments

    Based on DOE's reconsideration of the January 2021 Final 
Interpretative Rule and careful consideration of the comments received 
in response to the August 2021 NOPIR, the Department is revising its 
interpretation of EPCA's ``features'' provision in the context of 
condensing and non-condensing technology used in furnaces, water 
heating equipment, and similarly-situated appliances. Consistent with 
the interpretation presented in the May 2015 Furnaces NOPR, the 
September 2016 Furnaces SNOPR, and the May 2016 Commercial Water 
Heaters NOPR, DOE concludes that, in the context of residential 
furnaces, commercial water heaters, and similarly-situated products or 
equipment, use of non-condensing technology (and associated venting) is 
not a performance-related ``feature'' for the purpose of the EPCA 
prohibitions at 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa). DOE finds that non-condensing technology 
(and the associated venting) does not provide unique utility to 
consumers separate from an appliance's function of providing heated air 
or water, as applicable.
    Upon further consideration, DOE concludes that utility is 
determined through the benefits and usefulness the feature provides to 
the consumer while interacting with the product, not through design 
parameters impacting installation complexity, or costs that anyone, 
including the consumer, manufacturer, installer, or utility companies, 
may bear. Stated differently, DOE has determined that differences in 
cost or complexity of installation between different methods of venting 
(e.g., a condensing furnace versus a non-condensing furnace) do not 
make any method of venting a performance-related feature under 42 
U.S.C. 6295(o)(4), as would justify separating the products/equipment 
into different product/equipment classes under 42 U.S.C. 6295(q)(1).
    This interpretation is consistent with EPCA's requirement for a 
separate and extensive analysis of economic justification for the 
adoption of any new or amended energy conservation standard (see 42 
U.S.C. 6295(o)(2)-(3); 42 U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)). 
Therefore, because DOE has come to see that the issues underlying its 
January 2021 Final Interpretive Rule are more appropriately framed as 
matters of cost, this interpretation will return those issues for 
resolution to their proper sphere as part of DOE's economic analysis in 
individual energy conservation standards rulemakings. DOE finds this 
interpretation to be the better reading of the relevant provisions of 
EPCA, which is consistent with the intent and purposes of the statute. 
In the balance of this section, DOE summarizes the comments received on 
the August 2021 NOPIR, followed by the agency's responses, which 
provide further basis for the final interpretation set forth in this 
document.

[[Page 73952]]

    In response to the August 2021 NOPIR, DOE received a number of 
general comments either supporting or opposing DOE's proposed change in 
interpretation. Along these lines, the State Attorneys General 
commented in support of DOE's proposed interpretation of the EPCA's 
``features'' provision, stating they strongly support a robust national 
appliance and equipment efficiency program. (State Attorneys General, 
No. 136 at p. 1) ASAP et al. stated that DOE's proposed interpretation 
would help protect consumers and allow the Department to carry out 
EPCA's goal of increasing the energy efficiency of covered products and 
equipment through energy conservation standards. (ASAP et al., No. 143 
at p. 2) NEEA, NBI, A.O. Smith, CEC, the CA IOUs, and NRDC et al. also 
commented in support of returning to DOE's long-standing interpretation 
of the ``features'' provision, under which the technology used to 
supply heated air or water does not constitute a performance-related 
``feature.'' (NEEA, No. 137 at p. 1; NBI, No. 128 at p. 1; A.O. Smith, 
No. 133 at p. 1; CEC, No. 134 at p. 1; CA IOUs, No. 141 at p. 2; NRDC 
et al., No. 144 at p. 1) Regal Beloit likewise supported DOE revisiting 
the interpretation of ``feature'' in the context of residential 
furnaces and commercial water heaters. (Regal Beloit, No. 131 at p. 1).
    In contrast, Crown Boiler, New Yorker Boiler, U.S. Boiler,\9\ and 
AGA et al. favored maintaining the interpretation adopted in the 
January 2021 Final Interpretive Rule. (Crown Boiler, No. 127 at p. 1; 
New Yorker Boiler, No. 130 at p. 1; U.S. Boiler, No. 129 at p. 1; AGA 
et al., No. 135 at p. 2). AHRI requested DOE not to implement the 
proposed policy reversal, arguing that the condensing/non-condensing 
performance feature provides an important utility to consumers. (AHRI, 
No. 139 at p. 1).
---------------------------------------------------------------------------

    \9\ Crown Boiler, New Yorker Boiler, and U.S. Boiler submitted 
substantively identical comments.
---------------------------------------------------------------------------

    GEUAG objected to the proposed interpretation, asserting that DOE 
failed to engage in the reasoned decision-making in the August 2021 
NOPIR required by administrative law. (GEUAG, No. 132 at p. 4) GEUAG 
commented that nothing in the technology or operation of these products 
has changed since DOE published the January 2021 Final Interpretive 
Rule, nor has anything changed in the extensive analyses, facts, and 
studies that supported that features determination. (Id. at p. 5).
    APGA et al. asserted that DOE did not provide sufficient time to 
adequately comment and thoroughly analyze the proposed reversal of the 
interpretation issued in response to the Gas Industry Petition. (APGA 
et al., No. 140 at p. 7) IER commented that the DOE failed to provide a 
reasoned explanation for the change, and instead merely asserted the 
exact opposite of its prior explanation in the January 2021 Final 
Interpretive Rule. (IER, No. 138 at p. 2) AHRI expressed concern about 
the change in course on this ruling within such a short period of time, 
stating that sudden changes create significant costs and administrative 
burdens for manufacturers and hinder innovation and progress. (AHRI, 
No. 139 at p. 4)
    In response to these comments and as further explained elsewhere in 
this document, DOE is issuing this final interpretation following a 
reexamination of the record developed in the rulemakings for 
residential furnaces and commercial water heaters, review of the 
comments received to the August 2021 NOPIR, and further analysis of 
DOE's authority under EPCA. The issues addressed by this re-evaluation 
and the information on which this final interpretation is based have 
been thoroughly aired, not only in this proceeding, but also in a 
number of prior rulemakings (which themselves had ample opportunity for 
public comment), so the record before the agency is substantial. 
Moreover, as noted previously, DOE provided an extension of the 
opportunity for public comment on the August 2021 NOPIR at stakeholder 
request. Consequently, this final interpretive rule is the product of 
considerable public input.
    DOE agrees with the commenters that little has changed in terms of 
the technology or operation of the products/equipment at issue since 
promulgation of the January 2021 Final Interpretive Rule and DOE has 
not acted to implement that interpretation during the intervening 
period. However, the absence of subsequent developments on the 
manufacturing and regulatory fronts does not preclude DOE from 
reexamining the substantial existing record to assess the soundness of 
its prior ``features'' determination. Furthermore, because stakeholder 
positions on the relevant issues have been well documented in the past, 
when coupled with the lack of any substantial changes during the 
intervening period, the Department does not agree with those 
stakeholders who argued that the comment period provided for in the 
August 2021 NOPIR (45 days in total) was inadequate to analyze DOE's 
proposal or to prepare written comments. Commenters have also failed to 
demonstrate any specific harms suffered as a result of reliance on 
DOE's interpretation between the January 2021 Final Interpretive Rule 
and the August 2021 NOPIR, and, particularly because that final 
interpretation was never implemented through amended energy 
conservation standards, the status quo never changed during this period 
of interpretation review.
    As discussed in the following sections, based on this review and 
the extensive record that exists, DOE finds its historical 
interpretation (i.e., the interpretation proposed in the August 2021 
NOPIR) to be the better reading of the relevant provisions of EPCA, 
which also better aligns with EPCA's goals of increasing the energy 
efficiency of covered products and equipment through the establishment 
and amendment of energy conservation standards and promoting 
conservation measures when feasible. (42 U.S.C. 6291 et seq.) 
Furthermore, this interpretation avoids requiring separate product or 
equipment classes to preserve less efficient technologies, while 
maintaining consideration of installation costs as part of the 
extensive analysis of economic justification required by EPCA for the 
adoption of any new or amended energy conservation standard (see 42 
U.S.C. 6295(o)(2)-(3); 42 U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)). 
The following paragraphs set forth DOE's rationale for its revised 
interpretation in further detail, as well as the responses to other 
specific comments received.

A. ``Features'' Provision and Utility

    As described previously in this document, DOE must follow specific 
statutory criteria for prescribing new or amended energy conservation 
standards for covered products and covered equipment. In general, a new 
or amended standard must be designed to achieve the maximum improvement 
in energy efficiency that the Secretary determines is technologically 
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A); 42 
U.S.C. 6295(o)(3)(B); 42 U.S.C. 6316(a)) In deciding whether a proposed 
standard is economically justified, DOE must determine whether the 
benefits of the standard exceed its burdens after receiving comments on 
the proposed standard and by considering, to the greatest extent 
practicable, seven factors. One of the seven factors for consideration 
is the lessening of the utility or the performance of the covered 
products likely to result from the standard. (42 U.S.C. 
6295(o)(2)(B)(i)(IV); 42 U.S.C. 6313(a)(6)(B)(ii)(IV); 42 U.S.C. 
6316(a))
    EPCA further directs that the Secretary may not prescribe an 
amended

[[Page 73953]]

or new standard if the Secretary finds (and publishes such finding) 
that interested persons have established by a preponderance of the 
evidence that the standard is likely to result in the unavailability in 
the United States in any covered product type (or class) of performance 
characteristics (including reliability), features, sizes, capacities, 
and volumes that are substantially the same as those generally 
available in the United States at the time of the Secretary's finding. 
(42 U.S.C. 6295(o)(4); 42 U.S.C. 6313(a)(6)(B)(iii)(II); 42 U.S.C. 
6316(a)) Also, as discussed, when prescribing an energy conservation 
standard, DOE must consider whether separate product/equipment classes 
are justified based on: (1) Consumption of a different kind of energy 
or (2) existence of performance-related features and their associated 
utility. (42 U.S.C. 6295(q)(1); 42 U.S.C. 6316(a)) The ``features'' 
provision, the seven factors for economic justification, and the 
product class provisions are all required considerations in 
establishing new and amended energy conservation standards.
    As discussed in the August 2021 NOPIR, a ``feature'' is a trait, 
attribute, or function of a product. 86 FR 48049, 48053 (August 27, 
2021). The usefulness and benefit provided to a consumer by a feature 
is the feature's ``utility,'' and consumer utility is used to evaluate 
whether a purported feature justifies a separate product class. Id.
    DOE has historically viewed utility of a product or equipment as an 
aspect of the appliance that is accessible to the layperson consumer 
and is based upon user operation and interaction with that appliance. 
Borrowing from the examples presented in the previous section of this 
document, oven door windows and angle of access for clothes washers are 
illustrative of this principle. Consumers use the oven door window (in 
conjunction with the oven lamp) to gauge the progress of food 
undergoing baking, without the need to open the oven door. Needing to 
open the oven door and losing heat would arguably decrease the energy 
efficiency of the oven. The oven door window is a feature which 
consumers generally appreciate and with which they routinely interact 
when cooking. The window's elimination would result in the loss of a 
performance-related feature that provides valued utility for consumers. 
Regarding the angle of access of a clothes washer, consumers currently 
have two options when purchasing clothes washers: Front-loading 
machines and top-loading machines. Some consumers, such as the elderly, 
may prefer a top-loading clothes washer, because it is easier to reach 
the laundry without excessive bending, which is in contrast to the 
angle of access of a front-loading washer. A broad spectrum of 
consumers recognizes and appreciates the ability of a top-loading 
washer to readily accept additional clothing items, even after a wash 
cycle has begun. Other consumers, such as those with disabilities, may 
prefer a front-loading machine because that angle of access better 
suits their access needs. The two angles provide consumer utility in 
terms of ease of loading or use to different consumer subgroups. As 
with the oven door window, the angle of access is a feature with which 
consumers routinely interact while washing clothes. Consequently, 
consistent with the requirements of EPCA, DOE views angle of access as 
a performance-related feature for clothes washers that cannot be 
eliminated from the market through adoption of an energy conservation 
standard.
    In contrast to the examples discussed in the preceding paragraph, 
DOE has historically viewed a consumer's interaction with a furnace or 
water heater to be a simple one, whereby the user interacts only to 
initiate demand for heated air or water. After the consumer adjusts the 
thermostat or faucet, the user receives the requested heated air or 
water. There is no noticeable difference to the consumer in output 
based upon the type of technology (non-condensing or condensing) or 
venting used by the appliance, and, therefore, there is no difference 
in the utility derived from the appliance based on these factors. As 
noted previously, this approach had been DOE's longstanding 
interpretation of EPCA's ``features'' provision in the context of these 
appliances until the January 2021 Final Interpretive Rule.
    On this topic, commenters had divergent viewpoints as to whether 
non-condensing technology, and associated venting, constitute a 
performance-related feature under EPCA. One group of commenters clearly 
favored the approach proposed in the August 2021 NOPIR. For example, 
NEEA commented in support of DOE's proposed interpretation that the 
technology used to supply heated air or water does not constitute a 
performance-related ``feature'' and that venting type or the use of 
non-condensing technology does not constitute a performance-related 
feature as defined in EPCA. (NEEA, No. 137 at p. 1) NEEA asserted that 
users are typically unaware of their water heater's or furnace's 
venting category or heating technology, as it does not provide them 
with any utility. (NEEA, No. 137 at p. 2)
    CEC generally supported reinstatement of the prior interpretation 
of ``features,'' stating that the interpretation from the January 2021 
Final Interpretive Rule is unjustified, is not authorized by law, 
misapplies EPCA, and will preserve inefficient products that offer no 
unique utility to the consumer. (CEC, No. 134 at p. 1) CEC agreed that 
the use of non-condensing technology (and associated venting) is not a 
performance-related feature for the purpose of the EPCA prohibitions 
because it does not have a direct effect on the utility of providing 
the consumer with hot air or water. (CEC, No. 134 at p. 3)
    NBI commented that non-condensing technologies used in furnaces and 
water heaters do not represent a performance-related feature that 
justifies a different energy conservation standard. (NBI, No. 128 at p. 
1) NBI further commented that non-condensing technology does not 
represent a unique utility to consumers that is separate from the 
appliance's function of providing heated air or water. (Id.)
    The Institute for Policy Integrity stated that, while there may be 
some undefined, limited number of cases in which installation of a 
condensing unit could result in the loss of some usable space, in all 
other cases, such installation would not result in the loss of usable 
space. The commenter went on to state that the potential unavailability 
of a unit using non-condensing technology would not result in any 
significant loss of utility for many, if not most, consumers. 
(Institute for Policy Integrity, No. 145 at p. 3)
    A.O. Smith stated that the proposed reversal of the January 2021 
Final Interpretive Rule would return the Department to the most 
sensible reading of the statute. (A.O. Smith, No. 133 at p. 2) The 
State Attorneys General commented that furnaces and water heaters using 
non-condensing technologies and associated venting offer no unique 
utility to consumers beyond the basic function of providing heated air 
and heated water and that DOE had a strong statutory basis for its 
historical interpretation of ``features.'' (State Attorneys General, 
No. 136 at pp. 2, 3)
    Another group of commenters supported the January 2021 Final 
Interpretive Rule as the proper application of EPCA's ``features'' 
provision. Among this group, Bradford White asserted that, based on the 
dictionary definitions of ``attribute'' and ``characteristic,'' a 
feature would include an attribute, which could be

[[Page 73954]]

inferred as a distinguishing trait of a commercial water heater (i.e., 
different types of venting). (Bradford White, No. 146 at p. 2) Bradford 
White commented that reliability, which it asserted does not directly 
relate to the utility that a consumer sees from a product, is 
considered a characteristic in the context of the ``features'' 
provision of EPCA. (Id.) The commenter reasoned that, therefore, 
venting could similarly be treated as a distinguishing feature even if 
it does not directly relate to the utility (e.g., hot water). (Id.) 
Bradford White disagreed with DOE's statement that energy efficiency 
differences arise from technologies and design parameters other than 
size, arguing that condensing technology requires more heat exchange 
surface area and larger tank size, thereby increasing the size of the 
overall system and contributing to installation concerns. (Id. at p. 3) 
Bradford White also requested that DOE provide the data it used to re-
evaluate the January 2021 Interpretive Final Rule. (Id.)
    Crown Boiler, New Yorker Boiler, and U.S. Boiler commented that the 
historical definition of ``utility'' for furnaces and water heaters, 
provided by DOE, ignores the installation considerations that impact 
the consumer directly. (Crown Boiler, No. 127 at p. 3; New Yorker 
Boiler, No. 130 at p. 3; U.S. Boiler, No. 129 at p. 3) GEUAG commented 
that, in considering what constitutes a ``feature,'' DOE must consider 
that condensing appliances cannot (physically or economically) perform 
in conjunction with non-condensing venting systems. (GEUAG, No. 132 at 
p. 11) GEUAG stated that in order to preserve consumer choice over the 
use of those energy alternatives that best meet the consumer's economic 
and operational needs, the January 2021 Final Interpretative Rule 
should be maintained. (Id. at pp. 2-3)
    AGA et al. commented that non-condensing furnaces and water heaters 
provide unique utility in their ability to commonly vent with other gas 
appliances, vent into masonry chimneys, operate in unconditioned space 
without freeze protection, easily install in retrofit applications, and 
operate without the need to dispose of condensate. (AGA et al., No. 135 
at p. 29) AGA et al. stated that the facts in the record support a 
finding that design-specific constraints related to non-condensing 
technology present important performance-related features, valued by 
consumers, that justify treating non-condensing appliances as a 
separate class from condensing appliances. (Id. at p. 30) AGA et al. 
objected to the suggestion that features that make the product work in 
a consumer's existing home or business are not important performance-
related features. (Id. at p. 27)
    Crown Boiler, New Yorker Boiler, and U.S. Boiler stated that a 
``layperson consumer'' may not understand the technical issues 
associated with a move from Category I (``atmospheric'') venting (i.e., 
the venting commonly used in conjunction with non-condensing products) 
to Category IV (``condensing'') venting, but consumers will notice the 
impacts of the associated structural modifications necessary to 
accommodate the Category IV vent system, the presence of a condensing 
vent terminal on the side of their house, and the resulting noise and/
or an exhaust plume that damages the building exterior, harms plants, 
or simply obstructs the view. (Crown Boiler No. 127 at p. 3; New Yorker 
Boiler, No. 130 at p. 3; U.S. Boiler, No. 129 at p. 3)
    HARDI commented that it disagrees with DOE's interpretation of 
consumer utility and determining it only through the lens of whether 
the feature benefits the consumer. The commenter argued that changes to 
the living space caused by these retrofits do impact the utility of the 
new equipment, often in negative ways. (HARDI, No. 142 at pp. 2-3) For 
example, HARDI commented that replacing venting systems and/or 
relocating equipment in existing homes could lead to changes in the 
living space that would be unnecessary if a non-condensing system were 
installed, and that condensing venting systems may require freeze 
mitigation equipment (to prevent condensate from freezing) that could 
be impractical. (Id.) HARDI asserted limiting the ``utility'' 
definition simply to how a consumer interacts with the equipment in 
daily life is not a proper measurement of utility, particularly for 
heating, ventilation, and air conditioning (HVAC) equipment, which 
HARDI stated is often considered an ``invisible good'' (i.e., if the 
product continues to operate as designed, the consumer is unaware of 
its existence). (Id. at p. 3)
    HARDI also commented that inclusion of ``size'' in the ``features'' 
provision is not specifically limited to the size of the equipment 
itself, and that the change in size caused by the encroachment of a 
consumer's living space due to new venting or increased equipment 
closet size would similarly violate EPCA's protections. (Id.) Crown 
Boiler, New Yorker Boiler, and U.S. Boiler asserted that the potential 
loss of living space to accommodate a new condensing vent system is 
tantamount to setting a standard that makes an existing appliance size 
unavailable, even if the size of the appliance itself is unchanged. 
(Crown Boiler No. 127 at p. 3; New Yorker Boiler, No. 130 at p. 3; U.S. 
Boiler, No. 129 at p. 3) APGA et al. commented that the concept of 
preserving the availability of a product size is the same as preserving 
the availability of products that are compatible with the built-in 
venting systems provided to serve the appliances installed in those 
spaces in that in both cases, the statute prohibits efficiency 
standards that leave purchasers without the kinds of products that the 
infrastructure of their building was designed to accommodate. (APGA et 
al., No. 140 at pp. 4, 11)
    DOE responds to these comments as follows. As discussed in the 
August 2021 NOPIR and in the following paragraphs, there is a strong 
statutory basis for returning to DOE's historical interpretation of 
viewing the utility of a product or equipment as an aspect of the 
appliance that is accessible to the layperson consumer and is based 
upon user operation and interaction with that appliance. As stated, 
EPCA prohibits the Secretary from prescribing an amended or new 
standard if the Secretary finds (and publishes such finding) that 
interested persons have established by a preponderance of the evidence 
that the standard is likely to result in the unavailability in the 
United States in any covered product (or certain covered equipment) 
type (or class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States at the time of 
the Secretary's finding. (42 U.S.C. 6295(o)(4); 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa); 42 U.S.C. 6316(a))
    EPCA does not define these listed attributes or the related utility 
of such ``features.'' Therefore, to understand further those attributes 
that qualify as ``features'' and their relevant utility, DOE looks to 
EPCA as a whole and the purpose of the statute. (See Robinson v. Shell 
Oil Co., 519 U.S. 337, 341 (1997)) To this end, DOE has once again 
carefully examined the relevant statutory provisions and would 
highlight the following.
    First, EPCA authorizes DOE to prescribe new or amended energy 
conservation standards for covered products and covered equipment. (42 
U.S.C. 6295(a)(2); 42 U.S.C. 6313) EPCA defines ``energy conservation 
standard,'' in relevant part, as a performance standard that prescribes 
the minimum energy efficiency or maximum energy use of an appliance. 
(42 U.S.C. 6291(6);

[[Page 73955]]

42 U.S.C. 6311(18) (emphasis added)) ``Energy efficiency'' is the ratio 
of the useful output of services from a consumer product [or an article 
of industrial equipment] to the energy use of such a product [or 
article]. (42 U.S.C. 6291(5); 42 U.S.C. 6311(3)) ``Energy use'' means, 
in relevant part, the quantity of energy directly consumed by a 
consumer product [or article of industrial equipment] at the point of 
use. (42 U.S.C. 6291(4); 42 U.S.C. 6311(4)) EPCA further provides that 
DOE may establish more than one energy conservation standard for 
products that serve more than one major function by setting one energy 
conservation standard for each major function. (42 U.S.C. 6295(o)(5); 
42 U.S.C. 6316(a))
    Reading these provisions in the context of EPCA as a whole, the 
statute requires the Department to establish energy conservation 
standards that regulate the energy use associated with the useful 
output or energy consumption at the point of use of an appliance in 
operation of its major function. Where an appliance possesses more than 
one major function, Congress authorized and directed DOE to consider 
regulation of energy efficiency or consumption of an appliance for each 
major function. Where Congress tasked DOE to address other matters 
beyond the appliance's major function(s), it expressly directed DOE to 
set standards that pursue those other objectives, such as when it 
directed the agency to establish standards for standby mode and off 
mode operation of covered products (see 42 U.S.C. 6295(gg)).
    Given EPCA's focus on an appliance's major function(s), it is 
reasonable to assume that the consumer would be cognizant of such 
function and recognize such feature as providing additional benefit in 
the appliance's performance of such major function. It follows that an 
aspect of the appliance whose elimination would not be noticed by the 
consumer when interacting with the appliance would not be the type of 
product characteristic that Congress would expect DOE to preserve at 
the expense of energy savings. Given that DOE is directed to consider 
the application of EPCA's ``features'' provision in appropriate cases 
when prescribing new or amended energy conservation standards, DOE 
finds the better reading of the ``features'' provision (i.e., those 
features that cannot be eliminated by the establishment of a new or 
amended energy conservation standard) to be those features that provide 
a consumer unique utility during the operation of the appliance in 
performance of its major function(s). Stated another way, the 
``features'' provision and the related utility of such features pertain 
to those aspects of the appliance with which the consumer interacts 
during the operation of the product (i.e., when the product is 
providing its ``useful output'') and the utility derived from those 
features during normal operation.
    Using this logic, in the context of residential furnaces, 
commercial water heaters, and similarly-situated products or equipment, 
incorporation of non-condensing technology (and associated venting) is 
not a performance-related ``feature'' for the purpose of the EPCA 
prohibitions at 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa).
    As discussed in the subsequent paragraphs, DOE acknowledges that a 
condensing appliance generally cannot operate as intended by the 
manufacturer if installed with a non-condensing venting system without 
modifications. Also, issues of complex and costly installations that 
require modifications to the existing venting system to be properly 
installed, as well as potential alternatives, are economic matters 
appropriately addressed as part of the determination of whether new or 
amended standards are economically justified, as required by EPCA.
    DOE finds that non-condensing technology (and the associated 
venting) does not provide unique utility to consumers distinct from an 
appliance's function of providing heated air or water, as applicable. 
Regardless of changes to the living space that may be required at the 
time of installation, the consumer utility of a condensing residential 
furnace or commercial water heater is the same as that of a non-
condensing residential furnace or commercial water heater once 
installed and operating. While interacting with a residential furnace 
or commercial water heater during operation of the appliance, a 
consumer discerns no unique utility resulting from the specific heat 
exchanger technology (non-condensing or condensing) or the associated 
venting, as the heated air or water provided by the appliance is 
indistinguishable to the consumer regardless of those attributes. 
Because the consumer realizes the same perceived benefit (i.e., heated 
air or water) regardless of the technology used by the appliance, there 
is no unique utility to preserve as would justify sacrificing potential 
additional gains in energy savings through new or amended energy 
conservation standards in future product-specific rulemakings.
    DOE disagrees with Bradford White that the Department's reading, as 
adopted in this final interpretive rule, is inconsistent with the 
inclusion of ``reliability'' in the ``features'' provision. Whether a 
consumer can depend on a product to provide its useful output when 
needed goes directly to an aspect of the appliance that is accessible 
to the layperson consumer and is based upon user operation and 
interaction with that appliance. Preserving reliability ensures, for 
example, that when a consumer calls upon a residential furnace or 
commercial water heater, the consumer is provided heated air or water, 
as the case may be. Conversely, there is no noticeable difference to 
the consumer in access or output based upon the type of technology or 
venting used by the appliance. In addition, DOE disagrees with Bradford 
White's assertion that condensing technology requires an increase in 
the overall size of a water heater, and instead, the agency agrees with 
the Institute for Policy Integrity that installation of a condensing 
appliance would not result in a loss of useful space for most 
consumers. To confirm this understanding, DOE conducted a review of 
several condensing and non-condensing models having similar 
characteristics (i.e., input rating and storage volume) from multiple 
manufacturers and found that the overall dimensions for condensing 
models were not significantly larger than for non-condensing 
models.\10\ Further, changes to product dimensions resulting from 
increasing efficiency is more appropriately considered as part of the 
energy conservation standards rulemaking process, so that DOE can 
evaluate the appropriate cost impacts on a case-by-case basis.
---------------------------------------------------------------------------

    \10\ DOE notes that it surveyed the dimensions of representative 
commercial water heaters (100 gallon, 200,000 British thermal units 
(Btu)/hour) and found the height and diameter dimensions comparable. 
The cubic volume of condensing models ranged from 20 percent less to 
2 percent more than the cubic volume of comparable non-condensing 
models.
---------------------------------------------------------------------------

    APGA et al. further commented that establishing energy conservation 
standards at a condensing level would make all atmospherically-vented 
furnaces and water heaters no longer commercially viable. (APGA et al., 
No. 140 at p. 7) GEUAG asserted that the adoption of proposed standards 
under the interpretation set forth in the August 2021 NOPIR would 
effectively eliminate the use of non-condensing gas furnaces, which is 
not permitted under 42 U.S.C. 6295(o)(4). (GEUAG, No. 132 at pp. 3-4)
    In response to APGA et al. and GEUAG, DOE notes that, in 
establishing the ``features'' provision, EPCA anticipates that new or 
amended energy

[[Page 73956]]

conservation standards may result in the unavailability of certain 
inefficient technologies. Preserving inefficient technologies would be 
inimical to the statute's energy-saving purposes. Accordingly, EPCA's 
``features'' provision is targeted to ensure preservation of only 
certain performance characteristics (including reliability), features, 
sizes, capacities, and volumes. 42 U.S.C. 6295(o)(4). However, as 
discussed in section II.C of this document, an overly broad reading of 
the ``features'' provision to include features that do not impact the 
utility of the covered product would preserve inefficient technologies 
at the expense of EPCA's energy conservation goals and frustrate the 
purpose of EPCA.
    In the August 2021 NOPIR, DOE clarified that the proposed view of 
the ``features'' provision in the present case of non-condensing gas-
fired residential furnaces and commercial water heaters is 
distinguishable from certain other products that the Department has 
regulated in the past (e.g., space-constrained central air conditioners 
and ventless and compact clothes dryers). 86 FR 48049, 48055 (August 
27, 2021).
    Certain commenters agreed with the reasoning in DOE's August 2021 
NOPIR that DOE's past determinations of the statute's ``features'' 
provision were properly applied and that the current case examining 
condensing vs. non-condensing technology is distinguishable. Along 
these lines, NEEA commented that the interpretation proposed in the 
August 2021 NOPIR is consistent with DOE's historical interpretation of 
a performance-related feature and that the features of water heaters 
and furnaces accessible to a layperson that affect user operation are 
the ability of the equipment to provide hot water or heated air on 
demand when called for by the end user, which does not depend on the 
technology used to heat the water or how the equipment is vented. 
(NEEA, No. 137 at p. 2) NEEA distinguished the present issue from DOE's 
prior interpretation of the ``features'' provision in the context of 
ventless clothes dryers, stating that ventless clothes dryers allow for 
the installation of a clothes dryer for certain consumers that would 
otherwise not be able to install a clothes dryer, whereas a condensing 
product can always be installed, despite a small percentage of cases 
where installation is complicated. (Id.) NBI commented that the 
proposed interpretation follows the precedent set in the consumer water 
heater rulemaking in which DOE declined to establish a separate product 
class for heat pump water heaters, which similarly raised questions of 
additional cost and complexity due to the need for installation of a 
condensate drain and vent changes. (NBI, No. 128 at p. 1 (citing 75 FR 
20112, 20135 (April 16, 2010)))
    In contrast, other commenters viewed DOE's proposed approach in the 
August 2021 NOPIR as conflicting with the Department's past precedent. 
For example, AHRI and IER cited the rulemaking for ventless clothes 
dryers as precedent for the proposition that venting provides utility. 
(AHRI, No. 139 at p. 4; IER, No. 138 at p. 5) IER stated that utility 
of a residential furnace to the consumer is not merely heated air, but 
also, based on the DOE's previous ruling on ventless clothes dryers, 
installation considerations. (IER, No. 138 at p. 5) IER also referenced 
DOE's prior statement that ``compact-size clothes dryers provide 
utility to consumers by allowing for installation in space-constrained 
environments.'' (IER, No. 138 at p. 5 (citing 76 FR 22454, 22485 (April 
21, 2011))) IER asserted that this statement indicates that the utility 
to the consumers was not merely heated air to dry clothing, but also 
installation considerations. (Id.) IER also cited the establishment of 
separate product classes for package terminal air conditioners (PTACs), 
which address size constraints that allow for replacement units to be 
installed in existing wall sleeves. (Id.)
    In their comments, AGA et al. drew an analogy between electric 
clothes dryers and non-condensing gas-fired appliances. Noting that 
electric clothes dryers have the benefit of fitting into consumers' 
apartment buildings without the need for remodeling or loss of living 
space, the commenter argued that such dryers provide an important 
utility and, accordingly, constitute a performance-related feature. 
(AGA et al., No. 135 at pp. 26) Similarly, AGA et al. reasoned that 
natural gas appliances that function with existing chimneys and 
plumbing designed to accommodate non-condensing appliances likewise 
serve an important utility and constitute a performance-related 
feature. (Id. at pp. 26-27) AGA et al. went on to comment that the 
constraints that amounted to a performance-related feature for other 
appliances are too similar to the space and functional constraints of 
furnaces, water heaters, and boilers for that latter group of 
appliances not to be accorded similar treatment as performance-related 
features under the statute. (Id. at p. 27) AGA et al. further commented 
that when the Department reevaluated the standards for central air 
conditioners and heat pumps and packaged terminal air conditioners, the 
Department recognized separate classes of ``space constrained'' and 
``non-standard sized'' units that differed from standard air 
conditioners because of their performance-related feature: their 
ability to accommodate the space constraints of many homes and 
apartments. (Id. at p. 24) According to the commenter, the Department 
cannot consider space and functional constraints a ``performance-
related feature'' justifying separate standards for those products, but 
deny equal treatment to those furnaces, water heaters, and boilers 
facing similar constraints. (Id. at p. 27) AGA et al. opined that an 
appliance provides a consumer limited or no utility if it can only be 
used after renovating their home or business. (Id. at p. 26)
    AGA et al. and AHRI further submitted that the furnace fans 
rulemaking is also relevant precedent in support of a requirement for 
the establishment of separate product classes, given that DOE 
recognized that condensing and non-condensing furnaces present 
significant design differences that warrant different product classes 
for furnace fans in that proceeding. As the commenters point out, use 
of condensing versus non-condensing technology was one of the 
distinguishing factors in the furnace fans product classes adopted by 
DOE. (AGA et al., No. 135 at pp. 25-26; AHRI, No. 139 at pp. 3-4)
    In response to these comments, DOE does not find any tension or 
inconsistency between its prior application of the ``features'' 
provision and the interpretation adopted in this document (i.e., the 
technology used to supply heated air or hot water (and the associated 
venting) is not a performance-related ``feature'' that provides a 
distinct consumer utility). The present case of non-condensing gas-
fired residential furnaces and commercial water heaters is 
distinguishable from certain other products cited by commenters (i.e., 
ventless and compact clothes dryers, space-constrained central air 
conditioners, and furnace fans) for the reasons that follow.
    Regarding ventless clothes dryers, DOE recognizes that there may be 
some parallels between those appliances and the noncondensing furnaces 
and water heaters at issue here (particularly regarding problematic 
installation situations), but the Department would once again clarify 
that the circumstances surrounding these two sets of appliances are 
distinguishable. Those different circumstances lead to different 
results when DOE is interpreting EPCA's ``features'' provision. Stated 
simply, DOE found

[[Page 73957]]

that in the case of ventless clothes dryers, a substantial subset of 
consumers (e.g., high-rise apartment dwellers) would be deprived of the 
benefits of a having clothes-drying appliance in their residence 
entirely unless DOE established a ventless clothes dryers product 
class. In contrast, DOE has determined that, even in difficult 
installation situations, consumers would not be deprived of heat or hot 
water absent product/equipment classes set at a noncondensing level. 
Instead, the latter group of consumers facing difficult installation 
situations have options, including available technological solutions 
(albeit sometimes costly, if they seek to continue using a gas-fired 
appliance) or products that they can substitute (i.e., electric 
appliances), such that they will continue receiving the benefits of 
heat and hot water. Again, the heat and hot water provided would be 
indistinguishable to consumers regardless of the technology supplying 
them. As explained further in the paragraphs that follow, this 
understanding drives the different regulatory outcomes for residential 
clothes dryers, as compared to residential furnaces and commercial 
water heaters.
    The clothes dryer situation was explained in detail in a direct 
final rule (DFR) published in the Federal Register on April 21, 2011. 
76 FR 22454. In that rulemaking, DOE also referenced and relied on the 
details presented in the associated TSD accompanying that rulemaking. 
76 FR 22454, 22485 (April 21, 2011). In that TSD, DOE explained that 
ventless clothes dryers can be installed in locations where vented 
dryers would be precluded due to venting restrictions, and the 
Department went on to note how a clothes dryer is vented is not simply 
an issue of initial installation cost or a consumer choosing one 
product type over another (i.e., if a ventless clothes dryer were not 
available, no clothes dryer would be available for certain 
locations).\11\ A prime example that DOE considered was high-rise 
apartment buildings, some of which may be constructed without dedicated 
or otherwise accessible venting for a clothes dryer. Subsequent 
installation of additional venting in those situations would be 
infeasible in those situations, so if a traditional dryer were the only 
option, such consumers would be deprived of the benefit of having a 
clothes-drying capability in their homes. Thus, the ventless 
configuration goes to the heart of the function of the product--it 
allows the dryer to operate where otherwise a consumer could not have a 
clothes dryer--so absent the availability of a ventless clothes dryer, 
some consumers would not be able to have a clothes dryer at all. With 
that in mind, DOE examined the design and operational parameters of 
ventless clothes dryer models to understand their energy efficiency 
potential and cost structure, in order to develop appropriate energy 
conservation standards pursuant to EPCA that would ensure preservation 
of the relevant performance-related feature (i.e., ventless operation). 
In the TSD for the April 2011 DFR, DOE explained how ventless operation 
inherently limits the energy efficiency of those appliances, so in the 
end, the agency set separate classes on that basis.\12\
---------------------------------------------------------------------------

    \11\ Technical Support Document: Energy Efficiency Program for 
Consumer Products and Commercial and Industrial Equipment: 
Residential Clothes Dryers and Room Air Conditioners, pp. 3-6 
(Available at: www.regulations.gov/document?D=EERE-2007-BT-STD-0010-0053).
    \12\ DOE explained that due to the lack of a vent to expel 
moisture-laden exhaust air to the outdoors, ventless clothes dryers 
produce a wastewater stream that can be either collected in an 
integrated storage container or discharged down an available 
household drain. The Department acknowledged that the process of 
condensing the moisture out of the recirculated air results in 
higher energy consumption by a ventless dryer as compared to a 
conventional (i.e., vented) dryer. 76 FR 22454, 22470 (April 21, 
2011).
---------------------------------------------------------------------------

    The present case of residential furnaces and commercial water 
heaters is quite different. Unlike consumers of ventless dryers, 
consumers facing the prospect of replacing a non-condensing residential 
furnace or commercial water heater with a condensing furnace or water 
heater do have options available to either modify existing venting or 
install a new venting system to accommodate a condensing furnace or 
water heater, or to install a feasible alternative to have heated air 
or water provided (i.e., an electric appliance). In all cases, the 
consumer would not be precluded access to heated air or water, a result 
which is distinctly different from the one at issue in the ventless 
clothes dryers example. Given the ongoing availability of the consumer 
benefits of heat and hot water and for the reasons explained elsewhere 
in this document, DOE finds it reasonable to once again conclude that 
the technology used to supply heated air or water is not a performance-
related feature under EPCA as would justify establishing separate 
product/equipment classes on that basis. In light of those available 
options, DOE finds it appropriate to address the matter of difficult 
furnace and water heater installations in the economic analysis of 
energy conservation standards rulemakings for those individual 
appliances.
    With regard to compact clothes dryers, the ``compact'' delineation 
relates directly to the size and capacity of the product--two 
attributes explicitly listed in the ``features'' provision. (See 42 
U.S.C. 6295(o)(4)) This difference in size and capacity is recognized 
by the consumer in operation of the product (i.e., by limiting the 
amount of wet clothes which can be processed per cycle). Moreover, DOE 
determined that compact-size clothes dryers have inherently different 
energy consumption than standard-size clothes dryers. 76 FR 22454, 
22485 (April 21, 2011).
    In establishing a separate product class for space-constrained 
central air conditioners, DOE recognized the space constraints faced by 
these products and that the efficiency of such products is limited by 
physical dimensions that are rigidly constrained by the intended 
application. 76 FR 37408, 37446 (June 27, 2011). Space-constrained 
central air conditioners have an indoor or outdoor unit that is limited 
in size due to the location in which the unit operates. As a result, 
space-constrained central air conditioners lack the flexibility of 
other central air conditioners to increase the physical size of the 
unit, thereby limiting the ability of space-constrained units to 
achieve improved efficiency through use of a larger coil. Id. In 
establishing standards for space-constrained central air conditioners, 
DOE discussed the expense of modifying an exterior opening to 
accommodate a larger unit, but such discussion did not abrogate DOE's 
determination that space-constrained central air conditioners provide 
centralized air conditioning in locations with space constraints that 
would preclude the use of other types of central air conditioners. Id. 
In contrast, the subject non-condensing residential furnaces and 
commercial water heaters are not significantly different in overall 
footprint, size, or heating capacity from their condensing counterparts 
\13\ (although the composition of the venting used may be different), 
and the energy efficiency differences are a result of the technology 
used, a design parameter that is dictated by considerations other than 
size.
---------------------------------------------------------------------------

    \13\ As provided in footnote 10 supra., DOE surveyed the 
dimensions of representative commercial water heaters (100 gallon, 
200,000 Btu/hour) and found the height and diameter dimensions 
comparable.
---------------------------------------------------------------------------

    With regard to the equipment classes for PTACs, in its prior 
rulemaking, DOE found that the size of the heat exchanger directly 
affects the energy efficiency of the equipment. 73 FR 58772, 58782 
(October 7, 2008). Like space-constrained central air conditioners, the

[[Page 73958]]

location of operation of a PTAC directly influences the size of the 
equipment, which impacts the size of the heat exchanger and has a 
corresponding direct effect on the energy efficiency of the equipment. 
Id. DOE acknowledged the potentially high costs that would be 
associated with installing a non-standard sized PTAC in an existing 
building due to the need to increase the wall opening (i.e., the wall 
sleeve) in which a replacement PTAC is installed. Id. As explained in a 
subsequent rulemaking for PTACs, DOE further clarified that it accounts 
for installation costs in the life-cycle cost (LCC) and payback period 
(PBP) analyses used to evaluate increased standard levels, which is a 
separate and distinct consideration from whether separate product 
classes are justified. 80 FR 43162, 43167 (July 21, 2015). 
Consideration of installation costs in the LCC and PBP analysis used 
for evaluating an increased energy conservation standard level is 
consistent with the application of 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6295(q)(1) in the final interpretation adopted in this document.
    The furnace fan product classes also are not an analogous 
comparison to residential furnaces and commercial water heaters that 
rely on non-condensing technology. Furnace fans are electrically-
powered devices used in consumer products for the purpose of 
circulating air through ductwork. 10 CFR 430.2. A furnace fan operates 
to allow the furnace in which it is installed to function. The 
references to condensing and non-condensing in the furnace fan product 
classes do not reflect a difference in utility between condensing and 
non-condensing furnaces, but rather reflect the differences between the 
operation of a furnace fan installed in a condensing furnace as 
compared to a furnace fan installed in a non-condensing furnace. In 
establishing the energy conservation standards for furnace fans, DOE 
differentiated between furnace fan product classes based on internal 
structure and application-specific design differences that impact 
furnace fan energy consumption. 79 FR 38130, 38142 (July 3, 2014). The 
internal structures encountered differ for a furnace fan installed in a 
condensing furnace, as compared to a furnace fan installed in a non-
condensing furnace. The presence of an evaporator coil or secondary 
heat exchanger, as in a condensing furnace, significantly impacts the 
internal structure of an HVAC product, and in turn, the energy 
performance of the furnace fan integrated in that HVAC product. Id. 
These differences result in different energy use profiles for furnace 
fans installed in condensing furnaces, as compared to furnace fans 
installed in non-condensing furnace, which justifies the separate 
product classes.
    For the reasons presented in the August 2021 NOPIR and the 
preceding paragraphs, DOE has determined that its historical 
interpretation--that utility is properly determined through an 
assessment of the benefits and usefulness that the feature provides to 
the consumer while interacting with the product--is the better reading 
of EPCA. The differences in cost or complexity of installation between 
products/equipment with different heat exchanger technology (i.e., non-
condensing or condensing) and associated venting do not constitute a 
performance-related feature under 42 U.S.C. 6295(o)(4), as would 
justify separating the products/equipment into different product/
equipment classes under 42 U.S.C. 6295(q)(1). As discussed in the 
following section, this approach is consistent with EPCA's requirement 
for a separate and extensive analysis of economic justification for the 
adoption of any new or amended energy conservation standard (see 42 
U.S.C. 6295(o)(2)-(3); 42 U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)).

B. Cost and Installation Considerations

    The Department acknowledges that, in its January 2021 Final 
Interpretative Rule, it extended its view of consumer utility of 
residential furnaces and commercial water heaters beyond those 
appliances' primary function of providing heated air or water, giving 
considerable weight to installation situations that could require the 
addition of new pipes or venting to the usable space of a home or 
business, major modifications to a utility room, or encroachment upon 
an existing window or patio. 86 FR 4776, 4786 (Jan. 15, 2021).
    However, differences in cost or complexity of installation between 
different methods of venting (e.g., category IV venting for a 
condensing furnace versus category I venting for a non-condensing 
furnace) do not make any method of venting a performance-related 
feature under 42 U.S.C. 6295(o)(4), as would justify separating the 
products/equipment into different product/equipment classes under 42 
U.S.C. 6295(q)(1). DOE has come to see the issues underlying the 
January 2021 Final Interpretive Rule more appropriately framed as 
matters of cost. This view is consistent with EPCA's requirement for a 
separate and extensive analysis of economic justification for the 
adoption of any new or amended energy conservation standard (see 42 
U.S.C. 6295(o)(2)-(3); 42 U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)). 
DOE stated in the August 2021 NOPIR that the proposed interpretation 
would return the issues underlying the January 2021 Final Interpretive 
Rule to their proper sphere as part of DOE's economic analysis in 
individual energy conservation standards rulemakings. 86 FR 48049, 
48053 (August 27, 2021).
    Once again, commenters had mixed views on the change in position 
outlined in the August 2021 NOPIR, with some in favor and others 
opposed to DOE's proposed modified approach. Among those in favor, ASAP 
et al. stated that that non-condensing technology (and associated 
venting) does not provide unique utility to consumers separate from an 
appliance's function of providing heated air or water and that the cost 
impacts are appropriately considered in the context of individual 
rulemakings, which can consider the specific circumstances of each 
product. (ASAP et al., No. 143 at p. 2)
    The Institute for Policy Integrity commented that in making a 
``feature'' determination, DOE should consider consumer utility as 
separate from any cost considerations, any technological advances that 
could resolve the current challenges, and any benefits of fuel 
switching. (Institute for Policy Integrity, No. 145 at p. 1) CEC 
commented that the ``features'' provision makes no mention of cost as a 
relevant consideration and that such factors are properly considered 
during the evaluation of a proposed standard level's economic 
justification. (CEC, No. 134 at p. 3)
    NRDC et al. commented that, while condensing technologies may 
require additional installation costs, there are alternatives that can 
make condensing technologies work within the existing space. NRDC added 
that it would be more appropriate to incorporate increased installation 
costs associated with condensing technologies in the life cycle cost 
and payback period analyses in energy conservation standards 
rulemakings. (NRDC et al., No. 144 at pp. 1-2)
    The State Attorneys General commented that any differences in cost 
or complexity of installation between different methods of venting for 
condensing and non-condensing products are more properly considered as 
part of the DOE's economic analysis in individual energy conservation 
standards rulemakings. (State Attorneys General, No. 136 at p. 3) These 
commenters stated that any potential

[[Page 73959]]

additional costs associated with condensing products are not an 
independent basis for establishing separate product classes subject to 
differing efficiency standards. (Id.)
    A.O. Smith commented that it is technologically feasible to replace 
a non-condensing gas-fired water heater with a condensing gas-fired 
water heater in all circumstances, but that there are certain instances 
where it is cost prohibitive to do so. To address such circumstances, 
A.O. Smith recommended that DOE expand the economic analysis for 
different subgroups with specific installation considerations as part 
of any future substantive rulemaking on efficiency standards. (A.O. 
Smith, No. 133 at p. 9) Similarly, ASAP et al. recommended that the 
Department consider impacts on low-income populations, because low-
income households are disproportionally renters, and, therefore, are 
responsible for the higher energy costs of less-efficient technologies, 
and not the cost of the system itself. (ASAP et al., No. 143 at p. 3)
    A.O. Smith and the Institute for Policy Integrity commented that 
the January 2021 reinterpretation of the ``features'' provision double-
counts the economic impact of certain costs as compared to the 
efficiency gains, in that installation issues would be considered in 
terms of both utility and the economic analyses. (A.O. Smith, No. 133 
at p. 4; Institute for Policy Integrity, No. 145 at pp. 2, 3)
    Turning to the commenters opposed to DOE's proposed change in 
approach, IER disagreed with the DOE's tentative finding that the 
issues sought to be addressed by the January 2021 Final Interpretative 
Rule were based on cost. (IER, No. 138 at p. 3) IER urged DOE to 
explain why the final interpretive rule was ``framed as a matter of 
cost'' when DOE stated in the January 2021 Final Interpretive Rule that 
the decision was not based on the cost of the feature. (Id. at p. 4)
    AGA et al. stated that economic justification is a separate 
consideration and that EPCA should be read in a manner that gives 
meaning to all its provisions. (AGA et al., No. 135 at pp. 18-19) AGA 
further commented that reading ``performance related-features'' to 
include those features that make a product useful for its intended 
purpose flows from the meaning and context of several provisions of 
EPCA, including that: (1) Energy conservation standards must be 
technically feasible for their intended application; (2) covered 
products should be subcategorized into classes to recognize different 
functions, consumer needs, and fuel types; (3) standards should not 
render covered products unavailable to American consumers; and (4) the 
Department should recognize ``performance-related features'' that make 
a product useful to consumers. (AGA et al., No. 135 at pp. 17-18) In 
addition, AGA reasoned that viewing physical, technical, architectural, 
and code constraints as purely economic considerations fails to give 
meaning to the entire purpose behind establishing separate classes of 
consumer products based on their ``performance-related features.'' (AGA 
et al., No. 135 at p. 18)
    AGA et al. asserted that the proposed interpretation in the August 
2021 NOPIR could render non-condensing natural gas furnaces, commercial 
water heaters, and boilers unavailable to millions of Americans whose 
homes and businesses cannot accommodate the alternative, condensing 
appliances without significant complications and, in many cases, 
renovation. (AGA et al., No. 135 at p. 2) These commenters stated that 
when viewed in that light, non-condensing units provide an important 
performance-related feature in that they work with the homeowner's or 
business's existing utility structure venting system. (Id. at p. 6) AGA 
et al. argued that an evaluation of the factors for economic 
justification would show standards based on condensing technology to be 
economically unjustified in many applications. (Id. at p. 17)
    Bradford White commented that although energy conservation 
standards at condensing levels would likely benefit their company, it 
predicted that eliminating non-condensing technologies from the market 
would impact both installers and consumers negatively, with there being 
circumstances where condensing gas-fired water heaters could not be 
used, either due to installation challenges or increased cost. 
(Bradford White, No. 146 at p. 1)
    Crown Boiler, New Yorker Boiler, and U.S. Boiler asserted that DOE 
itself acknowledged problems with sole reliance on the economic 
justification during promulgation of the current rule (i.e., the 
January 2021 Final Interpretive Rule), including that: Subsets of the 
population (particularly low-income people in urban areas) may be 
disproportionately impacted by these costs, thereby resulting in 
consumers keeping unsafe equipment in service, installing the 
condensing equipment in unsuitable venting systems, or switching to 
less comfortable, more expensive, less safe forms of heat (e.g., 
resistance electric or kerosene space heaters); and the economic 
analysis cannot quantify consumer burdens that are associated with 
building modifications to accommodate venting, such as loss of interior 
space, loss of decks, aesthetic changes, etc. (Crown Boiler, No. 127 at 
p. 2; New Yorker Boiler, No. 130 at p. 2; U.S. Boiler, No. 129 at p. 2)
    Kramer commented that the ``non-condensing'' feature of furnaces 
should be preserved to avoid economic burden for low-income households 
for which the installation of a condensing furnace is not feasible due 
to the current location of the installed unit and the costs associated 
with changing ductwork or upgrading electric services to accommodate a 
condensing unit. (Kramer, No. 124 at p. 1)
    HARDI commented that for existing homes, the need to change the 
venting system to install a condensing furnace leads to modifications 
to the living space that are unnecessary if the equipment is replaced 
with a non-condensing furnace or water heater. The commenter also 
stated that non-condensing furnaces and water heaters likewise obviate 
the need for a consumer to install heat-tape and other freeze 
mitigation equipment used to prevent the freezing of condensate in the 
vent and without which, there could be resulting damage to the furnace 
or water heater. Finally, HARDI argued that for consumers with heating 
equipment that is only in use part-time, the need to constantly heat 
the venting system would be impractical. (HARDI, No. 142 at p. 2)
    DOE acknowledges that the interpretation adopted in this final 
interpretive rule is a departure from the January 2021 Final 
Interpretative Rule. The interpretation adopted in this document, which 
reverts to DOE's historical interpretation, gives meaning to the 
``features'' provision in the context of EPCA's direction to DOE to 
establish minimum levels of energy efficiency or maximum quantities of 
energy use for covered products and equipment when performing their 
intended function. Conversely, the January 2021 Final Interpretive Rule 
expanded the ``features'' provision to include consideration beyond the 
operation of a product or equipment, namely through consideration of 
other installation matters best characterized as cost issues. As 
explained previously in this document and in the paragraphs that 
follow, DOE has concluded that its historical interpretation is the 
best reading of the statute, an understanding shared by numerous 
commenters on the August 2021 NOPIR.

[[Page 73960]]

    As indicated by several commenters, in certain instances, replacing 
a non-condensing appliance with a condensing one may involve 
complications, including the need for installation of new venting and 
renovation of existing living space. However, these installation 
complications are separate and apart from any performance-related 
impacts of the unit once installed. When properly installed, a 
condensing furnace or water heater would be expected to provide the 
consumer with heated air or water indistinguishable from that supplied 
by a non-condensing appliance.
    DOE finds strong statutory support for its changed position. EPCA's 
``features'' provision makes no mention of cost as a relevant 
consideration. (42 U.S.C. 6295(o)(4); 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa)) As AGA et al. noted, EPCA directs DOE to 
separately consider whether energy conservation standards would be 
economically justified. Therefore, DOE finds that the factors that gave 
rise to the January 2021 Final Interpretive Rule can be addressed 
through an evaluation of the factors for economic justification.
    EPCA enumerates seven factors for economic justification that DOE 
must consider when evaluating whether to establish or amend energy 
conservation standards.\14\ (42 U.S.C. 6295(o)(2)-(3); 42 U.S.C. 
6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)) Included among those factors is 
consideration of the savings in operating costs throughout the 
estimated average life of the covered product [or covered equipment] in 
the type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered products 
which are likely to result from the imposition of the standard. (42 
U.S.C. 6295(o)(2)(b)(i)(II); 42 U.S.C. 6313(a)(6)(B)(ii)(II); 42 U.S.C. 
6316(a))
---------------------------------------------------------------------------

    \14\ Specifically, at 42 U.S.C. 6295(o)(2)(B)(i) (and with 
essentially the same language at 42 U.S.C. 6313(a)(6)(B)(ii)), EPCA 
provides: In determining whether a standard is economically 
justified, the Secretary shall, after receiving views and comments 
furnished with respect to the proposed standard, determine whether 
the benefits of the standard exceed its burdens by, to the greatest 
extent practicable, considering--(I) the economic impact of the 
standard on the manufacturers and on the consumers of the products 
subject to such standard; (II) the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered 
products which are likely to result from the imposition of the 
standard; (III) the total projected amount of energy, or as 
applicable, water, savings likely to result directly from the 
imposition of the standard; (IV) any lessening of the utility or the 
performance of the covered products likely to result from the 
imposition of the standard; (V) 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; (VI) the 
need for national energy and water conservation; and (VII) other 
factors the Secretary considers relevant.
---------------------------------------------------------------------------

    As part of evaluating this factor, DOE conducts a LCC and PBP 
analysis. The LCC is the total consumer expense of an appliance or 
product over the life of that product, consisting of total installed 
cost plus operating costs. The PBP is the estimated amount of time (in 
years) it takes consumers to recover the increased purchase cost, 
including installation, of a more-efficient product through lower 
operating costs.
    In this case, DOE originally considered the additional costs 
associated with installing condensing residential furnaces and 
condensing commercial water heaters in the rulemaking proceedings for 
those appliances whose proposals were withdrawn in conjunction with the 
January 2021 Final Interpretive Rule. (See 81 FR 65720, 65776-65783 
(Sept. 23, 2016); 81 FR 34440, 34484-34485 (May 31, 2016)) 
Additionally, in both the residential furnaces and commercial water 
heaters rulemaking proceedings, DOE conducted consumer subgroup 
analyses to understand the disparate impacts of the proposed standards 
on low-income households by analyzing the LCC impacts and PBP for those 
particular consumers from alternative standard levels. In these 
analyses, DOE used different discount rates to reflect various income 
categories. (See 81 FR 65720, 65798-65799 (Sept. 23, 2016); 81 FR 
34440, 34494-34495 (May 31, 2016)) DOE has concluded that these 
analyses are appropriate for analyzing the impacts of potential 
standards on consumers generally and low-income consumers in 
particular.
    In proposing to return to its historical interpretation, DOE 
furthermore added that it tentatively concluded that it gave undue 
weight to the arguments presented by the Gas Industry Petitioners. 86 
FR 48049, 48054-48055 (August 27, 2021). After reexamining the record, 
DOE preliminarily determined that the qualitative arguments made by the 
Gas Industry Petitioners were not accompanied by sufficient evidence to 
establish the existence or magnitude of the alleged problem, as would 
support the significant change from DOE's historical interpretation to 
the interpretation contained in the January 2021 Final Interpretive 
Rule. 86 FR 48049, 48055 (August 27, 2021). To the extent that 
consumers would be faced with difficult installation situations, DOE 
tentatively concluded that consumers have other options for resolving 
such situations without the need for the Department to declare non-
condensing technology and associated venting to be a performance-
related feature under EPCA. Id. In short, consumers facing difficult 
installation situations can either: (1) Utilize a technological 
solution to resolve their installation problem, or (2) switch to an 
appliance utilizing alternative technologies. Either approach would 
allow those consumers with potentially difficult installation 
situations to choose how best to avoid loss of usable space, extensive 
building modifications, or extreme installation costs identified in the 
January 2021 Final Interpretive Rule. Id. With regard to specific 
concerns of ``orphaned'' water heaters,\15\ DOE noted the development 
of potential technology solutions. Id. The Department stands by and 
reaffirms these conclusions in this Final Interpretive Rule. DOE has 
also concluded that installation professionals have the expertise to 
complete any necessary appliance replacements in a safe and effective 
fashion.
---------------------------------------------------------------------------

    \15\ The Gas Industry Petitioners raised specific concern with 
the potential of an orphaned water heater. An ``orphaned water 
heater'' refers to the situation in which a non-condensing furnace 
and non-condensing water heater share a common vent, but, upon 
replacement of the non-condensing furnace with a condensing furnace, 
they can no longer share that same venting due to differences in 
venting requirements.
---------------------------------------------------------------------------

    In response to these tentative findings in the August 2021 NOPIR, 
NEEA cited results from a study conducted by NEEA, Pacific Gas and 
Electric Company, National Grid, and Northeast Energy Efficiency 
Partnerships, which found that 5 percent or fewer of condensing gas 
appliance installations were challenging, and stated that, even in 
cases that present significant challenges, technical solutions were 
always possible. (NEEA, No. 137 at p. 2) The commenter referenced 
technologies available on the market (i.e., DuraVent's FasNSeal 80/90) 
that it stated allow for the installation of a condensing appliance 
with existing venting systems and in situations with narrow lot lines, 
challenging clearances, or where side wall venting is not practical. 
(Id. at p. 3) NEEA suggested that such solutions allow for condensing 
appliance venting without the need for additional building penetrations 
or the need to disturb finished internal spaces. (Id.) Similarly, the 
State Attorneys General stated that based on the rulemaking record, a 
variety of technological fixes are available to accommodate the 
replacement of non-condensing units and to increase compatibility with 
other non-condensing appliances. (State Attorneys General, No. 136 at 
p. 3)

[[Page 73961]]

ASAP et al. stated that non-condensing and condensing furnaces have 
different venting configurations, but that these different 
configurations are a matter of cost and not utility, and there are a 
variety of solutions to challenging venting requirements. (ASAP et al., 
No. 143 at p. 2) A.O. Smith stated that it is technologically feasible 
to replace non-condensing equipment in every commercial setting. (A.O. 
Smith, No. 133 at p. 9)
    In contrast, AGA et al. asserted that the record for the January 
2021 Final Interpretive Rule shows that for millions of applications, 
appliances with condensing technology would not work (or would present 
hazardous conditions) if the appliances were installed within existing 
home and business venting and plumbing systems, absent modification. 
(AGA et al., No. 135 at p. 28) In support of its assertion, AGA et al. 
pointed to DOE's estimates that upwards of 10 percent of households 
with gas-fired furnaces would face difficult installation situations if 
non-condensing furnaces were eliminated, as well as a survey from 
installation contractors that AGA et al. stated showed that atmospheric 
venting systems often prevent use of condensing furnaces. (Id. at pp. 
29, 31) AGA et al. argued that, although DOE claims the existence of 
technological solutions to difficult installation situations, no 
evidence is cited for that proposition. (Id. at p. 31) AGA et al. 
further commented that the National Fuel Gas Code (ANSI Z223.1/NFPA 54) 
and the International Fuel Gas Code, which are installation codes for 
gas appliances that are adopted and enforced in the majority of States 
and jurisdictions within the United States, do not permit venting a 
condensing type of vented gas appliances (positive venting pressure) 
with a non-condensing type of vented appliance (negative venting 
pressure) because of safety concerns. (Id. at p. 32) AGA et al. stated 
that, therefore, even if technological issues were overcome, 
replacement of non-condensing appliances with condensing appliances 
would still violate the aforementioned installation codes to the extent 
that the condensing appliance is vented in the same vent line with a 
negative venting pressure non-condensing appliance. (Id.)
    AHRI commented that consumers, especially in older homes, will 
struggle to replace their appliances if condensing-only appliance 
standards are set in efficiency rulemakings. (AHRI, No. 139 at p. 1) 
Kramer commented that non-condensing furnaces are sometimes installed 
in unheated spaces such as an attic or garage, and that such locations 
cannot accommodate a condensing furnace because the condensation will 
freeze and cause damage to the heating unit. (Kramer, No. 124 at p.1) 
Kramer further commented that relocation of such units to the heated 
part of the home is cost-prohibitive due to reworking of the ductwork 
and would result in loss of living space inside the home. (Id.)
    Crown Boiler, New Yorker Boiler, and U.S. Boiler stated that the 
research conducted by Oak Ridge National Laboratory (ORNL) referenced 
by DOE in the August 2021 NOPIR demonstrates that condensing furnace 
standards would result in a significant problem. (Crown Boiler, No. 127 
at p. 3; New Yorker Boiler, No. 130 at pp. 3-4; U.S. Boiler, No. 129 at 
pp. 3-4) These commenters asserted that the ``EntrainVent'' technology 
discussed in the ORNL research cited by DOE is problematic because: (1) 
If the common portion of the vent becomes blocked, the condensing 
appliance will force flue products backwards down the category I vent 
and into the living space through the draft diverter and that detecting 
this spillage will be a significant technical challenge; and (2) this 
system will only work when the furnace inducer is running, meaning that 
water heater cannot safely operate when the furnace inducer is off. 
(Crown Boiler No. 127 at p. 4; New Yorker Boiler, No. 130 at pp. 4-5; 
and U.S. Boiler, No. 129 at pp. 4-5) Crown Boiler, New Yorker Boiler, 
and U.S. Boiler further commented that the use of other venting systems 
described in the ONRL report (i.e., the DuraVent FasNSeal 80/90 and 
draft inducer paired with a chimney liner) is not practical in 
situations where there are offsets in the chimney, or where the cross-
sectional area of the chimney is too small to provide adequate drafting 
for the water heater after the new liner(s) are added. (Crown Boiler 
No. 127 at p. 5; New Yorker Boiler, No. 130 at p. 5; U.S. Boiler, No. 
129 at p. 5) These commenters stated that any concentric vent system 
consisting of a pressurized vent system inside a Category I vent system 
raises safety concerns because the inner pipe will be difficult or 
impossible to inspect and a breach in the pipe will lead to flue gas 
inside the building and that this problem would be particularly acute 
for a pipe modified with a draft inducer that was not designed to be 
pressurized. (Id.)
    Bradford White commented that a non-condensing commercial gas-fired 
water heater installed in a high-rise building in a large, older city 
(e.g., New York City, Boston, Chicago) would not be able to be replaced 
with a condensing equivalent, as it would not be able to vent 
horizontally due to jurisdictions prohibiting side wall venting in 
these applications. (Bradford White, No. 146 at p. 3) Bradford White 
further commented that if the mechanical room is in the basement or 
ground level floor of a 15-story building (and shorter in some cases), 
the water heater may not be certified with a long enough vent length to 
be able to vent vertically through the building's roof, and that if the 
venting had to run up through current living spaces, there would be 
impacts to the building space. (Id.)
    AGA et al. and APGA et al. stated that, in the current market, the 
known solutions often require making major reconfigurations to building 
venting and plumbing systems. (AGA et al., No. 135 at p. 18; APGA et 
al., No. 140 at p. 9) APGA et al. stated that most of the existing 
buildings in which gas furnaces and water heaters are installed were 
architecturally designed to accommodate standard atmospherically-vented 
products and have built-in atmospheric venting systems to serve such 
products, often with vents sized to serve two or more commonly-vented 
products. (APGA et al., No. 140 at p. 8) APGA et al. commented that 
there are instances when it is possible to use existing venting when 
switching from non-condensing to condensing technologies or to scrap 
the existing venting and run new venting through the same chase, but 
there are many common scenarios in which this would not be possible 
(Id. at p. 7) APGA et al. further commented that if atmospherically-
vented products were unavailable, replacement of an existing 
atmospherically-vented product would require building modifications to 
facilitate the installation of condensing products in buildings that 
were not designed to accommodate them and potentially a relocation of 
the heating system, which would result in orphaned venting 
infrastructure. (Id. at pp. 7, 8)
    Bradford White commented that DOE should not base its analysis on a 
technology that is not currently commercially available (i.e., venting 
technologies that could make it easier to switch from noncondensing to 
condensing appliances). (Bradford White, No. 146 at p. 2)
    AHRI stated that there is no justification or evidence provided by 
DOE for its statements regarding the existence of technological 
solutions for gas-fired installation issues, orphaned water heaters, or 
other issues raised by the gas industry petition that would support the 
Department's proposed policy change. (AHRI, No. 139 at p. 2) The 
commenter argued that requiring new venting for condensing

[[Page 73962]]

technologies would be inhibited by safety and building codes, 
providing, as an example, building types and jurisdictions in which 
side wall vents necessary for condensing units are prohibited or not 
feasible. (Id.) AHRI claimed that if a consumer cannot install a piece 
of equipment due to venting constraints, there will be no consumer 
access to heated air or water. (Id.) Furthermore, AHRI stated that 
upgrading to condensing equipment, upgrading electrical panels for heat 
pump use, and modifications for the safe use of an orphaned water 
heater come at a price that disproportionally affects underserved 
households and small businesses. (Id. at p. 4)
    As discussed previously, installation costs are addressed in the 
LCC and PBP analyses, as well as in consumer subgroup-specific 
analyses. These analyses account for the cost of difficult (i.e., 
unusually costly) installations, including those subgroups of the 
population that may be differentially impacted by DOE's consideration 
of amended energy conservation standards. In the September 2016 Furnace 
SNOPR, DOE's analysis assumed that when replacing a non-condensing gas 
furnace with a condensing gas furnace in replacement applications, 
additional costs could include adding a new polyvinyl chloride (PVC) 
flue venting, PVC combustion air venting, concealing vent pipes, 
addressing an orphaned water heater (by updating flue vent connectors, 
vent resizing, or chimney relining), and condensate removal. 
Additionally, in the installation costs in new construction 
installations, DOE's cost estimates for condensing gas furnaces 
included appropriate flue vents, combustion air venting for direct vent 
installations, accounting for commonly-vented water heaters, and 
condensate removal. 81 FR 65720, 65776-65783 (Sept. 23, 2016). In that 
rulemaking, DOE estimated that a certain percentage of all installation 
scenarios would incur extra costs to replace a non-condensing furnace 
with a condensing furnace and ascribed additional installation costs to 
address a number of installation scenarios, including scenarios in 
which venting is replaced.\16\ Similarly, venting cost estimates for 
condensing commercial water heaters accounted for the type of 
installation (new construction or retrofit), draft type (atmospheric 
venting or power venting), water heater fuel type, building vintage, 
number of stories, and presence of a chimney. 81 FR 34440, 34484 (May 
31, 2016). The materials and diameters of venting analyzed depended on 
the type of installation. A fixed percentage of buildings were 
estimated to have masonry chimneys that would require relining. Id. In 
applying the interpretation adopted in this document to future energy 
conservation standards for residential furnaces, commercial water 
heaters, and similarly-situated products/equipment, DOE expects to 
employ similar analytical methods.
---------------------------------------------------------------------------

    \16\ See Table 8D.2.19 in Appendix 8D of the TSD for the 
September 2016 Furnace SNOPR (Available at: regulations.gov at 
Docket No. EERE-2014-BT-STD-0031-0217).
---------------------------------------------------------------------------

    With respect to concerns raised regarding the safety of the venting 
technologies evaluated by ORNL, DOE reiterates that the evaluated 
technologies are discussed in the August 2021 NOPIR only as examples of 
potential solutions that could emerge to mitigate installation issues 
related to venting, ones whose development could be hampered by the 
interpretation provided in the January 2021 Final Interpretive Rule. 
DOE notes that the EntrainVent evaluated by ORNL was a proof-of-concept 
designed to demonstrate key functionality, rather than a commercially-
available product, and as such, it had not incorporated additional 
safety-related features (e.g., controls and sensors) that would not 
impact ordinary operation. DOE did not consider this technology 
solution in its analysis of furnace standards for the September 2016 
Furnaces SNOPR. DOE did analyze the DuraVent product as part of an 
alternative case.\17\
---------------------------------------------------------------------------

    \17\ See Appendix 8L of the TSD for the September 2016 Furnaces 
SNOPR (Available at: regulations.gov at Docket No. EERE-2014-BT-STD-
0031-0217).
---------------------------------------------------------------------------

    DOE would point out that the DuraVent FasNSeal 80/90 is a 
commercially-available product intended for a similar purpose (i.e., to 
allow condensing products to be concentrically vented with a non-
condensing, atmospheric product venting through an existing vent) and 
which is listed to the applicable Underwriters Laboratories' safety 
standards, indicating that it can be used safely when installed as 
intended. DOE also notes other commenters stated that replacement of 
non-condensing units with condensing units is possible in all cases, 
indicating that there are not building code prohibitions on such 
replacements. (See NEEA, No. 137 at p. 2; A.O. Smith, No. 133 at p. 9)
    As stated, DOE acknowledges that installation of condensing 
products/equipment requires modifications to the installed space in 
some applications and that such modifications may impact the 
installation cost and/or complexity. As illustrated by the analyses 
conducted in the prior rulemakings for residential furnaces and 
commercial water heaters, such costs and complexities can be and have 
been addressed as part of DOE's evaluation under EPCA's factors for 
determining whether new or amended standards would be economically 
justified. To the extent that commenters raised concern regarding the 
practicability and safety of certain developing technologies that 
address the orphaned water heater issue, DOE notes that its analysis 
for the prior residential furnaces rulemaking accounted for the 
potential of separate venting, limiting consideration of such 
developing technology to a sensitivity analysis.\18\
---------------------------------------------------------------------------

    \18\ See Appendix 8D of the TSD for the September 2016 Furnaces 
SNOPR (Available at: www.regulations.gov at Docket No. EERE-2014-BT-
STD-0031-0217).
---------------------------------------------------------------------------

    Installation costs may influence consumer decisions regarding fuel 
choice, and, at any time, a segment of consumers may choose replacement 
products that rely on a different fuel source than that of the unit 
being replaced. In a limited number of cases, a consumer facing a 
difficult installation situation may decide it to be impracticable (due 
to cost or other considerations, including local safety and building 
codes as suggested by Bradford White and AHRI) to replace a product 
with another that relies on the same fuel source. In such cases, the 
consumer may choose to replace the existing appliance with one 
utilizing a different fuel type as another viable solution. However, 
the mere potential for fuel switching does not serve as the basis for 
establishment of a performance-related feature under EPCA.
    As discussed in the August 2021 NOPIR, a consumer may replace a 
gas-fired furnace or water heater with an electric heat pump or water 
heater, thereby obviating the need for extensive changes to existing 
venting. 86 FR 48049, 48055-48056 (August 27, 2021). Consumers 
routinely make such choices, where they deem it appropriate, which 
reflects economic decision-making. Installation of an electric heat 
pump or water heater would provide the consumer with heated air or hot 
water, respectively, without the loss of usable space or aesthetics 
because it would obviate the need to make significant changes to the 
residential or commercial space. An electric heat pump or water heater 
would also be an option to provide the consumer with heated air or hot 
water,

[[Page 73963]]

respectively, were a condensing product to present a difficult 
installation situation. Stated another way, neither the desire to 
maintain a home's or business's current aesthetics and space 
configuration, nor the prospect of a difficult installation, would 
prevent a consumer from having heated air or water because in those 
instances an electric heat pump or electric water heater could be 
installed.
    Commenters offered a variety of views on the topic of fuel 
switching. The CA IOUs expressed their belief that fuel switching will 
occur in the market regardless of whether standards are changed, and 
that fuel switching should not be a rationale for designating non-
condensing technologies as a feature. (CA IOUs, No. 141 at p. 3)
    NRDC et al. commented that fuel switching from gas to electric is 
not a rationale that EPCA recognizes as a reason for classifying a 
technology as a feature and it should not prevent DOE from adopting a 
condensing standard. NRDC noted that in performing its economic 
analysis, DOE should account for such impacts, consistent with the 
Department's practice in prior rulemakings. (NRDC et al., No. 144 at p. 
2)
    CEC commented that EPCA does not authorize DOE to limit energy 
conservation standards to allow for the inefficient consumption of 
energy by certain fuel types; instead, standards must be ``designed to 
achieve the maximum improvement in energy efficiency that the Secretary 
determines is technologically feasible and economically justified.'' 
(CEC, No. 134 at p. 4)
    The State Attorneys General stated that nothing in EPCA precludes 
fuel switching, as long as DOE's standard would not eliminate the 
appliance of that fuel type entirely, and the commenters suggested that 
a consumer facing difficult installation could replace a gas-fired 
appliance with an electric unit to eliminate the need for extensive 
changes to existing venting. (State Attorneys General, No. 136 at p. 3) 
The State Attorneys General and ASAP et al. stated that fuel switching 
is a natural part of market operation for the subject appliances. 
(State Attorneys General, No. 136 at p. 3; ASAP et al., No. 143 at p. 
3) The State Attorneys General further stated the mere potential for 
fuel switching should not serve as the basis for establishment of a 
performance-related feature under EPCA. (State Attorneys General, No. 
136 at p. 4) ASAP et al. stated that the costs and benefits of 
switching to an electric heat pump can and should be evaluated as part 
of DOE's economic analysis when considering new or amended energy 
conservation standards, as the Department has done in prior 
rulemakings. (ASAP et al., No. 143 at p. 3)
    The Institute for Policy Integrity commented that the rulemakings 
would likely cause a small amount of fuel switching, but that 
theorizing about the extent of this impact would unnecessarily suggest 
that there is a ``threshold'' that violates EPCA. (Institute for Policy 
Integrity, No. 145 at pp. 1, 7) The commenter argued that ``fuel-type'' 
is not explicitly listed among the traits that standards may not make 
unavailable. (Id. at p. 6) In addition, the Institute for Policy 
Integrity suggested that the subset of consumers who would face 
aesthetically undesirable installations of condensing units maintain 
the option of relying on technological solutions or switching to a 
heating appliance based on a different fuel source to avoid those 
unwelcome changes, thereby maintaining the aesthetic of their space. 
(Id. at p. 5)
    In contrast, APGA et al. commented that DOE's ``fuel switching'' 
analysis is inconsistent with the statutory direction that any consumer 
impacts as a result of standards must be economically justified, but, 
according to these commenters, the analysis framed fuel switching as a 
means to avoid the changes in building design associated with a 
condensing standard, and fuel switching is used as a means to justify 
the costs of switching to a condensing system. (APGA et al., No. 140 at 
pp. 14-15) These commenters further stated that DOE's analysis 
underestimates the extent to which the previously proposed standards 
would lead to fuel switching. (Id.)
    AGA et al., citing 42 U.S.C. 6295(f)(1)(B)(iii), commented that 
Congress, in directing DOE to finalize standards for certain furnaces 
built after January 1, 1992, recognized that separate standards would 
be appropriate based on fuel and performance-related features and that 
Congress explicitly established separate standards for gas, oil, and 
electric furnaces (among others). (AGA et al., No. 135 at p. 13) AGA et 
al. further referenced EPCA's direction to issue separate standards for 
classes of products that ``consume a different kind of energy'' (i.e., 
type of fuel) than ``other covered products within such type'' and to 
issue separate standards for classes of products that have ``a 
performance-related feature which other products within such type (or 
class) do not have [.]'' (Id. at p. 14) AGA et al. asserted that these 
provisions, read together with the ``features'' provision, make clear 
that EPCA forecloses a standard that would force consumers to switch 
fuels or make natural-gas products unavailable to consumers who want to 
buy them for reasons beyond economics. (Id. at p. 22)
    AGA et al. additionally commented that if the DOE has evidence to 
support the expectation that the proposal will not lead to significant 
fuel switching, it should be included in the proposal to allow 
stakeholders a meaningful opportunity to comment. (Id. at p. 32) Crown 
Boiler, New Yorker Boiler, and U.S. Boiler asserted that DOE has not 
addressed its prior determination in the January 2021 Final 
Interpretive Rule that some enhanced level of fuel switching would 
occur. (Crown Boiler, No. 127 at pp. 3-4; New Yorker Boiler, No. 130 at 
p. 4; U.S. Boiler, No. 129 at p. 4) Crown Boiler, New Yorker Boiler, 
and U.S. Boiler suggested that fuel switching will result in a loss of 
reliability for many consumers since electric products are only as 
reliable as the electric grid they are connected to. (Crown Boiler, No. 
127 at p. 4; New Yorker Boiler, No. 130 at p. 4; U.S. Boiler, No. 129 
at p. 4)
    Bradford White stated that DOE appeared to put a fair amount of 
weight in past trends related to fuel switching continuing to be 
representative of what will occur in the future, but the commenter 
disagreed with any such assumption because it argued that significant 
activity at the State and local levels is driving all parties to shift 
to primarily electric products. (Bradford White No, 146 at p. 2)
    AGA et al. commented that some consumers may have no choice other 
than to switch to an electric appliance if it is untenable or 
infeasible, regardless of cost, to replace their non-condensing 
appliances with condensing ones, citing concerns ranging from 
aesthetics to functionality of living spaces. (AGA et al., No. 135 at 
p. 21) Bradford White commented that while electric water heaters can 
be used to provide hot water, there are challenges with using them in 
place of commercial gas water heaters. According to Bradford White, 
some of the limitations or problems to overcome include, but are not 
limited to, slower recovery rates, maximum temperature settings on heat 
pump water heaters, and panel and outlet upgrades needed to handle the 
necessary amp draw. (Bradford White, No. 146 at p. 3)
    Kramer commented that a fuel change to an electric unit is very 
frequently not economically feasible for lower income clients due to 
necessary electrical upgrades. Kramer elaborated that if the home only 
has 60 or 100 amp service, a breaker panel and electric meter

[[Page 73964]]

upgrade is necessary, which costs $2000 to $3000. (Kramer, No. 124 at 
p. 1)
    GEUAG asserted that the proposed interpretive rule constrains fuel 
choice and is, therefore, incompatible with the law and detrimental to 
consumers. (GEUAG, No. 132 at p. 3) GEUAG commented that the 
alternatives of electric resistance and heat pumps typically resort to 
electric resistance when cold weather conditions exist, negating much 
of the claimed benefit and putting lives at risk in extreme temperature 
events, asserting that grid reliability becomes an issue when switching 
to electric. (Id. at pp. 13-14)
    Once again, in response to these comments, DOE does not find 
potential fuel switching to be a basis to support a determination that 
non-condensing technology and associated venting constitute a 
performance-related feature. As stated in the August 2021 NOPIR, 
nothing in EPCA precludes such effects, as long as DOE's standard would 
not eliminate the appliance of that fuel type entirely. 86 FR 48049, 
48056 (August 27, 2021). In this case, interpretation of EPCA's 
``features'' provision that maintains non-condensing and condensing 
units under a single class of product or equipment would not eliminate 
residential furnaces or commercial water heaters that rely on natural 
gas, propane, or other any other fuel type, from the U.S. market. 
Notably, both non-condensing and condensing units rely on natural gas 
and propane as the fuel source. The interpretation adopted in this 
document would continue to preserve consumer choice, which DOE 
understands to be influenced by a variety of considerations, including 
market conditions, such as fuel prices. The final interpretive rule 
adopted in this document allows consumers to make the choice of when 
market forces (and installation costs) warrant replacement of a gas-
fired appliance with a comparable electric appliance.
    It bears noting that while EPCA recognizes that various fuel types 
exist in the appliance marketplace and provides certain protections, 
the statute itself does not act, nor does it mandate, that DOE take 
regulatory action to preclude such marketplace effects, except in 
limited cases expressly defined. In certain areas, Congress set 
statutory energy conservation standard levels for products, such as 
consumer water heaters (see 42 U.S.C. 6295(e)(1)) and consumer boilers 
(see 42 U.S.C. 6295(f)(3)), based on fuel type (e.g., gas, oil, 
electricity). EPCA also recognizes differences in fuel type under 42 
U.S.C. 6295(q)(1)(A), which provides for setting separate classes where 
appliances consume a different kind of energy from that consumed by 
other covered products within such type (or class).
    Where Congress required DOE to consider the potential impacts of 
fuel switching, it stated so explicitly. Congress directed DOE to 
prescribe a final rule not later than January 1, 1989, to establish an 
energy conservation standard for certain furnaces, i.e., furnaces 
(other than furnaces designed solely for installation in mobile homes) 
having an input of less than 45,000 Btu per hour and manufactured on or 
after January 1, 1992, which DOE determined not likely to result in a 
significant shift from gas heating to electric resistance heating with 
respect to either residential new construction or furnace replacement. 
(42 U.S.C. 6295(f)(1)(B)(i) and (iii)) This consideration of fuel 
switching was specific to smaller-capacity furnaces, rather than being 
placed in a more general provision of broader applicability. Further, 
this explicit direction to consider fuel switching did not preclude any 
and all fuel switching, only significant fuel shifting from gas to 
electric resistance heating.
    Conversely, ECPA's ``features'' provision at 42 U.S.C. 6295(o)(4) 
does not include fuel type within its ambit. Thus, Congress structured 
EPCA to recognize fuel-type distinctions and to create a level playing 
field, while balancing the need for overall energy savings. For these 
reasons, DOE finds the positions of GEUAG, AGA et al., and other 
commenters expressing similar views on DOE's statutory obligations 
regarding fuel switching to be an overly broad reading that the 
statutory text cannot support.
    Regarding the concerns raised by commenters about the safety of 
fuel switching and grid reliability, DOE notes that modern gas-fired 
central furnaces also require electricity to operate and would, 
therefore, be rendered inoperable during a power outage without an 
appropriately-sized back-up generator. Thus, while grid reliability may 
be a legitimate societal concern, it is not limited to any one specific 
fuel type.
    In response to concerns about using commercial electric water 
heaters in place of commercial gas-fired water heaters, DOE has 
concluded that solutions are available to resolve the potential issues 
raised by commenters. For example, DOE notes that issues related to the 
maximum temperature setting on a heat pump water heater could be 
mitigated by utilizing electric resistance heating as a backup or 
supplementary source to reach the desired outlet temperature. The 
concerns raised about the panel and outlet upgrades needed to handle 
the increased amp draw are appropriately considered as installation 
costs. Finally, the recovery rate will largely be a function of the 
rate at which the water heater provides heat to the water, so sizing an 
electric water heater with a heating rate comparable to that of the 
gas-fired water heater it is replacing should not result in any loss of 
recovery ability.
    Regarding the prevalence of fuel switching, DOE has typically found 
fuel switching to occur in a small number of cases in any given 
rulemaking, and the Department takes this potential into account as 
part of the analyses conducted to determine whether amended standards 
would be economically justified. For example, in the September 2016 
Furnaces SNOPR, DOE estimated the percentages of consumers that would 
switch from a residential non-weatherized gas furnace to either a 
residential heat pump or electric furnace, and from a commercial gas-
fired water heater to a commercial electric water heater (as a result 
of the existing gas-fired water heater being ``orphaned'') that would 
occur under the various potential amended standards scenarios under 
consideration.\19\ Similarly, in the May 2016 Commercial Water Heaters 
NOPR, DOE considered the potential for fuel switching from gas to 
electric water heating equipment and tentatively concluded that fuel 
switching was very unlikely for both storage and instantaneous water 
heaters. Therefore, DOE did not explicitly include fuel switching in 
its analyses for that rulemaking. 81 FR 34440, 34494-34495 (May 31, 
2016). DOE has determined its analytical methodologies to provide a 
robust assessment of potential fuel switching, and the Department 
stands by its results. Although the gas industry commenters have 
faulted these methodologies in the past for a variety of reasons, DOE 
has disagreed and responded to such challenges in past rulemakings.\20\
---------------------------------------------------------------------------

    \19\ See Appendix 8J of the TSD for the September 2016 Furnace 
SNOPR (Available at: www.regulations.gov at Docket No. EERE-2014-BT-
STD-0031-0217).
    \20\ For example, see the fuel switching analysis in the 
September 2016 Furnaces SNOPR. 81 FR 65720, 65792-65793 (Sept. 23, 
2016).
---------------------------------------------------------------------------

    Even if the Department had definitive evidence regarding the extent 
of difficult or impossible installation situations, loss of usable 
residential or commercial space, or fuel switching effects, DOE 
nonetheless had a strong statutorily-based rationale for its historical 
interpretation and the return

[[Page 73965]]

thereto. As consumer utility turns on the layperson's operation and 
interaction with the product (i.e., calling for and enjoying the heated 
air or water which the appliance in question provides) rather than type 
of combustion or venting, it follows that all furnaces and water 
heaters provide the same basic utility: Heated air or water.
    As discussed previously, utility is not determined through 
analyzing or making comparisons to considerations that impact 
installation, or costs that anyone, including the consumer, 
manufacturer, installer, or utility companies, may bear. Utility is 
determined through the benefits and usefulness the feature provides to 
the consumer while interacting with the product. This approach is 
consistent with EPCA's requirement for a separate and extensive 
analysis of economic justification for the adoption of any new or 
amended energy conservation standard (see 42 U.S.C. 6295(o)(2)-(3); 42 
U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 6316(a)). Moreover, as discussed in 
the following section, DOE has concluded that this approach is more 
consistent with the overall purposes of EPCA.

C. Purposes of EPCA

    In the August 2021 NOPIR, DOE tentatively concluded that it gave 
insufficient weight to other policy arguments in development of the 
January 2021 Final Interpretive Rule. 86 FR 48049, 48054 (August 27, 
2021). In particular, DOE expressed concern that tying the concept of 
``feature'' to a specific technology would effectively lock in the 
currently existing technology as the ceiling for product efficiency and 
eliminate DOE's ability to address technological advances that could 
yield significant consumer benefits in the form of lower energy costs 
while providing the same functionality/utility for the consumer. Id. 
(citing 81 FR 65720, 65752 (Sept. 23, 2016)). Because the statute 
effectively accords performance-related features a protected status, 
the Department must take great care when making a features 
determination.
    On this topic, A.O. Smith commented that the January 2021 Final 
Interpretive Rule imposes an artificial ceiling on energy efficiency 
that is well below the maximum improvement that the Department would 
likely determine is technologically feasible if it followed its 
longstanding interpretation. The commenter also argued that the January 
2021 Final Interpretive Rule would lock in an outdated and inefficient 
technology with no consumer benefit, an outcome contrary to EPCA. (A.O. 
Smith, No. 133 at p. 7) A.O. Smith added that the preservation of non-
condensing water heaters at the current minimum efficiency level would 
freeze the marketplace, reduce innovation, increase regulatory burden, 
and limit consumer choice. (Id. at p. 8)
    NEEA commented that establishing product classes based on non-
condensing technology or venting type would limit innovation and 
increase the cost of efficiency for both consumers and utility 
programs. (NEEA, No. 137 at p. 3) NEEA further stated that maintaining 
a single product class for condensing and non-condensing equipment 
will: (1) Continue to encourage the market to develop lower-cost 
solutions for the small percentage of installations that are 
challenging; (2) reduce the cost of efficiency for consumers and 
utility programs, and (3) result in overall cost and energy savings as 
more condensing equipment is installed. (Id.)
    CEC commented that finalizing the proposal from the August 2021 
NOPIR will ensure that DOE is able to continue to address technological 
advances that could lower energy costs (something which is especially 
important to low-income consumers) and maintain product utility. (CEC, 
No. 134 at p. 2)
    The State Attorneys General stated that the January 2021 Final 
Interpretive Rule unlawfully interpreted EPCA's statutory requirements 
and improperly constrained DOE's ability to adopt more stringent, 
updated efficiency standards for residential furnaces, commercial water 
heaters, and similarly-situated products and equipment. (State 
Attorneys General, No. 136 at p. 2) The State Attorneys General 
expressed concern that determining what constitutes a feature based 
solely on product technology, rather than how the consumer interacts 
with and benefits from a feature, could undermine the entire Appliance 
Standards Program, and they agreed that tying the concept of 
``feature'' to a specific technology would effectively lock in the 
currently existing technology as the ceiling for product efficiency and 
eliminate DOE's ability to address technological advances that could 
yield significant consumer benefits in the form of lower energy costs 
while providing the same functionality/utility for the consumer. (Id. 
at p. 4)
    The CA IOUs and ASAP et al. commented that designating a technology 
as a ``feature'' would hamper DOE's ability to increase standards in 
response to efficiency improvements, and that the proposed EPCA 
interpretation as presented in the August 2021 NOPIR better reflects 
EPCA's intent to increase standards as a means of ``promoting 
conservation measures when feasible.'' (CA IOUs, No. 141 at p. 2; ASAP 
et al., No. 143 at p. 3)
    In contrast, Bradford White disagreed with the contention that 
establishing non-condensing technology as a feature would limit 
technological innovation in the industry. The commenter pointed to 
condensing gas water heaters as an example, as that technology was 
nonetheless developed even though previous technologies were far more 
efficient than DOE and ENERGY STAR requirements. (Bradford White, No. 
146 at p. 2)
    AGA et al. commented that the proposed interpretation is based on a 
desired policy outcome that fails to adhere to structure Congress 
enacted into law, and that the proposal does not present a permissible 
interpretation of the statute. (AGA et al., No. 135 at p. 23) These 
commenters asserted that the separation of the condensing and non-
condensing product classes would allow DOE to focus on establishing the 
maximum feasible efficiency levels for each technology. (Id. at p. 19) 
AGA et al. also asserted that by separating condensing and non-
condensing units, DOE could evaluate the cost of increased efficiency 
for condensing units without considering the increased costs required 
to retrofit millions of structures. (Id. at p. 20) AGA et al. stated 
that any effort to promulgate energy conservation standards based on 
the proposed interpretation would be contrary to EPCA and could not 
withstand judicial scrutiny. (Id.)
    AHRI stated that separate product classes for condensing and non-
condensing products/equipment would not deter technical development or 
slow the adoption of condensing technologies, but it would protect 
consumers who do not have the ability change the technology used in 
their building. (AHRI, No. 139 at p. 1) In support of its position that 
a separate product class would not hinder the movement in the market 
towards condensing products when feasible, AHRI also commented that 
existing market data demonstrate a trend towards condensing furnaces 
where venting does not present a technical problem. (Id. at p. 3)
    GEUAG and APGA et al. asserted that utility and performance would 
be lessened under the interpretation proposed in the August 2021 NOPIR 
and disproportionately affect low-income consumers, which would be in 
contradiction with 42 U.S.C. 6295(o)(2)(B)(i). (GEUAG, No. 132 at p. 
12; APGA et al., No. 140 at p. 6)

[[Page 73966]]

    IER stated that there is no explanation provided for the assertion 
made by DOE that the January 2021 Final Interpretive Rule would impede 
innovation and the development of more efficient technologies, and IER 
further stated that the market is moving toward more efficient 
appliances. (IER, No. 138 at p. 7) In addition, IER argued that 
Congress's purposes and goals in enacting EPCA were not that energy 
efficiency should overtake all competing concerns. (Id. at p. 8).
    Crown Boiler, New Yorker Boiler, and U.S. Boiler reiterated their 
prior recommendations that DOE use ``compatibility with Category I 
venting'' as the feature that should be protected, stating that this 
approach would address the concern with potentially locking in a 
particular technology. (Crown Boiler, No. 127 at pp. 5-6; New Yorker 
Boiler, No. 130 at p. 6; U.S. Boiler, No. 129 at p. 6) Crown Boiler, 
New Yorker Boiler, and U.S. Boiler further commented that DOE's 
reliance on E.O. 13990 to initiate the review of the January 2021 Final 
Interpretive Rule suggests that DOE's reversal is rooted more in 
politics than in fault with the current rule. (Crown Boiler, No. 127 at 
p. 1; New Yorker Boiler, No. 130 at p. 1; U.S. Boiler, No. 129 at p. 
1).
    Similarly, APGA et al. commented that DOE cannot rely solely on the 
terms of E.O. 13990 as its justification for changing its position, and 
that DOE must follow the statute and not render ``policy choices for 
purely political reasons nor to rest them primarily upon unexplained 
policy preferences.'' (APGA et al., No. 140 at p. 5).
    Additionally, GEUAG stated that nothing has changed in the 
applicable legal standards and requirements that govern such 
determinations and asserted that DOE's decision is a result of changing 
policy preferences. The commenter stated that DOE cited E.O. 13990 as 
part of its rationale to justify its change in position, but argued 
that such executive actions cannot supersede existing statutes, such as 
EPCA, that protect consumers from regulatory overreach. (GEUAG, No. 132 
at p. 8).
    APGA et al. and GEUAG asserted that promotion of electrification is 
not an authorized objective under EPCA, and that the proposed 
interpretation would expand DOE's authority beyond that authorized by 
Congress. (APGA et al., No. 140 at pp. 2, 5. 6, 7, 11; GEUAG, No. 132 
at p. 5) GEUAG asserted that the proposed interpretation in the August 
2021 NOPIR would arbitrarily and unnecessarily erode the important role 
played by natural gas and propane in favor of energy sources that have 
significant and negative environmental and human rights issues, or 
require technologies that cannot meet demands currently served by 
natural gas and propane. GEAUAG also stated that the reliance on such 
alternative energy sources will put the United States in competition 
for rare earth minerals against those with policies in conflict with 
the best interests of Americans. (GEUAG, No. 132 at p. 3) (DOE 
understands this comment to be referencing the use of rare earth 
minerals in certain technologies that are commonly associated with 
electrification, such as batteries.) APGA et al. further commented that 
EPCA's purpose to conserve energy must be considered in terms of the 
product being regulated (gas products), not savings incurred by 
switching to a different product class (electric products). (APGA et 
al., No. 140 at p. 11).
    As stated previously, DOE initiated a re-review of the January 2020 
Final Interpretative Rule in response to E.O 13990. However, the final 
interpretation, which reinstates DOE's historical interpretation, is 
based solely on EPCA, review of public comments received, and the 
analysis presented in this document. Contrary to assertions from 
certain commenters, it is not based on political considerations or a 
policy to promote electrification. Instead, as explained in detail 
previously, it is based on what the Department has concluded to be the 
better reading of the ``features'' provision in light of EPCA's 
direction for DOE to establish new and amended energy conservation 
standards for covered products and equipment to achieve the 
congressional purpose of improving the energy efficiency of major 
appliances and certain other consumer products. (42 U.S.C. 6201(5)) It 
is further noted that EPCA directs DOE to regulate enumerated types of 
covered products and equipment, not specific subcategories of equipment 
tied to the technologies they utilize. Not surprisingly, different 
groups of commenters on the August 2021 NOPIR had diametrically opposed 
viewpoints as to the lawful interpretation of the relevant statutory 
provisions.
    In the 2016 Furnaces SNOPR, DOE expressed concern that separate 
standards based on preserving a technology used to produce heated air 
(or the associated type of venting) would not place any restriction on 
the use of non-condensing appliances and, therefore, would not be a 
meaningful standard, resulting in little or no change in products 
offered, their market shares, or energy savings. See 81 FR 65720, 
65752-65753 (Sept. 23, 2016). DOE remains concerned that determining 
features solely on product technology, rather than on how the consumer 
interacts with and benefits from the feature, could undermine the 
Appliance Standards Program established by EPCA.
    As previously discussed and identified by commenters, newer 
technologies are being developed and introduced into the market that, 
when mature could address issues of difficult installation (orphaned 
appliances in particular), thereby allowing consumers to switch from a 
non-condensing furnace to a condensing furnace while permitting 
continued use of existing common venting in a greater variety of 
applications. This venting technology may allow a consumer to obtain 
the efficiency of a condensing furnace using the existing venting in a 
residence by sharing venting space with a water heater. However, DOE 
also notes that such technology was not incorporated into the analysis 
conducted for the prior rulemakings and would include such technology 
in its analysis only after evaluating the technological feasibility of 
any such technology in future rulemakings.
    In response to Crown Boiler, New Yorker Boiler, and U.S. Boiler's 
suggestions to rely on venting capability as the ``feature,'' DOE 
previously determined that such an approach would increase the 
complexity and regulatory burden of its regulatory framework (e.g., the 
certification of appliances capable of operating with multiple 
categories of venting) with little benefit. 86 FR 4776, 4972. (Jan. 15, 
2021) Additionally, DOE notes that much of the same reasoning for 
rejecting an interpretation of the ``features'' provision to cover non-
condensing technology would apply. Venting compatibility is not an 
aspect of the product that is accessible to the layperson and is based 
on user operation and interaction with the product. The issues sought 
to be addressed by these commenters' recommendation are issues of cost 
related to installation and would result in preserving less-efficient 
technologies.
    If DOE is required to maintain separate product classes to preserve 
less-efficient technologies (i.e., if non-condensing products remain 
available), the development and advancement of such technologies may be 
slowed, if not stalled. As efficiencies are increased for non-
condensing appliances to near-condensing efficiency levels (i.e., 
higher efficiencies), small amounts of acidic condensate would form 
that would require upgrades similar to what is required for condensing 
systems. Thus, were the product and equipment classes tied to non-
condensing technology,

[[Page 73967]]

DOE's ability to increase efficiencies would be limited, if not 
forestalled entirely. Further, if separate product classes are 
maintained to preserve less-efficient technologies, then future 
advancements in the energy efficiency of covered products would become 
largely voluntary, an outcome in conflict with Congress's purposes and 
goals in enacting EPCA.
    Moreover, EPCA provides for consideration of the costs associated 
with difficult installations and the potential impact on consumers, 
including sub-groups of consumers, as part of the robust economic 
factors DOE is statutorily required to consider. As discussed, such 
installation costs are appropriately considered when comparing the 
savings in operating costs to any increase in the price of, or in the 
initial charges for, a covered product or article of covered equipment 
which are likely to result from the imposition of standards, as 
directed by EPCA. (42 U.S.C. 6295(o)(2)(B)(i)(II)) It is noted that 
EPCA requires DOE to consider whether its overall energy conservation 
standards are economically justified, not to assess economic 
justification in each individual instance, which is tantamount to what 
certain commenters would ask the agency to do.
    In response to comments about market trends moving towards 
condensing appliances, DOE takes into consideration such trends as part 
of the national impact analysis conducted to determine whether amended 
standards are justified under EPCA's economic factors. As explained in 
the withdrawn March 2015 Furnaces NOPR and September 2016 Furnaces 
SNOPR for residential furnaces, a key component of the national impact 
analysis is the trend in energy efficiency projected for the no-new-
standards case and each of the evaluated standards cases. 81 FR 65720, 
65796 (Sept. 23, 2016). In the withdrawn September 2016 Furnaces SNOPR, 
DOE projected growth in the national market share of condensing 
products in the base case analysis (i.e., a scenario in which the 
current standards are not amended). Id.\21\ The ``features'' provision 
directs DOE to consider the availability of products with certain 
attributes following the establishment of new or amended energy 
conservation standards. The consideration of market trends is 
appropriately addressed as part of the economic evaluation to estimate 
the costs and energy savings at a national level consistent with 42 
U.S.C. 6295(o)(2)(B)(i)(II) and 42 U.S.C. 6313(a)(6)(B)(ii)(II), not as 
part of the ``features'' consideration.
---------------------------------------------------------------------------

    \21\ See also Chapter 10 of the TSD to the September 2016 
Furnaces SNOPR (Available at: www.regulations.gov at Docket No. 
EERE-2014-BT-STD-0031-0217).
---------------------------------------------------------------------------

    Moreover, simply relying on the market to realize improvements in 
energy efficiency and related technological innovations would result in 
the Appliance Standards Program being largely voluntary, contrary to 
the purposes and goals of EPCA. The regulatory scheme prescribed by 
EPCA directs DOE to drive efficiencies beyond what the market provides 
where energy conservation would result in significant energy savings 
and are technologically feasible and economically justified. See 
generally 42 U.S.C. 6295(o); 42 U.S.C. 6313(a)(6)(A)-(C); 42 U.S.C. 
6316(a).
    Based on the foregoing discussion, DOE revises its interpretation 
of EPCA's ``features'' provision in the context of condensing and non-
condensing technology used in furnaces, water heating equipment, and 
similarly-situated appliances (where permitted by EPCA) along the lines 
discussed. Accordingly, DOE concludes that in the context of 
residential furnaces, commercial water heaters, and similarly-situated 
products/equipment, use of non-condensing technology (and associated 
venting) is not a performance-related ``feature'' for the purpose of 
the EPCA prohibitions at 42 U.S.C. 6295(o)(4) and 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa).

D. Other Topics

    In the August 2021 NOPIR, DOE stated that at the conclusion of this 
proceeding, the Department plans to again evaluate whether amended 
energy conservation standards would result in significant savings of 
energy, be technologically feasible, and be economically justified, 
consistent with its latest interpretation. 86 FR 48049, 48057 (August 
27, 2021).
    Regarding the petition-for-rulemaking process, the CA IOUs 
commented that DOE should produce explicit guidelines on what types and 
what quantity of evidence is necessary to be considered as a petition 
to change DOE policies and processes for DOE rulemakings, in order to 
avoid wasted time and funds. (CA IOUs, No. 141 at p. 2).
    A.O. Smith commented that the January 2021 reinterpretation 
disadvantages U.S.-based manufacturers against low-cost and subsidized 
products imported from outside the United States. (A.O. Smith, No. 133 
at p. 8) A.O. Smith also expressed concern that the January 2021 Final 
Interpretative Rule, if relied upon to set Federal efficiency 
standards, will invite many State petitions for exemption from Federal 
preemption in order to allow for stricter State regulations, given the 
low Federal standards that would be adopted. (Id.).
    GEUAG provided a number of criticisms of the economic analysis 
performed by DOE as part of past rulemakings to evaluate amended energy 
conservation standards. (GEUAG, No. 132 at pp. 9, 11) GEUAG also 
provided a number of comments regarding the economic analyses conducted 
as part of the withdrawn rulemaking notices, including comments on the 
assumptions relied on in the Monte Carlo analyses conducted as part of 
the national impact analysis, which GEUAG asserted inflated the 
estimated energy savings. (Id. at p. 9) Similarly, APGA et al. asserted 
that a condensing standard for gas products is not economically 
justified and questioned a number of aspects of the economic analyses 
conducted as part of the prior standards rulemakings. (APGA et al., No. 
140 at pp. 12-15).
    AGA et al. encouraged DOE to adopt minimum efficiency standards and 
related policies only after consideration of all relevant points of 
view, including the distributors of natural gas, whose desire for the 
efficient use of natural gas is matched only by their commitment to 
ensure minimum standards do not distort consumers choices away from 
natural gas to potentially more costly fuel sources. (AGA et al., No. 
135 at p. 3).
    Other commenters urged DOE to finalize the August 2021 NOPIR and 
proceed with rulemakings to set new energy efficiency standards 
expeditiously. The CA IOUs commented that DOE should not restart 
rulemakings for residential furnaces and commercial water heaters from 
scratch, because the previous analyses are still relevant, and new 
standards should be established. (CA IOUs, No. 141 at p. 3) The State 
Attorneys General and ASAP et al. urged DOE to finalize its proposed 
interpretive rule and proceed expeditiously towards updating efficiency 
standards for residential furnaces and commercial hot water heaters. 
(State Attorneys General, No. 136 at p. 4; ASAP et al., No. 143 at p. 
3) NEEA recommended that DOE finalize the August 2021 proposed 
interpretive rule as soon as possible and proceed expeditiously with 
the rulemakings for non-weatherized gas furnaces and commercial water 
heating equipment, which have the potential to result in significant 
energy savings. (NEEA, No. 137 at pp. 3-4) CEC likewise urged DOE to 
finalize the proposed interpretation as soon as possible and to 
consider energy savings,

[[Page 73968]]

economic justification, and emissions reductions with greater weight 
than the potential for fuel switching in all ongoing and upcoming 
rulemakings, unless otherwise explicitly directed by Congress. (CEC, 
No. 134 at pp. 3, 4) ASAP et al. commented that setting condensing 
standards have the potential to save U.S. consumers and businesses more 
than $100 billion on their energy bills through 2050 while reducing 
cumulative carbon dioxide emissions by more than 500 million metric 
tons. (ASAP et al., No 143 at p. 1).
    As discussed previously, given the multitude of covered products 
and equipment for which DOE is responsible, the Department has found 
the concept of ``feature'' to be very case-specific. 86 FR 4776, 4797 
(Jan. 15, 2021). As such, DOE finds that it would not be practicable, 
as suggested by the CA IOUs, to develop guidelines as to the type and 
degree of the information and data necessary to make a determination 
under the ``features'' provision.
    With regard to rulemakings for residential furnaces and commercial 
water heaters, as noted, DOE withdrew its March 12, 2015 proposed rule 
and September 23, 2016 supplemental proposed rule for energy 
conservation standards for non-weatherized gas furnace and mobile home 
gas furnaces, as well as its May 31, 2016 proposed rule for energy 
conservation standards for commercial water heating equipment, for 
further proceedings consistent with the interpretation contained in the 
January 2021 Final Interpretive Rule. 86 FR 4776, 4817 (Jan. 15, 2021); 
see also 86 FR 3873 (Jan. 15, 2021).
    As explained in this document, after a careful review of the 
available information and public comments received, DOE is adopting the 
interpretation as proposed in the August 2021 NOPIR, which reinstates 
its historical interpretation of the ``features'' provision. This 
change in approach should address any competition concerns or 
preemption waiver issues mentioned by A.O. Smith. With the finalization 
of this interpretation, DOE plans to once again evaluate whether 
amended energy conservation standards for the subject covered products/
equipment would result in significant savings of energy, be 
technologically feasible, and be economically justified, consistent 
with its latest interpretation. As always, DOE welcomes public comments 
from all interested parties and will take into account the viewpoints 
expressed in this proceeding. As part of that evaluation, DOE will 
consider the comments addressing the technical and economic analyses, 
as well as any associated assumptions.
    As explained in the August 2021 NOPR, in any future rulemaking, DOE 
will make clear that the rulemakings for residential furnaces and 
commercial water heating equipment have been subject to multiple rounds 
of public comment, including public meetings, and extensive records 
have been developed in the relevant dockets. (See Docket Number EERE-
2014-BT-STD-0031 and Docket Number EERE-2014-BT-STD-0042, 
respectively). Consequently, DOE wishes to reassure stakeholders that 
the information obtained through those earlier rounds of public 
comment, information exchange, and data gathering have not gone to 
waste. Instead, DOE anticipates building upon these existing records 
through further notice and comment rulemaking. Such an approach also 
reflects DOE's cognizance of the statutory deadlines associated with 
the energy conservation standards for residential furnaces and 
commercial water heating equipment. Further, any future rulemakings 
would evaluate potential energy conservation standards according to the 
requirements of EPCA and consistent with this document. Comments 
pertaining to the details of DOE's economic analyses will be addressed, 
as appropriate, in those individual energy conservation standards 
rulemakings.

III. Conclusion

    In summary, for this final interpretive rule, DOE has concluded 
that differences in cost or complexity of installation between 
different methods of venting (e.g., a condensing residential furnace 
versus a non-condensing residential furnace; a condensing commercial 
water heater versus a non-condensing commercial water heater) do not 
make any method of venting a performance-feature under 42 U.S.C. 
6295(o)(4) (or 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa); 42 U.S.C. 6316(a) 
for certain covered equipment). Relatedly, DOE has concluded that the 
possibility that installing an appliance that employs a particular 
method of venting (e.g., a non-condensing residential furnace, a non-
condensing commercial water heater) may be less costly or less complex 
than installing a product that employs a different method of venting 
(e.g., a condensing furnace; a condensing commercial water heater) does 
not justify separating the products/equipment into different product/
equipment classes under 42 U.S.C. 6295(q)(1) (or as applicable to 
certain covered equipment under 42 U.S.C. 6316(a)).
    Based on the foregoing discussion and careful consideration of 
available information and comments received, DOE hereby revises its 
interpretation of EPCA's ``features'' provision in the context of 
condensing and non-condensing technology used in furnaces, water 
heating equipment, and similarly-situated appliances (where permitted 
by EPCA) along the lines discussed previously elsewhere in this 
document. DOE concludes that in the context of residential furnaces, 
commercial water heaters, and similarly-situated products/equipment, 
use of non-condensing technology (and associated venting) is not a 
performance-related ``feature'' for the purpose of the EPCA 
prohibitions at 42 U.S.C. 6295(o)(4); 42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa); 42 U.S.C. 6316(a).
    DOE has determined that its interpretation is the better reading of 
the relevant language of EPCA and DOE's statutory obligation to 
establish energy conservation standards for covered products and 
equipment. Additionally, the interpretation allows DOE to consider 
more-efficient standards for certain products and equipment, consistent 
with the agency's statutory mandate.
    DOE is revising its application of the ``features'' provisions in 
42 U.S.C. 6295(o)(4) and 42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa) as an 
interpretive rule within the meaning of the Administrative Procedure 
Act (APA). 5 U.S.C. 551(4), 5 U.S.C. 553(b). DOE published the proposed 
interpretive rule in the Federal Register (86 FR 48049 (August 27, 
2021)) to solicit comment and to provide the public with a clear and 
transparent explanation of DOE's view of a specific legal question, 
thereby following a process similar to that which resulted in the 
January 2021 Final Interpretive Rule.

Review Under Executive Order 12866

    The Office of Information and Regulatory Affairs (OIRA) in the 
Office of Management and Budget (OMB) waived review of this 
interpretive rule under Executive Order 12866, ``Regulatory Planning 
and Review.'' 58 FR 51735 (Oct. 4, 1993).

IV. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this 
notification of final interpretive rule.

Signing Authority

    This document of the Department of Energy was signed on December 
20,

[[Page 73969]]

2021, by Kelly J. Speakes-Backman, Principal Deputy Assistant Secretary 
for Energy Efficiency and Renewable Energy, pursuant to delegated 
authority from the Secretary of Energy. That document with the original 
signature and date is maintained by DOE. For administrative purposes 
only, and in compliance with requirements of the Office of the Federal 
Register, the undersigned DOE Federal Register Liaison Officer has been 
authorized to sign and submit the document in electronic format for 
publication, as an official document of the Department of Energy. This 
administrative process in no way alters the legal effect of this 
document upon publication in the Federal Register.

    Signed in Washington, DC, on December 21, 2021.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2021-28007 Filed 12-28-21; 8:45 am]
BILLING CODE 6450-01-P