[Federal Register Volume 74, Number 167 (Monday, August 31, 2009)]
[Rules and Regulations]
[Pages 44914-44968]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19392]
[[Page 44913]]
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Part II
Department of Energy
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10 CFR Part 431
Energy Conservation Program: Energy Conservation Standards for
Refrigerated Bottled or Canned Beverage Vending Machines; Final Rule
Federal Register / Vol. 74, No. 167 / Monday, August 31, 2009 / Rules
and Regulations
[[Page 44914]]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2006-STD-0125]
RIN 1904-AB58
Energy Conservation Program: Energy Conservation Standards for
Refrigerated Bottled or Canned Beverage Vending Machines
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
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SUMMARY: The U.S. Department of Energy (DOE) is adopting new energy
conservation standards for refrigerated bottled or canned beverage
vending machines. DOE has determined that energy conservation standards
for these types of equipment would result in significant conservation
of energy, and are technologically feasible and economically justified.
DATES: The effective date of this rule is October 30, 2009, except that
the standards in 10 CFR 431.296 are effective August 31, 2011. The
incorporation by reference of certain publications listed in this rule
was approved by the Director of the Federal Register on October 30,
2009.
ADDRESSES: For access to the docket to read background documents, the
technical support document, transcripts of the public meetings in this
proceeding, or comments received, visit the U.S. Department of Energy,
Resource Room of the Building Technologies Program, 950 L'Enfant Plaza,
SW., 6th Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m.
and 4 p.m., Monday through Friday, except Federal holidays. Please call
Brenda Edwards at the above telephone number for additional information
regarding visiting the Resource Room. (Note: DOE's Freedom of
Information Reading Room no longer houses rulemaking materials.) You
may also obtain copies of certain previous rulemaking documents in this
proceeding (i.e., framework document, advance notice of proposed
rulemaking, notice of proposed rulemaking), draft analyses, public
meeting materials, and related test procedure documents from the Office
of Energy Efficiency and Renewable Energy's Web site at http://www1.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html.
FOR FURTHER INFORMATION CONTACT:
Charles Llenza, U.S. Department of Energy, Energy Efficiency and
Renewable Energy, Building Technologies Program, EE-2J, 1000
Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-2192,
[email protected].
Francine Pinto, Esq., U.S. Department of Energy, Office of General
Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585-
0121, (202) 586-9507, [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Final Rule and Its Benefits
A. The Standard Levels
B. Benefits to Customers of Beverage Vending Machines
C. Impact on Manufacturers
D. National Benefits
II. Introduction
A. Authority
B. Background
1. History of Standards Rulemaking for Beverage Vending Machine
Equipment
2. Miscellaneous Rulemaking Issues
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
C. Energy Savings
D. Economic Justification
1. Specific Criteria
2. Rebuttable Presumption
IV. Methodology and Discussion of Comments on Methodology
A. Market and Technology Assessment
1. Definitions Related to Refrigerated Beverage Vending Machines
2. Equipment Classes
B. Screening Analysis
C. Engineering Analysis
1. Approach
2. Analytical Models
D. Markups To Determine Equipment Price
E. Energy Use Characterization
F. Life-Cycle Cost and Payback Period Analyses
G. Shipments Analysis
1. Split Incentives
2. Sustainability of Sales Less Than 100 Thousand Units
3. Distribution of Equipment Classes and Sizes
4. Future Sales Decline
H. National Impact Analysis
1. Choice of Discount Rate
2. Discounting of Physical Values
I. Life-Cycle Cost Subgroup Analysis
J. Manufacturer Impact Analysis
K. Utility Impact Analysis
L. Employment Impact Analysis
M. Environmental Assessment
N. Monetizing Carbon Dioxide and Other Emissions Impacts
V. Discussion of Other Comments
A. Information and Assumptions Used in Analyses
1. Engineering Analysis
B. Benefits and Burdens
VI. Analytical Results and Conclusions
A. Trial Standard Levels
B. Significance of Energy Savings
C. Economic Justification
1. Economic Impact on Commercial Customers
2. Economic Impact on Manufacturers
3. National Impact Analysis
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
D. Conclusion
1. Class A Equipment
2. Class B Equipment
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act
1. Need for and Objectives of the Final Rule
2. Significant Issues Raised by Public Comments
3. Description and Estimated Number of Small Entities Regulated
4. Description and Estimate of Reporting, Recordkeeping, and
Other Compliance Requirements
5. Steps DOE Has Taken To Minimize the Economic Impact on Small
Manufacturers
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VIII. Approval of the Office of the Secretary
I. Summary of the Final Rule and Its Benefits
A. The Standard Levels
The Energy Policy and Conservation Act, as amended (42 U.S.C. 6295
et seq.; EPCA), directs the Department of Energy (DOE) to establish
mandatory energy conservation standards for refrigerated bottled or
canned beverage vending machines. (42 U.S.C. 6295(v)(1), (2) and (3))
These types of equipment are referred to collectively hereafter as
``beverage vending machines.'' Any such standard must be designed to
``achieve the maximum improvement in energy efficiency * * * which the
Secretary determines is technologically feasible and economically
justified.'' (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) Furthermore, the
new standard must ``result in significant conservation of energy.'' (42
U.S.C. 6295(o)(3)(B)) The standards in today's final rule, which apply
to all beverage vending machines, satisfy these requirements.
Currently, no mandatory Federal energy conservation
[[Page 44915]]
standards exist for the beverage vending machine equipment covered by
this rulemaking.
Table I.1 shows the standard levels that DOE is adopting today.
These standards will apply to all beverage vending machines
manufactured for sale in the United States, or imported to the United
States, starting 3 years after publication of the final rule.
Table I.1--Standard Levels for Beverage Vending Machines
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Proposed standard level ** maximum
Equipment class * daily energy consumption (MDEC) kWh/
day ***
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A.............................. MDEC = 0.055 x V + 2.56.[dagger]
B.............................. MDEC = 0.073 x V +
3.16.[dagger][dagger]
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* See section IV.A.2 of the NOPR for a discussion of equipment classes.
** ``V'' is the refrigerated volume (ft \3\) of the refrigerated bottled
or canned beverage vending machine, as measured by the American
National Standards Institute (ANSI)/Association of Home Appliance
Manufacturers (AHAM) HRF-1-2004, ``Energy, Performance and Capacity of
Household Refrigerators, Refrigerator-Freezers and Freezers.'' V is
the volume of the case, as measured in ARI Standard 1200-2006,
Appendix C.
*** Kilowatt hours per day.
[dagger] Trial Standard Level (TSL) 6.
[dagger][dagger] TSL 3.
B. Benefits to Customers of Beverage Vending Machines
Table I.2 indicates the impacts on commercial customers of today's
standards.
Table I.2--Implications of New Standards for Commercial Customers
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Energy
Equipment class conservation Total installed Total installed Life-cycle cost Payback period
standard cost $ cost increase $ savings $ years
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Class A....................................................... TSL 6 2,935 233 277 4.1
Class B....................................................... TSL 3 2,070 86 37 6.8
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The economic impacts on commercial customers (i.e., the average
life-cycle cost [LCC] savings) are positive for most equipment classes.
For example, fully cooled (Class A) medium-capacity vending machines--
the most common type currently being sold--have installed prices of
$2,625 and annual energy costs of $188, respectively at national
average values. To meet the new standards, DOE estimates that the
installed prices of such equipment will be $2,864, an increase of $239,
which will be offset by annual energy savings of approximately $69 and
an increase in maintenance and repair cost of $13.
C. Impact on Manufacturers
Using a real corporate discount rate of 7 percent, DOE estimates
the industry net present value (INPV) of the beverage vending machine
industry to be $44.1 million for Class A units, and $33.7 million for
Class B units (both figures in 2008$). For Class A machines, DOE
expects the impact of today's standards on the INPV of manufacturers of
beverage vending machines to be a loss of 18.0 to 25.1 percent ($7.9
million to $11.1 million) for Class A machines and a loss of 1.9 to 3.5
percent ($0.6 million to $1.2 million) for Class B machines. Based on
DOE's interviews with manufacturers of beverage vending machines, DOE
expects minimal plant closings or loss of employment as a result of the
standards.
D. National Benefits
DOE estimates that the standards will save approximately 0.159
quads (quadrillion, or 10 \15\) British thermal units (Btu) of energy
over 30 years (2012-2042). This is equivalent to all the energy
consumed by more than 830 thousand American households in a single
year.
By 2042, DOE expects energy savings from the standards to eliminate
the need for approximately 0.118 new 1,000-megawatt (MW) power plants.
These energy savings will result in cumulative greenhouse gas emission
reductions of approximately 9.6 million metric tons (Mt) of carbon
dioxide (CO2), an amount equal to that produced by
approximately 2.0 million cars every year. Additionally, the standards
will help alleviate air pollution by resulting in 3.28 kilotons (kt) of
cumulative nitrogen oxide (NOX) emission reductions and
between 0 and 0.188 tons of cumulative mercury (Hg) emission reductions
from 2012-2042. The estimated net present monetary values of these
emissions reductions (expressed in 2007$) are between $5.5 and $266.3
million for CO2, (expressed in 2007$), $354,000 and $3.6
million for NOX (expressed in 2007$), and $0 and $1.5
million for Hg (expressed in 2007$) at a 7-percent discount rate
(discounted to 2009). At a 3 percent discount rate, the estimated net
present values of these emissions reductions are between $11.3 and
$543.5 million (2007$) for CO2, $749,000 and $7.7 million
(2007$) for NOX, and $0 and $3.2 million (2007$) for Hg.
The national NPV of the standards is $0.182 billion using a 7
percent discount rate and $0.476 billion using a 3 percent discount
rate, cumulative from 2012-2057 in 2008$. This is the estimated total
value of future savings minus the estimated increased equipment costs,
discounted to 2009.
The benefits and costs of today's final rule can also be expressed
in terms of annualized (2008$) values from 2012-2042. Separate
estimates of values for Class A and Class B equipment are shown in
Table I.3 and Table I.4, respectively. In each table, the annualized
monetary values are the sum of the annualized national economic value
of operating savings benefits (energy, maintenance and repair),
expressed in 2008$, plus the monetary values of the benefits of carbon
dioxide emission reductions, otherwise known as the Social Cost of
Carbon (SCC) expressed as $19 per metric ton of carbon dioxide, in
2007$. The $19 value is a central interim value from a recent
interagency process. The derivation of this value is discussed in
section VI.C.6. Although summing the value of operating savings to the
values of CO2 reductions provides a valuable perspective,
please note the following: (1) The national operating savings are
domestic U.S. consumer monetary savings found in market transactions
while the CO2 value is based on a range of estimates of
imputed marginal social cost of carbon from $1.14 to $55 per metric ton
(2007$), which are meant to reflect, for the most part, the global
benefits of carbon dioxide reductions; (2) the national operating
savings are measured in 2008$ while the CO2 saving are
measured in 2007$; and (3) the assessments of operating savings and
CO2 savings are performed with different computer models,
leading to
[[Page 44916]]
different time frames for analysis. The present value of national
operating savings is measured for the period 2012-2057 (31 years from
2012 to 2042 inclusive, plus the lifetime of the longest-lived
equipment shipped in the 31st year), then converted the annualized
equivalent for the 31 years. The value of CO2, on the other
hand is meant to reflect the present value of all future climate
related impacts, even those beyond 2057.
Using a 7 percent discount rate for the annualized cost analysis,
the combined cost of the standards established in today's final rule
for Class A and Class B beverage vending machines is $24.0 million per
year in increased equipment and installation costs, while the
annualized benefits are $41.8 million per year in reduced equipment
operating costs and $9.0 million in CO2 reductions, for a
net benefit of $26.8 million per year. Using a 3 percent discount rate,
the cost of the standards established in today's final rule is $23.1
million per year in increased equipment and installation costs, while
the benefits of today's standards are $49.1 million per year in reduced
operating costs and $10.3 million in CO2 reductions, for a
net benefit of $36.3 million per year. The separate estimates of values
for Class A and Class B equipment are shown in Table I.3 and Table I.4
respectively.
Table I.3--Annualized Benefits and Costs for Class A Equipment
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Units
Primary estimate (AEO Low estimate (low High estimate (high -----------------------------------------------
Category reference case) growth case) growth case) Disc Period
Year dollars (percent) covered
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Benefits
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Annualized Monetized (millions$/ 37.7................... 34.2.................. 40.0.................. 2008.............. 7 31
year).
44.2................... 39.9.................. 46.8.................. 2008.............. 3 31
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Annualized Quantified.......... 0.25 CO2 (Mt).......... 0.25 CO2 (Mt)......... 0.25 CO2 (Mt)......... NA................ 7 31
0.07 NOX (kt).......... 0.07 NOX (kt)......... 0.07 NOX (kt)......... NA................ 7 31
0.004 Hg (t)........... 0.004 Hg (t).......... 0.004 Hg (t).......... NA................ 7 31
0.26 CO2 (Mt).......... 0.26 CO2 (Mt)......... 0.26 CO2 (Mt)......... NA................ 3 31
0.039 NOX (kt)......... 0.039 NOX (kt)........ 0.039 NOX (kt)........ NA................ 3 31
0.005 Hg (t)........... 0.005 Hg (t).......... 0.005 Hg (t).......... NA................ 3 31
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CO2 Monetized Value (at $19/ 7.9.................... 7.9................... 7.9................... 2007.............. 7 31
Metric Ton, millions$/year).
9.0.................... 9.0................... 9.0................... 2007.............. 3 31
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Total Monetary Benefits 45.5................... 42.1.................. 47.9.................. 2008 & 2007....... 7 31
(millions$/year)*.
53.2................... 48.9.................. 55.8.................. 2008 & 2007....... 3 31
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Qualitative
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Costs
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Annualized Monetized (millions$/ 19.6................... 19.6.................. 19.6.................. 2008.............. 7 31
year).
18.8................... 18.8.................. 18.8.................. 2008.............. 3 31
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Qualitative
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Net Benefits/Costs
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Annualized Monetized, including 26.0................... 22.6.................. 28.4.................. 2008 & 2007....... 7 31
Carbon Benefits* (million$/
year).
34.4................... 30.1.................. 36.9.................. 2008 & 2007....... 3 31
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Qualitative
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* Per the above discussion, this represents a simplified estimate that includes both 2007$ and 2008$.
Table I.4--Annualized Benefits and Costs for Class B Equipment
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Units
Primary estimate (AEO Low estimate (low High estimate (high -----------------------------------------------
Category reference case) growth case) growth case) Disc Period
Year dollars (percent) covered
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Benefits
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Annualized Monetized (millions$/ 4.1.................... 3.6................... 4.4................... 2008.............. 7 31
year).
4.9.................... 4.3................... 5.2................... 2008.............. 3 31
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Annualized Quantified.......... 0.03 CO2 (Mt).......... 0.03 CO2 (Mt)......... 0.03 CO2 (Mt)......... NA................ 7 31
0.01 NOX (kt).......... 0.01 NOX (kt)......... 0.01 NOX (kt)......... NA................ 7 31
0.001 Hg (t)........... 0.001 Hg (t).......... 0.001 Hg (t).......... NA................ 7 31
0.04 CO2 (Mt).......... 0.04 CO2 (Mt)......... 0.04 CO2 (Mt)......... NA................ 3 31
0.012 NOX (kt)......... 0.012 NOX (kt)........ 0.012 NOX (kt)........ NA................ 3 31
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0.001 Hg (t)........... 0.001 Hg (t).......... 0.001 Hg (t).......... NA................ 3 31
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CO2 Monetized Value (at $19/ 1.1.................... 1.1................... 1.1................... 2007.............. 7 31
Metric Ton, millions$/year).
1.3.................... 1.3................... 1.3................... 2007.............. 3 31
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Total Monetary Benefits 5.2.................... 4.7................... 5.6................... 2008 & 2007....... 7 31
(millions$/year)*.
6.1.................... 5.5................... 6.5................... 2008 & 2007....... 3 31
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Qualitative
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Costs
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Annualized Monetized (millions$/ 4.4.................... 4.4................... 4.4................... 2008.............. 7 31
year).
4.3.................... 4.3................... 4.3................... 2008.............. 3 31
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Qualitative
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Net Benefits/Costs
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Annualized Monetized, including 0.8.................... 0.3................... 1.1................... 2008 & 2007....... 7 31
Carbon Benefits (million$/
year)*.
1.9.................... 1.3................... 2.2................... 2008 & 2007....... 3 31
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Qualitative
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* Per the above discussion, this represents a simplified estimate that includes both 2007$ and 2008$.
II. Introduction
A. Authority
Title III of EPCA sets forth a variety of provisions designed to
improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309)
provides for the Energy Conservation Program for Consumer Products
Other Than Automobiles. The amendments to EPCA contained in the Energy
Policy Act of 2005 (EPACT 2005), Public Law 109-58, include new or
amended energy conservation standards and test procedures for some of
these products, and direct DOE to undertake rulemakings to promulgate
such requirements. In particular, section 135(c)(4) of EPACT 2005
amends EPCA to direct DOE to prescribe energy conservation standards
for beverage vending machines. (42 U.S.C. 6295(v))
Because of its placement in Part A of Title III of EPCA, the
rulemaking for beverage vending machine energy conservation standards
is bound by the requirements of 42 U.S.C. 6295. However, since beverage
vending machines are commercial equipment, DOE intends to place the new
requirements for beverage vending machines in Title 10 of the Code of
Federal Regulations (CFR), Part 431 (``Energy Efficiency Program for
Certain Commercial and Industrial Equipment''), which is consistent
with DOE's previous action to address the EPACT 2005 requirements for
commercial equipment. The location of the provisions within the CFR
does not affect either their substance or applicable procedure, so DOE
is placing them in the appropriate CFR part based on their nature or
type. DOE will refer to beverage vending machines as ``equipment''
throughout the notice because of their placement in 10 CFR part 431.
DOE publishes today's final rule pursuant to Title III, Part A of EPCA,
which provides for test procedures, labeling, and energy conservation
standards for beverage vending machines and certain other equipment.
The test procedures for beverage vending machines appear at sections
431.293 and 431.294.
EPCA provides criteria for prescribing new or amended standards for
beverage vending machines. As indicated above, any new or amended
standard for this equipment must be designed to achieve the maximum
improvement in energy efficiency that is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)) Additionally, EPCA
provides specific prohibitions on prescribing such standards. DOE may
not prescribe an amended or new standard for any equipment for which
DOE has not established a test procedure. (42 U.S.C. 6295(o)(3))
Further, DOE may not prescribe an amended or new standard if DOE
determines by rule that such standard would not result in ``significant
conservation of energy'' or ``is not technologically feasible or
economically justified.'' (42 U.S.C. 6295(o)(3)(A) and (B))
EPCA also provides that in deciding whether such a standard is
economically justified for equipment such as beverage vending machines,
DOE must, after receiving comments on the proposed standard, determine
whether the benefits of the standard exceed its burdens by considering,
to the greatest extent practicable, the following seven factors:
1. The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
2. The savings in operating costs throughout the estimated average
life of the covered equipment in the type (or class) compared to any
increase in the price, or in the initial charges for, or maintenance
expenses of, the equipment likely to result from the imposition of the
standard;
3. The total projected amount of energy savings likely to result
directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the products
likely to result from the imposition of the standard;
[[Page 44918]]
5. The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
6. The need for national energy conservation; and
7. Other factors the Secretary of Energy (Secretary) considers
relevant. (42 U.S.C. 6295(o)(2)(B)(i))
In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii) and
6316(a)), establishes a rebuttable presumption that any standard for
covered products is economically justified if the Secretary finds that
``the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy (and as applicable, water) savings during
the first year that the consumer will receive as a result of the
standard, as calculated under the test procedure * * *'' in place for
that standard.
EPCA further provides that the Secretary may not prescribe an
amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is ``likely to result
in the unavailability in the United States in any covered product type
(or class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States at the time of
the Secretary's finding.'' (42 U.S.C. 6295(o)(4) and 6316(e)(1))
Section 325(q)(1) of EPCA is applicable to promulgating standards
for most types or classes of equipment, including beverage vending
machines that have two or more subcategories. (42 U.S.C. 6295(q)(1) and
42 U.S.C. 6316(e)(1)) Under this provision, DOE must specify a
different standard level than that which applies generally to such type
or class of equipment for any group of products ``which have the same
function or intended use, if * * * products within such group--(A)
consume a different kind of energy from that consumed by other covered
products within such type (or class); or (B) have a capacity or other
performance-related feature which other products within such type (or
class) do not have and such feature justifies a higher or lower
standard'' than applies or will apply to the other products. (42 U.S.C.
6295(q)(1)(A) and (B)) In determining whether a performance-related
feature justifies such a different standard for a group of products,
DOE must consider ``such factors as the utility to the consumer of such
a feature'' and other factors DOE deems appropriate. (42 U.S.C.
6295(q)(1)) Any rule prescribing such a standard must include an
explanation of the basis on which DOE established such a higher or
lower level. (See 42 U.S.C. 6295(q)(2))
Federal energy conservation standards for commercial equipment
generally supersede State laws or regulations concerning energy
conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c);
42 U.S.C. 6316(e)(2)-(3)) DOE can, however, grant waivers of preemption
for particular State laws or regulations, in accordance with the
procedures and other provisions of section 327(d) of the Act. (42
U.S.C. 6297(d); 42 U.S.C. 6316(e)(2)-(3))
B. Background
1. History of Standards Rulemaking for Beverage Vending Machine
Equipment
As discussed in the notice of proposed rulemaking (NOPR), 74 FR
26022 (May 29, 2009) (the May 2009 NOPR), the EPACT 2005 amendments to
EPCA require that DOE issue energy conservation standards for the
equipment covered by this rulemaking, which would apply to equipment
manufactured 3 years after publication of the final rule establishing
the energy conservation standards. (42 U.S.C. 6295(v)(1), (2) and (3))
The energy use of this equipment has not previously been regulated by
Federal law.
Section 135(a)(3) of EPACT 2005 also amended section 321 of EPCA,
in part, by adding definitions for terms relevant to this equipment.
(42 U.S.C. 6291 (40)) EPCA defines ``refrigerated bottled or canned
beverage vending machine'' as ``a commercial refrigerator that cools
bottled or canned beverages and dispenses the bottled or canned
beverages on payment.'' (42 U.S.C. 6291 (40)) Section 136(a)(3) of
EPACT 2005 amended section 340 of EPCA, in part, by adding a definition
for ``commercial refrigerator, freezer, and refrigerator-freezer.''
During the course of this rulemaking, Congress passed the Energy
Independence Security Act of 2007 (EISA 2007), which the President
signed on December 19, 2007 (Pub. L. 110-140). Section 310(3) of EISA
2007 amended section 325 of EPCA in part by adding subsection 325(gg)
(42 U.S.C. 6295(gg)). This subsection requires any new or amended
energy conservation standards adopted after July 1, 2010, to
incorporate ``standby mode and off mode energy use.'' (42 U.S.C.
6295(gg)(3)(A)) In the NOPR, DOE stated that because any standards
associated with this rulemaking are required by August 2009, the energy
use calculations will not include ``standby mode and off mode energy
use.'' To include standby mode and off mode energy use requirements for
this rulemaking would take considerable analytical effort and would
likely require changes to the test procedure. Given the statutory
deadline, DOE has decided to address these additional requirements when
the energy conservation standards for beverage vending machines are
reviewed in August 2015. At that time, DOE will consider the need for
possible amendment in accordance with 42 U.S.C. 6295(m). (74 FR 26023)
DOE commenced this rulemaking on June 28, 2006, by publishing a
notice of a public meeting and of the availability of its framework
document for the rulemaking. 71 FR 36715. The framework document
described the approaches DOE anticipated using and issues to be
resolved in the rulemaking. DOE held a public meeting in Washington, DC
on July 11, 2006, to present the contents of the framework document,
describe the analyses DOE planned to conduct during the rulemaking,
obtain public comment on these subjects, and facilitate the public's
involvement in the rulemaking. After the public meeting, DOE also
allowed the submission of written statements in response to the
framework document.
On June 16, 2008, DOE published an advance notice of proposed
rulemaking (ANOPR) in this proceeding. 73 FR 34094 (the June 2008
ANOPR). In the June 2008 ANOPR, DOE sought comment on its proposed
equipment classes for the rulemaking, and on the analytical framework,
models, and tools that DOE used to analyze the impacts of energy
conservation standards for beverage vending machines. In conjunction
with the June 2008 ANOPR, DOE published on its Web site the complete
ANOPR technical support document (TSD), which included the results of
DOE's various preliminary analyses in this rulemaking. In the June 2008
ANOPR, DOE requested oral and written comments on these results and on
a range of other issues. DOE held a public meeting in Washington, DC,
on June 26, 2008, to present the methodology and results of the ANOPR
analyses and to receive oral comments from those who attended. The oral
and written comments DOE received focused on DOE's assumptions,
approach, and equipment class breakdown, and were addressed in detail
in the May 2009 NOPR.
In the May 2009 NOPR, DOE proposed new energy conservation
standards for beverage vending machines. 74 FR 26020. In conjunction
with the May 2009 NOPR, DOE also published on its Web site the complete
[[Page 44919]]
TSD for the proposed rule, which incorporated the final analyses that
DOE conducted, and contained technical documentation for each step of
the analysis. The TSD included the engineering analysis spreadsheets,
the LCC spreadsheet, and the national impact analysis spreadsheet. The
standards DOE proposed for beverage vending machines are shown in Table
II.1.
Table II.1--May 2009 Proposed Standard Levels for Beverage Vending
Machines
------------------------------------------------------------------------
Proposed standard level ** maximum
Equipment class * daily energy consumption (MDEC) kWh/
day ***
------------------------------------------------------------------------
A.............................. MDEC = 0.055 x V + 2.56.[dagger]
B.............................. MDEC = 0.073 x V +
3.16.[dagger][dagger]
------------------------------------------------------------------------
* See section IV.A.2 of the NOPR (74 FR 26027) for a discussion of
equipment classes.
** ``V'' is the refrigerated volume (ft\3\) of the refrigerated bottled
or canned beverage vending machine, as measured by ANSI/AHAM HRF-1-
2004, ``Energy, Performance and Capacity of Household Refrigerators,
Refrigerator-Freezers and Freezers.''
*** Kilowatt hours per day.
[dagger] TSL 6.
[dagger][dagger] TSL 3.
In the May 2009 NOPR, DOE identified issues on which it was
particularly interested in receiving comments and views of interested
parties. These included the magnitude of the estimated decline in INPV
and what impact this level could have on industry parties including
small businesses; whether the proposed linear equation used to describe
the maximum daily energy consumption standards should be based on a
two-point, three-point, or some other weighting strategy; whether the
proposed standard risks industry consolidation; how small business
manufacturers will be affected due to new energy conservation
standards; the potential compliance costs and other impacts to small
manufacturers that do not supply the high-volume customers of beverage
vending machines; the impacts on small manufacturers for possible
alternatives to the proposed rule; and whether the energy savings and
related benefits outweigh the costs, including potential manufacturer
impacts. After the publication of the May 2009 NOPR, DOE received
written comments on these and other issues. DOE also held a public
meeting in Washington, DC, on June 17, 2009, to hear oral comments on
and solicit information relevant to the proposed rule. The May 2009
NOPR included additional background information on the history of this
rulemaking. 74 FR 26023.
2. Miscellaneous Rulemaking Issues
a. Type of Standard
For the ANOPR, DOE received comments from interested parties
regarding the type of standards it would be developing as part of this
rulemaking. Some interested parties recommended that DOE set
prescriptive standards, while others suggested that the choice of
technologies used to achieve standards should be left to the discretion
of the manufacturer. (73 FR 34100)
In response, DOE noted in the ANOPR that EPCA provides that an
``energy conservation standard'' must be either (A) ``a * * * level of
energy efficiency'' or ``a * * * quantity of energy use,'' or (B), for
certain specified equipment, ``a design requirement.'' (42 U.S.C.
6291(6)) Thus, an ``energy conservation standard'' cannot consist of
both a design requirement and a level of efficiency or energy use. In
addition, beverage vending machines are not one of the specified types
of equipment for which EPCA allows a standard be set with a design
requirement. (42 U.S.C. 6291(6)(B), 6292(a)) Item (A) above also
indicates that, under EPCA, a single energy conservation standard
cannot have measures of both energy efficiency and energy use.
Furthermore, EPCA specifically requires DOE to base its test procedure
for this equipment on ANSI/American Society of Heating, Refrigerating
and Air-Conditioning Engineers (ASHRAE) Standard 32.1-2004, Methods of
Testing for Rating Vending Machines for Bottled, Canned or Other Sealed
Beverages. (42 U.S.C. 6293(b)(15)) The test methods in ANSI/ASHRAE
Standard 32.1-2004 consist of means to measure energy consumption, not
energy efficiency. (73 FR 34100)
During the NOPR public meeting, the Appliance Standards Awareness
Project (ASAP), stated that DOE's previous decisions to not allow
multi-part standards needs to be revisited, but not as part of this
rulemaking. Multi-part standards would allow performance standards and
design requirements to be established. (ASAP, Public Meeting
Transcript, No. 56 at p. 35) A notation in the form ``ASAP, No. 56 at
p. 35'' identifies an oral comment that DOE received during the June
17, 2008, NOPR Public Meeting. This comment was recorded in the public
meeting transcript in the docket for this rulemaking (Docket No. EERE-
2006-BT-STD-0125). This particular notation refers to a comment (1)
made during the public meeting by the Appliance Standards Awareness
Project; (2) recorded in document number 35, which is the public
meeting transcript filed in the docket of this rulemaking; and (3)
appearing on page 35 of document number 56. In a written comment co-
signed by Pacific Gas and Electric Company (PG&E), Southern California
Edison, Southern California Gas Company (SCGC), San Diego Gas and
Electric (SDGE), ASAP, and the National Resource Defense Council
(NRDC), hereafter the Joint Comment, signatories urged DOE to include a
design requirement for factory set controls in today's final rule.
(Joint Comment, No. 67 at p. 2) For the reasons given above, DOE
maintains that it does not have authority to develop standards that
consist of both a design requirement and a level of efficiency or
energy use. Instead, DOE has developed standards that would require
that each beverage vending machine be subject to a maximum level of
energy consumption, and manufacturers could meet these standards with
their own choice of design methods.
In response to the NOPR, the University of Southern Maine (USM)
recommended that DOE establish energy consumption standards that are
based on beverage vending machines that have no lights, with the
exception of lighting the coin slots. Or as an alternative, USM
suggested that the standards be based on a machine that has lights
controlled by proximity sensors that turn lights on only when
prospective purchasers are nearby. (USM, No. 52 at p. 1) USM also
supported setting a design standard that encourages the use of
refrigerant gases that offer the lowest total life-cycle impacts. (USM,
No. 52 at p. 1) As stated above, beverage vending machines are not one
of the specified equipment for which EPCA allows a standard to consist
of a design requirement. (42 U.S.C. 6291(6)(B), 6292(a))
b. Combination Vending Machines
Combination vending machines have a refrigerated volume for the
purpose of cooling and vending ``beverages in a sealed container,'' and
are therefore covered by this rule. However, beverage vending is not
their sole function. Combination vending machines also have non-
refrigerated volumes for the purpose of vending other, non-``sealed
beverage'' merchandise. In the ANOPR, DOE addressed several comments
from interested parties regarding combination vending machines.
Specifically, these parties were concerned that regulating vending
machines that contain both refrigerated and non-refrigerated products
could result in confusion
[[Page 44920]]
about what this rulemaking covers, or could result in manufacturers
taking advantage of loopholes to produce equipment that does not meet
the standards. In response, DOE stated that the language used in EPCA
to define beverage vending machines is broad enough to include any
vending machine, including a combination vending machine, as long as
some portion of that machine cools bottled or canned beverages and
dispenses them upon payment. (42 U.S.C. 6291 (40)) DOE interprets this
language to cover any vending machine that can dispense at least one
type of refrigerated bottled or canned beverage, regardless of the
other types of vended products (some of which may not be refrigerated).
73 FR 34105-06.
At the NOPR public meeting, Dixie-Narco stated that combination
vending machines were not specifically included in the analysis, which
focused on glass front and stack-style beverage vending machines, and
should be studied further. (Dixie-Narco, Public Meeting Transcript, No.
56 at p. 204) Dixie-Narco asserted that the existing formulas for Class
A and Class B machines create an energy threshold that cannot be met by
combination machines. Dixie-Narco explained that with combination
machines, the entire cabinet is illuminated, but they typically have
smaller refrigerated volumes compared to other vending machines with
similar exterior dimensions. Dixie-Narco suggested creating a Class C
equipment class for zone-cooled glass front vending machines. It
proposed the following equation: MDEC = 0.073 x V + 3.5. Dixie-Narco
also stated that it is open to other possible solutions suggested by
DOE or other concerned parties. (Dixie-Narco, No. 64 at p. 3) Coca-Cola
stated that combination vending machines may not scale down in
efficiency because refrigeration components may not be available in
small sizes. (Coca-Cola, Public Meeting Transcript, No. 56 at p. 210)
Dixie-Narco noted that combination vending machines are not typically
purchased by Coca-Cola and PepsiCo, and are manufactured by a group of
manufacturers different from the beverage vending machine
manufacturers. Dixie-Narco also stated that shipments for combination
vending machines are very small. (Dixie-Narco, Public Meeting
Transcript, No. 56 at pp. 204, 212)
In the analysis for the proposed rule, DOE did not consider
combination vending machines as a separate equipment class. Rather,
they were considered with all other Class A and Class B beverage
vending machines. However, based on comments received, DOE recognizes
that the design and manufacture of combination vending machines may be
challenged by less component availability compared to other beverage
vending machines. DOE concludes that combination vending machines have
a distinct utility that limits the energy efficiency improvement
potential possible for such beverage vending machines. While more
efficient combination vending machines are technologically feasible,
DOE does not have the data needed to estimate either the energy
efficiency improvement potential or the cost of more efficient designs
of combination vending machines. Furthermore, none of the interested
parties' comments provided an economic analysis demonstrating that
efficiency standards for such beverage vending machines would be cost-
justified. Without engineering cost and efficiency data, DOE was not
able to perform an analysis of the impacts of standards on combination
vending machines. Thus, DOE is not able to determine whether energy
conservation standards for combination vending machines are
economically justified and would result in significant energy savings.
Based on the above, DOE concludes that combination vending machines are
a class of beverage vending machines, and, since DOE cannot determine
whether standards would meet EPCA's statutory criteria, DOE is not
setting standards for combination vending machines at this time.
Instead, DOE is reserving standards for combination vending machines.
EPCA does require that, not later than 6 years after issuance of any
final rule establishing or amending a standard, the Secretary shall
publish either a notice of determination that standards for the product
do not need to be amended or a notice of proposed rulemaking including
new proposed standards. 42 U.S.C. 6295(m).
So that interested parties understand what constitutes a
combination vending machine, DOE is incorporating into today's final
rule a definition for combination vending machine, and is modifying the
definitions of Class A and Class B beverage vending machines (see
section IV.A.2). DOE adopts the following definition for combination
vending machine: ``Combination vending machine means a refrigerated
bottled or canned beverage vending machine that also has non-
refrigerated volumes for the purpose of vending other, non-``sealed
beverage'' merchandise.''
DOE notes that this definition for combination vending machine
could be refined if DOE initiates a rulemaking proceeding that
evaluates energy conservation standards for combination vending
machines.
c. Installed Base
USA Technologies stated that it does not believe that significant
energy savings will be achieved by the standard unless the installed
base is included. (USA Technologies, Public Meeting Transcript, No. 56
at p. 16)
DOE acknowledges that additional energy savings can be obtained by
regulating the installed base of beverage vending machines. This would
require existing, used machines to be rebuilt or refurbished to comply
with the standards. However, in the ANOPR, DOE carefully considered its
authority to establish energy conservation standards for rebuilt and
refurbished beverage vending machines and concluded that its authority
does not extend to rebuilt and refurbished equipment. (73 FR 34106-07)
As stated in the ANOPR, throughout the history of the energy
conservation standards program, DOE has not regulated used consumer
products or commercial equipment that has been refurbished, rebuilt, or
undergone major repairs, since EPCA only covers new covered equipment
distributed in commerce. Therefore, for this final rule, DOE maintains
that rebuilt or refurbished beverage vending machines are not new
covered equipment under EPCA and, therefore, are not subject to DOE's
energy conservation standards or test procedures.
d. Rating Conditions
In the ANOPR, DOE stated that it planned to use a 75 [deg]F/45 RH
rating condition for all beverage vending machines covered by this
rulemaking. (73 FR 34102) In a written comment on the NOPR, the
National Automatic Merchandising Association (NAMA) stated that these
rating conditions were appropriate. (NAMA, No. 65 at p. 3) Dixie-Narco
also commented that it supports the 75 [deg]F/45 percent relative
humidity (RH) rating condition because it is a more realistic
temperature for measuring energy efficiency compared to the 90 [deg]F/
65 percent RH condition. Therefore, for this final rule, DOE continues
to use the 75 [deg]F/45 RH rating condition for all beverage vending
machines covered by this rulemaking.
e. Certification and Enforcement
Regal Beloit asked how certification and enforcement will be
conducted for the energy conservation standards that DOE establishes
for beverage vending machines. (Regal Beloit, No. 59 at p. 1)
To enforce energy conservation standards, DOE establishes both
[[Page 44921]]
generally applicable regulations that apply to various types of
products or equipment covered by standards, as well as a limited number
of product-specific requirements. DOE has not adopted requirements that
apply to beverage vending machines (an EPACT 2005 addition to the
program). DOE is developing enforcement regulations for the EPACT 2005
equipment, which it expects will be based on the existing enforcement
regulations that require manufacturers to certify compliance with the
standards by filing two separate documents: (1) A compliance statement
in which the manufacturer certifies its equipment meets the
requirements; and (2) a certification report in which the manufacturer
provides equipment-specific information, such as the model number,
energy consumption and other model specific information that would
enable DOE to determine which equipment class and standard the
equipment is subject to and whether the equipment meets the standard.
In instances where there are questions whether equipment meets the
standards, existing regulations require DOE to consult with the
manufacturer. If DOE remains unsatisfied with the manufacturer's
explanation for the alleged noncompliance, DOE may test units of the
allegedly non-complying product or equipment, to determine whether it
meets the applicable standard. After DOE has completed testing, the
manufacturer has the option to conduct additional tests for DOE to
consider. DOE has never had to conduct enforcement testing, as it has
been able to resolve all issues with manufacturers prior to taking that
step.
The beverage vending machine standards will go into effect 3 years
after the publication of the final rule. DOE anticipates that it will
have enforcement regulations in place, applicable to beverage vending
machines, by that time. But if such regulations are not in place when
the standards go into effect, manufacturers will not be required to
report to DOE. Moreover, if there is a question regarding compliance
with the standards, DOE will confer with the manufacturer before
pursuing enforcement action. A violation of these standards could
subject a manufacturer to injunctive action or other relief. See 42
U.S.C. 6302-6305.
III. General Discussion
A. Test Procedures
On December 8, 2006, DOE published a final rule (the December 2006
final rule) in the Federal Register that incorporated by reference
ANSI/ASHRAE Standard 32.1-2004, with two modifications, as the DOE test
procedure for this equipment. 71 FR 71340, 71375; 10 CFR 431.294. In
section 6.2 of ANSI/ASHRAE Standard 32.1-2004, Voltage and Frequency,
the first modification specifies that equipment with dual nameplate
voltages must be tested at the lower of the two voltages only. 71 FR
71340, 71355 The second modification specifies that (1) any measurement
of ``vendible capacity'' of refrigerated bottled or canned beverage
vending machines must be in accordance with the second paragraph of
section 5 of ANSI/ASHRAE Standard 32.1-2004, Vending Machine Capacity;
and (2) any measurement of ``refrigerated volume'' of refrigerated
bottled or canned beverage vending machines must be in accordance with
the methodology specified in section 5.2, Total Refrigerated Volume
(excluding subsections 5.2.2.2 through 5.2.2.4) of ANSI/AHAM HRF-1-
2004, ``Energy, Performance and Capacity of Household Refrigerators,
Refrigerator-Freezers and Freezers.''
The current version of ANSI/ASHRAE Standard 32.1-2004 defines
standard bottled, canned, or other sealed beverage storage capacity;
establishes uniform methods of testing for determining laboratory
performance of vending machines for bottled, canned, or other sealed
beverages; and defines three tests/test conditions, as seen in Table
III.1.
Table III.1--ANSI/ASHRAE Standard 32.1-2004--Standard Test Conditions
----------------------------------------------------------------------------------------------------------------
Energy consumption
Test and pretest conditions tests Vend test Recovery test
----------------------------------------------------------------------------------------------------------------
Ambient Temperature.................. Perform twice: At 90 90 2 90 2
2 [deg]F [deg]F (32.2 1 minus> 1 [deg]C). minus> 1 [deg]C).
[deg]C) and at 75
[deg]F 2
[deg]F (23.9 1 [deg]C).
Relative Humidity.................... 65 5% for 65 5%..... 65 5%.
90 2
[deg]F test and 45
5% for 75
2 [deg]F
test.
Reloaded Product Temperature......... ....................... 90 1 90 1
[deg]F (32.2 0.5 [deg]C). minus> 0.5 [deg]C).
Average Beverage Temperature (for 36 1 40 [deg]F or less (4.4 33-40 [deg]F (0.6-4.4
test). [deg]F (2.2 0.5 [deg]C) Temperature. Temperature.
Throughout Test.
Average Beverage Temperature (for Not Applicable......... 36 1 36 1
pretest conditions). [deg]F (2.2 0.6 [deg]C) minus> 0.6 [deg]C)
Pretest Conditions. Pretest Conditions.
----------------------------------------------------------------------------------------------------------------
During the NOPR public meeting, ASAP stated that DOE's test
procedures for beverage vending machines should be revised to capture
technologies such as variable speed technologies and advanced controls.
ASAP stated that there are energy savings that are not being achieved
because the test procedure does not account for these types of
technologies. (ASAP, Public Meeting Transcript, No. 56 at p. 36) In
addition, Coca-Cola stated that the DOE test procedure does not
accurately reflect actual operating conditions, because it does not
regulate or dictate the control of the operating methods for all the
powered elements in the equipment. (Coca-Cola, Public Meeting
Transcript, No. 56 at p. 147) Coca-Cola also stated that lighting
controls would not save as much energy in real world applications as
the test procedure indicates, resulting in ``artificially low'' test
results. (Coca-Cola, No. 63 at p. 1) Coca-Cola commented that very few
of its vending machines go into applications where they are inactive
for long periods of time. (Coca-Cola, Public Meeting Transcript, No. 56
at p. 193) For these reasons, Coca-Cola and NAMA conclude that TSL 6
for Class A machines is not ``practically feasible.'' (Coca-Cola, No.
63 at p. 1 and NAMA, No. 65 at p. 3) The Joint Comment recommends that
the next revision to the current test procedure address; (1) the
limitations of steady-state testing conditions, (2) the current test
procedure's insufficient representation of real world conditions, and
(3) the capture of increased energy use as a result of future, energy
intensive beverage vending machine features, such as interactive
displays. (Joint Comment, No. 67 at p. 4) Elstat stated that
prohibiting the use of standby and off mode power does not support the
goal of reduced energy consumption in
[[Page 44922]]
beverage vending machines, and recommends that DOE revisit the use of
energy management controls in 2010, or within one year of the rule
statutory deadline (Elstat, No. 62 at p. 1) DOE notes, however, that it
is not prohibiting the use of standby and off mode power consumption,
but rather is not including standby mode and off mode power consumption
in its calculation of energy use. As stated in the May 2009 NOPR, DOE
has decided to address these additional requirements when the energy
conservation standards for beverage vending machines are reviewed in
August 2015 (see section II.B.1) and, as described below, must review
the test procedures by 2013.
As stated above, DOE's test procedure for refrigerated beverage
vending machines is based on ANSI/ASHRAE Standard 32.1-2004. Section
302(a) of EISA 2007 amended section 323 of EPCA, in part, by adding new
subsection 323(b)(1). (42 U.S.C. 6293(b)(1)) This subsection provides
that the Secretary shall review test procedures at least once every 7
years. Therefore, the test procedure for refrigerated beverage vending
machines must be reviewed by December 8, 2013, to determine whether an
amendment is necessary. In addition, DOE is aware that ASHRAE, via its
Standards Project Committee 32.1, is working on an update to ANSI/
ASHRAE Standard 32.1-2004. While specific changes to ASHRAE Standard
32.1-2004 are unknown at this time, DOE understands that the beverage
vending machine industry is working closely with ASHRAE to develop an
update to this test procedure. As part of the 7-year review of the test
procedures for refrigerated beverage vending machines, DOE will
consider any updates to ASHRAE Standard 32.1 standard, as well as any
technologies to reduce energy consumption and/or increase energy
efficiency and determine whether the test procedure and/or measure of
energy efficiency warrant revisions.
B. Technological Feasibility
1. General
As stated above, any standards that DOE establishes for beverage
vending machines must be technologically feasible. (42 U.S.C.
6295(o)(2)(A) and (o)(3)(B); 42 U.S.C. 6316(e)(1)) DOE considers a
design option to be technologically feasible if it is in use by the
respective industry or if research has progressed to the development of
a working prototype. ``Technologies incorporated in commercially
available equipment or in working prototypes will be considered
technologically feasible.'' 10 CFR part 430, subpart C, appendix A,
section 4(a)(4)(i).
This final rule considers the same design options as those
evaluated in the May 2009 NOPR. (See chapter 4 of the TSD.) All the
evaluated technologies have been used (or are being used) in
commercially available products or working prototypes. Therefore, DOE
has determined that all of the efficiency levels evaluated in this
notice are technologically feasible.
2. Maximum Technologically Feasible Levels
As required by EPCA, (42 U.S.C. 6295(p)(2) and 42 U.S.C.
6316(e)(1)) in developing the May 2009 NOPR, DOE identified the energy
use levels that would achieve the maximum reductions in energy use that
are technologically feasible (``max-tech'' levels) for beverage vending
machines. 74 FR 26025. For today's final rule, the max-tech levels for
all classes are the levels provided in Table III.2. DOE identified
these maximum technologically feasible levels for the equipment classes
analyzed as part of the engineering analysis (chapter 5 of the TSD).
For both equipment classes, DOE applied the most efficient design
options available for energy-consuming components.
Table III.2--Max-Tech Energy Use Levels
------------------------------------------------------------------------
Equipment class Max-tech level kWh/day *
------------------------------------------------------------------------
A................................ MDEC = 0.045 x V + 2.42.
B................................ MDEC = 0.068 x V + 2.63.
------------------------------------------------------------------------
``V'' is the refrigerated volume of the refrigerated bottled or canned
beverage vending machine, as measured by ANSI/AHAM HRF-1-2004.
* Kilowatt hours per day.
C. Energy Savings
DOE forecasted energy savings in its national energy savings (NES)
analysis through the use of a spreadsheet tool discussed in the May
2009 NOPR. 74 FR 26020, 26039-43, 26057.
One criterion that governs DOE's adoption of standards for
refrigerated beverage vending machines is the standard must result in
``significant conservation of energy.'' (42 U.S.C. 6295(o)(3)(B) and 42
U.S.C. 6316(e)(1)) While EPCA does not define the term ``significant,''
the U.S. Court of Appeals in Natural Resources Defense Council v.
Herrington 768 F.2d 1355, 1373 (DC Cir. 1985) indicated that Congress
intended ``significant'' energy savings in this context to be savings
that were not ``genuinely trivial.'' DOE's estimates of the energy
savings for energy conservation standards at each of the TSLs in
today's final rule indicate that the energy savings each would achieve
are nontrivial. Therefore, DOE considers these savings ``significant''
within the meaning of section 325 of EPCA.
D. Economic Justification
1. Specific Criteria
As noted earlier, EPCA provides seven factors to evaluate in
determining whether an energy conservation standard for refrigerated
beverage vending machines is economically justified. (42 U.S.C.
6295(o)(2)(B)(i) and 42 U.S.C. 6316(e)(1)) The following sections
discuss how DOE has addressed each of those seven factors in this
rulemaking.
a. Economic Impact on Commercial Customers and Manufacturers
DOE considered the economic impact of the new refrigerated beverage
vending machines standards on commercial customers and manufacturers.
For customers, DOE measured the economic impact as the change in
installed cost and life-cycle operating costs, i.e., the LCC. (See
sections IV.F and VI.C.1.a and chapter 8 of the TSD.) DOE investigated
the impacts on manufacturers through the manufacturer impact analysis
(MIA). (See sections IV.J and VI.C.2, and chapter 13 of the TSD.) The
economic impact on commercial customers and manufacturers is discussed
in detail in the May 2009 NOPR. 74 FR 26033-38, 26039-26044, 26044-47,
26050-53, 26053-56, 26063-67.
b. Life-Cycle Costs
DOE considered life-cycle costs of beverage vending machines, as
discussed in the May 2009 NOPR. 74 FR at 26033-38, 26050-53
DOE calculated the sum of the purchase price and the operating
expense (discounted over the lifetime of the equipment) to estimate the
range in LCC benefits that commercial customers would expect to achieve
due to the standards.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for imposing an energy conservation standard, EPCA also
requires DOE, in determining the economic justification of a standard,
to consider the total projected energy savings that are expected to
result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III) and
42 U.S.C. 6316(e)(1)) As in the May 2009 NOPR (74 FR 26056-57), for
today's final rule, DOE used the NES spreadsheet results in its
consideration of total projected
[[Page 44923]]
savings that are directly attributable to the standard levels DOE
considered.
d. Lessening of Utility or Performance of Equipment
In selecting today's standard levels, DOE sought to avoid new
standards for beverage vending machines that would lessen the utility
or performance of that equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and
42 U.S.C. 6316(e)(1)); 74 FR 26059. Today's standards do not involve
changes in design or unusual installation requirements that would
reduce the utility or performance of the equipment.
e. Impact of Any Lessening of Competition
DOE considers any lessening of competition likely to result from
standards. Accordingly, as discussed in the May 2009 NOPR (74 FR 26059,
26064-65, 26070-71), DOE requested that the Attorney General transmit
to the Secretary a written determination of the impact (if any) of
lessening of competition likely to result from today's standard,
together with an analysis of the nature and extent of such impact. (42
U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii) and 42 U.S.C. 6316(e)(1))
To assist the Attorney General in making such a determination, DOE
provided the Department of Justice (DOJ) with copies of May 2009
proposed rule and the NOPR TSD for review. (DOJ, No. 61 at pp. 1-2) The
Attorney General's response is discussed in section VI.C.5 and is
reprinted at the end of this rule. For Class A machines, DOJ concluded
that the proposed TSL 6 could potentially lessen competition. DOJ
requested that DOE ensure that the standard it adopts for Class A
beverage vending machines will not require access to intellectual
property owned by an industry participant, which would place other
industry participants at a comparative disadvantage. For Class B
machines, DOJ does not believe the proposed standard would likely lead
to a lessening of competition. Compliance with a lesser standard does
not appear to raise similar concerns.
f. Need of the Nation To Conserve Energy
In considering standards for refrigerated beverage vending
machines, the Secretary must consider the need of the Nation to
conserve energy. (42 U.S.C. 6295(o)(2)(B)(i)(VI) and 42 U.S.C.
6316(e)(1)) The Secretary recognizes that energy conservation benefits
the Nation in several important ways. The non-monetary benefits of the
standards are likely to be reflected in improvements to the security
and reliability of the Nation's energy system. Today's standards will
also result in environmental benefits. DOE has considered these factors
in adopting today's standards.
g. Other Factors
In determining whether a standard is economically justified, EPCA
directs the Secretary to consider any other factors deemed relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(VII) and 42 U.S.C. 6316(e)(1)) In adopting
today's standard, DOE considered LCC impacts on identifiable groups,
such as customers of different business types who may be
disproportionately affected by any national energy conservation
standard. In particular, DOE examined the LCC on businesses with high
financing costs and low energy prices that may not be able to afford a
significant increase in the purchase price (``first cost'') of beverage
vending machines. Some of these customers may retain equipment past its
useful life. Large increases in first cost could also preclude the
purchase and use of equipment entirely. DOE identified no factors for
analysis other than those already considered above.
2. Rebuttable Presumption
Section 325(o)(2)(B)(iii) of EPCA states that there is a rebuttable
presumption that an energy conservation standard is economically
justified if the additional cost to the consumer that meets the
standard level is less than three times the value of the first-year
energy (and as applicable, water) savings resulting from the standard,
as calculated under the applicable DOE test procedure. (42 U.S.C.
6295(o)(2)(B)(iii) and 42 U.S.C. 6316(e)(1)) DOE's LCC and payback
period (PBP) analyses generate values that calculate the PBP for
customers of potential energy conservation standards, which includes,
but is not limited to, the 3-year PBP contemplated under the rebuttable
presumption test discussed above. However, DOE routinely conducts a
full economic analysis that considers the full range of impacts,
including those to the customer, manufacturer, Nation, and environment,
as required under 42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6316(e)(1).
The results of this analysis serve as the basis for DOE to evaluate
definitively the economic justification for a potential standard level
(thereby supporting or rebutting the results of any preliminary
determination of economic justification).
IV. Methodology and Discussion of Comments on Methodology
DOE used several previously developed analytical tools in setting
today's standard. Each was adapted for this rule. One of these
analytical tools is a spreadsheet that calculates LCC and PBP. Another
calculates national energy savings and national NPV. A third tool is
the Government Regulatory Impact Model (GRIM), the results of which are
the basis for the MIA, among other methods. In addition, DOE developed
an approach using the National Energy Modeling System (NEMS) to
estimate impacts of energy efficiency standards for beverage vending
machines on electric utilities and the environment. The TSD appendices
discuss each of these analytical tools in detail. 74 FR 26026-49.
As a basis for this final rule, DOE has continued to use the
spreadsheets and approaches explained in the May 2009 NOPR. DOE used
the same general methodology but has revised some of the assumptions
and inputs for this final rule in response to comments from interested
parties. The following paragraphs discuss these revisions.
A. Market and Technology Assessment
When beginning an energy conservation standards rulemaking, DOE
develops information that provides an overall picture of the market for
the equipment concerned, including the purpose of the equipment, the
industry structure, and market characteristics. This activity includes
both quantitative and qualitative assessments based primarily on
publicly available information. DOE presented its market and technology
assessment for this rulemaking in the May 2009 NOPR and chapter 3 of
the NOPR TSD. The assessment included equipment definitions, equipment
classes, manufacturers, quantities and types of equipment offered for
sale, retail market trends, and regulatory and non-regulatory programs.
1. Definitions Related to Refrigerated Beverage Vending Machines
a. Definition of Bottled or Canned Beverage
EPCA defines the term ``refrigerated bottled or canned beverage
vending machine'' as ``a commercial refrigerator that cools bottled or
canned beverages and dispenses the bottled or canned beverages on
payment.'' (42 U.S.C. 6291(40)) Thus, coverage of equipment under EPCA
as a beverage vending machine, in part, depends on whether it cools and
dispenses ``bottled beverages'' and/or ``canned beverages.'' DOE
[[Page 44924]]
tentatively decided to consider a broader definition for the terms
``bottled'' and ``canned'' as they apply to beverage vending machines
based on comments on the framework document. A bottle or can in this
broader definition refers to ``a sealed container for beverages,'' so a
bottled or canned beverage is ``a beverage in a sealed container.''
Such a definition would avoid unnecessary complications regarding the
material composition of the container and eliminate the need to
determine whether a particular container is a bottle or a can. In the
ANOPR, DOE sought comment on this broader definition and on whether it
is consistent with the intent of EPCA. (73 FR 34103) DOE did not
receive any comments on this and thus proposed in the NOPR that a
bottled or canned beverage mean ``a beverage in a sealed container.''
(74 FR 26027) Because DOE did not receive any comments in response to
the proposed definition in the May 2009 NOPR, DOE is adopting the
definition of bottled or canned beverage as proposed, without
modification.
2. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
generally divides covered equipment into equipment classes by the type
of energy used, capacity, or other performance-related features that
affect efficiency and factors such as the utility of such feature(s).
(42 U.S.C. 6295(q)) DOE routinely establishes different energy
conservation standards for different equipment classes based on these
criteria.
Certain characteristics of beverage vending machines have the
potential to affect their energy use and efficiency. Accordingly, these
characteristics could be the basis for separate equipment classes for
these machines. DOE determined that the most significant criterion
affecting beverage vending machine energy use is the method used to
cool beverages. In the NOPR, DOE divided covered equipment into two
equipment classes according to method of refrigeration: Class A and
Class B. (74 FR 26027)
The Class A beverage vending machine equipment class comprises
machines that cool product throughout the entire refrigerated volume of
the machine. Class A machines generally use ``shelf-style'' vending
mechanisms and a transparent (glass or polymer) front. Because the
next-to-be-vended product is visible to the customer and any product
can be selected by the customer off the shelf, all bottled or canned
beverage containers are necessarily enclosed within the refrigerated
volume.
In Class B beverage vending machines, refrigerated air is directed
at a fraction (or zone) of the refrigerated volume of the machine. This
cooling method is used to assure that the next-to-be-vended product
will be the coolest product in the machine. These machines typically
have an opaque front and use a ``stack-style'' vending mechanism.
Therefore, DOE defines Class A and Class B as follows:
Class A means a refrigerated bottled or canned beverage
vending machine that is fully cooled, and is not a combination vending
machine.
Class B means any refrigerated bottled or canned beverage
vending machine not considered to be Class A, and is not a combination
vending machine.
Because DOE did not receive any comments in response to the
presentation of equipment classes in the May 2009 NOPR, DOE is adopting
the equipment classes as proposed, with a modification to address
combination vending machines as described in section II.B.2.b.
B. Screening Analysis
The purpose of the screening analysis is to evaluate the technology
options identified as having the potential to improve the efficiency of
equipment, to determine which technologies to consider further and
which to screen out. DOE consulted with industry, technical experts,
and other interested parties to develop a list of technologies for
consideration. DOE then applied the following four screening criteria
to determine which technologies are unsuitable for further
consideration in the rulemaking:
1. Technological Feasibility. Technologies incorporated in
commercial equipment or in working prototypes will be considered
technologically feasible.
2. Practicability to Manufacture, Install, and Service. If mass
production and reliable installation and servicing of a technology in
commercial equipment could be achieved on the scale necessary to serve
the relevant market at the time of the effective date of the standard,
then that technology will be considered practicable to manufacture,
install, and service.
3. Adverse Impacts on Equipment Utility or Equipment Availability.
If a technology is determined to have significant adverse impact on the
utility of the equipment to significant subgroups of customers, or
result in the unavailability of any covered equipment type with
performance characteristics (including reliability), features, sizes,
capacities, and volumes that are substantially the same as equipment
generally available in the United States at the time, it will not be
considered further.
4. Adverse Impacts on Health or Safety. If it is determined that a
technology will have significant adverse impacts on health or safety,
it will not be considered further.
10 CFR part 430, Subpart C, Appendix A at 4(a)(4) and 5(b).
In the ANOPR market and technology assessment, DOE developed an
initial list of technologies expected to have the potential to reduce
the energy consumption of beverage vending machines. In the screening
analysis, DOE screened out technologies based on the four criteria
discussed above. The list of remaining technologies became one of the
key inputs to the engineering analysis. (73 FR 34108-09) For the
engineering analysis each technology is referred to as a design option.
After the ANOPR screening analysis, DOE did not receive any
comments suggesting a change to its list of design options. As a
result, no changes were made for the NOPR. During the NOPR public
meeting, multiple manufacturers expressed the ability to meet today's
standard with the use of lighting controls. (Dixie-Narco, Public
Meeting Transcript, No. 56 at p. 188 and Royal Vendors, Public Meeting
Transcript, No. 56 at p. 189) As a result, the signatories of the Joint
Comment suggest that DOE consider lighting controls as a design option
for the final rule because, if not considered, ``cost-effective energy-
savings may be forgone.'' (Joint Comment, No. 67 at p. 3)
DOE disagrees with the Joint Commenters' assessment of lighting
controls. The Joint Comment infers that a lighting control design
option meets the screening analysis criteria. According to the
screening criteria, however, a technology cannot be considered as a
design option if it has adverse impacts on equipment utility. 10 CFR
part 430, Subpart C, Appendix A at 4(a)(4) and 5(b) DOEs analysis
ensures preservation of equipment utility by choosing design options
that, when implemented, do not lessen utility relative to the
engineering baseline unit. The energy-savings potential of lighting
controls is realized when the control system automatically deactivates
all or a portion of a machine's lighting system. While the lighting
system is deactivated, the light output of the machine is reduced,
leaving the machine's contents or signage less visible. If lighting
[[Page 44925]]
controls were a design option in the engineering analysis, this
reduction would represent a loss in utility relative to the baseline
unit. Therefore, lighting controls do not meet the screening criteria,
and DOE will not consider them as a design option in its analysis for
the final rule.
In the ANOPR screening analysis, variable-speed compressors were
eliminated from consideration. For the NOPR analysis, DOE did not
receive any comments recommending that variable-speed compressors be
reconsidered. For the final rule analysis, the Joint Comment
recommended that DOE reconsider this technology, stating that it
believes variable-speed compressors can provide some energy-use
reduction, despite the current steady-state conditions that are
prescribed in ANSI/ASHRAE Standard 32.1-2004 test procedure. The Joint
Comment asserted that when DOE screened out variable-speed compressors,
DOE did not consider that beverage vending machine manufacturers
oversize their compressors to meet purchasers' pull down requirements.
(Joint Comment, No. 67 at p. 2)
DOE screened out variable-speed compressors in the ANOPR analysis
because the resulting energy efficiency ratio of a variable-speed
compressor operating at steady state, according to the test procedure,
would not be greater than the energy efficiency ratio of a properly
sized single-speed compressor. DOE acknowledges that a variable-speed
compressor operating at steady state may have energy savings compared
to an oversized single-speed compressor operating at the same
conditions. However, DOE is unaware of any data that quantifies and
compares these energy savings specifically for beverage vending
machines under these conditions. DOE was also unable to determine
whether variable-speed compressors are a cost-effective design option.
Due to a lack of any comparative data on the performance of variable
speed compressors for these applications and evidence of the cost
effectiveness of variable-speed compressors, DOE did not consider
variable-speed compressors in its analysis.
In the framework document, DOE stated that, to the greatest extent
possible, it would base its analysis on commercially available
technologies that have not been screened out, including proprietary
designs. DOE stated that it would consider a proprietary design in the
subsequent analyses only if it is not a unique path to a given
efficiency level. If the proprietary design is the only approach
available to achieve a given efficiency level, then DOE will exclude
that efficiency level from further analysis.
During the NOPR public meeting, PepsiCo stated that the use of LED
lighting in glass front vendors is a proprietary design patented by
Coca-Cola, which PepsiCo is precluded from using. (PepsiCo, Public
Meeting Transcript, No. 56 at p. 52) In a written comment, NAMA stated
similar concerns. (NAMA, No. 65 at p. 3) Coca-Cola stated that there
are control strategies used in beverage vending machines (e.g., certain
lighting controls and certain motor controls) that are patented and are
not widely available for use by all manufacturers. (Coca-Cola, No. 56
at p. 149 and Coca-Cola, No. 63 at p. 1) Coca-Cola added that TSL 6 for
Class A machines cannot be achieved without these ``firmware'' control
strategies. (Coca-Cola, No. 63 at p. 1) According to USA Technologies,
there are patented, after-market lighting control products widely used
in the industry. (USA Technologies, Public Meeting Transcript, No. 56
at p. 200) In addition, Dixie-Narco stated that it is not aware of any
intellectual property issues that would prevent other manufactures from
adopting lighting strategies similar to those that it has been using in
its equipment. (Dixie-Narco, No. 64 at p. 3) ASAP stated that certain
patented technologies may provide a cost-effective way to achieve a
certain efficiency level, but they do not preclude a manufacturer from
achieving the same efficiency level in a different manner. ASAP submits
that there are historically multiple paths to achieve any given
efficiency level. (ASAP, Public Meeting Transcript, No. 56 at p. 202)
DOE recognizes that there are existing patents that involve
specific screened-in beverage vending machine technologies. For
example, there is a U.S. patent on a ``Dispensing Apparatus with
Directional LED Lighting'' (Patent No. U.S. 6,550,269 B2, April 22,
2003). DOE is not screening out proprietary technologies such as LED
lighting or certain control strategies, solely because they are
proprietary. In contrast, DOE is incorporating these technologies into
its analysis because DOE believes that there are alternate pathways to
achieve the efficiency levels associated with these technologies.
Providing LED lighting in a vending machine in a manner other than
directionally, employing an alternative lighting type, and/or providing
various other control strategies that are not patented, have the
potential to result in a vending machine that meets equivalent
efficiency levels.
DOE notes that most patents do not convey market power to their
owners because close substitutes for these inventions exist. Licensors
will pay no more for patented technologies than the cost advantage they
provide over the next best alternative pathway to compliance with the
efficiency standard. Ultimately, the availability of cost-effective
alternate technology pathways is what limits the ability of the owner
of a proprietary technology to extract high fees for its use. It is
DOE's opinion that a standard level which can only be met with a single
proprietary technology which comes without assurances of open and free
technology access should be rejected because it carries great risk of
resulting in an anti-competitive market. This principle has been
consistently applied in past DOE rulemakings. If standard levels were
set based on proprietary technologies representing a unique path to
compliance and not available to all equipment manufacturers, the
standards-setting process itself would convey great market power
because there would be no alternative means to satisfy the standard. In
consideration of these factors, DOE maintains that it can consider
proprietary designs as long as it is not a unique path to a given
efficiency level. For the reasons discussed, DOE believes that neither
directional LED lighting nor lighting controls represent a unique path
to compliance with TSL 6 for Class A equipment.
C. Engineering Analysis
The engineering analysis develops cost-efficiency relationships to
show the manufacturing costs of achieving increased energy efficiency.
As discussed in the May 2009 NOPR, DOE used the design-option approach,
involving consultation with outside experts, review of publicly
available cost and performance information, and modeling of equipment
cost and energy consumption. 74 FR 26027-26030. Chapter 5 of the NOPR
TSD contains a detailed discussion of the engineering analysis
methodology.
1. Approach
In this rulemaking, DOE is adopting a design-option approach, which
calculates the incremental costs of increased efficiency. Efficiency
increases are modeled by implementing specific energy saving
technologies, referred to as design options, to a baseline model. Using
the design-option approach, cost-efficiency relationship estimates are
based on manufacturer or component supplier data or derived from
engineering computer simulation
[[Page 44926]]
models. Chapter 5 of the TSD contains a detailed description of the
equipment classes analyzed and analytical models used to conduct the
design-option approach based beverage vending machine engineering
analysis.
2. Analytical Models
a. Cost Model
DOE used a cost model to estimate the core case cost of beverage
vending machines. The core case cost is the cost of all non-energy-
consuming components, such as the structure, walls, doors, shelving,
and fascia. This model was adapted from a cost model developed for
DOE's rulemaking on commercial refrigeration equipment (refer to http://www1.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html for further detail on and validation of
the commercial refrigeration equipment cost model). The approach for
commercial refrigeration equipment involved disassembling a self-
contained refrigerator, analyzing the materials and manufacturing
processes for each component, and developing a parametric spreadsheet
to model the cost to fabricate (or purchase) each component and the
cost of assembly. Because of the similarities in manufacturing
processes between self-contained commercial refrigeration equipment and
beverage vending machines, DOE was able to adapt the commercial
refrigeration equipment cost model for use in this rule. This
adaptation involved maintaining many of the assumptions about materials
and manufacturing processes but modifying the dimensions and types of
components specific to beverage vending machines. To confirm the
accuracy of the cost model, DOE obtained input from interested parties
on beverage vending machine production cost estimates and on other
assumptions DOE used in the model. Chapter 5 of the TSD provides
details of the cost model.
b. Energy Consumption Model
The energy consumption model estimates the daily energy consumption
(DEC) of beverage vending machines at various performance levels using
the previously discussed design-option approach. The model is specific
to the categories of equipment covered under this rulemaking, but is
sufficiently generalized to model the energy consumption of both
covered equipment classes. For a given equipment class, the model
estimates the DEC for the baseline design and the energy consumption of
several levels of performance above the baseline design. DOE uses the
model to calculate each performance level separately. For the NOPR, DOE
made updates to the energy consumption model by altering Class A can
capacities (or vendible capacities) and verifying Class B can
capacities. For both classes, DOE modified exterior case dimensions,
which resulted in changes in infiltration loads, refrigerated volumes,
and exterior wall areas. These alterations and their effects are
detailed in chapter 5 of the TSD. DOE did not receive any comments in
response to these changes. Therefore, DOE maintained these revised
calculation methodologies for the final rule. DOE did, however, receive
a comment regarding the energy consumption model DEC results. Royal
Vendors and NAMA commented that, without lighting, a Class B machine
will always consume less energy than a similarly equipped Class A
machine due to differences in their thermodynamic properties. Royal
Vendors cites the divergence from this expected outcome at TSL 4 as the
origin of their skepticism for DOE's Class A analysis. (Royal Vendors,
No. 60 at pp. 1 and 2; NAMA, No. 65 at pp. 3 and 4)
DOE's analysis results and selected TSLs adequately reflect the
thermodynamic differences between Class A and Class B machines. DOE
agrees that a Class B machine stripped of electricity consuming
components that are not essential to the refrigeration system (i.e.,
lighting) will consume less energy than a similarly equipped Class A
machine. As described in chapter 5 of the final rule TSD, the
engineering analysis' DEC results are modeled as the sum of the
component electricity consumption and compressor electricity
consumption. The physical and thermodynamic equipment differences
described by Royal affect the total refrigeration load, which is
factored into the compressor electricity consumption in DOE's energy
consumption model. When comparing compressor electricity consumption
results between a Class A and Class B machine with the same volume, the
Class B machine compressor consumes less electricity at all engineering
efficiency levels. The divergence in DEC described by Royal Vendors at
higher TSLs occurs because the modeled Class A and Class B machines
being compared are no longer ``similarly equipped.'' Different design
options are implemented for each machine class at each TSL, and each
design option has unique energy savings potential. For instance, at TSL
4 for Class A machines, LED lighting is implemented which has an
incremental component energy savings of 0.89 kWh/day. At TSL 4 for
Class B machines, an electronically commutated motor (ECM) condenser
fan motor is implemented which has an incremental component energy
savings of 0.05 kWh/day. These incremental component energy savings
manifest themselves as reductions in the component electricity
consumption addend of the DEC. The greater energy savings potential of
some Class A design options results in component electricity
consumption reductions significant enough to drive the overall DEC of
Class A machines below that of Class B machines. See chapter 5 of the
TSD for a detailed explanation of the engineering analysis energy
consumption model.
Based on public comments, DOE proposed to use refrigerated volume
instead of vendible capacity as the normalization metric for setting
standards for beverage vending machines in the NOPR. (74 FR 26029)
Following the NOPR, NAMA commented that volume was an appropriate
normalization metric, rather than the number of cans. (NAMA, No. 65 at
p. 3) Therefore, DOE will continue to use refrigerated volume as the
normalization metric in the standard.
D. Markups To Determine Equipment Price
In the May 2009 NOPR, DOE explained how it developed the
distribution channel markups used. 74 FR 26036. DOE did not receive
comments on these markups; however, it updated the distribution channel
markups by including 2009 sales tax data as well as the markups for
refrigerated beverage vending machines wholesalers using 2009 financial
data. DOE used these markups, along with sales taxes, installation
costs, and manufacturer selling prices (MSPs) developed in the
engineering analysis, to arrive at the final installed equipment prices
for baseline and higher efficiency refrigerated beverage vending
machines. As explained in the May 2009 NOPR (74 FR 26036), DOE defined
three distribution channels for refrigerated beverage vending machines
to describe how the equipment passes from the manufacturer to the
customer. DOE retained the same distribution channel market shares
described in the May 2009 NOPR.
The new overall baseline and incremental markups for sales within
each distribution channel are shown in Table IV.1 and Table IV.2.
Chapter 6 of the TSD provides additional details on markups.
[[Page 44927]]
Table IV.1--Overall Average Baseline Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
Manufacturer Wholesaler/ Overall weighted
Markup category direct distributor average
----------------------------------------------------------------------------------------------------------------
Markup................................................. 1.000 1.460 1.069
Sales tax.............................................. 1.071 1.071 1.071
Overall markup......................................... 1.071 1.564 1.145
----------------------------------------------------------------------------------------------------------------
Table IV.2--Overall Average Incremental Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
Manufacturer Wholesaler/ Overall weighted
Markup category direct distributor average
----------------------------------------------------------------------------------------------------------------
Markup................................................. 1.000 1.200 1.030
Sales tax.............................................. 1.071 1.071 1.071
Overall markup......................................... 1.071 1.285 1.103
----------------------------------------------------------------------------------------------------------------
E. Energy Use Characterization
The energy use characterization estimates the annual energy
consumption of beverage vending machines. This estimate is used in the
subsequent LCC and PBP analyses (chapter 8 of the TSD) and NIA (chapter
11 of the TSD). DOE estimated the energy use for machines in the two
equipment classes examined (74 FR 26027) in the engineering analysis
(chapter 5 of the TSD) based on the DOE test procedure. DOE
incorporated ANSI/ASHRAE Standard 32.1-2004 by reference with two
modifications as the DOE test procedure for the beverage vending
machines. 71 FR 71340, 71375 (Dec. 8, 2006); 10 CFR 431.294. DOE
assumed all Class A machines to be installed indoors and subject to a
constant air temperature of 75 [deg]F and relative humidity of 45
percent, matching test conditions in the DOE test procedure. 73 FR
34114-15. Based on market data and discussions with several beverage
vending machine distributors, DOE assumed that 25 percent of Class B
machines are placed outdoors, with the remaining 75 percent placed
indoors. DOE sought but did not receive comments on this distribution;
thus, DOE maintained the same distribution of Class B machines for this
final rule.
F. Life-Cycle Cost and Payback Period Analyses
In response to the requirements of section 325(o)(2)(B)(i) of EPCA,
DOE conducted LCC and PBP analyses to evaluate the economic impacts of
possible new beverage vending machine standards on individual
customers. DOE used the same spreadsheet models to evaluate the LCC and
PBP as it used for the NOPR analysis; however, DOE updated certain
specific inputs to the models. Details of the spreadsheet model and of
all the inputs to the LCC and PBP analyses are in TSD chapter 8. DOE
conducted the LCC and PBP analyses using a spreadsheet model developed
in Microsoft Excel for Windows 2003.
The LCC is the total cost for a unit of beverage vending machine
equipment over the life of the equipment, including purchase and
installation expense and operating costs (energy expenditures and
maintenance). To compute the LCC, DOE summed the installed price of the
equipment and its lifetime operating costs discounted to the time of
purchase. The PBP is the change in purchase expense due to a given
energy conservation standard divided by the change in first-year
operating cost that results from the standard. DOE expresses PBP in
years. DOE measures the changes in LCC and in PBP associated with a
given energy use standard level relative to a base case equipment
energy use. The base case forecast reflects the market in the absence
of mandatory energy conservation standards.
The data inputs to the PBP calculation are the purchase expense
(otherwise known as the total installed customer cost or first cost)
and the annual operating costs for each selected design. The inputs to
the equipment purchase expense were the equipment price and the
installation cost, with appropriate markups. The inputs to the
operating costs were the annual energy consumption, electricity price,
and repair and maintenance costs. The PBP calculation uses the same
inputs as the LCC analysis, but because it is a simple payback, the
operating cost is for the year the standard takes effect, assumed to be
2012. DOE believes LCC is a better indicator of economic impacts on
customers. For each efficiency level analyzed, the LCC analysis
required input data for the total installed cost of the equipment,
operating cost, and discount rate.
Table IV.3 summarizes the inputs and key assumptions DOE used to
calculate the economic impacts of various energy consumption levels on
customers. Equipment price, installation cost, and baseline and
standard design selection affect the installed cost of the equipment.
Annual energy use, electricity costs, electricity price trends, and
repair and maintenance costs affect the operating cost. The effective
date of the standard, the discount rate, and the lifetime of equipment
affect the calculation of the present value of annual operating cost
savings from today's standard. Table IV.3 also shows how DOE modified
these inputs and key assumptions for the final rule relative to the May
2009 NOPR. Chapter 8 of the TSD provides the changes to the input data
and discusses the overall approach to the LCC analysis.
Table IV.3--Summary of Inputs and Key Assumptions Used in the LCC and
PBP Analyses
------------------------------------------------------------------------
Changes for
Input NOPR description final rule
------------------------------------------------------------------------
Baseline Manufacturer Selling Price charged by Data reflect
Price. manufacturer to updated
either a wholesaler engineering
or large customer for analysis.
baseline equipment.
Developed by using
industry-supplied
efficiency level data
and a design option
analysis.
[[Page 44928]]
Standard-Level Manufacturer Incremental change in Data reflect
Selling Price Increases. manufacturer selling updated
price for equipment engineering
at each of the higher analysis.
efficiency standard
levels. Developed by
using a combination
of energy consumption
level and design
option analyses.
Markups and Sales Tax......... Associated with Markups updated
converting the based on
manufacturer selling revised data on
price to a customer sales tax and
price (chapter 6 of wholesaler
TSD). Developed based financial data.
on product
distribution channels
and sales taxes.
Installation Price............ Cost to the customer Data reflect
of installing the updated
equipment. This installation
includes labor, costs.
overhead, and any
miscellaneous
materials and parts.
The total installed
cost equals the
customer equipment
price plus the
installation price.
Installation cost
data provided by
industry comment.
Equipment Energy Consumption.. Site energy use Data reflect
associated with the updated
use of beverage engineering
vending machines, analysis for
which includes only each efficiency
the use of level.
electricity by the
equipment itself.
Taken from
engineering analysis
and validated in
energy use
characterization.
(chapter 7 of the
TSD).
Electricity Prices............ Established average No change.
commercial
electricity price ($/
kWh) from EIA data
for 2008 in 2007$.
DOE then established
scaling factors for
beverage vending
machine customers
based on the 2003
Commercial Building
Energy Consumption
Survey.
Electricity Price Trends...... Used the AEO2009 All price cases
Reference Case to revised to
forecast future reflect April
electricity prices 2009 update to
and extrapolated AEO2009 values.
prices to 2042.
Maintenance Costs............. Labor and material No change in
costs associated with methodology;
maintaining the however,
beverage vending reinterpreted
machines (e.g., year's values.
cleaning heat
exchanger coils,
checking refrigerant
charge levels, lamp
replacement). Based
on industry comment
on the NOPR, included
an updated annualized
cost of one
refurbishment/
remanufacturing cycle.
Repair Costs.................. Labor and material No change.
costs associated with
repairing or
replacing components
that have failed.
Estimated based on
replacement
frequencies and costs
for key components.
Equipment Lifetime............ Age at which the No change.
beverage vending
machine is retired
from service. Based
on industry comment
on the ANOPR, reduced
average service life
to 10 years, with 15
years as a maximum.
Discount Rate................. Computed by estimating Updated based on
the cost of capital data available
for companies that in the 2009
purchase version of the
refrigeration Damodaran Web
equipment using site.
business financial
data from the
Damodaran Online
database from 2008.
Rebound Effect................ A rebound effect was No change.
not taken into
account in the LCC
analysis.
Analysis Period............... The time span over No change.
which DOE calculated
the LCC (i.e., 2012-
2042).
------------------------------------------------------------------------
The changes in the input data and the discussion of the overall
approach to the LCC analysis are provided in chapter 8 of the TSD.
G. Shipments Analysis
The shipments analysis develops future shipments for each class of
beverage vending machines based on current shipments and equipment life
assumptions, and takes into account the existing stock and expected
trends in markets that use beverage vending machines. DOE received
several comments on the shipments analysis and the resulting shipments
during the NOPR. Although DOE used the same shipments model for the
final rule analysis as the NOPR, many of the underlying assumptions
concerning future market behavior were changed as a result of the
interested party comments.
1. Split Incentives
Coca-Cola (Coca-Cola, Public Meeting Transcript, No. 56 at p. 196
and Coca-Cola, No. 63 at p. 2) and PepsiCo (PepsiCo, Public Meeting
Transcript, No. 56 at p. 94) stated that if costlier components and
expensive control schemes are necessary to produce higher efficiency
equipment, it would purchase less equipment. While DOE recognizes the
principle that higher costs of equipment might possibly affect sales,
neither major purchaser provided any data that would allow a
quantitative assessment of the effect of higher prices on overall
purchases (price elasticity) to be calculated. However, DOE notes that
for Class A equipment, the increase in installed cost at TSL 6 is in
the range of 5 to 10 percent; for Class B machines, the increase in
installed cost is in the range of 2 to 4 percent. Even if shipments
fell by the same percentage that installed cost increased by (i.e.,
price elasticity equaled 1.0, a relatively large number), neither the
net present value of TSL 6 for Class A equipment nor the net present
value of TSL 3 for Class B equipment would be noticeably affected, nor
would the choice of standard levels.
2. Sustainability of Sales Less Than 100 Thousand Units
USA Technologies (USA Tech, Public Meeting Transcript, No. 56 at
pp. 78, 79, and 85) expressed a concern that the industry's current
number of manufacturers could not stay in business if total production
were under 100,000 machines per year. DOE acknowledges the concern
about industry sustainability. However, for the final rule, DOE assumes
a level of shipments of 190,000 units per year, as explained in section
IV.G.4. This assumption mitigates the concern about sales declining
below 100,000 units. One major manufacturer (Dixie-Narco, Public
Meeting Transcript, No. 56 at p. 86) stated that it can survive even at
today's low sales levels (less than 100,000 units) by operating on one
shift; additionally, neither manufacturer with a large market share
believed that a costly investment was necessary to meet the proposed
standard. (Dixie-Narco, Public Meeting Transcript, No. 56 at p.
[[Page 44929]]
186; Royal Vendors, Public Meeting Transcript, No. 56 at p. 188)
3. Distribution of Equipment Classes and Sizes
In the analysis conducted for the NOPR, DOE assumed based on
interested party comments that Class A equipment would constitute 55
percent of new sales and Class B equipment would constitute 45 percent
of new sales. PepsiCo (PepsiCo, Public Meeting Transcript, No. 56 at p.
89) commented that Class A sales would be between 50 and 60 percent and
Coca-Cola (Coca-Cola, Public Meeting Transcript, No. 56 at p. 90)
commented that, although they expected Class A equipment would be the
majority of sales, currently Class B machines are more than 50 percent
of sales. DOE has decided to shift to a ratio of 60 percent Class A
machines to 40 percent Class B sales for the final rule. DOE also
assumed in the analysis for the NOPR that small-size units would
constitute approximately zero percent of future sales, medium-size
units at 75 percent, and large-size units at 25 percent of sales. Coca-
Cola (Coca-Cola, Public Meeting Transcript, No. 56 at p. 107) confirmed
the distribution used for the NOPR. Dixie-Narco (Dixie-Narco, Public
Meeting Transcript, No. 56 at p. 107) commented that the small-size
unit sales were zero, but that the large equipment share might be
higher--by as much as 40 percent. Dixie-Narco also recommended that the
NAMA could act as an intermediary to compile the data on sales and
provide it to DOE. DOE asked NAMA, and NAMA was able to provide an
estimate of the distribution between Class A and Class B units for a
subset of the manufacturers, approximately 60 percent Class B machines
and 40 percent Class A machines (NAMA, No. 65 at p. 2). To take account
of all of the comments received, DOE has decided to shift to a ratio of
50 percent Class A machines to 50 percent Class B sales for the final
rule. NAMA was not able to provide data on the size distribution within
classes. In the absence of that data and to account for all comments
received, DOE has modified its distribution of sales to account for as
follows for both Class A and Class B units: Small-size units, zero
percent; medium-size units, 67 percent; and large-size units, 33
percent.
4. Future Sales Decline
For the analysis at the NOPR stage, DOE assumed based on comments
from interested parties on the ANOPR that future sales would all be
replacement sales and would be flat at the then-current level of sales
of about 90,000 units per year for the entire period of analysis. This
level of replacements would result in a reduction in stock from today's
level of about 2.3 million units to about 1 million units by 2020. The
commenters agreed that the current economic situation would result in
additional decline in the number of deployed units (Royal Vendors,
Public Meeting Transcript, No. 56 at p. 74; Dixie-Narco, Public Meeting
Transcript, No. 56 at p. 76); Coca-Cola, Public Meeting Transcript, No.
56 at pp. 77 and 91), but with a possibility of a near-term recovery
based on the need to replace older equipment as it reaches the end of
its lifetime and to continue to serve the current customer base.
(Dixie-Narco, Public Meeting Transcript, No. 56 p. 79-80; Pepsi, Public
Meeting Transcript, No. 56 at p. 88; Coca-Cola, Public Meeting
Transcript, No. 56 at p. 91) Several commenters (Dixie-Narco, Public
Meeting Transcript, No. 56 at p. 76; Coca-Cola, Public Meeting
Transcript, No. 56 at pp. 77 and 83; ASAP, Public Meeting Transcript,
No. 56 at p. 87) stated that 1 million units was too small to sustain
the current customer base and that the shipments would therefore have
to be higher than the current level. During the public meeting,
participants estimated the ultimate stock ranged from about 1.6 million
(Dixie-Narco, Public Meeting Transcript, No. 56 at p. 84) to above 2
million units. (Coca-Cola, Public Meeting Transcript, No. 56 at p. 83)
In view of these comments that there would be some additional shrinkage
of stock but that the eventual level of stock in 2020 will need to be
approximately 2 million units, DOE assumed that future shipments would
quickly recover to 190,000 units per year by 2011 and continue at that
level for the foreseeable future. This allows for some continued stock
shrinkage to about 1.6 million units in the short run as the 1998-2000
vintage equipment retires faster than it is replaced, but with stock
recovering to 1.9 million units by 2020 and to approximately 2 million
units by 2022. As ASAP observed (ASAP, Public Meeting Transcript, No.
56 at p. 87), this change in assumptions for the final rule
significantly increases the overall economic benefit of the rule, but
its effect is proportional to sales and does not significantly affect
the choice between potential levels of the standards.
H. National Impact Analysis
The national impact analysis (NIA) assesses future NES and the
national economic impacts of different efficiency levels. The analysis
measures economic impacts using the NPV (future amounts discounted to
the present) of total commercial customer costs and savings expected to
result from new standards at specific efficiency levels. For the final
rule analysis, DOE used the same spreadsheet model used in the NOPR to
calculate the energy savings and the national economic costs and
savings from new standards, but did so with updates to specific input
data. Unlike the LCC analysis, the NES spreadsheet does not use
distributions for inputs or outputs. DOE examined sensitivities by
applying different scenarios. DOE used the NIA spreadsheet to perform
calculations of NES and NPV using; (1) the annual energy consumption
and total installed cost data from the LCC analysis, and (2) estimates
of national shipments and stock for each beverage vending machine class
from the shipments analysis. DOE forecasted the energy savings from
each TSL from 2012 to 2042. DOE forecasted the energy cost savings,
equipment costs, and NPV of benefits for all refrigerated beverage
vending machines classes from 2012 to 2057. The forecasts provided
annual and cumulative values for all four output parameters.
DOE calculated the NES by subtracting energy use under a standards
scenario from energy use in a base case (no new standards) scenario.
Energy use is reduced when a unit of refrigerated beverage vending
machines in the base case efficiency distribution is replaced by a more
efficient piece of equipment as a result of the standard. Energy
savings for each equipment class are the same national average values
as calculated in the LCC and PBP spreadsheet. Table IV.4 summarizes key
inputs to the NIA analysis and the changes DOE made in the analysis for
the final rule. Chapter 11 of the TSD provides additional information
about the NIA spreadsheet.
[[Page 44930]]
Table IV.4--Summary of National Energy Savings and Net Present Value
Inputs
------------------------------------------------------------------------
Description of NOPR Changes for
Input data analysis final rule
------------------------------------------------------------------------
Shipments..................... No growth in Shipments grow
shipments; based on to 190,000 per
industry comments on year.
the NOPR, all
shipments are
replacements.
Effective Date of Standard.... 2012.................. No change.
Base Case Efficiencies........ Distribution of base No change.
case shipments by
efficiency level.
Standards Case Efficiencies... Distribution of No change.
shipments by
efficiency level for
each standards case.
Standards case annual
market shares by
efficiency level
remain constant over
time for the base
case and each
standards case.
Annual Energy Consumption per Annual weighted- No change.
Unit. average values are a
function of energy
consumption level per
unit, which are
established in
chapter 7 of the TSD.
Total Installed Cost per Unit. Annual weighted- No change in
average values are a methodology.
function of energy Installed costs
consumption level reflect the
(chapter 8 of the updated final
TSD). rule LCC.
Repair Cost per Unit.......... Annual weighted- No change in
average values are methodology.
constant in real Repair costs
dollar terms for each reflect the
energy consumption updated final
level (chapter 8 of rule LCC
the TSD). values.
Maintenance Cost per Unit..... Annual weighted- No change in
average value methodology.
(chapter 8 of the
TSD), plus lighting
maintenance cost.
Escalation of Electricity Energy Information All cases
Prices. Administration (EIA) updated to
Annual Energy Outlook April 2009
2009 (AEO2009) update to
forecasts (to 2030) AEO2009
and extrapolates forecasts
beyond 2030 (chapter (chapter 8 of
8 of the TSD). the TSD).
Electricity Site-to-Source Conversion factor Site-to-source
Conversion. varies yearly and is ratio follows
generated by EIA's April 2009
NEMS model. Includes update to
the impact of AEO2009.
electric generation,
transmission, and
distribution losses
based on AEO2008.
Discount Rate................. 3 and 7 percent real.. No change.
Present Year.................. Future costs are No change.
discounted to 2009.
Rebound Effect................ A rebound effect (due No change.
to changes in
shipments resulting
from standards) was
not considered in the
NIA.
------------------------------------------------------------------------
The modifications DOE made to the NES and NIA analyses for the
final rule primarily reflect the latest available updates to the same
data sources used in the NOPR, but not changes in methodology. In
addition, the underlying input data on equipment costs and energy
savings by TSL are based on the LCC analysis results as revised in the
final rule.
Maintenance Costs Savings for LED Lighting in Machines
At the NOPR stage, the Joint Comment (No. 67 at p. 3) indicated
that there are maintenance costs savings and therefore potential life-
cycle cost savings when LED lighting is used in place of the baseline
T8 fluorescent lighting for beverage vending machines. The Joint
Comment referenced an article in the September 3, 2008, edition of
``Automatic Merchandiser,'' Energize Displays with LED Lighting,
accessed on Vendingmarketwatch.com for information on LED lighting
maintenance costs versus maintenance costs for a beverage vending
machine with a fluorescent lighting system (last accessed July 25,
2009). DOE also reviewed a more recent industry publication on
maintenance cost savings for LED display lights in beverage vending
machines in the April 15, 2009, edition of ``Automatic Merchandiser,''
Tools to Enhance Energy Savings, which was accessed on
Vendingmarketwatch.com (last accessed July 25, 2009).
In response to this comment, DOE conducted a sensitivity analysis
for today's final rule to estimate the net economic effect of reduced
maintenance costs for using LED lighting in place of baseline T8
fluorescent lighting in beverage vending machine equipment. The
sensitivity analysis estimated the annualized life cycle cost savings
for LED lighting. For machines with T8 lighting, the analysis assumes
two maintenance visits to a machine to change out three T8 lamps and a
change out of the T8 lamps and the ballast at refurbishment (at 5
years) DOE assumed there was no additional labor for this change out,
since this is undertaken at refurbishment. DOE estimated the total cost
for maintenance (labor and materials) for machines with T8 lighting
over the machine lifetime (10 years) to be $194.
For machines with LED lighting, no lighting maintenance visits
would be required over the lifetime of the machine. The cost of
replacing three LED strips at $50 each would take place during
refurbishment and would be $150. DOE assumed there would be no
additional labor charge for this change out since this was being
undertaken at refurbishment.
The analysis estimated that the annualized net maintenance cost
savings is $4.68 for a LED lighting system used to light a machine
compared to the baseline T8 lighting system for a machine. This net
annualized maintenance cost savings is very small and does not
significantly affect the life cycle cost analysis and thus does not
impact the standards levels for today's final rule. Chapter 8 of the
TSD provides additional details of this sensitivity analysis.
1. Choice of Discount Rate
ASAP commented that the balance of DOE's discussion of the choice
of proposed standard overemphasized the 7 percent discount rate when
both 7 percent and 3 percent are mandated by the Office of Management
and Budget (OMB). (ASAP, Public Meeting Transcript, No. 56 at p. 144)
ASAP argued that the actual cost of capital the Department chose for
the purchase of the machine was lower than 7 percent so that the 3
percent rate should be considered in the Department's analysis, and is
required to be considered by OMB. In response, DOE notes that it
follows the guidelines on discount factors set forth in guidance that
OMB provides to Federal agencies on the development of regulatory
analysis (OMB Circular A-4 (September 17, 2003), particularly section
E, ``Identifying and Measuring Benefits and Costs''). Accordingly, DOE
is continuing to use 3 percent and 7 percent real discount rates for
the relevant calculations for this final rule.
[[Page 44931]]
2. Discounting of Physical Values
ASAP commented that DOE should not be applying financial discount
rates to physical values such as energy savings. (ASAP, Public Meeting
Transcript, No. 56 at p. 37) It said that doing so is an inappropriate
application of financial evaluation tools and should be discontinued.
DOE continues to report both undiscounted and discounted values of
energy savings and carbon emission reductions. DOE believes this allows
for consideration of a range of policy perspectives, one of which is
the view that a reduction in emissions today is more valuable than one
in 30 years.
I. Life-Cycle Cost Subgroup Analysis
In analyzing the potential impact of new or amended standards on
commercial customers, DOE evaluates the impact on identifiable groups
(i.e., subgroups) of customers, such as different types of businesses
that may be disproportionately affected by a National standard level.
For this rulemaking, DOE identified manufacturing and industrial
facilities that purchase their own beverage vending machines as a
relevant sub-group. This customer subgroup is likely to include owners
of high-cost beverage vending machines because it has the highest
capital costs. This group also faces the lowest electricity prices of
any customer subgroup. These two conditions make it likely that this
subgroup will have the lowest life-cycle cost savings of any major
customer sub-group.
DOE determined the impact on this refrigerated beverage vending
machines customer subgroup using the LCC spreadsheet model. DOE
conducted the LCC and PBP analyses for customers represented by the
subgroup. DOE did not receive comments on its identification of this
class of customers as the key sub-group or on the assumptions applied
to those subgroups. DOE relied on the same methodology outlined in the
NOPR for the final rule analysis. The results of DOE's LCC subgroup
analysis are summarized in section VI.C.1.b and described in detail in
chapter 12 of the TSD.
J. Manufacturer Impact Analysis
DOE performed an MIA to estimate the financial impact of energy
conservation standards on manufacturers of beverage vending machine
equipment, and to assess the impact of such standards on employment and
manufacturing capacity. DOE conducted the MIA for beverage vending
machine equipment in three phases. Phase 1, Industry Profile, consisted
of preparing an industry characterization, including data on market
share, sales volumes and trends, pricing, employment, and financial
structure. Phase 2, Industry Cash Flow Analysis, focused on the
industry as a whole. In this phase, DOE used the GRIM to prepare an
industry cash-flow analysis. Using publicly available information
developed in Phase 1, DOE adapted the GRIM's generic structure to
perform an analysis of beverage vending machine equipment energy
conservation standards. In Phase 3, Subgroup Impact Analysis, DOE
conducted interviews with manufacturers representing the majority of
domestic beverage vending machine equipment sales. This group included
large and small manufacturers, providing a representative cross-section
of the industry. During these interviews, DOE discussed engineering,
manufacturing, procurement, and financial topics specific to each
company, and obtained each manufacturer's view of the industry. The
interviews provided valuable information DOE used to evaluate the
impacts of an energy conservation standard on manufacturer cash flows,
manufacturing capacities, and employment levels.
The GRIM inputs consist of the beverage vending machine industry's
cost structure, shipments, and revenues. This includes information from
many of the analyses described above, such as manufacturing costs and
selling prices from the engineering analysis and shipments forecasts
from the NES.
The GRIM uses the manufacturer selling prices in the engineering
analysis to calculate the manufacturer production costs for each
equipment class at each TSL. By multiplying the production costs by
different sets of markups, DOE derives the MSPs used to calculate
industry revenues.
The GRIM estimates manufacturer revenues based on total-unit-
shipment forecasts and the distribution of these shipments by
efficiency. Changes in the efficiency mix at each standard level are a
key driver of manufacturer finances. For the final rule analysis, DOE
used the total shipments and efficiency distribution found in the final
rule NES.
DOE estimates the equipment conversion costs and capital conversion
costs that the industry would incur at each TSL. Equipment conversion
costs include engineering, prototyping, testing, and marketing expenses
incurred by a manufacturer as it prepares to comply with a standard.
Capital conversion costs are the one-time outlays for tooling and plant
changes required for the industry to comply.
During the NOPR public meeting, DOE asked manufacturers to discuss
their ability to meet the proposed TSLs and describe the impacts of
those standards. Both Royal Vendors and Dixie-Narco discussed their
ability to meet the proposed standards in terms of the conversion costs
each would incur to develop higher efficiency equipment. Royal Vendors
stated that, in the past, considerable costs were incurred to get from
pre-ENERGY STAR efficiency levels to ENERGY STAR Tier I efficiency
levels. These costs included implementation of ECM fan motors, magnetic
ballasts, and higher efficiency compressors. (Royal Vendors, Public
Meeting Transcript, No. 56 at p. 185) Dixie-Narco agreed with Royal
Vendors and stated that it faced a costly transition from ENERGY STAR
Tier I to ENERGY STAR Tier II efficiency levels. (Dixie-Narco, Public
Meeting Transcript, No. 56 at p. 186) In a written comment, NAMA also
noted the considerable funds already spent by its members to comply
with ENERGY STAR standards. (NAMA, No. 65 at p. 2) For Class B
machines, Royal Vendors expects meeting TSL 3 will not require a
tremendous effort. (Royal Vendors, Public Meeting Transcript, No. 56 at
p. 220) Dixie-Narco also stated that it will be able to achieve the
proposed standard for Class B machines without investing significant
costs that would need to be passed on to its customers. (Dixie-Narco,
No. 64 at p. 4) Dixie-Narco noted that it achieved the TSL 6 energy
consumption level with one of its Class A vending machines this year,
using a lighting management system. (Dixie-Narco, Public Meeting
Transcript, No. 56 at p. 188) Royal Vendors stated that it could meet
TSL 6 for Class A machines at relatively minor cost if it were not
precluded by proprietary design restrictions from adopting a lighting
management system similar to Dixie-Narco's. (Royal Vendors, Public
Meeting Transcript, No. 56 at p. 189) Royal Vendors stated that
implementing an energy management system is not an expensive addition
to the machine and that it can be passed on at essentially no
additional cost. (Royal Vendors, Public Meeting Transcript, No. 56 at
p. 188)
Based on public comments, DOE believes that it accurately estimated
the conversion costs for Class B vending machines and did not make any
changes for the final rule. However, for Class A vending machines, DOE
believes that the use of energy management systems (e.g., lighting)
could provide a method of achieving energy savings at minimal cost to
manufacturers. To account for
[[Page 44932]]
this possibility, DOE modified the assumed conversion costs required
for manufacturers to meet the Class A energy consumption levels. In the
NOPR, DOE assumed that since almost all of the market was already
reaching TSL 1 (i.e., ENERGY STAR Tier II) for Class A machines, the
conversion costs at TSL 1 were zero. The conversion costs progressively
increased from TSL 2 through TSL 7 (i.e., max-tech). For the final
rule, DOE accounted for the potential use of an energy management
system by assuming there would be negligible conversion costs through
TSL 2 for all Class A machines, shifting the conversion costs for TSLs
2 through 5 from the NOPR to TSLs 3 through 6 for the final rule. For
TSL 7, DOE maintained the conversion costs from the NOPR since they
represent the maximum possible conversion costs for the max-tech level.
For more information about DOE's manufacturer impact assumptions, see
chapter 13 of the TSD.
In a comment submitted on the NOPR, NAMA stated that one of its
manufacturers would have difficulty achieving the reduction in energy
consumption required by the proposed standard levels. The manufacturer
could only meet the standards by changing the cabinet insulation
thickness, which would require retooling its production lines at an
estimated cost of over $1 million. (NAMA, No. 65 at p. 3)
DOE estimated the conversion costs to manufacturers of the standard
levels for both equipment classes and reports the values in chapter 13
of the TSD. DOE's total estimated costs exceed the 1 million dollars
reported by the manufacturer. Because DOE has accounted for conversion
costs of this magnitude for the industry, DOE maintained the conversion
costs reported in chapter 13 of the TSD.
For the final rule, DOE analyzed manufacturer impacts under two
distinct markup scenarios: (1) The preservation-of-gross-margin-
percentage markup scenario, and (2) the preservation-of-operating-
profit markup scenario.
Under the first scenario, DOE applied a single uniform ``gross
margin percentage'' markup that represents the current markup for
manufacturers in the beverage vending machine industry. This markup
scenario implies that as production costs increase with efficiency, the
absolute dollar markup will also increase. DOE calculated that the non-
production cost markup--which consists of selling, general, and
administrative (SG&A) expenses; research and development (R&D)
expenses; interest; and profit--is 1.26.
Under the second scenario, the implicit assumption behind the
``preservation-of-operating-profit'' scenario is that the industry can
only maintain its operating profit (earnings before interest and taxes)
from the baseline after implementation of the standard in 2012. The
industry impacts occur in this scenario when manufacturers expand their
capital base and production costs to make more expensive equipment, but
the operating profit does not change from current conditions. DOE
implemented this markup scenario in the GRIM by setting the
manufacturer markups at each TSL to yield approximately the same
operating profit in both the base case and the standard case in the
standards effective year of 2012. Together, these two markup scenarios
characterize the range of possible conditions that the beverage vending
machine market will experience as a result of new energy conservation
standards.
In the NOPR, DOE sought comments on whether and to what extent
parties estimate they will be able to transfer costs of implementing
TSL 6 to consumers. 74 FR 26022. During the NOPR public meeting, Coca-
Cola stated that, 10 years ago, it only had to sell 20 cases for a
vending machine to make a profit. Now, it has to sell 100 cases for a
vending machine to make a profit. It continued that there are many
factors driving the profitability model of a vending machine, and to
assume that model will not change is erroneous. (Coca-Cola, Public
Meeting transcript, No. 56 at p. 91) Coca-Cola stated that,
historically, cost increases in equipment could not be passed through
to the customer. It does not believe the increased cost of
manufacturing higher efficiency equipment can be passed on to the
consumer. As a result, the profit margin for each machine diminishes,
resulting in an overall reduction in purchases. (Coca-Cola, Public
Meeting Transcript, No. 56 at p. 183, Coca-Cola, No. 63 at p. 2, and
NAMA, No. 65 at p. 5) As a result, Coca-Cola concluded that any
increase in cost resulting from installing more energy-efficient
technologies into a vending machine cannot be transferred over to
consumers. (Coca-Cola, Public Meeting Transcript, No. 56 at p. 182 and
NAMA, No. 65 at p. 2) Coca-Cola estimates that today's standard will
result in an overall weighted average price markup of 14\1/2\. (Coca-
Cola, No. 63 at p. 2)
The inability to pass on costs starts at the consumer level and
ultimately travels throughout the entire distribution chain. As stated
in comments from the NOPR public meeting, consumers are typically
unwilling to incur additional costs for more energy-efficient
equipment. In addition, end-users (e.g., bottlers) are typically
unwilling to incur additional costs for energy-efficient equipment,
primarily due to the split-incentive issue. The split incentive issue
is described in detail in the ANOPR. 73 FR 34101. Therefore, it is very
difficult for manufacturers to transfer any cost increases for more
energy-efficient equipment to their customers. The preservation-of-
operating-profit scenario models the more negative potential impacts on
the refrigerated beverage vending machine industry, and accounts for
manufacturers' inability to transfer additional costs to end-users. For
additional detail on the manufacturer impact analysis, refer to chapter
13 of the TSD. In addition, as stated earlier in section IV.J, multiple
major manufacturers stated that their equipment could meet today's
standard at little or no added cost. (Dixie-Narco, No. 64 at p. 2 and
Royal Vendors, Public Meeting Transcript, No. 56 at p. 189)
K. Utility Impact Analysis
The utility impact analysis estimates the effects of reduced energy
consumption due to improved equipment efficiency on the utility
industry. This analysis compares forecast results for a case comparable
to the April 2009 updated AEO2009 Reference Case and forecast results
for policy cases incorporating each of the beverage vending machines
proposed TSLs.
DOE analyzed the effects of proposed standards on electric utility
industry generation capacity and fuel consumption using a variant of
EIA's NEMS model. EIA uses NEMS to produce its AEO, a widely recognized
baseline energy forecast for the United States. DOE used a variant
known as NEMS-BT, run similar to the April 2009 update to the NEMS,
except that refrigerated beverage vending machines energy usage is
reduced by the amount of energy (by fuel type) saved due to the TSLs.
DOE obtained the inputs of national energy savings from the NES
spreadsheet model. In response to the May 2009 NOPR, DOE did not
receive comments directly on the methodology used for the utility
impact analysis. DOE revised the final rule inputs to use the NEMS-BT
consistent with the April 2009 update to AEO2009 and to use the NES
impacts developed in the beverage vending machines final rule analysis.
In the utility impact analysis, DOE reported the changes in
installed capacity and generation by fuel type that result for each TSL
as well as changes in end-use electricity sales.
[[Page 44933]]
Chapter 14 of the TSD provides details of the utility analysis methods
and results.
L. Employment Impact Analysis
DOE considers direct and indirect employment impacts when
developing a standard. In this case, direct employment impacts are any
changes in the number of employees for beverage vending machines
manufacturers, their suppliers, and related service firms. Indirect
impacts are those changes in employment in the larger economy that
occur due to the shift in expenditures and capital investment caused by
the purchase and operation of more efficient beverage vending machines.
In this rulemaking, the MIA addresses direct impacts (chapter 13 of the
TSD), and the employment impact analysis addresses indirect impacts
(chapter 15 of the TSD).
Indirect employment impacts from beverage vending machines
standards consist of the net jobs created or eliminated in the national
economy (other than in the manufacturing sector being regulated) as a
consequence of (1) reduced spending by end users on electricity (offset
to some degree by the increased spending on maintenance and repair);
(2) reduced spending on new energy supply by the utility industry; (3)
increased spending on the purchase price of new refrigerated beverage
vending machines; and (4) the effects of those three factors throughout
the economy. DOE expects the net monetary savings from standards to be
redirected to other forms of economic activity. DOE also expects these
shifts in spending and economic activity to affect the demand for
labor.
DOE used a different methodology to estimate indirect national
employment impacts using an input-output model of the U.S. economy
called ImSET (Impact of Sector Energy Technologies) developed by DOE's
Building Technologies Program. 74 FR 26047, 26058. The new method uses
the most recent version of the U.S. input-output table and updated
sector employment intensities. The ImSET model estimates changes in
employment, industry output, and wage income in the overall U.S.
economy resulting from changes in expenditures in various economic
sectors. DOE estimated changes in expenditures using the NES
spreadsheet. ImSET then estimated the net national indirect employment
impacts of potential refrigerated beverage vending machines efficiency
standards on employment by sector. In response to the May 2009 NOPR,
DOE did not receive comments directly on the methodology used for the
utility impact analysis. DOE updated its indirect employment impact
analysis using Version 3 of the ImSET model in the final rule.
M. Environmental Assessment
Pursuant to the National Environmental Policy Act of 1969 (NEPA)
(42 U.S.C. 4321 et seq.) and 42 U.S.C. 6295(o)(2)(B)(i)(VI), DOE
prepared an environmental assessment (EA) of the potential impacts of
the proposed standards it considered for today's final rule, which it
has included as chapter 16 of the TSD for the final rule. DOE found
that the environmental effects associated with the standards for
beverage vending machines were not significant. Therefore, DOE is
issuing a Finding of No Significant Impact (FONSI), pursuant to NEPA,
the regulations of the Council on Environmental Quality (40 CFR parts
1500-1508), and DOE's regulations for compliance with NEPA (10 CFR part
1021). The FONSI is available in the docket for this rulemaking.
In the EA, DOE estimated the reduction in total emissions of
CO2 and NOX using the NEMS-BT computer model. DOE
calculated a range of estimates for reduction in Hg emissions using
current power sector emission rates. The EA does not include the
estimated reduction in power sector impacts of sulfur dioxide
(SO2), because DOE is uncertain that an energy conservation
standard would not affect the overall level of SO2 emissions
in the United States due to the presence of national caps on
SO2 emissions. These topics are addressed further below; see
chapter 16 of the TSD for additional detail.
The NEMS-BT is run similarly to the April 2009 update of NEMS,
except that the refrigeration energy use is reduced by the amount of
energy saved due to the trial standard levels. The inputs of national
energy savings come from the NIA analysis. For the EA, the output is
the forecasted physical emissions. The net benefit of the standard is
the difference between emissions estimated by NEMS-BT and the April
2009 updated AEO2009 Reference Case. The NEMS-BT tracks CO2
emissions using a detailed module that provides results with a broad
coverage of all sectors and inclusion of interactive effects.
Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for all affected Electric Generating Units. The
attainment of the emissions cap is flexible among generators and is
enforced through the use of emissions allowances and tradable permits.
Thus, DOE is not certain that there will be reduced overall
SO2 emissions from the standards. However, there may be an
economic benefit from reduced demand for SO2 emission
allowances. Electricity savings decrease the generation of
SO2 emissions from power production, which can lessen the
need to purchase SO2 emissions allowance credits, and
thereby decrease the costs of complying with regulatory caps on
emissions.
NOX emissions from 28 eastern States and the District of
Columbia (DC) are limited under the Clean Air Interstate Rule (CAIR),
published in the Federal Register on May 12, 2005. 70 FR 25162 (May 12,
2005). Although CAIR has been remanded to EPA by the DC Circuit, it
will remain in effect until it is replaced by a rule consistent with
the Court's July 11, 2008 opinion in North Carolina v. EPA. 531 F.3d
896 (D.C. Cir. 2008); see also North Carolina v. EPA, 550 F.3d 1176 (DC
Cir. 2008). These court positions were taken into account in the May
2009 NOPR. Thus, the same methodology was followed in estimating future
NOX in the May 2009 NOPR as in the final rule. Because all
States covered by CAIR opted to reduce NOX emissions through
participation in cap-and-trade programs for electric generating units,
emissions from these sources are capped across the CAIR region.
For the 28 eastern States and DC where CAIR is in effect, no
NOX emissions reductions will occur due to the permanent
cap. Under caps, physical emissions reductions in those States would
not result from the energy conservation standards under consideration
by DOE, but standards might have produced an environmentally related
economic impact in the form of lower prices for emissions allowance
credits, if they were large enough. However, DOE determined that in the
present case, such standards would not produce an environmentally
related economic impact in the form of lower prices for emissions
allowance credits, because the estimated reduction in NOX
emissions or the corresponding allowance credits in States covered by
the CAIR cap would be too small to affect allowance prices for
NOX under the CAIR. In contrast, new or amended energy
conservation standards would reduce NOX emissions in those
22 States not affected by the CAIR. As a result, DOE used the NEMS-BT
to forecast emission reductions from the beverage vending machine
standards that are considered in today's final rule.
Similar to SO2 and NOX, future emissions of
Hg would have been subject to emissions caps under the Clean Air
Mercury Rule (CAMR) [70 FR 28606 (May 18, 2005)], which would
[[Page 44934]]
have permanently capped emissions of mercury for new and existing coal-
fired power plants in all States beginning in 2010, but the CAMR was
vacated by the DC Circuit in its decision in New Jersey v.
Environmental Protection Agency prior to publication of the May 2009
NOPR. 517 F 3d 574 (DC Cir. 2008).
After CAMR was vacated, DOE was unable to use the NEMS-BT model to
estimate any changes in the quantity of mercury emissions (anywhere in
the country) that would result from standard levels it considered for
the proposed rule. Instead, DOE used a range of Hg emissions rates (in
tons of Hg per unit energy produced) based on the AEO2008 for the May
2009 NOPR. Because virtually all mercury emitted from electricity
generation is from coal-fired power plants, DOE based the high-end
emissions rate on the tons of mercury emitted per terawatt hour (TWh)
of coal-generated electricity. To estimate the reduction in mercury
emissions, DOE multiplied the emissions rate by the reduction in coal-
generated electricity associated with the standards considered. DOE's
low estimate assumed that future standards would displace electrical
generation only from natural gas-fired power plants, thereby resulting
in an effective emission rate of zero. The low end of the range of Hg
emissions rates is zero because natural gas-fired powered power plants
have virtually no Hg emissions associated with their operations.
Because the CAMR remains vacated, DOE continued to use the approach it
used for the May 2009 NOPR to estimate the Hg emission reductions due
to standards for today's final rule. To estimate the reduction in Hg
emissions, DOE multiplied the emissions rates by the reduction in
electricity generation associated with the standards proposed in
today's final rule.
Earthjustice commented that DOE's approach to estimating mercury
emissions arbitrarily ignores the results of the Department's own
utility impact analysis, which models cumulative avoided electricity
from all sources and a breakout disclosing cumulative generation from
several sources (coal, petroleum, natural gas, and renewables).
(Earthjustice, No. 66 at pp. 1-2) Given that DOE's own utility impact
analysis models the energy savings from each source of electricity
generation, DOE may not refuse to apply that information to estimate
the cumulative mercury emissions reductions without a rational
explanation. EarthJustice added that DOE need only refer to the AEO
Reference Case average emissions rates to obtain updated projections
for future Hg emissions factors.
DOE estimates its emission factors based on marginal emissions
rates for energy savings for the primary energy saved by the standard.
Diagnosis of NEMS-BT model runs leaves significant uncertainty
concerning which generating fuels would be affected at the margin at
the scale of energy savings expected as a result of the standard. The
differences in emission rates are particularly important for Hg because
some fuels generate almost no Hg. Therefore, DOE has elected to keep a
range of emissions values in this rule. DOE also notes that the average
Hg emissions values suggested by Earthjustice fell between the two
values used by DOE.
DOE notes that neither EPCA nor NEPA requires that the economic
value of emissions reductions be incorporated in the LCC or NPV
analysis of energy savings. DOE has chosen to report these benefits
separately from the net benefits of energy savings. A summary of the
monetary results is shown in section VI.C.6 of this final rule. DOE
considered both values when weighing the benefits and burdens of
standards.
N. Monetizing Carbon Dioxide and Other Emissions Impacts
DOE also calculated the possible monetary benefit of
CO2, NOX, and Hg reductions. Cumulative monetary
benefits discounted from the year of the emission reduction to the
present using discount rates of 3 and 7 percent. DOE monetized
reductions in CO2 emissions due to the standards proposed in
this final rule based on a range of monetary values drawn from studies
that attempt to estimate the present value of the marginal economic
benefits (based on the avoided marginal social costs of carbon) likely
to result from lowering future atmospheric concentrations of greenhouse
gases. The marginal social cost of carbon is an estimate of the
monetary value to society of the environmental damages of
CO2 emissions. One comment was provided on the economic
valuation of CO2 at the NOPR public meeting.
ASAP stated that it is important for DOE to reevaluate its approach
to carbon valuation. (ASAP, Public Meeting Transcript, No. 56 at p. 37)
ASAP believes that DOE's estimate for the value of carbon is low, but
did not provide data for analysis. As discussed in section VI.C.6, DOE
has updated the approach described in the May 2009 NOPR for its
monetization of environmental emissions reductions for today's final
rule. DOE continues to work with other Federal agencies on a common
approach and values to be used in monetizing carbon and other
emissions.
Although this rulemaking may not affect SO2 emissions
nationwide and does not affect NOX emissions in the 28
eastern States and D.C. where CAIR is in effect, there are markets for
SO2 and NOX emissions allowances. The market
clearing price of SO2 and NOX emissions
allowances is roughly the marginal cost of meeting the regulatory cap,
not the marginal value of the cap itself. Further, because national
SO2 and NOX emissions are regulated by a cap-and-
trade system, the cost of meeting these caps is included in the price
of energy. Thus, the value of energy savings already includes the value
of SO2 and NOX control for those customers
experiencing energy savings. The economic cost savings associated with
SO2 and NOX emissions caps is approximately equal
to the change in the price of traded allowances resulting from energy
savings multiplied by the number of allowances that would be issued
each year. That calculation is uncertain because the energy savings
from new standards for beverage vending machines would be so small
relative to the entire electricity generation market that the resulting
emissions savings would have almost no impact on price formation in the
allowances market. These savings would most likely be outweighed by
uncertainties in the marginal costs of compliance with SO2
and NOX emissions caps.
The current NEMS-BT model used in projecting the environmental
impacts includes the CAIR rule, as described above, which is projected
to reduce SO2 and NOX emissions. NEMS-BT also
takes into account the current set of State level renewable portfolio
standards, the effect of the Northeastern states Regional Greenhouse
Gas Initiative (RGGI), and utility investor reactions to the
possibility of future CO2 cap and trade programs, all of
which affect electricity prices and reduce the projected carbon
intensity of generation. The most recent Reference Case, AEO2009, is
available at http://www.eia.doe.gov/oiaf/servicerpt/stimulus/index.html, and documentation of the AEO2009 assumptions is available
at http://www.eia.doe.gov/oiaf/aeo/assumption/index.html.
V. Discussion of Other Comments
Since DOE opened the docket for this rulemaking, it has received
more than 100 written comments from a diverse set of parties, including
manufacturers and their representatives, wholesalers and
[[Page 44935]]
distributors, energy conservation advocates, State officials and
agencies, and electric utilities. Section IV of this preamble discusses
comments DOE received on the analytic methodologies it used. Additional
comments DOE received in response to the May 2009 NOPR addressed the
information DOE used in its analyses, results of and inferences drawn
from the analyses, impacts of standards, the merits of the different
TSLs and standards options DOE considered, and other issues affecting
adoption of standards for beverage vending machines. DOE addresses
these comments in this section.
A. Information and Assumptions Used in Analyses
1. Engineering Analysis
During the NOPR public meeting, Royal Vendors commented that the
data used for Class A fluorescent lighting systems in the engineering
analysis is not consistent with the specifications of the fluorescent
lighting systems it uses in its glass-front machines. Specifically, it
stated that DOEs estimated energy consumption of 32 watts (W) per
fixture is too high. Royal Vendors claims its fluorescent fixtures only
consume 22 W (Royal Vendors, Public Meeting Transcript, No. 56 at p.
68).
DOE uses aggregate values for its engineering analysis inputs.
These values are derived using publicly available data or information
provided by multiple manufacturers and/or component suppliers. Analysis
inputs are generalized so as to better represent the industry as a
whole. DOE's estimate of 32 W of energy consumed for T8 fluorescent
fixtures in Class A machines is adequate for the beverage vending
machine industry and it has not made any adjustments for the final
rule.
B. Benefits and Burdens
Royal Vendors stated that the proposed standards appeared to be
reversed for Class A machines and Class B machines. It stated that
Class A machines typically use more energy than Class B machines.
(Royal Vendors, Public Meeting Transcript, No. 56 at p. 27) Dixie-Narco
disagreed with Royal Vendors, stating that the proposed standards are
correct and appropriate. (Dixie-Narco, Public Meeting Transcript, No.
56 at p. 29) ASAP stated that it generally supports DOE's proposed
standard levels. It stated that for Class A machines, DOE's proposal,
TSL 6, is the maximum level that is cost effective. However, for Class
B machines, ASAP suggested that DOE consider selecting TSL 4 rather
than TSL 3 because the economic results for these two levels are very
similar. (ASAP, Public Meeting Transcript, No. 56 at p. 31) Dixie-Narco
stated that when you consider that the standards equations are based on
refrigerated volume and not can capacity (or vendible capacity), the
equations for the standards are appropriate for both equipment classes.
(Dixie-Narco, Public Meeting Transcript, No. 56 at p. 152) Dixie-Narco
further stated that it is currently achieving the proposed efficiency
level for Class A machines but not for Class B machines, and therefore
would have to make modifications to meet the proposed level for Class B
machines. (Dixie-Narco, Public Meeting Transcript, No. 56 at p. 163,
219) Royal Vendors stated that for Class A machines, they do not
currently meet those levels, but given no proprietary design problems,
they could meet them fairly easily. For Class B machines, Royal Vendors
stated that they do not meet the proposed standards currently, but
could without tremendous effort. (Royal Vendors, Public Meeting
Transcript, No. 56 at p. 220) Coca-Cola commented that an appropriate
standard for Class A equipment would be one that is ``on par'' with the
ENERGY STAR Tier II level. (Coca-Cola, No. 63 at p. 2)
In a written comment, NAMA stated that it received a mixed response
from its members regarding the technological feasibility and economic
benefits of the standard levels proposed by DOE. One manufacturer
stated that it would have difficulty achieving additional reductions
for Class A and Class B machines, while another stated that it could
achieve the standard for both Class A and Class B machines without
significant costs to them or their customers. However, most responses
to NAMA's request for information indicated that the proposed standard
for Class B machines was appropriate and achievable. One manufacturer
specifically stated that TSL 3 for Class B could be reached without
significant costs. The proposed standard for Class A, on the other
hand, raised questions among many manufacturers, although one
manufacturer stated that it already exceeds the Class A standard
without adding significant costs. (NAMA, No. 65 at pp. 3, 4) DOE
considers these comments on its selection of the final energy
conservation standard level for beverage vending machines. See section
VI.D.
VI. Analytical Results and Conclusions
A. Trial Standard Levels
DOE analyzed seven energy consumption levels for Class A equipment
and six energy consumption levels for Class B equipment in the LCC and
NIA analyses. For the May 2009 NOPR, DOE determined that each of these
levels should be presented as a possible TSL and correspondingly
identified seven TSLs for Class A and six TSLs for Class B equipment.
For each equipment class, the range of TSLs selected includes the
energy consumption level providing the maximum NES level for the class,
the level providing the maximum NES while providing a positive NPV, the
level providing the maximum NPV, and the level approximately equivalent
to ENERGY STAR Tier II. Many of the higher levels selected correspond
to equipment designs that incorporate specific noteworthy technologies
that can provide energy savings benefits. For Class A machines, DOE
also included two intermediate efficiency levels to fill in significant
energy consumption gaps between the levels identified above the ENERGY
STAR Tier II equivalent level. For Class A equipment, the ENERGY STAR
Tier II level is equivalent to TSL 1, which allows for the highest
energy consumption. For Class B equipment, DOE included one TSL with
energy consumption higher than that provided by ENERGY STAR Tier II
level.
For the May 2009 NOPR, four of the TSLs for each equipment class
were based on the levels that provided maximum energy savings, maximum
efficiency level with positive LCC savings, maximum LCC savings, and
the highest efficiency level with a payback of less than 3 years.
DOE preserved energy consumption levels from the NOPR that met the
same economic criteria in the final rule but also included the ENERGY
STAR Tier II equivalency level and several additional TSLs. These
additional levels either provide additional intermediate efficiency
levels or include specific noteworthy technologies examined in the
engineering analysis. Table VI.1 and Table VI.2 show the TSL levels DOE
selected for the equipment classes and sizes analyzed. For Class A
equipment, TSL 7 is the max-tech level for each equipment class. TSL 6
is the maximum efficiency level with a positive NPV at the 7 percent
discount rate, achieved by incorporating an ECM condenser fan. TSL 5 is
the efficiency level with the maximum NPV and maximum LCC savings,
achieved by using an advanced refrigerant condenser design. TSL 4 is
the level that first incorporated light-emitting diode (LED) lighting
as a design feature in the engineering analysis. TSL 3 and TSL 2 were
intermediate efficiency levels chosen to bridge the gap between TSL 4,
and the
[[Page 44936]]
ENERGY STAR Tier II equivalent level, which is TSL 1.
Table VI.1--Trial Standard Levels for Class A Equipment Expressed in Terms of Daily Energy Consumption (kWh/day)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level in order of efficiency
Size TSL -----------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
LCC Efficiency level 1 2 3 4 5 6 7 8
Small............................. Engineering Level... 1 5 *NA *NA 6 7 9 11
kWh/day............. 6.10 5.27 4.75 4.25 3.95 3.73 3.58 3.25
Medium............................ Engineering Level... 1 5 *NA *NA 6 7 9 11
kWh/day............. 6.53 5.51 5.25 4.75 4.19 3.95 3.79 3.43
Large............................. Engineering Level... 1 4 *NA *NA 5 6 8 10
kWh/day............. 6.75 6.21 5.75 5.25 4.89 4.60 4.41 3.94
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Not applicable. These levels established as intermediate points along the engineering cost curves.
Table VI.2--Trial Standard Levels for Class B Equipment Expressed in Terms of Daily Energy Consumption (kWh/day)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level in order of efficiency
Size TSL -----------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
LCC Efficiency Level...... 1 2 3 4 5 6 7
Small................................... Engineering Level......... 1 2 4 4 5 6 7
kWh/day................... 4.96 4.62 4.31 4.31 4.28 3.78 3.69
Medium.................................. Engineering Level......... 1 2 4 5 6 7 8
kWh/day................... 5.56 5.20 4.99 4.76 4.72 4.22 4.12
Large................................... Engineering Level......... 1 2 3 4 5 6 7
kWh/day................... 5.85 5.48 5.33 5.07 5.03 4.52 4.41
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Not applicable. These levels established as intermediate points along the engineering cost curves.
For Class B equipment, TSL 6 is the max-tech level for each
equipment size. TSL 5 is the level that first incorporated LED lighting
as a design option in the engineering analysis. TSL 4 is the next
highest efficiency level incorporating an ECM condenser fan motor. TSL
3 was achieved by using an advanced refrigerant condenser design. This
TSL provided an NPV value of essentially 0, with total capital
expenditures for new equipment balanced by total operating cost savings
over the NIA analysis period, based on a 7 percent discount rate. TSL 2
is the ENERGY STAR Tier II level for Class B machines. This TSL
provided the maximum LCC savings and maximum NPV savings at a 7 percent
discount rate. TSL 1, which provided an energy consumption level
approximately 4 percent higher than TSL 2, was also included in the
analysis. TSL 1 represented the first level incorporating an evaporator
fan driven by an ECM in the engineering analysis.
As stated in the May 2009 NOPR, DOE chose to characterize the
proposed TSL levels in terms of equations that establish a maximum
daily energy consumption (MDEC) limit through a linear equation of the
following form:
MDEC = A x V + B
Where:
A is expressed in terms of kWh/day/ft \3\ of measured volume,
V is the measured refrigerated volume (ft \3\) calculated for the
equipment, and
B is an offset factor expressed in kWh/day.
Coefficients A and B are uniquely derived for each equipment class
based on a linear equation passing between the daily energy consumption
values for equipment of different refrigerated volumes. For the A and B
coefficients, DOE used the energy consumption values shown in Table
VI.1 and Table VI.2 for the medium and large equipment sizes within
each class of beverage vending machine. DOE did not use the small sizes
in either equipment class because information from the May 2009 NOPR
indicated that there are no significant shipments of this equipment
size. Results are described in more detail in chapter 9 of the TSD.
Chapter 9 of the TSD also explains the methodology DOE used for
selecting TSLs and developing the equations shown in Table VI.3.
Table VI.3--Trial Standard Levels Expressed in Terms of Equations and Coefficients for Class A and Class B
Equipment
----------------------------------------------------------------------------------------------------------------
Trial standard level Test metric Class A Class B
----------------------------------------------------------------------------------------------------------------
Baseline..................... kWh/day......... MDEC = 0.019 x V + MDEC = 0.068 x V + 4.07.
6.09.
1............................ kWh/day......... MDEC = 0.062 x V + MDEC = 0.066 x V + 3.76.
4.12.
2............................ kWh/day......... MDEC = 0.044 x V + MDEC = 0.080 x V + 3.24.
4.26.
3............................ kWh/day......... MDEC = 0.044 x V + MDEC = 0.073 x V + 3.16.
3.76.
[[Page 44937]]
4............................ kWh/day......... MDEC = 0.062 x V + MDEC = 0.073 x V + 3.12.
2.80.
5............................ kWh/day......... MDEC = 0.058 x V + MDEC = 0.070 x V + 2.68.
2.66.
6............................ kWh/day......... MDEC = 0.055 x V + MDEC = 0.068 x V + 2.63.
2.56.
7............................ kWh/day......... MDEC = 0.045 x V + NA. *
2.42..
----------------------------------------------------------------------------------------------------------------
* Not applicable. There is no TSL 7 for Class B equipment.
B. Significance of Energy Savings
To estimate the energy savings through 2042 due to new standards,
DOE compared the energy consumption of beverage vending machines under
the base case (no standards) to energy consumption of this equipment
under each TSL that DOE considered. Table VI.4 and Table VI.5 show
DOE's NES estimates, which it based on the April 2009 update of the
AEO2009 Reference Case, for each TSL. Chapter 11 of the TSD describes
these estimates in more detail. DOE reports both undiscounted and
discounted values of energy savings. Discounted energy savings
represent a policy perspective where energy savings farther in the
future are less significant than energy savings closer to the present.
Table VI.4 shows the forecasted aggregate national energy savings, both
discounted and undiscounted, of Class A equipment at each TSL. The
table also shows the magnitude of the estimated energy savings if the
savings are discounted at the 7 percent and 3 percent real discount
rates. Each TSL considered in this rulemaking would result in
significant energy savings, and the amount of savings increases with
higher energy conservation standards (ranging from an estimated 0.007
quads to 0.170 quads, undiscounted, for TSLs 1 through 7) (see chapter
11 of the TSD).
Table VI.4--Summary of Cumulative National Energy Savings for Class A Equipment
[Energy savings for units sold from 2012 to 2042]
----------------------------------------------------------------------------------------------------------------
Primary national energy savings (quads)
Trial standard level -----------------------------------------------------
Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1......................................................... 0.007 0.004 0.002
2......................................................... 0.031 0.018 0.010
3......................................................... 0.069 0.040 0.021
4......................................................... 0.107 0.061 0.032
5......................................................... 0.127 0.073 0.038
6......................................................... 0.139 0.080 0.042
7......................................................... 0.170 0.097 0.051
----------------------------------------------------------------------------------------------------------------
In Table VI.5, DOE reports both undiscounted and discounted values
of energy savings for Class B equipment. As with Class A equipment,
each TSL considered would result in significant energy savings, and the
amount of energy savings increases with higher energy conservation
standards (ranging from an estimated 0.003 quads to 0.068 quads,
undiscounted, for TSLs 1 through 6.
Table VI.5--Summary of Cumulative National Energy Savings for Class B Equipment ]
[Energy savings for units sold from 2012 to 2042]
----------------------------------------------------------------------------------------------------------------
Primary national energy savings (quads)
Trial standard level -----------------------------------------------------
Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1......................................................... 0.003 0.002 0.001
2......................................................... 0.004 0.002 0.001
3......................................................... 0.020 0.012 0.006
4......................................................... 0.023 0.013 0.007
5......................................................... 0.061 0.035 0.018
6......................................................... 0.068 0.039 0.020
----------------------------------------------------------------------------------------------------------------
C. Economic Justification
1. Economic Impact on Commercial Customers
a. Life-Cycle Costs and Payback Period
To evaluate the economic impact of the TSLs on customers, DOE
conducted an LCC analysis for each TSL. More efficient beverage vending
machines are expected to affect customers in two ways: Annual operating
expense is expected to decrease and purchase price is expected to
increase. DOE analyzed the net effect by calculating the LCC. Inputs
used for calculating the LCC include total installed costs (i.e.,
equipment price plus installation costs), annual energy savings,
average electricity costs by customer, energy price trends, repair
costs, maintenance costs, equipment lifetime, and discount rates.
DOE's LCC and PBP analyses provided five outputs for each TSL that
are reported in Table VI.6 through Table VI.8 for Class A equipment.
The first three outputs are the percentages of
[[Page 44938]]
standard-compliant machine purchases that would result in (1) a net LCC
increase, (2) no impact, or (3) a net LCC savings for the customer. DOE
used the estimated distribution of shipments by efficiency level for
each equipment class to determine the affected customers. The fourth
output is the average net LCC savings from standard-compliant
equipment. The fifth output is the average PBP for the customer
investment in standard-compliant equipment. The PBP is the number of
years it would take for the customer through energy savings to recover
the increased costs of higher efficiency equipment compared to baseline
efficiency equipment.
Table VI.6--Summary LCC and PBP Results for Class A Equipment--Large
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Results ------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......................... 0 1 3 3 3 5 100
Equipment with No Change in LCC (%).......................... 90 0 0 0 0 0 0
Equipment with Net LCC Savings (%)........................... 10 99 97 97 97 95 0
Mean LCC Savings ($)......................................... 84 132 184 222 244 240 (1,481)
Mean Payback Period (years).................................. 2.3 3.1 3.4 3.6 3.8 4.3 83.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table VI.7--Summary LCC and PBP Results for Class A Equipment--Medium
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Results ------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......................... 0 0 1 1 3 5 100
Equipment with No Change in LCC (%).......................... 90 0 0 0 0 0 0
Equipment with Net LCC Savings (%)........................... 10 100 99 99 97 95 0
Mean LCC Savings ($)......................................... 162 207 235 296 305 295 (1,183)
Mean Payback Period (years).................................. 2.1 2.0 3.1 3.3 3.6 4.0 71.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table VI.8--Summary LCC and PBP Results for Class A Equipment--Small
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Results ------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).......................... 0 1 3 3 3 5 100
Equipment with No Change in LCC (%).......................... 90 0 0 0 0 0 0
Equipment with Net LCC Savings (%)........................... 10 99 97 97 97 95 0
Mean LCC Savings ($)......................................... 130 179 227 255 265 255 (1,153)
Mean Payback Period (years).................................. 2.1 2.9 3.3 3.5 3.8 4.2 80.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
For the Class A equipment, there are positive net LCC savings on
average for TSL 1 through 6. Only 10 percent of all equipment purchased
is expected to achieve a net LCC savings at TSL 1, since about 90
percent of the equipment on the market in 2012 is expected to meet that
standard. LCC savings consistently peak at TSL 5, but about 95 percent
of purchasers of Class A equipment are projected to achieve LCC savings
even at TSL 6. Simple average PBPs are projected to be less than 3
years for all Class A equipment for TSL 1, and PBPs are less than 4
years from TSL 1 through 5.
DOE's LCC and PBP analyses provided the same five outputs for each
TSL for Class B equipment. These outputs are reported in Table VI.9
through Table VI.11.
Table VI.9--Summary LCC and PBP Results for Class B Equipment--Large
----------------------------------------------------------------------------------------------------------------
Trial standard level
Results -----------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)........... 0 9 27 35 100 100
Equipment with No Change in LCC (%)........... 90 0 0 0 0 0
Equipment with Net LCC Savings (%)............ 10 91 73 65 0 0
Mean LCC Savings ($).......................... 43 46 40 30 (545) (2,414)
Mean Payback Period (years)................... 3.3 4.5 6.5 7.5 83.8 100.0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
[[Page 44939]]
Table VI.10--Summary LCC and PBP Results for Class B Equipment--Medium
----------------------------------------------------------------------------------------------------------------
Trial standard level
Results -----------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)........... 0 9 29 39 100 100
Equipment with No Change in LCC (%)........... 90 0 0 0 0 0
Equipment with Net LCC Savings (%)............ 10 91 71 61 0 0
Mean LCC Savings ($).......................... 41 49 36 26 (558) (2,230)
Mean Payback Period (years)................... 3.4 4.6 6.9 7.9 85.4 99.9
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table VI.11--Summary LCC and PBP Results for Class B Equipment--Small
----------------------------------------------------------------------------------------------------------------
Trial standard level
Results ----------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%).................. 1 41 41 55 100 10
0
Equipment with No Change in LCC (%).................. 90 0 0 0 0 0
Equipment with Net LCC Savings (%)................... 10 59 59 45 0 0
Mean LCC Savings ($)................................. 35 16 16 2 (612) (2
,1
29
)
Mean Payback Period (years).......................... 3.9 8.7 8.7 10.9 94.7 10
0.
0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
For Class B equipment, there are positive net LCC savings on
average for TSLs 1 through 4. Only 10 percent of all equipment
purchased is expected to achieve a net LCC savings at TSL 1, since
about 90 percent of the equipment on the market in 2012 is expected to
meet that standard. LCC savings consistently peak at TSL 2, but for 26
to 65 percent of purchasers, Class B equipment is projected to achieve
LCC savings at TSL 4. Simple average PBPs are projected to be 3.3 to
3.4 years for large and medium size Class B equipment at TSL 1. PBPs
are about 4.5 to 4.6 years for large and medium size Class B equipment
for TSLs 1 and 2 and under 7 years for TSLs 1 through 3.
b. Life-Cycle Cost Subgroup Analysis
Using the LCC spreadsheet model, DOE estimated the impact of the
TSLs on the following customer subgroup: Manufacturing facilities that
have purchased their own beverage vending machines. This is the largest
component of the 5 percent of site owners, who also own their own
beverage vending machines, and comprises about 2 percent of all
beverage vending machines. About 95 percent of beverage vending
machines are owned by bottlers and vendors. The manufacturing
facilities subgroup was analyzed because, in addition to being the
largest independent block of owners, it had among the highest financing
costs (based on weighted average cost of capital) and faced the lowest
energy costs of any customer subgroup. The group was therefore expected
to have the least LCC savings and longest PBP of any identifiable
customer subgroup.
DOE estimated the LCC and PBP for the manufacturing facilities
subgroup. Table VI.12 shows the mean LCC savings for equipment that
meets the energy conservation standards in today's final rule for the
manufacturing facilities subgroup, and Table VI.13 shows the mean PBP
(in years) for this subgroup. Chapter 12 of the TSD provides more
detailed discussion on the LCC subgroup analysis and results.
Table VI.12--Mean Life-Cycle Cost Savings for Refrigerated Beverage Vending Machine Equipment Purchased by the Manufacturing Facilities LCC Subgroup
(2008$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Equipment class Size --------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
A................................... S.................... 92 118 143 158 159 142 (1,258)
M.................... 115 148 154 190 188 171 (1,302)
L.................... 62 86 116 137 146 134 (1,585)
B................................... S.................... 28 24 8 (3) (590) (2,433) NA
M.................... 26 26 4 (8) (603) (2,251) NA
L.................... 28 24 8 (3) (590) (2,433) NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values. NA = not applicable.
Table VI.13--Mean Payback Period for Refrigerated Beverage Vending Machine Equipment Purchased by the Manufacturing Facilities LCC Subgroup (Years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Equipment class Size ------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.................................... S..................... 2.6 3.6 4.1 4.3 4.7 5.2 90.6
M..................... 2.6 2.4 3.7 4.0 4.4 5.0 82.7
L..................... 2.7 3.8 4.2 4.4 4.7 5.3 92.2
[[Page 44940]]
B.................................... S..................... 4.9 11.9 11.9 15.5 99.5 100.0 NA
M..................... 4.2 5.8 9.0 10.5 94.1 100.0 NA
L..................... 4.1 5.7 8.4 9.9 93.0 100.0 NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: NA = not applicable.
For beverage vending machines, the positive LCC and PBP impacts for
manufacturing facilities that own their own beverage vending machines
are less than those of all customers. Because they face lower energy
costs, the lower value of energy savings lengthens the period over
which the original investment is paid back and also reduces operating
cost savings over the lifetime of more efficient beverage vending
machines. In addition, because they face higher financing costs, these
customers sites have a relatively high opportunity cost for investment,
so the value of future electricity savings from higher efficiency
equipment is further reduced. Even so, for this subgroup of customers,
LCC savings are still positive for all but TSL 7 for Class A and is
positive at TSL 3 and below for Class B. PBP is lengthened by about a
year for Class A and 2 years for Class B but is still less about 5
years at TSL 6 for Class A and less than 9 years for medium-size Class
B equipment (which is less than the equipment lifetime) at TSL 3.
2. Economic Impact on Manufacturers
DOE determined the economic impacts of today's standard on
manufacturers, as described in the proposed rule. 74 FR 26053-56. As
updated for today's final rule, DOE analyzed manufacturer impacts under
two distinct markup scenarios: (1) The preservation-of-gross-margin-
percentage markup scenario, and (2) the preservation-of-operating-
profit (absolute dollars) markup scenario.
Together, these two markup scenarios characterize the range of
possible conditions the beverage vending machine market will experience
as a result of new energy conservation standards. See chapter 13 of the
TSD for additional details of the markup scenarios and analysis.
a. Industry Cash-Flow Analysis Results
Using two different markup scenarios, DOE estimated the impact of
new standards for beverage vending machines on the INPV of the beverage
vending machine industry. The impact consists of the difference between
INPV in the base case and INPV in the standards case. INPV is the
primary metric used in the MIA, and represents one measure of the fair
value of the industry in today's dollars. DOE calculated the INPV by
summing all of the net cash flows, discounted at the beverage vending
machine industry's cost of capital or discount rate.
Table VI.14 through Table VI.17 show the changes in INPV that DOE
estimates would result from the TSLs DOE considered for this final rule
using the preservation-of-gross-margin-percentage and preservation-of-
operating-profit scenarios described above. The tables also present the
equipment conversion costs and capital conversion costs that the
industry would incur at each TSL. Equipment conversion costs include
engineering, prototyping, testing, and marketing expenses incurred by a
manufacturer as it prepares to comply with a standard. Capital
conversion costs are the one-time outlays for tooling and plant changes
required for the industry to comply.
Table VI.14--Manufacturer Impact Analysis for Class A Refrigerated Beverage Vending Machine Equipment Under the Preservation-of-Gross-Margin-Percentage
Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Metric Units Base ------------------------------------------------------------------
case 1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV........................................ 2008$ millions................ 44.1 44.2 44.3 44.5 42.9 42.8 36.2 41.0
Change in INPV.............................. 2008$ millions................ ....... 0.0 0.2 0.3 (1.3) (1.3) (7.9) (3.2)
%............................. ....... 0.1 0.5 0.7 (2.9) (3.0) (18.0) (7.2)
Equipment Conversion Costs.................. 2008$ millions................ ....... 0.0 0.0 0.6 0.6 1.2 2.9 3.5
Capital Conversion Costs.................... 2008$ millions................ ....... 0.0 0.0 0.0 2.2 2.2 9.1 14.1
Total Investment Required................... 2008$ millions................ ....... 0.0 0.0 0.6 2.8 3.4 11.9 17.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers in parentheses indicate negative values.
Table VI.15--Manufacturer Impact Analysis for Class A Refrigerated Beverage Vending Machine Equipment Under the Preservation-of-Operating-Profit Markup
Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of operating profit markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Metric Units Base ---------------------------------------------------------------------
case 1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2008$ millions............... 44.1 44.1 43.9 43.0 40.6 40.1 33.1 15.8
Change in INPV............................ 2008$ millions............... ....... (0.0) (0.3) (1.1) (3.5) (4.1) (11.1) (28.3)
%............................ ....... (0.1) (0.6) (2.5) (7.9) (9.3) (25.1) (64.2)
[[Page 44941]]
Equipment Conversion Costs................ 2008$ millions............... ....... 0.0 0.0 0.6 0.6 1.2 2.9 3.5
Capital Conversion Costs.................. 2008$ millions............... ....... 0.0 0.0 0.0 2.2 2.2 9.1 14.1
Total Investment Required................. 2008$ millions............... ....... 0.0 0.0 0.6 2.8 3.4 11.9 17.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers in parentheses indicate negative values.
Table VI.16--Manufacturer Impact Analysis for Class B Refrigerated Beverage Vending Machine Equipment Under the Preservation-of-Gross-Margin-Percentage
Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units Base ---------------------------------------------------------------
case 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................... 2008$ millions................. 33.7 33.7 33.7 33.1 32.7 26.3 30.5
Change in INPV............................... 2008$ millions................. ........ 0.0 0.0 (0.6) (1.0) (7.4) (3.2)
%.............................. ........ 0.1 0.1 (1.9) (3.0) (21.9) (9.5)
Equipment Conversion Costs................... 2008$ millions................. ........ 0.0 0.0 1.7 2.6 3.5 6.9
Capital Conversion Costs..................... 2008$ millions................. ........ 0.0 0.0 0.0 0.0 11.0 14.7
Total Investment Required.................... 2008$ millions................. ........ 0.0 0.0 1.7 2.6 14.5 21.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers in parentheses indicate negative values.
Table VI.17--Manufacturer Impact Analysis for Class B Refrigerated Beverage Vending Machine Equipment Under the Preservation-of-Operating-Profit Markup
Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of operating profit markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units Base -----------------------------------------------------------------
case 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV........................................ 2008$ millions................ 33.7 33.7 33.7 32.5 32.0 17.2 0.2
Change in INPV.............................. 2008$ millions................ ........ (0.0) (0.0) (1.2) (1.7) (16.5) (33.5)
%............................. ........ (0.1) (0.2) (3.5) (5.0) (48.9) (99.4)
Equipment Conversion Costs.................. 2008$ millions................ ........ 0.0 0.0 1.7 2.6 3.5 6.9
Capital Conversion Costs.................... 2008$ millions................ ........ 0.0 0.0 0.0 0.0 11.0 14.7
Total Investment Required................... 2008$ millions................ ........ 0.0 0.0 1.7 2.6 14.5 21.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers in parentheses indicate negative values.
The May 2009 NOPR discusses the estimated impact of new beverage
vending machine standards on INPV for each equipment class. 74 FR
26053-55. See chapter 13 of the TSD for details.
b. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several regulations may have
serious consequences for some manufacturers, groups of manufacturers,
or an entire industry. Assessing the impact of a single regulation may
overlook this cumulative regulatory burden.
DOE recognizes that each regulation can significantly affect
manufacturers' financial operations. Multiple regulations affecting the
same manufacturer can reduce manufacturers' profits and possibly cause
manufacturers to exit from the market. During the public meeting,
PepsiCo stated that pending regulation would mandate that the beverage
vending machine industry add nutrition labels to the exterior of all
machines that specify the nutritional information for its contents.
(PepsiCo, Public Meeting Transcript, No. 56 at p. 178)
On May 14, 2009, the Menu Education and Labeling (MEAL) Act, a bill
to amend the Federal Food, Drug, and Cosmetic Act to extend the food
labeling requirements of the Nutrition Labeling and Education Act of
1990, was introduced into Congress. The bill includes a provision to
require the vending machine industry to post labels on their machines
containing certain nutrition information about their contents. While
this legislation may potentially result in an additional labeling
requirement for beverage vending machine manufacturers, DOE cannot
consider in its cumulative regulatory burden analysis any legislation
that has not yet been enacted. Furthermore, DOE has not found or
received any quantitative or qualitative information regarding the
magnitude of the financial burden that may accompany the pending
nutritional information regulation.
DOE did not identify any other DOE regulations that would affect
the manufacturers of beverage vending machines or their parent
companies. DOE requested information about the
[[Page 44942]]
cumulative regulatory burden during manufacturer interviews. In
general, manufacturers were not greatly concerned about other Federal,
State, or international regulations. The requirements of their major
customers have a greater impact on their business than any of these
other regulations. For further information about the cumulative
regulatory burden, see chapter 13 of the TSD.
c. Impacts on Employment
DOE used the GRIM to assess the impacts of energy conservation
standards on beverage vending machine industry employment. DOE used
statistical data from the U.S. Census Bureau's 2006 Annual Survey of
Manufacturers, the results of the engineering analysis, and interviews
with manufacturers to estimate the inputs necessary to calculate
industry-wide labor expenditures and employment levels. Results of the
U.S. Census Bureau's 2007 Annual Survey of Manufacturers are not yet
available.
The vast majority of beverage vending machines are manufactured in
the United States. Based on results of the GRIM, DOE expects that there
would be slightly positive direct employment impacts among domestic
beverage vending machine manufacturers for TSLs 1 through 6 for Class A
equipment and TSLs 1 through 5 for Class B equipment. The GRIM
estimates that employment would increase by fewer than 36 employees for
Class A equipment at TSLs 1 through 6 and fewer than 97 employees for
Class B equipment at TSLs 1 though 5. The employment impacts are more
positive at the max-tech levels (TSL 7 for Class A equipment and TSL 6
for Class B equipment) because more labor is required and the
production costs of the most efficient equipment greatly increase. The
employment impacts calculated in the GRIM are shown in Table VI.35 and
Table VI.36 in section VI.D.
The results calculated in the GRIM do not account for the possible
relocation of domestic jobs to lower-labor-cost countries, which may
occur independently of new standards or may be influenced by the level
of investments new standards require. Manufacturers stated that
although there are no current plans to relocate production facilities,
higher TSLs would increase pressure to cut costs, which could result in
relocation. The labor impacts would be different if manufacturers chose
to relocate to lower cost countries or if manufacturers consolidated.
In addition, standards could increase pressure to consolidate within
the industry due to the low profitability and existing excess
production capacity. Chapter 13 of the TSD further discusses how the
employment impacts are calculated and shows the projected changes in
employment levels by TSL.
The conclusions in this section are independent of any conclusions
regarding employment impacts from the broader U.S. economy estimated in
the employment impact analysis. Those impacts are documented in chapter
15 of the TSD.
d. Impacts on Manufacturing Capacity
According to the majority of beverage vending machine
manufacturers, new energy conservation standards will not affect
manufacturers' production capacity. Within the last decade, annual
shipments of beverage vending machines have decreased almost three-
fold. Due to the decline in shipments, it is likely that any of the
major manufacturers has the capacity to meet most of the recent market
demand. Consequently, the industry has the capacity to make many times
more units than are currently sold each year. Thus, DOE believes
manufacturers will be able to maintain manufacturing capacity levels
and continue to meet market demand under new energy conservation
standards.
e. Impacts on Subgroups of Manufacturers
As discussed in the May 2009 NOPR, 74 FR 26044-45, 26056, 26069-72,
DOE evaluated the impacts of new energy conservation standards on small
manufacturers as defined by the U.S. Small Business Administration
(SBA). DOE identified six small manufacturers and requested information
that would determine if there are differential impacts that may result
from new energy conservation standards. In the NOPR, DOE specifically
requested comments on how small business manufacturers will be affected
by new energy conversation standards. 74 FR 26071. However, DOE did not
receive any comments in response to this request. For a discussion of
the impacts on small business manufacturers, see chapter 13 of the TSD
and section VII.B of this preamble (``Review Under the Regulatory
Flexibility Act'').
3. National Impact Analysis
a. Amount and Significance of Energy Savings
Because the pattern and strategies for improving the energy
performance of beverage vending machines is somewhat different between
Class A and B equipment, energy savings are reported separately for
each class of equipment by TSL. The national energy savings are between
0.003 and 0.170 quads, beyond that achieved in ENERGY STAR Tier 1
equipment, depending on the TSL and equipment class, an amount of
energy savings that DOE considers significant. As stated previously,
energy savings increase as TSLs grow progressively more stringent than
the baseline efficiency level.
To estimate the energy savings through 2042 due to new energy
conservation standards, DOE compared the energy consumption of beverage
vending machines under the base case to energy consumption under a new
standard. The energy consumption calculated in the NIA is source
energy, taking into account energy losses in the generation and
transmission of electricity as discussed in section VI.B.
DOE tentatively determined the amount of energy savings at each of
the seven TSLs being considered for Class A equipment and six TSLs for
Class B equipment, then analyzed and aggregated the results across the
three sizes for each equipment class.
Table VI.18 shows the forecasted aggregate national energy savings,
both discounted and undiscounted, of Class A equipment at each TSL. The
table also shows the magnitude of the estimated energy savings if the
savings are discounted at the 7 percent and 3 percent real discount
rates. Each TSL considered in this rulemaking would result in
significant energy savings, and the amount of savings increases with
higher energy conservation standards (ranging from an estimated 0.007
to 0.170 quads, undiscounted, for Class A equipment for TSLs 1 through
7). See chapter 11 of the TSD for details of the NIA.
[[Page 44943]]
Table VI.18--Summary of Cumulative National Energy Savings for Class A Equipment (Energy Savings for Units Sold
From 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Primary national energy savings quads
Trial standard level -----------------------------------------------------
Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1......................................................... 0.007 0.004 0.002
2......................................................... 0.031 0.018 0.010
3......................................................... 0.069 0.040 0.021
4......................................................... 0.107 0.061 0.032
5......................................................... 0.127 0.073 0.038
6......................................................... 0.139 0.080 0.042
7......................................................... 0.170 0.097 0.051
----------------------------------------------------------------------------------------------------------------
In Table VI.19, DOE reports both undiscounted and discounted values
of energy savings for Class B equipment. Each TSL considered would
result in significant energy savings, and the amount of savings
increases with higher energy conservation standards (ranging from an
estimated 0.003 to 0.068 quads, undiscounted, for Class B equipment for
TSLs 1 through 6).
Table VI.19--Summary of Cumulative National Energy Savings for Class B Equipment (Energy Savings for Units Sold
from 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Primary national energy savings quads
Trial standard level -----------------------------------------------------
Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1......................................................... 0.003 0.002 0.001
2......................................................... 0.004 0.002 0.001
3......................................................... 0.020 0.012 0.006
4......................................................... 0.023 0.013 0.007
5......................................................... 0.061 0.035 0.018
6......................................................... 0.068 0.039 0.020
----------------------------------------------------------------------------------------------------------------
b. Net Present Value
The NPV analysis is a measure of the cumulative benefit or cost of
standards to the Nation. In accordance with OMB guidelines on
regulatory analysis (OMB Circular A-4, section E, September 17, 2003),
DOE calculated an estimated NPV using both a 7 percent and 3 percent
real discount rate. The 7 percent rate is an estimate of the average
before-tax rate of return to private capital in the U.S. economy. This
rate reflects the returns to real estate and small business capital as
well as corporate capital. DOE used this discount rate to approximate
the opportunity cost of capital in the private sector, since recent OMB
analysis has found the average rate of return to capital to be near
this rate. DOE also used the 3 percent discount rate to capture the
potential effects of standards on private consumption (e.g., through
higher prices for equipment and purchase of reduced amounts of energy).
This rate represents the rate at which society discounts future
consumption flows to their present value. This rate can be approximated
by the real rate of return on long-term Government debt (e.g., the
yield on Treasury notes minus the annual rate of change in the Consumer
Price Index), which has averaged about 3 percent on a pre-tax basis for
the last 30 years.
Table VI.20 shows the estimated cumulative NPV calculated for all
Class A equipment. Table VI.20 assumes the AEO2009 Reference Case
forecast for electricity prices. At a 7 percent discount rate, TSLs 1
through 6 show positive cumulative NPVs. The highest NPV is provided by
TSL 5 at $0.192 billion. TSL 6 showed an NPV at $0.185 billion. TSL 7
showed an NPV at -$1.449 billion, the result of negative NPV observed
in all sizes of this equipment class.
Table VI.20--Summary of Cumulative Net Present Value for Class A
Equipment (AEO2009 Reference Case)
------------------------------------------------------------------------
NPV* billion 2008$
-------------------------------
Trial standard level 7% Discount 3% Discount
rate rate
------------------------------------------------------------------------
1....................................... 0.015 0.034
2....................................... 0.068 0.153
3....................................... 0.112 0.268
4....................................... 0.175 0.415
5....................................... 0.192 0.464
6....................................... 0.185 0.465
7....................................... (1.449) (2.466)
------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative NPV (i.e., net cost).
[[Page 44944]]
At a 3 percent discount rate, all but TSL 7 showed a positive NPV,
with the highest NPV provided at TSL 6 ($0.465 billion). TSL 5 showed a
near equivalent NPV at $0.464 billion. TSL 7 showed an NPV of -$2.466
billion. DOE observed that all Class A equipment at TSL 7 has a
negative NPV at a 3 percent discount rate.
Table VI.21 shows the estimated cumulative NPV for beverage vending
machines resulting from the sum of the NPV calculated for Class B
equipment. This table assumes the AEO2009 Reference Case forecast for
electricity prices. At a 7 percent discount rate, TSLs 1 and 2 show
positive cumulative NPVs. The highest NPV is provided by TSL 2 at
$0.006 billion. TSL 3 showed -$0.003 billion NPV. TSLs 4 through 6 also
show a negative NPV. TSL 6 has a -$2.452 billion NPV, the result of
negative NPV observed in all sizes of Class B equipment.
Table VI.21--Summary of Cumulative Net Present Value for Class B
Equipment (AEO2009 Reference Case)
------------------------------------------------------------------------
NPV billion 2008$
-------------------------------
Trial standard level 7% Discount 3% Discount
rate rate
------------------------------------------------------------------------
1....................................... 0.005 0.011
2....................................... 0.006 0.014
3....................................... (0.003) 0.011
4....................................... (0.014) (0.006)
5....................................... (0.621) (1.083)
6....................................... (2.452) (4.427)
------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative NPV (i.e., net cost).
At a 3 percent discount rate, TSLs 1 through 3 showed a positive
NPV, with the highest NPV of $0.014 billion provided at TSL 2. TSL 1
and 3 provided a near equivalent NPV at $0.009 billion. TSL 4 showed an
NPV of -$0.006 billion. DOE observed that all Class B equipment sizes
at TSL 5 have a negative NPV at a 3 percent discount rate.
In addition to the Reference Case, DOE examined the NPV under the
AEO2009 high-growth and low-growth electricity price forecasts. Chapter
11 of the TSD presents the results of this examination.
c. Impacts on Employment
Besides the direct impacts on manufacturing employment discussed in
section VI.C.2.c, DOE develops general estimates of the indirect
employment impacts of proposed standards on the economy. As discussed
above, DOE expects energy conservation standards for beverage vending
machines to reduce energy bills for commercial customers, and the
resulting net savings to be redirected to other forms of economic
activity. DOE also realizes that these shifts in spending and economic
activity by beverage vending machine operators and site owners could
affect the demand for labor. The impact comes in a variety of
businesses not directly involved in the decision to make, operate, or
pay the utility bills for beverage vending machines. Thus, the economic
impact is ``indirect.'' To estimate these indirect economic effects,
DOE used an input/output model of the U.S. economy using U.S.
Department of Commerce, Bureau of Economic Analysis (BEA) and Bureau of
Labor Statistics (BLS) data (as described in section IV.L. See chapter
15 of the TSD for details of the net national employment impact.
In this input/output model, the spending of the money saved on
utility bills when more efficient vending machines are deployed is
centered in economic sectors that create more jobs than are lost in
electric utilities when spending is shifted from electricity to other
products and services. Thus, today's refrigerated beverage vending
machine energy conservation standards are likely to slightly increase
the net demand for labor in the economy. However, the net increase in
jobs is so small that it would be imperceptible in national labor
statistics and might be offset by other, unanticipated effects on
employment. Neither the BLS data nor the input/output model used by DOE
includes the quality of jobs. As shown in Table VI.22 and Table VI.23,
DOE estimates that net indirect employment impacts from a proposed
beverage vending machine standard are likely to be very small.
Table VI.22--Net National Change in Indirect Employment From Class A Equipment: Number of Jobs From 2012 to 2042
----------------------------------------------------------------------------------------------------------------
Net national change in employment
Trial standard level ---------------------------------------------------------------
2012 2022 2032 2042
----------------------------------------------------------------------------------------------------------------
1............................................... 0 13 13 13
2............................................... 4 67 69 82
3............................................... 17 142 159 172
4............................................... 30 221 238 265
5............................................... 42 256 285 313
6............................................... 44 286 316 344
7............................................... 157 402 444 475
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
[[Page 44945]]
Table VI.23--Net National Change in Indirect Employment From Class B Equipment: Number of Jobs From 2012 to 2042
----------------------------------------------------------------------------------------------------------------
Net national change in employment
Trial standard level ---------------------------------------------------------------
2012 2022 2032 2042
----------------------------------------------------------------------------------------------------------------
1............................................... 1 6 6 6
2............................................... 1 9 9 10
3............................................... 8 41 45 49
4............................................... 9 47 52 55
5............................................... 58 138 150 162
6............................................... 166 193 204 216
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
4. Impact on Utility or Performance of Equipment
As indicated in section V.B.4 of the May 2009 NOPR, the new
standards DOE is adopting today will not lessen the utility or
performance of any beverage vending machine. 74 FR 26059.
5. Impact of Any Lessening of Competition
As discussed in the May 2009 NOPR, 74 FR 26059, and in section
III.D.1.e of this preamble, DOE considers any lessening of competition
likely to result from standards. The Attorney General determines the
impact, if any, of any lessening of competition.
The DOJ believes that the Class B standards contained in the
proposed rule would not likely lead to a lessening of competition.
(DOJ, No. 61 at p. 1)
For Class A machines, DOJ concluded that the proposed TSL 6 could
potentially lessen competition. DOJ commented that beverage vending
machine manufacture is a highly concentrated industry in the United
States, and compliance with the proposed Class A standard could require
a disproportionate investment by some manufacturers, potentially
placing them at a disadvantage with respect to others and leading to
greater concentration. DOJ requested that DOE take this possible
competitive impact into account and to ensure that the standard it
adopts for Class A beverage vending machines will not require access to
intellectual property owned by an industry participant, which would
place other industry participants at a comparative disadvantage. (DOJ,
No. 61 at pp. 1-2)
DOE agrees with DOJ that the market is highly concentrated, with
three major manufacturers supplying the vast majority of the U.S.
market. In the May 2009 NOPR, DOE stated that it did not believe there
would be differential impacts among manufacturers at TSL 6 for Class A
equipment. At this level the manufacturers would have to redesign all
their existing equipment and make capital investments in their
production lines to comply with the standard, but the investments would
be similar for each manufacturer at this level. (74 FR 26054)
For today's final rule, DOE modified the assumed conversion costs
required for manufacturers to meet the Class A energy consumption
levels by accounting for the potential use of an energy management
system (see section IV.J). This change mitigates the overall impacts at
TSL 6, but does not impose disproportionate investments on some
manufacturers.
In addition, DOE received a written comment on the NOPR from NAMA
suggesting that there could be a differential impact among
manufacturers for part of the standards proposed in the NOPR. NAMA
stated that it received a mixed response from its members regarding the
technological feasibility and economic benefits of the standard levels
proposed by DOE. One manufacturer stated that it would have difficulty
achieving additional reductions for Class A and Class B machines, while
another stated that it could achieve the standards for both Class A and
Class B machines without significant costs to them or their customers.
However, most responses to NAMA's request for information indicated
that the proposed standard for Class B machines was appropriate and
achievable, but the proposed standard for Class A raised questions
among some manufacturers. (NAMA, No. 65 at p. 3) Dixie-Narco indicated
for the NOPR that they could achieve the proposed TSL 6 for Class A
machines without the use of intellectual property owned by an industry
participant. Dixie-Narco stated that it is currently achieving the
proposed efficiency level for Class A machines. (Dixie-Narco, Public
Meeting Transcript, No. 56 at pp. 163 and 219) Royal Vendors stated
that for Class A machines, they do not currently meet those levels, but
given no proprietary design issues, they could meet them fairly easily.
(Royal Vendors, Public Meeting Transcript, No. 56 at p. 220; Royal
Vendors, No. 60 at p. 1) Dixie-Narco addressed the proprietary design
issue by stating that it is not aware of any intellectual property
issues that would prevent its competitors from achieving the levels in
the proposed standards (Dixie-Narco, No. 64 at p. 2) The Joint Comment
also stated that the proposed standards could be met without using LED
lighting, which addresses concerns raised by interested parties
concerning patent limitations on LED lighting use in vending machines.
(Joint Comment, No. 67 at p. 1).
For today's final rule, DOE did not receive comments that indicated
that the energy conservation standards would result in the
unavailability of standards-compliant products. DOE recognizes that
there was a mixed response from manufacturers regarding their ability
to meet the standards for Class A machines. However, DOE notes that the
technology options that could be used to meet the standard are
available to all manufacturers, and DOE does not believe manufacturers
will have to obtain proprietary technologies to meet the energy
conservation standards set forth by today's rule. As stated in section
IV.B, all major manufacturers have access to alternative technology
pathways to meet the efficiency levels in the analysis, including TSL
6, without the use of proprietary technology. DOE did not receive any
information or comments that would indicate that the identified
alternative technologies that could be used to meet energy conservation
standards set forth by today's final rule will lead to any lessening of
competition. Section IV.B of today's final rule further discusses
alternative technology pathways and proprietary technologies.
In the NOPR, DOE requested comment on whether the proposed standard
could result in industry consolidation. NAMA submitted a comment
stating that the industry has
[[Page 44946]]
experienced a trend of industry consolidation that would continue, if
not accelerate, if equipment costs escalate due to the proposed
standard. (NAMA, No. 65 at p. 6)
DOE believes that an increase in equipment costs due to standards
would have a comparable impact on all manufacturers. Therefore,
industry participants would not be placed at a comparative
disadvantage.
The Attorney General's response is reprinted at the end of today's
rulemaking.
6. Need of the Nation To Conserve Energy
Improving the energy efficiency of beverage vending machines, where
economically justified, would likely improve the security of the
Nation's energy system by reducing overall demand for energy, thus
reducing the Nation's reliance on foreign sources of energy. Reduced
demand would also likely improve the reliability of the electricity
system, particularly during peak-load periods. As a measure of this
reduced demand, DOE expects the energy savings from the adopted
standards to eliminate the need for approximately 0.103 Gigawatts (GW)
of generating capacity for Class A equipment and 0.015 GW for Class B
equipment by 2042.
Enhanced energy savings also produces environmental benefits in the
form of reduced emissions of air pollutants and greenhouse gases
associated with energy production. Table VI.24 provides DOE's estimate
of cumulative CO2, NOX, and Hg emissions
reductions that would result from the TSLs considered in this
rulemaking for both Class A and Class B equipment. The expected energy
savings from these standards for beverage vending machines may also
reduce the cost of maintaining nationwide emissions standards and
constraints. In the EA (chapter 16 of the TSD), DOE reports estimated
annual changes in CO2, NOX, and Hg emissions
attributable to each TSL.
Table VI.24--Cumulative CO2 NOX and Hg Emissions Reductions for Classes A and B Equipment
[Cumulative reductions for equipment sold from 2012 to 2042]
----------------------------------------------------------------------------------------------------------------
Trial standard levels for Class A equipment
Results -----------------------------------------------------------------------------------
1 2 3 4 5 6 7
----------------------------------------------------------------------------------------------------------------
Emissions reductions
----------------------------------------------------------------------------------------------------------------
CO2 (Mt).................... 0.40 1.89 4.18 6.45 7.63 8.40 10.22
NOX (kt).................... 0.13 0.65 1.43 2.20 2.60 2.87 3.49
----------------------------------------------------------------------------------------------------------------
Hg (tons)
----------------------------------------------------------------------------------------------------------------
Low......................... 0 0 0 0 0 0 0
High........................ 0.008 0.037 0.082 0.127 0.150 0.165 0.201
----------------------------------------------------------------------------------------------------------------
Trial standard levels for Class B equipment
Results -----------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Emissions reductions
----------------------------------------------------------------------------------------------------------------
CO2 (Mt)................................ 0.16 0.24 1.19 1.36 3.66 4.08
NOX (kt)................................ 0.05 0.08 0.41 0.46 1.25 1.39
----------------------------------------------------------------------------------------------------------------
Hg (tons)
----------------------------------------------------------------------------------------------------------------
Low..................................... 0 0 0 0 0 0
High.................................... 0.003 0.005 0.023 0.027 0.072 0.080
----------------------------------------------------------------------------------------------------------------
Mt = million metric tons.
kt = thousand tons.
Note: Detail may not sum to total due to rounding.
As noted in section IV.M of this final rule, DOE does not report
SO2 emissions reductions from power plants because DOE is
uncertain that an energy conservation standard would affect the overall
level of U.S. SO2 emissions due to emissions caps.
NOX emissions from 28 eastern States and the District of
Columbia (DC) are limited under the CAIR, published in the Federal
Register on May 12, 2005. 70 FR 25162 (May 12, 2005). Although CAIR has
been remanded to EPA by the DC. Circuit, it will remain in effect until
it is replaced by a rule consistent with the Court's December 23, 2008,
opinion in North Carolina v. EPA. North Carolina v. EPA, 550 F.3d 1176
(DC Cir. 2008). These court positions were taken into account in the
May 2009 NOPR. Thus, the same methodology was followed in estimating
future NOX emission reductions in the May 2009 NOPR as in
the final rule. Because all States covered by CAIR opted to reduce
NOX emissions through participation in cap-and-trade
programs for electric generating units, emissions from these sources
are capped across the CAIR region.
For the 28 eastern States and DC where CAIR is in effect, no
NOX emissions reductions will occur due to the permanent
cap. Under caps, physical emissions reductions in those States would
not result from the energy conservation standards under consideration
by DOE, but standards might have produced an environmentally related
economic impact in the form of lower prices for emissions allowance
credits, if they were large enough. However, DOE determined that in the
present case, such standards would not produce an environmentally
related economic impact in the form of lower prices for emissions
allowance credits, because
[[Page 44947]]
the estimated reduction in NOX emissions or the
corresponding allowance credits in States covered by the CAIR cap would
be too small to affect allowance prices for NOX under the
CAIR. In contrast, new or amended energy conservation standards would
reduce NOX emissions in those 22 States that are not
affected by the CAIR, and these emissions could be estimated from NEMS-
BT. As a result, DOE used the NEMS-BT to forecast emission reductions
from the beverage machine standards in today's final rule.
As noted in section IV.M, DOE was able to estimate the changes in
Hg emissions associated with an energy conservation standard as
follows. DOE notes that the NEMS-BT model used for the NOPR, and used
as an integral part of today's rulemaking, does not estimate Hg
emission reductions due to new energy conservation standards, as it
assumed that Hg emissions would be subject to EPA's CAMR. 70 FR 28606
(May 18, 2005). CAMR would have permanently capped emissions of mercury
for new and existing coal-fired plants in all States by 2010. DOE
assumed that under such a system, energy conservation standards would
have resulted in no physical effect on these NOX emissions,
but might have resulted in an environmentally related economic benefit
in the form of a lower price for emissions allowance credits if those
credits were large enough. DOE estimated that the change in the Hg
emissions from energy conservation standards would not be large enough
to influence allowance prices under CAMR.
On February 8, 2008, the DC Circuit issued its decision in New
Jersey v. Environmental Protection Agency to vacate CAMR. 517 F.3d 574
(DC Cir. 2008). In light of this development and because the NEMS-BT
model could not be used to directly calculate Hg emission reductions,
DOE used the Hg emission rates discussed below to calculate emissions
reductions in the NOPR. This same methodology is used for the final
rule as well due to the continued fluid environment ``* * * with many
States planning to enact new laws or make existing laws more
stringent.'' EIA AEO2009 (March 2009), p. 18. The NEMS-BT has only
rough estimates of mercury emissions, and it was felt that the range of
emissions used in the NOPR remain appropriate given these
circumstances.
Therefore, rather than using the NEMS-BT model, DOE established a
range of Hg emission rates to estimate the Hg emissions that could be
reduced through energy conservation standards. The estimate should
provide the full range of possible outcomes and DOE has therefore
selected the low and high values to bracket the uncertainties
associated with estimating mercury emission reductions. DOE's low
estimate assumed that future standards would displace electrical
generation only from natural gas-fired power plants, thereby resulting
in an effective emission rate of zero. (Under this scenario, coal-fired
power plant generation would remain unaffected.) The low-end emission
rate is zero because natural gas-fired power plants have virtually zero
Hg emissions associated with their operation.
DOE's high estimate, which assumed that standards would displace
only coal-fired power plants, was based on a nationwide Hg emission
rate from AEO2008. (Under this scenario, gas-fired power plant
generation would remain unaffected.) Because power plant emission rates
are a function of local regulation, scrubbers, and the mercury content
of coal, it is extremely difficult to identify a precise high-end
emission rate. Therefore, the most reasonable estimate is based on the
assumption that all displaced coal generation would have been emitting
at the average emission rate for coal generation as specified in the
April update to AEO2009. As noted previously, because virtually all Hg
emitted from electricity generation is from coal-fired power plants,
DOE based the emission rate on the tons of Hg emitted per TWh of coal-
generated electricity. Based on the emission rate for 2006, DOE derived
a high-end emission rate of 0.0255 tons per TWh. To estimate the
reduction in Hg emissions, DOE multiplied the emission rate by the
reduction in coal-generated electricity due to the standards considered
in the utility impact analysis. These changes in Hg emissions are
extremely small, ranging from 0 to 0.04 percent of the national base-
case emissions forecast by NEMS-BT, depending on the TSL.
In the May 2009 NOPR, DOE indicated that it intended to consider
the likely monetary benefits of CO2 emission reductions
associated with standards. 74 FR 102, 26020 (May 29, 2009). To put the
potential monetary benefits from reduced CO2 emissions into
a form that would likely be most useful to decision makers and
interested parties, DOE used methods that were similar to those it used
to calculate the net present value of consumer cost savings. DOE
converted the estimated yearly reductions in CO2 emissions
into monetary values that represented the present value, in that year,
of future benefits resulting from that reduction in emissions, which
were then discounted from that year to the present using both 3 percent
and 7 percent discount rates.
In the May 2009 NOPR, DOE proposed to use the range $0 to $20 per
ton for 2007 in 2007$. These estimates were originally derived to
represent the lower and upper bounds of the costs and benefits likely
to be experienced in the United States. The lower bound was based on an
assumption of no benefit and the upper bound was based on an estimate
of the mean value of worldwide impacts due to climate change that was
reported by the Intergovernmental Panel on Climate Change (IPCC) in its
``Fourth Assessment Report.'' For today's final rule, DOE is relying on
a new set of values recently developed by an interagency process that
conducted a more thorough review of existing estimates of the social
cost of carbon (SCC).
The SCC is intended to be a monetary measure of the incremental
damage resulting from greenhouse gas (GHG) emissions, including, but
not limited to, net agricultural productivity loss, human health
effects, property damages from sea level rise, and changes in ecosystem
services. Any effort to quantify and to monetize the harms associated
with climate change will raise serious questions of science, economics,
and ethics. But with full regard for the limits of both quantification
and monetization, the SCC can be used to provide estimates of the
social benefits of reductions in GHG emissions.
For at least three reasons, any single estimate of the SCC will be
contestable. First, scientific and economic knowledge about the impacts
of climate change continues to grow. With new and better information
about relevant questions, including the cost, burdens, and possibility
of adaptation, current estimates will inevitably change over time.
Second, some of the likely and potential damages from climate change--
for example, the value society places on adverse impacts on endangered
species--are not included in all of the existing economic analyses.
These omissions may turn out to be significant, in the sense that they
may mean that the best current estimates are too low. Third,
controversial ethical judgments, including those involving the
treatment of future generations, play a role in judgments about the SCC
(see in particular the discussion of the discount rate, below).
To date, regulations have used a range of values for the SCC. For
example, a regulation proposed by the U.S. Department of Transportation
(DOT) in
[[Page 44948]]
2008 assumed a value of $7 per ton CO2 (2006$) for 2011
emission reductions (with a range of $0-14 for sensitivity analysis).
Regulation finalized by DOE used a range of $0-$20 (2007$). Both of
these ranges were designed to reflect the value of damages to the
United States resulting from carbon emissions, or the ``domestic'' SCC.
In the final Model Year 2011 Corporate Average Fuel Economy rule, DOT
used both a domestic SCC value of $2/tCO2 and a global SCC
value of $33/tCO2 (with sensitivity analysis at $80/
tCO2), increasing at 2.4 percent per year thereafter.
In recent months, a variety of agencies have worked to develop an
objective methodology for selecting a range of interim SCC estimates to
use in regulatory analyses until improved SCC estimates are developed.
The following summary reflects the initial results of these efforts and
proposes ranges and values for interim social costs of carbon used in
this rule. It should be emphasized that the analysis described below is
preliminary. These complex issues are of course undergoing a process of
continuing review. Relevant agencies will be evaluating and seeking
comment on all of the scientific, economic, and ethical issues before
establishing final estimates for use in future rulemakings.
The interim judgments resulting from the recent interagency review
process can be summarized as follows: (a) DOE and other Federal
agencies should consider the global benefits associated with the
reductions of CO2 emissions resulting from efficiency
standards and other similar rulemakings, rather continuing the previous
focus on domestic benefits; (b) these global benefits should be based
on SCC estimates (in 2007$) of $55, $33, $19, $10, and $5 per ton of
CO2 equivalent emitted (or avoided) in 2007; (c) the SCC
value of emissions that occur (or are avoided) in future years should
be escalated using an annual growth rate of 3 percent from the current
values); and (d) domestic benefits are estimated to be approximately 6
percent of the global values. These interim judgments are based on the
following:
1. Global and domestic estimates of SCC. Because of the distinctive
nature of the climate change problem, estimates of both global and
domestic SCC values should be considered, but the global measure should
be ``primary.'' This approach represents a departure from past
practices, which relied, for the most part, on measures of only
domestic impacts. As a matter of law, both global and domestic values
are permissible; the relevant statutory provisions are ambiguous and
allow the agency to choose either measure. (It is true that Federal
statutes are presumed not to have extraterritorial effect, in part to
ensure that the laws of the United States respect the interests of
foreign sovereigns. But use of a global measure for the SCC does not
give extraterritorial effect to Federal law and hence does not intrude
on such interests.)
It is true that under OMB guidance, analysis from the domestic
perspective is required, while analysis from the international
perspective is optional. The domestic decisions of one nation are not
typically based on a judgment about the effects of those decisions on
other nations. But the climate change problem is highly unusual in the
sense that it involves (a) a global public good in which (b) the
emissions of one nation may inflict significant damages on other
nations and (c) the United States is actively engaged in promoting an
international agreement to reduce worldwide emissions.
In these circumstances, the global measure is preferred. Use of a
global measure reflects the reality of the problem and is expected to
contribute to the continuing efforts of the United States to ensure
that emission reductions occur in many nations.
Domestic SCC values are also presented. The development of a
domestic SCC is greatly complicated by the relatively few region- or
country-specific estimates of the SCC in the literature. One potential
estimate comes from the DICE (Dynamic Integrated Climate Economy,
William Nordhaus) model. In an unpublished paper, Nordhaus (2007)
produced disaggregated SCC estimates using a regional version of the
DICE model. He reported a U.S. estimate of $1/tCO2 (2007 value, 2007$),
which is roughly 11 percent of the global value.
An alternative source of estimates comes from a recent EPA modeling
effort using the FUND (Climate Framework for Uncertainty, Negotiation
and Distribution, Center for Integrated Study of the Human Dimensions
of Global Change) model. The resulting estimates suggest that the ratio
of domestic to global benefits varies with key parameter assumptions.
With a 3 percent discount rate, for example, the U.S. benefit is about
6 percent of the global benefit for the ``central'' (mean) FUND
results, while, for the corresponding ``high'' estimates associated
with a higher climate sensitivity and lower global economic growth, the
U.S. benefit is less than 4 percent of the global benefit. With a 2
percent discount rate, the U.S. share is about 2 to 5 percent of the
global estimate.
Based on this available evidence, a domestic SCC value equal to 6
percent of the global damages is used in this rulemaking. This figure
is in the middle of the range of available estimates from the
literature. It is recognized that the 6 percent figure is approximate
and highly speculative and alternative approaches will be explored
before establishing final values for future rulemakings.
2. Filtering existing analyses. There are numerous SCC estimates in
the existing literature, and it is legitimate to make use of those
estimates to produce a figure for current use. A reasonable starting
point is provided by the meta-analysis in Richard Tol, ``The Social
Cost of Carbon: Trends, Outliers, and Catastrophes, Economics: The
Open-Access, Open-Assessment E-Journal,'' Vol. 2, 2008-25. http://www.economics-ejournal.org/economics/journalarticles/2008-25 (2008).
With that starting point, it is proposed to ``filter'' existing SCC
estimates by using those that (1) are derived from peer-reviewed
studies; (2) do not weight the monetized damages to one country more
than those in other countries; (3) use a ``business as usual'' climate
scenario; and (4) are based on the most recent published version of
each of the three major integrated assessment models (IAMs): FUND, DICE
and PAGE (Policy Analysis of the Greenhouse Effect) Policy.
Proposal (1) is based on the view that those studies that have been
subject to peer review are more likely to be reliable than those that
have not been. Proposal (2) is based on a principle of neutrality and
simplicity; it does not treat the citizens of one nation differently on
the basis of speculative or controversial considerations. Proposal (3)
stems from the judgment that as a general rule, the proper way to
assess a policy decision is by comparing the implementation of the
policy against a counterfactual state where the policy is not
implemented. A departure from this approach would be to consider a more
dynamic setting in which other countries might implement policies to
reduce GHG emissions at an unknown future date, and the United States
could choose to implement such a policy now or in the future.
Proposal (4) is based on three complementary judgments. First, the
FUND, PAGE, and DICE models now stand as the most comprehensive and
reliable efforts to measure the damages from climate change. Second,
the latest versions of the three IAMs are likely to reflect the most
recent evidence and learning, and hence they are presumed
[[Page 44949]]
to be superior to those that preceded them. It is acknowledged that
earlier versions may contain information that is missing from the
latest versions. Third, any effort to choose among them, or to reject
one in favor of the others, would be difficult to defend at this time.
In the absence of a clear reason to choose among them, it is reasonable
to base the SCC on all of them.
The agency is keenly aware that the current IAMs fail to include
all relevant information about the likely impacts from greenhouse gas
emissions. For example, ecosystem impacts, including species loss, do
not appear to be included in at least two of the models. Some human
health impacts, including increases in food-borne illnesses and in the
quantity and toxicity of airborne allergens, also appear to be
excluded. In addition, there has been considerable recent discussion of
the risk of catastrophe and of how best to account for worst-case
scenarios. It is not clear whether the three IAMs take adequate account
of these potential effects.
3. Use a model-weighted average of the estimates at each discount
rate. At this time, there appears to be no scientifically valid reason
to prefer any of the three major IAMs (FUND, PAGE, and DICE).
Consequently, the estimates are based on an equal weighting of
estimates from each of the models. Among estimates that remain after
applying the filter, the average of all estimates within a model is
derived. The estimated SCC is then calculated as the average of the
three model-specific averages. This approach ensures that the interim
estimate is not biased towards specific models or more prolific
authors.
4. Apply a 3 percent annual growth rate to the chosen SCC values.
SCC is assumed to increase over time, because future emissions are
expected to produce larger incremental damages as physical and economic
systems become more stressed as the magnitude of climate change
increases. Indeed, an implied growth rate in the SCC is produced by
most studies that estimate economic damages caused by increased GHG
emissions in future years. But neither the rate itself nor the
information necessary to derive its implied value is commonly reported.
In light of the limited amount of debate thus far about the appropriate
growth rate of the SCC, applying a rate of 3 percent per year seems
appropriate at this stage. This value is consistent with the range
recommended by IPCC (2007) and close to the latest published estimate
(Hope, 2008).
For climate change, one of the most complex issues involves the
appropriate discount rate. OMB's current guidance offers a detailed
discussion of the relevant issues and calls for discount rates of 3
percent and 7 percent. It also permits a sensitivity analysis with low
rates for intergenerational problems. (``If your rule will have
important intergenerational benefits or costs you might consider a
further sensitivity analysis using a lower but positive discount rate
in addition to calculating net benefits using discount rates of 3 and 7
percent.'') The SCC is being developed within the general context of
the current guidance.
The choice of a discount rate, especially over long periods of
time, raises highly contested and exceedingly difficult questions of
science, economics, philosophy, and law. See, e.g., William Nordhaus,
``The Challenge of Global Warming (2008); Nicholas Stern, ``The
Economics of Climate Change'' (2007); ``Discounting and
Intergenerational Equity'' (Paul Portney and John Weyant, eds., 1999).
Under imaginable assumptions, decisions based on cost-benefit analysis
with high discount rates might harm future generations--at least if
investments are not made for the benefit of those generations. See
Robert Lind, ``Analysis for Intergenerational Discounting,'' id. at
173, 176-177. At the same time, use of low discount rates for
particular projects might itself harm future generations, by ensuring
that resources are not used in a way that would greatly benefit them.
In the context of climate change, questions of intergenerational equity
are especially important.
Reasonable arguments support the use of a 3 percent discount rate.
First, that rate is among the two figures suggested by OMB guidance,
and hence it fits with existing National policy. Second, it is standard
to base the discount rate on the compensation that people receive for
delaying consumption, and the 3 percent rate is close to the risk-free
rate of return, proxied by the return on long term inflation-adjusted
U.S. Treasury Bonds. (In the context of climate change, it is possible
to object to this standard method for deriving the discount rate.)
Although these rates are currently closer to 2.5 percent, the use of 3
percent provides an adjustment for the liquidity premium that is
reflected in these bonds' returns.
At the same time, other arguments support use of a 5 percent
discount rate. First, that rate can also be justified by reference to
the level of compensation for delaying consumption, because it fits
with market behavior with respect to individuals' willingness to trade
off consumption across periods as measured by the estimated post-tax
average real returns to private investment (e.g., the S&P 500). In the
climate setting, the 5 percent discount rate may be preferable to the
riskless rate because it is based on risky investments and the return
to projects to mitigate climate change is also risky. In contrast, the
3 percent riskless rate may be a more appropriate discount rate for
projects where the return is known with a high degree of confidence
(e.g., highway guardrails).
Second, 5 percent, and not 3 percent, is roughly consistent with
estimates implied by reasonable inputs to the theoretically derived
Ramsey equation, which specifies the optimal time path for consumption.
That equation specifies the optimal discount rate as the sum of two
components. The first reflects the fact that consumption in the future
is likely to be higher than consumption today (even accounting for
climate impacts), so diminishing marginal utility implies that the same
monetary damage will cause a smaller reduction of utility in the
future. Standard estimates of this term from the economics literature
are in the range of 3 to 5 percent. The second component reflects the
possibility that a lower weight should be placed on utility in the
future, to account for social impatience or extinction risk, which is
specified by a pure rate of time preference (PRTP). A conventional
estimate of the PRTP is 2 percent. (Some observers believe that a
principle of intergenerational equity suggests that the PRTP should be
close to zero.) It follows that discount rate of 5 percent is within
the range of values which are able to be derived from the Ramsey
equation, albeit at the low end of the range of estimates usually
associated with Ramsey discounting.
It is recognized that the arguments above--for use of market
behavior and the Ramsey equation--face objections in the context of
climate change, and of course there are alternative approaches. In
light of climate change, it is possible that consumption in the future
will not be higher than consumption today, and if so, the Ramsey
equation will suggest a lower figure. Some people have suggested that a
very low discount rate, below 3 percent, is justified in light of the
ethical considerations calling for a principle of intergenerational
neutrality. See Nicholas Stern, ``The Economics of Climate Change''
(2007); for contrary views, see William Nordhaus, The A Question of
Balance (2008); Martin Weitzman, ``Review of the Stern Review on the
Economics of Climate Change.'' Journal of Economic Literature, 45(3):
703-724 (2007). Additionally, some analyses attempt to deal with
uncertainty with respect to interest rates
[[Page 44950]]
over time; a possible approach enabling the consideration of such
uncertainties is discussed below. Richard Newell and William Pizer,
``Discounting the Distant Future: How Much do Uncertain Rates Increase
Valuations?'' J. Environ. Econ. Manage. 46 (2003) 52-71.
The application of the methodology outlined above yields estimates
of the SCC that are reported in Table VI.25. These estimates are
reported separately using 3 percent and 5 percent discount rates. The
cells are empty in rows 10 and 11, because these studies did not report
estimates of the SCC at a 3 percent discount rate. The model-weighted
means are reported in the final or summary row; they are $33 per
tCO2 at a 3% discount rate and $5 per tCO2 with a
5% discount rate.
Table VI.25--Global Social Cost of Carbon (SCC) Estimates ($/tCO2 in 2007 (2006$)), Based on 3% and 5% Discount
Rates *
----------------------------------------------------------------------------------------------------------------
Climate
Model Study scenario 3% 5%
----------------------------------------------------------------------------------------------------------------
1........................... FUND........... Anthoff et al. FUND default... 6 -1
2009.
2........................... FUND........... Anthoff et al. SRES A1b....... 1 -1
2009.
3........................... FUND........... Anthoff et al. SRES A2........ 9 -1
2009.
4........................... FUND........... Link and Tol No THC......... 12 3
2004.
5........................... FUND........... Link and Tol THC continues.. 12 2
2004.
6........................... FUND........... Guo et al. 2006 Constant PRTP.. 5 -1
7........................... FUND........... Guo et al. 2006 Gollier 14 0
discount 1.
8........................... FUND........... Guo et al. 2006 Gollier 7 -1
discount 2.
----------------------------------------------------------------------------------------------------------------
FUND Mean...... 8.25 0
----------------------------------------------------------------------------------------------------------------
9........................... PAGE........... Wahba & Hope A2-scen........ 57 7
2006.
10........................... PAGE........... Hope 2006...... ............... .............. 7
11........................... DICE........... Nordhaus 2008.. ............... .............. 8
----------------------------------------------------------------------------------------------------------------
Summary.................................................... Model-weighted 33 5
Mean.
----------------------------------------------------------------------------------------------------------------
* The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008),
Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of FUND, PAGE, or
DICE and use business-as-usual climate scenarios. All values are based on the best available information from
the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all
estimates included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3 percent
annual growth rate in the SCC, and adjusted for inflation using GDP deflator.
Analyses have been conducted at $33 and $5 as these represent the
estimates associated with the 3 percent and 5 percent discount rates,
respectively. The 3 percent and 5 percent estimates have independent
appeal and at this time a clear preference for one over the other is
not warranted. Thus, DOE has also included--and centered its current
attention on--the average of the estimates associated with these
discount rates, which is $19. (Based on the $19 global value, the
domestic value would be $1.14 per ton of CO2 equivalent.)
It is true that there is uncertainty about interest rates over long
time horizons. Recognizing that point, Newell and Pizer have made a
careful effort to adjust for that uncertainty. See Newell and Pizer,
supra. This is a relatively recent contribution to the literature.
There are several concerns with using this approach in this
context. First, it would be a departure from current OMB guidance.
Second, an approach that would average what emerges from discount rates
of 3 percent and 5 percent reflects uncertainty about the discount
rate, but based on a different model of uncertainty. The Newell-Pizer
approach models discount rate uncertainty as something that evolves
over time; in contrast, one alternative approach would assume that
there is a single discount rate with equal probability of 3 percent and
5 percent.
Table VI.26 reports on the application of the Newell-Pizer
adjustments. The precise numbers depend on the assumptions about the
data generating process that governs interest rates. Columns (1a) and
(1b) assume that ``random walk'' model best describes the data and uses
3 percent and 5 percent discount rates, respectively. Columns (2a) and
(2b) repeat this, except that it assumes a ``mean-reverting'' process.
As Newell and Pizer report, there is stronger empirical support for the
random walk model.
Table VI.26--Global Social Cost of Carbon (SCC) Estimates ($/tCO2 in 2007 (2006$)),* Using Newell & Pizer (2003) Adjustment for Future Discount Rate
Uncertainty **
--------------------------------------------------------------------------------------------------------------------------------------------------------
Random-walk model Mean-reverting model
---------------------------------------------------
Model Study Climate scenario 3% 5% 3% 5%
---------------------------------------------------
(1a) (1b) (2a) (2b)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................ FUND................ Anthoff et al. 2009. FUND default........ 10 0 7 -1
2................................ FUND................ Anthoff et al. 2009. SRES A1b............ 2 0 1 -1
3................................ FUND................ Anthoff et al. 2009. SRES A2............. 15 0 10 -1
4................................ FUND................ Link and Tol 2004... No THC.............. 20 6 13 4
5................................ FUND................ Link and Tol 2004... THC continues....... 20 4 13 2
6................................ FUND................ Guo et al. 2006..... Constant PRTP....... 9 0 6 -1
7................................ FUND................ Guo et al. 2006..... Gollier discount 1.. 14 0 14 0
8................................ FUND................ Guo et al. 2006..... Gollier discount 2.. 7 -1 7 -1
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 44951]]
FUND Mean........... 12 1 9 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
9................................ PAGE................ Wahba & Hope 2006... A2-scen............. 97 13 63 8
10................................ PAGE................ Hope 2006........... .................... ........... 13 ........... 8
11................................ DICE................ Nordhaus 2008....... .................... ........... 15 ........... 9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Summary................................................................... Model-weighted Mean. 55 10 36 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008), Hope (2008), and Anthoff et al. (2009),
that are based on the most recent published version of FUND, PAGE, or DICE and use business-as-usual climate scenarios. All values are based on the
best available information from the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all estimates
included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3 percent annual growth rate in the SCC, and adjusted for
inflation using GDP deflator.
** Assumes a starting discount rate of 3 percent. Newell and Pizer (2003) based adjustment factors are not applied to estimates from Guo et al. (2006)
that use a different approach to account for discount rate uncertainty (rows 7-8).
The resulting estimates of the social cost of carbon are
necessarily greater. When the adjustments from the random walk model
are applied, the estimates of the social cost of carbon are $10 and
$55, with the 3 percent and 5 percent discount rates, respectively. The
application of the mean-reverting adjustment yields estimates of $6 and
$36.
Since the random walk model has greater support from the data,
analyses are also conducted with the value of the SCC set at $10 and
$55.
Based on this analysis, DOE has concluded that it is appropriate to
consider the global benefits of reducing CO2 emissions,
while also presenting the domestic benefits. Consequently, DOE
considered in its decision process for this final rule the potential
global benefits resulting from reduced CO2 emissions valued
at $5, $10, $19, $30 and $55 per metric ton, and has also presented the
domestic benefits derived using a value of $1.14 per metric ton. All of
these values represent emissions that are valued in 2007$. As indicated
in the analysis summarized above, the value of future emissions is
determined using a 3 percent escalation rate. The resulting range is
based on current peer-reviewed estimates of the value of SCC and, DOE
believes, fairly represents the uncertainty surrounding the global
benefits resulting from reduced CO2 emissions and, at the
$1.14 level, also encompasses the likely domestic benefits, DOE also
concluded, based on the most recent Tol analysis, that it was
appropriate to escalate these values at 3 percent per year to represent
the expected increases, over time, of the benefits associated with
reducing CO2 and other greenhouse gas emissions. Estimates
of SCC are assumed to increase over time since future emissions are
expected to produce larger incremental damages as physical and economic
systems become more stressed as the magnitude of climate change
increases. Although most studies that estimate economic damages caused
by increased GHG emissions in future years produce an implied growth
rate in the SCC, neither the rate itself nor the information necessary
to derive its implied value is commonly reported. Given the limited
amount of debate thus far about the appropriate growth rate of the SCC,
applying a rate of 3 percent per year seems appropriate at this stage.
This value is consistent with the range recommended by IPCC (2007).
Table VI.27 and Table VI.28 present the resulting estimates of the
potential range of NPV benefits associated with reducing CO2
emissions for both Class A and Class B equipment based on the range of
values used by DOE for this final rule.
Table VI.27--Estimates of Savings From CO2 Emissions Reductions at All TSLs and CO2 Prices at a 7 Percent Discount Rate for Class A Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of estimated CO2 emission reductions (million 2007$)**
Estimated -----------------------------------------------------------------------------------------------
TSL cumulative CO2 CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of
(MMt) emission $1.14/metric $5/metric ton $10/metric ton $19/metric ton $33/metric ton $55/metric ton
reductions ton CO2* $ CO2 $ CO2 $ CO2 $ CO2 $ CO2 $
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 0.40 0.23 1.00 1.99 3.79 6.58 10.97
2....................................... 1.89 1.09 4.77 9.54 18.13 31.49 52.48
3....................................... 4.18 2.41 10.56 21.12 40.12 69.69 116.14
4....................................... 6.45 3.71 16.28 32.55 61.85 107.43 179.04
5....................................... 7.63 4.39 19.25 38.49 73.13 127.02 211.70
6....................................... 8.40 4.84 21.21 42.42 80.61 140.00 233.34
7....................................... 10.22 5.88 25.80 51.60 98.04 170.28 283.80
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This value per ton represents the domestic negative externalities of CO2 only.
[[Page 44952]]
Table VI.28--Estimates of Savings From CO2 Emissions Reductions at All TSLs and CO2 Prices at a 3 Percent Discount Rate for Class A Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of estimated CO2 emission reductions (million 2007$)**
Estimated -----------------------------------------------------------------------------------------------
TSL cumulative CO2 CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of
(MMt) emission $1.14/metric $5/metric ton $10/metric ton $19/metric ton $33/metric ton $55/metric ton
reductions ton CO2* $ CO2 $ CO2 $ CO2 $ CO2 $ CO2 $
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 0.40 0.46 2.04 4.07 7.73 13.43 22.39
2....................................... 1.89 2.22 9.74 19.47 36.99 64.25 107.09
3....................................... 4.18 4.91 21.55 43.09 81.87 142.20 237.00
4....................................... 6.45 7.57 33.21 66.43 126.21 219.21 365.35
5....................................... 7.63 8.95 39.27 78.54 149.23 259.20 432.00
6....................................... 8.40 9.87 43.29 86.57 164.48 285.68 476.14
7....................................... 10.22 12.00 52.65 105.29 200.06 347.46 579.11
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This value per ton represents the domestic negative externalities of CO2 only.
Table VI.29--Estimates of Savings From CO2 Emissions Reductions at All TSLs and CO2 Prices at a 7 Percent Discount Rate for Class B Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of estimated CO2 emission reductions (million 2007$)**
Estimated -----------------------------------------------------------------------------------------------
TSL cumulative CO2 CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of
(MMt) emission $1.14/metric $5/metric ton $10/metric ton $19/metric ton $33/metric ton $55/metric ton
reductions ton CO2* $ CO2 $ CO2 $ CO2 $ CO2 $ CO2 $
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 0.16 0.09 0.40 0.81 1.53 2.66 4.43
2....................................... 0.24 0.14 0.60 1.20 2.27 3.95 6.58
3....................................... 1.19 0.68 3.00 6.00 11.40 19.81 33.01
4....................................... 1.36 0.78 3.43 6.86 13.04 22.65 37.75
5....................................... 3.66 2.11 9.24 18.48 35.11 60.98 101.64
6....................................... 4.08 2.35 10.29 20.58 39.10 67.91 113.18
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This value per ton represents the domestic negative externalities of CO2 only.
Table VI.30--Estimates of Savings From CO2 Emissions Reductions at All TSLs and CO2 Prices at a 3 Percent Discount Rate for Class B Equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of estimated CO2 emission reductions (million 2007$)**
Estimated -----------------------------------------------------------------------------------------------
TSL cumulative CO2 CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of CO2 Value of
(MMt) emission $1.14/metric $5/metric ton $10/metric ton $19/metric ton $33/metric ton $55/metric ton
reductions ton CO2* $ CO2 $ CO2 $ CO2 $ CO2 $ CO2 $
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 0.16 0.19 0.82 1.64 3.12 5.42 9.04
2....................................... 0.24 0.28 1.22 2.44 4.64 8.05 13.42
3....................................... 1.19 1.40 6.12 12.25 23.27 40.42 67.36
4....................................... 1.36 1.60 7.00 14.01 26.61 46.22 77.04
5....................................... 3.66 4.30 18.85 37.71 71.65 124.44 207.40
6....................................... 4.08 4.79 21.00 41.99 79.78 138.57 230.95
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This value per ton represents the domestic negative externalities of CO2 only.
DOE recognizes that scientific and economic knowledge about the
contribution of CO2 and other GHG to changes in the future
global climate and the potential resulting damages to the world economy
continues to evolve rapidly. Thus, any value placed in this rulemaking
on reducing CO2 emissions is subject to change.
DOE, together with other Federal agencies, will continue to review
various methodologies for estimating the monetary value of reductions
in CO2 and other greenhouse gas emissions. This ongoing
review will consider the comments on this subject that are part of the
public record for this and other rulemakings, as well as other
methodological assumptions and issues. However, consistent with DOE's
legal obligations, and taking into account the uncertainty involved
with this particular issue, DOE has included in this final rule the
most recent values and analyses resulting from the ongoing interagency
review process.
DOE also investigated the potential monetary benefit of reduced
SO2, NOX, and Hg emissions from the TSLs it
considered. As previously stated, DOE's initial analysis assumed the
presence of nationwide emission caps on SO2 and Hg, and caps
on NOX emissions in the 28 States covered by the CAIR. In
the presence of these caps, DOE concluded that no physical reductions
in power sector emissions would occur, but that the standards could put
downward pressure on the prices of emissions allowances in cap-and-
trade markets. Estimating this effect is very difficult because such
factors as credit banking can change the trajectory of prices. DOE has
concluded that the effect from energy conservation standards on
SO2 allowance prices is likely to be negligible based on
runs of the NEMS-
[[Page 44953]]
BT model. See chapter 16 of the TSD for further details.
Because the courts have decided to allow the CAIR rule to remain in
effect, projected annual NOX allowances from NEMS-BT are
relevant. The update to the AEO2009-based version of NEMS-BT includes
the representation of CAIR. As noted above, standards would not produce
an economic impact in the form of lower prices for emissions allowance
credits in the 28 eastern States and D.C. covered by the CAIR cap. New
or amended energy conservation standards would reduce NOX
emissions in those 22 States that are not affected by the CAIR. For the
area of the United States not covered by the CAIR, DOE estimated the
monetized value of NOX emissions reductions resulting from
each of the TSLs considered for today's final rule based on
environmental damage estimates from the literature. Available estimates
suggest a very wide range of monetary values for NOX
emissions, ranging from $370 per ton to $3,800 per ton of
NOX from stationary sources, measured in 2001$ (equivalent
to a range of $432 to $4,441 per ton in 2007$). Refer to the OMB,
Office of Information and Regulatory Affairs, ``2006 Report to Congress
on the Costs and Benefits of Federal Regulations and Unfunded Mandates
on State, Local, and Tribal Entities,'' Washington, DC, for additional
information.
For Hg emissions reductions, DOE estimated the national monetized
values resulting from the TSLs considered for today's rule based on
environmental damage estimates from the literature. DOE conducted
research for today's final rule and determined that the impact of
mercury emissions from power plants on humans is considered highly
uncertain. However, DOE identified two estimates of the environmental
damage of mercury based on two estimates of the adverse impact of
childhood exposure to methyl mercury on intelligence quotient (IQ) for
American children, and subsequent loss of lifetime economic
productivity resulting from these IQ losses. The high-end estimate is
based on an estimate of the current aggregate cost of the loss of IQ in
American children that results from exposure to mercury of U.S. power
plant origin ($1.3 billion per year in year 2000$), which works out to
$32.6 million per ton emitted per year (2007$). Refer to L. Trasande et
al., ``Applying Cost Analyses to Drive Policy that Protects Children,''
1076 Ann. N.Y. Acad. Sci. 911 (2006) for additional information. The
low-end estimate is $0.66 million per ton emitted (in 2004$) or $0.729
million per ton in 2007$. DOE derived this estimate from a published
evaluation of mercury control using different methods and assumptions
from the first study but also based on the present value of the
lifetime earnings of children exposed. See Ted Gayer and Robert Hahn,
``Designing Environmental Policy: Lessons from the Regulation of
Mercury Emissions,'' Regulatory Analysis 05-01, AEI-Brookings Joint
Center for Regulatory Studies, Washington, DC (2004). A version of this
paper was published in the Journal of Regulatory Economics in 2006. The
estimate was derived by back-calculating the annual benefits per ton
from the net present value of benefits reported in the study. Table
VI.31 through Table VI.34 present the resulting estimates of the
potential range of present value benefits associated with reducing
national NOX and Hg emissions for Class A and B equipment.
Table VI.31--Estimates of Savings From Reducing NOX and Hg Emissions at All Trial Standard Levels at a 7 Percent
Discount Rate for Class A Equipment
----------------------------------------------------------------------------------------------------------------
Estimated Value of Estimated Value of
cumulative NOX estimated NOX cumulative Hg estimated Hg
TSL emission emission emission emission
reductions reductions reductions reductions
kt thousand 2007$ tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1............................................... 0.13 15-150 0.008 0-61
2............................................... 0.65 70-716 0.037 0-293
3............................................... 1.43 154-1,584 0.082 0-649
4............................................... 2.20 238-2,442 0.127 0-1,001
5............................................... 2.60 281-2,888 0.150 0-1,183
6............................................... 2.87 310-3,183 0.165 0-1,304
7............................................... 3.49 377-3,871 0.201 0-1,586
----------------------------------------------------------------------------------------------------------------
Table VI.32--Estimates of Savings From Reducing NOX and Hg Emissions at All Trial Standard Levels at a 7 Percent
Discount Rate for Class B Equipment
----------------------------------------------------------------------------------------------------------------
Estimated Value of Estimated Value of
cumulative NOX estimated NOX cumulative Hg estimated Hg
TSL emission emission emission emission
reductions reductions reductions reductions
kt thousand 2007$ tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1............................................... 0.05 6-60 0.003 0-25
2............................................... 0.08 9-90 0.005 0-37
3............................................... 0.41 44-450 0.023 0-185
4............................................... 0.46 50-515 0.027 0-211
5............................................... 1.25 135-1,386 0.072 0-568
6............................................... 1.39 150-1,544 0.080 0-633
----------------------------------------------------------------------------------------------------------------
[[Page 44954]]
Table VI.33--Estimates of Savings From Reducing NOX and Hg Emissions at All Trial Standard Levels at a 3 Percent
Discount Rate for Class A Equipment
----------------------------------------------------------------------------------------------------------------
Estimated Value of Estimated Value of
cumulative NOX estimated NOX cumulative Hg estimated Hg
TSL emission emission emission emission
reductions reductions reductions reductions
kt thousand 2007$ tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1............................................... 0.13 31-317 0.008 0-132
2............................................... 0.65 148-1,516 0.037 0-633
3............................................... 1.43 326-3,356 0.082 0-1,401
4............................................... 2.20 503-5,174 0.127 0-2,160
5............................................... 2.60 595-6,117 0.150 0-2,554
6............................................... 2.87 656-6,742 0.165 0-2,815
7............................................... 3.49 798-8,200 0.201 0-3,424
----------------------------------------------------------------------------------------------------------------
Table VI.34--Estimates of Savings From Reducing NOX and Hg Emissions at All Trial Standard Levels at a 3 Percent
Discount Rate for Class B Equipment
----------------------------------------------------------------------------------------------------------------
Estimated Value of Estimated Value of
cumulative NOX estimated NOX cumulative Hg estimated Hg
TSL emission emission emission emission
reductions reductions reductions reductions
kt thousand 2007$ tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1............................................... 0.05 12-128 0.003 0-53
2............................................... 0.08 18-190 0.005 0-79
3............................................... 0.41 93-954 0.023 0-398
4............................................... 0.46 106-1,091 0.027 0-455
5............................................... 1.25 286-2,937 0.072 0-1,226
6............................................... 1.39 318-3,270 0.080 0-1,365
----------------------------------------------------------------------------------------------------------------
7. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i) and
(v)) Under this provision, DOE considered LCC impacts on identifiable
groups of customers, such as customers of different business types who
may be disproportionately affected by any national energy conservation
standard level. DOE also considered the reduction in generated capacity
that could result from the imposition of any national energy
conservation standard level. DOE identified no factors other than those
already considered above for analysis.
D. Conclusion
EPCA specifies that any new or amended energy conservation standard
for any type (or class) of covered equipment shall 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) and 6316(e)(1)) In determining whether a standard
is economically justified, the Secretary must determine whether the
benefits of the standard exceed its burdens. (42 U.S.C.
6295(o)(2)(B)(i) and 6316(e)(1)) The new or amended standard must
``result in significant conservation of energy.'' (42 U.S.C.
6295(o)(3)(B) and 6316(e)(1))
DOE established a separate set of TSLs for Class A and B beverage
vending machines. DOE considered seven TSLs for Class A and six TSLs
for Class B beverage vending machines. The following discussion briefly
explains the development of the TSLs, consideration of the TSLs
(starting with the most stringent) under the statutory factors, and
DOE's conclusions.
Table VI.35 and Table VI.36 present summaries of quantitative
analysis results for each TSL for Class A and B equipment,
respectively, based on the assumptions and methodology discussed above.
These tables present the results or, in some cases, ranges of results,
for each TSL. The ranges reported for industry impacts represent the
results of the different markup scenarios DOE used to estimate impacts.
Table VI.35--Summary of Results for Class A Equipment Based Upon the AEO2009 Reference Case Energy Price Forecast *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Results --------------------------------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Energy Saved (quads)..... 0.007................ 0.031................ 0.069................ 0.107................ 0.127................ 0.139............... 0.170.
7% Discount Rate................. 0.002................ 0.010................ 0.021................ 0.032................ 0.038................ 0.042............... 0.051.
3% Discount Rate................. 0.004................ 0.018................ 0.040................ 0.061................ 0.073................ 0.080............... 0.097.
[[Page 44955]]
Generation Capacity Reduction 0.005................ 0.023................ 0.051................ 0.079................ 0.094................ 0.103............... 0.126.
(GW) **.
NPV 2008$ billion:
7% Discount Rate............. 0.015................ 0.068................ 0.112................ 0.175................ 0.192................ 0.185............... (1.449).
3% Discount Rate............. 0.034................ 0.153................ 0.268................ 0.415................ 0.464................ 0.465............... (2.466).
Industry Impacts:
Industry NPV (2008$ million). 0.0-(0.0)............ 0.2-(0.3)............ 0.3-(1.1)............ (1.3)-(3.5).......... (1.3)-(4.1).......... (7.9)-(11.1)........ (3.2)-(28.3).
Industry NPV (% change)...... 0.1-(0.1)............ 0.5-(0.6)............ 0.7-(2.5)............ (2.9)-(7.9).......... (3.0)-(9.3).......... (18.0)-(25.1)....... (7.2)-(64.2).
Cumulative Emissions
Impacts[dagger]:
CO2 Reductions (Mt).......... 0.4.................. 1.9.................. 4.2.................. 6.4.................. 7.6.................. 8.4................. 10.2.
Value of CO2 Reductions at 7% 0.2 to 11............ 1.1 to 52.5.......... 2.4 to 116.1......... 3.7 to 179........... 4.4 to 211.7......... 4.8 to 233.3........ 5.9 to 283.8.
Discount Rate (million
2007$).
Value of CO2 Reductions at 3% 0.5 to 22.4.......... 2.2 to 107.1......... 4.9 to 237........... 7.6 to 365.4......... 9 to 432............. 9.9 to 476.1........ 12 to 579.1.
Discount Rate (million
2007$).
NOX Reductions (kt).............. 0.1.................. 0.6.................. 1.4.................. 2.2.................. 2.6.................. 2.9................. 3.5.
Value of NOX Reductions at 7% 15-150............... 70-716............... 154-1,584............ 238-2,442............ 281-2,888............ 310-3,183........... 377-3,871.
Discount Rate (thousand 2007$).
Value of NOX Reductions at 3% 31-317............... 148-1,516............ 326-3,356............ 503-5,174............ 595-6,117............ 656-6,742........... 798-8,200.
Discount Rate (thousand 2007$).
Hg Reductions (tons)............. 0.008................ 0.037................ 0.082................ 0.127................ 0.150................ 0.165............... 0.201.
Value of Hg Reductions at 7% 0-61................. 0-293................ 0-649................ 0-1,001.............. 0-1,183.............. 0-1,304............. 0-1,586.
Discount Rate (thousand 2007$).
Value of Hg reductions at 3% 0-132................ 0-633................ 0-1,401.............. 0-2,160.............. 0-2,554.............. 0-2,815............. 0-3,424.
Discount Rate (thousand 2007$).
Life-Cycle Cost:
Net Savings (%).............. 10................... 100.................. 98................... 98................... 97................... 95.................. 0.
Net Increase (%)............. 0.................... 0.................... 2.................... 2.................... 3.................... 5................... 100.
No Change (%)................ 90................... 0.................... 0.................... 0.................... 0.................... 0................... 0.
Mean LCC Savings (2008$)..... 136.................. 182.................. 218.................. 272.................. 285.................. 277................. (1,281).
Mean PBP (years)............. 2.2.................. 2.4.................. 3.2.................. 3.4.................. 3.7.................. 4.1................. 75.2.
Direct Domestic Employment 1.................... 5.................... 15................... 23................... 30................... 36.................. 259.
Impacts (2012) (jobs).
Indirect Domestic Employment 13................... 82................... 172.................. 265.................. 313.................. 344................. 475.
Impacts (2042) (jobs).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. For LCCs, a negative value means an increase in LCC.
** Change in installed generation capacity by 2042 based on April 2009 update to the AEO2009 Reference Case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include physical reductions at power plants as well as production of emissions allowance
credits where NOX emissions are subject to emissions caps.
Table VI.36--Summary of Results for Class B Equipment Based on the AEO2009 Reference Case Energy Price Forecast *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Results ------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Energy Saved (quads)... 0.003.............. 0.004............. 0.020............. 0.023............. 0.061............. 0.068.
7% Discount Rate............... 0.001.............. 0.001............. 0.006............. 0.007............. 0.018............. 0.020.
3% Discount Rate............... 0.002.............. 0.002............. 0.012............. 0.013............. 0.035............. 0.039.
Generation Capacity Reduction 0.002.............. 0.003............. 0.015............. 0.017............. 0.045............. 0.050.
(GW) **.
NPV (2008$ billion):
7% Discount Rate........... 0.005.............. 0.006............. (0.003)........... (0.014)........... (0.621)........... (2.452).
3% Discount Rate........... 0.011.............. 0.014............. 0.011............. (0.006)........... (1.083............ (4.427)
Industry Impacts:
Industry NPV (2008$ 0.................. 0................. (0.6)-(1.2)....... (1.0)-(1.7)....... (7.4)-(16.5)...... (3.2)-(33.5).
million).
Industry NPV (% Change).... 0.1-(0.1).......... 0.1-(0.2)......... (1.8)-(3.5)....... (3.0)-(5.0)....... (21.9)-(48.9)..... (9.5)-(99.4).
Cumulative Emissions
Impacts[dagger]:
CO2 Reductions (Mt)........ 0.2................ 0.2............... 1.2............... 1.4............... 3.7............... 4.1.
[[Page 44956]]
Value of CO2 reductions at 0.1 to 4.4......... 0.1 to 6.6........ 0.7 to 33......... 0.8 to 37.8....... 2.1 to 101.6...... 2.3 to 113.2.
7% discount rate (million
2007$).
Value of CO2 reductions at 0.2 to 9........... 0.3 to 13.4....... 1.4 to 67.4....... 1.6 to 77......... 4.3 to 207.4...... 4.8 to 230.9.
3% discount rate (million
2007$).
NOX Reductions (kt)............ 0.1................ 0.1............... 0.4............... 0.5............... 1.3............... 1.4.
Value of NOX reductions at 7% 6-60............... 9-90.............. 44-450............ 50-515............ 135-1,386......... 150-1,544.
discount rate (thousand 2007$).
Value of NOX reductions at 3% 12-128............. 18-190............ 93-954............ 106-1,091......... 286-2,937......... 318-3,270.
discount rate (thousand 2007$).
Hg Reductions (t).............. 0.003.............. 0.005............. 0.023............. 0.027............. 0.072............. 0.080.
Value of Hg reductions at 7% 0-25............... 0-37.............. 0-185............. 0-211............. 0-568............. 0-633.
discount rate (thousand 2007$).
Value of Hg reductions at 3% 0-53............... 0-79.............. 0-398............. 0-455............. 0-1,226........... 0-1,365.
discount rate (thousand 2007$).
Life-Cycle Cost:
Net Savings (%)............ 10................. 91................ 72................ 62................ 0................. 0.
Net Increase (%)........... 0.................. 9................. 28................ 38................ 100............... 100.
No Change (%).............. 90................. 0................. 0................. 0................. 0................. 0.
Mean LCC Savings (2008$)... 42................. 48................ 37................ 27................ (554)............. (2,291).
Mean PBP (years)........... 3.4................ 4.5............... 6.8............... 7.8............... 84.9.............. 99.9.
Direct Domestic Employment 0.................. 1................. 8................. 11................ 97................ 316.
Impacts (2012) (jobs).
Indirect Employment Impacts 6.................. 10................ 49................ 55................ 162............... 216.
(2042) (jobs).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. For LCCs, a negative value means an increase in LCC.
** Change in installed generation capacity by 2042 based on the April 2009 update to the AEO2009 reference case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include physical reductions at power plants as well as
production of emissions allowance credits where NOX emissions are subject to emissions caps.
1. Class A Equipment
First, DOE considered TSL 7, the most efficient level for Class A
beverage vending machines that was determined to be technologically
feasible. TSL 7 would save a cumulative 0.170 quads of energy through
2042, an amount DOE considers significant. For the Nation as a whole,
DOE projects that TSL 7 would result in a net decrease of $1.449
billion in NPV using a discount rate of 7 percent and $2.47 billion
discounted at 3 percent. The emissions reductions at TSL 7 are 10.22 Mt
of CO2, up to 3.49 kt of NOX, and up to 0.201 ton
of Hg. These reductions have a value in 2007$ of up to $283.8 million
for CO2, up to $3.9 million for NOX, and up to
$1.6 million for Hg at a discount rate of 7 percent. These reductions
have a value in 2007$ of up to $579.1 million for CO2, up to
$8.2 million for NOX, and up to $3.4 million for Hg at a
discount rate of 3 percent. DOE also estimates that at TSL 7, total
electric generating capacity in 2042 will decrease compared to the base
case by 0.126 GW.
At TSL 7, DOE projects that the average Class A beverage vending
machine customer will experience an increase in LCC of $1,281 compared
to the baseline. At TSL 7, DOE estimates the fraction of customers
experiencing LCC increases will be 100 percent. The mean PBP for the
average Class A beverage vending machine customer at TSL 7 compared to
the baseline level is projected to be 75.2 years.
At higher TSLs, manufacturers have a more difficult time
maintaining current operating profit levels, as higher standards
increase recurring operating costs such as capital expenditures,
purchased materials, and carrying inventory. Therefore, TSL 7 is more
likely to cause impacts in the higher end of the ranges (i.e., a drop
of 64.2 percent in INPV). Manufacturers expressed great concern about
high capital and equipment conversion costs necessary to convert
production to standards-compliant equipment. At TSL 7, all
manufacturers would have to completely redesign their production lines,
and the risk of very large negative impacts on the industry from
reduction in manufacturers' operating profits levels is high.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 7, DOE finds that the benefits to the Nation of TSL
7 (i.e., energy savings and emissions reductions, including
environmental and monetary benefits) do not outweigh the burdens (i.e.,
a decrease of $1,738 million in NPV and a decrease of 64.2 percent in
INPV). Because the burdens of TSL 7 outweigh the benefits, TSL 7 is not
economically justified. Therefore, DOE rejects TSL 7 for Class A
equipment.
DOE then considered TSL 6, which provides for Class A equipment the
maximum efficiency level that the analysis showed to have positive NPV
to the Nation. TSL 6 would likely save a cumulative 0.139 quads of
energy through 2042, an amount DOE considers significant. For the
Nation as a whole, DOE projects that TSL 6 would result in a net
increase of $185 million in NPV using a discount rate of 7 percent and
$465 million using a discount rate of 3 percent. The estimated
emissions reductions at TSL 6 are up to 8.4 Mt of CO2, up to
2.87 kt of NOX, and up to 0.165 tons of Hg. These reductions
have a value in 2007$ of up to $233.3 million for CO2, up to
$3.2 million for NOx, and up to $1.3 million for Hg, at a discount rate
of 7 percent, and a value in 2007$ of up to $476.1 million for
CO2, up to $6.7 million for NOX, and up to $2.8
million for Hg, at a discount rate of 3 percent. Total electric
generating capacity in 2042 is estimated to decrease compared to the
base case by 0.103 GW under TSL 6.
At TSL 6, DOE projects that the average beverage vending machine
customer will experience a reduction in LCC of $277 compared to the
baseline. The mean PBP for the average beverage vending machine
customer at TSL 6 is
[[Page 44957]]
projected to be 4.1 years compared to the purchase of baseline
equipment.
At TSL 6, DOE believes the majority of manufacturers would need to
completely redesign all Class A equipment offered for sale. Therefore,
DOE expects beverage vending machine manufacturers would have some
difficulty maintaining current operating profit levels with higher
production costs. Similar to TSL 7, it is more likely that the higher
end of the range of impacts would be reached at TSL 6 (i.e., a decrease
of 25.1 percent in INPV). However, the higher end of the range of
impacts at TSL 6 is lower than the higher end of the range of impacts
for TSL 7. In addition, Class A equipment showed significant positive
LCC savings on a national average basis and customers did not
experience an increase in LCC with a standard at TSL 6 compared to the
baseline. The PBP calculated for Class A equipment was less than the
life of the equipment.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 6, DOE finds that for Class A equipment, TSL 6
represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified. TSL 6 is
technologically feasible because the technologies required to achieve
these levels are already in existence. TSL 6 is economically justified
because the benefits to the Nation [i.e., increased energy savings of
0.139 quads, emissions reductions including environmental and monetary
benefits of, for example, up to 8.4 Mt of carbon dioxide emissions
reduction with an associated value in 2007$ of up to $233.3 million at
a discount rate of 7 percent ($476.1 million at 3 percent), and an
increase in NPV of $185 million at 7 percent discount rate to $465
million at 3 percent discount rate] outweigh the costs (i.e., a
decrease of 25.1 percent in INPV). In addition, the carbon dioxide
reductions at the central value of $19 would further increase NPV by
$80.6 million (2007$) at 7% discount rate and by $164 million at a 3
percent discount rate. The combined NPV, including the value of
CO2 emissions reductions, would be $265.6 million at 7
percent discount rate and $629.0 million at a 3 percent discount rate.
There is also the added benefit of a reduction in total electrical
generating capacity in 2042 compared to the base case of 0.103 GW under
the TSL 6 scenario. Therefore, DOE establishes TSL 6 as the energy
conservation standard for Class A beverage vending machines in this
final rule.
2. Class B Equipment
First, DOE considered TSL 6, the most efficient level for Class B
beverage vending machines. TSL 6 would likely save a cumulative 0.068
quads of energy through 2042, an amount DOE considers significant. For
the Nation as a whole, DOE projects that TSL 6 would result in a net
decrease of $2.452 billion in NPV using a discount rate of 7 percent,
and $4.427 billion in NPV using a discount rate of 3 percent. The
emissions reductions at TSL 6 are up to 4.08 Mt of CO2, up
to 1.39 kt of NOX, and up to 0.080 ton of Hg. These
reductions have a value in 2007$ of up to $113.2 million for
CO2, up to $1.5 million for NOX, and up to
$633,000 for Hg at a discount rate of 7 percent and a value of up to
$230.9 million for CO2, up to $3.3 million for
NOX, and up to $1.4 million for Hg at a discount rate of 3
percent. DOE also estimates that at TSL 6, total electric generating
capacity in 2042 will decrease compared to the base case by 0.050 GW.
At TSL 6, DOE projects that for the average customer, the LCC of
Class B beverage vending machines will increase by $2,291 compared to
the baseline. At TSL 6, DOE estimates the fraction of customers
experiencing LCC increases will be 100 percent. The mean PBP for the
average Class B beverage vending machine customer at TSL 6 compared to
the baseline is projected to be almost 100 years.
At higher TSLs, manufacturers have large increases in production
costs, resulting in difficulty maintaining operating profit. Therefore,
it is more likely that the higher end of the range of impacts would be
reached at TSL 6 (i.e., a decrease of 99.4 percent in INPV). At TSL 6,
all manufacturers would have to completely redesign their production
lines, and there is the risk of very large negative impacts on the
industry if manufacturers' operating profit levels are reduced.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 6, DOE finds that the benefits to the Nation of TSL
6 (i.e., energy savings and emissions reductions including
environmental and monetary benefits) do not outweigh the burdens (i.e.,
a decrease of $2.45 to $4.43 billion in NPV, a decrease of 99.4 percent
in INPV, and an economic burden on customers). DOE finds that the
burdens of TSL 6 outweigh the benefits and TSL 6 is not economically
justified. Therefore, DOE rejects TSL 6 for Class B equipment.
TSL 5, the next most efficient level, would likely save a
cumulative 0.061 quads of energy through 2042, an amount DOE considers
significant. For the Nation as a whole, DOE projects that TSL 5 would
result in a net decrease of $621 million in NPV, using a discount rate
of 7 percent and $1.083 billion in NPV, using a discount rate of 3
percent. The estimated emissions reductions at TSL 5 are up to 3.66 Mt
of CO2, up to 1.25 kt of NOX, and up to 0.072 ton
of Hg. These reductions have a value in 2007$ of up to $101.6 million
for CO2, up to $1.4 million for NOX, and up to
$568,000 for Hg at a discount rate of 7 percent, and a value in 2007$
of up to $207.4 million for CO2, up to $2.9 million for
NOX, and up to $1.2 million for Hg at a discount rate of 3
percent. Total electric generating capacity in 2042 is estimated to
decrease compared to the base case by 0.045 GW at TSL 5.
At TSL 5, DOE projects that the average Class B beverage vending
machine customer will experience an increase in LCC of $554 compared to
the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 5 is projected to be 84.9 years compared to the
purchase of baseline equipment.
At TSL 5, DOE believes the majority of manufacturers would need to
completely redesign all Class B equipment offered for sale at TSL 5.
Therefore, DOE expects that manufacturers will have difficulty
maintaining operating profit with larger cost increases. Though the
higher end of the range of expected impacts is lower for TSL 5 than for
TSL 6, TSL 5 would likely cause impacts at the higher end of the range
(i.e., a decrease of 48.9 percent in INPV).
After carefully considering the analysis and evaluating the
benefits and burdens of TSL 5, DOE finds that the benefits to the
Nation of TSL 5 (i.e., energy savings and emissions reductions,
including environmental and monetary benefits) do not outweigh the
burdens (i.e., a decrease of $621 to 1.08 billion in NPV and a decrease
of 48.9 percent in INPV as well as the economic burden on customers).
DOE finds that the burdens of TSL 5 outweigh the benefits and TSL 5 is
not economically justified. Therefore, DOE rejects TSL 5 for Class B
equipment.
TSL 4 would save a cumulative 0.023 quads of energy through 2042,
an amount DOE considers significant. For the Nation as a whole, DOE
projects that TSL 4 would result in a net decrease of $14 million in
NPV using a discount rate of 7 percent and a net decrease of $6 million
in NPV using a discount rate of 3 percent. The estimated emissions
reductions at TSL 4 are up to 1.36 Mt of CO2, up to 0.46 kt
of NOX, and up to 0.027 ton of Hg. Based on previously
[[Page 44958]]
developed estimates, these reductions could have a value in 2007$ of up
to $37.8 million for CO2, up to $515,000 for NOX,
and up to $211,000 for Hg at a discount rate of 7 percent and a value
in 2007$ of up to $77.0 million for CO2, up to $1.1 million
for NOX, and up to $455,000 for Hg at a discount rate of 3
percent. Total electric generating capacity in 2042 is estimated to
decrease compared to the base case by 0.017 GW at TSL 4.
At TSL 4, DOE projects that the average Class B beverage vending
machine customer will experience a reduction in LCC of $27 compared to
the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 4 is projected to be 7.8 years compared to the
purchase of baseline equipment.
At TSL 4, DOE believes that while a complete redesign would not be
required, manufacturers would need to redesign most existing Class B
equipment offered for sale. Therefore, while perhaps to a somewhat
lesser extent than for TSL 5 and TSL 6, DOE expects that manufacturers
will have difficulty maintaining operating profit with high increases
in production costs. In addition, while the higher end of the range of
impacts expected from TSL 4 is less than those for TSL 5 and TSL 6, it
is still likely that the higher end of the range of impacts would be
reached at TSL 4 (i.e., a decrease of 5.0 percent in INPV). However,
compared to the baseline, Class B equipment showed positive LCC savings
on a national average and most customers did not experience an increase
in LCC at TSL 4. The PBP calculated for Class B equipment was less than
the lifetime of the equipment.
After carefully considering the analysis and evaluating the
benefits and burdens of TSL 4, DOE finds that the benefits to the
Nation of TSL 4 (i.e., energy savings and emissions reductions,
including estimates of the monetary value of the environmental
benefits) do not outweigh the burdens (i.e., a decrease of $6 million
to $14 million in NPV and a decrease of up to 5.0 percent in INPV,
primarily from equipment redesigns). DOE finds that the burdens,
especially the likelihood of net economic losses indicated by negative
NPV values at both discount rates, of TSL 4 outweigh the benefits and
TSL 4 is not economically justified. Therefore, DOE rejects TSL 4 for
Class B equipment.
TSL 3 would save a cumulative 0.020 quads of energy through 2042,
an amount DOE considers significant. For the Nation as a whole, DOE
projects that TSL 3 would result in a decrease in NPV of $3 million,
using a discount rate of 7 percent. However, using a 3 percent discount
rate, DOE projects that TSL 3 would result in a net increase of $11
million in NPV. The estimated emissions reductions at TSL 3 are up to
1.2 Mt of CO2, up to 0.41 kt of NOX, and up to
0.023 ton of Hg. Based on previously developed estimates, these
reductions could have a value in 2007$ of up to $33.0 million for
CO2, up to $450,000 for NOX, and up to $185,000
for Hg at a discount rate of 7 percent. At a 3 percent discount rate,
these reductions could have a value in 2007$ of up to $67.4 million for
CO2, up to $954,000 for NOX, and up to $398,000
for Hg. Total electric generating capacity in 2042 is estimated to
decrease compared to the base case by 0.015 GW at TSL 3.
At TSL 3, DOE projects that the average Class B beverage vending
machine customer will experience a reduction in LCC of $37 compared to
the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 3 is projected to be 6.8 years compared to the
purchase of baseline equipment.
At TSL 3, DOE believes manufacturers would have to make some
component switches to comply with the standard, but most manufacturers
will not have to significantly alter their production process. These
minor design changes would not raise the production costs beyond the
cost of most equipment sold today, resulting in minimal impacts on
industry value. Compared to the baseline, Class B equipment showed
significant positive LCC savings on a national average and customers
did not experience an increase in LCC at TSL 3. The PBP calculated for
Class B equipment was less than the lifetime of the equipment.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 3, DOE finds that for Class B equipment, TSL 3
represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified. TSL 3 is
technologically feasible because the technologies required to achieve
these levels are already in existence. TSL 3 is economically justified
because DOE finds that the benefits to the Nation [i.e., an increase of
$11 million in NPV using a 3 percent discount rate, energy savings, and
emissions reductions, including environmental and monetary benefits of,
for example, up to 1.2 Mt of carbon dioxide emissions reduction with an
associated value in 2007$ of up to $33 million at a discount rate of 7
percent and $67.4 million at a discount rate of 3 percent, and an
increase in NPV of $11 million at 3 percent discount rate] outweigh the
costs (i.e., a $3 million loss in NPV at a 7 percent discount rate and
a decrease of 3.5 percent in INPV, primarily from upgraded components).
In addition, the carbon dioxide reductions at the central value of $19
would further increase NPV by $11.4 million (2007$) at 7% discount rate
and by $23.3 million at a 3 percent discount rate. The combined NPV,
including the value of CO2 emissions reductions, would be
$8.4 million at a 7 percent discount rate and $34.3 million at a 3
percent discount rate. DOE finds that, while there is a greater
likelihood of net economic losses at TSL 4 (indicated by negative NPV
values at 3 percent and 7 percent discount rates), TSL 3 is more
favorable since it shows a greater possibility of a net economic
benefit (indicated by a positive NPV value at a 3 percent discount
rate). There is also the added benefit of a reduction in total
electrical generating capacity in 2042 compared to the base case of
0.015 GW under the TSL 3 scenario. Therefore, DOE establishes TSL 3 as
the energy conservation standard for Class B beverage vending machines
in this final rule.
DOE also calculated the annualized values for certain benefits and
costs at the various TSLs. Table VI.37 shows the annualized values for
Class A equipment and Table VI.38 shows the annualized values for Class
B equipment.
[[Page 44959]]
Table VI.37--Annualized Benefits and Costs for Class A Machines
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary estimate (AEO Low estimate (low growth High estimate (high
reference case) case) growth case)
TSL Category Unit -----------------------------------------------------------------------------
7% 3% 7% 3% 7% 3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 1.96 2.29 1.79 2.09 2.07 2.41
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.01 0.01 0.01 0.01 0.01 0.01
Reductions.
NOX (kT).............. 0.003 0.004 0.003 0.004 0.003 0.004
Hg (T)................ 0.000 0.000 0.000 0.000 0.000 0.000
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 0.45 0.43 0.45 0.43 0.45 0.43
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 1.50 1.86 1.34 1.65 1.62 1.98
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
2...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 9.23 10.81 8.46 9.83 9.76 11.38
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.06 0.06 0.06 0.06 0.06 0.06
Reductions.
NOX (kT).............. 0.016 0.019 0.016 0.019 0.016 0.019
Hg (T)................ 0.001 0.001 0.001 0.001 0.001 0.001
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 2.56 2.46 2.56 2.46 2.56 2.46
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 6.67 8.34 5.90 7.37 7.20 8.92
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
3...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 19.32 22.66 17.61 20.51 20.50 23.93
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.12 0.13 0.12 0.13 0.12 0.13
Reductions.
NOX (kT).............. 0.035 0.041 0.035 0.041 0.035 0.041
Hg (T)................ 0.002 0.002 0.002 0.002 0.002 0.002
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 8.33 8.02 8.33 8.02 8.33 8.02
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 10.99 14.64 9.29 12.50 12.17 15.92
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
4...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 29.80 34.96 27.18 31.65 31.62 36.92
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.19 0.20 0.19 0.20 0.19 0.20
Reductions.
NOX (kT).............. 0.054 0.064 0.054 0.064 0.054 0.064
Hg (T)................ 0.003 0.004 0.003 0.004 0.003 0.004
--------------------------------------------------------------------------------------------------------------------------------
[[Page 44960]]
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 12.74 12.26 12.74 12.26 12.74 12.26
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 17.06 22.70 14.44 19.39 18.89 24.66
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
5...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 34.83 40.87 31.72 36.95 36.98 43.19
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.22 0.24 0.22 0.24 0.22 0.24
Reductions.
NOX (kT).............. 0.064 0.036 0.064 0.036 0.064 0.036
Hg (T)................ 0.004 0.004 0.004 0.004 0.004 0.004
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 16.10 15.50 16.10 15.50 16.10 15.50
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 18.73 25.37 15.63 21.46 20.88 27.69
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
6...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 37.67 44.22 34.24 39.91 40.04 46.78
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.25 0.26 0.25 0.26 0.25 0.26
Reductions.
NOX (kT).............. 0.070 0.039 0.070 0.039 0.070 0.039
Hg (T)................ 0.004 0.005 0.004 0.005 0.004 0.005
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 19.56 18.83 19.56 18.83 19.56 18.83
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 18.11 25.40 14.68 21.08 20.48 27.95
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
7...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. (0.59) 1.02 (4.76) (4.22) 2.30 4.13
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.30 0.32 0.30 0.32 0.30 0.32
Reductions.
NOX (kT).............. 0.085 0.048 0.085 0.048 0.085 0.048
Hg (T)................ 0.005 0.006 0.005 0.006 0.005 0.006
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 141.02 135.74 141.02 135.74 141.02 135.74
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. (141.61) (134.72) (145.77) (139.97) (138.72) (131.61)
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 44961]]
Table VI.38--Annualized Benefits and Costs for Class B Machines
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary estimate (AEO Low estimate (low growth High estimate (high
reference case) case) growth case)
TSL Category Unit -----------------------------------------------------------------------------
7% 3% 7% 3% 7% 3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 0.73 0.86 0.66 0.77 0.77 0.90
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.00 0.00 0.00 0.00 0.00 0.00
Reductions.
NOX (kT).............. 0.001 0.002 0.001 0.002 0.001 0.002
Hg (T)................ 0.000 0.000 0.000 0.000 0.000 0.000
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 0.26 0.25 0.26 0.25 0.26 0.25
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 0.47 0.61 0.41 0.53 0.52 0.66
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
2...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 1.03 1.21 0.94 1.09 1.10 1.28
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.01 0.01 0.01 0.01 0.01 0.01
Reductions.
NOX (kT).............. 0.002 0.002 0.002 0.002 0.002 0.002
Hg (T)................ 0.000 0.000 0.000 0.000 0.000 0.000
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 0.48 0.46 0.48 0.46 0.48 0.46
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. 0.56 0.76 0.46 0.63 0.62 0.83
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
3...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 4.11 4.87 3.62 4.26 4.44 5.23
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.03 0.04 0.03 0.04 0.03 0.04
Reductions.
NOX (kT).............. 0.010 0.012 0.010 0.012 0.010 0.012
Hg (T)................ 0.001 0.001 0.001 0.001 0.001 0.001
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 4.44 4.28 4.44 4.28 4.44 4.28
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. (0.34) 0.59 (0.82) (0.02) (0.00) 0.95
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
4...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. 4.36 5.19 3.81 4.49 4.75 5.60
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.04 0.04 0.04 0.04 0.04 0.04
Reductions.
NOX (kT).............. 0.011 0.013 0.011 0.013 0.011 0.013
Hg (T)................ 0.001 0.001 0.001 0.001 0.001 0.001
--------------------------------------------------------------------------------------------------------------------------------
[[Page 44962]]
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 5.72 5.51 5.72 5.51 5.72 5.51
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. (1.36) (0.32) (1.91) (1.02) (0.97) 0.09
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
5...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. (7.83) (8.30) (9.32) (10.18) (6.80) (7.18)
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.11 0.11 0.11 0.11 0.11 0.11
Reductions.
NOX (kT).............. 0.031 0.036 0.031 0.036 0.031 0.036
Hg (T)................ 0.002 0.002 0.002 0.002 0.002 0.002
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 52.84 50.86 52.84 50.86 52.84 50.86
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. (60.67) (59.16) (62.16) (61.04) (59.63) (58.05)
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
6...................... Benefits
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer 2008$................. (67.78) (76.40) (69.44) (78.49) (66.63) (75.16)
Benefits ($millions/
year).
Annualized Emission CO2 (Mt).............. 0.12 0.13 0.12 0.13 0.12 0.13
Reductions.
NOX (kT).............. 0.034 0.040 0.034 0.040 0.034 0.040
Hg (T)................ 0.002 0.002 0.002 0.002 0.002 0.002
--------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------
Annualized Consumer Costs 2008$................. 171.92 165.49 171.92 165.49 171.92 165.49
($millions/year).
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------
Net Consumer Benefits 2008$................. (239.70) (241.89) (241.36) (243.98) (238.55) (240.65)
(excluding emission
benefits) ($millions/
year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
Executive Order 12866 requires that each agency identify in writing
the problem the agency intends to address that warrants new agency
action (including, where applicable, the failures of private markets or
public institutions), as well as assess the significance of that
problem to determine whether any new regulation is necessary. Executive
Order 12866, section 1(b)(1).
Because today's regulatory action is a significant regulatory
action under section 3(f)(1) of Executive Order 12866, section 6(a)(3)
of the Executive Order requires DOE to prepare and submit for review to
the Office of Information and Regulatory Affairs (OIRA) in OMB an
assessment of the costs and benefits of today's rule. Accordingly, DOE
presented to OIRA for review the draft final rule and other documents
prepared for this rulemaking, including a regulatory impact analysis
(RIA). These documents are included in the rulemaking record and are
available for public review in the Resource Room of the Building
Technologies Program, 950 L'Enfant Plaza, SW., 6th Floor, Washington,
DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m. Monday through
Friday, except Federal holidays.
The May 2009 NOPR contained a summary of the RIA, which evaluated
the extent to which major alternatives to standards for beverage
vending machines could achieve significant energy savings at reasonable
cost, as compared to the effectiveness of the proposed rule. 74 FR
26067-69. The complete RIA (Regulatory Impact
[[Page 44963]]
Analysis for Proposed Energy Conservation Standards for Beverage
Vending Machines) is contained in the TSD prepared for today's rule.
The RIA consists of: (1) A statement of the problem addressed by this
regulation and the mandate for government action, (2) a description and
analysis of the feasible policy alternatives to this regulation, (3) a
quantitative comparison of the impacts of the alternatives, and (4) the
national economic impacts of today's standards.
The major alternatives DOE analyzed were: (1) No new regulatory
action; (2) financial incentives, including tax credits and rebates;
(3) revisions to voluntary energy efficiency targets; (4) early
replacement; (5) bulk government purchases; and (6) prescriptive
standards that would mandate design requirements. As explained in
detail in Section VI. of the May 2009 NOPR, none of the alternatives
DOE examined would save as much energy or have an NPV as high as the
proposed standards. The same conclusion applies to the standards in
today's rule. Also, several of the alternatives would require new
enabling legislation, because DOE does not have authority to implement
those alternatives. Additional detail on the regulatory alternatives is
found in the RIA chapter in the TSD.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) for
any rule that by law must be proposed for public comment, and a final
regulatory flexibility analysis (FRFA) for any such rule that an agency
adopts as a final rule, unless the agency certifies that the rule, if
promulgated, will not have a significant economic impact on a
substantial number of small entities. A regulatory flexibility analysis
examines the impact of the rule on small entities and considers
alternative ways of reducing negative impacts. Also, as required by
Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003 to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of General Counsel's
Web site: http://www.gc.doe.gov.
For the beverage vending machine manufacturing industry, the SBA
defines small businesses as manufacturing enterprises with 500 or fewer
employees. See http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf. DOE used this small business definition
to determine whether any small entities would be required to comply
with the rule. (65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR
53533, 53544 (September 5, 2000) and codified at 13 CFR part 121.) The
size standards are listed by North American Industry Classification
System (NAICS) code and industry description. Beverage vending machine
manufacturing is classified under NAICS 333311, ``Automatic Vending
Machine Manufacturing.''
As explained in the May 2009 NOPR, the beverage vending machine
industry is characterized by both large and small manufacturers that
service a wide range of customers, including large bottlers and direct
end-users. Almost all beverage vending machines sold in the United
States are manufactured domestically. Three major companies supply
roughly 90 percent of all equipment sold. Most of the sales for these
companies are made to a few major bottlers. One of the major
manufacturers with significant market share is considered a small
business. The remaining 10 percent of industry shipments is believed to
be supplied by five manufacturers. All of these companies not supplying
the major bottlers are considered small businesses.
Before issuing this notice of proposed rulemaking, DOE contacted
all identified small business manufacturers and provided a
questionnaire seeking information to better understand the impacts of
the proposed standards on small businesses and how these impacts differ
between large and small manufacturers. The small business interview
questionnaire is a condensed version of the manufacturer interview
guide described in the manufacturer impact analysis, chapter 13 of the
TSD.
In accordance with the Regulatory Flexibility Act, during the NOPR
stage of this rulemaking, DOE prepared an IRFA which describes
potential impacts on small businesses associated with beverage vending
machine design and manufacture, and incorporates information received
in response to the questionnaire. The IRFA addresses the following: (1)
The reasons the regulatory action is being considered, (2) the
objectives of and legal basis for the proposed rule, (3) a description
and estimate of the number of small entities that would be affected by
the rule, (4) an estimate of the reporting, recordkeeping, and other
compliance costs for the proposed rule, (5) an analysis of significant
alternatives to the proposed rule that could lessen any
disproportionate burdens on small entities, and (6) a discussion of any
duplicative, overlapping, and conflicting rules. (``A Guide for
Government Agencies: How to Comply with the Regulatory Flexibility Act,
Chapter 2, Office of Advocacy, U.S. Small Business Administration,
2003,'' available at http://www.sba.gov/advo/laws/rfaguide.pdf) DOE
divided the estimate of the compliance costs for small businesses into
two categories representing potential impacts to small business
manufacturers with major market shares, and potential impacts to small
business manufacturers with small market shares. DOE also analyzed
alternatives that could reduce the disproportionate impact of the
proposed standards on small vending machine manufacturers. DOE provided
the complete IRFA in the May 2009 NOPR, 74 FR 26069-72, for review by
the Chief Counsel for Advocacy of the SBA and the public. Chapter 13 of
the TSD contains more information about the impact of this rulemaking
on manufacturers.
For today's final rule, DOE has prepared a FRFA, which is presented
in the following discussion. DOE developed this FRFA for review by the
Chief Counsel for Advocacy of the SBA and the public. The FRFA below is
written in accordance with the requirements of the Regulatory
Flexibility Act.
1. Need for and Objectives of the Final Rule
Part A of subchapter III (42 U.S.C. 6291-6309) provides for the
Energy Conservation Program for Consumer Products Other Than
Automobiles (this part was originally titled Part B, but was
redesignated Part A after Part B of Title III was repealed by Pub. L.
109-58; similarly, Part C, Certain Industrial Equipment, was
redesignated Part A-1). The amendments to EPCA contained in the EPACT
2005, Public Law 109-58, include new or amended energy conservation
standards and test procedures for some of these products, and direct
DOE to undertake rulemakings to promulgate such requirements. In
particular, section 135(c)(4) of EPACT 2005 amends EPCA to direct DOE
to prescribe energy conservation standards for beverage vending
machines. (42 U.S.C. 6295(v)) Hence, DOE is publishing today's final
rule on energy conservation standards for refrigerated bottle or canned
beverage vending machines pursuant to Part A of EPCA. Because of its
placement in Part A of Title III of EPCA, the rulemaking for beverage
vending
[[Page 44964]]
machine energy conservation standards is bound by the requirements of
42 U.S.C. 6295. However, since beverage vending machines are commercial
equipment, DOE intends to place the new requirements for beverage
vending machines in Title 10 of the CFR, Part 431 (Energy Efficiency
Program for Certain Commercial and Industrial Equipment), which is
consistent with DOE's previous action to incorporate the EPACT 2005
requirements for commercial equipment. The location of the provisions
within the CFR does not affect either their substance or applicable
procedure, so DOE is placing them in the appropriate CFR part based on
their nature or type.
EPCA provides that any new or amended standard for beverage vending
machines must be designed to achieve the maximum improvement in energy
efficiency that is technologically feasible and economically justified.
(42 U.S.C. 6295(o)(2)(A) and (v)) EPCA precludes DOE from adopting any
standard that would not result in significant conservation of energy.
(42 U.S.C. 6295(o)(3)(B) and (v)) Moreover, DOE may not prescribe a
standard for certain equipment if no test procedure has been
established for that equipment, or if DOE determines by rule that the
standard is not technologically feasible or economically justified and
will not result in significant conservation of energy. (42 U.S.C.
6295(o)(3)(A)(B) and (v)) To determine whether economic justification
exists, DOE reviews comments received and conducts analysis to
determine whether the economic benefits of the proposed standard exceed
the burdens to the greatest extent practicable, taking into
consideration seven factors set forth in 42 U.S.C. 6295(o)(2)(B) and
(v). (See section II.A of this preamble.)
EPCA also states that the Secretary may not prescribe an amended or
new standard if interested parties have established by a preponderance
of the evidence that the standard is likely to result in the
unavailability in the United States of any equipment type (or class)
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States. (42 U.S.C. 6295(o)(4) and
(v))
As set forth above, DOE has determined that the standards adopted
in today's rule are designed to achieve the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. DOE has also determined that the standards will result in a
significant conservation of energy and will not result in the
unavailability in the United States of any equipment type or class with
performance characteristics that are substantially the same as those
generally available in the United States. Chapter 1 of the TSD provides
further background information on this rulemaking.
2. Significant Issues Raised by Public Comments
DOE summarized comments from interested parties, including beverage
vending machine manufacturers, in sections IV and V of this preamble.
DOE did not receive any comments regarding impacts specific to small
business manufacturers for the adoption of TSL 6 for Class A machines
and TSL 3 for Class B machines in today's final rule or the
alternatives identified in section 6 of the IRFA, ``Significant
Alternatives to the Rule.'' No changes were made to the IRFA as a
result of public comment.
3. Description and Estimated Number of Small Entities Regulated
To establish a list of small beverage vending machine
manufacturers, DOE examined publicly available data and contacted
manufacturers to determine if they meet the SBA's definition of a small
manufacturing facility and if their manufacturing facilities are
located within the United States. Based on this analysis, DOE confirmed
that there are six small manufacturers of beverage vending machines.
One of these six small manufacturers is one of the top three major
manufacturers, who supply roughly 90 percent of all equipment sales.
The full line of products offered by this small manufacturer and the
remaining two major manufacturers, which are considered large
businesses, are covered under this rulemaking (i.e., equipment that
dispenses refrigerated bottled or canned beverages). The remaining five
small manufacturers comprise approximately 10 percent of industry
shipments for covered equipment. See chapter 3 of the TSD for further
details on the beverage vending machine market. In its examination of
the beverage vending machine industry, DOE has determined that these
small business manufacturers with small market shares differ
significantly from the major manufacturers. The primary difference
between these small business manufacturers and the major manufacturers
is that these five small business manufacturers produce a wide variety
of specialty and niche equipment that are not covered under this
rulemaking, such as machines that dispense a wide range of items
including snacks, heated drinks, electronic goods, DVDs, bowling
supplies, and medical products. Furthermore, unlike the major
manufacturers, these small business manufacturers do not sell equipment
to the major bottlers because they do not produce covered equipment in
the necessary volumes. Instead, these manufacturers rely on providing
customized equipment in much smaller volumes.
Before issuing the NOPR, requests for interviews were delivered
electronically to the six manufacturers that met the small business
criteria. DOE received responses from fewer than half and conducted an
on-site interview with the single manufacturer who agreed to be
interviewed. In the questionnaire and during the interview, DOE
requested information that would determine if there are differential
impacts on small manufacturers that may result from new energy
conservation standards. See chapter 13 of the TSD for further
discussion about the methodology DOE used in its analysis of
manufacturer impacts, including small manufacturers.
4. Description and Estimate of Reporting, Recordkeeping, and Other
Compliance Requirements
Potential impacts on manufacturers include impacts associated with
beverage vending machine design and manufacturing. The level of
research and development needed to meet energy conservation standards
increases with more stringent standards. As mentioned previously, DOE
examined the level of impacts that small manufacturers would incur by
identifying small business manufacturers and sending them a short
questionnaire seeking information to better understand the impacts of
the proposed standard that are unique to small manufacturers. Because
not all of the small business manufacturers responded to the
questionnaire, it is difficult to specifically quantify how the impacts
of the proposed standards differ between large and small manufacturers.
However, as explained below, DOE found that the impacts of the proposed
standard on the small business manufacturer with a major market share
would not differ greatly from those of its larger competitors; the
impacts would not be significant for the remaining small business
manufacturers.
a. Small Business Manufacturer With a Major Market Share
The small business manufacturer that has a major market share in
covered equipment will not be disproportionately disadvantaged by the
proposed standard. It has a large shipment volume as a major supplier
to
[[Page 44965]]
the large bottlers and its access to capital is nearly identical to its
larger competitors. Its large shipment volume allows it to distribute
the added cost of compliance across its products, similar to the large
manufacturers. Correspondingly, it echoed the large manufacturers'
concerns about new energy conservation standards, including conversion
costs needed to meet standards, meeting customer needs, and current
market conditions. DOE found no significant differences in the R&D
emphasis or marketing strategies between this small business
manufacturer with a major market share and large manufacturers. As a
result, DOE does not believe the impacts of the proposed standard will
be significantly different for the small business manufacturer with a
large market share when compared to those expected for the large
business manufacturers.
b. Small Business Manufacturers With Small Market Shares
DOE does not expect the small businesses with small market shares
to be compromised by the energy conservation standard finalized in
today's rule. DOE estimates that only approximately 40 percent of their
offered vending equipment is covered by the standard. The majority of
equipment offered is specialty or niche equipment. As a result, the
primary source of revenue for these small manufacturers comes from
supplying a market underserved by the major manufacturers of covered
equipment. These small manufacturers may balance the cost disadvantage
experienced in making their covered equipment compliant with today's
standard by charging premium prices for their non-covered niche
equipment. As a result, DOE believes the standard will not affect the
competitive position of the small business manufacturers with small
market shares in covered equipment.
DOE was able to estimate a portion of the differential impacts of
the standard on the small manufacturers with small market shares by
evaluating costs associated with equipment testing and certification.
Manufacturers must test the energy performance of each basic model it
manufactures to determine compliance with energy conservation standards
and testing requirements. Therefore, DOE examined the number of basic
models available from each manufacturer to determine an estimate for
the differential in overall compliance costs. The number of basic
models attributed to each manufacturer is based on an examination of
the different models advertised by each. DOE estimates the cost of
testing a piece of covered equipment to be approximately $2,000. A
typical major manufacturer has approximately 23 basic models,
approximately 85 percent of which are covered and would require
separate standards compliance certifications. Therefore, DOE estimates
that a typical major manufacturer will incur approximately $44,013 in
annual costs for standards compliance certifications. DOE estimates
that a typical small manufacturer with small market share has
approximately 27 basic models, 44 percent of which are covered and
would require separate standards compliance certifications. DOE
estimates that a typical small manufacturer will incur approximately
$14,380 in annual costs for standards compliance certifications.
According to this comparison, the cost of certification for a small
manufacturer with small market share is significantly lower than that
of a major manufacturer.
As stated above, DOE estimated that there would be some
differential impacts associated with beverage vending machine design
and manufacturing on small manufacturers. DOE requested comments on how
small business manufacturers would be affected due to new energy
conversation standards. Specifically, DOE requested comments on the
compliance costs and other impacts to small manufacturers that do not
supply the high-volume customers of beverage vending machines. However,
DOE did not receive any comments regarding impacts specific to small
business manufacturers.
5. Steps DOE Has Taken To Minimize the Economic Impact on Small
Manufacturers
In consideration of the benefits and burdens of standards,
including the burdens posed on small manufacturers, DOE concluded that
TSL 6 for Class A machines and TSL 3 for Class B machines are the
highest levels that can be justified for beverage vending machines.
Therefore, while the lower TSLs analyzed may lessen the impacts on
small entities, DOE is precluded from adopting them based on the
requirements of EPCA.
Section VI.C.2 discusses how business impacts, including small
business impacts, entered into DOE's selection of today's standards for
beverage vending machines. DOE made its decision regarding standards by
beginning with the highest level considered (TSL 7 for Class A machines
and TSL 6 for Class B machines) and successively eliminating TSLs until
it found a TSL that is both technically feasible and economically
justified, taking into account other EPCA criteria. DOE expects today's
standard to have little or no differential impact on small
manufacturers of beverage vending machines.
As explained in part 6 of the IRFA, Significant Alternatives to the
Rule, DOE expects that the differential impact on small beverage
vending machine manufacturers would be less severe in moving from TSL 5
to TSL 6 for Class A than it would be in moving from TSL 6 to TSL 7.
For Class B machines, DOE expects that the differential impact on small
beverage vending machine manufacturers would be less significant in
moving from TSL 2 to TSL 3 than it would be in moving from TSL 4 to TSL
5. Higher TSLs would place excessive burdens on manufacturers,
including small manufacturers of beverage vending machines. Such
burdens would include research and development costs and also a
potential reduction of profit margins by limiting the flexibility of
customers to choose design options. However, the differential impact on
small businesses is expected to be lower at TSL 6 for Class A machines
and TSL 3 for Class B machines because research and development efforts
are less at lower TSLs. Chapter 13 of the TSD contains additional
information about the impact of this rulemaking on manufacturers.
The TSD includes a regulatory impact analysis (RIA) (chapter 17),
which discusses the following policy alternatives to the standards
announced today that may lessen impacts on small entities: (1) No new
regulatory action, (2) financial incentives including rebates or tax
credits, (3) revisions to voluntary energy efficiency targets such as
ENERGY STAR program criteria, (4) bulk government purchases, (5) early
replacement incentive programs, and (6) prescriptive standards that
would mandate design requirements (e.g., lighting and refrigeration
controls). DOE did not consider these alternatives further because they
are either not feasible to implement, or not expected to result in
energy savings as large as those that would be achieved by the standard
levels under consideration.
DOE considered the following alternatives in its IRFA in accordance
with Section 603(c) of the RFA: (1) Establishment of different
compliance or reporting requirements for small entities or timetables
that take into account the resources available to small entities, (2)
clarification, consolidation, or simplification of compliance and
reporting requirements for small entities, (3) use of performance
rather than design standards, and (4) exemption for certain small
entities
[[Page 44966]]
from coverage of the rule, in whole or in part. For reasons described
in the May 2009 NOPR, DOE did not choose any of these alternatives to
the proposed rule. 73 FR 26071-26072.
C. Review Under the Paperwork Reduction Act
DOE stated in the May 2009 NOPR that this rulemaking would impose
no new information and recordkeeping requirements, and that OMB
clearance is not required under the Paperwork Reduction Act (44 U.S.C.
3501 et seq.). 74 FR 26072. DOE received no comments on this in
response to the May 2009 NOPR, and, as with the proposed rule, today's
final rule imposes no information and recordkeeping requirements.
Therefore, DOE has taken no further action in this rulemaking with
respect to the Paperwork Reduction Act.
D. Review Under the National Environmental Policy Act
DOE prepared an environmental assessment of the impacts of today's
standards which it published as chapter 16 within the TSD for the final
rule. DOE found the environmental effects associated with today's
various standard levels for beverage vending machines to be
insignificant. Therefore, DOE is issuing a FONSI pursuant to NEPA (42
U.S.C. 4321 et seq.), the regulations of the Council on Environmental
Quality (40 CFR parts 1500-1508), and DOE's regulations for compliance
with NEPA (10 CFR part 1021). The FONSI is available in the docket for
this rulemaking.
E. Review Under Executive Order 13132
DOE reviewed this rule pursuant to Executive Order 13132,
``Federalism,'' 64 FR 43255 (August 4, 1999), which imposes certain
requirements on agencies formulating and implementing policies or
regulations that preempt State law or that have federalism
implications. In accordance with DOE's statement of policy describing
the intergovernmental consultation process it will follow in the
development of regulations that have federalism implications, 65 FR
13735 (March 14, 2000), DOE examined the May 2009 proposed rule and
determined that the rule would not have a substantial direct effect on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of Government. 74 FR 26072. DOE received no comments on
this issue in response to the May 2009 NOPR, and its conclusions on
this issue are the same for the final rule as they were for the
proposed rule. Therefore, DOE has taken no further action in today's
final rule with respect to Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Federal agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity, (2) write
regulations to minimize litigation, and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. Section 3(b) of Executive
Order 12988 specifically requires that executive agencies make every
reasonable effort to ensure that the regulation: (1) Clearly specifies
the preemptive effect, if any; (2) clearly specifies any effect on
existing Federal law or regulation; (3) provides a clear legal standard
for affected conduct while promoting simplification and burden
reduction; (4) specifies the retroactive effect, if any; (5) adequately
defines key terms; and (6) addresses other important issues affecting
clarity and general draftsmanship under any guidelines issued by the
Attorney General. Section 3(c) of Executive Order 12988 requires
executive agencies to review regulations in light of applicable
standards in section 3(a) and section 3(b) to determine whether they
are met or it is unreasonable to meet one or more of them. DOE has
completed the required review and determined that, to the extent
permitted by law, the final regulations meet the relevant standards of
Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
As indicated in the May 2009 NOPR, DOE reviewed the proposed rule
under Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) (UMRA), which imposes requirements on Federal agencies when
their regulatory actions will have certain types of impacts on State,
local, and Tribal governments and the private sector. 74 FR 26073. DOE
concluded that this rule would not contain an intergovernmental
mandate, nor result in expenditures of $100 million or more in one year
by the private sector. Id. In the May 2009 NOPR, DOE addressed the UMRA
requirements to prepare a statement as to the basis, costs, benefits,
and economic impacts of the proposed rule, and that it identify and
consider regulatory alternatives to the proposed rule. Id. DOE received
no comments concerning the UMRA in response to the May 2009 NOPR, and
its conclusions on this issue are the same for the final rule as they
were for the proposed rule. Therefore, DOE has taken no further action
in today's final rule with respect to the UMRA.
H. Review Under the Treasury and General Government Appropriations Act,
1999
DOE determined that, for this rulemaking, it need not prepare a
Family Policymaking Assessment under Section 654 of the Treasury and
General Government Appropriations Act, 1999 (Pub. L. 105-277). Id. DOE
received no comments concerning Section 654 in response to the May 2009
NOPR, and, therefore, has taken no further action in today's final rule
with respect to this provision.
I. Review Under Executive Order 12630
DOE determined under Executive Order 12630, ``Governmental Actions
and Interference with Constitutionally Protected Property Rights,'' 53
FR 8859 (March 18, 1988), that today's rule would not result in any
takings that might require compensation under the Fifth Amendment to
the U.S. Constitution. 74 FR 26073. DOE received no comments concerning
Executive Order 12630 in response to the May 2009 NOPR, and, therefore,
has taken no further action in today's final rule with respect to this
Executive Order.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most
disseminations of information to the public under guidelines
established by each agency pursuant to general guidelines issued by
OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002).
DOE has reviewed today's final rule under the OMB and DOE guidelines
and has concluded that it is consistent with applicable policies in
those guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to OIRA
a Statement of Energy Effects for any significant
[[Page 44967]]
energy action. DOE determined that today's rule, which sets energy
conservation standards for beverage vending machines, is not a
``significant energy action'' within the meaning of Executive Order
13211. 74 FR 26073. Accordingly, DOE did not prepare a Statement of
Energy Effects on the proposed rule. DOE received no comments on this
issue in response to the May 2009 NOPR. As with the proposed rule, DOE
has concluded that today's final rule is not a significant energy
action within the meaning of Executive Order 13211, and has not
prepared a Statement of Energy Effects on the final rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology, issued its ``Final Information Quality Bulletin
for Peer Review'' (the Bulletin). 70 FR 2664 (January 14, 2005). The
purpose of the Bulletin is to enhance the quality and credibility of
the Government's scientific information. The Bulletin establishes that
certain scientific information shall be peer reviewed by qualified
specialists before it is disseminated by the Federal Government. As
indicated in the May 2009 NOPR, this includes influential scientific
information related to agency regulatory actions, such as the analyses
in this rulemaking. 74 FR 26073-74.
As set forth in the May 2009 NOPR, DOE held formal in-progress peer
reviews of the types of analyses and processes that DOE has used to
develop the energy efficiency standards in today's rule, and issued a
report on these peer reviews. The report is available at http://www.eere.energy.gov/buildings/appliance_standards/peer_review.html.
Id.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will submit to Congress a report
regarding the issuance of today's final rule prior to the effective
date set forth at the outset of this notice. The report will state that
it has been determined that the rule is a ``major rule'' as defined by
5 U.S.C. 804(2). DOE also will submit the supporting analyses to the
Comptroller General in the U.S. Government Accountability Office (GAO)
and make them available to each House of Congress.
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of today's final
rule.
List of Subjects in 10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation, Incorporation by reference.
Issued in Washington, DC, on August 5, 2009.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and Renewable Energy.
0
For the reasons set forth in the preamble, chapter II of title 10, Code
of Federal Regulations, part 431 is amended to read as set forth below.
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
2. In Sec. 431.292 add, in alphabetical order, new definitions for
``bottled or canned beverage,'' ``Class A,'' ``Class B,'' ``combination
vending machine,'' and ``V'' to read as follows:
Sec. 431.292 Definitions concerning refrigerated bottled or canned
beverage vending machines.
* * * * *
Bottled or canned beverage means a beverage in a sealed container.
Class A means a refrigerated bottled or canned beverage vending
machine that is fully cooled, and is not a combination vending machine.
Class B means any refrigerated bottled or canned beverage vending
machine not considered to be Class A, and is not a combination vending
machine.
Combination vending machine means a refrigerated bottled or canned
beverage vending machine that also has non-refrigerated volumes for the
purpose of vending other, non-``sealed beverage'' merchandise.
* * * * *
V means the refrigerated volume (ft\3\) of the refrigerated bottled
or canned beverage vending machine, as measured by ANSI/AHAM HRF-1-2004
(incorporated by reference, see Sec. 431.293).
0
3. Section 431.293 is revised to read as follows:
Sec. 431.293 Materials incorporated by reference.
(a) General. DOE incorporates by reference the following standards
into Subpart Q of Part 431. The material listed has been approved for
incorporation by reference by the Director of the Federal Register in
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Any subsequent
amendment to a standard by the standard-setting organization will not
affect the DOE regulations unless and until amended by DOE. Material is
incorporated as it exists on the date of the approval and a notice of
any change in the material will be published in the Federal Register.
All approved material is available for inspection at the National
Archives and Records Administration (NARA). For information on the
availability of this material at NARA, call (202) 741-6030 or visit
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. This material is also available for
inspection at U.S. Department of Energy, Office of Energy Efficiency
and Renewable Energy, Building Technologies Program, 6th Floor, 950
L'Enfant Plaza, SW., Washington, DC 20024, 202-586-2945, or visit
http://www1.eere.energy.gov/buildings/appliance_standards. Standards
can be obtained from the sources listed below.
(b) ANSI. American National Standards Institute, 25 W. 43rd Street,
4th Floor, New York, NY 10036, 212-642-4900, or visit http://www.ansi.org.
(1) ANSI/AHAM HRF-1-2004, Energy, Performance and Capacity of
Household Refrigerators, Refrigerator-Freezers and Freezers, approved
July 7, 2004, IBR approved for Sec. Sec. 431.292 and 431.294.
(2) ANSI/ASHRAE Standard 32.1-2004, Methods of Testing for Rating
Vending Machines for Bottled, Canned, and Other Sealed Beverages,
approved December 2, 2004, IBR approved for Sec. 431.294.
0
4. In Subpart Q, add an undesignated center heading and Sec. 431.296
to read as follows:
Energy Conservation Standards
Sec. 431.296 Energy conservation standards and their effective dates.
Each refrigerated bottled or canned beverage vending machine
manufactured on or after [Insert date 3 years from the date of
publication of this final rule] shall have a maximum daily energy
consumption (in kilowatt hours per day), when measured at the 75 [deg]F
2 [deg]F and 45 5% RH condition, that does
not exceed the following:
[[Page 44968]]
----------------------------------------------------------------------------------------------------------------
Equipment class Maximum daily energy consumption (kilowatt hours per day)
----------------------------------------------------------------------------------------------------------------
Class A.................................... MDEC = 0.055 x V + 2.56.
Class B.................................... MDEC = 0.073 x V + 3.16.
Combination Vending Machines............... [RESERVED].
----------------------------------------------------------------------------------------------------------------
[The following letter from the Department of Justice will not
appear in the Code of Federal Regulations.]
Appendix
Department of Justice
Antitrust Division.
Christine A. Varney
Assistant Attorney General.
Main Justice Building, 950 Pennsylvania Avenue, NW., Washington, DC
20530-0001, (202) 514-2401/(202) 616-2645 (f), E-mail:
[email protected], Web site: http://www.usdoj.gov.
July 23, 2009.
Eric J. Fygi, Deputy General Counsel, Department of Energy,
Washington, DC 20585.
Dear Deputy General Counsel Fygi: I am responding to your May
22, 2009 letter seeking the views of the Attorney General about the
potential impact on competition of proposed energy conservation
standards for Class A and Class B refrigerated beverage vending
machines (``BVMs''). Your request was submitted pursuant to Section
325(o)(2)(B)(i)(V), which requires the Attorney General to make a
determination of the impact of any lessening of competition that is
likely to result from the imposition of proposed energy conservation
standards. The Attorney General's responsibility for responding to
requests from other departments about the effect of a program on
competition has been delegated to the Assistant Attorney General for
the Antitrust Division in 28 CFR 0.40(g).
In conducting its analysis the Antitrust Division examines
whether a proposed standard may lessen competition, for example, by
substantially limiting consumer choice, leaving consumers with fewer
competitive alternatives, placing certain manufacturers of a product
at an unjustified competitive disadvantage compared to other
manufacturers, or by inducing avoidable inefficiencies in production
or distribution of particular products.
We have reviewed the proposed standard contained in the Notice
of Proposed Rulemaking (``NOPR'') (74 FR 26020) and attended the
June 17, 2009 public hearing on the proposed standard. In addition,
we have conducted interviews with members of the industry.
Based on our review of the record and information we have
gathered, we do not believe the proposed standard for Class B BVMs
would likely lead to a lessening of competition. We are concerned,
however, that the proposed Trial Standard Level 6 for Class A BVMs
could potentially lessen competition. BVM manufacture is a highly
concentrated industry in the United States, and compliance with the
proposed Class A standard could require a disproportionate
investment by some manufacturers, potentially placing them at a
disadvantage vis-[agrave]-vis others and leading to greater
concentration. Compliance with a lesser standard does not appear to
raise similar concerns.
We ask the Department of Energy to take this possible
competitive impact into account. We further ask the Department of
Energy to ensure that the standard it adopts for Class A BVMs will
not require access to intellectual property owned by an industry
participant, which would place other industry participants at a
comparative disadvantage.
Sincerely,
Christine A. Varney,
Assistant Attorney General.
[FR Doc. E9-19392 Filed 8-28-09; 8:45 am]
BILLING CODE 6450-01-P