Regulatory Scoring
Agency:
Department of Energy
Rule title:
Energy Conservation for Commercial Freezers and Refrigerators
RIN
1904-AB59 RIA Separate? Yes
Stage Publication Date
Proposed Rule 8/25/2008
Rule summary:
The Energy Policy and Conservation Act prescribes energy conservation standards for certain commercial
and industrial equipment and requires the Department of Energy (DOE) to administer an energy conservation
program for this equipment. In this notice, DOE is proposing new energy conservation standards for
commercial ice-cream freezers, self-contained commercial refrigerators, commercial freezers, commercial
refrigerator-freezers without doors and remote condensing commercial refrigerators, commercial freezers, and
commercial refrigerator-freezers.
Openness Score Comments
1. How easily were the RIA, the proposed rule, and any supplementary
materials found online? 1 1A
2. How verifiable are the data used in the analysis? 5 1B
3. How verifiable are the models and assumptions used in the analysis? 4 1C
4. Was the Regulatory Impact Analysis comprehensible to an informed
layperson? 2 1D
Total Openness (Sum of 1-4) 12
Analysis Score Comments
5. How well does the analysis identify the desired outcomes and demonstrate
that the regulation will achieve them? 3 2A
6. How well does the analysis identify and demonstrate the existence of a
market failure or other systemic problem the regulation is supposed to solve? 1 2B
7. How well does the analysis assess the effectiveness of alternative
approaches? 3 2C
8. How well does the analysis assess costs and benefits? 3 2D
Total Analysis (Sum of 5-8) 10
Use Score Comments
9. Does the proposed rule or the RIA present evidence that the agency used
the Regulatory Impact Analysis? 4 3A
10. Did the agency maximize net benefits or explain why it chose another
alternative? 5 3B
11. Does the proposed rule establish measures and goals that can be used
to track the regulation’s results in the future? 1 3C
12. Did the agency indicate what data it will use to assess the regulation’s
performance in the future and establish provisions for doing so? 2 3D
Total Use (Sum of 9-12) 12
Total Score 34
Openness
Criterion Score Com. No. Comment
The NPRM but not the technical
support document is available in
regulations.gov. The NPRM does not
provide a link to the analysis
document. The reader already has to
know how and where these technical
support documents can be found on
the DOE web page. Links on the DOE
website are not very intuitive. Energy
efficiency links no longer lead to these
regulations. The reader has to go to
1. How easily were the RIA, "laws and regulations" in the site map.
the proposed rule, and any We did not find the technical support
supplementary materials document until 2011, more than 2
found online? 1 1 years after the NPRM was published.
Most data are presented in
2. How verifiable are the data appendices with sources also given. A
used in the analysis? 5 2 substantial portion is available online.
Sources are extensively referenced;
about half also have links. DOE
highlights where simplifying
assumptions were made. It would
have been useful to know why DOE
believes the simplifying assumptions
are generally true. DOE assumes that
demand for refrigeration equipment is
inelastic with no qualifying evidence. It
is only one assumption but from the
3. How verifiable are the point of view of economic analysis a
models and assumptions fairly major one. Spreadsheets used
used in the analysis? 4 3 for calculations are available online.
DOE takes an unusual and complex
approach to structuring the analysis
for energy conservation regulations. It
explains how it all fits together in
Chapter 2 of the technical support
document. Photos of a typical product
in each class make it much easier for
the reader to visualize what the
regulation applies to. Explanations of
calculations are tedious, and all but
the simplest will be rough going for the
layman. It is not very transparent how
the higher cost of more efficient
4. Was the analysis equipment affects sales -- a key
comprehensible to an relationship for understanding the
informed layperson? 2 4 analysis of alternatives.
Analysis
Score Com. No. Comment
5. How well does the
analysis identify the desired
outcomes and demonstrate
that the regulation will
achieve them? 3
The primary outcome directly linked to quality of life
Does the analysis clearly
is life-cycle cost savings. Energy savings are also
identify ultimate outcomes considered an outcome in their own right, with little
that affect citizens’ quality of explanation as to why. Reduced pollutant
life? 3 5A emissions are at best an intermediate outcome.
The primary measures are energy savings, the
monetary value of energy savings, the net present
value of savings (or costs) taking energy savings
and higher equipment costs into account, and
pollutant emissions. Environmental benefits are
expressed as emission reductions, not
improvements in air quality or human health. The
NPRM, but not the TSD, assigns a preliminary
range of monetary values to the reduction in
carbon dioxide, mercury, and NOX emissions. To
the extent that most of the energy savings occur
Does the analysis identify late at night, the social benefits may be over-
how these outcomes are to estimated because the marginal social cost of
be measured? 4 5B baseload power plants is low.
No explicit theory is elaborated. Implicit theory is
Does the analysis provide a that 100% compliance with standards will lead to
energy savings, with few perverse consequences
coherent and testable theory
that could increase energy use. The possibility that
showing how the regulation the regulation may motivate stores to keep
will produce the desired inefficient equipment longer is mentioned but
outcomes? 2 5C dismissed.
Analysis assumes the outcomes will occur and
calculates them. Given DOE's extensive
experience with these kinds of regulations, one
might expect that some kind of retrospective
analysis of earlier regulations could demonstrate
Does the analysis present actual energy savings. For alternative policies,
credible empirical support for effects are estimated based on studies of similar
the theory? 2 5D programs.
Savings and payback periods are presented as
probability distributions. Sensitivity analysis
performed for fuel prices, assumed baseline
efficiency level, and LED lighting costs. Energy
savings were simulated in 5 different climates to
see whether engineering analysis was accurate.
DOE performed some sensitivity analysis
Does the analysis
accounting for stores that may not use lighting 24
adequately assess hours a day, but retained the 24-hour assumption
uncertainty about the after manufacturers commented that 24-hour
outcomes? 3 5E operation is highly likely.
6. How well does the
analysis identify and
demonstrate the existence of
a market failure or other
systemic problem the
regulation is supposed to
solve? 1
No explicit systemic problem is identified anywhere
in the technical support document. It is simply
assumed that voluntary decisions have not led to
the "right" amount of energy consumption. The
NPRM says DOE-solicited information on market
failures in the ANPRM, but received no response. It
Does the analysis identify a then asserts that these commercial customers lack
market failure or other information about energy efficiency for the
systemic problem? 1 6A equipment in question.
NPRM contains one assertion that store owners
lack information because they don't replace
Does the analysis outline a equipment often. There is also an assertion that
coherent and testable theory utility of display is more important to stores than
energy savings, but this is not elaborated into a
that explains why the
theory of why profit-minded retailers ignore energy
problem (associated with the cost savings. No explicit theory of environmental
outcome above) is systemic externality is presented either, although that would
rather than anecdotal? 1 6B have been easy to do.
The TSD notes that some equipment on the
market already exceeds some of the trial standard
levels. This presents an opportunity to analyze
Does the analysis present companies' decisions to adopt energy-saving
credible empirical support for equipment, but the analysis did not take advantage
the theory? 0 6C of this opportunity.
Does the analysis
adequately assess
uncertainty about the
existence or size of the The problem is not well-defined, but some kind of
problem? 0 6D problem is assumed to exist with certainty.
7. How well does the
analysis assess the
effectiveness of alternative
approaches? 3
Does the analysis enumerate
other alternatives to address Several alternative policy approaches and multiple
the problem? 5 7A standard levels.
Is the range of alternatives One chapter considers five reasonably different
considered narrow (e.g., alternatives to the proposed standards: no new
some exemptions to a regulatory action, tax credits, customer rebates,
early replacement, and bulk government
regulation) or broad (e.g.,
purchases. For the standard, the RIA considered
performance-based five "trial standard levels" in addition to the
regulation vs. command and baseline. However, if the goal is to reduce energy
control, market mechanisms, consumption in general, then different ways of
nonbinding guidance, getting commercial users to buy more efficient
fridges is pretty narrow. Even within that
information disclosure,
framework, numerous other approaches (such as
addressing any government requiring doors) were not analyzed due to legal
failures that caused the constraints; this could have shed light on
original problem)? 3 7B opportunity costs of the legal constraints.
RIA estimated net present value of energy savings
Does the analysis evaluate
for the first three alternatives, and concluded the
how alternative approaches others are impractical. TSD estimated energy
would affect the amount of savings, net savings to customers, and reductions
the outcome achieved? 4 7C in pollutant emissions for each trial standard level.
"Baseline" technology specifications appear to
reflect what is done now, rather than a projection of
what manufacturers or state governments will do in
Does the analysis the future in the absence of a federal regulation.
adequately address the Analysis explicitly declines to incorporate effects of
baseline? That is, what the any voluntary market initiatives in the future due to
lack of data, in spite of analysis that shows it's in
state of the world is likely to
the customers' own best interest to adopt more
be in the absence of federal efficient technologies. Baseline for cost savings
intervention not just now but includes electricity prices projected by the Energy
in the future? 1 7D Information Administration.
8. How well does the
analysis assess costs and
benefits? 3
Analysis identifies incremental costs of all standard
Does the analysis identify
levels and three out of the five alternative policies.
and quantify incremental Costs are hard to separate out because they are
costs of all alternatives buried in the calculation of life cycle costs and
considered? 4 8A change in manufacturers' net present value.
Does the analysis identify all
expenditures likely to arise Expenditures required to comply with alternative
as a result of the regulation? 5 8B standards are analyzed in great detail.
DOE estimated how the costs would affect
equipment prices for the customer using different
markups that varied based on distribution channel.
Does the analysis identify
For electricity, a pretty good analysis using a partial
how the regulation would equilibrium model of the energy industry is given.
likely affect the prices of No consideration of how the regulation would affect
goods and services? 4 8C the price of food is given.
Analysis assumes that firms fail to maximize
profits. It fails to consider the fact that customers
prefer the (supposedly more expensive overall)
option. Absent some explained market failure that
would imply a loss of utility at least equal to the
measured gain in NPV. This deserves a fairly large
deduction in points because it would dramatically
change the outcome had it been considered. The
shipments analysis assumes that equipment price
has no effect on quantity of equipment purchased
because DOE lacks data to estimate this effect.
This allows DOE to estimate that the regulation will
Does the analysis examine increase employment because manufacturing
higher-efficiency units requires more labor. No
costs that stem from
analysis of a "rebound effect," whereby lower
changes in human behavior operating costs might lead to more intensive use
as consumers and producers (or less used of conservation measures, like night
respond to the regulation? 1 8D covers) or delays in replacing old equipment.
If costs are uncertain, does
the analysis present a range
of estimates and/or perform A sensitivity analysis explored the effect of
a sensitivity analysis? 2 8E fluctuating metal prices and LED lighting costs.
Analysis identifies alternative with the lowest life-
cycle cost, identifies costs borne by manufacturers
for each alternative, and calculates the national
energy savings associated with each alternative.
This is not exactly a calculation of net social
benefits (it excludes environmental benefits), but it
allows DOE to make the comparisons the statute
requires. The information would have been a lot
Does the analysis identify easier to understand if it were crosswalked into
the alternative that OMB's required accounting statement of social
maximizes net benefits? 3 8F benefits and costs.
This was not done. If the information had been
Does the analysis identify presented as a social accounting of benefits and
the cost-effectiveness of costs, then energy savings could have been
each alternative considered? 2 8G divided by cost to estimate cost-effectiveness.
Effects on small business are analyzed separately.
Small businesses would likely pay higher prices for
equipment and have higher cost of capital, but they
also pay higher prices for electricity, so the net
effect on small business would be similar to the
effect on other businesses. The TSD also
estimates how the standards would affect electricity
generation and generating capacity. Finally, an
input-output model concludes that the effect on
Does the analysis identify all
employment would be small. It is possible a big
parties who would bear costs loss to retailers goes unmeasured because
and assess the incidence of retailers may prefer to select equipment based on
costs? 3 8H other criteria.
The main beneficiaries are apparently the
customers who buy the equipment, who achieve
lower life-cycle costs as a result of the standards,
but for some unexplained reason they must be
forced to save money. Environmental benefits,
which presumably accrue to a broader group of
citizens, are mentioned, but the analysis shows the
Does the analysis identify all
regulation would reduce emissions by less than 1
parties who would receive percent. The effect on generation capacity was
benefits and assess the interpolated after a model found an effect smaller
incidence of benefits? 2 8I than random noise, which seems ad hoc.
Use
Criterion Score Com. No. Comment
The decision to establish standards was required
by statute. DOE explicitly states that calculations
guided selection of the standard level. A great
9. Does the proposed rule or
deal of discussion in the NPRM deals with
the RIA present evidence stakeholder comments and suggestions
that the agency used the regarding various parameters and assumptions
analysis? 4 9 in the calculations.
The law requires that standards must "achieve
the maximum improvement in energy efficiency
that is technologically feasible and economically
justified." Comparison of benefits and costs is
somewhat opaque due to the way the analysis is
conducted. The NPRM presents some
annualized, discounted benefit and cost numbers
10. Did the agency maximize that suggest the standards maximize net
net benefits or explain why it benefits, although the calculations do not include
chose another alternative? 5 10 environmental benefits.
11. Does the proposed rule
No commitment to goals or measures. The RIA
establish measures and
could provide a basis for establishing goals and
goals that can be used to measures, especially if the results were
track the regulation's results crosswalked into the regulatory accounting chart
in the future? 1 11 required by OMB.
12. Did the agency indicate
what data it will use to No commitment to gather data for monitoring
future performance. The description of the
assess the regulation's
analytical process suggests that DOE could get
performance in the future access to data for retrospective analysis if it
and establish provisions for wanted to, and the RIA could provide a useful
doing so? 2 12 template for measuring costs and benefits.
Rule Title RIN Agency Pub Date RIA separate? Total (G+H+J) Openness
Department of Energy Freezers Yes
1904-AB59
Energy Conservation for Commercial8/25/2008 and Refrigerators 34 12
Analysis Quality (G+H) Use 1 2 3 45
10 22 12 1 5 4 2 3
5A 5B 5C 5D 5E 6 6A 6B 6C
3 4 2 2 3 1 1 1 0
6D 7 7A 7B 7C 7D 8 8A 8B
0 3 5 3 4 1 3 4 5
8C 8D 8E 8F 8G 8H 8I 9 10
4 1 2 3 2 3 2 4 5
11 12
1 2