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Code · REGISTER · 2008-03-13 · Office of Energy Efficiency and Renewable Energy, Department of Energy · Presidential Documents

Presidential Documents. Advance notice of proposed rulemaking

101,797 words·~463 min read·/register/2008/03/13/08-1032

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

Billing code 4710-10-P 73 50 Thursday, March 13, 2008 Proposed Rules Part II Department of Energy 10 CFR Part 430 Energy Conservation Program: Energy Conservation Standards for General Service Fluorescent Lamps and Incandescent Reflector Lamps; Proposed Rule DEPARTMENT OF ENERGY 10 CFR Part 430 [Docket No. EE-2006-STD-0131] RIN 1904-AA92 Energy Conservation Program: Energy Conservation Standards for General Service Fluorescent Lamps and Incandescent Reflector Lamps AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Advance notice of proposed rulemaking. SUMMARY: The Energy Policy and Conservation Act authorizes the Department of Energy
(DOE)to establish energy conservation standards for various consumer products and commercial and industrial equipment, including general service fluorescent lamps and incandescent reflector lamps, for which DOE determines that energy conservation standards would be technologically feasible and economically justified, and would result in significant energy savings. In this advance notice of proposed rulemaking (ANOPR), DOE is considering amendment of existing energy conservation standards for general service fluorescent lamps and incandescent reflector lamps, and it is also considering whether standards should apply to additional general service fluorescent lamps. In addition, this ANOPR considers various amendments to lighting-related definitions DOE previously developed and incorporated into the CFR. DATES: DOE held a public meeting in Washington, DC, that began on March 10, 2008. The agenda for the public meeting covered first the concurrent test procedure rulemaking for general service fluorescent, incandescent reflector, and general service incandescent lamps (see proposal in today's **Federal Register** ), and then this energy conservation standards rulemaking for these lighting products. DOE began accepting comments, data, and information regarding the ANOPR at the public meeting and will continue to accept comments until, but no later than April 14, 2008. See section V, “Public Participation,” of this ANOPR for details. ADDRESSES: The public meeting was held at the U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Any comments submitted must identify the ANOPR for Lighting Standards, and provide the docket number EE-2006-STD-0131 and/or Regulatory Information Number
(RIN)1904-AA92. Comments may be submitted using any of the following methods: • *Federal eRulemaking Portal: http://www.regulations.gov.* Follow the instructions for submitting comments. • *E-mail: fluorescent_and_incandescent_lamps.rulemaking@ee.doe.gov.* Include the docket number EE-2006-STD-0131 and/or RIN number 1904-AA92 in the subject line of the message. • *Postal Mail:* Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Please submit one signed paper original. • *Hand Delivery/Courier:* Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 6th Floor, 950 L'Enfant Plaza, SW., Washington, DC 20024. Telephone:
(202)586-2945. Please submit one signed paper original. For detailed instructions on submitting comments and additional information on the rulemaking process, see section V of this document (Public Participation). *Docket:* For access to the docket to read background documents or comments received, visit the U.S. Department of Energy, 6th Floor, 950 L'Enfant Plaza, SW., Washington, DC 20024,
(202)586-2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Please call Ms. Brenda Edwards at
(202)586-2945 for additional information regarding visiting the Resource Room. FOR FURTHER INFORMATION CONTACT: Ms. Linda Graves, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone:
(202)586-1851. E-mail: *Linda.Graves@ee.doe.gov.* Ms. Francine Pinto or Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC-72, Forrestal Building, Mail Station GC-72, 1000 Independence Avenue, SW., Washington, DC 20585. Telephone:
(202)586-9507. E-mail: *Francine.Pinto@hq.doe.gov or Eric.Stas@hq.doe.gov.* For information on how to submit or review public comments and on how to participate in the public meeting, contact Ms. Brenda Edwards, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone:
(202)586-2945. E-mail: *Brenda.Edwards@ee.doe.gov.* SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction A. Purpose of the Advance Notice of Proposed Rulemaking B. Authority C. Summary of Proposed Coverage for Lamps D. Overview of the Analyses Performed 1. Engineering Analysis and Product Price Determination 2. Energy-Use Characterization 3. Life-Cycle Cost and Payback Period Analyses 4. National Impact Analysis E. Background 1. History of Standards Rulemaking for General Service Fluorescent Lamps, Incandescent Reflector Lamps, and General Service Incandescent Lamps 2. Energy Independence and Security Act of 2007 a. General Service Fluorescent Lamps b. General Service Incandescent Lamps c. Incandescent Reflector Lamps d. Off Mode and Standby Mode Energy Consumption 3. Test Procedures II. Consideration Regarding the Scope of Energy Conservation Standards Coverage A. Introduction B. Additional General Service Fluorescent Lamps Being Considered Under EPCA Section 325(i)(5) 1. Scope 2. Rationale for Coverage 3. Analysis of Individual General Service Fluorescent Lamps C. Amended Definitions 1. “Rated Wattage” 2. “Colored Fluorescent Lamp” III. Energy Conservation Standards Analyses for Fluorescent and Incandescent Reflector Lamps A. Market and Technology Assessment 1. Market Assessment 2. Product Classes a. General Service Fluorescent Lamps i. Class Setting Factors ii. Other Potential Class-setting Factors Considered, But Not Adopted iii. Product Class Results b. Incandescent Reflector Lamps i. Class Setting Factors ii. Other Potential Class-setting Factors Considered, But Not Adopted iii. Product Class Results 3. Technology Assessment a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps B. Screening Analysis 1. Technology Options Screened Out a. Multi-photon Phosphors b. Microcavity Filaments c. Novel Filament Materials d. Crystallite Filament Coatings e. Luminescent Gases f. Non-Tungsten-Halogen Regenerative Cycles g. Infrared Phosphor Glass Coatings h. Integrally Ballasted Low Voltage Lamps i. Trihedral Corner Reflectors 2. Design Options Considered Further in Analysis C. Engineering Analysis 1. Approach 2. Representative Product Classes and Baseline Lamps a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 3. Lamp and Lamp-and-Ballast Designs a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 4. Candidate Standard Levels a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 5. Engineering Analysis Results a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 6. Scaling to Product Classes Not Analyzed a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps D. Energy-Use Characterization 1. Operating Hours 2. Results E. Product Price Determination 1. Introduction and Methodology a. Overview b. General Service Fluorescent Lamps c. Incandescent Reflector Lamps 2. End-User Price Results a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 3. Sales Taxes F. Rebuttable Presumption Payback Periods G. Life-Cycle Cost and Payback Period Analyses 1. Approach 2. Life-Cycle Cost Inputs a. Total Installed Cost Inputs b. Operating Cost, Replacement Cost, and Residual Value Inputs i. Electricity Prices ii. Lamp Lifetime iii. Discount Rates iv. Analysis Period v. Effective Date 3. Payback Period Inputs 4. Lamp Purchasing Events 5. Life-Cycle Cost and Payback Period Results a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps H. Shipment Analysis 1. Historical Shipments 2. Shipment Projections to 2011 and Calculations of Stock of Lamps in 2011 3. Base-Case and Standards-Case Shipment Forecasts to 2042 4. Market-Share Matrices a. General Service Fluorescent Lamps b. Incandescent Reflector Lamps 5. Shipment Forecast Results I. National Impact Analysis 1. Approach 2. Base-Case and Standards-Case Forecasted Efficacies 3. National Impact Analysis Inputs 4. National Impact Analysis Results J. Life-Cycle Cost Subgroup Analysis K. Manufacturer Impact Analysis 1. Cumulative Regulatory Burden 2. Preliminary Results of the Manufacturer Impact Analysis a. Retooling Equipment to Produce Standards-Compliant Lamps b. Availability of Materials to Produce Standards-Compliant Lamps c. Maintaining Product Availability and Features L. Utility Impact Analysis M. Employment Impact Analysis N. Environmental Assessment O. Regulatory Impact Analysis IV. Candidate Energy Conservation Standards Levels V. Public Participation A. Submission of Comments B. Issues on Which DOE Seeks Comment 1. Consideration of Additional General Service Fluorescent Lamps 2. Amended Definitions 3. Product Classes 4. Scaling to Product Classes Not Analyzed 5. Screening of Design Options 6. Operating Hours 7. General Service Fluorescent Energy Consumption 8. Life-Cycle Cost Calculation 9. Installation Costs 10. Base-Case Market-Share Matrices in 2012 11. Shipment Forecasts 12. Base-Case and Standards-Case Forecasted Efficiencies 13. Trial Standard Levels 14. Lamp Production Equipment Conversion Timeframe VI. Regulatory Review and Procedural Requirements VII. Approval of the Office of the Secretary Acronyms and Abbreviations AEO Annual Energy Outlook ANOPR advance notice of proposed rulemaking ANSI American National Standards Institute BEF ballast efficacy factor BF ballast factor BR bulged reflector (reflector lamp shape) CBECS Commercial Buildings Energy Consumption Survey CCT correlated color temperature CEC California Energy Commission CEE Consortium for Energy Efficiency CFR Code of Federal Regulations CFL compact fluorescent lamp CIE International Commission on Illumination CO <sup>2</sup> carbon dioxide CRI color rendering index CSL candidate standard level DOE U.S. Department of Energy E26 Medium screw-base (incandescent lamp base type) EIA Energy Information Administration EISA 2007 Energy Independence and Security Act of 2007 EPACT 1992 Energy Policy Act of 1992 EPACT 2005 Energy Policy Act of 2005 EPCA Energy Policy and Conservation Act ER elliptical reflector (reflector lamp shape) FEMP Federal Energy Management Program FR **Federal Register** FTC Federal Trade Commission GE General Electric Lighting and Industrial GRIM Government Regulatory Impact Model GSFL general service fluorescent lamp GSIL general service incandescent lamp HIR halogen infrared reflector HO high output HVAC Heating, Ventilating and Air-Conditioning IESNA Illuminating Engineering Society of North America ImSET Impact of Sector Energy Technologies I-O input-output IR Infrared IRL incandescent reflector lamp K degrees Kelvin LCC life-cycle cost Lm lumens LMC U.S. Lighting Market Characterization Volume I Lm/W lumens per watt MECS Manufacturer Energy Consumption Survey
(MECS)MIA Manufacturer Impact Analysis NAICS North American Industry Classification System NEEP Northeast Energy Efficiency Partnership NEMA National Electrical Manufacturers Association NEMS National Energy Modeling System NES national energy savings NIA National Impact Analysis NOPR notice of proposed rulemaking NO <sup>X</sup> nitrogen oxides NPV net present value OIRA Office of Information and Regulatory Affairs OMB U.S. Office of Management and Budget PAR parabolic aluminized reflector (reflector lamp shape) PBP payback period PG&E Pacific Gas and Electric R reflector (reflector lamp shape) RECS Residential Energy Consumption Survey SBA Small Business Administration SO <sup>2</sup> sulfur dioxide T5, T8, T10, T12 tubular fluorescent lamps, diameters of 0.625, 1, 1.25 or 1.5 inches, respectively TSD technical support document TSL trial standard level U.S.C. United States Code UV ultraviolet V volts W watts I. Introduction This advance notice of proposed rulemaking (ANOPR) serves two primary purposes:
(1)Providing a preliminary determination regarding additional general service fluorescent lamps
(GSFL)that DOE is considering for coverage and standards; and
(2)initiating rulemaking to consider amending DOE's energy conservation standards related to coverage of GSFL and incandescent reflector lamps (IRL). The ANOPR is intended to help DOE satisfy two statutory directives, namely to make a preliminary determination representing the Secretary's initial assessment of additional GSFL to consider for energy conservation standards under section 325(i)(5) of the Energy Policy and Conservation Act (hereinafter “EPCA”) (42 U.S.C. 6295(i)(5)), and to conduct an energy conservation standards rulemaking for general service fluorescent lamps and incandescent reflector lamps under Section 325(i)(3) of EPCA (42 U.S.C. 6295(i)(3)). Because the preliminary determination for certain additional lamps is positive, DOE is including such lamps in the ANOPR analyses for standard-setting purposes. DOE welcomes comment on any relevant issue related to this ANOPR. However, throughout this **Federal Register** notice, DOE identifies specific areas and issues on which it specifically invites comment. These critical issues are summarized in section V.E of this notice. A. Purpose of the Advance Notice of Proposed Rulemaking The purpose of the ANOPR is to provide interested parties with an opportunity to comment on: 1. The preliminary determination of additional GSFL being considered for energy conservation standards; 2. The product classes DOE is planning to analyze in this rulemaking; 3. The analytical framework, methodology, inputs, and models (e.g., life-cycle cost
(LCC)and national impact analysis
(NIA)spreadsheets) that DOE developed to evaluate energy conservation standards for GSFL and IRL (collectively referred to in this ANOPR as the “two categories of lamps”); 4. The analyses conducted for the ANOPR, including the preliminary results for the engineering analysis, product price determination, LCC and payback period
(PBP)analysis, and NIA. These analyses are summarized in this ANOPR and presented in detail in the ANOPR technical support document (TSD), Energy Conservation Standards for General Service Fluorescent Lamps and Incandescent Reflector Lamps, 1 published in tandem with this ANOPR; and 1 To view the technical support document for this rulemaking, visit DOE's website at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/incandescent_lamps.html.* 5. The candidate standard levels
(CSLs)that DOE developed for the ANOPR. B. Authority Title III of EPCA (42 U.S.C. 6291 et seq.) sets forth a variety of provisions designed to improve energy efficiency. Part B of Title III (42 U.S.C. 6291-6309) established the “Energy Conservation Program for Consumer Products Other Than Automobiles,” which includes major household appliances. Subsequent amendments expanded Title III of EPCA to include additional consumer products and certain commercial and industrial equipment, including certain fluorescent and incandescent lamps—the products that are the focus of this document. In particular, amendments to EPCA in the Energy Policy Act of 1992 (EPACT 1992), P.L. 102-486, established energy conservation standards for certain classes of GSFL and IRL, and authorized DOE to amend these standards if such amendments were warranted. (42 U.S.C. 6291(1), 6295(i)(1) and (3)-(4)) The same EPACT 1992 amendments to EPCA also authorized DOE to adopt standards for additional GSFL and general service incandescent lamps (GSIL), if such additional standards were warranted. (42 U.S.C. 6295(i)(5)) Subsequent amendments to EPCA in the Energy Independence and Security Act of 2007 (EISA 2007), P.L. 110-140, amended the existing energy conservation standards for IRL and removed DOE's authority under 42 U.S.C. 6295(i)(5) to adopt standards for additional GSIL. Before DOE establishes any new or amended energy conservation standards, it must first solicit public comments on a proposed standard. EPCA, as amended, specifies that any new or amended energy conservation standard that DOE prescribes for consumer products shall be designed to “achieve the maximum improvement in energy efficiency * * * which the Secretary [of Energy] determines is technologically feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A)) Moreover, EPCA states that the Secretary of Energy (the Secretary) may not establish an amended standard if 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)(B)) To determine whether a proposed standard is economically justified, DOE must, after receiving comments on the proposed standard, determine whether the benefits of the standard exceed its burdens to the greatest extent practicable, weighing the following seven statutory factors:
(1)The economic impact of the standard on manufacturers and consumers of the product subject to the standard;
(2)The savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered product that are likely to result from the imposition of the standard;
(3)The total projected amount of energy savings (or, as applicable, water savings) likely to result directly from the imposition of the standard;
(4)Any lessening of the utility or the performance of the covered product likely to result from the imposition of the standard;
(5)The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;
(6)The need for national energy and water conservation; and
(7)Other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)) C. Summary of Proposed Coverage for Lamps DOE's regulations currently set energy efficiency standards for certain classes of general service fluorescent lamps and incandescent reflector lamps. 10 CFR 430.32(n). However, section 325(i)(5) of EPCA directs the Secretary of Energy to consider whether the standards in effect for GSFL should be amended so as to apply to “additional general service fluorescent lamps.” (42 U.S.C. 6295(i)(5)). Accordingly, in section II of this notice, DOE presents its preliminary determination regarding additional lamps that may be considered as part of the standards rulemaking. Section II provides a summary of DOE's authority under EPCA to consider additional lamps for coverage. In addition, because the preliminary determination was positive, section II also presents, by lamp type, the additional lamps for which DOE intends to consider setting standards. D. Overview of the Analyses Performed As noted above, EPCA authorizes DOE to consider establishing or amending energy conservation standards for various consumer products and commercial and industrial equipment, including the two categories of lamps that are the subject of this ANOPR. For each of these products, DOE conducted key technical analyses for this ANOPR in the following areas:
(1)Engineering;
(2)energy-use characterization;
(3)product price determination;
(4)LCC and PBP analyses; and
(5)NIA. DOE performed a separate set of the requisite analyses for each of the two categories of lamps examined in this rulemaking. This ANOPR presents the methodology and results of each of these analyses (first an overview, followed by a more in-depth discussion). For each type of analysis, Table I.1 identifies the sections in this document that summarize the methodologies, key inputs, and assumptions for the analysis. In addition, DOE conducted several other analyses that either support the five analyses discussed above or are preliminary analyses that will be expanded upon during the NOPR stage of this rulemaking. These analyses include the market and technology assessment, a screening analysis which contributes to the engineering analysis, and the shipments analysis which contributes to the national impacts analysis. In addition to these analyses, DOE has begun some preliminary work on the life-cycle cost subgroup analysis, manufacturer impact analysis, utility impact analysis, employment impact analysis, environmental assessment analysis, and the regulatory impact analysis for the ANOPR. These analyses will be expanded upon during the NOPR stage of this rulemaking. DOE consulted with interested parties as part of its process for conducting all of the analyses for the ANOPR and invites further input from the public on these topics. While obtaining such input is the primary purpose of this stage of the rulemaking, this notice also contains a synopsis of the preliminary analytical results. (The TSD contains a complete set of results.) The purpose of publishing these preliminary results in this notice is to:
(1)Facilitate public comment on DOE's analytical methodology;
(2)illustrate the level of detail found in the TSD; and
(3)invite comment on the structure and the presentation of those results. The preliminary analytical results presented in the ANOPR are subject to revision following review and input from the public. Table I.—1 Key Technical Analyses Conducted for the ANOPR Analysis area Methodology Key inputs 2 Key assumptions ANOPR section and TSD chapter Engineering Analysis Design option analysis to establish lamp and lamp-and-ballast designs at each CSL Published catalog data on performance values such as operating life, rated power, efficacy, and light output Analysis can be extended to product classes and efficiency levels for which DOE did not conduct analysis; ballast system power varies linearly by ballast factor Section III.C and TSD Chapter 5. Energy-Use Characterization Multiply lamp power, or lamp-and-ballast system power, by annual operating hours Annual operating hours by lamp type; lamp, or lamp and ballast, energy consumption. Energy Information Administration
(EIA)2001, 2002, and 2003 survey data and 2002 U.S. Lighting Market Characterization Study Vol. I Data sources are indicative of current lighting use Section III.D and TSD Chapter 6. Product Price Determination Mark up manufacturer price schedules to develop low, medium, and high end-user retail prices Manufacturer price schedules. Publicly available discount schedules from State procurement contracts and other users Future pricing for more efficacious products will reflect discounts used with today's commodity products Section III.E and TSD Chapter 7. Life-cycle Cost and Payback Period Analyses Use Monte Carlo simulation in combination with inputs that are characterized with probability distributions to establish a distribution of consumer economic impacts (i.e., LCC savings and PBP); capture variability in annual energy use; correlate electricity prices with building samples to capture regional and sector-specific variability; use residual value to account for any remaining life of a lamp at the end of the analysis period; report LCC savings by event type and CSL Lamp and ballast installation costs; annual energy consumption; electricity prices and future trends; product lifetimes; discount rates; consumer “lamp purchasing events” that cause purchase of a new lamp / system; building samples based on the EIA's Commercial Building Energy Consumption Survey (CBECS), EIA's Residential Energy Consumption Survey (RECS), and EIA's Manufacturing Energy Consumption Survey
(MECS)and the U.S. Lighting Market Characterization Vol. I
(LMC)AEO 2007 basis for energy price forecasts and EIA 2005 basis for distribution of electricity prices; average discount rate is 5.6% for the residential sector, 6.2% for the commercial sector, and 7.5% for the industrial sector Section III.G and TSD Chapter 8. National Impact Analysis and Shipment Analysis Forecasts of national GSFL and IRL costs and energy consumption; forecast shipments through the use of a stock accounting model. DOE used the lamp purchase events to divide the market into segments—new construction, replacements, and early retrofit (only for GSFL); use multiple scenarios to forecast the technology mix of lamps (and ballasts) sold at each CSL Historical and forecasted annual shipments; lamp stock; total installed product costs; unit annual energy consumptions; AEO2007 energy price forecasts; site-to-source conversion factors for electricity; discount rate; HVAC interaction, and rebound effect Annual shipments; forecasted base-case and standards-case efficacy improvements based on market-share matrices and historical trends; AEO2007 basis for site-to-source conversion factors; discount rates are 3 percent and 7 percent real; future costs discounted to present year
(2007)Sections III.H and III.I; TSD Chapters 9 and 10. 1. Engineering Analysis and Product Price Determination DOE uses the engineering analysis and product price determination together to characterize the relationship between the end-user (consumer) price and the efficiency of the product DOE evaluates for standards. The relationship between the efficiency of a product and the price of that product is essential in determining the relative cost of a more efficient product over its lifetime (i.e., the purchase price of the product plus maintenance and operating costs) as compared to a less efficient product. This calculation is necessary to determine whether individual consumers and the nation will benefit under an efficiency standard. DOE's approach to these analyses is explained briefly below. 2 The data sources cited in this table were the most current available at the time DOE prepared this ANOPR. In the future, should more up-to-date sources become available, DOE will incorporate those more up-to-date sources into its analysis. The engineering analysis identifies the representative baseline lamps, or lamp-and-ballast combinations, that DOE will evaluate in the engineering analysis. The term “baseline” refers to a lamp (or lamp-and-ballast system) that has features and technologies typically found in equipment currently offered for sale and is representative of the characteristics of products in a given product class; for products which are already subject to an energy efficiency standard, the baseline unit is typically one which just meets the current regulatory requirement. DOE based the product price determination for lamps and ballasts on marked-up manufacturer price schedules, developing low, medium, and high end-user retail prices. Section III.C and Chapter 5 of the TSD discuss the engineering analysis, and section III.E and Chapter 7 of the TSD discuss the product price determination in further detail. 2. Energy-Use Characterization The energy-use characterization provides estimates of annual energy use for the two categories of lamps which are the subject of the present rulemaking. DOE uses these estimates in the LCC and PBP analyses, as well as the NIA. To develop annual energy use estimates, DOE multiplied annual usage (in hours per year) by the system power estimates (in watts). In order to obtain the inputs for these calculations, DOE took the following steps. DOE developed the system power estimates in the engineering analysis. To derive annual energy usage, DOE used data published in the U.S. Lighting Market Characterization: Volume I
(LMC)3 , the Residential Energy Consumption Survey
(RECS)4 , the Commercial Building Energy Consumption Survey (CBECS) 5 , and the Manufacturer Energy Consumption Survey
(MECS)6 . More detail on the calculation of operating hours is available in section III.D.1 of this notice, and Chapter 6 of the TSD. 3 U.S. Department of Energy. Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Final Report: U.S. Lighting Market Characterization, Volume I: National Lighting Inventory and Energy Consumption Estimate (2002). Available at: *www.eere.energy.gov/buildings/info/documents/pdfs/lmc_vol1_final.pdf.* 4 U.S. Department of Energy. Energy Information Agency, Residential Energy Consumption Survey: File 1: Housing Unit Characteristic (2006). Available at: *http://www.eia.doe.gov/emeu/recs/recs2001/publicuse2001.html.* 5 U.S. Department of Energy. Energy Information Agency, Commercial Building Energy Consumption Survey: Micro-level data, file 2 Building Activities, Special Measures of Size, and Multi-building Facilities (2003). Available at: *http://www.eia.doe.gov/emeu/cbecs/public_use.html.* 6 U.S. Department of Energy. Energy Information Agency, Manufacturing Energy Consumption Survey, Table 1.4: Number of Establishments by First Use of Energy for All Purposes (Fuel and Nonfuel) (2002). Available at: *http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html.* 3. Life-Cycle Cost and Payback Period Analyses The LCC and PBP analyses determine the economic impact of potential standards on individual consumers. The LCC is the total consumer expense for a product over the life of the product (i.e., purchase price plus maintenance and operating costs). The LCC analysis compares the LCC of products and equipment designed to meet possible energy conservation standards with the LCC of the products and equipment likely to be installed in the absence of standards. The PBP represents the number of years required to recover the increase in purchase price (including installation cost) of a more-efficient product through savings in the operating cost of the product. The PBP is calculated by dividing the change in total installed cost due to increased efficacy by the change in annual operating cost from increased efficacy. More detail on the calculation of LCC and PBP is available in section III.G of this notice and Chapter 8 of the TSD. 4. National Impact Analysis The NIA estimates the national energy savings
(NES)and the net present value
(NPV)of total customer costs and savings expected to result to the nation from new standards at specific efficiency levels. Stated another way, in the NIA, DOE calculates NES and NPV for any given potential standard level for each of the two categories of lamps as the difference between a base-case forecast (i.e., without new standards) and the standards-case forecast (i.e., with new standards). To start, DOE determines national annual energy consumption by multiplying the number of units in use which are expected to be purchased after the standard takes effect by their average unit energy consumption. Using that input, the NES is calculated as the sum of the cumulative annual energy savings over the analysis period (2012-2042). 7 The national NPV is then calculated from the discounted net savings each year for the products purchased over that same analysis period. The NPV sums the discounted net savings each year, consisting of the difference between the savings in total operating costs and increases in total installed costs. More detail on the NIA is available in sections III.H and III.I of this notice and Chapters 9 and 10 of the TSD. 7 DOE uses 31 years as the time period of analysis for its NES calculations in many of its rulemakings, in order to enable stakeholders to understand the relative magnitude of energy savings potentials of the various products and standard levels being considered. E. Background 1. History of Standards Rulemaking for General Service Fluorescent Lamps, Incandescent Reflector Lamps, and General Service Incandescent Lamps As noted above, EPCA established energy conservation standards for GSFL, requiring that certain fluorescent lamps meet prescribed minimum efficacy levels and minimum color rendering index
(CRI)levels. EPCA also established efficacy standards for certain IRL. (42 U.S.C. 6295(i)(1)) For both categories of lamps, EPCA requires that DOE conduct two cycles of rulemakings to determine whether the standards should be amended. (42 U.S.C. 6295(i)(3)-(4)) In addition, EPCA provides that within 24 months after U.S. Federal Trade Commission
(FTC)labeling requirements become effective for GSFL and GSIL, DOE must initiate a rulemaking to determine if the standards in effect for fluorescent and incandescent lamps should be amended so that they would be applicable to additional general service fluorescent lamps. (42 U.S.C. 6295(i)(5)) Within 18 months of initiating the rulemaking, EPCA further requires DOE to publish a final rule containing such amendment, if any. (42 U.S.C. 6295(i)(5)) The FTC published a final rule establishing labeling requirements for covered lamps on May 13, 1994, with an effective date of May 15, 1995. 59 FR 25176. In this rulemaking, DOE is addressing two statutory directives under 42 U.S.C. 6295(i). First, DOE is reviewing and deciding whether to amend EPCA's prescribed energy conservation standards for GSFL and IRL. (42 U.S.C. 6295(i)(3)) Second, DOE is reviewing whether energy conservation standards should be made applicable to additional GSFL. (42 U.S.C. 6295(i)(5)) To initiate the current energy conservation standards rulemaking, on May 31, 2006, DOE published on its Web site the Rulemaking Framework Document for General Service Fluorescent Lamps, Incandescent Reflector Lamps, and General Service Incandescent Lamps 8 (“Framework Document”), which describes the procedural and analytical approaches it anticipated using to evaluate potential energy conservation standards for these products. 9 DOE published a notice to announce the availability of the Framework Document, to schedule a public meeting on the planned analytical framework for this rulemaking (hereafter, “Public Meeting”), and to invite written comments concerning this analytical framework. The title of that **Federal Register** notice published on May 31, 2006 is “Energy Conservation Standards for General Service Fluorescent Lamps, Incandescent Reflector Lamps, and General Service Incandescent Lamps: Notice of Public Meeting and Availability of the Framework Document,” 10 —71 FR 30834. 8 A PDF copy of the framework document published in May 2006 is available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/lamps_framework.pdf.* 9 At the time of publication of the Framework Document, EPCA gave DOE authority to consider energy conservation standards for additional GSIL under 42 U.S.C. 6295(i)(5). However, subsequent amendments to EPCA in EISA 2007 removed that authority. 10 This rulemaking notice is available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/incandescent_lamps.html.* A Public Meeting was held on June 15, 2006, whose purpose was to discuss the analyses and issues identified in various sections of the Framework Document. At the Public Meeting, DOE described the different analyses it would conduct, such as the LCC and PBP analyses, the methods it planned to employ when conducting them, and the relationship among the various analyses. 11 Manufacturers, trade associations, environmental advocates, and other interested parties attended the Public Meeting. Issues discussed included:
(1)The rulemaking's scope of coverage and definition of exclusions;
(2)the development of product classes;
(3)lamp-life variation;
(4)selection of representative lamps for analysis and baseline models;
(5)appropriate methods and sources for developing end-user price estimates;
(6)test procedures;
(7)the methodology for developing shipment estimates;
(8)the need for systems analysis for GSFL (i.e., analyzing a lamp and a ballast in some scenarios);
(9)the impact of higher efficacy lamps on building space conditioning loads; and
(10)the use of average electricity rates. Comments submitted during the Framework Document comment period elaborated upon these major issues raised at the June 2006 Public Meeting. DOE worked with its contractors to address these issues in the ANOPR analyses. 11 PDF copies of the slides and other material associated with the public meeting are available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/lamps_meeting_061506.html.* Comments received in response to the Framework Document helped identify further issues involved in this rulemaking, and such input contributed to the overall analytical process. This document summarizes the comments DOE has received to date, each with a parenthetical reference at the end citing the location of the item in the docket for this rulemaking (i.e., the public record). 2. Energy Independence and Security Act of 2007 On December 19, 2007, during the ANOPR phase of this rulemaking, the Energy Independence and Security Act of 2007 was signed into law. In relevant parts, EISA 2007 amends various EPCA provisions regarding GSFL, IRL, and GSIL, and considerably changes the scope of this rulemaking and the structure of DOE's ANOPR analyses. Accordingly, DOE has incorporated these changes in both the preliminary determination and energy conservation standards analyses contained in this ANOPR. DOE notes that the relevant amendments in EISA 2007 are effective on the date prescribed by the legislation, not on the effective date of this rulemaking. As stated earlier, in May 2006 DOE published a Framework Document outlining the procedural and analytical approaches it anticipated using for this rulemaking. In addition, DOE received both written and oral comments in response to the Framework Document. Due to the recent amendments to EPCA in EISA 2007, the scope of coverage and analytical approach presented in this ANOPR by necessity differs from that which was previously outlined in the Framework Document. In addition, given these latest legislative amendments, numerous comments submitted no longer hold relevance to this rulemaking and, therefore, are not addressed in this ANOPR. The following section summarizes various sections of EISA 2007 relevant to this rulemaking and discusses their effect on the preliminary determination and ANOPR analyses contained in this notice. a. General Service Fluorescent Lamps Regarding GSFL, section 316(b) of EISA 2007 amends section 321(30)(B)(viii) of EPCA (42 U.S.C. 6291(30)(B)(viii)) by modifying the definition of “general service fluorescent lamp” so as to exclude lamps with a CRI of 87 or greater (as compared to the previous exclusion for lamps with a CRI of 82 or greater). This amendment effectively changes the scope of coverage of energy conservation standards for GSFL to now include additional fluorescent lamps with a CRI rating from 82 up to 87. The ANOPR analyses reflect this change in scope of coverage by analyzing lamp designs with CRI ratings up through 86 and also by accounting for the national impacts due to the regulation of this full range of GSFL. In addition, section 322(b) of EISA 2007 amends section 325(i) of EPCA (42 U.S.C. 6295(i)) by moving the table of efficacy requirements for fluorescent lamps from section 325(i)(1)(A) to section 325(i)(1)(B). However, every aspect of the table is identical to the previous standard as enacted by EPACT 1992, including the product groupings, and the minimum efficacy and CRI requirements. 12 Therefore, the amendment in section 322(b) of EISA 2007 results in no substantive change in DOE's approach toward GSFL. Furthermore, the legislation does not modify the authority to consider extending coverage to additional GSFL under section 325(i)(5) of EPCA (42 U.S.C. 6295(i)(5)). 12 These CRI requirements reflect minimum CRI standards for covered fluorescent lamps. These minimum requirements are not affected by the exclusion in the definition of “general service fluorescent lamp” for lamps with a CRI of 87 or greater, as amended by EISA 2007. b. General Service Incandescent Lamps Regarding GSIL, section 321(a)(1) of EISA 2007 amends section 321(30) of EPCA (42 U.S.C. 6291(30)) by deleting the existing definition and inserting a new definition for “general service incandescent lamp.” In the context of redefining “general service incandescent lamp,” this section also introduces new definitions for several lighting-related terms, some of which were previously defined by DOE in the CFR. Definitions contained in section 321(a)(1) of EISA 2007 relevant to this rulemaking include the following terms:
(1)“Modified spectrum;”
(2)“rough service lamp;”
(3)“vibration service lamp;” and
(4)“colored incandescent lamp.” The effect that the incorporation of these definitions has on this rulemaking will be discussed in section I.E.2.c of this notice. In addition, section 321(a)(3) amends section 325 of EPCA (42 U.S.C. 6295) by prescribing separate energy conservation standards and minimum rated lifetimes for general service incandescent lamps and modified spectrum general service incandescent lamps, with effective dates ranging from January 1, 2012 to January 1, 2014. In addition, this section also directs DOE to conduct two future standards rulemakings to review and possibly amend the standards. Furthermore, although EPACT 1992 gave DOE authority under 42 U.S.C. 6295(i)(5) to consider additional general service incandescent lamps for energy conservation standards coverage, section 321(a)(3) of EISA 2007 amends section 325(i)(5) of EPCA and removes this provision. Accordingly, DOE has terminated its preliminary determination regarding the expansion of scope to additional GSIL. In addition, as EISA 2007 prescribed energy conservation standards for GSIL, this ANOPR does present any analyses or candidate standard levels related to GSIL. c. Incandescent Reflector Lamps Regarding IRL, section 322(a)(1) of EISA 2007 amends section 321(30)(C)(ii) of EPCA (42 U.S.C. 6291(30)(C)(ii)) by modifying the portion of the definition of “incandescent lamp” which is applicable to reflector lamps so as to expand that definition to include lamps with a diameter between 2.25 and 2.75 inches, as well as BPAR-, ER-, and BR-shaped lamps. In addition, section 322(a)(2) of EISA 2007 adds new statutory definitions for a BPAR incandescent reflector lamp, a BR incandescent reflector lamp, and an ER incandescent reflector lamp. These new statutory definitions supersede the existing CFR definitions for “ER incandescent reflector lamp” and “BR incandescent reflector lamp” that were developed by DOE (62 FR 29221 (May 29, 1997)), and thereby remove DOE's authority to amend these definitions. In addition, section 322(b) of EISA 2007 amends section 325(i) of EPCA (42 U.S.C. 6295(i)) by moving the table of minimum average lamp efficacy requirements for IRL from section 325(i)(1)(A) to section 325(i)(1)(B). However, as noted above for GSFL, every aspect of this table of IRL efficacy requirements is identical to the previous standard as enacted by EPACT 1992. Section 322(b) also amends EPCA to incorporate several new exemptions to the IRL standards in a newly-adopted section 325(i)(1)(C) of EPCA. These exemptions are as follows:
(1)Lamps rated at 50 watts or less that are ER30, BR30, BR40, and ER40;
(2)lamps rated at 65 watts that are BR30, BR40, or ER40 lamps; and
(3)R20 incandescent reflector lamps rated 45 watts or less. DOE notes that the expanded scope of IRL, as presented in EISA 2007, is consistent the proposal contained in a joint comment submitted by the American Council for an Energy Efficient Economy (ACEEE) and the National Electrical Manufacturers Association
(NEMA)regarding this rulemaking. (ACEEE and NEMA, No. 14 at pp. 3-8) The effective date of energy conservation standards for BPAR, ER, and BR shaped lamps as prescribed by EISA 2007 is January 1, 2008. The effective date of standards for smaller diameter IRL as prescribed by EISA 2007 (i.e., diameter of more than 2.25 inches, but not more than 2.75 inches) is the later of January 1, 2008 or 180 days after the date of enactment of EISA 2007. Given that EISA 2007 was enacted on December 19, 2007, the effective date of these standards for smaller diameter IRL is June 16, 2008. In both of these cases, the EISA 2007 standards come into effect well before an amended IRL standard (as would be prescribed by this rulemaking) would come into effect. DOE's draft ANOPR analyses were modified to account for this expanded scope of IRL coverage by selecting IRL baselines which DOE expects to be the least efficacious covered lamp design that would comply with the amended standard. In addition, DOE updated its IRL shipment forecasts in response to EISA 2007 to account for both the expansion of scope for Federally-regulated reflector lamps and the exemptions to the standards. In addition, it is also important to note that, as previously discussed, EISA 2007 introduced statutory definitions for “rough service lamp,” “vibration service lamp,” and “colored incandescent lamp,”—lamp types which are explicitly excluded from the definition of “incandescent reflector lamp,” as contained in the referenced definition of “incandescent lamp.” DOE had previously developed and adopted into the CFR definitions for these three terms in the context of IRL; however, as previously mentioned, these DOE definitions are now superseded by the statutory definitions in EISA 2007. As these terms are used to define that portion of the definition of “incandescent lamp” that corresponds to the definition of “incandescent reflector lamp,” any amendments to these terms affect the scope of energy conservation standards coverage of IRL. In examining the new definitions for “rough service lamp” and “vibration service lamp,” DOE recognizes that they differ from the earlier CFR definitions DOE had adopted. In response to the changes to these definitions, DOE attempted to account for these changes in the ANOPR analyses. Similarly, the new EISA 2007 definition for “colored incandescent lamp” effectively expands the scope of coverage for IRL. That is, IRL containing five percent or more of neodymium content and plant light IRL are now subject to energy conservation standards. DOE accounts for this expanded coverage of IRL by creating a separate product class for these lamps, termed “modified spectrum lamps.” This decision to treat modified spectrum lamps separately is consistent with the approach taken in EISA 2007 with respect to GSIL. Finally, although EPACT 1992 gave DOE authority under U.S.C. 6295(i)(5) to consider additional general service incandescent lamps (which included IRL) for energy conservation standards coverage, section 321(a)(3) of EISA 2007 has amended section 325(i)(5) of EPCA to remove this provision. Accordingly, DOE has terminated its preliminary determination regarding the expansion of scope to additional GSIL and IRL. However, as discussed above, in the ANOPR analyses, DOE accounts for the new scope of coverage for IRL for purposes that remain relevant to this rulemaking (i.e., considering amended efficacy standards for all covered IRL). d. Off Mode and Standby Mode Energy Consumption In addition to the specific relevant actions described above, EISA 2007 also places various requirements on all covered products. Of particular note here, section 310(3) of EISA 2007 amends section 325 of EPCA (42 U.S.C. 6295) by mandating that any final rule establishing or revising a standard for a covered product that is adopted after July 1, 2010 shall incorporate standby mode and off mode energy use into the standard, if feasible. DOE notes that final rule for this energy conservation standards rulemaking on fluorescent and incandescent lamps is scheduled for publication by June 2009. In addition, after careful review, DOE has preliminarily determined that for the GSFL and IRL which are the subjects of this rulemaking, current technologies for these products do not employ a standby mode or off mode, so a determination of the energy consumption of such features is inapplicable. Given EISA 2007's definitions of “active mode,” “off mode,” and “standby mode” 13 applicable to both GSFL and IRL, the lamp must be entirely disconnected from the main power source (i.e., the lamp is switched off) in order not to provide any active mode function (i.e., emit light), thereby meeting the second provision in the definition of “off mode.” However, if the lamp is disconnected from the main power source, the lamp clearly does not satisfy the requirements of operating in off mode. In addition, DOE believes that all covered products that meet the definitions of “GSFL” and “IRL” are single-function products and do not offer any secondary user-oriented or protective functions. Therefore, DOE has tentatively concluded that it is not feasible to incorporate off mode or standby mode energy use into the energy conservation standards for GSFL and IRL. DOE welcomes comment on its understanding of off mode and standby mode energy consumption for the products addressed by this rulemaking. 13 In amending 42 U.S.C. 6295(gg)(1)(a)(i), (ii), and (iii), EISA 2007 defines “active mode,” “off mode,” and “standby mode” as follows: “ The term ‘active mode’ means the condition in which an energy-using product—(I) is connected to a main power source;
(II)has been activated; and
(III)provides 1 or more main functions.” “The term `off mode' means the condition in which an energy-using product—(I) is connected to a main power source; and
(II)is not providing any stand-by or active mode function.” “The term ‘standby mode' means the condition in which an energy-using product—(I) is connected to a main power source; and
(II)offers 1 or more of the following user-oriented or protective functions:
(aa)To facilitate the activation or deactivation of other functions (including active mode) by remote switch (including remote control), internal sensor, or timer.
(bb)Continuous functions including information or status displays (including clocks) or sensor-based functions.” 3. Test Procedures DOE test procedures outline the method by which manufacturers must determine the efficiency of their products and equipment, and thereby assess and certify compliance with the energy conservation standards adopted pursuant to EPCA. DOE established test procedures for fluorescent and incandescent lamps in a final rule published in the **Federal Register** on May 29, 1997 (hereafter “1997 Test Procedure Final Rule”). 62 FR 29222 (adopting 10 CFR part 430, Subpart B, Appendix R 14 ). In addition, the test procedures incorporate by reference American National Standards Institute (ANSI), Illuminating Engineering Society of North America (IESNA), and International Commission on Illumination
(CIE)standards to measure lamp efficacy and CRI. In their totality, the DOE test procedures provide detailed instructions for measuring the performance of GSFL and IRL and certain performance attributes of GSIL. 14 “Uniform Test Method for Measuring Average Lamp Efficiency
(LE)and Color Rendering Index
(CRI)of Electric Lamps.” The National Electrical Manufacturers Association
(NEMA)submitted a comment identifying what it perceived to be problems with several of the industry standards incorporated in DOE's test procedures. Specifically, NEMA stated that many of the standards referenced in the test procedures are outdated, have been replaced, or are no longer available. (NEMA, No. 12 at pp. 2-4) 15 15 A notation in the form “NEMA, No. 12 at pp. 2-4” identifies a written comment that DOE has received and has included in the docket of this rulemaking. This particular notation refers to a comment
(1)by the National Electrical Manufacturers Association (NEMA),
(2)in document number 12 in the docket of this rulemaking, and
(3)appearing on pages 2 through 4. Prompted by the NEMA comment, DOE reviewed the DOE test procedures for GSFL, IRL, and GSIL, and DOE has tentatively concluded that they should be revised because many of industry standards cited in the test procedures are out of date, are not available for purchase, or are no longer maintained. Therefore, DOE has initiated a test procedure rulemaking, in parallel with this energy conservation standards rulemaking, to review and revise the test procedures for these three categories of lamps—GSFL, IRL and GSIL (even though GSIL is no longer part of this ANOPR). To this end, DOE is publishing a notice of proposed rulemaking
(NOPR)in today's **Federal Register** that proposes to amend the lighting test procedures. The following briefly summarizes the major points in the test procedures NOPR; however, for a complete discussion on these and other points, please consult the NOPR. In the test procedure NOPR, DOE is proposing primarily to update the references to outdated industry standards for fluorescent and incandescent lamps. DOE believes this update is necessary in order to ensure that stakeholders and testing laboratories are able to follow DOE's test procedures, which require obtaining and using several industry standards incorporated by reference. DOE believes that the proposed test procedure amendments would not impact the measured efficacy of a lamp. In the test procedure NOPR, DOE is also proposing a few definitional and procedural modifications to accommodate technological migrations in the GSFL market and approaches DOE is considering in this energy conservation standards rulemaking. Specifically, DOE is proposing to mandate that GSFL testing continue to be conducted on low-frequency ballasts whenever possible. By maintaining fluorescent lamp testing on low-frequency ballasts when possible, DOE's proposed updates to more current ANSI standards would not alter the measured efficacy of fluorescent lamps and maintain consistent testing across manufacturers. In addition, DOE is proposing amendments related to the calculation of “lamp efficacy” for GSFL. Presently, manufacturers are directed to report efficacies to differing degrees of accuracy for fluorescent and incandescent lamps. For example, fluorescent lamp efficacies are rounded off to the nearest whole number, while incandescent lamp efficacies are reported to the tenths decimal place. DOE is proposing to revise the reporting requirements for GSFL, such that all covered lamp efficacies are reported with an accuracy to the tenths decimal place. DOE believes that such change would not only promote consistency among the various lamp categories, but also would coincide with the significant digits presented in the EPCA efficacy standard. In addition DOE found that in order to have standard levels for GSFL that are best able to maximize energy savings, it must utilize the tenths decimal place in its energy conservation standards analysis. DOE is also proposing in the test procedure NOPR to adopt a testing and calculation method for measuring the correlated color temperature
(CCT)of fluorescent and incandescent lamps, a provision that is not currently contained in the test procedure. DOE is considering using CCT to differentiate between product classes for GSFL, and DOE notes that the definitions of “colored fluorescent lamp” and “colored incandescent lamp” both incorporate CCT ranges, which, in part, determine whether lamps are subject to regulation. The test procedure NOPR also recognizes that DOE is considering the possibility of extending coverage to certain additional GSFL (see section II of this notice). In addition, the test procedure NOPR recognizes and accounts for the fact that EISA 2007 has extended statutorily-prescribed energy conservation standards to specified types of GSIL. Thus, the NOPR informs the public that DOE intends to amend the test procedures to accommodate these additional lamps, and to provide appropriate test methods, should DOE adopt standards for them. Overall, and as stated in the NOPR, DOE believes that most of the proposed revisions to the test procedures would not significantly change the reported efficacy of covered lamps or result in a significant increase in testing burden. For any that do have an appreciable impact on the reported efficacy, DOE is proposing to delay the effectiveness of such test procedure revision until the effective date of any new energy conservation standard for these products. DOE held a public meeting to discuss both the test procedure NOPR and energy conservation standards ANOPR for fluorescent and incandescent lamps. DOE intends to issue a final rule for the lamps test procedure prior to issuing the NOPR for the energy conservation standards rulemaking. II. Consideration Regarding the Scope of Energy Conservation Standards Coverage A. Introduction As noted previously, section 325(i)(5) requires DOE to consider whether to adopt energy efficiency standards for additional GSFL beyond those already covered by the statutorily-prescribed standard. (42 U.S.C. 6295(i)(5)) More specifically, EPCA directs that the Secretary “shall initiate a rulemaking procedure to determine if the standards in effect for fluorescent lamps should be amended so that they would be applicable to additional general service fluorescent [lamps] * * * ” *Id.* Pursuant to this mandate and as explained in this section of the notice, DOE has made a preliminary determination that expanded coverage would be appropriate. The public is invited to review and comment on the initial findings and analyses, as set forth below, regarding which additional fluorescent lamps should be evaluated for possible coverage by energy conservation standards. Furthermore, DOE was urged to make this preliminary determination by comments received at the Public Meeting. For example, the Appliance Standards Awareness Project
(ASAP)recommended that DOE should permit the public to comment on consideration of the scope of additional product coverage, and that DOE should define that scope of coverage early in the rulemaking process in order to prevent any scheduling delays. (Public Meeting Transcript, No. 4.5 at pp. 34-36) DOE agrees with the ASAP comment, and consequently, this notice provides the public with the opportunity to submit comments regarding DOE's preliminary determination. Below, DOE discusses the range of additional lamps that EPCA authorizes DOE to consider. Then, DOE identifies those additional GSFL that it believes warrant further consideration for possible energy conservation standards, and why. DOE requests comment on these subjects. After consideration of these comments, DOE may propose additional lamps to be covered, along with proposed standard levels for these lamps, during the NOPR stage of this standards rulemaking. After further public comment, DOE will publish a final rule which includes its final decision regarding coverage of additional lamps (and applicable standards levels, as appropriate). In addition, the following sections also discuss modifications of various existing lighting-related definitions DOE developed and incorporated into the CFR. These modifications reflect market migrations or changes in industry standards and often have the effect of increasing or decreasing DOE's scope of energy conservation standards coverage. B. Additional General Service Fluorescent Lamps Being Considered Under EPCA Section 325(i)(5) 1. Scope Prior to embarking on a discussion of additional coverage of general service fluorescent lamps, it is first necessary to explain the extent of coverage under the present standard. Section 325(i)(1) of EPCA established energy conservation standards for certain 4-foot medium bipin lamps, 2-foot U-shaped lamps, 8-foot recessed double contact high output lamps, and 8-foot single pin slimline lamps. (42 U.S.C. 6295(i)(1)) The relevant standard levels for the products can be found in DOE's regulations at 10 CFR 430.32(n). As the next step in this inquiry, DOE notes that section 325(i)(5) of EPCA directs DOE to determine if the standards in effect should be amended so as to apply to “additional general service fluorescent [lamps] * * *” (42 U.S.C. 6295(i)(5)) There are currently a wide variety of fluorescent lamps being used in broad, general service lighting applications 16 that are not covered by existing energy conservation standards. Accordingly, these lamps are potential candidates for expanded coverage pursuant to 42 U.S.C. 6295(i)(5). 16 A key provision in the statutory definitions of “general service fluorescent lamp” is that the lamp must satisfy “the majority of fluorescent applications.” (42 U.S.C. 6291(B)) DOE interprets these phrases to mean that these lamps have broad utility in various fluorescent or lighting applications. In general, these lamps will not represent products used solely in niche applications (such as those specifically excluded in the definition of “general service fluorescent lamp”), but rather will represent products that often fulfill general illumination purposes (casting light over a broad area), such as in the following common locations: Office space, warehouses, call centers, schools, health care, government buildings, residential housing, and retail stores. In addition, DOE received a joint comment from several stakeholders (hereafter referred to as “Joint Comment”) concerning the extent of DOE's authority to expand coverage of its energy conservation standard for lighting products. The Joint Comment was submitted by the Alliance to Save Energy, ACEEE, ASAP, Natural Resources Defense Council, Northeast Energy Efficiency Partnerships, Northwest Power and Conservation Council, and PG&E (Pacific Gas and Electric). Given the stakeholders involved, it should be noted that the Joint Comment reflects views of both energy efficiency advocates and utilities. The Joint Comment asserted that section 325(i)(5) of EPCA authorizes DOE to adopt standards for any fluorescent lamp not currently covered by standards so long as standards for that lamp would be technologically feasible, economically justified, and would achieve significant energy savings. The comment seems to argue that in implementing section 325(i)(5), DOE should interpret its mandate broadly to include any GSFL that meet these statutory criteria. (Joint Comment, No. 9 at pp. 1-2; Public Meeting Transcript, No. 4.5, pp. 38-39, and 45) Given that EPCA's statutory definitions of “general service fluorescent lamp” contains a number of express exclusions for certain categories of fluorescent lamps, DOE finds no basis in the language of EPCA to support commenters' assertions that the agency's authority to act under section 325(i)(5) of EPCA is unlimited. As discussed below, DOE believes section 325(i)(5) covers additional GSFL that are not one of the enumerated specialized products that EPCA excludes from coverage (see 42 U.S.C. 6291(30)(B)). EPCA defines “general service fluorescent lamp” as follows: [F]luorescent lamps which can be used to satisfy the majority of fluorescent applications, but does not include any lamp designed and marketed for the following non-general lighting applications:
(i)Fluorescent lamps designed to promote plant growth.
(ii)Fluorescent lamps specifically designed for cold temperature installations.
(iii)Colored fluorescent lamps.
(iv)Impact-resistant fluorescent lamps.
(v)Reflectorized or aperture lamps.
(vi)Fluorescent lamps designed for use in reprographic equipment.
(vii)Lamps primarily designed to produce radiation in the ultra-violet region of the spectrum.
(viii)Lamps with a color rendering index of 87 or greater. (42 U.S.C. 6291(30)(B)) Both key elements of this definition—i.e., that the lamps can satisfy the majority of lighting applications and the exclusion of certain specialized fluorescent lamps—are consistent with the mandate of section 325(i)(5) that DOE consider and adopt standards for GSFL that currently are not covered by standards. That would allow DOE to cover a broad range of additional products used and viewed as general service fluorescent lamps. In determining which GSFL would be suitable for consideration under 42 U.S.C. 6295(i)(5), DOE limited its inquiry to those fluorescent lamps with generic physical and operational features closely matching the IESNA's widely accepted definition of “fluorescent lamp,” as contained in “The IESNA Lighting Handbook: Reference and Application,” Ninth Edition, 2000, p. G-14. 17 Because only lamps with these features are commonly understood to be fluorescent or general service fluorescent lamps, DOE would apply standards to only such fluorescent lamps, provided that such lamps are not expressly excluded under 42 U.S.C. 6291(30)(B). 17 The definition of fluorescent lamp in the IESNA handbook is a “low-pressure mercury electric-discharge lamp in which a fluorescing coating (phosphor) transforms some of the UV energy generated by the discharge into light.” In summary, in considering whether to amend the standards in effect for fluorescent lamps to apply to “additional” GSFL under section 325(i)(5) of EPCA, DOE has considered all lamps that meet the general description of a “fluorescent lamp” in the introductory language of 42 U.S.C. 6291(30)(A), that can be used to satisfy the majority of fluorescent lighting applications, for which EPCA does not prescribe standards, and that are not within the exclusions specified in 42 U.S.C. 6291(30)(B). 2. Rationale for Coverage In considering which additional GSFL to cover, DOE considered lamps other than those specifically excluded. Among the lamps considered, DOE used potential energy savings of the lamps as the primary criterion in considering preliminarily which should be covered by the standards program. After selecting the lamps for consideration, DOE then conducted a preliminary assessment of whether a standard on those lamps would have the potential to meet the two remaining criteria for prescribing new or amended standards—i.e., being technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In the ANOPR (as described in section III below) and NOPR, each lamp selected for coverage would then be the subject of a more comprehensive analysis to determine if there is a reasonable likelihood that standards are justified. DOE assessed the potential to achieve significant energy savings by extending coverage to particular lamps from market-share estimates and from potential incremental energy savings that could result from more-efficacious lamp designs. DOE has quantitative shipment or market share information for certain lamps, such as 8-foot T8 single pin slimline lamps, which it considered and cites in this notice. However, DOE has little to no information on shipments or market share for other lamp types which DOE is considering, such as 8-foot very high output
(VHO)fluorescent lamps. In the absence of data, DOE has relied on qualitative assessments of market share (based on discussions with lighting industry experts) to gauge the potential for significant energy savings. DOE invites the public to present further shipment or market share data relevant to consideration of coverage for additional lamps. In addition, DOE assessed the potential to achieve significant energy savings for particular lamps by considering whether these lamps serve as potential substitutes to other regulated lamps. By leaving potential substitutes unregulated, DOE risks that regulating one lamp shape may lead to rapid increased sales of other, unregulated substitutable shapes. This shift of installed stock towards unregulated lamps may result in decreased energy savings, or even the possibility of increased energy use, from energy conservation standards on regulated lamps. In order to avoid this consequence, DOE plans to consider coverage of GSFL lamps that are potential substitutes for any lamps that have high energy savings potential and are likely to be regulated. Though the shipments of these substitute lamps may not currently be high-volume, DOE believes that if the lamps are left unregulated, the shipments have the potential to grow in market share. As long as efficacy improvements are technologically feasible, coverage of these additional substitute lamps has the potential to not only provide energy savings in their own right, but to also prevent potentially significant losses in energy savings through substitution effect. In addition to independently conducting its preliminary determination analysis, DOE considered comments on the additional GSFL it should cover. The following subsections provide a discussion of the GSFL being considered and not considered as expanded coverage, a summary of comments relating to the preliminary determination, and DOE's response to these comments. DOE invites comment on the rationale for coverage presented in this preliminary determination. DOE also invites comment on the scope of coverage defined in this preliminary determination. In addition, the following sections also discuss modifications to various existing lighting-related definitions DOE developed and incorporated into the CFR, which would have the effect of increasing the scope of coverage under applicable energy conservation standards. The new and amended definitions under consideration are discussed and presented in section II.C. 3. Analysis of Individual General Service Fluorescent Lamps Current DOE regulations set standards for the following types of fluorescent lamps:
(1)4-foot, medium bipin, straight-shaped lamps, rated wattage ≥ 28W;
(2)2-foot, medium bipin, U-shaped lamps, rated wattage of ≥ 28W;
(3)8-foot, recessed double contact, rapid start, high output lamps, 0.800 nominal amperes (as defined in ANSI C78.1-1991); and
(4)8-foot, single pin, instant start, slimline lamps, rated wattage of ≥ 52 (as defined in ANSI C78.3-1991). Based on an investigation of available products in manufacturer catalogs, DOE identified various, currently-unregulated general service fluorescent lamps that could be considered for additional coverage under section 325(i)(5) of EPCA, while maintaining the exclusions specified in the definition of “general service fluorescent lamp.” These lamps are as follows: • 4-foot, medium bipin, straight-shaped lamps, rated wattage of < 28W; • 2-foot, medium bipin, U-shaped lamps, rated wattage of < 28W; • Additional 8-foot, recessed double contact, rapid start, high output lamps; • Additional 8-foot single pin, instant start, slimline lamps; • Very High Output
(VHO)straight-shaped lamps; • T5 miniature bipin straight-shaped lamps; • Additional straight-shaped and U-shaped lamps, other than those listed above (e.g., alternate lengths, diameters, or bases); and • Additional fluorescent lamps with alternate shapes (e.g., circline, pin-based CFL). The following section discusses DOE's rationale for considering or not considering expansion of coverage to the above-listed lamps. In addition, in section II.C, DOE considers revisions to the definitions of “rated wattage” and “colored fluorescent lamp” which may further affect DOE's scope of energy conservations standards coverage. DOE is considering extension of the standard's coverage to certain 4-foot, medium bipin, GSFL to which standards do not currently apply. Presently, DOE's regulations do not cover or set standards for any 4-foot medium bipin lamp with a wattage less than 28W. As part of this preliminary determination, DOE is considering extension of coverage to 4-foot, medium bipin, straight-shaped fluorescent lamps with wattages between 25W and 28W. DOE understands that 25W, 4-foot medium bipin, T12 fluorescent lamps are manufactured and used primarily in the residential sector for general purpose illumination applications, providing additional opportunity for energy savings. Although DOE received no quantitative shipment information on the market share of these wattages of 4-foot medium bipin lamps, DOE has found that manufacturers currently market and sell 25W, 4-foot medium bipin, T8 fluorescent lamps as replacements for higher-wattage, 4-foot medium bipin, T8 fluorescent lamps. As discussed earlier, by expanding standards coverage to substitute lamps of currently regulated lamps, DOE mitigates the risk of 25W lamps becoming a potential loophole (that decreases energy savings) to the current and pending amended standards on 4-foot medium bipin lamps. For these reasons, DOE believes that 25W 4-foot medium bipin lamps (both T8 and T12) are suitable candidates to be considered for coverage under this rulemaking. In addition, as the technology and incremental costs associated with increased efficiency of 25W lamps are similar to their already regulated 28W counterparts, DOE has tentatively concluded that standards on these lamps have the potential to meet the statutory criteria of being technologically feasible and economically justified. Therefore, in this ANOPR, DOE analyzes these lamps as part of the 4-foot medium bipin product class in the life-cycle cost
(LCC)and national impact analysis
(NIA)(sections III.G and III.I, respectively). DOE invites comment on this potential expansion of coverage to 4-foot medium bipin lamps with wattages greater than or equal to 25W, including whether T12 lamps (commonly referred to as “residential straight-shaped lamps”) should be covered. Similar to 4-foot medium bipin lamps, DOE's current regulations do not cover or set standards for any 2-foot U-shaped lamp with a wattage less than 28W. In its research of available product in manufacturer catalogs, DOE found no commercially-available 2-foot U-shaped GSFL with wattages less than 28W. Therefore, DOE believes that the current standards cover the majority of the U-shaped general service lighting products available in the market today. Consequently, DOE's preliminary assessment is that lowering the minimum wattage threshold of U-shaped lamps will most likely not result in significant additional energy savings. For this reason, DOE is not considering expanded coverage of 2-foot, medium bipin, U-shaped lamps in this preliminary determination. In this preliminary determination, DOE is considering extension of the standard's coverage to certain 8-foot, recessed double contact, rapid start, high output fluorescent lamps to which energy conservation standards do not currently apply. DOE's definition of “fluorescent lamp,” adopted in accordance with EPCA, includes only those 8-foot recessed double contact HO lamps with 0.800 nominal amperes and which are listed in ANSI Standard C78.1-1991. 10 CFR 430.2. Due to the ampere specification in the definition, the current standards applicable to GSFL (10 CFR 430.32(n)(1)), cover only T12, 8-foot recessed double contact HO lamps but none of the T8, 8-foot recessed double contact HO lamps (which usually have 0.400 nominal amperes). ACEEE and Osram Sylvania (hereafter “Osram”) commented that DOE should cover T8, 8-foot lamps. (Public Meeting Transcript, No. 4.5 at p. 59) According to Osram, T8, 8-foot recessed double contact HO lamps are currently available, and are replacing the older T12 technology. Osram stated its belief that this trend will continue. (Osram, No. 15 at p. 5) Furthermore, DOE is aware that T8, 8-foot lamps are substitutes for T12, 8-foot lamps. As discussed earlier, by not regulating substitutes (e.g., T8, 8-foot recessed double contact HO lamps) of regulated lamps (e.g., T12, 8-foot recessed double contact HO lamps), DOE risks losing the potential energy savings of the current energy conservation standards for T12, 8-foot lamps, as well as any revised standard that may be adopted pursuant to this rulemaking. In addition, because T8, 8-foot recessed double contact HO lamps are predicted to replace the T12 market, the shipments of T8 lamps may increase considerably. For the reasons above, DOE believes that regulating T8, 8-foot recessed double contact HO lamps has the potential to achieve significant energy savings. DOE analyzes these T8 lamps as part of the 8-foot recessed double contact HO product class in the NIA. From this analysis, DOE estimates that the energy savings achieved due to regulation of T8, 8-foot recessed double contact HO lamps could be as high as 0.30 quads over the analysis period. (See section III.I of this notice.) In addition, in this preliminary determination, DOE tentatively plans to expand its coverage of 8-foot recessed double contact, rapid start, high output fluorescent lamps to those not listed in ANSI Standard C78.1-1991. As discussed in the fluorescent and incandescent lamps test procedure NOPR published in today's **Federal Register** , many of the ANSI standards currently referenced in DOE regulations (e.g., ANSI Standard C78.1-1991) are outdated. DOE understands that as the fluorescent lamp market moves forward and evolves, new 8-foot recessed double contact, rapid start, high output lamps (with 0.800 nominal amperes or other currents) may be introduced into the market. As these lamps would not be listed in the 1991 ANSI standard, they would not be covered under paragraph
(3)of the definition of fluorescent lamp, and, therefore, would not be subject to current energy conservation standards. However, DOE understands that though these newly introduced lamps might have different wattages than those listed in ANSI Standard C78.1-1991, they serve as replacements and substitutes for the regulated 8-foot recessed double contact high output lamps. As discussed earlier, by leaving these potential substitute lamps unregulated, DOE risks not achieving the maximum energy savings from its established energy conservation standards. Given the potential energy savings, in this preliminary determination, DOE is considering extension of coverage to T8, 8-foot recessed double contact HO lamps, thereby adding lamps previously restricted by the 0.800 nominal ampere limitation. In addition, DOE is considering extension of coverage to 8-foot recessed double contact HO lamps not listed in ANSI Standard C78.1-1991. As the technologies of T8, 8-foot recessed double contact HO lamps and the 8-foot recessed double contact HO lamps not listed in ANSI Standard C78.1-1991 are similar to the technologies of their already-regulated T12 counterparts, DOE has tentatively concluded that standards on these lamps have the potential to meet the statutory criterion of being technologically feasible. With regards to the statutory criterion of being economically justified, DOE analyzes T8, 8-foot recessed double contact HO lamps in the LCC analysis and NIA. Preliminary results show that regulation of these lamps would be expected to achieve LCC savings up to $3.15 (discounted at 6.2 percent) per lamp system and net present value
(NPV)up to $0.73 billion to the nation (discounted at 3 percent) over the analysis period. Also, 8-foot recessed double contact HO lamps not listed in ANSI Standard C78.1-1991 should incur similar economic effects as their already-covered counterparts. Therefore, for the purpose of this preliminary determination, DOE has tentatively concluded that energy conservation standards on these lamps have the potential of being economically justified. Similar to 8-foot recessed double contact HO lamps, in this preliminary determination, DOE is considering extension of the standard's coverage to certain 8-foot, single pin, instant start, slimline lamps to which energy conservation standards do not currently apply. DOE's definition of “fluorescent lamp,” adopted in accordance with EPCA, includes only those 8-foot, single pin, instant start, slimline lamps, with a rated wattage greater than or equal to 52W and listed in ANSI Standard C78.3-1991. 10 CFR 430.2. Under this definition, because they are not listed in ANSI Standard C78.3-1991, no T8, 8-foot single pin slimline lamps would be subject to energy conservation standards. However, as indicated by their inclusion in the updated ANSI Standard C78.81-2005, DOE understands that since the publication of ANSI Standard C78.3-1991, T8, 8-foot single pin slimline lamps have penetrated the GSFL market. Shipment information submitted by NEMA indicates that T8 lamps comprise approximately 15 percent of the total 8-foot single pin slimline market. (NEMA, No. 12 at p. 2) In addition, ACEEE and Osram commented that DOE should cover T8, 8-foot single pin slimline lamps. (Public Meeting Transcript, No. 4.5 at p. 59) For similar reasons as discussed with regard to T8, 8-foot recessed double contact HO lamps, DOE believes that the regulation of T8, 8-foot single pin slimline lamps has the potential to achieve significant energy savings. DOE analyzes these T8 lamps as part of the 8-foot single pin slimline product class in the NIA. From this analysis, the energy savings achieved due to the regulation of T8, 8-foot single pin slimline lamps would be expected to be as high as 0.25 quads over the analysis period (i.e., from the year 2012 to 2042). (See section III.I of this notice.) As such, in this preliminary determination, DOE is considering expanding the standards' scope of coverage of 8-foot single pin slimline lamps with a rated wattage greater than or equal to 52W to those not listed in ANSI Standard C78.3-1991. This would include T8 lamps and any additional 8-foot single pin slimline lamps that might be introduced into the fluorescent lamp market in the future. As the technologies of T8, 8-foot single pin slimline lamps and the 8-foot single pin slimline lamps not listed in ANSI Standard C78.3-1991 are similar to the technologies of their already-regulated T12 counterparts, DOE has tentatively concluded that standards on these lamps have the potential to meet the statutory criterion of being technologically feasible. With regards to the statutory criterion of being economically justified, DOE analyzes T8, 8-foot single pin slimline lamps in the LCC analysis and NIA. Preliminary results show that regulation of these lamps has the potential to achieve LCC savings up to $8.27 per lamp system (discounted at 6.2 percent) and NPV of $1.15 billion to the nation (discounted at 3 percent) over the analysis period (i.e., from the year 2012 to 2042). Also, 8-foot single pin slimline lamps not listed in ANSI Standard C78.1-1991 would be expected to incur similar economic effects as their already covered counterparts. Therefore, for the purpose of this preliminary determination, DOE has tentatively concluded that energy conservation standards for these lamps have the potential to be economically justified. DOE also observed that some 8-foot, single pin, slimline lamps with wattages below 52W are available on the market today. These include 51W and 50W versions. However, DOE notes that published catalogs offered very few models at these wattages. Also, DOE believes that these lower-wattage slimline lamps are used for niche applications and would likely not be used as a substitute for higher-wattage versions. In particular, these lamps offer different lumen packages from their higher-wattage counterparts and are not currently marketed as substitutes. Consequently, DOE believes that the market share of such lamps is and will remain relatively small, thereby making the potential energy savings that would be achieved from their regulation small as well. Therefore, DOE has tentatively decided not to extend coverage of the energy conservation standards to T8, 8-foot single pin slimline lamps with wattages below 52W. DOE requests comment on this approach. In this preliminary determination, DOE also considered whether or not to expand coverage to include very high output
(VHO)fluorescent lamps. Philips Lighting (hereafter “Philips”) commented that DOE should set standards for VHO, T12 fluorescent lamps, asserting that these lamps consume a large amount of energy. (Philips, No. 5 at p. 1) DOE research involving review of manufacturer catalog data corroborated the Philips comment, as common VHO fluorescent lamps can have rated wattages ranging from 115W to 215W, while corresponding HO lamps have rated wattages ranging from 60W to 110W. However, in considering the Philips comment, DOE learned from discussions with manufacturers that many VHO lamps are used in outdoor applications, such as parking lot or other area illumination, where high-intensity discharge
(HID)lamps are rapidly gaining market share. Research also indicated that shipments of VHO, T12 lamps have been and are continuing to decline rapidly. Overall, DOE understands that these lamps constitute a very low-volume share of the relevant market, and these products will likely further decrease in terms of market share. As such, although these lamps may individually have a per-lamp energy savings potential larger than that of a typical GSFL, DOE believes that the total energy savings from regulating these lamps would be small and decreasing as that these lamps are naturally disappearing from the market in the absence of regulation. Therefore, DOE does not plan to extend coverage of the energy conservation standard to VHO lamps. DOE also considered whether to include T5 fluorescent lamps in its expansion of energy conservation standards coverage. At the Public Meeting on the Framework Document, ACEEE and PG&E commented that DOE should cover T5 lamps. (Public Meeting Transcript, No. 4.5 at pp. 39 and 59) However, ACEEE and PG&E did not provide a rationale for consideration of these lamps, and DOE did not receive any written comments recommending that it consider T5 lamps for coverage. To further investigate this issue, DOE evaluated the market and typical applications for T5 lamps, and has tentatively decided to not extend coverage to T5 lamps, for the reasons that follow. DOE found that T5 systems are used in a wide variety of indoor general illumination applications where T8 and T12 systems could also be used. However, DOE understands that T5 systems are always operated with higher-efficiency, high-frequency electronic ballasts (versus lower-efficiency, low-frequency ballasts). In addition, it was found that these lamps tend to have higher efficacies and that the systems tend to have lower energy consumption than the corresponding T8 and T12 lamps and systems. Therefore, DOE believes that the regulation of T5 lamps may not have the potential for significant per-unit energy savings. In addition, DOE understands that the current GSFL market share of T5 lamps is relatively small, representing low total energy savings potential. DOE also notes that T5 systems tend to be higher in cost than T8 or T12 systems. Thus, DOE believes that excluding T5 lamps from this rulemaking would be unlikely to undermine any energy savings that would result from a T12 and T8 standard, even if the standard caused increased sales of T5 systems. 18 To the contrary, not regulating T5 lamps could provide market incentives for and result in energy savings by encouraging greater end-user use of highly efficacious T5 lamps. For the above stated reasons, DOE does not plan to extend the standards' coverage to T5 lamps. DOE solicits further comment on whether it should extend coverage to T5 lamps, as well as the rationale for doing so. 18 At CSLs four and five, some T8 systems are more efficacious than their T5 counterparts. However, DOE notes that the average cost of a T5 system is more expensive than a T8 system. The fact that T5 lamps are less efficacious and more expensive at these standard levels indicates that there is little or no incentive for stakeholders to migrate to T5 lamps from T8 or T12 lamps in an effort to avoid the fluorescent lamp standard. Furthermore, DOE does not intend to extend coverage to fluorescent lamps that have alternate lengths, diameters, bases, or shapes (or a combination thereof) than the lamps discussed in the preceding section. DOE believes that the lamps currently covered and the additional lamps described above that DOE is considering for coverage (i.e., ones which have lengths and bases the same as those currently regulated) represent the significant majority of the market for GSFL, and, thus, the bulk of potential energy savings. Furthermore, DOE believes that there is limited potential for lamps with miscellaneous lengths and bases to grow in market share, given the constraint of fixture lengths and socket compatibility. DOE requests comment on this approach. In summary, the following list represents the “additional general service fluorescent lamps” which DOE is considering for expanded coverage under the energy conservation standards: • 4-foot, medium bipin lamps with wattages ≥ 25 and < 28; • 8-foot recessed double contact, rapid start, HO lamps not defined in ANSI Standard C78.1-1991; • 8-foot recessed double contact, rapid start, HO lamps (other than 0.800 nominal amperes) defined in ANSI Standard C78.1-1991; and • 8-foot single pin instant start slimline lamps, with a rated wattage ≥ 52, not defined in ANSI Standard C78.3-1991. C. Amended Definitions As part of the examination of the scope of coverage of GSFL, DOE is considering amendments to existing DOE-adopted definitions in order to more clearly and accurately define the scope of GSFL and IRL. The following section describes these planned amendments and requests comment. 1. “Rated Wattage” One element of EPCA's definitions for “fluorescent lamp” and “incandescent reflector lamp” is a lamp's “rated wattage,” which helps to delineate the lamps for which the statute set prescriptive standards. (42 U.S.C. 6291(30)(A), (C)(ii) and (F)). For example, the definition of “fluorescent lamp” includes certain 4-foot medium bipin lamps with “a rated wattage of 28 or more” (42 U.S.C. 6291(30)(A)(i)), and EPCA prescribes standards for these particular lamps (42 U.S.C. 6295(i)(1)(B)). In addition, EISA 2007 prescribed energy conservation standards for general service incandescent lamps that require lamps of particular lumen outputs to have certain maximum rated wattages. (section 321(a)(3) of EISA 2007 amending section 325(i) of EPCA) EPCA does not, however, define “rated wattage.” Therefore, DOE adopted a definition of “rated wattage” for 4-foot medium bipin T8, T10, and T12 fluorescent lamps when it established test procedures for fluorescent and incandescent lamps in 1997. 62 FR 29222 (May 29, 1997). This definition, located in 10 CFR 430.2, references an ANSI guide from 1991, specifically ANSI Standard C78.1-1991, “for Fluorescent Lamps—Rapid-Start Types—Dimensional and Electrical Characteristics.” Although EPCA also uses the term “rated wattage” when referring to “2-foot U-shaped lamps” (42 U.S.C. 6291(30)(A)(ii)), “8-foot slimline lamps,” (42 U.S.C. 6291(30)(A)(iv)), and “incandescent lamps” (i.e., the portion of that definition pertaining to IRL) (42 U.S.C. 6291(30)(C)), DOE did not define “rated wattage” for these lamps in 1997. In this rulemaking, DOE plans to update its existing definition of “rated wattage” to cite the current version of ANSI Standard C78.1-1991, and to apply this definition to those lamps where rated wattage is a key characteristic but is not currently defined. DOE's current definition of “rated wattage” for 4-foot medium bipin T8, T10, or T12 lamps, in effect, contains three definitions of “rated wattage”: One for those lamps listed in the ANSI Standard C78.1-1991 standard; another for residential straight-shaped lamps; and a third for all other lamps. The definition of “rated wattage” currently contained in DOE regulations is as follows: *Rated wattage* , with respect to 4-foot medium bi-pin T8, T10 or T12 lamps, means:
(1)If the lamp is listed in ANSI C78.1-1991, the nominal wattage of a lamp determined by the lamp designation in Annex A.2 of ANSI C78.1-1991; or
(2)If the lamp is a residential straight-shaped lamp, the wattage a lamp consumes when operated on a reference ballast for which the lamp is designed; or
(3)If the lamp is neither listed in ANSI C78.1-1991 nor a residential straight-shaped lamp, the wattage a lamp consumes when using reference ballast characteristics of 236 volts, 0.43 amps and 439 ohms for T10 or T12 lamps or reference ballast characteristics of 300 volts, 0.265 amps and 910 ohms for T8 lamps. (10 CFR 430.2) Annex A.2 of ANSI Standard C78.1-1991, referenced in the first part of the definition, discusses how to designate lamps according to industry procedure. It indicates that the lamp abbreviation may include either the rated wattage or nominal wattage for a particular lamp. The most current equivalent industry standard corresponding to ANSI Standard C78.1-1991 is ANSI Standard C78.81-2005, which also includes an equivalent section on lamp abbreviations. However, this equivalent section specifies that lamp abbreviations are to incorporate only the nominal wattage. DOE believes that a different section of ANSI Standard C78.81-2005 more appropriately defines “rated wattage.” Specifically, Clause 11.1 of ANSI Standard C78.81-2005 deals more directly with rated wattage when it refers to rated values in the lamp data sheets of Part IV of the standard and notes the margin that manufacturer's average values must maintain from rated values. In relevant part, Clause 11.1 of ANSI Standard C78.81-2005 states: The values of lamp voltage, current and wattage shown on the individual lamp data sheets in Part IV are rated values that apply after the lamps have been aged for 100 hours. These values were chosen by consensus to represent the industry average at the time of publication. No manufacturer's average wattage shall exceed the rated value by more than 5% plus 0.5 watts * * * Therefore, DOE tentatively plans to update the “rated wattage” definition's reference to ANSI Standard C78.81-2005 and to reference Clause 11.1 of that ANSI standard in place of Annex A.2 of ANSI Standard C78.1-1991. The second part of the “rated wattage” definition addresses residential straight-shaped lamps. DOE adopted a definition for “residential straight-shaped lamp” in 10 CFR 430.2 at the same time it defined “rated wattage” and established the applicable test procedures. 62 FR 29222 (May 29, 1997). This definition applies only to 4-foot medium bipin lamps. The provisions on residential straight-shaped lamps reflect DOE's understanding that lamp wattage differs when a lamp operates on a low-power-factor ballast (typically residential applications) versus a high-power-factor ballast (typically commercial applications). (The measured wattage of a residential straight-shaped lamp could be different depending on the ballast on which it is operated.) 19 Thus, these provisions effectively ensure that lamps designed for residential applications are tested on ballasts typically used for residential applications. Defining “rated wattage” for these lamps is significant, as it clarifies whether DOE's standards are applicable to them. DOE believes that the clarification is still relevant. However, DOE notes that ANSI Standard C78.81-2005 lists a rated wattage value for a 25-Watt, 4-foot T12 rapid start medium bipin fluorescent lamp, operating on a low-power-factor ballast. Thus, it appears that some lamps which could be classified as a residential straight-shaped lamp have rated wattage values listed in ANSI Standard C78.81-2005. Therefore, DOE intends to update the second portion of the definition to state that if a residential straight-shaped lamp is not listed in ANSI, then rated wattage should be based on the wattage a lamp consumes when operated on a reference ballast for which the lamp is designed. 19 If a lamp is not listed in ANSI C78.1-1991, its “rated wattage” would depend on test measurements. The third part of the definition for “rated wattage” (applicable if neither of the first two parts applies) states that the rated wattage is that which results when the lamp is tested under specified testing conditions. DOE is updating the test procedures for fluorescent and incandescent lamps in a concurrent test procedures rulemaking. The NOPR for that rulemaking is published in today's **Federal Register** . As part of the test procedures rulemaking, DOE is also developing testing methods for lamps not currently listed in ANSI standards which will be included as part of the DOE test procedure. DOE believes that it is preferable to reference these more detailed test procedures, rather than the current approach of specifying testing conditions in the definitions section of 10 CFR 430.2. Therefore, DOE intends to replace the third part of the “rated wattage” definition with a reference to the test procedures that will be set forth in 10 CFR Part 430, Subpart B, Appendix R. EPCA's definition of “fluorescent lamp” uses the term “rated wattage” not only in describing 4-foot medium bipin lamps, but also in describing 2-foot U-shaped and 8-foot single pin slimline lamps. (42 U.S.C. 6291(30)(A)(ii) and (iv)) To clarify rated wattage for 2-foot U-shaped, and 8-foot single pin slimline lamps, DOE has tentatively decided to utilize the same framework to define “rated wattage” as was used for 4-foot medium bipin lamps. In particular, DOE plans to reference ANSI industry standards where they have defined the rated wattage for particular lamps, and to reference DOE's test procedures (as amended) where ANSI has not defined the rated wattage for particular lamps. Thus, DOE intends to modify the current definition of “rated wattage” that applies to 4-foot medium bipin lamps and make it applicable to all covered fluorescent lamps. Because ANSI Standard C78.81-2005 does not include ratings for U-shaped lamps, DOE plans to incorporate by reference and to cite to ANSI Standard C78.901-2005, “for Electric Lamps—Single-Based Fluorescent Lamps—Dimensional and Electrical Characteristics”, which does. ANSI Standard C78.901-2005 also contains Clause 11.1, using text similar to that noted above. The statutory definition for “incandescent lamp” also contains the term “rated wattage,” and the definition for “incandescent reflector lamp” similarly references a portion of the definition of “incandescent lamp” which contains that term. In addition, EISA 2007 set energy conservation standards for general service incandescent lamps which require the lamps to meet a maximum rated wattage for a particular lumen output. For incandescent reflector lamps and general service incandescent lamps, the rated wattage is the same as measured wattage. Therefore, DOE believes that the test procedures outlined in 10 CFR Part 430, Subpart B, Appendix R suffice for determining rated wattage for incandescent lamps. The following summarizes the modified definition of “rated wattage” that DOE intends to consider making applicable to all covered lamps and updated to reference current industry standards: *Rated wattage* means:
(1)With respect to fluorescent lamps and general service fluorescent lamps:
(i)If the lamp is listed in ANSI C78.81-2005 or ANSI C78.901-2005, the rated wattage of a lamp determined by the lamp designation of Clause 11.1 of ANSI C78.81-2005 or ANSI C78.901-2005;
(ii)If the lamp is a residential straight-shaped lamp, and not listed in ANSI C78.81-2005, the wattage of a lamp when operated on a reference ballast for which the lamp is designed; or
(iii)If the lamp is neither listed in one of the ANSI guides referenced in (1)(i) nor a residential straight-shaped lamp, the wattage of a lamp when measured according to the test procedures outlined in Appendix R to subpart B of this part.
(2)With respect to general service incandescent lamps and incandescent reflector lamps, the wattage measured according to the test procedures outlined in Appendix R to subpart B of this part. DOE requests comment on its above-discussed modification of the definition of “rated wattage,” applicable to both covered fluorescent and incandescent lamps. DOE recognizes that changes to the definition could affect coverage for fluorescent lamps. However, DOE believes that the modifications would have a relatively minor, if any, impact on the scope of coverage. 2. “ *Colored Fluorescent Lamp* ” With regard to the definition of “colored fluorescent lamp” that was codified in the CFR as part of the 1997 Test Procedure Final Rule, DOE is requesting comment on the definition for this type of fluorescent lamp which is excluded from energy conservation standards. The current definition of that term reads as follows: *Colored fluorescent lamp* means a fluorescent lamp designated and marketed as a colored lamp, and with either of the following characteristics: A CRI less than 40, as determined according to the method given in CIE Publication 13.2 (see 10 CFR 430.22), or a lamp correlated color temperature less than 2,500K or greater than 6,600K. 10 CFR 430.2. In its market research, DOE observed that one of the major lamp manufacturers that operates in the European market recently introduced a fluorescent lamp with a correlated color temperature
(CCT)of 17,000K. The product literature associated with this new lamp indicates that it is intended for general illumination applications. In the “Product Application” section of the literature, it suggests that this lamp be used for “Indoor working areas (call centers, industry, schools, healthcare etc.), especially where an energizing environment needs to be created.” 20 Even though DOE is unaware of any general purpose fluorescent lamps like this one being introduced into the U.S. market, there is the potential that the current definition of “colored fluorescent lamp” would provide an exclusion for new products being introduced in general illumination lighting applications. Therefore, DOE is considering revising the definition, possibly by adding a phrase such as “and not designed or marketed for general illumination applications.” DOE invites comment on this issue. 20 Philips Lighting Product Specification Document, MASTER TL5 ActiViva Active 54W SLV (published June 29, 2007). III. Energy Conservation Standards Analyses for Fluorescent and Incandescent Reflector Lamps This section addresses the analyses DOE has performed and intends to perform for GSFL and IRL under consideration in this rulemaking and discusses the underlying assumptions applied to the analyses. For both GSFL and IRL, DOE will perform a set of analyses, including:
(1)An engineering analysis;
(2)a product price determination;
(3)an energy-use determination;
(4)an LCC and PBP analysis;
(5)an NIA; and
(6)an MIA. A full description of how these analyses are performed is contained in the TSD. 21 However, this section of the ANOPR provides an overview of these analyses, while focusing on how these analyses are being tailored to this rulemaking and on their underlying assumptions. It also discusses comments received from interested parties since DOE published the lighting products Framework Document. 21 Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/incandescent_lamps.html.* A. Market and Technology Assessment The market assessment provides an overall picture of the market for the products concerned, including the nature of the products, the industry structure, and market characteristics for the products. The technology assessment identifies available technologies for these products, which will be considered in the screening analysis. The subjects addressed in the market and technology assessment include product classes, technology options, manufacturers, quantities and types of products sold and offered for sale, retail market trends, and regulatory and non-regulatory programs. DOE considers both quantitative and qualitative information from publicly available sources and stakeholders in this assessment. The information DOE gathers for the market and technology assessment serves as resource material for use throughout the rulemaking. 1. Market Assessment Issues addressed in the market assessment include:
(1)Information about lamp manufacturers;
(2)existing regulatory and non-regulatory initiatives;
(3)historical shipments and
(4)product classes. Each of these topics will be discussed in turn below. NEMA is the trade association that represents many GSFL and IRL manufacturers. NEMA provides an organization framework for manufacturers of lighting products to work together on projects that affect their industry and business. The majority of the domestic market share of GSFL and IRL is held by three manufacturers:
(1)GE Lighting (General Electric, Inc.);
(2)OSRAM Sylvania (Siemens AG); and
(3)Philips Lighting (Royal Philips Electronics). In addition to lamps listed under this rulemaking, the lighting divisions of all three companies manufacture other products, such as lamp ballasts, high intensity discharge lamps, LED lighting, GSIL (already regulated by EISA 2007) and compact fluorescent lamps (CFL). It is noted that DOE is required to consider whether small businesses are likely to be particularly affected by the promulgation of minimum efficacy standards for lamps. (5 U.S.C. 601 et seq.) The Small Business Administration
(SBA)defines “small business” manufacturing enterprises for manufacturers of GSFL and IRL as ones having 1,000 or fewer employees. 22 More specifically, SBA lists small business size standards that are matched to industries as they are described in the North American Industry Classification System (NAICS). A small business size standard is the largest that a for-profit entity can be and still qualify as a small business for Federal Government programs. These size standards are generally related to the average annual receipts or the average employment of a firm. For lamp products, the size standard is matched to NAICS code 335110, *Electric Lamp Bulb and Part Manufacturing,* which has a size standard of 1,000 employees. DOE identifies several small business manufacturers of GSFL and IRL in Chapter 3 of the TSD. DOE will study the potential impacts on small businesses in detail during the MIA, which it will conduct as a part of the analyses for the notice of proposed rulemaking. 22 Small Business Administration, Table of Small Business Size Standards: Matched to North American Industry Classification System Codes. (Feb. 2007). Available at: *http://www.sba.gov/services/contractingopportunities/sizestandardstopics/part121sects/index.html.* Furthermore, DOE is aware of several Federal, State, and international regulatory programs that impact the GSFL and IRL markets. Amendments to EPCA in EPACT 1992 established Federal energy conservation standards for residential, commercial, and industrial GSFL and IRL. (42 U.S.C. 6295(i)(1)) In addition to the Federal regulations, the following States have established appliance efficiency regulations for other lamps for which there are no Federal standards (and thus are not preempted): Arizona, California, Connecticut, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, and Washington. DOE also reviewed several voluntary programs promoting the use of energy-efficient GSFL in the United States, including the Federal Energy Management Program's
(FEMP)program for energy-efficient lighting, the Consortium for Energy Efficiency (CEE)'s High Performance Commercial Lighting Initiative, the Energy Efficient Commercial Buildings Deduction, and various regional initiatives that work with State utilities to offer rebates for installation of higher efficacy GSFL systems. See Chapter 3 of the TSD for more information regarding regulatory and non-regulatory initiatives. DOE received historical shipment data from NEMA for the years 2001 to 2005 for the two categories of lamps. (NEMA, No. 12 at pp. 5-6) Overall, NEMA's historical lamp shipment data that was incorporated by DOE into the analytical tools for the ANOPR had three main purposes. First, the shipment data and market trend information contributed to the shipments analysis and base-case forecast for each of the two categories of lamps (see Chapter 9 of the TSD). By using recent shipment data and expert opinion on market trends, DOE believes that the shipments model and base-case forecasts are based on a sound dataset. Second, DOE used the data to select the representative product classes and representative units for analysis. Generally, DOE selected representative product classes and units for analysis to reflect the highest volume, most common lamp types and wattages used in the U.S. today (see Chapter 3 of the TSD). And thirdly, DOE used these data to develop the market-share matrices for the NIA (see Chapter 10 of the TSD). Based on its understanding of trends in the market, DOE estimated how the market would respond to the various CSLs. Additional detail on the market assessment can be found in Chapter 3 of the TSD. 2. Product Classes In general, when evaluating and establishing energy conservation standards, DOE divides covered products into classes by the type of energy used, capacity, or other performance-related features that affect efficiency, and factors such as the utility of the product to users. (See 42 U.S.C. 6295(q)) DOE normally establishes different energy conservation standards for different product classes based on these criteria. However, classification of lamps into product classes presents a challenge, because, for example, a fluorescent lamp is a component of a system, and the lamp's performance is directly related to the ballast on which it operates. The following section describes and discusses the product classes of lamps that DOE is considering for this rulemaking. a. General Service Fluorescent Lamps EPCA established eight product classes for GSFL based on the four fluorescent lamp types EPCA describes in its definition for “fluorescent lamp” and based on nominal lamp wattage. (42 U.S.C. 6295(i)(1)(B)) These product classes are outlined in Table III.1. Table III.1.—EPCA Product Classes for GSFL Lamp type Nominal lamp wattage *W* Min. CRI Min. avg. efficacy *lm/W* 4-ft Medium Bipin >35W 69 75.0 ≤35W 45 75.0 2-ft U-Shaped >35W 69 68.0 ≤35W 45 64.0 8-ft Single Pin >65W 69 80.0 Slimline ≤65W 45 80.0 8-ft High Output >100W 69 80.0 ≤100W 45 80.0 In the Framework Document for this rulemaking, DOE presented a preliminary discussion of potential revisions to the prescriptive standards established by EPCA. ((42 U.S.C. 6295(i)(1)(B); see 10 CFR 430.32(n)(1)). Specifically, DOE considered subdividing the product categories in EPCA's table of efficacy requirements for fluorescent lamps, nearly doubling the number of product classes by introducing lamp tube diameter as a differentiating variable (i.e., “>T8” and “≤T8”). In presenting this potential modification, DOE used the same wattage divisions and minimum color rendering index
(CRI)requirements that EPCA uses for these lamps, with T8 and T12 lamps in the same product class. Several stakeholders provided comment on the draft product classes discussed in the Framework Document, as discussed below. For 4-foot medium bipin lamps, Philips suggested combining all lamps with diameters greater than T8 into one category. Philips then suggested creating a category for T8 and smaller diameters with wattages less than or equal to 32W. (Philips, No. 11 at p. 1) GE and Osram both supported DOE's suggestion for lamps with diameters greater than T8, but they suggested that DOE should change the wattage division from 35W to 31W, and include a correlated color temperature
(CCT)division for lamps with diameters less than or equal to T8. (GE, No. 13 at pp. 1-2; Osram, No. 15 at pp. 2-3) The Joint Comment recommended that DOE combine the T8 and T12 product classes, because there are few T8 lamps above 35W, and, therefore, the existing wattage bins could be analyzed by maintaining some separation of T8 and T12 lamps. (Joint Comment, No. 9 at p. 8) For 2-foot U-shaped lamps, Philips suggested modifying the draft product classes by combining wattage ranges, and the commenter also recommended having just two product classes, based upon lamp diameter, that apply to any wattage 2-foot U-shaped lamps. GE and Osram both supported DOE's approach for considering lamps with diameters greater than T8, and these commenters suggested that DOE should change the wattage division from 35W to 31W, and include a CCT division for lamps with diameters less than or equal to T8. (GE, No. 13 at pp. 1-2; Osram, No. 15 at pp. 2-3) For the 8-foot single pin slimline lamps, Philips suggested combining all lamps with diameters greater than T8 into one product class, and then establishing a separate product class for lamps with T8 and narrower diameters, regardless of wattage. (Philips, No. 11 at pp. 1-2) GE and Osram both suggested keeping the T12 category of high output lamps, and creating a separate class for diameters less than T12. For this new separate class, GE and Osram both proposed dividing it further into two subclasses, one including T12 8-foot single pin slimline lamps with wattages greater than 58W and another including T12 8-foot single pin lamps with wattages less than or equal to 58W. (GE, No. 13 at pp. 1-2; Osram, No. 15 at pp. 2-3) For the 8-foot high output lamps, Philips suggested combining all lamps with diameters greater than T8 into one product class, and then establishing a separate product class for lamps with T8 and narrower diameters with a nominal lamp wattage of 86W and below. (Philips, No. 11 at pp. 1-2) GE and Osram both suggested keeping the T12 category of high output lamps, and creating a separate class for lamps with diameters less than T12. (GE, No. 13 at pp. 1-2; Osram, No. 15 at pp. 2-3) GE argued that this class of lamps with diameters less than T12 should encompass all wattages, whereas Osram recommended that the class should encompass only lamps greater than 85W. (GE, No. 13 at pp. 1-2; Osram, No. 15 at pp. 2-3) DOE considered all these comments, and continued to research appropriate product classes for the general service fluorescent lamps being considered for coverage under this rulemaking. DOE identified differential utility and physical attributes of fluorescent lamps around which the development of separate product classes would be based on the statutory criteria. (42 U.S.C. 6295(q)) 23 In this notice, DOE is considering establishing product classes based upon the following three lamp attributes that have differential utility and impact efficacy:
(1)Physical constraints of lamps (i.e., lamp shape and lamp length);
(2)lumen package (i.e., regular versus high output); and
(3)CCT. Following that discussion, this document also analyzes other potential factors that DOE considered as potential product class determinants (i.e., ballast interoperability, lamp wattage, lamp diameter, and color rendering index), but which were not adopted for reasons indicated below. 23
(q)Special rule for certain types or classes of products
(1)A rule prescribing an energy conservation standard for a type (or class) of covered products shall specify a level of energy use or efficiency higher or lower than that which applies (or would apply) for such type (or class) for any group of covered products which have the same function or intended use, if the Secretary determines that covered 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 from that which applies (or will apply) to other products within such type (or class). In making a determination under this paragraph concerning whether a performance-related feature justifies the establishment of a higher or lower standard, the Secretary shall consider such factors as the utility to the consumer of such a feature, and such other factors as the Secretary deems appropriate. i. Class Setting Factors *Physical Constraints of Lamps.* The physical constraints of the lamp relate to the shape of the lamp (e.g., U-shaped versus linear) and the fact that these lamps could not be substitutes for each other, unless the entire fixture is changed. The lamp shapes provide unique utility because the shapes of these lamps prevent them from being used as replacements, even with a ballast replacement, in a given fixture. However, the shape and geometry of a lamp also impact its efficacy. For example, a 2-foot U-shaped lamp, while having the same overall tube length, is less efficacious than a 4-foot linear lamp due in part to the fact that the electrical arc within the tube has to bend to conform to the shape of the lamp. Similarly, a 4-foot lamp has a different utility than an 8-foot lamp, as these lamps generally require different fixtures. And, efficacy tends to increase with length, such that all else being equal, 8-foot lamps generally have higher efficacy values than 4-foot lamps. Given the impact that geometry has on both utility and efficacy, DOE proposes maintaining the division of product classes by lamp geometry. *Lumen Package.* In addition to the physical constraints of a lamp, DOE also recognizes that the lumen package a lamp provides to consumers is another potential differentiating factor for product classes, because it provides utility in the form of a quantity of light per unit lamp length. In this way, lamps that have high lumen output may be installed in certain high-ceiling or outdoor installations, where large quantities of light are needed. Lamps that have standard levels of light output might be installed in lower-ceiling installations such as offices or hospitals, where distance between the light source and the illuminated surfaces is not as large. DOE notes, however, that efficacy decreases as a fluorescent lamp is driven harder to increase its light output. For example, the efficacy of high output 8-foot lamps are approximately 7 to 10 percent lower than that of slimline 8-foot lamps. Because 8-foot lamps are not already subdivided according to physical constraints, DOE plans to further subdivide the 8-foot linear lamps into slimline and high output. Considering the fluorescent lamps currently covered under EPCA and the additional general service fluorescent lamps discussed in section II which DOE is considering for coverage, DOE is considering establishment of the following four differentiating categories of lamps:
(a)4-foot medium bipin;
(b)2-foot U-shaped;
(c)8-foot single pin slimline; and
(d)8-foot recessed double contact high output. DOE notes that these are the same four categories of lamps that were established by EPCA in section 325(i)(1). (42 U.S.C. 6295(i)(1)(B)) *Correlated Color Temperature.* Finally, within each of these four categories of fluorescent lamps, DOE recognizes that the CCT of the fluorescent lamps provides a distinct utility (i.e., the light emitted by the fluorescent lamp has different qualities), which impacts the efficacy of the lamp. The CCT describes, in part, how the white light emitted from a fluorescent lamp is perceived. Lower color temperatures correspond to “warmer” light, with more red content in the spectrum, and higher color temperatures correspond to “cooler” light, with more blue content. As the spectral emission of the light radiated from the fluorescent lamp is modified to change the CCT, the light emitted may contain more red light (and less blue) or more blue light (and less red). The measured efficacy of these lamps with different CCT will be different, because efficacy is measured in lumens 24 per watt, and light emitted across the visible spectrum is not given equal weighting under this metric. Lumens are determined using the human eye's sensitivity function, and due to the fact that the human eye is less responsive to blue light, those fluorescent lamps that shift their spectral emission profiles to contain more blue light will have lower efficacies. In sum, the metric that DOE will establish as the minimum performance requirement for fluorescent lamps—efficacy, measured in lumens per watt—may need to be adjusted to account for differences in the CCT of light emitted from a fluorescent lamp. Today, lamps with a “warmer” CCT (4,100K) represent the majority of the fluorescent lamp market, and therefore this is the CCT of the lamps analyzed in this ANOPR. Fluorescent lamps having a “cooler” CCT (e.g., >5,000K) are growing in popularity in the market, perhaps because they have been found to allow for better color discrimination and improved visual performance. 25 24 A “lumen” is a measurement of the radiometric energy emission from a light source weighted by the response function of a human eye, referred to as the “photopic spectral luminous efficiency function” (V(λ)). 25 “Full Spectrum Q&A,” *National Lighting Product Information Program,* Vol. 7 Issue 5 (March 2005). Available at: *http://www.lrc.rpi.edu/programs/nlpip/lightingAnswers/fullSpectrum/claims.asp.* GE and Osram both requested that DOE establish separate product classes for T8 lamps with CCT above and below 4,500K. (GE, No. 13 at pp. 1-2; Osram, No. 15 at p. 1 and p. 3) Osram commented that higher CCT lamps have a lower lumen output because lamps with higher CCT contain more blue light, which causes the lumen measurement to be lower. Osram argued that it is important for DOE to differentiate certain fluorescent lamps by CCT in the analysis to account for this difference in performance. (Osram, No. 15 at p. 1) GE also stated that should DOE decide to regulate lamps with high CCT values (e.g., 5,000K), then these types of lamps would require a different and lower lumen-per-watt threshold, because of the slightly lower lumen rating due to the increased energy in the blue part of the light emission spectrum. (GE, No. 13 at p. 1) Philips commented that if DOE decides to adopt efficacy levels higher than those proposed by Philips, then DOE should place higher CCT lamps in a separate product class because they tend to have slightly lower efficacies. (Philips, No. 11 at p. 2) In response, DOE believes that for fluorescent lamps, the differences in CCT of the light emission can be sufficiently large that they constitute a performance-related feature that affects the efficacy of the lamp. Therefore, DOE is planning to establish separate product classes for GSFL in part based upon CCT. Related to this preliminary decision are two critical, associated issues—(1) How many groups should be established? and
(2)Where should the separator(s) between product classes be set? DOE's initial thoughts on this matter are set forth below. Presently, EPCA does not cover colored fluorescent lamps (i.e., such lamps are excluded under 42 U.S.C. 6291(30)(B)(iii)) and these lamps are defined, in part by their CCT (both terms defined at 10 CFR 430.2). Lamps with a CCT less than 2,500K or greater than 6,600K are considered “colored fluorescent lamps” and are not subject to the minimum efficacy standards (note: See discussion in this section pertaining to a potential revision to coverage of colored fluorescent lamps). DOE is considering dividing GSFL, (with CCTs ranging from 2,500K to 6,000K) into two product classes. DOE believes that establishing two groups does not make the product classification overly complex, and yet such approach acknowledges the primary issue raised about the different utility provided by the cooler lamps. To this end, DOE is considering adoption of a CCT divider at 4,500K, as recommended by industry. (Osram, No. 15 at p. 1, GE, No. 13 at p. 2) The most common CCTs found on the market are 3,500K, 4,100K, 5,000K, and 6,500K. Thus, having a divider at 4,500K will establish separate product classes for those lamps with “warmer” CCTs (3,500K and 4,100K) and “cooler” CCTs (5,000 and 6,500K). Although in this proceeding, DOE is considering establishing two separate CCT groups for GSFL, if the trend toward much higher CCT lamps continues (discussed in section II.B.3), then DOE may need to establish multiple CCT groups, as the spectral emission (and thus, efficacy) of these general service lamps will vary as the CCT increases. DOE is requesting comment on all aspects of this potential CCT division, but particularly:
(1)Whether there should be a CCT product class divider;
(2)how many groupings of CCT are appropriate; and
(3)what the CCT divider or dividers should be. In addition, DOE welcomes technical perspectives on how DOE might scale the efficacy level from the representative unit of analysis of 4,100K to higher CCT product classes. In addition, DOE also notes that if comments indicate that the definition of a colored fluorescent lamp warrants some revision such that certain very high CCT lamps would be covered (e.g., over 17,000K), then perhaps it would be appropriate to consider several CCT groupings (which would manifest themselves as minimum efficacy steps). DOE requests further comment on this issue, including technical perspectives. ii. Other Potential Class-Setting Factors Considered, But Not Adopted As stated above, DOE did not choose to establish product classes based upon any of the following four factors:
(1)Ballast interoperability;
(2)lamp wattage;
(3)lamp diameter (i.e., T8 vs. T12); and
(4)color rendering index (CRI). Each of these factors is discussed below, along with DOE's rationale for not further considering them for class-setting purposes. *Ballast Interoperability* . DOE did not consider interoperability of lamps on the same ballast system as a differentiating factor for product classes. DOE acknowledges that there is a difference between lamps and lamp-and-ballast systems, and that certain lamps may have the same form factor but may not operate on the same ballast. However, DOE treats these constraints as an economic issue in its LCC analysis, rather than a utility issue. In other words, in the LCC analysis, DOE considered a T8 lamp as a more-efficacious replacement for a T12 baseline lamp. In its economic analysis, DOE accounts for the need to install a new ballast to operate the T8 lamp by including the installed cost of a new lamp and ballast for the T8 replacement. This consideration of T8 lamps as substitutes for T12 lamps is consistent with DOE's understanding of the market, and with manufacturers' marketing literature. Had DOE elected to differentiate these lamps on ballast interoperability, or indeed, lamp diameter, this direct comparison may not have been made. DOE believes this approach is appropriate for this rulemaking, because there is no unique functionality or service rendered by, for example, one T8 lamp and an equivalent T12 lamp. *Lamp Wattage* . With respect to lamp wattage, DOE observed in the product literature published by manufacturers that lower-wattage lamps are marketed and promoted as energy-saving versions of the more popular wattages. For example, lamps with 25W, 28W, and 30W are marketed as energy-efficient alternatives to the 32W T8. For this reason, DOE does not believe it is appropriate to establish divisions based upon wattage within the product classes, because wattage does not have utility in and of itself, but rather is a measure of energy use. For example, if a 30W T8 lamp can deliver the same (or very similar) performance as a 32W T8, then there is no reason to establish an arbitrary wattage divide at 31W, forcing these two lamps into separate product classes. If two product classes were set, the 30W T8 lamp could not be considered as an efficient alternative for the 32W T8 lamp, which conflicts with how these lamps are treated by the market. DOE understands that these reduced-wattage lamps are marketed and used by consumers as energy-efficient substitutes, and therefore, should be considered as such when DOE establishes product classes for these lamp types. Therefore, DOE plans to consider eliminating wattage-based dividers, because this attribute by itself does not provide utility. Fluorescent lamps of different wattages are generally capable of being substituted for each other, and provide the same or similar service. DOE also believes that a product classification system that eliminates wattage dividers would be more representative of how these lamps are currently being installed and used in the market. *Lamp Diameter* . With respect to lamp diameter, DOE had expressed in the Framework Document its intention to consider lamps with diameters of T8 and smaller in one product class and lamps with diameters greater than T8 in a separate product class. On further consideration, DOE has tentatively decided that the lamp diameter does not provide unique utility to end-users. As an example, a consumer can choose to use a 4-foot medium bipin lamp and be able to obtain similar lumen packages from either a T12 or T8 model. The T8 lamp may need to be operated on a different ballast with a higher ballast factor (BF), but the system can be modified to account for the differences in lamp diameter, so the resultant systems are approximately equivalent. DOE recognizes that the diameter of the lamp will impact the efficacy, but the utility provided to the end-user is comparable and/or equivalent. Therefore, DOE has tentatively decided not to separate product classes by lamp diameter. However, recognizing that both T12 and T8 lamps operate on different ballasts and in order to consider separately the impact of standards on consumers of both types of lamps, DOE structured the analytical tools (including the LCC and NIA spreadsheets) so that each consumer subgroup could be analyzed separately. Thus, for example, the LCC results are reported separately for T8 and T12 baseline lamps. *Color Rendering Index* . The Color Rendering Index
(CRI)is the ability of a light source to produce color in objects. The CRI is expressed on a scale from 0-100, where 100 is the best in producing vibrant color in objects. Relatively speaking, a source with a CRI of 80 will produce more vibrant color in the same object than a source with a CRI of 60. Generally, fluorescent lamps with higher efficiency phosphors exhibit both a higher efficacy and higher CRI, although this is not always the case. EPCA establishes an upper and lower bound on the CRI of GSFL. Specifically, EPCA states that lamps with a CRI equal to or greater than 87 are excluded from coverage. (42 U.S.C. 6291(30)(B)(viii)) EPCA also establishes two minimum CRI requirements for each of the four groups of fluorescent lamps, one at 69 CRI and one at 45 CRI. Within one group of fluorescent lamps (e.g., 4-foot medium bipin), EPCA requires that lamps nominally rated at greater than 35W have a minimum CRI of 69 and that lamps nominally rated at 35W or lower have a minimum CRI of 45. (42 U.S.C. 6295(i)(1)(B); see 10 CFR 430.32(n)(1)) Several manufacturers suggested that DOE should make changes to the minimum CRI required for GSFL. (Philips, No. 11 at p. 1; GE, No. 13 at p. 2; Osram, No. 15 at p. 3) These manufacturers recommended that the T8 lamp diameter product classes should have minimum CRI values of 75. Philips also recommended that DOE should adopt minimum CRI values of 75 or greater for all fluorescent lamp product classes, given today's technology. (Philips, No. 11 at p. 1) DOE considered these comments, but believes it lacks the authority to accommodate this request to adjust minimum CRI values in this way. While 75 CRI may be a reasonable level for fluorescent lamps, DOE's mandate from Congress is to focus on advancing energy efficiency and energy conservation in the marketplace. DOE does not set standards by regulating specific performance attributes of products, such as the CRI rating of a lamp. Furthermore, if DOE were to simply adopt the higher CRI level, it might be eliminating lamps from the market without conducting a rulemaking analysis to determine whether this action was cost-justified or not. For all of these reasons, DOE is not increasing the minimum CRI requirement to 75, but is inviting further comment and rationale on possible approaches to handling the issue of CRI. DOE recognizes that in removing the wattage distinctions for GSFL product classes, the metric that differentiated by CRI is no longer present. Therefore, some possible solutions would be to:
(1)Eliminate the CRI minimum requirement for all regulated fluorescent lamps;
(2)adopt the lower of the two CRI minimum requirements (i.e., 45 CRI) as applying to all regulated fluorescent lamps;
(3)adopt the higher of the two CRI requirements (i.e., 69 CRI) as applying to all regulated fluorescent lamps;
(4)adopt the CRI of the representative lamp that is determined to be cost-justified as the minimum CRI for that product class; and
(5)maintain the CRI requirements in EPCA for the product classes established by EPACT 1992 while setting efficacy standards for the product classes established in this notice. DOE recognizes that each of these approaches for addressing the CRI minimum requirement has its own advantages and disadvantages. The first option, eliminating the CRI requirement, risks the potential for a back-sliding in performance. That said, for the products offered in the market today, the CRI generally increases with the efficacy levels considered in this rulemaking. Thus, the CRI values of future standards-compliant lamps would naturally be higher than the two existing minimum requirements. The second option suggests that DOE simply apply the minimum 45 CRI requirement to all fluorescent lamps. This approach would not eliminate any lamps now covered between 45 and 69 CRI, however as with the first option, carries a certain risk that there may be some backsliding for lamps that previously required to meet would have had to have been 69 CRI, but which now could be as low as 45 CRI. The third option, to simply require all lamps to have a minimum of 69 CRI, would eliminate certain lamps that are presently manufactured between 45 and 69 CRI. DOE notes that through this energy conservation standards rulemaking, it may be increasing the efficacy requirements on those lamps anyway, which may have the effect of preventing further use of those phosphors that supply light with a 45 to 69 CRI performance. However, to simply change the CRI requirement without analysis, and thereby eliminate product, appears to be in conflict with DOE's authority under EPCA. The fourth option identified above concerns DOE simply adopting the CRI requirement of the cost-justified lamp considered in the rulemaking analysis. That is to say, if DOE determines that a particular lamp with a certain efficacy is the cost-justified level at which it will set the mandatory standard for that product class, DOE would also adopt the CRI of that lamp as the minimum CRI requirement for all lamps in that product class. Finally, the fifth option maintains the current minimum requirements in EPCA for the product classes established in EPACT 1992 while setting efficacy requirements for the additional product classes established in this notice. Because this option requires no change in the CRI requirement for fluorescent lamps, there is no risk of eliminating product from the marketplace nor does it allow for backsliding in performance. DOE requests comment on these five alternative approaches or others that would address the issue of the minimum CRI requirement for fluorescent lamps. iii. Product Class Results For the reasons discussed above, DOE has tentatively decided to consider the following product classes for GSFL (see Table III.2). These draft product classes are more aggregated than those originally presented in the Framework Document. For each of the eight product classes, DOE anticipates that it would develop a point efficacy value (lumens per watt), which would apply to all the lamps covered within each class. Table III.2.—DOE ANOPR Product Classes for GSFL Lamp type For CCT ≤ 4,500K, minimum lamp efficacy *lm/W* For CCT > 4,500K, minimum lamp efficacy *lm/W* 4-foot medium bipin Product Class #1 Product Class #5. 2-foot U-shaped Product Class #2 Product Class #6. 8-foot single pin slimline Product Class #3 Product Class #7. 8-foot recessed double contact HO Product Class #4 Product Class #8. b. Incandescent Reflector Lamps EPCA established minimum efficacy requirements by wattage for IRL, as presented in Table III.3. (42 U.S.C. 6295(i)(1)(B)) Table III.3.—EPCA Product Classes and Efficacy Requirements for IRL Wattage *W* Min. average efficacy *lm/W* 40-50 10.5 51-66 11.0 67-85 12.5 86-115 14.0 116-155 14.5 156-205 15.0 In its Framework Document, DOE stated its preliminary intention to keep the same six product classes. DOE requested comment on this approach, including whether any modifications to the six product classes was warranted. Several stakeholders commented that these potential product classes for IRL seemed reasonable and appropriate for this rulemaking. (NEMA, No. 4.5 at p. 75; ACEEE, No. 4.5 at p. 75; PG&E, No. 4.5 at p. 75; EEI, No. 4.5 at p. 76; NEMA, No. 8 at p. 2; Joint Comment, No. 9 at p. 5) DOE's additional research, however, has identified a problem with the potential product classes presented in the Framework Document, particularly as DOE considered standard levels with higher efficacy values. The existing wattage groups are problematic because the wattage rating of the lamp is a property about the lamp that the regulation is working to reduce, and yet it is also being used as the basis of classification. This issue is further complicated by the fact that some consumers (particularly in the residential sector) think of and purchase IRL based on the rated wattage, which is associated with an expected level of light output. The following discussion outlines DOE analyses in determining preliminary product classes for incandescent reflector lamps and the rationale therefore. i. Class Setting Factors *Modified-Spectrum.* As discussed in section I.E.2, EISA 2007 adopted a new definition for “colored incandescent lamp” 26 which supersedes DOE's definition previously incorporated at 10 CFR 430.2. 27 This new statutory definition effectively increases the scope of energy conservation standards coverage of IRL to include any IRL that has a lens containing five percent or more neodymium oxide or is a plant light lamp. As both of these types of IRL filter out portions of the emitted spectrum of the lamp, DOE believes that many of these lamps would fall under the definition of “modified spectrum” which was also adopted by the new energy legislation. The EISA 2007 definition of “modified spectrum” reads as follows: 26 EISA 2007's definition of “colored incandescent lamp” reads as follows: “The term `colored incandescent lamp' means an incandescent lamp designated and marketed as a colored lamp that has—(i) a color rendering index of less than 50, as determined according to the test method given in CIE publication 13.3-1995; or
(ii)a correlated color temperature of less than 2,500K or greater than 4,600K, where correlated temperature is computed according to the Journal of Optical Society of America, Vol. 58, pages 1528-1595 (1986).” 27 The definition of “colored incandescent lamp” adopted by the 1997 Lamps Test Procedure Final Rule 62 FR 29221, 29228 (May 29, 1997) reads as follows: “Colored incandescent lamp means an incandescent lamp designated and marketed as a colored lamp that has a CRI less than 50, as determined according to the method given in CIE Publication 13.2 (see 10 CFR 430.22); has a correlated color temperature less than 2,500K or greater than 4,600K; has a lens containing 5 percent or more neodymium oxide; or contains a filter to suppress yellow and green portions of the spectrum and is specifically designed, designated and marketed as a plant light.” “The term `modified spectrum' means, with respect to an incandescent lamp, an incandescent lamp that—
(i)Is not a colored incandescent lamp; and
(ii)When operated at the rated voltage and wattage of the incandescent lamp— I. Has a color point with (x,y) chromaticity coordinates on the Commission Internationale de l'Eclairage (C.I.E.) 1931 chromaticity diagram that lies below the black-body locus; and II. has a color point (x,y) chromaticity coordinates on the C.I.E. 1931 chromaticity diagram that lies at least 4 MacAdam steps (as referenced in IESNA LM16) distant from the color point of a clear lamp with the same filament and bulb shape, operated at the same rated voltage and wattage.” (42 U.S.C. 6291(30)(W)) Modified-spectrum lamps provide unique utility to consumers, in that they offer a different spectrum of light from the typical incandescent lamp, much like two fluorescent lamps with different CCT values. These lamps offer the same benefits as fluorescent lamps with “cooler” CCTs in that they may ensure better color discrimination and improved visual performance. 28 In addition to providing a unique utility, DOE also understands that the technologies that modify the spectral emission from these lamps also decrease their efficacy (i.e., the ability of the lamp to convert watts of energy into lumens of visible light). This is because a portion of the light emission is absorbed by the coating. Neodymium coatings or other coatings on modified-spectrum lamps absorb some of the visible emission from the incandescent filament (usually red), creating a modified, reduced spectral emission. Since the neodymium or other coatings absorb some of the lumen output from the filament, these coatings decrease the efficacy of the lamp. 28 “Full Spectrum Q&A,” *National Lighting Product Information Program* , Vol. 7 Issue 5 (March 2005). Available at: *http://www.lrc.rpi.edu/programs/nlpip/lightingAnswers/fullSpectrum/claims.asp* . DOE is concerned that, given the newly-adopted definition of “colored incandescent lamp,” if DOE were to subject modified-spectrum IRL to the same standard as standard-spectrum IRL, then these IRL with modified-spectrum glass or coatings may not be able to achieve the mandatory standard, which could in turn lead to this type of product being lost from the market. Therefore, consistent with EISA 2007's approach on general service incandescent lamp standards, DOE is planning to establish separate product classes for regular IRL (i.e., those without modification to the spectral emission) and modified-spectrum IRL (i.e., ones which have some portion of the spectral emission absorbed). However, to ensure that a suitable standard level is set for these lamps (such that they are neither disadvantaged nor advantaged compared to standard-spectrum lamps), DOE plans to establish an appropriately scaled efficacy requirement for them, based on DOE's analysis of standard-spectrum IRL and then adjusted to account for the portions of the spectrum that are absorbed by the neodymium or spectrally-enhancing coating. DOE discusses how this scaling would be accomplished in the Engineering Analysis (see section III.C.6). ii. Other Potential Class-Setting Factors Considered, but Not Adopted *Wattage.* As DOE started to structure the analytical framework for the IRL analysis, DOE increasingly found that the initial approach of six wattage groups for product classes was not reasonable. Particularly as more-efficacious IRL with equivalent light output were considered, the approach presented in the Framework Document would have resulted in these replacement lamps being placed in a separate product class, and as such, would no longer be considered a “replacement.” For example, consider a 75W reflector lamp at 14.0 lm/W and an equivalent, more-efficacious replacement at 60W at 17.5 lm/W. These two lamps are essentially equivalent products, with equal levels of light output, operating lives, and customer utility (e.g., both operate in the same socket). However, under the Framework Document's approach for potential IRL product classes, these lamps would appear in different product classes. (42 U.S.C. 6295(i)(1)(B); see 10 CFR 430.32(n)(2)) Thus, DOE realized that wattage is not a suitable product class divider because it does not provide a unique utility; instead, it merely provides a measure of power consumption. On further examination and consideration of the standard established by EPCA for reflector lamps, DOE is now interpreting the wattage groups in the existing standard as equivalent to a mathematical step-function equation that applies to all regulated IRL. DOE believes EPCA, in effect, establishes different minimum average lamp efficacies at each “step” or range of wattages for a single product class, which encompasses all IRL. This function recognizes that IRL incorporating the same technological feature, like a halogen capsule, are less efficacious at lower wattages than higher wattages. Therefore, lamps at lower wattages are subject to a lower standard than lamps at higher wattages even though lamps at all wattages are in the same product class. As DOE considers more-efficacious substitute lamps in the analysis for this rulemaking, it must decrease the nominal lamp wattage range in order to keep the light output of the substitute lamps to within ten percent of the light output of the baseline lamp. Thus, as DOE presents the CSLs for the ANOPR, DOE plans to use a mathematical function that would establish the efficacy requirement at any wattage. Like the step function in EPCA, this mathematical function accounts for the fact that lamps at lower wattages are inherently less efficacious than lamps at higher wattages. See TSD Chapter 5 for a detailed discussion on the development of the CSLs for IRL. *Spot Versus Flood Incandescent Reflector Lamps.* With respect to the issue of spot versus flood reflector lamps, several stakeholders commented that they did not believe DOE should establish separate product classes on this basis. (NEMA, No. 4.5 at p. 75; ACEEE, No. 4.5 at p. 75; PG&E, No. 4.5 at p. 75; EEI, No. 4.5 at p. 76; NEMA, No. 8 at p. 2) DOE considered these comments and reviewed technical reports on the performance of spot versus flood reflector lamps. Based upon this information, DOE has tentatively concluded that while there might be a differentiating utility afforded to consumers through the light distribution patterns of a spot reflector lamp versus a flood reflector lamp, that differentiating utility would not be expected to impact the efficacy of the lamp. Thus, DOE does not plan on creating separate product classes for spot and flood reflector lamps. iii. Product Class Results In sum, as discussed previously, DOE is considering all wattages of reflector lamps to be part of the same product class, with the standard level for any given lamp being a function of lamp wattage. As DOE considers more-efficacious replacement lamps, the rated wattages must decrease in order to maintain consistent levels of light output (i.e., within ten percent of the baseline lamp). Additionally, DOE is planning to consider efficacy standards for full-spectrum IRL separately from modified-spectrum IRL. Table III.4 summarizes the two product classes DOE is considering for the ANOPR. (For ease of commenting on IRL product classes, DOE has continued the product class numbering from where the GSFL classes left off.) Table III.4.—DOE ANOPR Product Classes for IRL Lamp type Standard-spectrum minimum lamp efficacy *lm/W* Modified-spectrum minimum lamp efficacy *lm/W* Incandescent Reflector Lamps Product Class #9 Product Class #10. 3. Technology Assessment In the technology assessment, DOE identifies technology options that appear to be feasible means of improving product efficacy. This assessment provides the technical background and structure on which DOE bases its screening and engineering analyses. The following discussion provides an overview of the salient aspects of the technology assessment, including issues on which DOE seeks public comment. For a more complete discussion, Chapter 3 of the TSD provides detailed descriptions of the basic construction and operation of GSFL and IRL, followed by a discussion of technology options to improve the efficacy of that lamp type. a. General Service Fluorescent Lamps Table III.5 lists the technology options that DOE has identified for improving the efficacy of GSFL. Table III.5 also provides TSD citations to each of the options listed, in order to enable the public to learn more about what is encompassed under each of the options. Table III.5.—General Service Fluorescent Lamp Technology Options Name of technology option Description TSD reference Highly Emissive Electrode Coatings Improved electrode coatings to increase electron emission Chapter 3, Section 3.3.1.1. Higher Efficiency Lamp Fill Gas Composition Fill gas compositions to improve cathode thermionic emission or increase mobility of ions and electrons in the lamp plasma Chapter 3, Section 3.3.1.2. Higher Efficiency Phosphors Techniques to increase the conversion of ultraviolet light into visible light Chapter 3, Section 3.3.1.3. Glass Coatings Coatings that enable the phosphors to absorb more UV energy, so that they emit more visible light Chapter 3, Section 3.3.1.4. Higher Efficiency Lamp Diameter Vary the lamp diameter to improve its efficacy Chapter 3, Section 3.3.1.5. Multi-Photon Phosphors Emitting more than one visible photon for each incident UV photon Chapter 3, Section 3.3.1.6. Philips commented that some lamps use an extra thick layer of expensive phosphors to improve efficacy. However, Philips commented that the global supply of these high-quality phosphors is unknown, and there may be some issues associated with higher manufacturing cost if a standard level were set such that it required the use of this technology. (Philips, No. 11 at p. 2) DOE will keep this comment in mind during the manufacturer impact analysis interviews it will conduct at the NOPR stage of this rulemaking. b. Incandescent Reflector Lamps Table III.6 lists the technology options DOE has identified to improve the efficacy of IRL. Some of the technology options listed in Table III.6 are incorporated into commercially-available products today. For example, higher-temperature operation is utilized (usually in conjunction with halogen lamps) to improve the efficacy of the tungsten filament. Additionally, coiling of the tungsten filament is currently practiced widely by lamp manufacturers to increase its surface area, thereby improving filament efficacy. Table III.6.—Incandescent Reflector Lamp Technology Options Name of technology option Description TSD reference Higher-Temperature Operation Operating the filament at higher temperatures, the spectral output shifts to lower wavelengths, increasing its overlap with the eye sensitivity curve. This measure may shorten the operating life of the lamp Chapter 3, Section 3.3.2.1. Microcavity Filaments Texturing, surface perforations, microcavity holes with material fillings Chapter 3, Section 3.3.2.2. Novel Filament Materials More-efficacious filament alloys Chapter 3, Section 3.3.2.3. Thinner Filaments Thinner filaments to increase operating temperature. This measure may shorten the operating life of the lamp Chapter 3, Section 3.3.2.4. Efficient Filament Coiling Coiling of the filament to increase surface area Chapter 3, Section 3.3.2.5. Crystallite Filament Coatings Layers of micron or submicron crystallites deposited on the filament surface Chapter 3, Section 3.3.2.6. Efficient Filament Orientation Positioning the incandescent filament to increase light emission out of the lamp Chapter 3, Section 3.3.2.7. Higher Efficiency Inert Fill Gas Filling lamps with alternative gases, such as Krypton, to improve efficacy by reducing heat conduction Chapter 3, Section 3.3.2.8. Luminescent Gas Gaseous fills that react with certain wavelengths of the filament emission to generate visible light Chapter 3, Section 3.3.2.9. Tungsten-Halogen Lamps Small diameter fused quartz envelope with a halogen molecule to re-deposit tungsten on the filament. Commonly referred to as a “halogen” lamp Chapter 3, Section 3.3.2.10. Higher Pressure Tungsten-Halogen Lamps Increased pressure of the halogen capsule by increasing the density of halogen elements Chapter 3, Section 3.3.2.11. Non-Tungsten Regenerative Cycles Novel filament materials that incorporate a regenerative cycle Chapter 3, Section 3.3.2.12. Infrared Glass Coatings Infrared coatings (both phosphor and thin-film) to reflect some of the radiant energy back onto the filament. When used in conjunction with a halogen capsule, this technology option is referred to as a halogen infrared reflector
(HIR)lamp Chapter 3, Section 3.3.2.13. Integrally Ballasted Low Voltage Lamps The ballast converts the operating voltage of the lamp from line voltage to a lower voltage Chapter 3, Section 3.3.2.14. Higher Efficiency Reflector Coatings Alternative internal coatings with higher reflectivity Chapter 3, Section 3.3.2.15. Trihedral Corner Reflectors Individual corner reflectors in the cover glass that reflect light directly back in the direction from which it came Chapter 3, Section 3.3.2.16. Efficient Filament Placement Positioning the filament to increase light emission out of the lamp Chapter 3, Section 3.3.2.17. Additional detail on the technology assessment can be found in Chapter 3 of the TSD. In summary, DOE invites comments on all of the technology options it considered for GSFL and IRL, including any omissions or revisions necessary to have a more comprehensive technology assessment. In the context of commenting on technology options, DOE also requests information on the feasibility, performance improvement, and cost of the technology options, as well as any recent developments in their technical maturity. 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 a product, to determine which options to consider further and which options to screen out. DOE consults with industry, technical experts, and other interested parties in developing a list of technology options for consideration. Section III.A.3 discusses the lists of identified technology options for the products being considered for coverage under this rulemaking. DOE then applies the following set of screening criteria to determine which design options are unsuitable for further consideration in the rulemaking:
(1)*Technological Feasibility* . DOE will consider technologies incorporated in commercial products or in working prototypes to be technologically feasible.
(2)*Practicability to Manufacture, Install, and Service* . If mass production and reliable installation and servicing of a technology in commercial products could be achieved on the scale necessary to serve the relevant market at the time the standard comes into effect, then DOE will consider that technology practicable to manufacture, install, and service.
(3)*Adverse Impacts on Product Utility or Product Availability* . If DOE determines a technology would have significant adverse impact on the utility of the product to significant subgroups of consumers, or would result in the unavailability of any covered product type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not consider this technology further.
(4)*Adverse Impacts on Health or Safety* . If DOE determines that a technology will have significant adverse impacts on health or safety, it will not consider this technology further. 10 CFR part 430, Subpart C, Appendix A, (4)(a)(4) and (5)(b). 1. Technology Options Screened Out Applying the four screening criteria discussed above to the identified technology options for GSFL and IRL, DOE developed the list of technology options shown in Table III.13 that will not be considered further in this rulemaking analysis, because they do not meet one or more of the aforementioned screening criteria. In the text following Table III.13, DOE discusses each of these technology options and provides the rationale for screening them out. Chapter 4 of the TSD provides further information on the Screening Analysis. Table III.7.—Summary of Technology Options Screened Out of DOE's Analysis Lamp category Technology option Screening criteria failed on GSFL Multi-Photon Phosphors Technological feasibility; Practicability to manufacture, install, and service. IRL Microcavity Filaments Product utility to consumers; Practicability to manufacture, install, and service. IRL Novel Filament Materials Practicability to manufacture, install, and service; Product utility to consumers. IRL Crystallite Filament Coatings Practicability to manufacture, install, and service. IRL Luminescent Gas Technological feasibility. IRL Non-Tungsten-Halogen Regenerative Cycles Practicability to manufacture, install, and service; Product utility to consumers. IRL Infrared Phosphor Glass Coating Practicability to manufacture, install, and service. IRL Integrally Ballasted Low Voltage Lamps Technological feasibility. IRL Trihedral Corner Reflectors Practicability to manufacture, install, and service. a. Multi-Photon Phosphors For GSFL, DOE screened out the use of multi-photon phosphors, even though they have the potential to significantly improve lamp efficacy. By emitting more than one visible photon for each incident ultraviolet photon, a lamp employing this technology would be able to emit more light for the same amount of power. However, development of this technology remains in the research phase, and DOE is unaware of any prototypes or commercialized products that incorporate multi-photon phosphors. Thus, DOE screened out this technology option based on the first criterion, technological feasibility. Additionally, because this technology is still in the research phase, DOE believes that it would not be practicable, or even possible, to manufacture, install, and service this technology on the scale necessary to serve the relevant market at the time of the effective date of an amended standard. As discussed below in section III.C, DOE based the GSFL engineering analysis on commercially-available lamps, deriving efficacy values for these lamps from manufacturer catalogs and specifications. Therefore, DOE considered the technology options contained in Table III.5 implicitly as incorporated into commercially available lamps at the efficacy levels it evaluated. b. Microcavity Filaments DOE also screened out several technologies that could potentially improve the efficacy of IRL. First, DOE screened out the use of microcavity filaments. Microcavity filaments increase an incandescent lamp's efficacy by reducing the amount of energy converted to infrared light emitted by the filament while increasing the amount of energy converted to visible light. The TSD's market and technology assessment (TSD Chapter 3) notes that Sandia National Laboratories researchers examined microcavity resonance in a tungsten photonic lattice, and a literature search revealed multiple patents referencing this technology. Since research prototypes of microcavity filaments do exist, DOE determined that this technology option is technologically feasible. However, research indicates that materials patterned at the submicron level may experience problems with stability. Because such instability could negatively affect lamp function and life, DOE believes that it is not yet practicable to implement this technology in general service lamps. For this reason, DOE screened out this technology option based on the third criterion, impacts on product utility to consumers. Furthermore, DOE is unaware of any commercialized lamps that incorporate microcavity filaments, so we are concerned that mass-manufacturing techniques for this technology would be problematic. For this reason, DOE does not believe that this technology would be practicable to manufacture, install, and service. Therefore, DOE is not considering filaments with microcavities as a design option for improving the efficacy of IRL. c. Novel Filament Materials Second, DOE screened out the use of novel filament materials, such as nitrides and carbides, that have the potential to improve lamp efficacy by emitting more light in the visible spectrum at a given temperature than traditional tungsten filaments. Because several patents on such filaments exist, DOE believes that this technology option is technologically feasible. However, DOE is unaware of any lamps available today that use such filaments. Furthermore, DOE understands that technological barriers, such as prohibitive brittleness of the filament, limit implementation of this technology. Finding a practical way to incorporate novel filament materials into commercially-viable incandescent lamps would require further research, as would making such lamps practical for general service applications. Thus, DOE believes this option must be screened out due to its potential negative impacts on consumer utility. Furthermore, DOE believes that it would not be practicable to manufacture this technology on the scale necessary to serve the relevant market at the time of the effective date of an amended standard. Therefore, DOE is not considering novel filament materials as a design option for improving the efficacy of IRL. d. Crystallite Filament Coatings Third, DOE screened out crystallite filament coatings, which are oxide-covered micron or sub-micron crystallites comprised of thorium, tantalum, or niobium. These coatings can be used to increase the light emissivity of an incandescent lamp's filament. Because several patents on such filament coatings exist, DOE believes that this technology option is technologically feasible. However, DOE was unable to locate any data on the incorporation of crystallite filament coatings into prototypes or commercially available products. Using crystallite filament coatings in incandescent lamps may require additional manufacturing techniques, such as chemical vapor deposition. DOE understands that these techniques are not in use in the mass-production of incandescent lamps. In addition, DOE believes that it would not be practicable to manufacture this technology on the scale necessary to serve the relevant market of incandescent lamps before the effective date of an amended standard. Therefore, DOE is not considering crystallite filament coatings as a design option for improving the efficacy of IRL. e. Luminescent Gases Fourth, DOE screened out luminescent gases. These gases, placed inside the envelope of an incandescent lamp, react with certain wavelengths of the filament emission and generate visible light. DOE is unaware of any existing commercially-available products or prototypes of incandescent lamps incorporating luminescent gases. Accordingly, DOE screened out luminescent gases based on the first criterion, technological feasibility. Therefore, DOE is not considering luminescent gas fills as a design option for improving the efficacy of IRL. f. Non-Tungsten-Halogen Regenerative Cycles Fifth, DOE screened out non-tungsten-halogen regenerative cycles. Regenerative cycles allow a filament to burn at a higher temperature (and thus higher efficacy) than conventional incandescent lamps, while maintaining a useful service life. Non-tungsten-halogen regenerative cycles are regenerative cycles that do not employ the use of the tungsten filament or halogen gas fill. DOE understands that regenerative cycles other than tungsten-halogen may be possible for other filament materials. However, as noted above, DOE screened out the use of novel filament materials on the basis of the second and third screening criteria. Due to the fact that use of the non-tungsten-halogen regenerative cycles would depend on the incorporation of a non-tungsten filament (already screened out), DOE is screening out such cycles from consideration based on the same two criteria. DOE believes that it would not be practicable, and maybe not even possible, to manufacture novel filament materials lamps with associated regenerative cycles on the scale necessary to serve the relevant market at the time of the effective date of an amended standard. Also, the use of other filament materials, and therefore their associated regenerative cycles, may have an adverse impact on consumer utility. Therefore, DOE is not considering non-tungsten-halogen regenerative cycles as a design option for improving the efficacy of IRL. g. Infrared Phosphor Glass Coatings For IRL, DOE screened out infrared phosphor glass coatings. When used as a coating on the bulb surface, infrared phosphors harvest the emitted infrared energy and convert it to visible light, thereby potentially increasing lamp efficacy. Because patents on such infrared phosphor coatings exist, DOE determined that this technology option is technologically feasible. However, DOE does not believe infrared phosphor glass coatings would be practicable to manufacture because making hundreds of millions of incandescent lamps annually with infrared phosphor coatings would require significant changes to current manufacturing processes and DOE has no data to indicate that such manufacturing processes are feasible or could be made ready to serve the relevant market at the time of the effective date of an amended standard. Therefore, DOE is not considering infrared phosphor coatings as a design option for improving the efficacy of IRL. h. Integrally Ballasted Low Voltage Lamps Incandescent filaments that are designed to operate at a lower voltage are both shorter in length and thicker in cross-sectional area than incandescent filaments designed to operate at a line voltage from 115 to 130V. Increasing the thickness of the filament can improve its efficacy by allowing the lamp to be operated at higher temperatures. Therefore, using an integral ballast allows one to increase the efficacy of a lamp by operating its filament at a lower voltage (e.g., 12 volts) than standard U.S. household line voltage (i.e., 120 volts). Although this technology is commercially available in Europe 29 and elsewhere in the world where the standard household line voltage is 220-240 volts, DOE is unaware of any commercially-available products or prototypes of this same technology option that operate on U.S. household line voltage of 120 volts. Accordingly, DOE is screening out integrally ballasted low voltage lamps based on the first criterion, technological feasibility. Therefore, DOE is not considering integrally ballasted low voltage lamps as a design option for improving the efficacy of IRL. 29 Philips Electronics Press Release (2007). Available at: *http://www.lighting.philips.com/gl_en/news/press/product_innovations/archive_2007/press_new_masterclassic_lamp.php* . i. Trihedral Corner Reflectors For IRL, DOE screened out trihedral corner reflectors, which could be incorporated into the cover glass of IRL and have the potential to increase lamp efficacy by redirecting infrared radiation back onto the filament. Because patents on trihedral corner reflectors exist, DOE determined that this technology option is technologically feasible. However, manufacturer data have not provided any indication as to the incorporation of this technology into prototypes or commercially-available products. Using trihedral corner reflectors, which entail an additional disc requiring external fabrication and installation in the lamp, is likely to necessitate manufacturing techniques not currently available for mass production. For this reason, DOE believes that it would not be practicable to implement this technology on the scale necessary to serve the relevant IRL market at the time of the effective date of an amended standard. Therefore, DOE is not considering trihedral corner reflectors as a design option for improving the efficacy of IRL. 2. Design Options Considered Further in Analysis After screening out technologies in accordance with the policies set forth in 10 CFR part 430, Subpart C, Appendix A, (4)(a)(4) and 5(b), DOE is considering the technologies, or “design options,” listed in the table below as viable means of improving the efficacy of lamps covered under this ANOPR. The market and technology assessment (TSD Chapter 3) provides a detailed description of these design options. Table III.8.—GSFL and IRL Design Options GSFL design options IRL design options Highly Emissive Electrode Coatings Higher-Temperature Operation. Higher Efficiency Lamp Fill Gas Composition Thinner Filaments. Higher Efficiency Phosphors Efficient Filament Coiling. Glass Coatings Efficient Filament Orientation. Higher Efficiency Lamp Diameter Higher Efficiency Inert Fill Gas. Tungsten-Halogen Lamps. Higher Pressure Tungsten-Halogen Lamps. Infrared Glass Coatings (thin-film). Higher Efficiency Reflector Coatings. Efficient Filament Placement. The above listed “design options” will be considered by DOE in the engineering analysis. As discussed in section III.C, to the greatest extent possible, DOE based its engineering analysis on commercially-available products, which incorporate one or more of the design options listed above. In this way, DOE is better able to apply these features of more-efficacious lamps in a manner consistent with real world application. To this end, DOE has used catalog data, including price and performance information, where available. DOE invited comment on DOE's selection of these design options. Previously, manufacturers have expressed some concern about certain technologies impacting the manufacturing of high-volume IRL. DOE understands that infrared reflective coatings require time to deposit on the capsules/lamps. While lamps with this technology option are commercially available today in small production runs, DOE is requesting comment on whether these technologies could be applied in the volumes necessary to meet the market demand for IRL in the three-year compliance period mandated under the law authorizing DOE to conduct this rulemaking. In particular, DOE requests comment on whether this technology (or other technology options listed above) indeed meet DOE's screening criterion related to whether a technology can be “mass manufactured.” For more detail on how DOE developed the technology options and on the process DOE used to screen these options, refer to Chapter 3 and Chapter 4 of the TSD. C. Engineering Analysis The engineering analysis identifies, for each product class, potential increasing efficiency levels above the level of the baseline model. As key inputs in this process, the engineering analysis considers technologies not eliminated in the screening analysis. DOE considers these technologies either explicitly as design options or implicitly as incorporated into commercially-available lamps at the efficiency levels evaluated. For more information on the technologies used in commercially-available lamps, refer to Chapter 5 of the TSD. In the engineering analysis for this rulemaking, DOE concentrated its efforts on developing product efficacy levels associated with “lamps designs,” based upon commercially-available lamps that incorporate a range of design options. “Design options” consist of discrete technologies (e.g., infrared reflective coatings). However, where necessary, DOE supplemented commercially-available product information with an examination of the incremental costs and improved performance of discrete technologies. In this way, DOE's standards development analyses can appropriately assess the technologies identified as candidates for improving lamp efficacy. In energy conservation standard rulemakings for other products, DOE often develops cost-efficiency relationships in the engineering analysis. However, for this lamps rulemaking, DOE derived efficacy levels in the engineering analysis and end-user prices in the product price determination. By combining the results of the engineering analysis and the product price determination, DOE derived typical inputs for use in the LCC and NIA. Section III.E of this notice discusses the product price determination (see TSD Chapter 7 for further detail). 1. Approach To the extent possible, DOE based the analysis on commercially-available lamps that incorporate the design options identified by the Technology Assessment and Screening Analysis. For GSFL, all lamp-and-ballast designs are commercially available and have publicly available performance and price information. The majority of the engineering analysis for IRL is also based on commercially-available lamps. However, where needed, DOE supplemented these lamps with additional model lamps which use commercially-available technologies so that a substitute lamp at each CSL was available for each baseline lamp. For both GSFL and IRL, instead of using manufacturer cost data, DOE elected to follow suggestions to derive price information using observed market prices for existing products. For more information on the rationale for this approach, refer to section III.E of this notice. The engineering analysis follows on the same general approach for both categories of lamps analyzed in this rulemaking. The steps below more fully describe this approach: *Step 1: Select Representative Product Classes.* DOE reviewed covered lamps and their associated product classes. DOE identified and selected certain product classes as “representative” product classes where DOE would concentrate its analytical effort. DOE chose these representative product classes primarily because of their high market volumes. Section III.C.2 of this notice provides detail on the representative product classes selected for the analysis. Section III.C.6 of this notice provides detail on how DOE extrapolates from the representative product class to other product classes. *Step 2: Select Baseline Lamps.* DOE selected baseline lamps from the representative product classes on which it conducted the engineering analysis (and subsequent analyses). These baseline lamps were selected to represent the characteristics of typical lamps in a given product class. Generally, a baseline lamp is one that just meets existing mandatory energy conservation standards or one that represents the typical lamp sold. Specific characteristics such as CCT, operating life, and light output were all selected to characterize the most common lamps purchased by consumers today. For all the representative product classes, DOE selected multiple baseline lamps, in order to ensure consideration of different high-volume lamps and associated consumer economics. Baseline lamps are discussed in section III.C.2 of this notice. *Step 3: Identify Candidate Lamp or Lamp-and-Ballast Designs.* DOE selected a series of more-efficacious lamps for each of the baseline lamps considered within each representative product class. DOE considered technologies not eliminated in the screening analysis. DOE considered these technologies either explicitly as design options or implicitly as design options incorporated into commercially-available lamps at the efficiency levels evaluated. In identifying more efficacious lamp or lamp-and-ballast designs, DOE recognizes that the lumen package and performance characteristics of a system are important design criteria for consumers. For example, if consumers do not have the option to purchase substitution lamps or lamp-and-ballast systems with similar lumen packages under an energy conservations standard, consumers would need to renovate the lighting design in a particular building in order to maintain a similar light output. Therefore, lamp and lamp-and-ballast designs for the LCC analysis were established such that potential substitutions maintained light output above a maximum 10 percent decrease from the baseline lamp system's light output. In addition, substitute lamps were chosen to have performance characteristics (e.g., CCT) similar to those of the baseline lamp. In identifying more-efficacious substitutes for GSFL, DOE utilized a database of commercially-available lamps. For the LCC, DOE developed the engineering analysis based on the two substitution scenarios where a consumer can maintain light output while decreasing energy consumption. In the first scenario, the consumer maintains light output while decreasing energy by replacing the baseline lamp with a more efficacious lower-wattage lamp that operates on the existing ballast. In the second scenario, the consumer maintains light output while decreasing energy consumption by replacing the lamp-and-ballast system with a more efficacious lamp and a different ballast. For example, a lamp-and-ballast system with a more efficacious same-wattage lamp and lower ballast factor ballast will consume less energy and maintain light output. For IRL, DOE used some commercially-available lamps, but also developed “model” lamps which incorporate design options that may not be commercially available for certain lamp types and wattages but which use commercially-available technologies. For example, DOE developed efficacy estimates for reduced-wattage IRL with an improved halogen infrared
(HIR)coating. For the LCC, DOE considered only one substitution scenario. In this scenario, consumers save energy and maintain light output by replacing their lamp with a lower wattage more efficacious lamp. For a more detailed discussion of lamp and ballast designs, see section III.C.3 of this notice. *Step 4: Developed Candidate Standard Levels.* Having identified the more-efficacious substitutes for each of the baseline lamps (or lamp-and-ballast systems), DOE developed CSLs based on a consideration of several factors including:
(1)The design options associated with the specific lamps being studied (e.g., grades of phosphor for fluorescent lamps, the use of infrared coatings for IRL);
(2)the ability of lamps across wattages to comply with the standard level of a given product class; 30 and
(3)the maximum technologically-feasible level. For a more detailed discussion of CSL development for each of the representative product classes analyzed, see section III.C.4 of this notice. 30 Efficacy levels span multiple lamps of different wattages. In selecting CSLs, DOE considered whether these multiple lamps can meet the efficacy levels. A more detailed discussion of the methodology DOE followed to perform the engineering analysis can be found in the engineering analysis chapter of the TSD (Chapter 5). 2. Representative Product Classes and Baseline Lamps As discussed in section III.A.2, DOE is considering establishing eight product classes across the range of covered GSFL and two product classes for covered IRL. Due to scheduling and resource constraints, DOE was not able to analyze each and every product class. Instead DOE carefully selected certain product classes that it would analyze, and then scale its analytical findings on those representative product classes to other product classes that were not analyzed. The representative product classes are generally selected to encompass the highest volume, most commonly sold lamp types. Once DOE identifies the representative product classes for analysis, DOE selects the representative units for analysis (i.e., baseline lamps) from within each product class. In the Framework Document, DOE identified some preliminary ideas for representative product classes and units for analysis. This section summarizes the comments received on this topic and the related decisions DOE made in conducting this portion of the ANOPR analysis. ACEEE provided a cross-cutting comment about representative product classes and units for analysis. ACEEE expressed concern that DOE may over-simplify the analysis by analyzing lamps of a few wattages and then generalizing to lamps of other wattages, in which case the results may not scale well. (ACEEE, No. 4.5 at pp. 67 and 79-80) The Joint Comment expressed this same concern, stating that analyzing too few products risks oversimplifying the analysis and obtaining results that cannot be extended to other products. Because such an approach could result in the sacrifice of potential energy savings, the Joint Commenters urged DOE to analyze multiple lamp wattages. (Joint Comment, No. 9 at p. 2) In response, DOE plans to establish eight product classes for GSFL. For IRL, although DOE is considering only two product classes, DOE defines CSLs with lamp efficacy requirements that vary by wattage to prevent oversimplification of the analysis. In addition, for each potential GSFL and IRL product class that is being analyzed, DOE is analyzing more than one baseline lamp to reflect the range of manufacturers' current lamp offerings. For example, for IRL, DOE recognizes that an incandescent lamp with the same basic technology exhibits higher efficacies at higher wattages. By analyzing multiple products at several different wattages, DOE was able to define a CSL that sets the same technology requirement for IRL, regardless of wattage. a. General Service Fluorescent Lamps As discussed in section III.A.2, DOE has tentatively decided to revise the table of product classes to reflect the utility of these products and how they are used in the market. From this new set of product classes, DOE generally selected as representative product classes those that encompassed the majority of shipments and from which efficacy values could be scaled. DOE observed that 4-foot medium bipin lamps constitute the vast majority of GSFL sales. These are followed in order of unit sales by 8-foot single pin slimline lamps and 8-foot recessed double contact HO lamps, which together constitute less than a quarter of GSFL sales. Because 4-foot medium bipin, 8-foot single pin slimline, and 8-foot recessed double contact HO lamps are the most common GSFL, DOE has selected them as representative lamps for its analysis. Shipments of 2-foot U-shaped lamps account for less than 5 percent of GSFL unit sales historically. 31 Given the relatively small market share of U-shaped lamps, DOE did not explicitly analyze these lamps. 31 Source: NEMA, No. 12 at p. 7. With regard to product class divisions by CCT, DOE recognizes that lamps whose CCT is greater than 4,500K represent a small market share of GSFL. Therefore, DOE has chosen to analyze lamps with CCT less than or equal to 4,500K. Although DOE is not analyzing the 2-foot U-shaped lamps or lamps that have a CCT greater than 4,500K, DOE nevertheless plans to consider standards for these product classes. DOE will extend its decision for the 4-foot medium bipin product class to the 2-foot U-shaped product class. This is possible because 2-foot U-shaped lamps generally are operated in the same way and generally span the same wattages as 4-foot medium bipin lamps. For lamps whose CCT is greater than 4,500K, DOE will extrapolate its findings from the representative lamps it analyzed that are less than or equal to 4,500K. For details on how DOE intends to consider development of standards for product classes not analyzed, see section III.C.6 of this notice. Within the representative product classes for GSFL, DOE selected as representative units for analysis those lamps with the highest volumes. Although DOE reorganized the product classes from what it presented in the Framework Document, the representative units selected for analysis are generally consistent with the comments received regarding the appropriate units for analysis. For example, several stakeholders commented that DOE should select the cool white phosphor energy-saver T12 as a baseline lamp. (NEMA, No. 8 at pp. 2-3; GE, No. 4.5 at pp. 63-65 at pp. 70-71; Philips, No. 11 at p. 1; GE, No. 13 at pp. 2-4; Osram, No. 15 at p. 3; GE, No. 4.5 at pp. 63-65). Osram commented that DOE should also consider a 700 series T8 as a baseline lamp. (Osram, No. 15 at p. 3). In contrast, EEI and PG&E commented that the baseline lamps should be selected in terms of when the standard will go into effect (six years from now), and the cool white lamp may not be a good representative baseline lamp at that time. (EEI, No. 4.5 at pp. 68-69, PG&E, No. 4.5 at p. 73). In addition, ACEEE commented that it may be better for DOE to analyze both the energy-saver and non-energy-saver lamps as baselines, and then later in the process DOE could decide whether one should be removed from the analysis. (ACEEE, No. 4.5 at pp. 66-67). After consideration of the public comments, DOE selected T8 and T12 baseline lamps for analysis. For T12 lamps, DOE selected both non-energy-saver lamps (i.e., 40W T12 4-foot medium bipin GSFL) and energy-saver versions (i.e., 34W T12 4-foot medium bipin GSFL), where they were available, as baseline lamps. For non-energy-saver versions of T12 GSFL, DOE selected 700 series, non-cool-white T12 lamps. For energy-saver versions of the T12 GSFL, DOE selected cool white models as baseline lamps. For T8 lamps, DOE only selected the non-energy-saver lamp (i.e., 32W T8 4-foot medium bipin GSFL) as a baseline lamp because energy-saver versions are not prevalent in the marketplace. For the baseline 32W T8 lamp, DOE used a rare-earth phosphor 700 series non-energy-saving lamp as the baseline. In all cases, the phosphor technology employed by each of these lamps is a direct reflection of the most commonly sold lamp today. DOE also selected fluorescent lamps with a CCT of 4,100K for all the analysis (i.e., baseline lamps and standard-compliant replacement lamps). DOE selected this CCT value because it is both the most popular CCT and because it falls approximately in the middle of the range of typical GSFL, which span from 3,000K to 6,500K. Table III.9 presents the representative product classes and baseline lamps that DOE has tentatively developed for GSFL. Table III.9.—GSFL Representative Product Classes and Baseline Lamps Lamp type Representative product class Baseline lamps Descriptor Nominal wattage *W* CCT *K* Rated efficacy* *lm/W* Initial light output *lm* Mean light output *lm* Lifetime *hr* 4-foot medium bipin CCT ≤4,500K F40T12 40 4,100 80.0 3,200 2,880 20,000 F34T12 34 4,100 77.9 2,650 2,300 20,000 F32T8 32 4,100 86.2 2,800 2,520 20,000 8-foot single pin slimline CCT ≤4,500K F96T12 75 4,100 85.6 6,420 5,906 12,000 F96T12 60 4,100 87.6 5,300 4,664 12,000 F96T8 59 4,100 94.8 5,700 5,130 15,000 8-foot recessed double contact HO CCT ≤4,500K F96T12 110 4,100 80.1 9,050 8,145 12,000 F96T12 95 4,100 82.5 8,000 6,950 12,000 *Rated efficacy is based on the rated wattage of the lamps and the initial lumen output. The rated wattage in order of baseline is 40W, 34W, 32.5W, 75W, 60.5W, 60.1W, 113W, and 97W. As discussed in section III.C.3.a, DOE is taking a systems approach to its analysis for GSFL. In accordance with this approach, DOE selected typical ballasts to pair with the baseline lamps. DOE generally paired a “normal” BF ballast (i.e., with a BF typically between 0.84 and 1.0) with baseline lamp systems. These pairings are intended to characterize the typical system used in the market. For example, for installed T8, 4-foot medium bipin fluorescent systems, DOE selected an instant start electronic ballast with a BF of 0.88. In addition to ballast types, DOE also selected the number of lamps per ballast that represent a typical system. DOE is aware that 4-foot medium bipin ballasts are available in a variety of lamp-per-ballast designs. According to the 2000 rule on GSFL ballasts (hereafter “2000 Ballast Rule”), there are on average 2.8 lamps per 4-foot medium bipin system. 62 FR 56740 (Sept. 19, 2000). 32 To accurately represent the market and to simplify the analysis, DOE has decided to use a 3-lamp system for 4-foot medium bipin lamps. For 8-foot lamps, DOE selected 2-lamp ballasts, representative of typical 8-foot systems in the market. For further detail on the lamps and lamp-and-ballast systems DOE uses in its analyses, see Chapters 5 and Appendix 5A of the TSD. 32 U.S. Department of Energy. Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Technical Support Document: Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast Proposed Rule. Appendix B. Marginal Energy Prices and National Energy Savings. Table B.6. (Jan. 2000). Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_b.pdf.* b. Incandescent Reflector Lamps As discussed above, for the ANOPR, DOE decided to revise the table of product classes to reflect the utility of these products and how they are used in the market, including the creation of a product class for modified-spectrum lamps. Because modified-spectrum lamps currently make up only a small percentage of the market, DOE has selected the standard-spectrum IRL product class for analysis and intends to extrapolate its findings to the modified-spectrum product class. Section III.C.6 provides detail on this extrapolation. ACEEE commented that DOE should analyze each of the six IRL wattage group product classes, rather than only two, as DOE presented in its Framework Document. Otherwise, ACEEE argued that DOE would potentially risk oversimplifying the analysis. (ACEEE, No. 4.5 at pp. 79-80) The Joint Comment also asserted that DOE should examine each product class for IRL since the appropriate substitute lamps in each of those classes can vary. (Joint Comment, No. 9 at p. 2) Given the revisions to the product class structure for IRL (i.e., that product classes are no longer defined by wattage), DOE now recognizes that the discrete utility of IRL is based on the lumen package, not the wattage rating. For this reason, the discrete IRL representative wattage groups that were discussed in the Framework Document, and upon which DOE received comment, are being merged into one product class. However, to prevent oversimplification of the analysis, DOE has chosen to analyze three different lamps of multiple wattages (and lumen packages) in the standard-spectrum product class. DOE has tentatively decided to concentrate its resources on conducting analysis of the most popular reflector lamps—in terms of lamp size, wattage, and lumen package. Accordingly, DOE examined existing products on the market at multiple wattages to select baseline lamps which it used to derive efficacy equations that span wattage. Therefore, DOE was able to apply the analysis performed on the most popular lamps to the other, less common lamps. Further detail on the CSLs DOE has developed for IRL follows in section III.C.6. With regard to baseline lamps, NEMA commented that DOE should conduct more analysis on the 75W and the 150W parabolic aluminized reflector
(PAR)lamp, and clarify whether these are “blown PAR” lamps. (NEMA, No. 8 at pp. 2-3) EEI commented that given the market penetration of halogen PAR lamps, DOE might consider them as some of the baseline lamps for the analyses. (EEI, No. 4.5 at p. 77) GE commented that blown PAR38 lamps are very common in the market (both 75W and 150W), and that they may represent a good baseline because they are the least efficient type of PAR technology currently sold. (GE, No. 4.5 at p. 79) In response, DOE selected three baseline lamps of varying wattage and shapes to provide a comprehensive understanding of consumer economics. Specifically, DOE included PAR halogen baseline lamps of three different wattages: 50, 75, and 90 Watts. Average wattage information of PAR lamps acquired from NEMA and a review of manufacturer product catalogs indicate that these are the highest volume wattages. These baseline lamps are currently regulated by EPCA and, therefore, meet the EPCA standard. DOE identified three lumen packages that are popular in the commercial and residential sectors, and then identified lamps that provided that service. These three packages are in the range of approximately 600 to 1,300 lumens. DOE analyzed PAR baseline lamps in each of the lumen packages as DOE believes that these lamps represent a good cross-section of the most common reflector lamps that will be sold and used at the effective date of the standard (the year 2012). Since these lamps capture a range of wattages and lumen packages, they cover a range of applications. Table III.10 presents the representative product class and baseline lamps that DOE has selected for the ANOPR IRL analyses. Table III.10.—IRL Representative Product Class and Baseline Lamps Lamp category Representative product class Representative product class baseline lamps Descriptor Wattage *W* Efficacy *lm/W* Initial light output *lm* Lifetime *hr* IRL IRL Standard-Spectrum PAR30 50 11.6 580 3,000 PAR38 75 14.0 1,050 2,500 PAR38 90 14.6 1,310 2,500 DOE requests comment on its preliminary selection of representative product classes and baseline lamps for GSFL and IRL. 3. Lamp and Lamp-and-Ballast Designs In the market and technology assessment (see TSD Chapter 3), DOE identifies a range of technology options that improve the efficacy of the two categories of lamps considered in this rulemaking. In the screening analysis (see TSD Chapter 4), DOE screened out certain technology options because they fail to satisfy the requirements of all four screening criteria. Those technology options not screened out by the four criteria are called “design options,” and DOE considered them in the engineering analysis. The Joint Comment suggested that, when deciding how many potential standard levels to examine, DOE should look at natural divisions in the market, by product class, rather than selecting an arbitrary number of standard levels. (Joint Comment, No. 9 at p. 4) For the lamps considered in this rulemaking, DOE's selection of design options guided its selection of CSLs. Because products spanned a large range of efficacies for GSFL and IRL, DOE looked at natural divisions in the market when selecting lamp designs. For example, for GSFL, DOE noted groupings around the types of phosphor used and the wall thickness of those phosphors. With regard to IRL, DOE identified natural “technology-based” divisions in the market around the type of incandescent technology used (i.e., halogen, or HIR). DOE also took into account lumen output when it established lamp designs for its analyses. In the Framework Document, DOE stated its intention to hold the lamp lumen output constant at the level of the baseline model. Thus, as the lamps become more efficacious, they will consume less energy rather than produce more light. Holding lumen output constant across the efficacy levels is necessary to ensure that products supply equivalent service under the base-case and standards-case scenarios. The Joint Comment agreed with DOE's intention in this regard and suggested that DOE avoid structuring the standard so that compliant lamps would noticeably reduce light output. The Joint Comment also expressed concern about a standard that might result in the use of efficiency gains to over-illuminate certain installations or to install longer-life lamps instead of capturing energy savings. (Joint Comment, No. 9 at p. 6) EEI stated that there are some energy-saving incandescent lamps that use a slightly lower wattage and produce fewer lumens, but do so at a higher efficacy. Therefore, to allow for energy savings, and as a sensitivity to the analysis, EEI recommended that DOE should evaluate a 10-percent lumen band of equivalency for incandescent lamps. (EEI, No. 4.5 at pp. 117-118) In response, it is noted that for the LCC, DOE considered those lamps (or lamp-and-ballast systems) which:
(1)Emit lumens equal to the lumen output of the baseline lamp or lamp-and-ballast system, or below that lamp by no more than 10 percent, and
(2)result in energy savings. Lamp or lamp-and-ballast designs that under-illuminate and over-illuminate are considered in the NIA. For the LCC, DOE also chose to consider only energy-saving options. For GSFL, energy savings can either be achieved through lamp replacements or lamp-and-ballast replacements. For GSFL, energy savings can only be achieved through lamp replacements. For the NIA, DOE analyzed a range of energy saving and non-energy-saving options. The non-energy-savings lamps, as well as more-efficient lamps that increase or decrease light output by more than 10 percent of the base case, can be found in Appendix 5A of the TSD. a. General Service Fluorescent Lamps EEI recommended that DOE should take a systems approach when analyzing GSFL in the NES and LCC, because the ballast is the piece of the system that determines the energy usage overall. (EEI, No. 7 at p. 1) DOE agrees with this comment and did apply a systems approach for the fluorescent lamp analysis because DOE recognizes that both lamps and ballasts determine a system's energy use and the overall system lumen output. By using a systems approach, DOE was able to demonstrate the actual energy consumption and light output of an operating lamp in a given end-user installation. DOE is cognizant of the fact, however, that it is not regulating fluorescent lamp ballasts in this rulemaking, and, therefore, while it selected ballasts with different ballast factors
(BF)33 in order to obtain the appropriate level of system lumen output, DOE did not necessarily select the most energy-efficient versions of those ballasts with different BF. (Note: DOE is initiating a separate rulemaking on fluorescent lamp ballasts, in which it will evaluate whether new and amended efficiency standards should be applied to fluorescent lamp ballasts. 34 ) So although DOE is not setting minimum performance standards for fluorescent systems in this rulemaking, DOE's analysis does consider the operation of fluorescent lamps in a lamp-and-ballast system while evaluating efficacy standards for these lamps. 33 The “ballast factor” of a ballast is the ratio of the light output of a fluorescent lamp or lamps operated on a ballast to the light output of the lamp(s) operated on a standard (reference) ballast. Ballast factor depends on both the ballast and the lamp type; a single ballast can have several ballast factors depending on lamp type. The light output of a single fluorescent lamp is measured on a ballast with a ballast factor of 1.0. One can reduce the light output of a lamp-and-ballast system by operating a lamp on a ballast with a lower ballast factor. 34 Energy efficient ballasts are characterized as having higher ballast efficacy factors (BEF). The BEF is directly related to the quotient of the BF and the power consumed by the ballast, such that a ballast maintaining BF while reducing power consumption will have a higher BEF, and be a more energy-efficient ballast. In its ANOPR analysis, DOE varied the ballast BF, not the BEF, in its assessment of standards for fluorescent lamps. DOE will be considering new and amended BEF standards in the separate fluorescent lamp ballast rulemaking. This systems approach allows DOE to select a variety of energy-saving lamp-and-ballast designs that meet a given CSL. In general, DOE chose its potential design options by selecting commercially-available fluorescent lamps at higher efficacies than the baseline lamps. These higher efficacies are achieved through a variety of technologies. As discussed in the screening analysis (section III.B.2), DOE considered commercially-available GSFL that use highly emissive electrode coatings, higher efficiency lamp fill gas composition, higher efficiency phosphors, glass coatings, or higher efficiency lamp diameter to achieve a higher efficacy. After selecting these higher efficacy lamps, DOE selected lamp-ballast combinations for the LCC that both save energy and maintain comparable lumen output. For instances in which the consumer is replacing only the lamp, DOE selected a reduced-wattage, higher-efficacy lamp for use on the existing ballast. For instances in which the consumer is replacing both the lamp and the ballast, DOE was able to obtain energy savings and maintain comparable lumen output using a variety of lamp-and-ballast combinations. GE argued that DOE can only control a lamp for lamp replacement in this rulemaking, and that the ballast type is not regulated as part of this rulemaking. (GE, No. 4.5 at pp. 110-111) GE also commented that an increase in lumens would suffice for the lamp replacement events. (GE, No. 4.5 at p. 122) ACEEE and GE commented that DOE should consider replacement lamps that have the same wattage but higher efficacy coupled with a lower ballast factor
(BF)ballast as energy-efficient substitutes for the baseline lamp. Similarly, ACEEE recommended that DOE should consider technology options that use a lower BF ballast with a higher-efficiency lamp to achieve energy savings. (ACEEE, No. 4.5 at p. 113) GE stated that the energy use for fluorescent lamps is driven primarily by the BF, and that this should be a part of the energy savings analysis. (GE, No. 4.5 at pp. 116-117) DOE agrees with these comments, and followed the recommendations of these stakeholders in its analysis. As the efficacies of the fluorescent lamps being considered increased, DOE selected and used ballasts with lower ballast factors, such that the system lumen output was within ten percent of the baseline system lumen output. In this rulemaking, DOE considers reduced-wattage lamp options (i.e., ones which emit lumens equal to the lumen output of the baseline lamp, or below that lamp by no more than 10 percent, and result in energy savings). In the NIA, DOE also considers substitute lamps which produce more light but do not save energy. This reflects the fact that DOE cannot require consumers to change their ballast along with their lamps. However, in situations where a consumer has the opportunity to replace a ballast, DOE allows consumers to change both their ballast and lamp. For example, consumers can select a lamp with a higher efficacy and a ballast with a lower BF to obtain a system that would result in approximately the same system light output as the baseline system. This new lamp-and-ballast combination would have a lower-wattage consumption due to the lower BF. In the Framework Document, DOE identified several technology options that it intended to consider analyzing in this rulemaking. In response to that list of technology options, stakeholders provided feedback on certain options. Upon reviewing some of the fluorescent lamp-and-ballast pairings, GE commented that DOE should not assume that as lamp efficacy increases, one could always reduce wattage to achieve a constant light output with fluorescent lamps. GE points out that going below the 34W energy savings lamp, for example, is not possible, because lower-wattage lamps would not work on available ballasts. (GE, No. 4.5 at pp. 106-107) In response, DOE has sought to create lamp and lamp-and-ballast designs that are practical and realistic in this engineering analysis. For example, for the 34W 4-foot medium bipin T12 GSFL, DOE did not consider reduced-wattage substitutes. Rather, DOE paired higher efficacy 34W 4-foot medium bipin T12 GSFL with lower BFs to capture energy savings while maintaining lumen output. GE also stated that it is not always possible to use a 28W fluorescent lamp as a replacement for a 32W lamp on all the available ballasts. GE recommends that DOE decide what an acceptable range of reduced-wattage lamps might be, given that restrictions on use increase as the wattage decreases. (GE, No. 4.5 at pp. 126-127). DOE understands that one of the ways manufacturers build lower-wattage fluorescent lamps is through the addition of krypton gas into the mix to change the resistance of the lamp. In the manufacturer interviews DOE held to prepare for the ANOPR, DOE was told that as the proportion of krypton gas increases, the fluorescent lamp has more difficulty starting, being dimmed, and operating in cold-temperature environments. However, in other manufacturer interviews, DOE was informed that technological improvements were such that 28W fluorescent lamps should no longer have problems starting nor issues with features such as dimming or frequent on-off (often caused by motion sensors). DOE also reviewed publicly-available manufacturer literature and found at least one major lamp manufacturer stating that its 28W fluorescent lamp does not have restrictions on use. 35 For these reasons, DOE did consider the 28W lamp as an energy-saving replacement for a 32W T8 baseline lamp. However, DOE is aware that consumers should not be subject to any decrease in utility and performance and that not all consumers would choose a lower-wattage lamp if DOE established standards for T8 lamps. The NIA analysis contains technology option market-share matrices which contain assumptions about the relative proportion of consumers who would elect a particular lamp (or lamp and ballast) option in response to a standard. These matrices are described in section III.H of this notice, and Chapter 9 of the TSD. DOE invites further comment on the use of 28W, as well as 25W, replacement fluorescent lamps in the analysis and the expected market share these lamps would capture at the various CSLs. DOE intends to continue the dialogue with the public on this issue to better understand the capability of these reduced-wattage fluorescent lamps. 35 This catalog states the following about 25W, 28W, and 30W T8 lamps: “Operates on: Any Instant Start Ballast; Programmed Start Ballast that supplies equal to or greater than 550 starting voltage.” Source: Philips Lamp Specification and Application Guide (2006), p. 72. b. Incandescent Reflector Lamps For IRL, DOE has observed natural efficacy divisions in the marketplace which correspond to the use of halogen capsules, HIR technology, and improved reflector coatings to increase lamp efficacy. DOE considers these efficacy divisions in selecting CSLs by using the efficacy levels of commercially-available lamps as a guide. Commercially-available products do not exist at all of the CSLs for all of the baseline lamps, however. For example, the 75W PAR38 baseline lamp with 1,050 lumens has commercially-available products at all three CSLs, but the 50W PAR30 baseline lamp with 580 lumens only has commercially-available products at one of the three CSLs. Because DOE believes it is technically feasible to incorporate the commercially-available technologies in lamp types that correspond to all of the baseline lamps, and in order to have a continuous range of efficacies to analyze, DOE is developing some model IRL which it bases on lamp lumen packages which are commercially available. In particular, using efficacy information for the commercially-available lamp designs (that are substitutes for certain baseline lamps), DOE is able to develop a relationship of efficacy to wattage. This then allows DOE to develop lamp designs that are not commercially available for certain wattages, but that would be substitutes for other baseline lamps. DOE assumes that lamps of similar diameters may substitute for one another (e.g., PAR38 IRL will be substituted with another PAR38 IRL). Generally, the lamp design substitutes for baseline lamps are based around the lumen output of the baseline lamp, plus or minus 10 percent. In reviewing published catalog data, DOE observed that higher efficacy, reduced-wattage IRL (which maintain light output within 10 percent) are available as substitutes for a number of baseline lamps. Furthermore, these reduced-wattage designs span a range of design options available for consideration in this rule. These design options, discussed in the screening analysis portion of this notice (section III.B), include the tungsten-halogen regenerative cycle (hereafter “Halogen”) and halogen infrared technologies (hereafter “HIR”), a technology that uses both Halogen and glass coatings that reflect infrared light. DOE observed that the commercially-available halogen IRL fall within two tiers of efficacy. To distinguish the efficacies of these halogen IRL, DOE is designating them as Halogen and Improved Halogen. DOE also observes two tiers of efficacy for HIR IRL. To distinguish the efficacies of these IRL, DOE is designating them as HIR and Improved HIR. DOE believes Improved HIR and Improved Halogen can be achieved by using the additional design options discussed in the screening analysis. These design options include higher-efficiency filaments, efficient filament coiling, filament configuration, capsule design, high pressure capsules, or higher efficiency reflector coating. DOE observed lifetime changes across these “naturally-occurring” reduced-wattage IRL. (That is, a halogen reduced-wattage IRL typically has a lifetime of around 2,000 to 3,000 hours, whereas an HIR IRL typically lives for 3,000 to 4,000 hours.) DOE has maintained the lifetime attributes of the commercially-available product for its analysis. In summary, DOE seeks comment on its selection of lamp and lamp-and-ballast designs for GSFL and IRL. 4. Candidate Standard Levels a. General Service Fluorescent Lamps Table III.20 and Table III.22 present a summary of the candidate standard levels
(CSLs)for each of the representative product classes for the lamps covered under this rulemaking. In general, the CSLs for GSFL (presented in Table III.20) follow a general trend of increasing efficacy through the use of higher-quality phosphors. The CSLs also represent a move from higher-wattage T12 technologies to lower-wattage, higher-efficacy T8 technologies. CSL5 represents the most efficacious fluorescent lamp (i.e., “max tech”). In all product classes, fluorescent lamps that meet CSL5 are T8 lamps which use 800 series phosphors. The following paragraph presents a detailed discussion of the design options used to meet each CSL for the 4-foot medium bipin product class. For more information on design options used to meet each CSL for the 8-foot single pin slimline product class and the 8-foot recessed double contact HO product class, refer to Chapter 5 of the TSD. A standard at CSL1 impacts the two 4-foot medium bipin T12 baseline lamps. Because the baseline T8 lamp is above this efficacy level, consumers using the T8 lamp are not impacted. This CSL can be met with a 34W T12 lamp using 700 series rare earth phosphors or a 40W T12 lamp using improved 700 series or 800 series rare earth phosphors. A standard at CSL2 also only impacts T12 lamps. This CSL can be met by both the 34WT12 and 40W T12 lamp using an 800 series rare earth phosphor. A standard at CSL3 impacts all three baseline lamps. To meet this level, the 32W T8 lamp must use an 800 series rare earth phosphor. The T12 lamps must use an 800 series rare earth phosphor and possibly other design options such as a different gas fill or increased thickness of the bulb-wall phosphor to increase the lamp's efficacy. A standard at CSL4 also impacts all three baseline lamps. However, there are no T12 lamps commercially available that can meet this efficacy requirement. Therefore, users of T12 lamps would be forced to replace their ballasts and operate T8 lamps instead. For the T8 lamps, this level requires the use of higher-efficacy 800 series rare earth phosphor. A 30W T8 lamp that produces an equivalent amount of light as the baseline unit on a similar ballast meets this CSL. CSL5, which also impacts all three baseline lamps, represents the most efficacious 4-foot medium bipin lamps. Again, there are no T12 lamps commercially available that can meet this efficacy requirement. Therefore, users of T12 lamps would be forced to replace their ballasts and operate T8 lamps instead. 32W T8 lamps which meet this efficacy level must use 800 series rare earth phosphor and may incorporate other efficacy improvements to the lamp, such as a different gas fill or increased thickness of the bulb-wall phosphor. A 28W and a 25W T8 lamp that produces an equivalent amount of light on the same ballast as the baseline unit meets this CSL. Philips commented that there is more than one kind of reference ballast that can be used to test GSFL, and that the same lamp operated on two different ballasts can have a different efficacy. Because a given lamp can exhibit different efficacies based on the testing method use, Philips commented that DOE should use a standard test procedure based on ANSI requirements to develop lamp efficacy values. (Philips, No. 11 at p. 3) In response, DOE's current test procedure for fluorescent lamps is based on ANSI standards and evaluates the performance of lamps on a single, low-frequency reference ballast. As noted previously, DOE is currently conducting a rulemaking on the test procedures for fluorescent and incandescent lamps in tandem to this energy standards rulemaking. In that rulemaking, DOE is proposing to continue to use low-frequency ballast testing for all GSFL except those which can only be tested on a high-frequency ballast. Further detail on the ANSI standards incorporated by reference that are used to evaluate lamps is available in 10 CFR Part 430, Subpart B, Appendix R and in the Test Procedures NOPR. DOE does note, however, that while it uses the test procedure values to set efficacy levels, it considers the operation of lamps on several different ballast types in the LCC and NIA analyses. This way, the economic evaluation of the CSLs more accurately reflects how users actually operate these lamps. 36 DOE calculated system power data using published catalog information. Further detail on this calculation is available in Chapter 5 of the TSD. 36 This approach is similar to other rulemakings where DOE bases product efficacy levels on the test procedure measurements, while design options analyzed in the NIA are adjusted with operating hour data to reflect energy use in the marketplace. A more detailed discussion on how DOE selected these CSLs for each product class, which technologies they represent, and which design option lamps DOE used at these CSLs for each of the representative units, can be found in Chapter 5 of the TSD. Table III.11.—Summary of the Candidate Standard Levels for Fluorescent Lamps With CCT ≤ 4,500K Candidate standard level 4-Foot medium bipin *lm/W* 8-Foot single pin slimline *lm/W* 8-Foot recessed double contact HO *lm/W* CSL1 82.4 87.3 83.2 CSL2 85.0 92.0 86.1 CSL3 90.0 94.8 87.6 CSL4 92.3 98.2 91.9 CSL5 95.4 101.5 95.3 b. Incandescent Reflector Lamps Table III.22 presents the CSLs for IRL. For IRL, the increasing CSLs represent shifts in technology, including shifts from halogen to HIR technology. As the baseline lamps are generally already utilizing halogen technology, CSL1 for IRL is met through improved halogen technologies which are achieved with an improved reflective coating or higher pressure halogen capsules. CSL2 for IRL can be met with HIR technology (i.e., a technology that uses a halogen capsule with an infrared reflective coating.) CSL3 for IRL can be met with improved HIR technologies; this level can be achieved with an HIR lamp that has an improved reflective coating, better HIR coatings or higher pressure halogen capsules. The CSLs for IRL use an efficacy equation which calculates minimum average efficacy (in lumens per watt) based on the rated wattage of the lamp (denoted by the variable P in the equation). As an example, consider a baseline 50W PAR30 lamp with an efficacy of 11.6 lm/W. The minimum required efficacies of a 50W lamp under the CSLs would be 14.4 lm/W at CSL1, 15.8 lm/W at CSL2, and 17.8 lm/W at CSL3. Plots of these CSLs are presented in Chapter 5 of the TSD. Table III.12.—Summary of the Candidate Standard Levels for Standard-Spectrum IRL Candidate standard level Standard-spectrum incandescent reflector lamps *lm/W* CSL1 5.0P 0.27 CSL2 5.5P 0.27 CSL3 6.2P 0.27 A more detailed discussion on how these CSLs were derived, which technologies they represent, and which design option lamps are used at these CSLs for each of the representative units can be found in Chapter 5 of the TSD. DOE invites comment on the CSLs for GSFL and IRL. 5. Engineering Analysis Results The following section presents partial results from the engineering analysis for GSFL and IRL. The results include detail on the characteristics of lamp and lamp-and-ballast designs DOE used in its analyses and the CSL which they meet. The full set of results for the lamps and lamp-and-ballast systems DOE analyzed, including additional product classes and baselines, are available in Chapter 5 and Appendix 5A of the TSD. DOE is presenting the partial results here to facilitate comment on the methodology of DOE's analyses, and on the presentation of its results. a. General Service Fluorescent Lamps Engineering analysis results for GSFL include descriptions of the lamp-and-ballast systems DOE selected for the analyses. Because the CSLs are based on lamps, and at some CSLs DOE has analyzed multiple lamps, in some instances DOE presents multiple systems per CSL. Table III.13 presents the engineering analysis results for a 34W T12 baseline lamp system. Building from the baseline system, the table presents each of the engineering analysis lamp-and-ballast designs DOE used for each of the five CSLs. At each CSL, DOE generally considered both a replacement lamp that had the same wattage as the baseline lamp and operates on a new (lower BF) ballast, and a replacement lamp that had a reduced wattage. This difference between the design lamps considered is evident in the “rated wattage” column. Then, for each of those design lamps, DOE provides the rated efficacy, the initial and mean light outputs, and the average operating life of the lamp. The table is sorted by efficacy, such that each lamp represents a higher efficacy, and thus constitutes a more-efficient lamp design in the engineering analysis. The table also presents the type of ballast DOE pairs with each lamp, including the BF for that ballast, the resultant system power rating of the lamp operating on that ballast, and the system initial and the system mean light outputs. The BF was selected so that the new system does not reduce light output by more than 10 percent of the baseline lamp system. The system performance of the more-efficacious lamps is utilized in the LCC, where an economic analysis is conducted to determine whether a more-efficacious lamp or lamp-and-ballast system is cost-justified. For details on the LCC, see section III.G and Chapter 8 of the TSD. 4-Foot T8 lamp and ballast replacements are considered as substitutes for the baseline lamp. The highest energy-saving system uses a 0.88 BF electronic ballast with a reduced-wattage T8 lamp and maintains lumen output within 10 percent. Additional engineering analysis results for GSFL are available in Chapter 5 and Appendix 5A of the TSD. Table III.13.—Lamp-and-Ballast Replacement Engineering Analysis 4-Foot Medium Bipin GSFL With a CCT ≤ 4,500K Candidate standard level Lamp diameter Nominal wattage *W* Rated wattage *W* Rated efficacy *lm/W* Initial light output *lm* Mean light output *lm* Life *hr* Ballast type Ballast factor System power rating *W* System initial light output *lm* System mean light output *lm* Baseline T12 34 34 77.9 2,650 2,300 20,000 Magnetic 0.88 108.0 6,996 6,072 Baseline T12 34 34 77.9 2,650 2,300 20,000 Electronic 0.88 91.7 6,996 6,072 CSL1 T12 34 34 82.4 2,800 2,460 20,000 Electronic 0.88 91.7 7,392 6,494 CSL1 T12 34 34 82.4 2,800 2,460 20,000 Electronic 0.86 90.3 7,224 6,347 CSL2 T12 34 34 85.3 2,900 2,610 20,000 Electronic 0.86 90.3 7,482 6,734 CSL2 T8 32 32.5 86.2 2,800 2,520 20,000 Electronic 0.88 87.5 7,392 6,653 CSL3 T8 32 32.5 90.8 2,950 2,710 20,000 Electronic 0.78 78.5 6,903 6,341 CSL3 T12 34 34 91.2 3,100 2,790 24,000 Electronic 0.86 90.3 7,998 7,198 CSL4 T8 32 32.5 92.3 3,000 2,850 24,000 Electronic 0.75 75.9 6,750 6,413 CSL4 T8 30 30 95 2,850 2,680 18,000 Electronic 0.78 72.4 6,669 6,271 CSL5 T8 32 32.5 95.4 3,100 2,915 24,000 Electronic 0.75 75.9 6,975 6,559 CSL5 T8 28 28 97.3 2,725 2,560 18,000 Electronic 0.78 63.3 6,377 5,990 CSL5 T8 25 25 96 2,400 2,280 24,000 Electronic 0.88 66.8 6,336 6,019 *This table includes the systems DOE analyzed for 3-lamp 34W T12, 4,100K systems. These lamp-and-ballast designs apply to situations where consumers purchase both a lamp and a ballast. Additional results for other baselines and purchasing events are available in Chapter 5 of the TSD. b. Incandescent Reflector Lamps Engineering analysis results for IRL describe the baseline lamps DOE selected for the analyses. Table III.14 presents the engineering analysis results for the 75W PAR38 IRL. This baseline lamp and its lamp design substitutes are based around a 1,050 lumen-output lamp. The max-tech option
(CSL3)offers a 36 percent improvement in efficacy, with longer life. Additional engineering analysis results are available in Chapter 5 and Appendix 5A of the TSD. Discussion on the CSL efficacy values (derived from observed and extrapolated lamp efficacy values) are also available in Chapter 5 and Appendix 5A of the TSD. Table III.14.—Engineering Analysis for Standard-Spectrum IRL* Candidate standard level Design option Lamp descriptor Wattage *W* Initial light output *lm* Efficacy *lm/W* Lamp lifetime *Hr* Baseline Halogen PAR38 75 1050 14.0 2,500 CSL1 Improved Halogen PAR38 66 1050 15.9 3,000 CSL2 HIR PAR38 60 1050 17.5 3,000 CSL3 Improved HIR PAR38 55 1050 19.1 4,000 *The results in this table are for 75W PAR38 IRL. Additional results are available in Chapter 5 of the TSD. 6. Scaling to Product Classes Not Analyzed As discussed above, DOE identified and selected certain product classes as “representative” product classes where DOE would concentrate its analytical effort. DOE chose these representative product classes primarily because of their high market volumes. The following section discusses how DOE intends to scale CSLs from those product classes that it analyzed to those product classes that it did not analyze. a. General Service Fluorescent Lamps As discussed in section III.C.2, above, DOE did not analyze GSFL with a correlated color temperature
(CCT)above 4,500K and 2-foot U-shaped lamps. As discussed in section III.A, the efficacy of lamps with cooler CCTs (i.e., higher CCT values) is lower due to the quality of blue light emitted by lamps with cooler CCT. DOE compared commercially-available T8 lamps at 4,100K and 6,500K, and found that the efficacy of the 6,500K lamps was between 4 and 7 percent lower than that of the 4,100K lamps. In order not to overly penalize current product offered in the market, DOE is considering adopting the larger of the two scaling factors, namely 7 percent, when determining the minimum efficacy requirement for lamps greater than 4,500K. This would mean, for example, that if 82.4 lm/W (i.e., CSL1) were selected for the 4-foot medium bipin product class of 4,500K CCT and below, the scaled minimum efficacy requirement for the product class greater than 4,500K CCT would be 76.6 lm/W. DOE invites comment on this preliminary decision, including other approaches the public suggests, and any mathematical or other technical scaling factors that could be applied. Similarly, DOE observed that 2-foot U-shaped lamps generally are less efficacious than 4-foot medium bipin lamps due to the bend of a 2-foot U-shaped lamp. This drop in efficacy appears to be dependent on the wattage and diameter of the lamp in question. DOE has observed that 40W T12 2-foot U-shaped lamps are on average 6 percent less efficacious than a 40W T12 medium bipin lamp of the same phosphor series and manufacturer, while 34W T12 or 32W T8 2-foot U-shaped lamps are generally 3 percent less efficacious than the 34W T12 or 32W T8 medium bipin lamp of the same phosphor series and manufacturer. In order not to overly penalize T12 lamps, DOE is considering applying a 6 percent decrease to the CSLs for 4-foot medium bipin lamps for 2-foot U-shaped lamps. DOE invites comment on this preliminary decision, including other approaches, and any mathematical or other technical scaling factors that could be applied. b. Incandescent Reflector Lamps DOE has analyzed standard-spectrum lamps in its analysis, but DOE intends to set separate minimum efficacy requirements for standard-spectrum and modified-spectrum IRL, utilizing the approach discussed below. Modified-spectrum IRL filter out portions of the light spectrum emitted by the filament in order to obtain a particular spectral emission. Modified-spectrum lamps achieve their particular spectral emission through either a coating applied to the outer glass of the lamp or through the incorporation of neodymium (or other additives) into the outer glass bulb. Because this filtering of light reduces the lumen output of the lamp, DOE plans to establish a separate minimum efficacy requirement, appropriately scaled, for modified-spectrum lamps. As there is considerable variability in the modification of the spectrum (i.e., with some lamp coatings or glass additives adsorbing more light, others less), DOE plans to scale standard levels based on the degree of spectral modification. In order to scale appropriately, manufacturers would be required to measure the lumen output of both their modified-spectrum lamp, as well as the lumen output of an equivalent, standard-spectrum reference lamp (i.e., a lamp with equivalent:
(1)Rated wattage;
(2)rated voltage;
(3)gas fill pressure and composition;
(4)bulb shape and size;
(5)filament type and orientation;
(6)finish; and
(7)other design features of the modified-spectrum lamp except for the coating or neodymium (or other additives) which produces the modified-spectrum. In order to determine the appropriate minimum efficacy requirement for the modified-spectrum lamp, manufacturers would measure the lumen output of both the modified-spectrum lamp and the equivalent standard-spectrum reference lamp, and then multiply the ratio of lumen outputs (i.e., the lumen output of the modified spectrum lamp divided by the lumen output of the standard-spectrum reference lamp) by the minimum efficacy requirement for the standard-spectrum reference lamp. This lumen-output-adjusted minimum efficacy requirement would be scaled appropriately for exactly the coating or neodymium (or other additives) content producing the modified spectrum. In this way, the consumer would be assured that any minimum efficacy standard the Secretary may establish for standard-spectrum lamps would also be incorporated into the covered modified-spectrum lamps. DOE invites comment on this method of establishing a lumen-output-adjusted efficacy requirement, including other approaches, and any mathematical or other scaling factors for modified-spectrum lamps. Additional detail on the engineering analyses can be found in the Engineering Chapter (Chapter 5) of the TSD. D. Energy-Use Characterization The purpose of the energy-use characterization is to estimate the energy consumption of the baseline and higher efficacy lamps and lamp systems considered in this analysis. DOE determines the energy consumption of the lamps and lamp systems through the rated power (i.e., rated in watts) and the way consumers use the lamp (i.e., operating hours per year). This analysis, which is meant to represent typical energy consumption in the field, is an input to both the LCC and PBP analyses and the NIA. The energy-use characterization enables DOE to determine the LCC and the PBP of more-efficacious lamps relative to the baseline lamp. DOE derives the annual energy consumption of lighting systems by multiplying the power rating by the number of hours of operation per year. The following sections discuss the inputs and calculations DOE used to develop annual operating hours and the energy consumptions for the various lamps and lamp systems considered in this analysis. For more information on the representative classes analyzed for these lamp and lamps systems refer to section III.C.2 of this notice. Comments provided on issues related to the energy-use characterization are also summarized in these sections. 1. Operating Hours In the Framework Document, DOE sought data on the typical applications and end-use profiles of GSFL and IRL. EEI recommended that DOE take into account the distribution of operating hours (i.e., the number of hours a lamp is in use) by both lamp category and sector. (Public Meeting Transcript, No. 4.5 at pp. 158-159) DOE structured the analysis in a manner consistent with this comment, developing operating hours by both lamp category and sector. In addition, for the LCC analysis, DOE accounted for variability of operating hours by developing a distribution of operating hours for the LCC spreadsheet. The operating hour distributions capture variation across census divisions, building types, and lamp categories for all sectors. Within the commercial and industrial sectors, the distributions capture variation across “applications,” and within the residential sector, the distribution captures variation across “room types.” A list of these applications and room types is available in Chapter 6 of the TSD. EEI and the Northwest Power and Conservation Council (NWPCC) suggested several sources (such as Electric Power Research Institute, New York State Energy Research and Development Authority, California Energy Commission, CalMac, Florida Solar Energy Center) that DOE could use to obtain operating hour distribution data. (Public Meeting Transcript, No. 4.5 at pp. 158-164) NEMA recommended that DOE should use data from the 2002 study, U.S. Lighting Market Characterization Volume I (LMC). (Public Meeting Transcript, No. 4.5 at p. 160; NEMA, No. 8 at p. 3) After reviewing other data sources, DOE selected the LMC for this analysis because it is the most complete source of operating hour data and because it is generally consistent with other sources. The LMC, which is based on thousands of building audits and surveys, provides national-level data on operating hours by building type and lamp category for all sectors. These operating hours are broken down by application for the commercial and industrial sectors, and room type for the residential sector. EEI suggested that DOE should update the operating hour distributions to account for lighting controls in the commercial sector (Public Meeting Transcript, No. 4.5 at p. 158). EEI was not specific whether the lighting controls should encompass occupancy sensors, daylight dimming, or demand-responsive dimming systems that are activated during peak demand periods. While DOE recognizes that there probably are more lighting controls being used today, DOE does not believe the level of penetration is likely to be significantly different from LMC, which was published in 2002. Furthermore, DOE believes the overall national level of penetration of lighting controls at the individual level (i.e., those that would respond to one individual's office) is still relatively low. Finally, DOE is unsure how it would account for lighting controls, as there is uncertainty about which control systems are being recommended and nationally-representative data sources on the impact of lighting controls were not identified. Therefore, DOE has not modified the operating hour data from LMC for the ANOPR. However, DOE invites comment on this issue. In particular, DOE invites comment on the type, prevalence, and operating hour reductions due to lighting controls used separately in the commercial, industrial, and residential sectors. In conjunction with data from the LMC, DOE used data from the Energy Information Administration's
(EIA)CBECS (2003), RECS (2001), and the MECS (2002). These EIA studies provide information on the distribution of buildings within the U.S., by building type and census division. DOE associated the LMC's operating hour data by building type with the EIA's data by building type and census division to derive operating hours by census division. This allowed DOE to correlate the electricity price distribution (see TSD Chapter 8) and sales tax distribution (see TSD Chapter 7) with the operating hour distribution by census division in the LCC spreadsheet. The following describes data sources used to develop operating hours, by sector. For the residential sector, DOE used RECS building data and LMC residential sector operating hour data. The 2001 RECS data indicate the probability that a certain building type is within a census division. The LMC indicates the occurrence of certain room types within a given building type and the operating hour characteristics of typical lamps in these rooms. By using probabilities derived from RECS, the LCC model selects a building of a certain type and census division. The model then selects a room within that building type using LMC data and presents operating hour data for a typical lamp in that room. DOE used a similar approach to the one described for the residential sector to develop a distribution of operating hours in the commercial sector. However, in lieu of room type, the model selects operating hours based on application. The 2003 CBECS data indicate the probability a certain building type is located in a certain census division. Once the LCC model selects a building, DOE used the LMC to indicate the probability a lamp is installed in a certain application in that building. The LMC then estimates the operating hour characteristics of a typical lamp for that application. A sample of the diversity of operating hour characteristics can be found in Chapter 6 of the TSD. To develop a distribution of operating hours in the industrial sector, DOE used an approach similar to that used for the commercial sector. The 2002 MECS data indicate the probability a certain building type exists. Once the model selects a building, DOE uses LMC to ascertain the probability a GSFL or IRL is installed in a certain application in that building. LMC then gives the operating hour characteristics of a typical lamp for that application. Because MECS does not provide the location of industrial sector buildings, DOE used population information from the 2007 census to establish the probability that a certain industrial building exists in a certain census division. Table III.15 summarizes the weighted-average operating hours per lamp category per sector. DOE has not developed the weighted-average operating hours for GSFL in the residential sector because shipment information and manufacturer interviews indicate that the vast majority of the GSFL market resides in the commercial and industrial sectors. However, if analysis of GSFL in the residential sector were deemed necessary, DOE could use the distribution of operating hours of IRL, as this may approximate the operating hour profile of GSFL in the residential sector. Alternatively, DOE could develop a distribution of operating hours from an alternative data source. DOE invites comment on the average operating hours for the use of GSFL and IRL in the commercial, residential, and industrial sectors. DOE also invites comment on how DOE should develop an operating hour distribution for GSFL in the residential sector. Table III.15.—Average Operating Hours by Sector and Lamp Category Sector Lamp category Average annual operating hours *hrs/year* Residential IRL 884.2 Commercial GSFL 3435.0 IRL 3450.0 Industrial GSFL 4795.1 IRL 4664.0 2. Results For GSFL, energy consumption by sector is based on the system power rating derived by DOE and the average annual operating hours of that lamp. As an illustration of how DOE determined energy consumption, Table III.16 and Table III.17 list the system power ratings and annual energy consumption of the 4-foot medium bipin product class. Additional detail on the energy-use characterization of other GSFL can be found in Chapter 6 of the TSD. Table III.16.—Four-Foot Medium Bipin T8 GSFL 3-Lamp System Power Consumption Rating and Annual Energy Consumption Lamp & ballast designs System power rating *W* Annual energy consumption Commercial *kWh* Industrial *kWh* 1.18BF32 Elec 37 114.5 393.2 548.9 1.18BF25 Elec 93.0 319.5 446.1 1.0BF32 Elec 98.3 337.7 471.4 1.0BF30 Elec 90.2 309.8 432.5 1.0BF28 Elec 80.5 276.5 386.0 0.88BF32 Elec 87.5 300.6 419.7 0.88BF30 Elec 80.5 276.5 386.0 0.88BF28 Elec 71.1 244.2 340.9 0.88BF25 Elec 66.8 229.6 320.5 0.78BF32 Elec 78.5 269.8 376.6 0.78BF30 Elec 72.4 248.8 347.3 0.78BF28 Elec 63.3 217.3 303.3 0.75BF32 Elec 75.9 260.5 363.7 Table III.17.—Four-Foot Medium Bipin T12 GSFL 3-Lamp System Power Rating and Annual Energy Consumption Lamp-and-ballast designs System power rating *W* Annual energy consumption Commercial *kWh* Industrial *kWh* 0.95BF40 Mag 129.0 443.1 618.6 0.88BF34 Mag 108.0 371.0 517.9 0.88BF40 Elec 107.7 369.8 516.2 0.88BF34 Elec 91.7 314.8 439.5 0.87BF40 Elec 107.0 367.5 512.9 0.86BF40 Elec 90.3 310.2 433.0 Because the lamp system for IRL consists only of the lamp, the system's rate of energy use is simply the rated power of the lamp. Table III.18 details the lamp power rating and annual energy consumption for the 75W PAR38 reference lamp and its lamp designs. Additional detail on the energy-use characterization of IRL can be found in Chapter 6 of the TSD. 37 A notation of the form “1.18BF32Elec” indicates a lamp-ballast system consisting of a 32W lamp paired with an electronic ballast of a 1.18 ballast factor. “0.95VF40 Mag” refers to a lamp-ballast system of a 40W lamp paired with a magnetic ballast of a 0.95 ballast factor. Table III.18.—IRL Power Rating and Annual Energy Consumption, 75PAR38 Technology option Lamp efficacy *lm/W* Lamp power rating *W* Annual energy consumption Commercial *kWh* Industrial *kWh* Residential *kWh* Baseline 14.0 75.0 258.8 349.8 66.3 CSL1 15.9 66.0 227.7 307.8 58.4 CSL2 17.5 60.0 207.0 279.8 53.1 CSL3 19.1 55.0 189.8 256.5 48.6 E. Product Price Determination This section explains how DOE developed end-user prices for baseline products as well as higher-efficacy products, and how DOE developed the sales tax figures it used in the analyses. To derive the total, installed end-user cost of products, DOE added sales tax and installation costs, where appropriate, to end-user prices. Please see section III.G for a discussion of installation costs. 1. Introduction and Methodology a. Overview In the Framework Document, DOE suggested the approach of deriving end-user prices by applying distributor and contractor mark-ups to manufacturer-selling-price estimates. DOE had planned to derive manufacturer selling prices by applying manufacturer mark-ups to the manufacturer costs of production. At the Public Meeting, GE and NEMA commented that manufacturer cost data is proprietary information and is therefore unlikely to be shared by manufacturers. (Public Meeting Transcript, No. 4.5 at pp. 133-135). As an alternative to deriving manufacturer selling price from manufacturer cost, GE suggested that DOE obtain manufacturer selling prices from distributors, State procurement contracts and other publicly-available information sources. GE further recommended that if DOE seeks to derive manufacturer costs, DOE could work backwards through the distribution chain from the publicly-available product list prices. (Public Meeting Transcript, No. 4.5 at p. 133) ACEEE and several stakeholders supported the same methodology recommended by GE. (NEMA, No. 8 at p. 3, Public Meeting Transcript, No. 4.5, p. 129 and p. 136; Joint Comment, No. 9 at p. 3). As suggested by stakeholders, DOE obtained manufacturer's published end-user price schedules for lamps (hereafter called the manufacturer's “blue book” or “lamp price schedules”) as well as information on discounts applied to those price schedules from distributors, State contracts, and other publicly-available information sources. In addition, DOE also obtained information on distributor pricing (i.e., what a distributor would pay) for commercial, industrial, and institutional consumers of lamps. Thus, in response to comments on the Framework Document, and due to the availability of pricing information, DOE revised its approach for developing lamp prices from what was presented in the Framework Document. Starting from a consistent set of prices in the blue books, DOE looked at publicly-available prices in State procurement contracts, at large electrical supply distributors, home-improvement/hardware stores, and other sources of publicly-available end-user prices, such as Internet retailers. In its review of publicly-available market prices, DOE observed a range of end-user prices paid for a given lamp, depending on the distribution channel through which it is purchased and the volume at which it is purchased. DOE observed that State procurement contracts typically negotiated a discount of around 70 to 90 percent off the blue book. In the vast majority of instances, these discounts apply uniformly to all products on a price schedule irrespective of the volume of a particular lamp. Internet retailers, electrical supply distributors, and home-improvement/hardware stores generally reflected prices paid by consumers in the medium-to-high range of prices. Furthermore, these channels usually apply different discounts to lamps depending on their sales volume. Since many high-efficacy lamps are “niche” products, DOE observed that they were generally less discounted than commodity lamps. ACEEE commented that State procurement contracts represent prices with low mark-ups. (Public Meeting Transcript, No. 4.5 at pp. 129-130) GE and the Joint Comment stated that mark-ups vary by volume, with GE stating that higher volume lamps have lower mark-ups and lower volume lamps have higher mark-ups. (Public Meeting Transcript, No. 4.5 at p. 133; Joint Comment, No. 9 at p. 3). In response to comments and in line with its observations of public pricing, DOE developed three sets of discounts from the blue books, representing the range of low, medium, and high lamp prices for GSFL and IRL. For IRL, commercially-available products did not span the full range of efficacies considered. For those lamps where commercial pricing was not available, DOE extrapolated pricing from available lamps. The development of the low, medium, and high prices specific to each lamp category is described below in subsection III.E.1.b. Several stakeholders commented that the manufacturer costs DOE derives should reflect the production of commodity-type products. (Joint Comment, No. 9 at pp. 2-3). To reflect future commoditization of higher-efficacy lamps when they become the minimum complying products, the discounts DOE applied to blue books to derive the low, medium, and high prices are a constant markdown across all lamps. (Baseline incandescent lamps received a slightly larger discount, as reflected in State procurement contracts.) DOE also accounted for the future commoditization of high-efficacy residential IRL by using the incremental pricing of PAR 38 IRL. In particular, DOE notes that the market for high-efficacy PAR 38 IRL is well developed in comparison to the high-efficacy PAR 30 IRL market. Furthermore, DOE notes that the products themselves use the same fundamental technologies. Although DOE did not estimate manufacturer costs directly, DOE notes that the use of a single markdown across efficacies and types of PAR 38 IRL and the use of PAR38 IRL incremental pricing for PAR30 IRL accounts for commoditization of high-efficacy products. Once DOE calculated end-user prices, DOE added sales tax and, if appropriate, installation costs to derive the total, installed end-user cost. Please see section III.G for a discussion of installation costs. For the reference case in the LCC, DOE used the medium lamp prices, but it also conducted analysis at the low and high lamp prices, to ascertain the impact of these other price points (see TSD Chapter 8). In the NIA, DOE used only the medium prices in that analysis because this price best represents the average purchase price for a variety of consumers nationwide (see TSD Chapter 10). DOE also developed a single average end-user price for the new and replacement ballasts used, to which it added sales tax and installation costs. DOE requests comment on the approach to developing end-user prices for GSFL and IRL considered in this rulemaking. b. General Service Fluorescent Lamps To develop low-range prices for GSFL, DOE calculated a discount off the blue book consistent with prices found in State procurement contracts. DOE mirrored the procurement discount schedule by using a constant discount across lamp efficacies. As noted above, DOE believes that using this discount schedule is appropriate for the rulemaking analyses, as it reflects currently-available pricing and because it takes into account commoditization of standard-compliant lamps. Consistent with State procurement contracts, DOE assumed that these low-range prices include a distributor mark-up but no contractor mark-up. As such, this is truly a lower bound of pricing which assumes the most favorable conditions. For medium-range prices, DOE took a discount off the blue book that is consistent with the distributor pricing it received and that represents a typical discount for commercial institutions on high-volume (commodity) lamps. Again, DOE used a single discount across efficacies. DOE added a contractor mark-up of 13 percent so that the resulting price would encompass both a contractor and distributor mark-up. DOE obtained this contractor mark-up estimate from the 2000 Ballast Rule. 38 38 U.S. Department of Energy. Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Technical Support Document: Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast Proposed Rule (Jan. 2000). Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/gs_fluorescent_0100_r.html* . For the high-range prices, DOE deduced discounts on commodity lamps from blue book prices for small quantity purchasers by observing high-range pricing and obtaining distributor quotes. These prices also encompass both a contractor and a distributor mark-up. DOE was able to obtain data on actual prices for all GSFL it considered in the analyses. For the replacement ballasts considered in the analysis, DOE gathered prices from publicly-available manufacturer price schedules and applied a uniform discount that is customary for pricing to large customers. All ballast prices represent contractor net price plus contractor mark-up for ballasts purchased from a distributor. DOE computed a simple average end-user price by applying a 50-percent mark-up above the lowest price paid in large multi-year State procurement contracts. Based on conversations with industry experts, DOE believes these prices are representative of average end-user sales prices. DOE was able to obtain data on actual prices for ballasts it considered in the analyses. c. Incandescent Reflector Lamps For IRL, DOE modeled PAR30 and PAR38 IRL. DOE calculated the low-range price for PAR38 IRL as it did for GSFL given their large range of higher-efficacy products commercially available. Specifically, DOE compared State procurement contracts to blue books to develop an average discount. Again, DOE mirrored State contract pricing by following the discount schedule used in State contracts. For the medium-range price, DOE took a discount off the blue book to represent shipment weighted-average prices paid by consumers for commonly available lamps. For the high-range prices, DOE took a discount off the blue book that represents prices that are higher-than-average but in line with observed high-range pricing. This medium-range price is equidistant from the low-range and high-range prices. For PAR30 IRL, DOE used a slight variation to the methodology followed for GSFL and PAR38 IRL. In particular, to develop the PAR30 baseline lamp price, DOE used the price differential between an incandescent (non-halogen) BR40 lamp and halogen PAR38 lamp. DOE added this price differential to a incandescent (non-halogen) BR30 lamp price to obtain the baseline halogen PAR30 lamp price. By developing prices for the baseline lamps from the incandescent replacement lamps (BR30 and BR40 lamps), DOE is recognizing that the high-volume product currently being shipped may be a lower-efficacy (non-halogen) incandescent lamp. 39 Therefore, basing prices off of this lamp will most accurately represent the commoditization of the halogen PAR30 by 2012 (the effective date of the amended standard). Similarly for higher-efficacy lamp designs, DOE developed a list price to discount from based on the incremental blue book prices of PAR38 IRL. As such, DOE added the incremental end-user blue book price of PAR38 lamps to the baseline PAR30 lamp price to derive higher-efficacy PAR30 lamp list prices. DOE chose this methodology for PAR30 IRL because for PAR30 lamps, two of the standards-compliant lamps were not commercially available. In addition, PAR30 lamps use the same fundamental technologies as PAR38 lamps, which serve a more developed market. 39 Although currently the BR40 non-halogen IRL may be the higher-volume product, DOE expects that, with the prescription of energy conservation standards for certain ER and BR lamps by EISA 2007, by 2012 (the effective date of this rulemaking's amended standards) the PAR30 halogen baseline lamp price will reflect the effects of further commoditization. 2. End-User Price Results The following section presents partial results from the product price determination. The tables summarize the end-user prices DOE developed through the product price determination. (The figures in the tables do not include tax or installation costs). They follow in order of lamp category. Additional results for the product price determination are available in Chapter 7 of the TSD. a. General Service Fluorescent Lamps Table III.19 lists the low, medium, and high end-user prices DOE used for the 4-foot medium bipin T12 GSFL considered in the analyses. Results for 4-foot medium bipin T8 GSFL and 8-foot GSFL are available in Chapter 7 of the TSD. In reviewing market prices, DOE observed that prices generally increased with increasing efficacy. However, other lamp characteristics such as lifetime, wattage, and CRI likely also affected price, but these variables cannot be completely isolated. To the extent feasible, DOE considered non-efficacy characteristics that affect installed or operating costs in the LCC. Table III.19.—End-User Prices for 4-Foot Medium Bipin GSFL* CSL Lamp efficacy *lm/W* Lamp power *W* Lamp lifetime *hr* CRI Mean lamp light output *lm* Low price *$* Medium price *$* High price *$* T12 40W Baseline 80.0 40 20,000 70 2,880 1.41 2.35 3.28 T12 34W Baseline 77.9 34 20,000 62 2,300 0.89 1.49 2.09 1 82.5 40 20,000 80 3,000 2.64 4.41 6.17 1 82.4 34 20,000 70 2,460 1.58 2.64 3.70 2 85.0 40 24,000 80 3,060 3.51 5.86 8.20 2 85.3 34 20,000 80 2,610 2.90 4.83 6.76 3 90.0 40 24,000 85 3,250 3.57 5.95 8.33 3 91.2 34 24,000 85 2,790 3.50 5.83 8.16 * This table presents results for T12 4-foot medium bipin GSFL. Results for additional product classes, and T8 4-foot medium bipin GSFL are available in Chapter 7 of the TSD. As noted above, DOE derived one end-user price for the GSFL ballasts it considered in the analysis. DOE did not develop end-user prices for magnetic ballasts operating with 4-foot medium bipin lamps (rapid start magnetic ballasts), 8-foot single pin slimline lamps (instant start magnetic ballasts), and 8-foot recessed double contact high output lamps (rapid start magnetic ballasts). This is because the LCC and NIA analyses do not model any purchases of these ballasts after 2012. The energy conservation standards set by the 2000 Ballast Rule and the EPACT 2005, Pub. L. 109-58, are effective for all covered ballasts in 2010. These standards ban the sale of magnetic 4- foot medium bipin and 8-foot single pin slimline ballasts. In addition, DOE believes that sales of magnetic ballasts that operate 8-foot recessed double contact high output lamps will be minimal after 2012. Again, for all of these reasons, DOE did not consider magnetic ballasts in either the LCC or NIA analyses. In its review of market prices for ballasts, DOE observed that prices tended to be constant within two groupings of BFs:
(1)Low and normal BFs (a BF typically under 1.0); and
(2)high BFs (a BF typically over 1.0). Table III.20 presents end-user prices for ballasts used in the LCC and NIA analysis. Table III.20.—End-User Prices for Instant Start Electronic Fluorescent Lamp Ballasts Lamp type Ballast factor range Ballast price 4-foot T8 Medium Bipin Normal and Low BF 0.75-0.88 $18.31 4-foot T8 Medium Bipin High BF 1.0-1.18 25.49 4-foot T12 Medium Bipin Normal BF 0.86-0.88 24.36 8-foot T8 Single Pin Slimline Normal and Low BF 0.78-0.88 25.86 8-foot T8 Single Pin Slimline High BF 1.18 47.51 8-foot T12 Single Pin Slimline Normal BF 0.85-0.88 24.73 8-foot T8 Recessed Double Contact HO Normal BF 0.81-0.88 48.17 8-foot T12 Recessed Double Contact HO Normal BF 0.88-0.90 30.40 b. Incandescent Reflector Lamps For IRL, within the range of lamp wattages analyzed, DOE observed that lamp price did not vary significantly by wattage. As a result, DOE did not vary price by wattage in its analysis. However, DOE did observe price differentials between larger- and smaller-diameter IRL and, therefore, analyzed the two lamp shapes (PAR38 and PAR30) separately. Table III.21 presents the end-user price results for PAR38 IRL. Results for the PAR30 IRL are available in Chapter 7 of the TSD. Table III.21.—End-User Prices for PAR38 IRL Lamp type Lamp shape CSL Lamp lifetime *hr* Low price *$* Medium price *$* High price *$* Halogen PAR38 Baseline 2,500 3.20 4.80 6.40 Improved Halogen PAR38 1 3,000 4.07 6.10 8.13 HIR PAR38 2 3,000 4.18 6.26 8.35 Improved HIR PAR38 3 4,000 5.00 7.50 10.00 DOE requests feedback on its approach to developing lamp or lamp-and-ballast prices for GSFL and IRL. Furthermore, DOE requests comment on its end-user prices results for fluorescent lamp ballasts. 3. Sales Taxes The sales tax figure represents State and local sales taxes that are applied to the consumer product price. It is a multiplicative factor that increases the consumer product price. DOE derived State and local taxes from data provided by the Sales Tax Clearinghouse. 40 These data represent weighted averages that include county and city rates. DOE then derived population-weighted average tax values for each Census division and large State. The distribution of sales tax rates ranges from a minimum of 0 percent to a maximum of 9.4 percent, with a weighted-average value of 6.9 percent. 40 Sales Tax Clearinghouse, Aggregate State Tax Rates (2007). Available at: *http://thestc.com/STrates.stm* . Specifically, DOE utilized the relevant material from this website as posted on May 25, 2007; that material is available in Docket #EE-2006-STD-0131. Additional detail on the derivation of the product prices used in this analysis can be found in Chapter 7 of the TSD, product price determination. F. Rebuttable Presumption Payback Periods A more energy-efficient device will usually cost more to purchase than a device of standard energy efficiency. However, the more-efficient device will usually cost less to operate due to reductions in operating costs (i.e., lower energy bills). The payback period
(PBP)is the time (usually expressed in years) it takes to recover the additional installed cost of the more-efficient device through energy cost savings. Section 325(o)(2)(B)(iii) of EPCA establishes a rebuttable presumption that a standard for GSFL or IRL 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 * * * savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure * * *.” (42 U.S.C. 6295(o)(2)(B)(iii)) This rebuttable presumption test is an alternative path to establishing economic justification, as compared to consideration of the seven factors set forth in 42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII). DOE's lamp test procedures measure the rate of light output per unit power consumption of a lamp (i.e., lumens per watt) rather than a measurement of energy consumption (i.e., a measurement over a duration or operating time period). Therefore, in order to calculate energy savings for the rebuttable presumption payback period, one would need to multiply the rate of power consumption of a lamp times the usage profile of that lamp. For IRL, energy savings calculations in the LCC and PBP analyses use both the relevant test procedures as well as the relevant usage profile. Because DOE calculates payback periods using a methodology consistent with the rebuttable presumption test for IRL in the LCC and payback period analysis, DOE is not performing a stand-alone rebuttable presumption analysis for IRL, as it is already embodied in the LCC and PBP analyses. For GSFL, DOE believes that the rate of energy consumption of the lamp-and-ballast system is a more accurate measure of real world power consumption than the rate of power consumption of the lamp as measured on a reference ballast, as specified in the test procedure. 41 Because calculations of energy savings in the LCC are based on real-world conditions, DOE will also rely on payback periods calculated in the LCC for GSFL. See section III.G of this notice or Chapter 8 of the TSD for further detail on the LCC and payback period calculation. 41 For example, T8 lamps which are often operated on high-frequency electronic ballasts would be tested and measured on a line-frequency (60 Hz) reference ballast using DOE's test procedure, resulting in different performance characteristics than this lamp would exhibit in the field, operated on an electronic ballast. G. Life-Cycle Cost and Payback Period Analyses The life-cycle cost
(LCC)and payback period
(PBP)analyses determine the economic impact of potential standards on consumers. The effects of standards on individual or commercial consumers include changes in operating expenses (usually lower) and changes in total installed cost (usually higher). DOE analyzed the net effect of these changes GSFL and IRL first by calculating the changes in consumers' LCCs likely to result from CSLs as compared to a base case (no new standards). The LCC calculation considers total installed cost (which includes manufacturer selling price, sales taxes, distribution chain mark-ups, and any installation cost), operating expenses (energy, repair, and maintenance costs), product lifetime, and discount rate. DOE performed the LCC analysis from the perspective of the consumer of a lamp. DOE also analyzed the effect of changes in operating expenses and installed costs by calculating the PBP of potential standards relative to a base case. The PBP estimates the amount of time it would take the individual or commercial consumer to recover the assumed higher purchase expense of more energy efficient product through lower operating costs. The PBP is based on the total installed cost and the operating expenses, the same approach used in calculating the LCC. However, unlike in the LCC analysis, DOE considers only the first-year operating expenses in the calculation of the PBP. Because the PBP does not account for changes in operating expense over time or the time value of money, it is also referred to as a simple PBP. Usually the consumer benefits of a regulation exceed the consumer costs of that regulation if the service life of the covered product is substantially longer than the PBP. The following discussion provides an overview of the approach and inputs for the LCC and PBP analyses performed by DOE, as well as a summary of the preliminary results generated for the lamps under consideration in this rulemaking. However, for a more detailed discussion on the LCC and PBP analyses please refer to Chapter 8 of the ANOPR TSD. 1. Approach The LCC analysis estimates the impact on consumers of potential energy conservation standards by calculating the net cost of a lamp (or lamp-ballast system) under two scenarios:
(1)A “base case” of no new standard; and
(2)a “standards case” under which lamps must comply with a new energy efficiency standard. The first step in calculating the LCC is specifying the installed costs associated with each design, which includes the lamp (or lamp-and-ballast system) price, sales taxes, and any installation cost. (The development of total installed costs is explained more fully in sections III.E of this notice and Chapters 7 and 8 of the TSD.) After developing the installed costs, DOE used operating hour data and electricity price data to develop operating costs of the base-case and standards-case lamps over the analysis period. (The development of operating costs is explained in section III.D.1. of this notice and Chapters 6 and 8 of the TSD.) DOE calculated the LCC value for each design and each customer using a discount rate that represents the average cost of capital for that customer. After repeating the calculation for many customers and many designs, 42 DOE calculated the distribution of net LCC impacts of each design. A distinct advantage of this approach is that DOE can identify the proportion of lamp installations achieving LCC savings or attaining certain payback values due to a new energy conservation standard, in addition to the average LCC savings or average payback for that standard. Refer to Chapter 8 of the ANOPR TSD for detailed discussion of the LCC analysis method. 42 For each design, DOE calculated the LCC results for 1,000 consumers using Monte Carlo simulations. These results are presented in Appendix 8B of the TSD. During the Public Meeting on the Framework Document, DOE stated its intention to use Monte Carlo analysis in the LCC to consider end-user variability and conduct sensitivity analyses. Reinforcing this decision, stakeholders commented that conducting such analyses using a Monte Carlo approach would provide useful information on the number of purchasers who benefit from or are disadvantaged by the standard, and by how much. (Joint Comment, No. 9 at p. 4) Accordingly, DOE has incorporated in its LCC and PBP spreadsheet model both Monte Carlo simulation and probability distributions by using Microsoft Excel spreadsheets with Crystal Ball (a commercially-available add-in program). DOE's Monte Carlo simulation considers variability in electricity prices, sales taxes, operating hours, and discount rates. See section III.G.2 for a discussion of LCC inputs. For a detailed discussion on the average annual energy use of lamps and the methodology used to calculate the distribution of annual energy use, please refer to section III.D of this ANOPR and Chapter 6 of the TSD. In order to accurately compare the life cycle cost of two different products, one must evaluate the life cycle cost of each product over the same fixed period of time (i.e., the analysis period). For the life-cycle cost analysis, the analysis period is the lifetime of the covered product. For most covered products that DOE analyzes, the lifetimes of the more efficient products are the same as the lifetimes of baseline products being analyzed. For this rulemaking, given the unequal lifetimes of the baseline and higher efficacy lamp designs, DOE has chosen to establish its analysis period on the lifetime of the baseline lamp. In situations where a lamp lifetime is shorter than the analysis period, DOE assumes that the lamp is replaced during the analysis period. To account for any remaining lifetime at the end of the analysis period, DOE calculates a “residual value” for that lamp. 43 43 The “residual value” represents the remaining value of a lamp or a ballast from the end of the period of analysis to the end of the service life of the lamp or ballast. The equation for residual value is as follows: (see equation above) Where IC = total installed cost of the product, n = the number of replacements within the analysis period, SL = the service life of the product, and P <sup>Analysis</sup> = the analysis period. EP13MR08.000 The residual value is an estimate of the product's value to the consumer at the end of the life-cycle cost analysis period. In addition, this residual value must recognize that a lamp system continues to function beyond the end of the analysis period. DOE calculates the residual value by linearly prorating the product's initial cost consistent with the methodology described in the Life-Cycle Costing Manual for the Federal Energy Management Program. 44 More information discussing the residual value is given in Chapter 8 of the TSD. 44 National Institute of Standards and Technology Handbook 135, 1996 Edition, 210 pages (Feb. 1996), p. 4-6. ACEEE commented that a residual value calculation or a 50-year analysis period would yield similar results. (Public Meeting Transcript, No. 4.5 at p. 188) DOE agrees that using a long analysis period, such as 50 years, and discounting cash flows would normalize for differences in lifetimes of different lamps. However, the statute explicitly directs DOE to consider the increased first costs and operating cost savings over “the estimated average life of the covered product.” (42 U.S.C. 6295(o)(2)(B)(i)(II)) The life-cycle costs over a 50 year analysis period would be significantly larger than those over a typical lamp lifetime. For this reason, DOE believes that the residual value approach is more consistent with the statute and with the concept of life-cycle costing, and elected to use the lifetime of the baseline lamp as the period of analysis. DOE invites comment on its usage of residual values in the life-cycle cost analysis as well as any other possible approaches to calculating life-cycle costs for products with different lifetimes. 2. Life-Cycle Cost Inputs For each efficacy level analyzed, the LCC analysis requires input data for the total installed cost of the product, the operating cost, and the discount rate. Table III.22 summarizes the inputs and key assumptions DOE used to calculate the consumer economic impacts of various energy efficacy levels for each product. A more detailed discussion of the inputs follows. Table III.22.—Summary of Inputs and Key Assumptions Used in the LCC Analyses Input Description Consumer Equipment Price As discussed in section III.E, DOE started with manufacturer catalog (“blue-book”) pricing, and used different discounts to represent low, medium, and high prices for all lamp categories. Sales tax Sales tax is then applied to convert the consumer equipment price to a final consumer price including sales tax. The sales tax mark-up is described in detail in section III.E. Installation cost This input represents the cost to the commercial or industrial customers of installing the lamps or lamp systems. The installation price represents all costs required to install the lamp or lamp system but does not include the customer equipment price. The installation price includes labor and overhead. Thus, the total installed cost equals the consumer equipment price including sales tax plus the installation price. Annual operating hours The annual operating hours are the estimated hours that a lamp is in use during the time span of one year. Section III.D, Energy-Use Characterization, details how DOE determined the lamp operating hours as a function of end-user sector, geographic region, and application. Product energy consumption rate The product energy consumption is the site-energy usage rate associated with operating the lamp system. Section III.D, Energy-Use Characterization, details how DOE determined the product energy consumption rate. Electricity prices Electricity prices used in the analysis are the average price per kilowatt-hour (i.e., $/kWh) paid by customers. DOE determined electricity prices using national average residential, commercial, and industrial electricity prices for the sample calculation, while for the Monte Carlo distribution, DOE used average residential, commercial, and industrial values for 13 regions and large States. All electricity price data are obtained from the EIA, 2005. Electricity price trends DOE used the EIA's *AEO2007* 45 to forecast electricity prices. For the results presented in this notice, DOE used the *AEO2007* reference case to forecast future electricity prices. Lifetime The total hours in operation after which the consumer retires the lamp or components of a lamp system from service. Discount rate The discount rate is the rate at which DOE discounts future expenditures to establish their present value. Analysis Period Analysis period is the time span over which DOE calculated the LCC. a. Total Installed Cost Inputs The following sections describe the total installed cost inputs. As described previously, to account for variability in pricing, DOE estimated three product prices per lamp design, which correspond to variation in purchasing power. DOE applied sales tax to each product price to create a set of end-user prices for these system components. 45 U.S. Department of Energy. Energy Information Administration, Annual Energy Outlook 2007 with Projections to 2030 (Feb. 2007). Available at: *http://www.eia.doe.gov/oiaf/aeo/index.html* . The installation cost represents all costs associated with installing the lamp or lamp-and-ballast system, other than the end-user lamp price. Thus, the total installed cost equals the consumer lamp price (which includes mark-ups and taxes) plus the installation cost. In its Framework Document, DOE noted that installation costs are negligible for the residential sector but important in the commercial and industrial sectors. NEMA commented that there are generally no repair or maintenance costs for incandescent lamps, but only installation costs. (Public Meeting Transcript, No. 4.5 at p. 174; NEMA, No. 8 at p. 3) DOE is aware that installation costs for incandescent lamps are applicable by sector and not by lamp type. For example, consumers in the residential sector typically do not incur installation costs, as these consumers typically change their own lamps. Therefore, for IRL analyzed in the residential sector, DOE assumed no installation costs. Rather, the cost the user pays is simply that of the product. Purchasers in the commercial and industrial sectors, on the other hand, do incur installation costs because they usually employ a maintenance worker to install their incandescent lamps. Therefore, DOE applied installation costs for IRL analyzed in the commercial and industrial sectors. DOE stated in the Framework Document that it would consider installation costs but not maintenance costs in its analysis. According to NEMA, installation costs are important for fluorescent lamps, but there are also some maintenance costs. (Public Meeting Transcript, No. 4.5 at p. 174) DOE presumes that the maintenance costs to which NEMA referred are the costs of re-lamping a lighting system (i.e., replacing the lamp in a lighting system at end of lamp life). For GSFL, DOE assumed installation costs for lamp-and-ballast systems, and re-lamping costs for lamps. DOE requested comment in the Framework Document on whether it should consider group and spot re-lamping practices in its analysis of installation costs. NEMA commented that, for GSFL, a small percentage of fluorescent lamps are group re-lamped rather than spot re-lamped. (Public Meeting Transcript, No. 4.5 at pp. 174-176; NEMA, No. 8 at p. 3) GE commented that group re-lamping should not be considered for incandescent or incandescent reflector lamps, but could be considered for fluorescent lamps; however, GE did not provide further explanation for its opinion. (Public Meeting Transcript, No. 4.5 at pp. 176-177) The approach DOE is following for the ANOPR is consistent with these comments. For GSFL, DOE obtained estimates of the prevalence of group versus spot re-lamping from the 2000 Ballast Rule. DOE then weighted the spot and group re-lamping times by the percent occurrence of spot versus group re-lamping to derive weighted-averaged re-lamping times. To account for installation costs for IRL in the commercial sector, DOE used re-lamping time estimates from the *RS Means Electrical Cost Data, 2007* 46 (hereafter “RS Means”). 46 R.S. Means Company, Inc., 2007 RS Means Electrical Cost Data (2007). For ballasts, DOE derived labor rates for electricians and helpers from RS Means. Labor rates are the sum of the wage rate, employer-paid fringe benefits (i.e., vacation pay, employer-paid health, and welfare costs), and any appropriate training and industry advancement funds costs. DOE assumed that the labor rate for installing a ballast is a composite that equals 50 percent of the electrician labor rate plus 50 percent of the electrician-helper labor rate. For re-lamping (only lamp replacement), DOE assumed that the task was performed by a general maintenance worker at a labor rate DOE obtained from the U.S. Bureau of Labor Statistics for a General Maintenance worker. 47 Using these labor rates and labor times, DOE derived the average cost to install a lamp and the average cost to install a lamp and ballast. 47 U.S. Department of Labor Bureau of Labor Statistics. Occupational Employment and Wage Estimates. National Cross-Industry Estimates (May 2005). Available at: *http://www.bls.gov/oes/oes_dl.htm* . DOE recognizes that labor times for replacing a ballast may change because of changes in the 2005 National Electric Code. 48 Specifically, the addition of Part XIII, Section 410.73(G) to the 2005 National Electric Code requires a means for disconnecting luminaires installed in an indoor location so that electrical contractors will not work on energized equipment while replacing or servicing ballasts. This change applies to both commercial and industrial installations. 49 This requirement goes into effect January 1, 2008, and it is expected to significantly increase the labor time required for ballast installations. Therefore, DOE is requesting comment on how labor times and related installation costs for ballasts will be affected by this change in the National Electric Code. 48 National Fire Protection Association, *National Electric Code 2005* . CENGAGE Delmar Learning: 2004. 49 Ode, Mark C., “Unplugging Fluorescents,” Electrical Contractor (July 2005). Available at: *www.ul.com/regulators/ode/0705.pdf* . Additional details on the development of installation costs can be found in Chapter 8 of the ANOPR TSD. b. Operating Cost, Replacement Cost, and Residual Value Inputs The following sections describe additional inputs used in calculating the LCC. These include inputs used to develop operating costs, replacement costs, and residual values. The operating cost of a lamp system is a function of the annual energy consumption, energy cost, repair and maintenance costs, analysis period, and the discount rate. Annual energy consumption is the site-energy use (i.e., electricity use) associated with operating a lamp or lamp-and-ballast system. The inputs for estimating annual energy consumption are discussed in section III.D of this ANOPR. Electricity prices are the prices paid by consumers for electricity. DOE used electricity price trends to forecast electricity prices into the future. Multiplying the annual energy consumption by the electricity prices yields the annual energy cost. Because DOE assumed no repair or maintenance costs, costs associated with repairing or replacing components that have failed, the only operating costs associated with lamps are energy costs. The analysis period is the time span over which the LCC is calculated. For the purpose of this rulemaking, DOE based the analysis period on the baseline lamp's service lifetime (i.e., the lamp's operating lifetime in hours divided by annual operating hours). The discount rate is the rate at which DOE discounted future expenditures to establish their present value. The replacement cost (i.e., the costs associated with a lamp replacement) is dependent on the installed cost, discount rate, analysis period, and service life. The product service life is the age at which the product is retired from service. The residual value (also dependent on the four inputs used to develop replacement costs) is the discounted total installed cost of a lamp (or lamp and ballast) multiplied by the percentage of remaining life for that lamp (or lamp and ballast) past the analysis period. i. Electricity Prices With regard to electricity prices, DOE derived average prices for 13 geographic areas consisting of the nine U.S. Census divisions, with four large States (New York, Florida, Texas, and California) treated separately. For Census divisions containing one of these large States, DOE calculated the regional average values leaving out data for the large State—for example, the Pacific region average does not include California, and the West South Central region does not include Texas. DOE estimated residential, industrial, and commercial electricity prices for each of the 13 geographic areas based on data garnered from EIA Form 861, Annual Electric Power Industry Report. DOE's calculation methodology uses the most recently available EIA data (2005). For further details of the methodology that DOE used for deriving energy prices, see Chapter 8 of the ANOPR TSD. DOE stated in the Framework Document that it would use price forecasts by the EIA to estimate the trends in electricity prices. In response, ACEEE and the Joint Comment argued that current EIA energy price forecasts are too low and will likely be revised upwards over the next few years. (Joint Comment, No. 9 at p. 3; Public Meeting Transcript, No. 4.5 at p. 216) Therefore, the Joint Comment requested that DOE use the latest available price forecasts from EIA to conduct the analyses. (Joint Comment, No. 9 at p. 3) Taking into account these comments, DOE used EIA's AEO2007, containing the latest available price forecasts from EIA to estimate future energy prices. For the analyses to be conducted for the NOPR and Final Rule, DOE intends to update its energy price forecasts to be based on the latest available version of AEO. DOE did not explicitly discuss demand charges 50 in the Framework Document, but stakeholders identified this as an issue and submitted comments. For example, ACEEE commented that DOE should consider demand charges in its electricity pricing rather than averaging prices because lighting tends to be “peakier” than the average use. (Public Meeting Transcript, No. 4.5 at pp. 169-171) PG&E commented that DOE should account for the marginal consumer cost of electricity in its analysis and that the marginal cost of electricity is significantly different than the average cost of electricity in certain regions (Public Meeting Transcript, No. 4.5 at pp. 215) PG&E also commented that in addition to using a single average price, DOE should look at a range of electricity prices. EEI commented that separating out demand charges could lead to similar results, except, possibly, for the residential sector. (Public Meeting Transcript, No. 4.5 at pp. 172 and 215) The Joint Comment stated that utility rate structures have been changing over time, and it recommended that DOE conduct a sensitivity analysis to evaluate whether changes in pricing structure would significantly impact the rulemaking analyses. The Joint Comment also suggested that DOE should consider basic electricity tariff evolutions in the structure of the LCC and NIA, if the sensitivity analysis shows that expected changes to electricity price structures are influential. (Joint Comment, No. 9 at p. 4) 50 Typically consumers pay a premium for electricity consumed during times in the day when the demand for electricity is at its peak. These additional charges are called “demand charges.” DOE notes that in the analysis performed for the fluorescent ballast rulemaking, DOE found that the reduction in ballast energy consumption results in a correspondingly lower reduction in peak power. In other words, the lighting load improves a building's load profile. Thus, the marginal rate of electricity for lighting was found to be slightly lower than the average utility rate. In relative terms, DOE assumed in the ballast rulemaking that the demand reduction was 80 percent of the energy savings. For the case study analyzed in the ballast rule, a 5-percent energy savings resulted in a 4-percent demand reduction of the peak kW, and at the consumption weighted mean of the differences, the electricity marginal prices were found to be 5.2 percent lower than average prices. 51 51 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Technical Support Document: Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast Proposed Rule: Appendix B, Marginal Energy Prices and National Energy Savings p. B-10 (Jan. 2000). Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_b.pdf* . Consistent with a number of other current DOE rulemakings, DOE has tentatively decided to use average regional electricity prices for its analyses. DOE believes that using average regional EIA prices would not underestimate operating cost savings. In addition, the approach will include the regional variations in energy prices, while reducing analytical complexity. In addition to accounting for regional variability, DOE also addressed future variability by incorporating three separate projections from AEO2007 into the spreadsheet models for calculating LCC and PBP:
(1)Reference;
(2)low economic growth; and
(3)high economic growth. These three cases reflect the uncertainty of economic growth in the forecast period (from 2005 to 2030). The high- and low-growth cases show the projected effects of alternative growth assumptions on energy markets. The development and use of regional average electricity prices are described below and in more detail in Chapter 8 of the TSD. ii. Lamp Lifetime With regard to lamp lifetime, DOE stated in the Framework Document that it would consider published catalog data, as well as literature sources and inputs from manufacturers and other stakeholders in its analysis. GE and NEMA commented that DOE should use published catalog data for lamp lifetimes. (Public Meeting Transcript, No. 4.5 at p. 176; NEMA, No. 8 at p. 3) In response, DOE did use published manufacturer literature for lamp lifetimes, where available. However, for some IRL, published manufacturer literature on lamp lifetimes is not available. Therefore, where applicable, DOE derived lamp lifetimes as part of the engineering analysis, in the manner discussed in section III.C. For GSFL, the manufacturer literature provides lamp lifetimes for both lamps operated three hours per start and those operated 12 hours per start. Therefore, in the Framework Document, DOE invited comment as to which lifetime value is more appropriate for use in the LCC analysis. GE and EEI commented that by referencing studies on lighting controls, DOE could develop a weighted lamp lifetime by estimating the proportion of the installed base that is operated at 12 hours per start and the proportion that is operated at three hours per start. (Public Meeting Transcript, No. 4.5 at p. 179, Public Meeting Transcript, No. 4.5 at pp. 179-180) In its comments, EEI opined that using 3 hours per start in the base case and standards case would be sufficient for this analysis (Public Meeting Transcript, No. 4.5 at p. 180). After considering public comments, DOE has tentatively decided on the following approach in this area. Because published manufacturer literature on lamp lifetimes for 12 hours per start is not available for all lamps in the base case and the standards case, and because the lifetimes are shorter in three-hours-per-start data, DOE decided to base its calculation of lamp lifetimes for both base- and standards-case lamps on three hours per start data. Thus, under this approach, DOE would not risk overstating energy savings. DOE welcomes comment on this approach. Lamp lifetime is not only affected by the number of hours per start but also by the type of relamping practiced. For example, lamps replaced through group relamping, in contrast to spot relamping, will be replaced before the end of their rated life. In the Framework Document, DOE invited comment on whether the effect on lamp lifetime of group and/or spot re-lamping practices should be taken into account. GE commented that group re-lamping practices should be taken into account for GSFL and that this practice usually occurs at 70 percent of the rated lifetime. (Public Meeting Transcript, No. 4.5 at pp. 176-177) Like the calculation of re-lamping costs, DOE averaged the group versus spot re-lamping impact on lifetime by their percent occurrence for GSFL. DOE assumed a lamp subject to group re-lamping practices operates for 75 percent of its rated life, an estimate obtained from the 2000 Ballast Rule. 52 DOE then applied this life impact factor to the rated lifetimes from the manufacturing literature for the GSFL it analyzed. For 4-foot medium bipin lamps, the average lifetime used in the analysis was 94 percent of the rated lifetime. For 8-foot single pin slimline lamps, the average lifetime was 91 percent of the rated lifetime, and for 8-foot recessed double contact HO lamps, the average lifetime was 92 percent of the rated lifetime. For the reasons discussed in section III.G.2.a, DOE agrees with GE that group re-lamping should not be considered for IRL. (Public Meeting Transcript, No. 4.5 at pp. 176-177). Therefore, DOE did not assume an impact on lamp lifetime due to group re-lamping for IRL. 52 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Technical Support Document: Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast Proposed Rule: Appendix A, p. A-19 (Jan. 2000). Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_a.pdf* . iii. Discount Rates As noted in the Framework Document, DOE planned to develop an analysis on discount rates similar to prior rulemaking analyses that evaluated the impact of standards on products or equipment installed in the residential, commercial, and industrial sectors. NWPCC commented that DOE should use discount rates from prior rulemakings, because these rates do not vary appreciably over the long term. (Public Meeting Transcript, No. 4.5 at pp. 183-184) In response, DOE reviewed the discount rate analyses from several recent rulemakings, and decided to use the same residential discount rates as it did for the 2007 ANOPR for the Residential Electric and Gas Ranges and Microwave Ovens, Dishwashers, Dehumidifiers, and Commercial Clothes Washers (hereafter “Home Appliance ANOPR”). 72 FR 64432 (November 15, 2007). For the commercial sector, DOE used the same discount rates for the categories of lamp users as it used for those same categories in the 2006 NOPR for Electrical Distribution Transformers (hereafter “Transformer NOPR”). 71 FR 44356 (August 4, 2006). However, DOE adjusted the aggregate commercial sector discount rate to account for differences in the proportions of types of owners of each lamp type. For residential replacement lamps, DOE identified all possible debt or asset classes that would be sources of funds used to purchase replacement lamps, including household assets that might be affected indirectly. The mean real effective rate across all types of household debt and equity, weighted by the shares of each class, is 5.6 percent. For the commercial and industrial sectors, DOE derived the discount rate from the cost of capital of publicly-traded firms in the sectors that purchase lamps. To obtain an average discount rate value for the commercial sector, DOE used data from CBECS 2003, which provides market-share data by type of owner. Weighting each ownership type by its market share, DOE estimated the average discount rate for the commercial sector to be 6.2 percent. Similarly, the industrial sector discount rate was derived to be 7.5 percent. For further details on DOE's method for estimating discount rates, see Chapter 8 of the ANOPR TSD. iv. Analysis Period The analysis period is the time span over which the LCC is calculated. DOE bases the analysis period on the longest baseline lamp life in a certain product class divided by the annual operating hours of that lamp. If the user chooses to run the LCC using weighted average values, then the analysis period is based on the longest baseline lamp life divided by the average annual operating hours for that lamp in a chosen sector, or a multiple thereof. For example, the longest lived baseline IRL lamp is 3,000 hrs. If the user chooses to analyze this lamp in the commercial sector, then the analysis period is the lamp lifetime of 3,000 hours divided by the average annual operating hours for IRL in the commercial sector of 3,450 hrs/yr, which yields an analysis period of 0.9 years. In order to allow users to compare the cost of IRL lamps over multiple lamp lifetimes, one can select a multiple of this analysis period (i.e., 1.8, 2.7, or 3.6 years). If the user chooses to run the LCC using Crystal Ball® software (a tool used to do the Monte Carlo analysis), the analysis period is based on the longest baseline lamp life divided by the annual operating hours chosen by Crystal Ball®. For example, the user may choose to run IRL in the commercial sector using Monte Carlo analysis. If Crystal Ball® selects a building that is used for religious worship, the analysis period for IRL for that selection will be based on a lamp lifetime of 3,000 hours divided by the annual operating hours for IRL in a building used for religious worship of 1,609 hrs/yr, which yields an analysis period of 1.9 years. However, users cannot select a multiple of this analysis period when using Crystal Ball® due to the nature of the LCC spreadsheet. For detail on additional results, please see Chapter 8 and Appendix 8B of the TSD. v. Effective Date For purposes of this discussion, the “effective date” is the future date when a new standard becomes operative (i.e., the date by and after which lamp manufacturers must manufacture products that comply with the standard). DOE publication of a final rule in this standards rulemaking is scheduled for completion in June 2009. Pursuant to sections 325(i)(3) and
(5)of EPCA, the effective date of any new or amended energy conservation standards for these lamps must be three years after the final rule is published, which would be June 2012. (42 U.S.C. 6295(i)(3) and (i)(5)) DOE calculated the LCCs for all consumers, based upon an assumption that each would purchase the new product in the year the standard takes effect. 3. Payback Period Inputs As explained above, the PBP is the amount of time it takes the consumer to recover the estimated additional installed cost of more-efficient products through energy cost savings only. Payback analysis is a technique used to obtain a rough indication of whether an investment is worthwhile. This type of calculation is known as a “simple” payback period because it does not take into account other changes in operating expenses over time or the time value of money. The inputs to the calculation of the PBP are the total installed cost of the product to the customer for each efficacy level and the annual (represented by first-year) operating expenditures for each efficacy level. The PBP calculation uses the same inputs as the LCC analysis, except that energy price trends and discount rates are not needed. The calculation needs energy prices only for the year in which a new standard is expected to take effect, in this case 2012. 4. Lamp Purchasing Events GE, ACEEE, and PG&E all recommended that DOE should divide the lamp market into three market segments:
(1)New construction;
(2)major retrofit; and
(3)replacement lamps; such an approach would allow DOE to differentiate between the options facing consumers for those three scenarios. (GE, No. 4.5 at p. 112; ACEEE, No. 4.5 at p. 113; PG&E, No. 4.5 at p. 113) GE, for example, commented that lumens can be kept constant with the baseline system for new construction, whereas for the replacement lamp market segment, lumens may be higher than the baseline system. (GE, No. 4.5 at p. 122) In response, DOE agrees with stakeholders on this point and has broken the LCC and NIA into several market segments or “lamp purchasing events” to represent the lamp-and-ballast designs facing consumers under each scenario. These “lamp purchasing events” are described below. Although DOE considers in the LCC only those energy-saving design options which reduce lumen output by 10 percent or less, all other design options facing consumers are considered in the NIA. To further explain, DOE designed the LCC analysis for this rulemaking around scenarios where consumers have a need to replace a lamp; these are collectively referred to as “lamp purchasing events.” Each of these events may present the consumer with a different set of technology options and, therefore, a different set of LCC savings for a certain CSL. For GSFL, DOE identified five possible scenarios under which consumers would purchase a lamp and potentially be affected by a minimum energy conservation standard. These scenarios are:
(1)Lamp failure;
(2)standards-induced retrofit;
(3)ballast failure;
(4)ballast retrofit; and
(5)new construction/renovation. These five lamp purchasing events are described in more detail below. (It is noted that for IRL, due to the fact that there is no ballast involved, the scenario for the incandescent lamp product classes is simply a lamp failure.) In addition to the descriptions below, Table III.23 and Table III.24 summarize the lamp purchasing events considered in this analysis. • *Lamp Failure (Event I):* This event reflects a scenario in which a lamp either fails (spot-relamping) or is about to fail (group relamping) and must be replaced. In the absence of the energy conservation standard, the analysis assumes an identical lamp would have been installed as a replacement. However, under a lamp energy conservation standards scenario, a standards-compliant lamp is required which operates on the existing ballast. Thus, the first consumer response to a lamp failure is expected to be a simple lamp replacement with the same type of lamp. A second response occurs for owners of T12 systems. Unlike T8 lamps, there are certain lamp standard levels which a T12 lamp cannot meet. These users would be required to purchase both new lamps and ballasts in order to meet the lamp energy conservation standard. • *Standards-Induced Retrofit (Event II):* This event reflects a scenario in which an increase in the energy conservation standard for lamps prompts end-users to retrofit both lamps and ballasts, whereas, in the base case, they would otherwise have installed only a lamp due to a lamp failure. This lamp purchasing event only applies to users with T12 lamps because, unlike T8 lamps, there are certain lamp standard levels which a T12 lamp cannot meet. This event contemplates a scenario where users, under a lamp energy conservation standard, can no longer purchase a T12 replacement lamp for their T12 ballast. For this scenario, DOE assumes a uniform age distribution of T12 lamps throughout the nation. Therefore, based on this age distribution, the average T12 lamp is halfway through its lifetime. Consumers in the base case purchase only a lamp after the average T12 lamp has died (i.e., after it has lived through the second half of its lifetime). Consumers in the standards case choose to change both the lamp and the ballast early, instead of waiting for their T12 lamps to fail. Therefore, in the standards case, a lamp-and-ballast purchase would occur at the beginning of the analysis, before the average lamp being replaced has failed. • *Ballast Failure (Event III):* This event reflects a scenario in which the installed ballast has failed. DOE recognizes that energy conservation standards for ballasts set by the 2000 Ballast Rule and EPACT 2005 are effective in 2010. These standards ban the sale of magnetic 4-foot medium bipin and 8-foot single pin slimline ballasts. In addition, DOE believes that sales of magnetic ballasts that operate 8-foot recessed double contact high output lamps will be minimal after 2012. Therefore, in the baseline, users who had a magnetic T12 ballast would be expected to replace it with an electronic T12 ballast. Users who had a T8 ballast installed would be expected to replace it with a T8 ballast. However, in the standards case, end-users would select a standards-compliant lamp-ballast combination such that the system light output never drops below 10 percent of the baseline system. • *Ballast Retrofit (Event IV):* This event applies only to T12 users because, according to industry experts, the majority of ballasts that are retrofitted are T12 lamp-and-ballast systems. As opposed to the standards-induced retrofit event where end-users replace only their lamps in the base case, end-users under this event replace both their lamps and ballasts in the base case in order to save energy. With standards, end-users will also retrofit their old lamps and ballasts, but with standards-compliant lamps. DOE assumes that end-users continue to use the existing fixture and replace only the ballast. Because the spatial layout in the building space is constrained by the number of fixtures, light output of the replacement lamp-and-ballast system is maintained. • *New Construction and Renovation (Event V):* This lamp purchasing event encompasses all the new fixture installations where the lighting design will be completely new or can be completely changed. This scenario is only applicable to those baseline lamps that are usually used in new construction and renovation (4-foot T8s, 8-foot single pin slimline T8s, and 8-foot recessed double contact HO T12s). In this scenario, the spatial layout of fixtures in the building space is not constrained to any previous configuration. Because new fixtures can be installed, consumers could install a lamp-and-ballast system that would not maintain the light output of the baseline system. For instance, if light output of the standards case system is lower than the base case system, consumers can increase the number of standards case lamp-and-ballast systems installed in the building by a certain percentage to maintain the light output of base case lamp-and-ballast systems. Table III.23 and Table III.24 outline the events and actions taken by consumers in response to those events both in the base case and the standards case. Table III.23.—Framework of Event-Type Scenarios for T12 Lamps Event Base-case action Standards-case action Event I. Lamp Failure
(a)Installs a T12 lamp Installs a lower-wattage, higher efficacy lamp, where the system light output never drops below 10 percent of the baseline system.
(b)Installs a T12 lamp Installs a T12 or T8 electronic ballast and lamp, where the system light output never drops below 10 percent of the baseline system. Event II. Standards-Induced Retrofit Replace T12 lamp halfway through analysis period. 53 Installs a new T12 or T8 electronic ballast and lamp, where the system light output never drops below 10 percent of the baseline system. Event III. Ballast Failure Installs a T12 electronic ballast and lamps in the existing fixture Installs a new T12 or T8 ballast and lamps, where the system light output never drops below 10 percent of the baseline system. Event IV. Ballast Retrofit Installs a T8 electronic ballast and lamps in the existing fixture Installs a new T12 or T8 ballast and lamps, where the system light output never drops below 10 percent of the baseline system. Event V. New Construction and Renovation Installs a new T12 system Installs a new T12 or T8 system that is where the system light output never drops below 10 percent of the baseline system. Light output can be maintained through spacing. Table III.24.—Framework of Event-Type Scenarios for T8 Lamps Event Base-case action Standards-case action Event I. Lamp Failure Installs a T8 lamp Installs a lower-wattage, higher efficacy lamp, where the system light output never drops below 10 percent of the baseline system. Event III. Ballast Failure Installs a T8 electronic ballast and lamps in the existing fixture Installs a new T8 ballast and lamps, where the system light output never drops below 10 percent of the baseline system. Event V. New Construction and Renovation Installs a new T8 system Installs a new T8 system, where the system light output never drops below 10 percent of the baseline system. Light output can be maintained through spacing. 5. Life-Cycle Cost and Payback Period Results 53 Event Type II represents a standards-induced retrofit where lamps are substituted before the end of their lifetime. DOE assumed that lamps lived to half of their average lifetime when substituted under this scenario. DOE calculated the average LCC savings relative to the base-case forecast for each product class. As mentioned above, the base case consists of the projected pattern of product purchases that would occur in the absence of new energy conservation standards. DOE did not explicitly discuss aggregating results of the LCC and PBP analyses in the Framework Document, but stakeholders identified this as a critical issue and submitted comment thereon. For example, ACEEE commented that DOE should weigh its results for the three market segments it considered—new construction, retrofit, and lamp replacement—by their percentage of sales. (Public Meeting Transcript, No. 4.5 at pp. 118-119) The Joint Comment also recommended that DOE should weigh its results by market segment. (Joint Comment, No. 9 at p. 5) In addition, ACEEE commented that some of the higher efficacy lamp substitutes could have higher wattages than their replacement. (Public Meeting Transcript, No. 4.5 at pp. 118-119) DOE recognizes that different lamp consumers will be impacted differently by a new standard depending on the market segment to which they belong. To model these different situations, the LCC analysis is designed around scenarios—the “lamp purchasing events”—where consumers have a need to replace a lamp. The LCC spreadsheet calculates the LCC impacts for each of these scenarios separately. Looking at the impacts on each scenario separately allows one to view the results of many subgroup populations in the LCC analyses. For the ANOPR, DOE decided not to aggregate the results of the various event scenarios together into a single LCC at each CSL. To do so would have required too many assumptions, such as:
(1)The relative occurrence of each event over time, or
(2)the market share of each lamp in the base case and each standards case. Another argument against aggregating the LCC results stems from the fact that the LCC analysis only considers energy-saving lamp or lamp-and-ballast designs. As ACEEE commented, consumers may elect options that save no energy or perhaps consume more energy. (Public Meeting Transcript, No. 4.5 at pp. 118-119) Finally, aggregating the results of the LCC analysis events blurs the lines with the NIA analysis. DOE believes it is more appropriate to incorporate assumptions about consumer decisions and long-term market trends in the NIA, and leave the LCC as a direct head-to-head comparison between lamp and lamp-and-ballast designs under different scenarios or “events.” Note further that the LCC savings results help DOE estimate consumer behavior decisions for the NIA. DOE recognizes that the large number of LCC and PBP results can make it difficult to draw conclusions about the cost-effectiveness of CSLs. The following presents partial results from the LCC analysis. The LCC results are presented according to the lamp purchasing events that culminate in purchase of lamp-and-ballast designs. These results are for a subset of all of the possible events, although they represent the most prevalent purchasing events (events I(b) and IV have been omitted in this notice but are presented in the TSD). A range of the LCC savings and PBP are given for each CSL. The range reflects the results of multiple systems (i.e., multiple lamp-ballast pairings) which consumers could purchase to meet a CSL. In addition, DOE has chosen not to present detailed PBP results by CSL in this ANOPR because DOE believes that, given the drawbacks to PBP discussed earlier, the short lifetime of IRL and the systems nature of GSFL, LCC results are a better measure of cost-effectiveness. However, a full set of both LCC and PBP results for the systems DOE analyzed are available in Chapter 8 of the TSD. DOE is presenting the partial results here to facilitate comment on DOE's methodology of its analyses, and on the presentation of its results. a. General Service Fluorescent Lamps Table III.25 through Table III.27 lists the result for one baseline lamp in each of the three product classes DOE analyzed (i.e., 4-foot medium bipin, 8-foot single pin slimline and 8-foot recessed double contact HO). Throughout this section, the terms “positive LCC savings” and “negative LCC savings” are used. When a standard results in “positive LCC savings,” the life cycle cost of the standards-compliant lamp is less than the life cycle cost of the baseline lamp, and therefore, the consumer benefits. A consumer is adversely affected when a standard results in “negative LCC savings” (i.e., when the life cycle cost of the standards-compliant lamp is higher than the life cycle cost of the baseline lamp). The range of values given represents the multiple ways a consumer can meet a certain CSL under each lamp purchasing event. For example, at CSL3, a consumer in need of a lamp and ballast can either purchase a high-efficacy T12 lamp on an electronic ballast or a high-efficacy T8 lamp on an electronic ballast. While both these choices are available to the consumer, the selection of a T8 system offers positive LCC savings. Table III.25 presents the findings of an LCC analysis on the 34W T12 4-foot medium bipin GSFL baseline operating in the commercial sector. Key inputs consist of using AEO2007 reference case electricity prices, an analysis period of 5.5 years, and medium-range lamp and ballast prices. Note that any standard level beyond CSL3 for this baseline lamp would require a lamp and ballast replacement, since no T12 lamp currently meets the efficacy requirements of CSL4. In addition, because DOE is only presenting energy-saving options in the LCC and because there are no energy-saving (or reduced wattage) lamp replacement options for the 34W T12 lamp, Event I(a) which would require only a lamp replacement is not shown. In general, one finds that consumers who do switch from T12 to T8 lamps experience positive LCC savings at all CSLs. The positive LCC results for Event II are due to consumers that replace a functioning 34W T12 lamp on a magnetic ballast with a high efficacy T8 lamp on an electronic ballast. This situation occurs at CSLs three through five. Negative LCC savings (i.e., increases in life-cycle costs) are generally due to replacement of a functioning 34W T12 lamp on a magnetic ballast with a higher-efficacy T12 lamp on a T12 electronic ballast. This situation occurs at CSLs one through three. (Both the T12 and T8 electronic substitutions result in negative LCC savings at CSL2) These LCC results explain why consumers are electing to replace their T12 magnetic systems with T8 electronic systems instead of choosing T12 electronic ballast systems. Event III represents consumers who are already faced with replacing both a lamp and a ballast. The baseline ballast for this event is assumed to be an electronic T12, since the ballast standards from the 2000 Ballast Rule and EPACT 2005 would be effective in 2010. Consumers prompted by this event would experience positive LCC savings if they purchase a high efficacy 4-foot T8 lamp on an electronic ballast at all CSL levels. Negative LCC savings would occur if consumers replace a functioning 34W T12 lamp on an electronic ballast with a high efficacy T12 lamp. The LCC savings of Event III are greater than those of Event II because in the base case of Event III consumers were faced with a ballast replacement cost. PBP results for Event II and III range from zero to 37.7 years. The systems nature of the lamp LCC makes the payback period results difficult to interpret. For example, LCC savings are positive for many CSLs where the payback period exceeds the lifetime of the baseline lamp which is approximately five years. When these paybacks are compared to the lifetime of a lamp-ballast system of 15 years (spanning the life of one ballast and three lamp replacements), the payback periods appear much more acceptable. Payback periods longer than the lifetime of the system are associated with negative LCC savings. The zero-year payback (or instantaneous payback) also results from the systems nature of these LCC results. For example, zero payback periods that appear for Event III are due to the replacement of a more expensive electronic T12 ballast with a less expensive T8 electronic ballast. For more information on PBP results refer to Chapter 8 of the TSD. Table III.25.—LCC Results for a 3-Lamp 4-Foot Medium Bipin System Operating in the Commercial Sector* Candidate standard level Rated lamp efficacy *lm/W* LCC savings 2006$ Event II: standards-induced retrofit (lamp & ballast replacement) Event III: ballast failure (lamp & ballast replacement) CSL1 82.4 −18.00 −2.02 CSL2 85.3 to 86.2 −23.36 to −6.31 −9.05 to 8.01 CSL3 90.8 to 91.2 −23.66 to 1.60 −9.34 to 15.92 CSL4 92.3 to 95.0 5.01 to 6.26 19.33 to 20.58 CSL5 95.4 to 97.3 4.88 to 16.96 19.19 to 31.28 * The results displayed are for the 34W T12 baseline lamp with a 5.5 yr analysis period. Additional results are available in Chapter 8 of the TSD. Table III.26 presents the findings of an LCC analysis on the 60W T12 8-foot single pin slimline GSFL baseline lamp operating in the commercial sector. Key inputs consist of using AEO2007 reference case electricity prices, an analysis period of 4.0 years and medium-range lamp and ballast prices. Note that any standard level beyond CSL3 for this baseline lamp would require a lamp-and-ballast replacement, since no T12 lamp currently meets the efficacy requirements of CSL3. In general, consumers who do switch from a 60W T12 to a T8 lamp experience positive LCC savings only if their ballast has already failed. Event I is not shown because there are no energy-saving lamp replacement options for a 60W T12 lamp. Event II represents consumers who respond to higher lamp standards by replacing a functioning 60W T12 system with a new lamp and ballast. For this event, consumers experience increased LCC at all CSLs. Event III represents consumers who are already faced with replacing both a lamp and a ballast. The baseline ballast for this event is assumed to be an electronic T12, since the ballast standards from the 2000 Ballast Rule and EPACT 2005 would be effective in 2010. Consumers prompted by this event would experience positive LCC savings if they purchase a high-efficacy 8-foot single pin slimline T8 lamp on an electronic ballast. Negative LCC savings would occur because some consumers who replace a functioning 60W T12 lamp on an electronic ballast with a high-efficacy T12 lamp on an electronic ballast. PBP results for Event II and III range from 2.7 to 20.7 years. For more information on PBP results refer to Chapter 8 of the TSD. Table III.26.—LCC Results for a 2-Lamp 8-Foot Single Pin Slimline System Operating in the Commercial Sector* Candidate standard level Rated lamp efficacy *lm/W* LCC savings 2006$ Event II: standards-induced retrofit (lamp & ballast replacement) Event III: ballast failure (lamp & ballast replacement) CSL1 54 87.6 N/A N/A CSL2 92.6 −24.78 −3.04 CSL3 94.8 to 97.5 −24.31 to −23.55 −2.56 CSL4 98.2 −16.42 5.33 CSL5 101.5 to 101.8 −15.68 to −13.73 6.06 to 8.02 *The results displayed are for the 60W T12 baseline lamp with a 6.0 yr analysis period. Additional results are available in Chapter 8 of the TSD. Table III.27 presents the findings of an LCC analysis for a 95W T12 8-foot recessed double contact GSFL baseline lamp operating in the industrial sector. Key inputs consist of using AEO2007 reference case electricity prices, an analysis period of 2.3 years, and medium-range lamp and ballast prices. Note that any standard level beyond CSL2 for this baseline lamp would require a lamp and ballast replacement, since no T12 lamp currently meets the efficacy requirements of CSL3. In general, DOE's research indicates that consumers who do switch from a 95W T12 to a T8 lamp would experience positive LCC savings only if their ballast has already failed or if they are renovating or constructing a new building. 54 Because the 60W T12 baseline exceeds CSL1, there are no energy saving design options at this level. There are, however, energy saving design options at CSL1 for the 75W T12 baseline. Event I is not shown because there are no energy-saving lamp replacement options for a 95W T12 lamp. The positive LCC results for Event II occur because some consumers replace a functioning 95W T12 lamp on an electronic ballast with a high-efficacy T8 lamp on an electronic ballast. Negative LCC results are due to consumer replacement of a functioning 95W T12 lamp on a magnetic ballast with a high-efficacy T12 lamp on an electronic ballast. Events III and V represent consumers who are already faced with replacing both a lamp and a ballast. Consumers, prompted by these events, would experience positive LCC savings if they purchase a high-efficacy T8 lamp on an electronic ballast. Consumers would experience higher LCCs if they replace a functioning 95W T12 lamp on an electronic ballast with a high-efficacy T12 lamp on an electronic ballast. Under this scenario, the lowest LCC occurs at CSL4. PBP results for Event II, III, and V range from 3.2 to 64.8 years. For more information on PBP results refer to Chapter 8 of the TSD. Table III.27.—LCC Results for a 2-Lamp 8-Foot Recessed Double Contact HO System Operating in the Industrial Sector* Candidate standard level Rated lamp efficacy *lm/W* LCC savings 2006$ Event II: standards-induced retrofit (lamp & ballast replacement) Event III: ballast failure and event V: new construction and renovation (lamp & ballast replacement) CSL1 N/A 55 N/A N/A CSL2 85.5 to 86.1 −36.86 −3.43 CSL3 87.6 to 88.9 −47.10 to −46.48 −13.67 to −13.05 CSL4 91.9 to 93.0 −24.12 to −21.19 9.32 to 12.25 CSL5 95.3 −20.53 12.9 *The results displayed are for the 95W T12 baseline lamp with a 2.3-yr analysis period. Additional results are available in Chapter 8 of the TSD. Results for all GSFL events and baselines are presented in Table 8.5.1 to Table 8.5.16 of Chapter 8 in the TSD. 55 Because the 95W T12 baseline is only slightly below CSL1, there are no energy saving design options at this level. There are, however, energy saving design options at CSL1 for the 110W T12 baseline. b. Incandescent Reflector Lamps Table III.28 provides the LCC results for a 75W PAR38 IRL operating in the commercial sector. These results are based on the AEO2007 reference case electricity prices, an analysis period of 0.9 years, 56 and use of medium-range lamp prices. Note that the lowest LCC (and highest LCC savings) occurs at CSL3. PBP results for IRL range from 0.4 to 0.6 years. LCC and PBP results for all IRL baseline lamps are available in Chapter 8 in the TSD. More information about the lamps that meet each CSL are provided in Chapter 5 of the TSD. 56 The service life of commercial IRL is shorter than GSFL because the longest lived baseline IRL lamp is 3,000 hrs while the baseline lamps for GSFL vary between 12,000 and 20,000 hours. In addition, operating hours for commercial IRL are comparable to the operating hours for commercial and industrial GSFL (3,450 for commercial IRL and 3,435 for commercial GSFL or 4,795 for industrial GSFL). Table III.28.—LCC Results for a 75W PAR38 Operating in the Commercial Sector* Candidate standard level Rated lamp efficacy *lm/W* LCC savings 2006$ CSL1 15.9 2.71 CSL2 17.5 3.92 CSL3 19.1 5.89 *These results are for the 75W PAR38 baseline lamp. Additional results are available in Chapter 8 of the TSD. In summary, DOE presents these findings to facilitate public review of the LCC and PBP analyses for this rulemaking. DOE seeks information and comments relevant to the assumptions, methodology, and results for all of these analyses. See Chapter 8 of the TSD for additional detail on the LCC and PBP analyses and results. For results of the Monte-Carlo model and other sensitivities refer to Appendix 8B of the TSD. H. Shipment Analysis This section presents the shipment analysis, which is an input into the national impact analysis
(NIA)(section III.I) and manufacturer impact analysis (section III.K). DOE will undertake revisions to the NIA, conduct the final manufacturer impact analysis (MIA), and then report the findings from both in the NOPR. As indicated above and in the NIA section below, DOE developed a base-case shipment forecast for each analyzed lamp type to depict what would happen to energy use, and to consumer costs for purchase and operation of lamps, in the absence of new or revised energy conservation standards. To evaluate the impacts of such standards for these lamps, DOE compares the estimated base-case projection against forecasted estimates of what would happen if DOE were to promulgate standards for GSFL and IRL. One common element in the base-case and standards-case forecasts is product shipments. In determining the base case, DOE considered historical shipments, the mix of efficacies sold in the absence of any new standards, and how that mix might change over time. DOE developed separate shipment models for GSFL and IRL. The GSFL shipment model projects lumen growth by forecasting lumen demand serviced by GSFL lamp type in the commercial and industrial sectors. In accordance with historical shipment data, annual shipments are forecasted for 8-foot recessed double contact HO lamps in the industrial sector, and 4-foot medium bipin and 8-foot single pin slimline lamps in the commercial sector. Due to their relatively small shipment-based market share (approximately four percent) of the total GSFL market, DOE decided—for the ANOPR only—not to forecast shipments of or analyze the national impacts of standards on 2-foot U-shaped lamps. However, for the NOPR, DOE does intend to scale the NIA results from other product classes that were analyzed to the 2-foot U-shaped lamp product classes, to develop estimates of the NES and NPV for this lamp type. DOE may base the extrapolation of NIA results on relative market shares, average incremental prices for each lamp design, or average changes in energy consumption between lamp-and-ballast designs. DOE invites comment on which of these or other scaling relationships it should use for the NOPR. The shipment model for IRL is based on the growth in the number of sockets using these light sources in the commercial and residential sectors. Based on manufacturer interviews, DOE forecasted shipments of IRL in both the commercial and residential sectors. DOE invites comment on the various sectors used to establish shipment forecast estimates for GSFL and IRL. DOE followed a consistent four-step process to forecast shipments for GSFL and IRL. First, DOE used NEMA's historical shipment data from 2001 to 2005 to estimate total historical (NEMA member and non-NEMA members) shipments of each analyzed lamp type in the sectors described above. Second, using these historical shipments, DOE projected shipments to 2011. Then, based on average service lifetimes, DOE estimated a stock of lamps in 2011 for each lamp type. Third, DOE forecasted lamp (and ballast for GSFL) shipments from 2012 to 2042 (the analysis period for the NIA) by modeling various events, such as lamp replacement or new construction. Because these shipments are dependent on lamp and lamp-system properties (e.g., lifetime and lumen output), as a fourth step, DOE developed base-case and standards-case market-share matrices. These market-share matrices determine the forecasted technology mixes in the lamp stock and shipments. Each of these analytical steps in the shipment analysis is discussed in further detail below. 1. Historical Shipments GE and NEMA both commented that historical shipment data should be used as an input to the fluorescent and incandescent lamp shipment models. (Public Meeting Transcript, No. 4.5 at p. 198; NEMA, No. 12 at p. 2) NEMA provided shipment data on GSFL and IRL spanning 2001 to 2005. Recognizing that these shipment figures cover only NEMA members, based on manufacturer interviews DOE increased these estimates slightly to account for the volume of fluorescent and incandescent lamps that are imported and/or manufactured by non-NEMA lamp companies. A list of lighting-related NEMA member companies and several lists including various lighting-related non-NEMA member companies can be found in Chapter 3 of the TSD. Because certain ER and BR shaped IRL (BR 30 and BR40 65 Watt) are statutorily exempted from energy conservation standards, DOE used manufacturer product catalogs to estimate the market share of those exempted products. As research indicated that these exempted products constitute approximately 60 percent of all incandescent (non-halogen) IRL shipments, DOE accounted for this when using the NEMA historical shipments data. In addition, to model IRL operated in the commercial sector separately from those operated in the residential sector, DOE used a reflector lamp study conducted by the New York State Energy Research and Development Authority 57 with additional shipment data submitted by NEMA (NEMA, No. 17 at p. 2) 58 to estimate the percentage of incandescent and halogen IRL shipments by sector. 57 New York State Energy Research and Development Authority, Incandescent Reflector Lamps Study of Proposed Energy Efficiency Standards for New York State (2006). (Last accessed October 7, 2006 at: *http://www.nyserda.org/publications/Report%2006-07-Complete%20report-web.pdf.* ) The October 7, 2006 material from this Web site is available in Docket #EE-2006-STD-0131. 58 This written comment, document number 17, was submitted in response to the Energy Conservation Program for Commercial and Industrial Equipment: High-Intensity Discharge
(HID)Lamps and is available in Docket #EE-DET-03-001. In addition, because GSFL of different correlated color temperatures
(CCTs)were not segregated in the NEMA historical shipment data, DOE decided to analyze and forecast shipments of each lamp type, aggregating across the lamps of low (less than or equal to 4,500K) and high (greater than 4,500K) CCT. Similarly, DOE forecasts IRL shipments by aggregating across the standard-spectrum and modified-spectrum lamps. In both of these cases of aggregation, DOE used a representative product class to evaluate lamp designs and believes that the national impacts will be similar for those product classes not directly analyzed. Specifically, for GSFL, DOE used lamp designs with CCT less than or equal to 4,500K to represent both low-CCT and high-CCT lamps. For IRL, DOE used standard-spectrum lamp designs to represent the markets of both standard-spectrum and modified-spectrum reflector lamps. In addition, by aggregating the previously-discussed product classes, DOE assumes that there will be no significant migration of shipments or stock between lamps of different CCTs or spectrums. DOE invites comment on this aggregation of product classes in the shipment analysis and NIA. Details regarding scaling and usage of NEMA's historical shipments can be found in Chapter 9 of the TSD. 2. Shipment Projections to 2011 and Calculations of Stock of Lamps in 2011 DOE estimated shipments to 2011 for GSFL and IRL by linearly extrapolating historical shipment data (from 2001 to 2005) of each lamp type. In addition, DOE also accounts for efficacy standards (effective in 2008) for small diameter and ER and BR shaped lamps prescribed by EISA 2007. DOE expects that the result of these standards is that by 2008, all IRL shipments covered in this rulemaking will be of products using halogen technology. Because halogen lamps generally have longer lifetimes than their incandescent counterparts, and are therefore replaced (and shipped) less often, DOE has applied a reduction to its projection of IRL shipments after 2007. DOE invites comment on the shipment projections to 2011 for GSFL and IRL. The stock of lamps in 2011 was estimated by summing annual shipments backward from 2011. For each lamp type, DOE summed shipments for the number of years that corresponds to the average lifetime of that lamp type. For GSFL, this initial lamp stock is converted into an initial lamp-and-ballast system stock. DOE extrapolated the ballast age profile of each lamp system type by considering historical shipments from census data for electronic and magnetic ballasts and historical growth in lumen demand. Since DOE determined that the 2011 lamp stock of 8-foot T8 recessed double contact HO are a small minority of the total GSFL stock, DOE disregarded this initial lamp stock in its shipment forecast. However, as discussed later, DOE did capture future shipments of these lamps as they replace 8-foot T12 recessed double contact HO systems. DOE invites comment on the methodology and data sources used to estimate initial lamp stocks in the year 2011, in particular its treatment on 8-foot T8 recessed double contact HO lamps. 3. Base-Case and Standards-Case Shipment Forecasts to 2042 The shipment models DOE developed for the ANOPR each consider specific market segments in developing their estimate of annual shipments. For all lamp types, DOE accounts for two lamp purchase events (corresponding to those discussed in Section III.G):
(1)Lamp replacement following a lamp failure (Event I); and
(2)new construction (Event V). In addition, for the GSFL shipment models, DOE models two additional lamp purchase events—lamp-and-ballast systems installed following a ballast failure (Event III), and lamp-and-ballast systems installed due to lamp system retrofit (an aggregation of Events II and IV). ACEEE and the Joint Comment recommended that DOE should weigh the analytical results for GSFL by market segment. (Public Meeting Transcript, No. 4.5 at pp. 118-119; Joint Comment, No. 9 at p. 5) In response, DOE implicitly weighs the occurrence of new construction, retrofit, and replacement lamp sales based on stock turnover in the shipment model. DOE's determination of shipments due to new construction assumes a 1.6 percent per year lumen growth rate. DOE estimated a 1.6 percent per year lumen growth rate based on the latest CBECS data on growth of building floor space. Shipments due to ballast replacement are based on a ballast inventory model with a 14-year ballast lifetime in the commercial sector and a 10-year ballast lifetime in the industrial sector. To account for consumer reactions in response to higher total installed costs of certain systems, DOE assumes that the retrofit rates (or rates of early ballast retirement) of these systems increase as the CSLs increase. Finally, DOE calculated the market share of lamp replacements in the GSFL shipment model as a function of the average lamp lifetime of the lamp designs chosen. For more information, see Chapter 9 of the TSD. GE and NEMA both recommended that DOE should develop its lamp shipment forecast based on lamp shipments, rather than a ballast inventory model. (Public Meeting Transcript, No. 4.5 at pp. 193-194; NEMA, No. 8 at p. 3) In response, DOE did use the lamp shipment data provided by NEMA and has calibrated its shipment models using historical shipment data. However, for the fluorescent lamp shipment analysis (and NIA), based on this historical lamp shipment data and 2002 and 2005 U.S. Census Bureau data, DOE developed a ballast inventory model for several reasons. For example, DOE needs to capture and track the anticipated decline in BF that would occur in the ballast inventory (or stock) in standards cases as discussed earlier. This decline in BF is critical to tracking the NIA calculations and results. Also, by modeling the ballast stock and its turnover, DOE was able to model the occurrence of lamp-and-ballast purchase events, as described earlier. In their comments on the Framework Document, GE and the Joint Commenter emphasized the importance of accounting for wider fixture spacing of higher-lumen-output systems in the new construction/remodeling market. (Joint Comment, No. 9 at p. 5; Public Meeting Transcript, No. 4.5 at pp. 119-120) In response, DOE notes that the fluorescent shipment model's base-case and standards-case forecasts account for this effect by allowing installed systems to have a range of light outputs. DOE then normalizes the total lumen output due to new construction by decreasing or increasing the number of shipments based on the average lumen output per system. For IRL, the shipment forecasts are based on a stock turnover (i.e., lamp replacements upon lamp failure) and growth in the number of sockets in use (through new construction). DOE assumed a 1.6 percent growth rate in lamp sockets per year for the commercial sector and 1.3 percent growth rate per year for the residential sector. DOE based these estimates on the latest CBECS and RECS forecasts of square footage growth in these respective sectors. The rate of stock turnover from one lamp technology to another and the total number of shipments depend upon operating hours and the lifetimes of shipped lamps. DOE also received comments from ACEEE and NEMA remarking that DOE should be aware of any clear trends in historical shipment data and that these trends should be reflected in the base-case shipment model. (Public Meeting Transcript, No. 4.5 at p. 194; NEMA, No. 12 at p. 2) DOE took these comments into account when developing its analytical approach, using the data on market trends provided by NEMA as well as manufacturer and expert interviews to establish base-case trends. For example, for GSFL, DOE mimicked historical trends and modeled a shift from magnetic to electronic ballasts in both the 4-foot medium bipin and 8-foot single pin slimline markets. For the 8-foot T12 recessed double contact HO lamp, DOE modeled it as having no new construction, because historical shipments have indicated that its market is relatively flat. In addition, DOE incorporated historical market trends in the GSFL model by controlling the types of systems shipped to account for new construction and retrofits. DOE invites further comments on other trends that should be modeled in its shipment forecasts, particularly for GSFL. For IRL, a significant source of uncertainty in the base-case lamp forecasts involves the potential for rapidly-emerging new lighting technologies to enter the market. For example, the residential market is already being transformed by the rapid increase in reflector CFL sales. CFL can be three to four times more efficient and last several times longer than the incandescent lamps they are replacing. Assumptions made in the base-case lamp forecast about any change in market share for CFL greatly impact the energy savings and NPV benefits that could result from standards. Yet in comparison to solid-state lighting
(SSL)sources, 59 CFL are a “mature” technology, with relatively predictable price, efficacy, and lifetime attributes. Technology forecasts about the potential attributes of SSL sources suggest that they may achieve efficacies twice that of CFL and may last up to ten times longer. Clearly, if SSL technology achieved such promise, it would radically impact the benefits calculations from potential standards. However, in order to calculate the energy savings and NPV benefits, DOE would need to accurately forecast the anticipated price and performance points of an emerging technology such as SSL, which would be extremely difficult and speculative. 59 “SSL source” refer to a lighting technology using light-emitting diodes (LEDs). Therefore, in this rulemaking, DOE plans to account for the market impact of these emerging technologies in the NIA by deducting the anticipated emerging technology market share from the installed base. DOE would estimate the market shares of these technologies in the future (absent standards) by deducting that market share from the base case of impacted customers. This methodology would effectively reduce the size of the market impacted by energy conservation standards, without requiring DOE to prepare estimates of the price and efficacy of those emerging technologies for the NIA model. Thus, DOE could incorporate the impact of emerging technologies in the base-case and standards-case, without having to prepare uncertain forecasts for those emerging technologies. DOE believes that reducing the number of affected consumers is the most appropriate approach for this rulemaking because:
(1)the efficacies of the emerging technologies are projected to be much higher than those that can be achieved by incandescent-based lamps; and
(2)the emerging technology lamps are not yet subject to any DOE regulation, and, therefore, consumers would be migrating to non-covered, substitute lamps. For the ANOPR, DOE is estimating that the market penetration of these emerging technologies (e.g., SSL, Ceramic Metal Halide, CFL) will be 50% of the IRL sockets in the installed base by the year 2042. DOE requests comment on this methodology used in the ANOPR for incorporating emerging technologies in the base-case forecasts. In addition, DOE seeks input on reasonable market-share estimates for GSFL and IRL in order to properly bound the range of potential energy savings and NPV that would result from standards. 4. Market-Share Matrices As discussed in the engineering analysis (Section III.C) and the LCC analysis (section III.G), consumers have available to them a variety of choices in terms of lamps and lamp systems. When choosing lighting systems, consumers often make their choice after considering lamp attributes such as lifetime, efficacy, price, lumen output, rated wattage, and total system power. As discussed earlier, the shipments for GSFL and IRL depend on input assumptions, including lamp lifetime and system lumen output. In addition, other lamp or lamp-system properties such as price and energy consumption are key inputs to the NES and NPV calculations. Therefore, within each product class, DOE believes it necessary to directly account for the mix of technologies which consumers select in the base case and standards case. In order to account for the range of possible consumer choices, DOE developed and populated technology market-share matrices. These market-share matrices allocate percentage market shares to each of the lamp technologies for the base case and standards case, either by proportioning lamp shipments or lamp stocks. As discussed in the NIA (Section III.I), the base-case and standards-case efficacy forecasts are also dependent on the market-share matrices. a. General Service Fluorescent Lamps The GSFL shipment model incorporates several separate market-share matrices to characterize shipments of lamps and lamp-and-ballast systems at different times during the analysis period. For each analyzed system type (e.g., 4-foot T8 medium bipin), DOE defines market-share matrices for the ballasts installed before 2012 versus new ballasts installed in 2012 and later. This enables the GSFL shipment model to capture a migration to different lamp-and-ballast designs over time in both the base and standards cases. At the Public Meeting, PG&E commented that, by the effective date of the standard, it is expected that commercial fluorescent lighting fixtures will be considerably improved. (Public Meeting Transcript, No. 4.5 at p. 113) In addition, NWPCC generally commented that typical BFs may change between the current stock and the stock in 2012. (Public Meeting Transcript, No. 4.5 at p. 175) In response, DOE recognizes that fluorescent lighting systems will likely improve and that the ballast factors
(BFs)may change over time. DOE populated the 2012 base-case market-share matrix (including BFs) based on discussions with industry experts, manufacturer interviews, and a review of available products. DOE can alter the inputs into the base-case market-share matrix (the technology mix in 2012) to reflect any level of improvement in lighting fixtures by 2012. In addition, the base-case GSFL shipment forecast has the ability to model improvement in lighting systems and shifts in BFs after 2012. Furthermore, if the public were to present alternative forecast scenarios to those considered for the ANOPR, the matrices are designed such that these alternative scenarios could be modeled for the NOPR. In addition, for the standards-case market-share matrices, DOE implemented two shipment scenarios for fluorescent lamps:
(1)“roll-up,” and
(2)“shift.” The “roll-up” scenario represents the standards case assuming all product efficacies in the base case which do not meet the standard would “roll-up” to meet the new standard level. Those that were above the standard level are considered unaffected and continue to purchase the same base-case lamp or lamp system. The “roll-up” scenario characterizes consumers primarily driven by the first-cost of the lamp, and they are restricted to replacing their base-case lamp with an equal wattage lamp when possible. The “roll-up” scenario, therefore, represents a lower bound of energy-savings scenario. The “shift” scenario models the standards case assuming all product efficacies are affected by the standard (whether or not their base-case efficacy meets the standard). This scenario, in which consumers are driven by both lamp cost and energy savings, results in an upper bound energy-savings scenario. A detailed description of the two fluorescent standards-case scenarios can be found in Chapter 9 of the TSD. DOE invites comment on the populated GSFL market-share matrices in the base-case and both standards-case scenarios. To illustrate the above approach, Table III.29 presents an example of a market-share matrix for the GSFL shipment model. This matrix characterizes the technology mix of new 4-foot T8 medium bipin lamp-and-ballast systems shipped in 2012 and 2042 in the base case and at CSL 3 under the shift scenario. Shipments of new systems in the intermediate years can be characterized by a linear progression from the 2012 technology mix to the 2042 technology mix. A separate market-share matrix exists for 4-foot T8 medium bipin lamp purchases on pre-existing ballasts. For this new system market-share matrix, the lamp-and-ballast designs were generated by pairing each lamp with the three ballasts with the most common BFs (0.88, 0.78, and 0.75) in the 4-foot T8 medium bipin market. This produces both energy-saving and non-energy-saving options. In the standards-case scenario shown, consumers then shift to reduced-wattage lamps and/or lower BFs. Table III.29.—Four-Foot T8 Medium Bipin Market-Share Matrix Under the Shift Scenario Mix of New Lamp-and-Ballast Systems Purchased CSL Lamp-and-ballast design Base case 2012 (percent) 2042 (percent) CSL3 2012 (percent) 2042 (percent) Electronic Ballast Factor 0.88 2 32.5 W, 86.2 lm/W 43 8 3 32.5 W, 90.8 lm/W 29 10 0 0 4 32.5 W, 92.3 lm/W 11 14 0 0 4 30 W, 92.3 lm/W 0 3 11 14 5 32.5 W, 95.4 lm/W 7 12 7 12 5 28 W, 97.3 lm/W 0 3 0 3 5 25 W, 96 lm/W 0 4 0 0 0.78 2 32.5 W, 86.2 lm/W 0 4 3 32.5 W, 90.8 lm/W 0 0 43 8 4 32.5 W, 92.3 lm/W 0 6 29 10 4 30 W, 92.3 lm/W 2 6 0 0 5 32.5 W, 95.4 lm/W 0 6 0 0 5 28 W, 97.3 lm/W 3 7 0 4 5 25 W, 96 lm/W 0 4 3 7 0.75 2 32.5 W, 86.2 lm/W 0 0 3 32.5 W, 90.8 lm/W 0 0 0 10 4 32.5 W, 92.3 lm/W 0 0 0 9 4 30 W, 92.3 lm/W 2 6 0 0 5 32.5 W, 95.4 lm/W 0 0 0 0 5 28 W, 97.3 lm/W 3 7 7 19 5 25 W, 96 lm/W 0 0 0 4 Total 100 100 100 100 b. Incandescent Reflector Lamps Similar to the GSFL model, the IRL shipment model use market-share matrices to project shipments. The IRL commercial and residential shipment models separately designate stock technology mixes in the years 2012 and 2042. These market-share matrices also present the available lamp designs in the standards case for which the stock technology mix is also characterized in one intermediate year. DOE developed percentage inputs for the IRL market-share matrices based on an examination of manufacturer product catalogs, historical shipment information, and interviews with manufacturers. Table III.30 presents an example of a market-share matrix for the commercial IRL shipment model. This matrix characterizes the stock technology mix of IRL in the years 2011 and 2042 in the base case, and in the years 2013 and 2042 at CSL 2. DOE chooses to characterize the stock in 2013 because DOE projects that by then the majority of the base-case commercial IRL stock would have turned over to be standards compliant. In the base case, DOE predicts a decline in halogen technology lamps and a rise in more-efficient HIR lamps. At CSL 2, all IRL must meet an HIR standard. Table III.30.—Market-Share Matrix for Commercial IRL Sockets Candidate standard level Lamp design Percentage stock in 2011 (Base case input only) Percentage of stock in 2013 (Standards case input only) Percentage of stock in 2042 Base Case 90 W, 14.6 lm/W, 2500 hrs, Halogen 33 21 75 W, 14.0 lm/W, 2500 hrs, Halogen 26 16 50 W, 11.6 lm/W, 3000 hrs, Halogen 22 14 70 W, 18.0 lm/W, 3000 hrs, HIR 8 21 60 W, 17.5 lm/W, 3000 hrs, HIR 6 16 41.3 W, 15.0 m/W, 3000 hrs, HIR 5 14 Total 100 100 CSL2 70 W, 18.0 lm/W, 3000 hrs, HIR 41 41 60 W, 17.5 lm/W, 3000 hrs, HIR 32 32 41.3 W, 15.0 m/W, 3000 hrs, HIR 27 27 Total 100 100 In addition to modeling one main scenario for IRL shipments, in order to capture the range of NES and NPV results possible, DOE created two sensitivity scenarios in the IRL shipments analysis. In one sensitivity scenario (termed “65 Watt BR lamp substitution”) in the standards case, DOE models a migration away from covered IRL toward exempted 65 Watt BR 30 and 65 Watt BR 40 lamps. As discussed earlier, EISA 2007 extended energy conservation standards coverage to certain ER and BR while exempting others. DOE believes that as the efficacy standards for IRL increase, some consumers who would normally purchase a covered IRL may instead choose to purchase a higher-wattage, lower-first-cost, exempted 65 Watt BR lamp. Although these exempted lamps do not fall under the scope of this rulemaking, DOE has included a sensitivity scenario incorporating this potential outcome, because it affects NES and NPV results. Further discussion of this 65 Watt BR lamp substitution sensitivity scenario can be found in Chapter 9 and Appendix 9A of the TSD. Regarding the second standards-case sensitivity scenario modeled, EEI commented that consumers may choose to purchase a higher-wattage lamp rather than a reduced-wattage lamp. (EEI, No. 7 at p. 1) If this were to happen, consumers would operate lamps in the standards case that gave them more lumens than they are modeled to be using in the base case. To represent this scenario, DOE created a “10-percent lumen increase” sensitivity scenario, which assumes that the residential IRL market, on average, would produce ten percent more lumens under standards scenarios. To achieve this increase in lumens, DOE models a portion of IRL purchases at reduced wattages and others at constant or higher wattages. Appendix 9A of the TSD presents both the market-share matrix and results associated with this scenario. Chapter 9 and Appendix 9A of the TSD presents all of the market-share matrices used in the shipment models for GSFL and IRL. DOE requests specific comment on the detailed matrices which represent the underlying input assumptions for each of the shipment scenarios and lamp types. 5. Shipment Forecast Results Table III.31 and Table III.32 present the results of the base-case shipment forecasts for GSFL and IRL, respectively. In those tables, values provided for the years 2001 to 2005 present historical shipment data, whereas the 2006 to 2011 shipments are linear extrapolations from the historical shipments. The shipments estimated for 2012 to 2042 are the projected unit shipments generated by the shipment models. This section includes a general discussion of the market dynamics impacting shipments in the standards cases. Chapter 9 of the TSD provides the detailed numerical output of the standards-case shipment forecasts. For GSFL, in accordance with historical shipment data, shipments of 4-foot T12 medium bipin and 8-foot T12 single pin slimline lamps in the base case are expected to decline as the magnetic ballasts on which those lamps are installed are no longer sold. These retired 4-foot T12 medium bipin and 8-foot T12 single pin slimline systems are expected to be replaced with 4-foot T8 medium bipin lamp-and-ballast systems, respectively. In addition, DOE forecasts that 90 percent of 8-foot T12 single pin slimline systems will be replaced with 4-foot T8 medium bipin lamp systems, and 10 percent will be replaced with 8-foot T8 single pin slimline systems. This effect, along with the 4-foot T8 systems purchased for new construction, account for the expected increase in 4-foot T8 and 8-foot T8 shipments. The base-case shipment forecasts of 8-foot T12 recessed double contact HO are depicted as constant, similar to the historical shipments. The standards-case forecasts experience similar trends, though at modified rates. At CSL1, CSL2, and CSL3, the early retrofit rates of 4-foot T12 medium bipin and 8-foot T12 single pin slimline systems are expected to increase, thereby accelerating the reduction in those shipments while increasing shipments of 4-foot T8 medium bipin and 8-foot T8 single pin slimline shipments. Because voluntary retrofits are not incorporated in the 8-foot T12 recessed double contact HO model, the standards-case shipment forecasts of these lamps at CSL1, CSL2, and CSL3 are similar to the base-case forecast. In addition, because at CSL 4 and CSL 5, 4-foot T12 medium bipin, 8-foot T12 single pin slimline, and 8-foot T12 recessed double contact HO lamps are no longer standards-compliant, these systems are automatically retrofitted upon lamp failure. Table III.31.—GSFL Shipments in the Base Case [Millions] Year 4-foot T12 medium bipin 4-foot T8 medium bipin 8-foot T12 single pin slimline 8-foot T8 single pin slimline 8-foot T12 recessed double contact HO 2001 236 182 48 5 27 2003 202 191 41 6 27 2005 181 240 37 6 28 2007 151 262 32 7 27 2009 122 292 26 7 27 2012 111 425 17 9 31 2015 71 479 10 9 31 2020 22 584 3 10 31 2025 657 10 31 2030 705 10 31 2035 775 10 31 2040 874 10 31 2042 889 10 31 Cumulative (2012-2042) 556 20,812 78 305 971 The forecasted shipments beyond the year 2011 of covered IRL (exempted BR and ER lamps are not included) are shown in Table III.32. As demonstrated below, the shipments shown decrease over the analysis period. There are two reasons why DOE projects shipments to decrease:
(1)Increased penetration of CFL and other long-lived emerging technologies; and
(2)historical growth in IRL stock (approximately 8 to 10 percent annually) which is significantly higher than the historical growth rate in building floor space (i.e., 1.6 percent annually in the commercial sector and 1.3 percent annually in the residential sector). Given this inconsistency in growth rates, DOE believes this high historical growth rate in IRL stock is unsustainable in the long term, so DOE has tentatively decided to instead base IRL socket growth after 2011 on the historical growth in building floor space. This decrease in stock growth contributes to the expected decline in IRL shipments. In the standards case, shipments of IRL in both the commercial and residential sectors are generally expected to decrease relative to the base case, as longer-lived HIR and improved HIR lamps are incorporated into the installed stock. In addition, for the 65 Watt BR lamp substitution scenario, shipments of covered IRL decrease relative to the base case due to the migration to exempted 65 Watt BR lamps. Table III.32.—IRL Shipments in the Base Case [Millions] Year Commercial Residential 2001 67 66 2003 71 70 2005 83 85 2007 89 93 2009 92 85 2012 98 99 2015 98 98 2020 96 96 2025 94 93 2030 90 88 2035 86 83 2040 80 76 2042 77 74 Cumulative (2012-2042) 2,814 2,770 Additional detail on the shipments analyses can be found in Chapter 9 of the TSD. I. National Impact Analysis The national impact analysis
(NIA)assesses cumulative national energy savings
(NES)and the cumulative national economic impacts of candidate standards levels. The analysis measures economic impacts using the net present value
(NPV)metric, which represents the net present value (i.e., future amounts discounted to the present) of total customer costs and savings expected to result from new standards at specific efficacy levels. For a given CSL, DOE calculated the NPV, as well as the NES, as the difference between a base case and the standards-case forecasts. Detailed information on the national impacts analysis can be found in Chapter 10 of the TSD. DOE determined national annual energy consumption as the product of the annual energy consumption per unit lamp system and the number of total units in the installed stock. The per-unit annual energy consumption is a function of lamp efficacy and lamp wattage (and BF in the case of the GSFL). TSD Chapter 6, *Energy-Use Characterization,* describes how the per-unit energy consumption varies as a function of efficacy for each of the considered lamps. Cumulative energy savings are the sum of the annual NES determined over a specified time period. DOE calculated net economic savings each year as the difference between total operating cost savings and increases in total installed costs. Cumulative economic savings are the sum of the annual NPVs determined over a specified time period. 1. Approach In the standards case, more-efficacious products gradually replace less-efficacious products over time. This affects calculations of both the NES and NPV, which are both a function of the total number of units in use and their efficacies, and thus depend on annual shipments and the lifetime of a product. Both calculations start by first estimating the installed lamp stock. As discussed in section III.H (Shipments Analysis), new lamps (or, for GSFL, new lamp-and-ballast systems) shipped over time are specified by market-share matrices. These shipments are tracked through the analysis period to establish the installed stock of lamps. In the standards case, given that most consumers are likely to install lamp systems with energy consumption less than or equal to their base-case systems, the energy consumption per unit of capacity used by the products in service gradually decreases in the standards case relative to the base case. To estimate the resulting national energy savings at each CSL, DOE followed a four-step process. First, DOE calculated the national site-energy 60 consumption for GSFL and IRL for each year, beginning with the expected effective date of the standards
(2012)for the base-case forecast and each standards-case forecast. Second, DOE determined the annual site-energy savings, consisting of the difference in site-energy consumption between the base case and the standards case. DOE also estimated and reported additional heating, ventilating, and air conditioning
(HVAC)interaction savings associated with increased lamp efficacy in the commercial sector. Third, DOE converted the annual site-energy savings into the annual amount of energy saved at the source of electricity generation (i.e., primary energy), using a site-to-source conversion factor that varies by year (calculated from AEO 2007 projections). Finally, DOE summed the annual source-energy savings from 2012 to 2042 to calculate the total NES for that period. 60 “Site energy” is the energy consumed by the lamp systems directly as they are operated at the end-use site. To estimate NPV, DOE calculated the net impact each year as the difference between total operating cost savings (or the electricity cost savings) and increases in total installed costs (which consist of manufacturer selling price, sales taxes, and installation cost). DOE calculated the national NPV at each CSL using a three-step process. First, DOE determined the total product costs under the standards case and the base case from the total installed cost (including product prices, installation, and replacement costs as discussed in section III.G.2.a) and shipments of lamps (or lamp-and-ballast systems). Second, DOE determined the total operating costs in the base case and standards case from electricity prices and the stock of lamps and lamp systems. Third, DOE determined the difference between the net operating cost savings and the net product cost increase to get the net savings (or expense) for each year. DOE then discounted the annual net savings (or expenses) to 2007 for lamps bought during the analysis period (2012 to 2042) and summed the discounted values to provide the NPV of a CSL. An NPV greater than zero shows net savings (i.e., the CSL would reduce customer expenditures relative to the base case in present-value terms). An NPV that is less than zero indicates that the CSL would result in a net increase in customer expenditures in present-value terms. 2. Base-Case and Standards-Case Forecasted Efficacies A key aspect of the estimates of NES and NPV is the proportion of future lamp shipments meeting different efficacies for the base case (without new standards) and each of the standards cases (with new standards). Because key inputs to the calculation of the NES and NPV are dependent on the estimate of the efficacies shipped, it is important to know the projected efficacy-distribution of lamp shipments. However, with regard to the calculation of the NES, it is also important to note that the total energy savings per unit is not solely dependent on the lamp efficacy, but also on the lamp wattage (and BF for fluorescent lamps). Because most consumers select lamp wattage when purchasing lamps, per-unit energy consumption for a particular standards-case purchase is not necessarily less than per-unit energy consumption for the corresponding base-case purchase. For example, a higher-efficacy lamp can be purchased at the same wattage under the standards case, thereby increasing lumen output without reducing energy consumption. On the other hand, by installing an equally-efficacious fluorescent lamp on a ballast with a lower BF, the outcome can be a positive energy savings for that system. As discussed in section III.H, the lamp systems available in the shipments forecast, and ultimately in the NIA, incorporate consumer choices that encompass both energy-saving and non-energy-saving options. Also discussed in the shipments analysis (section III.H), the base-case and standards-case forecasted efficacies are primarily determined by inputs into the market-share matrices in both the fluorescent and incandescent NIA models. As exemplified in Table III.33, the base-case efficacy forecast of 4-foot medium bipin and 8-foot single pin slimline lamps show a gradual increase in average efficacy due to both the phasing out of T12 ballasts and the penetration of higher-efficacy T8 lamps. As T12 lamps are generally less efficacious than their T8 counterparts, the market shift toward T8 lamp-and-ballast systems causes an overall increase in efficacies of shipped fluorescent lamps. In addition, as T12 magnetic ballasts generally have higher system powers than their electronic T8 counterparts, average system power decreases overall. Due to the banning of magnetic ballasts by the 2000 Fluorescent Ballast rulemaking, by the year 2025, all magnetic T12 ballasts are expected to have retired from the installed stock, and the increase in average lamp efficacy and decrease in average system power slows. Because the installed stock of the 8-foot recessed double contact HO lamp market is already predominantly operating on electronic ballasts, the increase in average lamp efficacy and decrease in average system power is solely due to the penetration of more-efficacious or reduced-wattage lamps being installed on lower ballast factor ballasts. Table III.33.—Base-Case Average Lamp Efficacy and System Power of the GSFL Stock Year 4-foot medium bipin Average efficacy *lm/W* Average system power * *W* 8-foot single pin slimline Average efficacy *lm/W* Average system power ** *W* 8-foot recessed double contact HO Average efficacy *lm/W* Average system power † *W* 2012 87.9 93 91.3 135 83.0 198 2015 88.9 89 92.6 129 83.0 197 2020 90.0 85 95.7 116 83.3 197 2025 90.7 84 97.5 110 83.7 196 2030 91.3 82 98.0 109 84.1 194 2035 91.9 81 98.4 108 84.5 193 2042 92.8 79 99.1 107 85.0 192 * 4-foot medium bipin systems are lamp systems composed of either one or two ballasts and three lamps. ** 8-foot single pin slimline systems are lamp systems composed of one ballast and two lamps. † 8-foot recessed double contact systems are lamp systems composed of one ballast and two lamps. Improvement in stock efficacy for IRL is driven by shifts to more-efficacious HIR technologies. For IRL, as discussed in the Shipments Analysis (see section III.H.3), DOE reports only the improvement in efficacy of the lamp sockets not migrating to non-IRL emerging technologies such as solid-state lighting or ceramic metal halide. As demonstrated in Table III.34 the average efficacy of the installed stock of IRL is expected to increase during the analysis period. Table III.34.—Base-Case Average Lamp Efficacy of the IRL Stock Year Average efficacy *lm/W* 2012 13.7 2015 13.8 2020 13.8 2025 13.8 2030 13.9 2035 13.9 2042 13.9 DOE invites comment on the base-case efficacy forecasts of GSFL and IRL. 3. *National Impact Analysis Inputs* Table III.35 summarizes the major inputs to the NES and NPV spreadsheet models. For each input, the table provides a brief description of the data source. For details on the entire national impact analysis, see Chapter 10 of the ANOPR TSD. Table III.35.—National Energy Saving and Net Present Value Inputs Input data Data description Shipments Annual shipments from the GSFL and IRL shipment models (see TSD Chapter 9, Shipments Analysis). Stock of Lamps Established based on the 2011 lamp stock, the service life of lamps and/or ballasts, and the annual shipments. The initial stock is based on historical shipments and projected shipments from 2006 to 2011. (See TSD Chapter 9, Shipments Analysis). Effective Date of Standard 2012. Analysis Period 2012 to 2042. Unit Energy Consumption (kWh/yr) Established in the Energy-Use Characterization, TSD Chapter 6, by lamp or lamp-and-ballast design and sector. Total Installed Cost Established in the Product Price Determination, TSD Chapter 7 and the LCC Analysis, TSD Chapter 8, by lamp-and-ballast designs. Electricity Price Forecast 2007 EIA Annual Energy Outlook forecasts (to 2030) and extrapolation for beyond 2030 (see TSD Chapter 8). Electricity Site-to-Source Conversion Conversion varies yearly and is generated by 2007 EIA Annual Energy Outlook forecasts (to 2030) of electricity generation and electricity-related losses. Conversion factors for beyond 2030 are extrapolated. HVAC Interaction Savings 6.25% of total energy savings in the commercial sector. Rebound Effect 1% of total energy savings in the commercial sector. 8.5% of total energy savings in the residential sector. Discount Rate 3 and 7 percent real. Present Year Future costs and savings are discounted to the year 2007. Inputs for the calculation of NES identified in Table III.35 include the analysis period, per-unit annual energy consumption, shipments, lamp stock, site-to-source conversion factors, rebound effect, and heating/ventilating/air conditioning
(HVAC)interaction savings. The following discussion provides further context and information on these inputs. One of the critical inputs to the NES and NPV calculations is the analysis period. DOE received several comments at the Framework Meeting regarding the appropriateness of 30 years as the duration of the analysis period for a fluorescent and incandescent lamp NES. Both GE and PG&E commented that because the life-cycle of fluorescent lighting systems is approximately 15 or 20 years, a 30-year analysis period is too long in the commercial sector. In addition, GE commented that although incandescent lamps are often upgraded much sooner than 20 years, a 20-year analysis period could be used for consistency with the GSFL analysis. (Public Meeting Transcript, No. 4.5 at pp.204-205) ACEEE commented that DOE should use a 30-year analysis period for consistency with other rulemaking analyses. (Public Meeting Transcript, No. 4.5 at pp. 205-206) In response, DOE recognizes that the life-cycle of GSFL systems and IRL are all estimated to be less than 30 years; however, DOE has tentatively decided to use an analysis period from 2012 to 2042 for consistency with the shipment and national impact analyses of other rulemakings. Annual energy consumption per lamp system is used to calculate the annual national energy consumption. For IRL, the lamp system is solely composed of the incandescent lamp. For GSFL, DOE received a comment from EEI urging DOE to consider system energy consumption in the fluorescent lamp national impact analysis. EEI emphasized that the ballast determines the energy savings in many situations. (EEI, No. 7 at p. 1) DOE recognizes the significance of EEI's comment and has incorporated this approach into its analysis. Accordingly, for the ANOPR, DOE considered GSFL lamp-and-ballast pairs, or systems, in constructing its national impact analysis. Section III.D, *Energy-Use Characterization* , provides the energy consumption of each lamp-and-ballast pairing used in the national impact analysis. The lamp stock in a given year is the number of lamps shipped from earlier years to the present and which survive in the given year. The NIA spreadsheet model keeps track of the number of units shipped each year. As discussed in Section III.H, *Shipments Analysis* , DOE develops its forecasted shipments for the base case from the initial stock of fluorescent and incandescent lamps in the year before the effective date of the standard (i.e., 2011). For both GSFL and IRL, DOE developed market-share matrices illustrating the technology migration of the stock. The growth in stocks (either by lumen demand or by number of sockets in the field) and the average lumen output per lamp result in a forecasted lumen output for the commercial GSFL, industrial GSFL, commercial IRL, and residential IRL markets over the analysis period. If DOE receives comment that over-lighting or under-lighting in any of the markets will result in a decrease in total shipments and total stock, DOE may make such a stock adjustment for the NOPR. DOE invites comment on this issue. The site-to-source conversion factor is the multiplicative factor DOE uses for converting site-energy consumption (the energy used at the end-use site) into primary or source energy consumption (the energy used at the source before transmission or conversion losses). For electricity, the conversion factors vary over time due to projected changes in generation sources (i.e., the power plant types projected to provide electricity to the country). For the ANOPR, DOE calculated annual average site-to-source conversion factors using EIA's AEO2007. The conversion factors were derived by dividing the total energy used to produce electricity in each forecast year in the United States, as indicated in AEO2007, by the total electricity delivered for each forecasted year. For example, the site-to-source conversion factor in 2012 is calculated to be 10,680 BTU/kWh. DOE received multiple comments regarding the HVAC system interaction with fluorescent lighting fixtures in the commercial sector. EEI commented that DOE should account for this interaction (both the reduction of AC loads and increase in heating loads) as an effect of the standard in its national impacts analysis. (EEI, No. 7 at p. 1; Public Meeting Transcript, No. 4.5 at p. 242) In addition, EEI noted that a trend toward higher-efficacy HVAC systems may lower this HVAC interaction with lighting. (Public Meeting Transcript, No. 4.5 at pp. 159-160) Based on this comment, DOE has decided to include HVAC interaction in its calculation of the NES (but not in the NPV calculation). To account for HVAC energy savings, DOE used the analysis completed by the 2000 Fluorescent Ballast rulemaking, which calculates an HVAC interaction energy savings of 6.25 percent of total energy savings. 61 As EEI suggested, this analysis incorporates changes in both heating and cooling loads as a result of the standard. The analysis also involved calculating the lighting HVAC interaction energy savings on buildings built before 1989 (5 percent of total energy savings) and ones built from 1990 to 1995 (10 percent of total energy savings). The ballast analysis assumed that over the analysis period, the building stock would move from the 5 percent interaction factor towards the 10 percent interaction factor. Using simple scaling methods, 6.25 percent was used as an average interaction over the entire analysis period. Using this same methodology for lamps, an analysis period ranging from 2012 to 2042 would have a slightly higher HVAC energy savings. However, DOE acknowledges EEI's comment that the overall HVAC savings with lighting may also decrease due to more-efficient heating and cooling systems. Considering these competing factors, DOE believes it is reasonable to use 6.25 percent of total energy savings as the HVAC energy savings in commercial sector for both GSFL and IRL. 61 U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Technical Support Document: Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast Proposed Rule: Appendix B, pp. B-23-B-30 (Jan. 2000). Available at: *http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_b.pdf* NWPCC commented that due to the increasing prevalence of air conditioning systems, it would be worthwhile to analyze the heating load of incandescent lamps on the HVAC systems in the residential sector. (Public Meeting Transcript, No. 4.5 at pp. 162-163) GE then responded that incandescent lamps have a minor effect on HVAC energy usage, so such an analysis is not warranted. (Public Meeting Transcript, No. 4.5 at p. 163) While DOE appreciates NWPCC's comment, DOE believes that IRL will have a minor effect on HVAC energy usage in the residential sector. Therefore, DOE has not included that interaction in the NES analysis. DOE invites further comment on the issue of HVAC interaction in both the commercial and residential sectors. In its analysis, DOE considered the rebound effect 62 that occurs after installation of energy-efficient lighting equipment. DOE examined a summary of the literature regarding the rebound effect in relation to lighting equipment. 63 Based on four studies, the summary estimated that, for a 100 percent increase in energy efficiency, values of ”take-back” or rebound for residential lighting are between five and twelve percent of the energy consumption savings. In addition, with regards to a firm's response to higher-efficiency lighting, the summary estimated zero to two percent for values of rebound for lighting. Therefore, in the calculation of national energy savings due to energy conservation standards on lighting, DOE used a rebound rate of 8.5 percent in the residential sector and one percent in the commercial and industrial sectors. However, DOE notes that the summary of the literature reports that the results of rebound due to lighting are inconclusive. Thus, DOE invites comments on both the inclusion and magnitude of the rebound effect for purposes of analyzing the expected effects of this regulation. 62 Under economic theory, “rebound effect” refers to the tendency of a consumer to respond to the cost savings associated with more efficient equipment in a manner that actually leads to marginally greater product usage, thereby diminishing some portion of anticipated energy savings related to improved efficiency. 63 Greening, L.A., D.L. Greene, and C. Difiglio, “Energy efficiency and consumption—the rebound effect—a survey,” 28 *Energy Policy* (2000), pp. 389-401. The take-back in energy consumption associated with the rebound effect provides consumers with increased value (e.g., increased lighted hours, since the increased efficiency enables consumers to use their lighting equipment for longer periods of time). The impact on consumers is, thus, the sum of the change in the cost of owning the lighting equipment (i.e., life-cycle cost) and the increased value for the longer lit hours. However, DOE is unable to monetize this increase in consumer value in the LCC analysis. DOE believes that, if it were able to monetize the increased value to consumers added by the rebound effect, this value would be at least as great as the value of the foregone energy savings. For this analysis, DOE estimates that this value is equivalent to the monetary value of the energy savings that would have occurred without the rebound effect. Therefore, the economic impacts on consumers with or without the rebound effect, as measured in the LCC and NPV analyses, are the same. The inputs to the NPV calculation are total installed cost per unit, annual operating cost savings per unit, total annual installed cost increases, total annual operating cost savings, discount factor, present value of increased installed costs, and present value of operating cost savings. As discussed in section III.E, DOE has collected prices for GSFL and IRL with varying wattages, efficacies, and lifetimes. In addition, for GSFL, ballast prices are included in the analysis. The total installed cost per unit, as described in section III.G, consists of these manufacturer selling prices, labor costs, and sales tax. The annual operating cost savings per unit incorporates changes in electricity costs due to a standard efficacy level and lower energy consumption per unit. As described previously, DOE forecasted the per-unit annual electricity consumption. DOE forecasted electricity prices based on EIA's AEO2007. By using both of these values, DOE is able to establish the annual operating cost savings per unit. The total annual installed cost increase is equal to the annual change between the base case and standards case in the product of per-unit total installed cost multiplied by the shipments forecasted of each lamp or lamp-and-ballast design. The total annual operating cost savings are equal to the change in the product of annual operating costs per unit and the total lamp stock by lamp or lamp-and-ballast design. DOE multiplies monetary values in future years by the discount factor to determine the present value. DOE estimated national impacts using both a three-percent and a seven-percent real discount rate as the average real rate of return on private investment in the U.S. economy. DOE uses these discount rates in accordance with Office of Management and Budget
(OMB)guidance to Federal agencies on the development of regulatory analysis (OMB Circular A-4, September 17, 2003), and section E, “Identifying and Measuring Benefits and Costs,” therein. DOE defines the present year as 2007. The present value of increased installed costs is the annual installed cost increase in each year (i.e., the difference between the standards case and base case), discounted to the present, and summed for the time period over which DOE is considering the installation of product (i.e., from the effective date of standards, 2012, to the year 2042). The increase in total installed cost refers to both product cost and installation cost associated with the higher energy efficacy of product purchased in the standards case compared to the base case. The present value of operating cost savings is the annual operating cost savings (i.e., the difference between the base case and standards case) discounted to the present, and summed over the period from the effective date, 2012, to the time when the last unit installed in 2042 is retired from service. Savings are decreases in operating costs associated with the higher energy efficacy of products purchased in the standards case compared to the base case. Total annual operating cost savings is the savings per unit multiplied by the number of units surviving in a particular year. 4. National Impact Analysis Results Tables III.36 through Table III.38 present the NES results (including rebound effect and HVAC interactions where applicable) for each CSL considered for GSFL and IRL. As mentioned in Section III.H, due to the relatively small shipments-based market share of 2-foot U-shaped lamps, national impact results for 2-foot U-shaped lamps are not presented in the ANOPR. However, DOE does intend to estimate NES and NPV results for these product classes in the NOPR. In addition, the following NES and NPV values provide results for lamps of all covered CCT for GSFL. For IRL, the results are representative for both the standard-spectrum and modified-spectrum lamps. As mentioned earlier in sections III.H.3 and III.H.4, in the GSFL shipment model, when 8-foot T12 single pin slimline lamp-and-ballast systems are retired, consumers have the option to replace those systems with 4-foot T8 medium bipin lamp-and-ballast systems. For this reason, it is necessary that DOE considers pairs of CSLs when reporting the results for the ANOPR. For the ANOPR, when DOE reports the 4-foot medium bipin NES and NPV results, these values represent only the savings accrued from new construction and the replacements of the initial 2011 4-foot medium bipin stock. It does not include savings that may be accumulated due to the added shipments and installed stock of 4-foot medium bipin systems replacing 8-foot single pin slimline systems. In addition, DOE reports the 8-foot single pin slimline NES and NPV as the savings accrued from the replacements of the initial 2011 8-foot single pin slimline stock. This assumes that 4-foot medium bipin lamps that replace the 8-foot single pin slimline lamps are still at the base-case efficacies. However, when reporting the total NES and NPV for the entire linear GSFL market, DOE assumes that all product classes (4-foot medium bipin, 8-foot single pin slimline, and 8-foot recessed double contact HO) are at the same CSL and all savings are accounted for. DOE invites comment on appropriate CSL pairings that should be reported as trial standard levels in the NOPR, including additional pairings not presented in this ANOPR. The NIA spreadsheet has the flexibility to compute results for all combinations of CSLs at the product class level and even at the level of baseline lamps for GSFL. For example, in the GSFL NIA model, it is possible to specify different efficacy requirements for 4-foot T12 medium bipin and 4-foot T8 medium bipin lamps. More detailed discussion regarding these CSL pairs can be found in Chapter 9 of the TSD. Table III.36 and Table III.37 present the national energy savings for GSFL under both the “shift” (upper bound) and “roll-up” (lower bound) scenarios. The highest energy savings result from CSL 5 for both scenarios and all lamp types. In addition, note that at CSL 1 and CSL 2 (and CSL 3 for only 8-foot recessed double contact HO lamps), all energy savings originate from shifts to higher-efficacy T12 lamps and, in the 4-foot medium bipin and 8-foot single pin slimline models, early retrofits to the more-efficacious T8 systems. At these CSLs, all T8 lamps are standards- compliant and, therefore, unaffected in both scenarios. At CSL 3, a large increase in total energy savings of GSFL can be observed, stemming from the saving associated with 4-foot T8 lamps (the majority of the stock) being affected by the regulations. It is also important to note that at CSL 4 and CSL 5 for all GSFL product classes, all T12 lamp systems are automatically retrofitted to T8 lamp systems because no T12 standards-compliant lamps are available as lamp designs. Table III.36.—Cumulative National Energy Savings for GSFL Under the Shift Scenario [2012-2042] [quads] 64 Candidate standard level Product class NES *quads* Undiscounted Discounted at 7% Discounted at 3% 1 4-foot medium bipin 0.27 0.14 0.20 8-foot single pin slimline 0.05 0.03 0.04 8-foot recessed double contact HO 0.48 0.15 0.27 Total 0.80 0.31 0.51 2 4-foot medium bipin 0.45 0.24 0.34 8-foot single pin slimline 0.09 0.05 0.06 8-foot recessed double contact HO 0.65 0.20 0.37 Total 1.19 0.49 0.78 3 4-foot medium bipin 6.79 1.98 3.81 8-foot single pin slimline 0.13 0.07 0.10 8-foot recessed double contact HO 0.67 0.20 0.38 Total 7.94 2.35 4.49 4 4-foot medium bipin 8.17 2.54 4.72 8-foot single pin slimline 0.41 0.15 0.25 8-foot recessed double contact HO 2.16 0.63 1.21 Total 11.09 3.43 6.39 5 4-foot medium bipin 12.69 3.62 7.05 8-foot single pin slimline 0.41 0.16 0.26 8-foot recessed double contact HO 2.19 0.64 1.23 Total 15.86 4.59 8.86 Table III.37.—Cumulative National Energy Savings for GSFL Under the Roll-Up Scenario [2012-2042] [quads] 64 Candidate standard level Product class NES *quads* Undiscounted Discounted at 7% Discounted at 3% 1 4-foot medium bipin 0.27 0.14 0.20 8-foot single pin slimline 0.05 0.03 0.04 8-foot recessed double contact HO 0.35 0.12 0.21 Total 0.67 0.28 0.45 2 4-foot medium bipin 0.45 0.24 0.34 8-foot single pin slimline 0.09 0.05 0.06 8-foot recessed double contact HO 0.61 0.19 0.35 Total 1.15 0.48 0.76 3 4-foot medium bipin 2.88 0.92 1.68 8-foot single pin slimline 0.13 0.07 0.10 8-foot recessed double contact HO 0.63 0.19 0.36 Total 3.79 1.23 2.23 4 4-foot medium bipin 3.71 1.16 2.14 8-foot single pin slimline 0.17 0.09 0.13 8-foot recessed double contact HO 1.89 0.55 1.06 Total 5.92 1.85 3.42 5 4-foot medium bipin 6.62 1.90 3.68 8-foot single pin slimline 0.23 0.11 0.16 8-foot recessed double contact HO 2.05 0.60 1.15 Total 9.26 2.72 5.20 Table III.38 presents the national energy savings for IRL in the commercial and residential sectors. As shown in the table, energy savings for both commercial and residential IRL are greatest at CSL3. Appendix 10B of the TSD presents NES results for both the “65 Watt BR lamp substitution” and the “10 percent lumen increase” sensitivity scenarios. Because both of these scenarios involve the purchasing of either higher-wattage or same-wattage lamps, the two sensitivity scenarios generally present lower NES results than that of the main scenario presented in this notice. 64 Results of 4-foot medium bipin energy savings and NPV are calculated assuming there is no 8-foot single pin slimline standard while the 8-foot single pin slimline results assume no 4-foot medium bipin standard. Total results assume 4-foot medium bipin lamps and 8-foot single pin slimline lamps are subject to the same CSL. Table III.38.—Cumulative National Energy Savings IRL [2012-2042] [quads] Candidate standard level Sector NES *quads* Undiscounted Discounted at 7% Discounted at 3% 1 Commercial 0.48 0.15 0.28 Residential 0.60 0.18 0.34 Total 1.08 0.33 0.62 2 Commercial 0.83 0.27 0.49 Residential 1.03 0.30 0.58 Total 1.86 0.57 1.07 3 Commercial 1.13 0.36 0.66 Residential 1.27 0.37 0.71 Total 2.40 0.73 1.37 Below are the NPV results for the CSLs considered for GSFL and IRL. Results are cumulative and are shown as the discounted value of these savings in dollar terms. The present value of increased total installed costs is the total installed cost increase (i.e., the difference between the standards case and base case), discounted to the present, and summed over the time period in which DOE evaluates the impact of standards (i.e., from the effective date of standards, 2012, to 2042). Savings are decreases in operating costs associated with the higher energy efficacy of each product purchased in the standards case compared to the base case. Total operating cost savings are the savings per unit multiplied by the number of units surviving in a particular year. Each product consumes energy and must be maintained over its entire lifetime. For a unit that survives after 2042, DOE calculates a residual value in both the base case and standards case to account for its remaining life. The cost savings associated with this residual value are incorporated into the total NPV result. A detailed description of this calculation can be found in Chapter 10 of the TSD. The NPV results for the CSLs analyzed for each of the lamp types are based on discount rates of 7 and 3 percent. Table III.39 and Table III.40 provide the NPV for GSFL under both the shift and roll-up scenarios. As seen below, CSL 4, for 8-foot recessed double contact HO lamps and 8-foot single pin slimline lamps, and CSL 5 for 4-foot medium bipin, achieve the highest NPV for the shift scenario. For the roll-up scenario, CSL 5 achieves the highest NPV for all types of fluorescent lamps analyzed. Also, for both scenarios and at all CSLs, the 4-foot medium bipin lamp results in positive NPV, because increasingly efficacious lamp-and-ballast designs generally have higher LCC savings relative to each other and the base-case lamp-and-ballast designs. For all GSFL, at CSL 4 and CSL 5, large and positive NPV generally result due to the integration of more-efficacious T8 design options into both commercial and industrial lamp stocks. As 4-foot T8 medium bipin lamps are the majority of stock of all GSFL, an increase in lamp efficacy and a decrease in energy consumption result in large operating cost savings and, therefore, high NPV. Table III.39.—Cumulative NPV Results for GSFL Under the Shift Scenario [Billion 2006$] Candidate standard level Product class NPV *billion 2006$* Discounted at 7% Discounted at 3% 1 4-foot medium bipin 0.20 0.52 8-foot single pin slimline −0.03 0.02 8-foot recessed double contact HO 0.94 1.86 Total 1.11 2.40 2 4-foot medium bipin 0.24 0.74 8-foot single pin slimline 0.01 0.11 8-foot recessed double contact HO 1.42 2.73 Total 1.67 3.58 3 4-foot medium bipin 9.33 19.92 8-foot single pin slimline 0.13 0.31 8-foot recessed double contact HO 0.05 0.20 Total 10.15 21.66 4 4-foot medium bipin 13.75 27.03 8-foot single pin slimline 0.69 1.52 8-foot recessed double contact HO 3.64 8.08 Total 18.78 37.92 5 4-foot medium bipin 20.37 42.62 8-foot single pin slimline 0.68 1.51 8-foot recessed double contact HO 3.63 8.06 Total 25.74 54.26 Table III.40.—Cumulative NPV Results for GSFL Under the Roll-Up Scenario [Billion 2006$] Candidate standard level Product class NPV *billion 2006$* Discounted at 7% Discounted at 3% 1 4-foot medium bipin 0.20 0.52 8-foot single pin slimline −0.03 0.02 8-foot recessed double contact HO 0.56 1.01 Total 0.73 1.55 2 4-foot medium bipin 0.24 0.74 8-foot single pin slimline 0.01 0.11 8-foot recessed double contact HO 1.15 2.13 Total 1.40 2.98 3 4-foot medium bipin 2.60 6.15 8-foot single pin slimline 0.13 0.31 8-foot recessed double contact HO 0.00 0.07 Total 2.98 7.00 4 4-foot medium bipin 5.37 10.63 8-foot single pin slimline 0.07 0.26 8-foot recessed double contact HO 3.27 7.33 Total 9.00 18.74 5 4-foot medium bipin 8.19 17.29 8-foot single pin slimline 0.24 0.66 8-foot recessed double contact HO 3.40 7.61 Total 12.47 26.72 Table III.41 presents the NPV for IRL in the commercial and residential sectors. As shown in Table III.41, the NPV for IRL is greatest at CSL3, consistent with trends in LCC savings. Appendix 10B of the TSD presents NPV results for both the “65 Watt BR lamp substitution” and the “10 percent lumen increase” sensitivity scenarios. Table III.41.—Cumulative NPV Results for IRL [Billion 2006$] Candidate standard level Sector NPV *billion 2006$* Discounted at 7% Discounted at 3% 1 Commercial 0.82 1.53 Residential 1.20 2.47 Total 2.02 4.00 2 Commercial 1.54 2.86 Residential 2.31 4.64 Total 3.85 7.50 3 Commercial 2.88 5.40 Residential 3.34 6.76 Total 6.22 12.16 J. Life-Cycle Cost Subgroup Analysis The LCC subgroup analysis evaluates impacts of standards on identifiable groups of customers, such as different population groups of consumers (e.g., consumers part of low income households) or different business types (e.g., educational facilities), which may be disproportionately affected by any national energy conservation standard level. In the NOPR phase of this rulemaking, DOE will analyze the LCCs and PBPs for consumers that fall into such groups. The analysis will determine whether any particular group of consumers would be adversely affected by any of the trial standard levels. DOE plans to examine variations in energy prices and energy use that might affect the NPV of a standard for customer subpopulations. To this end, DOE intends to perform additional analyses to consider how differences in energy use will affect subgroups of customers. DOE will determine the effect on customer subgroups using the LCC spreadsheet model. As described in Section III.G, the ANOPR LCC analysis includes various customer types that use the lamps being considered under this rulemaking. This analysis includes consumers purchasing lamps in different sectors, purchasing lamps for different building types, replacing different baseline lamps or lamp/ballast systems, and undergoing different purchasing events. For IRL, DOE can estimate LCC savings and payback periods for consumers in the residential, commercial, and industrial sectors. For GSFL, DOE can perform an LCC analysis for consumers in the commercial and industrial sectors. A subgroup analysis for consumers of GSFL in the residential sector could also be performed if DOE assumes GSFL residential lamps have the same operating hour profile as IRL residential lamps. DOE requests comment on this assumption. DOE can also analyze the LCC impacts on consumers living in different buildings in the commercial and residential sectors. For example, DOE can analyze the impact of standards for people running educational facilities and for those who live in a mobile home. DOE also has the ability to analyze the impacts on consumers living in different regions of the country. For both GSFL and IRL, DOE has the ability to evaluate the LCC impacts on consumers who purchase different baseline lamps or lamp-and-ballast systems. For example, the economic impacts of a standard will be different for a consumer who owns a typical 4-foot T8 lamp-and-ballast system than for a consumer who owns a typical 4-foot T12 lamp-and-ballast system. For GSFL, DOE also has the ability to analyze the LCC impact of a standard on consumers faced with a variety of different lamp-purchasing events. The LCC impacts on a consumer who must replace a lamp for their existing system are very different from those impacts on a consumer who must purchase a lamp because they are constructing a new building. DOE received one comment in response to the Framework Document pertaining to the LCC subgroup analysis. PG&E argued that consumers will experience differential LCCs impacts, particularly for low-income households. (PG&E, No. 4.5 at p.218) DOE will consider analyzing the impacts of candidate standards on low-income subgroups for the NOPR. DOE invites comment on these and other consumer subgroups that it should consider for the NOPR. DOE also invites comments on how LCC inputs might change for each consumer subgroup. K. Manufacturer Impact Analysis The purpose of the MIA is to identify the likely impacts of energy conservation standards on manufacturers. DOE has begun and will continue to conduct this analysis with input from manufacturers and other interested parties. During the MIA, DOE considers financial impacts and a wide range of other quantitative and qualitative industry impacts that might occur following the adoption of a standard. For example, if DOE adopts a particular standard level, it could require changes to manufacturing practices. DOE will identify and understand these impacts through interviews with manufacturers and other stakeholders during the NOPR stage of its analysis. More specifically, DOE will conduct each MIA in this rulemaking in three phases, and will further tailor the analytical framework for each MIA based on comments. In Phase I, DOE creates an industry profile to characterize the industry and identify important issues that require consideration. In Phase II, DOE prepares an industry cash flow model and an interview questionnaire to guide subsequent discussions. In Phase III, DOE interviews manufacturers, and assesses the impacts of standards, both quantitatively and qualitatively. It assesses industry and sub-group cash flow and NPV through use of the Government Regulatory Impact Model (GRIM). DOE then assesses impacts on competition, manufacturing capacity, employment, and regulatory burden based on manufacturer interview feedback and discussions. Until recently, DOE reported MIA results in its standards rulemakings only after the ANOPR phase of the rulemaking. However, DOE is now evaluating and reporting preliminary MIA information in its ANOPRs. For a detailed discussion on the MIA, refer to Chapter 12 of the ANOPR TSD. From a comment received at the Framework Document public meeting, DOE is aware that manufacturer cost data may be difficult to obtain from industry. (Public Meeting Transcript, No. 4.5 at pp. 133-135) Therefore, as recommended, DOE may approximate manufacturer costs by working backwards through the distribution chain from publicly-available prices by using estimated manufacturer and supply chain mark-ups. (Public Meeting Transcript, No. 4.5 at pp. 129 and 133-136; NEMA, No. 8 at p. 3; Joint Comment, No. 9 at p. 3). For more information on the industry cash flow analysis, refer to Chapter 12 of the ANOPR TSD. 1. Cumulative Regulatory Burden DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same product. In response to the Framework Document, several stakeholders submitted comments concerning the cumulative impact of regulation on lamp manufacturers. Specifically, NEMA commented that a number of companies face regulations in other countries, and that some of these products are manufactured globally for sale around the world. Therefore, NEMA commented that there are some regulatory burdens and issues that may play a factor here. (NEMA, No. 4.5 at p. 229) EEI commented that DOE should take into account State regulations in assessing the impacts of different requirements for manufacturers. (EEI, No. 4.5 at p. 233) PG&E commented that DOE should take into account trade impacts in the industry. However, PG&E does not expect this would have a large impact for manufacturers of lighting products. (PG&E, No. 4.5 at pp. 239-240) In response, DOE recognizes that both States and foreign countries are already regulating certain lamp categories or contemplating doing so. As discussed in section III.A.1, many States are currently regulating IRL primarily used in the commercial sector, and a few are beginning to regulate lamp types used more often in the residential sector. Regulations are also pending in both Mexico and Canada. DOE will analyze and consider the impact on manufacturers of multiple, product-specific regulatory actions in the NOPR. DOE invites comment on regulations applicable to lamp manufacturers that contribute to their cumulative regulatory burden. 2. Preliminary Results of the Manufacturer Impact Analysis DOE conducted a series of preliminary interviews with manufacturers to assess their concerns about potential impact of changes to the requirements or coverage of the regulatory standard for fluorescent and incandescent lamps. In general, manufacturers identified the following major issues of concern:
(a)Sufficient time to retool in response to the standards;
(b)availability of materials to produce standards-compliant lamps; and
(c)maintaining product availability and features that consumers use. Each of these concerns is discussed in further detail below. a. Retooling Equipment To Produce Standards-Compliant Lamps All of the manufacturers interviewed expressed concern regarding the adequacy of the time periods specified under EPCA for developing standards-compliant lamps. For GSFL, some manufacturers expressed concern about the time period necessary to retool to produce standards-compliant lamps (e.g., converting from a T12 product line to a T8 product line at certain standard levels). For IRL, manufacturers commented that, depending on the timeframe for transition, they could face production capacity problems if DOE were to raise standards such that the use of halogen capsules or infrared reflective
(IR)coatings on halogen capsules were required. Manufacturers believe there could be a production capacity problem due to the process time involved in layering dozens of thin, IR-reflective film coatings on the capsule. The high volumes associated with both GSFL and IRL were cited frequently as the underlying cause for concern. b. Availability of Materials To Produce Standards-Compliant Lamps Manufacturers interviewed expressed concern about the availability of materials to manufacture standards-compliant lamps. More specifically, concern was expressed about potential shortages of certain materials (e.g., the phosphor that produces blue light), which could in turn drive up the production cost. c. Maintaining Product Availability and Features Manufacturers expressed concern to DOE about the potential impact the regulation may have on their ability to continue to supply a wide diversity of products with attributes and features that their customers require. Depending on the mandatory standard level, manufacturers expressed concern that certain lamp shapes and sizes may be eliminated from the market, or that significant market shifts could occur (e.g., from incandescent technology to compact fluorescent lamps). As discussed above, DOE will be conducting the manufacturer impact analysis for the NOPR stage of this rulemaking. As part of this inquiry, DOE will be investigating this preliminary list of issues in more depth, as well as discussing other impacts that manufacturers may experience. DOE invites comment on these and other issues, relating to the regulatory impacts on manufacturers. Furthermore, DOE considered the possible effect of energy conservation standards for GSFL and IRL on small businesses. At this time, DOE is not aware of any small manufacturers of the lamps being considered in this rulemaking. Should any small business manufacturers be identified, DOE will study the potential impacts in greater detail during the MIA, which DOE will conduct as a part of the NOPR analysis. L. Utility Impact Analysis For the NOPR, the utility impact analysis will estimate the effects on the utility industry of reduced energy consumption due to any new or amended energy conservation standards for fluorescent and incandescent lamps. For GSFL and IRL, the utility impact analysis will compare the differences between each lamp type's forecasted base and standards cases for electricity generation, installed capacity, sales, and prices. To estimate the effects of potential standards on the electric utility industry, DOE intends to use a variant of the EIA's National Energy Modeling System (NEMS). 65 NEMS, which is available in the public domain, is a large, multi-sectoral, partial equilibrium model of the U.S. energy sector. DOE/EIA uses NEMS to produce a widely recognized baseline energy forecast for the U.S. DOE uses a variant of NEMS known as NEMS-Building Technologies (NEMS-BT) to supply key inputs to its utility impact analysis. 65 For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information EIA documentation; a useful summary is *National Energy Modeling System: An Overview 2003,* Report number: DOE/EIA-0581(2003), March 2003 (available at: *http://tonto.eia.doe.gov/FTPROOT/forecasting/05812003.pdf* ). DOE/EIA approves use of the name ``NEMS'' to describe only an official version of the model without any modification to code or data. Because the present analysis entails some minor code modifications and the model is run under various policy scenarios that are variations on DOE/EIA assumptions, in this analysis, DOE refers to it by the name “NEMS-BT.” For electrical end uses, NEMS-BT utilizes predicted growth in demand for each end use to build up a projection of the total electric system load growth for each of fifteen electricity market module supply regions, which it uses in turn to predict necessary additions to capacity. For electrical end uses, NEMS-BT accounts for the implementation of energy conservation standards by decrementing the appropriate reference case load shape. DOE will determine the size of the decrement using the per-unit energy savings data developed in the LCC and PBP analyses (see Chapter 8 of the ANOPR TSD) and the forecast of shipments developed for the NIA (see Chapter 9 of the ANOPR TSD). For more information on the utility impact analysis, refer to Chapter 13 of the ANOPR TSD. The use of NEMS for the utility impact analysis offers several advantages. As the official DOE energy forecasting model, NEMS relies on a set of assumptions that are transparent and have received wide exposure and commentary. NEMS allows an estimate of the interactions between the various energy supply and demand sectors and the economy as a whole. The utility impact analysis will determine the changes for electric utilities in installed capacity and in generation by fuel type produced by each CSL, as well as changes in electricity sales. DOE plans to conduct the utility impact analysis as a variant of AEO2007, applying the same basic set of assumptions. For example, the utility impact analysis uses the operating characteristics (e.g., energy conversion efficacy, emissions rates) of future electricity generating plants. DOE will also explore deviations from some of the reference case assumptions to represent alternative future outcomes. Two alternative scenarios use the high- and low-economic-growth cases of AEO2007. (The reference case corresponds to medium growth.) The high-economic-growth case assumes higher projected growth rates for population, labor force, and labor productivity, resulting in lower predicted inflation and interest rates relative to the reference case. The opposite is true for the low-growth case. While DOE varies supply-side growth determinants in all three of these different economic-growth cases, AEO2007 assumes the same reference case energy prices for all three economic growth cases so that the impact of differences in the three scenarios are comparable, referenced against a consistent set of energy prices. The three different economic growth cases all affect the rate of growth of electricity demand. Since the AEO2007 version of NEMS forecasts only to the year 2030, DOE must extrapolate results to 2042. It is not feasible to extend the forecast period of NEMS-BT for the purposes of this analysis, nor does EIA have an approved method for extrapolation of many outputs beyond 2030. While it might seem reasonable in general to use simple linear extrapolations of results, in practice this is not advisable, because outputs could be contradictory. For example, changes in the fuel mix implied by extrapolations of those outputs could be inconsistent with the extrapolation of marginal emissions factors. An analysis of the various trends to a sufficiently detailed degree to guarantee consistency among the extrapolations is not conducted as part of this analysis. Further, even it were, the extrapolations would still involve a great deal of uncertainty. Therefore, for all extrapolations beyond 2030, DOE intends to simply repeat the results from the year 2030 results, until it reaches the end of the analysis period, 2042. While this simplified extrapolation technique and the resulting values may seem unreasonable in some instances, results are nevertheless guaranteed to be consistent. As with the AEO reference case in general, the implicit premise is that the regulatory environment does not deviate from the current known situation during the extrapolation period. Only changes that have been announced with date-certain introduction are included in NEMS-BT. In comments on the Framework Document, EEI requested that DOE provide an explanation of the calculations conducted using the NEMS-BT model. EEI believes such explanation would enable the public to more easily comment on the plausibility of the output. (EEI, No. 4.5 at pp. 236-237) In response, when DOE conducts the utility impact analysis for the NOPR, it will endeavor to improve the clarity and presentation of the calculations conducted using the NEMS-BT model. M. Employment Impact Analysis At the NOPR stage, DOE estimates the impacts of standards on employment for equipment manufacturers, relevant service industries, energy suppliers, and the economy in general. The following discussion explains the methodology DOE plans to use in conducting the employment impact analysis for this rulemaking. Both indirect and direct employment impacts are analyzed. Direct employment impacts would result if standards led to a change in the number of employees at manufacturing plants and related supply and service firms. Direct impact estimates are covered in the MIA. Indirect employment impacts are impacts on the national economy other than in the manufacturing sector being regulated. Indirect impacts may result both from expenditures shifting among goods (substitution effect) and changes in income which lead to a change in overall expenditure levels (income effect). DOE defines indirect employment impacts from standards as net jobs eliminated or created in the general economy as a result of increased spending driven by the increased equipment prices and reduced spending on energy. DOE expects new standards to increase the total installed cost of equipment (includes manufacturer's selling price, distribution channel mark-ups, sales taxes, and installation cost). DOE also expects the new standards to decrease energy consumption, and, thus, expenditures on energy. Over time, increased total installed cost is paid back through energy savings. The savings in energy expenditures may be spent on new commercial investment and other items. Using an input/output model of the U.S. economy, this analysis seeks to estimate the effects on different sectors and the net impact on jobs. DOE will estimate national employment impacts for major sectors of the U.S. economy in the NOPR, using public and commercially available data sources and software. DOE will make all methods and documentation pertaining to the employment impact analysis available for review in the Technical Support Document published in conjunction with the NOPR. DOE developed Impact of Sector Energy Technologies (ImSET), a spreadsheet model of the U.S. economy that focuses on 188 sectors most relevant to industrial, commercial, and residential building energy use. 66 ImSET is a special-purpose version of the U.S. Benchmark National Input-Output (I-O) model, which has been designed to estimate the national employment and income effects of energy-saving technologies that are considered by the DOE Office of Energy Efficiency and Renewable Energy. In comparison with previous versions of the model used in earlier rulemakings, the current version allows for more complete and automated analysis of the essential features of energy efficiency investments in buildings, industry, transportation, and the electric power sectors. 66 Roop, J. M., M. J. Scott, and R. W. Schultz, “ImSET: Impact of Sector Energy Technologies,” PNNL-15273. (Pacific Northwest National Laboratory, Richland, WA)(2005). The ImSET software includes a personal computer-based I-O model with structural coefficients to characterize economic flows among the 188 sectors. ImSET's national economic I-O structure is based on the 1997 Benchmark U.S. table (Lawson, et al. 2002), 67 specially aggregated to 188 sectors. The time scale of the model is 50 years. 67 Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim-Nader, and Jiemin Guo, “Benchmark Input-Output Accounts of the U. S. Economy, 1997,” Survey of Current Business (Dec. 2002), pp. 19-117. The model is a static I-O model, which means that the model is able to accommodate a great deal of flexibility concerning the types of effects the energy conservation standards can have on the national employment and income effects. For example, certain economic effects of energy-efficiency improvements require an assessment of inter-industry purchases, which is handled in the model. Some energy-efficiency investments will not only reduce the costs of energy in the economy but the costs of labor and other goods and services as well, which is accommodated through a recalculation of the I-O structure in the model. Output from the ImSET model can be used to estimate changes in employment, industry output, and wage income in the overall U.S. economy resulting from changes in expenditures in the various sectors of the economy. Although DOE intends to use ImSET for its analysis of employment impacts, it welcomes input on other tools and factors it might consider. For more information on the employment impacts analysis, refer to Chapter 14 of the TSD. N. Environmental Assessment For the NOPR, DOE will assess the environmental effects of energy conservation standards for GSFL and IRL. DOE anticipates that the primary environmental effects will be reduced power plant emissions resulting from reduced electricity consumption. DOE will assess these environmental effects by using NEMS-BT to provide key inputs to the analysis. The environmental assessment produces results in a manner similar to those provided in the AEO. The intent of the environmental assessment is to provide emissions results estimates, and to fulfill legislative requirements that DOE quantify and consider the environmental effects of all new Federal rules. The environmental assessment that will be produced by NEMS-BT considers potential environmental impacts from three pollutants (sulfur dioxide (SO <sup>2</sup> ), nitrous oxide (NO <sup>X</sup> ), mercury (Hg)) and from carbon dioxide (CO <sup>2</sup> ) emissions. For each of the trial standard levels, DOE will calculate total undiscounted and discounted power plant emissions using NEMS-BT. DOE will conduct each portion of the environmental assessment performed for this rulemaking as an incremental policy impact (i.e., an energy conservation standard imposed on the product being evaluated, in this case general service fluorescent lamps and incandescent reflector lamps) of the AEO2007 forecast, applying the same basic set of assumptions used in AEO2007. For example, the emissions characteristics of an electricity generating plant will be exactly those used in AEO2007. Also, forecasts conducted with NEMS-BT consider the supply-side and demand-side effects on the electric utility industry. Thus, the analysis will account for any factors affecting the type of electricity generation and, in turn, the type and amount of airborne emissions generated by the utility industry. The NEMS-BT model tracks carbon emissions with a specialized carbon emissions estimation subroutine, producing reasonably accurate results due to the broad coverage of all sectors and the inclusion of interactive effects. Past experience with carbon results from NEMS suggests that emissions estimates are somewhat lower than emissions based on simple average factors. One of the reasons for this divergence is that NEMS tends to predict that energy conservation measures will slow generating capacity growth in future years, and new generating capacity is expected to be more efficient than existing capacity. On the whole, NEMS-BT provides carbon emissions results of reasonable accuracy, at a level consistent with other Federal published results. In addition to providing estimates of the quantitative impacts of GSFL and IRL standards on carbon emissions, DOE may consider the use of monetary values to represent the potential value of such emissions reductions. DOE invites comment on how to estimate such monetary values or on any widely accepted values that might be used in DOE's analyses. NEMS-BT also reports on SO <sup>2</sup> and NO <sup>X</sup> , which DOE has reported in past analyses. The Clean Air Act Amendments of 1990 68 set an SO <sup>2</sup> emissions cap on all power generation. The attainment of this target, however, is made flexible among generators through the use of emissions allowances and tradable permits. Although NEMS includes a module for SO <sup>2</sup> allowance trading and delivers a forecast of SO <sup>2</sup> allowance prices, accurate simulation of SO <sup>2</sup> trading implies that physical emissions effects will be zero because emissions will always be at or near the ceiling. However, there may be an SO <sup>2</sup> economic benefit from energy conservation in the form of a lower SO <sup>2</sup> allowance price. Since the impact of any one standard on the allowance price is likely small and highly uncertain, DOE does not plan to monetize the SO <sup>2</sup> benefit. 68 The Clean Air Act Amendments of 1990 were signed into law as Pub. L. 101-549 on November 15, 1990. The amendment can be viewed at: *http://www.epa.gov/air/caa/.* NEMS-BT also has an algorithm for estimating NO <sup>X</sup> emissions from power generation. The impact of these emissions, however, will be affected by the Clean Air Interstate Rule (CAIR), which the EPA issued on March 10, 2005. 70 FR 25162 (May 12, 2005). CAIR will permanently cap emissions of NO <sup>X</sup> in 28 eastern States and the District of Columbia. As with SO <sup>2</sup> emissions, a cap on NO <sup>X</sup> emissions means that product energy conservation standards may have no physical effect on these emissions. When NO <sup>X</sup> emissions are subject to emissions caps, DOE's emissions reduction estimate corresponds to incremental changes in the prices of emissions allowances in cap-and-trade emissions markets rather than physical emissions reductions. Therefore, while the emissions cap may mean that physical emissions reductions will not result from standards, standards could produce an environmental-related economic benefit in the form of lower prices for emissions allowance credits. However, as with SO <sup>2</sup> allowance prices, DOE does not plan to monetize this benefit because the impact on the NO <sup>X</sup> allowance price from any single energy conservation standard is likely small and highly uncertain. With regard to mercury emissions, NEMS-BT has an algorithm for estimating these emissions from power generation, and, as it has done in the past, DOE is able to report an estimate of the physical quantity of mercury emissions reductions associated with an energy conservation standard. DOE assumed that these emissions would be subject to EPA's Clean Air Mercury Rule 69 (CAMR), which would permanently cap emissions of mercury for new and existing coal-fired plants in all States by 2010. Similar to SO <sup>2</sup> and NO <sup>X</sup> , DOE assumed that under such system, energy conservation standards would result in no physical effect on these emissions, but would be expected to result in an environmental-related economic benefit in the form of a lower price for emissions allowance credits. DOE's plan for addressing analysis does not include monetizing the benefits of reduced mercury emissions, because DOE considered that valuation of such impact from any single energy conservation standard would likely be small and highly uncertain. 69 70 FR 28606 (May 18, 2005). On February 8, 2008, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued its decision in State of *New Jersey, et al.* v. *Environmental Protection Agency,* 70 in which the Court, among other actions, vacated the CAMR referenced above. Accordingly, DOE is considering whether changes are needed to its plan for addressing the issue of mercury emissions in light of the D.C. Circuit's decision. DOE invites public comment on addressing mercury emissions in this rulemaking. 70 No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8, 2008). With regard to particulates, these emissions are a special case because they arise not only from direct emissions, but also from complex atmospheric chemical reactions that result from NO <sup>X</sup> and SO <sup>2</sup> emissions. DOE does not intend to analyze or report on the particulate emissions from power stations because of the highly complex and uncertain relationship between particulate emissions and particulate concentrations that impact air quality. In sum, the results for the environmental assessment are similar to a complete NEMS run as published in the AEO2007. These results include power-sector emissions for SO <sup>2</sup> , NO <sup>X</sup> , mercury, and carbon in five-year forecasted increments extrapolated to 2042. The outcome of the analysis for each CSL is reported as a deviation from the AEO2007 reference
(base)case. The Joint Comment stated that DOE should evaluate mercury and particulate emissions as part of the environmental assessment due to their potential impacts on public health. (Joint Comment, No. 9 at p. 4) As discussed above, DOE will analyze and report on mercury emission reductions; however it does not intend to report on particulate emissions. For more detail on the environmental assessment, refer to the environmental assessment in the ANOPR TSD. O. Regulatory Impact Analysis DOE will prepare a draft regulatory impact analysis in compliance with Executive Order 12866, “Regulatory Planning and Review,” which will be subject to review by the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA). 58 FR 51735 (Oct. 4, 1993). As part of the regulatory impact analysis, and as discussed in Section III.K, “Manufacturer Impact Analysis,” DOE will identify and seek to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same products. Through manufacturer interviews and literature searches, DOE will compile information on burdens from existing and impending regulations affecting the lamps covered under this rulemaking. DOE also seeks input from the public about regulations whose impacts it should consider. The regulatory impact analysis also will address the potential for non-regulatory approaches to supplant or augment energy conservation standards to improve the efficacy of GSFL and IRL. The NOPR will include a complete quantitative analysis of alternatives to the proposed conservation standards. DOE will use the NES spreadsheet model (as discussed in section III.I, “National Impact Analysis”) to calculate the NES and NPV for the alternatives to the proposed conservation standards. For more information on the regulatory impact analysis, refer to the regulatory impact analysis report in the ANOPR TSD. IV. Candidate Energy Conservation Standards Levels In terms of process, DOE specifies candidate standards levels in the ANOPR, but does not propose a particular standard at this stage of the rulemaking. Table IV.1 and Table IV.2 present the CSLs that are discussed in today's ANOPR for the fluorescent and incandescent reflector lamps product classes directly analyzed. As mentioned earlier, in this ANOPR, DOE analyzes four of the ten product classes of lamps. Section III.C.6 discusses DOE's considered approach for extrapolation of CSLs to other product classes not analyzed. Table IV.1.—Summary of the Candidate Standard Levels for GSFL Candidate standard level 4-Foot medium bipin lamps with CCT ≤ 4,500K *lm/W* 8-Foot single pin slimline amps with CCT ≤ 4,500K *lm/W* 8-Foot recessed Double contact HO lamps with CCT ≤ 4,500K *lm/W* CSL1 82.4 87.3 83.2 CSL2 85.0 92.0 86.1 CSL3 90.0 94.8 87.6 CSL4 92.3 98.2 91.9 CSL5 95.4 101.5 95.3 Table IV.2.—Summary of the Candidate Standard Levels for IRL Candidate standard level Standard-spectrum incandescent reflector lamps *lm/W* CSL1 5.0P 0.27 CSL2 5.5P 0.27 CSL3 6.2P 0.27 where P = rated wattage of the incandescent lamp DOE will review the public input it receives in response to this ANOPR and update the analyses appropriately for each product class before issuing the NOPR. DOE also will consider any comments it receives on the CSLs set forth above for GSFL and IRL, and on whether alternative levels would satisfy the EPCA criteria. For the NOPR, DOE will develop trial standard levels
(TSL)for GSFL and IRL from the above CSLs or other higher or lower levels after consideration of public comments. In previous rulemakings, DOE has considered several criteria in developing the TSLs, such as requiring that a CSL have a minimum LCC, maximum NPV, and maximum technologically-feasible efficacy. DOE invites comment on whether any of these criteria are appropriate for this rulemaking, or whether other TSLs are appropriate, perhaps based on technologies or applications that are specific to the lamps being regulated. DOE seeks feedback on the criteria it should use as the basis for the selection of TSLs. This is identified as Issue 10 under “Issues on Which DOE Seeks Comment” in Section 0 of this ANOPR. V. Public Participation DOE will make the entire record of this proposed rulemaking, including the transcript from the public meeting, available for inspection at the U.S. Department of Energy, Resource Room of the Building Technologies Program, Sixth Floor, 950 L'Enfant Plaza, SW., Washington, DC,
(202)586-2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Any person may buy a copy of the transcript from the transcribing reporter. A. Submission of Comments DOE began accepting comments, data, and other relevant information regarding all aspects of this ANOPR at the public meeting and will continue to accept comments until no later than April 14, 2008. Please submit comments, data, and information electronically to the following e-mail address: *fluorescent_and_incandescent_lamps.rulemaking@ee.doe.gov* . Please submit electronic comments in WordPerfect, Microsoft Word, PDF, or text (ASCII) file format and avoid the use of special characters or any form of encryption. Comments in electronic format should be identified by the Docket Number EE-2006-STD-0131 and/or RIN number 1904-AA92, and whenever possible carry the electronic signature of the author. Absent an electronic signature, comments submitted electronically must be followed and authenticated by submitting the signed original paper document. No telefacsimiles (faxes) will be accepted. Under 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies. One copy of the document shall include all the information believed to be confidential, and the other copy of the document shall have the information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it according to its determination. Factors that DOE considers when evaluating requests to treat submitted information as confidential include:
(1)A description of the items;
(2)whether and why such items are customarily treated as confidential within the industry;
(3)whether the information is generally known by, or available from, other sources;
(4)whether the information has previously been made available to others without obligation concerning its confidentiality;
(5)an explanation of the competitive injury to the submitting person which would result from public disclosure;
(6)when such information might lose its confidential character due to the passage of time; and
(7)why disclosure of the information would be contrary to the public interest. B. Issues on Which DOE Seeks Comment DOE is interested in receiving comments on all aspects of this ANOPR. DOE especially invites comments or data to improve the analyses, including data or information that will respond to the following questions or concerns that were addressed in this ANOPR: 1. Consideration of Additional General Service Fluorescent Lamps EPCA directs DOE to consider additional GSFL for coverage under 42 U.S.C. 6295(i)(5). In this notice, DOE outlines its preliminary consideration of the expansion of coverage for GSFL under 42 U.S.C. 6295(i)(5), keeping in mind the express exclusions contained in the definitions of “general service fluorescent lamp” (42 U.S.C. 6291(30)(B)). DOE requests comment on its planned expansion of coverage. See section II for details on this issue. 2. Amended Definitions EPCA directs DOE to consider additional GSFL for coverage under 42 U.S.C. 6295(i)(5). In the definition of “general service fluorescent lamp,” (42 U.S.C. 6291(30)(B)) EPCA identifies “colored fluorescent lamps” as expressly excluded from coverage. Although DOE defined “colored fluorescent lamp” in the 1997 test Procedure Final Rule, DOE believes this definition requires updating and, therefore, presents a draft amended definition for comment. DOE also invites comment on whether other exclusions are ambiguous or require modification. One element of EPCA's definitions for “fluorescent lamp” and “incandescent reflector lamp” is a lamp's “rated wattage,” which helps to determine which lamps are subject to standards. (42 U.S.C. 6291(30)((A), (C)(ii) and (F), and 6295(i)(1)) In addition, energy conservation standards for general service incandescent lamps prescribed by EISA 2007 require lamps of particular lumen outputs to have certain maximum rated wattages. (42 U.S.C. 6295(i)(1)(B) In this rulemaking, DOE plans to update its definition of rated wattage to current industry references, and to apply this definition to those lamps where rated wattage is not defined (e.g., 8-foot single pin slimline lamps and incandescent lamps). DOE seeks comment on its planned modification to the definition of “rated wattage,” a term which applies to both covered fluorescent and incandescent lamps. See section II for details on all of these issues. 3. Product Classes DOE requests comment on its planned revisions to the product classes for GSFL and IRL, including the use of CCT in the GSFL product classes and the separate treatment of modified-spectrum lamps for IRL. Details about DOE's planned product classes are presented in section III.A.2. 4. Scaling to Product Classes Not Analyzed DOE is inviting comment on the selected representative product classes where it concentrates its analytical effort (see section III.C.2), and on the extrapolation of findings from the representative product classes to others that were not analyzed (see section III.C.6). DOE invites comment on appropriate scaling methods it should follow, particularly for the draft scaling factors discussed in section III.C.6 for 2-foot U-shaped GSFL, GSFL with a higher CCT, and modified-spectrum IRL. 5. Screening of Design Options In determining which design options to consider for the engineering analysis, DOE applies four statutory screening criteria to a set of potential technologies that may improve efficacy (i.e., technology options). One of those screening criteria is “practicability to manufacture, install, and service.” DOE invites comment on whether certain technology options discussed in section III.B fail to meet this criterion. Some manufacturers have expressed some concern about integrating certain technology options into high-volume production lines within a limited time-frame (i.e., the statutory three-year compliance period). DOE invites comment on this issue and, if appropriate, to provide possible solutions to help resolve the issue. See section III.B and section III.K for details. 6. Operating Hours DOE used the U.S. Lighting Market Characterization Volume I and the EIA's RECS, CBECS, and MECS to develop a national distribution of average operating hours for lamp types and end-use sectors. DOE requests comment on whether the average operating hours derived are a reasonable representation of these end-uses. See section III.D.1 for details. 7. General Service Fluorescent Energy Consumption In today's **Federal Register** , DOE is also publishing a test procedure NOPR for fluorescent and incandescent lamps. In that NOPR, DOE proposes to continue to use low-frequency ballast testing for all GSFL except for those lamp types that can only be tested on high-frequency ballasts. While DOE uses the test procedure to confirm that manufacturers have met the minimum requirements, in this ANOPR, DOE considers the operation of fluorescent lamps on several different ballast types for the LCC and NIA analyses (i.e., DOE uses average system power ratings of GSFL operating on electronic and magnetic ballasts). This approach enables the economic evaluation of the CSLs to more accurately reflect how fluorescent lamps are operated in the field. DOE invites comment on this approach, as well as the calculated system power ratings it derived for the lamp-and-ballast combinations using published data. Detail on the system power ratings can be found in Chapter 5 of the TSD. 8. Life-Cycle Cost Calculation In order to determine the life-cycle cost savings of lamp designs with unequal lifetimes, DOE used an analysis period corresponding to the lifetime of the baseline lamp. To account for the remaining life of the equipment at the end of the analysis period, DOE calculated a residual value by linearly prorating the initial cost of the equipment. DOE invites comment on its usage of residual values in the life-cycle cost analysis and on other possible approaches to calculating life-cycle costs for product with different lifetimes. 9. Installation Costs In order to determine the complete installed cost for the LCC analysis, DOE developed estimates of commercial sector installation costs for IRL and GSFL. DOE seeks comment on the average labor rates and times for each lamp type. See Chapter 8 of the TSD for details. 10. Base-Case Market-Share Matrices in 2012 DOE has developed a base-case to represent the distribution of lamp systems and their efficacies currently in the marketplace, and thereby determine the proportion of consumers affected by a particular energy conservation standard level. DOE developed base-case efficacy distributions for GSFL and IRL based on a combination of interviews with lighting experts, historical shipments information, and available product data. DOE requests comment on the resultant base-case product distributions. See section III.H for details. 11. Shipment Forecasts A key input into the shipment forecasts of GSFL and IRL is the assumed market growth. For commercial GSFL and IRL, DOE uses a growth rate of 1.6 percent based on CBECS floor space growth projections. For residential IRL, DOE uses a 1.3 percent growth rate from the RECS residential building growth projection. DOE invites comment on the data sources, estimates, and implementation of these growth rates. In addition, the shipment forecasts impact the total national lumen output of each lamp type. DOE invites comment on the national lumen output projection in both the base case and standards case. Specifically, DOE invites comment on whether any adjustments are necessary to respond to consumer actions resulting in over-lighting or under-lighting. See Chapter 9 of the TSD and section III.H for details. 12. Base-Case and Standards-Case Forecasted Efficiencies Forecasts of average market efficacy and energy consumption, in both the base case and standards case, are fundamental inputs to the NES and NPV calculations. Estimates of the market's selection of lamp and lamp-and-ballast designs, in turn, drive the forecasts for average efficacy and energy consumption. As a sensitivity to the NES and NPV calculations, DOE developed standards-case scenarios to test the upper and lower bounds of the NES and NPV results. DOE invites comment on these standards-case scenarios it developed estimating market behavior in response to a standard, such as roll-up and shift in the GSFL market or the 65W BR lamp substitution scenario. See section III.H for details. 13. Trial Standard Levels For the NOPR, DOE will develop trial standard levels
(TSLs)based on the candidate standard levels for GSFL and IRL. DOE is considering several criteria in developing the TSLs, including, but not limited to, minimum LCC, maximum NPV, and maximum technologically-feasible efficacy. These TSLs may include combinations of CSLs and the interaction between product classes such as 4-foot medium bipin and 8-foot single pin slimline fluorescent lamps or standard-spectrum and modified-spectrum IRL. From the list of TSLs developed, DOE will select one as its proposed standard for the NOPR. DOE invites comment on the criteria it should use as the basis for the selection of TSLs. See section III.H for details. 14. Lamp Production Equipment Conversion Timeframe Manufacturers of high-volume lamps expressed concern as to their ability to retool, invest in, or replace equipment within the statutorily-required three-year compliance period, such that they may continue to offer the volume lamps for sale at a new standard level. DOE invites comment on this issue, and welcomes recommendations on how best to mitigate any equipment conversion issues. VI. Regulatory Review and Procedural Requirements DOE submitted this ANOPR for review to OMB under Executive Order 12866, “Regulatory Planning and Review.” 58 FR 51735 (October 4, 1993). If DOE later proposes new or revised energy conservation standards for GSFL or IRL, and if the proposed rule constitutes a significant regulatory action, DOE would prepare and submit to OMB for review the assessment of costs and benefits required by section 6(a)(3) of the Executive Order. The Executive Order requires agencies to identify the specific market failure or other specific problem that it intends to address that warrants new agency action, as well as assess the significance of that problem, to enable assessment of whether any new regulation is warranted. (Executive Order 12866, § 1(b)(1)). DOE presumes that a perfectly functioning market would result in efficiency levels that maximize benefits to all affected persons. Consequently, without a market failure or other specific problem, a regulation would not be expected to result in net benefits to consumers and the nation. However, DOE also notes that whether it establishes standards for these products is determined by the statutory criteria expressed in EPCA. Even in the absence of a market failure or other specific problem, DOE nonetheless may be required to establish standards under existing law. DOE's preliminary analysis for GSFL and IRL explicitly accounts for the percentage of consumers that already purchase more efficient equipment and takes these consumers into account when determining the national energy savings associated with various candidate standard levels. The preliminary analysis suggests that accounting for the market value of energy savings alone (i.e., excluding any possible “externality” benefits such as those noted below) would produce enough benefits to yield net benefits across a wide array of products and circumstances. DOE requests additional data on, and suggestions for testing the existence and extent of potential market failure to complete an assessment of the significance of these failures and, thus, the net benefits of regulation. In particular DOE seeks to verify the estimates of the percentage of consumers of all product types purchasing efficient equipment and the extent to which consumers will continue to purchase more-efficient equipment in future years. DOE believes that there is a lack of consumer information and/or information processing capability about energy efficiency opportunities in the lighting market. If this is in fact the case, DOE would expect the efficiency for lighting products to be randomly distributed across key variables such as electricity prices and usage levels. Although DOE has already identified the percentage of consumers that already purchase more efficient lighting products, DOE does not correlate the consumer's usage pattern and electricity price with the efficiency of the purchased product. Therefore, DOE seeks data on the efficiency levels of existing lamps in use by how often it is utilized (e.g., how many hours the product is used) and its associated electricity price (and/or geographic region of the country). DOE plans to use these data to test the extent to which purchasers of this equipment behave as if they are unaware of the costs associated with their energy consumption. Specifically, with respect to lighting products, DOE believes several factors contribute to the lack of consumer information. In the residential sector, consumer purchases are often based on wattage rather than lumen output which may result in consumers not purchasing, or rejecting higher-efficacy or energy-saving lamp designs. For example, consumers may not recognize a higher-efficacy, reduced-wattage lamp as fulfilling the same utility as their higher-wattage lamp though both lamps may have similar lumen outputs. For this reason, these higher-efficiency products may be unduly rejected in the marketplace. In addition, in the commercial and industrial sectors, the complexity of GSFL systems may introduce high information costs. GSFL systems are composed of both lamps and ballasts that may have a multitude of varying properties such as lamp wattage, lumen output, lifetime, and ballast factor. These many numerous variables impose high information costs which may prevent purchasers from selecting the most cost-effective GSFL system. DOE seeks comment on additional knowledge of the Federal Energy Star program, and the program's potential as a resource for increasing knowledge of the availability and benefits of energy-efficient lamps in the lighting consumer market. A related issue is the problem of asymmetric information (one party to a transaction has more and better information than the other) and/or high transactions costs (costs of gathering information and effecting exchanges of goods and services). In the case of lamps, in many instances the party responsible for the lamp purchase may not be the one who pays the cost to operate it. For example, in the commercial and industrial sectors, building owners and developers may make purchase decisions about lighting fixtures which include ballasts and lamps, but it may be the tenants who pay the utility bills. Although renters often have the opportunity to purchase the replacement lamps, they are severely limited in their choices by prior fixture and ballast selections. If there were no transactions costs, it would be in the building developers' and owners' interests to install lighting fixtures that renters would choose on their own. For example, a tenant who knowingly faces higher utility bills from low-efficiency lighting would be willing to pay less in rent, and the building owner would indirectly bear the higher utility cost. However, this information is not costless, and it may not be in the interest of the renter to take the time to develop it, or, in the case of the building owner who installs the lamp system, to convey that information to the renter. To the extent that asymmetric information and/or high transactions costs are problems, one would expect to find certain outcomes with respect to commercial and industrial lighting energy efficiency. For example, other things equal, one would not expect to see higher rents for office space with high-efficiency lighting systems. Conversely, if there were symmetric information, one would expect higher energy efficiency lighting in commercial space where the rent includes utilities, as compared to those where the tenant pays the utility bills separately. Of course, there are likely to be certain “external” benefits resulting from the improved efficiency of units that are not captured by the users of such equipment. These include both environmental and energy security-related externalities that are not already reflected in energy prices, such as reduced emissions of greenhouse gases and reduced use of natural gas and oil for electricity generation. DOE invites comments on the weight that should be given to these factors in DOE's determination of the maximum efficiency level at which the total benefits are likely to exceed the total costs resulting from a DOE standard. As previously stated, DOE generally seeks data that might enable it to conduct tests of market failure for products under consideration for standard-setting. For example, given adequate data, there are ways to test for the extent of market failure for commercial GSFL. One would expect the owners of fluorescent lamps who also pay for their electricity consumption to purchase lamps that exhibit higher energy efficiency compared to lamps whose owners do not pay for the electricity usage, other things equal. To test for this form of market failure, DOE needs data on energy efficiency of such units and whether the owner of the equipment is also the one who pays the operating costs. DOE is also interested in other potential tests of market failure and data that would enable such tests. In addition, various other analyses and procedures may apply to such future rulemaking action, including those required by the National Environmental Policy Act (Pub. L. 91-190, 42 U.S.C. 4321 et seq.); the Unfunded Mandates Act of 1995 (Pub. L. 104-4); the Paperwork Reduction Act (44 U.S.C. 3501 et seq.); the Regulatory Flexibility Act (5 U.S.C. 601 et seq.); and certain Executive Orders. The draft of today's action and any other documents submitted to OMB for review are part of the rulemaking record and are available for public review at the U.S. Department of Energy, Resource Room of the Building Technologies Program, Sixth Floor, 950 L'Enfant Plaza, SW., Washington, DC
(202)586-2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. VII. Approval of the Office of the Secretary The Secretary of Energy has approved publication of today's advance notice of proposed rulemaking. Issued in Washington, DC, on February 21, 2008. Alexander A. Karsner, Assistant Secretary, Energy Efficiency and Renewable Energy. [FR Doc. E8-4018 Filed 3-12-08; 8:45 am] BILLING CODE 6450-01-P 73 50 Thursday, March 13, 2008 Proposed Rules Part III Securities and Exchange Commission 17 CFR Part 248 Part 248—Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Personal Information; Proposed Rule SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 248 [Release Nos. 34-57427; IC-28178; IA-2712; File No. S7-06-08] RIN 3235-AK08 Part 248—Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Personal Information AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing amendments to Regulation S-P, which implements certain provisions of the Gramm-Leach-Bliley Act (“GLBA”) and the Fair Credit Reporting Act (“FCRA”) for entities regulated by the Commission. The proposed amendments would set forth more specific requirements for safeguarding information and responding to information security breaches, and broaden the scope of the information covered by Regulation S-P's safeguarding and disposal provisions. They also would extend the application of the disposal provisions to natural persons associated with brokers, dealers, investment advisers registered with the Commission (“registered investment advisers”) and transfer agents registered with the Commission (“registered transfer agents”), and would extend the application of the safeguarding provisions to registered transfer agents. Finally, the proposed amendments would permit a limited transfer of information to a nonaffiliated third party without the required notice and opt out when personnel move from one broker-dealer or registered investment adviser to another. DATES: Comments must be received on or before May 12, 2008. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/proposed.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number S7-06-08 on the subject line; or • Use the Federal eRulemaking Portal ( *http://www.regulations.gov* ). Follow the instructions for submitting comments. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number S7-06-08. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/proposed.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, or Brice Prince, Special Counsel, Office of the Chief Counsel, Division of Trading and Markets,
(202)551-5550; or Penelope Saltzman, Acting Assistant Director, or Vincent Meehan, Senior Counsel, Office of Regulatory Policy, Division of Investment Management,
(202)551-6792, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission today is proposing amendments to Regulation S-P 1 under Title V of the GLBA, 2 the FCRA, 3 the Securities Exchange Act of 1934 (the “Exchange Act”), 4 the Investment Company Act of 1940 (the “Investment Company Act”), 5 and the Investment Advisers Act of 1940 (the “Investment Advisers Act”). 6 1 17 CFR part 248. Unless otherwise noted, all references to rules under Regulation S-P will be to Part 248 of the Code of Federal Regulations (17 CFR 248). 2 15 U.S.C. 6801-6827. 3 15 U.S.C. 1681w. 4 15 U.S.C. 78a. 5 15 U.S.C. 80a. 6 15 U.S.C. 80b. Table of Contents I. Background A. Statutory Requirements and Current Regulation S-P Mandates B. Challenges Posed by Information Security Breaches II. Discussion A. Information Security and Security Breach Response Requirements B. Scope of the Safeguards and Disposal Rules C. Records of Compliance D. Exception for Limited Information Disclosure When Personnel Leave Their Firms III. General Request for Comments IV. Paperwork Reduction Act V. Cost-Benefit Analysis VI. Initial Regulatory Flexibility Analysis VII. Consideration of Burden on Competition and Promotion of Efficiency, Competition and Capital Formation VIII. Small Business Regulatory Enforcement Fairness Act IX. Statutory Authority X. Text of Proposed Rules and Rule Amendments I. Background A. Statutory Requirements and Current Regulation S-P Mandates Subtitle A of Title V of the GLBA requires every financial institution to inform its customers about its privacy policies and practices, and limits the circumstances in which a financial institution may disclose nonpublic personal information about a consumer to a nonaffiliated third party without first giving the consumer an opportunity to opt out of the disclosure. 7 In enacting the legislation, Congress also specifically directed the Commission and other federal financial regulators to establish and implement information safeguarding standards requiring financial institutions subject to their jurisdiction to adopt administrative, technical and physical information safeguards. 8 The GLBA specified that these standards were to “insure the security and confidentiality of customer records and information,” “protect against any anticipated threats or hazards to the security or integrity” of those records, and protect against unauthorized access to or use of those records or information, which “could result in substantial harm or inconvenience to any customer.” 9 7 *See* 15 U.S.C. 6802(a) and (b). The GLBA and Regulation S-P draw a distinction between “consumers” and “customers.” A “consumer” is defined in Section 3(g)(1) of Regulation S-P to mean an individual who obtains a financial product or service that is to be used primarily for personal, family, or household purposes. *See* 17 CFR 248.3(g)(1). A “customer” is defined in Section 3(j) of Regulation S-P as a consumer who has a continuing relationship with the financial institution. *See* 17 CFR 248.3(j). The distinction between customer and consumer determines the notices that a financial institution must provide. Pursuant to Sections 4 and 5 of Regulation S-P, a financial institution must provide *customers* with an initial notice describing the institution's privacy policies when a customer relationship is formed and at least annually throughout the customer relationship. In contrast, if a *consumer* is not a customer, a financial institution must only provide a notice if it intends to share nonpublic personal information about the consumer with a nonaffiliated third party (outside of certain exceptions). *See* 17 CFR 248.4 and 248.5. 8 The GLBA directed the Commission, the Federal Trade Commission (“FTC”) and state insurance authorities to implement the safeguarding standards by rule. *See* 15 U.S.C. 6805(b)(2). The GLBA directed the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Thrift Supervision (collectively, the “Banking Agencies”) and the National Credit Union Administration (“NCUA”) to implement the safeguarding standards by regulation or by guidelines. *See* 15 U.S.C. 6805(b)(1). 9 15 U.S.C. 6801(b). In response to these directives, we adopted Regulation S-P in 2000. 10 Section 30(a) of Regulation S-P (the “safeguards rule”) requires institutions to safeguard customer records and information, 11 while other sections of the regulation implement the notice and opt out provisions of the GLBA. 12 The safeguards rule currently requires institutions to adopt written policies and procedures for administrative, technical, and physical safeguards to protect customer records and information. The safeguards must be reasonably designed to meet the GLBA's objectives. 13 This approach provides flexibility for institutions to safeguard customer records and information in accordance with their own privacy policies and practices and business models. The safeguards rule and the notice and opt out provisions currently apply to brokers, dealers, registered investment advisers, and investment companies. 14 10 *See Privacy of Consumer Financial Information (Regulation S-P)* , Exchange Act Release No. 42974, Investment Company Act (“ICA”) Release No. 24543, Investment Advisers Act (“IAA”) Release No. 1883 (June 22, 2000), 65 FR 40334 (June 29, 2000). Pursuant to the GLBA directive, Regulation S-P is consistent with and comparable to the financial privacy rules adopted by other federal financial regulators in 2000. *See* FTC, *Privacy of Consumer Financial Information* , 65 FR 33646 (May 24, 2000); Banking Agencies, *Privacy of Consumer Financial Information* , 65 FR 35162 (June 1, 2000); and NCUA, *Privacy of Consumer Financial Information; Requirements for Insurance* , 65 FR 31722 (May 18, 2000). *See also* 15 U.S.C. 6804(a)(2) (directing federal financial regulators to consult and coordinate to assure, to the extent possible, that each agency's regulations are consistent and comparable with the regulations prescribed by the other agencies). In 2001, we amended Regulation S-P to permit futures commission merchants and introducing brokers that are registered by notice as broker-dealers in order to conduct business in security futures products under Section 15(b)(11)(A) of the Exchange Act (“notice-registered broker-dealers”) to comply with Regulation S-P by complying with financial privacy rules that the Commodity Futures Trading Commission (“CFTC”) adopted that year. *See* 17 CFR 248.2(b); *Registration of Broker-Dealers Pursuant to Section 15(b)(11) of the Securities Exchange Act of 1934* , Exchange Act Release No. 44730 (Aug. 21, 2001), 66 FR 45138 (Aug. 27, 2001); *see also* CFTC, *Privacy of Consumer Financial Information* , 66 FR 21236 (Apr. 27, 2001). 11 17 CFR 248.30(a). 12 *See* 17 CFR 248.1-248.18. As described above, the GLBA and Regulation S-P require brokers, dealers, investment advisers registered with the Commission, and investment companies to provide an annual notice of their privacy policies and practices to their customers (and notice to consumers before sharing their nonpublic personal information with nonaffiliated third parties outside certain exceptions). *See supra* note 7; 15 U.S.C. 6803(a); 17 CFR 248.4; 17 CFR 248.5. In general, the privacy notices must describe the institutions' policies and practices with respect to disclosing nonpublic personal information about a consumer to both affiliated and nonaffiliated third parties. 15 U.S.C. 6803; 17 CFR 248.6. The notices also must provide a consumer a reasonable opportunity to direct the institution generally not to share nonpublic personal information about the consumer (that is, to “opt out”) with nonaffiliated third parties. 15 U.S.C. 6802(b); 17 CFR 248.7. (The privacy notice also must provide, where applicable under the FCRA, a notice and an opportunity for a consumer to opt out of certain information sharing among affiliates.) Sections 13, 14, and 15 of Regulation S-P (17 CFR 248.13, 17 CFR 248.14, and 17 CFR 248.15) set out exceptions from these general notice and opt out requirements under the GLBA. Section 13 includes exceptions for sharing information with other financial institutions under joint marketing agreements and with certain service providers. Section 14 includes exceptions for sharing information for everyday business purposes, such as maintaining or servicing accounts. Section 15 includes exceptions for disclosures made with the consent or at the direction of a consumer, disclosures for particular purposes such as protecting against fraud, disclosures to consumer reporting agencies, and disclosures to law enforcement agencies. In March 2007, the Commission, together with the Banking Agencies, the CFTC, the FTC, and the NCUA, published for public comment in the **Federal Register** a proposed model privacy form that financial institutions could use for their privacy notices to consumers required by the GLBA. *See Interagency Proposal for Model Privacy Form Under the Gramm-Leach-Bliley Act* , Exchange Act Release No. 55497, IAA Release No. 2598, ICA Release No. 27755 (Mar. 20, 2007), 72 FR 14940 (Mar. 29, 2007) (“Interagency Model Privacy Form Proposal”). 13 Specifically, the safeguards must be reasonably designed to insure the security and confidentiality of customer records and information, protect against anticipated threats to the security or integrity of those records and information, and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer. *See supra* note 9 and accompanying text. 14 Regulation S-P applies to investment companies as the term is defined in Section 3 of the Investment Company Act (15 U.S.C. 80a-3), whether or not the investment company is registered with the Commission. *See* 17 CFR 248.3(r). Thus, a business development company, which is an investment company but is not required to register as such with the Commission, is subject to Regulation S-P. In this release, institutions to which Regulation S-P currently applies, or to which the proposed amendments would apply, are sometimes referred to as “covered institutions.” Pursuant to the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the Commission amended Regulation S-P in 2004 to protect against the improper disposal of consumer report information. 15 Section 30(b) of Regulation S-P (the “disposal rule”) currently applies to the institutions subject to the other provisions of Regulation S-P, except that it excludes notice-registered broker-dealers and includes registered transfer agents. 15 17 CFR 248.30(b). Section 216 of the FACT Act amended the FCRA by adding Section 628 (codified at 15 U.S.C. 1681w), which directed the Commission and other federal financial regulators to adopt regulations for the proper disposal of consumer information, and provides that any person who maintains or possesses consumer information or any compilation of consumer information derived from a consumer report for a business purpose must properly dispose of the information. *See Disposal of Consumer Report Information* , Exchange Act Release No. 50781, IAA Release No. 2332, ICA Release No. 26685 (Dec. 2, 2004), 69 FR 71322 (Dec. 8, 2004) (“Disposal Rule Adopting Release”). When we adopted the disposal rule, we also amended Regulation S-P to require that the policies and procedures institutions must adopt under the safeguards rule be in writing. The disposal rule requires transfer agents registered with the Commission, as well as brokers and dealers other than notice-registered broker-dealers, investment advisers registered with the Commission, and investment companies that maintain or possess “consumer report information” for a business purpose, to take “reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal.” In order to provide clarity, the Disposal Rule Adopting Release included five examples intended to provide guidance on disposal measures that would be deemed reasonable under the disposal rule. *See Disposal Rule Adopting Release* at section II.A.2. B. Challenges Posed by Information Security Breaches In recent years, we have become concerned with the increasing number of information security breaches that have come to light and the potential for identity theft and other misuse of personal financial information. Once seemingly confined mainly to commercial banks and retailers, this problem has spread throughout the business community, including the securities industry. 16 16 *See* Press Release, NASD, *NASD Warns Investors to Protect Online Account Information, Brokerages Also Reminded of Obligation to Protect Customer Information from New Threats* (July 28, 2005), *http://www.finra.org/PressRoom/NewsReleases/2005NewsReleases/P014775* (last visited Nov. 6, 2007). *See also In re NEXT Financial Group, Inc.* , Exchange Act Release No. 56316 (Aug. 24, 2007), *http://www.sec.gov/litigation/admin/2007/34-56316.pdf* , and Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Aug. 24, 2007) (alleging violations of the notice and opt out provisions of Regulation S-P and the safeguards rule in connection with recruiting registered representatives), *http://www.sec.gov/litigation/admin/2007/34-56316-o.pdf* . In the last two years, we have seen a significant increase in information security breaches involving institutions we regulate. Perhaps most disturbing is the increase in incidents involving the takeover of online brokerage accounts, including the use of the accounts by foreign nationals as part of “pump-and-dump” schemes. 17 The financial services sector also is a popular target for online targeted attacks, and “phishing” attacks in which fraudsters set up an Internet site designed to mimic a legitimate site and induce random Internet users to disclose personal information. 18 In other recent incidents, registered representatives of broker-dealers disposed of information and records about clients or prospective clients in accessible areas, from which journalists were able to remove them. Sensitive securities-related data also has been lost or stolen as a result of other incidents. 19 17 While some account takeovers may have been facilitated by investors failing to take adequate precautions against security threats such as “keylogger” programs and “phishing” attacks, many online brokerage firms have successfully reduced their exposure to account takeovers by improving their authentication and monitoring procedures. The Commission has been active in this area, and has brought several enforcement cases involving defendants in foreign jurisdictions. *See, e.g.* , Litigation Release No. 20037 (Mar. 12, 2007), available at *http://www.sec.gov/litigation/litreleases/2007/lr20037.htm* (three Indian nationals charged with participating in an alleged fraudulent scheme to manipulate the prices of at least fourteen securities through the unauthorized use of other people's online brokerage accounts); and Litigation Release No. 19949 (Dec. 19, 2006), available at *http://www.sec.gov/litigation/litreleases/2006/lr19949.htm* (emergency asset freeze obtained; complaint alleged an alleged Estonia-based account intrusion scheme that targeted online brokerage accounts in the U.S. to manipulate the markets). 18 In 2006, Symantec Corporation, a seller of information security and information management software, reported that in the first half of 2006, 84 percent of tracked phishing sites targeted the financial sector and 9 of the top 10 brands phished this period were from the financial sector. Because the financial services sector is a logical target for attackers increasingly motivated by financial gain, that sector was also the second most frequent target of Internet-based attacks (after home users). *See* Symantec, *Symantec Internet Security Threat Report, Trends for January 06-June 06* , at 9, 23 (Sept. 2006), *http://www.symantec.com/specprog/threatreport/ent-whitepaper_symantec_internet_security_threat_report_x_09_2006.en-us.pdf* (last visited Nov. 6, 2007) (“Symantec September 2006 Internet Security Threat Report”). Reportedly, employees of financial services firms “are increasingly being invited to visit Web sites or download programs by people pretending to be colleagues or peers,” followed by attack programs on the sites or in downloads that “then open tunnels into the corporate network.” More recently, although financial services-related spam reportedly “made up 21 percent of all spam in the first six months of 2007, making it the second most common type of spam during this period,” there was a 30-percent decline in stock market “pump and dump” spam “due to a decline in spam touting penny stocks that was triggered by actions taken by the United States Securities and Exchange Commission, which limited the profitability of this type of spam by suspending trading of the stocks that are touted.” *See Symantec, Symantec Internet Security Threat Report, Trends for January-June 07, Volume XII* , at 107 (Sept. 2007), *http://eval.symantec.com/mktginfo/enterprise/white_papers/ent-whitepaper_internet_security_threat_report_xii_09_2007.en-us.pdf* (last visited Nov. 6, 2007) (citing Commission Press Release 2007-34, *SEC Suspends Trading Of 35 Companies Touted In Spam E-mail Campaigns* (Mar. 8, 2007), available at *http://www.sec.gov/news/press/2007/2007-34.htm* ). 19 For example, in April 2005, a shipping company lost a computer backup tape containing account information for more than 200,000 broker-dealer customers. The broker-dealer voluntarily notified its affected customers, although the data was compressed and the tape was thought to have been destroyed. In December 2005, a laptop computer containing unencrypted information that included names and account numbers of 158,000 customers and the names and Social Security numbers of 68,000 adviser personnel was stolen from a registered investment adviser, and in March 2006, a laptop computer containing the names, addresses, Social Security numbers, dates of birth, and other employment-related information of as many as 196,000 retirement plan participants was stolen from a benefits plan administration subsidiary of a registered investment adviser. In both cases, the laptops were taken from vehicles by thieves who appear to have stolen them for their value as computer hardware rather than for the information contained on them. The registered investment adviser voluntarily notified the more than 200,000 clients and financial advisers whose information was compromised, while the benefits plan administrator voluntarily notified the nearly 200,000 retirement plan participants whose information was compromised, and offered to pay for a year of credit monitoring for each of them. Many firms in the securities industry are aware of these problems and have appropriate safeguards in place to address them. 20 We are concerned, however, that some firms do not regularly reevaluate and update their safeguarding programs to deal with these increasingly sophisticated methods of attack. 21 For this reason, and in light of the increase in reported security breaches and the potential for identity theft among the institutions we regulate, we believe that our previous approach, requiring safeguards that must be reasonably designed to meet the GLBA's objectives, merits revisiting. 22 20 Some institutions regulated by the Commission have already taken steps to strengthen their policies and procedures for safeguarding investors' information, such as by offering investors the use of password-generating tokens for online brokerage accounts. We also note that some firms have been sharing information about suspicious activity with one another for the purpose of combating identity theft. To the extent it might involve sharing nonpublic personal information about consumers of the firms, Regulation S-P does not prohibit such information sharing because Section 15(a)(2)(ii) of Regulation S-P permits firms to disclose nonpublic personal information to a nonaffiliated third party for the purpose of protecting against fraud without first giving consumers notice of and an opportunity to opt out of the disclosures. 21 According to a September 2007 report from Deloitte Touche Tohmatsu, for example, 37 percent of 169 surveyed financial institutions do not have an information security strategy in place, and 33 percent of these institutions do not conduct vulnerability testing, or only do so on an ad hoc basis. *See* Deloitte Touche Tohmatsu, *2007* *Global Security Survey,* at 12, 36 (Sept. 2007), *http://www.deloitte.com/dtt/cda/doc/content/dtt_gfsi_GlobalSecuritySurvey_20070901%281%29.pdf* (last visited Nov. 6, 2007). 22 In 2004 we sought comment on whether to revise our safeguards rule to require institutions to address certain elements in designating their safeguarding policies and procedures. *See Disposal of Consumer Report Information,* Exchange Act Release No. 50361, IAA Release No. 2293, ICA Release No. 20596 (Sept. 14, 2004), 69 FR 56304 (Sept. 20, 2004) (“Disposal Rule Proposing Release”), at section II.B. At that time we decided not to revise the safeguards rule, but noted we would consider the comments we received in the event we proposed any amendment to the rule. *See Disposal Rule Adopting Release, supra* note 15, at section II.B. *See also infra* note 31. We also are concerned that while the information protected under the safeguards rule and the disposal rule includes certain personal information, it does not include other information that could be used to access investors' financial information if obtained by an unauthorized user. Finally we want to address other issues under Regulation S-P that have come to our attention, including the application of the regulation to situations in which a representative of one broker-dealer or registered investment adviser moves to another firm. Accordingly, today we are proposing amendments to the safeguards and disposal rules that are designed to address these concerns. II. Discussion To help prevent and address security breaches in the securities industry and thereby better protect investor information, we propose to amend Regulation S-P in four principal ways. First, we propose to require more specific standards under the safeguards rule, including standards that would apply to data security breach incidents. Second, we propose to amend the scope of the information covered by the safeguards and disposal rules and to broaden the types of institutions and persons covered by the rules. Third, we propose to require institutions subject to the safeguards and disposal rules to maintain written records of their policies and procedures and their compliance with those policies and procedures. Finally, we are taking this opportunity to propose a new exception from Regulation S-P's notice and opt-out requirements to allow investors more easily to follow a representative who moves from one brokerage or advisory firm to another. A. Information Security and Security Breach Response Requirements To help prevent and address security breaches at the institutions we regulate, we propose to require more specific standards for safeguarding personal information, including standards for responding to data security breaches. When we adopted Regulation S-P in 2001, the safeguards rule simply required institutions to adopt policies and procedures to address the safeguarding objectives stated in the GLBA. Following our adoption of the rule, the FTC and the Banking Agencies issued regulations with more detailed standards for safeguarding customer records and information applicable to the institutions they regulate. 23 We believe these standards include necessary elements that institutions should address when adopting and implementing safeguarding policies and procedures. We have therefore looked to the other agencies' standards in developing our proposal and tailored them, where appropriate, to develop proposed standards for the institutions we regulate. 23 The Banking Agencies issued their guidelines for safeguarding customer records and information in 2001. *See Interagency Guidelines Establishing Standards for Safeguarding Customer Information and Rescission of Year 2000 Standards for Safety and Soundness,* 66 FR 8616 (Feb. 1, 2001) (“Banking Agencies” Security Guidelines”). The FTC adopted its safeguards rule in 2002. *See Standards for Safeguarding Customer Information,* 67 FR 36484 (May 23, 2002) (“FTC Safeguards Rule”). The Banking Agencies also have jointly issued guidance on responding to incidents of unauthorized access or use of customer information. *See Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice,* 70 FR 15736 (Mar. 29, 2005) (“Banking Agencies” Incident Response Guidance”). More recently, through the Federal Financial Institutions Examination Council (“FFIEC”), the Banking Agencies jointly issued guidance on the authentication of customers in an Internet banking environment, and the Banking Agencies and the FTC jointly issued final rules and guidelines for identity theft “red flags” programs to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts. *See* FFIEC, *Authentication in an Internet Banking Environment* (July 27, 2006), available at *www.ffiec.gov/pdf/authentication_guidance.pdf* (“Authentication Guidance”); Banking Agencies and FTC, *Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003,* 72 FR 63718 (Nov. 9, 2007) (“Final Red Flag Rules”). *See also* Banking Agencies and FTC, *Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit Transactions Act of 2003,* 71 FR 40785 (July 18, 2006) (“Proposed Red Flag Guidelines”). In March of this year, the FTC also published a brochure on data security, Protecting Personal Information: A Guide for Business (available at *http://www.ftc.gov/infosecurity/* ), and the FDIC issued a *Supervisory Policy on Identity Theft,* FIL-32-2007 (Apr. 11, 2007), available at *http://www.fdic.gov/news/news/financial/2007/fil07032a.html.* 1. Revised Safeguarding Policies and Procedures As noted above, the safeguards rule requires institutions to adopt written policies and procedures that address administrative, technical and physical safeguards to protect customer records and information. The proposed amendments would further develop this requirement by requiring each institution subject to the safeguards rule to develop, implement, and maintain a comprehensive “information security program,” including written policies and procedures that provide administrative, technical, and physical safeguards for protecting personal information, and for responding to unauthorized access to or use of personal information. 24 This program would have to be appropriate to the institution's size and complexity, the nature and scope of its activities, and the sensitivity of any personal information at issue. 25 Consistent with current requirements for safeguarding policies and procedures, the information security program also would have to be reasonably designed to:
(i)Ensure the security and confidentiality of personal information;
(ii)protect against any anticipated threats or hazards to the security or integrity of personal information; and
(iii)protect against unauthorized access to or use of personal information that could result in substantial harm or inconvenience to any consumer, employee, investor or securityholder who is a natural person. 26 Although the term “substantial harm or inconvenience” is currently used in the safeguards rule, it is not defined. We propose to define the term to mean “personal injury, or more than trivial financial loss, expenditure of effort or loss of time.” 27 This definition is intended to include harms other than identity theft that may result from failure to safeguard sensitive information about an individual. For example, a hacker could use confidential information about an individual for extortion by threatening to make the information public unless the individual agrees to the hacker's demands. “Substantial harm or inconvenience” would *not* include “unintentional access to personal information by an unauthorized person that results only in trivial financial loss, expenditure of effort or loss of time,” such as if use of the information results in an institution deciding to change the individual's account number or password. 28 The rule would provide an example of what would not constitute harm or inconvenience that rises to the level of “substantial,” which should help clarify the scope of what would constitute “substantial harm or inconvenience.” 24 As amended, Section 30 would be titled, “Information security programs for personal information; records of compliance.” 25 *See* proposed paragraph (a)(1) of Section 30. The term “information security program” would mean the administrative, technical, or physical safeguards used to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle personal information. *See* proposed paragraph (d)(6) of Section 30. 26 *See* proposed paragraph (a)(2) of Section 30. *Compare* 17 CFR 248.30(a)(1)-(3). 27 *See* proposed paragraph (d)(12) of Section 30. “Substantial harm or inconvenience” would include theft, fraud, harassment, impersonation, intimidation, damaged reputation, impaired eligibility for credit, or the unauthorized use of the information identified with an individual to obtain a financial product or service, or to access, log into, effect a transaction in, or otherwise use the individual's account. 28 *See* proposed paragraph (d)(12)(ii) of Section 30. Thus, for example the proposed definition would not encompass a firm's occasional, unintentional delivery of an individual's account statement to an incorrect address if the institution determined that the information was highly unlikely to be misused. This determination would have to be made promptly after the institution becomes aware of an incident of unauthorized access to sensitive personal information, and documented in writing. *See* proposed paragraph (a)(4)(iii) of Section 30. The proposed amendments also would specify particular elements that a program meeting the requirements of Regulation S-P must include. 29 These elements are intended to provide firms in the securities industry with detailed standards for the policies and procedures that a well-designed information security program should include to address recent identity theft-related incidents such as firms in the securities industry losing data tapes and laptop computers and failing to dispose properly of sensitive personal information, and hackers hijacking online brokerage accounts. 30 These elements also are intended to maintain consistency with information safeguarding guidelines and rules adopted by the Banking Agencies and FTC. 31 In addition, these elements are consistent with policies and procedures we understand many institutions in the securities industry have already adopted. We understand that large and complex organizations generally have written policies that address information safeguarding procedures at several layers, from an organization-wide policy statement to detailed procedures that address particular controls. 32 29 Many of these elements are addressed by widely accepted information security standards. *See, e.g.* , National Institute of Standards and Technology (“NIST”), Special Publication 800 series (Computer Security), for example *Generally Accepted Principals and Practices for Securing Information Technology Systems* (SP 800-14) (Sept. 1996), *Guide to Intrusion Detection and Prevention Systems*
(IDPS)(SP 800-94) (Feb. 2007), and *Guide to Secure Web Services* (SP 800-95) (Aug. 2007) (all available at *http://csrc.nist.gov/publications/PubsSPs.html* ), and bulletins dealing with computer security published by the NIST's Information Technology Laboratory (ITL), for example *Secure Web Servers: Protecting Web Sites That Are Accessed By The Public* (ITL January 2008) (available at *http://csrc.nist.gov/publications/PubsITLSB.html* ); *Federal Information System Controls Audit Manual,* General Accounting Office, Accounting and Information Management Division, *Federal Information System Controls Audit Manual,* GAO/AIMD-12.19.6 (known as “FISCAM”) (Jan. 1999) (available at *http://www.gao.gov/special.pubs/ai12.19.6.pdf* ); International Organization for Standardization, *Code of Practice for Information Security Management* (ISO/IEC 27002:2005) (known among information security professionals as the “British Standard,” and formerly designated BS ISO/IEC 17799:2005 and BS 7799-1:2005) (available for purchase at *http://www.standardsdirect.org/iso17799.htm* and at *http://www.bsi-global.com/en/Shop/Publication-Detail/?pid=000000000030166440* ); and Information Systems Audit and Control Association/IT Governance Institute, *Control Objectives for Information and Related Technology* (known as “COBIT”) (last updated, and published as version 4.1, May 2007) (available at *http://www.isaca.org* ). 30 *See supra* notes 16-19 and accompanying text. 31 *See* Banking Agencies' Security Guidelines and FTC Safeguards Rule, *supra* note 23. As noted above, we sought comment on whether to revise our safeguards rule in 2004. *See supra* note 22. At that time, several commenters noted that Rule 206(4)-7 under the Investment Advisers Act (17 CFR 275.206(4)-7) and Rule 38a-1 under the Investment Company Act (17 CFR 270.38a-1) require registered investment advisers and registered investment companies to have written policies and procedures reasonably designed to prevent violation of the federal securities laws, including safeguards for the protection of customer records and information under Regulation S-P. These rules also require registered investment advisers and funds to review, no less frequently than annually, the adequacy of these policies and procedures. *See* Comment Letter of the Investment Counsel Association of America (Oct. 20, 2004), at p. 3; Comment Letter of the Investment Company Institute (Oct. 20, 2004) at p. 2. Each of these letters is available at *http://www.sec.gov/comments/s73304.shtml.* We do not intend for the proposed amendments to alter or conflict with these requirements. 32 *See Disposal Rule Proposing Release, supra* note 22, at 69 FR 56308 & n.29. Institutions subject to the rule would be required to:
(i)Designate in writing an employee or employees to coordinate the information security program; 33 33 *See* proposed paragraph (a)(3)(i) of Section 30. Of course, the employee or employees designated to coordinate an institution's information security program would need to have sufficient authority and access to the institution's managers, officers and directors to effectively implement the program and modify it as necessary.
(ii)Identify in writing reasonably foreseeable security risks that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of personal information or personal information systems; 34 34 *See* proposed paragraph (a)(3)(ii) of Section 30. The term “personal information system” would mean any method used to access, collect, store, use, transmit, protect or dispose of personal information. *See* proposed paragraph (d)(9) of Section 30.
(iii)Design and document in writing and implement information safeguards to control the identified risks; 35 35 *See* proposed paragraph (a)(3)(iii) of Section 30.
(iv)Regularly test or otherwise monitor and document in writing the effectiveness of the safeguards' key controls, systems, and procedures, including the effectiveness of access controls on personal information systems, controls to detect, prevent and respond to attacks, or intrusions by unauthorized persons, and employee training and supervision; 36 36 *See* proposed paragraph (a)(3)(iv) of Section 30.
(v)Train staff to implement the information security program; 37 37 *See* proposed paragraph (a)(3)(v) of Section 30.
(vi)Oversee service providers by taking reasonable steps to select and retain service providers capable of maintaining appropriate safeguards for the personal information at issue, and require service providers by contract to implement and maintain appropriate safeguards (and document such oversight in writing); 38 and 38 *See* proposed paragraph (a)(3)(vi) of Section 30.
(vii)Evaluate and adjust their information security programs to reflect the results of the testing and monitoring, relevant technology changes, material changes to operations or business arrangements, and any other circumstances that the institution knows or reasonably believes may have a material impact on the program. 39 39 *See* proposed paragraph (a)(3)(vii) of Section 30. This requirement is similar to the requirement in the Banking Agencies' Security Guidelines that institutions covered by those guidelines monitor, evaluate, and adjust, as appropriate, their information security program in light of any relevant changes in technology, the sensitivity of their customer information, internal or external threats to information, and their own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to customer information systems. *See supra* note 23, Banking Agencies' Security Guidelines, 66 FR at 8634, 8635-36, 8637, 8639, 8641. The “material impact” standard in proposed paragraph (a)(3)(iii) is intended to require adjustment of a covered institution's information security program only when a reasonable coordinator of the program would consider adjusting the program important in light of changing circumstances. The term “service provider” would mean any person or entity that receives, maintains, processes, or otherwise is permitted access to personal information through its provision of services directly to a person subject to the rule. 40 We understand that in large financial complexes, a particular affiliate may be responsible for providing a particular service for all affiliates in the complex. In that circumstance, each financial institution subject to Regulation S-P would be responsible for taking reasonable steps to ensure that the service provider is capable of maintaining appropriate safeguards and of overseeing the service provider's implementation, maintenance, evaluation, and modifications of appropriate safeguards for the institution's personal information. Under the proposed amendments, we anticipate that a covered institution's reasonable steps to evaluate the information safeguards of service providers could include the use of a third-party review of those safeguards such as a Statement of Auditing Standards No. 70 (“SAS 70”) report, a SysTrust report, or a WebTrust report. 41 40 *See* proposed paragraph (d)(11) of Section 30. 41 *See* Codification of Accounting Standards and Procedures, Statement on Auditing Standards No. 70, Reports on Processing of Transactions by Service Organizations (American Inst. of Certified Public Accountants). *See also* description and comparison of these reports at *http://infotech.aicpa.org/Resources/System+Security+and+Reliability/System+Reliability/Principles+of+a+Reliable+System/.* We request comment on the proposed specific standards for safeguarding personal information. • Would these standards provide sufficient direction to institutions? Are there particular standards that should be more or less prescriptive? For example, should institutions be required to designate an employee or employees to coordinate the information security program by name, or should institutions be permitted to make these designations by position or office? • Would additional standards be appropriate or are certain standards unnecessary? Should the proposed standards be modified to more closely or less closely resemble standards prescribed by the Banking Agencies or the FTC? For the securities industry, are there any other standards that a well-designed information security program should address? Are there any other standards that would provide more flexibility to covered institutions? • We also invite comment on the proposed requirement that entities assess the sufficiency of safeguards in place, to control reasonably foreseeable risks. Should the rules include more detailed standards and specifications for access controls? Should the requirement specify factors such as those identified in the Banking Agencies' guidance regarding authentication in an Internet banking environment or include policies and procedures such as those in the Banking Agencies and the FTC's proposed or final “red flag” requirements? 42 For example, should we require that covered institutions implement multifactor authentication, layered security, or other controls for high-risk transactions involving access to customer information or the movement of funds to third parties? Should we require that covered institutions include in their information security programs “red flag” elements that would be relevant to detecting, preventing and mitigating identity theft in connection with the opening of accounts or existing accounts, or in connection with particular types of accounts associated with a reasonably foreseeable risk of identity theft? Should we require that covered institutions adopt policies and procedures for evaluating changes of address followed closely by an account change or transaction, or for processing address discrepancy notices from consumer reporting agencies? If the rule were to include more detailed standards and specifications for access controls, how should these apply to business conducted by telephone? 42 *See* Authentication Guidance, Proposed Red Flag Guidance, and Final Red Flag Rules, *supra* note 23. The Authentication Guidance has been credited with helping to curtail online banking fraud, but has been characterized as not adequately addressing authentication in the context of telephone banking. *See* Daniel Wolfe, *How New Authentication Systems are Altering Fraud Picture,* Amer. Banker (Dec. 26, 2007). • Commenters are invited to discuss the proposed definition of “substantial harm or inconvenience.” Are there circumstances that commenters believe would create substantial harm or inconvenience to individuals that would not meet the proposed definition? If so, how should the definition be revised to address these circumstances? • Commenters are invited to discuss the proposed requirements for written documentation of compliance with the proposed safeguarding provisions. • Commenters are invited to discuss the proposed definition of “service provider.” They also are invited to discuss whether, if the proposed amendments are adopted, they should include or be accompanied by guidance on the use of outside evaluations of third-party service providers. For example, should the Commission provide guidance similar to that provided by the FFIEC on the appropriate use of SAS 70 reports in evaluating the information safeguards of service providers? 43 43 The FFIEC provided the following guidance on the use of SAS 70 reports in the oversight of third-party service providers (“TSPs”) by financial institutions regulated by FFIEC member agencies: Financial institutions should ensure TSPs implement and maintain controls sufficient to appropriately mitigate risk. In higher-risk relationships the institution by contract may prescribe minimum control and reporting standards, obtain the right to require changes to standards as external and internal environments change, and obtain access to the TSP for institution or independent third-party evaluations of the TSP's performance against the standard. In lower risk relationships the institution may prescribe the use of standardized reports, such as trust services reports or a Statement of Auditing Standards 70 (SAS 70) report. * * * * * Financial institutions should carefully and critically evaluate whether a SAS 70 report adequately supports their oversight responsibilities. The report may not provide a thorough test of security controls and security monitoring unless requested by the TSP. It may not address the effectiveness of the security process in continually mitigating changing risks. Additionally, the SAS 70 report may not address whether the TSP is meeting the institution's specific risk mitigation requirements. Therefore, the contracting oversight exercised by financial institutions may require additional tests, evaluations, and reports to appropriately oversee the security program of the service provider. FFIEC, *FFIEC IT Examination Handbook, Information Security Booklet—July 2006,* at 77, 78 (available at *http://www.ffiec.gov/ffiecinfobase/booklets/information_security/information_security.pdf* ). 2. Data Security Breach Response Because of the potential for harm or inconvenience to individuals when a data security breach occurs, we are proposing that information security programs include procedures for responding to incidents of unauthorized access to or use of personal information. These procedures would include notice to affected individuals if misuse of sensitive personal information has occurred or is reasonably possible. The procedures would also include notice to the Commission (or for certain broker-dealers, their designated examining authority 44 ) under circumstances in which an individual identified with the information has suffered substantial harm or inconvenience or an unauthorized person has intentionally obtained access to or used sensitive personal information. The proposed rules that would require prompt notice of information security breach incidents to individuals, as well as the Commission or designated examining authorities, are intended to facilitate swift and appropriate action to minimize the impact of the security breach. 44 A broker-dealer's designated examining authority is the self-regulatory organization (“SRO”) of which the broker-dealer is a member, or, if the broker-dealer is a member of more than one SRO, the SRO designated by the Commission pursuant to 17 CFR 240.17d-1 as responsible for examination of the member for compliance with applicable financial responsibility rules (including the Commission's customer account protection rules at 17 CFR 240.15c3-3). The data security breach response provisions of the proposed amendments include elements intended to provide firms in the securities industry with detailed standards for responding to a breach so as to protect against unauthorized use of compromised data. The proposed standards would specify procedures a covered institution's information security program would need to include. These procedures would be required to be written to provide clarity for firm personnel and to facilitate Commission and SRO examination and inspection. The proposed standards are intended to ensure that covered institutions adopt plans for responding to an information security breach incident so as to minimize the risk of identity theft or other significant investor harm or inconvenience from the incident. These proposed procedures also are intended to be consistent with security breach notification guidelines adopted by the Banking Agencies. 45 45 *See* Banking Agencies' Incident Response Guidance, *supra* note 23. Under the proposed amendments, institutions subject to the rule would be required to have written procedures to:
(i)Assess any incident involving unauthorized access or use, and identify in writing what personal information systems and what types of personal information may have been compromised; 46 46 *See* proposed paragraph (a)(4)(i) of Section 30.
(ii)Take steps to contain and control the incident to prevent further unauthorized access or use and document all such steps taken in writing; 47 47 *See* proposed paragraph (a)(4)(ii) of Section 30.
(iii)Promptly conduct a reasonable investigation and determine in writing the likelihood that the information has been or will be misused after the institution becomes aware of any unauthorized access to sensitive personal information; 48 and 48 *See* proposed paragraph (a)(4)(iii) of Section 30.
(iv)Notify individuals with whom the information is identified as soon as possible (and document the provision of such notification in writing) if the institution determines that misuse of the information has occurred or is reasonably possible. 49 49 *See* proposed paragraph (a)(4)(iv) of Section 30. Notification could be delayed, however, if an appropriate law enforcement agency determines that notification will interfere with a criminal investigation and requests in writing a delay in notification. We propose to require notification of individuals only if misuse of the compromised information has occurred or is reasonably possible to avoid requiring notification in circumstances in which there is no significant risk of substantial harm or inconvenience. If covered institutions were required to notify individuals of every instance of unauthorized access or use, such as if an employee accidentally opened and quickly closed an electronic account record, individuals could receive an excessive number of data breach notifications and become desensitized to incidents that pose a real risk of identity theft. We propose to define the term, “sensitive personal information,” to mean “any personal information, or any combination of components of personal information, that would allow an unauthorized person to use, log into, or access an individual's account, or to establish a new account using the individual's identifying information,” including the individual's Social Security number, or any one of the individual's name, telephone number, street address, e-mail address, or online user name, in combination with any one of the individual's account number, credit or debit card number, driver's license number, credit card expiration date or security code, mother's maiden name, password, personal identification number, biometric authentication record, or other authenticating information. 50 This definition is intended to cover the types of information that would be most useful to an identity thief, and to which unauthorized access would create a reasonable possibility of substantial harm or inconvenience to an affected individual. 50 *See* proposed paragraph (d)(10) of Section 30. The amendments also would require an institution to provide notice to the Commission as soon as possible after the institution becomes aware of any incident of unauthorized access to or use of personal information in which there is a significant risk that an individual identified with the information might suffer substantial harm or inconvenience, or in which an unauthorized person has intentionally obtained access to or used sensitive personal information. 51 This requirement would allow Commission and SRO investigators or examiners to review the notices to determine if an immediate investigative or examination response would be appropriate. In this regard, it is crucial that institutions respond promptly to any follow-up requests for records or information from our staff or the staff of the designated examining authority. 52 Under the proposed amendments, a prompt response in accordance with existing Commission guidance on the timely production of records would be particularly important in circumstances involving ongoing misuse of sensitive personal information. 51 *See* proposed paragraph (a)(4)(v) of Section 30. 52 *See generally* 15 U.S.C. 21(a) (investigative requests); 17 CFR 240.17a 4(j) (examinations of broker-dealers); 17 CFR 275.204-2(g) (examinations of investment advisers). The regulatory notification requirement in the Banking Agencies' guidance requires a report to the appropriate regulator as soon as possible after the institution becomes aware of an incident involving unauthorized access to or use of sensitive customer information. 53 Our proposed notice requirement differs from the Banking Agencies' approach in that it would require notice to the Commission (or a designated examining authority) when an incident of unauthorized access to or use of personal information poses a significant risk that an individual identified with the information might suffer substantial harm or inconvenience, or in which an unauthorized person has intentionally obtained access to or used sensitive personal information. The proposed notice requirement is intended to avoid notice to the Commission in every case of unauthorized access, and to focus scrutiny on information security breaches that present a greater potential likelihood for harm. We believe that this approach would help conserve institutions', as well as the Commission's, administrative resources by allowing minor incidents to be addressed in a way that is commensurate with the risk they present. The information to be included in the notice would allow the Commission or a broker-dealer's designated examining authority to evaluate whether any legal action against a would-be identity thief or other action is warranted in light of the circumstances. A broker-dealer, other than a notice-registered broker dealer, would be required to notify the appropriate designated examining authority on proposed Form SP-30. An investment company or registered investment adviser or transfer agent would be required to notify the Commission on proposed Form SP-30. 54 53 *See* Banking Agencies' Incident Response Guidance, *supra* note 23, at 70 FR 15740-15741 (concluding that the Banking Agencies' standard for notification to regulators should provide an early warning to allow an institution's regulator to assess the effectiveness of an institution's response plan, and, where appropriate, to direct that notice be given to customers if the institution has not already done so). 54 We anticipate that this form could be downloaded from our Web site and would be required to be filed electronically with the Registrations Branch in the Office of Compliance Inspections and Examinations. While broker-dealers generally would file the form with their designated examining authority rather than the Commission, investment advisers that are dually registered with the Commission as broker-dealers also would file with the Commission and indicate their dual-registrant status on the form. Proposed Form SP-30 would require the institution to disclose information that the Commission (or the designated examining authority) needs to understand the nature of the unauthorized access or misuse of personal information and the institution's intended response to the incident. 55 Accordingly, in addition to identifying and contact information for the covered institution, the form would request a description of the incident, when it occurred and what offices or parts of the registrant's business were affected. The form also would require disclosure of any third-party service providers that were involved, the type of services provided and, if the service provider is an affiliate, the nature of the affiliation. This information would help examiners to assess the information security policies and procedures of the service provider. In addition, the form would require a description of any customer account losses. 55 *See* proposed Form SP-30. Information submitted to the Commission on the form would be accorded confidential treatment to the extent permitted by law. *See,* *e.g.* , 17 CFR 200.83. We realize that the full amount of losses may not be known at the time an information security breach is discovered, but we would expect covered institutions to make a good faith effort to complete the proposed form to the extent possible. Under the proposed amendments, if a covered institution determined that an unauthorized person had obtained access to or used sensitive personal information, and that misuse of the information had occurred or was reasonably possible, the institution also would be required to provide notification, in a clear and conspicuous manner, to each individual identified with the information. 56 The proposed requirements for notices to individuals are intended to give investors information that would help them protect themselves against identity theft. They also are intended to be consistent with similar requirements in the Banking Agencies' Incident Response Guidance. 57 56 *See* proposed paragraph (a)(5) of Section 30. 57 *See* Banking Agencies' Incident Response Guidance, *supra* note 23. The notices to affected individuals that would be required by the proposed amendments would have to:
(i)Describe the incident and the type of information that was compromised, and what was done to protect the individual's information from further unauthorized access or use; 58 58 *See* proposed paragraphs (a)(5)(i) and (a)(5)(ii) of Section 30.
(ii)Include a toll-free telephone number or other contact information for further information and assistance from the institution; 59 59 *See* proposed paragraph (a)(5)(iii) of Section 30.
(iii)Recommend that the individual review account statements and immediately report any suspicious activity to the institution; 60 and 60 *See* proposed paragraphs (a)(5)(iv) and (a)(5)(v) of Section 30.
(iv)Include information about FTC guidance regarding the steps an individual can take to protect against identity theft, a statement encouraging the individual to report any incidents of identity theft to the FTC, and the FTC's Web site address and toll-free telephone number for obtaining identity theft guidance and reporting suspected incidents of identity theft. 61 61 *See* proposed paragraph (a)(5)(vi) of Section 30. We request comment on the proposed specific standards relating to incidents of unauthorized access to or misuse of personal information. • Commenters are invited to discuss the proposed requirements for procedures for responding to incidents of unauthorized access to or use of personal information. Are there any particular steps that may not be necessary, or not necessary in all situations? Are there any other steps that could be taken in response to a security breach that also should be required in some or all situations? • We request comment on the proposed provisions regarding procedures for notifying the Commission (or a broker-dealer's designated examining authority) of incidents in which an individual identified with compromised information has suffered substantial harm or inconvenience, or an unauthorized person has intentionally obtained access to or used sensitive personal information. • For example, should firms be required to provide notice only if the information compromised in an incident is identified with a certain number of individuals? Should the rule include a numerical or other threshold for when notice to the Commission (or to a broker-dealer's designated examining authority) is required? If so, how would a threshold work for smaller institutions that may be far more likely than larger institutions to meet the threshold? Will the proposed standard provide a sufficient early warning to the Commission, or should the Commission broaden the circumstances under which notices would be required to be provided to the Commission (or to a broker-dealer's designated examining authority), such as the standard adopted by the Banking Agencies? Commenters should explain their views. • Is the proposed definition of “sensitive personal information” sufficient? Are there particular types of information that should or should not be included? • We request comment on proposed Form SP-30. Is the form easy to understand and use? For example, is the form clear, or would additional guidance, such as instructions or further explanation of particular questions or terms be helpful? Would it be easier or more cost-effective for firms if the rule specified the information they are required to provide rather than provide a form? Would the form be more useful if it were in a tabular format? Commenters should be specific regarding changes they believe should be made to the content or format of the proposed form. • Similarly, we invite comment on the proposed provisions regarding procedures for notifying individuals of incidents of unauthorized use or access if an institution determines that an unauthorized person has obtained access to or used the information and that misuse of sensitive personal information has occurred or is reasonably possible. Is the information in the proposed notice to individuals appropriate? Is there additional information that institutions should include, or information, proposed to be included, that should be eliminated? Is the proposed threshold for notice appropriate? If not, are there alternative thresholds for notice to individuals that would be more appropriate? If so, commenters should explain their views. • Commenters are invited to discuss the proposed requirements for written documentation of compliance with the proposed incident response provisions. B. Scope of the Safeguards and Disposal Rules 1. Information Covered by the Safeguards and Disposal Rules The Commission adopted the safeguards and disposal rules at different times under different statutes—respectively, the GLBA and the FACT Act—that differ in the scope of information they cover. As noted above, Regulation S-P implements the GLBA privacy provisions governing requirements for notice and opt out before an institution can share certain information with nonaffiliates and for safeguarding information. The regulation's notice and opt out provisions limit institutions from sharing “nonpublic personal information” about consumers and customers as defined in the GLBA and in Regulation S-P, with nonaffiliated third parties. 62 As required under the GLBA, the safeguards rule requires covered institutions to maintain written policies and procedures to protect “customer records and information,” 63 which is not defined in the GLBA or in Regulation S-P. The disposal rule requires institutions to properly dispose of “consumer report information,” a third term, which Regulation S-P defines consistent with the FACT Act provisions. 64 Each of these terms includes a different set of information, although the terms include some of the same information. 65 Each term also does *not* include some information that, if obtained by an unauthorized user, could permit access to personal financial information about an institution's customers. We preliminarily believe that in order to provide better protection against the unauthorized disclosure of this personal financial information, the scope of information protected by both the safeguards rule and the disposal rule should be broader. Broadening the scope of information covered by the safeguards and disposal rules would more appropriately implement Section 525 of the GLBA. Section 525 directs the Commission to revise its regulations as necessary to ensure that covered institutions have policies, procedures, and controls in place to prevent the unauthorized disclosure of “customer financial information.” Section 521 of Title V of the GLBA prohibits persons from obtaining or requesting a person to obtain, customer information by making false or fraudulent statements to an officer, employee, agent, or customer of a financial institution. 66 In furtherance of these prohibitions, the GLBA directs the Commission and the other federal financial regulators to review their regulations and to revise them as necessary to ensure that financial institutions have policies, procedures and controls in place to prevent the unauthorized disclosure of “customer financial information” and to deter and detect the activity described in Section 521. 67 Applying both the safeguards and disposal rules to a consistent set of information also could reduce any burden that may have been created by the application of the safeguards and disposal rules to different information. 68 62 *See* 15 U.S.C. 6802(a), (b). “Nonpublic personal information” is generally defined in the GLBA and Regulation S-P as encompassing personally identifiable financial information, as well as any list, description, or other grouping of consumers (and publicly available information pertaining to them) derived using any personally identifiable financial information that is not publicly available, subject to certain exceptions. *See* 15 U.S.C. 6809(4); 17 CFR 248.3(t) and 248.3(u). *See supra* note 12 for a discussion of the notice and opt out provisions. 63 *See* 17 CFR 248.30; 15 U.S.C. 6801(b)(1). 64 17 CFR 248.30(b)(2). Section 628(a)(1) of the FCRA directed the Commission to adopt rules requiring the proper disposal of “consumer information, or any compilation of consumer information, derived from consumer reports for a business purpose.” 15 U.S.C. 1681w(a)(1). Regulation S-P uses the term “consumer report information” and defines it to mean a record in any form about an individual “that is a consumer report or is derived from a consumer report.” 17 CFR 248.30(b)(1)(ii). “Consumer report” has the same meaning as in Section 603(d) of the Fair Credit Reporting Act (15 U.S.C. 1681(d)). 17 CFR 248.30(b)(1)(i). 65 *See* Disposal Rule Adopting Release, *supra* note 15, at 69 FR 71323 n.13. 66 *See* 15 U.S.C. 6821(a), (b). 67 *See* 15 U.S.C. 6825. 68 *See* David Annecharico, Note, * Online Transactions: Squaring the Gramm-Leach-Bliley Act Privacy Provisions With the FTC Fair Information Practice Principles * , 6 N.C. Banking Inst. 637, 662 (2002), available at *http://www.unc.edu/ncbank/Articles%20and%20Notes%20PDFs/Volume%206/DavidAnnecharico%5Bpp637-664%5D.pdf* (“To require financial institutions to treat the security of consumer information on par with customer information may be cost effective and efficient. It could merely mean storing consumer information within the already mandated secure storage systems that are being used to store customer information.”). Accordingly, we propose to amend the safeguards and disposal rules so that both protect “personal information,” and to define that term to encompass any record containing either “nonpublic personal information” or “consumer report information.” 69 As noted above, each of these terms is defined in Regulation S-P. 70 The term “consumer report information” would continue to mean any record about an individual, whether in paper, electronic or other form, that is a consumer report or is derived from a consumer report, as well as a compilation of such records, but not including information that does not identify individuals, such as aggregate information or blind data. 71 The proposed amendments would leave the meaning of the term “consumer report” unchanged from the definition set forth in Section 603(d) of the FCRA. 72 Section 603(d) defines “consumer report” in general as encompassing communications of information by a consumer reporting agency bearing on a consumer's creditworthiness, credit standing, reputation or particular other factors used in connection with establishing the consumer's eligibility for credit or insurance, or for employment purposes or other authorized purposes, subject to certain exclusions. 73 69 Proposed paragraph (d)(8) of Section 30. 70 *See* 17 CFR 248.3(t)(1) (definition of “nonpublic personal information”); 17 CFR 248.30(b)(ii) (definition of “consumer report information”). 71 *See* proposed paragraph (c)(4) of Section 30 and current paragraph (b)(ii) of Section 30 (definition governing current disposal requirements). 72 *See* proposed paragraph (d)(3) of Section 30. 73 *See* 15 U.S.C. 1681a(d). In addition to nonpublic personal information and consumer report information, “personal information” also would include information identified with any consumer, or with any employee, investor, or securityholder who is a natural person, 74 in paper, electronic or other form, that is handled by the institution or maintained on the institution's behalf. 75 Thus, for example, the definition would include records of employee user names and passwords maintained by a brokerage firm, and records about securityholders maintained by a transfer agent. We believe safeguarding employee user names and passwords promotes information security because unauthorized access to this information could facilitate unauthorized access to a firm's network and its clients' personal information. 76 Safeguarding information about investors and securityholders, such as maintained by registered transfer agents, is necessary to protect investors who may, directly or indirectly, do business with the Commission's regulated entities even though they may not be “consumers” or “customers” of those entities as those terms are defined for purposes of Regulation S-P. 77 We also propose to make a conforming change to the definition of “personally identifiable financial information” by including within the definition information that is handled or maintained by a covered institution or on its behalf, and that is identified with any consumer, or with any employee, investor, or securityholder who is a natural person. 78 We preliminarily believe that this change would be appropriate in the public interest and for the protection of investors because it would help protect information identified with an investor who may not be a “consumer” or “customer” of a covered institution. 74 This element of the definition would exclude information identified only with persons other than natural persons, such as corporations. The GLBA limits the protections provided under subtitle A of the privacy provisions to “consumers,” who are *individuals* who obtain from a financial institution financial products or services to be used for personal, family or household purposes. 15 U.S.C. 6809(9). The FACT Act defines a “consumer” to mean an individual. 15 U.S.C. 1681a(c). 75 *See* proposed paragraph (d)(8) of Section 30. 76 *See supra* note 17 and accompanying text. 77 As discussed *supra* at note 7, Regulation S-P defines the terms “consumer” and “customer” at 17 CFR 248.3(g) and 248.3(j), respectively. 78 *See* proposed new paragraph (u)(1)(iv) of Section 3. The proposed amendments also would include technical, conforming changes to references to Section 30 in Sections 1(b) and 2(b) of Regulation S-P. To better protect investors” and securityholders' information from unauthorized disclosure, the proposed amendments would apply the safeguards and disposal rules to nonpublic personal information or consumer report information that is identified with any individual consumer, employee, investor or securityholder and handled or maintained by or on behalf of the institution. The proposal to include personal information and consumer report information about employees of covered institutions is intended to reduce the risk that a would-be identity thief could access investor information by impersonating an employee or employing “social engineering” techniques or bribery. Including consumer report information within the definition of “personal information” (to which the safeguards rule would apply) would be consistent with the congressional intent behind making consumer report information subject to the disposal requirements set forth in the FACT Act. 79 Furthermore, the proposed scope of protection appears to be consistent with the practices of many covered institutions that currently protect employee information, consumer report information, and nonpublic personal information about consumers and customers in the same manner. 80 79 The disposal rule was intended to reduce the risk of fraud or related crimes, including identity theft, by ensuring that records containing sensitive financial or personal information are appropriately redacted or destroyed before being discarded. *See* 108 Cong. Rec. S13,889 (Nov. 4, 2003) (statement of Sen. Nelson). 80 Based on our staff's informal discussions with industry representatives about Regulation S-P issues, as well as the estimated costs and benefits of the proposed amendments we believe that many covered institutions currently protect both kinds of information in the same way out of prudence and for reasons of operational efficiency. *See infra* section V.B. We invite comment on the proposed definition of “personal information.” • Should the safeguards rule extend to consumer report information that is not nonpublic personal information? • Should the disposal rule extend to nonpublic personal information that is not consumer report information? • To what extent do institutions currently take the same measures in disposing of consumer report information, customer records and information, nonpublic personal information about consumers and customers, and information other than consumer report information that is identified with employees, investors, or securityholders who are not consumers or customers? To the extent that measures are different, what is the basis for those differences? • Is the proposed definition of “personal information,” which includes all records containing either consumer report information or nonpublic personal information, broad enough to encompass the information that needs to be protected? If not, how should we expand the definition? Are there any aspects of the proposed definition that, in the context of the information security requirements discussed below, may be over-inclusive with regard to particular types of entities? If so, how should we tailor the definition? • The proposed definition of “personal information” encompasses information identified with any consumer, or with any employee, investor, or securityholder who is a natural person. Are there any other persons whose information should be protected under the safeguards rule, or should the safeguards rule cover only information identified with individuals who are customers of a financial institution? • Should the proposed definition of “personal information” be expanded to include information identified with non-natural persons, such as corporate clients? Commenters should explain their views. 2. Institutions Covered by the Safeguards Rule As discussed above, the safeguards rule currently applies to brokers, dealers, registered investment advisers, and investment companies. The disposal rule currently applies to those entities as well as to registered transfer agents. We propose to extend the safeguards rule to apply to registered transfer agents. 81 These institutions, like those currently subject to both the safeguards and disposal rules, may maintain personal information such as Social Security numbers, account numbers, passwords, account balances, and records of securities transactions and positions. Unauthorized access to or misuse of such information could result in substantial harm and inconvenience to the individuals identified with the information. The proposed amendments thus would require that covered institutions that may receive personal information in the course of effecting, processing or otherwise supporting securities transactions must protect that information by maintaining appropriate safeguards in addition to taking measures to properly dispose of the information. 82 Registered transfer agents may maintain sensitive personal information about investors, the unauthorized access to or use of which could cause investors substantial inconvenience or harm. Therefore, we preliminarily believe that extending the safeguards rule to registered transfer agents would be appropriate in the public interest and for the protection of investors. 83 81 The term “transfer agent” would be defined by proposed paragraph (d)(14) of Section 30 to have the same meaning as in Section 3(a)(25) of the Exchange Act (15 U.S.C. 78c(a)(25)). As discussed below, we also propose to extend the disposal rule to associated persons of broker-dealers, supervised persons of registered investment advisers, and associated persons of registered transfer agents. 82 The proposed definition of “personal information” would include information about individual investors maintained by registered transfer agents even though transfer agents typically do not have consumers or customers for purposes of Regulation S-P because their clients generally are not individuals, but are the companies in which investors, including individuals, hold shares. 83 Under Section 17A of the Exchange Act (15 U.S.C. 78q-1) the Commission has authority to prescribe rules and regulations for transfer agents as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of Title I of the Exchange Act. The proposed amendments also would limit the scope of broker-dealers covered by the safeguards rule to brokers or dealers other than those registered by notice with the Commission under Section 15(b)(11) of the Exchange Act. 84 Notice-registered broker-dealers must comply with the privacy rules, including rules requiring the safeguarding of customer records and information, adopted by the CFTC. 85 Excluding notice-registered broker-dealers from the scope of the Commission's safeguards rule would clarify that both sets of rules do not apply to notice-registered broker-dealers, and that the CFTC would have primary responsibility for oversight of those broker-dealers in this area. 84 Proposed paragraph (a)(1) of Section 30. *See* 15 U.S.C. 78 *o* (b)(11). The Commodity Futures Modernization Act of 2000 established a system of notice registration under which trading facilities and intermediaries that are already registered with either the Commission or the CFTC may register with the other agency on an expedited basis for the limited purpose of trading security futures products. Under the substituted compliance provision in Section 2(b) of Regulation S-P (17 CFR 248.2(b)), CFTC-regulated futures commission merchants and introducing brokers that are registered by notice with the Commission and in compliance with the financial privacy rules of the CFTC are deemed to be in compliance with Regulation S-P, except with respect to Regulation S-P's disposal rule (currently 17 CFR 248.30(b)). Notice-registered broker-dealers are already excluded from the scope of the disposal rule. 85 *See* 17 CFR 160.30. We seek comment on the proposed scope of the safeguards rule. • Should registered transfer agents be subject to the safeguards rule? To what extent are registered transfer agents expected to possess, or lack, the type of information that could be used to commit identity theft or otherwise cause individuals substantial harm or inconvenience? 86 Are there special issues that registered transfer agents might have in implementing or meeting the requirements of the safeguards rule? 86 Such information could include address and account information used to disseminate shareholder communications and dividend and interest payments, as well as information collected pursuant to Rule 17Ad-17 under the Exchange Act (17 CFR 240.17Ad-17), which requires transfer agents registered with the Commission to use taxpayer identification numbers or names to search databases for addresses of lost securityholders. • Should the Commission propose to extend the safeguards and disposal rules to self-regulatory organizations or other types of institutions in the securities industry? If so, which ones? • Should notice-registered broker-dealers be excluded from the scope of the proposed amended safeguards rule? If not, why not? 3. Persons Covered by the Disposal Rule As noted above, the disposal rule currently applies to broker-dealers, investment companies, registered investment advisers and registered transfer agents. We propose to extend the disposal rule to apply to natural persons who are associated persons of a broker or dealer, supervised persons of a registered investment adviser, and associated persons of a registered transfer agent. 87 As noted above, we have become concerned that some of these persons, who may work in branches far from the registered entity's main office, may not dispose of sensitive personal financial information consistent with the registered entity's disposal policies. The proposal is intended to make persons associated with a covered institution directly responsible for properly disposing of personal information consistent with the institution's policies. 87 *See* proposed paragraph (b)(1) of Section 30. The term “associated person of a broker or dealer” would be defined by proposed paragraph (d)(1) of Section 30 to have the same meaning as in Section 3(a)(18) of the Exchange Act (15 U.S.C. 78c(a)(18)). The term “supervised person of an investment adviser” would be defined by proposed paragraph (d)(13) of Section 30 to have the same meaning as in Section 202(a)(25) of the Investment Advisers Act of (15 U.S.C. 80b-2(a)(25)). We are proposing to include “supervised” persons of an investment adviser, rather than “associated” persons in order to include all employees, including clerical employees, of an investment adviser who may be responsible for disposing of personal information. *See* 15 U.S.C. 80b-2(a)(17) (defining term “person associated with an investment adviser” not to include associated persons whose functions are clerical or ministerial). This approach is intended to cover the same range of employees as investment advisers, broker-dealers, and registered transfer agents. The term “associated person of a transfer agent” would be defined by proposed paragraph (d)(2) of Section 30 to have the same meaning as in Section 3(a)(49) of the Exchange Act (15 U.S.C. 78c(a)(49). An additional proposed extension to the scope of the disposal rule is discussed below. *See infra* section II.B. • We request comment on the proposed extension of the scope of the disposal rule to apply to natural persons who are associated with broker-dealers, supervised persons of registered investment advisers, or who are associated persons of registered transfer agents. • Are there alternative ways of helping to ensure that these persons would follow the covered institution's disposal policies and properly dispose of personal information? C. Records of Compliance We further propose to amend Regulation S-P to require institutions subject to the safeguards and disposal rules to make and preserve written records of their safeguards and disposal policies and procedures. We also propose to require that institutions document that they have complied with the elements required to develop, maintain and implement these policies and procedures for protecting and disposing of personal information, including procedures relating to incidents of unauthorized access to or misuse of personal information. These records would help institutions assess their policies and procedures internally, and help examiners to monitor compliance with the requirements of the amended rules. The periods of time for which the records would have to be preserved would vary by institution, because the requirements would be consistent with existing recordkeeping rules, beginning with when the records were made, and, for records of written policies and procedures, after any change in the policies or procedures they document. 88 Broker-dealers would have to preserve the records for a period of not less than three years, the first two years in an easily accessible place. Registered transfer agents would have to preserve the records for a period of not less than two years, the first year in an easily accessible place. Investment companies would have to preserve the records for a period not less than six years, the first two years in an easily accessible place. Registered investment advisers would have to preserve the records for five years, the first two years in an appropriate office of the investment adviser. We believe that these proposed recordkeeping provisions, while varying among covered institutions, would all result in the maintenance of the proposed records for sufficiently long periods of time and in locations in which they would be useful to examiners. Moreover, we do not believe that shorter or longer maintenance periods would be warranted by any difference between the proposed records and other records that covered institutions currently must maintain for these lengths of time. We also believe that conforming the proposed retention periods to existing requirements would allow covered institutions to minimize their compliance costs by integrating the proposed requirements into their existing recordkeeping systems. 89 88 *See* proposed paragraph
(c)of Section 30. 89 *See* 17 CFR 240.17a-4(b); 240.17Ad-7(b); 270.31a-2(a)(4)-(6); 275.204-2(e)(1). We request comment on the proposed requirements for making and retaining records. • Are the proposed periods of time for preserving the records appropriate, or should certain records be preserved for different periods of time? • Would the costs associated with preserving records for periods of time consistent with covered institutions' other recordkeeping requirements be less than they would be if all institutions were required to keep these records for the same period of time? D. Exception for Limited Information Disclosure When Personnel Leave Their Firms Finally, we propose to amend Regulation S-P to add a new exception from the notice and opt out requirements to permit limited disclosures of investor information when a registered representative of a broker-dealer or a supervised person of a registered investment adviser moves from one brokerage or advisory firm to another. The proposed exception is intended to allow firms with departing representatives to share limited customer information with the representatives' new firms that could be used to contact clients and offer them a choice about whether to follow a representative to the new firm. At many firms, representatives develop close professional and personal relationships with investors over time. Representatives at such firms likely remember the basic contact information for their clients or have recorded it in their own personal records. Some firms discourage departing representatives from soliciting clients to move to another firm, while others do not. At any firm, departing representatives may have a strong incentive to transfer as much customer information as possible to their new firms, and it has been brought to our attention that, at some firms, information may have been transferred without adequate supervision, in contradiction of privacy notices provided to customers, or potentially in violation of Regulation S-P. 90 90 *See, e.g.* , *In re NEXT Financial Group, Inc.* , *supra* note 16. The proposed exception is designed to provide an orderly framework under which firms with departing representatives could share certain limited customer contact information and could supervise the information transfer. 91 The proposed exception would permit one firm to disclose to another only the following information: the customer's name, a general description of the type of account and products held by the customer, and contact information, including address, telephone number and e-mail information. 92 We propose to include this particular information as it would be useful for a representative seeking to maintain contact with investors, but appears unlikely to put an investor at serious risk of identity theft. It also is the type of information an investor would expect a representative to remember. Broker-dealers and registered investment advisers seeking to rely on the exception would have to require their departing representatives to provide to them, not later than the representative's separation from employment, a written record of the information that would be disclosed pursuant to the exception, and broker-dealers and registered investment advisers would be required to preserve such records consistent with the proposed recordkeeping provisions of Section 30. 93 This condition is intended to help ensure that firms relying on the exception are appropriately accounting for the information they are disclosing in connection with departures of their representatives. 94 91 In 2004, certain large broker-dealers entered into a protocol under which signatories agreed not to sue one another for recruiting one another's registered representatives, if the representatives take only limited client information to another participating firm. The initial signatories, Citigroup Global Markets/Smith Barney, Merrill Lynch, and UBS Financial Services, were joined more recently by Raymond James, Wachovia Securities and others. We understand that, under the protocol, the information that a departing representative may take to another firm is limited to each client's name, address, a general description of the type of account and products held by the client, and the client's phone number and e-mail address. This information may be used at the representative's new firm only by the representative, and only for the purpose of soliciting the representative's former clients. We further understand that there may be some confusion in the securities industry regarding what information may be disclosed to a departing representative's new firm consistent with the limitations in Regulation S-P, and that at times these limitations may cause inconvenience to investors. NASD (now consolidated into FINRA) issued guidance to its member firms regarding the permissible and impermissible use of “negative response letters” for bulk transfers of customer accounts and changes in the broker-dealer of record on certain types of accounts ( *see* NASD NtM 04-72 (Oct. 2004); NtM 02-57 (Sept. 2002)). More recently, FINRA issued guidance relating to Regulation S-P in the context special considerations firms should use to supervise recommendations of newly associated registered representatives to replace mutual funds and variable products). *See* FINRA, Regulatory Notice 07-36, available at *http://www.finra.org/web/groups/rules_regs/documents/notice_to_members/p036445.pdf* . However, our staff reports that scenarios involving representatives moving from one firm to another continue to create uncertainty regarding firms' obligations under Regulation S-P. 92 *See* proposed paragraph (a)(8)(i) of Section 15. 93 *See* proposed paragraph (a)(8)(iii) of Section 15 and proposed paragraph
(c)of Section 30. For purposes of the proposed exception, the term “representative” would be defined to mean a natural person associated with a broker or dealer registered with the Commission, who is registered or approved in compliance with 17 CFR 240.15b7- 1, or a supervised person of an investment adviser as defined in Section 202(a)(25) of the Investment Advisers Act. *See* proposed paragraph (a)(8)(iv) of Section 15. 94 Most firms seeking to rely on the proposed exception would not need to revise their GLBA privacy notices because they already state in the notices that their disclosures of information not specifically described include disclosures permitted by law, which would include disclosures made pursuant to the proposed exception and the other exceptions provided in Section 15 of Regulation S-P. The exception would be subject to conditions that are designed to limit the potential that the information would result in identity theft or other abuses. The shared information could not include any customer's account number, Social Security number, or securities positions. 95 A representative would not need this type of information to contact investors, although it would be useful to an identity thief, and an investor probably would not expect a representative to remember it. In addition, a representative could solicit only an institution's customers that were the representative's clients. This condition recognizes that an investor might expect to be contacted by a representative with whom the investor has done business before, but not by another person at the representative's new firm. 96 95 *See* proposed paragraph (a)(8)(ii) of Section 15. 96 *See* proposed paragraph (a)(8)(i) of Section 15 (permitting a representative to solicit customers to whom the representative personally provided a financial product or service on behalf of the institution). As noted above, the proposed exception is designed to facilitate the transfer of client contact information that would help broker-dealers and registered investment advisers offer clients the choice of following a departing representative to a new firm. At firms that choose to rely on it, the proposed exception also should reduce potential incentives some representatives may have to take information with them secretly when they leave. By specifically limiting the types of information that could be disclosed to the representative's new firm, the proposed amendments are designed to help firms safeguard more sensitive client information. This limitation also would clarify that a firm may not require or expect a representative from another firm to bring more information than necessary for the representative to solicit former clients. Because the proposed exception is designed to promote investor choice, provide legal certainty, and reduce potential incentives for improper disclosures, we preliminarily believe that it would be necessary or appropriate in the public interest, and is consistent with the protection of investors. The proposed exception would not limit the disclosure of additional information to a new firm pursuant to a customer's consent or direction. 97 It also would not preclude the disclosure of additional information required in connection with the transfer of a customer's account. 98 Depending on its business organization, its policies regarding departing representatives and the circumstances of a representative's departure, a firm could choose to rely on existing exceptions rather than the proposed new exception. 99 The proposed exception is designed to allow firms that choose to share limited contact information to do so. The proposed exception would not, however, affect firm policies that prohibit the transfer of any customer information other than at the customer's specific direction. 97 For example, if an investor chooses to move his or her business to the representative's new firm, he or she may consent to having the original firm disclose additional information about the customer's account to the representative's new firm without the firm first having to provide the customer with an opt out. *See* 17 CFR 248.15(a)(1). 98 If an investor requests or authorizes the transfer of his or her account from the representative's old firm to the representative's new firm, the old firm may disclose additional information as necessary to effect the account transfer. *See* 17 CFR 248.14(a)(1) and 248.14(b)(2)(vi)(B). The exception also would not preclude the disclosure of additional information about the investor if the firm has provided the investor with a privacy notice describing the disclosure and given the investor a reasonable opportunity to opt out of the disclosure, and the customer has not opted out. *See* 17 CFR 248.10. Thus, covered institutions that wish to disclose an investor's nonpublic personal information to a departing representative's new firm without relying on the proposed new exception or without first obtaining consent from the investor to the disclosure or to an account transfer could revise their privacy notices to describe disclosures the firm would make in the context of a representative's move to another broker-dealer or registered investment adviser. 99 *See* 17 CFR 248.14, 248.15. We have chosen to propose this approach as opposed to an alternative approach that would require all firms to include specific notice and opportunity to opt out of this information sharing in their initial and annual privacy notices. Under this alternative, a broker-dealer or registered investment adviser's privacy notice would have to provide specific disclosure regarding the circumstances under which the broker-dealer or adviser would share customer information with another firm when a registered representative or supervised person leaves. We have chosen this approach because, as indicated earlier, many representatives develop close professional and personal relationships with investors. They are likely to remember basic contact information for their clients or have recorded it in their own personal records, and investors would expect representatives to have this information. This type of limited contact information is unlikely to put investors at serious risk of identity theft. Also, we believe that a description of disclosures to a departing representative's new firm would be difficult to distinguish from the description of disclosures made for the purpose of third-party marketing and would further complicate already complex privacy notices. • Commenters are invited to discuss the proposed new exception. Would it permit the transfer of contact information so as to promote investor choice and convenience? Would it foreclose the transfer of particularly sensitive information that, if misused, could lead to identity theft? Should the transfer of customer contact information be conditioned on the broker-dealer or registered investment adviser receiving the information certifying to the sharing institution that it complies with the safeguards and disposal rules? • We also invite commenters to share their views on the likely effect of the proposed new exception on competition in recruiting broker-dealer and investment adviser representatives. Are there alternative approaches that would both protect investor information and not unduly restrict the transfer of representatives from one firm to another? • We seek comment on potential alternative approaches, including requiring specific disclosure. Are investors, particularly new clients to a firm, likely to understand disclosures about information that would be given to a departing representative's new firm in initial or annual privacy notices? 100 Should the availability of the proposed exemption be conditioned on providing investors with specific disclosure regarding whether a covered institution would disclose personal information in connection with a representative's departure? 100 We expect that if the Banking Agencies, the FTC and the Commission were to adopt the proposed model privacy form, *see* Interagency Model Privacy Form Proposal, *supra* note 12, the description of the disclosure to a nonaffiliated firm could be included on page 2 of the proposed form in the section defining nonaffiliates. • The proposed exception would permit broker-dealers and registered investment advisers to transfer limited information to other broker-dealers and registered investment advisers without first providing notice and opt out. Should we make the proposed exception available for information transferred to other types of financial institutions where a departing representative may go? For example, should we permit broker-dealers and registered investment advisers to rely on the exception to share information with investment advisers that are not registered with the Commission? • Commenters are invited to express their views on the proposed exemption's condition that a departing representative of a covered institution relying on this exemption could solicit only the institution's customers that were the representative's clients. III. General Request for Comments We request comment on all aspects of the proposed amendments to Regulation S-P. We particularly urge commenters to suggest other provisions or changes that could enhance the ways in which securities industry participants protect personal information. We encourage commenters to provide empirical data, if available, to support their views. IV. Paperwork Reduction Act Certain provisions of the proposed amendments contain “collections of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”). 101 The Commission is submitting these amendments to the Office of Management and Budget (“OMB”) for review and approval in accordance with the PRA. 102 The title for the collections of information is “Information security programs for personal information; records of compliance.” The safeguards and disposal rules we propose to amend contain currently approved collections of information under OMB Control No. 3235-0610, the title of which is, “Rule 248.30, Procedures to safeguard customer records and information; disposal of consumer report information.” 103 The Commission is proposing to amend Regulation S-P's safeguards and disposal rules, 17 CFR 248.30(a) and (b), pursuant to Sections 501, 504, 505, and 504 of the GLBA, 104 Sections 17, 17A, 23, and 36 of the Exchange Act, 105 Sections 31(a) and 38 of the Investment Company Act, 106 and Sections 204 and 211 of the Investment Advisers Act. 107 Regulation S-P sets forth the Commission's safeguards rule for institutions covered by the regulation. Among other things, the safeguards rule requires covered institutions to adopt administrative, technical, and physical information safeguards to protect customer records and information. Regulation S-P also contains the Commission's disposal rule, which requires institutions to properly dispose of consumer report information possessed for a business purpose by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal. 101 44 U.S.C. 3501-3520. 102 44 U.S.C. 3507(d) and 5 CFR 1320.11. 103 The paperwork burden imposed by Regulation S-P's notice and opt-out requirements, 17 CFR 248.1 to 248.18, is currently approved under a separate OMB control number, OMB Control No. 3235-0537. The proposed amendments would not affect this collection of information. 104 15 U.S.C. 6801, 6804, 6805 and 6825. 105 15 U.S.C. 78q, 78q-1, 78w, and 78mm. 106 15 U.S.C. 80a-30(a), 80a-37. 107 15 U.S.C. 80b-4, 80b-11. The proposed amendments are designed to ensure that covered institutions maintain a reasonable information security program that includes safeguarding policies and procedures that are more specific than those currently required, including policies and procedures for responding to data security breach incidents, for notifying individuals for whom the incidents pose a risk of identity theft, and for reporting certain incidents to the Commission (or to a broker-dealer's designated examining authority) on proposed Form SP-30. The amendments also would broaden the scope of information and the types of institutions and persons covered by the safeguards and disposal rules. Finally, the amendments would create a new exception from Regulation S-P's notice and opt-out requirements for disclosures of limited information in connection with the departure of a representative of a broker-dealer or registered investment adviser. Firms choosing to rely on the exception would be required to keep records of the information disclosed pursuant to it. The hours and costs associated with these collections of information would consist of reviewing the proposed amendments, collecting and searching for existing policies and procedures, conducting a risk assessment, developing and recording information safeguards appropriate to address risks, training personnel, and adjusting written safeguards on an ongoing basis. Institutions would also have to respond appropriately to incidents of data security breach as may occur on an ongoing basis. If misuse of information has occurred or is reasonably possible, this would include notifying affected individuals. If there is a significant risk that an individual identified with the information might suffer substantial harm or inconvenience, or any unauthorized person has intentionally obtained access to or used sensitive personal information, this would also include notifying the Commission or an appropriate designated examining authority as soon as possible on proposed Form SP-30. Certain of these collections of information also would require disclosure, reporting, and recordkeeping burdens, as analyzed below. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless a currently valid OMB control number is displayed. Responses to these collections of information would not be kept confidential. 108 The collections of information would be mandatory, and would have to be maintained by broker-dealers for not less than three years, the first two years in an easily accessible place, by registered transfer agents for a period of not less than two years, the first year in an easily accessible place, by investment companies for a period not less than six years, the first two years in an easily accessible place, and registered investment advisers would have to preserve the records for five years, the first two years in an appropriate office of the investment adviser. 108 Information submitted to the Commission on proposed Form SP-30 would be kept confidential to the extent permitted by law. *See supra* note 55. Information Security and Security Breach Response Requirements The proposed amendments contain collections of information requirements related to the more specific standards we are proposing for safeguarding personal information, including standards for responding to data security breaches. We believe these proposed collections of information are necessary to help prevent and address security breaches and designed to ensure that covered institutions maintain a reasonable information security program pursuant to the statutory requirements. Covered institutions would have to document in writing steps they would be required to take to develop, implement, and maintain a comprehensive information security program. We estimate that there would be 12,432 respondents to this information collection. 109 Of these covered institutions, we estimate that 5,862 are smaller institutions and 6,570 are larger institutions. 110 109 This estimate includes 6,016 broker-dealers, 4,733 investment companies representing portions of 813 fund complexes, 77 business development companies, 9,860 registered investment advisers, and 501 registered transfer agents. As discussed in more detail in the cost-benefit analysis below, the staff estimates that 56 percent of these 17,267 institutions, or 9,670 institutions, have one or more affiliates. The staff estimates, for purposes of this analysis, that each of the affiliated institutions has one corporate affiliate. The staff estimates that these affiliated institutions are likely to bear these paperwork burdens on an organization-wide basis, rather than being incurred by each institution. Based on these estimates, the staff estimates there would be 12,432 respondents to this information collection. (17,267 − (9,670 ÷ 2) = 12,432) These estimates are discussed in more detail in the cost-benefit analysis, *see infra* note 149 and accompanying text. 110 *See infra* note 154 and accompanying text. Based on limited inquiries of covered institutions, the staff estimates that the amount of time smaller institutions would devote to initial compliance with the proposed amendments would range from 2 to 80 hours with a midpoint of 41 hours. 111 This estimate reflects the following burden hours: 1 hour for the board of directors to designate an information security program coordinator; 1 hour for the program coordinator to review the amendments; 4 hours to assess risks and review procedures; 10 hours to review, revise and implement new safeguards (including any data breach notification procedures); 8 hours to test the effectiveness of the safeguards controls and procedures; 7 hours to train staff; and 10 hours to review service providers' policies and procedures and revise contracts as necessary to require them to maintain appropriate safeguards. The staff estimates that initially it would cost smaller institutions approximately $18,560 to comply with the proposed amendments. 112 Amortized over three years, the estimated annual hourly burden would be 14 hours at a cost of approximately $6,187. 111 The staff estimate uses the midpoint of the range of hours, although the average number of burden hours could be higher or lower. Our estimates are based on staff contacts with several institutions regarding their current safeguarding and disposal policies and procedures as well as the potential costs of the proposed amendments. Because the staff was able to discuss these issues with only a small number of very large institutions, and our estimates in this analysis are based largely on this information, our estimates may be much higher or lower than the range of actual current costs related to compliance with Regulation S-P and the range of potential costs associated with the proposed amendments. 112 This estimate is based on a cost of $2,000 for one hour of the board of directors' time (at $2,000/hour) and $16,560 for 40 hours of a program coordinators' time (at $414/hour). Staff believes that the program coordinator would be a senior executive of the institution, such as a chief compliance officer of an investment adviser. For purposes of this PRA analysis, the staff is using salaries for New York-based employees which tend to be higher than the salaries for comparable positions located outside of New York. This conservative approach is intended to capture unforeseen costs and to account for the possibility that a substantial portion of the work would be undertaken in New York. The salary information is derived from data compiled by the Securities Industry and Financial Markets Association. The Commission staff has modified this information to account for an 1,800-hour work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead. *See* Securities Industry and Financial Markets Association, *Report on Management and Professional Earnings in the Securities Industry* (2007); Securities Industry and Financial Markets Association, *Report on Office Salaries in the Securities Industry* (“SIFMA Earnings Reports”). The staff estimates that the amount of time larger institutions would devote to initial compliance with the proposed amendments would range from 40 hours to 400 hours with a midpoint of 220 hours. 113 This estimate reflects the following burden hours: 2 hours for the board of directors to designate an information security program coordinator; 2 hours for the program coordinator to review the amendments; 42 hours to assess risks and review procedures; 60 hours to review, revise and implement new safeguards (including any data breach notification procedures); 60 hours to test the effectiveness of the safeguards controls and procedures; 34 hours to train staff; and 20 hours to review service providers policies and procedures and revise contracts as necessary to require them to maintain appropriate safeguards. The staff estimates that larger institutions would spend approximately $172,732 to comply with the proposed amendments initially. 114 Amortized over three years, the estimated annual hourly burden would be 73 hours at a cost of approximately $57,577. 113 The staff estimate uses the midpoint of the range of hours, although the average number of burden hours could be higher or lower. 114 This estimate is based on a cost of $4,000 for 2 hours of board of directors' time (at $2,000/hour) and $168,732 for 218 hours of a group of compliance professionals' time (at $774/hour). The staff believes that this group of compliance professionals would include the program coordinator at a rate of $414 per hour, an in-house attorney at a rate of $295 per hour, and an administrative assistant at a rate of $65 per hour. *See* SIFMA Earnings Reports, *supra* note 112. In total, we estimate that this group of compliance professionals would cost the larger institution $758 per hour. $414 + $295 + $65 = $774. On an annual, ongoing basis the staff estimates that the amount of time smaller institutions would devote to ongoing compliance with the safeguards and disposal rules, as they are proposed to be amended, would range from 12 hours to 40 hours per year with a midpoint of 26 hours per year. This estimate reflects the following burden hour estimates: 5 hours to regularly test or monitor the safeguards' key controls, systems, and procedures; 3 hours to augment staff training; 3 hours to provide continued oversight of service providers; 3 hours to evaluate and adjust safeguards; 10 hours to respond appropriately to potential incidents of data security breach, including investigating the breach and, as necessary, notifying affected individuals; and 2 hours to notify the Commission or a designated examining authority as soon as possible on proposed Form SP-30, in the event there is a significant risk that an individual identified with the information might suffer substantial harm or inconvenience or an unauthorized person has intentionally obtained access to or used sensitive personal information. 115 We believe that most institutions investigate data security breaches as a matter of good business practice to protect their business operations and the sensitive information they have about employees and clients. Nevertheless, we have estimated additional burden hours because the proposed rule specifies certain elements of the investigation and the notice to affected individuals. We also believe that an institution would have gathered all the information that would have to be disclosed in Form SP-30 in the course of these investigations of data security breaches. Thus, staff estimates for the Form SP-30 collection of information burden reflect only the time it would take to draft the information on the form. Staff estimates that smaller institutions would spend an additional $10,764 per institution per year in connection with these burdens. 116 115 We estimate that each covered institution that has developed and adopted and is maintaining safeguarding policies and procedures will experience some form of breach of data security each year. *See, e.g.* , Deloitte & Touche LLP and Ponemon Institute LLC, Enterprise@Risk: 2007 Privacy & Data Protection Survey (Dec. 2007), *http://www.deloitte.com/dtt/cda/doc/content/us_risk_s%26P_2007%20Privacy10Dec2007final.pdf* (last visited Dec. 19, 2007) (85% of surveyed privacy and security professionals experienced a reportable breach within the past 12 months). These data security breaches may range from minor breaches (such as an individual who accidentally sees data that he or she does not have authority to view) to more serious breaches. Accordingly, we have estimated that each of these institutions would experience a data security breach that would require notice to the Commission (or a designated examining authority) each year. We understand that the nature of security breaches will vary widely within and among institutions, and that this estimate may be much higher than the actual reporting that would be required under the proposed rule. 116 This estimate is based on the following calculation: 26 hours per smaller institution per year × $414 per hour = $10,764. The staff also estimates that the amount of time larger institutions would devote to ongoing compliance with the proposed amendments would range from 32 hours to 100 hours with a midpoint of 66 hours per year. This estimate reflects the following burden hour estimates: 12 hours to regularly test or monitor the safeguards' key controls, systems, and procedures; 9 hours to augment staff training; 9 hours to provide continued oversight of service providers; 10 hours to evaluate and adjust safeguards; 20 hours to respond appropriately to potential incidents of data security breach, including investigating the breach and, as necessary, notifying affected individuals; and 6 hours to notify the Commission or a designated examining authority as soon as possible on proposed Form SP-30, in the event there is a significant risk that an individual identified with the information might suffer substantial harm or inconvenience or an unauthorized person has intentionally obtained access to or used sensitive personal information. 117 Staff believes that larger institutions are likely to have more complex business operations and data systems and may experience more sophisticated security attacks than smaller institutions. As a result, staff anticipates that larger institutions are more likely to conduct more complicated investigations that require more detailed explanations on proposed Form SP-30. Staff estimates therefore that larger institutions would take more time to perform investigations and to complete the questions on proposed Form SP-30. 118 The staff estimates that larger institutions would spend approximately an additional $51,084 per institution per year. 119 117 *See supra* note 115. 118 We recognize that the time it takes to perform an investigation of a data security breach and to complete Form SP-30 may vary significantly depending on the nature, size and complexity of an institution's business operations as well as the nature and size of the security breach. Accordingly, the actual time it may take a particular institution to investigate the breach and complete Form SP-30 may vary significantly from staff estimates. 119 This estimate is based on the following calculation: 66 hours × $774 = $51,084. Given the estimates set forth above, we estimate that the weighted average initial burden for each respondent would be approximately 136 hours 120 and $100,036. 121 We also estimate that the weighted average ongoing burden for each respondent would be approximately 47 hours 122 and $32,072. 123 120 This estimate is based on the following calculation: ((5,862 smaller institutions × 41 hours) + (6,570 larger institutions × 220 hours) ÷ 12,432 total institutions = 135.60 hours. 121 This estimate is based on the following calculation: ((5,862 smaller institutions × $18,560) + (6,570 larger institutions × $172,732)) ÷ 12,432 total institutions = $100,036.03. 122 This estimate is based on the following calculation: ((5,862 smaller institutions × 26 hours) + (6,570 larger institutions × 66 hours)) ÷ 12,432 total institutions = 47.14 hours. 123 This estimate is based on the following calculation: ((5,862 smaller institutions × $10,764) + (6,570 larger institutions × $51,084)) ÷ 12,432 total institutions = $32,072.12. Scope of the Safeguards and Disposal Rules The amendments also would broaden the scope of information and of the entities covered by the safeguards and disposal rules. These amendments do not contain collections of information beyond those related to the information security and security breach response requirements, analyzed above. Records of Compliance The proposed amendments would require that written records required under the disposal and safeguards rules be maintained and preserved by broker-dealers for not less than three years, the first two years in an easily accessible place, by registered transfer agents for a period of not less than two years, the first year in an easily accessible place, by investment companies for a period not less than six years, the first two years in an easily accessible place, and registered investment advisers would have to preserve the records for five years, the first two years in an appropriate office of the investment adviser. Covered institutions are already required pursuant to other Commission rules to maintain and preserve similar records in the same manner, and we do not believe that the currently approved collections of information for these rules would change based on the proposed amendments. 124 124 *See* 17 CFR 240.17a-4(b); 240.17Ad-7(b); 270.31a-2(a)(4)-(6); 275.204-2(e)(1). Exception for Limited Information Disclosure When Personnel Leave Their Firms The proposed amendments would create a new exception from Regulation S-P's notice and opt out requirements that would permit limited disclosures of investor information when a registered representative of a broker-dealer or supervised person of a registered investment adviser moves from one brokerage or advisory firm to another. This exception would require that the departing representative provide the broker, dealer, or registered investment adviser he or she is leaving with a written record of the permissible information that would be disclosed under this exception. Broker-dealers and registered investment advisers also would be required to retain a record of that information consistent with existing record retention requirements. All broker-dealers and registered investment advisers maintain records of their customers and clients, including relevant contact information and type of account. Thus, we estimate that allowing a departing representative to make a copy of this information and requiring the broker-dealer or registered investment adviser to retain a record of that information would not result in an additional measurable burden to the firm. We request comment on whether these estimates are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments in order to:
(i)Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility;
(ii)evaluate the accuracy of the Commission's estimate of the burden of the proposed collections of information;
(iii)determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and
(iv)minimize the burden of the collections of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. Members of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing these burden hours. Persons wishing to submit comments on the collection of information requirements of the proposed amendments should direct them to the Office of Management and Budget, Attention Desk Officer of the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Room 10102, New Executive Office Building, Washington, DC 20523, and should send a copy to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090 with reference to File No. S7-06-08. OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication of this release; therefore a comment to OMB is best assured of having its full effect if OMB receives it within 30 days after the publication of this release. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-06-08, and be submitted to the Securities and Exchange Commission, Public Reference Room, 100 F Street, NE., Washington, DC 20549. V. Cost-Benefit Analysis The Commission is sensitive to the costs and benefits imposed by its rules. We have identified certain costs and benefits of the proposed amendments and request comment on all aspects of this cost-benefit analysis, including identification and assessment of any costs and benefits not discussed in this analysis. We seek comment and data on the value of the benefits identified. We also welcome comments on the accuracy of the cost estimates in each section of this analysis, and request that commenters provide data so we can improve these cost estimates. In addition, we seek estimates and views regarding these costs and benefits for particular covered institutions, including registered transfer agents, as well as any other costs or benefits that may result from the adoption of these proposed amendments. As discussed above, the proposed rule amendments are designed to enhance covered institutions' information security policies and procedures as well as their ability to protect personal information. Under Regulation S-P, covered institutions have been required to safeguard customer records and information since 2001 and to dispose properly of consumer report information since 2005. The proposed amendments would modify Regulation S-P's current safeguards and disposal rules to:
(i)Require more specific standards under the safeguards rule, including standards that would apply to data security breach incidents;
(ii)broaden the scope of information and the types of institutions and persons covered by the rules; and
(iii)require covered institutions to maintain written records of their policies and procedures and their compliance with those policies and procedures. The proposed amendments also would create a new exception from Regulation S-P's notice and opt-out requirements that would not unduly restrict the transfer of representatives from one broker-dealer or registered investment adviser to another while protecting customer information. A. Costs and Benefits of More Specific Information Security and Security Breach Standards As noted, since 2001 broker-dealers, investment companies, and registered investment advisers have been required to adopt policies and procedures reasonably designed to insure the security and confidentiality of customer records and information, protect against anticipated threats or hazards, and protect against unauthorized access to or use of customer records and information. 125 The proposed rule amendments would require more specific standards for safeguarding personal information, including standards for responding to data security breaches. The amendments would require covered institutions to develop, implement, and maintain a comprehensive “information security program” for protecting personal information and for responding to unauthorized access to or use of personal information that would have to be appropriate to the institution's size and complexity, the nature and scope of its activities, and the sensitivity of the personal information involved. The information security program would have to include seven safeguarding elements, as described above in section II.A. Our proposed amendments also would specifically require that institutions' information security programs include procedures for responding to incidents of unauthorized access to or use of personal information. We believe that these proposed amendments would be consistent with safeguarding guidance and rules issued by the Banking Agencies and the FTC. 126 125 *See* 15 U.S.C. 6801; 17 CFR 248.30(a). The Commission also required that safeguarding policies and procedures be in writing by July 1, 2005. *See* Disposal Rule Adopting Release, *supra* note 15. 126 *See supra* note 23 and accompanying text. 1. Benefits of More Specific Information Security and Security Breach Standards We anticipate that the proposed amendments would benefit covered institutions and investors by providing specific standards for policies and procedures to safeguard investor information, boosting investor confidence and mitigating losses due to security breach incidents, helping to ensure that information security programs are actively managed and regularly updated, and reducing the compliance burden for institutions in the event of a data security breach incident. One benefit of the proposed information security and security breach standards would be to provide firms in the securities industry with detailed standards for the policies and procedures that a well-designed information security program should include. As already noted, a significant increase in reported information security breaches involving covered institutions, including increasingly sophisticated identity theft attacks directed at the securities industry, have altered the risk environment and brought to our attention the vulnerability of certain of our institutions' information security policies and procedures. 127 We are concerned that some Commission-regulated institutions may not regularly reevaluate and update their safeguarding programs to deal with these increasingly sophisticated methods of attack. As a result, our staff has devoted increased attention to this area. 127 *See supra* notes 16-19 and accompanying text. The current rule's reasonable design standard has permitted institutions flexibility to implement safeguarding policies and procedures tailored to their own privacy policies and practices and their varying business operations. While many institutions have appropriate safeguards in place, some institutions, including some smaller institutions, may have had difficulty keeping up with the changes in the threat environment. Setting out a more specific framework for institutions' continuing obligation to protect customer information, may ease institutions' burden in interpreting our expectations of safeguarding policies and procedures that are “reasonably designed,” while retaining much of the current rule's flexibility. We believe the proposed amendments would be consistent with the Commission's initial statutory mandate under the GLBA to adopt, in 2000, final financial privacy regulations that are consistent and comparable with those adopted by other federal financial regulators. 128 As noted above, after our adoption of Regulation S-P's safeguards rule, the FTC and the Banking Agencies issued regulations with more detailed standards applicable to the institutions they regulate. 129 The Banking Agencies also issued guidance for their institutions on responding to incidents of unauthorized access to or use of customer information. 130 Our proposed amendments include safeguarding elements consistent with the regulatory provisions of these other agencies that Commission-regulated institutions would have to address in their safeguarding policies and procedures. 131 128 *See* Section 504(a) of the GLBA (15 U.S.C. 6804(a)). 129 *See supra* note 23 and accompanying text. 130 *Id.* 131 When the FTC adopted its safeguards rule, it stated that an entity that demonstrated compliance with the Banking Agencies' or NCUA's safeguarding standards also would satisfy the FTC rule. The FTC stated, however, that it would not automatically recognize an institution's compliance with other safeguards rules (including Regulation S-P) as satisfying the FTC Safeguards Rule. The FTC stated that it made this decision because “such other rules and law do not necessarily provide comparable protection in terms of the safeguards mandated, data covered, and range of circumstances to which protection apply.” *See Standards for Safeguarding Customer Information* , 67 FR 36484 (May 23, 2003), at text accompanying and following nn.28-33. Compliance with other Regulation S-P provisions, however, currently satisfies other FTC privacy requirements. Thus, we expect that making the safeguarding provisions of Regulation S-P comparable to the FTC's requirements would benefit institutions by, for example, permitting state-registered investment advisers to satisfy the FTC standards by complying with the Commission's safeguards rule, which was drafted to address investment advisory business models. Covered institutions would benefit from having specific standards that are consistent and comparable to those already adopted by the Banking Agencies and the FTC in other ways. For example, covered institutions that have banking affiliates may have already developed policies and procedures consistent with the Banking Agencies' guidance that are applied to all affiliates of the bank. If they do not have the same policies and procedures, these covered institutions would be able to apply the banking affiliate's policies and procedures to the securities businesses with few changes. More specific safeguarding standards also could increase investor confidence in institutions and help mitigate losses that can result from lax safeguarding policies and procedures. Incidents of identity theft have affected a large number of Americans and are difficult and expensive for victims to deal with and correct. 132 Moreover, there is at least anecdotal evidence that the wave of widely-reported incidents of data security breaches have played a role in discouraging a significant number of individuals from conducting business online. 133 The proposed amendments could benefit investors and increase their confidence by providing firms with detailed standards for the processes that a well-designed information security program should include. This could result in enhanced protection for the privacy of investor information, and could decrease incidents of identity theft, thereby mitigating losses due to identity theft and other misuses of sensitive information. We also believe that the increased protection that could result from the proposed amendments could benefit institutions, which frequently incur the costs of fraudulent activity. 134 Thus, if only a small number of security breach incidents were averted because the proposed amendments were adopted, there still could be a significant cost savings to individuals and institutions. 135 132 In 2003 the FTC reported that up to 10 million Americans had been victimized by identity theft over a 12-month period and that these thefts cost businesses and consumers over $52 billion. *See* FTC, Identity Theft Survey Report (Sept. 2003), available at *http://www.ftc.gov/os/2003/09/synovatereport.pdf* . 133 A July 2005 study found that 48 percent of consumers avoided making purchases on the Internet because they feared their personal information may be stolen. *See* Cyber Security Industry Alliance, Internet Voter Survey, at 9 (June 2005), *https://www.csialliance.org/publications/surveys_and_polls/CSIA_Internet_Security_Survey_June_2005.pdf* (last visited Nov. 6, 2007). 134 In most cases, financial institutions do not impose the losses associated with fraudulent activity on consumers. *See, e.g.* , Testimony of Oliver I. Ireland, on Behalf of the Financial Services Coordinating Council, H.R. 3997, the “Financial Data Protection Act of 2005,” Before the Subcomm. on Financial Institutions and Consumer Credit, House Comm. on Financial Services (Nov. 9, 2005), available at *http://www.sia.com/testimony/2005/ireland11-9-05.html* . 135 One research institution has estimated that the average cost of a data security breach incident per institution is $1.4 million. *See* Ponemon Institute, LLC, 2006 Annual Study: Cost of a Data Breach (Oct. 2006), *http://download.pgp.com/pdfs/Ponemon2-Breach-Survey_061020_F.pdf* (last visited Nov. 6, 2007). In addition, some investigations into data breach incidents have been reported to cost as much as $5 million. *See* Daniel Wolfe, Security Watch, Amer. Banker (Apr. 4, 2007). As noted above, we are concerned that some institutions do not regularly reevaluate and update their safeguarding programs. Requiring covered institutions to designate in writing an employee or employees to coordinate their information security programs should foster clearer delegations of authority and responsibility, making it more likely that an institution's programs are regularly reevaluated and updated. Having an information security program coordinator also could contribute to an institution's ability to meet its affirmative and continuing obligation under the GLBA to safeguard customer information. 136 If, for example, elements of a covered institution's information security program were not maintained on a consolidated basis, but were dispersed throughout an institution, we believe having a responsible program coordinator or coordinators should facilitate the institution's awareness of these elements, as well as enable it to better manage and control risks and conduct ongoing evaluations. 136 *See* 15 U.S.C. 6801(a). We expect that the proposed framework for the initial and ongoing oversight of institutions' information security programs—in the form of formal risk assessments, periodic testing or monitoring of key controls, systems, and procedures, staff training, and relevant evaluations and adjustments—would help to ensure that information security programs are appropriately updated along with relevant changes in technology, new business arrangements, changes in the threat environment, and other circumstances. Finally, the proposed amendment that would require covered institutions to take reasonable steps to select and retain service providers that are capable of maintaining appropriate safeguards and would require service providers by contract to implement and maintain appropriate safeguards should help to ensure that sensitive personal information is protected when it leaves the institution's custody, while still permitting institutions the flexibility to select appropriate service providers. The proposed requirement that information security programs include specific procedures for responding to incidents of unauthorized access to or use of personal information is designed to benefit investors and institutions. The requirement would benefit investors who receive notice of an information security breach pursuant to an institution's incident response procedures by allowing those investors to take precautions to the extent they believe necessary. 137 The procedures also would benefit institutions by establishing a national data breach notification requirement for covered institutions. 138 Currently at least 39 states have enacted statutes requiring notification of individuals in the event of a data security breach. 139 This patchwork of overlapping and sometimes inconsistent regulation has created a difficult environment for financial institutions' compliance programs. However, many of the state statutes contain exemptions for entities regulated by federal data security breach regulations. 140 Accordingly, the proposed amendments could benefit covered institutions by significantly reducing the number of requirements with which covered institutions must comply. 141 As noted, the banking regulators published similar data breach notification guidance in 2005. 142 137 Often victims of identity theft are unaware of the crime until they are denied credit or employment, or are contacted by a debt collector for payment on a debt they did not incur. *See* Identity Theft Task Force, Combating Identity Theft, A Strategic Plan, p. 3 (Apr. 2007), available at *http://www.idtheft.gov/reports/StrategicPlan.pdf.* 138 Establishing national standards for data breach notification requirements was a recommendation of the Identity Theft Task Force. *Id.* at p. 35. 139 *See* Government Accountability Office, Personal Information: Data Breaches Are Frequent, but Evidence of Resulting Identity Theft Is Limited; However, the Full Extent Is Unknown (Jun. 4, 2007) at p. 2, and National Conference of State Legislatures, State Security Breach Notification Laws (as of Dec. 1, 2007), *http://www.ncsl.org/programs/lis/cip/priv/breachlaws.htm* (last visited Dec. 10, 2007). 140 *See, e.g.* , Crowell & Moring LLP, State Laws Governing Security Breach Notification (last updated Apr. 2007), *http://www.crowell.com/pdf/SecurityBreachTable.pdf* (last visited Dec. 10, 2007). 141 Under the proposed amendments, for example, using proposed Form SP-30 would satisfy an institution's obligations to notify the Commission or the appropriate designated examining authority. Because many state laws have exceptions from breach notification requirements for institutions subject to federal breach notification requirements, this would streamline institutions' current reporting obligations to numerous state authorities. 142 *See* Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice, 70 FR 15736 (Mar. 29, 2005), available at *http://www.occ.treas.gov/consumer/Customernoticeguidance.pdf.* The guidance supplements the Interagency Guidelines Establishing Standards for Safeguarding Information which was renamed the Interagency Guidelines Establishing Information Security Standards. We request comment on available metrics to quantify these benefits and any other benefits the commenter may identify. In particular, we request comment reflecting institutions' experiences in safeguarding customer information and addressing the security breach incidents discussed above. Commenters are also requested to identify sources of empirical data that could be used for the metrics they propose. 2. Costs of More Specific Information Security and Security Breach Standards Some institutions would likely incur additional costs in reviewing, implementing, and maintaining more specific information security and security breach standards. Institutions could incur additional costs in reviewing current safeguarding policies and procedures and designing and implementing new ones, if necessary, on an initial basis. Institutions also could incur additional costs on an ongoing basis to maintain up-to-date information security programs and to respond appropriately to any data security breach incidents. According to Commission filings, approximately 6,016 broker-dealers, 4,733 investment companies comprising portions of 813 fund complexes, 143 77 business development companies, 9,860 registered investment advisers, and 501 registered transfer agents, or 17,267 covered institutions, would be required to comply with the proposed amendments' more specific information security and security breach standards. 144 As noted, broker-dealers, investment companies, and registered investment advisers have been required to have reasonably designed safeguarding policies and procedures since 2001. In addition, transfer agents have been required to have information security safeguards since 2003, in accordance with the FTC Safeguards Rule. 145 We estimate that 56 percent of all covered institutions, or 9,670 institutions, have one or more financial affiliates (whether these institutions are regulated by the Commission or other federal financial regulators). 146 We estimate that each of the affiliated institutions has one corporate affiliate. Based on limited inquiries of covered institutions, we believe that these affiliated institutions are likely to have developed safeguarding policies and procedures on an organization-wide basis, rather than each affiliate developing policies and procedures on its own. 147 We also believe that the affiliate that developed the affiliated organization's safeguarding policies and procedures is also responsible for maintaining these policies and procedures. We therefore estimate that one-half of the covered affiliated institutions, or 4,835 institutions, have developed, documented, and are maintaining safeguarding policies and procedures, while the other half instead use the policies and procedures developed, documented, and maintained by their affiliate. 148 Accordingly, we estimate that 12,432 covered institutions have developed and adopted safeguarding policies and procedures and are maintaining these policies and procedures in accordance with the current rule. 149 143 Although the circumstances for every investment company vary, we believe that in general the costs of complying with the proposed rule amendments would be incurred on a per fund complex basis and not on a per fund basis because almost all investment companies are externally managed by affiliated organizations and independent contractors, who, if the proposals are adopted, are likely to review and implement the amended rules on behalf of all of the investment companies they manage. *See, e.g.* , Investment Company Institute, A Guide to Understanding Mutual Funds, at 16, Sept. 2006, available at *http://www.ici.org/pdf/bro_understanding_mfs_p.pdf* (last visited Dec. 3, 2007). Thus, throughout this cost-benefit analysis we estimate the costs of compliance on a per fund complex basis. 144 This estimate is based on the following calculation: 6,016 + 813 + 77 + 9,860 + 501 = 17,267. 145 *See supra* note 23. 146 The estimate that 56 percent of registrants have an affiliate is based upon statistics reported as of December 3, 2007 on Form ADV, the Universal Application for Investment Adviser Regulation, which contains specific questions regarding affiliations between investment advisers and other persons in the financial industry. We estimate that other institutions subject to the safeguards rule would report a rate of affiliation similar to that reported by registered investment advisers. The estimate that 9,670 institutions have an affiliate is based on the following calculation: 17,267 × 0.56 = 9,669.52. 147 *See supra* note 109. 148 *This estimate is based on the following calculation:* 9,670 ÷ 2 = 4,835. 149 *This estimate is based on the following calculation:* (17,267 − 9,670) + 4,835 = 12,432. We expect that these institutions' current costs to maintain safeguarding policies and procedures in compliance with the Commission's safeguards rule vary greatly depending upon the size of the institution, its customer base, the complexity of its business operations, and the extent to which the institution engages in information sharing. Thus, for example, we estimate that small investment advisers with fewer than 10 employees require more limited safeguarding policies and procedures to address a limited scope of information transfer, storage, and disposal. We believe that larger broker-dealers or fund complexes, by contrast, are more likely to have and maintain a more extensive set of information safeguarding policies and procedures, corresponding to these institutions' more complex business activities and information sharing practices. Of the covered institutions, we estimate that 7,030 registered investment advisers have 10 or fewer employees. 150 We estimate that 942 broker-dealers and investment company complexes are small institutions, and are likely to have no more than 10 employees. 151 Based on Commission filings, we also estimate that 170 transfer agents are smaller institutions that are likely to have no more than 10 employees. We therefore estimate that 8,142 institutions, out of 17,267 covered institutions, are smaller institutions that are likely to have no more than 10 employees. 152 We believe that the institutions that have developed and adopted safeguarding policies and procedures are as likely to be smaller institutions with no more than 10 employees as the total population of covered institutions. 153 Therefore, of 12,432 covered institutions that we estimate have developed and adopted and are maintaining safeguarding policies and procedures, we estimate for purposes of this analysis that 5,862 institutions are smaller institutions, while 6,570 institutions are larger institutions. 154 150 *See* Investment Adviser Association, Evolution Revolution, A Profile of the Investment Adviser Profession (2006), available at *http://www.nrs-inc.com/ICAA/EvRev06.pdf.* 151 As noted below, 915 broker-dealers and 238 investment companies, representing 27 fund complexes, are small entities. 152 *This estimate is based on the following calculation:* 7,030 + 942 + 170 = 8,142 smaller institutions. 153 8,142 ÷ 17,267 = 0.4715. 154 12,432 × 0.4715 = 5,861.88; 12,432 − 5,862 = 6,570. Based on conversations with representatives of covered institutions, and information collected from limited inquiries of covered institutions, we estimate that smaller institutions are currently spending between $5,000 and $1,000,000 per year to comply with the safeguards and disposal rules. 155 We also estimate that larger institutions are spending between $200,000 and $10,000,000 per year to comply with the safeguards and disposal rules. These estimates include costs for dedicated personnel, maintaining up-to-date policies and procedures, enforcing various safeguarding requirements (such as “clean desk” requirements), hiring contractors to properly dispose of sensitive information, developing and enforcing access procedures, ongoing staff training, monitoring and reviewing compliance with safeguarding standards, and computer encryption. These estimates also include current spending to comply with state data security breach statutes. 156 155 *See supra* note 111. 156 These estimates also include transfer agents' current spending to comply with the FTC Safeguards Rule. As noted, the proposed amendments would apply to every broker or dealer other than a notice-registered broker or dealer, every investment company, and every investment adviser or transfer agent registered with the Commission. *See* proposed paragraph (a)(1) of Section 30. We expect that most covered institutions have information security programs in place that would be consistent with the proposed amendments. 157 We do not have a reliable basis for estimating the number of institutions that would incur additional costs or the extent to which those institutions would have to enhance their policies and procedures, including documentation of the information safeguard program and its elements. Accordingly, we have estimated the range of additional costs that individual firms could incur. We seek comment on the number of firms that have information safeguard programs that would satisfy the proposed amendments, the number of firms that would have to enhance their programs, the extent of those enhancements, and the costs of enhancement. 157 This belief is consistent with the analysis of the Office of the Comptroller of the Currency and Office of Thrift Supervision when they adopted the Banking Agencies Safeguard Guidelines in 2001. At that time they stated with respect to the institutions they regulated, that “most if not all institutions already have information security programs in place that are consistent with the Banking Agencies' Security Guidelines. In such cases, little or no modification to an institution's program will be required.” *See* Banking Agencies' Security Guidelines, *supra* note 23. The statement was made in the analysis of whether the Guidelines would constitute “a significant regulatory action” for purposes of Executive Order 12866, which includes an action that would have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. The Board and the FDIC did not prepare an analysis under Executive Order 12866. If the proposed amendments were adopted, covered institutions could incur costs to supplement their current information security programs in some or all of the following ways. First, the institution would be required to review and, as appropriate, revise its current safeguarding policies and procedures, including their data security breach procedures and disposal rule procedures, to comply with the more specific requirements of the proposed amendments. Initially this would require the institutions to:
(i)Designate an employee or employees as coordinator for the information security program;
(ii)identify in writing reasonably foreseeable security risks that could result in the unauthorized access or compromise of personal information or personal information systems;
(iii)review existing or design new safeguards to control these risks;
(iv)train staff to implement the safeguards; and
(v)test the effectiveness of the safeguards' key controls, including access controls, controls to detect, prevent and respond to incidents of unauthorized access to or use of personal information. Second, an institution also would be required to review its service providers' information safeguards and determine whether its service providers are capable of maintaining appropriate safeguards for personal information, document this finding, and enter into contracts with the service providers to implement and maintain appropriate safeguards. Third, an institution would be required to review existing safeguarding procedures relating to data security breach incidents. Initially, this could include:
(i)Assessing current policies and procedures for responding to data breach incidents; and
(ii)designing and implementing written policies and procedures to assess, control, and investigate incidents of unauthorized access or use of sensitive personal information, as well as policies and procedures to notify individuals and the Commission or a broker-dealer's designated examining authority, if necessary. Fourth, to comply with these amendments on an ongoing basis, institutions would be required to:
(i)Regularly test or monitor, and maintain a written record of the effectiveness of their safeguards' key controls, systems and procedures (including an assessment of personal information system access controls, controls designed to detect, prevent and respond to data security breach incidents, and controls related to employee training or supervision);
(ii)train staff to implement their information security program;
(iii)continue and document their oversight of service providers; and
(iv)evaluate and adjust their information security programs in light of testing and monitoring, and changes in technology, business operations or arrangements, and other material circumstances. Finally, an institution would be required to begin to respond to any data security breach incidents as may occur on an ongoing basis. This would include implementing and following written procedures to:
(i)Assess the nature and scope of the incident;
(ii)take appropriate steps to contain and control it, and document those steps in writing;
(iii)promptly conduct a reasonable investigation and make a written determination of the likelihood that sensitive personal information had been or would be misused;
(iv)if misuse of information had occurred or were reasonably likely, notify affected individuals; and
(v)if an individual identified with the information had suffered substantial harm or inconvenience, or any unauthorized person had intentionally obtained access to or used sensitive personal information, notify the Commission, or the appropriate designated examining authority as soon as possible on proposed Form SP-30. We expect these estimated costs would vary significantly depending on the size of the institution, the adequacy of its existing safeguarding policies and procedures, and the nature of the institution's operations. The “reasonably designed” standard for information security programs in the proposed rule amendments is consistent with the current safeguards and disposal rules. Thus, we believe it should be relatively straightforward for an institution that does not currently have policies and procedures that apply to specific elements of the proposed amendments to incorporate these elements into its current system of safeguarding policies and procedures. In addition, we estimate that little or no modification to an institution's safeguarding policies and procedures would be required in situations where a covered institution's affiliate developed its existing safeguarding policies and procedures in compliance with the Banking Agencies' safeguarding guidance or the FTC's rules. In addition to an institution's size, the adequacy of its safeguards, and its operations, we expect that institutions' information security programs would vary considerably depending on the way in which each collects information, the number and types of entities to which each transfers information, and the ways in which each stores, transfers, and disposes of personal information. Based on conversations with representatives of covered institutions and information collected from limited inquiries of institutions, our staff estimates that the additional initial costs that an institution could incur to comply with the proposed amendments could range from 0 to 10 percent of its current costs of maintaining an information security program. Our staff also estimates that the additional costs an institution could incur for ongoing compliance with the proposed amendments could range from 0 to 5 percent of its current costs. 158 For purposes of the PRA, staff estimates that for a smaller institution, the initial costs could range from between $500 and $100,000, with an approximate cost of $18,560 per smaller institution. 159 Staff also estimates that for a smaller institution, additional ongoing costs could range from between $250 and $50,000, with an approximate cost of $10,764 per smaller institution per year. 160 With respect to a larger institution, again for purposes of the PRA, staff estimates that initial costs could range from between $20,000 and $1 million, with an approximate cost of $172,732 per larger institution. 161 Staff further estimates that for a larger institution, additional ongoing costs could range from between $10,000 and $500,000 per year, with an approximate cost of $51,084 per larger institution per year. 162 We note that an institution that currently incurs the highest estimated costs for its information security program seems likely already to have a comprehensive information security program and therefore would be less likely to require program enhancements to comply with the rule. Accordingly, the high end of the range of estimated costs for institutions may be excessive. 158 While we estimate that additional initial and ongoing costs would vary significantly across wide ranges, we estimate that the average cost per institution would be concentrated in the lower end of those ranges because, as noted, we believe that most institutions have already developed and adopted safeguarding and disposal polices and procedures, and are maintaining these policies and procedures, in accordance (or substantially in accordance) with the proposed rule amendments. 159 *See supra* note 112 and accompanying text. 160 *See supra* note 116 and accompanying text. 161 *See supra* note 114 and accompanying text. 162 *See supra* note 119 and accompanying text. We request comment on our estimated costs and our rationale underlying them, and any aspect of the estimates or other costs that we have not considered. We seek information about particular costs of compliance as well as information as to any overall percentage increase in costs that firms would likely incur as a result of the proposed amendments. We request comment accompanied with statistical or other quantitative information, and comment on the experiences of institutions in addressing the circumstances addressed above. Commenters should identify the metrics of any empirical data that support their cost estimates. B. Costs and Benefits of Broadened Scope of Information and of Covered Institutions The proposed rule amendments would broaden the scope of information covered by the safeguards and disposal rules. From the perspective of ease of compliance, we anticipate that institutions would benefit from having a common set of rules that apply to both nonpublic personal information about customers and consumer report information. We also expect that investors would benefit from expanding the scope of information covered by the safeguards and disposal rules because both terms exclude some information that without protections could more easily be used to obtain unauthorized access to investors' personal financial information. Because we expect that this expansion of the scope of information covered by the safeguards and disposal rules would not require modification of institutions' current policies and procedures, or their systems and databases for implementing these policies and procedures, and because many firms currently protect nonpublic personal information about customers and consumer report information in the same way, we expect that the proposal would result in no significant, if any, additional costs to institutions. The amendments also would expand the scope of the safeguards rule to include registered transfer agents, limit the scope of the safeguards rule to exclude notice-registered broker-dealers, and extend the disposal rule to apply to natural persons. As noted above, bringing registered transfer agents within the scope of our safeguards rule should benefit investors because these institutions maintain sensitive personal information. We included registered transfer agents in our estimate of the costs of the proposed information security and security breach procedures above. 163 Because transfer agents are currently subject to the FTC Safeguards Rule, which, if the proposed amendments were adopted, would be substantially similar to the Commission's safeguards and disposal rules, we do not anticipate that there would be any unique or unusual costs to transfer agents, beyond those discussed above. Similarly, we do not anticipate any costs or benefits resulting from the proposal to exclude notice-registered broker-dealers from Regulation S-P because they would be subject to the CFTC's substantially similar safeguards rules. This proposal would simply clarify that notice-registered broker-dealers need not comply with both Regulation S-P and the CFTC's rules. 163 *See supra* section V.A.2. We expect that the proposal to include natural persons within the scope of the disposal rule would benefit investors by establishing a system designed to ensure that personal information is disposed of properly by employees, particularly those who may work in branches far from a covered institution's main office. We also believe that this proposal would benefit investors by requiring compliance by natural persons, associated with a covered institution, who are directly responsible for properly disposing of personal information consistent with the institution's policies. We do not expect that this proposal would result in costs to institutions beyond those that would be imposed by the more specific standards analyzed above in section V.A.2. Specifically, we believe that any changes that would be required to covered institutions' policies and procedures or training programs to make it clear that individuals (not just firms) would have responsibility for complying with the disposal rule are captured in our estimates above. We request comment on these estimates of benefits and costs and our rationale underlying them, and any aspect of the estimates or other benefits or costs that we have not considered. In particular, we request comment accompanied with statistical or other quantitative evidence, and comment on the experiences of institutions in addressing the circumstances addressed above. Commenters should identify the metrics and sources of any empirical data that support their cost estimates. C. Costs and Benefits of Maintaining Written Records The proposed amendments would require covered institutions to maintain and preserve, in an easily accessible place, written records of the safeguards and disposal policies and procedures. The amendments also would require that institutions document compliance with their policies and procedures, and that records would have to be maintained for a period consistent with current requirements for similar records. We expect that this proposal would benefit investors by enabling the Commission's examination staff to evaluate whether institutions are in compliance with the requirements of the proposed amendments to the safeguards and disposal rules. We anticipate that institutions are unlikely to incur significant costs in maintaining records or documenting compliance to meet the requirements of this proposal because we would expect to establish a date for compliance with these amendments that would permit institutions to document and maintain these records in the normal course of ordinary business. Thus, we do not expect that this proposal would result in costs to institutions beyond those that would be imposed by the more specific standards analyzed above in section V.A.2. We request comment on these estimates of benefits and costs and our rationale underlying them, and any aspect of the estimates or other benefits or costs that we have not considered. In particular, we request comment accompanied with statistical or other quantitative evidence, and comment on the experiences of institutions in addressing the circumstances addressed above. Commenters should identify the metrics and sources of any empirical data that support their cost estimates. D. Costs and Benefits of Proposed New Exception Our proposed amendments would create a new exception from Regulation S-P's notice and opt out requirements for disclosures of limited information in connection with the departure of a representative of a broker-dealer or investment adviser. The proposal should enhance information security by providing a clear framework for transferring limited information from one firm to another in this context. At firms that choose to rely on it, the proposed exception also should reduce potential incentives some representatives may have to take information with them secretly when they leave. In addition, the amendment should promote investor choice regarding whether to follow a departing representative to another firm. Institutions that choose to rely on the proposed exception also should benefit from the greater legal certainty that it would provide. We expect that institutions would incur minimal costs in retaining a written record of the information that would be disclosed in connection with a representative's departure, and expect that for a number of firms such costs are incurred already in the ordinary course of business. 164 Institutions need not provide these disclosures. Thus we anticipate that only those that expect the potential benefits from the disclosure would justify any associated costs would make the disclosures. 164 *See supra* note 91 and accompanying text. We request comment on this cost estimate and our rationale underlying it, and any aspect of the estimates or other costs that we have not considered. In particular, we request comment accompanied with statistical or other quantitative evidence, and the experiences of institutions in addressing the circumstances addressed above. Commenters should identify the metrics and sources of any empirical data that support their cost estimates. E. Request for Comment We request comment on all aspects of this cost-benefit analysis, including comment as to whether the estimates we have used in our analysis are reasonable. We welcome comment on any aspect of our analysis, the estimates we have made, and the assumptions we have described. In particular, we request comment as to any costs or benefits we may not have considered here that could result from the adoption of the proposed amendments. We also request comment on the numerical estimates we have made here, and request comment and specific costs and benefits from covered institutions that have experienced any of the situations analyzed above. VI. Initial Regulatory Flexibility Analysis This Initial Regulatory Flexibility Analysis (“IRFA”) has been prepared in accordance with 5 U.S.C. 603. It relates to proposed amendments to Regulation S-P that seek to strengthen the protections for safeguarding and disposing of sensitive personal information and provide a limited exception to notice and opt out requirements intended to augment investors' ability to choose whether to follow personnel who move from one broker-dealer or registered investment adviser to another. The proposed amendments would:
(i)Require covered institutions to adopt more specific standards under the safeguards rule, including standards that would apply to security breach incidents;
(ii)broaden the scope of information and the types of institutions and persons covered by the rules; and
(iii)require covered institutions to maintain written records of the policies and procedures and their ongoing compliance with those polices and procedures. The proposed amendments also would require covered institutions seeking to rely on the new exception related to departing representatives to maintain a record of the information disclosed under the exception to a representative's new firm. A. Reasons for the Proposed Action We have become concerned with the significant increase in the number of information security breaches that have come to light in recent years and the potential created by such breaches for misuse of personal financial information, including identity theft. We are concerned that some firms do not regularly reevaluate and update their safeguarding programs to deal with increasingly sophisticated methods of attack. To help prevent and address security breaches at covered institutions, we propose to require more specific standards for safeguarding personal information, including standards for responding to data security breaches. In order to provide better protection against unauthorized disclosure of personal financial information, we believe that the scope of information covered by the current safeguards and disposal rules should be broader. We also propose a new exception to Regulation S-P's notice and opt out requirements to permit limited disclosures of investor information when a registered representative of a broker-dealer or a supervised person of an investment adviser moves from one brokerage or advisory firm to another. The proposed exception should provide legal certainty to firms that choose to rely on it and reduce incentives some representatives may have to take information with them secretly when they leave. We believe this amendment also would help to augment investors' ability to choose whether or not to follow a departing representative to another firm. B. Objectives of the Proposed Action The overall objectives of the proposed amendments are to:
(i)Strengthen the protections for safeguarding and disposing of sensitive personal information; and
(ii)provide a limited exception to Regulation S-P's notice and opt out requirements that would preserve investors' ability to choose whether to follow personnel who move from one broker-dealer or investment adviser to another. We believe that the proposed amendments would help to: • Prevent and mitigate information security breach incidents; • Ensure that sensitive financial information is not disposed of improperly; • Ensure that firms regularly review and update their safeguarding policies and procedures; • Ensure that the full range of appropriate information and all relevant types of institutions regulated by the Commission are covered by Regulation S-P's requirements; and • Enhance information security at firms choosing to rely on a new exemption for disclosures of limited information when representatives move from one firm to another by providing a clear framework for such disclosures and promote investor choice regarding whether or not to follow a departing representative to another firm. C. Legal Basis The amendments to Regulation S-P are proposed pursuant to the authority set forth in Sections 501, 504, 505, and 525 of the GLBA, Section 628(a)(1) of the FCRA, Sections 17, 17A, 23, and 36 of the Exchange Act, Sections 31(a) and 38 of the Investment Company Act, and Sections 204 and 211 of the Investment Advisers Act. 165 165 15 U.S.C. 6801, 6804, 6805, and 6825; 15 U.S.C. 1681w(a)(1); 15 U.S.C. 78q, 78q-1, 78w, and 78mm; 15 U.S.C. 80a-30(a), 80a-37; and 15 U.S.C. 80b-4, 80b-11. D. Small Entities Subject to the Proposed Rule Amendments The proposed amendments to Regulation S-P would affect brokers, dealers, registered investment advisers, investment companies, and registered transfer agents, including entities that are considered to be a small business or small organization (collectively, “small entity”) for purposes of the Regulatory Flexibility Act. For purposes of the Regulatory Flexibility Act, under the Exchange Act a broker or dealer is a small entity if it:
(i)Had total capital of less than $500,000 on the date in its prior fiscal year as of which its audited financial statements were prepared or, if not required to file audited financial statements, on the last business day of its prior fiscal year; and
(ii)is not affiliated with any person that is not a small entity. 166 A registered transfer agent is a small entity if it:
(i)Received less than 500 items for transfer and less than 500 items for processing during the preceding six months;
(ii)transferred items only of issuers that are small entities;
(iii)maintained master shareholder files that in the aggregate contained less than 1,000 shareholder accounts or was the named transfer agent for less than 1,000 shareholder accounts at all times during the preceding fiscal year; and
(iv)is not affiliated with any person that is not a small entity. 167 Under the Investment Company Act, investment companies are considered small entities if they, together with other funds in the same group of related funds, have net assets of $50 million or less as of the end of its most recent fiscal year. 168 Under the Investment Advisers Act, a small entity is an investment adviser that:
(i)Manages less than $25 million in assets;
(ii)has total assets of less than $5 million on the last day of its most recent fiscal year; and
(iii)does not control, is not controlled by, and is not under common control with another investment adviser that manages $25 million or more in assets, or any person that has had total assets of $5 million or more on the last day of the most recent fiscal year. 169 166 17 CFR 240.0-10. 167 *Id.* 168 17 CFR 270.0-10. 169 17 CFR 275.0-7. Based on Commission filings, we estimate that 894 broker-dealers, 153 registered transfer agents, 203 investment companies, and 760 registered investment advisers may be considered small entities. E. Reporting, Recordkeeping, and Other Compliance Requirements The proposed amendments to Regulation S-P would require more specific compliance requirements and create new reporting requirements for institutions that experience a breach of information security. The proposed amendments also would introduce new mandatory recordkeeping requirements. Under the proposed amendments to Regulation S-P, covered institutions would have to develop, implement, and maintain a comprehensive “information security program” for protecting personal information and responding to unauthorized access to or use of personal information. We expect that some covered institutions, including covered institutions that are small entities, would be required to supplement their current costs by the costs involved in reviewing and, as appropriate, revising their current safeguarding policies and procedures, including their data security breach response procedures and disposal rule procedures, to comply with the more specific requirements of the proposed amendments. Initially this would require institutions to:
(i)Designate an employee or employees as coordinator for their information security program;
(ii)identify in writing reasonably foreseeable security risks that could result in the unauthorized or compromise of personal information or personal information systems;
(iii)create a written record of their design and implementation of their safeguards to control identified risks;
(iv)train staff to implement their information security program; and
(v)oversee service providers and document that oversight in writing. Institutions also would have to review existing safeguarding procedures relating to data security breach incidents. This would include:
(i)Assessing current policies and procedures for responding to data breach incidents; and
(ii)designing and implementing written policies and procedures to assess, control, and investigate incidents of unauthorized access or use of sensitive personal information, as well as policies and procedures for, under certain conditions, notifying individuals and the Commission or, in the case of a broker-dealer, the appropriate designated examining authority. To comply with these amendments on an ongoing basis, institutions would have to implement procedures to:
(i)Regularly test or monitor, and maintain a written record of the effectiveness of their safeguards' key controls, systems and procedures (including access controls, controls related to data security breach incidents, and controls related to employee training and supervision);
(ii)augment staff training as necessary;
(iii)provide continued oversight of service providers; and
(iv)regularly evaluate and adjust their information security program in light of their regular testing and monitoring, changes in technology, their business operations or arrangements, and other material circumstances. Institutions also would have to respond appropriately to incidents of data security breach as may occur on an ongoing basis. This would include following their written procedures to:
(i)Assess the nature and scope of the incident;
(ii)take appropriate steps to contain and control the incident;
(iii)promptly conduct a reasonable investigation and make a written determination of the likelihood that sensitive personal information has been or will be misused;
(iv)if misuse of information has occurred or is reasonably likely, notify affected individuals as soon as possible; and
(v)if an individual identified with the information has suffered substantial harm or inconvenience, or any unauthorized person has intentionally obtained access to or used sensitive personal information, notify the Commission or an appropriate designated examining authority as soon as possible on proposed Form SP-30. Overall, we expect there would be incremental costs associated with the proposed amendments to Regulation S-P. Some proportion of large or small institutions would be likely to experience some increase in costs to comply with the proposed amendments if they are adopted. More specifically, we estimate that with respect to the more specific safeguarding elements, covered institutions would incur one-time costs that could include the costs of assessment and revision of safeguarding standards, staff training, and reviewing and entering into contracts with service providers. 170 We also estimate that the ongoing, long-term costs associated with the proposed amendments could include costs of regularly testing or monitoring the safeguards, augmenting staff training, providing continued oversight of service providers, evaluating and adjusting safeguards, and responding appropriately to incidents of data security breach. 171 170 *See supra* section IV.A.3. 171 *Id.* We encourage written comments regarding this analysis. We solicit comments as to whether the proposed amendments could have an effect that we have not considered. We also request that commenters describe the nature of any impact on small entities and provide empirical data to support the extent of the impact. F. Duplicative, Overlapping, or Conflicting Federal Rules As discussed above, the proposed amendments would impose requirements that covered institutions maintain and document a written information security program. The proposed amendments also would require reporting to individuals and appropriate regulators after certain serious data breach incidents. Covered institutions are subject to requirements elsewhere under the federal securities laws and rules of the self-regulatory organizations that require them to adopt written policies and procedures that may relate to some similar issues. 172 The proposed amendments to Regulation S-P, however, would not require covered institutions to maintain duplicate copies of records covered by the rule, and an institution's information security program would not have to be maintained in a single location. Moreover, although the proposed amendments would require covered institutions to keep certain records that may be required under existing recordkeeping rules, the purposes of the requirements are different, and institutions need not maintain duplicates of the records themselves. 173 We believe, therefore, that any duplication of regulatory requirements would be limited and would not impose significant additional costs on covered institutions including small entities. We believe there are no other federal rules that duplicate, overlap, or conflict with the proposed reporting requirements. 172 *See,* *e.g.* , 15 U.S.C. 80b-4a (requiring each adviser registered with the Commission to have written policies and procedures reasonably designed to prevent misuse of material non-public information by the adviser or persons associated with the adviser); and NASD Rule 3010 (requiring each broker-dealer to establish and maintain written procedures to supervise the types of business it is engaged in and to supervise the activities of registered representatives and associated persons, which could include registered investment advisers). 173 *See,* *e.g.* , 17 CFR 240.17a-3 (requiring broker-dealers to make and keep, among other things, blotters or other records of original entry, securities position records, and order tickets) and 17 CFR 270.31a-1(b)(11) (requiring investment companies to maintain, among other things, minute books of directors' meetings and “files of all advisory material received from the investment adviser”). G. Significant Alternatives The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered the following alternatives:
(i)Establishing different compliance or reporting standards that take into account the resources available to small entities;
(ii)The clarification, consolidation, or simplification of the reporting and compliance requirements under the rule for small entities;
(iii)Use of performance rather than design standards; and
(iv)Exempting small entities from coverage of the rule, or any part of the rule. With regard to the first alternative, we have proposed amendments to Regulation S-P that would continue to permit institutions substantial flexibility to design safeguarding policies and procedures appropriate for their size and complexity, the nature and scope of their activities, and the sensitivity of the personal information at issue. We nevertheless believe it necessary to provide a more specific framework of elements that every institution should consider and address, regardless of its size. The proposed amendments to Regulation S-P arise from our concern with the increasing number of information security breaches that have come to light in recent years, particularly those involving institutions regulated by the Commission. Establishing different compliance or reporting requirements for small entities could lead to less favorable protections for these entities' customers and compromise the effectiveness of the proposed amendments. With regard to the second alternative, we believe that the proposed amendments should, by their operation, simplify reporting and compliance requirements for small entities. Small covered institutions are likely to maintain personal information on fewer individuals than large covered institutions, and they are likely to have relatively simple personal information systems. Under proposed paragraph (a)(1) of Section 30, the information security programs that would be required by the proposed amendments would have to be appropriate to a covered institution's size and complexity, and the nature and scope of its activities. Accordingly, we believe that the requirements of the proposed amendment already would be simplified for small entities. We also believe that the requirements of the proposed amendments could not be further simplified, or clarified or consolidated, without compromising the investor protection objectives the proposed amendments are designed to achieve. With regard to the third alternative, the proposed amendments are for the most part performance based. Rather than specifying the types of policies and procedures or the technologies that an institution would be required to use to safeguard personal information, the proposed amendments would require the institution to assess the types of risks that it is likely to face and to address those in the manner the institution believes most appropriate. With respect to the specific requirements regarding notifications in the event of a data security breach, we have proposed that institutions provide only the information that seems most relevant for the Commission, a self-regulatory organization, or a consumer to know in order to adequately assess the potential damage that could result from the breach and to develop an appropriate response. Finally, with regard to alternative four, we believe that an exemption for small entities would not be appropriate. Small entities are as vulnerable as large ones to the types of data security breach incidents we are trying to address. We believe that the specific elements we have proposed must be considered and incorporated into the policies and procedures of all covered institutions, regardless of their size, to mitigate the potential for fraud or other substantial harm or inconvenience to investors. Exempting small entities from coverage of the proposed amendments or any part of the proposed amendments could compromise the effectiveness of the proposed amendments and harm investors by lowering standards for safeguarding investor information maintained by small covered institutions. Excluding small entities from requirements that would be applicable to larger covered institutions also could create competitive disparities between large and small entities, for example by undermining investor confidence in the security of information maintained by small covered institutions. We request comment on whether it is feasible or necessary for small entities to have special requirements or timetables for, or exemptions from, compliance with the proposed amendments. In particular, could any of the proposed amendments be altered in order to ease the regulatory burden on small entities, without sacrificing the effectiveness of the proposed amendments? H. Request for Comments We encourage the submission of comments with respect to any aspect of this IRFA. In particular, we request comments regarding:
(i)The number of small entities that may be affected by the proposed amendments;
(ii)the existence or nature of the potential impact of the proposed amendments on small entities discussed in the analysis; and
(iii)how to quantify the impact of the proposed amendments. Commenters are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. Such comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed amendments are adopted, and will be placed in the same public file as comments on the proposed amendments. Comments should be submitted to the Commission at the addresses previously indicated. VII. Consideration of Burden on Competition and Promotion of Efficiency, Competition and Capital Formation Exchange Act Section 23(a)(2) requires us, when adopting rules under the Exchange Act, to consider the impact any new rule would have on competition. 174 In addition, Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of Title I of the Exchange Act. The proposed amendments to Regulation S-P would:
(i)Require more specific standards under the safeguards rule, including standards that would apply to data security breach incidents;
(ii)broaden the scope of information and the types of institutions and persons covered by the safeguards and disposal rules; and
(iii)require covered institutions to maintain written records of their policies and procedures and their compliance with those policies and procedures. The proposed amendments also would create a new exception from Regulation S-P's notice and opt-out requirements for firms to transfer limited investor information regarding clients of departing representatives to those representatives' new firms. 174 15 U.S.C. 78w(a)(2). Other financial institutions are currently subject to substantially similar safeguarding and data breach response requirements under rules adopted by the Banking Agencies and the FTC. Under the proposed amendments, all financial institutions would have to bear similar costs in implementing substantially similar rules thus enhancing competition. We expect that the proposed amendment to create the new exception for firms to transfer limited investor information regarding clients of departing representatives to those representatives' new firms would not limit and might promote competition in the securities industry by providing legal certainty for firms that choose to rely on it and by facilitating the transition for customers who choose to follow a departing representative to a new firm. In addition, Exchange Act Section 3(f), Investment Company Act Section 2(c), and Investment Advisers Act Section 202(c) require us, when engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. 175 Our analysis on competition is discussed above. As discussed above, the proposed amendments could result in additional costs for covered institutions, which could affect the efficiency of these institutions. On the other hand, the amendments could promote investor confidence and bring new investors to these institutions. In the long term, the proposed amendments also could help reduce covered institutions' costs by mitigating the frequency and consequences of information security breaches. We do not believe the proposed amendments would have a significant effect on capital formation, although if the proposals lead to better information security practices at covered institutions, potential investors could feel more comfortable investing money in the capital markets. As a result, we expect that the potential additional expense of compliance with these proposed rule amendments would have little, if any, adverse effect on efficiency, competition, and capital formation. 175 15 U.S.C. 78c(f); 15 U.S.C. 80a-2(c); and 15 U.S.C. 80b-2(c). We request comment as to whether our estimates of the burdens the proposed amendments would have on covered institutions are reasonable. We welcome comment on any aspect of this analysis, and specifically request comment on any effect the proposed amendments might have on the promotion of efficiency, competition, and capital formation that we have not considered. Would the proposed amendments or their resulting costs affect the efficiency, competition, and capital formation of covered institutions and their businesses? Commenters are requested to provide empirical data and other factual support for their views to the extent possible. VIII. Small Business Regulatory Enforcement Fairness Act For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or “SBREFA,” 176 we must advise OMB as to whether the proposed regulation constitutes a “major” rule. Under SBREFA, a rule is considered “major” if, upon adoption, it results or is likely to result in: 176 Pub. L. No. 104-121, Title II, 110 Stat. 857
(1996)(codified in various sections of titles 5 and 15 of the United States Code, and as a note to 5 U.S.C. 601). • An annual effect on the economy of $100 million or more (either in the form of an increase or a decrease); • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effect on competition, investment or innovation. If a rule is “major,” its effectiveness will generally be delayed for 60 days pending Congressional review. We request comment on the potential impact of the proposed regulation on the economy on an annual basis. Commenters are requested to provide empirical data and other factual support for their view to the extent possible. IX. Statutory Authority The Commission is proposing to amend Regulation S-P pursuant to authority set forth in Sections 501, 504, 505 and 525 of the GLBA (15 U.S.C. 6801, 6804, 6805 and 6825), Section 628(a)(1) of the FCRA (15 U.S.C. 1681w(a)(1)), Sections 17, 17A, 23, and 36 of the Exchange Act (15 U.S.C. 78q, 78q-1, 78w, and 78mm), Sections 31(a) and 38 of the Investment Company Act (15 U.S.C. 80a-30(a) and 80a-37), and Sections 204 and 211 of the Investment Advisers Act (15 U.S.C. 80b-4 and 80b-11). X. Text of Proposed Rules and Rule Amendments List of Subjects in 17 CFR Part 248 Brokers, Dealers, Investment advisers, Investment companies, Privacy, Reporting and recordkeeping requirements, Transfer agents. For the reasons set out in the preamble, the Commission proposes to amend 17 CFR part 248 as follows. 1. Revise the heading of part 248 to read as follows: PART 248—REGULATION S-P: PRIVACY OF CONSUMER FINANCIAL INFORMATION AND SAFEGUARDING PERSONAL INFORMATION 2. Revise the authority citation for part 248 to read as follows: Authority: 15 U.S.C. 78q, 78q-1, 78w, 78mm, 80a-30(a), 80a-37, 80b-4, 80b-11, 1681w(a)(1), 6801-6809, and 6825. 3. Section 248.1(b) is amended by removing “(b)” from the reference to “§ 248.30(b)” in the first sentence of the paragraph. 4. Section 248.2(b) is amended by removing “(b)” from the reference to “§ 248.30(b)” in the first sentence. 5. Section 248.3(u) is amended by: a. Removing “or” at the end of paragraph (u)(1)(ii); b. Removing the period at the end of paragraph (u)(1)(iii) and in its place adding “; or”; and d. Adding paragraph (u)(1)(iv) to read as follows: § 248.3 Definitions.
(u)* * *
(1)* * *
(iv)Handled or maintained by you or on your behalf that is identified with any consumer, or with any employee, investor, or securityholder who is a natural person. 6. Remove the heading of subpart A of part 248 and add in its place the following undesignated center heading: “Privacy and Opt Out Notices”. 7. Remove the heading of subpart B of part 248 and add in its place the following undesignated center heading: “Limits on Disclosures”. 8. Remove the heading of subpart C of part 248 and add in its place the following undesignated center heading: “Exceptions”. 9. Section 248.15 is amended by: a. Removing the word “or” at the end of paragraph (a)(6); b. Removing the period at the end of paragraph (a)(7)(iii) and in its place adding “; or”; and c. Adding paragraph (a)(8). The addition reads as follows: § 248.15 Other exceptions to notice and opt out requirements.
(a)* * *
(8)To a broker, dealer, or investment adviser registered with the Commission in order to allow one of your representatives who leaves you to become the representative of another broker, dealer, or registered investment adviser to solicit customers to whom the representative personally provided a financial product or service on your behalf, provided:
(i)The information is limited to a customer's name, a general description of the type of account and products held by the customer, and the customer's contact information, including the customer's address, telephone number, and email information;
(ii)The information does not include any customer's account number, Social Security number, or securities positions; and
(iii)You require your departing representative to provide to you, not later than the representative's separation from employment with you, a written record of the information that will be disclosed pursuant to this exception, and you maintain and preserve such records under § 248.30(c).
(iv)For purposes of this section, representative means:
(A)A natural person associated with a broker or dealer registered with the Commission, who is registered or approved in compliance with § 240.15b7-1 of this chapter; or
(B)A supervised person of an investment adviser as defined in section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(25)). 10. Remove the heading of subpart D of part 248 and add in its place the following undesignated center heading: “Relation to Other Laws; Effective Date”. 11. Amend part 248 by adding the undesignated center heading, “Information Security Programs” before § 248.30, and revising § 248.30 to read as follows: INFORMATION SECURITY PROGRAMS § 248.30 Information security programs for personal information; records of compliance.
(a)*Information security programs* .—(1) *General requirements.* Every broker or dealer other than a notice-registered broker or dealer, every investment company, and every investment adviser or transfer agent registered with the Commission, must develop, implement, and maintain a comprehensive information security program. Your program must include written policies and procedures that provide administrative, technical, and physical safeguards for protecting personal information, and for responding to unauthorized access to or use of personal information. Your program also must be appropriate to your size and complexity, the nature and scope of your activities, and the sensitivity of any personal information at issue.
(2)*Objectives* . Your information security program must be reasonably designed to:
(i)Ensure the security and confidentiality of personal information;
(ii)Protect against any anticipated threats or hazards to the security or integrity of personal information; and
(iii)Protect against unauthorized access to or use of personal information that could result in substantial harm or inconvenience to any consumer, employee, investor or securityholder who is a natural person.
(3)*Safeguards* . In order to develop, implement, and maintain your information security program, you must:
(i)Designate in writing an employee or employees to coordinate your information security program;
(ii)Identify in writing reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of personal information and personal information systems that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of such information or systems;
(iii)Design and implement safeguards to control the risks you identify, and maintain a written record of your design;
(iv)Regularly test or otherwise monitor, and maintain a written record of the effectiveness of the safeguards' key controls, systems, and procedures, including the effectiveness of:
(A)Access controls on personal information systems;
(B)Controls to detect, prevent and respond to incidents of unauthorized access to or use of personal information; and
(C)Employee training and supervision relating to your information security program.
(v)Train staff to implement your information security program;
(vi)Oversee service providers, and document in writing that in your oversight you are:
(A)Taking reasonable steps to select and retain service providers that are capable of maintaining appropriate safeguards for the personal information at issue; and
(B)Requiring your service providers by contract to implement and maintain appropriate safeguards; and
(vii)Evaluate and adjust your information security program accordingly in light of:
(A)The results of the testing and monitoring required by paragraph (a)(3)(iv) of this section;
(B)Relevant changes in technology;
(C)Any material changes to your operations or business arrangements; and
(D)Any other circumstances that you know or reasonably believe may have a material impact on your information security program.
(4)*Procedures for responding to unauthorized access or use* . At a minimum, your information security program must include written procedures to:
(i)Assess the nature and scope of any incident involving unauthorized access to or use of personal information, and maintain a written record of the personal information systems and types of personal information that may have been accessed or misused;
(ii)Take appropriate steps to contain and control the incident to prevent further unauthorized access to or use of personal information and maintain a written record of the steps you take;
(iii)After becoming aware of an incident of unauthorized access to sensitive personal information, promptly conduct a reasonable investigation, determine the likelihood that the information has been or will be misused, and maintain a written record of your determination;
(iv)If you determine that misuse of the information has occurred or is reasonably possible, notify each individual with whom the information is identified as soon as possible in accordance with paragraph (a)(5) of this section and maintain a written record that you provided notification; provided however that if an appropriate law enforcement agency determines that notification will interfere with a criminal investigation and requests in writing that you delay notification, you may delay notification until it no longer interferes with the criminal investigation; and
(v)If you are a broker or dealer other than a notice-registered broker or dealer, provide written notice on Form SP-30 to your designated examining authority ( *see* 17 CFR 240.17d-1), and, if you are an investment company or an investment adviser or transfer agent registered with the Commission, provide written notice on Form SP-30 to the principal office of the Commission, as soon as possible after you become aware of any incident of unauthorized access to or use of personal information in which:
(A)There is a significant risk that an individual identified with the information might suffer substantial harm or inconvenience; or
(B)An unauthorized person has intentionally obtained access to or used sensitive personal information.
(5)*Notifying individuals of unauthorized access or use* . If you determine that an unauthorized person has obtained access to or used sensitive personal information, and you determine that misuse of the information has occurred or is reasonably possible, you must notify each individual with whom the information is identified in a clear and conspicuous manner and by a means designed to ensure that the individual can reasonably be expected to receive it. The notice must:
(i)Describe in general terms the incident and the type of sensitive personal information that was the subject of unauthorized access or use;
(ii)Describe what you have done to protect the individual's information from further unauthorized access or use;
(iii)Include a toll-free telephone number to call, or if you do not have any toll-free number, include a telephone number to call and the address and the name of a specific office to write for further information and assistance;
(iv)If the individual has an account with you, recommend that the individual review account statements and immediately report any suspicious activity to you; and
(v)Include information about the availability of online guidance from the FTC regarding steps an individual can take to protect against identity theft, a statement encouraging the individual to report any incidents of identity theft to the FTC, and the FTC's Web site address and toll-free telephone number that individuals may use to obtain the identity theft guidance and report suspected incidents of identity theft.
(b)*Disposal of personal information* .—(1) *Standard* . Every broker or dealer other than a notice-registered broker or dealer, every investment company, every investment adviser or transfer agent registered with the Commission, and every natural person who is an associated person of a broker or dealer, a supervised person of an investment adviser registered with the Commission, or an associated person of a transfer agent registered with the Commission, that maintains or otherwise possesses personal information for a business purpose must properly dispose of the information by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal.
(2)*Written policies, procedures and records* . Every broker or dealer, other than a notice-registered broker or dealer, every investment company, and every investment adviser and transfer agent registered with the Commission must:
(i)Adopt written policies and procedures that address the proper disposal of personal information according to the requirements of paragraph (b)(1) of this section; and
(ii)Document in writing its proper disposal of personal information in compliance with paragraph (b)(1) of this section.
(3)*Relation to other laws* . Nothing in this paragraph
(b)shall be construed:
(i)To require any broker, dealer, investment company, investment adviser, transfer agent, associated person of a broker or dealer, supervised person of an investment adviser, or associated person of a transfer agent, to maintain or destroy any record pertaining to an individual that is not imposed under other law; or
(ii)To alter or affect any requirement imposed under any other provision of law to maintain or destroy records.
(c)*Recordkeeping* .
(1)Every broker or dealer other than a notice-registered broker or dealer, every investment company, and every investment adviser or transfer agent registered with the Commission, must make and maintain the records and written policies and procedures required under paragraphs
(a)and (b)(2) of this section. Every broker or dealer other than a notice-registered broker or dealer, and every investment adviser registered with the Commission seeking to rely on the exception in § 248.15(a)(8) must make and maintain the records required by § 248.15(a)(8)(iii).
(2)Starting from when the record was made, or from when the written policy or procedure was last modified, the records and written policies and procedures required under paragraphs
(a)and (b)(2) of this section, and the records made pursuant to § 248.15(a)(8)(iii), must be preserved in accordance with:
(i)17 CFR 240.17a-4(b) by a broker or dealer other than a notice-registered broker or dealer;
(ii)240.17Ad-7(b) by a transfer agent registered with the Commission;
(iii)270.31a-2(a)(4)-(6) by an investment company; and
(iv)275.204-2(e)(1) by an investment adviser registered with the Commission.
(d)*Definitions.* As used in this § 248.30, unless the context otherwise requires:
(1)*Associated person of a broker or dealer* has the same meaning as in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)).
(2)*Associated person of a transfer agent* has the same meaning as in section 3(a)(49) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(49)).
(3)*Consumer report* has the same meaning as in section 603(d) of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)).
(4)*Consumer report information* means any record about an individual, whether in paper, electronic or other form, that is a consumer report or is derived from a consumer report. Consumer report information also means a compilation of such records. Consumer report information does not include information that does not identify individuals, such as aggregate information or blind data.
(5)*Disposal* means:
(i)The discarding or abandonment of personal information; or
(ii)The sale, donation, or transfer of any medium, including computer equipment, on which personal information is stored.
(6)*Information security program* means the administrative, technical, or physical safeguards you use to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle personal information.
(7)*Notice-registered broker or dealer* means a broker or dealer registered by notice with the Commission under section 15(b)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(11)).
(8)*Personal information* means any record containing consumer report information, or nonpublic personal information as defined in § 248.3(t), that is identified with any consumer, or with any employee, investor, or securityholder who is a natural person, whether in paper, electronic, or other form, that is handled or maintained by you or on your behalf.
(9)*Personal information system* means any method used to access, collect, store, use, transmit, protect, or dispose of personal information.
(10)*Sensitive personal information* means personal information, or any combination of components of personal information, that would allow an unauthorized person to use, log into, or access an individual's account, or to establish a new account using the individual's identifying information, including the individual's:
(i)Social Security number; or
(ii)Name, telephone number, street address, e-mail address, or online user name, in combination with the individual's account number, credit or debit card number, driver's license number, credit card expiration date or security code, mother's maiden name, password, personal identification number, biometric record, or other authenticating information.
(11)*Service provider* means any person or entity that receives, maintains, processes, or otherwise is permitted access to personal information through its provision of services directly to a broker, dealer, investment company, or investment adviser or transfer agent registered with the Commission.
(i)*Substantial harm or inconvenience* means personal injury, or more than trivial financial loss, expenditure of effort or loss of time, including theft, fraud, harassment, impersonation, intimidation, damaged reputation, impaired eligibility for credit, or the unauthorized use of information identified with an individual to obtain a financial product or service, or to access, log into, effect a transaction in, or otherwise use the individual's account.
(ii)Substantial harm or inconvenience does not include unintentional access to personal information by an unauthorized person that results only in trivial financial loss, expenditure of effort or loss of time, such as if use of the information results only in your deciding to change the individual's account number or password.
(13)*Supervised person of an investment adviser* has the same meaning as in section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(25)).
(14)*Transfer agent* has the same meaning as in section 3(a)(25) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(25)). 12. Redesignate Appendix A to part 248 as Appendix B to part 248, and revise its heading to read as follows: Appendix B to part 248—Sample Clauses 13. Add new Appendix A to part 248 to read as follows: Appendix A to Part 248—Forms
(1)*Availability of Forms.* Any person may obtain a copy of Form S-P or Form SP-30 prescribed for use in this part by written request to the Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. Any person also may view the forms on the Commission Web site as follows:
(a)Form S-P at: [Web site URL];
(b)Form SP-30 at: [Web site URL].
(2)*Form S-P.* Use of Form S-P by brokers, dealers, and investment companies, and by investment advisers registered with the Commission, constitutes compliance with the notice content requirements of §§ 248.6 and 248.7.
(3)*Form SP-30.* Form SP-30 must be used pursuant to § 248.30(a)(4)(v) as the notice of an incident of unauthorized access to or use of personal information to be filed with the appropriate designated examining authority by brokers or dealers other than notice-registered brokers or dealers, and to be filed with the Commission by investment companies, and by investment advisers and transfer agents registered with the Commission. 14. Add Form SP-30 (referenced in paragraph
(3)of Appendix A to part 248) to read as follows: Note: The text of Form SP-30 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM SP-30 SECURITY INCIDENT REPORTING FORM (Pursuant to § 248.30(a)(4)(v) of Regulation S-P (17 CFR 248.30(a)(4)(v))) 1. Provide identifying information (IARD/CRD number, CIK,* business name, principal business and mailing addresses, and telephone number). * CIK stands for “Central Index Key,” which is the unique number the Commission assigns to each entity that submits filings to it. 2. Provide contact employee (name, title, address, and telephone number). 3. Type of Institution: __Broker-Dealer __Investment Adviser __Investment Adviser/Broker-Dealer (Dual Registrant) __Investment Company __Transfer Agent 4. Describe the security incident ( *e.g.* , unauthorized use of your customers' online trading accounts, unauthorized use of your employee's password to access sensitive personal information maintained on one of your databases, or unauthorized access to your files on an investment company's shareholders):
(a)Provide the date(s) of the incident;
(b)List Registrant's offices, divisions or branches involved;
(c)Describe personal information system(s) compromised;
(d)Describe the incident and identify anyone you reasonably believe accessed or used personal information without authorization or compromised the personal information system(s). 5. Provide information on third-party service provider(s) involved:
(a)Identify any third-party service provider involved;
(b)Describe the services provided;
(c)If the service provider is an affiliate, describe the affiliation;
(d)Describe the involvement of the service provider(s) in the incident. 6. Describe steps taken or that you plan to take to assess the incident. 7. Provide the number of individuals whose information appears to have been compromised:_____ 8. Describe steps you have taken or plan to take to prevent improper use of any personal information that was or may be compromised by the incident. 9. Do you intend to notify affected individuals?
(a)If yes, when?
(b)If no, why not? 10. Describe any steps you have taken or any plan to review your policies and procedures in light of this incident. 11. Describe Customer account losses (to the extent known).
(a)Number of Customer Accounts Accessed: _____
(b)Unauthorized Money Transfers
(i)Initial Customer Losses from Actual or Attempted Unauthorized Transfers: $_____
(ii)Mitigation of Customer Losses from Firm's Efforts
(A)Surveillance/Investigative Intervention: $_____
(B)Recoveries from Receiving Parties: $_____
(C)Firm Compensation to Customers: $_____
(iii)Net Customer Losses: $_____
(c)Unauthorized Changes to Securities Portfolio ( *e.g.* , Pump and Dump Schemes)
(i)Initial Customer Losses from Actual or Attempted Unauthorized Trading
(A)Value of Accounts Before the Unauthorized Trading: $_____
(B)Value of Accounts After the Unauthorized Trading: $_____
(C)Initial Customer Losses/Gains: $_____
(ii)Did the firm return the affected customer accounts to their positions before the unauthorized trading? Yes/No
(iii)Net Customer Losses/Gains: $_____ Dated: March 4, 2008. By the Commission. Nancy M. Morris, Secretary. [FR Doc. E8-4612 Filed 3-12-08; 8:45 am] BILLING CODE 8011-01-P 73 50 Thursday, March 13, 2008 Rules and Regulations Part IV Department of Housing and Urban Development 24 CFR Parts 17 and 180 HUD Office of Hearings and Appeals; Conforming Changes To Reflect Organization Regulations; Final Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Parts 17 and 180 [Docket No. FR-5185-F-01] RIN 2501 AD35 HUD Office of Hearings and Appeals; Conforming Changes To Reflect Organization Regulations AGENCY: Office of the Secretary, HUD. ACTION: Final rule. SUMMARY: This final rule revises HUD's regulations to reflect the organization of HUD's Office of Hearings and Appeals (OHA). HUD has established the Office of Hearings and Appeals within the Office of the Secretary. As a result of the organization of the OHA, the position of the Chief Administrative Law Judge (Chief ALJ) has been eliminated. This rule makes conforming changes to HUD regulations to reflect this change. DATES: *Effective Date:* April 14, 2008. FOR FURTHER INFORMATION CONTACT: David T. Anderson, Director, Office of Hearings and Appeals, Department of Housing and Urban Development, 1707 H Street, NW., Eleventh Floor, Washington, DC 20006; telephone number
(202)254-0000 (this is not a toll-free number). Hearing- or speech-impaired individuals may access this telephone number via TTY by calling the toll-free Federal Information Relay Service at
(800)877-8339. SUPPLEMENTARY INFORMATION: I. Background Section 847 of Title VIII of the National Defense Authorization Act of Fiscal Year 2006 (Pub. L. 109-613, approved January 6, 2006) (2006 NDA Act) established the Civilian Board of Contract Appeals within the General Services Administration and gave it jurisdiction to decide contract disputes from several civilian agencies. The 2006 NDA Act simultaneously terminated the Boards of Contract Appeals of eight federal agencies, including HUD. Because of the statutory transfer of contract appeals adjudicatory responsibilities, and to provide for the non-procurement contract dispute functions performed by the HUD Board of Contract Appeals, HUD has established an Office of Hearings and Appeals
(OHA)within the Office of the Secretary. OHA consists of two separate divisions, under the supervision of the director of OHA: The existing Office of Administrative Law Judges and the Office of Appeals. II. This Final Rule This final rule updates HUD's regulations in 24 CFR part 17, subpart C and 24 CFR part 180, to conform them to the establishment of OHA. Part 17 contains HUD's policies and procedures governing administrative claims, and subpart C of those regulations govern the collection of claims by the government. HUD's regulations at 24 CFR part 180 contain the consolidated hearing procedures for civil rights matters. These HUD regulations contain outdated references to HUD's Chief Administrative Law Judge. That title and position are now obsolete since the establishment of OHA. This final rule updates the HUD regulations to reflect this change. III. Justification for Final Rulemaking Generally, HUD publishes a rule for public comment before publishing a rule for effect, in accordance with HUD's regulations on rulemaking at 24 CFR part 10. Part 10, however, allows in § 10.1 for omission of notice and public comment in cases of statements of policy, interpretive rules, rules governing the Department's organization or internal practices, or if a statute expressly provides for omission of notice and comment. In this case, HUD has determined that prior public comment is unnecessary because this rule is exclusively concerned with the internal procedures of OHA. The regulatory amendments made by the final rule are technical and non-substantive in nature, limited to updating the terminology used in HUD's regulations governing administrative hearings. This rule does not affect the rights or obligations of members of the public, and therefore public comment may be omitted pursuant to § 10.1. IV. Findings and Certifications Impact on Small Entities The Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This final rule does not establish new procedures that would need to be complied with by small entities. Nor does the rule change the procedures that all entities, small and large, must adhere to in the course of certain hearings and appellate review processes. Rather, this final rule makes technical, non-substantive changes to HUD's administrative hearing regulations. Accordingly, the undersigned certifies that this final rule would not have a significant economic impact on a substantial number of small entities. Environmental Impact This proposed rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, nor does it establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this final rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 *et seq.* ). Executive Order 13132, Federalism Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications, if the rule either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This final rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments nor preempt state law within the meaning of the Executive Order. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
(UMRA)establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This final rule does not impose any federal mandates on any state, local, or tribal governments or the private sector within the meaning of UMRA. List of Subjects 24 CFR Part 17 Administrative practice and procedure, Claims, Government employees, Income taxes, Wages. 24 CFR Part 180 Administrative practice and procedure, Aged, Civil rights, Fair housing, Individuals with disabilities, Investigations, Mortgages, Penalties, Reporting and recordkeeping requirements. Accordingly, for the reasons described in the preamble, HUD amends 24 CFR parts 17 and 180, as follows: PART 17—ADMINISTRATIVE CLAIMS 1. The authority citation for part 17 continues to read as follows: Authority: 5 U.S.C. 5514; 31 U.S.C. 3701, 3711, 3716-3720E; and 42 U.S.C. 3535(d). Subpart C—Procedures for the Collection of Claims by the Government 2. The authority citation for subpart C continues to read as follows: Authority: 5 U.S.C. 5514; 31 U.S.C. 3701, 3711, 3716-3720E; and 42 U.S.C. 3535(d). 3. Revise the first sentence in § 17.140 to read as follows: § 17.140 Miscellaneous provisions: correspondence with the Department. The employee shall file an original and one copy of a request for a hearing with the Clerk, Office of Hearings and Appeals, 409 3rd Street, SW., 2nd Floor, Washington, DC 20024, on official work days between the hours of 8:45 a.m. and 5:15 p.m. * * * PART 180—CONSOLIDATED HUD HEARING PROCEDURES FOR CIVIL RIGHTS MATTERS 4. The authority citation for part 180 continues to read as follows: Authority: 29 U.S.C. 794; 42 U.S.C. 2000d-1 3535(d), 3601-3619; 5301-5320, and 6103. § 180.200 [Amended] 5. In § 180.200, remove the second sentence. 6. Amend § 180.210 as follows: a. In paragraph (a), revise the reference to “Chief ALJ” to read “Director of the Office of Hearings and Appeals”; and b. Revise paragraph (c), to read as follows: § 180.210 Withdrawal or disqualification of ALJ.
(c)*Redesignation of ALJ.* If an ALJ is disqualified, another ALJ shall be designated to preside over further proceedings. 7. In § 180.315(b), revise the next to the last sentence to read as follows: § 180.315 Standards of conduct.
(b)* * * An attorney who is suspended or barred from participation may appeal to another ALJ designated by the Director of the Office of Hearings and Appeals. * * * 8. Revise § 180.410(c) to read as follows: § 180.410 Charges under the Fair Housing Act.
(c)*Election of judicial determination.* If the complainant, the respondent, or the aggrieved person on whose behalf a complaint was filed makes a timely election to have the claims asserted in the charge decided in a civil action under 42 U.S.C. 3612(o), the administrative proceeding shall be dismissed. 9. In § 180.445, revise paragraph
(a)and in paragraphs (b)(2) and
(c)revise the references to “Chief ALJ” to read “presiding ALJ” to read as follows: § 180.445 Settlement negotiations before a settlement judge.
(a)*Appointment of settlement judge.* The ALJ, upon the motion of a party or upon his or her own motion, may request the Director of the Office of Hearings and Appeals to appoint another ALJ to conduct settlement negotiations. The order shall direct the settlement judge to report to the presiding ALJ within specified time periods. 10. Revise § 180.545(b) and
(c)to read as follows: § 180.545 Subpoenas.
(b)*Issuance of subpoena.* Upon the written request of a party, the presiding ALJ or other designated ALJ may issue a subpoena requiring the attendance of a witness for the purpose of giving testimony at a deposition or hearing and requiring the production of relevant books, papers, documents or tangible things.
(c)*Time of request.* Requests for subpoenas in aid of discovery must be submitted in time to permit the conclusion of discovery 15 days before the date scheduled for the hearing. If a request for subpoenas of a witness for testimony at a hearing is submitted three days or less before the hearing, the subpoena shall be issued at the discretion of the presiding ALJ, or other designated ALJ as appropriate. Dated: March 5, 2008. Roy A. Bernardi, Deputy Secretary. [FR Doc. E8-5021 Filed 3-12-08; 8:45 am] BILLING CODE 4210-67-P 73 50 Thursday, March 13, 2008 Presidential Documents Part V The President Notice of March 11, 2008—Continuation of the National Emergency With Respect to Iran Title 3— The President Notice of March 11, 2008 Continuation of the National Emergency With Respect to Iran On March 15, 1995, by Executive Order 12957, the President declared a national emergency with respect to Iran pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by the actions and policies of the Government of Iran. On May 6, 1995, the President issued Executive Order 12959 imposing more comprehensive sanctions to further respond to this threat, and on August 19, 1997, the President issued Executive Order 13059 consolidating and clarifying the previous orders. Because the actions and policies of the Government of Iran continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States, the national emergency declared on March 15, 1995, must continue in effect beyond March 15, 2008. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to Iran. Because the emergency declared by Executive Order 12957 constitutes an emergency separate from that declared on November 14, 1979, by Executive Order 12170, this renewal is distinct from the emergency renewal of November 2007. This notice shall be published in the **Federal Register** and transmitted to the Congress. GWBOLD.EPS THE WHITE HOUSE, March 11, 2008. [FR Doc. 08-1032 Filed 3-12-08; 9:14 am]
Connectionstraces to 65
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U.S. Code
CFR
28 references not yet in our index
  • 10 CFR 430
  • 42 USC 6291-6309
  • 10 CFR 430.22
  • Pub. L. 109-58
  • Pub. L. 101-549
  • Pub. L. 91-190
  • Pub. L. 104-4
  • 17 CFR 248
  • 15 USC 6801-6827
  • 15 USC 80a
  • 15 USC 80b
  • 17 CFR 248.1-248
  • 17 CFR 275.206(4)
  • 17 CFR 270.38
  • 17 CFR 240.17
  • 17 CFR 240.15
  • 15 USC 78
  • 44 USC 3501-3520
  • 5 CFR 1320.11
  • 17 CFR 270.31
  • Pub. L. 104-121
  • 110 Stat. 857
  • Pub. L. 109-613
  • 24 CFR 17
  • 24 CFR 180
  • 24 CFR 10
  • 2 USC 1531-1538
  • 50 USC 1701-1706
Citation graph
cites case law
Presidential Documents
Advance notice of proposed rulemaking
U.S.C.§ 6295
U.S.C.§ 6291
C.F.R.§ 430.32
C.F.R.§ 430.2
U.S.C.§ 601
Fed. Reg.Notices
C.F.R.§ 1004.11
U.S.C.§ 4321
U.S.C.§ 3501
Cite10 CFR 430
Cite42 USC 6291-6309
Cite10 CFR 430.22
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