ANNEX 4A: DETAILED COMMENTS ON THE LIFE-CYCLE COST ANALYSIS FOR RESIDENTIAL DISHWASHERS
This annex provides greater detail of the committee’s analysis of the LCC analysis associated with the residential dishwasher’s rulemaking. The information in this annex, contained in two tables, comprises a review of the LCC as described in the Technical Support Document (DOE, 2014). Table 4A.1 summarizes DOE’s approach to estimating each input to the installation cost (IC) estimation for dishwashers and the committee’s recommendation to improve this estimation process by accounting for uncertainty and variability. Table 4A.2 summarizes DOE’s approach for each of the input variables for the operating costs (OC) of dishwashers and also includes recommendations.
REFERENCE
DOE (U.S. Department of Energy). 2014. Technical Support Document: Energy Efficiency Program for Consumer Products and Commercial and Industrial Equipment: Residential Dishwashers. Washington, DC. December. https://www.regulations.gov/document/EERE-2014-BT-STD-0021-0005.
TABLE 4A.1 Review of DOE Approach to Estimate the Value of Installed Costs (ICs) for Residential Dishwashers
Variable | Description/Relevance | DOE Approach | Committee Comments | ||
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Units and Estimate | Method | Data Sources | |||
Baseline Manufacturer Cost in the analysis year | This is the cost to manufacture the baseline dishwasher as estimated during the year DOE conducts the analysis | 2013$ Standard: 203.72 Compact: 187.68 |
Association of Home Appliance Manufacturers | This is a key input into DOE’s analysis. The committee finds that a single-value estimate, with the precision of cents of a dollar, conveys a false sense of certainty around a value that is, in fact, highly uncertain. DOE could provide a range instead of point estimates by propagating the uncertainty on the costs of different materials and labor. Nevertheless, because DOE’s interest is in comparing the baseline with the alternative ELs to find LCC Savings, this value ends up being irrelevant (what really matters is the incremental cost of the ELs). | |
Factor to account for Manufacturer cost declines due to learning, between the analysis year (2013) and the compliance year (2019) | Multiply the Manufacturers cost of year 2013 by this factor to obtain the forecast of manufacturer cost for 2019 in 2015$ | Unitless 0.905 |
DOE derives cost declining annual rates (due to experience or learning) from historical PPI data for other miscellaneous households’ appliances for years 1988-2013 and shipments data by fitting a power-law function | BLS Producer Price Index (PPI) data. GDP Chained Price Index. Data on annual shipments of dishwashers for 1972-2012 |
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Baseline Manufacturer Cost in the compliance year | This is the cost to manufacture the baseline product during the compliance year (i.e., 2019 for dishwashers) | 2015$ Standard: 148.31 Compact: 168.33 |
DOE multiplies the Baseline Manufacturer Costs in the Analysis year by the Factor representing cost reductions due to learning (prior row in this table) | 0.905 x Baseline Manufacturer cost in the compliance year | See recommendations in prior row. |
Manufacturer cost increases from ELs | Add to baseline cost to find the total manufacturer cost of each EL | 2013$ Standard; EL1:9.52 EL2:36.53 EL3:74.72 EL4:74.72 |
From engineering analysis and cost models that involve physically disassembling commercially available products, reviewing publicly available cost | Given that different products already in the market or that will be developed can achieve the same efficiency level through the adoption of different designs and components, it is clear that the manufacturer cost increases will differ among products within the same EL category. The committee recommends adopting one of two possible approaches: |
Variable | Description/Relevance | DOE Approach | Committee Comments | ||
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Units and Estimate | Method | Data Sources | |||
Compact; EL1:8.01 |
and performance information, and modeling equipment cost |
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Manufacturer Markup for Baseline product | Multiply this factor by the Manufacturer Production Cost (MPC) to obtain the final manufacturer price | Unitless 1.24 |
Weighted average of manufacturers’ markup reported in the data source | Securities and Exchange Commission SEC 10-K reports from 2004-2009 for manufacturers of major household appliances whose product offerings include dishwashers |
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Retailer Markup for Baseline | Multiply this factor by the Cost of Goods Sold (CGS) to obtain the final sale price of the baseline product to consumers | Unitless 1.36 |
Use the reported Sales and Gross Margin for Electronics and Appliance stores in year 2007 in the Formula: Baseline Markup = (CGS+GM)/GM or =Sales/GM | 2011 Annual Retail Trade Survey (ARTS)a |
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Variable | Description/Relevance | DOE Approach | Committee Comments | ||
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Units and Estimate | Method | Data Sources | |||
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Incremental Retailer Markup | Multiply this factor by the incremental cost of an EL (relative to the baseline product’s cost), to obtain the retailer price | Unitless 1.11 |
Breakdown Operating Expenses of Electronics and Appliance stores into two categories: invariant and variant + profits. Then apply the formula: IncrementalMarkup=(CG S+VariantCosts+Profits)/ CGS | 2007 Annual Retail Trade Survey Detailed Operating Expenses (ARTS).c The ARTS collects detailed data on Operating Expenses on years ending in 2 and 7 |
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Sales Taxes | Add to the retailer price to obtain the final purchasing cost to consumers | % Varies by state or groups of states |
Find the specific rate according to the state where the household is located | ||
Average Sales Taxes (Population Weighted National Average) | This value is presented in the TSD but not used for the LCC | % 7.11 |
DOE takes the Average Sales Tax Rate for 9 Census Divisions plus the four largest states in year | Sales Tax Clearinghouse http://thestc.com/STrates.stm |
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Variable | Description/Relevance | DOE Approach | Committee Comments | ||
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Units and Estimate | Method | Data Sources | |||
2014 and weights them by population in 2013 to obtain an average for the whole country |
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Installation cost | Add to the consumer product price to obtain total Installed Costs (IC) | 2013$ 2015$ 149.5 157.93 |
DOE equates labor costs to installation costs. DOE obtains Labor costs with overhead and profits by subtracting material costs from total costs | RS Means. Residential Cost Data 2013f | Because DOE is estimating LCC Savings and assuming installation costs are the same for all products, this value is irrelevant, because it cancels out in the calculation of savings. When DOE estimates LCC savings from a newly purchased baseline product, it should account for the variation of labor costs by state, rather than assuming a single value for the entire country. In the Monte Carlo simulation, DOE can use the information on the state (or group of states) where the RECS household is located to retrieve the corresponding installation costs. |
NOTE: ARTS = annual retail trade survey; BLS = Bureau of Labor Statistics; CGS = cost of goods sold; EL = efficiency level; GDP = gross domestic product; GM = gross margin; LCC = life-cycle cost; RECS = Residential Energy Consumption Survey.
a https://www.census.gov/data/tables/2011/econ/arts/annual-report.html.
b The minimum markup value was observed in 2011, the average value was observed in 2007, the maximum value was observed in 1993 (the first year for which there is data in this ARTS report), while values very close to the average were observed in 1995, 2007 and 2009.
c https://www.census.gov/data/tables/2007/econ/arts/detailed-operating-expenses.html.
d https://taxfoundation.org/state-and-local-sales-tax-rates-2014/ Table 1. State and Local Sales Tax Rates as of January 1, 2014.
e https://www.census.gov/data/datasets/2014/demo/saipe/2014-state-and-county.html.
f See p. 672 of Gordian. 2013. “RS Means. Residential Cost Data 2013: 32nd Annual Edition.” Kingston, MA: Gordian.
TABLE 4A.2 Review of DOE Approach to Estimating the Value of Operating Costs (OCs) for Dishwashers
Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
Number of cycles per year | Number of times that a dishwasher completes an operational cycle in a year | Cycles/year Varies by household and Monte Carlo run |
A random draw from a distribution depending on the answer provided by the household in RECS:
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RECS |
So far as probability distributions continue to be used, the committee recommends:
*The title of Table 7.4.1. “RECS dishwasher Usage data” is misleading. This title is appropriate to describe the content in columns 1-3 but gives the wrong impression that the probability distributions of column 4 are also part of data collected or directly inferred from RECS. Also, it is unclear if the probability distributions presented in column four already account for the adjustment of the total average of cycles per year, form 171 (as obtained from the 2009 RECS) to 215 (as obtained from Little [2001]). |
Average number of cycles per year | This number is used to translate the estimate of annual energy consumption of an EL into per cycle energy consumption and to adjust the RECS data to obtain an average of | Cycles/year 215 |
DOE bases this estimate on a survey of 26,000 households conducted by Arthur D. Little in 2001 | Arthur D. Little (2001). Review of Survey Data to Support Revisions to DOE’s Dishwasher Test Procedure. December 12, 2001. Prepared for the U.S. Department of Energy by Arthur D. Little, Cambridge, MA. |
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Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
cycles per year deemed to be more accurate |
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Duration of the average dishwashing cycle | This value is necessary to estimate the number of Standby hours per year | Hours 1 |
The caption of Tables 7.2.3 and 7.2.4 imply DOE assumes the average dishwashing cycle for all Standard Dishwashers and Compact dishwashers is 1 hour | Section 5.5.2.3 of the Engineering Analysis states that DOE expects manufacturers of EL2 to increase the duration of the cycle to compensate for decreased water use and maintain washing performance with improved efficiency. Given that DOE expects ELs 3 and 4 to improve upon the design options of EL2, it is quite likely that in practice, cycle duration will be different from 1 hour, depending on the dishwasher options and the consumer preferences. While the duration of a cycle has a direct impact on the estimation of standby energy consumption, it has a small impact on the operating costs of the dishwasher. Nevertheless, a more rigorous estimation of this number in the engineering analysis would benefit from an improvement in the presentation of the engineering analysis, which would characterize different cycles available at the different ELs and for each cycle, specify its duration, energy and water consumption. | |
Standby Power Use | Necessary to estimate Standby Energy Use | Watts | Tables 7.2.1. and 7.2.2 present estimates of the Standby Power for the baseline and EL of standard |
Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
Standard: Baseline: 0 EL1-EL4: 0.5 Compact: Baseline 2.3 EL1: 1.7 EL2: 0.5 |
and of compact dishwashers without providing any reference. Presumably standby power consumption is measured in some existing models and assumed to stay unchanged for others but for transparency DOE should state the conditions of the test and the assumptions about Standby Power estimates. In particular, it would be useful to explain the great discrepancy in standby power use between the Standard and the Compact product classes. | ||||
Standby hours per year | This value is necessary to estimate the Annual Standby Energy Use | Hours/yr 8551 |
DOE estimates the number of Standby hours by assuming there are 8766 hours in 1 year, and assuming the dishwashers are run for 215 cycles per year, each taking an average of 1 hour to be complete. Therefore the number of standby hours is 8766-215=8551. | DOE should characterize the Standby hours per year based on the characterization of the cycles for each EL. By assuming that all cycles last 1 hour, DOE may be overestimating the standby energy consumption from EL1, EL2, EL3, and EL4. According to the estimates presented, Standby energy represents less than 3% of the annual energy consumed by the Standard dishwashers and between 3% and 8% of the compact models. | |
Annual Standby Energy Use | This value is subtracted from Annual Energy Use to obtain Per-cycle Energy Use | kWh/yr Standard Baseline 0 EL1-EL4: 4.3kWh/yr Compact Baseline 19.7 EL1 14.5 EL2 4.3 |
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Annual Energy Use dedicated to Dishwashing Only. (I.e., total energy consumption minus standby energy consumption) | This is the energy consumed by the dishwasher to operate (i.e., heat water, operate the motors and dry the dishes) | kWh/yr Standard Baseline: 307 EL1: 290.7 EL2: 275.7 EL3: 229.7 EL4: 175.7 Compact: Baseline: 204.3 |
Subtract the estimate of Standby Annual Energy consumption from the Estimate of Annual Energy Use (kWh/yr) | This intermediate quantity is not reported explicitly in the TSD but can be calculated from Tables 7.3.1 and 7.3.2 |
Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
EL1: 188.5 EL2: 136.7 |
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Per-cycle energy use for each EL | Average energy used by a dishwasher per cycle of operation. Calculated for each EL. | kWh/cycle Standard; Baseline 307/215 EL1: 290.7 EL2:275.7 EL3:229.7 EL4:175.7 Compact: Baseline: 19.7 EL1: 14.5 EL2: 4.3 |
Divide Annual Energy Use Dedicated to Dishwashing Only by the Number of Cycles in a Year Standard; Baseline 307/215 EL1: 290.7/215 EL2:275.7/215 EL3:229.7/215 EL4:175.7/215 Compact: Baseline: 204.3/215 EL1: 188.5/215 EL2: 136.7/215 |
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Per-cycle Water Heating Energy Consumption | This estimate is necessary to calculate the operating costs of a dishwasher taking into account different sources of energy for water heating (e.g. electricity, gas, oil) | kWh/cycle Standard: Baseline 0.82 EL1 0.7 EL2 0.58 EL3 0.51 EL4 0.37 Compact: |
Assume the use of an electric water heater with 100% efficiency and multiply the per-cycle water consumption by an assumed temperature rise of 70F (21C) and a specific heat of 0.0024 kWh/gal-F (4.186 joule/gram-C) | Per-cycle water use (gallons/cycle) from the engineering analysis. |
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Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
Baseline 0.58 EL1 0.51 EL2 0.33 |
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Per-cycle energy use for machine and drying (motor energy for pumping water and electrical heating element for dish drying) | This value is reported for the baseline and each EL in tables 7.2.3 and 7.2.4 but does not play any role in the LCC calculations | kWh/cycle Compact; BL: 0.36 EL1 0.37 EL2 0.31 |
Subtract the Per-cycle Water-heating Energy Consumption from the per-cycle Energy Consumption | This value is not used in any LCC or PBP calculation | |
Annual Water Use | Intermediate calculation | Gal/yr Standard; BL:1075 EL1:914 EL2:753 EL3:667 EL4:477 Compact; BL: 753 EL1: 667 EL2: 430 |
Multiply per-cycle Water Consumption by Number of Cycles in a year | Per-cycle Water Consumption from Engineering Analysis and Number of cycles from Little (2001) | |
Annual Energy Consumption for water heating when Electric, Gas or Oil heaters are used | Necessary to estimate the cost of water heating for the baseline and ELs as a function of prices of electricity, gas and oil. The energy consumption for water heating reported by DOE is 44%-57% of the total energy consumed by | kWh/yr for electric water heaters MMBtu/yr for gas and oil water heaters. Standard Electric |
The caption of Tables 7.3.1 and 7.3.2 indicates that the calculation assumes water heater efficiencies of 98% electric, 80% for gas and 78% for oil. |
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Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
dishwashing operation for the standard models and 5%-56% for the compact models | BL: 177, EL1: 150, EL2:124, EL3:110, EL4:79. Gas: BL:0.74, EL1:0.63, EL2:0.52, EL3: 0.46, EL:4 0.33. Oil; BL:0.76, EL1:0.64, EL2:0.53, EL3:0.47, EL4:0.34 |
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Electricity prices in the analysis year | Annual average residential electricity price in 2012 | 2013$/kWh A different value for each of the 27 RECS regions |
Estimate annual average residential electricity prices for each of 27 RECS regions by weighting the annual residential electricity price for a utility by the number of households served in a region | EIA Form 861 which contains, for every utility serving final consumers, annual electricity sales, revenues from electricity sales, number of customers in each sector. | DOE should use the monthly average electricity prices to residential customers by state calculated by EIAa. Multiply monthly electricity prices in each state by monthly electricity consumption in each state to obtain state-specific, monthly electricity costs. |
Natural Gas Prices in the analysis year | Annual average of natural gas residential prices in 2012 | 2013$/MMBtu A different value for each of the 27 RECS regions | Estimate annual average of prices by state and then estimate the average price in the RECS region weighting each state in the region by its number of households | EIA publication, Natural gas Navigator which presents monthly averages of volumes of natural gas deliveries and prices by state. | Residential natural gas prices are likely to be higher than industrial and commercial prices. By using an average of the price for the three sectors, DOE is likely underestimating natural gas costs to residential customers. DOE should adjust the monthly average of natural gas prices by state for all sectors based on the relative difference between national residential, commercial and industrial monthly prices reported by EIA in its natural gas monthly publicationb |
Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
LPG prices in the analysis year | Annual average of LPG prices for residential customers in 2012 | 2013$/MMBtu A different value for each of the 27 RECS regions | Estimate average price in the RECS region by weighting each state in the region by its number of households | EIA’s 2012 State Energy Consumption Price and Expenditures Estimates (SEDS). | DOE should use monthly residential prices of propane by state provided by EIAc to estimate monthly energy costs for households with LPG water heaters. Then use monthly prices by state/region to estimate monthly energy costs. |
Oil prices in the year of analysis | Annual average residential oil prices in 2012 | 2013$/MMBtu A different value for each of the 27 RECS regions | Estimate average price in the RECS region by weighting each state in the region by its number of households | EIA’s 2012 State Energy Consumption Price and Expenditures Estimates (SEDS). | DOE should use monthly residential prices of heating oil by state provided by EIAd to estimate monthly energy costs for households with LPG water heaters. Then use monthly prices by state/region to estimate monthly energy costs. |
Water prices | Annual average of water prices in 2012 | 2013$/thousand gallons A different value for each of the four census regions (Northeast, Midwest, South and West) |
Due to small sample size of utilities in the survey, DOE estimates water volumetric prices for the four U.S. Census Regions. It first finds a volume weighted average price by state and then finds a regions price by weighting states averages by the state’s population | Water and Wastewater Rate Survey conducted by Raftelis Financial Consultants and the American Water Works Association with data from 290 water utilities and 214 wastewater utilities on fixed and volumetric charges. | There is numerosity and heterogeneity of the municipal water supply industry, and the surveys may suffer from response bias. Nonetheless, there are not better sources for data than those used by DOE. |
Future changes in electricity, natural gas, LPG and oil prices | Necessary to project electricity prices for the compliance year (2019) and 20 years beyond (i.e., through 2040) | Unitless For each fuel, one value for each year between 2012 and 2019 and another value for all years between 2030 and 2040 |
DOE calculates annual changes in prices forecast by the AEO 2014 reference case for the period 2012-2040. Then for all of the years between 2030 and 2040 it assigns the average annual change for the period | Annual Energy Outlook 2014 reference case. | DOE should account for uncertainty on future energy prices by considering the AEO projections under the low economic growth and high economic growth cases. DOE can assume that each of the AEO cases has equal likelihood and can sample accordingly in its Monte Carlo simulation. DOE can also look retrospectively at AEO projections, estimate their error and apply that error to current projections to obtain an upper and lower bound estimate. |
Future changes in water (and waste water) prices | Necessary to project water prices for the compliance year (2019) and 20 years beyond (i.e., through 2040) | Unitless One value of annual price change for all of the projection years |
DOE estimated the linear growth in water prices from 1970 through 2012 and extrapolated the trend to forecast prices through 2048 | National U.S. city average water price index from 1970 through 2012. | U.S. city data are only sources available. |
Repair and maintenance cost | Lack of data force DOE to assume that there are no incremental costs in repair or maintenance from changes in product efficiency |
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Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
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Product lifetime | Necessary to estimate operating costs for the entire lifetime of the product | Years Weibul distribution with shape parameter 16.25, and location parameter 2.18 estimated in Crystal Ball by using the inputs: average=15.4 years, minimum=5 years and maximum=50 years |
DOE adjusts RECS data to reflect use outside of primary residence based on AHS data and also takes into account shipments data from the Appliance magazine and trade associations DOE takes as maximum the 99th percentile |
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Variable | Description/Relevance | DOE Approach | Committee’s Comments | ||
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Units and Estimate | Method | Data Sources | |||
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Discount rates | Necessary to find the present value of Operating Costs of the dishwasher | % One probability distribution (30 bins) for each of 6 Income groups. Income groups: 1: 1-20 percentile, 2: 21-40 percentile, 3: 41-60 percentile, 4: 61-80 percentile, 5: 81-90 percentile, and 6: 90-99 percentile) |
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certificate of deposit, saving bonds. and AAA corporate bonds. Rate of return on stocks from Standard and Poor’s S&P 500. |
The committee finds DOE’s approach reasonable. |
NOTES: BL = baseline level; EL = efficiency level; kWh = kilowatt-hour; LCC = life-cycle cost; LPG = liquefied petroleum gas; mmBtu = million British thermal units; PBP = payback period; RECS = Residential Energy Consumption Survey; SCF = standard cubic feet. See A.D. Little, 2001, Review of Survey Data to Support Revisions to DOE’s Dishwasher Test Procedure, Prepared for the U.S. Department of Energy, Cambridge, MA, December 12.
a For example, monthly prices for April 2020 are reported in Table 5.6.A in Electric Power Monthly, “Average Price of Electricity to Ultimate Customers by End-Use Sector,” https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a.
b See, for example, Table 3 in “Selected national average natural gas prices, 2015‐2020” in the Natural Gas monthly, June 2020, https://www.eia.gov/naturalgas/monthly/pdf/table_03.pdf.
c For example Weekly Propane Prices (October-March) for residential customers is provided at https://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPLLPA_PRS_dpgal_w.htm.
d For example Weekly Heating Oil Prices (October-March) for residential customers is provided at https://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPD2F_PRS_dpgal_w.htm.