### 202-234-4433 **Neal R. Gross & Co., Inc. Page 1**  **US DEPARTMENT OF ENERGY + + + + +**  **PUBLIC MEETING ON PROPOSED WAIVER PROCESS FOR GRID CONNECTED LARGE-VOLUME**  **ELECTRIC STORAGE WATER HEATERS + + + + +**  **FRIDAY MARCH 15, 2013** 

**+ + + + + The meeting came to order in room**  **8E-089, 1000 Independence Avenue, SW, Washington, D.C., at 9:00 a.m., Doug Brookman,**  **Facilitator, presiding. PRESENT**  **DOUG BROOKMAN, Public Solutions, Inc. ARI ALTMAN, Department of Energy**  **ASHLEY ARMSTRONG, Department of Energy LAURA BARHYDT, Department of Energy**  **JOHN CYMBALSKY, Department of Energy**

**ALSO PRESENT**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 2**  **JIMMY BAKER, Palmetto Electric Cooperative Inc.**  **SCOTT BAKER, PJM TIMOTHY BALLO, EarthJustice**  **MICHAEL T. BEYERLE, GE Appliances SAMUEL R. BRUMBERG, Association of Electric**  **Cooperatives DONALD M. BRUNDAGE, Southern Company**  **MARKUS BRYANT, Lorain-Medina Rural Electric Cooperative, Inc.**  **ADAM DARLINGTON, Navigant Consulting KEITH DENNIS, National Rural Electronic**  **Cooperative Association DON FLYNN, Vaughn Thermal Corporation**  **CRAIG GLAZER, PJM BARRY L. GLOVER, Aiken Electric Cooperative,**  **Inc. DAVE GRAVES, Eau Claire Energy Cooperative**  **PENELOPE HINSON, Horry Electric Cooperative DERRIL HOLLY, National Rural Electric**  **Cooperative Association TOM HOLT, East River Electric**  **AMY HOUSTON BRYAN, Jackson Electric Membership Corporation**  **MICHAEL HYLAND, American Public Power Association**  **LINDA KING, Northwestern REC STEVEN KOEP, Vaughn Thermal Corporation**  **ALEX LEKOV, Ph.D., Lawrence Berkeley National Laboratory**  **DAVID LOGERMAN, Central Electric Power Cooperative**  **JEREMY MAHOWALD, Cass County Electric Cooperative**  **JAY MORRISON, National Rural Electric Cooperative Association**  **DAVID MOHRE, National Rural Electric Cooperative Association**  **DOUG PAYNE, Fairfield Electric EDDIE PLOWDEN, Berkeley Electric Cooperative**  **JEFF PRATT, Oglethorpe Power STEVEN ROSENSTOCK, Edison Electric Institute**  **JEFF SPRINGER, Dairyland Power Cooperative FRANK STANONIK, AHRI** 

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 3**  **PAUL STEFFES, Steffes Corporation ALLEN WICHER, Rheem Water Heating**  **JAMES COLEMAN, Shelby Electric Cooperative GARY CONNETT, Great River Energy**  **EARL JONES, General Electric ALEX BOESENBERG, NEMA**  **CATHERINE RIVEST, Navigant Consulting ROBIN ROY, NRDC**  **THOMAS ZIMMER, GE HARVEY SACHS, Natural Resources Defense**  **Council EDWARD SHORT, Power South Energy**  **ALEX HOFMANN, American Public Power Association**  **EDDIE PLOWDEN, Berkeley Electrical Cooperative JOHN COFFEY, Shenandoah Valley Electric**  **Cooperative**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 4**  **TABLE OF CONTENTS Welcome and Introductions, Doug Brookman 6**  **Welcome and Overview, John Cymbalsky 15 Opening Remarks from Industry**  **Representatives: Scott Baker, PJM Interconnection 19**  **Jay Morrison, NRECA 25 Alex Hofman American Public Power**  **Association 28 David Logerman, Central Electric Power**  **Cooperative, Columbia, SC 29 Linda King, Northwestern REC 35**  **Barry Glover, Aiken Electric Cooperative 40 Sam Brumberg, Virginia, Maryland, and**  **Delaware Association of Electric Cooperatives 45**  **John Coffey, Shenandoah Valley Electric Cooperative 54**  **Jim Coleman, Shelby Electric Cooperative, Shelbyville, Illinois 59**  **Jeff Pratt, Oglethorpe Power Corporation 63 Steven Koep, Vaughn Thermal Corporation 66**  **Markus Bryant, Lorain-Medina Rural Electric Cooperative 70**  **Doug Payne, Fairfield Electric Cooperative 76**  **Penelope Hinson, Horry Electric Cooperative 78**  **Gary Connett, Great River Energy 83 Robin Roy, Natural Resources Defense**  **Council 89 Edward Short, Power South Energy 94**  **Tom Holt, East River Electric Power Cooperative 96**  **Dave Graves, Eau Claire Energy Cooperative 102**  **Jeff Springer, Dairyland Power Cooperative 107**  **Jeremy Mahawold, Cass County Electric 110 Jimmy Baker, Palmetto Electric** 

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 5**  **Cooperative 115 Amy Bryan, Jackson EMC 121**  **Eddie Plowden, Berkeley Electric Cooperative 125**  **Paul Steffes, Steffes Corporation 129 Earl Jones, General Electric 132**  **Tom Zimmer, General Electric 136 Harvey Sachs, ACEEE 144**  **Tim Ballo, EarthJustice 150 Presentation: Ashley Armstrong, DOE 153**  **Discussion follows each segment of the presentation.**  **Closing Remarks: Jay Morrison, NRECA 242**  **Adjourn**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 6**  **1 P-R-O-C-E-E-D-I-N-G-S**  

### 2 **9:00 a.m.** 

### 3 **MR. BROOKMAN: So let us begin.** 

### 4 **Good morning, everyone, and welcome. This is** 

### 5 **the United States Department of Energy public** 

### 6 **meeting on proposed waiver process for grid** 

### 7 **connected large-volume electric storage water** 

### 8 **heaters.** 

### 9 **Today is Friday, March 15, 2013** 

### 10 **here at the Department of Energy, the** 

### 11 **Forrestal Building in Washington, D.C.** 

### 12 **My name is Doug Brookman from** 

### 13 **Public Solutions in Baltimore. I'm glad to** 

### 14 **have you all here.** 

### 15 **We typically start with** 

### 16 **introductions and I'll start to my immediate** 

### 17 **left. You can get used to turning the** 

### 18 **microphone on and off and getting it close to** 

### 19 **your face.** 

### 20 **MR. JONES: Good morning. Earl** 

### 21 **Jones, senior counsel at GE Appliances and** 

### 22 **Lighting.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 7**  **1 2**  **MR. HOFMANN: Alex Hofman, staff** 

### 3 **at American Public Power Association.** 

### 4 **MR. J. BAKER: Jimmy Baker, Vice** 

### 5 **President of Marketing and Public Relations** 

### 6 **for Palmetto Electric Cooperative in South** 

### 7 **Carolina.** 

### 8 **MR. STEFFES: Paul Steffes with** 

### 9 **Steffes Corporation in Dickinson, North** 

### 10 **Dakota.** 

### 11 **MR. MORRISON: Jay Morrison, VP of** 

### 12 **Regulatory for NRECA.** 

### 13 **MR. S. BAKER: Scott Baker,** 

### 14 **Business Solutions Analyst at PJM** 

### 15 **Interconnection.** 

### 16 **MR. WICHER: Allen Wicher, Manager** 

### 17 **of Industry Relations, Rheem Manufacturing** 

### 18 **Company.** 

### 19 **MR. GRAVES: Dave Graves with Eau** 

### 20 **Claire Energy Cooperative, Fall Creek,** 

### 21 **Wisconsin.** 

### 22 **MS. KING: Linda King, Vice**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 8**  **1 President of Marketing and Business**  

### 2 **Development at Northwestern Rural Electric** 

### 3 **Cooperative.** 

### 4 **MR. CONNETT: Gary Connett with** 

### 5 **Great River Energy up in Maple Grove,** 

### 6 **Minnesota. Director of Demand Side** 

### 7 **Management.** 

### 8 **MS. BRYAN: Amy Bryan, Director of** 

### 9 **Residential Marketing with Jackson EMC.** 

### 10 **MR. PRATT: Jeff Pratt, Director** 

### 11 **of Energy Efficiency for Oglethorpe Power in** 

### 12 **Georgia and President of Green Power EMC.** 

### 13 **MR. LOGERMAN: David Logerman,** 

### 14 **Director of Power Supply, Central Electric** 

### 15 **Power Cooperative, Columbia, South Carolina.** 

### 16 **MR. BRUMBERG: Good morning. Sam** 

### 17 **Brumberg, counsel to the Virginia, Maryland,** 

### 18 **and Delaware Association of Electric** 

### 19 **Cooperatives.** 

### 20 **MR. SHORT: Ed Short, CEO of** 

### 21 **Covington Electric Co-op speaking for Power** 

### 22 **South Energy.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 9**  **1 MR. ROY: Robin Roy, Natural**  

### 2 **Resources Defense Council.** 

### 3 **MR. SACHS: Harvey Sachs, American** 

### 4 **Council for an Energy Efficient Economy.** 

### 5 **MR. STANONIK: Frank Stanonik, Air** 

### 6 **Conditioning, Heating, Refrigeration** 

### 7 **Institute.** 

### 8 **MR. ALTMAN: Ari Altman with the** 

### 9 **Department of Energy's General Counsel's** 

### 10 **Office.** 

### 11 **MS. BARHYDT: Laura Barhydt,** 

### 12 **Assistant General Counsel for Enforcement at** 

### 13 **DOE.** 

### 14 **MS. ARMSTRONG: Ashley Armstrong,** 

### 15 **DOE Buildings.** 

### 16 **MR. CYMBALSKY: John Cymbalsky,** 

### 17 **Program Manager for Building Codes and** 

### 18 **Appliance Standards at DOE.** 

### 19 **MR. DARLINGTON: Adam Darlington,** 

### 20 **Navigant Consulting.** 

### 21 **MR. LEKOV: Alex Lekov, Lawrence** 

### 22 **Berkeley National Laboratory.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 10**  **1 MS. RIVEST: Catherine Rivest,**  

### 2 **Navigant Consulting.** 

### 3 **MR. BROOKMAN: Let's start with** 

### 4 **you. Please stand up.** 

### 5 **MR. MAHOWALD: Jeremy Mahowald,** 

### 6 **Cass County Electric Cooperative, Fargo, North** 

### 7 **Dakota.** 

### 8 **MR. SPRINGER: Jeff Springer with** 

### 9 **Dairyland Power in La Crosse, Wisconsin.** 

### 10 **MR. PLOWDEN: Eddie Plowden,** 

### 11 **Northwest Cooperative, marketing manager.** 

### 12 **MR. PAYNE: Doug Payne, Fairfield** 

### 13 **Electric Cooperative, Blythewood, South** 

### 14 **Carolina.** 

### 15 **MR. GLOVER: Barry Glover, Aiken** 

### 16 **Electric Cooperative, Inc.** 

### 17 **MS. HINSON: Penelope Hinson,** 

### 18 **Horry Electric Cooperative in Conway, South** 

### 19 **Carolina.** 

### 20 **MR. HOLT: Tom Holt, East River** 

### 21 **Electric Power Cooperative, Madison, South** 

### 22 **Dakota.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 11**  **1 MR. GLAZER: Thank you. Craig**  

### 2 **Glazer with PJM Interconnection.** 

### 3 **MR. KOEP: Good morning, Steve** 

### 4 **Koep with Vaughn Thermal Corporation in** 

### 5 **Salisbury, Mass.** 

### 6 **MR. FLYNN: Good morning. Don** 

### 7 **Flynn, Vaughn Thermal Corporation, Salisbury,** 

### 8 **Massachusetts.** 

### 9 **MR. HOLLY: Good morning, Derril** 

### 10 **Holly, NRECA.** 

### 11 **MR. COFFEY: John Coffey,** 

### 12 **Shenandoah Valley Electric Cooperative.** 

### 13 **MR. COLEMAN: Jim Coleman, Shelby** 

### 14 **Electric Cooperative representing Illinois** 

### 15 **Electric Cooperatives.** 

### 16 **MR. DENNIS: Keith Dennis with** 

### 17 **NRECA.** 

### 18 **MR. BEYERLE: Mike Beyerle, GE** 

### 19 **Appliances and Lighting.** 

### 20 **MR. BRYANT: Markus Bryant,** 

### 21 **General Manager of the Lorain-Medina Rural** 

### 22 **Electric Cooperative and the more central**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 12**  **1 electric cooperatives in Ohio and also**  

### 2 **representing Buckeye Power.** 

### 3 **MR. MOHRE: David Mohre, NRECA.** 

### 4 **MR. HYLAND: Mike Hyland, American** 

### 5 **Public Power Association.** 

### 6 **MR. BALLO: Tim Ballo, Earth** 

### 7 **Justice.** 

### 8 **MR. FOSTER: Chuck Foster. Foster** 

### 9 **and Jamison.** 

### 10 **MR. BRUNDAGE: Don Brundage,** 

### 11 **Southern Company.** 

### 12 **MR. ROSENSTOCK: Steve Rosenstock,** 

### 13 **Edison Electric Institute.** 

### 14 **MR. BROOKMAN: Thank you. And** 

### 15 **please.** 

### 16 **MR. ZIMMER: Tom Zimmer, General** 

### 17 **Electric, Louisville, Kentucky.** 

### 18 **MR. BROOKMAN: Thank you. Are we** 

### 19 **missing anyone? Well, again, welcome. Glad** 

### 20 **to have you here this morning. I'm going to** 

### 21 **do a very brief agenda review. And then** 

### 22 **following that, John Cymbalsky is going to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 13**  **1 provide a little bit of introduction and**  

### 2 **overview. After that, there's an opportunity** 

### 3 **for opening remarks, short, summary remarks** 

### 4 **from anybody that wishes to do so. And as I** 

### 5 **understand it, 29 individuals or so have** 

### 6 **requested to make an opening statement. We'll** 

### 7 **get into that in more detail.** 

### 8 **Following those opening remarks,** 

### 9 **we'll take a mid-morning break around about 11** 

### 10 **o'clock or so and then from there we'll be** 

### 11 **going into the details of the materials that** 

### 12 **you received when you came in the door:** 

### 13 **regulatory history, rulemaking overview,** 

### 14 **discussion of the issue. Following that,** 

### 15 **options and proposed action and another** 

### 16 **opportunity at the end of the day for closing** 

### 17 **remarks, and specifically how you can** 

### 18 **participate in sending in comments and the** 

### 19 **like, the details on that. That's the general** 

### 20 **plan. Any comments on that? I see none.** 

### 21 **I would ask for your consideration** 

### 22 **in the conduct of these meetings; for many**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 14**  **1 years, it's been easier for us to observe**  

### 2 **these courtesies. Please speak one at a time.** 

### 3 **Please say your name for the record each time** 

### 4 **you speak. There will be a complete** 

### 5 **transcript of this meeting made available. If** 

### 6 **you could keep the focus here, please turn** 

### 7 **your cell phones on silent mode if you haven't** 

### 8 **already done so. Please limit sidebar** 

### 9 **conversations. You've already gotten used to** 

### 10 **turning that microphone on and off. That will** 

### 11 **be necessary.** 

### 12 **If you can be concise, share the** 

### 13 **air time. There's a lot to be said here** 

### 14 **today. If you could keep your comments** 

### 15 **focused, that would be very, very helpful.** 

### 16 **I'll be queuing individuals as best I can by** 

### 17 **name. I also wish to encourage individuals** 

### 18 **who follow on to go back and forth. Sometimes** 

### 19 **the point, counterpoint can be very useful for** 

### 20 **the Department.** 

### 21 **And for webinar participants,** 

### 22 **Jack, how many webinar participants?**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 15**  **1 MR. GRAUL: Thirty-four.**  

### 2 **MR. BROOKMAN: Thirty-four webinar** 

### 3 **participants. Glad to have you joining us.** 

### 4 **The Department is trying hard to make these** 

### 5 **meetings accessible to folks via the web. If** 

### 6 **you could keep your cell phones on mute and** 

### 7 **you can raise your hand if you wish to** 

### 8 **participate or ask questions in this** 

### 9 **conversation.** 

### 10 **I think that's all the preliminary** 

### 11 **stuff. Are you going to do a few lead-off** 

### 12 **slides?** 

### 13 **John Cymbalsky for a welcome and** 

### 14 **overview.** 

### 15 **MR. CYMBALSKY: Thanks, Doug.** 

### 16 **John Cymbalsky, DOE. First, let me welcome** 

### 17 **everybody here to the public meeting. Given** 

### 18 **the attendance and the number of people who** 

### 19 **requested to speak, I guess we could all agree** 

### 20 **that this is an important issue to everybody** 

### 21 **in the room as it is to the Department.** 

### 22 **I'd like to thank, in particular,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 16**  **1 PJM, NRECA, and the others who brought this to**  

### 2 **our attention, met with us with ex parte** 

### 3 **communication meetings over the past several** 

### 4 **months to try to help frame up what we** 

### 5 **consider the issue here. The Department** 

### 6 **recognizes this set of circumstances for this** 

### 7 **appliance. We've also promulgated a standard.** 

### 8 **So I think we're trying to thread a small** 

### 9 **needle here with this proposal and so we're** 

### 10 **here today to take comment on that.** 

### 11 **I would request those of you who** 

### 12 **are going to speak try to keep it to three** 

### 13 **minutes, if you can. I know a lot of you are** 

### 14 **passionate about this and probably have a lot** 

### 15 **to say. But if we could all cooperate, I** 

### 16 **think we'll get through it.** 

### 17 **And then again, welcome. Let's** 

### 18 **have a productive meeting. Hopefully, we can** 

### 19 **get out of here, we're thinking about 1** 

### 20 **o'clock if things go smoothly.** 

### 21 **MR. BROOKMAN: Thank you. I have** 

### 22 **a list in front of me, 29 individuals. One or**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 17**  **1 two haven't made it, I understand. That's**  

### 2 **still a lot of individuals. It doesn't take a** 

### 3 **lot of fancy math to figure out if those of** 

### 4 **you that wish to speak for five or ten** 

### 5 **minutes, we're going to be here a long time.** 

### 6 **So let me ask pointedly, how many** 

### 7 **of you will not be able to conform to two or** 

### 8 **three minutes. Just tell me now. How much** 

### 9 **time do you need? Four minutes. How about** 

### 10 **you? Four. You? Four. Okay. Gentleman?** 

### 11 **Four. Five to seven. So you get six. That** 

### 12 **will work out.** 

### 13 **(Off mic comments.)** 

### 14 **Would you like to do that early on** 

### 15 **or would you like to do that in the context of** 

### 16 **these slides? It might work out better.** 

### 17 **Okay, we've already worked that out. Okay.** 

### 18 **So then let's embark upon this and** 

### 19 **try and be concise and share the air time.** 

### 20 **The first person that I have --** 

### 21 **MR. CYMBALSKY: Before we do** 

### 22 **opening remarks, let's just get this slide out**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 18**  **1 of the way. So when we go through the**  

### 2 **presentation, we'll see these yellow comment** 

### 3 **boxes and that's when we'll open up the floor** 

### 4 **for comment on issues that we think are very** 

### 5 **important to us and ones that we would like** 

### 6 **comment on in preparation for a final rule.** 

### 7 **Also, you can see April 29th is** 

### 8 **the closing date for formal comments to be** 

### 9 **submitted to the Department in writing and the** 

### 10 **Department requests anything that you say** 

### 11 **written will be captured in the transcript and** 

### 12 **put in the docket. But written comments are** 

### 13 **much more helpful for us to actually put our** 

### 14 **eyes to, so I would appreciate formal written** 

### 15 **comments, thank you.** 

### 16 **MR. BROOKMAN: And let me note** 

### 17 **also, for those of you that have written up** 

### 18 **your comments and perhaps in a lengthier form,** 

### 19 **they can be and will be inserted completely in** 

### 20 **the transcript, in the record of this meeting.** 

### 21 **Yet another inducement for you to summarize.** 

### 22 **So then let's start. Scott Baker**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 19**  **1 is the first person I have listed.**  

### 2 **MR. S. BAKER: Great. Thanks,** 

### 3 **Doug and John and Ashley and your office for** 

### 4 **putting this meeting together.** 

### 5 **Good morning. My name is Scott** 

### 6 **Baker and I work for PJM Interconnection’s** 

### 7 **Applied Solutions Department which leads** 

### 8 **demonstration projects with the goal of** 

### 9 **testing new technologies that improve grid** 

### 10 **reliability and market efficiency.** 

### 11 **PJM is the regional transmission** 

### 12 **organization serving 60 million people in a** 

### 13 **13-state region and the District of Columbia.** 

### 14 **As an RTO, PJM administers the world's** 

### 15 **largest competitive wholesale electricity** 

### 16 **market, matching buyers and sellers to ensure** 

### 17 **the reliable and cost-effective supply of** 

### 18 **electricity.** 

### 19 **Our markets serve as a platform** 

### 20 **for demand-side resources to provide capacity,** 

### 21 **energy, and ancillary services to PJM** 

### 22 **customers. These demand-side resources**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 20**  **1 compete directly with electric generation and**  

### 2 **in many cases provide a more environmentally** 

### 3 **benign and customer-driven means to meet** 

### 4 **future demands for electricity.** 

### 5 **PJM has seen tremendous growth in** 

### 6 **the amount of demand-side resources** 

### 7 **participating in our markets. Demand response** 

### 8 **as a capacity resource has grown from 1700** 

### 9 **megawatts in 2007 to over 14,800 megawatts in** 

### 10 **the future year of 2015.** 

### 11 **In addition to demand response** 

### 12 **renewable energy resources, especially wind** 

### 13 **energy, are an increasing share of the** 

### 14 **region's generation portfolio. Wind** 

### 15 **resources, particularly in PJM region, are** 

### 16 **intermittent and tend to generate most of** 

### 17 **their power at night. Therefore, off-peak** 

### 18 **energy storage, whether it be in the form of** 

### 19 **centralized power plants like pumped storage** 

### 20 **hydro or demand-side resources like the** 

### 21 **residential water heaters we're talking about** 

### 22 **today serves a critical role to the efficient**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 21**  **1 integration of future amounts of renewable**  

### 2 **energy.** 

### 3 **PJM approaches the issue before us** 

### 4 **today neither as a manufacturer, nor as a** 

### 5 **utility. Rather, we're a profit-neutral,** 

### 6 **FERC-regulated entity charged with ensuring** 

### 7 **reliability and that all resources, including** 

### 8 **demand-side resources such as water heaters** 

### 9 **can participate in our markets to ensure the** 

### 10 **provision of reliable electricity at a fair** 

### 11 **price and with the least environmental impact.** 

### 12 **For the purposes of today's** 

### 13 **testimony, let me start by thanking the** 

### 14 **Department's Energy Efficiency Office. As** 

### 15 **John noted earlier, we, along with some of our** 

### 16 **utility partners, pointed out in public** 

### 17 **submittals that the 2010 efficiency standard** 

### 18 **as it applied to large capacity electric** 

### 19 **resistance storage water heaters may have had** 

### 20 **some unintended consequences and that** 

### 21 **technology has evolved since the efficiency** 

### 22 **standard proceeding for water heaters first**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 22**  **1 began, as have wholesale electricity markets.**  

### 2 **Your office has recognized these** 

### 3 **facts and established a framework for a** 

### 4 **solution and for that we're very appreciative.** 

### 5 **As the grid operator, we're** 

### 6 **interested in all forms of energy storage,** 

### 7 **particularly those that are low cost and** 

### 8 **easily deployable. We feel the existing** 

### 9 **energy efficiency standard and this NOPR will** 

### 10 **deprive the market of those storage resources** 

### 11 **precisely at a time when deployment and** 

### 12 **innovation and controllable storage water** 

### 13 **heater technology is most important.** 

### 14 **Specifically, the process in the** 

### 15 **NOPR granting a one-year waiver and requiring** 

### 16 **annual renewals of that waiver will stifle** 

### 17 **technological development of storage water** 

### 18 **heaters. From PJM's perspective, there is, in** 

### 19 **fact, a very real Catch-22 in the proposed** 

### 20 **rule that will defeat the purpose of using** 

### 21 **storage water heaters to meet future** 

### 22 **reliability needs.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 23**  **1 PJM's capacity market is designed**  

### 2 **to ensure that sufficient resources are** 

### 3 **procured three years prior to the actual year** 

### 4 **they will be called upon to serve as** 

### 5 **reliability resources. This three year** 

### 6 **forward market has benefitted demand response** 

### 7 **resources greatly. It not only provides PJM** 

### 8 **with certainty of supplies, but also provides** 

### 9 **a fixed-revenue stream that market** 

### 10 **participants can use to finance the deployment** 

### 11 **of these resources.** 

### 12 **Year-by-year renewal process is** 

### 13 **complicated with the three year forward nature** 

### 14 **of PJM's capacity market. In addition to PJM,** 

### 15 **ISO New England operates a three year capacity** 

### 16 **market. California and Texas are exploring** 

### 17 **forward capacity markets and in non** 

### 18 **restructured states, utility integrated** 

### 19 **resource planning time horizons can be even** 

### 20 **longer.** 

### 21 **Designing regulations that allow** 

### 22 **demand-side resources to participate in these**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 24**  **1 capacity constructs will directly impact the**  

### 2 **need for building new fossil and nuclear** 

### 3 **generation.** 

### 4 **PJM recognizes the Department's** 

### 5 **desire to track a deployment of these** 

### 6 **resources. Therefore, reforms such as** 

### 7 **reporting through EIA are a good tool. PJM** 

### 8 **also has additional information that it can** 

### 9 **provide the Department to assist in analyzing** 

### 10 **the penetration of these programs. But we** 

### 11 **must make sure that the cure for concerns** 

### 12 **about leakage are not worse than the disease** 

### 13 **itself.** 

### 14 **PJM encourages the Department to** 

### 15 **rethink the time frame of the waiver for the** 

### 16 **reasons stated here. And we plan to submit** 

### 17 **more detailed comments in this docket, but** 

### 18 **appreciate the opportunity to participate** 

### 19 **today and look forward to working with the DOE** 

### 20 **and all the other stakeholders in this room on** 

### 21 **a comprehensive solution to the problem.** 

### 22 **Thanks very much.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 25**  **1 MR. BROOKMAN: Thank you. As I**  

### 2 **understand it, Mike Hyland didn't make it.** 

### 3 **MR. HOFMAN: He's not speaking.** 

### 4 **MR. BROOKMAN: He's not speaking.** 

### 5 **Then Jay Morrison.** 

### 6 **MR. MORRISON: Thank you. I'm Jay** 

### 7 **Morrison from NRECA.** 

### 8 **I want to start out by thanking** 

### 9 **Ms. Edwards for all her work setting up this** 

### 10 **meeting and making it easy to get through** 

### 11 **security.** 

### 12 **I want to thank John and Ashley** 

### 13 **for working so well with us. In this** 

### 14 **environment, it's very easy to beat up on the** 

### 15 **Government and beat up on DOE. We have not** 

### 16 **done that because John and Ashley really have** 

### 17 **been trying hard to make this work for us.** 

### 18 **And I want to thank them for that.** 

### 19 **However, the NOPR doesn't work.** 

### 20 **The one year time horizon, the conditions that** 

### 21 **are on the waiver are not consistent with the** 

### 22 **way our members plan and operate their system.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 26**  **1 It's not the way their consumers get water**  

### 2 **heaters. We don't have the information that's** 

### 3 **required to make the NOPR work as the NOPR is** 

### 4 **written. We have 17 members here today who** 

### 5 **can speak to those specifics a whole lot** 

### 6 **better than I can about how their systems** 

### 7 **operate, how their programs operate and what** 

### 8 **the specific challenges are under this NOPR.** 

### 9 **What I want to do is suggest an** 

### 10 **alternative, put it on the table. Rather than** 

### 11 **a one year, we think we need at least five** 

### 12 **years of certainty up front. We would like to** 

### 13 **see at least three years' notice before a** 

### 14 **waiver is canceled for much the same reasons** 

### 15 **that PJM mentioned. We need to be able to** 

### 16 **plan our systems, plan our programs, plan our** 

### 17 **resources out a ways. We need some certainty.** 

### 18 **I can see that as a rolling three** 

### 19 **year. So if after first two years of the** 

### 20 **program you all collect enough data that** 

### 21 **you're concerned with the way the waiver is** 

### 22 **working, then at that point looking out to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 27**  **1 2020 you can alter or cancel the waiver.**  

### 2 **If after four or five years of** 

### 3 **data, you find that the program is not** 

### 4 **working, then three years out from that point** 

### 5 **you could cancel or change the waiver. The** 

### 6 **point is to give us the notice, the time we** 

### 7 **need to plan the resources that we use to** 

### 8 **serve our members. We're a long-time** 

### 9 **industry. We're a 30 year horizon industry** 

### 10 **most of the time. One year doesn't work.** 

### 11 **We also would like to see most of** 

### 12 **those conditions removed. Again, like I said,** 

### 13 **they don't reflect the way water heaters** 

### 14 **really move through commerce. We can** 

### 15 **understand you wanting to have the water** 

### 16 **heaters when they leave the manufacturer look** 

### 17 **different than the ones that are on the shelf** 

### 18 **today, having some sort of universal load** 

### 19 **control device that the utility can use or** 

### 20 **bypass with their own device if they need to.** 

### 21 **We can understand different packaging. We** 

### 22 **can understand the need for data collection so**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 28**  **1 that after a couple of years you can assess**  

### 2 **the waiver program. But we do think it needs** 

### 3 **to be a very simple waiver so that the water** 

### 4 **heaters can actually get out there so that our** 

### 5 **consumers, our member owners, can buy them so** 

### 6 **that we can hook our load control devices on** 

### 7 **them.** 

### 8 **Thank you very much. And again,** 

### 9 **thank you for working with us.** 

### 10 **MR. BROOKMAN: Thank you.** 

### 11 **MR. HOFMAN: Alex Hofman.** 

### 12 **American Public Power Association. I just** 

### 13 **wanted to open with this fact that there are** 

### 14 **over 2,000 of these municipally-owned electric** 

### 15 **utilities in the U.S. And these not-for** 

### 16 **profit small entities do use demand response** 

### 17 **programs that do rely on resistance-type water** 

### 18 **heaters. They run small programs and at** 

### 19 **issue here is I think a very important fact.** 

### 20 **And it's based on the evidence that was** 

### 21 **brought forward by a lot of the stakeholders** 

### 22 **in this process, is this effort to correct**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 29**  **1 some of the unintended consequences of the**  

### 2 **2010 rule.** 

### 3 **And I think the framework proposed** 

### 4 **here in this NOPR will help to allow small** 

### 5 **cities that use these types of programs make** 

### 6 **their electric system more efficient on the** 

### 7 **whole. The efficiency gained here from** 

### 8 **resistive technology water heaters is a real** 

### 9 **thing and it is currently being taken** 

### 10 **advantage of by many entities.** 

### 11 **We are asking the Department to** 

### 12 **rethink one of the key pinch points here which** 

### 13 **is the time frame as was mentioned by NRECA.** 

### 14 **We do agree that a five year time frame would** 

### 15 **be something that would actually correctly fix** 

### 16 **this issue of certainty. So we want to thank** 

### 17 **you for getting together to try and make this** 

### 18 **effort. We hope that the conversation we have** 

### 19 **today will be a positive one.** 

### 20 **MR. BROOKMAN: Thank you. David** 

### 21 **Logerman.** 

### 22 **MR. LOGERMAN: Good morning. My**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 30**  **1 name is David Logerman and I'm Director of**  

### 2 **Power Supply at Central Electric Power** 

### 3 **Cooperative, headquartered in Columbia, South** 

### 4 **Carolina.** 

### 5 **Central is a generation and** 

### 6 **transmission cooperative supplying the** 

### 7 **wholesale power needs for the 20 electric** 

### 8 **distribution cooperatives in South Carolina** 

### 9 **who, in turn, provide power to more than 1.5** 

### 10 **million South Carolinians. So in that role,** 

### 11 **the comments that I'd like to make this** 

### 12 **morning will be from a power supply** 

### 13 **perspective.** 

### 14 **We're very concerned about the** 

### 15 **Department of Energy's actions that are going** 

### 16 **to seriously and quantifiably affect our** 

### 17 **ability to hold down costs for electricity.** 

### 18 **And again, I appreciate the opportunity to** 

### 19 **provide comments regarding this issue.** 

### 20 **Central has a very long history of** 

### 21 **operating control systems for both electric** 

### 22 **water heating and air conditioning in South**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 31**  **1 Carolina. As early as 1983, we recognized the**  

### 2 **value we could bring to members by moving** 

### 3 **water heater load from peak times to off-peak** 

### 4 **times.** 

### 5 **When Central constructed its first** 

### 6 **load-control systems, the electric water** 

### 7 **heaters managed were standard 30 and 40-gallon** 

### 8 **tanks. In order to make the program as** 

### 9 **transparent to customers as possible, the** 

### 10 **small storage capacity available on a 40-** 

### 11 **gallon tank limited us to a two-hour window** 

### 12 **for control. However, we very quickly learned** 

### 13 **the opportunity for savings was compromised by** 

### 14 **the short time frame.** 

### 15 **Simply put, there's just not** 

### 16 **enough hot water in the smaller tanks to last** 

### 17 **over a useful control period. Not only that,** 

### 18 **customers too frequently ran out of hot water** 

### 19 **making them incidentally unhappy with the** 

### 20 **program. And we were only able to capture a** 

### 21 **small fraction of the savings we had hoped** 

### 22 **for.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 32**  **1 So learning from these mistakes we**  

### 2 **returned to the drawing board. We created a** 

### 3 **new large capacity water heating program. By** 

### 4 **using 80 to 100-gallon energy storage** 

### 5 **reservoirs, we were able to lengthen the** 

### 6 **control period of four hours and customers did** 

### 7 **not run out of hot water. Satisfaction soared** 

### 8 **under the new program and that program** 

### 9 **continues to this day.** 

### 10 **There are now more than 100,000** 

### 11 **water heaters, large capacity water heaters,** 

### 12 **under control in South Carolina. And this** 

### 13 **success would not have been possible without** 

### 14 **the introduction of the larger capacity tanks.** 

### 15 **In marketing the program,** 

### 16 **skeptical customers questioned us regarding** 

### 17 **the size of the tanks. They asked if the** 

### 18 **energy use wouldn't be greater given the** 

### 19 **larger tank. To objectively answer this** 

### 20 **question, we approached the engineering school** 

### 21 **at the University of South Carolina and tasked** 

### 22 **them with answering the question. They found**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 33**  **1 the difference in energy use between an 80-**  

### 2 **gallon system and a 50-gallon system with the** 

### 3 **same construction standards was minimal. As** 

### 4 **the finding stated, the standby losses were** 

### 5 **not measurably significant.** 

### 6 **Contemplating the results, we did** 

### 7 **consider the larger storage hot water might** 

### 8 **result in more hot water consumed, simply** 

### 9 **because it's available. And while this might** 

### 10 **be true on the margin, generally, we feel that** 

### 11 **fuel use is a function of overall demand and** 

### 12 **not tank size. The fact is, demand control** 

### 13 **large capacity water heating systems do not** 

### 14 **use measurably more energy. They use it at** 

### 15 **different times, allowing for a more efficient** 

### 16 **use of our generation system.** 

### 17 **Twenty years ago, we only** 

### 18 **considered this from a cost perspective, but** 

### 19 **today, we also notice improved use of** 

### 20 **generation diminishes greenhouse gas emissions** 

### 21 **and defers the construction of new generation.** 

### 22 **And finally, as an often**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 34**  **1 overlooked benefit, but one I'm glad to hear**  

### 2 **it was mentioned a few minutes ago, large** 

### 3 **capacity water heaters may serve as an energy** 

### 4 **storage system we can use as a smart grid tool** 

### 5 **in a system emergency.** 

### 6 **Frankly, we feel our adaptation of** 

### 7 **a current, simple technology provides benefits** 

### 8 **that outweigh the kilowatt hour savings which** 

### 9 **may be realized by using more expensive, but** 

### 10 **less flexible technologies.** 

### 11 **As a consumer owned power company,** 

### 12 **we're looking for efficiencies and we're** 

### 13 **looking for energy efficiency in everything we** 

### 14 **do. Our concern is that the DOE is pursuing a** 

### 15 **path towards energy efficiency that has little** 

### 16 **payoff, while at the same time undoing a** 

### 17 **program which has had for us tremendous** 

### 18 **benefits. If the Department moves forward** 

### 19 **with these proposals, we would ask that the** 

### 20 **DOE consider a much longer transition period** 

### 21 **allowing us to react and find solutions.** 

### 22 **The one-year waiver is simply too**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 35**  **1 short and from a practical sense, is no waiver**  

### 2 **at all. As soon as it's begun, the clock will** 

### 3 **be ticking on applying for extending it. A** 

### 4 **long waiver allows planners, utility experts,** 

### 5 **to move forward in order to make an orderly** 

### 6 **transition to whatever it is that may lie** 

### 7 **ahead.** 

### 8 **This concludes my remarks. I want** 

### 9 **to thank you very much and thank the DOE for** 

### 10 **providing us with this forum.** 

### 11 **MR. BROOKMAN: Thank you. Linda** 

### 12 **King.** 

### 13 **MS. KING: Thank you. My name is** 

### 14 **Linda King. I'm Vice President of Marking and** 

### 15 **Business Development at Northwestern REC, a** 

### 16 **distribution cooperative in Northwestern** 

### 17 **Pennsylvania. I represent our 20,000 rural** 

### 18 **co-op members, as well as the 600,000** 

### 19 **consumers in the 14 Pennsylvania, New Jersey** 

### 20 **rural electric cooperatives.** 

### 21 **Northwestern has a 26 year rich** 

### 22 **history of load control using large capacity**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 36**  **1 water heaters. Our savings alone is over $18**  

### 2 **million in demand costs, while the** 

### 3 **Pennsylvania and New Jersey cooperatives have** 

### 4 **saved over $112 million in the course of the** 

### 5 **program.** 

### 6 **Northwestern has invested in AMI** 

### 7 **technology as well as a brand new load** 

### 8 **management system. Our members received a** 

### 9 **free water heater and 24-hour parts and** 

### 10 **service for their participation. This** 

### 11 **represents an estimated $1200 value to each** 

### 12 **participant as well as additional power cost** 

### 13 **savings. These changes represent a risk to** 

### 14 **that investment for not only our small** 

### 15 **business, but our rural members as well.** 

### 16 **Some of the far-reaching impacts** 

### 17 **detailed in my comments include only 25** 

### 18 **percent of our rural members have access to** 

### 19 **natural gas. Propane and fuel oil have higher** 

### 20 **installation costs with members having to pay** 

### 21 **for that fuel before they actually use it and** 

### 22 **many of our members don't have those**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 37**  **1 resources.**  

### 2 **Forty-four percent of our members** 

### 3 **actually participate in our water heater** 

### 4 **program of which 70 percent of those** 

### 5 **participants have a 75-gallon or larger water** 

### 6 **heater.** 

### 7 **Our dairy farmers use 105 and 120-** 

### 8 **gallon units in their milk house and parlor** 

### 9 **operations to effectively sterilize their** 

### 10 **milking equipment. To take this option away** 

### 11 **from our dairy farmers would have a** 

### 12 **significant impact on their financial** 

### 13 **operations as well as other small businesses** 

### 14 **such as rural slaughterhouses.** 

### 15 **Putting restrictions on the supply** 

### 16 **quantity of large capacity water heaters will** 

### 17 **result in a higher cost for each unit that we** 

### 18 **purchase. It's a simple supply and demand** 

### 19 **issue. Our large capacity units come with a** 

### 20 **lifetime warranty. Fifty-two gallon units and** 

### 21 **heat pump water heaters do not and this will** 

### 22 **also increase our cost of operations.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 38**  **1 Our demand response units are not**  

### 2 **mounted on the water heaters. They are** 

### 3 **mounted in the floor joists and in the walls** 

### 4 **in our over 8300 member homes. Members on** 

### 5 **special off-peak heating rates are controlled** 

### 6 **through a meter base and have no demand** 

### 7 **response unit in the home.** 

### 8 **We embrace the use of heat pump** 

### 9 **water heaters in the appropriate setting. But** 

### 10 **they are not a one-for-one replacement for our** 

### 11 **members. Height restrictions limit the number** 

### 12 **of rural homes that can accommodate these** 

### 13 **units. The cooling of the rooms that the unit** 

### 14 **resides in will resort in our northern climate** 

### 15 **users, such as myself, placing the unit on** 

### 16 **demand only setting during winter periods.** 

### 17 **The result is instead of using a standard** 

### 18 **large-capacity unit with an EF of 92, I am now** 

### 19 **using an 80-gallon heat pump water heater on** 

### 20 **demand only with an EF of 85. There must be a** 

### 21 **balanced approach.** 

### 22 **Twice the cost and weight also**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 39**  **1 represent a problem when you're trying to use**  

### 2 **a heat pump water heater. Our 75-gallon unit** 

### 3 **weights about 122 pounds. Heat pump water** 

### 4 **heaters we used in our pilot range from 190** 

### 5 **pounds to mine of 410. One pilot participant** 

### 6 **who is also a heat pump contractor asked to** 

### 7 **have his unit removed the day after** 

### 8 **installation. The home operated on demand** 

### 9 **only mode until we were able to put his old** 

### 10 **unit back in.** 

### 11 **Through our pilot, we metered** 

### 12 **gallons of water heated as well as kilowatt** 

### 13 **hours to heat that water. The results show** 

### 14 **that a 52-gallon unit uses more energy to heat** 

### 15 **a gallon of water than the 75-gallon unit that** 

### 16 **we utilize. So the option of using two 52-** 

### 17 **gallon units to replace a large-capacity unit** 

### 18 **would actually end up being less efficient and** 

### 19 **less cost effective.** 

### 20 **If a waiver is the only solution** 

### 21 **to a balanced approach, we would request the** 

### 22 **water heaters be marketed something like a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 40**  **1 grid-enabled unit without the sales**  

### 2 **restriction or the requirement of a load** 

### 3 **control device being attached at the** 

### 4 **manufacturer. We would also recommend the** 

### 5 **five-year waiver with a three-year notice.** 

### 6 **Thank you for your consideration.** 

### 7 **MR. BROOKMAN: Thank you. Barry** 

### 8 **Glover. Yes, please. Make sure it's on. I** 

### 9 **think it is.** 

### 10 **MR. GLOVER: Thank you. Good** 

### 11 **morning. My name is Barry Glover. I'm Vice** 

### 12 **President of Governmental Relations and Key** 

### 13 **Accounts for Aiken Electric Co-op in Aiken,** 

### 14 **South Carolina.** 

### 15 **First, I'd like to thank you again** 

### 16 **for hosting this program. First, I appreciate** 

### 17 **the DOE recognizing in its recent Notice of** 

### 18 **Proposed Rulemaking the tremendous value that** 

### 19 **electric thermal storage offers consumers. I** 

### 20 **also appreciate DOE recognizing that action is** 

### 21 **needed to mitigate the impacts of the April** 

### 22 **2010 efficiency rule on our ability to use**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 41**  **1 those water heaters in our demand response**  

### 2 **program.** 

### 3 **I'm here today to comment on both** 

### 4 **the value that the large electric resistance** 

### 5 **water heater brings to our program and the** 

### 6 **need to mitigate the impacts of the April 2010** 

### 7 **efficiency rule.** 

### 8 **For more than 20 years, Aiken** 

### 9 **Electric and other South Carolina co-ops have** 

### 10 **controlled large capacity electric resistance** 

### 11 **water heaters to manage our peak load, thus** 

### 12 **lowering peak demand during the days when the** 

### 13 **costs are highest. As a cooperative, we pass** 

### 14 **the savings from the supportive program on to** 

### 15 **our consumer members in order to keep our** 

### 16 **costs low.** 

### 17 **About 82 percent of Aiken Electric** 

### 18 **consumer members use electric water heaters.** 

### 19 **Of those, about 19 percent are directly** 

### 20 **controlled. Aiken Electric Cooperative saves** 

### 21 **approximately $100 on every directly** 

### 22 **controlled device that is in operation,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 42**  **1 decreasing the high-low demand through the use**  

### 2 **of directly-controlled water heaters and this** 

### 3 **equates to about $644,000 in annual savings.** 

### 4 **Of course, we pass that back on to the** 

### 5 **consumer.** 

### 6 **The use of demand response large** 

### 7 **capacity storage programs decreases the need** 

### 8 **for additional generation of associated costs.** 

### 9 **By controlling the operating times of** 

### 10 **residential water heaters, we are effectively** 

### 11 **negating the need for the addition of two** 

### 12 **combustion turbines to handle our peak demand.** 

### 13 **For South Carolina co-op members, the cost** 

### 14 **savings benefit is approximately $9 million.** 

### 15 **Conversely, the prohibition of demand response** 

### 16 **large capacity storage devices will create** 

### 17 **many negative consequences for cooperative** 

### 18 **members. The direct and indirect cost savings** 

### 19 **I mentioned above will vanish. Rates will** 

### 20 **increase due to higher wholesale power demand** 

### 21 **charges and the need for additional generation** 

### 22 **to handle increased peak load.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 43**  **1 Many of our members will be forced**  

### 2 **to use multiple water heaters or tankless** 

### 3 **systems, which would create higher initial and** 

### 4 **maintenance costs, a reduction of energy** 

### 5 **efficiency and potential space requirement** 

### 6 **issues in the home. Low-income and large** 

### 7 **families would be excessively burdened due to** 

### 8 **limited choices and higher costs.** 

### 9 **Approximately 25 percent of South Carolina co** 

### 10 **op members live in manufactured homes. Thus,** 

### 11 **because of heat restrictions, a heat pump** 

### 12 **system cannot be installed in a home where a** 

### 13 **water heater is located in a small room or** 

### 14 **closet which is typical for most stick-built** 

### 15 **and all manufactured homes in South Carolina.** 

### 16 **We're very concerned about threats** 

### 17 **to our program and enforcement of a proposed** 

### 18 **rule that does not effectively address the** 

### 19 **threat to our program posed by the 2010** 

### 20 **efficiency standard. The annual duration of** 

### 21 **the proposed waivers and significant** 

### 22 **conditions that the proposed rule imposes on**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 44**  **1 those waivers makes them simply unworkable. A**  

### 2 **one-year waiver does not give our system** 

### 3 **enough certainty to maintain our load** 

### 4 **management program. If we do not know year to** 

### 5 **year whether the water heaters we need for our** 

### 6 **program will continue to be available, we** 

### 7 **cannot justify a continued investment in the** 

### 8 **program.** 

### 9 **The proposed waiver process is** 

### 10 **impractical. It will create too much of a** 

### 11 **burden, and most importantly, it's not based** 

### 12 **on reality in the field. We don't have any** 

### 13 **kind of a way to get manufacturers and** 

### 14 **utilities to decide en masse how many units,** 

### 15 **which models, and which control devices we** 

### 16 **need for each individual utility program.** 

### 17 **We would suggest that you replace** 

### 18 **the one year waiver process in the proposed** 

### 19 **rule with a simple waiver that will last at** 

### 20 **least five years. Then look at your** 

### 21 **experience after a few years operating under** 

### 22 **that simple waiver and if the waiver is not**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 45**  **1 working, eliminate it or amend it with three**  

### 2 **years' notice. That way, you control adverse** 

### 3 **impacts, but you also give us some certainty** 

### 4 **and some simplicity we need to continue our** 

### 5 **demand response. We sincerely hope that DOE** 

### 6 **considers these comments and amends its** 

### 7 **proposal. Thank you.** 

### 8 **MR. BROOKMAN: Thank you. Sam** 

### 9 **Brumberg.** 

### 10 **MR. BRUMBERG: Yes, good morning,** 

### 11 **and thank you. My name is Sam Brumberg. I am** 

### 12 **Associate Counsel to the Virginia, Maryland,** 

### 13 **and Delaware Association of Electric** 

### 14 **Cooperatives. Thank you for the opportunity** 

### 15 **to comment on this issue.** 

### 16 **The 15-member systems of the** 

### 17 **Association use demand response technology** 

### 18 **attached to residential water heaters as an** 

### 19 **important part of their overall strategy to** 

### 20 **keep power costs down and grid stability** 

### 21 **reliable. Our cooperatives work hard to** 

### 22 **provide reliable, environmentally-responsible**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 46**  **1 power at the lowest reasonable cost to our**  

### 2 **customers. And we maximize reliability using** 

### 3 **demand response technologies.** 

### 4 **Water heaters of all sizes are an** 

### 5 **important and essential load-management tool** 

### 6 **for our member cooperatives. DOE appears to** 

### 7 **recognize the value that demand response and** 

### 8 **load-control programs using large electric** 

### 9 **resistance water heaters offer consumers, as** 

### 10 **well as a contribution they make toward energy** 

### 11 **efficiency.** 

### 12 **Thank you for recognizing also** 

### 13 **that action was needed to mitigate the impacts** 

### 14 **of the April 2010 efficiency rule on our** 

### 15 **ability to use those water heaters in demand** 

### 16 **response programs.** 

### 17 **I want to emphasize here that** 

### 18 **neither the Association nor its member systems** 

### 19 **are opposed to energy efficiency or more** 

### 20 **efficient water heaters or better water** 

### 21 **heaters. We've been industry leaders on** 

### 22 **energy efficiency for quite some time.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 47**  **1 However, these policies should make sense for**  

### 2 **all utilities which may be impacted by them.** 

### 3 **I would submit that the current** 

### 4 **proposed rule, while a de minimis improvement** 

### 5 **over the 2010 standard, still represents a** 

### 6 **very problematic and slippery slope which** 

### 7 **could threaten demand response programs** 

### 8 **regardless of switch technology or water** 

### 9 **heater size because utilities will not have** 

### 10 **the relative regulatory certainty and** 

### 11 **stability that they will need to justify** 

### 12 **future investments.** 

### 13 **Large capacity water heaters play** 

### 14 **an important role in our member systems'** 

### 15 **effort to provide safe, reliable, and** 

### 16 **affordable energy.** 

### 17 **I'd like to tell you a little bit** 

### 18 **about some of the experiences of our member** 

### 19 **systems. One began installing this equipment,** 

### 20 **this load management equipment as early as** 

### 21 **1979 and estimates at least $25 million in** 

### 22 **savings to its members by managing peak demand**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 48**  **1 through load management and the efficiency**  

### 2 **efforts. Many of the Association members** 

### 3 **systems have been using demand response** 

### 4 **technology such as that used with residential** 

### 5 **water heaters since the late 1970s or '80s.** 

### 6 **And the benefits have been significant.** 

### 7 **We believe all of these benefits** 

### 8 **are in jeopardy. Maybe not today, but five or** 

### 9 **ten years from now as water heaters and switch** 

### 10 **technology needs replacement, given where this** 

### 11 **policy appears to be headed.** 

### 12 **I would respectfully ask where the** 

### 13 **extent of regulation reaching out into** 

### 14 **individual homes would end? At a midsize** 

### 15 **rural cooperative with 8,000 switches and** 

### 16 **whose program started in 1990 savings have** 

### 17 **been over $11 million cumulatively. At three** 

### 18 **small rural cooperatives savings -- many** 

### 19 **millions of dollars have been achieved since** 

### 20 **the late 1980s. A midsize suburban** 

### 21 **cooperative with over 17,000 switches the** 

### 22 **installation of which began in 1988, has**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 49**  **1 achieved over $15 million in savings. A large**  

### 2 **suburban and exurban cooperative with over** 

### 3 **30,000 switches has achieved savings of over** 

### 4 **$54 million. And a midsize rural cooperative** 

### 5 **whose program started in 1988 has achieved** 

### 6 **$1.5 million in savings with only 4,000** 

### 7 **switches. These are significant dollar** 

### 8 **amounts for electric distribution** 

### 9 **cooperatives.** 

### 10 **Unfortunately, the proposed rule** 

### 11 **does not effectively address the threat to our** 

### 12 **demand response programs that was posed by the** 

### 13 **2010 standard. The annual duration of the** 

### 14 **waivers and the significant conditions the** 

### 15 **proposed rule imposes on them makes the** 

### 16 **waivers unworkable. A one-year waiver does** 

### 17 **not give our member systems enough certainty** 

### 18 **to maintain their management programs into the** 

### 19 **far future. Development and implementation of** 

### 20 **these programs are complex to multi-year** 

### 21 **process that requires cooperation among many** 

### 22 **stakeholders.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 50**  **1 Again, as Mr. Morrison with NRECA**  

### 2 **commented, if we do not know from year to year** 

### 3 **exactly what the regulatory environment will** 

### 4 **look like, we cannot continue to justify** 

### 5 **investment in these programs. The strict** 

### 6 **conditions placed on the waiver process are** 

### 7 **burdensome and impractical. The proposed rule** 

### 8 **puts several conditions on the waiver process** 

### 9 **that do not align with how these programs** 

### 10 **operate. There's no coordinated distribution** 

### 11 **network and utilities and manufacturers have** 

### 12 **no consensus on which models, how many units,** 

### 13 **and which control devices might be needed to** 

### 14 **meet the needs of individual utilities'** 

### 15 **programs.** 

### 16 **The diversity of control devices** 

### 17 **used by our programs, and the reality of how** 

### 18 **products move between manufacturers in the** 

### 19 **marketplace, make the waiver unworkable.** 

### 20 **Also, the distribution chain is not controlled** 

### 21 **-- neither co-ops, nor manufacturers, control** 

### 22 **the distribution chain from the point of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 51**  **1 manufacture to the point of use. Integration**  

### 2 **of this process is practically impossible.** 

### 3 **It's ultimately up to the customer to select** 

### 4 **the water heater and the utility to select and** 

### 5 **install the switch mechanism.** 

### 6 **Our member systems use a wide** 

### 7 **variety of control devices in their programs** 

### 8 **and even a single system may use multiple** 

### 9 **control devices depending on communications,** 

### 10 **availability in various parts of their** 

### 11 **territory. While it would be practicable to** 

### 12 **ensure that water heaters have a load control** 

### 13 **device installed at the time of manufacture,** 

### 14 **we must have the flexibility to use different** 

### 15 **control devices if the one included in the** 

### 16 **unit is not compatible with our system.** 

### 17 **We would support NRECA's proposal** 

### 18 **and suggest that you replace the one-year** 

### 19 **process with a simple waiver that will last** 

### 20 **five years, free of the complicated and** 

### 21 **burdensome conditions. This would allow us** 

### 22 **time to analyze the effects of the waiver and**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 52**  **1 collect some data and give us time to amend**  

### 2 **again, bearing in mind that a one-year time** 

### 3 **frame for an operating electric utility might** 

### 4 **as well be six months or 30 days.** 

### 5 **If DOE does not make changes to** 

### 6 **the proposed rule, we may lose the ability to** 

### 7 **use water heaters for load management programs** 

### 8 **at great cost to our members. We're also** 

### 9 **concerned that any proposed rule which might** 

### 10 **provoke a fuel switching behavior, as some of** 

### 11 **my colleagues alluded to, the rule that would** 

### 12 **provoke a fuel switching behavior ultimately** 

### 13 **would be poor public policy making.** 

### 14 **Finally, we're concerned about the** 

### 15 **impact of the freedom of market choice that** 

### 16 **this rule may have in the marketplace. The** 

### 17 **proposed rule would ultimately prohibit the** 

### 18 **manufacture of certain types of water heaters** 

### 19 **critical to the operation of our demand** 

### 20 **response programs. The choice of what to** 

### 21 **manufacture should ideally remain with the** 

### 22 **free market. Additionally, water heaters that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 53**  **1 manufacturers would be least likely to design**  

### 2 **and manufacture under the proposed rule due to** 

### 3 **their increased costs would be the ones most** 

### 4 **likely to appeal to low income, fixed income** 

### 5 **and more rural consumers.** 

### 6 **For all these reasons, the** 

### 7 **Association and its member systems would hope** 

### 8 **that DOE consider these comments and consider** 

### 9 **amending its proposal.** 

### 10 **I have here with me today, a** 

### 11 **representative from one of the member systems** 

### 12 **of the Virginia, Maryland, and Delaware** 

### 13 **Association who will discuss the specific** 

### 14 **impact that the proposed rule would have on** 

### 15 **his system and its member owners. I'll also** 

### 16 **momentarily be sharing some comments with you** 

### 17 **from Gil Jaramillo, manager of Business** 

### 18 **Development and Energy Services from Northern** 

### 19 **Virginia Electric Cooperative, who is unable** 

### 20 **to be with us today.** 

### 21 **Thank you once again. The** 

### 22 **Association and its member systems look**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 54**  **1 forward to submitting additional written**  

### 2 **comments in this matter and appreciate the** 

### 3 **opportunity to be heard.** 

### 4 **MR. BROOKMAN: John Coffey.** 

### 5 **MR. BRUMBERG: If I could, let me** 

### 6 **briefly summarize Mr. Jaramillo's comments.** 

### 7 **MR. BROOKMAN: You've already gone** 

### 8 **eight or nine minutes.** 

### 9 **MR. BRUMBERG: All right.** 

### 10 **MR. BROOKMAN: Yes.** 

### 11 **MR. BRUMBERG: He supports what I** 

### 12 **said.** 

### 13 **(Laughter.)** 

### 14 **MR. BROOKMAN: John Coffey.** 

### 15 **MR. COFFEY: Thank you very much.** 

### 16 **My name is John Coffey and I'm the Vice** 

### 17 **President of Engineering Operations for** 

### 18 **Shenandoah Valley Electric Cooperative which** 

### 19 **is headquartered in Mount Crawford, Virginia.** 

### 20 **Our co-op, and for that matter,** 

### 21 **I'm here today representing the 92,000 meters** 

### 22 **and consumers that we serve on a day-to-day**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 55**  **1 basis. And I really do appreciate the**  

### 2 **opportunity to comment on the issue.** 

### 3 **Large capacity electric resistance** 

### 4 **water heaters play an important role in the** 

### 5 **Cooperative's efforts to provide its member** 

### 6 **owners with safe, reliable, and affordable** 

### 7 **energy. For more than 32 years, our** 

### 8 **Cooperative has managed our peak load program** 

### 9 **by controlling large capacity electric** 

### 10 **resistance water heaters. As cooperatives, we** 

### 11 **pass the savings from the important program on** 

### 12 **to our member owners in order to keep the** 

### 13 **electric rates as low as possible.** 

### 14 **Specifically, Shenandoah Valley** 

### 15 **Electric Cooperative's water heater peak** 

### 16 **demand response program includes 9,409** 

### 17 **directly controlled water heaters and** 

### 18 **voluntary member participation by 13 percent** 

### 19 **of all residential accounts across the** 

### 20 **Cooperative's system. This includes 1912** 

### 21 **large capacity water heater control switches** 

### 22 **that have been installed since May 2011 in our**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 56**  **1 newly acquired service territory. For 2012,**  

### 2 **this program reduced the Cooperative's** 

### 3 **wholesale power costs by nearly $1.1 million.** 

### 4 **The savings directly translates into rate** 

### 5 **reductions for our member owners now and in** 

### 6 **the future. Since the program implementation,** 

### 7 **the Cooperative has saved our members over** 

### 8 **$24.9 million by reducing wholesale power** 

### 9 **demand costs. The annual peak load for the** 

### 10 **Cooperative has reduced through this program** 

### 11 **more than 2.5 percent in the winter and more** 

### 12 **than 1.9 percent in the summer. These numbers** 

### 13 **are expected to increase as additional** 

### 14 **switches are added in our acquired territory.** 

### 15 **Effective use of water heaters and** 

### 16 **demand response programs requires resistance** 

### 17 **water heating for demand reduction during** 

### 18 **control periods. Heat pump water heaters do** 

### 19 **not respond fast enough to properly function** 

### 20 **as a demand control device. For that matter,** 

### 21 **it is questionable whether the heat pump water** 

### 22 **heater would add any real value to the overall**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 57**  **1 residential structure if the heat exchange**  

### 2 **taking place happens within the confines of** 

### 3 **that structure.** 

### 4 **Unfortunately, the proposed rule** 

### 5 **does not effectively address the threat of the** 

### 6 **2010 efficiency standard to our demand** 

### 7 **response efforts. Development and** 

### 8 **implementation of our ongoing power** 

### 9 **requirements is a complex, multi-year process** 

### 10 **that requires cooperation among many** 

### 11 **stakeholders including cooperative staff, as** 

### 12 **well as wholesale power suppliers,** 

### 13 **contractors, regulators, board of directors,** 

### 14 **and our member owners.** 

### 15 **Lastly, it's important to note** 

### 16 **that cooperatives and manufacturers do not** 

### 17 **control the distribution chain of water** 

### 18 **heaters from the point of manufacture to the** 

### 19 **point of use. It is also impractical to** 

### 20 **expect that these distribution channels could** 

### 21 **even be developed. Simply put, our members** 

### 22 **purchase the water heater they need and may**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 58**  **1 voluntarily agree to participate in the**  

### 2 **Cooperative's water heater load control** 

### 3 **program. The Cooperative selects the most** 

### 4 **cost effective water heater control switch** 

### 5 **that is fully compatible with our systems and** 

### 6 **infrastructure. The end result is a highly** 

### 7 **customized and effective load control program** 

### 8 **that provides the highest level of wholesale** 

### 9 **power demand cost savings to our member owners** 

### 10 **at the lowest possible cost of installation.** 

### 11 **If the DOE does not make** 

### 12 **significant changes to the proposed rule, it** 

### 13 **appears that we will lose the ability to use** 

### 14 **large capacity water heaters as part of the** 

### 15 **Cooperative's load management program. In** 

### 16 **today's numbers, that will come at a cost of** 

### 17 **$1.1 million per year and additional wholesale** 

### 18 **demand cost that will be borne by the 92,000** 

### 19 **accounts owned by our member owners.** 

### 20 **Again, thank you for the** 

### 21 **opportunity to speak with you today regarding** 

### 22 **the proposed rule. I sincerely hope that the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 59**  **1 DOE considers these comments and amends its**  

### 2 **proposal to allow for the ongoing, existing** 

### 3 **use of large capacity water heaters as a vital** 

### 4 **part of the Cooperative's demand response** 

### 5 **program. Thank you.** 

### 6 **MR. BROOKMAN: Thank you. Jim** 

### 7 **Coleman.** 

### 8 **MR. COLEMAN: Thank you. Good** 

### 9 **morning. As a matter of brevity, I'll submit** 

### 10 **this document in writing, but I'll hit some of** 

### 11 **the high points as would like to acknowledge** 

### 12 **the comments made here, many of them have** 

### 13 **already been talked about.** 

### 14 **My name is Jim Coleman. I'm** 

### 15 **President and CEO of Shelby Electric** 

### 16 **Cooperative, Shelbyville, Illinois. I'm here** 

### 17 **to speak not only on behalf of Shelby, but the** 

### 18 **12 other electric cooperatives in Illinois** 

### 19 **that are presently participating in water** 

### 20 **heater demand programs and we appreciate the** 

### 21 **willingness of DOE to hear us out on this** 

### 22 **issue.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 60**  **1 Shelby Electric has 2,187 miles of**  

### 2 **line over 10,000 services beginning in January** 

### 3 **of 1938. Collectively, today I'm representing** 

### 4 **13 electric cooperatives with over 160,000** 

### 5 **meters, 51,000 miles of line. Our purpose is** 

### 6 **to provide safe, cost effective, and efficient** 

### 7 **power for Illinois member owners and the water** 

### 8 **heater management program is one that we** 

### 9 **administer to meet these goals.** 

### 10 **Presently in Illinois, we have** 

### 11 **17,470 meters on control and estimated 2,730** 

### 12 **to be installed in the next five years. We've** 

### 13 **had several of these programs in place for** 

### 14 **more than two decades and it's been found to** 

### 15 **be a very effective tool for managing high** 

### 16 **costs and peaks as we see changes in the MISO** 

### 17 **capacity market.** 

### 18 **We in Illinois are pleased with** 

### 19 **DOE's Notice of Proposed Rulemaking and the** 

### 20 **value that thermal storage capacity has,** 

### 21 **however, we recognize the rules as presently** 

### 22 **proposed by DOE do not handle the threat to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 61**  **1 Illinois programs in the 2010 standards.**  

### 2 **A few things I'd like to point** 

### 3 **out, the one-year waiver as many of you spoke** 

### 4 **to here. The multi-year process requires** 

### 5 **cooperation among stakeholders including our** 

### 6 **board of directors, staff, contractors,** 

### 7 **suppliers, and our member owners. If we don't** 

### 8 **know year to year whether the water heater we** 

### 9 **need for our program will be available, we** 

### 10 **cannot justify the continued investment.** 

### 11 **Co-ops and manufacturers do not** 

### 12 **generally control the distribution chain of** 

### 13 **water heaters from point of manufacture to** 

### 14 **point of use and it's impractical to expect** 

### 15 **the channel to be developed in the near** 

### 16 **future. Most of our members purchase their** 

### 17 **water heaters from big box stores, local** 

### 18 **hardware stores, and in some cases from the** 

### 19 **cooperatives.** 

### 20 **Co-ops use a wide variety, in** 

### 21 **Illinois, of load control devices, even the** 

### 22 **single system as in Shelby's case, use**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 62**  **1 multiple control devices. We use a high band**  

### 2 **158.13 megahertz FCC approved frequency to** 

### 3 **operate scientific ATLANTIS switches. We also** 

### 4 **use our AMR Aclara system with power line** 

### 5 **carrier to reach our water heaters. There's** 

### 6 **presently no one standard or method that the** 

### 7 **Illinois cooperative is using for protocol to** 

### 8 **turn the switches on and off.** 

### 9 **While it would be practical to** 

### 10 **ensure that water heaters have a load control** 

### 11 **device we must have the flexibility to make** 

### 12 **changes so that it's compatible with our** 

### 13 **system. The heat pump water heaters, I'll** 

### 14 **suggest that a 50-gallon water heater takes up** 

### 15 **700 square feet or a 9 by 9 by 8 room; the 85-** 

### 16 **gallon water heater significantly more. At** 

### 17 **Shelby Electric, we offer the large capacity** 

### 18 **GE water heater heat pumps. From personal** 

### 19 **experience I can attest to the large space** 

### 20 **requirements need for thermal transfer.** 

### 21 **There's also a significant noise issue related** 

### 22 **to when it's running and would not be suitable**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 63**  **1 for many main living areas.**  

### 2 **The Illinois cooperatives would be** 

### 3 **heavily impacted by this rule. We embrace the** 

### 4 **five years and with that in a matter of** 

### 5 **brevity, I'll --** 

### 6 **MR. BROOKMAN: Thank you. We** 

### 7 **appreciate that. Jeff Pratt.** 

### 8 **MR. PRATT: Thank you and I** 

### 9 **appreciate the opportunity to say a few words** 

### 10 **about this at the beginning. I represent** 

### 11 **Oglethorpe Power Corporation from Georgia.** 

### 12 **We are a generation cooperative for 39** 

### 13 **electric cooperatives in Georgia. That's** 

### 14 **about -- represent almost half of the** 

### 15 **residential population of the State of** 

### 16 **Georgia. So quite a few there. That includes** 

### 17 **both rural and suburban areas in the state.** 

### 18 **So a wide diversity of areas.** 

### 19 **Really, just straight to the** 

### 20 **point, there's a couple of issues in the NOPR** 

### 21 **that really concerns our cooperatives and the** 

### 22 **progress that this might have in their demand**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 64**  **1 response programs, energy storage programs.**  

### 2 **First, the NOPR really focuses on** 

### 3 **the waiver and the waiver being the way to go.** 

### 4 **We have significant concerns about the** 

### 5 **waiver. Much has been said here today about** 

### 6 **that, so I will just say a couple of quick** 

### 7 **points. First, EMCs are cooperatives, we call** 

### 8 **them EMCs in Georgia. They rely upon -- they** 

### 9 **plan, purchase, and rely upon their own** 

### 10 **communication systems to implement their** 

### 11 **demand response programs. They each look at** 

### 12 **their service area and decide what** 

### 13 **communication tools they need to purchase to** 

### 14 **make that happen.** 

### 15 **To date, we have not seen a** 

### 16 **manufacturer that has produced a product or a** 

### 17 **group of manufacturers in the water heating** 

### 18 **space that would allow a diverse set of** 

### 19 **communication tools. So one ship per** 

### 20 **manufacturer, so far we have not seen that** 

### 21 **happen. So that would immediately cause** 

### 22 **problems with the waiver.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 65**  **1 Secondly, it seems to put the**  

### 2 **utility in the business, squarely in the** 

### 3 **business of being a sole source of supplied** 

### 4 **water heaters for grid demand, grid demand** 

### 5 **water heaters. And I don't think that that's** 

### 6 **the intent. I think a more open opportunity** 

### 7 **for manufacturers to work together, much like** 

### 8 **the Consumer Electronic Association's R7.8** 

### 9 **communication interface, would be much more** 

### 10 **effective than the route that has been** 

### 11 **proposed in the NOPR.** 

### 12 **Third, I think it will be** 

### 13 **important to consider that cooperatives --** 

### 14 **that it will be unlikely with the waiver from** 

### 15 **year to year for it to be effectively** 

### 16 **introduced if the waiver is the only way that** 

### 17 **-- a provision that could make this happen. I** 

### 18 **would strongly encourage something longer than** 

### 19 **one year.** 

### 20 **As someone said, nothing happens** 

### 21 **in these programs in one year that's** 

### 22 **effective. Most of the programs that you've**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 66**  **1 heard about today I would suspect and**  

### 2 **certainly in Georgia, they take years to** 

### 3 **develop, years to implement, and years to see** 

### 4 **the effect. And year-to-year planning just** 

### 5 **will not work. Thank you.** 

### 6 **MR. BROOKMAN: Thank you. Don** 

### 7 **Flynn.** 

### 8 **MR. KOEP: Good morning. My name** 

### 9 **is Steven Koep. I'll be speaking on behalf of** 

### 10 **Vaughn Thermal Corporation. Vaughn Thermal** 

### 11 **Corporation has been in the business of** 

### 12 **manufacturing high efficiency, long life,** 

### 13 **electric water heaters for electric utility** 

### 14 **programs for over 50 years. We have a strong** 

### 15 **interest in this marketplace and we very much** 

### 16 **appreciate the opportunity to be with you here** 

### 17 **today.** 

### 18 **I will speak first directly to a** 

### 19 **couple of points that are on issues that DOE** 

### 20 **was seeking comment from manufacturers. The** 

### 21 **first point has to do with the requirement of** 

### 22 **the unit to be shipped from a manufacturer**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 67**  **1 with control device installed. That for all**  

### 2 **the reasons you've already heard is fairly** 

### 3 **impractical and from the manufacturer** 

### 4 **perspective, if you look at the number of** 

### 5 **sizes involved and the number of controls** 

### 6 **available, you're talking SKU multiplications** 

### 7 **by dozens.** 

### 8 **Let's see, on the response to DOE** 

### 9 **for adding a question to the EIA form, I think** 

### 10 **that's targeted specifically to utilities, but** 

### 11 **if requested, Vaughn can certainly provide** 

### 12 **grid interactive water heater production data** 

### 13 **directly to DOE.** 

### 14 **On the third point regarding the** 

### 15 **waiver process that it would not have a** 

### 16 **significant impact on a number of small** 

### 17 **business manufacturers, I guess I'm of the** 

### 18 **opinion that there are no longer a substantial** 

### 19 **number of water heater manufacturers in the** 

### 20 **country. We may be one of the last or the** 

### 21 **sole remaining small residential tank-type** 

### 22 **electric water heater manufacturer. We would**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 68**  **1 consider that the impacts would indeed be**  

### 2 **adverse, could be significant and the SKU** 

### 3 **multiplication issue would be the primary** 

### 4 **reason.** 

### 5 **I'll comment briefly on a couple** 

### 6 **of other items in regards to the waiver. We** 

### 7 **are in agreement with the comments that** 

### 8 **advocate for longer time frames. Five years** 

### 9 **would seem to be reasonable. The initial DOE** 

### 10 **rulemaking was five years. We think that the** 

### 11 **manufacturers and the utility industry, given** 

### 12 **a similar time frame, can certainly** 

### 13 **demonstrate the added value of grid** 

### 14 **interactive water heating technology.** 

### 15 **The second issue I'll touch on. I** 

### 16 **would describe as changing the technology or** 

### 17 **changing the source energy for residential** 

### 18 **electric water heaters. While heat pump water** 

### 19 **heaters have the potential to reduce the** 

### 20 **carbon footprint of the residential water** 

### 21 **heating appliance by up to 50 percent, for all** 

### 22 **the reasons noted today it's not universally**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 69**  **1 suited to all residential applications. We**  

### 2 **have done some considerable work, lab testing** 

### 3 **and field demonstrations of grid-interactive** 

### 4 **electric water heating and we can, I believe,** 

### 5 **demonstrate similar or greater carbon** 

### 6 **reduction potential. So at this point in time** 

### 7 **our position is that the Department of Energy** 

### 8 **has the unique opportunity to set the stage** 

### 9 **for a potential doubling of carbon reduction** 

### 10 **potential in the electric water heating market** 

### 11 **by enabling the continued evolution and** 

### 12 **proliferation of grid-interactive electric** 

### 13 **water heating.** 

### 14 **My last comment has to do with the** 

### 15 **renewable storage opportunity. As increasing** 

### 16 **amounts of renewable generation are coming** 

### 17 **online, the need for renewable storage is** 

### 18 **becoming more and more prominent. By** 

### 19 **necessity, the electric utility industry is** 

### 20 **experimenting with megawatt scale, battery,** 

### 21 **and flywheel technologies that promise** 

### 22 **performance and flexibility, but they carry**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 70**  **1 the added burdens of cost and complexity. It**  

### 2 **can certainly be argued that the nation needs** 

### 3 **an all of the above storage technology** 

### 4 **development strategy, but the fact remains** 

### 5 **that electric thermal storage is the low** 

### 6 **hanging fruit. Operating as a thermal** 

### 7 **battery, grid interactive electric water** 

### 8 **heaters at present are the only cost** 

### 9 **effective, wide deployment, distributed** 

### 10 **storage option currently available.** 

### 11 **In addition, if you're providing** 

### 12 **excess, low cost, or no cost renewable energy** 

### 13 **to that device you are, in essence,** 

### 14 **significantly reducing the carbon footprint of** 

### 15 **the appliance.** 

### 16 **Again, I want to thank you very** 

### 17 **much for the opportunity to be with you today.** 

### 18 **MR. BROOKMAN: Thank you. Markus** 

### 19 **Bryant.** 

### 20 **MR. BRYANT: Good morning. I'm** 

### 21 **Markus Bryant. I'm General Manager of the** 

### 22 **Lorain-Medina Rural Electric Cooperative in**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 71**  **1 Ohio and also the North Central Electric**  

### 2 **Cooperative in Ohio, also representing the** 

### 3 **other 22 electric cooperatives in Ohio as** 

### 4 **well. Our two cooperatives serve about 26,000** 

### 5 **meters, all the Ohio cooperatives combined,** 

### 6 **about 320,000 meters.** 

### 7 **I appreciate you having this** 

### 8 **hearing today. Large capacity water heaters** 

### 9 **are an extremely important tool in our load** 

### 10 **management program. Lorain-Medina has 5,400** 

### 11 **or about 37 percent of its residential** 

### 12 **accounts with these kind of water heaters.** 

### 13 **North Central has 3,800 or 45 percent of their** 

### 14 **accounts. There's almost no natural gas** 

### 15 **availability in North Central area. Across** 

### 16 **all of Ohio's cooperatives after 30 years of** 

### 17 **effort, there are 114,000 water heaters under** 

### 18 **load management or about a third of the** 

### 19 **residential accounts with about 54,000 kW,** 

### 20 **load deferral capability.** 

### 21 **We appreciate what DOE is trying** 

### 22 **to do here, to lessen the impact of the April**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 72**  **1 2010 rule so we can continue using these large**  

### 2 **capacity water heaters in our load management** 

### 3 **program. Unfortunately, the proposed rule** 

### 4 **really doesn't work for us. We generally** 

### 5 **support the waiver concept to allow greater** 

### 6 **than 55 gallon water heaters. At our two** 

### 7 **cooperatives, we very seldom install a load** 

### 8 **control switch on a water heater with less** 

### 9 **than 75 gallons. The few exceptions involve** 

### 10 **space considerations where we just can't get** 

### 11 **the larger tank in.** 

### 12 **After years of experience, we** 

### 13 **found that installing larger tanks are** 

### 14 **absolutely necessary to assure an adequate** 

### 15 **supply of hot water during extended load** 

### 16 **control periods. We found that consumers will** 

### 17 **not continue in the program if they run out of** 

### 18 **hot water frequently because of extended load** 

### 19 **control periods with smaller tanks.** 

### 20 **Although we do support a simple** 

### 21 **waiver with provisions for review and renewal** 

### 22 **that will last at least five and we prefer**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 73**  **1 even longer, seven years or more, frankly, in**  

### 2 **the utility business we have a long term** 

### 3 **budgeting and write off of load management** 

### 4 **investment that usually is a minimum of ten** 

### 5 **years. So this is all part of our** 

### 6 **consideration.** 

### 7 **In our view, a one-year waiver is** 

### 8 **effectively no waiver at all. A year-to-year** 

### 9 **waiver situation creates simply so much** 

### 10 **planning uncertainty that it will effectively** 

### 11 **halt the continued maintenance and expansion** 

### 12 **of our program.** 

### 13 **The conditions placed on the** 

### 14 **waiver process are unworkable even with the** 

### 15 **five to seven year waiver. The coordinated** 

### 16 **manufacturing distribution process envisioned** 

### 17 **by the rule simply does not exist and we do** 

### 18 **not believe that it could be expected to be** 

### 19 **developed. It is more cost effective in our** 

### 20 **view to the consumer which we think that** 

### 21 **cooperatives is the focus, should be the** 

### 22 **focus, to supply some sort of standard size**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 74**  **1 tanks meeting specific efficiency standards.**  

### 2 **In our program, we require a minimum EF of 90** 

### 3 **percent or better in our tanks that are hooked** 

### 4 **up. And we don't believe that it's necessary** 

### 5 **to require any attached load management** 

### 6 **devices.** 

### 7 **For some of the other reasons** 

### 8 **mentioned previously, it's simply more cost** 

### 9 **effective for the utility to install their** 

### 10 **choice of load management switch, matching the** 

### 11 **already installed communication technology.** 

### 12 **There seems to be some concern in** 

### 13 **the rules that somehow the purpose of the** 

### 14 **conditions that we have to sort of make sure** 

### 15 **the water heaters don't stray outside of the** 

### 16 **load management purpose, especially these** 

### 17 **larger tanks. One person mentioned leakage** 

### 18 **earlier. Frankly, the reality of the** 

### 19 **marketplace, we don't believe that's a real** 

### 20 **significant issue at all. So the safeguards** 

### 21 **are really unnecessary.** 

### 22 **In our area, our load management**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 75**  **1 program is what is actually driving the market**  

### 2 **for large capacity water heaters. And the** 

### 3 **reason for that if you look at our promotional** 

### 4 **literature, we provide rebates of up to $500** 

### 5 **to the consumer to purchase these water** 

### 6 **heaters. What typically happens is that** 

### 7 **without a load management program, consumers** 

### 8 **generally will buy a 55-gallon or smaller tank** 

### 9 **unless there's two potential market purposes** 

### 10 **why they wouldn't. One is they may have a** 

### 11 **very large family which today is quite** 

### 12 **unusual, but there are some large families** 

### 13 **where they may have seven people or more. And** 

### 14 **obviously, a 55-gallon water tank is not going** 

### 15 **to be enough hot water. The other use** 

### 16 **mentioned earlier was dairy farms, meeting** 

### 17 **milk quality reasons for their operations they** 

### 18 **must have larger quantities of water, hot** 

### 19 **water available.** 

### 20 **So generally, unless there is a** 

### 21 **need, price is going to dictate the consumer's** 

### 22 **decision generally towards a smaller tank.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 76**  **1 And as I mentioned earlier, those who**  

### 2 **participate in our water heater program** 

### 3 **receive a rebate which is frankly what drives** 

### 4 **them to the larger water heater size in the** 

### 5 **first place. So we see all the attached** 

### 6 **conditions as frankly unnecessary and** 

### 7 **counterproductive.** 

### 8 **In addition, our consumers receive** 

### 9 **a monthly $1.50 credit on their electric bills** 

### 10 **as their share of the wholesale power savings,** 

### 11 **so with those financial incentives I believe** 

### 12 **we're adequately controlling and steering the** 

### 13 **marketplace towards those larger sized tanks** 

### 14 **for this purpose of demand management. Thank** 

### 15 **you.** 

### 16 **MR. BROOKMAN: Thank you. Doug** 

### 17 **Payne.** 

### 18 **MR. PAYNE: My name is Doug Payne.** 

### 19 **I'm Vice President and a member of the** 

### 20 **Strategic Services for Fairfield Electric** 

### 21 **Cooperative in South Carolina. Thank you for** 

### 22 **giving me this opportunity to comment.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 77**  **1 For more than 20 years, Fairfield**  

### 2 **Electric Cooperative has promoted the** 

### 3 **installation of 80 gallon electric water** 

### 4 **heaters with load control devices. More than** 

### 5 **25 percent of our residential members** 

### 6 **participate in our load management program.** 

### 7 **We currently control more than 5,300 water** 

### 8 **heaters with an annual savings of more than** 

### 9 **$500,000 in demand charges.** 

### 10 **The reduction in the Cooperative's** 

### 11 **wholesale power cost has benefitted all our** 

### 12 **members through lower rates. Fairfield** 

### 13 **Electric Cooperative provides incentives to** 

### 14 **our members to participate in the load** 

### 15 **management program and we also offer a water** 

### 16 **heater maintenance program. We currently have** 

### 17 **more than 4,500 members participating in the** 

### 18 **maintenance program which provides repair** 

### 19 **service and replacement water heaters when** 

### 20 **necessary.** 

### 21 **The maintenance program gives us** 

### 22 **the opportunity to keep the member enrolled in**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 78**  **1 the load management program by offering a**  

### 2 **replacement water heater when the time comes** 

### 3 **for it to be replaced. The availability of** 

### 4 **large capacity water heaters is essential for** 

### 5 **us if we are to continue our load management** 

### 6 **program. We are pleased that DOE has** 

### 7 **recognized the need for the proposed rule and** 

### 8 **waiver. We ask that DOE consider changes that** 

### 9 **have been proposed by NRECA and we sincerely** 

### 10 **hope changes will be made to the proposed rule** 

### 11 **which will give us the ability to continue our** 

### 12 **program.** 

### 13 **Our members have reaped the** 

### 14 **benefits for many years and it is our hope** 

### 15 **that they will continue to benefit well into** 

### 16 **the future. Thank you again for the** 

### 17 **opportunity to comment.** 

### 18 **MR. BROOKMAN: Thank you.** 

### 19 **Penelope Hinson.** 

### 20 **MS. HINSON: Thank you. My name** 

### 21 **is Penelope Hinson. I'm manager of Public** 

### 22 **Relations, Marketing, and Energy Management at**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 79**  **1 Horry Electric Cooperative which is in Conway,**  

### 2 **South Carolina. And we appreciate the** 

### 3 **opportunity to add comment to this important** 

### 4 **issue.** 

### 5 **Much of what has our cooperative** 

### 6 **concerned is long-term planning. We have 20-** 

### 7 **year plans for finances, 10-year plans for** 

### 8 **engineering. Those are reviewed every four or** 

### 9 **five years. We're into long-term planning.** 

### 10 **Load forecasting which is strongly** 

### 11 **driven by historical trends and projections** 

### 12 **related to members' quantities and patterns of** 

### 13 **use figure very heavily into our long-term** 

### 14 **plans.** 

### 15 **We are pleased to see what we** 

### 16 **believe to be recognition by DOE of the need** 

### 17 **for long-term planning in the recent NOPR.** 

### 18 **The April 2010 efficiency rule, as it's** 

### 19 **written now, would have a negative impact on** 

### 20 **our ability to use large capacity electric** 

### 21 **water heaters in our demand response programs.** 

### 22 **There is nothing long term about a one-year**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 80**  **1 waiver.**  

### 2 **Horry Electric has been managing** 

### 3 **its peak demand for many years. Residential** 

### 4 **members can participate in an active load** 

### 5 **management program in which the cooperative** 

### 6 **controls water heating load during peak** 

### 7 **periods of energy use. In 2012, almost 4,800** 

### 8 **consumers participated in our load management** 

### 9 **program. Through that effort, the cooperative** 

### 10 **shaved over 1900 kilowatts of load per peak** 

### 11 **incident during the summer months and over** 

### 12 **3,300 kilowatts of load per peak incident** 

### 13 **during the winter months.** 

### 14 **We call our program H2O Select.** 

### 15 **We provide free financing to members because a** 

### 16 **lot of people can't go in and buy a water** 

### 17 **heater off the shelf with their finances, so** 

### 18 **we'll finance it for 12 months. We offer $125** 

### 19 **rebate for someone replacing with a 50-gallon** 

### 20 **electric water heater and $250 rebates for an** 

### 21 **80-gallon tank. It just doesn't need to be as** 

### 22 **complicated as the proposed waiver makes it.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 81**  **1 As long as the water heater itself meets our**  

### 2 **standards, efficiency standards and other set** 

### 3 **up requirements, we'll install a load** 

### 4 **management switch that's compatible with our** 

### 5 **metering and control system. We don't have** 

### 6 **and shouldn't need a complicated distribution** 

### 7 **network with manufacturers to plan how many** 

### 8 **units, which models, which control devices to** 

### 9 **produce. That adds a lot of complication to** 

### 10 **what is a very easy program.** 

### 11 **Sounds easy to say water heaters** 

### 12 **ought to have a load control device installed** 

### 13 **at the time they're made, but that eliminates** 

### 14 **the flexibility we have to use a different** 

### 15 **control device if the one at the factory** 

### 16 **installed doesn't match our system.** 

### 17 **Our program is the result of a** 

### 18 **complex, multi-year process that required a** 

### 19 **lot of cooperation. Our staff, our board of** 

### 20 **trustees, contractors, and our members are all** 

### 21 **part of the mix. The one absolutely sure** 

### 22 **thing in that formula has been the supply of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 82**  **1 water heaters that meet the requirements of**  

### 2 **our program. If their availability is not** 

### 3 **going to be known from year to year, we can't** 

### 4 **justify a continued investment in the program.** 

### 5 **Technology changes frequently. In** 

### 6 **the time that I've been associated with load** 

### 7 **management we've had five different** 

### 8 **generations of load control switches. As long** 

### 9 **as the water heater purchased is installed for** 

### 10 **the purpose of load management program meets** 

### 11 **our requirements, we don't care where the** 

### 12 **member gets it. Plumbing contractors, retail** 

### 13 **stores such as Lowe's, Home Depot, Sears, and** 

### 14 **even local hardware stores know about our** 

### 15 **program and its requirements and this is where** 

### 16 **a lot of the participants come from is these** 

### 17 **plumbing contractors and these hardware** 

### 18 **stores.** 

### 19 **As for the proposed one-year** 

### 20 **waiver, Horry Electric echoes comments made** 

### 21 **earlier by Mr. Morrison of NRECA, Mr. Glover** 

### 22 **of Aiken. Please don't make us lose the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 83**  **1 ability to use large capacity electric water**  

### 2 **heaters. Thank you.** 

### 3 **MR. BROOKMAN: Thank you. Gary** 

### 4 **Connett.** 

### 5 **MR. CONNETT: Gary Connett,** 

### 6 **Director of Demand Side Management at Great** 

### 7 **River Energy. We're a G&T cooperative and** 

### 8 **have 28 member distribution cooperatives** 

### 9 **located in Minnesota.** 

### 10 **Last night, Great River Energy** 

### 11 **stored over 800 megawatt hours in 70,000** 

### 12 **batteries. Some of these batteries are either** 

### 13 **in the far northern reaches of Minnesota where** 

### 14 **the snow stands deep. Others of these** 

### 15 **batteries are in southwestern Minnesota in the** 

### 16 **farm country near Buffalo Ridge where there's** 

### 17 **over 2,000 megawatts of wind turbines in their** 

### 18 **shadows.** 

### 19 **The 70,000 batteries are, of** 

### 20 **course, large capacity electric resistance** 

### 21 **water heaters that GRE charges in the night** 

### 22 **time only. They are on what is called an off-**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 84**  **1 peak strategy, only receiving energy for an**  

### 2 **eight-hour period beginning at 11 p.m. and** 

### 3 **ending at 7 a.m. The large capacity of the** 

### 4 **water heaters allow us to heat water, enough** 

### 5 **water in the eight hours of night time to** 

### 6 **ensure the home owner will have enough hot** 

### 7 **water for the next 16 on-peak hours. We've** 

### 8 **been promoting this technology since the mid** 

### 9 **1980s.** 

### 10 **Just this week, Great River Energy** 

### 11 **testified at a legislative hearing in** 

### 12 **Minnesota, regarding a proposed bill that will** 

### 13 **require us to have 40 percent of our energy** 

### 14 **coming from renewable resources by the year** 

### 15 **2030. Today, the utilities in Minnesota have** 

### 16 **to have 25 percent of their energy coming from** 

### 17 **renewable resources by the year 2025.** 

### 18 **Today, Great River Energy has 470** 

### 19 **megawatts of wind turbines that are meeting 12** 

### 20 **percent of our energy requirements. To meet** 

### 21 **any sort of renewable energy standard in** 

### 22 **Minnesota or wherever, you have to have**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 85**  **1 options. You have to have strategies. You**  

### 2 **have to have some way to store energy,** 

### 3 **particularly in the off-peak hours when there** 

### 4 **is so little demand for energy. Today, we all** 

### 5 **know that the industry is searching, doing** 

### 6 **intensive research to develop the perfect** 

### 7 **battery. Often involves aggregating smaller** 

### 8 **batteries together to make a much larger** 

### 9 **battery. For example, in Minnesota, Xcel has** 

### 10 **a battery that's 1 megawatt in size and it's** 

### 11 **made up of 50 KW batteries stacked side by** 

### 12 **side, aggregated.** 

### 13 **We found our battery, one that** 

### 14 **will help us better manage our renewable** 

### 15 **energy requirements. It's not fancy. It's** 

### 16 **not show stopping technology. It doesn't** 

### 17 **warrant much press or discussion. It's a** 

### 18 **large capacity electric resistance water** 

### 19 **heater. The electric grid doesn't know** 

### 20 **whether the storage is electric or whether** 

### 21 **it's thermal. You aggregate them together** 

### 22 **through a common utility load control strategy**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 86**  **1 and you have a simple, low cost, nontoxic**  

### 2 **battery that charges in the night time hours** 

### 3 **and discharges during the day in the form of** 

### 4 **hot water.** 

### 5 **Our member consumers get what they** 

### 6 **want, hot water. Great River Energy gets what** 

### 7 **it wants, low cost energy storage. All of our** 

### 8 **members benefit when we can better manage our** 

### 9 **energy resources.** 

### 10 **But DOE understands the need for** 

### 11 **energy storage and the potential value that** 

### 12 **off-peak water heating can provide. And we** 

### 13 **understand that DOE needs assurances that** 

### 14 **large capacity water heaters are truly** 

### 15 **adhering to utility program. But adding** 

### 16 **requirements to the manufacturer or to the** 

### 17 **utility is not the answer.** 

### 18 **As you've heard earlier, there's** 

### 19 **no coordinated distribution network between** 

### 20 **co-ops and water heater manufacturers and** 

### 21 **there's no standard load control technology.** 

### 22 **In fact, the co-ops use a large variety of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 87**  **1 load control technologies as you've heard. At**  

### 2 **Great River Energy, it could be radio** 

### 3 **frequency. It could be power line carrier.** 

### 4 **It could be paging technology. And we're** 

### 5 **working with Honeywell in Minnesota on using** 

### 6 **home area networks to control water heaters.** 

### 7 **There's going to be a variety of load control** 

### 8 **technologies.** 

### 9 **Here is what we need and as** 

### 10 **important what the DOE should like to offer.** 

### 11 **I came here with the notion of I want a new** 

### 12 **category of water heating. I want a grid** 

### 13 **enabled water heater, a new category. This is** 

### 14 **a different water heater. But we've all heard** 

### 15 **about a waiver. The one year waiver process** 

### 16 **with a -- replace the one year waiver process** 

### 17 **with a simple five-year waiver that evergreens** 

### 18 **and cannot be eliminated without three years'** 

### 19 **notice. I'm still back on this crazy notion I** 

### 20 **want a new category of water heater called the** 

### 21 **grid-interactive water heater.** 

### 22 **Require that water heaters**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 88**  **1 receiving the waiver must be shipped from the**  

### 2 **factory load control ready, but not with a** 

### 3 **specific load control device installed or** 

### 4 **packaged with the water heater.** 

### 5 **Require water heaters to be** 

### 6 **packaged and marketed as grid enabled for use** 

### 7 **in utility load control programs, but without** 

### 8 **any sales or distribution restrictions.** 

### 9 **And lastly, require the utilities** 

### 10 **to report in the Energy Information** 

### 11 **Administration Form 860 honest, demand** 

### 12 **response activities and programs so you can** 

### 13 **monitor the leakage if you will.** 

### 14 **Without the suggested changes to** 

### 15 **the proposed rule, Great River Energy and its** 

### 16 **28 member distribution cooperatives will lose** 

### 17 **the ability to use large capacity electric** 

### 18 **resistance water heaters for our load** 

### 19 **management programs at a great cost to our** 

### 20 **members.** 

### 21 **Thank you.** 

### 22 **MR. BROOKMAN: Thank you. Next,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 89**  **1 we're going to hear from Robin Roy.**  

### 2 **MR. ROY: Thanks, Doug. Thanks,** 

### 3 **John. Thanks, Ashley. Robin Roy, Natural** 

### 4 **Resources Defense Council. On behalf of our** 

### 5 **1.3 million members and supporters, thank you** 

### 6 **for the opportunity to be here this morning** 

### 7 **and discuss our initial views of DOE's** 

### 8 **proposed waiver for these large electric water** 

### 9 **heaters.** 

### 10 **We will listen to all these folks** 

### 11 **and continue to talk with many of you that** 

### 12 **we've already started talking with and** 

### 13 **consider further and make a submission and** 

### 14 **written comments later.** 

### 15 **But NRDC recognizes that the** 

### 16 **rapidly emerging prospects for grid** 

### 17 **interactive consumer devices and of the** 

### 18 **potential benefits that those offer for** 

### 19 **economics, for operations, for perhaps** 

### 20 **environmental performance, and the changes** 

### 21 **they imply for energy consumption. We also** 

### 22 **recognize that as a rapidly-emerging field**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 90**  **1 there is a reasonable lack of data and**  

### 2 **analysis and that a degree of speculation is** 

### 3 **unavoidable in performing quantitative** 

### 4 **assessments. However, it's critical to note** 

### 5 **that the water heaters we're discussing today** 

### 6 **are far less efficient and would use far more** 

### 7 **energy by a factor of two or more than the** 

### 8 **water heaters that meet the efficiency** 

### 9 **standards adopted by DOE following a rigorous** 

### 10 **and extensive, analytically based,** 

### 11 **quantitative process over several years.** 

### 12 **In light of both the prospective** 

### 13 **benefits and the prospective costs and the** 

### 14 **uncertainty about both, NRDC supports, and you** 

### 15 **can see in our comments to the RFI, NRDC** 

### 16 **supports DOE's consideration of a well** 

### 17 **designed waiver policy, both to explore the** 

### 18 **grid interactive programs that will deliver** 

### 19 **net benefits while considering specifically** 

### 20 **the energy, economic, and environmental** 

### 21 **impacts that result and to facilitate those** 

### 22 **programs where the analyses indicates that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 91**  **1 they are justified. And we suspect they're**  

### 2 **going to be justified in a number of cases.** 

### 3 **However, DOE's proposed waiver** 

### 4 **approach is overly broad. I think that's the** 

### 5 **first time we're hearing that this morning.** 

### 6 **But we also think it's overly constrained in** 

### 7 **line of what you're thinking as well. The way** 

### 8 **it's presented would present a significant** 

### 9 **loophole risk to bypass the efficiency** 

### 10 **standards while not necessarily delivering the** 

### 11 **grid interactive benefits, nor allowing DOE** 

### 12 **and other interested parties to learn more** 

### 13 **about and assess the practical opportunities.** 

### 14 **It's actually written so broadly now that it** 

### 15 **seems like it might run afoul of the anti** 

### 16 **backsliding provision, but we'll think about** 

### 17 **that a little bit more and I suspect you have** 

### 18 **as well.** 

### 19 **There are several straight-forward** 

### 20 **steps that come right to mind that could make** 

### 21 **a waiver much more effective than reduce the** 

### 22 **risk of it being merely a loophole. First,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 92**  **1 DOE needs to much more clearly define what is**  

### 2 **the hardship that it is intending to address** 

### 3 **in terms of the practical effective grid** 

### 4 **interactive programs that would be foregone by** 

### 5 **these utilities. You just have to define it.** 

### 6 **I think we have lots of information what** 

### 7 **those are.** 

### 8 **Second, DOE, I think, really needs** 

### 9 **to present at least some preliminary** 

### 10 **quantitative analysis of the energy, economic,** 

### 11 **and environmental impacts that would result** 

### 12 **from a waiver under a range of foreseeable** 

### 13 **circumstances at a reasonable variety of** 

### 14 **utility conditions.** 

### 15 **Third, DOE needs to assess whether** 

### 16 **other existing or emerging products could** 

### 17 **perform these grid interactive services,** 

### 18 **including whether the devices that comply with** 

### 19 **the efficiency standards might perform much or** 

### 20 **all of the benefit. Needs to at least address** 

### 21 **that and do it quantitatively.** 

### 22 **Fourth, I think in designing the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 93**  **1 waiver process, DOE should really require the**  

### 2 **waiver applicants to present some quantitative** 

### 3 **assessment of the energy, economic, and** 

### 4 **environmental impacts in their specific cases.** 

### 5 **These people think a lot about it. Even the** 

### 6 **small co-ops have given a lot of thought to** 

### 7 **it. They've planned long in advance. They** 

### 8 **will be able to do it. It should not be an** 

### 9 **overwhelming burden.** 

### 10 **And next, I think the waiver** 

### 11 **process as I understand it would not be** 

### 12 **subject to public review and comment. While I** 

### 13 **don't want to suggest there needs to be a** 

### 14 **burdensome process, the transparency that** 

### 15 **comes with public review and comment is very** 

### 16 **helpful and we suggest that really needs to be** 

### 17 **a part of any waiver process.** 

### 18 **As I mentioned earlier, we note** 

### 19 **that the one-year limitation seems to present** 

### 20 **some real practical constraints both for** 

### 21 **manufacturers and utilities. It's too short a** 

### 22 **period for program planning for product**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 94**  **1 manufacture.**  

### 2 **So thanks. We look forward to** 

### 3 **working with many of you. Some of you we've** 

### 4 **already started working with and coming up** 

### 5 **with a process that really works and really** 

### 6 **delivers on the opportunity and doesn't just** 

### 7 **open a lot of gaps.** 

### 8 **MR. BROOKMAN: Thank you. Ed** 

### 9 **Short.** 

### 10 **MR. SHORT: Thank you. I'm Ed** 

### 11 **Short, CEO of Covington Electric Cooperative,** 

### 12 **a member cooperative of Power South Energy in** 

### 13 **South Alabama. Power South Energy serves 20** 

### 14 **members, 16 cooperatives, and 4 municipals for** 

### 15 **the panhandle in Florida. The rest of them** 

### 16 **are principally south Alabama.** 

### 17 **I guess enough has probably been** 

### 18 **said about the waiver, one year versus five** 

### 19 **years which I support at least the five year** 

### 20 **process.** 

### 21 **I want to just talk a little bit** 

### 22 **about what we're doing in an infancy program**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 95**  **1 of load control at Power South. In the three**  

### 2 **years, four years that this program has been** 

### 3 **in effect, there's seven active participants** 

### 4 **out of the 20 at Power South. Those seven are** 

### 5 **saving in the range of a half million dollars** 

### 6 **a year on capacity charges with 10,000** 

### 7 **controlled objects in the field. We're** 

### 8 **projecting this to grow to $1.5 million** 

### 9 **savings per year for our member systems.** 

### 10 **We understand that you are working** 

### 11 **under the needle approach, threading the** 

### 12 **needle, and we appreciate your efforts to** 

### 13 **address this issue. But the other issue that** 

### 14 **we found in this infancy program is that in** 

### 15 **those small numbers that we have at this time,** 

### 16 **there's four different technologies being used** 

### 17 **for the switching program. So that supports** 

### 18 **the idea that one size fits all does not** 

### 19 **really work.** 

### 20 **So in essence of time, thank you** 

### 21 **for the opportunity for us to make these** 

### 22 **comments and we look forward to presenting**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 96**  **1 additional data later. Thank you.**  

### 2 **MR. BROOKMAN: Thank you for** 

### 3 **summarizing your comments.** 

### 4 **Tom Holt.** 

### 5 **MR. HOLT: Thank you. My name is** 

### 6 **Tom Holt. I'm representing East River** 

### 7 **Electric Power Cooperative from Madison, South** 

### 8 **Dakota. We represent 25 distribution** 

### 9 **cooperatives serving over a quarter of a** 

### 10 **million people in eastern South Dakota and** 

### 11 **western Minnesota. Greetings from the Great** 

### 12 **Plains.** 

### 13 **Thank you for giving us this** 

### 14 **opportunity to comment on this very important** 

### 15 **issue. As has been said a lot of the items** 

### 16 **that have comments on have been brought up** 

### 17 **before so I'll try and keep it brief and just** 

### 18 **summarize.** 

### 19 **Again, large capacity electric** 

### 20 **water heaters are essential and critical to a** 

### 21 **load management program that East River has** 

### 22 **been conducting for its distribution systems**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 97**  **1 for over 29 years. And we find this an**  

### 2 **extremely concerning issue and it will have a** 

### 3 **great effect on our consumers.** 

### 4 **Being a consumer-owned, not-for** 

### 5 **profit utility, we are very concerned about** 

### 6 **the cost to the end consumer because they are** 

### 7 **our owner members and so we are doing** 

### 8 **everything we can to offer them choices for** 

### 9 **energy efficiency, always have, always will,** 

### 10 **and as well as minimizing construction of new** 

### 11 **generating facilities. So our primary mission** 

### 12 **and goal is to provide value to our members** 

### 13 **and to their end consumer members as well.** 

### 14 **Having said all of that, that** 

### 15 **quarter of a million people, over half of them** 

### 16 **are participating in our load management** 

### 17 **program at this point. The primary thing that** 

### 18 **they participate with is the large capacity** 

### 19 **electric resistance water heaters, the vast** 

### 20 **majority, 85- and 105-gallon units. We use** 

### 21 **this, of course, to moderate system load** 

### 22 **during peak times, shift it to off-peak times.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 98**  **1 And these storage units have to have capacity**  

### 2 **to be able to do that. They also have to be** 

### 3 **able to respond quickly to that so that we can** 

### 4 **lower demand negating the need for building** 

### 5 **additional generation.** 

### 6 **Direct savings from the control of** 

### 7 **these large capacity water heaters has totaled** 

### 8 **27.7 megawatts per month and this has been** 

### 9 **translating into approximately $5.2 million** 

### 10 **per year in savings for our consumers and** 

### 11 **that's not counting avoided cost of new** 

### 12 **transmission and generating resources that are** 

### 13 **not needed to deliver this power.** 

### 14 **Our load control program has been** 

### 15 **overwhelmingly successful. It is a voluntary** 

### 16 **program. I need to emphasize that. It's up** 

### 17 **to our members to participate. We do not** 

### 18 **enforce any kind of rules that they must** 

### 19 **participate. It's a totally voluntary program** 

### 20 **and we have the ability because of the great** 

### 21 **success of that, to control over 24 percent of** 

### 22 **our system load.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 99**  **1 We're presently at about 75**  

### 2 **percent of our end consumers have electric** 

### 3 **water heaters. As was mentioned, there's a** 

### 4 **lot of areas out in our area that do not have** 

### 5 **access to natural gas. We have about 75** 

### 6 **percent penetration of electric water heaters** 

### 7 **and 70 percent of that penetration are large** 

### 8 **capacity units. And so again, a lot of those** 

### 9 **large capacity units have been installed over** 

### 10 **the years.** 

### 11 **The other piece that has not been** 

### 12 **mentioned a lot is again this opportunity** 

### 13 **afforded by the grid connected, quick** 

### 14 **response, large capacity water heaters to be** 

### 15 **used in other smart grid applications. Just** 

### 16 **last month, East River Electric Power** 

### 17 **Cooperative was named by the Department of** 

### 18 **Energy as Wind Cooperative of the Year. We** 

### 19 **are very in tune with the renewable energies.** 

### 20 **And so we have over ten percent of our power** 

### 21 **supply that we provide to the distribution** 

### 22 **cooperatives that own us is provided by wind**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 100**  **1 resources.**  

### 2 **In addition, 22 percent of the** 

### 3 **power supply is hydroelectric resources. So** 

### 4 **these are very important to us and we know** 

### 5 **that as technology advances, utilization of** 

### 6 **this vast number of large capacity resistance** 

### 7 **water heaters would allow us to store this** 

### 8 **renewable energy for fitting succinctly with** 

### 9 **DOE's objectives in other areas. So for** 

### 10 **increased use renewables, this is a very** 

### 11 **important issue.** 

### 12 **Again, we recognize that DOE** 

### 13 **hasn't seen the tremendous value of these** 

### 14 **large capacity water heaters. We thank you** 

### 15 **for this look at this and we do have concerns** 

### 16 **though with it. Like Gary, we're hoping for a** 

### 17 **change and a new classification. The one-year** 

### 18 **waiver that's been proposed to thread this** 

### 19 **needle just is not a workable situation for us** 

### 20 **for a number of the reasons that were** 

### 21 **mentioned.** 

### 22 **Our members get their water**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 101**  **1 heaters at a variety of sources. We're not in**  

### 2 **the business to sell water heaters. Some of** 

### 3 **our distribution co-ops do because there's** 

### 4 **none available elsewhere, but most of our end** 

### 5 **consumers buy them from the local plumbers,** 

### 6 **big box stores, and in some cases the electric** 

### 7 **co-op. So the fact that trying to coordinate** 

### 8 **all of that and set up a program that works** 

### 9 **that way is very impractical.** 

### 10 **Load control receivers, again, we** 

### 11 **have a problem with the requirement that the** 

### 12 **load control receiver be installed at the** 

### 13 **manufacturer because we have a lot of** 

### 14 **installation where our load control receiver** 

### 15 **controls a number of other appliances in the** 

### 16 **house. Most typically, it's the air** 

### 17 **conditioning unit or the heat pump unit. And** 

### 18 **so having it installed on the water heater** 

### 19 **itself would just be a duplication. We would** 

### 20 **probably have to not use that. It would** 

### 21 **increase costs to the consumer, an already** 

### 22 **fairly expensive piece of equipment.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 102**  **1 We utilize our incentives to**  

### 2 **encourage our members to participate in this** 

### 3 **voluntary program which also helps us defray** 

### 4 **the cost of new generating sources and so this** 

### 5 **one year waiver process in the proposed rule** 

### 6 **needs to be replaced with something that's** 

### 7 **much more workable, that will provide us** 

### 8 **certainty and simplicity that we need to** 

### 9 **continue to offer our members the benefits of** 

### 10 **the demand response program that has been very** 

### 11 **successful for many, many years. Thank you.** 

### 12 **MR. BROOKMAN: Thank you. Dave** 

### 13 **Graves.** 

### 14 **MR. GRAVES: My name is Dave** 

### 15 **Graves. I'm a senior member services** 

### 16 **associate with Eau Claire Energy Cooperative,** 

### 17 **a member-owned distribution cooperative with** 

### 18 **headquarters in Fall Creek, Wisconsin. I** 

### 19 **would also like to thank you for the** 

### 20 **opportunity to comment on this issue that is** 

### 21 **very important to our members.** 

### 22 **Approximately 5,000 of our 10,600**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 103**  **1 members participate in our water heater load**  

### 2 **management programs. For over 30 years, these** 

### 3 **programs have provided load shedding** 

### 4 **capability to the cooperative, along with cost** 

### 5 **savings ranging between $36 to well over $100** 

### 6 **per year for our members. Most of our members** 

### 7 **don't have natural gas, so LP or fuel oil** 

### 8 **would be the alternatives to electric water** 

### 9 **heaters and both of these options typically** 

### 10 **have higher operating costs than electric** 

### 11 **water heaters particularly when you factor in** 

### 12 **the savings from load management programs.** 

### 13 **The large capacity resistance** 

### 14 **water heaters have been the backbone of our** 

### 15 **load management programs for years. We have** 

### 16 **learned that without them these programs would** 

### 17 **be nowhere near as successful. The small** 

### 18 **water heaters just don't provide enough** 

### 19 **storage capacity for our members. The large** 

### 20 **capacity Marathon water heaters we sell are** 

### 21 **all high energy factor models. They provide** 

### 22 **our members the capacity to allow**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 104**  **1 participation in our programs and also do so**  

### 2 **in many cases, if not most, with an actual** 

### 3 **reduction in energy use when compared to the** 

### 4 **standard water heaters that we would otherwise** 

### 5 **typically find in homes.** 

### 6 **A recent trip to a large home** 

### 7 **improvement store locally found four 50-gallon** 

### 8 **models available. Of these, three had actual** 

### 9 **energy usage higher than even the 85- and 105-** 

### 10 **gallon water heaters we offer. Another** 

### 11 **important aspect of a water heater purchase to** 

### 12 **our members is the tank warranty. In our** 

### 13 **area, quite often five to seven years is all** 

### 14 **they can expect out of a metal tank water** 

### 15 **heater. Unfortunately, we do not feel the** 

### 16 **proposed rule to allow a one-year waiver for** 

### 17 **the production of these large capacity water** 

### 18 **heaters would give our members the confidence** 

### 19 **to invest in a higher quality water heater if** 

### 20 **they can't be assured the replacement water** 

### 21 **heater would be available should they have a** 

### 22 **warranty claim.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 105**  **1 In addition, we feel the proposed**  

### 2 **waiver process assumes a working relationship** 

### 3 **between utilities and manufacturers that is** 

### 4 **currently not in place and is unlikely to** 

### 5 **develop. It is a very uncertain process that** 

### 6 **seems detrimental to the continuation of** 

### 7 **existing load management programs.** 

### 8 **Also, installation of load** 

### 9 **management equipment by the water heater** 

### 10 **manufacturer, even if it could be the type of** 

### 11 **equipment each utility is currently using, in** 

### 12 **many cases would not meet the needs of the** 

### 13 **utilities. We locate our load management** 

### 14 **equipment on the outside of the home for ease** 

### 15 **of access should servicing be needed. It is** 

### 16 **much harder to get inside the home, more time** 

### 17 **consuming, and expensive if we have to get** 

### 18 **inside to service a unit.** 

### 19 **In addition, we often use one load** 

### 20 **management to control multiple loads at the** 

### 21 **home. An example of this, as mentioned, would** 

### 22 **be one receiver being utilized to control both**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 106**  **1 a water heater and a central air conditioning**  

### 2 **unit. If the receiver was located on the** 

### 3 **water heater, this would often not be feasible** 

### 4 **and would add additional expense to those** 

### 5 **installations.** 

### 6 **So while we appreciate DOE's** 

### 7 **attempt to offer the waiver option as a means** 

### 8 **to ensure that large capacity water heaters** 

### 9 **will continue to be available, we don't feel** 

### 10 **that the current structure of that waiver** 

### 11 **process will accomplish this. We would hope** 

### 12 **that this waiver process could be simplified** 

### 13 **and that the waiver term could be increased to** 

### 14 **a minimum of five years and hopefully longer,** 

### 15 **if not entirely eliminated.** 

### 16 **In addition, we would like to see** 

### 17 **the mandatory installation of load management** 

### 18 **equipment by the manufacturer dropped. This** 

### 19 **would allow us to ensure that the proper** 

### 20 **equipment is installed in the most cost** 

### 21 **effective manner for each installation. We** 

### 22 **urge DOE to consider these changes to ensure**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 107**  **1 that large capacity water heaters can continue**  

### 2 **to be an integral component of successful load** 

### 3 **management programs and continue to offer our** 

### 4 **members the savings opportunities provided by** 

### 5 **these programs. Thank you again for this** 

### 6 **opportunity.** 

### 7 **MR. BROOKMAN: Jeff Springer.** 

### 8 **MR. SPRINGER: Hi, I'm Jeff** 

### 9 **Springer with Dairyland Power Cooperative** 

### 10 **located in La Crosse, Wisconsin. I want to** 

### 11 **thank you for the chance to comment on these** 

### 12 **proposed rules.** 

### 13 **Water heaters are the backbone of** 

### 14 **our load control system which helps provide** 

### 15 **our members with reliable and affordable** 

### 16 **electricity. Most of our 250,000 members are** 

### 17 **located in rural areas where natural gas is** 

### 18 **not available. And while the cost of liquid** 

### 19 **propane does fluctuate, electric storage water** 

### 20 **heating is typically significantly less costly** 

### 21 **than water heating with liquid propane.** 

### 22 **Our first area of concern is the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 108**  **1 requirement that a load control device be**  

### 2 **installed on the water heater before it leaves** 

### 3 **the factory. Within our own system, we** 

### 4 **currently have two distinct control devices** 

### 5 **that are in use for resistance water heaters.** 

### 6 **One is the traditional radial base control** 

### 7 **and the other is a grid interactive broadband** 

### 8 **control with expanded capabilities that** 

### 9 **promise to enhance the ability to integrate** 

### 10 **renewable energy into our system by providing** 

### 11 **fast response and modulated control.** 

### 12 **It would be impossible for a** 

### 13 **manufacturer to install the right control for** 

### 14 **the end user given that wide variety of** 

### 15 **systems in use by utilities.** 

### 16 **Dairyland does understand the** 

### 17 **concern about limiting the number of these** 

### 18 **water heaters that are sold without** 

### 19 **participating in a load management system.** 

### 20 **However, we feel that the use of these water** 

### 21 **heaters in areas without load control programs** 

### 22 **would be self-limiting. It doesn't require**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 109**  **1 the installation of a factory control.**  

### 2 **A check of the local branch of the** 

### 3 **Nationwide home improvement store found an 80-** 

### 4 **gallon water heater priced at $739 which is a** 

### 5 **$470 premium over a 50-gallon model. No** 

### 6 **rational consumer will pay that premium unless** 

### 7 **there's the promise of future rate savings** 

### 8 **through participation in the utility load** 

### 9 **control program. The 80-gallon heat pump** 

### 10 **water heater available at the same store was** 

### 11 **priced at $2,399 which illustrates one reason** 

### 12 **why large heat pump water heaters are not an** 

### 13 **economical alternative for our program.** 

### 14 **The second area of concern is the** 

### 15 **complexity and short duration of the proposed** 

### 16 **waiver process requiring detailed information** 

### 17 **about each model of water heater, which** 

### 18 **utilities they have been sold to, creates an** 

### 19 **unreasonable burden for manufacturers and** 

### 20 **utilities. Surely, summary data provided** 

### 21 **annually by the manufacturers, coupled with** 

### 22 **data provided by utilities on Form 861 would**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 110**  **1 be adequate to determine the number of water**  

### 2 **heaters that are being sold without being** 

### 3 **controlled on a load control system.** 

### 4 **The potential additional energy** 

### 5 **use of a few uncontrolled large water heaters** 

### 6 **would be minimal and does not seem to justify** 

### 7 **the cumbersome waiver process that's proposed.** 

### 8 **And on the last point I'll just chime in with** 

### 9 **the rest of the folks on the five-year waiver** 

### 10 **proposal. It seems a lot more reasonable to** 

### 11 **us.** 

### 12 **So for the reasons outlined above,** 

### 13 **we urge DOE to make the changes to the** 

### 14 **proposed waiver process for large resistance** 

### 15 **water heaters to preserve the economic benefit** 

### 16 **that they provide to consumers in rural areas.** 

### 17 **Thank you.** 

### 18 **MR. BROOKMAN: Thank you. Jeremy** 

### 19 **Mahawold.** 

### 20 **MR. MAHAWOLD: Hello. My name is** 

### 21 **Jeremy Mahawold with Cass County Electric in** 

### 22 **Fargo, North Dakota. Thank you for this**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 111**  **1 opportunity to speak on the issue of demand**  

### 2 **response, its important and effective role** 

### 3 **with large water heaters and electric thermal** 

### 4 **storage.** 

### 5 **I'm encouraged the Department of** 

### 6 **Energy has recognized the significant benefit** 

### 7 **to end-use consumers as an effective means for** 

### 8 **managing peak loads.** 

### 9 **Cass County Electric is an** 

### 10 **electric distribution cooperative in** 

### 11 **southeastern North Dakota owned by the 38,000** 

### 12 **consumers we serve electricity to. We have a** 

### 13 **strong history of load management at Cass** 

### 14 **County Electric with nearly one third of all** 

### 15 **of our accounts participating in a wide** 

### 16 **variety of residential, commercial,** 

### 17 **industrial, agricultural demand response** 

### 18 **programs.** 

### 19 **Although we are still winter** 

### 20 **peaking, Cass County Electric recognized the** 

### 21 **importance of thermal storage water heating in** 

### 22 **the late '90s when summer demand was becoming**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 112**  **1 an expensive issue for us. We saw the need to**  

### 2 **incentivize the installation of large water** 

### 3 **heaters, 100 gallons or larger, to be able to** 

### 4 **sustain long durations of control needed in** 

### 5 **summer peaking conditions with 50 gallon units** 

### 6 **were not capable of.** 

### 7 **We also quickly saw the value of** 

### 8 **using these water heaters for load shaping as** 

### 9 **well because of their large thermal storage** 

### 10 **capacity and we effectively cycled these** 

### 11 **through our morning and evening peaks every** 

### 12 **day throughout the winter. So this is very** 

### 13 **valuable to us and for it we can give a much** 

### 14 **stronger incentive to the consumer.** 

### 15 **So I have come here to Washington** 

### 16 **with thanks to the Department of Energy for** 

### 17 **their interest in making rules that allow the** 

### 18 **continued use of this program. I am concerned,** 

### 19 **however, like others regarding some aspects of** 

### 20 **this waiver proposal. I believe a one year** 

### 21 **waiver period will leave a constant doubt in** 

### 22 **the sustainability or longevity in the program**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 113**  **1 and will make decision making difficult in**  

### 2 **ordering units, marketing to consumers or** 

### 3 **making recommendations for upcoming building** 

### 4 **projects.** 

### 5 **This program takes considerable time to** 

### 6 **establish in the one-year program -- one-year** 

### 7 **waiver does not complement this program.** 

### 8 **Another concern I share with** 

### 9 **others is the complexity of the waiver,** 

### 10 **specifically with including or installing the** 

### 11 **load control device on the unit. I feel this** 

### 12 **requirement would be too restrictive as is and** 

### 13 **the coordination between utility and** 

### 14 **manufacturer would be a very difficult** 

### 15 **challenge to overcome.** 

### 16 **I would recommend that you replace** 

### 17 **the one-year waiver with a five year, less** 

### 18 **complex waiver and for the same concerns I** 

### 19 **mentioned earlier there should be a three-year** 

### 20 **notice to the end of the program so if that** 

### 21 **were to occur, we could wind down the program** 

### 22 **economically and communicate it properly.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 114**  **1 The large capacity water heater**  

### 2 **demand response program is an effective tool** 

### 3 **and one I hope we don't lose. The incidence** 

### 4 **of gas water heaters in our service area is** 

### 5 **very low and natural gas availability does not** 

### 6 **extend for more than a couple of miles outside** 

### 7 **of Fargo and West Fargo.** 

### 8 **We're hopeful for it, but the** 

### 9 **feasibility of top of tank heat pump water** 

### 10 **heaters is not yet an economically good** 

### 11 **solution in our very cold climate. I'm** 

### 12 **concerned that without significant** 

### 13 **improvements to the proposed rule, most** 

### 14 **consumers in our region would revert to a 50-** 

### 15 **gallon electric water heater and we would lose** 

### 16 **our summer demand response capability, our** 

### 17 **winter load shaping ability, and the progress** 

### 18 **we've made on water heaters so far.** 

### 19 **For these reasons, I and the** 

### 20 **members at Cass County Electric urge you to** 

### 21 **consider these comments. And thank you for** 

### 22 **the invitation and your consideration.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 115**  **1 MR. BROOKMAN: Thank you. Jimmy**  

### 2 **Baker.** 

### 3 **MR. J. BAKER: Good morning. I'm** 

### 4 **Jimmy Baker, vice president --** 

### 5 **MR. BROOKMAN: Jimmy, please turn** 

### 6 **on your microphone. Thank you.** 

### 7 **MR. J. BAKER: I'm Jimmy Baker,** 

### 8 **vice president of Marketing and Public** 

### 9 **Relations at Palmetto Electric Cooperative** 

### 10 **headquartered in Ridgeland, South Carolina.** 

### 11 **On behalf of Palmetto Electric Co-op's 670,000** 

### 12 **consumer members from the South Carolina Low** 

### 13 **Country, thank you for providing me with the** 

### 14 **opportunity to comment on this very important** 

### 15 **issue.** 

### 16 **Load management and large capacity** 

### 17 **electric resistance water heaters go hand in** 

### 18 **hand with our effort to save money and energy** 

### 19 **for our members. We know that you know the** 

### 20 **tremendous value of electric thermal storage** 

### 21 **large capacity water heaters. And we're** 

### 22 **certainly encouraged by the recognition that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 116**  **1 something needs to be done to limit the effect**  

### 2 **of the April 2010 efficiency rule on our use** 

### 3 **of those water heaters for controlling demand.** 

### 4 **For over 20 years, Palmetto** 

### 5 **Electric has controlled large capacity** 

### 6 **electric resistance water heaters to manage** 

### 7 **our peak load. Our members heat water and** 

### 8 **store it when demand is low and power costs** 

### 9 **are too. Our members benefit from these cost** 

### 10 **savings. Currently, Palmetto Electric Co-op** 

### 11 **serves more than 35,000 water heaters under** 

### 12 **our load control program. That's pretty good,** 

### 13 **well over half of our members. That's close** 

### 14 **to $100 per year for every direct control** 

### 15 **device that is in operation. We reduce** 

### 16 **demand, the cooperative and its members save** 

### 17 **money, $3.4 million annually. That's serious** 

### 18 **money for our members.** 

### 19 **And there are other financial** 

### 20 **incentives to participate in the program as** 

### 21 **well including rebates, interest-free loans,** 

### 22 **and water heater maintenance. Furthermore,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 117**  **1 the use of our demand response large capacity**  

### 2 **storage program decreases the need for** 

### 3 **additional generation and its associated cost** 

### 4 **and lessens environmental impact.** 

### 5 **There are two combustion turbines** 

### 6 **that are not in place in our state and not** 

### 7 **running in our state because Palmetto Electric** 

### 8 **and other South Carolina co-ops operate this** 

### 9 **demand response program. Unfortunately, the** 

### 10 **DOE proposed rule does not effectively address** 

### 11 **the threat to our program posed by the 2010** 

### 12 **efficiency standard. Respectfully, we reject** 

### 13 **the basic premise of the 2010 standard that** 

### 14 **large capacity electric water heaters use** 

### 15 **significantly more energy than small electric** 

### 16 **tanks. A research study performed by a major** 

### 17 **university found the difference between large** 

### 18 **and small electric storage water heaters was** 

### 19 **negligible. In some cases, it found large** 

### 20 **tanks actually use less energy than small** 

### 21 **tanks.** 

### 22 **The 2010 standard will only allow**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 118**  **1 for large capacity tanks to be heat pump water**  

### 2 **heaters. While heat pump water heaters are** 

### 3 **efficient, their use is not economically or** 

### 4 **technically adequate in the demand response** 

### 5 **thermal storage program we offer our consumer** 

### 6 **members. For example, we serve thousands of** 

### 7 **mobile homes, condos, and apartments under our** 

### 8 **program that currently use 80-gallon water** 

### 9 **heaters located in small closets or interior** 

### 10 **utility areas. In most of these locations,** 

### 11 **heat pump water heaters would not fit, would** 

### 12 **not have adequate air circulation, and would** 

### 13 **not have a place to drain the condensate.** 

### 14 **The only option available for** 

### 15 **these members will be to install small** 

### 16 **capacity electric water heaters not feasible** 

### 17 **under our load control program. The DOE** 

### 18 **proposed waiver is simply unworkable due to** 

### 19 **the annual duration of the waiver and the** 

### 20 **troublesome conditions proposed by the rule.** 

### 21 **A one-year waiver does not give our** 

### 22 **cooperative enough certainty to maintain our**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 119**  **1 load management program. Development and**  

### 2 **implementation of our program is based on a** 

### 3 **ten-year window. If we do not know year to** 

### 4 **year whether the water heaters we need for our** 

### 5 **program will be available, we cannot justify** 

### 6 **continued investment in the program.** 

### 7 **The strict conditions placed on** 

### 8 **the waiver process are also overly burdensome** 

### 9 **and impractical. We connect approximately** 

### 10 **1,000 new water heaters per year under our** 

### 11 **program. Of these, about 40 percent are** 

### 12 **purchased from the co-op. The balance is** 

### 13 **purchased from local vendors. This proposed** 

### 14 **waiver would take away the local business and** 

### 15 **limit choices such as brand, warranty, tank** 

### 16 **dimensions, et cetera. The waiver's limit** 

### 17 **could result in shortages due to varying** 

### 18 **demand for water heaters. Members don't** 

### 19 **usually plan to replace a water heater. They** 

### 20 **replace them when they fail.** 

### 21 **The DOE proposed waiver to include** 

### 22 **load control devices at the point of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 120**  **1 manufacture is also not practical. Palmetto**  

### 2 **Electric has used at least six different** 

### 3 **control devices over the past years.** 

### 4 **Currently, we use a power line carrier which** 

### 5 **has two different models based on voltage.** 

### 6 **All of the devices we use are installed in the** 

### 7 **equipment connecting to the water heater, not** 

### 8 **attached directly to the water heater. The** 

### 9 **load control device has two relays and** 

### 10 **sometimes is connected to other loads such as** 

### 11 **the air conditioner or a pool pump. We must** 

### 12 **have flexibility to use a different control** 

### 13 **device if the one included with the unit is** 

### 14 **not compatible with our system.** 

### 15 **We would respectfully suggest that** 

### 16 **you replace the one-year waiver process in the** 

### 17 **proposed rule with a simple waiver that will** 

### 18 **last at least five years and eliminate the** 

### 19 **strict conditions placed on the waiver that** 

### 20 **make it burdensome and impractical. Your** 

### 21 **decision about making changes to the proposal** 

### 22 **will have a big impact. Without change, we**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 121**  **1 may lose the ability to use large water**  

### 2 **heaters for our load management program. That** 

### 3 **will cost us and more importantly it will come** 

### 4 **at great cost to our members.** 

### 5 **Thank you so much for considering** 

### 6 **these important issues with your proposal.** 

### 7 **MR. BROOKMAN: Thank you. Amy** 

### 8 **Bryan.** 

### 9 **MS. BRYAN: On behalf of Jackson** 

### 10 **EMC, I'd like to thank you for inviting us up** 

### 11 **here today to talk about water heating.** 

### 12 **Jackson EMC is the second largest electric** 

### 13 **cooperative in the nation, headquartered** 

### 14 **outside of Atlanta, Georgia. And we currently** 

### 15 **serve 208,000 meters.** 

### 16 **We have a tremendously long-term** 

### 17 **dedication to energy efficiency load** 

### 18 **management. These programs have maximized our** 

### 19 **system efficiency and helped us keep our rates** 

### 20 **low for our members. And I personally have** 

### 21 **been involved with these programs for 36** 

### 22 **years.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 122**  **1 About the waiver system, Jackson**  

### 2 **EMC does not agree with a temporary solution,** 

### 3 **believing that limited quantity agreements** 

### 4 **could produce higher retail rates for the same** 

### 5 **product that you could buy today. The annual** 

### 6 **loophole temporary solution would leave all** 

### 7 **parties in limbo from year to year. And** 

### 8 **Jackson EMC is a utility that does not want to** 

### 9 **become a water heater retailer or installer.** 

### 10 **We believe that the more traditional** 

### 11 **distribution chains can serve the customer** 

### 12 **better across our service territory.** 

### 13 **And determining accurate numbers** 

### 14 **every year, because customers replace water** 

### 15 **heaters when they break would also be a** 

### 16 **difficulty. I think I'm sitting in good** 

### 17 **company today. I didn't realize it when I sat** 

### 18 **down. But we support creating a new product** 

### 19 **class for a grid smart water heater, a more** 

### 20 **permanent solution. It's a concept supported** 

### 21 **by both manufacturers and utility** 

### 22 **organizations.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 123**  **1 I am aware of the anti-backsliding**  

### 2 **provision that seems to conflict with this.** 

### 3 **However, we believe it should be reviewed.** 

### 4 **During the original policy with smart grid** 

### 5 **technology being considered as a service** 

### 6 **approach. Jackson EMC supports the role of** 

### 7 **the DOE as an objective facilitator to allow** 

### 8 **the best ideas to prove themselves. And** 

### 9 **therefore, Jackson EMC believes that a grid** 

### 10 **interactive grid smart water heating** 

### 11 **technology and a separate product** 

### 12 **classification should be further evaluated.** 

### 13 **The energy factor of this separate** 

### 14 **product with further research would have an** 

### 15 **adjustment factor for the demand response and** 

### 16 **grid efficiency measures that it could** 

### 17 **contribute. These additional factors would** 

### 18 **mitigate the energy efficiency differences** 

### 19 **between an electric resistance water heater** 

### 20 **and a heat pump water heater.** 

### 21 **The separate class would make the** 

### 22 **supply chain more efficient for manufacturers,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 124**  **1 they could create a competitive product that**  

### 2 **would be available for a customer to purchase** 

### 3 **in a more traditional supply chain.** 

### 4 **We're concerned about our members.** 

### 5 **This new product class and some of the** 

### 6 **information from water heater manufacturers** 

### 7 **and the consumer electronics organization, the** 

### 8 **information that I've gotten a hold of is that** 

### 9 **meeting this new consumer electronic standard** 

### 10 **would anywhere from $1 to $10 to a traditional** 

### 11 **tank water heater to make it grid smart. That** 

### 12 **would be a more interesting approach for a** 

### 13 **product to offer to our customers and not** 

### 14 **drive the price up 75 percent to a different** 

### 15 **technology.** 

### 16 **Jackson EMC's commitment to energy** 

### 17 **efficiency programs is 37 years in the new** 

### 18 **construction market. And over 50 years in the** 

### 19 **existing home market with the bulk of that** 

### 20 **offering cutting-edge technology such as home** 

### 21 **performance testing. And we want to implement** 

### 22 **and we're dedicated to implementing a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 125**  **1 responsible water heating program that meets**  

### 2 **or exceeds industry standards and provides** 

### 3 **member customer satisfaction and thank you for** 

### 4 **listening today.** 

### 5 **MR. BROOKMAN: Thank you. Eddie** 

### 6 **Plowden.** 

### 7 **MR. PLOWDEN: I'm Eddie Plowden** 

### 8 **with Berkeley Electric Cooperative. I'm** 

### 9 **marketing manager from South Carolina.** 

### 10 **Berkeley Electric Cooperative would like to** 

### 11 **thank the DOE for allowing us to talk about** 

### 12 **this very important feature. I listened to** 

### 13 **the cooperatives and I'm concerned about** 

### 14 **eliminating the 80-gallon electric resistance** 

### 15 **water heater.** 

### 16 **It has proven to be a very** 

### 17 **valuable load management resource for our** 

### 18 **members for over 25 years. BEC is the largest** 

### 19 **electric cooperative in South Carolina with** 

### 20 **approximately 26,000 homes out of 70,000** 

### 21 **residential accounts. Thirty-seven percent of** 

### 22 **our members have electric resistance water**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 126**  **1 heaters participating in our load management**  

### 2 **program and saving our members a net of over** 

### 3 **$1 million per year in power costs.** 

### 4 **The 80-gallon water heater is a** 

### 5 **major part of the program and the best option** 

### 6 **for our members who have large families,** 

### 7 **needing more capacity and also volume builders** 

### 8 **that do not know the number of folks living,** 

### 9 **going to be occupying the home. The heaters** 

### 10 **cost only $140 more than the 50-gallon tank** 

### 11 **when purchasing them for our warranty program.** 

### 12 **For our water heater rebate program, we** 

### 13 **prefer for members and builders to purchase** 

### 14 **the water heaters from their suppliers. Also,** 

### 15 **a study done by Central Power Cooperative** 

### 16 **showed that there was very little difference** 

### 17 **in operating costs between the 80- and 50-** 

### 18 **gallon tank. This makes the large capacity** 

### 19 **water heater a very wise investment for our** 

### 20 **members.** 

### 21 **Some homes will be eliminated from** 

### 22 **participating in the load management program**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 127**  **1 due to limited space to install dual smaller**  

### 2 **tanks. This mostly includes smaller homes and** 

### 3 **mobile homes. These members will also have a** 

### 4 **very difficult time with the heat pump water** 

### 5 **heater because of limited space and also** 

### 6 **noise.** 

### 7 **Hybrid electric water heating** 

### 8 **systems. The electric resistance water heater** 

### 9 **system efficiency can be increased to the** 

### 10 **target 2.0 COP, co-efficiency of performance** 

### 11 **with a combination of devices working with** 

### 12 **electric resistance water heater. An example** 

### 13 **is geothermal heating/cooling systems can use** 

### 14 **the hot gas from the compressor tube to** 

### 15 **provide hot water. This geothermal** 

### 16 **combination is popular with our geothermal** 

### 17 **heating and cooling rebate program which has** 

### 18 **been available to our members since 1995.** 

### 19 **This combination is also available with our** 

### 20 **load management program. Additionally, the** 

### 21 **split system air source water heater can be** 

### 22 **used to achieve the same system co-efficiency**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 128**  **1 of performance goal when combined with the**  

### 2 **electric resistance water heater. And this** 

### 3 **would address to a certain degree the leakage** 

### 4 **that would shock them out in the market, that** 

### 5 **these heaters should be considered as also** 

### 6 **meeting the 2.0 COP system efficiency.** 

### 7 **Waiver. We support NRECA's** 

### 8 **proposal to allow the production of the 80-** 

### 9 **gallon and large capacity water heaters for a** 

### 10 **five-year period to work better with the** 

### 11 **utility programs and to keep the costs of the** 

### 12 **tanks competitive. Tracking the tanks could** 

### 13 **be matched with utility load management** 

### 14 **programs through the EIA.** 

### 15 **Load-control devices. Like** 

### 16 **Palmetto and other co-ops, we've gone through** 

### 17 **five or six different load management devices** 

### 18 **and we currently install radio-control devices** 

### 19 **or power line carrier switches at the water** 

### 20 **heater on the wall. This allows the heaters** 

### 21 **that leak and need to be replaced retain the** 

### 22 **load management switch into the future with**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 129**  **1 other tank changeouts.**  

### 2 **Again, we support the five-year** 

### 3 **waiver which will benefit our members and we** 

### 4 **request that DOE not take away the right to** 

### 5 **purchase the 80-gallon large capacity electric** 

### 6 **resistance water heater away from our members.** 

### 7 **Thank you.** 

### 8 **MR. BROOKMAN: Thank you. Rick** 

### 9 **Gerdeman. No? Paul Steffes.** 

### 10 **MR. STEFFES: Good morning. I'll** 

### 11 **be short. There's lots of things I won't** 

### 12 **repeat. I'm Paul Steffes with Steffes** 

### 13 **Corporation of Dickinson, North Dakota. And** 

### 14 **for the last 25 years we've been involved with** 

### 15 **literally hundreds of electric utilities to** 

### 16 **help them implement successful load management** 

### 17 **programs. These programs help utilities to** 

### 18 **effectively reduce peak power needs thereby** 

### 19 **having significant reductions in cost.** 

### 20 **The savings from these activities** 

### 21 **are passed along to the consumers through** 

### 22 **lower electric rates. We manufacture electric**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 130**  **1 thermal storage space heating equipment and**  

### 2 **water heater controls in the United States** 

### 3 **which are tools used within utility demand** 

### 4 **response programs and have about 100,000** 

### 5 **installations in the U.S. and Canada.** 

### 6 **Large capacity water heaters are a** 

### 7 **critical part of the program as they provide** 

### 8 **flexible resources, year round controlled** 

### 9 **capacity for utilities. Without storage water** 

### 10 **heaters many long standing, highly useful** 

### 11 **demand response programs will end.** 

### 12 **In October of 2006, we learned the** 

### 13 **workings of ancillary service markets and ISOs** 

### 14 **and RTOs. Ever since then, Steffes has worked** 

### 15 **hard to develop a system grid-interactive** 

### 16 **electric thermal storage water heaters, space** 

### 17 **and water heaters that can provide these** 

### 18 **valuable grid balancing, stabilization,** 

### 19 **renewable integration, and reliability** 

### 20 **enhancing services at a fraction of the cost** 

### 21 **of other electric storage technologies.** 

### 22 **For the last six years, Steffes**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 131**  **1 has invested heavily in the development of**  

### 2 **interactive controls to allow utilities to** 

### 3 **interface with large capacity water heaters.** 

### 4 **Grid-interactive water heaters respond to the** 

### 5 **real-time needs of the electric grid while** 

### 6 **providing affordable storage demand response,** 

### 7 **grid regulation, integration of ever** 

### 8 **increasing percentage of renewable energy and** 

### 9 **other critical needs of utilities.** 

### 10 **For the past three years, we've** 

### 11 **been demonstrating these technologies,** 

### 12 **advancements, and great benefits to the fast** 

### 13 **acting, affordable storage solutions with 20** 

### 14 **utilities.** 

### 15 **Certainly, everything else is kind** 

### 16 **of talking what everyone else has said.** 

### 17 **Certainly, the unworkable one year, the** 

### 18 **reporting requirements is we feel unworkable** 

### 19 **and we ask the DOE to look at possibly the** 

### 20 **five year limited restriction solution and** 

### 21 **allow for large capacity water heaters to be** 

### 22 **manufactured in the United States to be sold**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 132**  **1 to provide affordable electricity storage,**  

### 2 **demand response, and grid optimization** 

### 3 **services.** 

### 4 **MR. BROOKMAN: Thank you for** 

### 5 **summarizing your remarks. Earl Jones, you're** 

### 6 **next.** 

### 7 **MR. JONES: Okay, good morning.** 

### 8 **First of all, I hope you all will bear with** 

### 9 **me. Some of things I wanted to say are in** 

### 10 **somewhat response to some of the comments that** 

### 11 **I've heard this morning, but obviously G.E.** 

### 12 **supports these programs. The issue that I** 

### 13 **think we understand the issue to be whether or** 

### 14 **not the proposal would eliminate these** 

### 15 **programs and my understanding is it would not.** 

### 16 **Some have asked for some transition period** 

### 17 **and it's my understanding that what's being** 

### 18 **transitioned here is technology and therefore,** 

### 19 **there's no need for transition time.** 

### 20 **The technology transition we're** 

### 21 **talking about, of course, is heat pump water** 

### 22 **heaters. We've heard the comments about some**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 133**  **1 of the issues with heat pump water heaters. I**  

### 2 **think we'll be addressing some of those.** 

### 3 **Today, we have a presentation we'd like to** 

### 4 **share with you all if you can bear with us.** 

### 5 **But the fact is we've demonstrated that, in** 

### 6 **fact, these products can work for programs** 

### 7 **such as EPS. They have the capacity to store** 

### 8 **water at the temperatures required. They have** 

### 9 **the ability -- they have great interactive** 

### 10 **devices to shift load very effectively.** 

### 11 **And I think the thing most** 

### 12 **critical if you look at the objective that the** 

### 13 **original final rule was trying to achieve and** 

### 14 **which heat pump water heaters would allowed to** 

### 15 **be preserved and that is that they are** 

### 16 **extremely efficient and they will save** 

### 17 **significant sums for the consumers, savings** 

### 18 **that will far outweigh the savings that have** 

### 19 **been cited by some of the earlier commenters** 

### 20 **to the individual consumers.** 

### 21 **And by the way, to the same extent** 

### 22 **then, therefore save money for the generators**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 134**  **1 because your generating capacity will**  

### 2 **necessarily be reduced to the extent that you** 

### 3 **don't have to provide that level of support.** 

### 4 **As I said, our data shows that** 

### 5 **these products work well. We have done pilot** 

### 6 **projects which we'll share with you today with** 

### 7 **the results. These products are widely** 

### 8 **available. I've heard some of you indicate** 

### 9 **that particular products may be either too** 

### 10 **large or too noisy or too costly. The thing** 

### 11 **that struck me most of all with all the** 

### 12 **utilities who maintain these programs is the** 

### 13 **ability to use your power basically to work** 

### 14 **with providers to come up with solutions that** 

### 15 **I think your market power could command. I** 

### 16 **think that you're in a position to help shape** 

### 17 **what comes out of this not by a retrograde** 

### 18 **response to this rule, but instead by working** 

### 19 **with manufacturers and by settling upon** 

### 20 **appropriate technology, communications** 

### 21 **technology and other devices and to make this** 

### 22 **work.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 135**  **1 We are concerned that if this**  

### 2 **waiver is granted, that it really will be kind** 

### 3 **of like a back door backsliding effectively** 

### 4 **because the only reason for a waiver is if no** 

### 5 **effective technology is available to satisfy** 

### 6 **the requirements of the final rule. That** 

### 7 **technology exists.** 

### 8 **As we calculate it, allowing this** 

### 9 **waiver would, in effect, enable as many as** 

### 10 **three million units to participate. We're not** 

### 11 **talking about simply preserving those units** 

### 12 **which are in effect today. You're talking** 

### 13 **about creating the ability to expand those** 

### 14 **programs significantly, to encompass as many** 

### 15 **as three million plus units. That's something** 

### 16 **that because it allows for that significance** 

### 17 **would effectively be kind of like a** 

### 18 **backsliding. So that's another reason why we** 

### 19 **oppose this.** 

### 20 **At the end of the day, I mean this** 

### 21 **comes down to the question of the extensive** 

### 22 **analyses that was done by the DOE in the final**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 136**  **1 rule, despite by all the anecdotal comments**  

### 2 **made today, the real question is what is the** 

### 3 **data that supports any kind of effort to say** 

### 4 **that's not workable?** 

### 5 **I was struck by the fact that** 

### 6 **someone commented that in their same service** 

### 7 **territory that they have apartment and I guess** 

### 8 **trailer homes in small spaces which may not** 

### 9 **accommodate a heat pump water heater, but at** 

### 10 **the same time their controls also affect pool** 

### 11 **pumps. So that's an example of the kind of** 

### 12 **disparate fact pattern that I think unless we** 

### 13 **have way better data than so far we've heard** 

### 14 **presented today, the DOE would actually be** 

### 15 **acting inappropriately in granting this** 

### 16 **proposal.** 

### 17 **So my colleague, Mr. Zimmer, has a** 

### 18 **presentation. If you will bear with us and** 

### 19 **again, I think it just demonstrates the data** 

### 20 **that we're talking about and the basis on** 

### 21 **which we've actually come up with these** 

### 22 **conclusions that this transition is**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 137**  **1 appropriate and can be done certainly by 2015.**  

### 2 **MR. ZIMMER: Good morning. My** 

### 3 **name is Tom Zimmer. I'm with General Electric** 

### 4 **out of Louisville, Kentucky. What I'd like to** 

### 5 **share with you this morning is some of the** 

### 6 **study and some of the work we've done around** 

### 7 **application of heat pump water heater in light** 

### 8 **of the programs that we're discussing.** 

### 9 **To begin with, we wanted to take a** 

### 10 **look at the market and Earl has touched on** 

### 11 **this briefly already in terms of scope of the** 

### 12 **market. When you look at the breakout of** 

### 13 **electric water heating we've heard it from a** 

### 14 **number of the commenters this morning.** 

### 15 **Electric water heating is an important piece** 

### 16 **of the overall residential exposure in the** 

### 17 **country. When you break out the large** 

### 18 **capacity size that steps that down slightly,** 

### 19 **but it's still a significant number of people** 

### 20 **that are participating with large electric** 

### 21 **water heaters today.** 

### 22 **Given some of the statistics this**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 138**  **1 morning this may be understated. It may be**  

### 2 **relatively accurate. Of those that are using** 

### 3 **large water heaters, a third to -- we've heard** 

### 4 **as much as half of the people who have those** 

### 5 **water heaters participate in these demand** 

### 6 **programs, these ETS programs generating some** 

### 7 **level of savings for themselves and** 

### 8 **appropriately addressing the concerns of the** 

### 9 **utility.** 

### 10 **When we take a look at what that** 

### 11 **can mean from a consumer impact, again, the** 

### 12 **trade off in technology is the thing that we** 

### 13 **want to be sure that we highlight and the** 

### 14 **application of technology and what you're** 

### 15 **seeing this morning. Up to three million** 

### 16 **consumers based on that demographic breakout** 

### 17 **and application in programs could be affected.** 

### 18 **The trade off in savings between applying** 

### 19 **heat pump technology in those consumers' homes** 

### 20 **and participating in an ETS program leads to a** 

### 21 **net of about $380 a year difference to each** 

### 22 **consumer participating, significant,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 139**  **1 significant overall savings to consumers**  

### 2 **across the country.** 

### 3 **From utility impact perspective,** 

### 4 **again, the application of that heat pump water** 

### 5 **heating technology per the existing final rule** 

### 6 **allows the need to produce and generate at** 

### 7 **those levels not only during peak periods, but** 

### 8 **throughout the entire day, it reduces it** 

### 9 **dramatically, 50 percent or more.** 

### 10 **We've got a couple of supporting** 

### 11 **studies that I do want to take the team** 

### 12 **through or the group through this morning.** 

### 13 **The first is a study taking a look** 

### 14 **specifically at appropriate application in an** 

### 15 **ETS program of heat pump technology versus** 

### 16 **traditional electric resistance water heating.** 

### 17 **This comparison looks at initially the** 

### 18 **ability to store energy as a battery in that** 

### 19 **application. Column to the left shows the** 

### 20 **ability to store with 120 gallon tank. We** 

### 21 **have got a temperature difference in this** 

### 22 **chart, slight temperature difference, but**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 140**  **1 achievable with the technologies. The column**  

### 2 **to the right is an 80-gallon heat pump water** 

### 3 **heater. Every unit can appropriately store** 

### 4 **energy at equivalent levels.** 

### 5 **This is where the difference** 

### 6 **begins to become apparent. When you look at** 

### 7 **the electricity consumed to achieve that level** 

### 8 **of energy storage, the heat pump water heaters** 

### 9 **are using roughly half of what it takes in a** 

### 10 **resistance element unit to achieve the same** 

### 11 **storage. When you translate that to the** 

### 12 **savings to the consumer, it becomes clear that** 

### 13 **the true, in-the-pocket savings to each** 

### 14 **consumer that's affected becomes meaningful** 

### 15 **and significant throughout the course of the** 

### 16 **year.** 

### 17 **The next project I want to talk** 

### 18 **about addresses the ability to shift load and** 

### 19 **this is a real-world application. We've put** 

### 20 **30 units in a location in Kentucky, Glasgow,** 

### 21 **Kentucky. These are being controlled,** 

### 22 **monitored. Each of the units is being studied**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 141**  **1 day by day, month by month. As they've been**  

### 2 **out, they now have been out for a couple of** 

### 3 **years. We're going to look at two snapshots** 

### 4 **in time.** 

### 5 **Ten of the homes are put on a** 

### 6 **baseline electric resistance unit. That's the** 

### 7 **red line that you see. This is the energy use** 

### 8 **pattern throughout the course of the day. The** 

### 9 **peaks that everyone is concerned about are** 

### 10 **apparent in the use pattern, the morning peak** 

### 11 **and the afternoon peak. The blue line is a** 

### 12 **straight application, no demand response, no** 

### 13 **other change to the application other than** 

### 14 **these 20 homes in that same environment,** 

### 15 **similar usage patterns are applying heat pump** 

### 16 **technology. Again, the energy consumption in** 

### 17 **each home throughout all periods of the day is** 

### 18 **apparent from the graph.** 

### 19 **The purple line that you see** 

### 20 **coming in to the slide at this point actually** 

### 21 **shows the ability to shift peak. This first** 

### 22 **study looked at a two-month period. We took**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 142**  **1 those 20 units that had the heat pump water**  

### 2 **heaters and we applied a shifted load. We** 

### 3 **used a low cost,** 

### 4 **Wi-Fi approach to be able to do that, getting** 

### 5 **again at that grid-enabled approach. But we** 

### 6 **drove this and it could have been driven** 

### 7 **through any switching technology that's out** 

### 8 **there in the world today. We actually see our** 

### 9 **products that are coming out of our factories** 

### 10 **today applied to the same type switching** 

### 11 **programs that all of the utilities in the room** 

### 12 **deal with.** 

### 13 **This particular program focused on** 

### 14 **that period of time that you see highlighted** 

### 15 **as the shift that we were trying to** 

### 16 **accomplish. It pushes the load over. You do** 

### 17 **see a shift in the peak. Same study, same** 

### 18 **home, slightly different time period, again,** 

### 19 **trying to address pushing the peak and** 

### 20 **addressing storage in an off peak or usage in** 

### 21 **an off-peak period. But this one happened to** 

### 22 **occur during the month of January.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 143**  **1 This particular slide shows both**  

### 2 **the application of heat pump and the ability** 

### 3 **to shift. The period that was shifted, you** 

### 4 **see highlighted in the circle. This was truly** 

### 5 **a demand response push and you can see that** 

### 6 **that load peak was driven very much the way** 

### 7 **you would expect from any switching program.** 

### 8 **And it recovered during the off-peak period.** 

### 9 **We've talked about availability to** 

### 10 **product, applicability of product. There are** 

### 11 **products in the market today. This is an** 

### 12 **emerging technology. It is a growing market** 

### 13 **segment. So clearly, manufacturers in light** 

### 14 **of the final rule are developing new and more** 

### 15 **advanced products year over year. We see six** 

### 16 **different manufacturers listed on Energy Star.** 

### 17 **You can see the number of brands represented.** 

### 18 **And many, many different sizes are becoming** 

### 19 **available and broadly available commercially** 

### 20 **through this technology.** 

### 21 **And again, you've heard the** 

### 22 **position we see no need for the proposal for a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 144**  **1 waiver. Again, we think the data supports**  

### 2 **application heat pump technology in these** 

### 3 **environments and for these purposes. And** 

### 4 **that's basically that summary. So thank you** 

### 5 **for the opportunity to comment.** 

### 6 **MR. BROOKMAN: We are going to** 

### 7 **keep going. We have a few more speakers and** 

### 8 **then we're going to take a break. Harvey** 

### 9 **Sachs.** 

### 10 **MR. SACHS: Thank you, Doug, and** 

### 11 **DOE. First of all, I'm Harvey Sachs from** 

### 12 **ACEEE. We were early analysts and our analysis** 

### 13 **was one of the inputs to the rulemaking that** 

### 14 **led to the separation of both gas and electric** 

### 15 **units above 55 gallons as being asked to** 

### 16 **provide new technologies, condensing gas and** 

### 17 **heat pump water heaters, respectively.** 

### 18 **I've listened to an awful lot** 

### 19 **since that rule came out. Worked with a** 

### 20 **number of people in this room and thank all of** 

### 21 **them for what they've taught me. A few** 

### 22 **conclusions that I've come to that I want to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 145**  **1 share with you today. First is, the grid**  

### 2 **interactive or smart water heater is not the** 

### 3 **same thing as a load shifting water heater.** 

### 4 **It's a much better product and I believe it** 

### 5 **can be done economically through a number of** 

### 6 **routes. I'm particularly impressed with what** 

### 7 **heat pump manufacturers have accomplished to** 

### 8 **date.** 

### 9 **The next thing I want to stress is** 

### 10 **the energy storage is not just a question of** 

### 11 **volume, but also of the storage temperature.** 

### 12 **There is more thermal storage between the 135** 

### 13 **degree test temperature and 170 degrees than** 

### 14 **there is between the 135 test temperature and** 

### 15 **the 104 degrees generally taken as the minimum** 

### 16 **acceptable supply temperature for hot water.** 

### 17 **This is even more true when you** 

### 18 **remember that most water heaters are shipped** 

### 19 **with their controls set somewhere in the range** 

### 20 **of 120 to 125. Therefore, one of the** 

### 21 **characteristics that's important to me in any** 

### 22 **product that is going to be considered a smart**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 146**  **1 grid product for thermal storage for benefits**  

### 2 **to the utility, as well as the consumer, must** 

### 3 **be the ability to store up to something like** 

### 4 **170 or 180 degrees, but to contain from the** 

### 5 **factory a device, whether you call it an anti** 

### 6 **scald or a tempering valve shipped from the** 

### 7 **factory, capable of delivering by mixing water** 

### 8 **at temperatures that are acceptable to the** 

### 9 **consumer in the 120 to 125 range.** 

### 10 **We've had a lot of discussion** 

### 11 **today about waivers. And I wanted to digress** 

### 12 **just a second to thank our colleagues at DOE.** 

### 13 **I believe this may be traceable to Office of** 

### 14 **General Counsel, but I don't have to look** 

### 15 **inside the Department. In my more than one** 

### 16 **decade of following DOE rulemakings, I have** 

### 17 **never seen a proposal that so effectively** 

### 18 **brought together protagonists on all sides as** 

### 19 **the proposal for a one-year waiver. This was** 

### 20 **a remarkable accomplishment and I thank you.** 

### 21 **There is absolutely no way I can** 

### 22 **think of that I can bribe a manufacturer to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 147**  **1 gear up to manufacture a product for one year.**  

### 2 **I've dealt with a lot of utility regulators** 

### 3 **and have been one. There is no way that I** 

### 4 **could ask a utility or its management in the** 

### 5 **case of a co-op to support a one-year program.** 

### 6 **You guys need to get out more.** 

### 7 **(Laughter.)** 

### 8 **MR. CYMBALSKY: We'll send you to** 

### 9 **Fargo.** 

### 10 **MR. SACHS: I was in Fargo last** 

### 11 **year and it's not a bad place. So if there** 

### 12 **needs to be a waiver which would have to be** 

### 13 **documented through far more analysis than** 

### 14 **we've seen so far, we think a three-year** 

### 15 **waiver -- I like the concept that NRECA has** 

### 16 **advanced of a rolling closeout date, but at** 

### 17 **three year would be a good place to start our** 

### 18 **thinking. It must have high-temperature** 

### 19 **storage which gives you roughly 15 kilowatt** 

### 20 **hours storage instead of 7. It must have the** 

### 21 **automatic delivery temperature control.** 

### 22 **And I can't believe that it's 2013**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 148**  **1 and we're talking about specifying the**  

### 2 **controller. When I grew up Ma Bell had to** 

### 3 **come out to the house to add a phone. It was** 

### 4 **all hard wired. And somebody sued about fax** 

### 5 **machines they wanted to provide. And now** 

### 6 **we've got something called an RJ-11 which is a** 

### 7 **standard interface that allows you to plug in** 

### 8 **anything to the telephone system that meets** 

### 9 **certain things to protect the telephone** 

### 10 **company.** 

### 11 **We really should not be talking** 

### 12 **about a standard controller, but products** 

### 13 **which are shipped with a standard interface.** 

### 14 **As you suggested, this is a $1 to $10 item.** 

### 15 **This gives maximum freedom and it's easy to** 

### 16 **conceive of such a thing which reports the** 

### 17 **status, accepts the signal, reports its** 

### 18 **compliance and actually even is smart enough** 

### 19 **to defeat attempts to go around it while** 

### 20 **allowing a test. This is just protocol** 

### 21 **development.** 

### 22 **We do feel that any product that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 149**  **1 is sold to serve the utility needs must have**  

### 2 **some form of controls on its distribution to** 

### 3 **ensure that it is going into that market and** 

### 4 **not serving as a large-scale leak.** 

### 5 **On the other hand, we're concerned** 

### 6 **about national energy savings which means** 

### 7 **we're concerned about substantial compliance** 

### 8 **and not some nut in a state not represented** 

### 9 **here who figures out a way to defeat that** 

### 10 **controller. Okay?** 

### 11 **And we do insist that there needs** 

### 12 **to be regular evaluation, at least annually of** 

### 13 **penetration, energy savings, and economic** 

### 14 **value of any such program. We do not support a** 

### 15 **separate class for reasons that Mr. Jones has** 

### 16 **suggested and beyond that. It's just** 

### 17 **something which becomes very hard to remove if** 

### 18 **the need is not demonstrated. But we could** 

### 19 **support, if need is demonstrated, a controlled** 

### 20 **waiver process to support the smart evolution** 

### 21 **of the grid to allow us to learn better to** 

### 22 **accommodate heat pump water heaters and to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 150**  **1 protect their market as emerging products to**  

### 2 **the extent that is warranted by the economic** 

### 3 **and environmental analysis. We've long been** 

### 4 **boosters of water heaters.** 

### 5 **Thank you. And I hope I didn't** 

### 6 **offend you too much.** 

### 7 **MR. BROOKMAN: Our final commenter** 

### 8 **this morning is Tim Ballo. And immediately** 

### 9 **following Tim's remarks, we'll take a break.** 

### 10 **MR. BALLO: If I talk for too** 

### 11 **long, everyone is going to really like me. I** 

### 12 **just have two quick points to make following** 

### 13 **up in part on something Robin said for NRDC.** 

### 14 **The DOE's organic statute says that the** 

### 15 **Department is allowed to grant waivers to** 

### 16 **products consistent with the other purposes of** 

### 17 **the relevant act here. The relevant act is** 

### 18 **the Energy Policy and Conservation Act. And** 

### 19 **of course, there's been no analysis in the** 

### 20 **proposed rule that any waivers would, in fact,** 

### 21 **be consistent with EPCA. So I think that's** 

### 22 **troubling. It's also troubling that the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 151**  **1 proposed regulations governing the waiver**  

### 2 **process don't at all provide analysis of** 

### 3 **consistency with EPCA at the time the waiver,** 

### 4 **the individual waiver applications are** 

### 5 **received. So that's a problem.** 

### 6 **The organic statute also provides** 

### 7 **that DOE may grant waivers to prevent special** 

### 8 **hardship inequity or unfair distribution of** 

### 9 **burdens. Who is suffering the hardship here?** 

### 10 **Is there, in fact, a hardship? Is there an** 

### 11 **unfair distribution of burden? Who is bearing** 

### 12 **that burden? Where does the inequity lie?** 

### 13 **There's no analysis of these points in the** 

### 14 **proposed rule.** 

### 15 **And finally, the other issue Robin** 

### 16 **mentioned I'd like to amplify, one, is the** 

### 17 **lack of an opportunity to comment in the** 

### 18 **existing DOE waiver process. There is a** 

### 19 **period, a very short period provided for** 

### 20 **public input on any waivers received,** 

### 21 **especially to the extent that the Department** 

### 22 **is not going to perform any analysis in this**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 152**  **1 proposed rule. It really makes it incumbent**  

### 2 **on each individual waiver to demonstrate** 

### 3 **consistency with EPCA and an actual hardship** 

### 4 **because that has not been demonstrated in the** 

### 5 **NOPR. Thanks.** 

### 6 **MR. BROOKMAN: Thank you. The** 

### 7 **plan, the agenda as written, we are** 

### 8 **approximately 25 minutes behind schedule.** 

### 9 **That's not too bad, especially given all the** 

### 10 **content that we heard this morning already.** 

### 11 **But the plan now is that we will try to work** 

### 12 **expeditiously and try to end 1'ish and** 

### 13 **probably work maybe a little beyond that** 

### 14 **before we would ever consider breaking for** 

### 15 **lunch, for example. So that's what we are** 

### 16 **considering at this point.** 

### 17 **It's now 11:25. Let's take a 15-** 

### 18 **minute break. You must wear one of these** 

### 19 **badges visible while you're in the Forrestal** 

### 20 **Building. There are restrooms on both ends of** 

### 21 **the hall. If you're going for coffee or even** 

### 22 **a snack, go quickly. Take the elevators to**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 153**  **1 the ground floor, hang a left and there's a**  

### 2 **coffee shop just about below us on the ground** 

### 3 **floor. Okay? So 11:25 means 11:40 is when** 

### 4 **we'll resume right here in this room. And** 

### 5 **thanks for a very good start on the day.** 

### 6 **(Whereupon, the above-entitled** 

### 7 **matter went off the record at 11:22 a.m. and** 

### 8 **resumed at 11:39 a.m.)** 

### 9 **MR. BROOKMAN: I especially want** 

### 10 **to thank anybody this morning that truncated** 

### 11 **their comments. I think a lot of you tried** 

### 12 **and I appreciate that.** 

### 13 **Now we're going to move to** 

### 14 **presentation followed by an opportunity for** 

### 15 **comment. I think many of you are new to these** 

### 16 **proceedings, so this colorful PowerPoint slide** 

### 17 **packet will be the basis for both the** 

### 18 **presentation and your opportunity to comment.** 

### 19 **So if you would track this stuff, then that** 

### 20 **will be helpful. And we're going to start off** 

### 21 **with Ashley Armstrong.** 

### 22 **MS. ARMSTRONG: Hi, everyone. So**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 154**  **1 I'm actually going to present from here.**  

### 2 **Hopefully, that's okay. I am going to briefly** 

### 3 **go through the beginning slides because you** 

### 4 **guys have done such a nice job of explaining** 

### 5 **ETS programs and heat pump water heaters that** 

### 6 **we're just going to skip through those and** 

### 7 **hopefully, we'll finish off right around one** 

### 8 **and get everyone out of here.** 

### 9 **There's some comment boxes once we** 

### 10 **go through the details of the proposed waiver** 

### 11 **that we'd really like to spur some discussion,** 

### 12 **so that's one of the reasons I'm going to sit** 

### 13 **here to try to engage in that discussion.** 

### 14 **Just to give you some background,** 

### 15 **Energy Thermal Storage programs, a lot of the** 

### 16 **utility companies, we heard a variety of** 

### 17 **different manners to control water heater** 

### 18 **operation. The issue came to light when we** 

### 19 **adopted the April 2010 amended standards for** 

### 20 **water heaters greater than 55 gallons which** 

### 21 **essentially require heat pump technology to** 

### 22 **meet the efficiency level.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 155**  **1 So just to tee up the issue, I**  

### 2 **think you guys have framed it quite well that** 

### 3 **you see the lack of large volume electric** 

### 4 **storage water heaters greatly impacting the** 

### 5 **future feasibility of your programs. So in** 

### 6 **June of 2012, the Department published a** 

### 7 **Request For Information, summarizing and** 

### 8 **seeking comment on a variety of issues.** 

### 9 **We received 127 unique comments.** 

### 10 **You can see the breakdown of those comments** 

### 11 **from a variety of different interested** 

### 12 **parties. Most of the commenters supported** 

### 13 **some type of DOE action. Two commenters** 

### 14 **opposed. And one took no position on whether** 

### 15 **DOE should act.** 

### 16 **Moving right along. Okay, so here** 

### 17 **are some of the options that DOE considered.** 

### 18 **We considered alternatives to what could be** 

### 19 **currently used for large volume electric** 

### 20 **resistance water heaters and thermal storage** 

### 21 **programs. That includes large volume heat** 

### 22 **pumps as well as multiple small volume**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 156**  **1 electric resistance water heaters. And then**  

### 2 **we also considered a waiver process.** 

### 3 **So ultimately, we decided to** 

### 4 **propose a waiver process. We thought that the** 

### 5 **waiver process provided maximum flexibility** 

### 6 **since it could be reviewed and renewed as** 

### 7 **often as possible or as new technologies or** 

### 8 **new information became available. The waiver** 

### 9 **would be targeted to affect a certain portion** 

### 10 **of the market that was really in need. And** 

### 11 **obviously the comments on the RFI helped** 

### 12 **inform our decision to propose this waiver** 

### 13 **process.** 

### 14 **So here's a schematic which really** 

### 15 **is an overview of our process. First, the** 

### 16 **request gets submitted to the Department. It** 

### 17 **can be submitted by a manufacturer or utility** 

### 18 **or a combination of both. DOE would review** 

### 19 **that. If DOE grants the waiver, if the** 

### 20 **requirements for the waiver are met, then the** 

### 21 **large volume electric resistance water heaters** 

### 22 **could be produced by a manufacturer or**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 157**  **1 imported in that were subject to that waiver.**  

### 2 **They must have an energy thermal** 

### 3 **control device installed at the point of** 

### 4 **manufacture or the point of importation. And** 

### 5 **then we verify shipments through the EIA.** 

### 6 **I am going to go through the** 

### 7 **specific requirements of the waiver and we're** 

### 8 **going to open up each one for comment and** 

### 9 **discussion. So we encourage you even if** 

### 10 **you've made comments at the outset on your** 

### 11 **opinions to engage in a discussion to help** 

### 12 **inform the Department on its next steps.** 

### 13 **So the first is the applicant** 

### 14 **requirement. So the Department proposed that** 

### 15 **a manufacturer of large volume electric** 

### 16 **storage water heaters could apply. A utility** 

### 17 **program could apply that was administering a** 

### 18 **demand response program. Or a joint** 

### 19 **application could come in.** 

### 20 **The application required -- hang** 

### 21 **on one sec, please. The application required** 

### 22 **that the company's contact information, as**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 158**  **1 well as the utility programs and the**  

### 2 **manufacturer, be included as part of the** 

### 3 **application. So at this point, I'm going to** 

### 4 **turn and open up the floor. I can see we** 

### 5 **already have a line where DOE is specifically** 

### 6 **seeking comment on the information that we're** 

### 7 **going to collect as part of the waiver process** 

### 8 **from both the applicant which could include** 

### 9 **the manufacturer OEM of the tank as well as** 

### 10 **the utility.** 

### 11 **MR. BROOKMAN: Steven Rosenstock.** 

### 12 **MR. ROSENSTOCK: Steve Rosenstock,** 

### 13 **Edison Electric Institute. A couple of** 

### 14 **thoughts here. Just a -- this is a query for** 

### 15 **DOE. With other appliance standards --** 

### 16 **utilities don't manufacture the products and** 

### 17 **this is a manufacturing standard. So I'm just** 

### 18 **kind of curious if in the past over the past** 

### 19 **25 years or so of the program, have there been** 

### 20 **situations where non-manufacturer received a** 

### 21 **waiver of a manufacturing standard?** 

### 22 **MR. BROOKMAN: Ashley.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 159**  **1 MS. ARMSTRONG: This is Ashley**  

### 2 **from DOE. So off the cuff, not to my** 

### 3 **knowledge, but that's just off the cuff. So.** 

### 4 **MR. ROSENSTOCK: And again, so in** 

### 5 **this rulemaking you would specifically say** 

### 6 **that utilities would be eligible to request a** 

### 7 **waiver from a manufacturing standard?** 

### 8 **MS. ARMSTRONG: This is Ashley.** 

### 9 **That is part of our proposal. That was in our** 

### 10 **proposal.** 

### 11 **MR. ROSENSTOCK: The second** 

### 12 **thought I had is that if -- again, there was a** 

### 13 **record amount of renewables installed on the** 

### 14 **system in 2012, 13,000 megawatts of wind and** 

### 15 **3,000 megawatts of solar. And in January, 958** 

### 16 **megawatts of wind according to FERC and 267** 

### 17 **megawatts of solar. PGM has like 35,000** 

### 18 **megawatts of wind in the queue according to** 

### 19 **Scott over the next several years.** 

### 20 **And if a lot more utilities say** 

### 21 **hey, we need to have more of these programs,** 

### 22 **literally there are 3,000 electric**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 160**  **1 distribution companies in the United States.**  

### 2 **If at some point doesn't that mean there could** 

### 3 **be 3,000 waivers? And is there a way for DOE** 

### 4 **to handle that caseload?** 

### 5 **MS. ARMSTRONG: I think the answer** 

### 6 **is yes, if we needed to. I'm guessing we** 

### 7 **could.** 

### 8 **MR. ROSENSTOCK: Thank you.** 

### 9 **MR. BROOKMAN: Why don't you go** 

### 10 **first?** 

### 11 **MR. MORRISON: I'm not sure I** 

### 12 **qualify under either of those.** 

### 13 **(Laughter.)** 

### 14 **But thank you.** 

### 15 **MR. BROOKMAN: Is it Paul?** 

### 16 **MR. MORRISON: It's Jay Morrison.** 

### 17 **MR. BROOKMAN: Okay, Jay, I** 

### 18 **apologize.** 

### 19 **MR. MORRISON: Just to try and get** 

### 20 **clarification, the application requirement,** 

### 21 **the company and the contact information of** 

### 22 **both the manufacturer and the utility**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 161**  **1 programs, if the manufacturer applies and**  

### 2 **they're a national manufacturer, and there are** 

### 3 **1,000 nationwide programs, does the** 

### 4 **manufacturer have to put down 1,000 names?** 

### 5 **That's question one.** 

### 6 **And question two is, as Steve** 

### 7 **suggests, another 500 utilities recognized the** 

### 8 **beauty of demand responses as the Department** 

### 9 **hopes we will, do you have to then -- does the** 

### 10 **manufacturer have to then go in and apply for** 

### 11 **a new waiver for each utility that might have** 

### 12 **a program using the products they have on the** 

### 13 **shelf? Or do we just go back and add them so** 

### 14 **that everybody knows that yes, these** 

### 15 **additional utilities have programs? Are they** 

### 16 **not allowed to sell them for utility programs** 

### 17 **that aren't on the waiver list? I'm just** 

### 18 **trying to understand how this is practicable.** 

### 19 **MR. BROOKMAN: Ashley.** 

### 20 **MS. ARMSTRONG: So to answer your** 

### 21 **first question, the answer would be yes. The** 

### 22 **manufacturer would have to list all the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 162**  **1 programs that a given basic model was intended**  

### 2 **to be used in.** 

### 3 **Your second question as to would** 

### 4 **you have to apply for a whole new waiver** 

### 5 **process, the waiver -- I would say the** 

### 6 **proposal -- it doesn't explicitly say -- what** 

### 7 **it does say is there has to be a full list.** 

### 8 **So if new programs got added, you would at** 

### 9 **least have to let the Department know that** 

### 10 **your waiver needs modification to add this** 

### 11 **program for this model. Obviously, that's out** 

### 12 **for comment.** 

### 13 **MR. BROOKMAN: Harvey Sachs. No.** 

### 14 **Frank Stanonik.** 

### 15 **MR. STANONIK: Frank Stanonik with** 

### 16 **AHRI. First, I'd just want to make clear that** 

### 17 **as far as the particular issue here, I don't** 

### 18 **think we have at the moment a position, but** 

### 19 **there is something -- we're concerned about** 

### 20 **the precedent that's being set in this** 

### 21 **process. And it just seems to me, I'm very** 

### 22 **familiar with efficiency regulations and the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 163**  **1 efficiency regulations relate to the**  

### 2 **manufacturer of products. And efficiency** 

### 3 **standards it is the manufacturer's obligation** 

### 4 **to meet the efficiency standards. All the** 

### 5 **standards are -- when the standard changes you** 

### 6 **can't manufacturer a product after that date.** 

### 7 **That being the case, I do have a** 

### 8 **serious question as to whether a utility** 

### 9 **program of any entity that's not a** 

### 10 **manufacturer can ask for a waiver from an** 

### 11 **efficiency standard because it only applies to** 

### 12 **the manufacturer. And so I think if DOE** 

### 13 **perceives that that really needs to be** 

### 14 **thoroughly researched, I just don't see -- if** 

### 15 **I'm not a manufacturer, I don't need a waiver** 

### 16 **because it doesn't affect me.** 

### 17 **Granted, I understand it affects** 

### 18 **these programs, but the way the regulation is** 

### 19 **written it addresses the manufacturer of the** 

### 20 **product and I think there's a real legal** 

### 21 **question that needs to be I'll say iron cladly** 

### 22 **resolved because I just don't quite get how**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 164**  **1 somebody other than a manufacturer can get a**  

### 2 **waiver that applies manufacturing a product.** 

### 3 **MR. BROOKMAN: Ashley first and** 

### 4 **then to Sam.** 

### 5 **MS. ARMSTRONG: Yes, so Frank, I** 

### 6 **want to thank you for setting me up so greatly** 

### 7 **there. I think that that's exactly one of the** 

### 8 **reasons why the Department in its initial** 

### 9 **proposal did a flow down from the manufacturer** 

### 10 **and its basic model to the utilities and how** 

### 11 **they're being used. Because as Frank so** 

### 12 **succinctly explained, our regulations are at** 

### 13 **the point of manufacturer and when it becomes** 

### 14 **a question of did this basic model -- does it** 

### 15 **qualify for demand response potential waiver** 

### 16 **or is it just noncompliant, we will be asking** 

### 17 **questions of a given manufacturer. And there** 

### 18 **will need to be some succinct way to** 

### 19 **distinguish.** 

### 20 **We can get to this further on the** 

### 21 **next slide when it comes to controller and** 

### 22 **being shipped with it from the point of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 165**  **1 manufacturer. But really, I asked the**  

### 2 **manufacturers in the room as well as others,** 

### 3 **and those on the phone, you know, if the** 

### 4 **Department were in a situation where we were** 

### 5 **asking you to distinguish between a given** 

### 6 **model that was sold into a DR program or going** 

### 7 **to be used into a DR program and one that** 

### 8 **wasn't, and there was no -- as people have** 

### 9 **suggested, there was no flow down or there was** 

### 10 **no way to track or there was no** 

### 11 **differentiation at the point of manufacture,** 

### 12 **how would you do that?** 

### 13 **MR. BROOKMAN: So that is a** 

### 14 **specific request. Let's see if we can address** 

### 15 **that. Is there anybody that wishes or can** 

### 16 **address that at this time? Yes, please say** 

### 17 **your name for the record.** 

### 18 **MR. WICHER: Allen Wicher, Rheem** 

### 19 **Manufacturing Company.** 

### 20 **I think to be able to distinguish** 

### 21 **is probably not the challenge that we're** 

### 22 **seeing in terms of what we're actually**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 166**  **1 shipping into the program. I think the**  

### 2 **challenge would be the 1,000 or whatever** 

### 3 **utility applications coming in to the** 

### 4 **manufacturer and the timing of all of that and** 

### 5 **trying to -- you know, because we're trying to** 

### 6 **meet production. We've got business plans.** 

### 7 **We have production plans. We've got all those** 

### 8 **kinds of things that are continuous. It** 

### 9 **really kind of comes down for us, one of our** 

### 10 **initial thoughts is just the timing of getting** 

### 11 **all that information in and then subsequently** 

### 12 **submitting that information in and kind of** 

### 13 **being in a holding pattern for whatever amount** 

### 14 **of time and getting the approval processes** 

### 15 **through. So I think from our standpoint** 

### 16 **initially, it's really just the level of** 

### 17 **having to take all of that on. There's a lot** 

### 18 **of uncertainty built into this thing. I guess** 

### 19 **that's kind of where we're at least initially** 

### 20 **-- that's kind of where our thought process** 

### 21 **is.** 

### 22 **I think in terms of controlling,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 167**  **1 eventually, once we kind of get to that point**  

### 2 **and we know what we're going to be supplying,** 

### 3 **controlling that is not a difficult situation.** 

### 4 **MR. BROOKMAN: Gary, are you** 

### 5 **responding to Ashley's question? No. Any** 

### 6 **other responses to that specific query?** 

### 7 **Frank.** 

### 8 **MR. STANONIK: Frank Stanonik,** 

### 9 **AHRI. Just one other thought that somewhat** 

### 10 **connects. If the waiver was given to the** 

### 11 **manufacturer, and all other conditions were** 

### 12 **met, why wouldn't he just be allowed to build** 

### 13 **as many as he can build in a year if it's a** 

### 14 **year waiver? It will then be his problem to** 

### 15 **sell them or not.** 

### 16 **MR. BROOKMAN: Okay, Karen Meyers** 

### 17 **apparently online wishes to comment. Karen,** 

### 18 **speak loudly and clearly. We want to be able** 

### 19 **to hear you here in the room.** 

### 20 **MS. MEYERS: Okay, everyone. This** 

### 21 **is Karen Meyers. I do have a question. So I** 

### 22 **just want to make sure I'm reading this**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 168**  **1 correctly so a waiver could be granted to a**  

### 2 **utility and then that utility could just list** 

### 3 **the name of the manufacturer on their waiver?** 

### 4 **Is that the intent? Then the manufacturer** 

### 5 **wouldn't have to get a waiver?** 

### 6 **MR. BROOKMAN: Ashley?** 

### 7 **MS. ARMSTRONG: This is Ashley** 

### 8 **from DOE. That was part of the proposal.** 

### 9 **MS. MEYERS: Thank you.** 

### 10 **MR. BROOKMAN: We have several** 

### 11 **individuals who are in the queue. Sam first,** 

### 12 **and then this gentleman here, if you still** 

### 13 **wish to comment, and then to Gary.** 

### 14 **Sam.** 

### 15 **MR. BRUMBERG: Sam Brumberg with** 

### 16 **Virginia, Maryland, and Delaware Electric** 

### 17 **Cooperatives. I want to just comment on what** 

### 18 **AHRI raised. I think you do have almost a** 

### 19 **legal issue. If I'm the utility and I'm going** 

### 20 **to put my name and my executive signature on** 

### 21 **the waiver or its application, but I have no** 

### 22 **ability -- what's my responsibility under a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 169**  **1 granted waiver? I'm not the manufacturer. I**  

### 2 **don't have any ability to control the** 

### 3 **manufacturer's process. I don't have any** 

### 4 **quality control. But arguably, I would have** 

### 5 **some amount of liability on the waiver to see** 

### 6 **that it was complied with. So I think that's** 

### 7 **a question that needs to be examined.** 

### 8 **Also, I would submit that we heard** 

### 9 **it almost -- I don't want to put words in your** 

### 10 **mouth, but I think we almost heard it** 

### 11 **indirectly from Rheem. There's a lot of** 

### 12 **uncertainty associated with the one-year** 

### 13 **waiver process and if I'm sitting in the** 

### 14 **manufacturer's seat, why on earth would I put** 

### 15 **myself through a process to obtain a waiver** 

### 16 **for potentially thousands of individual** 

### 17 **utilities needing to apply for this waiver to** 

### 18 **get a one-year reprieve from this regulation?** 

### 19 **Why would I even participate in the waiver** 

### 20 **process and apply for it, given the -- if it's** 

### 21 **not going to be something simpler or something** 

### 22 **blanket?**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 170**  **1 And if I'm a small utility, how am**  

### 2 **I going to approach G.E. and say could you** 

### 3 **please sign on the dotted line here, G.E.?** 

### 4 **Thank you.** 

### 5 **MR. BROOKMAN: Gary.** 

### 6 **MR. CONNETT: I'm really too** 

### 7 **confused in terms of the waiver. And we work** 

### 8 **a lot with Marathon. And just this notion** 

### 9 **that am I committing to Marathon that I'm** 

### 10 **going to buy 20,000 water heaters or 5,000** 

### 11 **water heaters each year? I can't make that** 

### 12 **sort of commitment. Probably nor can they.** 

### 13 **And we buy others, too. It's not always** 

### 14 **Marathon. It may be AO Smith. Can I do it --** 

### 15 **can I do it more than once a year? Is this** 

### 16 **waiver option just January 1st? Or can I have** 

### 17 **a co-op that comes forward and says I want to** 

### 18 **get into this, too, and it's September 1st.** 

### 19 **Are you going to be entertaining waivers** 

### 20 **throughout the year?** 

### 21 **MS. ARMSTRONG: So this is Ashley** 

### 22 **from DOE. I think your questions just give**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 171**  **1 rise to why the Department initially proposed**  

### 2 **a one-year waiver. It's because we thought** 

### 3 **that you guys may want maximum flexibility. I** 

### 4 **mean we have definitely heard what you've said** 

### 5 **here, but it's just that. There's no timing** 

### 6 **specific. You can apply at any time. We can** 

### 7 **review a waiver at any time. You can modify a** 

### 8 **waiver at any time under this proposal. And** 

### 9 **we thought you would enjoy the flexibility of** 

### 10 **doing that.** 

### 11 **MR. BROOKMAN: Jay.** 

### 12 **MR. STEFFES: Thank you. Going to** 

### 13 **what Frank said, if the manufacturers** 

### 14 **permitted, once they've gotten a waiver for a** 

### 15 **grid-enabled water heater to produce as many** 

### 16 **as they think they can sell that year, and** 

### 17 **they go through the normal distribution** 

### 18 **routes, then if Gary needs 5,000, but he** 

### 19 **thought he was going to need 4, then those can** 

### 20 **come from Home Depots in Florida, North** 

### 21 **Carolina, South Carolina, wherever they need** 

### 22 **to get shipped around, Lowe's or Home Depot or**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 172**  **1 other distribution methods.**  

### 2 **If they have to be tied to a** 

### 3 **specific manufacturer, a specific product,** 

### 4 **specific model number, specific load** 

### 5 **controller, then there isn't that flexibility** 

### 6 **even on a year to year because the situation** 

### 7 **does change year to year. But if we use the** 

### 8 **current manufacturing of I'm going to build as** 

### 9 **many as I think I'm going to be able to sell,** 

### 10 **and the normal distribution methods, then we** 

### 11 **have the flexibility that we have today to be** 

### 12 **able to get the ones that we need.** 

### 13 **MR. BROOKMAN: Comments?** 

### 14 **Additional comments here? This has been** 

### 15 **useful. Please. Say your name, please, for** 

### 16 **the record.** 

### 17 **MR. GLAZER: I am sorry, I'll have** 

### 18 **to leave right soon after this, but Craig** 

### 19 **Glazer from PJM. Just a follow-up question** 

### 20 **because a number of comments as Gary Connett** 

### 21 **and others suggested a new classification of** 

### 22 **grid-interactive water heaters and sort of two**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 173**  **1 questions really, one process-wise. If people**  

### 2 **propose that, given the state of the docket** 

### 3 **and where it's at now, if people propose that** 

### 4 **and time is an important factor here, does** 

### 5 **that force this whole process to start over** 

### 6 **again? Where, if you were to entertain that,** 

### 7 **we'd have to sort of start over again, have** 

### 8 **another public hearing, another notice. Or is** 

### 9 **that still flexibility to pursue that route?** 

### 10 **From a process point of view and** 

### 11 **substantively if you could enlighten us on the** 

### 12 **reasons for your rejection of that -- of the** 

### 13 **new classification idea so people don't spill** 

### 14 **a lot of ink if there's something we're** 

### 15 **missing in your rejection of that approach.** 

### 16 **MR. ALTMAN: This Ari Altman from** 

### 17 **the GC's Office. Just very briefly, that** 

### 18 **would be a deviation from this proposal, so we** 

### 19 **would have to do a new document. It would be** 

### 20 **a SNOPR. We may or may not do a hearing for** 

### 21 **that, but we wouldn't be taking comment on it,** 

### 22 **but yes, essentially we'd be starting over**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 174**  **1 with a new proposal.**  

### 2 **MR. GLAZER: And then the** 

### 3 **rationale why when you were considering this,** 

### 4 **just so we can understand why the new** 

### 5 **classification concept if it was specific to** 

### 6 **grid interactive was rejected?** 

### 7 **MR. ALTMAN: I think -- are you** 

### 8 **going to address that? Okay. That was** 

### 9 **addressed in the notice and essentially there** 

### 10 **were concerns that that would raise a** 

### 11 **backsliding issue which has been mentioned** 

### 12 **here before. And so the waiver proposal we** 

### 13 **thought was the most practical and most likely** 

### 14 **to be able to get through the process.** 

### 15 **MR. GLAZER: So what I'm hearing,** 

### 16 **just to summarize, from a time perspective in** 

### 17 **keeping this thing moving we're in this waiver** 

### 18 **world is what we're dealing with at this point** 

### 19 **and then how to make it best work for** 

### 20 **everyone. But what I'm hearing is should** 

### 21 **people argue for a new classification, we'd be** 

### 22 **almost starting all over again. Is that fair?**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 175**  **1 MR. ALTMAN: Yes, this is Ari**  

### 2 **again from GC. Yes, we've be starting over. I** 

### 3 **think probably what you're most concerned** 

### 4 **about is the 2015 date that the 2010 rule** 

### 5 **would become effective. Yes, essentially we** 

### 6 **would begin to back into that if we needed to** 

### 7 **do another rule, but there's no -- it's not** 

### 8 **definite that if we did an SNOPR that it would** 

### 9 **suddenly mean that any final rule would come** 

### 10 **after that date. But certainly that is a** 

### 11 **consideration for everyone here.** 

### 12 **MR. GLAZER: Thank you.** 

### 13 **MR. BROOKMAN: Gary.** 

### 14 **MR. CONNETT: Gary Connett from** 

### 15 **Great River. Listening to this and having** 

### 16 **been a party to it for a couple of years now,** 

### 17 **I just had this crazy notion that we're** 

### 18 **working on something with an old rulebook at** 

### 19 **the DOE. And it's this notion around energy** 

### 20 **factor. And it's almost as though we're** 

### 21 **creating a smart grid, a grid-enabled** 

### 22 **appliance that the DOE hasn't had a whole lot**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 176**  **1 to -- rules around it. And just this notion**  

### 2 **that if you just focus on nothing but energy** 

### 3 **factor, it's just a plain old water heater.** 

### 4 **But if you start to think about this notion** 

### 5 **that it has the ability to do frequency** 

### 6 **response and this ability to store wind energy** 

### 7 **and all these other sort of things, it becomes** 

### 8 **something different.** 

### 9 **And it's this notion that you're** 

### 10 **trying to make the rules with the old** 

### 11 **rulebook. And I had this notion that maybe if** 

### 12 **we get a waiver, is it possible for the DOE to** 

### 13 **start thinking about all these smart grid** 

### 14 **technologies that are going to come that are** 

### 15 **going to make the grid more efficient and that** 

### 16 **maybe there will be a different sort of** 

### 17 **rulebook for these sort of things?** 

### 18 **MR. BROOKMAN: Thank you.** 

### 19 **MR. CONNETT: I'm interested in a** 

### 20 **comment, maybe, because I'm just struggling** 

### 21 **with I think we're putting this into a box, an** 

### 22 **energy factor box that's been around for quite**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 177**  **1 a few years and I think smart grid is here.**  

### 2 **I think Harvey wants to answer.** 

### 3 **(Laughter)** 

### 4 **MR. BROOKMAN: Harvey Sachs.** 

### 5 **MS. ARMSTRONG: Harvey, feel free.** 

### 6 **MR. SACHS: I would never speak** 

### 7 **for my colleagues at DOE, much less General** 

### 8 **Counsel, but there are some aspects of the law** 

### 9 **that do focus on energy savings as being the** 

### 10 **core parameter. One of the reasons that we're** 

### 11 **here from the energy efficiency community is** 

### 12 **recognition of the potential for other values** 

### 13 **and the need to walk a balance between** 

### 14 **encouraging energy and carbon oxide savings** 

### 15 **for the whole nation and the attributes of a** 

### 16 **single product.** 

### 17 **And it's a rough thing and it's a** 

### 18 **rough thing to fit in the organic law I think** 

### 19 **was the term that Tim used. And this looks** 

### 20 **like a way to do the experiment to demonstrate** 

### 21 **whether or not we can get value and whether or** 

### 22 **not we can get value within the existing legal**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 178**  **1 framework. So we're joining with you in**  

### 2 **trying to stretch my understanding of the law** 

### 3 **and this is why we feel that the conditional** 

### 4 **aspects of a waiver are the appropriate way to** 

### 5 **begin that.** 

### 6 **It's a quarter century that we've** 

### 7 **dealt with the same rating method. We're** 

### 8 **finally getting around in three different** 

### 9 **caucuses to try and look at how we rate water** 

### 10 **heaters just in terms of whether or not** 

### 11 **they're saving more energy or less. So the** 

### 12 **hippopotamus awakes slowly.** 

### 13 **MR. BROOKMAN: You have a comment** 

### 14 **here. Your name, please?** 

### 15 **MR. BRYANT: Markus Bryant from** 

### 16 **Ohio. Listening to the comments, I thought it** 

### 17 **might be useful to share with you our** 

### 18 **perspective of how we analyze and put together** 

### 19 **load management programs and try to integrate** 

### 20 **various types of equipment.** 

### 21 **The gentleman over here had a** 

### 22 **comment about manufacturers in terms of**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 179**  **1 specifications and frankly, when we go out to**  

### 2 **the marketplace, we as cooperatives are** 

### 3 **interested in value for our consumers. So we** 

### 4 **favor the most efficient appliances possible.** 

### 5 **That's what we promote.** 

### 6 **So even though we have large water** 

### 7 **heaters as part of our program, we require** 

### 8 **energy efficiency factors of 90 percent or** 

### 9 **better. We also promote geothermal technology** 

### 10 **and use large water heaters in connection with** 

### 11 **that. We have 8.5 percent of our residential** 

### 12 **homes have geothermal systems with water** 

### 13 **storage.** 

### 14 **The issue arises is that you have** 

### 15 **the manufactured equipment the most efficient** 

### 16 **as possible on the market. But then you also** 

### 17 **have a different level of efficiency as we** 

### 18 **look at it from the utility standpoint. And** 

### 19 **that is, in terms of maximizing our generation** 

### 20 **resources at the -- operated at the lowest** 

### 21 **possible cost for the consumer. Now we have** 

### 22 **another thing coming into the equation which**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 180**  **1 is the whole role of renewables and smart grid**  

### 2 **technology which we were talking about. And** 

### 3 **water heaters, frankly, are a unique storage** 

### 4 **battery for that.** 

### 5 **So what we need going forward is** 

### 6 **not so much from our standpoint a rule, we** 

### 7 **need a flexible framework for moving this** 

### 8 **process forward. And if we get a five year or** 

### 9 **more waiver, if you will, it could lead to an** 

### 10 **analysis that says yes, we need to have a** 

### 11 **separate category and I think in my view most** 

### 12 **likely the data will probably show that. If** 

### 13 **we look at it from a utility resources, energy** 

### 14 **resources, and combined efficiency of the** 

### 15 **system as opposed to just focusing solely on** 

### 16 **the manufactured product which in our view is** 

### 17 **only one piece of the equation. It's an** 

### 18 **important piece, but it has to be all tied** 

### 19 **together.** 

### 20 **And so this idea that maybe we're** 

### 21 **dealing with an old rulebook that has some** 

### 22 **merit, but we're not at a point we can throw**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 181**  **1 that out. We have to have a process to move**  

### 2 **forward. And so a waiver is a transitional** 

### 3 **method to get there and may result in a** 

### 4 **separate notice in the future.** 

### 5 **MR. BROOKMAN: Thank you. Linda,** 

### 6 **is it and then to Alex and then to Earl.** 

### 7 **MS. KING: Linda King,** 

### 8 **Northwestern REC. We preach to our members on** 

### 9 **a daily basis efficiency using energy the** 

### 10 **smart choice. To us, the most efficient** 

### 11 **kilowatt hour is the one we never have to** 

### 12 **produce. So in that regard, we very much** 

### 13 **support the use of heat pump technology even** 

### 14 **in our demand program. However, I would take** 

### 15 **issue with many of the points or assumptions** 

### 16 **that were given by the manufacturer in that we** 

### 17 **have not found some of those things to be true** 

### 18 **in our pilot, in our territory, particularly** 

### 19 **the temperature change in the household where** 

### 20 **the heat pump water heater resides. The** 

### 21 **ability -- it is not a one-for-one solution.** 

### 22 **And that's what we need, a balanced approach,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 182**  **1 not totally removing the resistance water**  

### 2 **heater load management technology.** 

### 3 **I'll give you an example. We had** 

### 4 **planned to embrace smart grid appliances into** 

### 5 **our load management program. Not just the** 

### 6 **water heater, but any appliance. Now the** 

### 7 **manufacturers have changed plans to produce** 

### 8 **those appliances. What assurances do we have** 

### 9 **if we totally disregard the use of electric** 

### 10 **resistance water heaters in our load** 

### 11 **management program, embrace heat pump water** 

### 12 **heater technology 100 percent or force it on** 

### 13 **situations where it doesn't work, the** 

### 14 **homeowners hate it and don't participate at** 

### 15 **all, therefore increase their cost and they** 

### 16 **don't sell enough so they discontinue the** 

### 17 **product. Then what do we do?** 

### 18 **MR. BROOKMAN: Alex.** 

### 19 **MR. HOFMAN: I'm really happy that** 

### 20 **we're having this discussion and actually just** 

### 21 **to echo what Harvey was saying and the** 

### 22 **gentleman up at the mic, I think flexibility**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 183**  **1 is a really key thing here. And the facts are**  

### 2 **that savings to utilities, especially** 

### 3 **nonprofit utilities, utilities are not** 

### 4 **operating for a profit margin at all. It's** 

### 5 **electricity not used. It's energy not used.** 

### 6 **It's more efficient use of the system.** 

### 7 **I think the right thing here is** 

### 8 **that we're trying to take a look at certain** 

### 9 **select cases where there is a lot left on the** 

### 10 **table. And we're advocating really to** 

### 11 **maximize system efficiency, so balancing the** 

### 12 **benefits of heat pump water heaters with their** 

### 13 **inadequacies in certain cases. And maybe the** 

### 14 **gentleman from General Electric could comment** 

### 15 **on this, but a lot of what I hear here and** 

### 16 **we're using this analogy of a battery, but** 

### 17 **perhaps you could talk to the real and** 

### 18 **reactive power elements of your differing** 

### 19 **technologies and how those differences might** 

### 20 **actually result in different system balance** 

### 21 **approaches or different system efficiencies.** 

### 22 **What I think I'd like to hear is**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 184**  **1 really the sort of avoiding this issue of**  

### 2 **backsliding. We're not advocating for** 

### 3 **backsliding in any way. We're just trying to** 

### 4 **find a way to make something that really does** 

### 5 **truly save consumers and in fact, I think** 

### 6 **we're heard at least hundreds of millions of** 

### 7 **dollars of savings have been mentioned,** 

### 8 **several generators avoided have been** 

### 9 **mentioned. And taking advantage of those and** 

### 10 **trying to find a way into the future to take** 

### 11 **advantage of those is something that's really** 

### 12 **important to us. So perhaps if anyone can** 

### 13 **comment on the type of system efficiency** 

### 14 **balancing techniques that we might be giving** 

### 15 **up here, that would be really interesting to** 

### 16 **me.** 

### 17 **MR. BROOKMAN: Earl Jones.** 

### 18 **MR. JONES: I'm not sure that I** 

### 19 **understand that there are any systems savings** 

### 20 **that are being lost here. I mean if we wanted** 

### 21 **to get into -- or DOE rather wanted to get** 

### 22 **into the issue which by the way has been**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 185**  **1 suggested not -- I mean this is the first time**  

### 2 **I've heard it mentioned for this product, but** 

### 3 **it's been mentioned in the past for many other** 

### 4 **appliances, urging DOE to focus on the total** 

### 5 **system, the whole home, for example, as** 

### 6 **opposed to the individual unit. And DOE has** 

### 7 **resisted doing that. And whether that grows** 

### 8 **out of the requirements of the law, as they** 

### 9 **see it, and I think it might be that, or** 

### 10 **whether it grows out of just we know what we** 

### 11 **do because we do what we have always done. I** 

### 12 **don't know. I'm sure they could address that.** 

### 13 **But I guess my real concern is I** 

### 14 **hear all these questions and I'm not sure I** 

### 15 **understand why any of them, quite frankly, are** 

### 16 **relevant for this particular product because** 

### 17 **they're all predicated upon the assumption** 

### 18 **that you must do this with the 120 or larger** 

### 19 **resistance water heaters. We don't believe** 

### 20 **that's true. And we don't believe that the** 

### 21 **data exists no matter what the contentions** 

### 22 **have been at this meeting today, that it**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 186**  **1 cannot be done with other technologies.**  

### 2 **I did want to get back to the** 

### 3 **question though of the utility and the** 

### 4 **manufacturer and I think it's really critical** 

### 5 **that indeed those two be allied in these** 

### 6 **applications and I say that as a manufacturer** 

### 7 **of products that do comply. We're very** 

### 8 **concerned about products that don't comply** 

### 9 **somehow getting into commerce and to the** 

### 10 **extent that this process is literally -- can** 

### 11 **be easily done, then I think we're** 

### 12 **increasingly vulnerable to that happening.** 

### 13 **And I think therefore that to the extent that** 

### 14 **you must do this, which we hope you don't, but** 

### 15 **if you must do this, then you make it** 

### 16 **literally as intricate as you have designed it** 

### 17 **to be, that the utility and the manufacturer** 

### 18 **be in lock step and we have an assurance that** 

### 19 **the products that are being targeted for the** 

### 20 **requested ETS program wind up there and no** 

### 21 **other place.** 

### 22 **MR. BROOKMAN: Yes, your name?**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 187**  **1 MR. SPRINGER: Jeff Springer with**  

### 2 **Dairyland Power in La Crosse, Wisconsin. I'd** 

### 3 **just like to respond on G.E.'s contention that** 

### 4 **the heat pump water heater can do everything** 

### 5 **we're asking for with these large storage** 

### 6 **water heaters. Interestingly enough, we have** 

### 7 **an old G.E. load control system that does our** 

### 8 **load control on the water heaters that we do** 

### 9 **have out there. But these large water heaters** 

### 10 **that we have, you showed some peaks where you** 

### 11 **could sort of effectively shift over a little** 

### 12 **bit. We want to empty those peaks.** 

### 13 **When we use these large water** 

### 14 **heaters, we drop to zero and we stay at zero** 

### 15 **during those two peaks and then we fill the** 

### 16 **valleys by turning them on during the other** 

### 17 **times. That's something you can't effectively** 

### 18 **do with a heat pump water heater because it** 

### 19 **needs a certain amount of run time because it** 

### 20 **can't make hot water at the speed that a 4500** 

### 21 **watt element can make. So that's one of the** 

### 22 **challenges there.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 188**  **1 MR. BROOKMAN: You first, go**  

### 2 **ahead.** 

### 3 **MR. J. BAKER: I'd just like to** 

### 4 **echo what I've heard from several of my** 

### 5 **counterparts.** 

### 6 **MR. BROOKMAN: What's your name?** 

### 7 **MR. J. BAKER: Jimmy Baker with** 

### 8 **Palmetto Electric Cooperative. First of all,** 

### 9 **let me say that heat pump water heaters are an** 

### 10 **integral part of our demand-side program. We** 

### 11 **promote heat pump water heaters and** 

### 12 **applications where they work, where they make** 

### 13 **sense, but it's not a one-for-one tradeoff.** 

### 14 **There are issues of space requirements for a** 

### 15 **heat pump water heater that a standard large** 

### 16 **capacity storage water heater does not have.** 

### 17 **There is the issue of condensate** 

### 18 **draining. There is an issue and I know that's** 

### 19 **not what we're specifically here to discuss** 

### 20 **today, but there is an expense to many of our** 

### 21 **members who simply cannot afford that** 

### 22 **technology.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 189**  **1 The other thing I think worth**  

### 2 **emphasizing and it was in my remarks is that** 

### 3 **we have documented research that shows that** 

### 4 **the large capacity electric resistance water** 

### 5 **heaters use negligibly more than a smaller** 

### 6 **capacity water heater and in some cases they** 

### 7 **use less. That's documented in the University** 

### 8 **of South Carolina study. And we'd be glad if** 

### 9 **we could introduce that and have that part of** 

### 10 **the record of this meeting. But we are for** 

### 11 **heat pump technology. We hope that heat pump** 

### 12 **technology and other technology will continue** 

### 13 **to advance and have more and more application,** 

### 14 **but we're simply not there today.** 

### 15 **MR. BROOKMAN: I'm hoping that we** 

### 16 **can continue to remain germane. Tom?** 

### 17 **MR. ZIMMER: Just briefly. Tom** 

### 18 **Zimmer, General Electric. And again, to the** 

### 19 **point made. As you look at the ETS programs** 

### 20 **and requirements for thermal storage, absolute** 

### 21 **valid point made by the earlier comment in** 

### 22 **terms of time required when using a heat pump**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 190**  **1 to recover that energy.**  

### 2 **However, keep in mind the heat** 

### 3 **pump technologies that are being delivered and** 

### 4 **taken to market today don't rely on a single** 

### 5 **source for energy use for a number of reasons,** 

### 6 **one of which is consumer convenience. This** 

### 7 **would be a similar application.** 

### 8 **If, in fact, the peak shift and** 

### 9 **the time for recovery becomes short, the** 

### 10 **capability to absorb that energy and store** 

### 11 **that energy over that time period exists.** 

### 12 **It's a question of what's the requirement.** 

### 13 **MR. BROOKMAN: Yes, go ahead.** 

### 14 **MR. S. BAKER: Scott Baker, PJM, a** 

### 15 **follow on to that. If you could explain for** 

### 16 **us, does that mean using the electric** 

### 17 **resistive element that's in the heat pump and** 

### 18 **doesn't that effectively lower the energy** 

### 19 **factor of the unit?** 

### 20 **MR. ZIMMER: Tom Zimmer. Yes, it** 

### 21 **does refer to use of the electric element, but** 

### 22 **that would be on an as-need basis per utility**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 191**  **1 requirement, not to achieve an overall savings**  

### 2 **throughout the course of every hour of every** 

### 3 **day. This would be a unique application** 

### 4 **specifically responding to that ETS need.** 

### 5 **MR. BROOKMAN: Go ahead.** 

### 6 **MR. S. BAKER: One more follow up.** 

### 7 **Do you have data on if you were to use the** 

### 8 **heat pump water heater and the electric** 

### 9 **resistive element daily in a load shifting** 

### 10 **program, what that energy factor would be?** 

### 11 **MR. ZIMMER: We do not have a** 

### 12 **complete set of data as I sit here today to be** 

### 13 **very direct about it. However, we are** 

### 14 **actively engaged in programs that are** 

### 15 **generating that data for that exact purpose.** 

### 16 **MR. BROOKMAN: Time frame on** 

### 17 **delivering that data? Or having access to** 

### 18 **that data?** 

### 19 **MR. ZIMMER: I'm going to defer** 

### 20 **that question for a moment, but we are** 

### 21 **actively engaged in that program today and the** 

### 22 **first data sets should be available, I would**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 192**  **1 expect, inside of the next six months.**  

### 2 **MR. BROOKMAN: Okay, great. Yes,** 

### 3 **please. I want to make sure we keep plugging** 

### 4 **ahead here. You're first and then I'm going** 

### 5 **to Gary.** 

### 6 **MR. BRYANT: Markus Bryant. You** 

### 7 **mentioned this electric resistance element can** 

### 8 **get you over the short-term problems with the** 

### 9 **heat pump water heaters. We have -- my** 

### 10 **understanding is we have spoken to both Rheem** 

### 11 **and G.E. local distributors that there is no** 

### 12 **effective way for us as a utility to control** 

### 13 **that element because we cannot get through** 

### 14 **your control devices. We've been told by your** 

### 15 **company that at some point that would be** 

### 16 **available. It's been over two years now. So** 

### 17 **if you're going to argue that point, you're** 

### 18 **going to have to have a product that delivers.** 

### 19 **MR. BROOKMAN: Let's let Tom** 

### 20 **follow on. Go ahead.** 

### 21 **MR. ZIMMER: Again, keeping in** 

### 22 **mind that what we're talking about is a waiver**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 193**  **1 process for a 2015 regulation and that as a**  

### 2 **manufacturer we've actively engaged in** 

### 3 **development. I'm not arguing the point that** 

### 4 **that technology exists at this moment today in** 

### 5 **the commercial market as needed to meet these** 

### 6 **specific needs. My argument is that the work** 

### 7 **to accomplish that in the time frame available** 

### 8 **is under way.** 

### 9 **MR. BRYANT: Well, the only answer** 

### 10 **I have for that is we are trying to promote** 

### 11 **where it fits the heat pump water heater** 

### 12 **technology. The problem we're having is** 

### 13 **integrated into our load management system.** 

### 14 **And so I think we're a little frustrated that** 

### 15 **manufacturers are not responding to our needs** 

### 16 **on that end.** 

### 17 **MR. BROOKMAN: Gary, and then Jay.** 

### 18 **MR. CONNETT: Well, to Jeff** 

### 19 **Springer's point, Dairyland Energy and Great** 

### 20 **River Energy run a similar program and it's** 

### 21 **just this notion that we charge the water** 

### 22 **heaters for eight hours a night and then they**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 194**  **1 don't get any energy for the next 16 hours.**  

### 2 **That the way that the heat pump manufacturers** 

### 3 **have described their product it's slow and** 

### 4 **steady. It's not a big heat pump, but it will** 

### 5 **heat hot water -- it will heat water. Just** 

### 6 **give it slow and steady. So this notion of** 

### 7 **having a heat pump water heater and then** 

### 8 **having it be a resistive water heater in the** 

### 9 **eight hours of night time it's far too** 

### 10 **expensive to do that. It's back to this** 

### 11 **notion why don't we just use an electric water** 

### 12 **heater if that's what we're going to do. Our** 

### 13 **strategy is to use off-peak energy and do it** 

### 14 **at a time when it's a lot of renewable energy** 

### 15 **into that peak period.** 

### 16 **MR. BROOKMAN: Let's let Tom** 

### 17 **follow on.** 

### 18 **MR. ZIMMER: Again, keep in mind** 

### 19 **that although heat pump recovery once the tank** 

### 20 **is stored at a fixed temperature, it's that** 

### 21 **capacity of hot water, independent of the** 

### 22 **source of energy used to get to that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 195**  **1 temperature and that storage capacity.**  

### 2 **Although the heat pump does take longer than** 

### 3 **resistive elements, I have seen no data that** 

### 4 **says any heat pump that I've tested requires** 

### 5 **over an eight-hour period to recover to the** 

### 6 **set point temperature. So it can be** 

### 7 **effectively used inside of an eight-hour** 

### 8 **period with no data supporting an argument** 

### 9 **that would say it can't be done from our data.** 

### 10 **MR. BROOKMAN: Thank you. Jay.** 

### 11 **MR. MORRISON: I want to respond** 

### 12 **both to what I've heard from G.E., but do it** 

### 13 **in the context of the yellow box.** 

### 14 **MR. BROOKMAN: Thank you.** 

### 15 **MR. MORRISON: You're welcome.** 

### 16 **(Laughter.)** 

### 17 **MR. BROOKMAN: Let's try to stay** 

### 18 **on that course.** 

### 19 **(Laughter.)** 

### 20 **Jay, please, go ahead.** 

### 21 **MR. MORRISON: The goal for the** 

### 22 **co-ops, as I've heard it from my members and**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 196**  **1 they'll correct me if I'm wrong, they're not**  

### 2 **bashful is to make sure that the product they** 

### 3 **need for their program is available when they** 

### 4 **need it, that the customers can find the** 

### 5 **product on the shelf, whatever shelf they** 

### 6 **happen to go to as a customer to get what they** 

### 7 **need. And a product that they're happy with** 

### 8 **so that they'll stay in the program and that** 

### 9 **they won't go buy a different product that** 

### 10 **doesn't work for the program because they just** 

### 11 **don't like what's on the shelf.** 

### 12 **G.E. made the point in their** 

### 13 **opening statement, Mr. Jones, that he had** 

### 14 **heard people express concerns about the cost** 

### 15 **of the heat pump product, about the space** 

### 16 **required for the heat pump product and -- I** 

### 17 **apologize, there was one other -- oh, the** 

### 18 **noise of the heat pump product. But assured** 

### 19 **us that our market power would be sufficient** 

### 20 **to convince the manufacturers to produce a** 

### 21 **product that was quiet enough, small enough,** 

### 22 **and otherwise able to meet our requirements.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 197**  **1 We also heard that even though**  

### 2 **it's only two years out, by 2015, we're** 

### 3 **assured that yes, you will be allowed to** 

### 4 **control the G.E. water heater even if you** 

### 5 **weren't today. Maybe. Maybe not. Maybe the** 

### 6 **product that's available from one manufacturer** 

### 7 **through June isn't as good as the product that** 

### 8 **might be available from another manufacturer** 

### 9 **August through November and maybe there's yet** 

### 10 **a new really great product that comes out in** 

### 11 **December. We want our members to have access** 

### 12 **to the best possible product from Day 1 in** 

### 13 **2015 and each year thereafter, so that they** 

### 14 **want to be in the program, so that they** 

### 15 **participate in the program.** 

### 16 **If you have to identify the** 

### 17 **specific manufacturer, the specific utility** 

### 18 **that's going to use the product, which exact** 

### 19 **product, that flexibility goes away. That** 

### 20 **means the ability to get the right product to** 

### 21 **the consumer who is willing to buy it so** 

### 22 **they'll participate in the program so that we**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 198**  **1 can get the benefit of the demand response**  

### 2 **isn't there.** 

### 3 **So I go back again to what AHRI** 

### 4 **said which is just let the manufacturers** 

### 5 **produce as much as they think they can sell of** 

### 6 **compliant products that meet the requirements** 

### 7 **of the waiver so long as those requirements** 

### 8 **are simple enough that we all understand them,** 

### 9 **the manufacturers do, and the utilities.** 

### 10 **MR. BROOKMAN: Are we ready to** 

### 11 **move on? Final comment and we're moving on.** 

### 12 **MR. PRATT: I was going to say** 

### 13 **that I think that my experience in Georgia is** 

### 14 **that the utilities have been interested in** 

### 15 **grid enabled heat pump water heater technology** 

### 16 **from the onset, but we're approaching a 2015** 

### 17 **deadline very quickly and it's kind of piggy** 

### 18 **backing what Jay said. As of yet, we are** 

### 19 **seeing a deadline coming up with no products** 

### 20 **to help meet it in this avenue.** 

### 21 **MR. BROOKMAN: Let's let Earl --** 

### 22 **MR. JONES: Very quickly. There**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 199**  **1 are grid enabled products. The ones that**  

### 2 **we've been described at G.E. are grid enabled.** 

### 3 **I think we have to make the distinction here** 

### 4 **between products that are grid enabled and** 

### 5 **products which are enabled to respond only to** 

### 6 **the signal that comes from utility X versus Y** 

### 7 **versus Z. That's an issue. But the fact is** 

### 8 **this product is able to respond to any of** 

### 9 **those, but it probably most effectively** 

### 10 **responds to controls Wi-Fi, internet.** 

### 11 **So I mean we're talking about I** 

### 12 **think a product that's sort of more** 

### 13 **contemporary and I think has got more** 

### 14 **capability going forward than maybe some of** 

### 15 **the ones that exist today that are kind of** 

### 16 **locked up with particular utilities. I think** 

### 17 **that's a model which is probably not** 

### 18 **sustainable quite frankly. And I think that** 

### 19 **one thing that needs to be considered by the** 

### 20 **managers of these programs is moving to units** 

### 21 **that have the capability to communicate much** 

### 22 **more broadly, whether it's some kind of a plug**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 200**  **1 in that Mr. Sachs mentioned or whether it's**  

### 2 **over the internet, but these kind of captured** 

### 3 **programs or products are not going to go** 

### 4 **forward.** 

### 5 **MS. KING: Linda King from** 

### 6 **Northwestern REC. We have looked at the** 

### 7 **manufacturer feedback. We have looked at the** 

### 8 **Wi-Fi option, the G.E. Nucleus in particular,** 

### 9 **and our problem with attempting to use that** 

### 10 **type of device is about 40 percent of our** 

### 11 **members do not have high-speed internet.** 

### 12 **Twenty-five percent don't have any internet at** 

### 13 **all.** 

### 14 **MR. BROOKMAN: Steve Rosenstock,** 

### 15 **briefly. Then we're moving on by the way.** 

### 16 **MR. ROSENSTOCK: Steve Rosenstock.** 

### 17 **I represent members that are regulated by** 

### 18 **state public utility commissions or state** 

### 19 **corporate commissions, etcetera, and there are** 

### 20 **certain states that have specific prohibitions** 

### 21 **against regulated utilities doing anything** 

### 22 **that's quote seen as quote promoting electric**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 201**  **1 products. So again, for some of my members,**  

### 2 **they'd have to really check with the** 

### 3 **regulators first before even asking this** 

### 4 **because they don't want to do anything that** 

### 5 **would even be seen as violating a state** 

### 6 **regulation in this regard. Thank you.** 

### 7 **MR. BROOKMAN: Thank you. Ashley.** 

### 8 **We're proceeding. We're now on Slide 22.** 

### 9 **MS. ARMSTRONG: Jay gave a pretty** 

### 10 **good segue to this one. So we've heard a lot** 

### 11 **of discussion about DOE's regulations being a** 

### 12 **manufacturing standard and that we need to be** 

### 13 **able to do -- well, the manufacturers need to** 

### 14 **be able to distinguish between those units** 

### 15 **that may get used ultimately in a DR program** 

### 16 **versus those units that when the standard --** 

### 17 **compliance with the standards required would** 

### 18 **just be noncompliant. So that leads us into** 

### 19 **the controller requirements in the proposed** 

### 20 **waiver.** 

### 21 **So our going-in proposal was that** 

### 22 **the controller be integrated and shipped with**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 202**  **1 the actual water heater itself from the point**  

### 2 **of manufacture. And I think our initial** 

### 3 **position was that at least that way there** 

### 4 **would be some assurance, along with the** 

### 5 **labeling and the marketing that we've included** 

### 6 **that this unit is differentiated at the point** 

### 7 **of manufacture to be used in a DR program.** 

### 8 **That way if questions arose later and we asked** 

### 9 **a given manufacturer is this unit part of a DR** 

### 10 **program and subject to a given waiver or is it** 

### 11 **not, there would be a clear way to tell by** 

### 12 **certain product characteristics.** 

### 13 **So with that, I'm going to open** 

### 14 **the floor because we've heard a variety of** 

### 15 **different proposals today or a variety of the** 

### 16 **options for the Department to consider and** 

### 17 **point of differentiation, I guess, at the** 

### 18 **point of manufacture is pretty important.** 

### 19 **MR. BROOKMAN: Harvey Sachs.** 

### 20 **MR. SACHS: Thank you, Ashley, and** 

### 21 **your proposal corresponds with what I was** 

### 22 **thinking quite a while ago and I've learned a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 203**  **1 lot since then and I think it's obsolete and**  

### 2 **wrong in several respects. I can still be** 

### 3 **wrong, but I think I'm less wrong.** 

### 4 **The first response to your first** 

### 5 **bullet, it must be capable of two-way** 

### 6 **communications. Unless it can tell the grid** 

### 7 **that it is cooperating or it is opted out, we** 

### 8 **have no way of evaluating the actual energy** 

### 9 **savings. And this is just as feasible as** 

### 10 **doing one-way communications.** 

### 11 **The second thing is if there's any** 

### 12 **message that I've received loudly and clearly** 

### 13 **today is that integrating the controller** 

### 14 **despite my first thoughts and yours is just** 

### 15 **not the approach. It's 2013. We need to talk** 

### 16 **about the requirements for the interface, not** 

### 17 **for the controller. It must be shipped with** 

### 18 **an interface which might look like a telephone** 

### 19 **plug. It might look like a USB. It might be** 

### 20 **Wi-Fi. But it allows the homeowner on behalf** 

### 21 **of the utility to attach a controller with it** 

### 22 **difficult to determine that the water heater**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 204**  **1 is running without that controller in place.**  

### 2 **So we avoid the labor cost of utility making a** 

### 3 **run, but we still get the assurances that this** 

### 4 **thing is being used. So that piece of it is** 

### 5 **about the interface.** 

### 6 **The third point I want to make as** 

### 7 **I've been thinking about the comments here is** 

### 8 **that it's not about the gallons. It's about** 

### 9 **the kBtu or kilowatt hours of storage** 

### 10 **available that this can be done equivalently** 

### 11 **by boosting temperature which unless we're in** 

### 12 **carbon dioxide will mean running resistive** 

### 13 **elements and we probably don't want fast** 

### 14 **response on the compressor by itself. But it** 

### 15 **means thinking about the waiver regulation in** 

### 16 **terms of the head room and the kBtu of** 

### 17 **available grid regulation and storage services** 

### 18 **available. I can get the same thing with a** 

### 19 **50-gallon water heater running to 170 as I can** 

### 20 **with a 100-gallon water heater that's running** 

### 21 **to 135.** 

### 22 **The final comment I want to make**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 205**  **1 at this point is the full description of the**  

### 2 **control device is to me where the line goes** 

### 3 **between the utility and the manufacturer of** 

### 4 **the water heater. Just as we talk about** 

### 5 **things on the customer side of the revenue** 

### 6 **meter, the description of the control device** 

### 7 **and I don't know how we reach that with the** 

### 8 **law, must be the responsibility of the** 

### 9 **utility. The capabilities of the controller** 

### 10 **in its interaction with the water heater are** 

### 11 **jointly the responsibility of the protocol** 

### 12 **definition, protocol including the physical** 

### 13 **layer of what that interconnection actually** 

### 14 **looks like.** 

### 15 **With that, I'll end my rant.** 

### 16 **MR. BROOKMAN: Gary. Did I miss** 

### 17 **Jay? I believe you were first. Thank you.** 

### 18 **MR. MORRISON: Thank you. I** 

### 19 **appreciate Harvey's comments. And I** 

### 20 **appreciate his focus on looking at the** 

### 21 **interface rather than the controller. And I** 

### 22 **do know that this is where the industry is**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 206**  **1 headed, but I also know that the process of**  

### 2 **developing common interfaces, common** 

### 3 **interoperability standards, common** 

### 4 **communication standards is a slow process.** 

### 5 **I am not confident that by 2015** 

### 6 **that such a standard will even have been** 

### 7 **adopted, much less products available for sale** 

### 8 **in the industry. Going back to the comment I** 

### 9 **made before, the goal is to have products that** 

### 10 **our consumers can buy on the shelf in 2015** 

### 11 **that we can use in our on-going programs given** 

### 12 **our legacy control devices. And while we may** 

### 13 **want to head in the direction that Harvey is** 

### 14 **suggesting and I know we're spending a lot of** 

### 15 **time in these inter-operability efforts, I'm** 

### 16 **just not confident we can get there on the** 

### 17 **schedule that this waiver approach is looking** 

### 18 **to achieve.** 

### 19 **MR. BROOKMAN: John Cymbalsky.** 

### 20 **MR. CYMBALSKY: Something just** 

### 21 **occurred to me from Harvey's rant. So we all** 

### 22 **go buy cell phones these days, right, and now**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 207**  **1 there's ignition locks on cars and things.**  

### 2 **What if this device instead of connecting to** 

### 3 **the grid is shipped with something that needs** 

### 4 **to be unlocked to become operable and the only** 

### 5 **way it can get unlocked is if the utility has** 

### 6 **the code to unlock it and such -- and then** 

### 7 **they can install whatever they want in terms** 

### 8 **of the two-way communication. Just a thought.** 

### 9 **I don't make water heaters. I don't know if** 

### 10 **that's possible. Does that make things** 

### 11 **easier?** 

### 12 **MR. BROOKMAN: Harvey Sachs, you** 

### 13 **were going to follow on previously on Jay's** 

### 14 **comment anyway.** 

### 15 **MR. SACHS: Jay, you raised two** 

### 16 **separate issues. One of them is transition.** 

### 17 **The legacy stuff is controlled now, you think.** 

### 18 **What we're talking about is how to build the** 

### 19 **environment post-January 1st or is it April --** 

### 20 **2015. And for that, we're proposing a very,** 

### 21 **very flexible software based interface for** 

### 22 **that which goes forward from that and is a no**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 208**  **1 brainer for connecting to anybody's control**  

### 2 **system. That's the first thing.** 

### 3 **The second thing is I believe with** 

### 4 **all due respect if we can keep the lawyers out** 

### 5 **of the room the software development on this** 

### 6 **interface is not a big problem. And I've** 

### 7 **played with it. I'm not an expert at it.** 

### 8 **It's a long time ago. But, that's not a hard** 

### 9 **technical problem.** 

### 10 **And the third thing, I just want** 

### 11 **to close with is I find myself relatively** 

### 12 **uninterested in going forward with products** 

### 13 **for your members' thin distribution networks** 

### 14 **which have real grid control problems I'm** 

### 15 **told, that don't offer the potential and** 

### 16 **capability for doing the fast regulation** 

### 17 **services that have as much economic value, Mr.** 

### 18 **Wellinghoff tells us, as the energy by itself.** 

### 19 **So to me, going forward, this** 

### 20 **capability of having a true grid interactive** 

### 21 **water heater is a go-no go.** 

### 22 **MR. BROOKMAN: Jay, keep going.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 209**  **1 MR. MORRISON: Thank you. A bunch**  

### 2 **of things packed into what Harvey said. Let** 

### 3 **me work my way backwards and I may need a** 

### 4 **reminder on number one.** 

### 5 **Number three item was not** 

### 6 **interested in dealing with our problem without** 

### 7 **fast regulation. Well, the challenge that a** 

### 8 **lot of our members have is communications** 

### 9 **infrastructure which is not something that may** 

### 10 **cooperatives are in a position to build to** 

### 11 **make up for the fact that there is no high** 

### 12 **speed communication infrastructure available.** 

### 13 **I'll note that I live only 55 miles out of** 

### 14 **Washington, D.C. and my fastest connection is** 

### 15 **twisted pair. There is no cellular** 

### 16 **connection. There is no high-speed** 

### 17 **interconnection. I've got to use satellite** 

### 18 **for any internet. So to assume that we can** 

### 19 **have -- that we must have two way, high speed** 

### 20 **connection in order to be able to have a** 

### 21 **demand response program is not consistent with** 

### 22 **rural infrastructure.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 210**  **1 MR. SACHS: Please let me respond**  

### 2 **to that. The bit rate required for this kind** 

### 3 **of control is a little bit faster than smoke** 

### 4 **signals. But it's measured in tens of bits** 

### 5 **per minute. It's not high-speed issue.** 

### 6 **MR. MORRISON: There is a reason** 

### 7 **that a large number of cooperatives are using** 

### 8 **PLC for controllers outside the home that** 

### 9 **don't connect directly to the devices because** 

### 10 **that's what's available to them.** 

### 11 **MR. SACHS: Jay, I'm not real good** 

### 12 **at technology, but I can plug the PLC in at** 

### 13 **one end to the wall and at the other end it** 

### 14 **can communicate with the water heater.** 

### 15 **MR. BROOKMAN: Let's move to the** 

### 16 **next point.** 

### 17 **MR. SACHS: Let's stay away from** 

### 18 **the technology because I'm a little less** 

### 19 **ignorant than you are, not much.** 

### 20 **MR. BROOKMAN: Let's move to the** 

### 21 **next point.** 

### 22 **MR. MORRISON: Thank you. The**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 211**  **1 middle point was about keeping lawyers out of**  

### 2 **the room. And I think, in fact, for the large** 

### 3 **part the lawyers do stay out of the room.** 

### 4 **Here, the problem is the business people, each** 

### 5 **of whom has a proprietary product that they** 

### 6 **want to become the common standard.** 

### 7 **MR. SACHS: Point well taken.** 

### 8 **MR. MORRISON: Remind me what your** 

### 9 **first point was, Harvey, because I know I** 

### 10 **wanted to respond to it.** 

### 11 **MR. SACHS: When you're my age --** 

### 12 **MR. MORRISON: I feel it some** 

### 13 **days.** 

### 14 **MR. BROOKMAN: I have this queue** 

### 15 **as approximately Sam and then Alex and then** 

### 16 **Frank. Briefly. Go ahead.** 

### 17 **MR. BRUMBERG: Sam Brumberg,** 

### 18 **Virginia, Maryland, and Delaware Cooperatives.** 

### 19 **Speaking as a lawyer, I would be happy to** 

### 20 **leave the room at any time that you all are** 

### 21 **ready for that.** 

### 22 **(Laughter.)**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 212**  **1 I would just -- a few brief**  

### 2 **reactions. The notion of a locking mechanism** 

### 3 **I think is interesting, but I would want to** 

### 4 **hear a lot more about that, especially from a** 

### 5 **consumer point of view. If I'm the consumer** 

### 6 **taking that into my home, I don't know that I** 

### 7 **-- I may or may not want the utility locking** 

### 8 **something or not locking something.** 

### 9 **I want to reiterate points that** 

### 10 **Jay -- a point that Jay has made and one that** 

### 11 **Northwestern, I'm sorry I don't remember your** 

### 12 **name, we do have the diversity control devices** 

### 13 **so I think I would skew towards the interfaces** 

### 14 **as opposed to the integrated control. And** 

### 15 **really, we still do even in cooperatives that** 

### 16 **are in suburban or relatively urbanized areas** 

### 17 **still have communication infrastructure** 

### 18 **problems.** 

### 19 **Folks at the end of the line do** 

### 20 **not have broadband and some of them do not** 

### 21 **want Wi-Fi or broadband type applications to** 

### 22 **be used without their express consent. So**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 213**  **1 there's a consumer relations issue to be**  

### 2 **addressed there also.** 

### 3 **MR. BROOKMAN: Alex.** 

### 4 **MR. HOFMAN: Real quick, just to** 

### 5 **John, this unlock to be become operable idea.** 

### 6 **Would that, in effect, render the waiver moot** 

### 7 **and also are you talking about a one time** 

### 8 **unlock which I suppose sounds like it's --** 

### 9 **maybe would have legal aspects to it?** 

### 10 **MR. CYMBALSKY: I'll say no for** 

### 11 **the first question. Again, I just thought of** 

### 12 **it as we were talking. It seems to me and** 

### 13 **this addresses what Sam just brought up that** 

### 14 **the idea here and Jay and others have brought** 

### 15 **up that if this thing ever appears on the** 

### 16 **shelf of Home Depot for a consumer to just** 

### 17 **pick up, the Department in no way wants that** 

### 18 **to end up in a house that's not part of a** 

### 19 **demand response program. And so if only the** 

### 20 **utility can unlock that unit for use in the** 

### 21 **home, it seems to me and I haven't thought** 

### 22 **about it too much, but it seems to me our**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 214**  **1 objective may have been met.**  

### 2 **I'm not saying -- we don't need a** 

### 3 **plumber to come in to key in the code, but in** 

### 4 **fact, if only -- yes, and this really goes to** 

### 5 **Rheem and G.E. It seems to me these** 

### 6 **technologies might not be that expensive to** 

### 7 **shut the resister off unless this code -- I** 

### 8 **know my car, if I replace the battery I can't** 

### 9 **get the stereo to work again unless I type in** 

### 10 **five numbers that are in my handbook that came** 

### 11 **with the car. Obviously, we don't want this** 

### 12 **to be shipped with the unit, only the utility.** 

### 13 **So this gets to the utility-manufacturer** 

### 14 **link, may be an easier way. I don't know.** 

### 15 **MR. BROOKMAN: Frank, you're next.** 

### 16 **And then Steve, you're next.** 

### 17 **MR. STANONIK: Frank Stanonik,** 

### 18 **AHRI. Just a couple of comments. First of** 

### 19 **all, if this discussion about requiring the** 

### 20 **manufacturer to provide whether it's an** 

### 21 **interface or control device or whatever, I** 

### 22 **can't help but just comment, you're creating a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 215**  **1 water heater that is a unique utility. Okay?**  

### 2 **For whatever that's worth.** 

### 3 **But I think the other part is that** 

### 4 **okay, if this goes forward and if there's a** 

### 5 **waiver process where the manufacturer has to** 

### 6 **apply and he has to identify all his potential** 

### 7 **utility partners and as has been mentioned** 

### 8 **here, you're going to require a label that** 

### 9 **identifies in some way this water heater** 

### 10 **intended for thermal storage programs,** 

### 11 **whatever, I think that's enough. The idea** 

### 12 **that you're going to require a device and in** 

### 13 **fact is useless because we've just heard** 

### 14 **plenty of testimony that everybody has their** 

### 15 **own process for controlling these products is** 

### 16 **just creating a point of contention that's** 

### 17 **totally unnecessary.** 

### 18 **MR. BROOKMAN: Steve Rosenstock.** 

### 19 **MR. ROSENSTOCK: Steve Rosenstock,** 

### 20 **Edison Electric Institute. The locking idea I** 

### 21 **think is interesting, but there's always** 

### 22 **issues because where new homeowners or new**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 216**  **1 house they're trying to set up, there might be**  

### 2 **a little bit of a lag time. What if the** 

### 3 **builder puts it in? And then the homeowner** 

### 4 **has to decide to join the program. The** 

### 5 **homeowner decides to join the program, well,** 

### 6 **it can take several days or possibly weeks to** 

### 7 **get the device, so that homeowner might be out** 

### 8 **of hot water for several days.** 

### 9 **MR. CYMBALSKY: I think you made** 

### 10 **our point for us. I don't want to interrupt,** 

### 11 **but that's exactly -- we don't want that,** 

### 12 **right? So you're saying a builder put this in** 

### 13 **the house without even knowing if there's** 

### 14 **going to be a demand response program. So you** 

### 15 **made our case perfectly. Thank you, Steve.** 

### 16 **MR. ROSENSTOCK: I didn't mean to.** 

### 17 **My point was there could be situations in** 

### 18 **terms of if the unlock devices are required** 

### 19 **and there's a several day lag time that** 

### 20 **homeowner is left without hot water for those** 

### 21 **days and they could just -- I don't know.** 

### 22 **They take a lot of cold showers, too. I**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 217**  **1 guess.**  

### 2 **MR. BROOKMAN: Laura, do you want** 

### 3 **to comment here?** 

### 4 **MS. BARHYDT: So my only comment** 

### 5 **is just listening to the discussion. I don't** 

### 6 **know whether people are not understanding the** 

### 7 **fundamental rule here which is that it is** 

### 8 **illegal to manufacture and distribute in** 

### 9 **commerce these large water heaters after April** 

### 10 **2015. So what we're looking for is a way to** 

### 11 **ensure that manufacturers are not breaking the** 

### 12 **law. And so we're looking for ways from the** 

### 13 **utilities, from the manufacturers, to if** 

### 14 **anything help protect the manufacturers** 

### 15 **because we will prosecute violations.** 

### 16 **MR. BROOKMAN: We have someone via** 

### 17 **the web who wants to make a comment or ask a** 

### 18 **question. Harshal Upahye. Please speak** 

### 19 **clearly.** 

### 20 **MR. UPAHYE: Good afternoon,** 

### 21 **folks. This is Harshal -- can you hear me?** 

### 22 **MR. BROOKMAN: Yes, we can.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 218**  **1 Loudly, please.**  

### 2 **MR. UPAHYE: I'm from the Electric** 

### 3 **Power Research Institute and I've --** 

### 4 **MR. BROOKMAN: We can't hear you.** 

### 5 **You need to find a way to get closer to the** 

### 6 **receiver or something.** 

### 7 **MR. UPAHYE: Can you hear me now?** 

### 8 **MR. BROOKMAN: That's better. Yes.** 

### 9 **MR. UPAHYE: So what I was talking** 

### 10 **about is how do we mention about having an** 

### 11 **interface for these water heaters? And I'm** 

### 12 **going to give out a number. It's called CEA** 

### 13 **2045 and that's a modular communications** 

### 14 **interface for energy management. And that's** 

### 15 **already there. It's already a released ANSI** 

### 16 **standard for energy management for devices,** 

### 17 **water heaters being one of the biggest loads** 

### 18 **that can be controlled. And what utilities** 

### 19 **can do probably is just mail out a document or** 

### 20 **something to people who want to get involved** 

### 21 **in this and they plug into that interface and** 

### 22 **the water heater works.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 219**  **1 MR. BROOKMAN: That's good. Say**  

### 2 **the number again.** 

### 3 **MR. UPAHYE: The number is CEA** 

### 4 **2045.** 

### 5 **MR. BROOKMAN: Thank you. Now Don** 

### 6 **Brundage.** 

### 7 **MR. BRUNDAGE: Don Brundage,** 

### 8 **Southern Company. We don't actually have at** 

### 9 **my utility any programs using this right now,** 

### 10 **so I haven't said much, but I have been** 

### 11 **involved in a lot of discussions along these** 

### 12 **lines for control devices.** 

### 13 **To have a physical hardware** 

### 14 **control device on a long-lived appliance is** 

### 15 **very problematic. I think what you're really** 

### 16 **dealing with here and it goes back to what** 

### 17 **Frank Stanonik said earlier, the waiver is** 

### 18 **really from the manufacturer. We've been** 

### 19 **talking about waivers for utilities, but** 

### 20 **really it's not a waiver for the utilities,** 

### 21 **it's compliance and enforcement measures on** 

### 22 **the utilities to make sure they don't end up**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 220**  **1 in the wrong hands.**  

### 2 **And I think a lot of these issues** 

### 3 **here with the controllers would go away, if** 

### 4 **you had a good compliance and enforcement** 

### 5 **mechanism perhaps something as simple as a** 

### 6 **Home Depot or a Lowe's can't sell this device** 

### 7 **to somebody unless they come in hand with a** 

### 8 **certificate from the utility that they're** 

### 9 **involved in a load control program. And if** 

### 10 **you do a good job on that, you could ship** 

### 11 **something out with just something like a CEA** 

### 12 **2045 plug in and not do something complex that** 

### 13 **potentially is obsolete down the road.** 

### 14 **MR. BROOKMAN: Thank you. Your** 

### 15 **name?** 

### 16 **MR. SPRINGER: Jeff Springer with** 

### 17 **Dairyland Power again. I respect Harvey's** 

### 18 **idea. I would love to see a universal** 

### 19 **interface that's out there. I can tell you in** 

### 20 **my own home that I have three different types** 

### 21 **of in-home control protocols and there's at** 

### 22 **least three more that I can think of offhand.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 221**  **1 So we're nowhere near a consumer standard yet**  

### 2 **on that. And what we'd like to do as** 

### 3 **utilities is see a consumer standard where we** 

### 4 **could interface with whatever other controls** 

### 5 **they have.** 

### 6 **There's no point in us going with** 

### 7 **a control type that their system can't see and** 

### 8 **control because the idea of controlling with** 

### 9 **smart phones is coming where you'll want to** 

### 10 **control your thermostat and so forth. But not** 

### 11 **everyone has Wi-Fi. Not everyone has ZigBee.** 

### 12 **Not everyone has all these other things, Z** 

### 13 **Wave and X10, all these others that are out** 

### 14 **there.** 

### 15 **MR. BROOKMAN: Go ahead, Harvey.** 

### 16 **Briefly.** 

### 17 **MR. SACHS: Harvey Sachs. Thanks** 

### 18 **for the chance to clarify. I'm not talking** 

### 19 **about specifying a controller. I'm talking** 

### 20 **about a physical interface and the software** 

### 21 **behind it that allows whatever controller you** 

### 22 **as a utility select to get two-way**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 222**  **1 communications with the appropriate**  

### 2 **information across that interface between you** 

### 3 **and the water heater. We've already heard** 

### 4 **some programs have gone through five or six** 

### 5 **successive generations of controllers. And** 

### 6 **I'm trying to help get out of that box so we** 

### 7 **have an interface that understands the likely** 

### 8 **evolution and now we have a plug in play for** 

### 9 **whatever particular brand you prefer.** 

### 10 **MR. BROOKMAN: Go ahead.** 

### 11 **MR. SPRINGER: It's a noble goal** 

### 12 **and we support it. But we just don't see it** 

### 13 **by 2015.** 

### 14 **MR. BROOKMAN: Jay, and then** 

### 15 **Allen, briefly.** 

### 16 **MR. MORRISON: Thank you. I'd** 

### 17 **like to respond to what the gentleman from** 

### 18 **Southern Company said and also to Laura's** 

### 19 **point. I understand this is a point of** 

### 20 **manufacturer standard, that if the** 

### 21 **manufacturer produces something that is** 

### 22 **noncompliant or doesn't receive a waiver, then**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 223**  **1 it's illegal. But if they produce a product**  

### 2 **that is legal because it's either compliant or** 

### 3 **receives a waiver, then as far as the law is** 

### 4 **concerned, as far as the standard is** 

### 5 **concerned, it doesn't matter who Home Depot** 

### 6 **sells it to. And it doesn't matter whether** 

### 7 **the consumer uses the water heater as a** 

### 8 **planter or as a snow -- toboggan, so long as** 

### 9 **the point of sale -- at the point of** 

### 10 **manufacture, it is either compliant or it** 

### 11 **meets the waiver.** 

### 12 **It seems to me that when we look** 

### 13 **at these sort of aggressive and complicated** 

### 14 **efforts to avoid any leakage whatsoever, we're** 

### 15 **losing a little bit of context. Congress has** 

### 16 **stated that it's the policy of the United** 

### 17 **States to promote demand response. The** 

### 18 **Secretary has made it clear that it's the** 

### 19 **policy of the Department to promote demand** 

### 20 **response.** 

### 21 **The question is whether the** 

### 22 **Department is willing to take a risk or the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 224**  **1 Secretary, because it's his waiver, is willing**  

### 2 **to take a risk for a couple of years that** 

### 3 **there might be a little bit of leakage in** 

### 4 **order to promote this policy that both** 

### 5 **Congress and the Department have said are** 

### 6 **extremely important.** 

### 7 **And so yes, you want to make sure** 

### 8 **that there's a distinction between the product** 

### 9 **that gets the waiver and the one on the shelf** 

### 10 **today. You want to try and do some tracking** 

### 11 **to make sure that there isn't an extraordinary** 

### 12 **amount of leakage so that you can amend or** 

### 13 **remove the waiver at a later date. But I** 

### 14 **think it's counterproductive and it fails to** 

### 15 **meet the goals of the Department to go so far** 

### 16 **to avoid a single product being sold to** 

### 17 **somebody who might use it as a toboggan that** 

### 18 **you lose the opportunity to do the demand** 

### 19 **response that we need to do.** 

### 20 **MR. BROOKMAN: Allen.** 

### 21 **MR. WICHER: Allen Wicher, Rheem.** 

### 22 **Just to follow on Jay's comments there. As a**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 225**  **1 manufacturer and supplier to the ETS programs**  

### 2 **for both heat pump and electric resistance** 

### 3 **water heaters, this complying with the NOPR as** 

### 4 **it is in terms of providing real time element** 

### 5 **control and a communications ability can be** 

### 6 **done in a simplistic and economic form, both.** 

### 7 **To me, identifying those products** 

### 8 **as ETS products can be done and can be** 

### 9 **controlled at the manufacturer level. We can** 

### 10 **report those numbers accordingly. We can** 

### 11 **report those numbers through AHRI as a** 

### 12 **certification body and they can certainly** 

### 13 **attest to those numbers. All manufacturers** 

### 14 **can do that and they can respond to those** 

### 15 **numbers as an industry.** 

### 16 **You can compare or contrast those** 

### 17 **numbers with what the utility base is** 

### 18 **submitting into their programs. And I would** 

### 19 **like to submit before we get all caught up in** 

### 20 **technology because we'll be here through the** 

### 21 **weekend doing that, I'd like to submit if we** 

### 22 **can compare those two numbers and manage that**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 226**  **1 going forward if we have a problem like this,**  

### 2 **we all need to look at it. But if it's a** 

### 3 **problem and it's just a timing issue of** 

### 4 **products versus getting installed into the** 

### 5 **utility-based programs, why is that such a** 

### 6 **large issue in terms of leakage?** 

### 7 **MR. BROOKMAN: Frank, did you have** 

### 8 **a comment? No.** 

### 9 **Yes, go ahead.** 

### 10 **MR. PRATT: Jeff Pratt with** 

### 11 **Oglethorpe Power. One last comment on that** 

### 12 **and I just wanted to reinforce both of these.** 

### 13 **It seems to me that with this 2015 deadline** 

### 14 **approaching, the market has not responded** 

### 15 **adequately to prevent unintended consequences** 

### 16 **of causing problems with demand response which** 

### 17 **as Jay said is a significant goal.** 

### 18 **So I just once again urge to** 

### 19 **consider the unintended consequence is going** 

### 20 **to happen with rules as we've stated.** 

### 21 **Flexibility in moving into those rules given** 

### 22 **where we're at and the realities of the**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 227**  **1 manufacturing and marketplace availability of**  

### 2 **products that fits with demand response** 

### 3 **programs, flexibility in that, in this process** 

### 4 **through this waiver process will be very** 

### 5 **helpful.** 

### 6 **MR. BROOKMAN: Thank you. We're** 

### 7 **going to move on now. There are only two more** 

### 8 **segments, two more comment segments.** 

### 9 **MS. ARMSTRONG: I'm actually going** 

### 10 **to argue that we hit this one, but with the** 

### 11 **last two. But this is just an overview of** 

### 12 **what the proposal requires in terms of the** 

### 13 **water heaters characteristics itself, as well** 

### 14 **as we already hit that it requires the utility** 

### 15 **programs kind of the mapping between OEM and** 

### 16 **the utility programs that again the basic** 

### 17 **model is going to.** 

### 18 **So I think we've gotten most of** 

### 19 **the comments on that, but if anyone has** 

### 20 **anything else to say on this, I'll leave it up** 

### 21 **for a second. Otherwise, I'm going to keep** 

### 22 **going.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 228**  **1 MR. BROOKMAN: Frank Stanonik.**  

### 2 **MR. STANONIK: Frank Stanonik,** 

### 3 **AHRI. I mean Ashley, I guess my point is that** 

### 4 **if a utility is running an ETS program,** 

### 5 **they're going to need one of these water** 

### 6 **heaters. So it seems to me what DOE is** 

### 7 **basically asking for is an annual list of** 

### 8 **utilities running ETS programs once we get** 

### 9 **past 2015, I guess. So maybe then -- maybe --** 

### 10 **to me, that's a separate, if you will, data** 

### 11 **collection, separate from any waiver process.** 

### 12 **It's just okay, who's running ETS programs in** 

### 13 **the United States? They're going to need one** 

### 14 **of these water heaters?** 

### 15 **MR. BROOKMAN: Go ahead.** 

### 16 **MS. ARMSTRONG: Good segue.** 

### 17 **MR. BRYANT: Markus Bryant.** 

### 18 **Question for Ashley. What do you mean by** 

### 19 **annual allotment value? Are you looking for -** 

### 20 **- what kind of number are you looking for?** 

### 21 **MS. ARMSTRONG: Shipments. So the** 

### 22 **number of units that are going to be used and**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 229**  **1 installed new in your program each year.**  

### 2 **MR. BRYANT: Well, the situation** 

### 3 **we have is if you had asked me in 2007, I** 

### 4 **could have told you it was going to be roughly** 

### 5 **300 a year for one co-op and 100 a year for** 

### 6 **the other. Our housing market has collapsed,** 

### 7 **as you may be aware. And I couldn't give any** 

### 8 **kind of commitment to a manufacturer today as** 

### 9 **to what we're going to need.** 

### 10 **MR. CYMBALSKY: So you're arguing** 

### 11 **for a shorter time period to be more flexible** 

### 12 **in the numbers, is that right?** 

### 13 **MR. BRYANT: I'm just saying --** 

### 14 **MR. CYMBALSKY: You don't want to** 

### 15 **do that five years in advance. I wouldn't** 

### 16 **either.** 

### 17 **MR. BRYANT: Just giving you a** 

### 18 **number I don't think is practical.** 

### 19 **MR. BROOKMAN: Okay, thank you.** 

### 20 **We're moving on to the next slide.** 

### 21 **Sam, did you want in here?** 

### 22 **MR. BRUMBERG: Extremely briefly.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 230**  **1 Whether you talk about this from an**  

### 2 **enforcement and compliance perspective or** 

### 3 **putting all of this into the application, I** 

### 4 **still -- I really want to sensitize DOE to the** 

### 5 **consequences of this. If I'm the** 

### 6 **manufacturer, I'm not interested in compiling** 

### 7 **this list. I'm not interested in getting to** 

### 8 **the granular level that's going to be needed** 

### 9 **to put together this application, and frankly,** 

### 10 **it's arguable that I'm interested in the risk** 

### 11 **associated with enforcement, potential** 

### 12 **enforcement consequences in the first place.** 

### 13 **MR. BROOKMAN: So then we are** 

### 14 **moving to the next slide.** 

### 15 **MR. CYMBALSKY: John Cymbalsky,** 

### 16 **DOE. So I didn't mean to be flippant in my** 

### 17 **last remark, but the way we thought about the** 

### 18 **one year thing is -- this is our thinking.** 

### 19 **I'm a utility. You know you have, let's say,** 

### 20 **200,000 people in this program. You know** 

### 21 **that. I know you know that. Based on some** 

### 22 **simple, I think, your planning on how you're**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 231**  **1 going to grow the program or not grow the**  

### 2 **program, based on some retirement curves that** 

### 3 **I think are pretty straightforward in the** 

### 4 **literature about water heaters, you can** 

### 5 **estimate roughly how many those might retire** 

### 6 **from the stock each year.** 

### 7 **We thought that this was something** 

### 8 **that would give you a lot of flexibility to** 

### 9 **say hey, we think we're going to need 15,000** 

### 10 **in the retirement roughly, roughly 15,000.** 

### 11 **Maybe you want to high ball the number a** 

### 12 **little bit to keep yourself covered. And we** 

### 13 **think we're going to grow the program by two** 

### 14 **percent this year. You can do the math. You** 

### 15 **can say we need a waiver for roughly X** 

### 16 **thousand water heaters.** 

### 17 **We understand that from year to** 

### 18 **year things might change and you would want to** 

### 19 **be able to be very flexible. So I just want** 

### 20 **to throw out there that was our thinking. If** 

### 21 **we got it wrong, you know, maybe we got it** 

### 22 **wrong, but that's exactly what we were**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 232**  **1 thinking when we devised this.**  

### 2 **MR. BROOKMAN: Go ahead, Frank.** 

### 3 **MR. STANONIK: Frank Stanonik,** 

### 4 **AHRI. So John, what I just heard is that if** 

### 5 **this was required then really the information** 

### 6 **to be provided would be the maximum number one** 

### 7 **might anticipate for a given year. If they** 

### 8 **fall short, they fall short, but they wouldn't** 

### 9 **be able to produce more than this. So again,** 

### 10 **if they were -- well, whatever. They could** 

### 11 **just -- if their experience said I'm turning** 

### 12 **over or whatever let's say 3,000, they might** 

### 13 **ask for a waiver for 5,000 just to give them a** 

### 14 **cushion. But -- I guess, I know I certainly** 

### 15 **looked at it and read it to say well, we want** 

### 16 **to know how many are you going to put in this** 

### 17 **year as opposed to establishing if you will a** 

### 18 **ceiling production.** 

### 19 **MS. ARMSTRONG: This is Ashley. I** 

### 20 **think it was meant to be an approximation.** 

### 21 **Obviously, you're not going to get to the** 

### 22 **single unit. And by no means does DOE require**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 233**  **1 you to say manufacture X, I want 100 units**  

### 2 **this year. I want 200 next year and** 

### 3 **regardless of participation in my program I'm** 

### 4 **going to buy those. By no means, but it's** 

### 5 **going to give DOE a sense of these are the** 

### 6 **number of units being manufactured. This is** 

### 7 **where these programs are going as well as have** 

### 8 **a way to judge against the ones being** 

### 9 **manufactured and what's now on this slide, the** 

### 10 **utility reporting requirements.** 

### 11 **MR. BROOKMAN: Jay.** 

### 12 **MR. MORRISON: John, we appreciate** 

### 13 **your interest in providing flexibility. But if** 

### 14 **this is the manufacturer's waiver as opposed** 

### 15 **to the utility's and I know that was one of** 

### 16 **the first questions we discussed, and if** 

### 17 **they're not required to get the waiver to map** 

### 18 **specific product SKU numbers with specific** 

### 19 **controllers, to particular utilities, then** 

### 20 **this estimation in advance of how many are** 

### 21 **going to be needed is no longer relevant. If** 

### 22 **they're going to produce a product that is**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 234**  **1 compliant with a waiver's description of what**  

### 2 **is an enabled unit, and they're going to ship** 

### 3 **them through their normal distribution** 

### 4 **methods, and those units can be moved around** 

### 5 **the country as the distributors find is** 

### 6 **necessary according to who is growing and who** 

### 7 **isn't in terms of these programs, then these** 

### 8 **numbers really aren't necessary and they** 

### 9 **aren't helpful.** 

### 10 **What's helpful is what's on this** 

### 11 **slide for post hoc analysis of how well we're** 

### 12 **doing in terms of getting these water heaters** 

### 13 **into our programs.** 

### 14 **MR. BROOKMAN: Steven Rosenstock.** 

### 15 **MR. ROSENSTOCK: Yes, Steve** 

### 16 **Rosenstock, Edison Electric Institute. To** 

### 17 **follow up with Jay, I think there's always** 

### 18 **concern about reporting a projected number.** 

### 19 **There's a worry that are we going to be** 

### 20 **penalized if we're way over or way under and I** 

### 21 **think if there's something in there that -- if** 

### 22 **you still require some sort of projection,**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 235**  **1 some sort of language that says this is just**  

### 2 **for estimation only. There's no penalty.** 

### 3 **There's no impact if the post analysis shows** 

### 4 **that you were different from your number. I** 

### 5 **think that's -- to follow on, I think that's** 

### 6 **the issue we're always concerned about being** 

### 7 **locked into a number and being felt like oh,** 

### 8 **I'm forced to do something about it in case** 

### 9 **I'm way over or way under. I think that's** 

### 10 **what we want to avoid. Thank you.** 

### 11 **MR. BROOKMAN: Harvey Sachs.** 

### 12 **MR. SACHS: Just a note that --** 

### 13 **and I really would ask Rheem to comment on** 

### 14 **this and G.E. My sense is if the manufacturer** 

### 15 **ships to one of the several hundred** 

### 16 **distributors who serve regions and that these** 

### 17 **guys are not particularly interested in** 

### 18 **reshipping to some other distributor in some** 

### 19 **other region, that there may be a practical** 

### 20 **issue with conceptually thinking about the** 

### 21 **post-manufactured shipments of products around** 

### 22 **the country. Manufacturers take a great deal**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 236**  **1 of care to think about their demand as they**  

### 2 **tell me from different areas. I'm a little** 

### 3 **concerned about the secondary shipment** 

### 4 **question. Just conceptually.** 

### 5 **MS. ARMSTRONG: Yes --** 

### 6 **MR. CYMBALSKY: If I may --** 

### 7 **MS. ARMSTRONG: One sec.** 

### 8 **MR. CYMBALSKY: Sure.** 

### 9 **MS. ARMSTRONG: So Harvey, that** 

### 10 **was a pretty good intro. So I was going to** 

### 11 **ask the manufacturers what they would think** 

### 12 **about as part of -- right now, they're** 

### 13 **required to certify annually each basic model** 

### 14 **that they sell in commerce and in theory that** 

### 15 **would hold true for the DRs as well. What** 

### 16 **would your feel be to reporting shipment** 

### 17 **annually for those basic models that meet DR** 

### 18 **criteria?** 

### 19 **MR. BROOKMAN: Allen?** 

### 20 **MR. WICHER: Allen Wicher, Rheem.** 

### 21 **Yes, would just add that as a mano a mano** 

### 22 **annual report.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 237**  **1 MR. JONES: Well, again,**  

### 2 **definitions, DR models, right?** 

### 3 **MS. ARMSTRONG: Well --** 

### 4 **MR. JONES: You mean old** 

### 5 **technology models that are responsive to** 

### 6 **signals?** 

### 7 **MS. ARMSTRONG: Waiver models.** 

### 8 **MR. JONES: Okay, great. We don't** 

### 9 **make them, so we can't comment.** 

### 10 **(Laughter.)** 

### 11 **MR. BROOKMAN: Jay, go ahead.** 

### 12 **MR. MORRISON: Thank you. There** 

### 13 **are certainly going to be product shipments to** 

### 14 **very local distributors. But there are also** 

### 15 **large numbers of product shipments to national** 

### 16 **distributors, Wal-Mart, Home Depot, Lowe's.** 

### 17 **If Lowe's in one area of the country runs out,** 

### 18 **I as a customer, can order that product to be** 

### 19 **delivered from a Lowe's in a different part of** 

### 20 **the company. These national companies do move** 

### 21 **product around as needed.** 

### 22 **MR. BROOKMAN: Okay.**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 238**  **1 MR. JONES: I did have another**  

### 2 **question on this.** 

### 3 **MR. BROOKMAN: Earl.** 

### 4 **MR. JONES: And that was on this** 

### 5 **question of the -- did I understand that the** 

### 6 **process as proposed would not allow for public** 

### 7 **comment?** 

### 8 **MS. ARMSTRONG: There was no** 

### 9 **public comment required or not. It was mute.** 

### 10 **Is that what you meant? On each individual** 

### 11 **application, there was no requirement for** 

### 12 **public comment.** 

### 13 **MR. JONES: Does that mean it's** 

### 14 **not available? I'm just trying to understand.** 

### 15 **MS. ARMSTRONG: There was not one** 

### 16 **proposed. So I think you could assume that it** 

### 17 **would not -- our proposal didn't include a** 

### 18 **requirement for one.** 

### 19 **MR. JONES: The reason I ask the** 

### 20 **question is I mean now that we've gotten to** 

### 21 **the point of saying that the numbers involved** 

### 22 **can be estimated or something, would that mean**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 239**  **1 then that if I were a utility that to date had**  

### 2 **1,000 participants that I may have a market** 

### 3 **plan which says my goal is 5,000 or 10,000,** 

### 4 **and therefore that's the number that I'm going** 

### 5 **to be applying a waiver for? And that would** 

### 6 **be information which wouldn't be available for** 

### 7 **public comment?** 

### 8 **To the extent that that is --** 

### 9 **that's what the proposal is at the moment, I** 

### 10 **certainly hope that Department would change** 

### 11 **its position on that. If you go forward with** 

### 12 **this waiver process which is fraught with all** 

### 13 **of the problems that we've been discussing** 

### 14 **today, then the least thing we can do is to** 

### 15 **make it as transparent as possible. And the** 

### 16 **objective certainly should not be to expand** 

### 17 **these programs because that just basically** 

### 18 **really opens the door to evisceration of the** 

### 19 **rule.** 

### 20 **And it's really kind of unfair in** 

### 21 **a way to say that, as an example, that rural** 

### 22 **consumers cannot take advantage of progress**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 240**  **1 and that somehow they're stuck in wherever**  

### 2 **they are today and I'm not going to be able to** 

### 3 **participate in programs which provide them the** 

### 4 **opportunity to save significant funds. And** 

### 5 **utilities which, already by the way, as I** 

### 6 **understand it, provide incentives, simply have** 

### 7 **to reconceive their incentive programs to** 

### 8 **enable a different result. So I hope you will** 

### 9 **certainly amend it at least to say that. In** 

### 10 **fact, I wonder whether or not that would even** 

### 11 **be lawful.** 

### 12 **MR. BROOKMAN: There is one more,** 

### 13 **moving ahead, there's one more comment box** 

### 14 **that the Department is asking you about.** 

### 15 **MR. CYMBALSKY: Yes, so just** 

### 16 **lastly, the last comment box talks about the** 

### 17 **reporting process through EIA Form 861 and** 

### 18 **861S. And I guess to just tie this all** 

### 19 **together, the way the Department could check,** 

### 20 **say for example, if Rheem and other** 

### 21 **manufacturers provided shipments on an annual** 

### 22 **basis, we could then go check with the new**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 241**  **1 questions on the 861 surveys from EIA that, in**  

### 2 **fact, the participants in these programs, they** 

### 3 **increase or decrease as it may be, support the** 

### 4 **level of shipments that came from the** 

### 5 **manufacturer. So this was our way of kind of** 

### 6 **tying the loop and then we can check and if** 

### 7 **there's a huge discrepancy -- or if there's a** 

### 8 **big enough discrepancy where we believe the** 

### 9 **leakage issue is more than one or two, three,** 

### 10 **five, how many it is, units that obviously** 

### 11 **corrective action needs to be taken.** 

### 12 **MR. BROOKMAN: Steve Rosenstock.** 

### 13 **MR. ROSENSTOCK: Steve Rosenstock,** 

### 14 **EEI. EEI discussed this with our colleagues** 

### 15 **at APPA and NRECA and we were all okay with** 

### 16 **this concept of adding this question to the** 

### 17 **EIA forms because a way to give DOE a more** 

### 18 **comfort level and also since it's post what** 

### 19 **happened that we can report to EIA. We're** 

### 20 **very comfortable with that concept.** 

### 21 **MR. BROOKMAN: Okay, thanks,** 

### 22 **Steve. Additional comments on this? I guess**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 242**  **1 Don Brundage.**  

### 2 **MR. BRUNDAGE: One suggestion on** 

### 3 **this. I like the concept. There's also a bit** 

### 4 **of a problem when you're asked to fill out a** 

### 5 **federal form and you have no clue at your** 

### 6 **utility because you haven't gathered that** 

### 7 **information about what size. If you could** 

### 8 **stick a check box in there, whether it's** 

### 9 **actual or estimated, number of storage volumes** 

### 10 **because not all utilities may have documented** 

### 11 **the storage size of the water heaters. Thank** 

### 12 **you.** 

### 13 **MR. BROOKMAN: So I think we've** 

### 14 **covered what the Department intended to cover** 

### 15 **here this morning. And I want to provide** 

### 16 **another opportunity for individuals to make** 

### 17 **closing remarks briefly. Other issues that** 

### 18 **haven't been covered sufficiently.** 

### 19 **I see, Jay, you'd like to go** 

### 20 **first.** 

### 21 **MR. MORRISON: I just did want to** 

### 22 **highlight that last slide. There was a box**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 243**  **1 asking about the small businesses. The**  

### 2 **cooperatives clearly aren't small business** 

### 3 **manufacturers, but the NOPR did ask about** 

### 4 **impact on any other small businesses. All but** 

### 5 **a handful of rural electric cooperatives** 

### 6 **qualify as small businesses under the SBA** 

### 7 **definition of a small electric utility. And** 

### 8 **so this would have a significant impact on a** 

### 9 **large number of small electric utilities.** 

### 10 **MR. BROOKMAN: Thank you.** 

### 11 **Additional closing remarks, final comments as** 

### 12 **we move towards closure?** 

### 13 **Then from my part I thank you for** 

### 14 **the direct and effective comment that has** 

### 15 **happened today. All of you have an evaluation** 

### 16 **form at the bottom of your packet. It only** 

### 17 **takes about 30 seconds to fill it out. So** 

### 18 **please, the Department is always interested in** 

### 19 **finding ways to improve these meetings and** 

### 20 **I'll turn it back to John Cymbalsky.** 

### 21 **MR. CYMBALSKY: Thanks, Doug.** 

### 22 **Just one last reminder about the comment**

### 202-234-4433 **Neal R. Gross & Co., Inc. Page 244**  **1 period closing at the end of April, April**  

### 2 **29th. And I know a lot of you talked about** 

### 3 **good data that you have and studies and what** 

### 4 **not. So we would appreciate all of those** 

### 5 **being sent to us. We can put it in the** 

### 6 **docket. And once again, thanks for coming. I** 

### 7 **think we all learned a lot about how important** 

### 8 **this DR program is to all of you and us as** 

### 9 **well. So safe travels and thanks for coming.** 

### 10 **MR. BROOKMAN: Please fill out the** 

### 11 **evaluation form.** 

### 12 **(Whereupon, at 1:13 p.m., the** 

### 13 **public meeting was concluded.)** 

### 14 **15 16**  **17 18**  **19 20**  **21 22** 

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80:21 109:9 118:8 125:14 126:4 129:5 140:2 800 83:11 8241:17 834:17 8300 38:4 85 38:20 62:15

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241:1 861S 240:18 894:18 9 9 62:15,15 9,409 55:16 9:00 1:9 6:2 9074:2 179:8 90s 111:22 92 38:18 92,000 54:21 58:18 944:18 958 159:15 964:19NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of:

Before:

Date:

Place:

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.

----------------------- Court Reporter 282

Proposed Waiver Process for Grid Connected Electric Water Heaters

US DOE

03-15-13

Washington, DC