1 

### U.S. DEPARTMENT OF ENERGY

OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY

HEARING ON PROPOSED VOLUNTARY HOME ENERGY RATING SYSTEM GUIDELINES (DOCKET NO. EE-RM--95-202) RIN 1904—AA 74

October 17. 1995 Washington, D.C.

- - The hearing was held in Room 6E-069, 1000 Independence Avenue, S.W., Washington, D.C., at 9:10 a.m., Jean Boulin, Chairman, presiding. V

PANEL MEMBERS: JEAN BOULIN, Chairman ROBERT MACKIE DIANE DEAN MARY BETH ZIMMERMAN DICK TRACEY RON JUDKOFF



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COMMENTATORS: PAGE NO.

TOM FARKAS, Edison Electric Institute 7

CHERYL DeVOL, Indiana Department of Commerce 16

ROBERT EGAN, American Gas Association 39

RON BURTON, Home Energy Rating Systems Council 55

CARSON D. CULBRETH, National Association of State Energy Officials 65

DORIS IKLE, Conservation Management Corporation 80

MALCOLM VERDICT, The Alliance to Save Energy 93

LAWRENCE R. WETHJE, Air Conditioning & Refrigeration Institute 102

MATT CHWALOWSKI, Edison Electric Institute 104

BOB BASILE, National Association of Home Builders 113



### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS3 1 P-R-O-C-E-E-D-I-N-G-S 2, 9:10 

### a.m. 3 CHAIRMANBOULIN: Goodmorning, ladies and 

# 4 h gentlemen. My name is Jean Boulin. I am Director of 5 the Buildings Division, Office of Codes and Standards which is responsible for the Department of Energy’s 7 proposed voluntary home energy rating systems 8 guidelines. On behalf of the Department of Energy, I 9

# I would like to thank you for taking the time to 10 participate in this public hearing concerning these 11 guidelines. 12 The purpose of this hearing is to receive 13 oral testimony from the public on DOE’s notice of 14 proposedrulemakingtoestablishvoluntaryhomeenergy 15 rating system guidelines, as published in the Federal 161 Register on July 25th 1995. The comments received 17 here today and those submitted during the written 181 comment period will assist the Department in 19 developing the final voluntary rule. The written 20 comment period for this rulemaking ends Monday, 21 October 23rd 1996. 22 As the presiding official for this 23 hearing, I will set forth the guidelines for 24 conducting the hearing and provide other pertinent 25 information. In approximately one week a complete 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS4 1 transcript of this hearing will be available for inspection and copying at the Department of Energy’s 3 Freedom of Information reading room. That’s located 4 in Room 1E-190. Anyone wishing to purchase a copy of the transcript can make arrangements with the court 6 reporter here today. 7 This will not be an evidentiary or 8 judicial type of hearing. It will be conduced in 9 accordance with Section 553 of the Administrative 10 Procedures Act, 5 U.S.C., Section 553 and Section 501 11 ofthe DOE Organization Act, 42 U.S.C., Section 7191. 12 To provide the Department with as much 13 pertinent information and as many views as can be 14 reasonably obtained, and to enable interested persons 15 to express their views, the hearing will be conducted 16 in accordance with the following procedures: 17 Speakers will be called to testify based 18 on a schedule of those people who responded to the 19 notice of this hearing. The speakers have been 20J allotted 15 minutes for their oral statements. 21 Speakers are requested to summarize their written 22 statements whenpossible. I particularly askthatyou 23 do that if you are supporting comments already given 24 ‘ by another speaker. Anyone may make an unscheduled 25 oral statement after all scheduled speakers have 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS5 1 delivered their statements. Persons interested in 2

# I making such an unscheduled statement should submit 3 their requests to the registration desk over here 4 before the conclusion of the scheduled speakers. 5 At the conclusion of all presentation, 6 scheduled and unscheduled, speakers will be given the opportunity to make a rebuttal statement subject to 8 time limitations, and will be called in the order in which the initial statements were made. 10 Questionswillbeaskedonlybymembers of 11 the panel conducting the hearing. However, I will 12 allow any interested person an opportunity to have 13 questions asked of speakers who have made oral 14 presentations. These questions will be taken after 15 any rebuttal statements subject to my determination 16

## 1 that the question is likely to result in amore timely 17 and effective resolution of the issues. There are 18 cards at the registration desk for this purpose. 19 Persons interested in this opportunity 20 must submit their questions to the registration desk 21 shortly after the completion of any rebuttal 22 statements. The questions submitted should identify 23 the author and to whom the question is directed. I 24J will determine whether the question is relevant. If 25 the question is allowed, I will ask it. 

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### 6 1 The close of the comment period, as I 2 stated before, is October 23rd 1995. All written 3 comments received will be available for public inspection at the DOE Freedom of Information reading 5 room. Theirphonenumber is areacode (202) 586-6020. 6 Writtencomments shouldbe addressedto theDepartment 7 of Energy as noted in the Federal Register notice for 8 today’s hearing. Ten copies of the comments are 9 requested. In addition, the Department would 10 appreciate an electronic copy of the comments. The 11 Department is currently using WordPerfect 5.1. No 12 faxed comments will be accepted. 13 Any person submitting information which 14 thatindividualbelieves tobeconfidential andexempt 15 by law from public disclosure should submit one 16 complete copy and ten copies from which information 17 claimed to be confidential has been deleted. 18 In accordance with the procedures 19 established at 10 C.F.R. 1004.11, the Department of 20 Energy shall make its own determination as to whether 21 the information shall be exempt from public 22 disclosure. 23 In keeping with the regulations of these 24’ facilities, there is no smoking allowed in this room. 25I Weappreciatethetime andeffortyouhave 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS7 1 taken inpreparing your statements. We arepleased to 2 receive your comments and opinions. I would like to 3 reiterate that this hearing is for comments on a 4 proposed rule to establish voluntary home energy 5!! rating system guidelines. 6 Today on the panel is Robert Mackie. Bob 7 is the HERS budget manager. To his left is Diana 8 Dean. She is from the Office of General Counsel. I 9 expect shortly Mary Beth Zimmerman from our Policy 10 Office, and myself. 11 Attending as technical consultants to the 12 panel, on my right, is Dick Tracey of D&R 13 International, and at the end of the table to my left 14 is Ron Judkoff of our National Renewable Energy 15 Laboratory in Colorado. 16 With that, our first speaker this morning 17 I believe Mr. Farkas. 18 Tom, if you would please state you name 19 and whom you represent? 20 MR. FARKAS: Good morning. I’m Tom 21 Farkas. I’m with the Edison Electric Institute, and 22 I am speaking today on behalf of EEl and our member 23! companies. EEl is the association of the nation’s 24 investor-owned electric utilities. Our members serve 25 76 percent of the electric utility customers 

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### 8 1 nationwide and generate 79 percent of all electricity 2 produced in the country. 3 Our industry has a long history of 4 promotingenergyefficiency, andwehave a substantial 5 interest in the subject ofhome energyratings andthe 6 NOPR today. 7 We appreciate the opportunity to speak to 8 you. We did submit a written copy of our testimony 9 that can be entered into the record, and I’ll just 10 summarize my comments. 11 Briefly though I’d like to recall our 12 recent history on the subject of home energy rating 13 systems and energy efficient mortgages. And that 14 recent history goes back at least five years to when 15 DOE in cooperation with HUD conducted the 16 collaborativeonhome energyrating systems andenergy 17 efficient mortgages. I think DOE is to be commended 18 for that initiative. 19 EEl was among the many stakeholders that 20

# I participated in that process at that time, and we 21 continue to support efforts to enhance user-friendly 22 financing ofenergy efficiency improvements. EEl was 23 supportive and involved in the process of creating a 24 public/private sector entity to provide a public 25 consensus forum to create uniformity of home energy 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS9 1 rating systems, and this was a major recommendation 2 that came out ofthe collaborative. So EEljoinedDOE 3 and others to found the home energy rating systems 4 council. 5 Since it’s creation the council has 6 embraced an open public consensus process. It has 7 encouraged participation and has invited involvement 8 by all interestedparties. EEl serves on the Board of 9 the home energyrating systems council and also on its 10 technical committee. 11 Utilities in general have been strong 12 supports not only with their time, manpower, but 13 resources. And I think on average since the creation 14 ofthe council, utilities represent 30 percent ofthe 15 membership. 16 EEl atthis timewould like to commendDOE 17 not only for their creativity and support going back 18 to the collaborative, but also in helping to create 191 and support the home energy rating systems council. 2O And also we’d like to applaud DOE for essentially 21 publishing the guidelines and the NOPR as they were 22 developed by the HERS Council. EEl would also 23 recommend that DOE continue to support a 24 public/private sector consensus process to update, 25 improve and administer the guidelines. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS10 1 We feel that the proposed guidelines 2 appropriately fulfil the requirements and intend of 3 the Energy Policy Act and that they are fuel neutral 

### 41 and based on a single uniform rating methodology. We 5 feel that DOE is to be commended for promulgating the 6 HERS guidelines. The process of developing the 7 guidelines lasted more than a year, was opened to all 8 parties who wished to provide comment or other input 9 in order to affect their content. All interested 10 parties had an opportunity to present information and 11 be heard and consequently I think none can deny that 12 the process of developing the guidelines is and has 13 been proper. l4 EEl wishes to underscore that the most 15 important aspect of the proposed HERS guidelines is 16 that itprovides a singlemethod so that consumers and 17 others have consistent information. A single method 18 can be adopted anywhere. It’s clearly superior to a 19 patchworkofdifferent schemes. While somevariations 20j1 reflecting unique local conditions are necessary, the 21 key aspects ofthemethodmustremainunchangeable and 22! a permanent fixture of any rating scheme such as the 23 rating method that relies on site-based energy and 24 nationally recognized codes and standards. 25 Such convention allows one to track 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797.2525 VIDEO;TRANSCRIPTIONS11 1 progress in residential housing energy efficiency. 2 Also such a method can be used to rate any home and 3 accommodate new technology and new construction techniques as they are developed and intended to 5 reduce energy consumption. 6 EEl approves of the guidelines of uniformity for the whole country for the purpose of 8 consistency, credibility, accuracy and acceptance 9 vital to any community which, as I’ll mention later 10 also, will includemore andmoreutilities as lenders. 11 This aspect is very important to encourage the 12 proliferationofenergyefficienthousing andalsothe 13 improvement, energy efficient improvement ofexisting 14 housing. 15 Without such uniformity the link between 16 builder, customer and the lending community will not 17

# j be established to provide financing for energy 18 efficient housing. The connection to the lending 19 communities is especially important in the current 20 reality. The electric utility industry is actually 21 transitioningfromrebates andincentivesto financing 22W of energy efficiency improvements. 

# 23 h We feel that the guidelines strike a 241 proper balance between providing flexibility and 25 setting rules that arenecessaryto make such arating 

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### I12 1 system comparable and to provide necessary 2 benchmarkinginformationtoconsumers. Theguidelines 3 proposed by DOE provide a solid foundation for a 

# 41U rating system because they are based on a nationally 5 recognizedcodes and standards suchas ASHRAE andCABO 6 Model Energy Code. Such underpinnings provide 7 references that are base don consensus standards that 8 have been adopted and accepted by other recognized 9 bodies. 10 Therefore, in general EEl wholeheartedly 11 supports the proposed guidelines as being proper and 12 adequate to fulfill their intended purpose. The 13 existing elements of such guidelines must remain a 14 part of them in order to provide a workable rating 15 method. 16 At the same time we have identified what 17 we call some aspects of the guidelines that may be in 18 error or they are slight deficiencies and we request 19 that DOE work with us to address and correct those 20 items. 21 Just briefly, without getting into too 22 much detail, I’ll tell youwhat areas they cover. Hot 23 water consumption equation, we feel that the equation 24 that is in the guidelines actually lacks some 25 consistency with what was in the original guidelines 

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# I that were developed by the HERS Council and we 2 recommend a correction there, and that’s in our 3 written comments. We would also propose that because there is widespread recognition that the equation on 5 hot water consumption is somewhat outdated and 6 incorrect, that EEl proposed that DOE adopt the 7 inclusion of an alternative formula. 8 The second item that we’d like to bring 9 up, that there is missing in the guidelines, is the 10 electric energy consumption by gas and oil furnaces. 11 We feel that this was just a minor oversight and can 12 be easily corrected, and we believe that energy 13 consumption should be included in the appropriate 14 tables to account for accuracy of home energy 15 consumption. 16 We feel there is an error and also maybe 17 a misleading situation with the energy consumption 18 associated with television sets, and recommend that 19 that be corrected. 20 Also the mechanical equipment efficiency 21 values regarding heat pump water heaters we think is 22 in error. 23 In summary though EEl supports the 24 I guidelines and the principles that were adhered to in 25 their development. EEl supports a single uniform 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS14 1 method and reliance on site energy consensus-based 21 codes and standards. EEl requests DOE’s assistance in 3! correcting a few of the errors or deficiencies. And 4 we also recommendthat theprocess onaccreditationbe 5 handled by the home energy rating systems council. 6 The HERS Council has created an accreditation and an 7 implementation committee. That is a standing 8 committee within its organization, similar in nature 9 to the technical committee that basically developed 10 the guidelines that we’re reviewing today. 11 The Boardhas approved its structure, its 12 mission statement, its goals, objectives, principles 13 and procedures and a membership profile that’s ready 14 to take on that task. 15 So EEl recommends that DOE continue to 16 support abroad-basedpublic/private sector consensus 17 process to address any outstanding issue. We would 18 also urge that DOE publish a final rule as quickly as 19 possible. We think with the rule in place that that 20 will allow the market to take over and we will see 21 more widespread implementation of home energy rating 22 systems which we feel, tying in with the proper 23 financing, will increase energy efficiency in the 24 country. 25 So weview DOE’s social responsibility is 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797.2525 VIDEO;TRANSCRIPTIONS15 l to help us remove the barriers that exist out there. 2 We think that that can be done by publishing the 3 guidelines in final form as quickly as possible. With 4 that, EEl appreciates the opportunity to speak today 5 and thank you for allowing us to do so. 6 CHAIRMAN BOULIN: Thank you, Tom. 7 Do we have any questions from the panel 8 here? 9 Let me ask then, Tom, if I may, regarding 10 the hot water consumption, recognizing EEl’s concern 11 that the total energy cost might be inaccurate, does 12 EEl have any concerns about the points or star rating 13 if the formula is not modified? 14 MR. FARKAS: No, we support the points or 15 star rating as they are laid out. We think that the 16 formulaor analternative formulacanbeprovidedwith 17 the guidelines without modifying the overall 18 methodology and those features. 19 CHAIRMAN BOULIN: Thank you. 20 Regardingthemissingelectricconsumption 21 for blowers, would you propose that this consumption 22!, might be added to the values in Table 8 which is not 23 a factor in calculating the rating, or would you 24 propose that a value be added to heating and cooling 25 totals which would then influence the rating? Do you 

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# I16 1 have any suggestions

-- 2 MR. FARKAS: Well, I think initially we 3 counted on having the correction in Table 8, but I 4 think when you put in the corrections and determine 5 what the amount of energy use will be, we’ll see 6 whether there is any impact. But I would suspect that 7 with the current methodology just making a minor 8 adjustment for energy factors would not affect the 9 overall methodology and stars and ratings. 10 CHAIRMANBOULIN: Thankyou. I don’thave 11 any further questions. Thank you. 12 MR. FARKAS: Thank you. 13 JUDGE JAMES: Our next scheduled speaker 14 was Ross Deter. I have a note that he will not be 15 speaking today. 16 So we will move to the third speaker, 17 Cheryl DeVol. Would you come forward and state your 18 name and who you represent? 19 MS. DeVOL: Good morning. 201 CHAIRMAN BOULIN: Good morning. MS. DeVOL: Cheryl DeVol. I’m from the 22 Indiana Department of Commerce. I’m the Director of 23 the Energy Policy Division there. And I am speaking 24 this morning on behalf of the Energy Rated Homes of 25 America. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS17 1 In the interest ofbrevity, interestingly 2 enough I am going to speak to my written comments 

## 31 because believe me, if I went casual, we’d be here 4 longer than if I read my written comments, so I will 5 start on that. 6 Onpaper, EnergyRatedHomes ofAmericais

a non profit, 5O1(c)(3) tax exempt organization 8 dedicated to improving the energy efficiency of 9 America’s housing stock. It seeks to achieve this end 10 through the marketplace bypromoting the availability 11 of, and the demand for, home energy rating systems 12 services and Energy Efficient Mortgage products. 13 On the ground, where missions become 14 reality, Energy Rated Homes of America is ten 15 operating home energy rating systems that have 16 collectively invested over $12 million in system and 17 marketdevelopment andratedover40,000 homes. These 18 ten systems are: 19 California Home Energy Efficiency Rating 20 System; and Energy Rated Homes of Alaska; Arkansas; 21 Colorado; Indiana; Iowa; Louisiana; Mississippi; 22 Vermont; and Rhode Islanders Saving Energy. 23 Each of these programs has constructed a 24 rating tool and system designed for local conditions 25 while accessing products available from the national 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO, rRANscRIPTI0NS18 1 mortgage market. In several cases, these programs 2 have created and are now piloting new mortgage 3 instruments in cooperation with the market. 4 Energy Rated Homes of America traces its 5 history back to 1981 and the development of a home 6 energy rating program in the Pacific Northwest. In 7 1986, ERHA was officially established, through the 8 support ofthenArkansas GovernorBill Clintonandthe 9 Arkansas Energy Office, as a vehicle to expand the 10 HERS concept throughout the country. Since that time 11 the Energy Rated Homes ofAmerica has grown to become 12 a network of ten state-based HERS programs. 13 Throughout its history, ERHA has changed 14 the focus of its work to better meet the challenges 15 posed by its mission. Most recently this entailed 16 evolving from a HERS system provider, a role that was 17! needed in the concept’s early days, to a HERS support 18J provider today. In this current role, Energy Rated 19 Homes of America is working with prospective and 20 current HERS providers along with other participants 21 in the housing industry to promote the availability 22 of, and demand for, home energy ratings and related 23 financial products. This is being accomplished in 241 part through information and technology sharing, 25 aggregation of markets, and central data collection. 

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## ii It is in this role, as a provider of 2 support forHERS programoperators, public andprivate 3 sector housing partners, and State Energy Offices, 4 that the Energy Rated Homes of America offers these 5 comments today. 6 The voluntary guidelines that are the 7 focus of these hearings were drafted as a result of 8 Section 102 of the Energy Policy Act of 1992. This 9 section called on the Department of Energy to create 10 guidelines that would “enable and encourage the 11 assignment ofenergy efficiencyrating to residential 12 buildings.” Congress included this sectioninthe law 13 due primarily to the efforts of existing HERS 14 providers, Energy Rated Homes of America, and the 15 National Association of State Energy Officials. 16

# 0! Fromtheexperiencegainedbyimplementing 17 home energy rating systems, this group of advocates 18[ felt that further growth of the concept, and the 19 realizationofhugepotential energy savings, wouldbe 20 easier to achieve if support and resources could be 21 generated at the national level. The vision was that 22 nationalmortgagemarketguidelines mightbemademore 23 uniform and easier to use by primary lenders, 24 technical and financial support might be found to 25 expand home energy rating systems to unserved areas, 

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### 20 1 and the support of national housing industry 2 associations garnered for marketing and training 3 purposes. 4 While progress has been made toward this 5 vision, it is the opinion of the ten existing home 6 energy rating systems that are Energy Rated Homes of 7 America that the voluntary guidelines published on 8 July 25th fall short in several areas. These issues 9• need to be addressed in orderto maintainthe strength 10 of the nation’s current rating systems and to ensure 11 the creation of new healthy systems. 12 Fannie Mae and Freddie Mac currently 13 recognize energy ratings from Energy Rated Homes of 14 America members in their existing energy efficient 15 mortgage programs. These ten operating systems are 16 now in the process of expanding their operating and 17 funding base by developing additional partnerships 18 with the housing and mortgage industry in order to 19 implement innovative market-based strategies so 20 increasethe demand forhome energyratings and energy 21 efficient mortgages. 22 While the proposed U.S. Department of 23 Energy guidelines forhome energy ratings are labeled 24 as “voluntary,” in fact they are intended to become 25 mandatoryin thattheDepartmentofEnergyexpects the 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS21 1 secondary mortgage market to adopt them as minimum 2 requirements to participate in theirenergy efficient 3 mortgage programs. 4 This presents the potential for another 5 unfunded mandate on the private sector in that the 6 alreadyundercapitalizedoperatinghome energyrating 7 systems would be expected to bear the costs in 8 altering their existing programs to meet the new 9 federal guidelines. Does this seem fair? Especially 10 given the fact that the largest federal mortgage 11 programs, Fannie Mae and Freddie Mac, currently 12 recognize the rating systems utilized in the Energy 13 Rated Homes of America program. 14 Iftheproposedguidelines areadopted, it 15 is estimated that the fledgling operating home energy 16 rating systems would have to spend more than $4 17 million revamping their systems to comply with the 18 federal guidelineswithoutthebenefits ofpotentially 19 realizing any off-setting value added in the 20 marketplace. 

### 211 As the Director of a State Energy Office 22 with anoperating rating system, I can assureyou that 23 we would be hard pressed to find the funding to make 24 these changes. Additionally, new guidelines would 25 createconfusioninthemarketplacewhenthebuildings 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS22 1 who built, the consumers who bought, and the lenders 

## 21 who financed tens of thousands of homes that have 3 already been energy rated, find that the rules have 4 changed. 5, ERHA urges the Department of Energy to 6 more fully considerthebestinterests ofthe existing 7 HERS programs in its decision-making process with 8 regard to this notice of proposed rulemaking 9 Tothatend, EnergyRatedHomes ofAmerica 10 convened its technical committee to review the issues 11 contained in the NOPR. The members of the committee 12 were the technical directors of the operating home 13 energy rating systems from Alaska to Mississippi and 14 from Indiana to Vermont. 15 In addition to the collective investment 16 of over $12 million in the development and 17 implementationofhomeenergyratingprograms intheir 18 states, they have over five decades of hands-on 19 experience with the technical issues involved in the 20 ratings ofhomes, and have rated over 40,000 homes in 21 climates that vary from 22,000 heating degrees in the 22 frigid arctic Alaska to the Mississippi delta. In 23 short, these states represent the working 24 institutionalknowledgeofhomeenergyratings inthis 25 nation. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS23 1 In the interest of the limited time 2 available today, I am incorporation as an attachment 3 to my testimony a memorandum from Mr. Richard Faesy 4 who chairs the ERHA technical committee. This memo 5 outlinesmorethan 13 differentcomments thatresulted 6 fromthecommittee’s studyoftheproposedguidelines. 7 I would also like to makeyou aware thatmore detailed 8 technical comments willbe filedby October23rd 1995. 9 Before I leave the subject, however, please allow me 10 to highlight two issues that are critical to our 11 housing industry partners, that of establishing the 12 set point for the five star rating, and awarding 13 credit for the permanent installation of energy 14 efficient fixtures and appliances. 15 Energy Rated Homes ofAmerica is strongly 16 opposed to setting the break point for a five star 17 rating at 30 percent overtheModel Energy Code (MEC). 18 All of the members of Energy Rated Homes have set 19 their five start threshold at 50 percent over MEC. 20 While to those with limited experience with home 21 energy ratings this may seem a minor issue, to the 22 operating systems this is critical. For example, in 23 Alaska and Indianathehomebuilding industryuses the 24 five star rating to market new homes. If the bar is 25 lowered, there will be hundreds of home builders and 

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### 24 1 thousands of consumers economically impacted simply 2 because the extramoneytheyput into achieving a five 3[ start rating would be cheapened by the artificial 4 reduction of the requirements for the five star 5 threshold. 6 More specifically, ERHA does recommend 

# 7k thatthepointthresholds above four stars bechanged. 8 We also recommend adding a four star plus level, and 9 moving the five starplus level up the scale. We feel 10 this change is necessary because the proposed scale 11 does notprovide enoughdefinitionabove the four star 12 level to reward builders for their truly energy 13 efficientefforts, andwouldmake it too easyto reach 14 a coveted five star rating. In addition, the 15 longevity of the rating scale would potentially be 16 limited as homes becomemore efficient overtime. The 17 rating scale needs to be able to stand the test of 181 time by accommodating the trend toward home energy 19 efficientlyin ameaningful fashion. Meaningthat, if 20 everyone can quality for a five star rating, are we 21 really challenging the housing industry to make a 

## 2211 difference? More serious consideration of the point 23 thresholds as proposed in the NOPR really needs to 24

# 1 occur. 25 The second technical item I would like to 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS25 1 highlight on behalf of the ERHA is the inclusion in 2,! the rating procedure of the ability to obtain credit 3 for anypermanentlyinstalled appliances that aremore 4 efficientthanthose inthereferencehouse, which are 5 set at theNAECA standards, including, butnot limited 6 to, light fixtures, dishwashers, ranges, ovens and 7 pumps. 8

# 1 Awardingratingpointsbasedonlyonspace 911 conditioning and water heating energy consumption 10 limits the comprehensiveness of the rating and does 11 not recognize efforts made by builders who take the 12 extra step to make their houses energy efficient in 13 all areas. This issue is especially important as 14 builders constructmorethermallyefficienthouses and 15 the other energy uses increase as a percentage of 16 total energy consumers. Before implementing this 17 provision, a predetermined operating schedule would 18 need to be established for each rated end—use. This 19 information is available from utility studies, and 20 would need to be compiled. 21 After intensive discussions among its 22 membership, Energy Rated Homes of America joins with 23 the National Association of State Energy Officials in 24 makingthe followingrecommendationstotheDepartment 25 of Energy on these voluntary guidelines. 

### SAG,CORP 4218LENOF1ELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS26 First, the publication of the voluntary 2 guidelines final rule should be delayed until 

# 3I intensive field testing can be performed on its 

## 4I provisions and the results of this testing 

# 51 incorporated in the final guidelines. This testing 6I should be done through the existing HERS programs 7 designated as Department of Energy pilots. 8 Forthereasons outlinedabove, ERHAfeels 9 that “real world” data needs to be collected on the 10 effects ofthe proposed guidelines on existing rating 11 systems. It was certainly not the intent of Congress 12 thatthevoluntaryguidelineshampertheeffectiveness 13 of or nullify the important progress made by existing 14 rating systems. Care needs to be taken to ensure that 15 once implemented, the guidelines will serve the 16 purpose of expanding the use of home energy ratings 17 throughout the nation, including areas already served l8J by existing rating systems. Field testing will help 19 to ensure this end by moving the process from the 20 theoretical to the actual. 21 Second, the final guidelines must remain 22 strictly voluntary and allow for alternate structures 23

# I that will lead to the same end. 24 While the ERHA rating systems recognize 25, the need for uniformity in many instances, this must 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS27 1 always be weighted against the specific needs of 2 certain regions or localities, or issues that might 3 arise. In some cases, rating systems may need to 4 organize their programs in ways which differ from the 5 national guidelines. In these instances the rating 6h systems should be allowed to follow the course that 7 best suits theirneeds. This maymeanthat the rating 8 system must forgo certain benefits linked to the 9 national guidelines, a national mortgage product for 10 example, and that new arrangements may have to be 11 negotiated. 12 The intentofSection 102 ofEPACTonthis 13 issue is clear, the guidelines are to be created to 14 “enable and encourage” the use ofenergy ratings, not 15 to prescribe or regulate the use of ratings. It is 16 vitally important that the final guidelines, and the 17 environment resulting from them, reflect this intent 18 and allow fornegotiated improvisation, improvisation 19 that may take a different road than the voluntary 2Oj guidelines, but still lead to the desired end of 21 increased residential energy efficiency in this 22h country. 23 Third, that a home energy rating program 24 accreditation system should be operated by those 25 entities with the greatest interest in accreditation: 

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### 28 1 HERS providers, state energy offices, and the secondary mortgage market. 3 The home energy rating systems that form 

# 4d THE WITNESS: feel that, as a number of 5 rating systems grow, it is vital to all providers that 6 “practitioners of the trade” go about their work in 7 I ways that protect the integrity and usefulness ofthe 8 rating concept. In addition, we recognize that while 9 the secondary mortgage market has been comfortable 10 working with the existing HERS programs without a 11 formal accreditation systeminthepast, amore formal 12 arrangement may be desired as the number of ratings 13 grow. Therefore, we believe that an accreditation 14 system should be created by the parties chiefly 15 concerned: HERS providers, sponsoring state energy 16 offices, and the secondary mortgage market. Working 17 together, these groups can ensure that minimum 181 standards are met as well as promote ongoing l9 “professional development” of rating programs, tools 2Od and staff. 21! I’d like to conclude by saying the ten 22I operating systems that are Energy Rated Homes of 23 America are quite proud oftheirpast achievements in 24 this field. We are also eager to build on that 25 success by expanding the market penetration of our 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS29 1 existing programs and helping others to start with 2 programs. We appreciatethis opportunityto share our 

# 3I thoughts on the proposed guidelines and we look 4 forward to working with you on the creation of final 5 guidelines which will allow both existing and newly 6 developed rating systems to flourish. Thank you very 7 much. 8 CHAIRMAN BOULIN: Thank you. 9 Do we have any questions from the panel? 10 MR. MACKIE: I think I dohave aquestion, 11 Jean. 12 Ms. DeVol, you made a statement about the 13 guidelines becoming mandatory for the secondary 14 market. Could you expand upon that and make it a 15 little bit clearer for me please? 16 MS. DeVOL: I would like to defer 17 expanding on that and make my answer to that in a 18 written form, if I could. I have been consulting 19 greatlywiththe othermembers ofthe ERHA and this is 2011 a compilation of a lot of different opinions to come 21 to a final document. So, ifI could, I wouldbe happy 22 to expand on that at a later time, if I can. 23 MR. MACKIE: Okay. I’ll be eager to 24 receive that. Thank you. 25 MS. ZIMMERMAN: I have a question. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS

### 30 1 MS. DeVOL: Yes? 2 MS. ZIMMERMAN: The first is 3 recommendation to task the Department of Energy

-- 4 MS. DeVOL: Yes. 5 MS. ZIMMERMAN:

-- doyouhave suggestions 

## 61 as to what specific information

-- you would like to 7 see focused on? 8 MS. DeVOL: Well, I would think 9 particularly we would want to focus on those issues 10 brought up in the attachment to my comments, which 11 were some of the differences on the technical review 12 that was done by the committee in ERHA, the technical 13 committee. We would probably want to focus on those 14 as well as the effects ofwhat are recommended in the 15 NOPR, and how those may compare and contrastwithwhat 16 we have existing in the field rightnow. And I’m sure 17 that again would be elaborated on once, you know, I’m 18 able to take some of these questions back to the ERHA 19 body. 20 MS. ZIMMERMAN: And do youhave a sense of 21 the time frame? 22 MS. DeVOL: For the field testing? 23 MS. ZIMMERMAN: Yes. 24 MS. DeVOL: I would say that, and I am 25 guessing here, we would be able to come up with a 

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# I 31 1 suitable time, I really wouldn’t even want to say at 21 this point in time, but I would say at least six months to a year of field testing. I don’t know what 4 would be a good guess. 5 MS. ZIMMERMAN: And one other question. 6 Again on the recommendations regarding the intended 7 strictly voluntary recommendation

-- 8 MS. DeVOL: Yes? 9 MS. ZIMMERMAN:

-- one of the benefits, 10 you know you think might be forgone, is the National 11 Mortgage

-- 12 MS. DeVOL: Yes. 13 MS. ZIMMERMAN:

-- and trade-offs? 14 MS. DeVOL: Well, at this point in time 15 the Fannie Mae’s and the Freddie Mac’s are accepting 16 those ratings, fromwhat I understand. Andby keeping 17 it voluntary, I think the fear is that the NOPR indeed 18 will not be seen as adhering to the NOPR and will not 19 be seen as voluntary, will indeedbe seen as something 20 that is mandated. And that, again, I will elaborate 21 on that at a later point in time. 22, MS. ZIMMERMAN: Thank you. 23 MS. DEAN: Your concern about this 24 becoming mandatory because of the mortgage markets 25 using it as the sole measure

-- 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS32 1 MS. DeVOL: Yes. 2 MS. DEAN:

-- would this, would your 3 concernberemovedifthemortgagemarket acceptedthe 4 federal guidelines, but also any other technically 5 feasible rating system, and if they did not only 6 accept these, but also accepted others? 7 MS. DeVOL: Thatmightgetcomplicated and 8 cumbersome. That would be the fear, but it would be 9 something that we would have to address. But I would 10 thinkthe flexibilityto respondto differences inthe 11 home energy rating systems and differences to simply 12 in the climates andhow arating systemhas to respond 13 from state to state would have to somehow be 14 accommodated and in a resultant fashion be 15 accommodated in the mortgage market. I think 16 flexibility would be advisable. And, again, this is 17 something that could be worked out with the field 18 testing. 19 MS. DEAN: Well, my question was more 20! that, ifthe mortgage markets did not eliminate using 21 other rating systems that they thought they were 22 technically able

-- 23 MS. DeVOL: Yes, ifyou letthe fieldopen 24 not only

-- 25 MS. DEAN:

-- so even if we had used 

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### 33 1 these, but therewere still, youknow, still voluntary 2 3 MS. DeVOL:

-- notprecluding theothers4 MS. DEAN:

-- yes, yes

-- 51 MS. DeVOL: Yes. 6 MS. DEAN:

-- would that alleviate a lot 7 of your concern at the mortgage market level, that 8 they would accept these guidelines but other systems 9 have already been in existence and

-- 10 MS. DeVOL: That could possibly, yes. 11 CHAIRMAN BOULIN: Let me ask a question 12 here, ifI might. Yourcomments reported an estimated 13 $4 million, and

-- the operating home energy rating 14 systems

-- 15 MS. DeVOL: Yes. 16 CHAIRMAN BOULIN:

-- could you give us an 17 elaboration of the differences between the proposed 18 voluntary guidelines and current operating practices ig which would require this type of expenditure? 20 MS. DeVOL: Well, again, that was a 21 nationwide estimate. It certainly wasn’t an estimate 22 for just one energy office. 23 CHAIRMAN BOULIN: Right. 24 MS. DeVOL: I mean that is clear, okay. 25 And your question again is? 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRhTICNS34 1 CHAIRMAN BOULIN: Can you give us an 2 example of the differences between the proposed 3 voluntary guidelines and any of the current

-- 4! MS. DeVOL: Yes. 5 CHAIRMAN BOULIN:

-- your 

### own guidelines 6 andthe currentguidelines thatwould causethat level 7 of expenditure? 8 MS. DeVOL: Well, in my own case, in the 9 State of Indiana, the rating system that we currently 10 use actually takes into account the guidelines as proposed in the NOPR. So, if this goes forward, we 12 actually would probably be less impacted by some of 13 the other energy offices because we can accommodate 14 that, however, some ofthe other offices that cannot, 15 I’m sure would have to accommodate those changes, say 16 in their software, in their actual, the actual 17 physical ratings that they are able to give out, and 18 theirpromotional efforts with the builders that they 19 have going now. 20 I know that just in man hours alone, the 21 marketingthatmyenergyratedhomes individuallydoes 22 simply on this program in the time that it takes to 23 explain how this works, build up the report with the 24 building market, and not to mention the mortgage 25 market, is quite tremendous, and we have a one-man 

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### 35 1 show in Indiana. I have one staff member that I can 2 dedicate to that effort. So in staff time, and just 3 some overhead costs alone, it would be quite a 4 tremendous undertakingjust forus, and we’re a little 5 ahead of the game if the NOPR does come down the road 6 simply because of the rating tools that we do use. 7 And as I said, other offices simply have 8 largerprograms thanwe do, and I can only imagine the 9 impact that Alaska would feel because they have just 10 a tremendous program up there. And you have to 11 consider some ofthe sub costs that the folks who have 12 already had their homes rated and now have the five 13 star rating or have made improvements to get their 14 homes to a five star rating, that basically

-- I mean 15 that might be considered money lost by them, if that 

### 161 bar is lowered in the future. 17 CHAIRMAN BOULIN: Perhaps you could take 18 that question back with you and help us understand

-- 19 MS. DeVOL: Surely. 20 CHAIRMAN BOULIN:

-- the nature of what 21 we’re dealing with here. 22 MS. DeVOL: Okay. 23 CHAIRMAN BOULIN: Could you describe for 24 me a typical five star home in your state under the 25 current rating system? 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797.2525 VIDbO;TRANSCRIPTIONS36 1 MS. DeVOL: The technical aspects of a 2 five start rated home? 3 CHAIRMAN BOULIN: Yes, yes. 4 MS. DeVOL: The technical aspects of a 5 five star ratedhome in the State of Indiana, probably 6 most simply put, basically do adhere to the current 7 guidelines. And that’s

-- 8 CHAIRMAN BOULIN: Okay. 9 MS. DeVOL:

-- they do adhere to the 10 current guidelines. 11 CHAIRMAN BOULIN: Could your desire to 12 include lighting and appliances be addressed by the 13 use of a bonus point system that reports the savings 14 table by appliances

-- 15 MS. DeVOL: Yes. 16 CHAIRMAN BOULIN:

-- and the like? 17 MS. DeVOL: Yes. We discussed this 18 particularly inmyoffice, andwe definitelywouldnot 19 want that to become a driver, say a large driver in 20 the rating, the overall rating system. We would not 21 want that to overtake some of the more important 22 aspects of what would qualify a home for a four or 23 five star rating. But definitely your idea of, say a 24 bonus point type thing, that might work as far as 25 taking the appliances and fixtures into account for 

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# I WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS

### 37 1 that. It is the need to try to be responsive, you 2 know, to those folks that do go the extramile to make 3 those changes. 4 CHAIRMAN BOULIN: Thank you very much. 5 That’s all I have. 6 Bob? 7 MR. MACKIE: I have one more. 8 MS. DeVOL: Yes? 9 MR. MACKIE: Ms. DeVol, in our attempt to 10 prepare flexible voluntary guidelines we did ourbest 11 to take into account that there were and are existing 12 systems out there that may have some concerns about 13 complying with the guidelines. We also attempted to 14 have a phasing in of full compliance starting with 15 basic compliance to full compliance. Is your 16 organization just basically against phasing in 17 national compliance? 18 MS. DeVOL: No, I wouldn’t say that we’re 19 against phasing in a national compliance. And you’re 20 talking national compliance under the terms of the 21i NOPR, correct? 

# 22 h MR. MACKIE: Yes, I am. 23; MS. DeVOL: Okay. But the one thing that 24 I

-- the one concern that again I would sound, and 25 thathas beenpretty consistently soundedbythe other 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797.2525 VIDEO;TRANSCRIPTIONS38 1 offices, is that we do believe that the field testing 2 of the NOPR is a good idea, and that could be indeed 3 part of the phasing in. It could be accommodated as 4

# I part of that schedule. 5 MR. MACKIE: Okay. So with your five 6 decades ofexperience, canyou not drawbackuponyour 7 files and offer that database to DOE to assist with 8 going on and preparing an expedited completion of 9 final rules? 10 MS. DeVOL: Anexpeditedcompletionofthe 11 final rules

-- 12 MR. MACKIE: Versus delay? 13 MS. DeVOL:

-- in what time of

-- 14 MR. MACKIE: Well, you were suggesting 15 that maybe delayed preparation of the final rule for 16 six months, and I’m asking does your organization, 17 from your years of experience, have possibly a 18 database that might answer the questions that you’re 19 surmising that may come out of a delay by field 20 testing

-- 211 MS. DeVOL: Surely, yes. 22 i MR. MACKIE:

-- some items. 

# 23 J MS. DeVOL: Yes, that is a possibility. 24 Of course there is a lot of present experience, as I, 25 you know, indicated inmyremarks. I definitelywould 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS39 1 have to take thatback to the ERHA membership to float 2 that idea by them to see if somehow basically there 3 could be a consensus, there could be a negotiated 4I ground on that, whether to not, you know, hold back 5 the implementation of a NOPR and to somehow 6 incorporate the experience that they have in possibly 7 making such a

-- 8 i MR. MACKIE: Okay. 9 MS. DeVOL: Does that

-- 10 MR. MACKIE: I think that’s fair. 11 MS. DeVOL: Okay. 12 CHAIRMAN BOULIN: Thank you very much. 13, MS. DeVOL: Thank you. 14 CHAIRMAN BOULIN: Our next commentator 15 this morning is Robert Egan. 16 Would you state your name and your 17 organization for the record? 18 MR. EGAN: Bob Egan, I’m with Washington 19 Gas. Today I’m speaking onbehalfofthe AmericanGas 20’ Association. Would it be possible for me to pass 21 these around? 22 CHAIRMAN BOULIN: Absolutely. 23 MR. EGAN: Very briefly, the American Gas 24 Association is a trade association with about 300 25 members that represent all aspects ofthe gas industry 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS40 1 from distribution through to the local distribution 2 companies. 3 I’m here representing and testifying on 4 behalf of all of the AGA, but I work for Washington 5 Gas. My formal title is Manager of Least Cost 6 Planning Program Development. We currently have 7 conservation programs in Maryland, the District of 8 Columbia, and Virginia and have them for quite some 9 time. A big aspect of our job is to identify cost 10 effective opportunities for our customers in the area 11 of improving the building efficiency in both 12 residential and commercial sectors. We serve 750,000 13 customers in this area. I suspect many of the people 14 in this room are our customers. 15 And, very briefly, the goal certainly 16 within our companies is to provide the best energy 17 value. And I think that the theme that also applies 18 here today in terms of why the natural gas industry 19 has been involved in this process is because energy 20 conservation

-- essential large energy supplier, it’s 21 very relevant to us. To the extent that any consumer 22 will focus onenergy, we tend to very well in terms of 23 cost, the environmental benefits of natural gas, as 24 well as comfort and other issues. 25 I have also served the last couple of 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS41 1 years on the HERS Council on the technical committee. 2 And I have only praise for the efforts that have been 3 madebypeople on this committee. The council andDOE 4 brought together a very broad range of expertise from 5 industry and government. I think the people in this 6 process havebeenvolunteers, andwe’vehadtojustify 7 why we were spending the time away from our normal 8 activities, and I thinkitwas very easy tojustify it 9 based on the supportwe got and the peoplewho were at 10 the table to address these issues. 11 Very briefly, I think one of the major 12 issues that the DOE has considered, I think the HERS 13 Council has considered, and I think the technical 14 committee has struggled with all through this process 15 is balancing theneedbetweenthe accuracy ofarating 16 and the actual cost ofthe rating. The example I like 17[ to give is, “If you tell me a rate is going to cost 18 you $4,000.00 and it will be extremely accurate, I’ll 19 say that’s very nice, no one in their right mind will 2O ever buy one,” and I think the work that has come out 21 of the council and the technical committee has tried 22 to work with that balance. I know a lot of people 23 think we’ve gone to one extreme or the other, but I 24 think that balance has been maintained. 25 I’ve put up there a true public/private 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS42 1 partnership over the last few years. I think that’s 2 probablythemostover-usedphase, but I trulybelieve 3 this has beenthat. It’s beenwell worthmy time, and it’s been well worth the people’s time on the 5 technical committee and the board to be in this 6 process, and I’mproud ofeverybodyon the council and 7 the technical committee is proud of the work they’ve 8 done. 9 Why do we go through this process? Why? 10 Because there is a need. In terms of the rating 11 systems out there, I believe there is a need for 12 greater accuracy. As some of the other people will 13 talk about today, financing programs are available 14 today for energy efficiency, but they are being 15 participated in relatively low numbers. Establishing 16 national standards I believe, and I thinkotherpeople 17 believe, is the best way to improve in that 18 participation. National, minimum, voluntary 19 guidelines is the right way to go. 20 Due in part that there is a great deal of 21 customer confusion out there, there are at this point 22 multipleandconfusingmessages that arebeing sent to 231 consumers. There are stars, there are points, there 24 are dollars, there a variety of mechanisms to try to 25 getpeopleto focus. Andwiththatclutteredmessage, 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;1RANSCROPTIONS43 1 the goal of the council and I think the goal of the 2 technicalcommitteewastoestablishthoseguidelines, 3 to sort through that and allow people to get a handle 4 on that. 5 I personally believe that some of the 6 existing tools out there have problems or deterrents 7 with their accuracy ofmeasurement and reliability of 8 the rating systems. I thinkthe guidelines do tend to 9 address those issues and make fundamental 10 improvements. 11 And also I believe what needs to be done, 12 and I think the goal should be, is to send a proper 13 signal to consumers about the proper level of 14 investment in conservation. We want them to invest. 15 We don’t want them to invest too little or to much. 16 By giving them the right signal, they will make the l7I right decision. 18 In terms of the actual NOPR and the 19 guidelines, the main focus has been on establishing 20 minimum and voluntary guidelines. I do believe the 2lI goal is to allow people to buy in and that over time 22 the market will identify those programs that are 23: successful andrequireexistingprograms thatare less 24 successful to improve. The HERS technical committee 25 and the council, I believe, rely on nationally 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS44 1 established standards. We are not in the business of 2 establishing new standards, we attempted to take 3 existing standards and use them, and I think we have 4 done that. Andwe did not go beyond the scope ofwhat 5 we were asked to do, we are focusing on ratings. 6 And when I think of ratings, when I talk 7 to our customers, we focus on cost. Is it cost 8 effective for them in terms of making possible 9 investments and upgrading equipment

-- But the main 10 problem that I have identified with respect to an 11 issuethatwas addressedby atthetechnical committee 12 level and the council level is, in terms of the 13 measurement of energy efficiency, is the problem of 14 measuring site energy for efficiency or source energy 15 for efficiency. 16 I mightnotethat atpage four, a footnote 17, ofmy written comments, I put 100 million BTUs, and I 18 believe that’s off by a factor of 100. I will 19 certainly try to correctthat, and I apologize for any 20 confusion. 21 The problem with the use of site-based 22 energy,a nd I will acknowledge it has been discussed 23h extensively at the technical committee level, is that 24 if you look at electricity versus gas or other 25 alternative fuels, there is so much energy loss that 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS45 1 occurs fromtheproductionofelectricitypriorto the 2 time it reaches the home that you are misstating 3 actual energy consumption. And these slides are from 4 the Gas Research Institute. I won’t spend awhole lot 5 of time because I think the people at DOE and this 6 roomare generally familiarwiththis discussion. But 7 if you compare electric versus other fuels, the 8 problemthat occurs is gas, natural gas, oil andother 9 appliances are very efficient in the home because of 10 the total BTU consumption. Electric may have 11 appliances that consumevery fewBTUs at the site, but 12 they consume a tremendous amount of energy prior to 13 getting it to that site. And I believe the guidelines 14 similar to the one present in California should 15 reflect the source-based standard. 16 Now, obviously the question becomes, why 17 does this issue matter so much? And, again, I 18 acknowledge it’s hotly contested. It is because as 19 they are currently drafted, the Gas Association has a 20 fundamental problem with it because they place 21

# 1 insufficientemphasis onthe cost ofthatenergy. The 22 purpose of these guidelines are to promote energy 23 financing programs for existing housing and mortgage 24 programs for both existing and new housing. 25 To the extent that you use a site-based 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS46 1 standard, it is our position that you may 2 fundamentally encourageboth consumers and lenders to 3 make improvements and have higher mortgages that are 4 not cost effective, but simply it’s the dollars that 5 matter, not the BTUs. I’m going to spend a few minutes on the 

# I following slide because it conveys a lot of 8 information about a typical program. This is for 9 Colorado. In this example, andthis is something that 10 was used at the technical committee as a discussion 11 piece, you have a home rating for a typical home in 12 Denver. The home is rated as 58 points. The home 13 with all the upgrades identified, which could be 14 raised to a 74 point score okay, would increase its 15 

### i stars and points ratings by accepting the individual 16 measures that were identified during the audit or 17 during the rating that occurred. 18 Theproblem is, is thatthe costofenergy 19 savings is estimated to be $400.00. Under the 20 proposed guidelines, as they currently exist, to get 21 additional points or get additional stars you have to 22 reduce your BTU consumption. The concern of the gas 23 industry and certainlymyconcern is that, thatmayor 24 maynotbe cost effective to the consumer. Points are 25 based on BTU reductions. The cost of those BTUs is 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS47 1 being ignored. 2 Now, the guidelines address other areas 3 where you identify by measures what is going to occur 4 in terms of potential upgrades and how much energy 5 savings are associated with individual upgrades. But 6 what people will see is they will see stars, to use a 7

# I simple analogy, and what we are most concerned about 8 is thatwe are encouragingpeople to look at something 9 that’s notrelevant. What is mostrelevant to lenders 10 and most relevant to consumers is dollars, not BTUs. 11 We believe that there is sufficient documentation 12 that, using, switching to a source-base methodology, 13 much more close approximate the true cost of energy. 14 And example, oil or gas versus 15 electricity, are probably on the order of, as I 16 correct in that footnote, $6.00 per million BTU. The 17 costofelectricity on anational average is closerto 18 about $25.00. They’rebothdown slightly, butthat is 19 anorderofmagnitudehas existed forquite some time. 20 Having said that, the other issues which 21 we believe, and at the end my testimony, very briefly 22 are, we believe because of the site—based standard 23 that the guidelines as they are currently drafted 24 discriminate against other non electric fuels due to 25 the methodology. We believe that DOE has addressed 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO:TRANSCRIPTIONS

### 48 1 this issue in other areas andthe firstguidelines are 2 not consistent with other guidelines as discussed in 3 my testimony, and that look towards a source-based 4 standard for both vehicles and also for buildings. 5 And finally, and to be a bit repetitive, 6 we believe that the site-based standard does not 7 measureefficiency. Ifyouwant tomeasureefficiency 8 andyoubelieve it is anational, a desirablenational 9 goal to save energy, we believe youhave to go backto 10 the source and look at all the energy consumed to 11 provide energy services to the end user whether it be 12 a consumer, whether it be a commercial customer, 13 whether it be an industrial customer. 14 Now, as I said, we’ve been involved in 15 this process over the last couple of years and I 16 believe that the guidelines can be modified very 17 quickly. Our specific proposal is for DOE to direct 18 the HERS Council to update the proposed guidelines to 19 reflectthe source-basedBTUmethodology. We strongly 20 believe thatthis implementationcouldbedonequickly 21 byDOE andHERs. This is something DOE andmany other 22 people around the country have addressed before. It 23 is something the guidelines, I think, are well 24 crafted, they can accept this. Will they require 25 updating? Yes. I do not believe it will be anunduly 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON.D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS

### I 49 1 delay. 2 One ofthe major challenges against using 

# 3I a source-based number historically has been, is that 4 it relied on national numbers. I do not believe that 5 is an issue. Each local HERS provider will be 6 required to update their energy costs on an annual 7 basis. They’ve got to get accurate cost information 8 to theirmodels. I believe thatDOE certainlyhas the 9 capability to provide either on a regional, state or 10 local, whatever is appropriate, but basically utility 11 basis, those calculations in terms of the actual 12 numbers orinterms ofanestablishedmethodologythat 13 can be done. 14 I also believe, and have knowledge, that 15 virtually any state commission, public service 16 commissionaroundthe country, could alsoprovidethat 17 calculation without a great deal of difficulty from 18 publicly-available sources. So I must stress that to 19 theextent the ifsource-basedmethodology is used, it 20 is vastly superior to the site-based method, and DOE 21 and HERS need to address this issue quickly. And even 22 if it is necessary to use national standards and 23 national averages, I thinkthey arevastly superiorto 241 the site-based method. 25 And inconclusionwhat I would liketo say 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS50 1 is that the local programs must update those 2 assumptions. The source-base method will be stable 3 over time. These numbers do not jump around. And 4 consumers and lenders are best served only if the 5 dollars are consistent with the point and are 6 consistentwiththe stars. This is similarto what is 7 being done in California. And I believe consumers and 8 U.s. energy policy is much better served if you rely 9 on source-base. Thank you. 10 CHAIRMAN BOULIN: Thank you very much. 11 Do we have any questions from the panel? 12 I have one or two. Letme ask a question while Bob is 13 getting set here. You had an example of the Colorado 14 rating there, using the proposed guidelines are you 15 saying that iftwohouses, whichwere identical except 16 for fuel, using the guidelines, would that result in 17 a gas house receiving a lower rating? 18 MR. EGAN: It could certainly result in 19 having a lowerrating and/orit couldresult inhaving 20 fundamentally different

-- you have two houses on the 21 same street. One has gas appliances or oil 221 appliances, the other has electricity. Depending on 23 where you are in the country, in most cases the gas 24 house will have lower operating cost to the consumer 25 and to the lender. That is what is most relevant. 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS51 1 CHAIRMAN BOULIN: But will it have a 2 different rating? 3 MR. EGAN: The way they are between the 4 referencedhome andthey are compared againstthe same 5 fuels, so it is possible that theywould have the same 6 rating, but fundamentally different operation cost. 7 CHAIRMAN BOULIN: If you

-- MR. EGAN: If you build a reference home 9 from

-- 10 CHAIRMAN BOULIN:

-- if you can come up 11 with an example that would show us that kind of

-- 12 MR. EGAN: Sure. 13 CHAIRMANBOULIN:

-- situation, thatwould 14 help us gain perspective on this. 15 MR. EGAN: For a four starhouse thatuses 16 gas appliances and a four star home that uses all 17 electric, and you can make the expense example out to 18 oil and other fuels, it is very likely, and we can 19 document it, that the operating cost of the all gas 20 home or the one that is a gas and electric combination 21 home is significantly cheaper to operate than the all 22 electric home. Our problem is, is that we’re trying 23 to encourage mortgages and in fact we’re trying to 24 allow people to qualify for higher mortgages and what 25 we have is, as these programs are implemented, you 

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### 52 1 will as a practical matter have to get to a peak in 2 theprogram, get to a certainthreshold, to make those 3 invest

-- 4 CHAIRIVIANBOULIN: Iunderstandwhatyou’re 5 saying. 6 MR. EGAN: Okay. And I believe source7 based method goes a long way to solving this problem. 8 CHAIRMAN BOULIN: Do you have any 9 suggestions for areas in the country where gas is not 10 available? 11 MR. EGAN: There is virtually no problem 12 where gas is not available. The homes who are still 13 standing, byusing sourceBTU5 andprominentlyposting 14 costs associated with those homes, if you choose to 15 live in an area or have to live in an area that 16 doesn’thave gas, you’re still getting aprice signal. 17 Our problem is, is where there is choice, that you 18 want to give people the best signal about the actual 19 cost of operating the home on an annual basis. 20 CHAIRMAN BOULIN: Thank you. I want to 21 state again, using your source-base method, would 22 there be additional impact on existing systems out 23 there already operating? 24 MR. EGAN: I know the CHEERS programs in 25 California have used the source-base method for quite 

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some time. I think, as a practical matter, I think 2 all programs will have to change. Ifyou comply with 3 the HERS, ifyou choose, it is avoluntaryprogram, if you choose to comply with the HERS guidelines, I do 5 notbelieve there is any additional undueburdenposed 6I on providers to switch to a source-base method. The 7 expertise is here atDOE, it’s at the state level with 8 state commissions, utilities, a lot of people have 9 gone into this issue before. If you are a member of 10 the HERS program, I do not believe there is any 11 additionalburdenimposedupon amemberwhochooses to 12 accept the minimum guidelines established by DOE. 13 MS. DEAN: Yourconcernhas to dowiththe 14 rating system, to some degree we have some 15 requirements for

-- does include estimates of cost. 16 MR. EGAN: Right. 17 MS. DEAN: Does this in any way alleviate 18 your concern? 19 MR. EGAN: It only partially mitigates 20 because to go under the proposed guidelines, to get 21 additional points you reduce BTUs. You do not look at 

## 2211 the cost of those BTUs. And for a conservation 23 program certainly

-- my great fear is that someone is 24 going tobe told spend $5,000.00 to install windows to 25k get those additional points on ETUs, and to sort of 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS54 1 pick on Long Island which always seems to be picked 21 on, most likely on Long Island it will always be 3 effective, cost effective, to install those windows. 4 If you live in the same climate area, but you happen 5 to pay the energy costs associated with the Midwest, 6’ it probably is not cost effective. Ifyou want to do 7 that, it’s your choice, but we should not be telling 8 homeowners and lenders that it is theprudent thing to 9 do based on cost. It does save BTUs, it ignores cost. 10 Asource-basedmethodologyis fundamentallymoreclose 11 to providing the right price signal to consumers and 12 to lenders. 13 MS. DEAN: At the beginning of your 14 presentationyou mentioned problems with the existing 15 tool accuracy, and I wondered if you could give 16 examples

-- 17 MR. EGAN: Sure. 18W MS. DEAN:

-- what you were looking at. igh MR. EGAN: What has tended to happen, and 2011 I’d rather not name names, if you don’t mind, but 

## 21I historically a lot of tools have tended to do two 22.1 things. One is they overstated the initial 23 consumption. And once they did that, they tended to 24 identify cost savings which

-- once you’ve done that, 25 if you identify measures, you’re going to overstate 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS55 1 the potential savings, therefore, you’re going to 2 overstate the possible dollars that the customer will 3 incur if they do install these upgrades. 4 I believe the guidelines do go towards a 5 goal of improving

-- to improve the tools and provide 6 a better measurement. This is going to be an ongoing 7 process. I don’t think the tools are state ofthe art 8 at this point in time. I think the guidelines, 9 certainly the goal ofthe technical committee was, to 10 try to move the tools in the right direction. 11 CHAIRMAN BOULIN: Thank you. 12 MR. EGAN: Thank you. 13 CHAIRMAN BOULIN: We’ll have one more 14 speaker this morning and then we’ll have a break. I 15 would ask you, ifyou’ve come in since we started, if 16 at the breakyou’d comeby the table here and sign in, 17 register here at the table during the break. 18 Our next presenter is Ron Burton. 19 Ron, would you state your name and the 20 organization you represent? 21 MR. BURTON: Thank you, Mr. Chairman. 22 My name is Ron Burton. I’m Vice Chairman 23 of the Home Energy Rating System Council. And I 24 appear before you today to deliver a statement on 25 behalf of Christine Taylor Lowrie, Chair of the HERS 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS56 1 Council, and all of the members of the Board of 2 Directors of the HERS Council. I will also be 3 available to answer any questions that you may have 4 both now and in this afternoon’s session. 5 The HERS Council is a nonprofit 6 association whose focus is to promote residential 7 energy efficiency nationwide by linking home energy 8 rating programs with financing for energy efficiency 9 improvements. The council maintains that once the 10 linkage between home energy ratings and effective 11 energy efficiency financing is established, energy 12 efficient homes will become more available and 13 affordable for an unprecedented number of Americans. 14 The HERS Council is a broad-based 15 coalition that represents all the various groups that 16 have a vested interest in the success of this 17 national, voluntaryinitiative. Thecouncil is unique 18 mt hat it draws its strength from the full spectrum 19 of both the public and private housing industry as 20 well as the housing financial community. The 21 following groups are active participants in the HERS 22 Council: the appraisal industry; home builders; 23 certifiedraters; city government officials; consumer 24 groups; contractors and retrofitters; energy and 25 environmental groups; HERS providers; primary and 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS57 1 second mortgage community members; product and 2 equipment manufacturers; the real estate industry; 3 state energy offices; and utilities. 4 Representatives fromtheHUD, DOE, andEPA 5 haveparticipatedregularlyintheworking sessions of 6 the council. Forthe record I have attached, and given 7 to you just a minute ago, a list of all of our 8 members. That includes members that conduct over 90 9 percent of the home energy ratings performed in the 10 United States today. 11 At DOE’s request, the HERS Council, 12 through a consensus process, focused for over three 13 years to create recommendations in response to the 14 1992 Energy Policy Act mandate that DOE promulgate a 15 series of voluntary guidelines. The recommendations 16 from the council were submitted to DOE and formed the 17 basis of the national voluntary guidelines for 18 uniformity of HERS. The goal is to ensure the 19 accuracy and consistency of home energy ratings in 20 order to facilitate access to effective energy 21 efficiency financing andtopromotethedevelopmentof 22! innovative financing products. 23 The secondary mortgage markets response 24 and support ofthis initiative is critical. Theyhave 25 statedcategoricallythatonlywhena singlemeasuring 

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### 58 1 stick is available can they participate fully in the 2 initiate. Without their full support there canbe no 3 national success. Small, isolatedprogramshavebeen, and may continue to be developed. We support these 5 programs. But they will not enjoy the benefits of 6 support fromthe national secondary financial markets 7 in transforming the market nationwide. The NOPR as 8 published represents the measuring stick that I 9 referred to, which is so critically needed to begin 10 the market transformation that we all want. 11 The council thanks DOE for its continued 12 support of this shared goal and applauds the 13 Department for publishing the voluntary home energy 14 rating systems guidelines as a notice of proposed 15 rulemaking. Further, the council is eager to provide 16 continued support to the Department in promulgating 17, and implementing this important voluntary national 

# 18I initiative. 19 The HERS Council supports the NOPR as 20 printed, while recognizing that some member of the 21 council have individual concerns which will be 22j expressed in their written and, as you heard, oral 23, presentations. The council urges the Department to 24 work with the council to continue to update the 25 guidelines over time and expects the Department to 

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### 59 1 work with the council to address individual concerns 2:. through the rulemaking process. 3 By using the existing iterative process 

### 4i established by the council’s broad-based technical 5 committee and board of directors to address NOPR 6 comments, DOE is guaranteed that all interested 7 parties will continue to have a voice. The council 8 realizes that theremaybe sometechnical issues which 9 may need to be revisited and/or fine—tuned over time. 10 In addition, we recognize that as more sophisticated 11 analysis methods and technologies become available, 12 other areas of refinement will be revealed. 13 TheHERSCounciltechnicalcommitteeplans 14 to continue its work using the consensus process in 15 its unique public/private forum to review the 16 technical issues which form the cornerstone of the 17 HERS energy efficiency financing initiative in order 18 to keep the guidelines a living up-to-date document. 19 However, in the interest of enabling the marketplace 20 to truly guide this initiative, the council urges DOE 21 to release the NOPR as a final rule as soon as 22! possible in its present format in order to maintain 23 consensus in the marketplace. 24 The HERS Council has empowered a new 25 standingcommitteeofitsmembershiponimplementation 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS60 1 to address the issues of accreditation of systems and 2 certification of tools. It is imperative that these 3 two areas be investigated in the same consensus and 4 inclusive process which produced the technical 5 guidelines and the NOPR. The HERS Council views the 6 HERS/EEF initiative as a stool with three legs. The 7 first leg is represented by the NOPR which provides 8 the necessary technical uniformity. That is not complete. The second is accreditation which will 10 provide program consistency. And the third is 11 certification which guarantees the validity of the 12 rating tools. 13 We strongly believe that the consensus 14

. process used by the HERS Council will create 15 responsible, single-pointaccreditationproceduresfor 16 any and all HERS systems operating nationwide. 17 Accreditation/certification mechanisms, correctly 18 prepared will allow HERS providers to be large or 19 small, local orprivate, utilityorbuilder-based, and 20 complete responsive to the needs of the financial 21 appraisal and real estate communities. 22 The HERS Council would like to thank all 23 the participants who enabled this process and strives 24 to be sure that their efforts will continue to yield 25 powerful results in the tasks whichremain ahead. The 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS61 1 coalition of public agencies and private industry 2 created an environment in which all the stakeholders 3 could be present during the development of the 4 guidelines recommendations including representatives 5 fromHUD/DOEpilot states, representatives of gas and 6 electric utilities, Good Cents programs, National 7 Associations of State Energy Officials, builders, and 8 product and equipment manufacturers. 9 We encourage input to the consensus 10 process from all interested parties, as we have from 11 thebeginning. TheHERS Councilbelieves thatworking 12 together is an important part of the goal of creating 13 an energy efficient future. The job is not yet 14 complete. We urge DOE to continue working within the 15 successful consensus process established by the 16 council in order to ensure that the infrastructure is 17 in place which can support the market transformation 18 which all parties have been working toward over the 19 past years. Thank you. 20 CHAIRMAN BOULIN: Thank you very much. 21 Do we have any questions from the panel? 22 MS. ZIMMERMAN: Sorry, I don’t have much 23 of a voice, but I hope I can be heard. You described 24 the NOPR as providing necessary technical uniformity 25 and also you described it as important that the rule 

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### 62 1 be a living up-to-date document. I’d like to getyour 2 sense of how you envision the updating process that 3 wouldensure thatthere arechanges thatwouldbalance 4 the uniformity of the time with the updating process? 5 MR. BURTON: The HERS Council technical 6 committee, as I mentioned inmy statement, is abroad7 based group set up by the board of directors with a 8 very balanced membership. And the idea that the 9 council has is to keep the technical committee in 10 place so that that committee could be the lightening 11 rod, if you will, for any comments, concerns, issues 12 that may come up in a technical basis over time so 13 that they can be addressed by that same group that 14 came up with these guidelines. 15 working in conjunctionwithDOE and other 16 groups, and anyotherinterestedparties thatwouldbe 17 interested inparticipating and bringing their issues 18 forward, we believe this is the way that you can keep 19 this up-to-date, keep it a living document, and make 20 it relevant at all times as time goes by. 21 MS. ZIMMERMAN: Letmetry torephrase it. 22 Would you try to ensure that what is apprised 23 reference house stays the same over time, I’m trying 24 to get a sense 25 of— 

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### 63 1 MR. BURTON: It’s very important to 2 understand that the guidelines set up a methodology 3 that in its basic form is a single method that uses a 4 reference which we don’t expect to change. Where the 5 set points arrive, above and below the reference, may 6 over a longer period of time be revisited. 7 Some speakers here have mentioned that 8 five star homes would become cheapened by the 9 guidelines, and I submit to you that that’s not the 10 case today. And ifit became the case, and that would 11 probably be some decades out, those issues could be 12 revisited as part of the guideline methodology and 13 those set points could be revisited at that time. 14 But the reference house would never 15 change. Rating systems, for instance that had a star 16 system for their marketing, could continue to use 17 that. Their star rating would be pegged to the 18 guideline rating scale. Where in the California’s 19 case areference housemightbe above theHERS Council 20 guideline reference house, that’s no problem at all 21 because California simply needs to land its reference 22 house on the scale and instead of an 80 four star 23 rating, that reference house in California would get 24 an 81 or a 2 or whatever and live up to scale. It’s 25 very inclusive of the kinds of changes that rating 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON.D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS64 1 systems want to make to upgrade their systems, make 2 thembetterthantheminimumbecause after all this is 31 only a minimum. So I see that potentially changing 4 I over a long period, and again that can be addressed easily by the council. 6 CHAIRMAN BOULIN: Thank you very much. We will have a 15 minute break. The 8 restrooms are to the end of the corridor and left. 9 There is a snack bar downstairs on the ground floor. 10 And once again, if you haven’t signed in here at the 11 table, please do so for us. Thank you. 12 (Whereupon, at 10:30 a.m., a recess until 13 10:46 a.m.) 14 CHAIRMANBOULIN: I would like, beforewe 15 start, once again to remind you that if you do have 16 questions ofa speaker, please feel free to write them 17 down, provide the lady in the red sweater here with 18 those comments, and I will be more than glad to pass 19 them on. I would also like to remind you that there 20 are statements here from the various speakers, ifyou 21 haven’t picked them up. And with that, let us get 22 underway. 23 Would you give us your name and 24 organization, and we’ll start the proceedings? 25 MR. CULBRETH: Thank you. My name is 

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### 65 1 Carson D. Cuibreth. I’m Director of the North 2 Carolina Energy Office, and I’m here today on behalf 3 ofthe National Association of State Energy Officials 4 which represents some 50 state and territorial energy 5 offices across thecountrythathavebeen inexistence 6 since the mid 1980s. 7 I musttell you that I feel I have to take 8 some personal credit for us all being here today, and 9 it’s with some chagrin and sadness that I find us 10 here, to be honest with you, today. I personally 11 requested the Department of Energy initiate this 12 process manyyears ago onbehalfofthe States because 13 we felt like it was in the best interest of HERS and 14 EEMS from a dollar perspective, and also to help us 15 work better with the financial community. It is 16 probably the most contentious issue which I’ve ever 17 had the opportunity to work on in terms of energy 18 efficiency in my 20 some years of work in the energy 19 field. 20 There are a lot of people here today who 21 ‘ have worked very hard and very diligently over many 22 years for us to make progress in this area. And it’s 23 most unfortunate that we find ourselves still in a 24 contentious position. I’m disappointed because I 25 believe that the public is best served by resolving 

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### 66 1 this issue and moving on in an expeditious manner. 2 I’m here today representing all of the 3) States, and very specifically those states which 4 already have state energy office programs. I’d like 5 to take

- - in a sense of talking about the policy 6 issue and not dwell on some ofthe mechanical issues. 7 Youhave a lot ofexperts who can depict themerits of 8 some of the technical portions. 9 Now, I would like to read my testimony at 10 this time, orportions thereof, whichyou alreadyhave 11 a copy of. The idea of using mortgage financing to 12 fundenergyefficiencyandrenewalenergyretrofits in 13 existing structures andto fundthe inclusionofthese 14 same technologies in new constructionhas been around 15 I since the late 1970s. As early as 1981 the Federal 16 Home Loan Mortgage Committee had issued guidelines 17 permitting higher debt to income rations for houses 18 which were built with energy efficiency features. 19) Energy costs are the largest expenditure for a 20 homeowner after the mortgage itself. 21I From the standpoint of energy efficiency 221 and renewable energy advocates, being able to fiance 23 these technologies through the mortgage system is a 24 wayaroundtheprimarybarrierto increasedeployment, 25 higher first cost. Admittedly, many energy efficient 

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### 67 1 construction techniques and some of the technologies 2 are no more expensive than those used in conventional 3 homes. 4 The answer to the question, “How can we 5 finance energy efficiency and renewable technologies 6 in the residential market and capture the value of 7 efficiency in the market” is the HERS/EEMS concept. 8 Fannie Mae, Freddie Mac, the Federal 9 Housing Administration, the Department of Veteran 10 Affairs, numerous statehousing financingagencies and 11 othermortgage lenders currently accept rating sheets 12 from the existing home energy rating systems which 13 have been set up in cooperation with the states. 14 State oversight is one of the criteria applied by 15 Fannie Mae and Freddie Mac for their EEM pilot 16 programs. This acceptance represents a clear vote of 17 confidence from the financial markets as t the 18 technical soundness and the professionalism of the 19 existing state-based programs. It should also be 20. noted that consumer complaints regarding the current 21 operating rating systems are virtually non-existent. 22 I’d like to specifically address the 23i1 proposed voluntary guidelines at this point in time. 24 From the perspective of state energy office, the next 25 step in transforming the resident marketplace, to 

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### 68 1 recognize energy efficiencies, to increase the market 2 penetration ofhome energy rating systems nationwide, 3 critical to this effort is the need to expand the 4 availabilityofmortgages andotherfinancialproducts which can be tied to energy efficiency and to expand 6 thenumberofmarkets wherehomeenergyrating systems 

# 7I are operating. 8 I The voluntary guidelines for residential energy efficiency, which are the subject of today’s 10 hearing, represent a small component of the overall 11 activities which must be undertaken to insure the 12 success ofHERS/EEMS concept. Voluntary standards can 13 accommodate the need ofprimary and secondary lenders 14 tohave a standardizedratingproduct, appropriate for 15 a national market. Standardization does not require 16 federal regulation or intrusion into the business 17 activities of this emerging industry. 18 Instancesofself=regulationaboundinthe 19 service sector ofthis country. It is NASEO’s belief 20 that a voluntary structure overseen by the rating 21 industry, the States, andthe financialcommunitywill 22 be adequate to provide the uniformity sought by all 23 directly involved in this industry. This approach is 24 clearly within the congressional intent ofthe Energy 25 PolicyActprovisionswhichauthorizethis rulemaking. 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS69 1 Therefore, NASEO’sboardhasunanimouslyadoptedthree 2 resolutions regarding the guidelines. 3 And at this point time I would like to 4 briefly go over those. I’mhoping that possibly it’s 5 a compromise because it’s clear there is disagreement 6 within the community about these guidelines, and it’s 7 important from the States’ perspective in terms of 8 investment and States’ rights to some degree that we 9 have some modicum of consensus in this area. And we 10 hope that what we’re proposing is a compromise

-- and 11 certainly we are always available to discuss further 12 compromises in this area. 13 Be itresolvedthattheU.S. Departmentof 14 Energy withhold the issuance of the final voluntary 15 guidelines forhomeenergyrating systems containedin 16 the recent notice ofproposed rulemaking until a work 17 plan for field testing ofthe guidelines is developed 18 and executed in cooperation with the DOE pilot home 19 energy rating systems and the results of this field 20 testing can be included in the final DOE guidelines. 21 NASEO, working with the state energy 22 offices and the operating home energy rating systems, 23 have identified a number of technical and practical 24 operational issues in the NOPR that jeopardize the 25 programmatic principles of the existing operating 

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### 70 1 systems. These issues are detailed in the testimony 2 provided by the Energy Rated Homes ofAmerica and are 3 appended to this testimony as well. NASEO fully 4 supports the views expressed by ERHA on these 5 technical issues. 61 Resolution of many of these issues will 7 require field analysispriorto implementation. State 8 energyoffices wereinvolved inthe negotiationofthe 9 pilot state agreements which specifically included 10 tasks relating to the field testing of the proposed 11 guidelines. NASEO believes that it will take 12 approximately three months to design a satisfactory 13 fieldworkprogramandninemonths willberequiredto 14 obtainadequatedata. NASEOhas beenrequesting field 15 testing ofthe guidelines sincethis Spring. Wewould 16 like toworkwiththeDepartment indesigning thework 17 plan for field testing and in evaluating the results. 18 It is critical that theNOPRbedelayed so ig adequate field testing can be done to the guidelines. 20 Like it or not, the voluntary guidelines will 21 effectively become regulations with the force of law 22 when adopted by all parties. It is important that 23I they be done correctly. Given the dearth of 24 complaints about the existing systems from both 25 lenders and consumers, the guidelines cannot be 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS71 1 justified as a means to correct flaws. Rather, the 2 point of the guidelines is to provide uniformity and 3 an independent verification of technical accuracy, 4 considerations that NASEO is well aware of and 5 believes are important if a nationwide system ofHERS 6 providers is to be developed. 7 And I come back to our original point, 8 “we,” the state energy offices, the people who 9 initiated this process anumber ofyears ago, and some 10 of you on this panel today participated, we are 11 committed 2000 percent to the process, but we do find 12 that there are some flaws and believe that it needs 13 some time to be worked out. 14 Secondly, NASEOHomeEnergyRatingSystems 15 Task Force is authorized to develope interim 16 guidelines for home energy rating systems to provide 17 nationaluniformityandaddressthe secondarymortgage 18 marketvsneed fornational technicalprotocol forhome 19 energy rating systems. 20 The board opted for NASEO to develope its 21 own guidelines after identifying elements ofthe HERS 22 Councilguidelineswhichconflictedwiththeoperating 23 practices of the existing systems and which would 24 reduce the positive impact on residential efficiency 25 achieved by the current operating systems. NASEO’s 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS72 1 guidelines will provide the national uniformity we 2 believe is important while the field test is being 

# 31 conducted and the final guidelines are prepared. 4 It is our intention to use the NOPR as a 5 basis for the interim guidelines, with some slight 6 modifications based on the marketplace experience of 7 the existing home energy rating systems. We believe 8 this approach is consistent with the language in the 9 Energy Policy Act of 1992 and with the authority 10 provided to states in the State Energy Efficiency 11 Programs Improvement Act. 12 Ourthird resolution, resolvedNASEO will 13 establish an accreditation subcommittee of the Home 14 Energy Rating Task Force made up of state energy 15 office directors, operating home energy rating 16 systems, and representatives of the primary and 17 secondary mortgage markets to accredit home energy 18 rating systems to NASEO’s interim guidelines. 19 The latter resolution was passed to 20 address mortgage industry concerns regarding the 21 proliferation of accrediting entitles among the many 221 states and not to usurp traditional state authority 23 over licensing of professional service providers. 24 States which choose to establish some sort of 25 accreditation should be free to do so. However, by 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS73 establishing an accreditation body through NASEO, we 2 should be able to integrate individual state entities 3 with a national accrediting body, ensuring the 4 mortgage industry of a single point of contract 5 regarding the professional credentials of any rating 6, system. This hybrid industry/state approach is 7 consistent with the intent of section 102 of the 8 Energy Policy Act of 1992 and other statutory 9 authority previously cited. 10 It is also recognition of the fact that 11 this emerging industry needs to work with the 12 financialcommunitywhilecontrollingits owndestiny. 13 We agree with the intent of Congress as evidenced by 14 theEPACtprovisionthatthis emerging industry should 15 notbe controlledby a federal agency orits surrogate 16 and that the guidelines should be truly voluntary. 17 Webelievethattheapproachtoguidelines 18 collectively contained in the NASEO resolutions is a 19 reasonable compromise for the home energy rating 20 industry, the states, utilities and others interested 21 in this field. Our stance reflects the intense 22 efforts wehaveundertaken inthe States overthepast 23 decade to develop home energy rating systems with 24 homebuilders, lenders, realtors, appraisers, utilities 25 and consumer groups. Individuals and organizations 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS74 1 have devoted thousands of hours to developing the 15 2 state-based systems. Wewouldbe remiss ifwe didnot 3 adequately represent these views in a national policy 4 debatethat often seems remote and irrelevantto those 5 actually involved inbuilding, selling, financing and 6 appraising homes which are efficient and increase the 7 comfort and affordability ofhomes for our consumers. 8 NASEO therefore recommends that the 9 Department take the following actions: 10 Delay the issuance ofthe final voluntary 11 guidelines forhomeenergyrating systems as issued in 12 the notice ofproposed rulemaking dated July the 25th 13 1995 until late 1996. 14 Two, commit to working with NASEO in the 15 six pilot states, develope a work plan for the field 16 testing of the proposed guidelines. 17 Three, monitor the field testing plan as 18 implemented by the pilot states between February 1, 19 1996 and October 31st 1996. 20j And, four, commit to conducting a 21 comparative analysis at the end of the field testing 22 between the DOE proposed guidelines and the NASEO 23 interimguidelines, culminating withameeting ofDOE, 24 NASEO, the home energy rating industry, and the 25 mortgage and appraisal industry whichwill review the 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRPTIONSH 75 1 final results andmakerecommendationsontheapproach 2 the Department will take to implement section 102 of 3 EPACT. 4 We remain open to alternative regarding 5 accreditation which are suggested by the primary and 6 secondary mortgage industry. We appreciate the 7 opportunitytobehere to share ourthoughts withyou, 8 and we’ll work with you in any way possible. 9 CHAIRMAN BOULIN: Thank you for your 10 comments. Do we have any questions from the panel? 11 MS. DEAN: Okay, what aspects of 12 guidelines do you think caused them not to be truly 13 voluntary and move into sort of what you feel is a 14 mandatory type situation? 15 MR. CULBRETH: I don’t know that I can 16

# I specifically answer your question to be very very 17j honest with you. I do not have a home energy rating 18 system done and do not have a personal dog in this 19 fight. However, I amcommitted to anational approach 20 that truly represents the States. There are a number 21 of technical issues, four star or five start might be 22 one of those, I’m not prepared to debate that today. 23 There are a small number of technical 24 issues, maybe ten percent, which are flawed and have 25 adirect impact onthe existing systems thatwill cost 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS76 1 time and money in terms of software, training and 2 other areas whichwebelieve, and thereasonwe sorted 3 out in this process to begin with, should not be the 4, case. We believe that there is a way to work with 5 existing programs and still give the flexibility that 6 they need and deserve because we believe that this is 7 a state issue, quite frankly. 8 That does not directly answer your 9 question and I’m not in a position to specifically 10 debate that today. I would be glad to have an answer 11 in writing for you from the association. 12 MR. MACKIE: Mr. Culbreth, you mentioned 13 some kind of contention exists between different 14 organizations at this time and that you’d like to see 15 those organizations get beyond that. Is there a way 16 in your mind that DOE can help facilitate that into 

### 171 some form of resolution and how quickly do you think 18 that can be done? 19 MR. CULBRETH: Well, letme once again say 20 that all of the people involved in this process have 21 worked very hard and are very honest and sincere in 22 their beliefs. And I certainly don’t want to 23 discredit any of those, but is a very contentious 241 issue. Whilewe’veworkedhard, we certainlyhavenot 25 arrived at the solution. What we propose here today, 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS77 1 or some form of that which I think allows for a field 2 test, is a compromise and a middle ground to actually 3 looking at what happens in real life to the existing 4 systems and new systems. That DOE has to play a role 5 in some field testing of these, that sitting around 

## 6U1 the table and talking about it is not going to answer 7 our problem. We’re going to have to field test these 8 in an actual demonstration form and look at it. 9 I I know we talked about at the 10 collaborative for two years, and I know that the HERS 11 Councilhas talked about itandworkedvery diligently 12 and honestly on it, but we still find there are 13 differences. And given the investment which my 14 numbers have made in this, and the total concept in 15 the national level towards States’ rights and the 16 ability to have flexibility and deregulation, I think 17 that it is incumbent upon DOE to find a middle ground 18 to accommodate all parties inwhat is avery important 19 issue in our building community. And that a field 20 test is certainly a beginning point to talk about 21 accomplishing this. 22! MS. ZIMMERMAN: Couldyoudescribehowthe 23!I field test would address some of the differences 24 you’ve described and your views about

-- 25, MR. CULBRETH: MaryBeth, I’mnotthebest 

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### 78 1 person to do that, to be honest with you, because I 2 wouldn’t design. I would be glad to have some of our 3 technical people answer that question for you, but I 4 am not the person to do that. 5 CHAIRMAN BOULIN: I think we would really 6 like very much, in your final testimony, examples of 7 what you feel need field testing and how that would 8 resolve those kinds of issue. It would help us 9 understand the issues that you bring to us today. 10 MR. CULBRETH: Would you like an addendum 11 to our testimony, is that what you’re asking for? 12 CHAIRMAN BOULIN: This can be taken care 13 ofinyour final written testimony. But those kind of 14 examples really help us understand what the issue is 15 and get to the bottom of these kinds of issues. I 16 assume that you will, NASEO will, file written, final 17 written, testimony by next Monday. 18 MR. CULBRETH: Could you bear with me a 19 moment? 20 CHAIRMAN BOULIN: Sure. 21 MR. CULBRETH: We’ll be able to do that 

### 22I for you. 23J CHAIRMAN BOULIN: Great. 24 In your second resolve you indicate the 25 intent to develop your own interim guidelines

-- 

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### 79 1 MR. CULBRETH: Yes. 2 CHAIRMAN BOULIN:

-- further indicating 3 that the proposed guideline conflict with the 4 operatingprocedures ofthe existing system. Itwould 5 help us, if in your final testimony, if you can 6 elaborate on those conflicts between some of your 7 existing systems and the proposed rule so we can 8 understand those kinds of differences that you have. 9 I wouldn’t ask you at this point in time to sort of do 10 that, given your previous comments. 11 MR. CULERETH: Some of those, the only 12 reason I’m reluctant is because I don’t consider 13 myself a true technician, and I think it would be a 14 stretch of my

-- 15 CHAIRMAN BOULIN: No. 16 MR. CULBRETH:

-- technical abilities. 17 But let me say there are, which you have heard from 

## 181 and have comments of the technical issues that have 19 been presented to you, those will be some of the 20 things that we will refer to in our comments, once 21 again four star, five star, and the impact they may 22 have on the program. 23 CHAIRMAN BOULIN: Okay. 24 MR. CULBRETH: But we will address it. 25 CHAIRMANBOULIN: You talkedinyourthird 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS80 1 resolve accredited home energy rating systems. Can 2 you comment, are there any plans for tool 3 certification? 4 MR. CULBRETH: No. 5 CHAIRMAN BOULIN: I think that’s all the 6 questions. Thank you very much. 7 MR. CULBRETH: Thank you for your time. 8 CHAIRMAN BOULIN: Wait a minute, I’m 9 sorry, I do have a question that was handed to me, and 10 I looked at it and put it down. 11 Do you know, letme see, howmanyhomes in 12 theNASEOprogramusedenergyefficientmortgages last 13 year or on any annual basis? 14 MR. CULBRETH: Could I confer with my 15 counsel? 16 CHAIRMAN BOULIN: If you would. 17[ MR. CULBRETH: Thank you. We do not have 18 that. 19 CHAIRMAN BOULIN: Thank you. 20 Our next commentator is Doris Ikie. Is 21 she here? There we go. 22 MS. IKLE: My name is Doris Ikle. 23 CHAIRMANBOULIN: Well, youknowhowto do 24 it. 25 MS. IKLE: With practice. And I’m the 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS81 1 founder and president of Conservation Management 2 Corporation. I’d like to tell you a little bit about 3 what our company does because there seems to be some 4 confusion. 5 We work for both gas and electric 6 utilities, therefore, we are fuel neutral And what 7 we do is implementprograms such as these. We started 8 off in 1977 implementing the RCS program and as 9 opposed to the Ten Energy Rated Homes of America who 10 did 40,000, we just, our company, has done 160,000 11 homes. We’ve also done commercial audits and we’ve 12 done all kinds ofHERS things, so thatwehave a great 13 deal of experience in doing the software and training 14 the people and then actually doing the thing. And 15 what we are most interested in is how HERS can save 16 energy. Our clients are the utilities, but our 17 ultimate customers are consumers, and so we’re 18 interested in maximizing the energy saved from this. 19 And I’d like to firstjust show you the, 20 let’s see if this one comes out right, yes, this is a 

## 211 pyramid of occupied homes. I have not included the 22 mobile homes and I have not included the unoccupied 23 and seasonable homes, but they’re the 61.3 million 24 owners, 33.5 million renters. 25 Now, as you have heard here, and as you 

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### 82 1 can read through the guidelines, the concentration is 2 on 1.5 million. Those are the ones that have the 3 energy efficient mortgages that can possibly be 4 interested in that. There are actually 4.6 million, 5 and these are all 1993 figures by the way, 4.6 million 6 people who are owners who moved. Of those, 3.7 million got new mortgages. And looking at the age of 8I the house, 1.5 million would be eligible, might be 9 interested in energy efficient mortgages. 10 Now, ifyou look attherenter side, we’ve 11 got 11.5 million who moved because renters move a lot 12 more than owners move. What we would like to see is 13 the residences eligible for HERS, which is at the 14 bottom there, there are 16 million of those compared 15 to the 1.5 million. So ifwe can de-couple HERS from 16 EEMS, because we believe there is a great like for 17 HERS beyond EEMS, we will be able to increase the 18’ savings and energy considerablyjust in terms of the 19 number of participants. 20 Now, let’s go on and look at the purpose 21’ ofHERS as it is written inthe guidelines. Now, does 22 anybody see anything wrong with that? It’s upside 23 down, right? Okay, that’s the problem with it. And 24 I now put it right side up so that you can read it. 25 You’ll see what I mean. What is shown first is that 

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### 83 1 bottom line, and I took this straight from the 2 guidelines. The firstthing is “Five lending industry 3 confidence to underwrite energy efficientmortgages.” 4 The second thing given is “Offer financing 5 mechanisms,” which is second to the bottom there. 6 The way I have put them is in terms of 7 theirimportance in saving energy, because I feel it’s 8 nothowmany loans, it’s howmuch energy is saved that 9 we shouldbe talking about. So I have on the top, and 10 that includes 90 percent of residences, what is 11 actually the last sentence in the guidelines, “Home 12 energyrating systems could stimulateincreaseduseof 13 energyefficiencyandrenewableenergytechnologiesby 14 making energy efficiency a quantitative, visible and 15 recognized attribute as homes are designed, built, 16 bought and remodeled.” And that will include all of 17 them. l8 And the 60 percent of course is to 19 “Encouragehomeownerstoimprovetheenergyefficiency 20 of new, reconstructed for existing homes.” 21 The third one is “Provide real estate and 22 appraisal industries with a basis for valuing energy 23 efficiency in home sales and resale markets.” 24 I’d like them in that order. I think 25 that’s important. Now, what does that mean in terms 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS84 1 ofwhat changes would occur? Okay, this shows a shift 2 of the focus from maximizing loans to maximizing energy efficiency. The proposed rule say that all 4 reports should include the star rating. The star 5 rating is only important for the energy efficient 6 mortgages. They say, I suggest that the star rating 7 be included only for customers who may be interested 8 in energy efficient mortgages. In other words, for 9 renters it makes no sense to have stars, or people 10 whosehouses are so poorthat they’rejust going tobe 11 insultedbecause they onlyget star and it’s notworth 12 it, rather keep it for the ones that are interested. 13 Second, theproposedrules saythatenergy 14 savings estimates should be included only if the 15 customer is interested in energy efficientmortgages. 16 I think the most important part is the energy savings 171 estimates. 18h Bob, talked about the importance of 19 showing the dollars. I think that what my ultimate 

## 2OI customers are interested in is how much am I going to 2111 pay for this rental property or for this home when 221 buy, is this really going to shock me or is it within 23 what I have in mind. I think showing the dollars is 24 absolutely the first thing that should be done. 25 So the suggested changes, improvements 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS85 1 shouldbe evaluated for all homes that are ratedwhich 2 should tell everybody how to improve. Again, this is 3 putting energy efficiency as my number one. 4 Third, evaluated improvements do not 5 include appliances, the reason they say is because 6 it’s not considered part of the house. Well, that’s 7 very true. However, refrigerators and freezers are 8 the number one item ofelectricity in the residential 9 sector. They take more than air conditioning, more 10 than anything else. Also, refrigerators and freezers 11 are the ones that improved in terms of energy 12 efficiency more than anything else. If you buy a 13 refrigeratortoday ofthe same size and type as one of 14 15 years ago, you’ll need only half the energy, so we 15 want to include those because they save energy. 16 The financial calculations to determine 17, the present worth and value required, you have to, in l 8 h order to do that, this is according to the proposed 19 rules, this is therater’sjob, whathappens is, first 20 of all you have to make some kind of assumption as to 21 the rate of discount, you have to know what the 22 interest rate is going to be for the mortgage. It’s 23 going to take a longer time to get that thanjust to 24 do the rating. 25 And I personally feel that the financial 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS86 1 calculations can better be done by the lender who is 2 used to doing those, who does it all the time. Let’s 3 get the rating first, send it to the lender and let 4; him worry about that. Again, one reason is that I 5 think the bulk will not be energy efficient mortgages 6 anyway. 7 Finally, the low cost, no cost 8 improvements are not included as part of the proposed 9 rules. We have found in the residential sector, 10 particularly the seal-ups that we do for Washington 11 Gas for instance, are the most cost effective. Not 12 only the most cost effective, but people call up 13 afterwards and say I’m somuchmorecomfortable. And, 14 yes, we do consider comfort because that’s the thing 15 that most people want to buy when they are buying and 16 energy efficient house. So we would like to have at 17 least the information included in the low cost, no 18 cost. 19 Now, I’d like tojust, ifyou take a look 20 athow the dollar is spent, the energy dollar is spent 21 in the home, you’ll find that the largest slice is 22 appliances. Appliances are not part of the home, 23 they’re not included. They are costs that add up the 24 cost. 25 Now, let me switch to this one and show 

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### 87 1 youwhat the appliances

-- the line thatyou see there 2 is based on actual data of appliance cost by size of 3 residence, from the smallest to the largest. And as 4 you see, the appliance expenditures go up with size, 5 which makes sense. It makes sense that ifyou have a 6 largerhouse, you’re going to havemore lights, ifyou 7 have a larger house you’re going to have larger 8 refrigerators, all of the appliances are going to go 9 up. Indeed, it’s that way no matter north, south, 10 east, west, Wilmington, Huntington, it always comes 11 out that way. 12 The guidelines, however, ignore the 13 correlation between size and expenditures for 14 appliances. In fact, if you look at the guidelines, 15 you’ll go from that bottom line there which is for a 16 homethatjusthas lights, TVs, arefrigerator and 500 17 KW hours worth of miscellaneous things. That’s that 18 lowest line. It’s the same for every size house, it’s 19 expected to have the same number of lights. Every 20 size house is supposed to spend the same for TVs. 21 Now, the top line there on the guidelines thing, that 22 shows if you have every appliance that they mention, 23 every appliance possible except for swimming pools, 24 you’ll hit that top line. 25 Now, if you look, the average up there 

### SAG,CORP 4218LENORELANE.N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS88 1 which is the green spot there, is about 25 percent 2 above the top that you will get from the guidelines. 3 And it’s 50 percent more than the average that you’ll 4 get from the guidelines. If you take

-- even ifyou 5 take ahome thathas apool andhas two refrigerators, 6 and thereyouwill be able to add fromthe guidelines, 7 that’s the lower one, it’s 23 percent below the

-- we 8 just vastly under-estimate the largest, by far the 9 largest sector, and that’s appliances. Because the 10 guidelines forappliancesreally are, theyjustdidn’t 11 care about them. 12 And what happens is that the dollarvalue 13 you’re going to get, if you use the guidelines, will 14 be about 20 percent below what it should be, and that 15 kind of thing could kill this program. Ifpeople get 16 estimates that are consistently 20 percent below, 17 that’s, you know, I meanthat’s something thathas got 18 to be fixed. 19 This one is a little less radical, but it 20 also should be fixed. And that’s the reference house 21 configuration is 18 percent of the conditioned floor 22 area. Now, they use floor area whereas CABO-MEC, 23 which the rest of it is based on, used wall area. The 24 states that have limits on windows as a percent of 25 wall area, always it’s wall area. However, because 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON.D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS89 1 the ASHRAE Bible says floor for residences, it does 2 say wall area for commercial by the way, that is the 3 excuse that has been given me every time I have 4 brought this up. 5 What happens when you use wall area 6 instead of floor area? It’s that the smaller house 7 doesn’t look as big as the larger house. These two 8 houses are exactly identical. The smaller one has 9 three stars, the larger one has four stars. Why? 10 Because a larger house will always look better than a 11 smaller house when you compare it in terms of the 12 floor area instead ofwall area. The reason? I found 13 the house that has the same for floor and that’s the 14 32 by 32 house. Let’s say you double the floor area 15 to 64, the floor is double, but the wall area is only 16 50 percent larger, and you can play with that 17 yourself, I’m not going to go through it. Trust me, 18 it’s right. So that’s another thing I feel should be 19 changed. 20 Finally, on a lighter, less technical 21 note, comes thetraining syllabus. The guidelines say 22 that every HERS provider should write their 

### own 23 training syllabus. And we’ve got a bunch of training 24 syllabuses, andeverybody spentmoney. Itcostsmoney 25 to write a decent training syllabus. We would very 

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# go 1 very much like to recommend one HERS training manual, 2 the 

### same way you did it with the RCS. They wrote an 3 excellent book. Everybody used it. And without a 4 single training manual you really don’t have what you 5

# I most want to have, which is one single method that is 6 the same for everybody. This will ensure it, it will 7 ensure the quality. If you ask everybody to write 8 their own, you know, you’re going to get lots ofpoor 9 things. 10 Letmejustsummarizetherecommendations. 11 One, increase the number of residences eligible for 12 HERS from the 1.5 million to the 15 million by 13 including renters and owners not eligible for EEMS or 14 EELS. Let’s realize that there’s a lot of potential 15 for HERS besides lending money to people. 16 Oh, second, sorry, broaden the scope of 17 HERS beyond EEMS and EELS. Estimate of energy costs 18 should be given in all HERS reports, and that’s 19 because that’s what people are most interested in. 20 The list of cost effective improvements should be 21 included in all reports. That’s what is going to save 22 energy. 

## 231 Refrigerator replacement should be a 24 measure addressed even though it’s not part of the 25 HERS. You don’t have to have it in the rating, but 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS91 1 you do have to have it. The lost cost and no cost 2 improvements and seal-up services should be included. 3 Themethodology forestimating appliances 4 has to be revised. The guidelines will severely 5 under-estimate appliance cost particularly or larger 6 houses. Fenestration for the reference should be 7 based on percent of wall, not percent of floor. And 8 one professional training manual would be much less 9 expensive and have HERS develope their own and would 10 promote uniformity among systems. 11 CHAIRMAN BOULIN: Thank you very much. 12 Do we have any questions from the panel? 13 CHAIRMAN BOULIN: There’s a question. 14 MS. ZIMMERMAN: The question is on the 15 appliance

-- recommendation, in your opinion would 16 that be revised in a way in which a specific number 17 would be given for each size group or would that be 18 specific to each client? 19 MS. IKLE: To each client? 20 MS. ZIMMERMAN: To each client, to each 21 rating. 22 MS. IKLE: No, what I have proposed, and 23 it is in my written, I have a more detailed written, 24’ what I propose is that you have, instead of having 25 just 500 KW hour plus lights, plus the TV, plus one 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS92 refrigerator, all of which have the same

-- is the 2 plug load actually, have a larger plug load that is 3 based on the size ofthe house. This does not require 4 any additional workby thewaybecause the size ofthe 5 house you have already in your software, and you 6 simply look atthe size ofthehouse andyou determine 7 what the plug load is based onthat size, and thenyou 8 add a few things that take a lot of electricity, but 9 are not found in many houses such as pool pumps, 10 dehumidifiers is a very important one, jacuzzi of 11 course is an important one, and we in the system, and 12 I haven’t mentioned it, but we do have our own system 13 and we do have a whole way of doing this that again 14 emphasizes energy efficiency. We look at 15 refrigerators because we are so anxious

-— 16 refrigerators really vary a lot in what they use, so 17 we do look at them not just

-- 18 CHAIRMAN BOULIN: Thank you. Thank you 19 very much. 20 Our next speaker is Kenneth Schaal. Did 21 I say that correct? 22 MR. SCHAAL: I’ll defer my comments. 23 CHAIRMAN BOULIN: Okay. 24 Then I guess we have our last speaker who 25 is Malcolm Verdict. 

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## I 93 1 MR. VERDICT: Good morning. 2 CHAIRMAN BOULIN: Good morning. 3 MR. VERDICT: It’s a pleasure to be here. 4 I always like to thinkthatyou save the best for last 5 because with a name that starts with a V, I’m 6 accustomed to being called on last many times. 7 Thankyou for this opportunity to present 8 brief public comments on behalf of the Alliance to 9 Save Energy in strong support of the Department of 10 Energy’s proposedrulemaking forvoluntaryhomeenergy 11 rating guidelines. We plan also to submit more 12 detailed comments. 13 CHAIRMAN BOULIN: Would you state your 14 name and the name of the organization you represent? 15j MR. VERDICT: Yes. My name is Malcolm 16 Verdict, and I’m with the Alliance to Save Energy. 17 I’m Director of Research at the Alliance to Save 18 Energy in Washington, D.C. The Alliance is a 19 bipartisan non-profit coalition of government, 20 business, environmental and consumer leaders with a 21 longstanding commitment to improving he energy 22h efficiency of our nation’s economy and to increasing 23 housing affordability. The Alliance was founded by 24 Senators Charles Percey and Hubert Humphrey in 1977 25 and is currentlychairedby Senators JeffBingaman and 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,DC.20008 (202)797-2525 VIDEO:TRANSCRIPTIONS94 1 James Jeffords. 2 We are proud to count among our directors 3 and associates such energy efficiency industry giants 4 as Fannie Mae, Honeywell, Owens Corning, and over 100 5 other business and energy leaders directly involved 6i with enhancing our nation’s housing efficiency, many 7 ofwhom have representatives sitting here in the room 8 today. And as you might also note, they don’t 9 necessarilyalways agreeuponwhatperhaps the answers 10 should be. 11 As a former bank loan officer, a state 12 energyofficedirectorandtheimmediatepastchairman 13 ofthe National Home Energy Rating Systems Council, I 14 have gained many valuable insights into the 15 opportunities and challenges offeredby this proposed 16 rule which I would like to share with you. My 17 comments will center on three very important issues: 18 One, the importance of public/private 19 corporation in removing market barriers. 20,1 Two, the critical need for accreditation 21 process that’s fully acceptable to the mortgage 22 industry. 23 And, three, the absolute necessity to 24 issue a final rule as soon as possible and move on 251j with this process. 

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### 95 1 First let me say that when this notice of 2 proposed rulemaking was published on July the 25th 3 homeowners came one giant step closer to affordable 4 home ownership. The Department of Energy under the 5 capable leadership of Assistant Secretary Christine 6 Ervin is to be commended for issuing these proposed 7 rule and forrelyingupon thekey stakeholders to help 8 draft the voluntary guidelines. By one simple act, 9 issuing this final rule, DOE will now dramatically 10 boost the residential energy efficiencypotential for 11 America’s 70 million homeowners. 12 The Alliance is proud to have been a part 13 of this process. In fact we designed the very first 14 energy efficient mortgage demonstration in the State 15 of Connecticut in 1983. 16 My first comment on the rule concerns the 17 importance ofthe public/private process to arrive at 18 a voluntary rule. DOE’s current national energy 19 strategy plan wisely states that the federal 20 government and the private sector canmaximize energy 21 productivity by identifying and removing market 22 barriers that inhibit cost effective investments in 

## 23I efficiency. This proposed rule is an excellent 24l example whereby the federal government and must 25 continue to work with the private sector to 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS96 1 voluntarily remove longstanding barriers. 2 These voluntary guidelines were derived 3 throughconsensus andunanimouslyrecommendedoneyear 4 ago to DOE by all major stakeholders represented by 5 the members of the HERS Council at that time. In 6 fact, the very first chair of the HERS Council, Ms. 7 Debra Howard, was from the Arizona State Energy 8 Office, and our current chair is Ms. Chris Taylor 9 Lowrie, Director of Virginia’s Home Energy Rating 10 System. This NOPRrepresents the collectivewisdomof 11 all stakeholders, notjust the providers of ratings, 12 who realized during aDOE’s national collaborative in 13 1992 that we must all work together or we will surely 14 fail. 15 The second point I would like to make is 16 the need for a rating accreditation system that is 17 fully acceptable to the secondary mortgage lenders, 18 commonly known as Fannie Mae and Freddie Mac. 19 Accreditationis the one single itemthatwill instill 20 confidence to both consumers and lenders. This 21 proposedrulerecognizes theneed foraccreditationto 22 be conductedby state or other body. Only one state, 23 California, has chosen to accept this responsibility. 24 With the issuance of this voluntary rule, there will 25 be littleneed forothers to follow. However, that is 

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### 97 1 certainly theirrightto do so. Should states wishto 2 go beyond the minimum requirements of this proposed 3 rule, that is also their right. 

# 41 However, with a uniform set of national 5 rating guidelines, andFannie andFreddie as the court 6

# 1 of last resort, no state need reinvent this wheel or 7 spent limited state dollars to do so. 8 I also submit that with a voluntary rule, 9 DOE should not pick the accreditation immunity. 10 Deciding who is best qualified to perform that task 11 with all its political and market implications is 12 perhaps better left to the financial markets. 13 Also, during our period of dramatic 14 government down-sizing, I question the political 15 wisdom of creating new government functions, either 16 federal or state, orempoweringnewindependentbodies 17 to perform accreditation. Once the guidelines are 18 final, I am certain that the secondary market will 19 have no problem determining who is qualified to 20 performthis task. Iftheydo not, this entire effort 21 is doomed to failure. 22 Sowhat amI suggesting is the solutionto 23 accreditation? Let the lenders decide. 24 Mythird and final pointconcerns theneed 25 for DOE to place this rule into the marketplace as 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS98 1 rapidly as possible. It has been one year since the 2 I multiple stakeholders of the HERS Council delivered 3’ the technical basis for this NOPR to DOE. Ithas been 4 18 months since theEnergyPolicyActdeadline forDOE 5 to issue these guidelines expired. It has been over 6 12 years since the Alliance and others conducted the 7 very first state pilot, pointing out the need for 8 uniformitybythemortgageindustry. Theseguidelines 9 are now long overdue. 10 Some will admonish DOE to wait until they 11 can come up with a more perfect set of guidelines, 12

# I albeit outside the national consensus process. I 13 submit that these guidelines are not technically 14 flawed, but are a living document that should be 15 updated through consensus. They have had months of 16 scrutiny by thevery best engineers and practitioners 17 in the rating business at our national labs. 18j, These guidelines are not command and control, they are voluntary and they are an excellent 2O opportunity forDOEtomakegovernmentworkbetter for 211 less. Issuing these guidelines now reached by 22 consensus of all major stakeholders should be a slam 23 dunk. 24 Let me respond to some valid concerns 25 expressed by others involved in this process. The 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO:TRANSCF1IPrW)N99 1 Department must not confuse the marketing needs of 2 local rating systems fueled by their anxieties from 

## 3j rapid change and diminishing federal support. I 4 understand their anxieties, which is why we must 5 finish this process before Congress no longer can 6I afford to fund this important consumer initiative. 

# 7j The truth of the matter is that those in 8I favor of issuing this rule conduct over 90 percent of the ratings and energy financing deals done today, 10 some 50,000 to 60,000 ratings annually at last count. 11 In a democracy, that’s apretty goodmajority. IfDOE 12 waits one extra day for the perfect rule or elects to 13 cast its responsibility back to the those who may 14 oppose this rule, it will clearly violate its 15 statutory mandate and, more importantly, its 16 obligation to our nations’s homeowners. 17 The solution is simple, justdo it. Issue 18J the voluntarily guidelines and let the financial 19 markets and the consumer decide what works and what 20 doesn’t. Isn’t that the purpose of a voluntary rule? 21 In closing, I would like to thank you 22 again for this important opportunity to speak. The 23 Department is to be commending for what had seemed 

# 24I almost impossible three years ago. With the issuance 25 ofthese guidelines, themarketplacecan finallybegin 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,DC.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS100 1 a voluntarily transformation. Any unnecessary delay

or abdication of responsibility by DOE will have a 

### 31 permanent, adverse financial impactuponournations’s 

### 4h residential consumers. 5 We have all worked too long and too hard 6j to come this far and fail. As always, the Alliance 7 stands ready to help DOE and others achieve this 8 importantnational energyand affordablehousing goal. 9 This concludes my formal comments, and I will be glad 10 to answer any questions that the panel might have. 11 CHAIRMAN BOULIN: Thank you very much. 12 Do we have any questions? There are no 13 questions. 14 I thank you very much for your comments. 15 I have here, is this NAHB statement, an 16 additional speaker? I have here a unscheduled 17d speaker, and I have two rebuttal speakers. We’ll take the two rebuttal speakers in the order that we

-- 19 well, I guess one of the rebuttal speakers has not 20 spoken before, so we will take him second, and go to 21 Carson Cuibreth. If we an get your rebuttal 22,I statement? 23! MR. CULBRETH: I don’t have a rebuttal. 24i CHAIRMAN BOULIN: Oh, this is a question. 25 MR. CULBRETH: I just merely had a 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS101 question. 2 CHAIRMAN BOULIN: Okay. I’ll be okay. 

# 3I I’m sorry. 4 Malcolm, we do have a question for you. 5, Are the 50,000 to 60,000 ratings energy audits or 6i scaled ratings equivalent to the proposed guidelines? 7 MR. VERDICT: Those are a combination of 8 both. 9 CHAIRMANBOULIN: A combination. Perhaps 10 you could provide some kind of breakdown of those 11 numbers for us. 12 MR. VERDICT: I’d be glad to do that. 13 CHAIRMAN BOULIN: Thank you. 14 We have one rebuttal speaker here, and we 15 have a unscheduled speaker. What I will do here is we 16 will continue on our schedule. We were scheduled to 17 break for lunch, but I thinkwe canprobably wrap this 18i up and go on our way, if we continue on. 

# igh MAN: Mr. Chairman? 20 CHAIRMAN BOULIN: Yes? 21 MAN: Mr. Basil who was going to give a 22 statement for NAHB was scheduled to be here at 1:00 23 o’clock. 24 CHAIRMAN BOULIN: At 1:00 o’clock? 25 MAN: Yes. He had other commitments this 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,DC.20008 (202)797-2525 V!DEO;TRANSCRIPTIONS102 1 morning, and I apologize. He wasn’t able to be here 2 because I didn’t know what your schedule would end up 

### 311 being. 4 CHAIRMAN BOULIN: No problem. 5 MAN: I’ll try to get him here a little earlier, if possible, but I won’t be able to get him 

### 71 here before you break for lunch. 8 CHAIRMAN BOULIN: Okay. So be it. 9 Why don’t we move to the rebuttal speaker 10 that we have here. We have a statement from ARI. Oh, 11 this is anunscheduled speaker. I’ll get this squared 12 away. Let’s go with this first thing. Lawrence 13 Wethje from ARI is an unscheduled speaker. 

### 14I Would you come forward please, and we’ll 15) hear that statement first and then we will get to the 161 rebuttal. 17 MR. WETHJE: Thank you. My name is Larry 18 Wethje with the Air Conditioning and Refrigeration 19 Institute. I’m the Director of Public Policy. I 20 hadn’t planned on speaking this morning, but I wanted 21 to speak in response briefly to some of the comments 221 made regarding the site versus source energy issue. 23 First of all, ARI is a National Trade 24j Association of Air Conditioning Manufacturers 25 representing over 90 percent of the central air 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS103 1 conditioners and heat pumps produced in the U.S. And 2i althoughwe may not support, necessarily support, the 3 promulgation of the HERS program as proposed, if the 4 I program does go forward, we recommend that it does 5 maintain the use of site energy instead of source 

## 61 energy in rating the home. 7 We feel that as long as theprogramallows B for the use of annual cost savings to be determined, 9 which it currently does, then the site energy is the 10 only reasonable approach because this is what the 11 homeowner will actually recognize. Use of source 12 energy would be very confusing and misleading to the 13 homeowner, we believe. Furthermore, it would be 14 inconsistent with other DOE rating procedures to use 15 a source energy approach. 16 ARI has consistently made this point to 17 DOE with respect to rating appliances, and DOE should 18J be well aware of its statutory limitations in this 19 area. Webelieve EPACT, the statute authorizing HERS, 2O is confined to the use of site energy as defined by 211 the overriding statute ofEPACT. Perhaps the program 22 should elevate the prominence of annual cost savings 23h versus energy savings, but it must be done on a site 241 basis in order to be meaningful to the homeowner and 25 lending institution. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 ii (202)797-2525 VIDEO;TRANSCRIPTIONS

### 104 1 That’s all I have to say. 2 CHAIRMAN BOULIN: Thank you very much. 3 MR. WETHJE: I’ll be happy to answer any 4 questions. 5 CHAIRMANBOULIN: Dowehave anyquestions 6 from the panel? 

# I MR. WETHJE: Thank you. 8 CHAIRMAN BOULIN: Thank you. gil We will have our rebuttal speaker, Matt 10 Chwalowski. He has arebuttal statementhe would like 11 to give. 12 MR. CHWALOWSKI: Goodmorning. Myname is 13 MattChwalowski. I amwithEdisonElectric Institute. 14 I was a participant in the development of the 15 guidelines. I was a member of the technical 16 committee. 17 I would like to address the issue also of 18 site versus source energy, which came to me as a 19 surprise this morning that so much time was spent on 

### 20i that, and the reason is because the technical 21 committee very early in the development of technical 22 guidelines decided on the use of site and that issue, 23 while there are many contentious issues, that issue 24 didn’t get a lot of prominence later on. 25 Additionally, I’d like to make it clear 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIflEC;TRANSCRIPTIONS105 1 that DOE policy with regard to, for example standards 2 development, is to use site energy in the appliance efficient standards development, and the purpose is 4 for the

-- and stability over time. Source-based 5 methodology does not offer that 6 To give you a good example, state of the 7 art power plant in the 1970s had an efficiency of 8, about 35 percent. In 1995 it’s 60 percent. National 9 averages, which was suggested by the gentleman from 10 theAmericanGasAssociationrepresentingAmericanGas 11 Association, and I would say that would be very 12 disturbing to use that even as default values. The 13 reason is that electricity price varies by 400 14 percent, between three to 13 cents. And for example 15 inWashington State, ifsomebodyuses aheatpump that 16 costs, let’s say, $300.00 to operate, with the use of 17 average value of electricity, the rating would be 18 based on $800.00 of operation and that very simply 19 does not reflect the reality. It would also 20I disadvantage off-peak programs which the electric 211 utility industry conducts to

-- peaking. 22 Also, I think we should not confuse the cost ofBTUversus the cost of service. These are two 24’ distinctlydifferentquantities. Twomore issues. In 25 the development of guidelines to prevent fuel 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS106 1 substitution gaining. A house that is rated is based 2i on the reference to house meeting the code using the 3 same fuel. It is a very important concept. We did 4 it. 5 Lastly, we insisted in the development of 6 guidelines that the price, electricity cost that a 7 customer pays, be prominently displayed on the label. 8 That was a very significant condition because this is 9 what the customer sees. So all this discussion about 10 customer being confused I think is a moot point. 11 Thank you. 12 CHAIRMAN BOULIN: Thank you very much. 13 Do we have any questions from the panel? 

# 14h Thank you. 15 

### I MS. DEAN: Do you have those comments in 16 writing, Matt? Is that typed? 17 MR. CHWALOWSKI: When I came this morning 18 I came surprised, so I have them scribbled them. 19 MS. DEAN: Also, the Chair made a comment 2 Oj if they wished to follow up their comment in writing, 21 it would be

-- 22

# I MR. CHWALOWSKI: I would be delighted to 23!i make a written comment out of my statement. 24 CHAIRMAN BOULIN: Thank you. 25 Wehave an additional rebuttal statement, 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO:TRANSCRIPTIONS107 1 but let me handle this by just going down from the 211 top. Tom Farkas, do you have any rebuttal 

# 41 statements that you’d like to make? 5 MR. FARKAS: No, thank you. 6l CHAIRMAN BOULIN: Cheryl DeVol? 7 MS. DeVOL: No, thank you. 81 CHAIRMANBOULIN: Okay, our next rebuttal 9 statement will be from Bob Egan. 10 MR. EGAN: I’m sorry this has to sort of 11 focus as much as it does on site versus source, but I 12 think it obviously should because of the dollars 13 involved. 14 Very briefly, AGA and other people who 15 were members of the technical committee and on the 161 board vehemently opposed the use ofthe site standard 17 during the development ofthe guidelines. The reason 18 thatwe state in this process was that theprocess had 19 to go forward, and we believe that, as I said, 201 earlier, the guidelines are designed and are good 21 enough that the change can be made relatively quickly 22 to a source-based standard and that is more accurate, 23, and that’s why we, in general the phrase I’ve used 241 around our office, and I think we’ve mitigated the 25 harm caused by the site standard. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS108 1 I still think people are told about stars 

# 21 and aboutpoints, andtheway it is currently designed 3 with the site standard, they are being misinformed 4 about the true cost of energy. You get additional 5 points based on BTU reductions, it has nothing to do 6 with the value of those BTUs when you get your actual 7 BTU points. Excuse me, let me restate that. The BTU 8 reductionis thebasis whywhich additionalpoints are g scored. Youdo notnecessarilyhave sufficientdollar savings to justify those additional investments. 11 As the gentleman from the EEl mentioned, 12 he said “averages,” we are explicitly stating you 13 should not be using averages if you can use local 14 conditions. If you have a situation in the Pacific 15 Northwest where there is extremely cheap electric and 16 the generation mix is radically different than the 17 Midwestwhichhas a great deal ofcoal, you don’thave 18 to use national average, you use local conditions. 19 DOE knows how to do this methodology, the local and 2011 state people know how to do this, so we are not 21h proposing that national averages are the sole 221’ solution. Again, use local energy costs, that’s the 23, bestinformation for someonewho lives in aparticular 24I location. 25 And, again, BTUs are not relative to 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS109 1 consumers, it’s

-- confusion. What is most relevant 2 and most important are dollars. Thank you. 3 CHAIRMAN BOULIN: Thank you. 

# 4 Ron Burton, do you have any rebuttal 5 statement? 6 MR. BURTON: No, Mr. Chairman. 7 CHAIRMAN BOULIN: Carson Culbreth? 8 MR. CULBRETH: No, Mr. Chairman. CHAIRMAN BOULIN: Malcolm, I have a late 10 question for you, and we may either be able to answer 11 it here or I would ask you perhaps to respond 12 subsequently. The 50,000 to 60,000 homes, who did 13 them, was arepresentativehouseconsulted, thenumber 14 ofhomes it represents, what portion ofthese werenew 15 homes? Andyou may not have that informationwithyou 16 from your previous comment. 171 MR. VERDICT: I don’t have that level of 18 detail. If the Department wishes to know the answer, 19 I’ll try to supply it. If the individual would like 20 to contact me directly, I would attempt to answerthat 21 as well. Those are a mixture of

-- those ratings are 22 both scale and certified and they’re both utilities, 23 they areindependentratingorganizations ofprimarily 24I not for profit, and even some for profit, and by far 25 and above most of those, the point representing, 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS110 1 giving that figure out is that through the consensus 2 process and being very inclusive in making sure that 3 everybody from the rating industry was adequately and 4’ duly represented, by far and above, the vast majority 5 ‘ of the people who are

-- business have had an 61, opportunity and, if they’re willing or even half way 7 participating inthatconsensusprocess, sothat’s the 8 point of the magnitude of the numbers. 9 And albeit whether it’s 40,000 or 60,000, 10 although I know it’s in the 50,000 plus range, those 11 people who have been involved in this process want to 12 make sure that the Department clearly understands 13 that. I thinkthey understandthat. Some, it’s not-- 14 obviously everyone does not “satisfied,” but I think 15 thattheprincipal consensus intheprocess thatwe’ve 16 all participated in, not just this one, but other 17 similar processes that, you know, the ultimate goal 18 justifies all ofthis participationand sitting atthe 19 table. 2O CHAIRMAN BOULIN: Thank you very much. 21W Doris Ikie, do you have any rebuttal 221 statement? 

## 2311 MS. IKLE: At the risk of losing both my 24 gas and electric testimony, I’d like to get into this 25 debate a moment. I think this is something that 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS111 1 everybody has given a lot of thought to, including 2i myself, and I think that ifyou take the suggestion I 3 have that every rating has to have prominently 4 displayed the estimated cost, the dollar figures, I 5 think you will have a compromise that both can live 6 with. In otherwords, you do rate the home. There is 7 a lot of differences between the rating of a home and B the cost of a home. 9 And to mention some of the more obvious 10 ones, if you live in North Dakota versus San Diego, 11 the costs are going to be different. If you live in 12 a 4,000 square foot house as opposed to a 1,000, you 13 know, there’s all kinds of differences. When we’re 141 looking at rating, we’re looking at efficiency of 15 specificparts ofthe house. We’renot looking at the 16 cost. When we’re looking at the cost, and that is 17 whatmost customers are interested in and that is what 18l they’re going to be looking at. And, if i may 19 suggest, it is what bankers are going to be looking 20 at. It’s those dollars that are the most important 211 thing. And those will reflect the relative cost of 22 the fuel, whereas the rating will show for this type 23i of fuel how efficient it is. 24 CHAIRI1AN BOULIN: Thank you very much. 25 Malcolm, did you have any rebuttal 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,DC.20008 (202)797.2525 VIDEO;TRANSCRIPTIONS112 1 statement that you wanted to make? 2 MR. VERDICT: No, I do not, Mr. Chairman. 3 CHAIRMAN BOULIN: With that, I will 4 adjourn the hearing until 1:00 o’clock at which time 5 we will have a statement by the National Association 6 of Home Builders. Bob Basile will be giving that 7 statement. 8 (Whereupon, at 12:00p.m., theproceedings 9 in the above-entitled matter were adjourned to 10 reconvene this same day at 1:03 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO:TRANSCRIPTIONS113 1 A-F-T-E-R-N-O-O-N S-E-S-S-I-O-N 2 1:03 

### p.m. 3 CHAIRMAN BOULIN: Okay, we have a final 

# 4 speaker. Bob Basile is here withus this afternoon to 5 give remarks from the National Association of Home 6 Builders. 7 Bob, if you would please proceed. 

## 81 MR. BASILE: Good afternoon. Thank you. I understandyou had to reconvene formycomments, and 

## 1011 I certainly appreciate you doing that. I only wish 11 that I had slides and pictures to make it more 12 entertaining. 13 My name is Bob Basile. I’m Chairman of 14 the Energy Committee at the National Association of 15 Home Builders. I am here representing 185,000 member 16 companies oftheNationalAssociationofHomeBuilders 17 and to comment on the notice of proposed rulemaking 18 for voluntary home energy rating systems guidelines. 19 NAHB supports safe, affordablehousingfor 

# 20 h all Americans. Our members are in the business of 21 providing thebest shelterhomebuyers canboth afford 22 and desire. NAHB members have been in the forefront 23! in providing energy efficient homes for today’s 24 buyers. The average new home today is twice as 25 efficient as those we built in 1970. And we support 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS114 1 voluntary programs that encourage energy saving 2 construction techniques that add to the efficiency of 3 our product. 4 Ourbuildermembersbuildwhathomebuyers 5 want and can afford and we build at a minimum to the 6! prevailing building codes adopted in our local 

# 71 jurisdictions. Most homes are purchased utilizing 811 mortgages providing 70 to 90 percent of the cost, 9 therefore mortgage financing is the key element in 10 assisting a buyer in the purchase ofhis home. Until 11 the consumer, our home-buying customer, canbe helped 12 with mortgage financing to afford added energy 131 efficient features, there will be relatively small 14 percentage of homes that include such features. 15 NAHB has avital interestin andhas taken 161 an active role in the activities surrounding the home 17 energy rating systems issues for a number of years. 18 Our involvement dates back to the national 19 collaborative on HERS and energy efficient mortgages 20 sponsored by DOE in coordination with HUD which was 21 held in 1991 and 1992. When the members of the 22 collaborative decided in 1992 that they should issue 23pi their report and end their schedule of monthly 24 meetings, all the participants favored a continuation 25 ofthe development ofprograms to encourage increased 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS 

# I115 1 residential energy efficiency. A permanent council 2 devoted to this mission was thought to be the best 3 vehicle for this task and this led to the formationof the HERS Council. 5 TheHERS Councilwas formedto address the 6 issues involved with developing a national HERS/EEMS 7 accreditation program in a forum where a broad 8 spectrum of affected groups could participate. The 9 Council’s mission is to, as we all know “increase 10 energy efficiency in housing by serving as an 11 education and research resource and by establishing 12 guidelines fortheuniformityofHERS andestablishing 13 a voluntary program for accrediting systems and 14 certificationtools thatassignhomeenergyefficiency 15 rating to facilitate access to energy efficient 16 mortgages and other programs.” 17 The council has approximately 100 members 18 that represent the broad range of industries that are 19 involved in energy, housing and finance. NAHB 20 participated in the early development of the council 21 andhas continuedto supportthe council over thepast 22 three years with a representative on the board of 23I, directors. Ourrepresentativehas served as the first 24 Secretary ofthe HERS Council Executive Committee and 25 for the pasttwoyears as avice-chairofthe council. 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO TRANSCRIPTIONS116 1 In the course of the council’s work the 2 1992 Energy Policy Act was passed. This law required DOE to develop a set ofuniform guidelines for rating 4 the energyefficiencyofhomes. Wisely, DOEturned to 5 the council to assist in this task, andwe applaudDOE 6 for supporting the work of the council and the effort 7 to make the council successful by the dozens of 8 participants from the broad spectrum of groups that 9 constitute the council’s membership. 10 The development of the HERS Council 11 guidelines that constitute the guidelines in the NOPR 12 we are here to support today, has been an example of 13 the best private/public partnership and consensus 14 process wehave everbeen involved in. The guidelines 15 are the result of countless hours of work by experts 16 in rating energy systems operation and housing energy 17 efficiency, alongwiththe input fromprofessionals in 18 government and industry. 19 All the parties involved in this process 2O came to agreement on the content of the guidelines 21W through an exhaustive process of consensus building 22 and responsiveness to the concerns of those most 23I affected by a set of national guidelines for rating 241 the energy efficiency of homes. The council did not 25 submit the guidelines to DOE for publication and the 

### SAG,CORP 4218LENORELANE.N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS117 1 NOPRuntil consensus had been reached on the contents 2 and, in 

### fact, the council is unanimous in its support 3 forthe guidelines in its final form. NAHB was apart 4 of that unanimous vote, as were council members 5 representing rating system providers, primary and 6 secondary mortgage lending organizations, gas and 7 electricutilities, realtors, consumerorganizations, 8 and all the other groups represented on the council. 9 NAHB supports the HERS Council guidelines 10 and the NOPR that you are hearing testimony on today. 11 We supporttheseguidelinesbecausetheyrepresentthe 12 best ideas of the best experts involved with these 13 issues. But more importantly, these guidelines have 14 been developed in a process that successfully 15 addressedthemajorconcerns ofthosemost affectedby 16 the guidelines. This includes the concerns of 17I existing rating organizations that will address you 18 today, or have already addressed you today, and who 19 may be critical of the guidelines and of the council 20 and its ongoing mission. 21! During the guideline development, as in 

## 22h any difficult undertaking where competing interests 23 conflict, manycompromises hadto bereached. Inmost 24 cases the compromises successfully addressed the 25 concerns of existing rating organizations. This was 

### SAG,CORP 4218LENORELANE.N.W. WASHINGTON,D.C.20008 (202)797-2525 VIOO;TRANSCRIPTIONS118 1 underscored by the unanimous vote to approve the 2 guidelines at the HERS Council Board of Directors. 3 NAHB believes that DOE should keep this fact in mind 4 when making decisions about what is included in the 5 final rulemaking on these guidelines. More 6 importantly, we believe DOE should continue to work 7 with the council on any revision of the guidelines as 8 a result of this NOPR process and ongoing revisions 9 that will become necessary as the guidelines gain the 10 widespread acceptance we hope and expect that they 11 will. 12 The guidelines have addressed the two 13 major concerns of home builders: One, that home 14 energy ratings remain voluntary; and two, that 15 existing homes represent the largest energy using 16 segment of the housing market. NAHB is now and will 17 continue to be a supporterofprograms to increasethe 18 energy efficiency ofhome andwewill push fortheuse 19 of the HERS Council guidelines as the basis of any 20 existing or newly formed programs in the market. I 21 can assure you that despite some of the comments that 22 you have heard today, NAHB could not be supportive of 23 theguidelines ifourbuilders thought thattheywould 24 become mandatory. 25 We think that this will help speed the 

### SAG,CORP 4218LENORELANE.N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCUPTIONS119 1 move towards uniformity in rating system, rating 2 energyuse sovital to the success ofvoluntaryenergy 3 efficiency efforts by everyone involved. 4

## 1 NAHBurges DOEtocontinue support forthe HERS Council. The council has performed a critical 6 service in developing these guidelines and this 7 accomplishment should never be underestimated. 8 However, in order for home buyers to demand more 9 energy efficiency, therefore driving the market and 10 making more efficient homes a top priority for home 11 builders, realtors, appraisers, lenders andother, the 12 development of guidelines is only the first step. 13 These guidelines mustbe used andbecome apart ofthe 14, home buying process nationwide. For this to happen, 15 we must address three other critical needs. 16I First, a system of accrediting rating 17 systems using the voluntary guidelines must be 18 developed. This is critical because the financial 19 community has told us it must have a single source 20 accreditation before the necessary uniformity can be 21J achieved. What form this accreditation system will 22 take is unknown at this time. However, by using the 23i power of the HERS Council and the consensus process 24 embeddedin its structure, this problemcanbe solved. 25 It will require everyone, both within and outside the 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TflANSCRIPTIONS120 1 council, to participate and find solutions and 2 compromises. Just like the development of the 3 guidelines, the accreditation system development can 4 be accomplished and NAHB expects to be a major 5 participant in the process. 6 Second, certification of the computer 7 tools usedby rating systems mustbe done. Again, the 8 housing finance organizations have told us this is 9 necessary so that they have confidence in the ratings 10 and the energy savings represented by the output of 11 the computer rating software. Like the accreditation 12 problem, the council has the capacity to provide the 13 solutions to this problem and NAHB will work with the 14 other interested parties to reach a consensus on a 15 certification process. 16 Finally, with the guidelines and a system 17 of accreditation and certification in place, we all 18 mustworkto findnew financing alternatives thatwill 19 encourageincreasedenergyefficiencyinhousing, both 20 existing and new. this is the toughest problem of 21 all, but can be solved if we all commit to work 22 together to find solutions. We simply must find 23 mechanisms to get home buyers and home owners to 24 consider energy efficiency in their decision making 25 process. And we all recognize that without 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS121 1 incentives, through financing alternatives, thisjust 2 will not happen. 3 NAHB wishes the Department of Energy to knowthatwe fully supporttheHERS Council guidelines 5 represented in theNOPR. We encourageDOE to finalize 6 the guidelines as they appear in the NOPR. NAHB will 7 also submit more extensive written comments on the 8 NOPR. We furtherencourageDOE to continue to support 9 the efforts of the HERS Council to reconcile the 10 remaining issues so that the guidelines will become 11 the benchmark for energy efficiency financing and the 12 market transformation we all want. 13 Finally, timingis critical. Weencourage 14 DOE not to waste any more time on further fine-tuning 15 of the guidelines because: one, these guidelines 16 already includeprovisions forongoingmodifications; 17 two, achieving the ultimate result, consumer demand 18

### 1 for more energy efficient housing, has a long road to 19 ravel before itbecomes areality; andthree, eachday 20 approximately 13,000homes, bothnew andexisting, are 21 purchasedwithout any significantperceivedvalue for 22 energy efficient features. That’s more than 13 23 million homes purchases since the HERS/EEMS 24 collaborative and the HERS Council have been 25 operating, and more than one million homes since the 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS122 1 publication of the NOPR in the Federal Register. It 2 is essential to put in place, as soon as possible, 3 these guidelines which form the basis of the strategy 4 outlined in my comments today for transforming 5 consumer demand into home purchases. 6 I’d be happy to answer any questions or 7 defer to my colleague. 8 CHAIRMAN BOULIN: Than you very much. 9 Do we have any questions from the panel? 10 MR. MACKIE: Mr. Basile, on the issue of 11 accreditation, would you agree that in order to have 12 accreditation we must have de-accreditation? 13 MR. BASILE: I don’t think I understand 14 what de-accreditation means. 15 MR. MACKIE: Okay, inorderto accreditan 16 organization we have to have within an accreditation 17 a set ofguidelines, ifthere is such a thing, that if 18 you’re not performing at a certain level for your 19 accreditation, you’ll be de-accredited. Which then 2O has a tendency to police, have self-policing

-- 21 MR. BASILE: Well, since, you know, I 22 suspect as a builder, if you’re looking for my 23 comment, the more important comment probably wouldbe 24 from people in the mortgage finance industry, the 25 secondarymarket FannieMae andFreddieMac, whowould 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS123 1 be relying on the accreditation process. And I 2 suspect, unless youhad away ofpolicing theprocess, 3 it would be difficult for people to rely on what is 411 coming out of the rating organizations. But I would 5 give more credence to whatever the secondary market 6 felt that they needed. We need financing, financing 7 needs accreditation, so we support both. 8 CHAIRMANBOULIN: We have a question from 9 the audience. DavidRinebolt asked, does NAHB believe 10 that compliance with the CABO Model Energy Code 11 confirms that ahome is energy efficient and therefore 12 shouldbe used as a reference house in the NOPR and as 13 a trigger for energy efficient financing? 14 MR. BASILE: Let me just

-- I think the 15 simple answer is yes. 16

# I CHAIRMAN BOULIN: Thank you. 17 Any other questions? 18 MS. ZIMMERMAN: Which version? 19 MR. BASILE: Sorry? 20i MS. ZIMMERMAN: I’m sorry, which version 21 of CABO would that answer refer to? 22 MR. BASILE: I’m going to turn to my 23 expert and see whether it’s ‘92 or

-- NAHB supports 24 the energy efficient mortgage that’s now available, 251 although it is not usedvery much, but it uses the ‘92 

### SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;THANSCRIPTIONSI 

### 124 1 model

-- the ‘93 and the ‘95 editions will also be a 2 triggerbecause they are equally as stringent as ‘92. 3 CHAIRMAN BOULIN: Thank you. 4 I Are there any further questions? 5 Thank you very much for your time and 6 coming here. 7 MR. BASILE: Thank you. 8 CHAIRMANBOULIN: I appreciate all ofyour 9 comments here and your statements. And with that, I 10 will close the hearing. 11 (Whereupon, at 1:22 p.m., theproceedings 12 in the above-entitled matter were concluded.) 13 14 15 16

# 9

20 21 22 23 24. 25 

### SAG,CORP 4218LENORELANE,N.W. WASHINGTON,D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS125 CERTIFICATE

This is to certify that the foregoing transcript in the matter of: Hearing on Proposed Voluntary Home Energy Rating System Guidelines (Docket No. EE-RM-95-202) RIN 1904—AA 74

Before:

Date:

Place: U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy

October 17, 1995

Washington, DC

represents the full and complete proceedings of the aforementioned matter, as reported and reduced to typewriting.



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