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

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1 P-R-O-C-E-E-D-I-N-G-S

2, 9:10 a.m.

3 CHAIRMAN BOULIN: Good morning, ladies and

4h 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 proposed rulemaking to establish voluntary home energy

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

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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 of the 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 when possible. I particularly ask that you

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

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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 Questions will be asked only by members 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 a more 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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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. Their phone number is area code (202) 586-6020.

6 Written comments should be addressed to the Department

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 that individual believes to be confidential and exempt

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.

25 I We appreciate the time and effort you have

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1 taken in preparing your statements. We are pleased 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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1 nationwide and generate 79 percent of all electricity

2 produced in the country.

3 Our industry has a long history of

4 promoting energy efficiency, and we have a substantial

5 interest in the subject of home energy ratings and the

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 collaborative on home energy rating systems and energy

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 of energy 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

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1 rating systems, and this was a major recommendation

2 that came out of the collaborative. So EEl joined DOE

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 interested parties. EEl serves on the Board of

9 the home energy rating 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 of the council, utilities represent 30 percent of the

15 membership.

16 EEl at this time would like to commend DOE

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.

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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 it provides a single method so that consumers and

17 others have consistent information. A single method

18 can be adopted anywhere. It’s clearly superior to a

19 patchwork of different schemes. While some variations

20j1 reflecting unique local conditions are necessary, the

21 key aspects of the method must remain unchangeable 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

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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 include more and more utilities as lenders.

11 This aspect is very important to encourage the

12 proliferation of energy efficient housing and also the

13 improvement, energy efficient improvement of existing

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 transitioning from rebates and incentives to financing

22W of energy efficiency improvements.

23h We feel that the guidelines strike a

241 proper balance between providing flexibility and

25 setting rules that are necessary to make such a rating

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1 system comparable and to provide necessary

2 benchmarking information to consumers. The guidelines

3 proposed by DOE provide a solid foundation for a

41U rating system because they are based on a nationally

5 recognized codes and standards such as ASHRAE and CABO

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 you what 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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1 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

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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 recommend that the process on accreditation be

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 Board has 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 a broad-based public/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 we view DOE’s social responsibility is

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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 formula or an alternative formula can be provided with

17 the guidelines without modifying the overall

18 methodology and those features.

19 CHAIRMAN BOULIN: Thank you.

20 Regarding the missing electric consumption

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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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 CHAIRMAN BOULIN: Thank you. I don’t have

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.

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1 In the interest of brevity, 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 On paper, Energy Rated Homes of America is

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 by promoting 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 market development and rated over 40,000 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

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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 of then Arkansas Governor Bill Clinton and the

9 Arkansas Energy Office, as a vehicle to expand the

10 HERS concept throughout the country. Since that time

11 the Energy Rated Homes of America 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 for HERS program operators, public and private

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 of energy efficiency rating to residential

12 buildings.” Congress included this section in the 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! From the experience gained by implementing

17 home energy rating systems, this group of advocates

18[ felt that further growth of the concept, and the

19 realization of huge potential energy savings, would be

20 easier to achieve if support and resources could be

21 generated at the national level. The vision was that

22 national mortgage market guidelines might be made more

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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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 order to maintain the 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 increase the demand for home energy ratings and energy

21 efficient mortgages.

22 While the proposed U.S. Department of

23 Energy guidelines for home energy ratings are labeled

24 as “voluntary,” in fact they are intended to become

25 mandatory in that the Department of Energy expects the

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1 secondary mortgage market to adopt them as minimum

2 requirements to participate in their energy efficient

3 mortgage programs.

4 This presents the potential for another

5 unfunded mandate on the private sector in that the

6 already undercapitalized operating home energy rating

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 If the proposed guidelines are adopted, 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 guidelines without the benefits of potentially

19 realizing any off-setting value added in the

20 marketplace.

211 As the Director of a State Energy Office

22 with an operating rating system, I can assure you that

23 we would be hard pressed to find the funding to make

24 these changes. Additionally, new guidelines would

25 create confusion in the marketplace when the buildings

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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 consider the best interests of the existing

7 HERS programs in its decision-making process with

8 regard to this notice of proposed rulemaking

9 To that end, Energy Rated Homes of America

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 implementation of home energy rating programs in their

18 states, they have over five decades of hands-on

19 experience with the technical issues involved in the

20 ratings of homes, 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 institutional knowledge of home energy ratings in this

25 nation.

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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 outlines more than 13 different comments that resulted

6 from the committee’s study of the proposed guidelines.

7 I would also like to make you aware that more detailed

8 technical comments will be filed by October 23rd 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 of America is strongly

16 opposed to setting the break point for a five star

17 rating at 30 percent over the Model 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 Indiana the home building industry uses 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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1 thousands of consumers economically impacted simply

2 because the extra money they put 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 that the point thresholds above four stars be changed.

8 We also recommend adding a four star plus level, and

9 moving the five star plus level up the scale. We feel

10 this change is necessary because the proposed scale

11 does not provide enough definition above the four star

12 level to reward builders for their truly energy

13 efficient efforts, and would make it too easy to reach

14 a coveted five star rating. In addition, the

15 longevity of the rating scale would potentially be

16 limited as homes become more efficient over time. The

17 rating scale needs to be able to stand the test of

181 time by accommodating the trend toward home energy

19 efficiently in a meaningful fashion. Meaning that, 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

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1 highlight on behalf of the ERHA is the inclusion in

2,! the rating procedure of the ability to obtain credit

3 for any permanently installed appliances that are more

4 efficient than those in the reference house, which are

5 set at the NAECA standards, including, but not limited

6 to, light fixtures, dishwashers, ranges, ovens and

7 pumps.

8 1 Awarding rating points based only on space

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 construct more thermally efficient houses 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 making the following recommendations to the Department

25 of Energy on these voluntary guidelines.

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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 For the reasons outlined above, ERHA feels

9 that “real world” data needs to be collected on the

10 effects of the proposed guidelines on existing rating

11 systems. It was certainly not the intent of Congress

12 that the voluntary guidelines hamper the effectiveness

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

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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 their needs. This may mean that 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 intent of Section 102 of EPACT on this

13 issue is clear, the guidelines are to be created to

14 “enable and encourage” the use of energy 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 for negotiated 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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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 of the

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 system in the past, a more 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 of their past achievements in

24 this field. We are also eager to build on that

25 success by expanding the market penetration of our

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1 existing programs and helping others to start with

2 programs. We appreciate this opportunity to 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 do have a question,

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 greatly with the other members of the ERHA and this is

2011 a compilation of a lot of different opinions to come

21 to a final document. So, if I could, I would be 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.

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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: -- do you have 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 of what are recommended in the

15 NOPR, and how those may compare and contrast with what

16 we have existing in the field right now. 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 you have 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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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, from what I understand. And by 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 indeed be 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 --

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1 MS. DeVOL: Yes.

2 MS. DEAN: -- would this, would your

3 concern be removed if the mortgage market accepted the

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: That might get complicated and

8 cumbersome. That would be the fear, but it would be

9 something that we would have to address. But I would

10 think the flexibility to respond to differences in the

11 home energy rating systems and differences to simply

12 in the climates and how a rating system has 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, if the mortgage markets did not eliminate using

21 other rating systems that they thought they were

22 technically able --

23 MS. DeVOL: Yes, if you let the field open

24 not only --

25 MS. DEAN: -- so even if we had used

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1 these, but there were still, you know, still voluntary

2

3 MS. DeVOL: -- not precluding the others4 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, if I might. Your comments 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?

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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 and the current guidelines that would cause that 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 of the 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 their promotional efforts with the builders that they

19 have going now.

20 I know that just in man hours alone, the

21 marketing that my energy rated homes individually does

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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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 undertaking just for us, 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 larger programs than we 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 of the 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?

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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 rated home 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 in my office, and we definitely would not

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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1 that. It is the need to try to be responsive, you

2 know, to those folks that do go the extra mile 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 our best

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?

22h 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 that has been pretty consistently sounded by the other

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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 of experience, can you not draw back upon your

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: An expedited completion of the

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.

23J MS. DeVOL: Yes, that is a possibility.

24 Of course there is a lot of present experience, as I,

25 you know, indicated in my remarks. I definitely would

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1 have to take that back 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

4 I 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 on behalf of the American Gas

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 of the gas industry

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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 on energy, 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

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1 years on the HERS Council on the technical committee.

2 And I have only praise for the efforts that have been

3 made by people on this committee. The council and DOE

4 brought together a very broad range of expertise from

5 industry and government. I think the people in this

6 process have been volunteers, and we’ve had to justify

7 why we were spending the time away from our normal

8 activities, and I think it was very easy to justify it

9 based on the support we got and the people who 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 the need between the accuracy of a rating

16 and the actual cost of the 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

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1 partnership over the last few years. I think that’ s

2 probably the most over-used phase, but I truly believe

3 this has been that. It’s been well worth my 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’m proud of everybody on 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 think other people

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 multiple and confusing messages that are being sent to

231 consumers. There are stars, there are points, there

24 are dollars, there a variety of mechanisms to try to

25 get people to focus. And with that cluttered message,

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1 the goal of the council and I think the goal of the

2 technical committee was to establish those guidelines,

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 of measurement and reliability of

8 the rating systems. I think the 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 and require existing programs that are less

24 successful to improve. The HERS technical committee

25 and the council, I believe, rely on nationally

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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. And we did not go beyond the scope of what

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 issue that was addressed by at the technical 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 might note that at page four, a footnote

17, of my 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 correct that, 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

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1 occurs from the production of electricity prior to 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 a whole lot

5 of time because I think the people at DOE and this

6 room are generally familiar with this discussion. But

7 if you compare electric versus other fuels, the

8 problem that occurs is gas, natural gas, oil and other

9 appliances are very efficient in the home because of

10 the total BTU consumption. Electric may have

11 appliances that consume very few BTUs 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 insufficient emphasis on the cost of that energy. 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

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1 standard, it is our position that you may

2 fundamentally encourage both 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, and this 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 The problem is, is that the cost of energy

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 certainly my concern is that, that may or

24 may not be cost effective to the consumer. Points are

25 based on BTU reductions. The cost of those BTUs is

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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 that we are encouraging people to look at something

9 that’s not relevant. What is most relevant 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 cost of electricity on a national average is closer to

18 about $25.00. They’re both down slightly, but that is

19 an order of magnitude has existed for quite 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

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1 this issue in other areas and the first guidelines 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 measure efficiency. If you want to measure efficiency

8 and you believe it is a national, a desirable national

9 goal to save energy, we believe you have to go back to

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 reflect the source-based BTU methodology. We strongly

20 believe that this implementation could be done quickly

21 by DOE and HERs. This is something DOE and many 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 an unduly

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1 delay.

2 One of the 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 their models. I believe that DOE certainly has 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 or in terms of an established methodology that

13 can be done.

14 I also believe, and have knowledge, that

15 virtually any state commission, public service

16 commission around the country, could also provide that

17 calculation without a great deal of difficulty from

18 publicly-available sources. So I must stress that to

19 the extent the if source-based methodology 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 think they are vastly superior to

241 the site-based method.

25 And in conclusion what I would like to say

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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 consistent with the stars. This is similar to 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. Let me 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 if two houses, which were 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 lower rating and/or it could result in having

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.

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1 CHAIRMAN BOULIN: But will it have a

2 different rating?

3 MR. EGAN: The way they are between the

4 referenced home and they are compared against the same

5 fuels, so it is possible that they would 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 CHAIRMAN BOULIN: --situation, that would

14 help us gain perspective on this.

15 MR. EGAN: For a four star house that uses

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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1 will as a practical matter have to get to a peak in

2 the program, get to a certain threshold, to make those

3 invest --

4 CHAIRIVIAN BOULIN: I understand what you’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, by using source BTU5 and prominently posting

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’t have gas, you’re still getting a price 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. If you comply with

3 the HERS, if you choose, it is a voluntary program, if

you choose to comply with the HERS guidelines, I do

5 not believe there is any additional undue burden posed

6I on providers to switch to a source-base method. The

7 expertise is here at DOE, 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 additional burden imposed upon a member who chooses to

12 accept the minimum guidelines established by DOE.

13 MS. DEAN: Your concern has to do with the

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 to be told spend $5,000.00 to install windows to

25k get those additional points on ETUs, and to sort of

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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. If you want to do

7 that, it’s your choice, but we should not be telling

8 homeowners and lenders that it is the prudent thing to

9 do based on cost. It does save BTUs, it ignores cost.

10 A source-based methodology is fundamentally more close

11 to providing the right price signal to consumers and

12 to lenders.

13 MS. DEAN: At the beginning of your

14 presentation you 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

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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 of the art

8 at this point in time. I think the guidelines,

9 certainly the goal of the 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, if you’ve come in since we started, if

16 at the break you’d come by 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

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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, voluntary initiative. The council 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 certified raters; city government officials; consumer

24 groups; contractors and retrofitters; energy and

25 environmental groups; HERS providers; primary and

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1 second mortgage community members; product and

2 equipment manufacturers; the real estate industry;

3 state energy offices; and utilities.

4 Representatives from the HUD, DOE, and EPA

5 have participated regularly in the working sessions of

6 the council. For the 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 and to promote the development of

22! innovative financing products.

23 The secondary mortgage markets response

24 and support of this initiative is critical. They have

25 stated categorically that only when a single measuring

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1 stick is available can they participate fully in the

2 initiate. Without their full support there can be no

3 national success. Small, isolated programs have been,

and may continue to be developed. We support these

5 programs. But they will not enjoy the benefits of

6 support from the 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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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 there may be some technical 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 The HERS Council technical committee plans

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 standing committee of its membership on implementation

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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-point accreditation procedures for

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 or private, utility or builder-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 which remain ahead. The

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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 from HUD/DOE pilot 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 the beginning. The HERS Council believes that working

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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1 be a living up-to-date document. I’d like to get your

2 sense of how you envision the updating process that

3 would ensure that there are changes that would balance

4 the uniformity of the time with the updating process?

5 MR. BURTON: The HERS Council technical

6 committee, as I mentioned in my statement, is a broad7 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 conjunction with DOE and other

16 groups, and any other interested parties that would be

17 interested in participating 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: Let me try to rephrase 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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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 if it 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 a reference house might be above the HERS 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

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1 systems want to make to upgrade their systems, make

2 them better than the minimum because 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 CHAIRMAN BOULIN: I would like, before we

15 start, once again to remind you that if you do have

16 questions of a 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, if you

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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1 Carson D. Cuibreth. I’m Director of the North

2 Carolina Energy Office, and I’m here today on behalf

3 of the National Association of State Energy Officials

4 which represents some 50 state and territorial energy

5 offices across the country that have been in existence

6 since the mid 1980s.

7 I must tell 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 many years ago on behalf of the 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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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 of the mechanical issues.

7 You have a lot of experts who can depict the merits of

8 some of the technical portions.

9 Now, I would like to read my testimony at

10 this time, or portions thereof, which you already have

11 a copy of. The idea of using mortgage financing to

12 fund energy efficiency and renewal energy retrofits in

13 existing structures and to fund the inclusion of these

14 same technologies in new construction has 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 way around the primary barrier to increase deployment,

25 higher first cost. Admittedly, many energy efficient

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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 state housing financing agencies and

11 other mortgage 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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1 recognize energy efficiencies, to increase the market

2 penetration of home energy rating systems nationwide,

3 critical to this effort is the need to expand the

4 availability of mortgages and other financial products

which can be tied to energy efficiency and to expand

6 the number of markets where home energy rating 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 of HERS/EEMS concept. Voluntary standards can

13 accommodate the need of primary and secondary lenders

14 to have a standardized rating product, 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 Instances of self=regulation abound in the

19 service sector of this country. It is NASEO’s belief

20 that a voluntary structure overseen by the rating

21 industry, the States, and the financial community will

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 of the Energy

25 Policy Act provisions which authorize this rulemaking.

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1 Therefore, NASEO’ s board has unanimously adopted three

2 resolutions regarding the guidelines.

3 And at this point time I would like to

4 briefly go over those. I’m hoping 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 it resolved that the U.S. Department of

14 Energy withhold the issuance of the final voluntary

15 guidelines for home energy rating systems contained in

16 the recent notice of proposed rulemaking until a work

17 plan for field testing of the 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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1 systems. These issues are detailed in the testimony

2 provided by the Energy Rated Homes of America 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 analysis prior to implementation. State

8 energy offices were involved in the negotiation of the

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 field work program and nine months will be required to

14 obtain adequate data. NASEO has been requesting field

15 testing of the guidelines since this Spring. We would

16 like to work with the Department in designing the work

17 plan for field testing and in evaluating the results.

18 It is critical that the NOPR be delayed 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

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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 of HERS

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 a number of years 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, NASEO Home Energy Rating Systems

15 Task Force is authorized to develope interim

16 guidelines for home energy rating systems to provide

17 national uniformity and address the secondary mortgage

18 marketvs need for national technical protocol for home

19 energy rating systems.

20 The board opted for NASEO to develope its

21 own guidelines after identifying elements of the HERS

22 Council guidelines which conflicted with the operating

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

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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 Our third resolution, resolved NASEO 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

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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 financial community while controlling its own destiny.

13 We agree with the intent of Congress as evidenced by

14 the EPACt provision that this emerging industry should

15 not be controlled by a federal agency or its surrogate

16 and that the guidelines should be truly voluntary.

17 We believe that the approach to guidelines

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 we have undertaken in the States over the past

23 decade to develop home energy rating systems with

24 homebuilders, lenders, realtors, appraisers, utilities

25 and consumer groups. Individuals and organizations

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1 have devoted thousands of hours to developing the 15

2 state-based systems. We would be remiss if we did not

3 adequately represent these views in a national policy

4 debate that often seems remote and irrelevant to those

5 actually involved in building, selling, financing and

6 appraising homes which are efficient and increase the

7 comfort and affordability of homes for our consumers.

8 NASEO therefore recommends that the

9 Department take the following actions:

10 Delay the issuance of the final voluntary

11 guidelines for home energy rating systems as issued in

12 the notice of proposed 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 interim guidelines, culminating with a meeting of DOE,

24 NASEO, the home energy rating industry, and the

25 mortgage and appraisal industry which will review the

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1 final results and make recommendations on the approach

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 opportunity to be here to share our thoughts with you,

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 am committed to a national 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 a direct impact on the existing systems that will cost

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1 time and money in terms of software, training and

2 other areas which we believe, and the reason we 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, let me 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. While we’ve worked hard, we certainly have not

25 arrived at the solution. What we propose here today,

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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 Council has talked about it and worked very 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 in what is a very 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: Could you describe how the

23!I field test would address some of the differences

24 you’ve described and your views about --

25, MR. CULBRETH: Mary Beth, I’m not the best

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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 of in your 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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1 MR. CULBRETH: Yes.

2 CHAIRMAN BOULIN: -- further indicating

3 that the proposed guideline conflict with the

4 operating procedures of the existing system. It would

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 CHAIRMAN BOULIN: You talked in your third

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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, let me see, how many homes in

12 the NASEO program used energy efficient mortgages 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 CHAIRMAN BOULIN: Well, you know how to do

24 it.

25 MS. IKLE: With practice. And I’m the

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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 implement programs 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 of HERS things, so that we have 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 first just 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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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, if you look at the renter 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 if we 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 considerably just in terms of the

19 number of participants.

20 Now, let’s go on and look at the purpose

21’ of HERS as it is written in the 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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1 bottom line, and I took this straight from the

2 guidelines. The first thing is “Five lending industry

3 confidence to underwrite energy efficient mortgages.”

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 their importance in saving energy, because I feel it’s

8 not how many loans, it’s how much energy is saved that

9 we should be 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 energy rating systems could stimulate increased use of

13 energy efficiency and renewable energy technologies by

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 “Encourage homeowners to improve the energy efficiency

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

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1 of what 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 whose houses are so poor that they’re just going to be

11 insulted because they only get star and it’s not worth

12 it, rather keep it for the ones that are interested.

13 Second, the proposed rules say that energy

14 savings estimates should be included only if the

15 customer is interested in energy efficient mortgages.

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

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1 should be evaluated for all homes that are rated which

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 of electricity 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 refrigerator today of the 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

l8h order to do that, this is according to the proposed

19 rules, this is the rater’s job, what happens 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 than just to

24 do the rating.

25 And I personally feel that the financial

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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 so much more comfortable. 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 to just, if you take a look

20 at how 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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1 you what the appliances -- the line that you 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 if you have a

6 larger house, you’re going to have more lights, if you

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 home that just has lights, TVs, a refrigerator 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

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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 if you

5 take a home that has a pool and has two refrigerators,

6 and there you will be able to add from the 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 for appliances really are, they just didn’t

11 care about them.

12 And what happens is that the dollar value

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. If people get

16 estimates that are consistently 20 percent below,

17 that’s, you know, I mean that’s something that has 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

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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 of wall 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 the training 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, and everybody spent money. It costs money

25 to write a decent training syllabus. We would very

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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 of poor

9 things.

10 Let me just summarize the recommendations.

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

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1 you do have to have it. The lost cost and no cost

2 improvements and seal-up services should be included.

3 The methodology for estimating 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

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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 of the house. This does not require

4 any additional work by the way because the size of the

5 house you have already in your software, and you

6 simply look at the size of the house and you determine

7 what the plug load is based on that size, and then you

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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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 think that you 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 Thank you 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 proposed rulemaking for voluntary home energy

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 currently chaired by Senators Jeff Bingaman and

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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 of whom have representatives sitting here in the room

8 today. And as you might also note, they don’t

9 necessarily always agree upon what perhaps the answers

10 should be.

11 As a former bank loan officer, a state

12 energy office director and the immediate past chairman

13 of the National Home Energy Rating Systems Council, I

14 have gained many valuable insights into the

15 opportunities and challenges offered by 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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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 for relying upon the key 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 efficiency potential 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 of the 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 can maximize 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

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1 voluntarily remove longstanding barriers.

2 These voluntary guidelines were derived

3 through consensus and unanimously recommended one year

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 NOPR represents the collective wisdom of

11 all stakeholders, not just the providers of ratings,

12 who realized during a DOE’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 Accreditation is the one single item that will instill

20 confidence to both consumers and lenders. This

21 proposed rule recognizes the need for accreditation to

22 be conducted by 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 little need for others to follow. However, that is

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1 certainly their right to do so. Should states wish to

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, and Fannie and Freddie 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, or empowering new independent bodies

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 perform this task. If they do not, this entire effort

21 is doomed to failure.

22 So what am I suggesting is the solution to

23 accreditation? Let the lenders decide.

24 My third and final point concerns the need

25 for DOE to place this rule into the marketplace as

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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. It has been

4 18 months since the Energy Policy Act deadline for DOE

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 uniformity by the mortgage industry. These guidelines

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 the very 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 for DOE to make government work better 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

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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 a pretty good majority. If DOE

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, just do 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 of these guidelines, the marketplace can finally begin

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1 a voluntarily transformation. Any unnecessary delay

or abdication of responsibility by DOE will have a

31 permanent, adverse financial impact upon our nations’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 important national energy and affordable housing 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

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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 CHAIRMAN BOULIN: 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 think we can probably 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

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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 an unscheduled 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

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1 conditioners and heat pumps produced in the U.S. And

2i although we 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 the program allows

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. We believe EPACT, the statute authorizing HERS,

2O is confined to the use of site energy as defined by

211 the overriding statute of EPACT. 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.

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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 CHAIRMAN BOULIN: Do we have any questions

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 a rebuttal statement he would like

11 to give.

12 MR. CHWALOWSKI: Good morning. My name is

13 Matt Chwalowski. I am with Edison Electric 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

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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 the American Gas Association representing American Gas

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 in Washington State, if somebody uses a heat pump 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 of BTU versus the cost of service. These are two

24’ distinctly different quantities. Two more issues. In

25 the development of guidelines to prevent fuel

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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

2Oj 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 We have an additional rebuttal statement,

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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 CHAIRMAN BOULIN: 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 of the site standard

17 during the development of the guidelines. The reason

18 that we state in this process was that the process 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.

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1 I still think people are told about stars

21 and about points, and the way 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 reduction is the basis why which additional points are

g scored. You do not necessarily have sufficient dollar

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 Midwest which has a great deal of coal, you don’t have

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, best information for someone who lives in a particular

24I location.

25 And, again, BTUs are not relative to

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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 a representative house consulted, the number

14 of homes it represents, what portion of these were new

15 homes? And you may not have that information with you

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 answer that

21 as well. Those are a mixture of -- those ratings are

22 both scale and certified and they’re both utilities,

23 they are independent rating organizations of primarily

24I not for profit, and even some for profit, and by far

25 and above most of those, the point representing,

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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 in that consensus process, so that’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 think they understand that. Some, it’s not--

14 obviously everyone does not “satisfied,” but I think

15 that the principal consensus in the process that we’ve

16 all participated in, not just this one, but other

17 similar processes that, you know, the ultimate goal

18 justifies all of this participation and sitting at the

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

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1 everybody has given a lot of thought to, including

2i myself, and I think that if you 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 other words, 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 specific parts of the house. We’re not looking at the

16 cost. When we’re looking at the cost, and that is

17 what most 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

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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 12:00 p.m., the proceedings

9 in the above-entitled matter were adjourned to

10 reconvene this same day at 1:03 p.m.)

11

12

13

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15

16

17

18

19

20

21

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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 with us 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 understand you had to reconvene for my comments, 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 of the National Association of Home Builders

17 and to comment on the notice of proposed rulemaking

18 for voluntary home energy rating systems guidelines.

19 NAHB supports safe, affordable housing for

20h all Americans. Our members are in the business of

21 providing the best shelter home buyers can both 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

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1 voluntary programs that encourage energy saving

2 construction techniques that add to the efficiency of

3 our product.

4 Our builder members build what home buyers

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 of his home. Until

11 the consumer, our home-buying customer, can be 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 a vital interest in and has 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 of the development of programs to encourage increased

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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 formation of

the HERS Council.

5 The HERS Council was formed to 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 for the uniformity of HERS and establishing

13 a voluntary program for accrediting systems and

14 certification tools that assign home energy efficiency

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 and has continued to support the council over the past

22 three years with a representative on the board of

23I, directors. Our representative has served as the first

24 Secretary of the HERS Council Executive Committee and

25 for the past two years as a vice-chair of the council.

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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 of uniform guidelines for rating

4 the energy efficiency of homes. Wisely, DOE turned to

5 the council to assist in this task, and we applaud DOE

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 we have ever been 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, along with the input from professionals 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

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1 NOPR until consensus had been reached on the contents

2 and, in fact, the council is unanimous in its support

3 for the guidelines in its final form. NAHB was a part

4 of that unanimous vote, as were council members

5 representing rating system providers, primary and

6 secondary mortgage lending organizations, gas and

7 electric utilities, realtors, consumer organizations,

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 support these guidelines because they represent the

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 addressed the major concerns of those most affected by

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, many compromises had to be reached. In most

24 cases the compromises successfully addressed the

25 concerns of existing rating organizations. This was

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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 supporter of programs to increase the

18 energy efficiency of home and we will push for the use

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 the guidelines if our builders thought that they would

24 become mandatory.

25 We think that this will help speed the

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1 move towards uniformity in rating system, rating

2 energy use so vital to the success of voluntary energy

3 efficiency efforts by everyone involved.

4 1 NAHB urges DOE to continue support for the

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 and other, the

12 development of guidelines is only the first step.

13 These guidelines must be used and become a part of the

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 embedded in its structure, this problem can be solved.

25 It will require everyone, both within and outside the

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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 used by rating systems must be 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 must work to find new financing alternatives that will

19 encourage increased energy efficiency in housing, 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

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1 incentives, through financing alternatives, this just

2 will not happen.

3 NAHB wishes the Department of Energy to

know that we fully support the HERS Council guidelines

5 represented in the NOPR. We encourage DOE 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 further encourage DOE 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, timing is critical. We encourage

14 DOE not to waste any more time on further fine-tuning

15 of the guidelines because: one, these guidelines

16 already include provisions for ongoing modifications;

17 two, achieving the ultimate result, consumer demand

18 1 for more energy efficient housing, has a long road to

19 ravel before it becomes a reality; and three, each day

20 approximately 13,000 homes, both new and existing, are

21 purchased without any significant perceived value 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

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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, in order to accredit an

16 organization we have to have within an accreditation

17 a set of guidelines, if there 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 would be

24 from people in the mortgage finance industry, the

25 secondary market Fannie Mae and Freddie Mac, who would

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1 be relying on the accreditation process. And I

2 suspect, unless you had a way of policing the process,

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 CHAIRMAN BOULIN: We have a question from

9 the audience. David Rinebolt asked, does NAHB believe

10 that compliance with the CABO Model Energy Code

11 confirms that a home is energy efficient and therefore

12 should be 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 used very much, but it uses the ‘92

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1 model -- the ‘93 and the ‘95 editions will also be a

2 trigger because 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 CHAIRMAN BOULIN: I appreciate all of your

9 comments here and your statements. And with that, I

10 will close the hearing.

11 (Whereupon, at 1:22 p.m., the proceedings

12 in the above-entitled matter were concluded.)

13

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25

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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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