### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 1

MEETING OF COMMERCIAL/INDUSTRIAL PUMPS WORKING GROUP

AT DEPARTMENT OF ENERGY 1000 INDEPENDENCE AVENUES SW FORRESTAL BUILDING WASHINGTON, DC 20585 ROOM NO.: GH-109 May 28, 2014

Reported By: Natalia Thomas Capital Reporting Company

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 2 1 A P P E A R A N C E S 2 DOUG BROOKMAN 3 JOHN CYMBALSKY 4 TOM ECKMAN 5 LOUIS STARR 6 JAY SIVIGNY 7 CHARLES CAPPELLINO 8 GREG TOWSLEY 9 BETSY KOHL 10 STEVE ROSENSTOCK 11 LUCAS ADIN 12 BRIAN HENRY 13 ROBERT BARBOUR 14 MARK HANDZEL 15 DAN DELANEY 16 JOANNA MAUER 17 GARY FERNSTROM 18 STEVE THOMPSON 19 BRENT McMANIS 20 ALEX BOESENBERG 21 SARAH WIDDER 22 ALISON WILLIAMS

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 3 1 A P P E A R A N C E S 2 (Continued) 3 4 DANIEL WEINTRAUB 5 CHRISTOPHER LAU 6 POLI MARMOLEJOS 7 GREG CASE 8 AL ISEPPON 9 10 11 12 13 14 15 16 17 18 19 20 21 22

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 4 1 P R O C E E D I N G S 2 MR. BROOKMAN: Good morning, 3 everyone, and welcome. This is the sixth meeting 4 of the ASRAC Pumps Working Group, Commercial and 5 Industrial Pumps Working Group. Today is May 28, 6 2014 here in the Forrestal Building in Washington, 7 DC. So glad to see you all here this morning. 8 Let's start off by doing some instructions around 9 the room. I'll start to my immediate left. 10 MR. CYMBALSKY: Hi. I'm John 11 Cymbalsky, Program Manager for Appliance Standards 12 here at DOE. 13 MR. ECKMAN: Tom Eckman, Northwest Power 14 and Conservation Council. 15 MR. STARR: Louis Starr, Northwest 16 Energy Efficiency Alliance. 17 MR. SIVIGNY: Jay Sivigny, Flowserve 18 Corporation. 19 MR. CAPPELLINO: Charlie Cappellino, ITT 20 Industrial Process. 21 MR. TOWSLEY: Greg Towsley, Grundfos. 22 MS. KOHL: Betsy Kohl, DOE GC.

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 5 1 MR. ROSENSTOCK: Steve Rosenstock, 2 Edison Electric Institute. 3 MR. ADIN: Lucas Adin, DOE. 4 MR. HENRY: Brian Henry, Patterson 5 Pump Company. 6 MR. BARBOUR: Bob Barbour, TACO. 7 MR. HANDZEL: Mark Handzel, Xylem. 8 MR. DELANEY: Dan Delaney, Regal 9 Beloit. 10 MS. MAUER: Joanna Mauer, Appliance 11 Standards Awareness Project. 12 MR. FERNSTROM: Gary Fernstrom 13 representing the California Investor-Owned 14 Utilities: PG&E, Southern California Edison, San 15 Diego Gas and Electric, and the Southern 16 California Gas Company. 17 MR. BROOKMAN: Steve? 18 MR. THOMPSON: Steve Thompson, TACO. 19 MR. McMANIS: Brent McManis, Baldor 20 Electric. 21 MR. BOESENBERG: Alex Boesenberg, 22 National Electrical Manufacturers Association.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 6 1 MS. WIDDER: Sarah Widder, Pacific 2 Northwest National Lab. 3 MS. WILLIAMS: Alison Williams, 4 Lawrence Berkeley National Lab. 5 MR. WEINTRAUB: Daniel Weintraub, 6 Navigant. 7 MR. LAU: Christopher Lau, Navigant. 8 MR. BROOKMAN: Thank you. And as I 9 understand it, we have a few individuals that 10 couldn't make it. You want to queue -- 11 MR. HANDZEL: One more behind you 12 too. 13 MR. BROOKMAN: Welcome. Please, 14 please take a seat. And would you say your name, 15 please? 16 MR. MARMOLEJOS: My name's Poli 17 Marmolejos. I'm the Director of the Office of 18 Hearings and Appeals here at the Department of 19 Energy. 20 MR. BROOKMAN: Welcome. Mark, you 21 were saying a few individuals haven't been able to 22 make it?

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 7 1 MR. HANDZEL: Yeah. Greg Case, the 2 Hydraulic Institute representative, is on the 3 WebEx in the conference call this meeting. 4 Obviously Brian Henry is substituting for Al 5 Huber. And I guess, you -- Bob -- Barbour won't 6 be here tomorrow, so Steve Thompson will be 7 representing TACO. And I think that's -- and Jay 8 is representing Chuck Powell. 9 MR. BROOKMAN: Great. Okay. Glad 10 you all could make it and thanks for making sure 11 that your seat is filled, that you've got a good 12 representative there sitting in. We're going to 13 start off this morning with Lucas Adin, who -- 14 Lucas and his team have prepared an agenda and are 15 going to start us off. 16 MR. ADIN: Thanks, Doug. So welcome 17 back, everyone. We have -- we have some 18 introductory slides that just cover what we had in 19 mind as a general agenda for the next couple of 20 days, and cover some upfront items about 21 summarizing essentially what we've done so far and 22 where we see this going for -- the Working Group

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 8 1 will understand is the near-term goals of -- of 2 the Working Group. So the information that we're 3 going to present over the next couple days, we'll 4 talk briefly about that, but also what -- we hope 5 the Working Group will use that information for 6 and what we hope you guys are all thinking about. 7 MR. HANDZEL: Hey, Lucas, can I just 8 -- Mark Handzel -- 9 MR. ADIN: Oh, yeah. 10 MR. HANDZEL: -- some comments from 11 the pump manufacturer's side and -- 12 MR. ADIN: Yeah, please. 13 MR. HANDZEL: Just wanted to say that 14 obviously the last two weeks since we had the 15 WebEx have been highly active and very data16 intense, and lots of revisions and updates. I 17 mean we're taxing our engineering departments, all 18 of us, you know, to try to stay on top of all of 19 it, but it, you know, obviously we feel stressed 20 at this point because we've been seeing so many 21 changes and trying to stay ahead of, you know, the 22 new calculator versions and things like that. So,

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 9 1 you know, from our perspective, you know, we've 2 got a lot of clarification that we hope to get 3 accomplished the next two days. 4 MR. ADIN: Okay. 5 MR. BROOKMAN: And I would -- and I 6 would just add -- I'd ask for further question or 7 inquiry. Greg Case at the last meeting said that 8 HI put together a group of 15 engineers to 9 continue to do this analysis. I presume that in 10 this -- the intervening weeks that you all have 11 been active doing that as well. 12 MR. HANDZEL: Absolutely. 13 MR. BROOKMAN: Okay. So then more 14 additional information, grist for the mill here, 15 yes? 16 MR. HANDZEL: Yeah. 17 MR. BROOKMAN: Okay. 18 MR. HANDZEL: Yeah. And just to 19 clarify that, so that group is meeting weekly for 20 one to two hours just on the call comparing notes, 21 in addition to processing all of our data through 22 the various different versions of calculators. It

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 10 1 doesn't sound like it's that complicated, but all 2 the data has to be reloaded and, you know, just we 3 have to make sure there's no errors. So it's 4 time-consuming. 5 MR. ADIN: Yeah. And the 6 calculators, I believe the last version of the 7 calculator was Version 10 or something, and so far 8 that's working okay for you all? 9 MR. HANDZEL: I think we have 10 questions on it, but I think, you know, it is 11 working. 12 MR. BROOKMAN: Okay. Okay. 13 MR. ADIN: Yeah. I mean that's -- that's 14 good. I mean the fact that you guys have had time 15 to go through and that you have feedback. I mean 16 you said we're doing our job. I think we're doing 17 it a little faster than - - 18 MR. HANDZEL: Right. Well -- yeah. 19 Just obviously, you know, the versions of the 20 calculator, it's been -- 21 MS. WIDDER: Hopefully this is the 22 spot where that stops.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 11 1 MR. HANDZEL: Right. We would 2 greatly appreciate that. 3 MS. WIDDER: I hope so as much as you 4 do. 5 MR. ADIN: Right, but -- but the 6 point is, we've been putting out a lot of 7 information. We've been doing a lot of the talking 8 and we've been giving you guys a lot to think 9 about, and really hopefully we're getting to the 10 point where there's information coming back. 11 You've had time to think it over and do some 12 analysis with the tools we've provided. And -- I 13 mean that's really where we're hoping to get to. 14 MR. HANDZEL: I jokingly said that I 15 thought the presenters on the WebEx really enjoyed 16 having all of us on mute because we -- 17 MR. CYMBALSKY: Wanted to question us 18 live -- 19 MR. HANDZEL: -- the questions as 20 they come up so you could do your whole 21 presentation. So obviously it's a little bit 22 different when we're using the open exchange that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 12 1 we have here. But, you know. So I think it'll 2 help us here to be able to have that exchange as 3 we go back and forth. 4 MR. CYMBALSKY: Yeah. 5 MR. HANDZEL: Okay. 6 MR. CYMBALSKY: That's really why we 7 call this a working group. 8 MR. ADIN: I warned you at the 9 outset. 10 MR. HANDZEL: You did. You did. 11 MR. ADIN: Okay. So just to 12 summarize and reiterate some points I think we've 13 made throughout the meeting so far. The purpose, 14 again, is to deliver a term sheet to ASRAC with 15 recommendations for pump standards. So I think 16 that's something that's understood among everyone 17 here. But just to reiterate, perhaps a little 18 more specifically, it's the entire group's 19 responsibility to came up with a recommendation. 20 So DOE will provide information and 21 we'll provide background and analysis based on all 22 the data that we've been able to gather. But it's

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 13 1 really the group's -- the entire group's 2 responsibility to come up with recommendations. 3 So to the extent, whether it's that you 4 don't agree with the information we've provided or 5 you have other data that's useful, I mean we've 6 obviously received some data already that's helped 7 us a lot in our analysis. But for any of the 8 Working Group members that have actual 9 recommendations on standards, that's -- you're 10 welcome to provide them and we'll -- we'll discuss 11 them. It isn't just DOE that's going to provide 12 all the information. 13 So we probably won't even have 14 necessarily a specific recommendation on a 15 standard level. It's really the job of the group 16 to come up with what those will be. So I think 17 that's really what we're trying to drive toward in 18 the near future since we only have a couple 19 meetings left to -- to come up with a term sheet. 20 So the goal of this meeting is to -- 21 well, the first item there -- on there is a 22 summary report. We, I think, discussed this

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 14 1 briefly the last meeting, maybe, but previous 2 working groups have provided to the ASRAC at a 3 point during their negotiating period an update to 4 the ASRAC just summarizing what they've done so 5 far and where they see it going. 6 It provides the ASRAC an opportunity to 7 provide some feedback. It's generally a good 8 thing to do, give some sense of buy-in from the 9 ASRAC about where the Working Group is going, 10 whether, you know, we're going in the right 11 direction, that kind of thing. So I don't know. 12 Doug, do you have anything that you wanted to 13 mention about that at all or -- 14 MR. BROOKMAN: No. 15 MR. ADIN: No. Okay. 16 MR. HANDZEL: Lucas, just a 17 question. 18 MR. ADIN: Yeah. 19 MR. HANDZEL: Mark Handzel from 20 Xylem. So do you have an example of what that 21 summary report may look like for some of the other 22 groups? This will be -- you know, obviously --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 15 1 obviously it would help us to have some pattern to 2 follow on that. 3 MR. BROOKMAN: We would like to make 4 a process, though, and I want to recognize Mark 5 for being so effective this morning and stating 6 his name before he spoke. 7 MR. HANDZEL: I don't want to get my 8 hand slapped. 9 MR. BROOKMAN: So well done. So 10 well done. This room and the acoustics are not as 11 great. We need to use our outdoor voices. And if 12 everyone would be a little disciplined about 13 saying your name before you speak, that's very 14 helpful. Back to Lucas. 15 MR. ADIN: Okay. Mark, to answer 16 your question, we do have examples. 17 MR. HANDZEL: Great. 18 MR. ADIN: Those were -- I think for 19 both the distribution transformers and the 20 commercial HVAC certification working groups, they 21 both had interim reports and they're in the 22 docket. I mean we can find them --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 16 1 MR. HANDZEL: Okay. 2 MR. ADIN: -- and point them out to 3 the Working Group. That'd be helpful, so. So 4 we're going to -- we're going to talk a little bit 5 more about some general aspects of the test 6 procedure, high level items, the metric, how it's 7 constructed. 8 I think we want to be getting to a point 9 by the end of these meetings where we feel 10 comfortable as a group about what the metric will 11 look like and, you know, at least that we have 12 some of those more fundamental items laid out so 13 we can talk more confidently about what standard 14 levels. 15 Now I think we've talked previously 16 about the idea that standard level should be at 17 the end of the metric, but we certainly understand 18 that the metric is a vital element in 19 understanding really how those will look on 20 products, actually be put out on the market. So 21 we want to make sure that we have a good feeling 22 about what -- what that'll look like.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 17 1 And then standards are really addressing 2 that third bullet there. I mean we want to be 3 getting to a point by the end of these meetings 4 where we're starting to zero in on a general range 5 of standard levels that probably are close to what 6 the group as a whole feels are -- are appropriate. 7 So we haven't really talked in specific 8 terms about that yet. I mean we've put up some 9 information about what different impacts look like 10 at the various standard levels across the entire 11 range, but I think now we're getting to the point 12 where we want -- want to at least start getting a 13 sense of, you know, where within that range is it 14 -- is it reasonable among all the members of this 15 group. 16 So the goal of the June meeting - we'll 17 go over a review of requested information and 18 hopefully develop and vote on a term sheet. So 19 clearly there's a lot of work to be done yet 20 between now and that point and, you know, there's 21 interim webinars or other presentations of 22 information we have to do in order to make sure

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 18 1 that -- that this group, all the members have what 2 they need to make an informed decision, and we'll 3 do so. 4 But the idea is, by the end of this 5 meeting anyway, or the end of tomorrow, we'll have 6 an idea of what -- if we can't get to an idea 7 about where that acceptable standard level lies, 8 what information you all need in order to get to 9 that point. 10 MR. BROOKMAN: Question from Charlie 11 Cappellino. Charlie, go ahead. 12 MR. CAPPELLINO: This is Charlie 13 Cappellino. Could -- I know you passed one around 14 before, but it's been a while, the term sheet? 15 Yeah. I think that's part of the end game here? 16 MR. ADIN: Yeah. 17 MR. CAPPELLINO: So I think it would 18 be worth just maybe, again, providing a term sheet 19 or at least taking a look at one, because if 20 that's the end game, I think we all kind of want 21 to see as we're getting closer to saying, okay, 22 this is what we need to produce.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 19 1 MR. BROOKMAN: That's a great -- 2 great suggestion. 3 MR. CAPPELLINO: The other question I 4 had is could our reporter just move -- maybe move 5 that chair like it's -- yeah. Thank you. Maybe 6 take that chair out, give her more room. 7 MR. BROOKMAN: Steve Rosenstock. 8 MR. ROSENSTOCK: Steve Rosenstock, 9 EEI. In this case could there possibly be two term 10 sheets, one for a test procedure and one for the 11 efficiency standards? 12 MR. ADIN: So that's something that 13 this group can discuss. I mean under the 14 authorization given to this working group by the 15 ASRAC currently, our task is to negotiate the 16 standard levels. So we're not specifically 17 negotiating a test procedure. 18 Now through our interim reports, 19 the ASRAC, we could recommend that this group 20 specifically negotiate the test procedure as well, 21 in which case, either that can be rolled into the 22 same term sheet as the standards or done as a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 20 1 separate -- I mean it's really whatever is 2 authorized or recommended by the 3 ASRAC. 4 MR. ROSENSTOCK: I mean -- Steve 5 Rosenstock. Yeah, the reason I mentioned that is 6 just in terms of the timing. If we don't, would 7 the test procedure have to go through a regular, 8 I'll say, rule-making process? 9 MR. ADIN: Yeah. 10 MR. ROSENSTOCK: And there's a timing 11 issue? 12 MR. ADIN: I have a slide on 13 here -- 14 MR. ROSENSTOCK: Okay. 15 MR. ADIN: -- that addresses the 16 test procedure, but, yes, that would be a rule 17 making. So, this slide here just briefly 18 addresses all the items that we've provided so far 19 and any items near the bottom that we have to -- 20 have yet to present, which is shipments to NIA, 21 manufacturer impact analysis. So, we'll be 22 covering those in the next couple of meetings

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 21 1 today and tomorrow. But, unless there are any 2 questions about this one, I don't know there's a 3 lot to discuss. 4 So those last two items really, the 5 shipments and NIA results, and then the 6 manufacturer impact analysis really just kind of 7 wrap up the last of what -- what DOE has done 8 analysis-wise. So from that point, I mean we're 9 relying on the information that you all have and 10 your reactions to what we've given you. I mean 11 certainly to the extent your -- you think that the 12 data we have might be lacking or the results 13 aren't what you would expect, I mean we're looking 14 for that kind of feedback, but I think we're 15 trying to get to the point where we provided, you 16 know, the extent of the information that we can 17 and we're hoping that we can start moving forward 18 with debate. 19 We did put up a proposed general agenda 20 for the next couple of days just to give you all 21 an idea of what we were looking to cover in a 22 general timeframe. So after I'm finished, we're

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 22 1 going to jump into the remaining analysis that we 2 have to present, which is the updated and new 3 results for engineering and lifecycle costs, the 4 shipments and NIA analysis, and then the 5 manufacturer impact analysis. 6 We have some -- some brief discussion of 7 comparisons between EU and DOE C values. We'll 8 talk a little bit more about that, but, I mean 9 there's been a lot of discussion about C values in 10 the period since the last meeting and we want to 11 make sure that the group is clear that the C 12 values that we've provided are not something that 13 the Department has definitively decided upon. 14 It's really up for the group to decide 15 what's appropriate. I mean we have data that 16 informed those C values. You know, we had no 17 reason to believe it was not accurate at the time 18 we used it. So we provided what we thought was 19 the best information at the time. Certainly to 20 the extent anyone here has an idea about what 21 might be better, that's really what we're 22 interested in hearing and that's the purpose of

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 23 1 having everyone participate in this fashion. 2 And then we have some items to discuss 3 regarding radially split vertical pumps. The data 4 was pretty limited on those, so we had some 5 different ways of addressing that. After that 6 we'll determine what additional information is 7 needed for the Working Group to start essentially 8 discussing what their recommendations might be or 9 what information you would need to inform your 10 decisions about that. 11 And then after that, I mean I think it's 12 going to be more open. I think after what we've 13 presented this morning, we'll be essentially at 14 the point where we've finished presenting what we 15 have to present analysis-wise, and we'll be -- 16 we'll be looking for more in the way of feedback 17 from the group and a discussion within the group 18 on where we're going to go on standard levels. 19 And then on Wednesday -- I'm sorry. 20 That's -- 21 MR. ROSENSTOCK: We're off a day. 22 MR. ADIN: Yeah, we're off a day. To

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 24 1 Wednesday, May 28th, a Thursday. Sorry. We'll 2 discuss the metric implementation, and then 3 hopefully we can get some point of finalization of 4 what the metric will look like tomorrow. So we 5 had in mind that we do analysis and discussion of 6 standards today and more the metric tomorrow. 7 And of course to the extent that we want 8 to keep discussing standard levels and we feel 9 comfortable with the metric, we can devote as much 10 time to that tomorrow as we want. This is an 11 original suggestion for an agenda, but it's 12 obviously open to the group to decide how we're 13 going to use this time. 14 MR. HANDZEL: Sorry, Lucas. It's 15 Mark Handzel. I assume tomorrow is 8:00 start. 16 Is that the plan? 17 MR. ADIN: Yeah, 8:00 start's the 18 plan. That's right. And we'll be upstairs in 8E19 089 tomorrow. Not down here. 20 MR. BROOKMAN: Yep. 21 MR. ADIN: Okay. So this slide 22 actually addresses the point that Steve raised

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 25 1 earlier regarding the test procedure. And we've 2 gotten one or two questions about this since the 3 last meeting. So hopefully this will resolve 4 those questions about how this will work 5 procedurally. 6 So the current scope of negotiations for 7 this group does not specifically include the test 8 procedure. It is -- it is to negotiate standard 9 levels. So obviously there's some aspects of 10 negotiating standard level that require debate and 11 consensus by the group, what kind of metric we'll 12 use and things like the weighting of the load 13 points, which load points, that kind of stuff. 14 Motor-sizing, how it will account for losses. How 15 we'll address things like VFDs. And we've been 16 debating all those things during this time. And 17 hopefully we'll get to some resolution about that 18 in the next couple of days. 19 But the test procedure itself as far as 20 how it's incorporated into DOE's regulations will 21 be done through rule-making. So the term sheet 22 won't specifically state which test procedure will

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 26 1 be used and exactly how the test procedure has to 2 be laid out and that kind of thing. That's 3 something the DOE will do through a rule-making. 4 So, you know, we'll certainly be 5 considering all the input that we receive from 6 this group during the time we've been in these -- 7 in these meetings. And the docket and the record 8 and all that will be considered because we 9 understand that the most significant stakeholders 10 in all this are in this room, so. But -- 11 MR. BROOKMAN: Charlie Cappellino. 12 MR. ADIN: Yeah. 13 MR. CAPPELLINO: Lucas, this is 14 Charlie Cappellino, ITT. So let me try to 15 understand. So I think what you're saying is the 16 test standard -- 17 MR. ADIN: Yeah. 18 MR. CAPPELLINO: -- will not be part 19 of the negotiated ruling, but a test standard will 20 be put in place and basically dictated by the DOE 21 as a result of input and dialogue and the 22 discussion of this group, but there will be no

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 27 1 negotiation on the test standard? 2 MR. ADIN: That's right. Yeah. 3 MR. CAPPELLINO: And the reason for 4 that is? 5 MR. ADIN: Well, I mean it really has 6 to do with the scope of the task that was 7 authorized to this working group by the ASRAC. So 8 if the ASRAC specifically says, okay, your scope 9 has expanded and now you are, part of your task is 10 to negotiate a test standard as well, which they 11 could give us authorization to do. You 12 recommended it, but -- 13 MR. FERNSTROM: This is Gary. 14 How can we have a standard without a full 15 understanding of the test procedure that drives 16 it? 17 MR. ADIN: Well, I mean that's 18 something that we've been trying to address to the 19 extent we can. I mean if the group isn't 20 comfortable with negotiating standards without 21 feeling absolutely certain about the test 22 procedure, I mean that's, you know.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 28 1 MR. CYMBALSKY: So let me speak 2 up here. John Cymbalsky. So, HI has delivered a 3 test method to the Department to consider as a -- 4 as a proposal, which we will do. Either way, if 5 we want to expand the scope to include the test 6 method, either way, that's going to be a NOPR that 7 has to go out for public comment. Just like the 8 standard that you're negotiating around here. So 9 given the timing, I would say you don't want to 10 put anymore on your plate. Given the fact that DOE 11 through it's contractors participated in the 12 development of that test method, I think we should 13 all feel pretty good about what you delivered. 14 We can't say with certainty what's going 15 to happen with the test method, but I think we 16 should rally around the fact that the test method 17 was developed with DOE contractor support, look at 18 that as a straw man as you negotiate the standards 19 and kind of move forward from there. I think if 20 you get bogged down with the test method, you're 21 not -- we're not going to get to where we want to 22 be with the standards levels, given the time.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 29 1 MR. ADIN: Right. And maybe just to 2 elaborate a little further on that. I think what 3 we've been trying to provide to the group this 4 whole time in our discussion about the metric is 5 more of an understanding of what the test 6 procedure would be doing. So when we talk about 7 the test procedure, we're just talking about a 8 written procedure that implements what that metric 9 represents. So it's just stating in words, this 10 is how you test a pump to get a measurement in 11 this metric. I don't know if that clarifies at 12 all what we've been addressing, but -- go ahead. 13 MR. CAPPELLINO: Charlie Cappellino, 14 ITT. So if we proceed as you recommended, who 15 would be the decision-maker around the test method 16 in terms of its use? Is it the ASRAC committee? 17 MR. ADIN: That's the center of it. 18 So DOE would put out a proposal and take public 19 comment. And it doesn't -- you all can comment on 20 the proposal for the test method because you 21 didn't sign off on that like you did with the 22 standards. You know, we set rules around that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 30 1 because you're negotiating the standard. You're 2 not negotiating the test method. So you all could 3 provide public comment. 4 MR. CAPPELLINO: So public comment, 5 and then, but who in the end would make the 6 decision? 7 MR. ADIN: We would write a final 8 rule based on all the public comment. 9 MR. CAPPELLINO: So the DOE staff. 10 MR. ADIN: Correct. 11 MR. CAPPELLINO: Okay. 12 MR. ADIN: I mean that would be true 13 in either case. We would have to do -- as John 14 was saying, we have to do a proposed rule. 15 Regardless of whether we've done it through the 16 ASRAC and have a term sheet, we still have to do a 17 proposal. And I mean if we were to receive 18 comments or information to consider in this group 19 that bears upon the final decision on that rule, I 20 mean that has to be considered. So it's not 21 guaranteed that the final rule would look exactly 22 as whatever this group puts out, but there's --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 31 1 MR. HANDZEL: Mark Handzel, Xylem. 2 So, John, would you expect the timing of the test 3 standard to be approximately in sync with when -- 4 MR. CYMBALSKY: Right. So -- 5 MR. HANDZEL: Yeah. 6 MR. CYMBALSKY: The test method 7 should lead, yes. 8 MR. HANDZEL: Okay, okay. So, they 9 wouldn't be -- I think that's kind of what Gary's 10 concern was, that they would be out of sync. 11 MR. BROOKMAN: Steve Rosenstock. 12 MR. CYMBALSKY: We tried very 13 carefully not to have that. It has happened, just 14 to be quite honest with you. But over 90 percent 15 of the time, it's the right way where the test 16 method leads. 17 MR. ADIN: Right, and based on the 18 schedule we've talked about, that's -- there's no 19 reason for us to believe that that wouldn't 20 happen. We mentioned up here that we published a 21 NOPR for a test procedure in the fall and we had 22 talked on publishing a NOPR based on the standards

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 32 1 that this group would recommend by the end of this 2 year. So the objective would be to get that test 3 procedure proposal well in advance. 4 MR. BROOKMAN: Steve Rosenstock. 5 MR. ROSENSTOCK: Steve Rosenstock. 6 Yeah, I was just asking about what the timing 7 might be and if there would, on the test procedure 8 side, have to be any sort of preliminary analysis 9 before the NOPR stage. I guess not at this point. 10 Okay. 11 MR. ADIN: I mean we're effectively 12 accomplishing that. 13 MR. CYMBALSKY: Yeah, I think you're 14 doing that in real time. I think that's the value 15 of the working group, is that you're actually 16 doing the preliminary analysis as we go. And so 17 at the end of the -- you know, like Lucas said, at 18 some point, you know, you guys have to start 19 negotiating around a standard. And I know we're 20 not quite there yet, but hopefully by the end of 21 tomorrow we all feel better about the numbers. 22 MR. ADIN: Right. So, and if, you

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 33 1 know, hopefully we've given you enough information 2 to be able to talk in an informed manner about 3 those things. And, you know, the metric and the 4 test procedure included. I mean we want you to 5 have enough of an idea of where we're headed on 6 that or what the group thinks is appropriate so 7 that -- so that you can do that. So you're not 8 completely in the dark. I mean, you know, they 9 are obviously directly linked to each other. 10 And so we want to know as much as we can 11 about what the group thinks it should look like 12 going into this. It would be just a question of 13 what's actually spelled out in the term sheet 14 versus how much are you letting DOE write into the 15 NOPR. It would take a lot -- as John said, it 16 would take a lot more time away from the 17 negotiating time that we have left for discussing 18 standards. 19 MR. BROOKMAN: Steve. 20 MR. ROSENSTOCK: Steve Rosenstock, 21 EEI. Just -- just thinking is, is there a way to 22 just say something like, as we go forward

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 34 1 considering the metric for the standard, there's 2 going to be an assumption that some of the 3 negotiations are going to be based on the proposed 4 test procedure by HI and/or DOE? You know, just 5 that it's a benchmark as a starting point that -- 6 that could be revised by DOE, but it's still, it's 7 there as a -- as a platform just to say we're 8 assuming that the test procedure is going to be 90 9 percent this way. 10 So we can, when we're doing the metric, 11 we can consider that, okay, this is how it falls 12 under that proposed or sample test procedure. Is 13 that a way to think about it? 14 MS. KOHL: Betsy from the DOE. I 15 would, I guess, be hesitant to say something like 16 the test procedure is 90 percent -- 17 MR. BROOKMAN: Betsy, we're having a 18 hard time hearing you. 19 MS. KOHL: I would be hesitant to say 20 in any written document that the test procedure is 21 90 percent done because there's a rule-making 22 process that has to follow. But I think we can

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 35 1 say something like, you know, the case standard 2 levels were developed based upon that method. 3 Right? I mean that's what we're doing, right? 4 MR. ADIN: Yeah. I know -- I mean -- 5 I think that's reasonable, you know. Based on 6 what we've said just this morning, I mean we've 7 been working towards a procedure that would 8 incorporate the test method that HI developed. 9 And, you know, it's reasonable to, for you all to 10 have your discussion on the basis of use of that 11 test method that's built around it. 12 MR. CYMBALSKY: Right. I think just 13 commonsense-wise, if you see DOE doing analysis 14 based on a certain test method, I think, you know, 15 we can't prejudge what the outcome of the final 16 test method will be, but I think we all need to 17 take some faith and stock into -- into that 18 assumption that we're doing and rally around it. 19 MR. ADIN: Yeah. 20 MR. BROOKMAN: Okay? Final questions 21 on this subject? Yes, Louis. 22 MR. STARR: Yes. Louis Starr. I

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 36 1 guess one concern I have is, is that the 2 calculated values for the efficiencies of the pump 3 or whatever metric we come up with is, that making 4 sure that the tested version actually exceeds the 5 calculated one. Kind of what I heard is that that 6 might not be the case for the pump guys. 7 So you'd see the problem it would get 8 you into if you ended up having a calculated 9 version of something and the test version actually 10 gave you worse results. 11 MR. ADIN: Right. 12 MR. STARR: It would not encourage 13 much testing. 14 MR. ADIN: Right. 15 MR. STARR: So you can negotiate 16 standards on a calculated version or the test 17 version. It doesn't get you better -- better 18 examples. You'll have nobody testing, so. 19 MR. ADIN: That's a good point. I'm 20 glad you brought that up. I mean I think that's 21 something that we're probably going to talk about 22 in more detail tomorrow. But, I mean we can talk

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 37 1 about it today, but I mean that is something that 2 we've been trying to emphasize in all the 3 discussion we've had about metric, is that the 4 idea is that we want to have a method where in the 5 calculated it's higher than the -- than the 6 measured. 7 So if, you know, there's some reason to 8 believe that what we've presented isn't getting to 9 that objective, then, you know, we need to know so 10 that we can think about how to address that. 11 Louis Starr. 12 MR. STARR: I think maybe just dial 13 in the test metric a little bit more before. I 14 don't know. I guess actually the best people who 15 would -- is the pump people. 16 MR. ADIN: Yeah. 17 MR. STARR: Generally the problems 18 seem to come around when the VFDs match up with 19 the motors. 20 MR. ADIN: Right. 21 MR. STARR: We don't get expected 22 results. A and B and A and C produce -- produce

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 38 1 different results depending on which VFD you pair 2 it with. 3 MR. ADIN: Right. 4 MR. STARR: I guess it's like Pete, 5 they don't all match up as what he's thinking 6 like, so. 7 MR. ADIN: I was going to have an 8 analysis. I mean that was really the purpose of 9 providing the calculator, is that, you know, so we 10 could start putting real data in there and get an 11 idea of, is this giving us the intended result, 12 and if not, to try and fix it. 13 MR. STARR: Well, perhaps. This is 14 my understanding at first, is that was a little, 15 to understand how the the pumps would fall out 16 with their given, their given pump lines. They 17 would look and see where the, how it affects their 18 pump business. But also it sounds like the other 19 aspect of that is to see how the test procedure, 20 potential test procedure results in the tested 21 numbers, they actually have to see if the 22 calculator's doing an accurate job of predicting

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 39 1 performance. 2 MR. ADIN: Well, it's really both in 3 actuality. It's is the metric delivering what 4 we've been talking about, you know. It's -- as 5 its intended purpose, does it communicate useful 6 information, that kind of thing. But also does 7 it, you know -- does it result in the thresholds 8 and the cutoffs that, that we're aiming for. 9 Yeah. It's both. So I'm glad you made, you 10 raised that question, 'cause we wanted to make 11 sure that that was clear. Yeah. Okay? 12 So I guess that's it for me. Yep. I 13 guess we can move on, unless there are any other 14 questions about the general overall process and 15 what we're aiming to cover in the next couple of 16 days. 17 MR. BROOKMAN: I'd like to make a 18 statement or two. The first is logistics. Lucas 19 and I received an e-mail from Doug Potts, who said 20 he wouldn't be able to make it to this meeting, I 21 believe both days. 22 Mr. ADIN: Yeah.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 40 1 MR. BROOKMAN: So we can remove that 2 chair and provide a little more room at the table. 3 The second thing would be I want to emphasize, 4 having just read through in considerable detail 5 the transcripts from the last meeting, we're 6 getting to the point now where the bulk of the 7 analysis, the bulk of what DOE is going to 8 present, is now presented. 9 So now this is your occasion. This is 10 the opportunity for you as a negotiating working 11 group to begin to really wrangle with the impact 12 of that, ask questions, to seek further bits of 13 analysis, clarification, all of that sort of thing 14 as we think about June being the, the three days 15 that we now have in June, June 17, 18, and 19, as 16 being the opportunity to really see if we can't 17 zero in on the content of that term sheet. 18 We may not make it all the way, but boy, 19 I sure hope we get the bulk of the way there 20 during, during that three day meeting. And I 21 guess that's all I wanted to say, just to 22 emphasize those points. Yes, Bob Barbour.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 41 1 MR. BARBOUR: Bob Barbour with TACO. 2 So I'm assuming from what Lucas has said that 3 you're in effect going to the next stage of this 4 meeting. The presentations will address the 5 questions that were forwarded, for example, by 6 Mark and others, because I know we had a number of 7 issues that we were all very concerned about. You 8 know, not just these, but others that we might 9 want to comment on that we really weren't able to 10 comment on during the last webinar. 11 MR. ADIN: Yeah. 12 MR. BARBOUR: So we'd like to get 13 like a line in the sand where we actually see 14 everything, where all of the comments have been 15 taken into consideration, and we can then take a 16 look at those calculations or analysis. 17 MR. ADIN: Yeah, we looked at 18 all the questions that you sent and I believe we 19 have material that covers everything that you were 20 asking about. I mean certainly to the extent we 21 missed something, let us know. And we want to 22 make sure, just like you said, that we've covered

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 42 1 everything that everyone's asked about up to this 2 point. 3 MR. BROOKMAN: Did you respond to the 4 questions? 5 MR. ADIN: Our intent was to address 6 them at this meeting. 7 MR. BROOKMAN: This morning? Okay. 8 Go ahead. 9 MR. ADIN: All right. We did 10 respond to the LCC questions. 11 MR. BROOKMAN: And when you 12 responded, are they posted on the SharePoint? 13 MR. ADIN: Yes. 14 MR. BROOKMAN: Okay. Excellent. 15 MR. ADIN: And the questions are 16 as well, of course. 17 MR. BARBOUR: I don't think we've 18 seen those. 19 MR. ADIN: I'll double check. I 20 know I haven't seen it, but I didn't get into 21 SharePoint yet. 22 MR. BROOKMAN: You can go into

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 43 1 SharePoint looking, but right -- 2 MR. ADIN: Yeah, the questions 3 and the answers should be posted in the 4 SharePoint, but we'll double check and make sure. 5 In any case, we can go over them for everyone's 6 benefit. Yeah. Okay. 7 MR. BROOKMAN: And let me -- we 8 should also acknowledge that Greg Case has joined 9 us online, yes. So Greg, as I understand it, you 10 are unmuted. We're counting you as being a 11 participant here in the room. 12 MR. CASE: Thanks, Doug. 13 MR. BROOKMAN: Okay. So let's 14 proceed. Let me make one more comment about the 15 meeting summaries. For those of you that have had 16 the opportunity to take a peek at them, the last 17 couple -- there's been so much presentation 18 material. I've been trying to take 700 pages of 19 stuff and boil it down. I've also tried to leave 20 the great bulk of the flow of the presentation 21 contents sort of intact, so that if you, if you -- 22 for those of you that aren't intimately familiar

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 44 1 with lifecycle costs or the derivation of the 2 metric as Sarah Widder described it, I think if 3 you read through the test procedure -- or pardon 4 me, the meeting summary -- I've tried to make it 5 sort of a primer. 6 So -- and this last one ended up being, 7 the first day alone, 20 plus pages. The second 8 day is going to be 15 pages so that we capture 9 this content. So that as you all continue to, 10 especially the manufacturer folks, continue to 11 sort through the detailed analysis, if you want to 12 refer back to the derivation side of this, there 13 ought to be a lot of content there for you to 14 refer to. Okay. So now to Dan Weintraub. 15 MR. WEINTRAUB: Thank you, Doug. All 16 right. So I'm going to get us started on our 17 engineering analysis update. So the slides that 18 we're going to go, we're going to show here are 19 based off of what was presented in the webinar. 20 So there is baseline of what we presented in the 21 webinar, plus some new stuff. So that'll give 22 anyone a chance to repose any questions that they

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 45 1 may have had from the webinar in realtime, and 2 then we'll talk about other changes that were 3 made. 4 So what we have in here, updates made to 5 the end suction and inline analyses since the 6 conclusion of the April 30th meeting, though some 7 of those changes are what we discussed at the 8 webinar. Some are a few other things that were 9 made as we went forward, results from the 10 vertical, submersible vertical turbines. So 11 that's, again, based off what we've showed at the 12 webinar with a few more tweaks that we'll go 13 through. Radial split-vertical, so we didn't 14 discuss that at the last meeting, so we'll get 15 into those. And then a small update to the MSP 16 versus efficiency relationship, which was not 17 discussed at the last meeting. So I'll walk you 18 through them. 19 So here for end suction and inline, 20 these first two items were exactly as presented at 21 the webinar. So I'll just highlight them and see 22 if we have any questions that we still want to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 46 1 discuss. 2 So item number one was percent of models 3 eligible to be polished was adjusted. So we 4 adjusted that down. There are less models 5 available to be polished because the gains we were 6 taking into account previously, gains from 7 polishing volutes which are not a design option. 8 So those available gains have gone down. Are 9 there any questions on that one? Additional -- 10 yeah -- 11 MR. HANDZEL: So you lowered it by 12 approximately half, maybe a little bit less than 13 half. 14 MR. WEINTRAUB: Yep. 15 MR. HANDZEL: I think - Sorry. Mark 16 Handzel from Xylem. And I think, you know, 17 Charlie kind of said that, that, you know, we 18 really don't polish unless we're trying to get a 19 pump up to an efficiency level that -- 20 MR. WEINTRAUB: Yep. Mm-hm. 21 MR. HANDZEL: -- we previously 22 published. So I -- personally I would say I'm

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 47 1 still troubled even if almost 4% in there for 2 polishing, because I don't think most of us would 3 intend to polish to meet public, you know, unless 4 we had to, you know. 5 MR. WEINTRAUB: Mm-hm. Yes, that's a 6 good point, Mark. So just to put a few things in 7 perspective and then pose the later questions. In 8 the model, it ends up coming down to less than 2% 9 are actually polished due to the decisions, 10 decision models that we put into there. And yes, 11 the -- I think we left the discussion last time 12 saying, okay, 2% of all models failing and PER10 13 is one or two models. 14 There are manufacturers that may indeed 15 do that, but then the later on discussion which I 16 posed at the webinar was I think we can affect, if 17 we'd like to screen this out, if you would like to 18 do this, screen this out as a design option, we're 19 going to have very little effect on the analysis, 20 the total conversion costs, and simplify 21 everything down. I am okay with doing that as 22 long as everyone is in agreement with, with taking

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 48 1 that out. 2 MR. HANDZEL: So just to clarify 3 further, Mark Handzel again with Xylem. So what 4 you're saying is, is that some of us might have 5 the options instead of redesigning a pump, of just 6 polishing it and getting it above the PER level 7 that wherever we end up picking it -- 8 MR. WEINTRAUB: Yes. 9 MR. HANDZEL: And so that would 10 prevent us from having to reinvest, reinvest and 11 redesign. 12 MR. WEINTRAUB: Yes. Yes. That's 13 why it was an option. 14 MR. HANDZEL: And I guess, you know, 15 from a, from a PER position, you know, maybe like 16 at the 10 level that might work, but when you get 17 up to the 40 level, you know, it's probably not 18 going to work. 19 MR. WEINTRAUB: Yeah. So -- 20 MR. HANDZEL: So I would probably say 21 I like your suggestion of looking at it with and 22 without.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 49 1 MR. WEINTRAUB: So I'll put that out 2 to the group to see if there is any objection. I 3 did propose that at the end of the last webinar, 4 whether anyone had, had objections to removing 5 this as a design option, just simplifying our 6 total cost model. It changes the costs very 7 little. 8 MS. WILLIAMS: Actually we're not 9 using the polishing cost analyses right now. So 10 downstream of the engineering, we're already 11 ignoring that. Yeah. 12 MR. HANDZEL: You already pulled 13 that? Yeah. Okay. 14 MR. WEINTRAUB: And I think one of 15 the main ideas of leaving the polishing in from 16 start to finish was, because it was identified as 17 an option, it was due diligence to see where it 18 was going to take us. 19 But we don't know where -- we don't know 20 where it would have went until we got there. So 21 now we know it's a very small amount, would 22 actually be polished in reality. So that's, I

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 50 1 think, the, the main basis for the idea of let's - 2 - if it's not really a technological option for 3 98% of pumps, then I don't think it should be a 4 design option. 5 MR. BARBOUR: Bob Barbour, TACO. 6 Personally I think it should be taken out. I know 7 in my 35 years with TACO, I don't think there's 8 been two pumps that we've ever polished that would 9 meet a job. So I find it, you know, a little 10 confusing to even leave it in there. 11 MR. BROOKMAN: So Alison, restate -- 12 that was Alison previously. Restate, what you're 13 doing now is what? 14 MS. WILLIAMS: So for the LCC, we're 15 currently only taking the conversion costs for 16 hydraulic redesigns because polishing was only 2% 17 and it would be a really annoying thing to add it 18 to the LCC. We've just ignored it basically 19 because we would have had to try to figure out 20 which pumps were polished and which ones weren't. 21 So we just said forget it, we're only using the 22 hydraulic redesign costs.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 51 1 MR. BROOKMAN: So I believe Dan put 2 that to the working group to see if that as a way 3 to proceed makes sense to everyone present. And 4 as I cast my eyes around the table, no one is 5 giving me a really ugly look or anything like 6 that. So I think we're okay with that, Dan. 7 MR. WEINTRAUB: Okay. Yeah, so we'll 8 simplify going forward. Okay. The next line item 9 was the capital conversion costs issue. So here, 10 additional capital conversion costs required to 11 change to advanced casting was reduced by 12 approximately half. So an original method we had 13 invalid assumption where for the pumps, for the 14 pumps, for models specifically that needed to go 15 to advanced casting within the model, which was 16 about 10% of them, 10% of failing pumps, we scaled 17 up the total pattern including costs, which 18 included impellers and volutes to the cost that it 19 would cost to, for the tooling, for advanced 20 casting tooling for impeller and volute. 21 We should have just been scaling up 22 impeller costs because volute -- advanced casting

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 52 1 with volutes was never a design option to begin 2 with. So, and again, this was a very small change 3 to the total costs, .3% of the total conversion 4 cost change, but it corrects the assumption we 5 wanted to make. Yes, Charlie. 6 MR. BROOKMAN: Charlie Cappellino. 7 MR. CAPELLINO: Go to your next one. 8 MR. WEINTRAUB: Yep. Okay. All 9 right. So number three, so this was hydraulic 10 redesign cost decreased by 15%. So this was -- we 11 went back and looked deeper into the original HI 12 survey, which the manufacturers participated in, 13 and I had some discussions with Greg Case. He 14 sent me the, the exact wording of the document, 15 what was to be included in the cost of capital 16 category, and that was defined as cost of money to 17 finance upgrades and inventory costs. 18 So when you work through the LCC and you 19 work through the MIA, there's a discount rate, a 20 weighted average cost of capital worked into 21 there, and that covers the cost of capital, how 22 much it's going to take to finance or get equity

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 53 1 or whatever you are going to need to do for that. 2 So we would be double counting if we counted 3 upfront the cost of your interest or the cost of 4 your equity that you're going to need to raise to, 5 to finance these changes. 6 So that's why that 15% was backed out of 7 it. It was an estimate. We tried to base that on 8 reality, but saying it was -- cost of capital was 9 20% of the total redesign cost, so we backed out 10 15% of the total redesign cost, leaving 5% of that 11 category to account for inventory costs, rework 12 transition inventory for legacy support. 13 The reasoning was when you, when you 14 look back at what that remaining, or what that 15% 15 represents as a percentage of what your upfront 16 costs are, it's about three to four years' worth 17 of financing costs at a weighted average cost of 18 capital at 11.8, which is in the analysis. 19 MR. BARBOUR: Bob Barbour from TACO. 20 Just a quick question on your, on that section. 21 Did you include in that the, what you would call 22 abandoned pumps that weren't going to be

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 54 1 redesigned? Did you reduce that number, because, 2 for example, a company like ours -- 3 MR. WEINTRAUB: Mm-hm. 4 MR. BARBOUR: -- we won't be 5 abandoning pump models. 6 MR. WEINTRAUB: Yeah. 7 MR. BARBOUR: It doesn't make any 8 sense for us because our typical customer will not 9 buy 95% of its pumps from TACO -- 10 MR. WEINTRAUB: Yeah. 11 MR. BARBOUR: -- and then 5% from 12 Xylem or vice versa. It just, it won't happen in 13 the marketplace. So for us to participate in the 14 full market -- 15 MR. WEINTRAUB: Yeah. 16 MR. BARBOUR: -- we won't be 17 abandoning pumps. I just want to make sure that 18 that's understood. I don't know how the rest of 19 the pump people feels about that, but from TACO's 20 perspective - 21 - 22 MR. WEINTRAUB: Mm-hm.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 55 1 MR. BARBOUR: -- that's the way we 2 would look at it. 3 MR. HANDZEL: Mark Handzel from 4 Xylem. If I can just add to that. So, you know, 5 I think as Bob pointed out, it, it varies by pump 6 manufacturer because, for example, Xylem may have 7 multiple lines of end suction pumps, but we may 8 not be redesigning all of them. 9 MR. WEINTRAUB: Mm-hm. 10 MR. HANDZEL: Okay. So we will 11 probably have some abandonment. So it's going to 12 depend -- each of us is going to have a different 13 situation. 14 MR. WEINTRAUB: Yes. 15 MR. HANDZEL: So -- 16 MR. WEINTRAUB: So I think -- I'm not 17 sure I see the full connection between stranded 18 lines or between financing costs here because 19 we're really just talking about financing or -- 20 MR. HANDZEL: It isn't directly the 21 finance costs. 22 MR. WEINTRAUB: Okay.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 56 1 MR. HANDZEL: Bob wasn't sure where 2 you should ask that question so, yeah, so it may 3 not -- it was more about you had a previous 4 abandonment, yeah, so -- 5 MR. WEINTRAUB: So that's unchanged 6 from where the group decided on, came to a 7 consensus last meeting. That has not been 8 touched. So that's, that was the 25% of the 9 industry down to 15% of the models in the industry 10 at a higher PER level would not be redesigned. 11 And that's unchanged based on consensus of the 12 group. 13 MR. BROOKMAN: Charlie Cappellino. 14 MR. CAPPELLINO: Just a couple of 15 thoughts. I'm Charlie Cappellino, ITT. I don't 16 know if just -- we'll continue on this discussion 17 in a minute. I want to go back two slides, but I 18 know you guys at some point look at small 19 businesses -- 20 MR. WEINTRAUB: Mm-hm. 21 MR. CAPPELLINO: -- and to Bob's 22 point, small business will tend to have less

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 57 1 overlap because they haven't basically bought a 2 lot of companies like the larger corporations who 3 potentially have overlap. So there might be a 4 small business element where smaller companies 5 aren't going to typically have that overlap. So I 6 don't know if that's a consideration as you guys 7 do the economic analysis down the road in small 8 business effect. 9 MR. WEINTRAUB: That's a very good 10 point and I think Chris is taking notes on that 11 right now because Chris is going to be handling 12 small business analysis. And yes, those are -- 13 that's a subgroup that would behave differently, 14 so we would treat them differently on that part of 15 it. 16 MR. CAPPELLINO: Okay. So I wanted 17 to get back to the two slides here to make sure 18 we're all on the same page. So for improvement of 19 efficiency, I think there was two main areas that 20 we settled on. One was surface finish improvement 21 due to advanced casting methods. 22 MR. WEINTRAUB: Yes, when, and that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 58 1 would only be included in a hydraulic redesign. 2 MR. CAPPELLINO: Only included in a 3 hydraulic redesign? 4 MR. WEINTRAUB: Yeah. It would never 5 stand alone. 6 MR. CAPPELLINO: It would never stand 7 alone. 8 MR. WEINTRAUB: Yeah. 9 MR. CAPPELLINO: Okay. And when 10 you're doing hydraulic redesign, are you including 11 tooling costs for both impellers and casings? 12 MR. WEINTRAUB: Yes. Yeah. And 13 that's so straight, a straight line within the HI 14 survey. So that's the only additional cost. The 15 only thing that we're correcting here with item 2 16 was the additional cost, that if you were already 17 at sand casting, you were previously at sand 18 casting, but you needed to go to investment 19 casting on your impeller, you got to up that cost, 20 but only on the impeller, not on the volute, 21 because the volute is staying at sand casting 22 because that's not a design option.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 59 1 MR. CAPPELLINO: And then the, so the 2 reduction in capital cost was -- in the past you 3 were basically double counting. 4 MR. WEINTRAUB: Yes. 5 MR. CAPPELLINO: Right. So you've 6 basically corrected an error in the capital costs 7 calculations. 8 MR. WEINTRAUB: Yes. 9 MR. CAPPELLINO: Okay. 10 MR. WEINTRAUB: Yes. 11 MR. CAPPELLINO: Okay. All right. 12 MR. WEINTRAUB: And when you're 13 saying capital, this is item 2 you're referring 14 to? 15 MR. CAPPELLINO: I'm talking about, 16 yeah, item 2, which would be tooling costs. 17 MR. WEINTRAUB: Yep. We were, we are 18 adding a cost that wouldn't exist. 19 MR. CAPPELLINO: Right. 20 MR. WEINTRAUB: Which we realized 21 after we looked deeper into it. 22 MR. CAPPELLINO: All right. Thank

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 60 1 you. 2 MR. WEINTRAUB: No problem. All 3 right so -- 4 MR. HANDZEL: So, Daniel -- I'm 5 sorry. Mark Handzel again. So, and Bob was asking 6 this question and I'm, of course, having a brain 7 freeze and not clear. I know that the Hydraulic 8 Institute has never done surveys on the pump 9 abandonment. 10 MR. WEINTRAUB: Mm-hm. 11 MR. HANDZEL: And so I think we had a 12 discussion and just kind of ballparked that 15% at 13 the last meeting. 14 MR. WEINTRAUB: Yes. 15 MR. HANDZEL: I'm clarifying that 16 everybody remembers that and, you know. 17 MR. WEINTRAUB: Yeah. So I can tell 18 you the process a little bit more. Yeah, so we 19 had a discussion and ballparked it. I have some 20 hard data, a level of hard data, which I know 21 based on our surveys, X number of pumps at each 22 level were told to me to be either dropped or

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 61 1 replaced by something that already existed. And 2 so those are zero cost replacements because the 3 model is already there. 4 Then we said, well, what about the 5 unknown? What about all the manufacturers that are 6 not going to, that didn't outwardly say what they 7 were going to do, and we had a discussion and said 8 that rate is probably between, on average for the 9 industry, 5 to 10%. 10 So I incorporated my numbers and we went 11 through the spreadsheet, and it's on the, on the 12 SharePoint. The numbers I had plus the estimate 13 for the rest of the industry, and then that did 14 work out to what you guys were estimating, at 15 around 25% at the low end, down to 15% at the 16 higher efficiency levels. And our bottom end was 17 somewhere like 10 or 15% down to 5 based on models 18 we were told explicitly would be dropped by 19 manufacturers. 20 MR. HANDZEL: And your -- Mark 21 Handzel again from Xylem. Your surveys were 22 primarily of the larger companies, right?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 62 1 MR. WEINTRAUB: Exactly. Yeah. 2 MR. HANDZEL: The people at this 3 table, right? 4 MR. WEINTRAUB: Yeah. 5 MR. HANDZEL: So I don't -- so that 6 was, I think, what Charlie was pointing out -- 7 MR. WEINTRAUB: Mm-hm. 8 MR. HANDZEL: -- that small business 9 impact. I don't think any of us at this table can 10 really -- 11 MR. WEINTRAUB: Mm-hm. 12 MR. HANDZEL: -- you know, give you 13 a, a gut feel for that. 14 MR. WEINTRAUB: Yeah. But that's 15 also why we did the, the five to ten means some 16 are giving five, some are giving zero, or dropping 17 zero. And it's going to, it's going to 18 incorporate somewhere. 19 MR. HANDZEL: Okay. 20 MR. WEINTRAUB: Yeah, and I think 21 the, the level of that 5 to 10%, we ended up 22 doing, when I was calculating things in that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 63 1 spreadsheet, it was about 7 point, the median, 2 7.5% added to what I knew already, is how we got 3 there. So, and I believe we -- so we went through 4 that spreadsheet and there was consensus. 5 Okay. Okay. So back to item number 6 three. So hydraulic redesign costs decreased as 7 not to double count the cost of, of financing. 8 I'm going to move forward unless we have any other 9 question on this. Okay. 10 All right. This is again updated number 11 of models in the industry. Actually this is, so 12 this, step four, we updated the model numbers 13 based on the data that we were given then. And 14 then step six, we updated the model numbers again, 15 the number of models in the industry, because at 16 first we were given one set of HI data and then we 17 actually went back and asked for -- when you guys 18 had released shipments and revenues for the 19 industry in that pdf, we got the model numbers to 20 go along with those. And those are the most 21 accurate because that's the aggregate. 22 So those were the numbers that we ended

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 64 1 up using in the end. So you had both your actual 2 data and then your scaled-up data. We got the 3 actual data and we then scaled up the models to, 4 by the same scaling factors to the total revenues. 5 So those are the -- that's how we got to the final 6 total model counts. 7 Okay. Number five. So the cost of 8 redesign per unit was adjusted to decrease 9 linearly from PER 40 to PER 10, and this is mostly 10 for the purpose of analysis. So previously we 11 modeled the manufacturers' plans to redesign to 12 PER 40 for any standard less than or equal to PER 13 40. So the change counts for the actual cost of 14 redesigning the PER 10 or 25 to fairly examine the 15 economic justification. So -- yes. 16 MR. ROSENSTOCK: Steve Rosenstock, 17 EEI. For that new dash line, is that based on data 18 from the manufacturers? 19 MR. WEINTRAUB: So it's based on 20 actually data, scaling from the EU data as we had 21 done scaling up. So all we received from the 22 manufacturers was that point at 40, was the data

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 65 1 point at 40. So previously we scaled upwards to 2 the right using the EU's relationship, what their 3 manufacturers had said it would cost at the higher 4 levels, and I took that same relationship and 5 their information at the lower levels as compared 6 to the mid level, went down to about half of the 7 original cost per model. 8 And again, this is because for the 9 purposes of analysis, we need to have a 10 representation of if you were to just do the 11 minimum required to get there, how much would it 12 cost, even though, even though that you make the 13 decision to go beyond what the minimum is. We 14 needed to have a representation of the minimum 15 cost to get there. So that's why we, we rebuilt 16 the cost in this manner. The 40 level is still 17 based off the manufacturer data. That still 18 stands. 19 MR. ROSENSTOCK: Steve Rosenstock, 20 EEI. So that dash line is, is that kind of your -- 21 you said it's based on the EU data. 22 MR. WEINTRAUB: Mm-mm.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 66 1 MR. ROSENSTOCK: Actual data? 2 MR. WEINTRAUB: Yes. So EU did 3 manufacturer surveys where the manufacturers 4 responded for how much will it cost total to get 5 to MEI 10, MEI 40, MEI 80 or so. 6 MR. ROSENSTOCK: Steve Rosenstock. 7 Do you have any certain economic incentives, any 8 sort of special tax credits or tax incentives or, 9 or advanced appreciation that would kind of lower 10 that maybe than what would happen in the US? 11 MR. WEINTRAUB: I'm not aware of any, 12 but we can, we can look into it. 13 MR. ROSENSTOCK: Okay. I'm just kind 14 of curious. 15 MR. WEINTRAUB: Yeah. 16 MR. ROSENSTOCK: Again, Steve 17 Rosenstock, EEI. If there was some sort of, you 18 know, economic parameters that were available 19 there to lower their costs versus what might 20 happen here. 21 MR. WEINTRAUB: Yeah. There was 22 nothing written into the EU study, so this was

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 67 1 based off the study done for the Lot 11 -- 2 MR. ROSENSTOCK: Okay. 3 MR. WEINTRAUB: -- by their 4 consultants, and there's nothing written into it, 5 but we can double check. It was just based -- 6 they said it was based on a survey from ... 7 MR. ROSENSTOCK: Thank you. 8 MR. WEINTRAUB: Do we have any other 9 questions? So I can share that report. It's a 10 public report. I can share that with you guys 11 just so you can see their numbers. 12 MARK HANDZEL: Mark Handzel from 13 Xylem. We were just -- Bob and I were just 14 talking, you know, because Chuck Powers was pretty 15 involved in the development of standards. So we 16 might want to call Chuck to see if he knows 17 specifically if there was, you know, if there was 18 financing done on the part of EU to help the 19 manufacturers with the design costs. 20 MR. WEINTRAUB: Mm-hm. 21 MR. BROOKMAN: Dan, say the name of 22 the report.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 68 1 MR. WEINTRAUB: Oh, it's the -- I'll 2 share it. It's the Preparatory Study for the EU 3 Lot 11. 4 MR. BROOKMAN: Okay. 5 MR. WEINTRAUB: And it's basically 6 like what one of our TSDs would be. It was the 7 report that informed the group on, to make their 8 decision. 9 MR. BROOKMAN: Thank you. 10 MR. WEINTRAUB: Yeah, so I'll share 11 that with everyone and, yeah, we'll go from there. 12 But, this was again -- 13 MR. CASE: Doug. 14 MR. BROOKMAN: Yes. Greg. 15 MR. CASE: Greg Case. You know, I'm 16 a little confused. In this study I think you just 17 referred to it, that we did this study and gave 18 you numbers at 10, 40, and 70, I think, MEI 19 levels, and why are we not using that data, or 20 what's different between this and what we gave 21 you? 22 MR. WEINTRAUB: So Greg, you guys

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 69 1 only, within the HI study, you only provided the 2 cost to get to 40. You actually did not provide 3 the cost to get to 10. So that, there was one 4 study, 3 horsepower bins, and the cost to get to 5 40. And we do understand that realistically 6 manufacturers may make the decision that if there 7 is an MEI10 or PER10, they're going to go to 40. 8 But we have to look at the incremental cost of 9 efficiency, in that how much would it actually 10 cost if you just wanted to hit the minimum 11 standard compared to going above and beyond for 12 analytical purposes. 13 MR. CASE: Okay. Thank you. I had 14 mis- remembered how we had set up that survey. 15 MR. WEINTRAUB: Okay. 16 MR. BROOKMAN: Okay. Thanks, Greg. 17 MR. WEINTRAUB: All right. If there 18 any other questions? Move forward. Okay. So six 19 we discussed. So these are the only new items 20 actually. So everything before this we presented 21 previously. And seven was just adding precision. 22 So I wanted to -- when we see results

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 70 1 change from month to month, I want people to know 2 why. So here we just added precision, and that 3 previously when we were talking about number of 4 models redesigned, it was just the flat PER10, 10% 5 of the population, PER20. We just dug, dug a 6 little deeper and, you know, it works out to be 7 PER10 is 10.3% because it's not round numbers. 8 And then we also looked at the actual 9 population of failing pumps, saying we have these 10 20 pumps failing. Based on the redesign survey, 11 how much does it cost to redesign all 20 of them, 12 not -- previously I just said the average cost to 13 redesign a pump. Over 200 pumps was $200,000 14 multiplied times 20. Now I looked at each 15 population separately. So it just became more 16 granular once we started to settle on a method 17 that we are going to go through. So it's just 18 more precise results, not large changes due to 19 this, but just more precise. 20 Okay. A quick look at the changes. So 21 here we have April 30th, May 14th, May 27th. May 22 14th is what you saw at the webinar for both

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 71 1 inline and end suction. You'll see between May 2 14th and May 27th very little change, very little 3 change. It's just mostly driven by the model 4 numbers, the number of models that we, that we 5 included in. 6 And you see the big -- there's the 7 negative 50, negative 50, negative 25, and 8 negative 30. That's driven by the decreasing 9 slope of the redesign versus efficiency level 10 curve. So moving on. 11 MR. BROOKMAN: Wait. Don't go so 12 fast. 13 MR. WEINTRAUB: Okay. Let you guys 14 soak it in. But yes, very little change over 15 where we were two weeks ago at our webinar. 16 MR. BROOKMAN: Just to let everybody 17 have a chance to get this. 18 MR. WEINTRAUB: Sure. 19 MR. BROOKMAN: Yes. Charlie 20 Cappellino. 21 MR. CAPPELLINO: Yes. Just so it's 22 absolutely crystal clear. The numbers in the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 72 1 cells are millions of dollars. 2 MR. WEINTRAUB: Yeah. Yep. Correct. 3 MR. CAPPELLINO: That the industry 4 would spend to accomplish the redesign. 5 MR. WEINTRAUB: Correct. 6 MR. BROOKMAN: As a whole. The 7 industry as a whole. 8 MR. WEINTRAUB: Aggregate, yep. 9 MR. HANDZEL: Yeah, Mark Handzel. I 10 would just request that that be added to the slide 11

-- 12 MR. WEINTRAUB: Okay. 13 MR. HANDZEL: -- just for other 14 people who may go back and look at this later, 15 that it's clear what the, what the impact is. 16 MR. BROOKMAN: I don't even see that 17 it says millions. 18 MR. HANDZEL: No, it doesn't say it 19 anywhere -- 20 MR. BROOKMAN: There it is, yeah. 21 MR. HANDZEL: That's good.All right, Dan, 22 you're right. Sorry, Dan, never mind. It's good.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 73 1 (Inaudible) and honest. And then thousand, 2 thousand, million. 3 MR. BROOKMAN: Great. Joanna Mauer. 4 MR. WEINTRAUB: "Total cost of 5 redesign to industry." Okay. I'll just - no, 6 we'll do parenthesis "in aggregate". 7 MR. BROOKMAN: You were going to say 8 something? 9 MS. MAUER: I was just -- this is 10 Joanna Mauer. 11 MR. WEINTRAUB: Yes. 12 MS. MAUER: Could you just kind of at 13 a high level explain a little bit -- I'm looking 14 at -- 15 MR. WEINTRAUB: Mm-hm. 16 MS. MAUER: -- the costs going from 17 PER 40 to PER 55. It looks like the cost doubles 18 about -- 19 MR. WEINTRAUB: Mm-hm. 20 MS. MAUER: -- going from 40% of 21 models that -- 22 MR. WEINTRAUB: Yes.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 74 1 MS. MAUER: -- would it meet the 2 level versus 55 -- 3 MR. WEINTRAUB: Yep. Yeah. So 4 you'll actually see that it's, at the other levels 5 say 25 to 40 we're seeing doubling also. And that 6 is the result of this curve. So basically the 7 model is doing two things. It's counting a new -- 8 at each level there is more models that need to be 9 redesigned. And then those need to be redesigned 10 at a higher cost per model each step up the 11 ladder. 12 So your 40, you know, as your baseline. 13 Now at 55 your cost has gone up about 1.4 and 14 you've added 15% more -- or you've added X percent 15 more models. Yes, actually, yeah, so you're going 16 from 40 to 55. So you've added 30, over 30% more 17 models that need to be redesigned. So it's just, 18 it's just a multiplication compounding issue. 19 MS. MAUER: Okay, thank you. 20 MR. WEINTRAUB: Is that clear? Go 21 ahead. 22 MR. BARBOUR: Can I ask one more

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 75 1 question? 2 MR. WEINTRAUB: Yeah sure. 3 MR. BARBOUR: Bob Barbour. This is 4 Bob Barbour with TACO. Sorry. The PER40 levels 5 that you're referring to there -- 6 MR. WEINTRAUB: Yep. 7 MR. BARBOUR: -- you're using 40%? 8 MR. WEINTRAUB: Yes. 9 MR. BARBOUR: But when we're running 10 our numbers, I don't think any of us based on the 11 C values that are in the spreadsheets at this 12 point -- 13 MR. WEINTRAUB: Mm-hm. 14 MR. BARBOUR: -- are coming up with a 15 40% impacted number. 16 MR. WEINTRAUB: Okay. 17 MR. BARBOUR: We're coming up with -- 18 with higher numbers, and typically as you get up 19 into the higher, higher PER numbers -- 20 MR. WEINTRAUB: Mm-hm. 21 MR. BARBOUR: -- and I don't know 22 what you may be doing to adjust those C values to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 76 1 better reflect that. 2 MR. WEINTRAUB: Mm-hm. So we 3 actually have a whole section devoted to talking 4 about C values later on this afternoon, or 5 whenever we get to it. Hey, Mark, 'cause I think 6 Bob's point is just that it, it could impact 7 (inaudible). 8 MR. HANDZEL: Oh, yes. 9 MS. WILLIAMS: Just sort of as aside, 10 though, when you calculate it to get 40% of the 11 whole industry, and any one of you is highly 12 likely to not get 40% because your pumps may be 13 better or worse than the industry average. So 14 it's sort of a little bit of a problem where it's 15 hard for you to individually assess how 16 appropriate the C values are, so -- 17 MR. WEINTRAUB: But we will show you 18 - yeah. But we will show you our, what our data 19 gave us, what HI's data gave you, and actually 20 it's just compared to the EU as a (inaudible). So 21 we have all that coming up. 22 But the idea here is, these efficiency

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 77 1 levels, as Lucas said earlier, are independent of 2 what the C value is. We want -- you guys as a 3 group will decide on what the C values are that 4 should go with these efficiency levels. But we're 5 setting these efficiency levels and doing these 6 calculations based on the drop of what we're 7 targeting. 8 MR. BARBOUR: Bob Barbour again from 9 TACO. So really what you're saying is it's not a 10 PER 40, but it's a 40% -- 11 MR. WEINTRAUB: Drop. 12 MR. BARBOUR: -- drop or redesign -- 13 MR. WEINTRAUB: Exactly. Yep. 14 MR. BARBOUR: That's why I was 15 getting a little confused as to what you were 16 trying to lead to. 17 MR. ADIN: This is independent of the 18 metric. 19 MR. WEINTRAUB: Yep. 20 MR. ADIN: So that wouldn't matter. 21 The C value tells you how to get from, how to get 22 that from --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 78 1 MR. WEINTRAUB: Yeah. Right. 2 MR. HANDZEL: Mark Handzel again. So 3 would the plan be that once there's agreement on 4 the metric, that you would refine this further, or 5 is this going to stay as an estimate at 40% of the 6

-- 7 MR. WEINTRAUB: This stays as is 8 because -- 9 MR. HANDZEL: Okay. 10 MR. WEINTRAUB: -- regardless of what 11 the metric is, you can change your C value or you 12 can change how you define the standard level based 13 on that metric to drop out 40% of the, of the 14 models. That's always the goal, to drop out the 15 number that we're prescribing here. Or if we want 16 to look at a level somewhere in between there, we, 17 you know, we drop out another percent and we say, 18 what's 30, what's PER 30. But, that's always the 19 goal. 20 MR. BROOKMAN: Louis Starr. 21 MR. STARR: This is Louis Starr. 22 Does that mean that on the standard levels, that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 79 1 you feel that the agreement will be one of these 2 levels, or can it be an intermediate value 3 somewhere between 25 and 55? 4 MR. WEINTRAUB: I believe it can be 5 any level that the group would like to -- to get 6 to. So, you know, we did a broad starting point 7 to, to show the lay of the land, but if it looks 8 like you're looking at two standard levels and 9 you're fighting between them and you want to see 10 what goes on in between them, we can do -- if 11 you're looking at 25 and 40, we can do 35. 12 MR. BROOKMAN: Just to restate, one 13 of Lucas' points in his first slide was that the 14 Working Group could, for example, choose analysis 15 at a, at a level of 30 or 35, that sort of thing, 16 and that, that would be a productive thing for us 17 to just, to work through in the next two days. 18 MR. STARR: Then you would be going 19 back and redoing your stuff, right? 20 MR. WEINTRAUB: Yes. Yeah. But 21 these are all scalable analyses. So turning this 22 around is very quick, yeah.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 80 1 MR. BROOKMAN: Steve Rosenstock. 2 MR. ROSENSTOCK: Steve Rosenstock, 3 yeah. So as a follow-on, if, if someone wanted to 4 say, well, what about PER 33, you could run those 5

-- 6 MR. WEINTRAUB: Yep. Mm-hm. 7 MR. ROSENSTOCK: -- calculations 8 pretty quick turn around? 9 MR. WEINTRAUB: Yes. Exactly. 10 MR. ROSENSTOCK: Okay. Thank you. 11 MR. WEINTRAUB: Yeah. Yes. 12 MR. BROOKMAN: Jay. 13 MR. SIVIGNY: Jay Sivigny, Flowserve. 14 End- suction, in-line. Do you have the rollups 15 for all of the models so we can see a total of all 16 of the different costs for the different types? 17 MR. WEINTRAUB: I actually don't have 18 it right here, but I can get that out later. I 19 don't have it in the slides, but I do have total 20 industry. Let me just double check. No, I don't 21 think I got total industry. Oh, I did get total 22 industry in there. There we go. Okay.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 81 1 So here you go. You have total industry 2 here, end suction, in-line, vertical turbines, 3 radial split verticals. You'll see and we'll 4 discuss radial split later why they're blocked 5 out. That's another discussion we're going to 6 need to have as a group, but for now there are 7 (inaudible) including costs in those categories. 8 You can take a look at the folder. 9 Of course, I didn't actually present to 10 you the VTS or the RSV yet, but you can see how it 11 sums. On the top, millions, in millions of dollars 12 total cost. On the bottom, as a percent of annual 13 revenues minus motor. So no motors in those 14 annual revenues. Same percent, same basis as was 15 done previously. 16 MR. SIVIGNY: Thank you, Daniel. 17 MR. WEINTRAUB: Yeah. Okay. I'm 18 going to -- we'll get back to this. I'll roll 19 back to that. Any other questions on end suction 20 and in-line specifically? Okay. 21 I'm going to move forward. So this was 22 what I had put forward to the group earlier,

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 82 1 simplifying and removing polishings. So we're 2 going to do that. I'd also like to propose the 3 removal of advanced casting from the model. I did 4 the numbers, and that added complication within 5 the model only adds .3% of those total dollars 6 that you see on the screen. So it doesn't even 7 impact what you're looking at, because if we're 8 looking at 12.2 million, .3% of that is the 9 difference to the industry. 10 So unless there are any objections, I'd 11 like to pull that out to again simplify it so as 12 we're scaling things, things can be scaled easier. 13 Does anyone have -- Charlie. 14 MR. CAPPELLINO: Charlie Cappellino. 15 On that point, you're saying remove the cost and 16 remove the benefit or advanced casting benefit? 17 MR. WEINTRAUB: Just simple -- so it 18 would just be a straight simplification, in that 19 previously we said 10%, approximately 10% of 20 failing models may change, would be forced to 21 change to advanced casting as well as redesign. 22 So now we're just saying they're going to get

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 83 1 there just using a hydraulic redesign. Just to 2 simplify the cost modelling. 3 MS. WILLIAMS: The benefits would be 4 the same. 5 MR. WEINTRAUB: The benefits are the 6 same. They're going to get there. Just the 7 baseline, yeah. 8 MR. BROOKMAN: Steve. 9 MR. ROSENSTOCK: Steve Rosenstock, 10 EEI. So again, as a design option, are you still 11 assuming the model that some manufacturers are 12 going to use advanced casting to meet the level? 13 MR. WEINTRAUB: As a design option, 14 we would be removing it as a design option and 15 replacing those pumps that, the pumps that 16 previously in the model right now were redesigned 17 and changed casting method to meet standard. 18 Those pumps just incur the cost of changing 19 standard, changing casting method. Sorry. Those 20 pumps just incur the cost of hydraulic redesign. 21 And on aggregate for the industry, it changes it 22 within the noise.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 84 1 MR. ROSENSTOCK: Does it change the 2 energy savings at all? 3 MR. WEINTRAUB: No, it -- we just 4 make the assumption that they'll get there. 5 They'll get to the same level with hydraulic 6 redesign only, 'cause in the model a failing pump 7 needs to make it to an efficiency level. That 8 pump that was redesigned will get there using 9 hydraulic redesign regardless. That's the 10 assumption that we're making. 11 MR. ROSENSTOCK: Again, Steve 12 Rosenstock, EEI. Even if it's a lower - again, 13 I'm just -- I'm trying to put all this out. Even 14 as an option, the casting might be -- I know 15 you're saying it reduces the, the total cost, but 16 what if a particular pump's casting is cheaper 17 than the redesign to meet that level? 18 MR. WEINTRAUB: So it was always a 19 coupled design option, in that the design options 20 that we previously had were hydraulic redesign or 21 hydraulic redesign with, plus casting, plus new 22 casting method. So we're just trying -- we're

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 85 1 proposing to just simplify it and say the only 2 design option left is just hydraulic redesign 3 because the costs are so similar to the other 4 design option, to just treat everything that's 5 going to, that can be redesigned and pass with, 6 with hydraulic redesign. 7 MR. BROOKMAN: Charlie. 8 MR. CAPPELLINO: Charlie Cappellino, 9 ITT. So you talk about the costs being small. 10 MR. WEINTRAUB: Mm-hm. 11 MR. CAPPELLINO: Are you talking 12 about the initial investment cost, tooling costs, 13 or the cost to manufacture the parts themselves? 14 MR. WEINTRAUB: The initial cost. 15 MR. CAPPELLINO: The initial cost. 16 MR. WEINTRAUB: Initial cost and that 17 was -- I can throw out some rough numbers for you. 18 It was about 7,000 dollars more to get the 19 advanced tooling over what the baseline was. And 20 then we had -- we showed that at the last meeting. 21 And so that 7,000 on -- 7,000 dollars on top of 22 200,000 dollars approximately. But that 7,000

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 86 1 dollars only incurred to 10% of the models in the 2 marketplace. So it becomes a very small 3 percentage of that total. 4 MR. CAPPELLINO: But the additional 5 cost to use an advanced casting method on a 6 production basis is still included in the model? 7 MR. WEINTRAUB: So we came to the 8 consensus of it during the last meeting that we 9 were okay with zero change in MPC. 10 MR. CAPPELLINO: Yeah, I never agreed 11 with that, but we'll talk about that later, I 12 guess. 13 MR. BROOKMAN: Dan, restate what you 14 think we agreed to. 15 MR. WEINTRAUB: I believe we came to 16 a consensus last meeting that there would be no 17 change in manufacturers' production cost on the, 18 on the basis, on the whole, from changing from a 19 sand cast impeller to an advanced cast impeller. 20 MR. CAPPELLINO: Okay. On impellers 21 only. 22 MR. WEINTRAUB: Impellers only.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 87 1 Yeah. 2 MR. BROOKMAN: Okay. Yeah. Thank 3 you. 4 MR. WEINTRAUB: And so you had, you 5 had proposed questions, we posed a response -- 6 MR. CAPPELLINO: Right. 7 MR. WEINTRAUB: -- to that. 8 MR. CAPPELLINO: Took the casting out 9 of the picture. 10 MR. WEINTRAUB: Castings out of the 11 picture. Yeah. 12 MR. BROOKMAN: Just as a matter of 13 clarifying, I'm trying to remember in the 14 transcript, did this come up at the very end of 15 the last meeting? 16 MR. WEINTRAUB: It was towards the 17 end, yes. I went back up with the slide. 18 MR. BROOKMAN: You went back over 19 slides and you asked for confirmation on what you 20 were doing -- 21 MR. WEINTRAUB: Yep. 22 MR. BROOKMAN: -- to change the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 88 1 assumptions? Yes. Okay. 2 MR. WEINTRAUB: Yep. And we did go 3 forward with that as a group. 4 MR. BROOKMAN: Yeah. Okay. And you 5 stated we intend to go forward with these revised 6 assumptions. 7 MR. WEINTRAUB: Yes. Mm-hm. And we 8 did. So are there any other questions on the, the 9 .3% change in costs due to getting rid of advanced 10 casting complications? 11 MR. BROOKMAN: Let me just make a 12 process note. The work of this working group is 13 predicated on all agreements, preliminary 14 agreements, until they come to them collectively 15 as a final agreement. So if you reach a point of 16 discomfort with any of these points, it's, we can 17 reconsider, but we want very much these 18 considerations to be as well considered as 19 possible. I think I'm getting redundant there. 20 Anyway, we want to -- we want as much thought 21 process and scrutiny going into each one of these 22 agreements that we make along the pathway, but

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 89 1 they're all preliminary or provisional until we 2 reach a final agreement. Okay. 3 MR. WEINTRAUB: So just to step back 4 and put this in perspective. So the simplifying 5 of the costs of the model. What does that mean? 6 Overall it means the only design option on the 7 table is hydraulic redesign. Generic hydraulic 8 redesign at a cost, the same number of pumps at 9 each level will get to be redesigned, just 10 everyone is incurring a hydraulic redesign, though 11 the pump that we had specified for polishing is no 12 longer polished. It's hydraulically redesigned. 13 The pump that we had specified as 14 hydraulically redesigned and changed to investment 15 casting is just hydraulically redesigned, and they 16 make it there. That's the proposal. And that's 17 pretty much in line with what HI had been 18 proposing from the start. So if there are any -- 19 are there any objections? If not, we're going to 20 move forward. Okay. 21 All right. Now so VTS and RSV. So we 22 went through vertical turbine submersible results

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 90 1 last meeting. Not much change. I didn't show the 2 changes because they were small. These are 3 updated numbers. Here we only analyzed two-pole 4 models. We'll discuss that later as we're only -- 5 currently we're only looking at the two-pole model 6 equipment class. We'll discuss that and come to a 7 consensus on that later. 8 No models are dropped out of the 9 marketplace. All failing models are hydraulically 10 redesigned because polishing cannot be done there. 11 Forty percent of total MSP attributed to motor 12 price, 70% of shipments assumed to be sold with 13 motors. So these are assumptions we had to make 14 due to short data, but we based it on the rest of 15 the population. 16 Cost to redesign linearly reduced 17 between below PER 40. That's the same linear 18 reduction in redesign costs that we looked at 19 earlier. And then the same price efficiency 20 relationship applied to it. And we'll discuss that 21 again later. 22 So these are your percentage costs.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 91 1 They were on the screen earlier. They're fairly 2 inline with what you see with the end-suction and 3 in-line pumps as a percentage of revenues. So 4 there's nothing surprising there in those results 5 and not very different from what you saw 6 previously at the webinar. If there aren't any 7 questions, I'm going to move forward. 8 MR. BROOKMAN: Before you move on -- 9 MR. WEINTRAUB: Sure. 10 MR. BROOKMAN: Just everybody take a 11 peek before we move on. Okay. 12 MR. WEINTRAUB: Okay. All right. 13 RSV. So this is new. We did not discuss this. 14 So RSV as we presented it in the webinar, or we, 15 we released some slides on the webinar -- we're 16 very short on data for vertical turbine -- for 17 radial split vertical pumps. So we're making a lot 18 of assumptions going through this analysis and I'm 19 going to take you through them. 20 So for this we did have HI's aggregate 21 number of models, HI's aggregate shipments, and 22 HI's aggregate revenues. So that was a good basis

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 92 1 to work off of. We just had very short actual 2 model data. 3 So to look at costs, we said all 4 available two-pole models are available in the 5 marketplace as a four-pole model and that was 6 based on discussions with manufacturers. We said 7 there's a limited additional cost to convert a 8 four-pole model because the two pole is the basis 9 that's out there in these types of models and the 10 four pole is not designed separately. It has a 11 motor put on it. It will likely be tested and 12 likely have marketing put out for it, but it's not 13 going to be designed specifically as a four-pole 14 model in the marketplace. 15 So the costs associated with the failing 16 four-pole models are very small. We said it was 17 25% of the marketing costs and 25% of the testing 18 costs, and there would be no additional hydraulic 19 redesign cost associated with that. No additional 20 tooling costs because it's the same product. We 21 said no models are dropped. We said all failing 22 models are hydraulically redesigned as the only

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 93 1 design option, 40% of total MSP attributed to 2 motor price, 70% of shipments sold with a motor, 3 and then the cost of redesign reduced linearly 4 below PER40 again. 5 And so here was the assumption why we 6 have black -- why we have the bottom end blacked 7 out. So the marketplace baseline is set at PER 8 40, which is equivalent to MEI 40 right now. 9 That's the discussion we'll have later on C 10 values, but saying that this is a -- and we didn't 11 -- it's kind of putting the cart before the horse 12 here, but RSV is our global platform. 13 What's sold in Europe is sold in the US 14 and Europe is in the process of phasing out 15 anything below MEI 40. And we're looking to 16 target our C values right now based on discussions 17 with the manufacturers, and we'll still need input 18 from the advocates' basing to target our C values 19 on the EU C values there because it's a global 20 platform. 21 So therefore, if anything below 40 is no 22 longer available in the EU, we don't expect it to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 94 1 be produced and brought over to the US either. 2 MR. BROOKMAN: Steve. 3 MR. ROSENSTOCK: Steve Rosenstock, 4 EEI. You said it has been phased out or is going 5 to be phased out? 6 MR. WEINTRAUB: January 2015. 7 MR. ROSENSTOCK: 2015? 8 MR. WEINTRAUB: Is the phaseout. 9 Right now PER10 is phased out, or MEI10 is phased 10 out. 11 MR. ROSENSTOCK: So that when you say 12 phased out, again, that's a baseline? 13 MR. WEINTRAUB: Yeah, that's the new 14 baseline. Okay. 15 MR. ROSENSTOCK: Okay. It said 16 phased out. 17 MR. WEINTRAUB: Yeah. Sorry. And 18 the data, the limited data we had didn't show any 19 pumps existed, or showed very few single 20 percentages below that 40. 21 MR. HANDZEL: Because all the 22 manufacturers have already redesigned --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 95 1 MR. WEINTRAUB: Exactly. So -- 2 MR. HANDZEL: Mark Handzel from 3 Xylem. 4 MR. WEINTRAUB: Yeah. Exactly. So 5 we're trying to -- so this one we know. Unlike 6 the end- suction and the in-line pumps, we know 7 that this is a global product. The other ones 8 have footprints in the US, footprints in EU. Some 9 overlaps don't -- independent marketplaces. Here 10 it's a very different marketplace. 11 MR. BROOKMAN: Louis Starr. 12 MR. STARR: Louis Starr with NEEA. 13 Did you look at higher levels just to see what, 14 because they're also, there's new standards moving 15 forward in the EU? So I'm wondering if you could 16 kind of see how that falls out at higher levels to 17 see if the market is shifting (inaudible). 18 MR. WEINTRAUB: So it takes the same 19 approach as the EU actually, where the top of the 20 market is what's out there right now. Is, so -- 21 MR. STARR: Okay. 22 MR. WEINTRAUB: -- you know, PER 100,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 96 1 which you can't really get to because that's the 2 tail of a bell curve, but the top is the top. 3 That's the best in the market. So PER 40 here is 4 meant to represent where the EU is going in 2015, 5 and the EU has made no statements to go beyond 6 there without, aside from the extended products 7 that they're looking at. But so here, you know, 8 at the top of the market, EU as they defined it 9 was MEI 70, so 70 would be top of market here 10 relating to what they did. 11 And here you see percentage. 12 Interesting, you get a, a break from what we were 13 seeing in the previous models and a percent of 14 revenues -- redesign costs of the percent of 15 revenues is very low, and that's because based on 16 the data that HI provided, you had large numbers 17 of shipments for relatively small number of models 18 in the industry, which means your costs can be 19 spread over more sales. So you see very low 20 percentage of revenues there. And again, those 21 models, model numbers are based on that HI survey. 22 All right.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 97 1 MS. MAUER: This is Joanna Mauer. 2 MR. WEINTRAUB: Yeah. 3 MS. MAUER: Just so I'm clear, so 4 you're defining, for example, PER 40 differently 5 from this category than you -- for the other 6 categories it's defined based on models available 7 today or whenever the survey was conducted in the 8 US. 9 MR. WEINTRAUB: Yeah. 10 MS. MAUER: Where here it's tied 11 directly to C values in the EU. 12 MR. WEINTRAUB: Yes. 13 MS. MAUER: Okay. 14 MR. WEINTRAUB: Yeah. Move forward? 15 All right. So we looked at this earlier. This is 16 the summary again. You see -- so just to run 17 through and give you the idea of the end-suction, 18 top line end- suction pumps, those -- so that's a 19 combined category. Those, and in-line, similar 20 costs if you were split them in half, say, end 21 suction and break out the close couple and the 22 frame-mounted. In line they all, they work very

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 98 1 similarly in the cost patterns. Vertical turbines 2 cost a little less at each level per unit. 3 As a percentage of revenues, you can see 4 they all work fairly similarly, you know. At the 5 low end you'll see 10% of revenues on an aggregate 6 of 70, then 30, 40, 28, average 28. So they're 7 all -- aside from the radial split verticals, 8 they're working in unison. Excuse me, VTS 9 (inaudible). 10 And I think these will be good things 11 for you guys -- well, we'll send these out after 12 as quickly as we can actually to the group so you 13 guys can kind of pour over them, because it will 14 be important information. 15 MR. BROOKMAN: Jay. 16 MR. SIVIGNY: Jay Sivigny, Flowserve. 17 Your efficiency level PER 10 -- 18 MR. WEINTRAUB: Yes. 19 MR. SIVIGNY: -- I see 9%, 10%, 8%, 20 and at the bottom we got 7%. 21 MR. WEINTRAUB: Mm-hm. 22 MR. SIVIGNY: Is that the RSV

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 99 1 bringing that down? 2 MR. WEINTRAUB: That is -- so RSV 3 does bring that down, yes, because there's no cost 4 incurred at that level if we were to set a 5 standard there, because we're saying we're using 6 the EU values. So if you were to set a standard 7 there using the EU C value, nothing needs to get 8 redesigned there. 9 MR. BROOKMAN: Are those weighted? 10 MR. WEINTRAUB: These are weighted, 11 yes. So that -- you can't just take the average 12 of 9, 10, and 8. You do total, 19.7 divided by 13 the total revenues of the industry gets you your 14 7%. 15 MR. BROOKMAN: Okay. 16 MR. WEINTRAUB: I'm sorry. I didn't 17 put up the total revenues, but you could actually 18 back them out if you wanted to. Yeah. So it 19 should be the same on each -- total revenue should 20 be the same for each level. So the same thing for 21 PER 25. There would be a zero cost of redesign 22 there.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 100 1 All right. So we'll distribute these so 2 you guys can work with them. All right. Finally, 3 this is just a brief update. So the MSP versus 4 efficiency relationship, you remember, and this 5 was the -- 6 MR. BROOKMAN: And for those of you 7 that are curious, at the end of this presentation, 8 which I think is going to be fairly soon -- 9 MR. WEINTRAUB: This is the next -- 10 looking at two slides. Yeah. So this 11 relationship which we looked at last meeting, this 12 was the idea where you got, there was a little bit 13 of a price efficiency relationship at the lower 14 end of the market, but it flattened out. This 15 hasn't really changed at all. All we did was 16 refine the analysis. So this was the basis that 17 fed into the LCC. 18 It was the idea that very inefficient 19 pumps were cheaper in the marketplace, but once 20 you reached a certain level, things were flat. 21 You weren't getting price -- you weren't getting 22 price for efficiency.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 101 1 So I just wanted -- it changed a little 2 bit from the last meeting, so I wanted to make 3 sure that you weren't being surprised by why does 4 this curve look different than this, than the last 5 curve. So the basic methodology hasn't changed as 6 we went through the last meeting. 7 What we did do was we did MSP premium 8 relationship, which ultimately means the markups 9 on a pump now realizing the pump's relative market 10 score. So the PER percent. So you have a pump and 11 it has a C value -- it has a C value, and that C 12 value entails that, and it also has where it 13 stands in the marketplace. It could be, you know, 14 in the 9th, 8th percentile, 9th percentile, 10th 15 percentile. 16 Where does it sit on the PER scale of 0 17 to 100? So how does it sit in the marketplace? 18 And when I did the analysis, I did the analysis 19 based on that relative market score. Basically 20 this X axis for further regression was now where 21 it sits percentage of models failing rather than C 22 value.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 102 1 And it just allowed us to be a little 2 more precise because we were dealing with the 3 equipment classes lumped together, end suction 4 close-couple 1800, 3600, and frame-mounted all in 5 one analysis group. 6 So I was able to apply the proper 7 standing. Every pump got its proper standing 8 because you apply to a close-couple 1800 pump, got 9 the C values, it got compared to its subgroup. 10 And a close-couple 3600 got compared to its 11 subgroup. So it sat properly within its group. 12 It was ranked properly. It was just a -- really 13 just adding precision to, to the model. 14 So it just, each pump, yeah. So it's 15 all, it's all written here. I mean that's, that's 16 the extent of it. The general shape doesn't 17 change. It's just the value is tweaked. 18 MR. BROOKMAN: Charlie. 19 MR. CAPPELLINO: Charlie Cappellino, 20 ITT. So just trying to understand the, the graph 21 there. 22 MR. WEINTRAUB: Yeah.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 103 1 MR. CAPPELLINO: So on the left-hand 2 side it says 0%. 3 MR. WEINTRAUB: So that's the bottom 4 of the market. 5 MR. CAPPELLINO: The bottom of the 6 market. 7 MR. WEINTRAUB: Yeah. 8 MR. CAPPELLINO: Up to, let's say, a 9 little over 20%. 10 MR. WEINTRAUB: Yep. 11 MR. CAPPELLINO: So what they're 12 saying, there's a 20, a little over 20% price 13 difference? 14 MR. WEINTRAUB: Yes. 15 MR. CAPPELLINO: Between the bottom 16 of the market and -- 17 MR. WEINTRAUB: Yep. So this would 18 represent, say, PER20, a pump at PER20 or a pump 19 at MEI, whatever it is. And that pump is going to 20 cost, say, about 1% more than the average pump in 21 the marketplace. And this was based off that 22 analysis that we did last time where we looked at

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 104 1 -- I regressed how every pump in the marketplace 2 performed as compared to the average cost 3 regressed on C value previously. 4 Now I regressed on its ranking in its 5 group rather than the C value. It's just changed 6 from regressing on C value to regressing on 7 ranking within the group. 8 MR. BROOKMAN: Wait a second, Steve. 9 Charlie, did that answer it? 10 MR. CAPPELLINO: Yeah, I think so. I 11 guess just -- I guess what I'm trying to 12 understand is the relevance here and how this zero 13 percent got, really isn't all that relevant 14 because it's, it's, it's the end, it's the end of 15 the - no, the zero percent. It's the end of the 16 market and there's not a lot of people playing 17 there anyway. So it's real relevant and it's kind 18 of that middle point that you were -- 19 MR. WEINTRAUB: Exactly. Because in 20 reality, the baseline of what's actually being 21 purchased is somewhere over, between five -- at 22 the bottom of what's really being purchased,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 105 1 between five and ten. But actually -- so we -- 2 because our model has to run -- starting with all 3 models, I actually cut off the analysis at, it was 4 somewhere around 5%, saying below there, you know, 5 this is, things start to get weird because these 6 are pumps that may not be purposely water, clean 7 water pumps and such. They may have other 8 tradeoffs. 9 So the data we used was really pumps 10 above, you know, the 3 or 4%, and said, but you 11 have to go to zero on your curve for the analysis. 12 MR. BROOKMAN: Bob Barbour. 13 MR. BARBOUR: Bob Barbour from TACO. 14 So to really simplify this, are we saying then, 15 approximately that you're not going to see a 16 premium as a, as a pump manufacturer if you fall 17 anywhere between 21% and the 90% level? 18 Mr. WEINTRAUB: Correct. 19 MR. BARBOUR: Pretty much would be it 20 flat? And that's really what you're saying? 21 MR. WEINTRAUB: In the marketplace 22 today and we're going to go through scenarios in

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 106 1 the LCC that may differ, if we go through this 2 scenario and other scenarios that will represent 3 tomorrow, but in the marketplace today, this 4 represents, yes, zero. 5 MR. BARBOUR: So the marketplace 6 today doesn't, doesn't - sorry. Bob Barbour 7 again. 8 MR. WEINTRAUB: Yeah. 9 MR. BARBOUR: The marketplace today 10 does not reflect any additional cost to the 11 consumer for a premium product? 12 MR. WEINTRAUB: Yes. Correct. 13 Correct. And that was, if you will remember from 14 -- we cleaned this up even more from what we saw. 15 We saw, you know, waves going up and down where, 16 you know, there's no correlation going on. 17 MR. ADIN: Lucas. Just to clarify 18 again. This is Lucas. That's the premium for 19 efficiency? 20 MR. WEINTRAUB: Premium for 21 efficiency, right. 22 MR. ADIN: So you might be paying a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 107 1 premium for other things like performance factors 2 or features, but there's no specific price premium 3 for efficiency. 4 MR. WEINTRAUB: And that's the 5 marketplace today as our data reflected. As our 6 regression could reflect. 7 MR. BROOKMAN: Steve Rosenstock. 8 MR. ROSENSTOCK: Steve Rosenstock, 9 EEI. But does your model show that there are some 10 cost increases going from 25 to 85 based on other 11 factors? 12 MR. WEINTRAUB: What the regression 13 showed was that you could have -- there was, there 14 was no correlation. So we didn't, we don't look 15 at other factors such as durability, reliability. 16 That's not within the scope of this. We can't 17 break those out. 18 But what we saw were you may have a cost 19 higher here. You may have a cost lower here. You 20 may have a cost higher here or a cost lower there. 21 And they were circling. They were circling the 22 slide. So we correlated to a zero correlation

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 108 1 beyond there, beyond where we could find an actual 2 relationship. 3 MR. ROSENSTOCK: Again, Steve 4 Rosenstock, EEI. So what you're saying, it's just 5 a flat price from 25 to 85. 6 MR. WEINTRAUB: Mm-hm. 7 MR. ROSENSTOCK: Basically. Okay. 8 That's very interesting. 9 MR. WEINTRAUB: And again, that 10 actually goes along with what we obtained. And 11 what we learned in manufacturer interviews along 12 the way was that what was stated was there's a 13 level you could get to, to be in the game for 14 bidding, but then there's other factors that come 15 into play that will win you those jobs, and it's 16 not particularly efficiency all the time. You 17 just have to hit that level and get in the game, 18 and then you can go. 19 MR. ROSENSTOCK: Okay. 20 MR. BROOKMAN: Louis. 21 MR. STARR: Louis Starr of NEEA. Good 22 morning. I was expecting that would be at 40%

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 109 1 rather than 30% where you start to not have a 2 premium just because it seems like most 3 manufacturers are global, maybe decide with the 4 European market. Did you expect to see that at 30 5 or maybe -- 6 MR. BROOKMAN: Mark Handzel. 7 MR. HANDZEL: Mark Handzel of Xylem. 8 That's not completely true because we, once we 9 sell a 60-cycle platform in North America. So 10 it's not the same product sold in Europe. So 11 that's, that's why there's, there's a difference. 12 We may have some products where there's some 13 overlap, but others there will not be any at all. 14 MR. WEINTRAUB: So Louis, that's 15 where the statement on the RSV pumps comes into 16 play. That is the truly global platform where we 17 recognize and we recognize that that is the same 18 pump here and there, but the rest of them are as 19 Mark said. They're separate. 20 MR. FERNSTROM: So this is Gary. 21 Mark, does that result in a different rotational 22 speed, the 60 cycle versus the --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 110 1 MR. HANDZEL: Mm-hm. 2 MR. FERNSTROM: Thank you. 3 MR. WEINTRAUB: All right. So this 4 is all I have, have left. 5 MR. BROOKMAN: We're due for a break 6 right now. It's just about 10:35, which means we 7 will resume here at 10:50 in this room. Please 8 make sure to wear your badge. And the restroom is 9 into the hall and the coffee shop is right down 10 here, just 30 paces down the hall. 11 (SESSION BREAK) 12 MR. BROOKMAN: I'd like for us to 13 start back up. Please take your seats. Let's 14 start. Let's resume. So at the break I had a 15 conversation in the hallway with a few members of 16 the manufacturer's caucus and they raised an issue 17 or two that they wanted to bring to the fore. And 18 I don't know whether you do that now or whether 19 you want to do that later or -- Bob Barbour. 20 MR. BARBOUR: My only issue was on 21 the -- I was a little surprised that the test 22 procedure was not going to be part of the rule

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 111 1 making, and I would have thought that we could 2 have put a one line statement in our task sheet 3 just stating to ASRAC that we recommended the use 4 of the HI test protocol, and hopefully it's going 5 to be ASRAC that's going to make the final 6 decision, isn't it? 7 MR. ADIN: Well, the ASRAC -- so 8 procedurally the way that works, is once, once the 9 working group has come up with a term sheet, we, 10 we vote on it. We present it to the ASRAC and the 11 ASRAC decides whether to accept it. So they do 12 their own vote and then they make a formal 13 recommendation to the Department. So we're making 14 a recommendation to the ASRAC of what they would 15 recommend to DOE, but, but the understanding that 16 whatever the ASRAC formally presents to DOE will 17 go into a proposed rule making. 18 So the only real difference between 19 putting a line in our term sheet that says 20 something about the test procedure and just 21 letting DOE do it, is that, you know, that 22 assuming the ASRAC accepts our recommendation,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 112 1 it'll get communicated to the DOE and go into the 2 proposal. What we're saying -- DOE is saying 3 that's -- you know, our intent is to use that, the 4 HI test method that John mentioned earlier. I 5 have been involved in that process -- 6 MR. BARBOUR: Like make it one simple 7 -- Bob Barbour again. I thought it would make it 8 a simpler, streamlined-type approach if it was 9 part of our task sheet, that we've made that 10 recommendation and then you wouldn't necessarily 11 need to have a second NOPR. Wouldn't it all be on 12 the NOPR if ASRAC said yes? 13 MR. ADIN: It would still need to be 14 a separate NOPR. We never do it -- 15 MR. BROOKMAN: DOE would still need to 16 do, as John said, their diligence. They'll still 17 need to do that, but -- 18 MR. ADIN: Yeah. I mean 19 procedurally -- generally you want it to be that 20 way. You want there to be an understanding what 21 the proposed test procedure is in advance of a set 22 of proposed standards. So, I mean that's the way

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 113 1 we normally do it and really there are advantages 2 to doing it that way. It gives us a chance to 3 collect -- 4 MR. BROOKMAN: Lucas, let me -- let me 5 ask you if, if this group gets incredibly 6 efficient all of a sudden -- 7 MR. ADIN: Uh-huh. 8 MR. BROOKMAN: -- and they decided they 9 wanted to devote some time because they've 10 uncovered that they had a little of more time in 11 their schedule than they had originally thought -- 12 MR. ADIN: Right. 13 MR. BROOKMAN: -- and wanted to give 14 some scrutiny to the HI test procedure proposal, 15 would that be a productive thing to do for this 16 group? 17 MR. ADIN: I mean -- 18 MR. BROOKMAN: I don't want to put you 19 on the spot. 20 MR. ADIN: I guess it depends. I 21 mean, my personal view is that the HI test method, 22 from what I understand, has already received a

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 114 1 fair amount of scrutiny and DOE has had to some 2 extent -- one of our consultants has been involved 3

-- 4 MR. BROOKMAN: Right. 5 MR. ADIN: Providing feedback. 6 MR. BROOKMAN: Correct. 7 MR. ADIN: So that component of it 8 by itself -- my sense has been that there isn't a 9 whole lot of concern about that. 10 MR. BROOKMAN: Yeah. 11 MR. ADIN: That component of it, 12 and so as long as there's an understanding that 13 that would form the basis of a test method, you 14 know. 15 MR. BROOKMAN: Well, I would just say, 16 when you made the announcement this morning I was 17 noticing at this end of the table there was some 18 kind of grumbling about, gee, don't we really need 19 to have this in place or an understanding of how 20 it's actually going to be before we establish this 21 standard level. So, I mean that was just kind of 22 this general tenor of under-the-table comment.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 115 1 But Louis Starr, go ahead. 2 MR. STARR: Yeah. This is Louis 3 Starr. I think more -- it's not the HI part of the 4 test metric. It's more the other, the extended 5 product part of the test metric. I bet Steve 6 could talk a lot about the motors and the motor 7 selection, how you make those motors. So it's 8 really all those other parts that have less to do 9 with the efficiency of the pump, but all the other 10 pieces that go onto the pump. And that's where 11 there probably would be heartburn in the test 12 metric. 13 One thought is, is actually we could 14 keep on the schedule where we're at and there 15 could be a meeting, perhaps afterwards, to be more 16 like a preliminary technical support document in 17 developing the pump metric further that include 18 the elements of the extended product that would 19 make the (inaudible) solution. 20 MR. BROOKMAN: Another thought for us to 21 consider -- just based on what we've set up as a 22 capacity builder for the working group, is if it -

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 116 1 - if there was significant interest in doing work 2 that we're not slated to do on the test metric, 3 that maybe we could establish a working group that 4 would devote some time and energy to it. That's 5 just another -- that's just another -- 6 MR. ADIN: Sub-working group? 7 MR. BROOKMAN: A sub-working group. 8 Thank you for clarifying. Yes. 9 MR. ADIN: Right. I apologize. I 10 didn't meant to interrupt. 11 MR. BROOKMAN: No, please. Please 12 proceed. 13 MR. ADIN: Certainly that's 14 something for the group to think about. I mean I 15 think -- we made some general remarks about that 16 at the last meeting. Maybe it just wasn't really 17 -- we had a lot more pressing things to discuss at 18 that time. 19 MR. BROOKMAN: Yeah. 20 MR. ADIN: But now it's clear, you 21 know, where things are kind of falling out 22 procedurally and, you know, what we need to know

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 117 1 to make real decisions. So if the groups feels -- 2 you know, that's something where a lot more 3 certainty is needed, then, you know, a working 4 group -- or a sub-group might be the way to 5 provide -- to figure that out separately so that 6 we don't have to spend working group time that we 7 need to deal with the standards dealing with the 8 metric part of it. 9 So, I mean we've -- our intent in 10 discussing the metric up until this point has been 11 to provide as much, as much as we can to the 12 working group that will, you know, essentially let 13 everyone feel comfortable with what we're 14 proposing to do going into the standards, you 15 know, so that specific negotiations on those 16 elements aren't needed and wouldn't -- we wouldn't 17 have to spend the time that we have, since we 18 don't have that much more time, on those elements. 19 Because we could -- you know, all of 20 these different aspects of variable speed drives 21 and the motors, and we could clearly spend a lot 22 of time talking about those things. So I think we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 118 1 just wanted to be -- I think we just wanted to 2 make sure that we're using our time productively 3 and, you know, a sub-group might be a way to deal 4 with it if there's still lingering concerns about 5 that. 6 MR. BROOKMAN: Dan Delaney. 7 MR. DELANEY: Yeah, Dan Delaney, 8 Regal. One of the things I was a little confused 9 about, if we don't do the test procedure -- I'll 10 assume we're going to provide a term sheet for 11 this, assume that we'd make a recommendation of 12 the HI test procedure with that term sheet, are we 13 not just avoiding the fact that a test procedure 14 NOPR of some type would have to be done? So 15 regardless, Lucas, is a test procedure NOPR going 16 to be required anyway? 17 MR. ADIN: Yes. Yes. 18 MR. DELANY: So even if we do a sub19 working group, it's just going to support a test 20 procedure NOPR; is that correct? 21 MR. ADIN: Right. So. 22 MR. DELANY: So.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 119 1 MR. ADIN: Right. And that was the 2 point, I think, John made earlier when he was 3 here. Test procedure NOPR will be required anyway. 4 I mean, essentially the working group would just 5 be providing more specific recommendations about 6 what should go in that NOPR, but even if we don't, 7 you know, we've been trying to provide as much of 8 a sense as to what, you know, we think is 9 appropriate and get as much feedback from the 10 group that will inform what DOE would put into 11 such a NOPR. I mean it's a question of how much, 12 how much you want to have specifically laid out in 13 the term sheet. 14 MR. DELANEY: And I guess just to 15 follow-up that, Lucas, -- Dan Delaney from Regal 16 Beloit -- what would be the timing of that? So 17 it's serial. Or is it at some point -- what I 18 didn't understand was the timing, obviously, how 19 critical that test procedure being part of, you 20 know, the term sheet and providing the final 21 information. Is that something that can start 22 parallel or does that have to start after the July

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 120 1 meetings or so? 2 MR. ADIN: With respect to the 3 publication of a proposal or -- 4 MR. DELANY: To this test procedure 5 NOPR. 6 MR. ADIN: So, I mean in theory, a 7 proposal could be published before and -- whether 8 that's realistic is a different question. I don't 9 know if I can, how specific I can be about that, 10 but, I mean in effect right now, they're, they're 11 going on a parallel. 12 MR. BROOKMAN: Sarah Widder, do you wish 13 to comment? 14 MS. WIDDER: I just wanted to clarify 15 a little bit. I think our intent -- tomorrow we 16 have some time that we've tentatively slotted for 17 discussing the metric, and I think the goal has 18 always been to sort of establish within the 19 working group those test procedure items that 20 affect setting the standard, which include the 21 load points and the weights, the general 22 architecture, especially as it applies to bigger

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 121 1 pumps, those assumptions that are made for bare 2 pumps. 3 So all of those things, I think, whether 4 or not we vote on them, is a decision that the 5 group can make, but they can certainly have 6 recommendations or a pretty good understanding 7 moving forward of those items that will affect the 8 standard level. But then there's a lot of other 9 issues, as everyone's aware, of translating HI 10 40.6 test data into the metric for a given pump 11 that don't necessarily affect the standard, 12 especially like controls-related issues. Since 13 we're, we're basing the standard just on bare pump 14 performance, those are important issues about the 15 rating your pump receives, but not necessarily 16 affecting the standard level that's chosen. 17 And so that's how -- we do want to 18 address all the issues as much as we can that 19 relate to the metric. And that will affect the 20 standard, and so we, we will talk about that 21 tomorrow. But there's a number of issues that 22 might be relegated to the test procedure NOPR

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 122 1 because they're just really test procedure and 2 rating related. 3 MR. BROOKMAN: Right. Sarah, that was 4 helpful. Thank you. Louis Starr. 5 MR. STARR: So let me see if I 6 understand this properly. So things like maybe 7 there needs to be some tweaks to some of the 8 control factors and all these other numbers we can 9 thoroughly negotiate a standards level and come 10 back later through the NOPR on the test procedure 11 and adjust those. 12 So we'd really be adjusting the standard 13 levels we agreed -- for instance, let's say we 14 take a -- instead of .96 on the control factor, we 15 decided that .92 was really the one that we 16 should've used, but we negotiated the standard 17 level based on .96. So would we readjust those 18 standard levels that we came up with out of this 19 meeting down to a lower level? 20 MS. WIDDER: Well, so just to be 21 clear, the .96 doesn't affect the standard level 22 because we're setting the standard just based on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 123 1 bare pumps performance. 2 MR. STARR: So I probably chose one 3 of the things that didn't matter, but there must 4 be, there must be some other items in there -- 5 MS. WIDDER: The specific items that 6 we -- so we've sort of thought about how to set 7 the standard and what metric issues are related. 8 And the list we've come up are motor sizing and 9 losses. So we're definitely going to get into 10 that in depth tomorrow. And at least have a -- we 11 might not resolve all the details tomorrow, but if 12 we can have a general idea of -- sort of like we 13 did with the definition -- the intent. So if we 14 didn't get the conservative motor losses curve 15 exactly right because testing is still -- you 16 know, some of the things you mentioned earlier. If 17 we have an intent going out of tomorrow, we can 18 implement that in the NOPR. 19 But motor losses and motor sizing, the 20 load points and weights, which I think we're 21 pretty close on, but just getting some 22 conformation on that, and the general

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 124 1 architecture, meaning like the ratioed value that 2 we've been discussing. And then we need to 3 discuss the standard and label thing, but that, 4 that really doesn't affect the number. 5 So those are the things that, that we've 6 come up with that affect the standard level. 7 They're right there. And then there's -- there's 8 a bunch of other things that we talked about, the 9 control, everything related to controls, including 10 what controls have system curves, what those 11 system curves look like, what the efficiency of 12 controls are. They won't affect how the standard 13 is set. 14 In addition, there's some details about 15 -- so you sweep a pump curve and you have a bunch 16 of data, and how do you move from that data to 17 pump shaft input power? Do you regress it or do 18 you interpolate or -- there's some very technical 19 issues with regard to how you determine a rating 20 for a given pump, but it won't affect the analysis 21 that Alison and Dan will do in terms of how things 22 shake out in the market.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 125 1 MR. STARR: This is Louis Starr. My 2 only concern is that whatever ends up happening, 3 is that it not be in the advantageous -- it'd be 4 advantageous to actually test something and get 5 some real world results out of it rather than 6 always doing a calculate, calculating one. So 7 whatever ends up in a test standards such that the 8 metric reflects that that be, you know, that the 9 measured one always comes out better. 10 MS. WIDDER: Right. 11 MR. STARR: I just don't want us to 12 get backed in in such a way that that wouldn't 13 fall out. 14 MS. WILLIAMS: This is Alison. I'm 15 just going to propose that possibly since -- we 16 finish up with the standards and then when John 17 comes in, maybe we can return to -- or you guys 18 can think about over lunch or whatever, how you 19 want to propose handling the test procedure, and 20 then maybe we can revisit that. Would that work? 21 MR. BROOKMAN: I think basically we've 22 covered what I thought -- the individuals I spoke

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 126 1 to, to cover at this point. And the explanation 2 you gave and this slide, that's helpful, and I'm 3 ready for us to proceed with the work at hand 4 here. But I just -- I thought we've, we've aired 5 this issue early on as, as we did. Steve. 6 MR. ROSENSTOCK: Steve Rosenstock, EEI. 7 I don't think it'd be harmful to have just one 8 line in a term sheet talking about -- we also 9 discussed test procedures and trying to 10 incorporate what we think the DOE test procedure 11 might look like. You know, our deliberations, 12 something like that. 13 MR. BROOKMAN: So that's definitely an 14 option and this working group can choose to 15 comment as it wishes to, provided, I would say -- 16 What I'm going to drive us toward, what I think we 17 all want to do is, is accomplish the task set out 18 for us by ASRAC. Go ahead, Bob. 19 MR. BARBOUR: One question. You had 20 mentioned that the metric was going to be based on 21 the bare pump only. I thought the metric was 22 going to have bare pump, pump plus a -- maybe a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 127 1 high efficiency motor and pump high efficiency 2 motor and control all within the standard. 3 MS. WIDDER: So, to be clear, the -- 4 a given pump can be rated as a bare pump plus a 5 default motor, a pump plus a more efficient motor 6 that it's sold with, or a pump plus a more 7 efficient motor and controls. And that will be 8 reflected in the rating, but the way the standard 9 is set -- so the design options that Dan and 10 Alison are considering is only looking at 11 improvements to pump efficiency. And so we're 12 setting the standard. The lowest common 13 denominator or the worst, the worst way you can 14 sell your pump essentially is as a bare pump. 15 And so we're just assuming that for all 16 the pumps that are available. So it only helps 17 manufacturers comply with the standard. It 18 doesn't really affect the setting of the standard. 19 MR. HANDZEL: So this is Mark 20 Handzel. So, so, I'm okay with that because, as 21 we talked before, what the pump manufacturers 22 control is our pump design.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 128 1 MS. WIDDER: Exactly. Right. 2 MR. HANDZEL: Okay. So that's why - 3 - what you're saying is, is that that's what we're 4 going -- that's what we have in our span of 5 control, so that's what we should be focused on. 6 MS. WIDDER: Yep. 7 MR. HANDZEL: But the concern that, 8 that Bob and others have is that when we introduce 9 the motor and the drive, you know, taking set 10 efficiency values and some, some of the things 11 that we're doing now, are leading to false 12 calculations that we would not be able to emulate 13 on a test stand if we were doing wire to water 14 efficiency testing. 15 MS. WIDDER: Okay. 16 MR. HANDZEL: So, so that's, 17 that's, I think, is kind of the summary of what 18 our issue is. So, you know, we understand that you 19 have to take some assumptions and we're doing 20 those in the calculator, but if we actually, you 21 know, put a drive and a motor on one of our pumps, 22 you know, that meets the PER --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 129 1 MS. WIDDER: Mm-hm. 2 MR. HANDZEL: You know, we probably 3 could not meet the number that we're calculating 4 right now in the calculator. 5 MS. WIDDER: So that's something 6 that we can certainly address, and maybe tomorrow 7

-- 8 MR. HANDZEL: Okay. 9 MS. WIDDER: We'll talk about, more 10 about is -- 11 MR. HANDZEL: It's just that we'll 12 indicate that that's what we're going to do. 13 MS. WIDDER: Yeah. That's 14 certainly the intent. And we don't have as much 15 information on tested pump performance as clearly 16 you do. And so that's where we really need some 17 feedback just like that from you guys. 18 MR. BROOKMAN: Okay. Are we good? 19 MR. HANDZEL: Yep. 20 MS. WIDDER: Okay. 21 MR. HANDZEL: Yeah, we're good. 22 MR. BROOKMAN: So let me just restate,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 130 1 though. I'm following a couple of conversations 2 that are happening informally here and members of 3 the energy efficiency caucus are also stating they 4 share that concern and they would like to engage 5 in that discussion when appropriate, as the 6 manufacturer's just described, Mark Handzel being 7 the spokesperson. Now we're going to proceed. 8 MS. WILLIAMS: Okay. So today I'm 9 going to go over some updates to the LCC and try 10 to answer also the questions that were posed last 11 week since I guess the responses didn't get seen. 12 And then I'm also going to go through the 13 shipments and NIA model. 14 So just to review, the lifecycle costs 15 model, it looks at impacts to individual 16 consumers. So basically run a sample of 10,000 17 consumers, and if, and they each are assigned 18 pumps based on, you know, our pumps data base and 19 what percentage of people buy different pumps. 20 And what the LCC is looking at is whether the 21 increased costs to a person for buying a more 22 efficient pump are offset by the benefits they get

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 131 1 in energy savings or not. So we'll go through all 2 that. 3 The shipments model then looks at the -- 4 so the LCC doesn't necessarily look at the entire 5 population of pumps; whereas, the shipments and 6 the NIA reflect the, all the pumps in scope across 7 the nation. And so in this shipments model we'll 8 go through how we're trying to project shipments 9 across a 30 year analysis period. 10 And the national impact analysis 11 basically takes the results of the LCC in terms 12 of, you know, average increased costs and average 13 energy savings, applies that to the shipments and 14 calculates national energy savings and national 15 net present value. So I'll go through each of 16 these in detail. But this is just sort of an 17 overview of how these pieces fit together. 18 MR. BROOKMAN: Jay. 19 MR. SIVIGNY: Jay Sivigny, Flowserve 20 Council. Can you just -- I want to make sure I 21 heard you correctly. On the LCC it says if you 22 did or did not take all of the different pump

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 132 1 types into account? 2 MS. WILLIAMS: Oh, so currently the 3 LCC -- okay. So until now you've only seen 4 results on the LCC for ESCC, ESFM and IL in-line. 5 Today we're going to add results for vertical 6 turbine submersible. We still haven't run 7 anything for radial split vertical because we 8 wanted to come to a consensus on what C values we 9 should be using and what data we should be using 10 basically, because what we have is really minimal. 11 So today we'll have results for 4 out of the 5 12 pump types. 13 MR. SIVIGNY: Okay. 14 MS. WILLIAMS: So this is just, 15 again, putting this in perspective, the life -- 16 the lifecycle cost analysis is one of the things 17 that we look at when, when determining standard 18 level. So it's just a piece of information for 19 you guys to look at to decide what you think. So 20 this starts just a review of the inputs and this 21 gets at some of the questions that were asked. 22 So on this first one, last week the pump

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 133 1 manufacturers recommended that the pump -- this 2 category in red, pump OEM to distributor, to 3 contactor, to end user, be changed from 17% to 4 70%. So basically flips, flips these two to make 5 the one in red the more common distribution 6 channel as suggested by the manufacturers. And so 7 this results in a new mark up, baseline markup of 8 1.59 and incremental markup of 1.34. So it 9 increases the markup slightly because you're 10 adding another factor in the distribution channel. 11 So, I don't -- hopefully everyone is okay with 12 that change. 13 So the next question was about this 14 slide. It's -- we'd like an explanation as to 15 where the new weights came from. So these are the 16 load profiles. Because we don't have very much 17 data, we're just basically simulating four 18 different load profiles that are assigned at 19 random. We looked at them before and they don't 20 really make a whole lot of difference in the 21 results. 22 But at the last meeting it was suggested

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 134 1 that hardly anyone is going to run their pump 2 above 100% BEP flow. This LP3 profile in purple 3 is the one that has a point above 110% flow. So 4 we decreased its weight in the sample from 25% to 5 10% and increased the others accordingly to 6 basically reduce the incidence of, of pumps 7 running above BEP flow. So that was in response 8 to feedback. So if you guys have concerns about 9 that change, we can certainly tweak that again. 10 MR. HANDZEL: Alison -- Mark Handzel 11 from Xylem. This is, this is one of those ones 12 that we kind of struggle with because I think the 13 EU used 25% across the board. But I think their 14 25 was based on 25%, 75%, -- 50%, 75% and 100%, 15 okay? So, so they didn't even have anything at 16 110%. 17 MS. WILLIAMS: Yes. 18 MR. HANDZEL: So. 19 MS. WILLIAMS: Well, I'm not 20 entirely sure how they did their analysis. They 21 don't really do this type of analysis in this much 22 detail, so this is a little bit disconnected from

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 135 1 what the load points are in the metric. We're 2 just trying to get a sense of where pumps operate 3 across their operating range. And because there's 4 limited data, we basically just created these four 5 synthetic profiles. You know, flat one, one 6 that's slightly overloaded, one that's slightly 7 under-loaded. We did -- I haven't really showed 8 the results, but we did do some analysis on it, 9 and if you change those profiles, it basically 10 makes hardly any difference in the results. 11 So I actually think that changing this - 12 - tweaking this will have -- like you probably 13 wouldn't even be able to see the impact of the 14 numbers. 15 MR. BROOKMAN: I also recall that the 16 crux of the conversation was that the load point 17 at 25, that -- you didn't want to go there anyway. 18 MR. HANDZEL: Right. Right. And 19 that the 20

-- 21 MR. BROOKMAN: Right. 22 MR. HANDZEL: And we could all spend

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 136 1 days and weeks or years arguing load profiles. 2 MS. WILLIAMS: Yeah, and so I just - 3 - this is separate from the load points in the 4 metric. 5 MR. BROOKMAN: Yeah. Yeah. 6 MS. WILLIAMS: This is just load 7 profiles to get energy use in the LCC. 8 MR. HANDZEL: Sure. 9 MS. WILLIAMS: And I am very 10 confident that these changes, tweaks in this will 11 have very minimal impact. So I would recommend 12 that, that unless there's a major concern with it, 13 there's, like things like operating hours and 14 lifetime -- 15 MR. HANDZEL: Yeah. 16 MR. BROOKMAN: She's telling us she 17 wants to move on. Charlie, go ahead. 18 MR. CAPPELLINO: I just want to offer 19 support. I think that's a good representation of 20 the typical load profile of our pumps, and I think 21 as manufacturers we ought to, you know, either, 22 either, either support it or propose an

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 137 1 alternative. And we ought to do it now because we 2 don't want to just keep 3

-- 4 MS. WILLIAMS: Right. 5 MR. CAPPELLINO: -- grinding away on 6 something that doesn't have a lot of impact in the 7 end anyways. So. 8 MR. HANDZEL: So this is Mark. We 9 raised this issue just because somebody -- some of 10 us recall that you said on the webinar that this 11 was based on new information from somebody. We 12 just wanted to know what the information was. 13 MS. WILLIAMS: Yeah. So this was at 14 the last meeting, yeah. 15 MR. HANDZEL: So now that the way 16 you've explained it, I know I'm okay with it. 17 MS. WILLIAMS: Okay. 18 MR. BROOKMAN: Yeah. So I think you can 19 proceed. Other than Steve. 20 MR. ROSENSTOCK: No. I was just going to 21 ask, and this could be considered a sensitivity 22 analysis, we'd be able to show the results with

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 138 1 both just to show that it's not really having an 2 impact? 3 MS. WILLIAMS: I mean we could. I 4 think I have a slide somewhere in an old deck that 5 basically showed there were no results. It would 6 be a lot of work -- 7 MS. ARMSTRONG: I think the point 8 she's, she's making, and it seems like the 9 majority agrees, is that it's not worth the effort 10

-- 11 MS. WILLIAMS: Yeah. 12 MS. ARMSTRONG: Like the effort's 13 better spent elsewhere. 14 MR. BROOKMAN: Right. 15 MS. ARMSTRONG: So let's focus on 16 where there are potentially big impacts. 17 MR. BROOKMAN: And let's move on. 18 MS. ARMSTRONG: Yeah. For those who 19 don't know, I'm Ashley, by the way. You can call 20 me whatever. Lucas, Ashley, sorry. I oversee 21 test procedures here at the Department and I'm 22 stepping in for Lucas for a little while. So.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 139 1 MS. WILLIAMS: So, okay. So the next 2 slide I just threw in. There was a question about 3 where this data is used. I wasn't fully sure what 4 exactly you guys wanted to know about this. So 5 basically this is the operating hours 6 distributions that we're using in the LCC. 7 And so the quintiles are just sort of 8 representation, but like 20% of customers with a 9 cooling water application will be assigned 2,500 10 hours a year, 20% will be assigned 3,500, 20% get 11 5,000 and so on. So it's supposed to represent 12 the range of operating hours across each 13 individual application that we're modeling. 14 MR. HANDZEL: So -- It's Mark 15 Handzel from Xylem. Alison, I just think we, we 16 weren't clear on all those details. So, I mean -- 17 or where they came from. So I guess that was 18 really kind of the question 19

-- 20 MS. WILLIAMS: Okay. Where they -- 21 MR. HANDZEL: Yeah, was it -- 22 MS. WILLIAMS: Yeah, so the -- this

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 140 1 is -- let's see. The operating hours come from a 2 combination of a motors database we have of in3 field operating hours. And we've also compared it 4 to the estimates that we received from our 5 consultant. And they're actually fairly 6 consistent. I had a slide a while back, that I 7 don't have in here right now that compared them 8 and, but, but, sort of the average was in the same 9 range. 10 So again, this is -- we don't limit the 11 data. The problem with field data for motors is 12 that a lot of it is audited, which tends to focus 13 on pumps and motors that are running most often. 14 So it could possibly be skewed to higher operating 15 hours. So that's, you know, that's why we 16 compared it to our consultant's estimate also. 17 And it looks like it wasn't too skewed. So we've 18 shown this before and haven't really gotten much 19 feedback on it. And I know it's hard for you guys 20 to know really how much pumps are used -- 21 MR. HANDZEL: We completely 22 understand it was part of the problem. So --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 141 1 MS. WILLIAMS: So basically the 2 quintile of three is essentially the median. So, 3 you know, users in, in, are using, you know, 1,000 4 hours for irrigation and pressure boost, and then 5 4 to 5 for cooling water, boiler feed, and 6 circulation. And then there's customers on either 7 side of those ends that are using different 8 amounts of hours. So everything in the LCC is 9 based on a distribution. And so people are 10 randomly assigned these operating hours based on - 11 - 12 MR. HANDZEL: Mark Handzel. So just 13 one other question that I came up with. 14 Circulation. What does circulation mean? Because 15 cooling water to me is like a chilled water system 16 in this building. Well, that's a circulation 17 system. Okay? So what is, what is that 18 circulation system -- 19 MS. WILLIAMS: That is a good 20 point. 21 MR. HANDZEL: So just -- this is 22 some contradiction. That's really the main one

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 142 1 that sticks out to me. 2 MR. ROSENSTOCK: Would that be like a 3 service hot water? 4 MR. CAPPELLINO: Cooling, cooling water. 5 Charlie Cappellino. So cooling water to me would 6 be like a cooling tower. 7 MS. WILLIAMS: Yeah. That's what I 8 was -- 9 MR. HANDZEL: So circulation could 10 be a heating system or a chilled water circulation 11 system. 12 MR. CAPPELLINO: We have a chilled water 13 pump and a condenser water pump, so -- 14 MR. HANDZEL: Yeah. But that's -- 15 but that's the type of thing that's just not real 16 clear. 17 MS. WILLIAMS: Yeah, and it's 18 actually hard to get that granular view of data, 19 but, yeah, what Charlie said is basically the gist 20 of what we're trying to capture in these 21 applications. 22 MR. HANDZEL: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 143 1 MR. ROSENSTOCK: Steve Rosenstock, EEI. 2 Would the hot water, service hot water pumps be 3 under the other, or would it be under -- I'm just 4 kind of curious. 5 MS. WILLIAMS: I believe -- I 6 believe that they're under circulation. I could 7 double check on that. 8 MR. BROOKMAN: Charlie, do you have -- 9 MR. ROSENSTOCK: I was thinking in 10 commercial buildings, where, you know, the, the -- 11 MR. BROOKMAN: Okay. 12 MR. CAPPELLINO: Carlie Cappellino, ITT. 13 So just so I understand. So that the quintiles, 14 those are basically buckets of 20% distribution? 15 MS. WILLIAMS: Yeah, it's, it's 16 basically just giving you a representation of the 17 distribution of operating hours that we use. 18 MR. CAPPELLINO: Operating hours of a 19 particular unit. 20 MS. WILLIAMS: Yeah. So, you know, 21 each consumer is assigned an application based on 22 weights we developed through data. And so within

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 144 1 any application, you know, as I said before, 20%, 2 20% of users with cooling water get 2,500 hours, 3 20% get the 3,500, 20% get 5,000 and so on. 4 MR. HANDZEL: So one addition -- go 5 ahead. Sorry. 6 MR. CAPPELLINO: And then, so then how 7 do you use that information mathematically to 8 calculate - 9 - 10 MR. HANDZEL: So what percentage of 11 cooling water -- you know, you have all this big 12 pump universe. What percent of cooling water, 13 what percent of boiler, what percent of 14 circulation -- 15 MS. WILLIAMS: Yeah, so I don't 16 have that data in my slide deck today. It was in 17 a previous deck. So maybe last month. So I don't 18 have that offhand, but we pulled that from the 19 motors database. Also we coded everything into 20 applications that we determined and, and then used 21 those percentages. So, it's pretty -- 22 MR. HANDZEL: But did the motor base

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 145 1 -- motor database break it down by those type of 2 pump applications? 3 MS. WILLIAMS: Yeah they had -- I 4 mean it was difficult, right, but they had comment 5 fields that talked about what type of pump it was. 6 And so we -- that's why we used to actually have 7 more applications and we condensed them because it 8 was not super detailed in the motors database, but 9 we did -- we were able to code them into these 10 categories. 11 MR. HANDZEL: And Alison, I guess 12 that -- you know, obviously you put this slide in 13 because you revised the other. 14 MS. WILLIAMS: Right. 15 MR. HANDZEL: The other to us was, 16 you know, that's pretty much inconsequential -- 17 MS. WILLIAMS: Yeah. 18 MR. HANDZEL: Because you have to 19 figure that's a very small percentage of the 20 market, but I don't think we've ever seen this 21 data in this presentation before, in this format 22 before --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 146 1 MS. WILLIAMS: Yeah, so -- 2 MR. HANDZEL: Which is why you're 3 getting drilled on it now. So -- 4 MS. WILLIAMS: I think you saw it 5 the previous month, but, I mean, it takes -- 6 MR. HANDZEL: No. 7 MS. WILLIAMS: -- a while for things 8 to sink in. So it's fine that we can review it 9 now. You know, all this has -- we -- but 10 basically when we first presented the LCC, we 11 present our initial set of inputs, and since then 12 we've only been presenting inputs that have 13 changed because we didn't receive feedback on the 14 other ones. 15 MR. BROOKMAN: Yeah. So -- 16 MS. WILLIAMS: It is certainly not 17 too late to provide that feedback. My deck 18 doesn't have all of them in there right now, but, 19 you know -- but what I want to go back to is, 20 unless there's something major, like, oh, it's not 21 4,000, it's 8,000 or -- but if we're just going 22 like, you know, 4,000 to 4,500, those kind of

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 147 1 things aren't going to majorly impact your 2 results. 3 MR. HANDZEL: Mark Handzel from 4 Xylem. So Alison, I think we've said numerous 5 times before too, we don't typically have 6 application data. 7 MS. WILLIAMS: Right. Right. 8 MR. HANDZEL: So we don't have 9 anything to refute it. 10 MS. WILLIAMS: Yeah. 11 MR. HANDZEL: But we were just 12 trying to understand -- 13 MS. WILLIAMS: Oh, sure. 14 MR. HANDZEL: How you developed this 15 and how you were using it. So that was, I think, 16 the basis for our questions. 17 MS. WILLIAMS: Mm-hm. So does this 18

-- 19 MR. HANDZEL: If anybody else, you 20 know, dig in. 21 MR. BROOKMAN: Jay, go ahead. 22 MR. SIVIGNY: Jay Sivigny,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 148 1 Flowserve. Quick question. How do you correlate 2 the application back to the pump type? 3 MS. WILLIAMS: Yeah, so these 4 slides were in the April meeting also, I think. 5 Basically we have -- I wish I had that slide. We 6 have a few different data sources that we 7 basically have to triangulate together to get that 8 relationship. So from the motor -- I don't 9 believe the motors database is very good data on 10 pump type, and so that's mostly application. We 11 have a consultant report that correlates 12 application to pump type. And, and so, you know, 13 for example vertical turbine submersible is going 14 to be more weighted to irrigation than some of the 15 other pump types are. 16 So we had some different data sources. 17 You know, we can pull up -- you know, we can -- 18 well, they're on the SharePoint already. Like if 19 you guys want to review tonight the whole data set 20 from the LCC, I'm pretty sure it was in the April 21 meeting. We can -- and send me any comments you 22 have, you can do that also.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 149 1 MR. SIVIGNY: Yeah. Jay Sivigny, 2 Flowserve. I think it's important, at least for 3 me, I'd like to kind of get a better feel for how 4 we mapped the end-suction foot-mounted, end5 suction close-coupled to this specific application 6 so we can see with a little more granularity. 7 And the second point I'd like to make, 8 certain things you mentioned don't have any 9 impact. So there's no, necessarily a need for a 10 sensitivity analysis. From what I've heard, pump 11 manufacturers have limited application knowledge 12 and your dataset seems to be limited. You said in 13 your own words, it's difficult. Would this lend 14 itself to some sort of sensitivity analysis where 15 -- let's say you were wrong plus or minus 20%. Is 16 that something that could be done or is that a 17 mountain of work? 18 MS. WILLIAMS: Yeah, so I -- I mean 19 we can do it. I think once we look at the 20 results, maybe then you guys will want to consider 21 how necessary some of these things are. 22 MR. SIVIGNY: Right.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 150 1 MS. WILLIAMS: I, you know, like 2 news breaker, right? We saw before the energy 3 savings dwarfed the costs in almost all 4 situations. So unless you're making a fairly 5 significant change to the energy savings, we can, 6 we can certainly run some like major 7 sensitivities. But I think when you see the 8 results, it'll help put it in perspective, like 9 how much of a difference some of these changes 10 will make. 11 MR. SIVIGNY: Well, how much you run 12 a pump directly drives the energy savings. 13 MS. WILLIAMS: Exactly. Right. 14 MR. SIVIGNY: And so if you're not - 15 - so if these numbers are too high, you're not 16 going to see this -- 17 MS. WILLIAMS: So like when you see 18 the results of, you know -- you can think, well, 19 if I reduced it by 20%, it'd still be dwarfing the 20 cost -- 21 MR. SIVIGNY: The costs. 22 MS. WILLIAMS: You know, we can, we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 151 1 can -- 2 MR. SIVIGNY: Sure. 3 MS. WILLIAMS: I'm happy to look at 4 that, but I think let's put everything in 5 perspective, maybe. 6 MR. SIVIGNY: Got it. 7 MS. WILLIAMS: Especially since It's 8 hard to actually have concrete feedback. But we 9 can definitely review. 10 MR. BROOKMAN: Louis Starr. 11 MR. STARR: So, and it sounds like 12 this would be directly proportional, so you could 13 kind of do what you're saying. You literally 14 could reduce the output-- 15 MS. WILLIAMS: Yeah. 16 MR. STARR: The costs, it would be 17 directly proportional to energy savings to number 18 of hours, so -- 19 MS. WILLIAMS: Mm-hm. 20 MR. SIVIGNY: Sure. 21 MR. STARR: Well, yeah, so got it. 22 We can do the sensitivity analysis --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 152 1 MS. WILLIAMS: Yeah. Yeah. I'm 2 just saying it doesn't need to be done super 3 detailed. 4 MR. STARR: No. No. 5 MS. WILLIAMS: You could just 6 eyeball it. Yeah. Okay. So lifetime, we had -- 7 this all -- this includes lifetime for vertical 8 turbine submersible which is new, and we also 9 revised the lifetimes for the others. In 10 particular, the feedback we got last week was that 11 28 years for ESFM and five repairs was overstated. 12 So what we actually did was randomize 13 the repairs for ESFMs, so now everyone gets 14 randomly between one and five. And so the average 15 is 2.6 and 2.7. It dropped the lifetime down to 16 21 and 19. So that's what we changed in response 17 to your feedback last week. 18 Let's see what else did you guys ask. 19 Oh, the average of mechanical life in hours comes 20 from consultant estimates because there's really 21 basically no database for that. And we adjusted 22 it based on feedback of the April meeting that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 153 1 said ESFM should be much higher than ESCC, and 2 3600 should be less than 1800. So we started with 3 consultant estimates and then adjusted based on 4 your feedback. And so now we've adjusted again to 5 reduced the repair cycle for 6 ESFM. 7 MR. BROOKMAN: Steve. 8 MR. ROSENSTOCK: Steve Rosenstock, EEI. 9 For the ESCC 1800, you say 31,000 hours and you 10 showed the range in the previous slide of like 11 2,500 to 7,500 hours -- well it depends on the 12 application -- 13 MS. WILLIAMS: So the previous slide 14 is operating hours and this slide is lifetime and 15 mechanical -- mechanical lifetime in hours. So if 16 you 17

-- 18 MR. ROSENSTOCK: Right. 19 MS. WILLIAMS: You know, divide the 20 average mechanical lifetime by operating hours -- 21 MR. ROSENSTOCK: Right. 22 MS. WILLIAMS: You get an average

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 154 1 lifetime 2

-- 3 MR. ROSENSTOCK: With your quintile 4 three, is like anywhere from 3,000 - well, it's 5 1,000 to 5,000 hours. Okay. Because you're 6 showing average and I'm just kind of curious, you 7 know, when you look at that graph, the median 8 seems to be a lot lower for a lot of those -- 9 MS. WILLIAMS: I mean, yes. 10 MR. ROSENSTOCK: -- durations. 11 MS. WILLIAMS: So this is the 12 distributions. You can see that it peaks at a much 13 lower level. 14 MR. ROSENSTOCK: Right. To determine 15 average lifetime, wouldn't it be better to say 16 median with this type of data scatter? 17 MS. WILLIAMS: Probably it would be. 18 MR. ROSENSTOCK: Okay. 19 MS. MAUER: Alison, this is Joanna. 20 Can you just explain quickly what a repair means 21 exactly? 22 MS. WILLIAMS: So this is a little

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 155 1 bit of a loose definition. This came from our 2 consultant. My understanding is that often the 3 ESCC pumps that are really small are what are more 4 termed throw-away pumps, whereas ESFM often get 5 refurbished. I'm sure a lot of these guys can, 6 can comment. I mean you could even like take the 7 impeller out and rebuild it and put it back in. 8 So it could be any number of things. 9 Basically it means you have essentially the same 10 casing, the same mount and everything, and you're 11 doing various things to, to rebuild it over its 12 lifetime. Do you any of you guys want to comment 13 on that? Okay. 14 MR. HANDZEL: It runs the full -- 15 Mark Handzel from Xylem. It runs the whole gamut, 16 though. I mean certainly the frame-mounted pumps, 17 you know, they could vary from 1-1/4 inch 18 discharge up to an 8 inch discharge and, you know. 19 I mean a lot of it -- and if you're getting into a 20 commercial building service, a lot of it has to do 21 with the depreciation that the owner's allowed. 22 MS. WILLIAMS: Right.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 156 1 MR. HANDZEL: So, you know, I mean I 2 can kind of see the, the average lifetime maybe 3 being a little bit lower than you're showing, but 4 it's better than it was. 5 MS. WILLIAMS: Okay. So -- 6 MR. HANDZEL: So, so, I mean -- 7 again, I can, you know, swallow it, but it, it 8 does seem a little high. But I think it's okay. 9 I guess some of my concerns is that, you know, 10 typically -- no, never mind. It's okay. I think 11 it's right. 12 MS. WILLIAMS: Okay. So I mean you 13 guys are welcome to think about this, and if you 14 have more comments, feel free to send them to me 15 tonight or whenever and, you know, we can, we can 16 make more changes. Okay. So this next -- I think 17 that is all, basically all the questions on inputs 18 that we received last week. 19 This slide I just have up here because 20 we added vertical turbine submersible. We haven't 21 shown it before. We are using different sector 22 weights for this. We have more weight in

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 157 1 agriculture and municipal than in commercial as 2 compared to the other sectors. That was our 3 understanding, is that they're typically used in 4 different -- more often in agriculture than others 5 are and more often in municipal. So I don't know 6 if anyone has feedback on that. 7 MR. BROOKMAN: Steve. 8 MR. ROSENSTOCK: Steve Rosenstock, EEI. 9 Just looking at the commercial section and then 10 just thinking about your hours of operation where 11 you showed 20% having, you know, 7,500 hours of 12 operation, in a lot of commercial buildings, you 13 know, systems are shut off at night. They're not 14 going to be anywhere near 7,500. Again, I'm just 15 thinking commercial applications. Yeah. That one 16 right there. 17 So again, whichever ones -- again, you 18 know, in terms of the mapping, you know, 19 especially for commercial applications, you might 20 want to make this more of a bell curve rather than 21 a flat 20% each way because 7,500 hours for a 22 commercial pump per year just seems overstated for

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 158 1 commercial pump application. I'm thinking mostly 2 commercial buildings, you know, like this one, you 3 know, those pumps are not going to be going for 4 7,500 -- especially on -- whether it's cooling 5 water or a boiler side, especially in this 6 climate, you know. Or -- 7 MR. TOWSLEY: Or hotels down south - 8

- 9 MR. ROSENSTOCK: That's a different 10 story. 11 MR. HANDZEL: -- Miami, for an example - 12

- 13 MR. ROSENSTOCK: Hotels are totally 14 different. I'm saying other commercial buildings, 15 retail, office, warehouse, etc. You know, that 16 7,500 is going to be just -- or say even 6,000 is, 17 you know, it's not going to be -- I, in my mind, 18 in my perspective, it's not going to be 20%. It's 19 probably going to be closer to 5% to 10%. 20 MR. BROOKMAN: Louis Starr. 21 MR. STARR: Well, I mean one thing, 22 you know, heating. I'll think you'll need heating

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 159 1 day and night, so that would be the heating side. 2 So 7,500 would, to my mind, even just one of those 3 heating coils in the building means that you'll be 4 running your pump. And on the cooling side, you 5 know, to some extent they still run the system 6 even though that there may not be as large a 7 demand. So there are systems that are going to 8 run quite a few hours a year. So -- 9 MR. ROSENSTOCK: And a lot are going to 10 be shut down at night because of the energy 11 management -- 12 MR. STARR: Well, that's why you have 13 the split, though, of the, the -- 14 MR. BROOKMAN: Dan Delaney. 15 MR. DELANEY: The one that I was 16 going to note back on this application slide from 17 our motor information -- we're kind of in a 18 similar situation as the pump guys. We don't have 19 that application information and the note that we 20 had when we went through our rule making was that 21 most of the information we saw for hours was a 22 good 20%, 30% high versus what we had. We had

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 160 1 very limited data. 2 But our hours, hours were typically -- 3 the DOE information was about 20% to 30% higher 4 than what we saw our applications running. We 5 were more conservative on our savings and that 6 because we're figuring the hours in which we had 7 seen. So I would agree 7,500 hours is not, not 8 typically for something we'd see -- something in 9 the five to six thousand at the top end. 10 MR. BROOKMAN: Greg, do you have a 11 comment here? 12 MR. TOWSLEY: No. 13 MR. BROOKMAN: Okay. 14 MS. WILLIAMS: So, I mean -- If, if you 15 guys want to provide more specific feedback about, 16 you know, what you think it, it should be, we can 17 go over that later. It's, it is hard, you know -- 18 this is, this is why we've been over this three 19 times. 20 Someone's like, oh, maybe change, this 21 is a little high, and then maybe we'll overshoot 22 or something. So it is -- we can certainly make

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 161 1 adjustments. It's nicer to have a little more 2 concrete feedback than maybe 7,500 is too high. 3 But we will look into that. Okay. 4 So results. First, as we did before, 5 there are two scenarios. The first one assumes 6 you can't pass through any costs to your customers 7 and the second one assumes you're passing through 8 full costs to your customers. So just as a 9 reminder, this is basically what Dan's last curve 10 is. This is just the base case MSP model. I 11 failed to update these. I just pulled it in to 12 remind you guys what we're looking at, but this is 13 basically like -- the current market structure for 14 pricing is the same in the base case and the 15 standards case. So not surprisingly in this case, 16 the average LCC savings are positive for 17 everything because -- the delta increased cost is 18 very small. 19 MR. HANDZEL: Alison, sorry to 20 interrupt. 21 MS. WILLIAMS: Mm-hm. 22 MR. HANDZEL: Mark Handzel from

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 162 1 Xylem. So, so we had a question, just, you know - 2

- 3 MS. WILLIAMS: Oh, right. Yeah. 4 MR. HANDZEL: In the slide deck, 5 there was an original scenario -- 6 MS. WILLIAMS: Yeah, so the, so -- 7 MR. HANDZEL: Slide eight. 8 MS. WILLIAMS: That was a, was a 9 mistake on my part. Those are not the same bin -- 10 MR. HANDZEL: Okay. 11 MS. WILLIAMS: Like flow -- they're 12 not the same size pumps. 13 MR. HANDZEL: Okay. 14 MS. WILLIAMS: So when my staff 15 updated the data, they put in different ones. 16 MR. HANDZEL: So that explains why 17 it jumped from 800 to 1,200. 18 MS. WILLIAMS: It didn't actually 19 jump. It was, it was not a directly comparable. 20 I apologize for that confusion. 21 MR. HANDZEL: Okay. All right. 22 MS. WILLIAMS: Yeah. Their -- Dan's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 163 1 MSP model has not changed drastically this whole 2 time, basically. He just presented the update 3 today, which is pretty minor. So what we're doing 4 this time that you haven't seen before is showing 5 results by size bin. 6 What happens is that a lot of the large 7 pump -- people who have large pumps get a lot of 8 savings compared to their costs, and people who 9 have small pumps don't. So we thought we'd break 10 it out. You can see the scales on these are very 11 different. The small one only goes up to 800, the 12 medium to 3,000 and the large to 9,000. I wish I 13 had these labeled. 14 The small is approximately 1 to 10 15 horsepower. The medium is approximately 10 to 60, 16 and the large is approximately 60 to 200. So we 17 just wanted to show different results just so you 18 can see - - yeah. 19 MR. HANDZEL: So before you were 20 just giving us the whole -- Mark Handzel. I'm 21 sorry. You were giving us the whole thing. 22 MS. WILLIAMS: Yeah. The total --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 164 1 this one on the upper left, the total -- 2 MR. HANDZEL: Right. 3 MS. WILLIAMS: -- was the only thing 4 that you've been shown before. 5 MR. CAPPELLINO: Charlie Cappellino, ITT. 6 The vertical scale is savings annual or -- 7 MS. WILLIAMS: Average -- average -- 8 MR. CAPPELLINO: Lifetime -- 9 MS. WILLIAMS: -- LCC savings of 10 lifecycle cost savings. So it's, yeah -- 11 MR. CAPPELLINO: Over the lifetime of the 12

-- 13 MS. WILLIAMS: Yeah. And I've 14 another one that compares -- so this is -- also 15 you've seen this before where the top is the 16 change in operating costs and the bottom, which is 17 much smaller, is the increase in purchase price. 18 So the increase in purchase price occurs once, 19 right, and then the operating costs savings are 20 over the lifetime of, of the unit. So it -- this 21 is basically just -- we know that this is going to 22 happen. This is a no-cost recovery scenario.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 165 1 So you're getting all these energy 2 savings, because this assumes that the 3 manufacturers are, are just having to suck up 4 those costs themselves. For the consumer, it's 5 going to be a win because, you know, this is 6 basically burdening the manufacturers. 7 So this is, this is sort of the lower 8 bound scenario, which is the best case for 9 consumers and the worst case for manufacturers. 10 So there's a lot of results in here. I'm sure 11 we'll send out the slides and you guys can take a 12 look at them in more detail later. We have -- you 13 can just see here everything's positive across the 14 board, all equipment types, all sizes, all 15 efficiency levels. 16 So again, this is not surprising for 17 this, this, basically benefit to the customer 18 scenario. There's essentially hardly any -- this 19 was another question from last week -- was the 20 benefit -- like the winners/losers, net 21 benefit/net cost things. 22 So basically in here, I think this was

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 166 1 labeled before net cost. So losers are people who 2 pay more in increased costs for a more efficient 3 pump than they save in energy. So they're 4 basically worse off than they were before; 5 whereas, winners are saving more in energy over 6 the lifetime of their pump than they paid in 7 increased costs. So they are benefitting from the 8 standard. 9 The people who are not impacted were -- 10 are- - like if the standard was at PER 40, they 11 were already purchasing a pump at PER 40 and 12 above, and therefore, the standard doesn't impact 13 them because they were already purchasing 14 something that's still okay. So that's sort of 15 what this breakdown is. Like some people are 16 going to benefit from the standard, some people 17 are going to be burdened, and some people, it just 18 doesn't impact them at all. 19 MR. BROOKMAN: Alison, we have an 20 individual who's joining us live. Al Iseppon asks 21 with regard to the VTS limited to six inches and 22 less, are you looking at product up to six inches

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 167 1 in diameter or fits into a six inch well? 2 MS. WILLIAMS: I believe we are 3 looking at up to six inches. Is that what was 4 provided to us? Up to and including six inches. 5 Yeah. 6 MR. ROSENSTOCK: That's on the original 7 list, I thought. 8 MS. WILLIAMS: Yeah. 9 MR. BROOKMAN: I, I would just note 10 that a few manufacturers are nodding their heads 11 yes in agreement. Okay. Keep going, Alison. 12 MS. WILLIAMS: Okay. So is this 13 more -- is the benefits and burdens more clear? 14 MR. BROOKMAN: We covered so much 15 content when, in that presentation deck that I 16 think that -- I want to just simply note that 17 you're talking about the lower bound and now 18 you're going to talk about the upper bound -- 19 MS. WILLIAMS: Correct. 20 MR. BROOKMAN: -- right? Okay. So 21 these, these two distinctive scenarios. 22 MS. WILLIAMS: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 168 1 MR. HANDZEL: So Alison, Mark 2 Handzel. So you've definitely clarified the 3 questions that we have. 4 MS. WILLIAMS: Okay. 5 MR. HANDZEL: But you're also 6 throwing a ton of data at us again. So obviously 7 we need some time to talk about it. 8 MS. WILLIAMS: Right. And I think 9 that's why, you know, we actually have on the 10 agenda like a two hour lunch. So if you guys want 11 to just like look at data and think about it and 12 talk about what it, what the implications are or 13 whatever you want, you know. You can ask us 14 questions. 15 MR. HANDZEL: And the only problem 16 is that we don't have copies of the slides. 17 MS. WILLIAMS: Yeah. So I don't 18 know if we can get that. 19 MR. HANDZEL: It's kind of hard to 20 process the data when you don't have all of it. 21 MR. ROSENSTOCK: Can you e-mail those to 22 us during lunch?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 169 1 MS. WILLIAMS: I can certainly e2 mail them. 3 MR. ROSENSTOCK: Not to the 4 SharePoint. To our actual -- 5 MS. WILLIAMS: I will probably have 6 the list somewhere. 7 MR. ROSENSTOCK: Steve Rosenstock, 8 EEI. Sorry. 9 MS. WILLIAMS: Yeah, we will get that 10 out to you guys. Okay. So, and also -- I'm not 11 sure you've seen payback period before. I put 12 this in here, too. It's pretty low for this 13 scenario, as would be expected. We're basically 14 recovering your costs that you paid in increased 15 price pretty quickly. This is all consumer. 16 Everything I'm talking about is consumer. Yes. 17 This is all consumers. 18 MS. ARMSTRONG: Hey, Alison. 19 MS. WILLIAMS: Yes. 20 MS. ARMSTRONG: Do you have a key 21 with the slides on it? 22 MS. WILLIAMS: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 170 1 MS. ARMSTRONG: Can you give it to 2 me real quick? 3 MR. BROOKMAN: Maybe you can just print 4 out a couple of them. 5 MS. ARMSTRONG: Let me see what I 6 can do. 7 MR. BROOKMAN: Alison, can you just -- 8 can you say that the numbers of the key slides -- 9 the detailed analysis -- 10 MS. WILLIAMS: No. 11 MR. ROSENSTOCK: She is only up to 12 slide 18 right now, so -- 13 MS. WILLIAMS: There's a lot. 14 MR. BROOKMAN: Okay. 15 MS. WILLIAMS: Okay. So this is the 16 other scenario. The full cost recovery, and so in 17 -- what happens in this one is we use Dan's 18 conversion -- 19 MS. ARMSTRONG: Is there other 20 files? 21 MS. WILLIAMS: Yeah. 22 MS. ARMSTRONG: Can you make it

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 171 1 obvious to me what the file is? 2 MS. WILLIAMS: It's ASRAC meeting 3 slides, LCC shipments NIA. 4 MS. ARMSTRONG: Okay. All right. 5 Thank you. 6 MR. BROOKMAN: ASRAC. 7 MS. ARMSTRONG: I'm going to run to 8 the copy center real quick and see what we can. 9 MR. HANDZEL: Yeah, don't worry. 10 MR. BROOKMAN: NIA. 11 MS. WIDDER: Brenda to the rescue. 12 MR. BROOKMAN: Okay. 13 MS. WILLIAMS: So right. So the no14 cost recovery, everyone's purchasing off base case 15 scenario. In the full cost recovery scenario, we 16 take the conversion costs and we basically 17 distribute them to all shipments of pumps that 18 were redesigned. And so these point -- this is an 19 example. This is also out of date. It hasn't 20 changed that much. These points up here are what 21 people are paying who have to buy the redesigned 22 pumps.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 172 1 So this means the manufacturers are 2 fully recovering all their conversion costs by 3 passing it through the consumer. So this is 4 basically the worst case scenario for consumers; 5 whereas, the previous one is the best case. Yes. 6 MR. BARBOUR: Bob Barbour from TACO. 7 What timeframe was that cost going to be -- 8 MS. WILLIAMS: In the full cost 9 recovery is, is over the full analysis period, 10 which is 30 years. I think that Mike had said last 11 time -- so there's 11.8% discount rate. I believe 12 Navigant determined last time that it was 13 approximately a 10 or 11 year -- it essentially 14 amounted -- translated to 10 or 11 years. But 15 you're basically made whole over the 30 year 16 analysis period. 17 MR. BROOKMAN: Jay. 18 MR. BARBOUR: Bob Barbour again. So 19 what you're -- what you're really saying is even 20 though the life expectancy of these pumps was 21 significantly lower than 30 years, we're going to 22 take 30 years to get our money back.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 173 1 MS. WILLIAMS: The life expectancy 2 of, well 3

-- 4 MR. BARBOUR: Isn't the life 5 expectancy cost -- 6 MS. WILLIAMS: We're not saying how 7 fast it takes you to get your money back. What we 8 are modeling is simply -- and Chris'll show this 9 later -- that the industry net present value does 10 not change over the analysis period. So how you 11 got your costs back in that analysis period is, is 12 not necessarily relevant because this is basically 13 representing a point in time and just trying to 14 take that into account. 15 So we'll go over the manufacturer impact 16 analysis separately and I think that will clarify 17 some of these things about the impacts to 18 manufacturers and cost recovery and that kind of 19 thing. But this -- I do not -- 20 MR. LAU: The two charts are meant to 21 bound the markups, right? The two scenarios are 22 meant to bound the markups. That's why you create

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 174 1 a high and low start in potential pricing. You 2 could create -- we could shorten the recovery 3 period and have you raise your prices higher, but 4 I think at some point you'll look at those markets 5 and say, well, they're just not realistic. 6 MR. BARBOUR: I think we've already 7 said that based on what we were told in the past. 8 MS. WILLIAMS: Right. 9 MR. BARBOUR: That the markups that 10 we were told weren't realistic. 11 MR. LAU: Well, but then -- I 12 mean isn't the flat markup the reasonable lower 13 bound? 14 MR. BARBOUR: Right. 15 MR. LAU: You're not going to, 16 you're not going to drop your prices as a result 17 of the standard. 18 MR. BARBOUR: No. 19 MR. LAU: Right. So then we 20 have a lower bound, and the question is, well, 21 what's the upper bound. 22 MR. BARBOUR: Yeah, but what I'm

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 175 1 commenting on was the 16% that we were told at the 2 last meeting. 3 MR. LAU: Sixteen percent. 4 MR. BARBOUR: It was just not a 5 number that I -- I don't believe from the pump 6 industry's perspective that we can, we can pass 7 that on to the consumer. 8 MS. WILLIAMS: Right, so I think -- 9 we're trying to show two scenarios. One is that 10 you pass nothing on to the consumer and one is you 11 pass enough to recover your cost fully over the 12 analysis period. And it may be that the real 13 scenario is somewhere in between and you guys are 14 welcome to look at the results of both scenarios 15 and sort of, you know -- maybe what you are really 16 going to do is somewhere in the middle. And so 17 this is basically trying to bound those, those two 18 things, so you can determine what the impact would 19 be. 20 MR. LAU: I think the original 21 session was we just wait until we did the full MIA 22 presentation and then we can --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 176 1 MR. BROOKMAN: So Chris, we'll hear from 2 you a little bit later on. Jay Sivigny. 3 MR. SIVIGNY: I just want to make 4 sure I'm fully clear. Jay Sivigny, Flowserve. 5 We've got full cost recovery. So you're pulling 6 Dan's and your analysis numbers -- 7 MS. WILLIAMS: Yep. 8 MR. SIVIGNY: All right. And you're 9 assigning that by product type and you, your 10 comment was over the analysis period. That, that 11 means what - - 30 years? 12 MS. WILLIAMS: Thirty years. 13 MR. SIVIGNY: Thirty years. 14 MS. WILLIAMS: There's a discount 15 rate involved. 16 MR. SIVIGNY: Of? 17 MS. WILLIAMS: So -- of 11.8% is the 18 WACC. 19 MR. SIVIGNY: And where does that 20 come from? 21 MS. WILLIAMS: It's the -- 22 MR. BROOKMAN: Stand up, Chris.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 177 1 MR. SIVIGNY: It's okay. I just 2 want to make sure -- 3 MS. WILLIAMS: Yeah. Yeah. 4 MR. SIVIGNY: -- I fully understand. 5 No problem. 6 MR. LAU: It makes sense. So 7 what we did is we took -- we look at SEC filings 8 from companies that are public, derived a discount 9 rate from those filings, and then we took those to 10 manufacturers and asked them to comment on it in 11 interviews. Got feedback on whether they should 12 be higher or lower. And then also at the end of 13 last meeting, I had to run out, but I think was 14 also some additional feedback about whether those 15 numbers, those financial metrics need to be 16 adjusted, one of which was the cost of capital. 17 MS. WILLIAMS: Okay. 18 MR. HANDZEL: They did ask us. Mark 19 Handzel from Xylem. They did ask us in our 20 surveys last summer about each of our cost of 21 capitals. 22 MR. SIVIGNY: Okay. But when you

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 178 1 say it's over the life of the analysis, it's 30 2 years? 3 MS. WILLIAMS: It's 30 years. 4 MR. SIVIGNY: So, so just to clarify 5 then, does that mean it's going to take us -- and 6 maybe I have it wrong -- is it going to take us 30 7 years to recover that, all that money? 8 MS. WILLIAMS: Well, so that's what 9 -- if - - in the webinar, Mike Rivest from 10 Navigant said he had done a translation that was 11 approximately 10 or 11 years to essentially -- as 12 related to the discount period and all that. I'm 13 not -- 14 MR. SIVIGNY: Okay. 15 MS. WILLIAMS: I'm do not entirely 16 recall. 17 MR. LAU: You'd make most of it 18 up over this first ten years. 19 MS. WILLIAMS: Right. 20 MR. SIVIGNY: Okay. 21 MR. LAU: That this is sort of a 22 -- because of the discount rate kind of trails

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 179 1 off. 2 MS. WILLIAMS: Yeah. 3 MR. SIVIGNY: Okay. So it's a -- 4 it's a curve where you get most of it back in the 5 first ten years. 6 MS. WILLIAMS: Yeah. 7 MR. SIVIGNY: Okay. Thank you. 8 MS. WILLIAMS: So. 9 MR. BROOKMAN: But that, that's in the 10 upper bound. 11 MS. WILLIAMS: Right. This is -- 12 MR. BROOKMAN: It's the upper bound 13 scenario. 14 MS. WILLIAMS: This is the worst 15 impact to consumers. Right. And I really do want 16 to -- Chris will talk fully about the manufacturer 17 impact later, and I really do want to try to focus 18 this, strictly to impact on the consumers. And so 19 the relevance to manufacturers will be discussed 20 in another segment -- 21 MR. BROOKMAN: Right. Okay. 22 MS. WILLIAMS: It is certainly

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 180 1 important, too. 2 MR. BROOKMAN: You're doing very well. 3 Keep going. 4 MS. WILLIAMS: Okay. So this is the 5 average LCC savings. Again, we broke it out by 6 horsepower bin, just so you can see. You can see 7 that while almost everything is positive LCC 8 savings, there are a few small pumps in the ESCC, 9 ESFM that have negative average LCC savings. That 10 means those customers are paying more for 11 increased efficiency than they're saving in energy 12 costs. 13 This is a pretty expected result. A lot 14 of times the large equipment is really driving 15 those energy savings. You know, there's huge -- 16 they're pulling huge power and the, the increased 17 cost isn't - - doesn't increase as fast for them 18 relatively. So the, so the people who purchase 19 large pumps might benefit more than the people who 20 purchase small pumps. 21 However, my understanding is that a lot 22 of people are purchasing both small and large

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 181 1 pumps. So the impact to consumers themselves is 2 a, is a little bit mixed than this which is 3 looking at individual pump sizes. 4 So this is just -- you can see the 5 numbers in red are the negative LCC savings. You 6 can see they occur a few places across the board, 7 and you'll have these to look at also when they 8 get printed out. This is a comparison to what 9 you've seen before. Again, the top is change in 10 operating costs and the bottom is increased 11 purchase price. So it just helps show where 12 everything is coming from. 13 Again, you can see that the scales are 14 totally different across the sizes. It goes up to 15 1,000 for small, 3,000 for medium, and 10,000 for 16 large. And so you can see, like, on the large 17 pumps the operating cost savings are really 18 dwarfing the increase in equipment costs; whereas, 19 for small pumps that's always -- 20 MR. BROOKMAN: Would you restate what 21 the graph shows? From here it's hard to see. 22 MS. WILLIAMS: So the, the top --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 182 1 the -- above the axis -- 2 MR. BROOKMAN: Yes. 3 MS. WILLIAMS: Axis. These are 4 changes in operating costs. So these are 5 operating cost savings 6

-- 7 MR. BROOKMAN: Okay. And then -- 8 MS. WILLIAMS: Across the lifetime 9 of a product, and the bottom is increase in 10 purchase price. 11 MR. BROOKMAN: Okay. 12 MS. WILLIAMS: So the consumers, you 13 know, for example, might be paying almost $500 14 more for a pump, but they may be saving almost 15 $1,500 over the lifetime of the pump, for example. 16 MR. BROOKMAN: Right. Steve Rosenstock. 17 MR. ROSENSTOCK: Steve Rosenstock, EEI. 18 Again, I'll just say the typical or median 19 lifetime that's being shown in this graph is how 20 many years? 21 MS. WILLIAMS: I mean, so those go 22 back to, to, to these different -- so they range

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 183 1 from 9 to 21 average lifetime. 2 MR. HANDZEL: Alison, it's Mark 3 Handzel. So I guess, I think Bob was trying to ask 4 the question and, and maybe we're just, we're 5 still beating around this, but at the last meeting 6 you heard -- everybody heard pretty soundly from 7 the manufacturers that we did not feel that we 8 were going to be able to raise our prices in 9 conjunction with, you know, with this efficiency 10 improvement that our customers are willing to 11 receive. So what are you basing the increases in 12 purchase price based on, knowing that information? 13 MS. WILLIAMS: Right. So knowing 14 that information is why we did the two bounds. 15 And the first results I showed you are the no-cost 16 recovery -- 17 MR. HANDZEL: Right. 18 MS. WILLIAMS: Which is -- what 19 you're saying, we can't pass anything along. 20 MR. HANDZEL: Right. 21 MS. WILLIAMS: But you're also 22 saying, well, actually, the payback is too long

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 184 1 for your other scenario, which is a completely 2 opposite message. So we're just trying to do the 3 two bounds. You may think that if you -- if you 4 think that you can't pass along those savings, 5 then the results -- the results for the consumers 6 will be closer to the no-cost recovery scenario. 7 If you think you can pass some results -- some 8 costs, but not all along, then, then we'll get 9 something closer to the full cost recovery 10 scenarios. So we're trying to provide a spectrum 11 where you can sort of think and use this for 12 negotiation. You know? 13 Like you can say, look -- in this case, 14 if you, if your argument is that we can't pass 15 anything along, then you can go to Max Tech for 16 consumer impacts. So these are just things that 17 you need to negotiate with each other once you, 18 once you start talking. Right? 19 MR. HANDZEL: So Mark Handzel from 20 Xylem. So just, you know, obviously, we -- we're 21 not saying we're not going to have price 22 increases, because obviously when the motor guys

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 185 1 give us a price increase, we pass it on -- 2 MS. WILLIAMS: Yep. 3 MR. HANDZEL: Our component 4 materials, you know, when bronze goes up or 5 stainless goes up or cast iron goes up, you know - 6

- 7 MS. WILLIAMS: Sure. 8 MR. HANDZEL: So we will have price 9 increase, but what we're saying is we cannot pass 10 on a price increase directly related to 11 redesigning, the cost of redesigning the pumps to 12 gain higher efficiency. 13 MS. ARMSTRONG: So maybe -- let me chime 14 in here for a second. I think what DOE is trying 15 to say is -- and what we've tried to give you is 16 two bounds, right? One is going to be where 17 Alison describes as the best case for consumers, 18 the worst for manufacturers, and the other one's 19 going to be the worst case for consumers, best 20 case for manufacturers, in which case you get all 21 your costs back that you had to invest to meet any 22 potential standard level.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 186 1 But the reality is, it's somewhere in 2 the middle and DOE isn't able to know that. And 3 it may be different for you than it is for him, 4 than it is for him. We're not really sure. And 5 the market may dictate that. What this allows you 6 to do, though, is to analyze the results at both 7 ends. And this is where your negotiations take 8 over. Where exactly is it that you might want to 9 fall? And so what Alison's trying to do is 10 saying, here's where the bounds are and here is 11 how this translates through our analysis. In which 12 case -- how DOE does its analysis. And you guys 13 need to start talking about the middle ground. 14 MR. HANDZEL: Well we asked - we asked 15 Lucas for a get-out-of-jail free card in the last 16 -- in the last discussion, you know. So obviously 17 we don't discuss price. 18 MS. ARMSTRONG: And, and no, I don't 19 think we're asking you to discuss price. What 20 we're asking you to do is look at the bounds for 21 the impacts to consumers and discuss a level. Not 22 a price. A level. Because what -- if Alison says

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 187 1 you can only pass through 50% of your costs, 2 you're going to see the analysis shift to 3 somewhere in that middle ground. And, and as far 4 as impacts to consumers. 5 So I'm not asking you to discuss exact 6 prices. What I'm asking -- what I think the ask, 7 is to start discussing the levels that, that you 8 might be able to consider based on the analysis. 9 MR. BROOKMAN: So that was Ashley and 10 not Bob Barbour. 11 MR. BARBOUR: Bob Barbour from TACO. 12 I think our question was on the bound that is best 13 for the manufacturers, what was the percentage 14 change in pricing that was used on that analysis, 15 and we never got that answer. 16 MS. WILLIAMS: Okay. So -- 17 MR. BARBOUR: That's the basic 18 question. I think Mark's asked it. I've asked 19 it. We're just trying to understand what you used 20 for that percentage 21

-- 22 MS. WILLIAMS: Okay. Right. So I

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 188 1 mean, this is an example scenario. This is 2 slightly out of date, but basically what, you 3 know, as, as was said before, we took the 4 conversion costs that Dan just showed and we're 5 basically calculating -- in the LCC we calculate 6 what price increase there has to be for each pump 7 in order to basically equal. So then we run the 8 LCC model and make sure that the old price plus -- 9 the new price minus the old price equal Dan's 10 conversion costs. So we basically calculate it 11 all. And this is one example. Like when you go up 12 to PER 70, you're at 1,600; whereas, you know, in 13 the base case you're at 1,200. So there's, you 14 know, a different increase calculated for each 15 level. And we -- so we took Dan's conversion 16 costs. We did a 30 year analysis period, 100% 17 cost recovery, 11.8% discount rate. And we 18 plugged those numbers in and back calculated these 19 prices that result in that full cost recovery. 20 MR. BARBOUR: So you don't have 21 actual percentages that you can give us. 22 MS. WILLIAMS: I could post process

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 189 1 those percentages for you. 2 MR. LAU: I think it would be 3 easier for me to do that. 4 MS. WILLIAMS: Yeah. We can get 5 that to you. Yeah. 6 MR. LAU: I'll add a slide that 7 shows the -- 8 MS. WILLIAMS: Mm-hm. 9 MR. LAU: The base case markup, 10 the standard -- 11 MR. BARBOUR: It just gives us a 12 benchmark to -- 13 MS. WILLIAMS: Sure. Yeah. It's -- 14 MR. BROOKMAN: Steve. 15 MR. ROSENSTOCK: Steve Rosenstock, EEI. 16 What would happen if the manufacturers wanted to 17 recover their costs at a faster rate because of 18 their economic conditions? 19 MS. WILLIAMS: Right. Then, you 20 know, we would model probably -- and it would be 21 worse for consumers, right? 22 MR. ROSENSTOCK: Right.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 190 1 MS. WILLIAMS: So again, we're 2 getting two messages. One is that we can't 3 recover any costs and one is 30 years is too long. 4 Right? Which are completely opposite messages. 5 If they wanted to recover in a shorter amount of 6 time, you would basically be increasing, you know 7 -- maybe instead of being here, this point would 8 end up here. Or something like that, right? It's 9 going to look worse for the consumer. 10 MS. ARMSTRONG: So I think this is where 11 you guys need to talk about things. We can 12 definitely get you percentages in terms of -- but, 13 Steve, I don't think it's realistic to say full 14 cost recovery, 50% faster. Right? I mean we're 15 hearing in the room that we can't even potentially 16 fully recover costs. 17 Now it may be that we should consider 18 something like 50% recovery, 50% faster. We can 19 run these scenarios, but we need you guys to think 20 about what those scenarios would be. And we're 21 not asking you about specific pricing, but we are 22 asking you about a specific scenario we can model

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 191 1 to get you results you may need to help inform 2 your discussions about levels. 3 MR. BROOKMAN: Dan Delaney. 4 MR. DELANEY: Dan Delaney from 5 Regal. Just so I understand this, to make sure 6 we're all on the same page, when we talk about -- 7 since we got into this discussion from the very 8 beginning, we have multi-stages, right, of 9 obviously pump, pump plus motor, pump plus motor 10 plus control. And all these scenarios, it is, 11 it's simply up to the manufacturer? They could, 12 could do the pump only. Or is this just pump only 13 discussion -- 14 MS. WILLIAMS: This is just pump 15 only. 16 MR. DELANEY: Good. Just want to 17 make sure we all understood that. 18 MS. WILLIAMS: Right. The design 19 options are pump only, so we are only modeling 20 pump only -- 21 MR. DELANEY: Okay. 22 MS. WILLIAMS: In all of these

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 192 1 scenarios -- Yes. 2 MR. BROOKMAN: Charlie. 3 MR. CAPPELLINO: Charlie Cappellino, ITT. 4 So the 30 years is too long comment, I think is 5 the result of confusion. You're saying you do a 6 30 year analysis period, which I guess is a 7 standard by which you do your calculations. And I 8 guess what some of us don't understand is how does 9 that relate to the equipment lifetimes that you 10 have on the other table? Right? 11 So does that mean, for example, if an 12 equipment lifetime was, let's say, 15 years, that 13 you would actually put in two purchases of the 14 equipment in that 30 year analysis period? 15 MS. WILLIAMS: So in the LCC, we 16 assume that all purchases take place in a single 17 year. It's a, it's a simplification. So, you 18 know, however -- it's basically assuming everyone 19 purchases their pump in 2019 and then it runs for 20 20 years or it runs for whatever. In the NIA and 21 the shipments model, which we still haven't gotten 22 to, we are modeling the whole population over all

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 193 1 the shipments in a 30 year period. 2 So you have a rolling population of 3 pumps. Like if you purchased your pump in 2019 and 4 it lasts for 20 years, or you purchased your pump 5 in 2035 and it lasts for 20 years, and so it's 6 like this rolling scenario. So these are two 7 different things. So for the LCC, this is 8 assuming all purchases are in a single year. 9 MR. CAPPELLINO: So real simple question. 10 So if I bought a pump in year one and calculating 11 energy savings, I calculate energy savings for 12 that pump for 30 years? 13 MS. WILLIAMS: No, for the lifetime 14 of that pump. 15 MR. CAPPELLINO: The lifetime of the 16 pump. 17 MS. WILLIAMS: Yep. 18 MR. CAPPELLINO: Okay. So I get it. I 19 think that's where some of the confusion is, is -- 20 so the conversation I hear is, well, pumps don't 21 last 30 years, why are they doing a 30 year 22 analysis? So I, I think the explanation is doing

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 194 1 a purchase of a pump, it'll last the lifetime that 2 you had on the previous table, which might be 11 3 years, 20 years or whatever, and that's the, the 4 duration of the product lifetime, but you're doing 5 an analysis over 30 years so you may have multiple 6 purchases -- 7 MS. WILLIAMS: Yeah, so -- 8 MR. CAPPELLINO: -- inside of that 30 9 years? 10 MS. WILLIAMS: Yeah. So I 11 apologize. It's a little confusing, right. So 12 the 30 years, I guess, is not really applicable to 13 the LCC. It's applicable to the NIA and the MIA. 14 And so the manufacturer impact analysis that Chris 15 is going to go over will talk about making 16 manufacturers whole over the 30 year analysis 17 period. 18 So 30 years of the MIA means you're -- 19 the industry net present value change will be 20 zero. So, you know, he'll get into that in a lot 21 more detail. So it was a little bit confusing to 22 say that the analysis period is 30 years. It's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 195 1 not relevant to the LCC. It's only relevant to 2 how we calculated the -- 3 MR. BROOKMAN: Tom Eckman has a 4 supplemental comment. 5 MR. ECKMAN: Tom Eckman, Northwest 6 Power Council. Yeah. The analysis we're talking 7 about now is just for the consumer, and that's the 8 one pump purchase for one pump life. The pricing 9 that went into that was based on manufacturers 10 recovering their cost over a 30 year period at an 11 11 .8% discount rate, that's the 30 years, not the 12 lifecycle cost. 13 MR. CAPPELLINO: Okay. 14 MR. ECKMAN: Lifecycle cost is just 15 for one -- a consumer buying a pump and when it 16 dies, it dies. That's it. But the price they had 17 to pay was based on your recovery over 30 years, 18 or not in the other scenario where you got nothing 19 recovered. 20 MR. BROOKMAN: Okay. Both comments. 21 MR. CYMBALSKY: So for the 30 years 22 that we're going to discuss further down the road

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 196 1 here, the reason we, we picked 30 years, is 2 because if you look over the whole portfolio of 3 the standards program, transformers has the 4 longest life of roughly 30 years. So 30 years is 5 just an artifact of being able to compare rules 6 against each other. So for, for a product that 7 lasts only five years, in that 30 year horizon, 8 you will purchase it six times -- 9 MR. CAPPELLINO: Six times. 10 MR. BROOKMAN: For yours, it's one-and11 a- half times, whatever the numbers. 12 MR. CYMBALSKY: So don't get hung up 13 on the 30 so much. It's just an artifact of -- 14 MR. BROOKMAN: That was John Cymbalsky. 15 So Joanna Mauer. 16 MS. MAUER: Just a quick question, 17 Alison. It looks like for the end suction 18 categories, that the incremental equipment cost is 19 significantly higher for the 1800 compared to 20 3600. Do you know why that is? 21 MS. WILLIAMS: So I do not know. 22 MR. BROOKMAN: Stand up, Dan.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 197 1 MR. WEINTRAUB: So, yes, the reason 2 for that is because we're -- end suction 1800, a 3 larger horsepower at 1800 compared to -- so a 4 hundred horsepower at 1800 is a physically larger 5 size than a hundred horsepower pump at 3600, which 6 is a smaller pump. So larger pump percentage cost 7 increase is a larger percentage overall. So that 8 where -- that's where that should come from. 9 MS. MAUER: Okay. 10 MR. BROOKMAN: So I thought we -- we're 11 ready to move on now. 12 MS. WILLIAMS: Yeah. So I'll just 13 continue showing a couple more of results from the 14 full cost recovery scenario. You can see as 15 compared to the no- cost recovery scenario that 16 there are a lot more consumers that lose in this 17 scenario, so they pay more for the more efficient 18 pump than they save over its lifetime in energy 19 costs. 20 So that's why, you know, this is worst 21 case for the consumer. The other one is, is, is 22 best case. So you can see that, you know, in some

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 198 1 of these areas, I've highlighted in red here a few 2 of the places where the percentage of losers 3 exceeds the percentage of winners just for some 4 perspective on looking at that, but -- and 5 obviously as compared to the other scenario, this 6 looks worse for consumers. 7 But, but overall across most of these 8 equipment classes, there's still more consumers 9 benefitting than there are being burdened. And 10 this is payback period for this scenario. 11 You can see there is -- I also 12 highlighted in red some of the high ones, above 20 13 years. So that's generally going to be above -- 14 take longer than the lifetime of the product to 15 pay back. So in this scenario there are some, 16 some levels that maybe aren't great for consumers. 17 So that's basically all the LCC results. 18 And so, I think hopefully when you get those 19 printed out, it'll -- you know, you can look at 20 those numbers in a little more detail and think 21 about what those mean and what's in the middle, 22 etc.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 199 1 MR. BROOKMAN: Alison, is there anything 2 else you wish to cover in this segment? Are there 3 any specific questions? 4 MS. WILLIAMS: In the LCC segment? 5 MR. BROOKMAN: Yeah. 6 MS. WILLIAMS: I have nothing else 7 in the LCC segment. 8 MR. BROOKMAN: Okay. We're about to 9 move on. We're going to go a little bit longer 10 and hope those photocopies show up. 11 MS. ARMSTRONG: We can just drop them off 12 if you want to go to lunch. 13 MR. BROOKMAN: Well, how much -- what's 14 the next segment? 15 MS. WILLIAMS: So we still have 16 shipments and NIA left, which is approximately 20 17 slides, and we've never gone over it before. So 18 it may not be fantastic -- 19 MR. BROOKMAN: Yeah, I think we should 20 go to lunch. 21 MS. WILLIAMS: -- to start right 22 now.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 200 1 MR. BROOKMAN: Okay. And you were 2 suggesting that we allow a longer period for 3 lunch, but we -- how should we do this so they can 4 get their hands on the slides? 5 MS. ARMSTRONG: We can send them out. 6 You have Internet, right? So we can send them out 7 to e- mails right now if anyone, for anyone that 8 has access to e-mail. 9 MR. CAPPELLINO: I don't think we need a 10 longer lunch. 11 MR. BROOKMAN: You don't think we need 12 it? 13 MR. CAPPELLINO: We've covered all the -- 14 MR. BROOKMAN: Okay. 15 MR. CAPPELLINO: I think an hour's -- 16 MR. BROOKMAN: An hour would be 17 sufficient? 18 MR. CAPPELLINO: You guys are good. 19 MR. BROOKMAN: I see a lot of heads 20 nodding yes. Okay, Charlie. Thank you. So it's 21 now 12:10. Let's take an hour for lunch, which 22 means we'll resume at 1:10 p.m. I have a reminder

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 201 1 to wear your badge inside the building, and if you 2 go to the big cafeteria, you'll probably need a 3 photo I.D. to get back through the security 4 portal. So we'll see you back here at 1:10 p.m. 5 We've covered a lot of ground. This room will be 6 secured. You can leave your stuff. 7 (SESSION BREAK) 8 MR. BROOKMAN: Welcome back. I hope 9 you had a nice lunch. I wanted to -- it's 10 something I neglected this morning, was to welcome 11 those that are joining us via the web. The 12 Department of Energy wants very much to make these 13 meetings successful to those listening in on the 14 web. I also wanted to provide an opportunity for 15 two folks here today that have joined us for the 16 first time to do a very brief introduction since 17 they're sitting in for other members. And we'll 18 start with Brian. Just say hello and give us a 19 30, 60 second -- 20 MR. HENRY : About 10 or 20. 21 No, I'm Brian Henry and I'm with Patterson Pump 22 Company. I've been with the company for 25 years

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 202 1 now. I handle global marketing for the company. 2 Other than that, degree in education. So I'm 3 putting that to good use at this point. I'm not 4 so sure. But I just have enjoyed listening this 5 morning and being a part of it. 6 MR. BROOKMAN: Thank you. Glad you 7 could join us. And Jay, you've been here a few 8 times, but give us a 30 second bio. 9 MR. SIVIGNY: Jay Sivigny, Flowserve 10 Corporation of Taneytown, Maryland. So I've been 11 down here pretty regularly with the kids. I've 12 been with Flowserve 17 years, degreed mechanical 13 engineer. Currently working in global product 14 management and marketing. 15 MR. BROOKMAN: Great. Okay. Alison. 16 MS. WILLIAMS: Thanks. Okay. 17 MR. BROOKMAN: We have -- it seems 18 like we have a comment or question right here at 19 the outset. Mark Handzel. And we should note for 20 the record that, thanks to Brenda Edwards. 21 MR. HANDZEL: Yes. Thank you, Brenda. 22 MR. BROOKMAN: We -- and actually

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 203 1 getting this in motion, we had a rather complete 2 Power Point packet printed off as we went to 3 lunch, and that preps the genesis of Mark's 4 comment. 5 MR. HANDZEL: So Mark Handzel from 6 Xylem. So, you know, the pump caucus spent some 7 time looking through the slides and just reviewing 8 the stuff that we've covered this morning. And, 9 you know, I think, you know, what we would like to 10 say is that we're all going to -- we all feel 11 strongly that we have to take a harder look at 12 this, passing on the cost increase potential, and 13 so we're going to be studying that further. John, 14 I'll just say one of our concerns is that we don't 15 know how we can openly talk about it because of 16 strategic concerns and price concerns. 17 So it, it's a difficult subject for us 18 to be able to come back in here say, yeah, we're 19 going to do this. Because it, it can be taken the 20 wrong way. So -- but we, we think we may be able 21 to pass on some of those costs, so, but we all are 22 going to need a bit more study of exactly what's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 204 1 going on. 2 MR. BROOKMAN: Charlie. 3 MR. CAPPELLINO: Just curious if -- 4 since you guys have done this multiple times 5 before, is there a method that you've used to 6 address this issue in terms of the pricing 7 discussions and avoiding legal, legal issues in 8 terms of price collusion and that kind of thing? 9 And is there any information relative to the 10 ability to extract some of the cost savings or 11 increased price, prices due to more energy 12 efficient equipment and similar standards that 13 have been ever created in the past? Because we're 14 kind of trying to predict the future of something 15 that we really have no relevant basis to make a 16 decision on. So looking at other, other industries 17 that have gone through the same kind of process, 18 is there something there that we could learn from? 19 MR. CYMBALSKY: This is John Cymbalsky, 20 DOE. So we do this for every rule. This is not a 21 unique situation whatsoever. We're not -- in what 22 we're doing in our analysis with the pass-through

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 205 1 of the cost that industry either absorbs or they 2 pass on, we're not -- we're not asking you guys to 3 get in a room and collude on prices so that - 4 You know, it's just a simple assumption 5 on our part when, you know, the team goes out and 6 interviews you guys to understand what your 7 manufacturing process is, then they take the whole 8 of your industry and try to aggregate it so that 9 nobody's, you know, personal business information 10 is compromised. But we basically have a range of, 11 of, you know, do you get to pass it on and that's 12 you recover everything. 13 So that's worst case scenario for the 14 consumer. Or you guys absorb it or some 15 combination of what happens -- 16 MR. FERNSTROM: Those are the bounds. 17 MR. CYMBALSKY: Yeah. That's the 18 bounds. So when we show the analysis results, we 19 show the bounds in the MIA, and you're going to 20 see that later on this afternoon. You know, your 21 industry either, you know, can go really far south 22 or it can, you know, retain its profit margins.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 206 1 So we're going to go through all of that. You 2 know, we make the assumptions that -- can you 3 maintain your profit margin or do you lose some 4 profit margin and all that kind of thing. So -- 5 MR. FERNSTROM: So this is Gary. I 6 think the reality from experience is in general, 7 when something becomes required by regulation, the 8 costs are not passed through to the extent that 9 many industries believe they could and should be. 10 And that's because if you have a dozen 11 manufacturers and one of them already has a 12 compliant product in the market and their business 13 is operating fine around that, they don't have to 14 make any investment and their price is already set 15 competitively. So the others who don't then have 16 to go out and make an investment to have the 17 product, but they can't charge that much more 18 because one of their competitors is already there. 19 So you, you know, you can't talk explicitly among 20 yourself about these things. But, but in general, 21 that's the way it's going to work for you. 22 MS. MAUER: This is Joanna. I would

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 207 1 just add that I think this is a -- the situation 2 is different in some ways from most other products 3 in that there's no incremental manufacturing 4 production cost. You know, when we look at 5 something like a refrigerator or air conditioner, 6 you get to higher efficiency levels by, you know, 7 adding materials -- 8 MR. HANDZEL: Adding more costs. Right. 9 MS. MAUER: Yeah, adding more cost. 10 MR. HANDZEL: More efficient motor, more 11 insulation. 12 MS. MAUER: And that the basis -- 13 exactly. And that's the basis of the cost to the 14 consumer. So I think this is somewhat of a 15 different scenario where we have to think about -- 16 I think typically conversion costs aren't 17 incorporated in the manufacturing production cost 18 as these, the actual cost of the product; whereas, 19 this is a little bit of a different, a different 20 case. 21 MR. FERNSTROM: This is Gary again. 22 Interestingly for us, the normal situation we see

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 208 1 is the industry we're working with will come back 2 and say, oh, this is going to result in huge costs 3 for consumers and it's not going to be cost 4 effective. 5 Well, to my astonishment, you know, you 6 guys have said, well, it's going to result in huge 7 cost for us all right, but, you know, we're not 8 sure competition is going to allow us to recover 9 those costs. That's, that's different than what 10 we normally hear. 11 MR. BROOKMAN: Steve. 12 MR. CASE: May I make a comment? This 13 is Greg Case. 14 MR. BROOKMAN: Please, Greg, do. 15 MR. CASE: It, it seems to me that, that 16 one result is to highly disadvantage U.S. 17 manufacturing and highly advantage offshore 18 manufacturing that's already had to comply with 19 something like this offshore. 20 MR. FERNSTROM: This is Gary. Yeah, 21 Greg. I would agree. I made the point some are 22 already there. And on account of international

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 209 1 requirements, it may be that offshore 2 manufacturers or those selling the large amount of 3 product into other markets are the ones that are 4 already there. 5 MR. BROOKMAN: Okay. Thanks, Greg. 6 Steve. 7 MR. ROSENSTOCK: Steve Rosenstock, EEI. 8 And again, as a first time standard for these 9 products, there is kind of a blank slate kind of 10 on all sides. We know all the products out there, 11 but it's a matter of, you know, now there's some 12 European standards and a U.S. standard, and also 13 now there's going to be some, you know, test 14 procedures. 15 You're going to, you know, if they're 16 the same as what you might be doing in Europe, 17 that would might lower your incremental costs, but 18 if there's, if there's differences, then there 19 might be some other costs. 20 So again, as a first time standard, 21 there's always some -- there's more unknowns, I 22 would say, with trying to set this one versus

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 210 1 other standards. And, you know, the -- and just 2 possibly more, possibly more unknown costs just 3 because of the fact with -- if different product 4 lines didn't have to meet a standard, now they do. 5 So it's all -- there's still a lot of chicken and 6 egg going on as we go through this. 7 MR. FERNSTROM: This is Gary again. I 8 think in pursuing our negotiation, we need to take 9 all of these factors into consideration. And we 10 will. 11 MR. CYMBALSKY: I would echo that. This 12 is John from DOE. So, you know, I've had a few 13 offline conversations and we know we've got the EU 14 standard out there that people are very aware of. 15 You've got what Steve just mentioned, first time 16 standards. So I think that's right. These are 17 the big factors that the negotiators should have 18 in their, in the front of their mind, not the back 19 of their mind, I think. 20 And in my mind, that makes things a lot 21 easier than what we've had on some other products 22 like transformers. We've had standards for those

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 211 1 and I think the issues in my mind were a lot more 2 complicated than what I've heard so far. Not to 3 say that this isn't hard, but I think there's a 4 few factors that were just raised around the table 5 that actually can make our negotiations, our 6 negotiations a bit easier and more straightforward 7 to kind of coalesce around. But that, that's up 8 to everyone here at the table to decide if that's 9 the right, right path forward. 10 MR. HANDZEL: I think -- Mark Handzel 11 from Xylem. Obviously, you know, as we pointed 12 out several times and we've kind of seen, you 13 know, the best and worst case, somewhere in 14 between there is, is kind of the scenario. And I 15 think, you know, we feel that it is somewhere in 16 between there. A lot of uncertainty for us to pin 17 it down where, but I think that's part of what 18 your point is, is that there typically, you don't 19 know exactly where. 20 MR. CYMBALSKY: Right. 21 MR. HANDZEL: So, but we do think 22 instead of being all the way to the no cost pass

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 212 1 through, it's somewhere in between. 2 MR. CYMBALSKY: Right. And, and then 3 just to put in every - again, in front of 4 everybody's minds that if, if we cannot come to a 5 negotiated agreement here, it's, it's the DOE 6 point. And so that's the kind of the, the 7 elephant in the room. I know I put on a little 8 weight, but -- you know, but seriously, I think -- 9 MR. HANDZEL: And John, I just was to 10 reiterate what I said to you earlier, that, that 11 as a caucus the pump manufacturers are -- you 12 know, this is not a over, you know, overarching 13 problem for us. We, we still agree with what's 14 being done here and we want to support it and, you 15 know, so we are fully committed to working through 16 the process. 17 MR. CYMBALSKY: Great. And I think that 18 sets the stage well for the next part of this 19 working group's business to, to get to the 20 negotiations, come to a good place for everybody. 21 MR. BROOKMAN: So we're going to 22 proceed. Alison is sitting there ready to go with

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 213 1 shipments analysis, which is slide 27 in the 2 packet, which we fortunately now have in front of 3 us. 4 MS. WILLIAMS: Yeah. And I'll preface 5 this, just adding on to that conversation, that 6 there'll be a lot of inputs in here that we can 7 discuss as well, you know, in the end. 8 Just to give you a preview, national net 9 present value is basically positive for everything 10 across the board. So, you know, I just want to 11 state that up front so you'll, you can think of 12 this in other terms. Like these are pieces of 13 data that we're providing to help you with the 14 negotiation, but there are all these other factors 15 that maybe will, you know, dwarf what we're 16 presenting here. So just to put that into 17 perspective. 18 MR. HANDZEL: So this is the first time 19 we've seen this slide -- 20 MS. WILLIAMS: Yes, you have never seen 21 this stuff before. This is all new. 22 MR. HANDZEL: Okay. Thank you.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 214 1 MS. WILLIAMS: So, yeah, this is just, 2 again, showing the over, overview. Shipments 3 analysis feeds kind of early into the national 4 impact analysis and the manufacturer impact 5 analysis, which is what you'll hear about next. 6 So basically for the national impact analysis and 7 manufacturing impact analysis, as we discussed 8 before, there's a 30 year analysis period. And so 9 we need to finish the shipments model to project 10 shipments across those, that 30 year analysis 11 period. I'm basically going to skip this. 12 So to start the shipments model, we need 13 some data for a historic period. For this rule 14 making, we have data from 2012 provided by HI 15 through NEMA BIS, that this is the table in the 16 upper right hand corner, the total industry 17 estimate for each of these equipment categories. 18 So this came from HI. It is difficult 19 to use existing sources of market data, as we've 20 discussed previously, because they're not relevant 21 specifically to the pumps in the rule making and 22 it's pretty hard to try to estimate percentages.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 215 1 So this is what we're starting with right now. 2 The thing I did want to note on this is 3 that the historical census data shows that the 4 quantity of imported centrifugal, non-submersible 5 pumps ranged from 9 million to 16 million per year 6 from 2000 to 2010. And our consultant estimated a 7 large fraction of those would've been small end 8 suction, close- coupled, and in-line pumps. A lot 9 of those might be under one horsepower, but 10 presumably not all of them would be. 11 And so I just wanted to sort of check 12 whether you think that this 420,000 number 13 provided through the HI NEMA survey really 14 adequately captures all the imports that are 15 coming into this market, because it seems like 16 there's a substantial number -- we don't know if 17 they're clean water pumps in scope or not, but 18 there's a big pool that is, is potentially not 19 accounted for here. So I just wanted to see if 20 anybody had feedback on that topic. 21 MR. HANDZEL: Mark Handzel from Xylem. 22 So, Alison, obviously this has been a, a huge

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 216 1 quandary for all of us from day one and, and 2 obviously, you know, HI did what we felt was the 3 most thorough survey we could possibly do in terms 4 of collecting that data. 5 MS. WILLIAMS: Right. 6 MR. HANDZEL: You know, in, you know, I 7 think everyone realizes that the entire pump 8 industry are not members of Hydraulic Institute. 9 So, you know, we know that there's a percentage 10 outside of what's in our survey. I don't think we 11 have an exact percentage to even tell you what 12 percentage we thought that was. Okay? I mean 13 clearly the largest pump manufacturers in North 14 America are in HI. 15 MS. WILLIAMS: Right. And so -- and I 16 think it was stated that these are supposed to 17 account for imports by those manufacturers, but I 18 think maybe it doesn't account for imports by 19 companies that are only importing potentially. 20 So I just -- the reason this might 21 potentially matter -- correct me if I'm wrong, 22 guys -- I don't think we typically calculate

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 217 1 conversion costs for manufacturers outside the US. 2 We only care about -- is that right? 3 MR. HANDZEL: Conversion costs -- 4 MR. BROOKMAN: Chris. 5 MR. LAU: Sorry. Chris Lua for 6 Navigant. We, we do conversion costs -- we have to 7 do conversion costs for the industry so that it 8 matches up with the shipments for the industry. 9 MS. WILLIAMS: So it does include 10 imports. Okay. So, but, so if this was higher, 11 both the energy savings -- basically everything 12 would be shifted higher. So we -- we don't need 13 to have an answer now. I'm going to go through it 14 with the data we have. I just wanted to put it 15 out there that potentially we're, we're missing 16 some fraction of imports that, that could be 17 contributing to energy savings for this rule. So 18 it's plausible we are counting, undercounting 19 energy savings right now. 20 MR. ROSENSTOCK: Alison, Steve 21 Rosenstock, EEI. Just, you know, just thinking 22 about -- I don't have the algorithm here from

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 218 1 NEMA, but just, just as a possible bounding range, 2 what's, what's the number for, I'll say the large 3 motors, one to five hundred horsepower motors per 4 year? 5 MS. WILLIAMS: I do not know off the top 6 of my head. 7 MR. ROSENSTOCK: I'm just kind of 8 curious, you know, just kind of ranges that we're 9 talking about pumps with electric motors. If the 10 number of motors is, let's say one million a year, 11 then that might, consider that maybe as some sort 12 of upper bound, maybe. Again -- 13 MS. WILLIAMS: I mean, I think we have 14 an upper bound. It's about getting it down to the 15 scope at hand. 16 MR. STARR: It's about what? 17 MS. WILLIAMS: Reducing the, the upper 18 bound estimates to the -- to what we're trying to 19 set standards for in this rule making. So I don't 20 -- we don't necessarily need to answer this 21 question -- 22 MS. MAUER: I think DOE estimated for

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 219 1 the recent motor rules about seven million per 2 year. Something in that range. 3 MR. HANDZEL: That's 1 to 500 hundred 4 horsepower? 5 MR. ROSENSTOCK: Yeah. 6 MR. HANDZEL: Within the scope of that, 7 within the scope for that expanded role. 8 MR. ROSENSTOCK: Okay. Because they add 9 the 10

-- 11 MR. HANDZEL: To, yeah. Right. It's 12 almost everything. 13 MR. ROSENSTOCK: Seven million a year? 14 MR. HANDZEL: Yeah, somewhere in that 15 range. 16 MS. MAUER: This is Joanna again. I was 17 -- do any of the manufacturers have a rough sense 18 of percentage of unit shipments that are below one 19 horsepower? Is that a very significant fraction 20 of the market? 21 MR. HANDZEL: Mark Handzel from Xylem. 22 I'll just say that for, for our products, we have

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 220 1 the majority of our products are in scope. So 2 there -- 3 MS. MAUER: Okay. 4 MR. HANDZEL: Okay. So we don't have a 5 lot out of scope, you know, other than when you 6 get in -- 7 MS. MAUER: Miles -- 8 MR. HANDZEL: Right. So I mean -- and 9 this is clean water, one to two hundred horsepower 10 in the pump categories that we've defined. So 11 obviously if you go into other pump designs, if 12 you broaden the horsepower range, you know, all of 13 that starts to change significance. Okay? But 14 we've never -- I don't, I don't have the data at 15 my fingertips that looked at our entire pump 16 population. 17 MR. BROOKMAN: Louis. 18 MR. STARR: So, so I was looking at the 19 nine million dollar shipments and I thought -- 20 MS. WILLIAMS: Units. 21 MR. STARR: Units, sorry. When Dan 22 Weintraub with Navigant did the other thing, I

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 221 1 thought the scaling factor was about half with the 2 categories of the pumps we looked at. HI's data 3 covered about half. So that's what's in scope. 4 So if you scale it similarly, that means that 5 there's probably 900,000 that are in scope here, 6 or 800,000. 7 MS. WILLIAMS: So this is a different 8 rate. This 9 to 16 million could include all sorts 9 of non- clean-water pumps. The problem is -- 10 MR. HANDZEL: Every possible pump, 11 right? 12 MS. WILLIAMS: Yeah, so the census 13 disaggregates US manufacturing into pretty small 14 bins, but for imports it just says centrifugal 15 submersible and centrifugal non-submersible. So 16 it's just like this huge bin of pumps that -- we 17 had a consultant that gave us an estimate of what 18 he thought might be in scope. It's not included 19 here because we are using the HI numbers right 20 now. 21 So, again, I don't necessarily want to 22 derail this conversation on this. I just wanted

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 222 1 to throw it out there. And if someone, you know, 2 wants to provide feedback at a later date, we can. 3 The only thing it would do is just basically 4 increase the magnitude of everything you're seeing 5 here. 6 MR. BROOKMAN: Steve has a comment. 7 MR. THOMPSON: Steve Thompson. How do 8 you define an import? Is it -- is it a product 9 that's brought in, certain components are brought 10 in outside the United States and they're assembled 11 in the US, and then impellers are trimmed when 12 they're modified? What's, what's the definition? 13 MR. HANDZEL: A fully assembled pump in 14 a box ready to be sold. 15 MR. THOMPSON: So that's the problem 16 with -- 17 MS. WILLIAMS: Yeah. I mean right. The 18 census doesn't define it. I would interpret it as 19 the latter, but we don't have good -- yeah. So 20 I'm going to move on from this, but I just wanted 21 to, to throw that out there. 22 So basically we're starting with the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 223 1 base total of 420,000 shipments in 2012. So I 2 wanted -- I'm going to first go through an 3 approach that I didn't use just to present it, 4 because this is what the motors used. 5 So the medium electric motors rule used 6 a shipments model driven by private fixed 7 investments in selected equipment. And you can 8 see on this right- hand side that they got their - 9 - their shipments index matched this private fixed 10 investment index quite well. And so they used 11 AEO's projection of, of real investment to -- to 12 predict motor shipments out in the future. 13 So we tried to do this for pumps because 14 we figured it was reasonable to do something 15 similar to motors. We could not obtain a fit as 16 good as for the motors rule, particularly when we 17 selected equipment that seemed appropriate to the 18 scope. And in fact, the best fit was with private 19 fixed investment in residential equipment. 20 So that led us to believe that the 21 historical census data we have, which we were just 22 using for a trend, not for actual shipments

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 224 1 numbers, is, is, is not really representative of 2 commercial and industrial pumps because it, it 3 seems to trend better with residential investment 4 than with commercial investment. 5 So I ran this scenario anyway, but we're 6 thinking it's maybe not appropriate because it 7 seems like that historical index just isn't what 8 we want to use. So this, this is what we did. 9 We, we found a relationship. We projected it 10 forward based on AEO private fixed investment and 11 this is the result. It seemed -- you know, you go 12 from 420 -- 420,000 shipments in 2012 and almost 13 triple it by the end of the analysis period, which 14 seemed pretty steep for a product that is, is very 15 mature. 16 So I'm currently not using this 17 shipments projection, but I just wanted to present 18 it as one alternative that we checked because it 19 is consistent with the motors approach, and then 20 I'm going to show what I'm actually using right 21 now and we can have a conversation about what 22 seems most appropriate.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 225 1 So because we decided the historical 2 data -- so the historical data I have is all 3 census based. I've never received any HI's 4 bookings data, so I can't look at that. So 5 basically if, if we think that this historical 6 data doesn't match up properly with the scope, we 7 have no way of verifying that our model fits 8 historically. 9 So what I did right now is basically 10 just ignored it. This is what was done in the 11 small electric motors rule a while ago. So we're 12 taking the current shipments and projecting them 13 forward with various AEO trends. 14 So for commercial, shipments to the 15 commercial sector, we're using AEO projections for 16 commercial floor space. For the industrial 17 sector, we're using value of manufacturing 18 shipments. Agricultural sector, we're using value 19 of agriculture, mining, and construction 20 shipments. And for the municipal sector, we're 21 using projections of population. 22 So these -- this is just -- these are

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 226 1 the same sector weights you've seen before that 2 distributes the shipments into them. And then we 3 take each of these four different trends and 4 project those forward from 2019 -- from today out 5 to the end of the analysis period. So this top 6 line is the total shipments when you add up 7 commercial, industrial, agricultural, and 8 municipal. And in this one we go from 420,000 in 9 2012 to approximately 700,000 in 2048. So it's a 10 much, much less of a -- less steep increase in 11 shipments than what the, the model showed that we 12 decided not to use. 13 So this one seemed a little more 14 reasonable to us and seemed to be using AEO 15 projections that maybe seem relevant, but I'm 16 certainly happy to hear any comments on what we're 17 doing with this model. 18 MR. BROOKMAN: Steve. 19 MR. ROSENSTOCK: Steve Rosenstock, EEI. 20 If you go back to slide 32, the historical, is 21 that -- again, was that, is that based on motors 22 data --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 227 1 MS. WILLIAMS: No, the historical is 2 based on pumps census, census data for pumps, but 3 we just used it as a trend. 4 MR. ROSENSTOCK: Okay. 5 MS. WILLIAMS: With the HI based data 6 for the year 2012, because the -- we've been told 7 that the census data isn't -- what we were using 8 wasn't really very good. So we're just using it 9 for a trend instead of for actual numbers. 10 MR. ROSENSTOCK: Okay. Thanks. Steve. 11 Because it - again, if this trend is kind of, you 12 know, it looks like a flat to declining trend over 13 that ten year period. 14 MS. WILLIAMS: Right. And then it's 15 shooting up. Right. So. 16 MR. ROSENSTOCK: It's shooting up. And 17 yours is, yours is increasing slowly, and I guess 18 on your slide, by going back to 34, which is what 19 you're using, your -- the biggest jump seems to be 20 in the industrial sector. 21 MS. WILLIAMS: Mm-hm. 22 MR. ROSENSTOCK: It looks like that's,

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 228 1 that's kind of the -- 2 MS. WILLIAMS: Yep. 3 MR. ROSENSTOCK: -- the sector that's 4 driving it the most. And again, I, I'm not as 5 familiar with the industrial sector. I know it's 6 been increasing lately, but -- 7 MS. WILLIAMS: Yeah. And so that's why, 8 you know, we try to use these published trends 9 from AEO and sort of let them do these 10 projections, and we're just trying to tie the 11 shipments to it rather than, hopefully, not to get 12 into those details. 13 MR. BROOKMAN: Jay. 14 MR. SIVIGNY: Jay Sivigny, Flowserve. 15 Just out of curiosity on your alternate approach. 16 MS. WILLIAMS: Yeah. 17 MR. SIVIGNY: What's that compound 18 annual growth rate? Do you have that? 19 MS. WILLIAMS: Oh, I have not calculated 20 that. 21 MR. SIVIGNY: Rough estimate? It would 22 just be a good thumb sketch to --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 229 1 MS. WILLIAMS: Yes. Steve's on it. 2 MR. SIVIGNY: When you get your 3 calculation 4

-- 5 MR. ROSENSTOCK: Hold on. Hold on. 6 It's about 300,000 over for the year. 7 MR. BROOKMAN: Charlie. 8 MR. CAPPELLINO: Charlie Cappellino, 9 ITT. So to understand the graph here -- so you've 10 got several different lines there for different 11 segments of the market? 12 MS. WILLIAMS: Yep. 13 MR. CAPPELLINO: At the bottom. 14 MS. WILLIAMS: Yes. 15 MR. CAPPELLINO: And then the top -- the 16 line at the top is some kind of an aggregate? 17 MS. WILLIAMS: Yes, it's the sum of, sum 18 of each of the sectors. 19 MR. CAPPELLINO: And it's -- how did you 20 -- did you equally weight the segments? 21 MS. WILLIAMS: So this -- the segments - 22 - this is the weighting for the segments.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 230 1 MR. CAPPELLINO: So that's the weighting 2 there. 3 MS. WILLIAMS: It's the same as we used 4 in the LCC -- 5 MR. HANDZEL: So starting here you just 6 maintained that, right? 7 MS. WILLIAMS: So we -- the changes over 8 time is the result of each sectors' projections. 9 So because industrial grows -- 10 MR. HANDZEL: These are all - 11 MS. WILLIAMS: -- more steeply - 12 MR. HANDZEL: -- more on square 13 footage and -- okay. 14 MS. WILLIAMS: Yeah. So it -- that, 15 that's only -- yes. This is for 2012 and then it 16 sort of organically changes. 17 MR. ROSENSTOCK: So it's about a 300,000 18 unit increase over about 40 years. So that's 19 about 7,500 a year, so it's - well, the first year 20 is 1.87%. Over 30 years, it's probably, compound 21 probably about 1.5% per year? Again, I'm just 22 roughing it). I just got the first year at about

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 231 1 1.8%. 2 MR. SIVIGNY: We are just trying to get 3 a general idea. 4 MR. HANDZEL: And Alison, you and Mark 5 handled the value as per feedback? 6 MS. WILLIAMS: Yeah. 7 MR. HANDZEL: We have a hard time 8 projecting three to five years and you're going 9 out this far, so I was just like, sure. 10 MS. WILLIAMS: Yeah, I mean, that's why 11 I'm like -- 12 MR. HANDZEL: You know, I mean let's 13 keep going. I don't think we can give you any 14 feedback that says no. 15 MS. WILLIAMS: Okay. Right. And that's 16 why I'm -- like even in the -- as Steve pointed 17 out, you know, the last ten years are almost flat, 18 and then if you use the motors approach, it goes 19 up really steeply. And that's why it didn't 20 really seem that appropriate. 21 So we're going with something lower. 22 But -- so this is also something that, you know,

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 232 1 if you think about it later tonight or whenever 2 and have input on it, we can discuss it. But, so, 3 so all the results we're showing right now are 4 based on this alternate scenario. 5 So then the equipment -- so this 6 projection that -- we're doing all the shipments 7 of all the equipment classes together, and then to 8 disaggregate them, we're using the 2012 shipments 9 from HI to disaggregate them and that -- those 10 fractions remain constant over time. So we're not 11 showing an increase in any classes compared to any 12 other classes. 13 So that is also an assumption that could 14 be changed. And we did the same thing to 15 disaggregate into speeds. We just used the 2012 16 data to do that and that's also constant over 17 time. So those, those are some assumptions that, 18 again, we can, we can get feedback on and alter 19 those. 20 And, and then the, the last main thing 21 to talk about is standards impacts on shipments. 22 So increased pump prices could affect the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 233 1 repair/replace decision and potentially decrease 2 shipments. We don't have any data to 3 quantitatively estimate that, so right now we are 4 using the same shipments in the base case as in 5 the standards case, basically saying people are 6 going to buy pumps no matter what because they 7 need them. 8 So that is something you are also 9 welcome to comment on. This is, this is something 10 where, you know, the data -- obviously it's hard 11 to get data on this and determine what that, that 12 scenario really is. 13 So this is just the results of the 14 shipments model, the same as what, as what was on 15 the figure. So in 2019 -- so 2012 was 420,000 16 shipments and in 2019 it's up at almost 490, and 17 by 2048, it's around 700. And this also shows the 18 breakdown by the groups of equipment costs. Okay. 19 So that is all that I had on the shipments. Does 20 anybody have any questions? 21 MR. BROOKMAN: There were several 22 specific questions in there. I presume that as

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 234 1 we're going through, no one felt like they could 2 answer them. Mark gave an overview comment, but I 3

-- 4 MS. WILLIAMS: Yeah, so any -- on those 5 ones, if anyone has comment, you know, when they 6 review the slides tonight or tomorrow, whenever, 7 it's -- feel free to pass those along to us. This 8 is another instance where, you know, any of the 9 changes, you know, if -- if you decided that the 10 motors approach was real and the one I'm using 11 wasn't, then that would have a huge impact on 12 results because it would, you know, be increasing 13 the shipments much more rapidly. So that would be 14 a big change. 15 Some of these, you know, the breakdown 16 by equipment class would have some minor changes 17 in distributing things. So there's, you know, the 18 impact of the data we're asking for is varied. 19 MR. BROOKMAN: Then with no additional 20 comment, let's move on. 21 MS. WILLIAMS: Okay. So the national 22 impact analysis -- the analysis period we're using

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 235 1 for this is 2019 to 2048. We're going to estimate 2 national energy savings from the new energy 3 conservation standards and the national net 4 present values. So this is still a consumer5 focused analysis, but instead of looking at 6 impacts to individual consumers, it aggregates 7 those impacts to the nation as a whole. So in 8 general, we're taking the unit lifetime energy 9 savings multiplied by projected shipments and 10 accumulating this over 30 years. 11 And then for the NPV we're looking at 12 difference each year between energy bill savings 13 and increased equipment expenditures. These are 14 just some diagrams to, to emphasize that. Again, 15 national energy savings is just the difference 16 between base case energy consumption in each year 17 and standards case energy consumption in each 18 year, and we just take that difference and that's 19 the national energy savings. And again -- and in 20 that present value, you're looking at energy costs 21 savings compared to increases in equipment costs. 22 And you'll see in this diagram it also

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 236 1 talks about repair, maintenance, and installation 2 costs. We are at present ignoring those because 3 we're assuming that there is no increase in any of 4 those with respect to efficiency. So no -- so if 5 you hydraulic redesign all your pumps, it's going 6 to cost the same to maintain, to repair, and to 7 install as your pump did before, which we based 8 sort of on the fact that, you know, you guys are 9 trying to design to the same dimensions and 10 everything, so it doesn't seem like there would be 11 an appreciable change. 12 So right now this, these, the total 13 install costs basically consist only of the 14 equipment price, which we have discussed, and 15 doesn't include installation costs. And the model 16 also is not looking at repair and maintenance 17 costs because we're assuming the delta would be 18 zero between all the efficiency levels. 19 I think we mentioned, we mentioned that 20 also before because those could go into the LCC as 21 well. So we've been ignoring them throughout the 22 analysis -- for all the analyses.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 237 1 The annual -- I'm just going through 2 this list of inputs. The annual energy use comes 3 from the LCC. It's the average value per 4 equipment class and efficiency level. For the 5 base case efficiencies, we used the shipment 6 weighted efficiency distributions that we got from 7 the data that we collected for 2012. Right now, 8 we're holding those distributions constant 9 throughout the analysis period. 10 One of the things that we've considered 11 doing is taking the trend from the motors 12 rulemaking and applying it to this rulemaking. 13 But if there's any other -- I think I've got a 14 slide on this somewhere. I don't remember where 15 it is, at the end. 16 If there's any, you know, if anybody has 17 data on sort of the historical trends of 18 efficiency over time, that's something that, that 19 we can build into the model, but at present, it is 20 not currently available. 21 And for the standards case efficiency 22 distributions, we assume that in the year of

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 238 1 compliance, which is in this case 2019, all the 2 pumps that previously were below the efficiency 3 level, for example PER 40, anything below there 4 would roll up to PER 40. So nothing would over 5 shoot it. They would all just go to the new bare 6 minimum that was required. For energy prices -- 7 MR. BROOKMAN: Greg, go ahead. 8 MR. TOWSLEY: No, that's okay. I'll let 9 her -- at the end. 10 MR. BROOKMAN: Then I have a question. 11 So all those that roll to PER 40, what about the 12 ones that are above? 13 MS. WILLIAMS: I'm sorry. Yes. The 14 ones above it stay where they were. 15 MR. BROOKMAN: Okay. You mean 16 proportion - oh, they stay where they were. Okay. 17 MS. WILLIAMS: Yeah, so if you had like 18 5% at PER 10 and 10% at PER 25, you would take 19 that 15% and add it to the PER 40, and everything 20 else would stay the same. 21 MR. BROOKMAN: Okay. 22 MS. WILLIAMS: As -- so the energy

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 239 1 prices, we're using the average prices from the 2 LCC and we're projecting them using AEO 2014. The 3

-- 4 MR. ROSENSTOCK: Question? Steve 5 Rosenstock, EEI. What, what -- how much did you 6 break out commercial versus industrial customers 7 for your energy price analysis? 8 MS. WILLIAMS: We're using -- for the 9 national impact analysis, we're using a weighted 10 average energy price for -- based on the 11 commercial/industrial split. 12 MR. ROSENSTOCK: Wait, wait. Okay. 13 Steve Rosenstock -- 14 MS. WILLIAMS: So like in, in these -- 15 so 47% are commercial and all the rest get the 16 industrial. We're assigning agriculture and 17 municipal to the industrial price right now. So 18 it's approximately a 50-50 split. It's, it's 19 technically weighted based on consumption, but -- 20 MR. ROSENSTOCK: Well, I, I know that, 21 but I'm just saying in terms -- 22 MS. WILLIAMS: Yeah, so we did account

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 240 1 for it. Yeah. Yes. 2 MR. ROSENSTOCK: Okay. 3 MS. WILLIAMS: So they're set -- 4 there's, there's separate price trends in the AEO 5 for commercial and industrial. Yes. 6 MR. ROSENSTOCK: Got it. 7 MS. WILLIAMS: Typically we use 8 electricity conversion factors to take site energy 9 savings to full fuel cycle energy savings. I 10 haven't actually done that yet. I'm just using an 11 estimate. We are still pulling the update for AEO 12 2014. So we will refine that later. 13 We -- for discount rates for all our 14 rule makings, we use 7% and 3% based on OMB 15 guidelines and the discount, the present year for 16 discounting is 2014. So. 17 MR. BROOKMAN: Greg. 18 MR. TOWSLEY: Greg Towsley, Grundfos. 19 Back on total installed costs -- 20 MS. WILLIAMS: Yes. 21 MR. TOWSLEY: Now that I've had a chance 22 to think about it, I think as you drive the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 241 1 efficiency higher, to the higher PERs, the 2 assumption of the size of the pump and trying with 3 a target of keeping flange to flange dimensions or 4 feet dimensions is a good assumption, but I think 5 as you drive to higher efficiencies, that could 6 cause some changes to dilute sizes, 7 configurations, footing, those kinds of things. So 8

-- 9 MS WILLIAMS: Okay. 10 MR. TOWSLEY: I think making a flat 11 assumption that installation costs would not 12 affect it over the full range is not a good one. 13 I don't know at what point -- 14 MS. WILLIAMS: Yeah. Do -- 15 MR. TOWSLEY: -- it changes. Whether 16 it's at 40, whether it's at 70 or, or where it is, 17 but at some point it will go up just based on 18 experience in, in -- 19 MS. WILLIAMS: So if anyone would be 20 willing to speculate on -- I mean, I, yeah -- I 21 appreciate that input, but -- so we'll have to, 22 you know, basically pick a level at which to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 242 1 include some incremental costs. So if, if that's 2 something people can provide feedback on, that 3 would be great. 4 MR. CAPPELLINO: Why don't we caucus 5 this afternoon? I agree with Greg. At certain -- 6 in order to optimize efficiency, sometimes you 7 have to actually stretch, stretch the pump, 8 whether it's length or height, to have more gentle 9 curves or gentle turns that -- 10 MS. WILLIAMS: Yeah. And maybe Greg can 11 give us -- Greg Case can give us an estimate. 12 MR. BROOKMAN: You're assuming he's 13 there. 14 MS. WILLIAMS: Yeah, so yeah. If you 15 guys want to caucus and, and give us -- 16 MR. CAPPELLINO: We'll get back to you. 17 Either later that day or -- 18 MR. BROOKMAN: Steve over here has a 19 comment. 20 MR. THOMPSON: Steve Thompson of TACO. 21 On your method, you've got a statement in here, 22 DOE calculates the NPV by accumulating the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 243 1 difference each year between energy bill savings 2 and increased equipment expenditures. Could you 3 expand on what's meant by increased equipment 4 expenditures? Is that -- 5 MS. WILLIAMS: Yeah. So in this case 6 it's really just the increased price for the pump. 7 MR. THOMPSON: Based on inflation or, or 8

-- 9 MS. WILLIAMS: Oh, no. The difference 10 between the base case and the standards case. So 11 the same as in the LCC, where if you were buying a 12 pump at PER 10 and then it got redesigned - so, 13 and I should say right now I'm doing the full cost 14 recovery scenario in this to be more conservative 15 on the NPV. So it's basically the increased price 16 that you would pay if the consumers were getting 17 full pass-through. 18 MR. THOMPSON: So it kind of takes - 19 sorry. Steve Thompson. So it kind of takes into 20 account manufacturers re-engineering -- 21 MS. WILLIAMS: Yes. Yes. Yes. It's 22 assuming that the manufacturers are, are passing

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 244 1 through all their conversion costs. 2 MR. THOMPSON: Thank you. 3 MR. BROOKMAN: Joanna. 4 MS. MAUER: Joanna Mauer. Just tell me 5 the, the rollup assumption. I don't know how much 6 difference it makes, but, you know, if the price 7 of a pump doesn't change between PER 30 or 8 whatever and PER 70, you know, I'd assume that 9 there'd actually be a distribution of purchases in 10 that range, that there'd be no apparent reason for 11 someone to buy only a PER 40 versus a -- 12 MS. WILLIAMS: Yeah. So we were 13 originally doing that for that exact same reason. 14 The reason we're not doing it right now is so we 15 can directly compare the no-cost recovery and the 16 full cost recovery scenario. And in the full cost 17 recovery scenario, there is an increase in each 18 efficiency level, so you would no longer expect 19 people to, like, sort of go wherever, right, 20 because it would cost them more to go there. So 21 to do a direct comparison, we no longer allow 22 people to jump, but -- I mean you make a good

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 245 1 point, right. 2 MR. BROOKMAN: Steve. 3 MR. ROSENSTOCK: Steve Rosenstock, EEI. 4 For the electricity conversion factors, I don't -- 5 I looked on the EIA website. I hadn't seen -- 6 have they published the electricity market module? 7 Because that's where they show some of the trends 8 in terms of the conversion, the decline in the 9 conversion factors. 10 MS. WILLIAMS: I'm not sure what out -- 11 all -- AEO 2014 is out right now and I believe 12 what we're doing to get the factors right now is 13 all coming from AEO and not NEMS, but again, I'm 14 not using those right now. And so when I do plug 15 those in, I'll be sure to let you know exactly -- 16 MR. ROSENSTOCK: Are you using it from 17 another rule, like from the -- 18 MS. WILLIAMS: I'm just using an estimate 19 right now, a 2.5 factor. 20 MR. ROSENSTOCK: That's not declining 21 like all the other rules? 22 MS. WILLIAMS: So this is just total --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 246 1 I ran the NIA. I haven't run the other model yet. 2 MR. ROSENSTOCK: Okay. Okay. 3 MS. WILLIAMS: So this is just to give 4 you an estimate. We'll do it the real way when -- 5 but since AEO 2014 just came out, we don't have 6 the numbers, and rather than run it with the AEO 7 2013 and then update it later, I just haven't run 8 it yet. So. 9 MR. ROSENSTOCK: Okay. So -- that's 10 kind of over -- if you used 2.5, it's going to 11 overstate it based on all the declines in all the 12 other rule makings that DOE has done. 13 MS. WILLIAMS: This - well, we could 14 debate it. 15 MR. ROSENSTOCK: It's not debatable. 16 It's what DOE's published. 17 MS. WILLIAMS: Okay. 18 MR. ROSENSTOCK: It's published rules 19 for all -- 20 MS. WILLIAMS: Yeah. 21 MS. MAUER: It depends on each rule. 22 MR. ROSENSTOCK: Right, but they show a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 247 1 decline. They don't show it flat. And after 2 Monday it's going to be quite different. 3 MS. WILLIAMS: And so I, I think that 4 this isn't going to have a big impact on this 5 because everything's -- it's all relative between 6 the efficiency levels, so -- 7 MR. ROSENSTOCK: -- relative -- 8 MS. WILLIAMS: The deltas between the 9 efficiency levels will be the same. So we will 10 definitely do it the correct way. I just have not 11 been able to implement that yet because AEO 2014 12 just came out and, and we haven't done all the 13 downstream analysis for this really yet. 14 So the other thing I just wanted to 15 mention before I show the results, is that 16 typically the NIA shows results in what are called 17 trial standards levels, which are combinations of 18 efficiency levels. Right now I'm just running it 19 with everything the same. So TSL1 is PER10 across 20 the board. TSL2 is PER25 across the board. But I 21 did just want to throw out for you in terms of 22 negotiation that, of course, you can choose

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 248 1 different PER levels for different equipment 2 classes if you would like to and we can combine 3 those to get the results. But right now, it's 4 assuming the same efficiency level for every 5 equipment class. 6 So these are the, the cumulative 7 national energy savings. Again, as I said, 8 they're estimated. I'm basically taking site 9 energy savings and multiplying them by 2.5, which 10 is not completely correct as Steve has noted. So 11 you can see across -- I should say we don't have 12 results for RSV yet because we hadn't decided how 13 to implement them, but for the other four classes, 14 the total ranges from 0.2 at TSL1, which is PER 15 10, up to 0.76 at TSL5, which is PER 70. I 16 should've put those labels on here. 17 MR. SIVIGNY: Quick question. Is this 18 annual or is this total? 19 MS. WILLIAMS: This is total. 20 Cumulative over the 30 year period, and it also 21 includes the trailing savings after 30 years. 22 MS. MAUER: Thirty years of sales.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 249 1 MR. SIVIGNY: Thiry years of sales. 2 MS. WILLIAMS: Yes. 3 MR. SIVIGNY: I just want to make 4 sure. So this is 2048. 5 MS. WILLIAMS: Sales. 6 MR. CYMBALSKY: So the savings continue 7 past 2048 because you've made the investment, but 8 you didn't capture the energy savings. So we 9 bring that back into the analysis period. 10 MR. SIVIGNY: It's worth it. 11 MR. CAPPELLINO: Sold on the last -- 12 Charlie Cappellino, ITT. If the pump is sold on 13 the last day of that 30 year window -- 14 MR. CYMBALSKY: You count the cost and 15 the expected savings over the life of that -- 16 MR. CAPPELLINO: Over the lifetime of 17 the product. Not another 30 years, just the 18 lifetime of the product. 19 MR. CYMBALSKY: Correct. Yep. 20 MS. WILLIAMS: Okay. The next two 21 slides are net present value at 3% and 7%. Again, 22 I ran this with the full cost recovery scenario

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 250 1 because it would be most conservative to 2 consumers. This is in billions of dollars so you 3 can see the savings. Everything's positive and it 4 goes from 0.8 billion to 2.8 billion at 3%, and 5 0.3 to 1.0 at 7%. So. There - - I just wanted to 6 throw a few things out there. 7 We don't have to talk about these right 8 now. This was basically a really simple analysis. 9 There is several things we can do to make it more 10 refined. One is the efficiency projections that I 11 talked about before, we could implement base case 12 efficiency trends. We could make some assumptions 13 about impeller trimming, what percentage of 14 shipments are trimmed and what power ratio they 15 have. Currently we're not assuming any use of 16 VSD. So we could implement those and we could 17 implement an efficiency degradation factor. 18 So these are various things that if you 19 have inputs for that you would want to refine the 20 model more, we can certainly do those things. 21 Right now this is a pretty simple NIA just to give 22 us these base case results. So that -- those are

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 251 1 all the slides I have. 2 MR. BROOKMAN: That's still plenty. 3 MS. WILLIAMS: So I don't -- do you guys 4 have any other questions? 5 MR. BROOKMAN: Your thought process, 6 Alison, is that everybody in the room can take 7 these back, they can look at them, they can send 8 questions, they can reflect upon what's in here, 9 etc.? 10 MS. WILLIAMS: Yeah. And, and again, I 11 do sort of want to iterate -- like a lot of times, 12 just to give this some perspective -- a lot of 13 times what happens is that some of the NPVs are 14 negative. And I think that in some cases if that 15 were true, it would help you guys negotiate, but 16 since everything's positive, I think you're 17 probably not going to be negotiating that much on 18 this stuff. It's going to be some of these other 19 factors that we have discussed. 20 So by all means, certainly, you know, 21 take these and review them, but in general the 22 theme of the savings seems to be the, the consumer

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 252 1 impacts actually look pretty good no matter what 2 efficiency level you're at. So that, that might 3 not be the, the main point of what you guys are 4 going to negotiate around, I would suspect. 5 MR. BROOKMAN: Tom. 6 MR. ECKMAN: And the ones you're showing 7 here are ones where the manufacturers are -- 8 that's at the one goal post they recover all their 9 costs? 10 MS. WILLIAMS: Yeah. So they -- there 11 would be an even higher NPV in the other case, 12 yes. 13 MR. BROOKMAN: So the -- oh, I didn't 14 get that. Say that again. 15 MR. ROSENSTOCK: This is the full cost 16 recovery case. 17 MR. BROOKMAN: Full cost recovery. 18 Okay. 19 MS. MAUER: This is Joanna. Alison, 20 just one quick question. Looking at, kind of 21 comparing shipment data to the, the energy savings 22 for the end section categories, so the close-

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 253 1 coupled shipments are about four times the frame2 mounted shipments, and the national energy savings 3 are roughly the same. Is that because frame4 mount, the kind of weighted average horsepower 5 frame-mounted pumps is significantly higher? 6 MS. WILLIAMS: Yeah. 7 MS. MAUER: Okay. 8 MS. WILLIAMS: And there will also be 9 impacts of the efficiency distributions in those 10 also, but yeah. What? Oh right. Yeah, longer 11 lives on the frame-mounted. Yes. Yes. 12 MR. BROOKMAN: What are you suggesting 13 we do next? 14 MS. WILLIAMS: Oh, well, Lucas is back. 15 Well -- maybe we can have a small break. 16 MR. BROOKMAN: Yeah. Okay. We should 17 take a small break. I'm ready for a lunch break. 18 Let's take -- let's take a 15 minute break, and 19 that means, that means we'll resume at 2:30. 20 (SESSION BREAK) 21 MR. BROOKMAN: Here we go. Chris 22 Lau is going to be presenting, and Chris, lead us

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 254 1 off. 2 MR. LAU: All right. Hi, folks. I'm 3 Chris Lau, Navigant. I've got to see most of you 4 before. You know, Alison is up here today trying 5 to talk to Mark about a few things. There's 6 interplay between the LCC and the MIA, a 7 manufacturer impact analysis. But really the 8 analysis that addresses what happens in the 9 industry is the MIA, the manufacturer impact 10 analysis. 11 And so I'm going to walk you through 12 some of the results today. But as I said before, 13 the purpose is to assess the impacts of different 14 standard levels on manufacturers. We do this for 15 a cash flow model, you know, your standard for 16 accounting MBA type thing. But what -- we've taken 17 a bunch of inputs, mostly things we discussed 18 already over the course of the last few sessions. 19 The MPCs for the engineering, the shipments that 20 Alison had mentioned, financial parameters that we 21 vetted as a group, the markups to get from 22 manufacturing production cost to manufacturing

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 255 1 selling price, which I'll get to. 2 But essentially what you have at a very 3 high level is you have industry shipments, you 4 have industry pricing, and that gives you revenue. 5 You subtract off COGs. Right? And operating 6 costs. And that gives you operating profit, and 7 we're able to from there into a cash flow 8 statement. So that's what 9

-- 10 MR. FERNSTROM: So this is Gary. A 11 question on the prior slide. 12 MR. LAU: Yes, sir? 13 MR. FERNSTROM: Is, is that a 14 suggestion you're making, that the industry 15 impacts are grim? 16 MR. LAU: No. It's the government 17 regulatory impact model. And I've been trying for 18 years to change the name of this model, but it 19 just won't -- it just cannot be done. It's too 20 ingrained in the institution. 21 MR. BROOKMAN: I would add having 22 been a part of the process when that was coined,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 256 1 Chuck Samuelson and others thought that was quite 2 clever. 3 MR. HANDZEL: It actually gave them a 4 chuckle. 5 MR. BROOKMAN: Yeah. 6 MR. LAU: So it is a discounted cash 7 flow model based on (inaudible) discussed. I can 8 go into the mechanics, but I think the things that 9 will probably interest the folks around the table 10 most are sort of what the forecasts are, what the 11 output is. So let me try to get to that. 12 Really we modeled two different 13 scenarios here, a lower bound, upper bound markup. 14 As we've -- 15 MR. CAPPELLINO: Are you going to 16 revisit that later? 17 MR. LAU: Yes. Yes, I will. I'll 18 revisit - - let's go to the results, and then we 19 can go back down to the mechanics of this method 20 if necessary. So we discuss this flat markup. 21 It's minimal to no cost recovery. We assume that 22 manufacturers do not raise, change any prices due

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 257 1 to a very highly competitive market. And this 2 results in minimal change in end- user pricing. 3 The other end is the recovery markup 4 where we try to model a high level of cost 5 recovery. Manufacturers are able to increase their 6 selling price to recover conversion costs, as well 7 as increase in any change in variable costs, which 8 there isn't really much. But what this does is, 9 results in a maximum increase to end-user pricing. 10 Up top is the flat markup. It's the 11 average markup we assumed for the industry based 12 on HI data, interview notes, and pricing 13 information we collected. The cost recovery markup 14 is based off of our estimated conversion costs and 15 the percent of shipments we think will fall out at 16 each level. And you can sort of see the 17 percentage. Someone asked earlier, well, what's 18 recovery markup? What's that mean in terms of our 19 pricing? You can sort of get a sense -- this is 20 the change in markup, and so you get a sense of 21 (inaudible) price increases we're talking about. 22 Here's the thing, though. I think this

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 258 1 wasn't necessarily clear. What happens is, if you 2 assume that there is no price increase for the 3 industry, as you increase your standard level, 4 industry value drops. Right? If you assume you 5 have a higher amount of cost recovery, it actually 6 makes the industry look better because we're 7 assuming you're making that money back. You're 8 raising prices and you're making more revenue to 9 cover -- not -- to cover those upfront costs. 10 And so what you end up with is an upper 11 bound. So the cost recovery is the upper bound to 12 what happens to industry, and the flat markup is 13 the lower bound. Right? You're always going to 14 do worse if you don't raise your prices. 15 MR. BROOKMAN: Charlie. 16 MR. CAPPELLINO: Charlie Cappellino. 17 ITT. What's the scale on the left -- 18 MR. LAU: That is the industry net 19 present value. So what we do -- 20 MR. CAPPELLINO: In millions? 21 MR. LAU: In millions, yes, sir. 22 MS. MAUER: This is Joanna. So in

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 259 1 the cost recovery scenario, it's not -- 2 MR. LAU: It's not a full cost 3 recovery, right. 4 MS. MAUER: It's not a full cost 5 recovery. Does that mean it's not the same 6 assumption as the assumption in the engineering 7 analysis? 8 MR. LAU: I think -- I think there is 9 a -- there's a little bit of a timing issue. What 10 happens is the day we announce the standard, 11 manufacturers know what the target is. They're 12 going to start making those investments. Right? 13 They actually don't start recouping those 14 investments until 2019 when the standard goes into 15 effect. However, we built the markups, or we 16 didn't take that timing difference into account in 17 the markups. 18 So we just assumed that the conversion 19 costs are -- where did I have that? Oh, I don't 20 have the conversion costs here. If the conversion 21 costs are $20 million, they make that investment 22 up front. They don't recover for five years.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 260 1 They don't start recovering until five years out. 2 And so there's this difference in terms of value 3 of -- time value of that money. 4 MS. MAUER: So you're saying it's the 5 assumption that cost recovery -- if the investment 6 was made instead all in 2019 -- 7 MR. LAU: Yes. 8 MS. MAUER: Then the change in -- 9 MR. LAU: Yes - 10 MS. MAUER: -- would be zero? 11 MR. LAU: Yes. Yes. It should. We 12 can iterate these numbers to make them out so that 13 MIA nets out at zero. But then your lower bound - 14 - your lower bound (inaudible) this flat markup, 15 right, where you kind of see this sort of 16 decreasing industry net present value. And your 17 upper bound would just be flat. Right? 18 And so you see this loss of industry 19 value as you increase the standard. And then the 20 cost recovery markup would just be zero, zero, 21 zero, zero, zero across the board. But what I 22 think -- what happens if you do that, those

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 261 1 markups increase even more than they do today. 2 And I don't think, you know -- I think if you 3 manufacture with these markups, they would say, 4 well, we're not going to -- I would imagine it's 5 tough to pass on a 13% price increase in the 6 industry. 7 MR. ROSENSTOCK: Could you go back to 8 that other, the slide with the percentages? 9 MR. BROOKMAN: Steve Rosenstock. 10 MR. ROSENSTOCK: Steve Rosenstock, 11 EEI. 12 MR. LAU: Yes. 13 MR. ROSENSTOCK: When you say minus 14 210%, what is your base at PER 40 -- 15 MR. LAU: Right. So basically - 16 sorry, I should have -- as I said, we have this 17 cash flow model where we say every year how much 18 does the industry make, right? 19 MR. ROSENSTOCK: Right. 20 MR. LAU: Then we add back in all the 21 cash - - all the depreciation. There's actually 22 no cash changing hands. We go back down to really

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 262 1 cash on hand. And then once we have this for the 2 analysis period, for 2013, 2014 date, and we 3 discount -- we discount by saying, well, if you 4 add up all the future cash flow in the industry, 5 how much is the industry worth? Right? And in 6 reality, industry can't go below zero. So that's 7 more a figment of the analysis. Right? At some 8 point manufacturers just leave the industry. 9 But, so that negative 200 is a 10 fluctuation meaning industry value that was below 11 zero. 12 MR. ROSENSTOCK: So it'd be like 13 negative, the -- 14 MR. LAU: Yeah. The upfront 15 investment was worth, cost more than the industry 16 is worth. 17 MR. ROSENSTOCK: So again, when you 18 say negative, more than negative 100%, I just kind 19 of -- 20 MR. LAU: Yeah, I understand. I 21 understand. Mathematically it works out. In 22 reality it doesn't really make sense.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 263 1 MR. ROSENSTOCK: Right. Got you. 2 MR. ECKMAN: So how's the investment 3 -- what's the timeframe of the investment 4 conversion cost? Is that all one year or is it 5 spread over the four years between now -- 6 MR. LAU: They're spread out. 7 They're spread out between the base year and the 8 standard year. 9 MR. BROOKMAN: Which is four? 10 MR. LAU: In this case, five years. 11 Yeah. Five years. All the capital conversion 12 costs are made by 2018, but I believe the product 13 conversion costs (inaudible) 2019. And so -- 14 MR. BROOKMAN: Charlie Cappellino. 15 MR. CAPPELLINO: Charlie Cappellino. 16 Just to make sure it's clear, what was your 17 assumption on the manufacturing cost of the 18 product to achieve the various levels of 19 efficiency improvement? Is that still a no 20 increase? 21 MR. LAU: So we assumed the MPCs 22 would have no change as the standard increased.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 264 1 However, there would be conversion costs, and 2 those conversion costs drove, would drive price 3 increases. 4 MR. CAPPELLINO: I'm still concerned 5 about that. I just need to have a little more 6 dialogue around that to know cost of manufacturing 7 as you drive up to the higher and higher 8 efficiency values. We need to spend some more 9 time on that at some point. 10 MR. BROOKMAN: Charlie, I'm unclear 11 on how you'd like to pursue that. Is that just in 12 your caucus? Or I don't quite get where you want 13 to go. 14 MR. CAPPELLINO: Well, I guess I'd 15 like to talk to Daniel a little bit about the 16 input that he's gotten from various sources and 17 understand some of the assumptions that he made 18 and how he drew that conclusion. So I don't want 19 to do it now. But I'd like to -- 20 MR. BROOKMAN: Yeah. And just to be 21 clear, the analysis team is available to consult 22 with both caucuses, individuals, all of that. So

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 265 1 you can explore this stuff. Whether you get it 2 done today, whether you do it tomorrow, whether 3 you do it offline, noting that additional 4 analysis, as we said in our last meeting, should 5 be -- should be requested through Lucas, that is 6 if he's not in the maternity ward. Lucas -- I 7 mean, pardon me. Louis. Louis. 8 MR. STARR: So on the next -- the one 9 with the yellow and green line on it. So 10 basically what that tells you, looking at that 11 chart where you cross over zero, that's the last 12 business case that it makes sense where those two 13 lines cross. So it's anywhere from PER 27 to PER 14 35 or something? 15 MR. LAU: Sure. Yes. So -- 16 MR. STARR: I mean maybe you could 17 explain what that means in real terms. 18 MR. LAU: Sure. Look at, over here. 19 This is percent change in industry value. In 20 general, not always, but in general, DOE has 21 steered away from standards that drop the 22 industry, that wipe out industry value. Right?

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 266 1 They don't -- they generally stay away from 2 anything that's triple digits. Okay? If that 3 makes sense. So 100%. There have been some cases 4 where it's -- I've been told that it's not been 5 true, but it's mostly been a figment of the 6 analysis. Funny things. I won't go into a lot of 7 detail. 8 But now I think historically DOE has 9 played more in this range, from no change in 10 industry value to something less than 100%. And 11 once again, we have just found the range. You 12 know, PER 25, we're talking about industry loses 13 between 50% and 90% of industry value. I don't 14 know what DOE would do in that situation. I don't 15 know what DOE would select. Right? 16 They would take this into account along 17 with energy savings and all the other analyses to 18 try to make some sort of trade-off analysis. 19 However, I think the opportunity here is, as a 20 group, is not putting that into -- necessarily 21 putting that into DOE's hands, having that 22 discussion up front to try to come up with

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 267 1 something that makes sense given the stakeholders 2 here rather than waiting -- rather than letting 3 DOE decide, putting a NOPR, having a whole lot of 4 comment, and then DOE going back in the dark room 5 and coming back in a final rule. That's the 6 typical process. 7 There are sort of these blackout periods 8 between public announcements because you can't 9 advantage any single party. You can't announce 10 anything until all analyses is complete. 11 MR. BROOKMAN: Joanna. 12 MS. MAUER: I guess I'm trying to 13 kind of reconcile some of the numbers and make 14 sense of them. I guess one thing -- the cost 15 recovery scenario where you explained they're not 16 fully -- manufacturers aren't fully recovering 17 costs, but they're recovering a significant 18 portion of their costs, and yet at anything above 19 PER 25, industry net present value is negative. 20 MR. LAU: I wish, so -- let me pull 21 up some quick numbers to give you sort of a little 22 bit of, that might help inform that, that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 268 1 cognitive dissonance. 2 MS. MAUER: And I guess my other kind 3 of high-level question maybe to the group is the 4 EU standards are roughly equivalent to PER 40, I 5 think with significant manufacturer input into 6 those standards. I wonder how that reconciles 7 with these. 8 MR. LAU: The conversion cost to 9 industry at baseline, total, is zero. At PER 10, 10 it's about 20 million. At PER 25, it's about 80 11 million. AT PER 40, it's 178 million. At PER 55, 12 it's like 342 million. So right around PER 40, at 13 178 million, that level of investment, it's rough, 14 more than three times the value of industry in the 15 base case. 16 Basically what I'm saying is it's a 17 really - - it's a fairly significant investment 18 for the industry (inaudible) common factors. 19 MR. BROOKMAN: Can you repeat those? 20 Dan -- go ahead, Dan. 21 MR. WEINTRAUB: I just wanted to -- 22 MR. BROOKMAN: Stand up.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 269 1 MR. WEINTRAUB: I think I can help 2 address Joanna's other question about the EU. 3 From what, our research looking at the documents 4 published by the EU, roughly the same amount of 5 models exist. Roughly ten times the amount of 6 shipments off those models. So you have a lot 7 more revenue per unit investment that you have to 8 do to make a change. So that can help reconcile 9 why they're able to go -- 10 MS. MAUER: Ten times as many 11 shipments in the EU? 12 MR. WEINTRAUB: Yeah. Just a lot 13 more pump, water pump usage there. 14 MR. BROOKMAN: Chris, will you repeat 15 the last comparison you made based on Joanna's 16 question? 17 MR. LAU: Yeah. Yeah. Sure. I said 18 at PER 40, the investment by industry is expected 19 to be about 178 million. So that's roughly three 20 times, more than three times, the industry value 21 in the base case. And it's just a rough 22 comparison to get a sense of how, the magnitude of

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 270 1 those conversion rates. 2 MR. BROOKMAN: Gary. 3 MR. FERNSTROM: So this is Gary. I 4 have a question of Dan. Why is it the shipments 5 in the EU are so much greater than here? What do 6 they do with all those pumps? 7 MR. WEINTRAUB: I don't know. 8 MR. FERNSTROM: Do the manufacturers 9 know? 10 MR. ROSENSTOCK: Do they have more 11 hydronic systems in Europe? 12 MR. BROOKMAN: They have more 13 hydronic systems. 14 MR. Lau: Population difference. 15 MR. HANDZEL: Virtually every home is 16 hydronic systems. 17 MS. MAUER: But we're not - those - 18 MR. BROOKMAN: Dan. 19 MR. WEINTRAUB: And we'd be looking 20 at homes and business pumps. Businesses, 21 commercial buildings are going to need pumps 22 (inaudible).

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 271 1 MR. FERNSTROM: Well, what I'd just 2 like to point out as we look to the future, 3 there's a lot of talk on the west coast with a 4 movement towards zero net energy homes, about the 5 future of the heat pump and hydronic -- 6 MR. HANDZEL: You can't do without 7 hydronics. 8 MR. FERNSTROM: Yeah. So I think in 9 this country the prevalence of water pumping is 10 going to increase. 11 MR. ROSENSTOCK: Even that little 12 thing called the drought out west, they're going 13 to -- 14 MR. HANDZEL: Well, it's a closed 15 system. It's a re-circ system, so you fill it once 16 and, you know -- 17 MR. BROOKMAN: Louis Starr. 18 MR. STARR: So this was kind of 19 earlier what I was talking about. The shipment 20 numbers here are basically based on 420,000 21 shipments. Right? So that's the HI estimate. 22 But we know HI is not all the ones selling the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 272 1 pumps, and it seems like we need to dial in with 2 that shipment number, is for non-HI members, which 3 I thought that's why I was suggesting that we use 4 800,000 because that's what we use in Dan 5 Weintraub's analysis. So I wasn't sure. And now 6 it makes a big difference because you have more 7 units to spread out over -- 8 MR. WEINTRAUB: I'll address that. 9 This is Dan Weintraub, Navigant. There was no -- 10 the only scaling I did when I talk about 11 representing half of the industry in my analysis, 12 I said we have half the shipments. It was half of 13 what HI had specified was the whole, which is 14 420,000. 15 MR. BROOKMAN: Oh, they -- they did 16 their own scalar. 17 MR. STARR: Oh, they did their own 18 scalars - 19 MR. HANDZEL: So we, we actually 20 included an adjustment factor based on the old 21 Department of Commerce report, which is what we've 22 always, you know, normalized our data to.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 273 1 MR. STARR: Oh, okay. So you had the 2 scalars on there already. 3 MR. HANDZEL: Yes. 4 MR. WEINTRAUB: We just had raw data 5 compared to -- 6 MR. HANDZEL: But the -- but the 7 challenge we had was that we never had the 8 constraints of clean water only, 1-200 horsepower. 9 So I mean there's more interpretation in it than 10 we've typically done before because we had to put 11 some limits and stops on it in places. 12 MR. BROOKMAN: But Louis, that's 13 good. That's an important clarification right 14 there. 15 MR. STARR: Yeah. I mean if there's 16 anything in there, then yeah, it makes sense. 17 MR. BROOKMAN: Dan, please. 18 MR. WEINTRAUB: Just to follow up on 19 that. If we're trying to think about it in 20 perspective, if we are missing import shipments, 21 we're also missing the conversion costs associated 22 with those. So the baseline assumption for me

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 274 1 would be that the same ratio of number of models 2 to percentage of shipments, number of models, or 3 shipments per model that it needs to be redesigned 4 holds as compared to the rest of the industry. 5 MR. STARR: It seems like if you have 6 more of, more products, then you can spread it out 7 across. That's what we were just saying in the 8 European market. They have ten times as many 9 pumps. So it seems like when you have more items 10 into there, you could spread those conversion 11 costs across more of them. 12 MR. WEINTRAUB: So Dan Weintraub. 13 What I'm saying is there's more cost also because 14 we didn't account for the models themselves that 15 would need to be redesigned. And as Chris said, 16 you have to account for all of the costs and all 17 of the revenue. 18 MR. ECKMAN: That assumes that all 19 the imports have the same efficiency mix. 20 MR. WEINTRAUB: Exactly. 21 MR. LAU: Right. Correct. 22 MR. WEINTRAUB: That is correct. We

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 275 1 don't -- 2 MR. ECKMAN: We don't -- we have no 3 information. 4 MR. HANDZEL: So Mark Handzel from 5 Xylem. We were having some discussions on our own 6 amongst, about imports, because, you know, some of 7 us, you know, Greg's company, my company, TACO, we 8 all import pumps into the US. Some of them 9 components, some of them in full pumps, you know. 10 So, but we report them as sales in the US. So we 11 aren't, you know, so we don't want to double 12 count. 13 MR. ECKMAN: Right. 14 MR. HANDZEL: You know, so -- I mean 15 that's why -- and plus, so what percentage of all 16 those imports is within the scope of what we 17 define in this rule making too? So it's -- those 18 are the tough questions. I mean we will -- HI 19 will still say that we have counted the majority 20 of the products being sold in the scope of this 21 product, in this group, in those estimates. Okay. 22 We think -- if we -- looking at the companies that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 276 1 we know we have survey results from, we feel it's 2 a very accurate number. 3 MR. BROOKMAN: Greg Towsley, do you 4 have a question or comment? 5 MR. TOWSLEY: No. Covered. 6 MR. BROOKMAN: Chris, is that it? 7 MR. LAU: That's all. 8 MR. BROOKMAN: That's all. I 9 expected a lot more. Okay. 10 MR. HANDZEL: So again, Chris -- Mark 11 Handzel from Xylem. So just based on the 12 discussions and some of the other changes today 13 that, you know, to some of the things that we've 14 talked back and forth, do you think your numbers 15 will have any significant changes based on some of 16 the things? Are they -- Are you pretty solid and 17 set? 18 MR. LAU: I think if you're looking 19 at this from a levels perspective, these 20 relatively discrete levels, I think the general 21 cutoffs are in the same places. Right. And if we 22 get to a point where we want to look at something

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 277 1 that splits a level, we can go there when the 2 discussion gets to that point. 3 MR. ROSENSTOCK: Steve Rosenstock, 4 EEI. So a significant change -- 5 MR. BROOKMAN: Pardon me, Steve. 6 They seem kind of linear. Do you expect the 7 linearity to kind of -- 8 MR. LAU: Yeah. You know what? It's 9 because of the conversion costs scale relatively 10 linearly. 11 MR. BROOKMAN: Okay. Steve, go 12 ahead. 13 MR. ROSENSTOCK: Steve Rosenstock, 14 EEI. So even if there was, let's say, a 15 significant jump in the shipments based on updated 16 data, those numbers would stay relatively the 17 same, you think? 18 MR. LAU: It would depend whether our 19 rate - - percent of shipments that got redesigned 20 or that ratio changed. 21 MR. ROSENSTOCK: Gotcha. 22 MR. HANDZEL: Yeah. You'd have to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 278 1 assume that would be in line as well. So -- 2 MR. ROSENSTOCK: Okay. I didn't know 3 if the economies of scale would play in to factor. 4 MR. BROOKMAN: I'm unclear what we 5 should do next. Maybe we should give - 6 MR. LAU: E-mail those, the 7 presentation? 8 MS. WILLIAMS: Yeah. So what we have 9 presented now is basically everything we have. 10 Right? Engineering, LCC, shipments, NIA, and MIA. 11 So these are all the data. As Mark asked, you 12 know, we can make some tweaks. We don't expect 13 any hugely significant changes unless, yeah, 14 something, I don't know, drastic were to happen. 15 What we can do if you guys start 16 discussing levels as Chris just mentioned, you 17 know, if you want to look at like a PER 30 or 18 something, we can run those and give you those 19 numbers. So there's some other things that we can 20 do. But in general, you guys have basically what 21 we are able to provide. So -- 22 MR. ADIN: Yeah. I don't think

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 279 1 there's anything else to -- 2 MR. BROOKMAN: Lucas Adin. That was 3 just Alison. Now Lucas. 4 MR. ADIN: But, I mean what you've 5 seen is the analysis that DOE would normally do in 6 a standards rule making. So we would present, I 7 mean, with a lot more explanation and discussion. 8 But in a notice of proposed rule making, we have 9 all these analyses and an explanation of kind of 10 how things fall out. This is what, you know, in 11 large part, the decision about a standard level 12 was based on. 13 In this case it's a little -- well, at 14 least it's less like the rules that I've typically 15 had experience with where it might be clearer 16 where a standard level might be looking reasonable 17 based on both a combination of consumer impacts 18 and manufacturer impacts. Here it might be a 19 little bit harder to kind of drill down to that. 20 But I mean, we're relying in large part 21 on your reactions to all of what we presented so 22 far. And certainly if there are other things that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 280 1 you think would be helpful, like Alison mentioned 2 looking at standard levels in between or, you 3 know, some other dimension of this, we can. Now 4 is, I think, the time to figure out what those 5 are. 6 MR. BROOKMAN: Charlie Cappellino. 7 MR. CAPPELLINO: So Charlie 8 Cappellino. So if I understand, we saw the two 9 pieces, the consumer piece and the manufacturers 10 piece. 11 MR. ADIN: Yeah. 12 MR. CAPPELLINO: One of the things we 13 had dialogue around, and I don't think we've 14 really revisited lately, is the ability to execute 15 the changes in a timeframe as far as resources 16 and, you know, the engineering availability, to be 17 able to execute all of the -- because in the end 18 here, the redesign is all hydraulic redesign. 19 That's kind of where we ended up. Right? 20 I mean we're saying we can't get much 21 out of surface finish improvements and advanced 22 manufacturing. So it lays the entire efficiency

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 281 1 improvement at the doorstep of hydraulic designer, 2 so to speak. So I don't know how that fits into 3 any kind of analysis in terms of being able to 4 execute. That would be one -- 5 MR. BROOKMAN: Chris Lau. 6 MR. LAU: This is Chris Lau of 7 Navigant. I think Dan has a little perspective 8 there, but overall I would -- I would say that 9 what I'm hearing is that there is a timeframe 10 issue. And really what I am hearing is that, as 11 part of the negotiation, the time period between 12 the -- between the announcement date and the 13 effective date should be part of the discussion. 14 MR. BROOKMAN: In previous discussion 15 we've also heard there's a resource availability 16 issue. I've heard in previous discussion that 17 there's a limited number of these designers around 18 -- if they're going to have to design all product 19 lines, that's a big workload, that sort of thing. 20 Right? 21 MR. HANDZEL: Yes. I mean -- Mark 22 Handzel. I mean, that's been something that we've

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 282 1 said all along, is that all of the resources that 2 would be used for this, they're all the same 3 places. You know, they're all the same foundries. 4 They're all the same designers of the hydraulic 5 design. They're all the same pattern designers. 6 You know, so it's all the same people. 7 MR. BROOKMAN: Louis. 8 MR. STARR: So I think one thing that 9 probably would be helpful is knowing where in the 10 base case and then in the markup case and the no 11 markup pass, and then some markup pass, where the 12 zero is on the net present value, where does it 13 cross and start becoming negative? That would - I 14 don't know if you know that off the top of your 15 head. But understanding where those two points 16 are would be good to understand. 17 MR. BROOKMAN: Okay. 18 MR. LAU: I don't think it 19 necessarily ties to the discussion about design 20 capacity. 21 MR. BROOKMAN: No, it does. It's a 22 different, a different direction, yeah.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 283 1 MR. STARR: It's just on that screen 2 with the yellow and blue, or the yellow and green, 3 you have where it crosses over at zero. What's 4 the PER levels for those two things? 5 MR. BROOKMAN: Charlie, Charlie 6 Cappellino. 7 MR. CAPPELLINO: Charlie Cappellino. 8 The other thing that I'm am trying to understand, 9 I think everything we saw here was all around 10 improving the efficiency of the bare pump. Right? 11 And from the beginning we've all said that's one 12 area of energy savings, but there's a richer field 13 and more to be had looking at the extended product 14 piece of this. And I'm trying to understand how 15 does that fit with the analysis done to date. And 16 is that -- how does that become part of the 17 decision-making process and part of the 18 negotiation? 19 MR. BROOKMAN: Lucas Adin. 20 MR. CAPPELLINO: And the reason I say 21 that is -- sorry, just to finish up here. Again 22 it gets back to resources, whether it's people or

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 284 1 investment. We've got a limited pool there. And 2 the more we apply to, let's say, trying to squeeze 3 the last point of efficiency out of a pump, it's 4 going to take away from investment in people that 5 we could apply to designing other products from an 6 extended products standpoint and get the energy 7 savings that could be had there. So I didn't know 8 how that came together here with our overall 9 intent of trying to save energy as a collective 10 group here. 11 MR. ADIN: Right. 12 MR. HANDZEL: I just want to add on 13 that too. I mean there's also a different 14 consumer impact on extended product because of, 15 you know, mandating the use of drives will make 16 the product more expensive, you know, than just a 17 pump and a motor. So, you know, you'd think there 18 would need to be some economic analysis on that. 19 MR. ADIN: Yeah. So the way I was 20 going to try and answer Charlie's question was by 21 saying that really there's kind of potentially two 22 ways to get at that. I mean if you wanted to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 285 1 guarantee savings as a result of use of variable 2 speed drives (inaudible) you would have to write 3 the standard in a way that would require their use 4 for a certain percentage of the products. So 5 products of a certain design are used in certain 6 ways, but have to use a variable speed drive. And 7 the feedback that we've gotten so far is that you 8 wouldn't want to write a standard that does that 9 necessarily. I mean certainly if there are other 10 opinions about it, we'd be interested. But -- 11 MR. CAPPELLINO: This is Charlie 12 Cappellino again. So -- but we spent a lot of 13 time putting together the PER, right, for a 14 reason. And again, I'm presuming that that's 15 maybe more for a labeling approach. I'm having a 16 hard time connecting all of that effort and work 17 that we've done because there's lots of energy 18 savings to be had there, but it doesn't seem to be 19 so rolled into the analysis also. 20 MR. ADIN: There's a difference -- 21 right. So we do the analysis based on what a 22 manufacturer would have to do to minimally comply

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 286 1 with the standard. So a -- the way we were 2 designing this metric, a manufacturer could use 3 other design options to do that. We're just not 4 considering the motor or variable speed drives as 5 a design option for achieving those savings. 6 But a manufacturer could choose to do 7 that. And so perspectively there's certain 8 applications wherein the energy savings could be 9 larger. We can only guarantee what a manufacturer 10 would do in the minimally compliant sense to get 11 to those efficiency levels. 12 MS. WILLIAMS: But it is certainly 13 something that you -- I mean that's a good 14 negotiating point. Right? Like we don't 15 necessarily have to provide that analysis for you 16 to say, well, we can trade off, you know. If we 17 don't have to invest so much in hydraulic 18 efficiency, then we can invest more -- like what 19 we provide in terms of the analysis doesn't have 20 to, and you don't necessarily have to negotiate 21 only on what we have provided you. Right? And it 22 is -- we could potentially use the LCC and the NIA

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 287 1 to model the impacts of a label, for example. 2 It's difficult because we don't really 3 know what the market, what the -- what the impact 4 of it. So it's not somewhere we really want to go, 5 but the concept of that is something you can 6 certainly negotiate. 7 MS. WIDDER: And we are going to 8 discuss the metric and the label, or the standard 9 and the label tomorrow during the metric 10 discussion. But I think you should think of the 11 standards analysis addressing pump only as sort of 12 like a worst case scenario. If you had to sell a 13 pump with the worst available motor and no 14 controls, what options are available to you to 15 improve the efficiency and reach the standard 16 level? 17 Now in the real world there are many 18 other options available that are not accounted for 19 in Alison and Dan's analysis and maybe more cost 20 effective, but they're not going to analyze that. 21 That's up to you as manufacturers to determine 22 what the best way to meet an appropriate standard

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 288 1 level is and what an appropriate standard level is 2 at all. Those two things sort of go together. 3 MR. BROOKMAN: Thank you Sarah. Tom 4 Eckman. 5 MR. ECKMAN: Yeah, I just want to 6 reiterate what Sarah is talking about there. I 7 mean from -- I think our collective at this end, 8 you know, we were interested in the extended 9 product. Setting the standard on the bare pump 10 still leaves you the latitude because of the way 11 the metric is being discussed here. To meet it 12 any other way that you'd like with the other 13 components of the system when it's a system, and 14 to the extent you sell the bare pump only, then 15 that's a constraint. That means hydraulic 16 redesign by and large. 17 But it doesn't mean full product line 18 hydraulic redesign if you have other options, be 19 they controls, slightly better motor, whatever to 20 improve the product and take advantage of those 21 options. I think the setting the standards so 22 that it allows that other, those other options to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 289 1 be pursued, may relieve constraints over time. 2 Maybe you do the pump redesign, but you don't have 3 the -- that's not the first thing you do because 4 you can't get there with a full product line. We 5 each have to decide how to do that yourselves. 6 And, you know, there's, from our 7 perspective, I think there's a fair amount, from 8 what we've looked at, a fair number of products 9 that go out with the motor. So you have some 10 control over that as an option. I thought I saw 11 70% of the product sales were along with a motor. 12 Now maybe that's specified by the buyer, maybe 13 it's specified in your plan, but a slightly 14 improved motor might get you over the, over the 15 edge, depending on where we pick to put it. And I 16 think that's, you know, from our perspective, a 17 way to get around some of these potential bumps in 18 the road. Either do the personnel constraints, 19 just number of hydraulic engineers tasked to do 20 whatever, or the value added proposition, which 21 is, well, we could price that differently because 22 it's a better motor.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 290 1 MR. FERNSTROM: So -- this is Gary. 2 If I could just add one quick thing. By having 3 the test method and the analytic framework to 4 value the motor and control, it gives us a 5 methodology of determining additional value maybe 6 for rebate programs that would result in energy 7 savings that go above and beyond the standard. 8 So, you know, my vision is kind of a standard for 9 pumps and a valuation methodology that would allow 10 for estimating savings or value in savings belong 11 that. 12 MR. BROOKMAN: Got you. Steve has a 13 comment. Please, Steve. 14 MR. THOMPSON: A quick question or 15 clarification for Steve Thompson. On the national 16 impact analysis report, reviewing it -- you had 17 mentioned that includes increased equipment 18 expenditure. So that's the cost of redevelopment. 19 Is that based on a negative net present value? 20 MS. WILLIAMS: Yeah. So I think I 21 misspoke earlier. I had said it was zero change 22 in INPV over the analysis period, but as Chris

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 291 1 mentioned, because there was a five year time lag, 2 that was actually an incorrect statement. So it 3 does not result in zero INPV. We could model a 4 zero INPV scenario, but as Chris said, that would 5 just leave you at zero. So I think the current 6 scenario is probably still of an okay bound 7 because, you know, as Chris said, the percentage 8 increases of 10 or 13% probably are already pretty 9 steep. 10 So we can certainly discuss modeling 11 something else, but, yeah, I misspoke on that 12 subject. I had initially -- we had initially 13 thought it was zero INPV. We actually iterate 14 with the MIA if we actually want to get there, and 15 we haven't had a chance to do that iteration yet. 16 Yeah. 17 MR. BROOKMAN: Mark Handzel. 18 MR. HANDZEL: So Mark Handzel from 19 Xylem. You know, I guess, Tom, I'm kind of - I'm 20 kind of in a quandary here because, you know, I 21 understood the initiative here was, you know, to 22 regulate pump efficiency.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 292 1 MR. ECKMAN: Bare pump. 2 MR. HANDZEL: Bare pump efficiency. 3 Right. That was the way that we started. And 4 obviously the Hydraulic Institute came in with the 5 extended product approach and said that there is a 6 far greater opportunity, you know, to take 7 advantage of energy savings, which was the 8 ultimate goal of what the DOE and the advocates 9 had wanted. 10 So I almost hear you saying instead of 11 redesigning your pump, you can get it through 12 other means and -- 13 MR. ECKMAN: I'm just saying there's 14 the flexibility to do that. I'm not saying that 15 that's what you choose to do. 16 MR. HANDZEL: Right. 17 MR. ECKMAN: But there's an option 18 exists because the way the metric is described to 19 take any one of those components and improve it 20 enough to meet the standard. It may be a short21 run solution, it may be a long-run solution, 22 depending upon the overall market.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 293 1 MR. HANDZEL: Because obviously we're 2 all using the same motors that are made by the 3 motor manufacturers, so we have limited 4 capabilities to exceed what's available in the 5 market because we don't make them, they do. And 6 they're obviously regulated under a separate rule 7 making, you know, that kind of sets their levels. 8 So -- 9 MR. ECKMAN: Yeah. I don't think 10 it's going to cost more. 11 MR. HANDZEL: You know, I mean it 12 clearly would be a very short-term opportunity, if 13 anything, I think, to do what you're suggesting. 14 MR. ECKMAN: Yeah. I'm not 15 advertising that -- I think that's a business 16 decision that you're going to have to make as 17 manufacturers, whether you decide to do the 18 hydraulic redesign or whether you choose some 19 other option or a combination thereof. 20 MR. HANDZEL: Right. 21 MR. ECKMAN: Because maybe you have 22 products that are going out with VFD already that

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 294 1 are integrated products, and they would satisfy 2 the standard, which assumes that there's not a VFD 3 on there. So you've got some ways of getting 4 there that -- because it's not a one-zero 5 proposition, is what I'm saying. I think there 6 are other options that might allow you to meet a 7 certain product requirement that is bare pump 8 driven and assumes default values for all the 9 other components, but you can get there because 10 you already manufacture a product, because it's 11 integrated that does that. 12 MR. BROOKMAN: Lucas, then Steve. 13 MR. ADIN: Yeah. I don't know if I 14 had much to add beyond what Tom just said. But I 15 mean, obviously decisions like that would -- if 16 they're made across the industry it would affect 17 some of the numbers that we've put up there. We 18 don't - we don't have a surefire way to exactly 19 predict because that's, you know, dependent upon 20 the choices that you all make and to some extent 21 will be dependent upon the products that consumers 22 want to buy, you know, once these start coming on

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 295 1 the market. 2 So the metric that we use and the test 3 method that is designed to show the benefit of the 4 use of a variable speed system, you know, the hope 5 was that that would drive more sales of those 6 types of products. And we'd like to be able to 7 estimate what those kinds of savings will be, but 8 we'd have to be -- we'd have to speculate. 9 And so the best that we can do is what 10 we showed up here, which is the minimum design 11 options we picked. But, you know, hopefully there 12 will be more use of systems that drive down energy 13 use. So, sorry. Go ahead, Steve. 14 MR. BROOKMAN: Steve. 15 MR. ROSENSTOCK: No, he wasn't done 16 yet. 17 MR. BROOKMAN: Well, I wanted to get 18 you in the queue before others jumped in. 19 MR. ROSENSTOCK: Oh, okay. 20 MR. ADIN: I'm done. I'm finishing 21 my thought. 22 MR. ROSENSTOCK: Steve Rosenstock,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 296 1 EEI. I think that, I think it's also, as again, 2 this is a first-time standard, and if you want it 3 to go into that extended product for negotiation, 4 I think it would be only fair that we would have 5 to expand the scope of who's at the table. We 6 would have to bring in the motor manufacturers and 7 the drive manufacturers because we're affecting 8 their products possibly. 9 But in this case, since we're really 10 kind of focused on the bare pump with the options 11 of the improvement in the motors and the other 12 controls, this, I think, this helps us. In this 13 process it helps us by not trying to cover the 14 motors and the drive as part of a suggested 15 standard. 16 MR. BROOKMAN: Gary. 17 MR. FERNSTROM: So this is Gary. I'd 18 like to go back to Mark and Tom's dialogue. When 19 we started our discussion a couple of years ago, 20 we were thinking improvements in pumps. You came 21 along and suggested extended product, and I think 22 the energy efficiency group all agreed that's a

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 297 1 great idea and we ought to pursue it. But we have 2 to remember two things about it. 3 One, it's only available as a pathway 4 where pumps are sold with motors and maybe 5 controls. And second, the notion that the motor 6 makers make the motors and they're already 7 regulated isn't very much of a limitation because 8 the variable speed motors really aren't regulated 9 at this point. And, and you can incorporate that 10 variable speed motor and drive as a part of your 11 product and have it produce savings that go well 12 beyond what the motor makers might be able to do 13 by themselves because they're already regulated 14 for their single speed products. 15 So, so there is a big opportunity there. 16 It's limited to pumps that are sold with motors 17 and maybe drives. 18 MR. BROOKMAN: I have a comment from 19 someone who's joined us online. Al Iseppon says 20 the mark-ups shown in the latest presentation look 21 very high. Since most boardrooms will not accept 22 reductions on ROI, does the analysis reflect the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 298 1 cost reductions per a head count plus outsourcing, 2 development offshore to recover the conversion 3 costs? Is this considered in the economic impact 4 study? Chris Lau. 5 Mr. LAU: This is Chris Lau now. So 6 two things. What we didn't present today is an 7 employment analysis. But I'll give a summary of 8 how that typically works. What we look at is the 9 labor content of a product. For this rulemaking, 10 since the MPC does not change, that labor content 11 does not change. So employment would be driven - 12 would be -- employment would be stable as long as 13 shipments are stable. 14 Now we often also do a lower bound. It 15 would probably involve more discussions with the 16 folks in the room today about changes in 17 production capacity or decisions about relocating 18 existing production facilities. But that, the 19 lower bound can say, be a more qualitative 20 analysis. 21 Mr. BROOKMAN: Okay. Dan Delaney. 22 MR. DELANEY: So just a couple

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 299 1 thoughts. Excuse me. Dan Delaney from Regal. 2 Back to Mark. You made some comments about the 3 motor manufacturers. You know, the scope of the 4 product that's been provided for most of these 5 pumps have been essentially out of the scope for 6 EISA. So most of the close- coupled pump, many of 7 the vertical pump, all that stuff has been special 8 modification whether mechanical, shaft, other, 9 right? So that will be coming in to play 2016. 10 MR. HANDZEL: Right. Definitely 11 (inaudible) shaft stuff. 12 MR. DELANEY: Yeah. So definitely 13 you're going to see a huge influx of that. So I 14 think you're going to find -- 15 MR. HANDZEL: Dan, I'm sorry to just 16 interrupt you. 17 MR. DELANEY: Yeah. Sure. Go ahead. 18 MR. HANDZEL: But obviously for those 19 of us in the commercial building space, our 20 consulting engineers who design HVAC systems don't 21 know the difference between those regulations. 22 Their spec says I want premium efficiency motors

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 300 1 for all motors coming into the mechanical system. 2 MR. DELANEY: Sure. 3 MR. HANDZEL: So you are providing me 4 a premium efficiency motor even though you are not 5 regulated to do it in that case. 6 MR. DELANEY: Right. And I would 7 agree that there is a good number of that product 8 that is at the -- it's hard to quantify that. 9 I'll tell you that right now. I think if we look 10 across what the industry is and who thinks they're 11 getting premium product, who really is getting 12 premium, I think you'd be surprised too what 13 you're actually getting. Regardless, 2016 forward, 14 you'll have that product essentially. That's what 15 we're talking about as a baseline there. 16 So what you're at today, where you'll be 17 at in two years, I think we'll be pretty safe to 18 say we'll be at the NEMA Table 1212 or for the 19 IEC's IE3. Second, we talked about extended 20 product, and certainly I support that. Certainly 21 support a growth of having more discussion. There 22 is obviously a lot of efforts going on globally

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 301 1 there. 2 We talk about the Europump and the 3 activities there. That spurred the creation of 4 the first extended product approach called EN 5 50598. That's a series of standards that the 6 CENELEC team developed through European motor 7 manufacturers where they are developing a motor, a 8 motor drive, and then obviously a system 9 efficiency. So Euro pump is the model in which 10 they're using it. It's kind of a three-part 11 series. 12 So it'll have motor for use on drives, 13 efficiency levels dedicated, drive efficiency 14 levels, and then a system methodology of how many 15 points you test to validate that system with 16 whether a gear box whether a pump, fan, whatever. 17 Right? So it will be regardless of the un-driven 18 system or the philosophy how to do that. 19 Right now I participate in a new working 20 group where we are now taking the EN 50598 because 21 that was really just -- that's part of the Dresden 22 agreement says, look, when you develop an

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 302 1 efficient -- I'm sorry. When you develop a 2 standard for European requirements, it's forced 3 and required to be considered for an IEC. So as 4 part of that Dresden we are officially, you know, 5 going to make this IEC, which it will make it more 6 of a global standard which is opportunity, you 7 know, US drive, US motor manufacturers are 8 participating in that, in that center now. 9 The reason I bring all that whole thing 10 up is we could look at a same effort to validate 11 the extended product approach, but a two-part PER 12 level maybe. Maybe that's an approach we want to 13 look at. So for example, if it's just pump only, 14 maybe it has a higher PER or lower, whichever, 15 right? And then a motor drive system maybe has a 16 different PER level. Right? 17 So maybe a two-pronged approach where 18 you try to emphasize the growth whichever way we 19 want it to go. That's certainly a precedence in 20 Europe right now. Fixed speed motors have higher 21 efficiency levels versus motors with fixed speeds. 22 That's what drove the creation of the 50598

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 303 1 extended product trying to develop standards now 2 that justifies why you can have components at 3 lower efficiency levels, because the system is 4 much more efficient together. 5 MR. HANDZEL: Put them all together 6 and they operate effectively. 7 MR. DELANEY: Yeah. But only if you 8 have a method by which you do that properly. So 9 my point in bringing this up is, there is a 10 structure there. It's not like we'd be starting 11 from scratch. It's fairly well-developed, but 12 obviously it's going to take its one, two-year 13 path. I think it is definitely on a fast track. 14 So most IEC standards are three years or more. 15 This one will probably occur under two years. 16 But nonetheless, 50598 is a structure 17 that's already out there as a draft. It will be 18 actually voted on, I think, in the next few months 19 and will become the first two series. The motor 20 and the motor drive will be released pretty soon 21 with the philosophy of the system. 22 MR. BROOKMAN: And what you

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 304 1 described, it encompasses the full-extended 2 product? 3 MR. DELANEY: That's correct. Yes. 4 MR. BROOKMAN: Okay. Steve 5 Rosenstock. 6 MR. ROSENSTOCK: Steve Rosenstock, 7 EEI. They're also developing standardized test 8 procedures for those products? 9 MR. DELANEY: So, yes. As a result 10 of having -- this is Dan Delaney from Regal. As a 11 result of having to have efficiency levels, the 12 mandated test standards are within these documents 13 as well. So not only does it have efficiency 14 levels, it also has the test procedure within it 15 as well. 16 MR. ROSENSTOCK: Again, Steve 17 Rosenstock, EEI. But right now they're in, I'll 18 say, a draft stage? 19 MR. DELANEY: They're in a draft 20 stage, but remember, the CENELEC EN version is 21 what will be released first. The IEC is basically 22 piggybacking on their work. So it depends.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 305 1 Right? They'll be an EN standard pretty soon, in 2 2014. That will be voted and approved as a, we'll 3 call, a national standard, right, over Europe, 4 European standard. That'll be one to be used. 5 IEC will not probably lag terribly far 6 behind. I can't tell you if it's 12 months or 7 more. 8 MR. ROSENSTOCK: Steve, again, Steve 9 Rosenstock, EEI. So the timeframe is like, within 10 like 6 to 12 months? 11 MR. DELANEY: So 2014 I think you'll 12 see the 505, the EN versions released, and then I 13 would hope by the end of 2015 you would see the 14 IEC comparable versions. Yes. 15 MR. ROSENSTOCK: So again, we're 16 talking end of 2014 and then end of 2015? 17 MR. DELANEY: I think that's pretty 18 comfortable. Yeah. Yeah -- dates. 19 MR. BROOKMAN: Joanna Mauer. 20 MR. ROSENSTOCK: Just in terms of our 21 timeframe. That's why I was asking. 22 MR. DELANEY: Yeah.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 306 1 MS. MAUER: Joanna Mauer. So I think 2 I agree with you, Mark, in that the, you know, the 3 intent of a standard developed as part of this 4 rule making by itself is to encourage or to get 5 improvements in bare pump efficiency and to make, 6 as you said, Charlie, the effort that's gone into 7 the development of the metric, where I think we 8 want to make sure the combination of the 9 information from -- or some combination of the 10 metric, label, information certification database 11 really provides utilities and other efficiency 12 program administration, administrators with the 13 information that they need to run successful 14 programs to hopefully increase the market share of 15 extended products. 16 So I look forward to the discussion 17 tomorrow and hope we can continue to think about 18 what is information that we, you know, we want to 19 make sure it comes out of this. 20 MR. BROOKMAN: Charlie. 21 MR. CAPPELLINO: So this is Charlie 22 Cappellino. So, Joanna, you just mentioned

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 307 1 labeling and potential benefits of that. Gary 2 mentioned it. I know Lucas has mentioned it 3 before. Is that something that can translate into 4 the analysis that the DOE does or not? Or is that 5 -- in other words, (inaudible) program, it will 6 promote a certain amount of energy savings. And 7 it would be included in, you know, the number of 8 quads that you save and everything else. 9 I'm not promoting that as an idea. I am 10 just curious. Is that something that you would 11 typically consider or not? 12 MR. BROOKMAN: Lucas Adin. 13 MR: ADIN: I mean effectively that 14 would be estimating the impacts of a labeling 15 program, and we don't normally do that as part of 16 a rule. You know, I mean -- 17 MR. CAPPELLINO: I'm not promoting 18 the idea. I'm just trying -- 19 MR. ADIN: Right. I mean it would be 20 nice to know what the prospective energy savings 21 might be as a result of consumer choices made on 22 the basis of those labels. I mean it would be a

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 308 1 good way to quantify the perspective impact, but - 2

- 3 MR. BROOKMAN: I'm trying to recall 4 the conversation we had on this previously, and 5 having just read these transcripts a couple of 6 times, it seems like we were saying that on any 7 level, label, there would be a figure on there 8 that would be the standard, but there would be 9 options to put other pieces of information on 10 there as well. 11 MR. ADIN: Right. 12 MR. BROOKMAN: I thought that's what 13 that conversation was. But I'm looking to the 14 young folks on the side of the room that might 15 have a better memory. 16 MS. WIDDER: That was my 17 understanding of where we left the last 18 discussion. And we'll revisit that again 19 tomorrow, but then as long as the standard was on 20 the label -- 21 MR. BROOKMAN: And clear. Yeah. 22 MS. WIDDER: -- and other metrics

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 309 1 could also be provided as information. In terms 2 of doing the analysis, I think the problem we 3 always run into is lack of data. 4 MR. ADIN: Right. I mean -- 5 MS. WILLIAMS: We have no idea how 6 consumers would react to a label essentially. 7 MR. ADIN: Right. Right. Right. We 8 would have to speculate about all those choices. 9 So -- 10 MR. BROOKMAN: Steve Rosenstock. 11 MR: ROSENSTOCK: Steve Rosenstock, 12 EEI. With other rules, whether it's either 13 proposed or (inaudible), there have been rules 14 where there has been analysis of non-regulatory 15 approaches. It depends on the rule, obviously, 16 but there have -- again, but again, it's a side 17 analysis basically. 18 MR. BROOKMAN: Yeah. 19 MR. ROSENSTOCK: But it -- 20 MS WILLIAMS: We do -- we're required 21 to do a -- 22 MS. WIDDER: Regulatory impact

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 310 1 analysis where we look at other options besides 2 setting standards. 3 MR. ROSENSTOCK: Right. Now is that -- 4 Steve Rosenstock, EEI. Is that in the proposed 5 full stage or the final stage? 6 MS. KOHL: It follows. But I mean it 7 starts -- this is Betsy Kohl. It starts with a 8 proposal (inaudible). 9 MR. ROSENSTOCK: Okay. 10 MR. BROOKMAN: Right. So -- 11 MS. WIDDER: I don't know that even 12 there we have data. 13 MS. WILLIAMS: I was going to say, in 14 general I'm not absolutely sure about the labeling 15 system fully, but the level of detail in those 16 analyses is much less. 17 MS. WIDDER: Very sparse. 18 MR: WILLIAMS: Yeah. 19 MR. BROOKMAN: Gary. 20 MR. FERNSTROM: This is Gary. Let me 21 go back to Charlie's comment that sort of drove 22 this whole discussion. If somebody else is going

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 311 1 to claim credit for the savings, you know, you 2 suggested might a component of this effort be some 3 sort of analysis of what a label does or doesn't 4 do. Well then we can't. 5 So if we're going to develop rebating 6 programs that, you know, drive off a labeling 7 scheme that shows difference, or for that matter 8 even a test and measurement scheme that 9 illustrates differences in performance, if 10 somebody else claims credit for that, we can't for 11 rebate programs. So I think where the savings go 12 from these two approaches need to be separated. 13 MR. CAPPELLINO: So -- this is 14 Charlie. So you're saying if some other 15 organization independent of this wanted to take 16 this concept and idea and develop a rebate program 17 around that, they could only do that if it wasn't 18 included in the DOE analysis? Is that what you're 19 saying? 20 MS. BROOKMAN: However, if I'm not 21 mistaken 22

--

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 312 1 MR. CAPPELLINO: He's trying to 2 repeat -- 3 MR. FERNSTROM: Well, this is - this 4 is Gary. I'm not directly answering your question 5 because you phrased it with respect to the 6 analysis. So I don't think DOE analyzing, 7 irrespective of how difficult it may be, what that 8 impact might be, would be preventative. But if 9 DOE claims it ordered the label and therefore the 10 savings associated with it are part of the 11 national impact, then we couldn't simultaneously. 12 MR. BROOKMAN: It would be counting - 13

- 14 MS. WILLIAMS: I thought you were 15 allowed to claim credit for your participation in 16 the codes and standards rule making, so. 17 MR. FERNSTROM: Well, we do. We do 18 through that channel, but that's separate from 19 what we do with our rebate program and so forth. 20 MR. ROSENSTOCK: (Inaudible) 21 utilities in California. 22 MS. WIDDER: And this is also a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 313 1 discussion that we're going to have tomorrow 2 during the standard versus label. I have a slide 3 where, I mean it's mostly to spur discussion like 4 this, but about how utilities might use this 5 standard to achieve and meet conservation goals 6 just like Gary is talking about that wouldn't 7 necessarily be accounted for in the rule making. 8 MR. BROOKMAN: Yeah. Okay. With 9 that, maybe we'll just wait on that then because 10 I've got a pretty clear recollection of that 11 conversation that happened at our last meeting. 12 So I'll just wait rather than get out of my depth 13 right now. Mark? 14 MR. HANDZEL: Mark Handzel from Xylem. 15 So when is the CV discussion? 16 MS. WILLIAMS: CV? 17 MS. WIDDER: What? 18 MR. HANDZEL: When we're going to 19 talk about the C factor. Sorry. 20 MR. WILLIAMS: C value. 21 MR. HANDZEL: C value. Sorry. I got 22 vowels on the mind. Sorry. The C-factor, I mean

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 314 1

-- 2 MR. WEINTRAUB: We're ready to get 3 there. So it's ready when we're -- just move past 4 this and, this discussion. 5 MR. HANDZEL: It feels like we're 6 running out of stuff for today. So I just -- 7 MS. WILLIAMS: We don't want to - no. 8 I mean what we want is for you guys to like 9 negotiate. Right? So if having the C value 10 discussion will help you negotiate, we can have 11 the C value discussion. 12 MR. HANDZEL: Well, it's -- 13 MS. WIDDER: We can also have the 14 discussion on labeling right now. I mean those 15 slides are ready too. 16 MR. HANDZEL: I mean I'll just say I 17 would rather have the C value discussion just 18 because it's more -- I think it impacts some stuff 19 and we had some concerns about it. So -- 20 MS. BROOKMAN: We can do that now. 21 MS. WIDDER: Yeah. 22 MR. HANDZEL: Yeah. I think that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 315 1 would be a good thing. 2 MR. BROOKMAN: Do we need a five 3 minute break? Or should we just launch into it? 4 (SESSION BREAK) 5 MR. BROOKMAN: Let's start. Let's 6 start back. Okay. Dan Weintraub I notice sitting 7 there ready to present. 8 MR. WEINTRAUB: Thank you, Doug. All 9 right. So we're going to start the discussion on C 10 values when I get everyone's attention. All 11 right. So we're starting to talk about C values 12 here. So I have two presentations that I'm going 13 to go through. 14 MR. BROOKMAN: How many slides 15 approximately? 16 MR. WEINTRAUB: Not that many. Maybe 17 20 or so. 18 MR. BROOKMAN: Okay. 19 MR. WEINTRAUB: It's a lot of looking 20 at graphs. 21 MR. BROOKMAN: Okay. 22 MR. WEINTRAUB: Because this is all

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 316 1 visual data that we need to understand. So two 2 presentations we're going to go through. The one 3 we're doing first is comparing the PER C values of 4 the DOE dataset, the one that Navigant collected 5 under NDA on our own versus the data, the C values 6 of the dataset collected by HI. So we'll see how 7 far apart those datasets are. 8 The next one that we're going to go to 9 is going to give you a view of how the EU's MEI 10 compares to the US MEI because EU doesn't have 11 PER, so we can't use that as a benchmark. So 12 it'll show you the relative efficiencies of the 13 marketplace. 14 So we'll start with the PER version. It 15 should be fairly straightforward. All right. So 16 the introduction -- using the PER metrics, C 17 values are used to define each efficiency level 18 for each equipment class. So I think we're pretty 19 all - we're all fairly set on that. 20 So at this time we have developed PER C 21 values at each efficiency level from both the HI 22 dataset and the DOE dataset. The eventual plan is

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 317 1 to get these merged. We're still in the process 2 of that. But being able to show you guys the DOE 3 and the HI will show you that obviously we're 4 going to be somewhere in-between when we finish 5 this. 6 So the following slides will present and 7 compare the current DOE and HI PER C values. Some 8 notes on what you're going to be looking at. So 9 end suction and inline DOE C values have not 10 changed since the last meetings. They're exactly 11 as presented on the screen, and we haven't changed 12 our data, so there's no difference. 13 Based on preliminary feedback, we're not 14 presenting C values for four-pole submersible 15 vertical turbine equipment class. That's a 16 separate topic we're going to need to agree upon 17 as a group. But we've so far said there's really 18 not a market for that, and we're not looking to 19 regulate it, but we have to get an agreement from 20 the group. 21 PER C values for RS-Vs have currently 22 been established by shifting the EU Lot 11 MEI C

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 318 1 values by -.524 points. That's a whole separate 2 discussion also that we're going to have. So 3 we'll worry about that later. And that's, again, 4 trying to sync up the EU and the US, but we're 5 going to focus on the end suction, inline, and 6 vertical turbine datasets. 7 So this is for you when you get this 8 set. These numbers don't -- you don't need to look 9 at them. But just so you have the numbers in front 10 of you, and when it's digital, these are tables 11 that you can pull numbers out of. So this is for 12 when you have it in front of you. 13 Now we're going to get into the charts. 14 Okay. So here we have comparison of DOE and HI 15 data set. End suction close coupled is 1,800. In 16 red we have the HI data. 17 MR. BROOKMAN: That's pretty good. 18 MR. WEINTRAUB: So HI C values. In 19 blue we have the DOE data. So these charts are 20 all going to be the same going on, but on the X21 axis we have PER level. Center point P is the PER 22 level. On the Y- axis we have the C value for the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 319 1 PER. So this is going to represent what the 2 cutoff would be at each level. So for this 3 equipment class -- oh, one more thing to put in 4 perspective. So the HI data -- how we got this HI 5 data. 6 So the DOE data we had pump -- pump 7 performance data. We knew how every pump 8 performed. We could calculate exactly the C value 9 that you could pump with -- the C value that would 10 cutoff 10% of that population that we had at 0.5%. 11 HI, you guys had your database. We were not able 12 to have our hands on individual performance data. 13 We had to have it aggregated. 14 So what Alison and I did as part of this 15 was we asked for C values to be calculated, C 16 value that a pump would fail at. We calculated 17 it. And then we had them tabulate pivot tables 18 for us that basically said, summarized, and we 19 used groupings of half points. So C value of, 20 ranging from 150 to 110. And we know that the C 21 values generally fall between 120 and 140. At 22 each increment, how many pumps failed.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 320 1 And so we had this table, we run down 2 that line, and we had to interpolate between, over 3 that bucket of pump efficiency points. So that's 4 the level of accuracy, is about half an 5 inefficiency point of the HI data. I actually 6 think we're going to have more granular and 7 accurate data with the merge data set once that 8 comes out. 9 But right now it's fairly accurate, and 10 it's fairly close because it was calculated, 11 tabulated, and then we used that tabulated data to 12 find where the cutoff should be for the HI. 13 MR. BROOKMAN: Charlie Cappellino. 14 MR. CAPPELLINO: Charlie Cappellino. 15 So the merged data set, I assume you would know 16 which data is duplicate? 17 MR. WEINTRAUB: Yes. That's what 18 we're working on this. 19 MS. WILLIAMS: It's what's taking so 20 long, actually, because we had to get binned data 21 from HI, and so we're grouping our own data in the 22 same bins, and then trying to --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 321 1 MR. CAPPELLINO: That's the intent. 2 MR. WEINTRAUB: That's the intent. 3 MS. WILLIAMS: That's the intent. 4 MR. WEINTRAUB: But this is also 5 going to show you that we're not going to change - 6 - it's not going to be very far off -- 7 MR. CAPPELLINO: Right. You are 8 going to end up somewhere in between -- 9 MR. WEINTRAUB: You can see, yeah, 10 these are really close within the ROV HI data that 11 I have, at least for this one. Some of them are 12 larger. We'll get there. But you can see there's 13 -- so for this particular class, not much 14 difference. You are going to see as a trend, I'm 15 going to go through all of them, HI will be 16 slightly less efficient. We'll show a population 17 being slightly less efficient than our dataset. 18 So the next one, close-couple 3600. You 19 see the gap there a little bit. We're still not 20 even -- we're still probably around half a point 21 on average. 22 MR. BROOKMAN: Dan, pardon me for

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 322 1 interrupting. 2 MR. WEINTRAUB: Yes? 3 MR. BROOKMAN: You said that the DOE 4 dataset is based on the Navigant interviews? 5 MR. WEINTRAUB: It's based on the 6 survey that Navigant and LBNL put out, the last 7 survey, which was actually the same survey that HI 8 did except for that we got the data directly 9 handed to us under confidentiality agreement. 10 MR. BROOKMAN: Okay. Thank you. 11 MR. WEINTRAUB: So here you see an 12 equipment class where there's a larger range. 13 It's still, it's about a point here, and these are 14 the point differences. A little bit higher at the 15 low end. So this one is more. There's a larger 16 discrepancy. But again, a merged dataset, if we 17 can get there, would be somewhere in between. But 18 again, it's one point. We're looking at about a 19 point between. 20 At 3600, it closes back down again. The 21 trend continues. So inline, actually they're 22 right on, very close. And actually we had a very

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 323 1 similar number of models in the datasets, so we 2 think we probably had similar pumps. Here, very 3 close. It opens up over the 25 and 40 and comes 4 back together. Again, pretty close overall. 5 Vertical turbines, very different 6 actually. So here you see the lines have flipped, 7 and the DOE dataset is less efficient than the HI 8 dataset. I can't explain that other than 9 different pumps in the population. I really -- 10 we, you know, we only know what we know. We're 11 given a blind dataset from HI. 12 MS. WILLIAMS: The only thing we are 13 checking as we merge them is that some 14 manufacturers did appear to make changes to their 15 data from between when they gave it to us and when 16 they gave it to HI, including changes in 17 efficiency. So we will look at that too because 18 there could be some implications of that. 19 MR. WEINTRAUB: Yeah. So, yeah. But 20 overall we don't - we only know what we have. And 21 then we have blind data from HI. So, yeah, this 22 is the gist of it. You can see in the bulk of the

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 324 1 equipment class, is very close. That's, you know, 2 your data, our data -- same, same apples. 3 Are there any questions about this? I 4 mean, this is, yeah, this is over all the gist. 5 And I've summarized at the end how they vary. And 6 actually I was originally going to give the MEI 7 presentation, but, so there's some reference to 8 MEI in here, which doesn't make sense yet. But 9 I've summarized the deltas. So between HI and 10 DOE, so for your reference. 11 End suction close couple, DOE C values 12 are consistently more efficient by an average of 13 half a point. Frame-mounted consistently more 14 efficient by 1.1 efficiency points. Inline 15 consistently more efficient by an average of .25 16 efficiency points. And then VT-S, it's flipped 17 where DOE is less efficient by an average of .7 18 points. So those values put it in perspective of 19 the magnitude of the delta (inaudible). 20 And where the middle ground falls I 21 don't know yet, but we hope to be able to figure 22 that out. And in the absence of even being able to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 325 1 figure it out, that is still something that can be 2 negotiated on. You guys can try and work to where 3 that middle ground should be between your data and 4 DOE's data. 5 MS. WILLIAMS: Again, so these C 6 values, we're just, as you requested, trying to 7 cut off 10% of pumps or 25% or whatever. So 8 really the efficiency levels that you negotiated 9 can be anything you want. We're just trying to be 10 consistent with what was desired. So, yeah. 11 MR. WEINTRAUB: Yeah. So this -- 12 these conclusions, there's not that -- these 13 relate tying back to the presentation I'm going to 14 give next. So this is what we have for these two 15 datasets. Are there any questions on them? 16 MR. BARBOUR: Robert Barbour with 17 TACO. Did you take the aggregate data and put it 18 into the spreadsheet and just see how the 19 percentages worked out with the different pump 20 classes? 21 MR. WEINTRAUB: Yes. 22 MR. BARBOUR: And did you come out to

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 326 1 the 40 and the 20 and the -- 2 MR. WEINTRAUB: Yeah. Yeah. It 3 comes back out. It does. The aggregate data -- 4 MR. BROOKMAN: Mark? You have a -- 5 MR. HANDZEL: Mark from Xylem. I 6 guess I am just trying to understand how we could 7 both use the same data and come up with different 8 answers. 9 MS. WILLIAMS: But you don't have the 10 whole dataset. Right? Or have you guys 11 calculated -- 12 MR. HANDZEL: The data that -- Greg, 13 maybe you can answer this. Does the C values that 14 we're using, were they recalculated with the 15 latest dataset? Or are they still based on the 16 submission from a year- and-a-half ago? 17 MR. WEINTRAUB: So, we can let Greg 18 answer. But -- 19 MR. BROOKMAN: Greg Case -- you 20 there? 21 MR. CASE: I am. No, the latest C 22 values that were put out were based on the latest

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 327 1 survey -- 2 MR. WEINTRAUB: And what -- 3 MR. CASE: -- related by (inaudible). 4 MS. WILLIAMS: They're MEIs. Right. 5 MR. WEINTRAUB: They're MEIs. So put 6 that in perspective of what you guys submitted via 7 spreadsheet in April, were MEI C values. 8 MR. CASE: That's correct. 9 MR. WEINTRAUB: Yeah, we put together 10 our spreadsheets and had NEMA BIS populate our 11 spreadsheets based on your data to give us PER C 12 values consistent with a calculation method used 13 for our PER C values. I'll actually be comparing 14 your MEI values on the other one. That's what 15 Greg -- that's what you guys provided in a 16 spreadsheet to us. But these C values for PER, if 17 you drop our dataset in there, and you get the 18 aggregated dropouts like we did yesterday. 19 MR. HANDZEL: So you just kind of -- 20 so just summarizing it, you backed into it a 21 different way than what you did. I mean that's 22 why we're seeing some differences. You calculated

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 328 1 it -- 2 MS. WILLIAMS: It's a different -- 3 well, maybe you should do the MEI deck now. I 4 don't -- like you don't get exactly the same C 5 value if you do it by MEI as if you do it by PER. 6 MR. HANDZEL: Right. 7 MR. WEINTRAUB: And that's inherent, 8 is that they're different -- there's an MEI C 9 value and a PER C value. They are different 10 things because they represent different things. 11 So I think -- yeah, let's go to the MEIs. 12 MR. HANDZEL: We didn't have PER when 13

-- 14 MR. WEINTRAUB: No, you didn't have - 15 - exactly. You did not have PER. And that's why 16 we requested that data based off your data. If we 17 would have done it -- if we were able to get the 18 aggregate data set from NEMA BIS, we would have 19 done it identically, our data, your data, same 20 method. But we came very close by having them 21 calculate it in an aggregated form. Okay. All 22 right.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 329 1 So on to MEI. Okay. So the working 2 group - - so introduction here to why we are 3 looking at this. I think we all know, but the 4 Working Group expressed concerns with the C 5 values. So the following slides evaluate the 6 relative efficiency of the US and the EU 7 populations by comparing the MEI C values from the 8 DOE US dataset -- that's our dataset -- the 9 Navigant LBNL, the HI US dataset, and the EU Lot 10 11 dataset. 11 So MEI C values are used here, again, 12 because it's not possible to calculate PER from 13 the EU data. So we want to go apples to apples. 14 What's the efficiency of the EU population versus 15 the efficiency of the US population? 16 Here we're actually presenting two sets 17 of HI values. So you guys gave to us those C 18 values. And then we also had NEMA BIS calculate 19 them using our spreadsheets too. And we don't 20 know what NEMA BIS' method was. We do know what 21 our method was, and we do know what filtering went 22 on with our method. So we have both. They're

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 330 1 fairly close, but there is discrepancies. We're 2 going to work through there. But I think it's all 3 bounding. 4 The US dataset is still kind of locked 5 together within a level of variability. So again, 6 DOE and HI datasets are in the process of being 7 merged, So we're going to present two- and four8 pole results for end suction close couple, frame9 mounted, inline, and VT-S. Yes. Okay. 10 So first one here. So here, a very 11 similar chart. X-axis is our MEI levels. Again, 12 cutoff percentages. Y-axis is C values for MEI. 13 So here we have a couple different lines. So the 14 first and the easiest, green, greenish-yellow, 15 that's the EU. That's what's published. So EU in 16 their standard only published 10 -- MEI 10 and 40, 17 but in the preparatory study they published a lot 18 of numbers. So that's what that's from. And they 19 line up with what the EU used in their standard 20 benchmark. 21 So this is what the EU marketplace is. 22 Here, blue is our dataset calculated using like

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 331 1 the methods that we discussed earlier. Now we 2 have two HI lines. The solid red line, HI NEMA 3 calc, so that's what you guys just gave to us. 4 And NEMA calc is what you guys gave to us 5 directly. Greg Case got that for us. 6 We had the data put through our 7 spreadsheets and calculated, used the bin data to 8 calculate C values. That came out to these dotted 9 lines. So there is a slight discrepancy between 10 them. We honestly don't know why. We've double 11 checked and triple checked ours. So there is -- 12 we can't account for why those numbers went up 13 differently. It could be that data was filtered 14 differently. 15 One of the reason we'd know, which I 16 highlighted here, should not make a difference, 17 but we checked it, was that one of our filtering 18 processes was -- it had a C value of failing below 19 110, which means extremely, extremely efficient. 20 We threw it out because it can't be there. It's 21 just -- it's bad data. 22 Same thing above 150. The odds of a

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 332 1 real pump being on the marketplace, being out 2 there was beyond the realm of what the EU data 3 showed it to be part of the population. 4 So we weren't considering those. But 5 one above and one below, models, it's not going to 6 skew your data everywhere. But I wanted to -- I 7 wanted to at least investigate it. So the general 8 conclusion, though, putting the discrepancies 9 aside, is the EU is less efficient. The EU 10 population of data -- that data there now sounds 11 less efficient than the population of data that we 12 have in our hand that's supposed to represent the 13 US market. That's -- for this, for end suction 14 close couple 1800. 15 So that's why and, you know, some of 16 those questions were early on before this whole 17 thing started. We put in exactly what we asked 18 for in our interview guide, was, you know, base 19 your decision, base your costs on how many pumps 20 fall out using MEI data with the EU. So now we 21 know that the EU -- MEI 10 with the EU is 22 different than MEI 10 in the US. So again --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 333 1 yeah? 2 MR. CAPPELLINO: Dan, this is 3 Charlie. MEI 10 you're saying is different -- 4 MR. WEINTRAUB: I'm sorry. Here it's 5 about the same. Yeah. Bad example. MEI 20, 25 6 is different. Bad example. Yeah. So that's the 7 gist here. And we can either -- if we have 8 questions now, or I can walk through what the 9 different ones look like, but you're going to see 10 similar trends. 11 MR. BROOKMAN: Let's take questions 12 here. 13 MR. WEINTRAUB: Yeah. 14 MR. BROOKMAN: Should there be any. 15 MR. WEINTRAUB: Yeah? 16 MR. TOWSLEY: Greg Towsley, Grundfos. 17 Just a clarifying statement. So EU pumps are less 18 efficient, or the flip side, ours are more 19 efficient in the US? 20 MR. WEINTRAUB: Exactly. Yeah. 21 Yeah. And, you know, this could be for a variety 22 of reasons. We've listed a summary at the end. It

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 334 1 could be the fact that the EU data was older. You 2 know, they published the study, the preparatory 3 study for the Lot 11 in 2007. That data was even 4 older. I don't know the providence of that data. 5 It was older. 6 So there's been a time lag. That could 7 be part of it. That's just speculation. We could 8 be seeing effects from the EU regulation that, you 9 know, we know that there's some cross talk between 10 the markets. We know that they don't completely 11 cross talk. We know that there's some. So 12 there's very different things. 13 And the reason we went about the 14 approach of setting our own C values was that when 15 the manufacturers came in with their initial 16 proposal, was you guys worked to tweak your C 17 values to meet the cutoffs. Now of course you can 18 set your C values wherever you want as a group to 19 decide, or you can set where you want the standard 20 to be. I just want everyone to be informed of how 21 it relates to the EU. And that's why we're giving 22 this presentation.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 335 1 And actually there'll be a 2 crosswalk at the end, which is kind of 3 complicated, but once you grasp it, you'll see 4 what a level of 25, when you cut out 25% of the US 5 pumps, what does that equate to in the 6 EU? 7 So you can see. Is that MEI reporting 8 in the EU? Is it MEI 55? So we'll get there. 9 But it's just this whole presentation here is to 10 inform you guys of how our data and our market 11 compares to the EU. So just -- we're just going 12 to go through them, and you'll see, again, you'll 13 see the discrepancy between the red, the two red 14 lines and the blue. But they stay together in 15 general. And again, less efficient where we're 16 more efficient. 17 Here frame-mounted things get a little 18 closer. Less so than the delta. Again, staying 19 closer together. Inline, so this is one where you 20 see a huge difference. And our data, HI data and 21 DOE data is saying the same thing. It's all lined 22 up. And this is what the EU used. So why? I

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 336 1 can't tell you, but there's a difference. 2 Same thing. Not as pronounced of a 3 difference at (inaudible) 3600, but there's a 4 difference. 5 So that's why you're going to see -- if 6 you were to plug in to MEI EU, you're plugging 7 your pumps into the MEI equation, the MEI C 8 values, you are going to see a whole lot more 9 pumps failing than you did when you first did it 10 with the EU values using our values. But again, 11 the industry on a whole in each one of the levels 12 with the C values that we provided previously will 13 still hit 10%, 25%, 40%, 50%, 55%, 70% of our 14 data. 15 VT-S, again, this one's the anomaly just 16 like before. The data is all over the place. You 17 know, we knew that the HI dataset and the DOE 18 datasets clicked. And here EU kind of cross-cuts 19 us. And I think EU had less of a range of 20 efficiencies effectively, but this is how it 21 compares. This is for you guys when you have this 22 in front of you. You can pull these into Excel.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 337 1 These are the C values that were just presented on 2 the screen in graphical format. You know, we don't 3 need to pour over it. 4 And then we just get into a summary, 5 which, you know, we've kind of gone through, but 6 this is just a summary of the deltas just like I 7 did before of how things differ. So here I'm 8 comparing the dotted red lines. So HI -- 9 Navigant's calculations of the HI data to the EU, 10 and you just see how the percentage points differ. 11 Close couple, one point, on average a one point 12 efficiency difference. Frame-mounted, about the 13 same. Inline 2.25 points difference, which was 14 the big jump that we saw. VT-S with mixed 15 results. 16 And then the possible reasons that I 17 brought up earlier which are nothing more than 18 just possibilities because we can't -- we really 19 don't know the exact answer. But it just goes 20 through like -- it goes through this -- I don't 21 think I need to go through the numbers, but 22 they're here for you to think about when you have

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 338 1 this in front of you, of just the differences 2 between the datasets summarized for you. 3 So one other thing. It's just really -- 4 oh, so I'll get to the crosswalk. The other thing 5 is in this dataset -- so we looked at -- both 6 datasets have DOE C values and HI C values. And 7 those deltas, so the ones that we just did with 8 the PER C values, that delta is -- they are 9 effectively the same. So the datasets are 10 consistent moving from C value, from PER to MEI. 11 HI's data is consistently slightly less 12 efficient than DOE's data in both of these charts 13 that we've just been looking at. So there's 14 consistency amongst the calculations, consistency 15 amongst the methods. So with that, now with 16 crosswalk again. This is stuff for you guys to 17 take back and think about. 18 Here, the background here of why we're 19 doing this. With certain brands and products sold 20 in both the EU and the US, it's important to 21 understand how the proposed US standard levels 22 compare to the existing EU Lot 11 standard level.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 339 1 So the crosswalk we have developed shows 2 what percentage of the EU market would be cut off 3 at a given US proposed efficiency level. So 4 currently we have two crosswalks, one crossing the 5 DOE data to the EU. And the other one crossing 6 the HI data to the EU. And if we can get this 7 merge completed, there'll be one crosswalk when we 8 can agree on C values. And so the results are 9 approximate just by the way of the method it was 10 done. They're approximate. They're to get you in 11 the ballpark. 12 So what we have here, on the top I've 13 listed these PER levels. You know, our efficiency 14 levels that we've been looking at the whole way, 15 10, 25, 40, 55, 70. So for example, the C values 16 that cause 10% of the US models to fail, that 17 would be this column, 10% of the US models 18 failing. In this case of end suction close couple 19 3600, would actually cause 22% of the EU models to 20 fail. So that's the comparison. And it goes like 21 that for all of these. 22 So here, close couple, we actually noted

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 340 1 this earlier, PER 10 was pretty close. So 10% of 2 the US models fail; 11% of the EU models fail. 3 You get out here, and I cut it off at 70 because 4 that's where -- what is it? Seventy, because 5 that's where the EU stopped their analysis. There 6 we go. Thank you. So it maxes out at 70. So 7 this is, again, it's something to take away and 8 think about. There's not much of a discussion. 9 MR. STARR: Louis Starr, again. So 10 PER 40, am I reading that is equivalent to, in a 11 European market, a 50? 12 MR. WEINTRAUB: Picking up 50% of the 13 European market. If we were to set a standard and 14 the EU were to have to comply with it, it would 15 take out 50% of their market. But again, that's 16 the market as defined by the EU pre-2007, not the 17 market as defined by the EU today. 18 MR. STARR: So those numbers would 19 probably adjust up -- 20 MR. WEINTRAUB: That's, yeah, that 21 was one of the, you know, kind of possibilities of 22 why these --

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 341 1 MR. STARR: So the EU standard, 2 though, that they're expecting to meet by 2015 3 would be the 2007 data? Right? 4 MR. WEINTRAUB: Yes. Yeah. And that 5 would - - so that's going to be MEI 40. So this 6 puts it in perspective. So this specific one, US 7 to EU using -- oh, this gives me HI data. And 8 then there's just another one that does the same 9 thing using the DOE data. I'm sorry. I think I 10 switched -- I guess I must have switched numbers 11 of the key. So this one's HI data. The previous 12 one is the crosswalk from DOE data. 13 And you can take those back and look at 14 them. That's the gist of this. Are there more 15 questions on this? 16 MR. BROOKMAN: Charlie? 17 MR. CAPPELLINO: Charlie Cappellino, 18 ITT. Dan, have you ever plotted the C value curves 19 for each of the equipment classes on the same 20 chart so you can compare, for example, what inline 21 C value looks like as compared to an end suction 22 frame-mounted or end suction close couple?

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 342 1 MR. WEINTRAUB: Yes, I have. So I'll 2 pull the data up just so I can talk to you a 3 little more accurately, but there are definitely 4 trends. You won't be able to see the data, but 5 I'll be able to talk to it because it's small. In 6 general, C values for like speeds, so we'll start 7 with four-pole. End suction close couple and end 8 suction frame mounted C values are extremely 9 close. They're generally the same (inaudible) 10 very similar (inaudible). Same thing, 36 to 36. 11 Inline then takes a jump of decreased 12 efficiency following the same trends because they 13 got extra losses in there. It's barely -- and 14 when we look at it, it's -- when you want to look 15 at how the trends are going, it's really within 16 the center, within the bulk, the meat of the bell 17 curve, 25, 40, 50, 70, is where they all kind of 18 run parallel, just skewed up and down. 19 Things get a little off the curve 20 because of the outliers when you get down to the 21 10% because you have pumps that are failing, but 22 are really, really failed and skewing things. But

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 343 1 yeah, for these really, the end suction and 2 inline, they all follow the same trends when it 3 comes to it. And in general, for end suction and 4 inline, if you're looking at the distribution of 5 efficiencies as defined by C value because C value 6 normalizes everything, they're normal. They're 7 very close to normal where you're going to have a 8 bell curve centered around the median or the mean. 9 Yeah. That's just -- they're very close. The 10 distribution is very close. 11 The only time you get off of normal is 12 at the tails because things start to spread a 13 little bit further than normal distribution but 14 really go with. But I looked at that numerous 15 times along the way. I can't really talk to 16 vertical turbines. We have less data on -- 17 actually they're not so normal, vertical turbines, 18 but we also don't have a ton of data. 19 And RS-V we have no data or effectively 20 no data to talk about how those work. So I can't 21 compare those (inaudible). Other questions? All 22 right.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 344 1 MR. BROOKMAN: Okay. Thanks, Dan. 2 These slides -- 3 MR. WEINTRAUB: Get them out. Yeah. 4 We'll get them out at the end of the day. 5 MR. BROOKMAN: Okay. Mark. You 6 start. You looked like you wanted to say 7 something. 8 MR. HANDZEL: No. No. 9 MR. BROOKMAN: As Alison said 10 earlier, she just wants you to start negotiating. 11 MR. CAPPELLINO: Why don't we look at 12 the agenda, the agenda where we are. 13 MR. BROOKMAN: That's a good idea. 14 Can we - - can we pull that back up? It does 15 occur to me -- 16 MS. WILLIAMS: The agenda involves 17 large amounts of time for caucusing and 18 negotiation. 19 MR. BROOKMAN: Right. 20 MR. HANDZEL: I think we're in that 21 part now. 22 MS. WILLIAMS: Hardly any of which

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 345 1 has been used so far. 2 MR. BROOKMAN: It does occur to me 3 that there are several elements or dimensions that 4 could be a part of each caucus's or each 5 individual's thought process, about how a proposal 6 that works for everybody in the room, how that 7 might come together. Several different pieces or 8 things that can be balanced and counterbalanced. 9 And so my thought process -- can we pull 10 up the agenda? Would be that you're frequently 11 better off in a complicated, multi-lateral 12 negotiation thinking about a variety of factors 13 that may be considered to arrive at a solution 14 than narrowly casting this at the outset. 15 MR. ADIN: So we've done all that 16 stuff at the top. We're basically at the bottom. 17 MR. BROOKMAN: Right. Yeah. 18 MS. WILLIAMS: It's five hours. 19 MR. HANDZEL: We're at 1:30. 20 MR. ADIN: Right. 21 MR. BROOKMAN: And I was wondering 22 if, for example, some of you have had more

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 346 1 experience doing -- 2 MR. HANDZEL: Something. 3 MR. BROOKMAN: -- this sort of thing, 4 what would be the general -- what would be your 5 thoughts on sort of the general parameters or the 6 elements of a proposal that you would expect to 7 cover that would be satisfactory to either caucus? 8 MR. ECKMAN: You're looking at me. 9 So I must have something to say. 10 MR. BROOKMAN: Let me do this, scan 11 the room here. 12 MR. ECKMAN: You know I -- I think 13 there's a time dimension to this because you have 14 conversion time and resource issues. In our minds 15 there's a harmonization with the EU issue that may 16 help minimize some of your costs or at least 17 eliminate duplication costs. And, you know, those 18 weigh in our ledger. Both of those are important 19 for you and us. 20 And there's, you know, the tradeoff 21 between the manufacturing impacts and the impacts 22 that consumers receive, which are pretty

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 347 1 beneficial all the way out there, but get pretty 2 heavy lifting for you guys as we get in the 30 and 3 40% range. So we haven't settled on what this new 4 data does too in terms of the EU relationship. 5 So we need to think a little bit about 6 that in caucus. But, you know, I think all of 7 those dimensions -- the magnitude of the savings 8 we're talking about are not huge, but significant. 9 So we'd like to try and keep them in the 10 middle range there somewhere, but we haven't 11 decided exactly what that middle means. So I 12 don't know where you guys have talked with respect 13 to EU harmonization, with how big an issue that is 14 for most of the manufacturers, what the timeframe 15 questions might be in your mind in terms of, you 16 know, is 19 the date or is some other date 17 possible. Would you like a phase- in? 18 MR. HANDZEL: Well, I think, you know 19 -- Mark Handzel from Xylem. I think, you know, 20 it's certainly something that the phase-in, we 21 think, has merit and would help us. It's going to 22 have -- every one of us will assess it

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 348 1 differently. Everyone will do something different 2 with it, but obviously we saw it in Europe. We 3 thought it went well in Europe, and I think, you 4 know, trying to speak for the industry, I think we 5 have an interest in trying to do it here. 6 So beyond that, I have to admit that our 7 group hasn't really started to talk about it 8 beyond that. And, you know, I mean, Doug, I would 9 almost probably suggest why don't we break for the 10 day and let us have some discussions and try to 11 come back in the morning. You know, and I think 12 we've got some good stuff to talk about in the 13 morning. 14 But I think, you know, we knew today 15 that we were just trying to take in a lot of data 16 and try to assess a lot of these questions. I 17 think -- I compliment the team back here. I think 18 they did a good job answering our questions, but I 19 think, you know, we still have more questions in 20 our mind now that are probably going to take us 21 beyond this meeting, you know, in terms of, you 22 know, being able to go further.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 349 1 MR. BROOKMAN: Chris, you had a 2 contribution? 3 MR. LAU: Oh, I just -- Chris Lau 4 from Navigant. I just wanted to just mention, and 5 I'm not exactly sure what ASRAC will allow us to 6 do, maybe what they're discussing, but there may 7 be constraints to flexibility in timeframe based 8 on the regulation. I just wasn't sure. 9 MS. KOHL: Sorry. We're having a 10 side bar. Can you repeat the question for us? 11 MR. LAU: Earlier in the discussion I 12 had mentioned that timeframe is something that may 13 make sense to negotiate, but I didn't know how 14 much flexibility the group had to negotiate the 15 timeframe of the standard. 16 MS. KOHL: Yeah. So, I mean our 17 understanding is that -- this is Betsy Kohl, DOE. 18 That there isn't really any -- I mean our reading 19 of the statute indicates that we have a five year 20 time lag, and we don't have statutory authority to 21 do this level in two years, and this level in 22 five, or this level in five, and this level in

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 350 1 seven. The statutory authority for that, we don't 2 have any because that would be two standards. 3 MR. BROOKMAN: Louis, do you wish to 4

-- 5 MR. STARR: No (inaudible). 6 MR. HANDZEL: Mark Handzel from 7 Xylem. So, Betsy, I mean there -- what's -- so 8 once a rule making is put in place, I think we've 9 talked about before there's a standard DOE level 10 from when it comes back up and gets reviewed 11 again. Can you tell us what that timeframe is? 12 MS. KOHL: That's once within six 13 years. That's the timeframe. 14 MR. HANDZEL: Oh, so there's no real 15 set? 16 MS. KOHL: No. 17 MR. HANDZEL: Okay. 18 MS. KOHL: At some point within six 19 years. 20 MR. HANDZEL: So it's not dictated? 21 MS. KOHL: No. 22 MR. HANDZEL: Okay.

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 351 1 MR. ECKMAN: Betsy, is this -- once 2 it's a rule the first time, is it three years 3 between? Or is it still? 4 MS. KOHL: Once it's -- oh, I think - 5

- 6 MR. ECKMAN: The first time it's 7 five, and then the next time it can be three? Is 8 that right? Or what? 9 MS. KOHL: I am not sure about that. 10 And we were only looking at it for this particular 11 rule making. But there is also in that once12 every-six-year review period, there is, I mean, we 13 -- I'm not sure what the actual time period is, 14 but we couldn't come back and say, okay, a year 15 from now there's other standards. There's a gap, 16 a required gap there too. So it's once within six 17 years we have to take a look, but there is a 18 backstop gap so it doesn't happen too fast. 19 MR. BROOKMAN: And since I can't 20 recall -- I am aware of this, Dan, since extended 21 product represents an interesting potential 22 benefit side in this equation, what is the status

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 352 1 of the test procedure on extended product? 2 MS. WIDDER: Do you mean like wire to 3 water? Or what do you mean by that? 4 MR. BROOKMAN: Well, I was just 5 thinking about any way that that would be -- 6 MS. WIDDER: Like a physical test? 7 MR. BROOKMAN: Yeah. 8 MS. WIDDER: There are tests in 9 development. I don't think that there's available 10 test data sufficient for us to consider a test 11 procedure for those products at this point today. 12 MR. FERNSTROM: Well, this is -- this 13 is Gary. You sort of outlined the methodology 14 part of it. 15 MS. WIDDER: Yeah. 16 MR. FERNSTROM: So what would need to 17 be developed would -- I say simply. It may not be 18 that simple, but simply the detailed steps and the 19 equipment necessary. And industry does that kind 20 of development all the time. So in principle it 21 shouldn't be that difficult given some time to 22 work out the details to provide the information

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 353 1 called for. 2 MS. WIDDER: I agree with that. 3 MR. BROOKMAN: Okay. 4 MR. DELANEY: Dan Delaney from Regal. 5 So I guess a couple aspects about that. The -- 6 certainly we talked about a motor and a drive 7 stand. There's precedence out there certainly. 8 There's CA-38. There's a CSA standard release that 9 gives you precedence to do that. And you bring in 10 the driven equipment, the pump -- obviously I 11 don't know how well that would cooperate with the 12 HI test procedure. I'm not as familiar there. 13 But there's certainly procedures out 14 there in the industry that are available to help 15 you give guidelines. So it's not just having to 16 (inaudible). And one of the reference, you know, 17 just looking at the motor as we finished our 18 regulation, not to say that that's a terrible help 19 to this one, but what I think what was a big 20 assistance, obviously this is the third rule21 making we went through through the evolution of 22 starting back in '92 -- what was a big benefit for

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 354 1 us as a motors group is we knew where we were at 2 as far as maturity of our product and the way we 3 were going. 4 And for us to give a very defined set of 5 requests I think was very helpful in having a 6 discussion around that. So I think that was one 7 of the big benefits, is having a very specific 8 position where we wanted to be from the motor end 9 to allow some of the negotiation discussion to 10 occur. 11 So that's a big help if manufacturers 12 who know their product best and know their 13 capabilities best to start with some kind of 14 guidance on that instead of others having to come 15 in and provide areas. 16 MR. BROOKMAN: Other comments here? 17 The proposal on the table is that we move towards 18 closure. Charlie? 19 MR. CAPPELLINO: Charlie Cappellino. 20 So I am just making some notes here from what Tom 21 said and try to just split what's actually input 22 to the decision-making process and what decisions

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 355 1 the group needs to make. And I don't know if I 2 got it right here, but kind of what I heard was 3 the manufacturing impact analysis's input, the 4 consumer analysis's input. One that I added in 5 here because I don't think we discussed it, but I 6 know there's been dialogue around it, is 7 enforcement. 8 I mean how do you enforce the 9 regulation? I mean we never really talked about 10 that much. And I don't know if that's inputted 11 into the decision or not. 12 But, I mean, I think, Dan, you mentioned 13 it to me in the hallway, that on the motor side of 14 it, that's been something that was part of the 15 decision- making process. Scope, well, let's see. 16 I think those were the -- the other one was, and I 17 keep bringing this up, but we haven't discussed it 18 yet either, is how do you commercially implement 19 this? 20 I mean the commercial implementation, 21 how do you go to the market? And I'd still like 22 to have a little more dialog around that as far

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 356 1 as, because there's burden there as well, just so 2 we all understand it. 3 And as far as decisions, I had scope, 4 which we've already kind of conquered, I think, 5 right? Including the Lot 11 decision and a next 6 step of pool pumps and circulators, right? So 7 that's a decision, but I think we've got that one 8 in hand. 9 Another decision is the C values, right? 10 So we got to kind of come to some kind of grip on 11 that. The time element, is there a timing decision 12 or not? Or is that basically fixed? It's still 13 not clear to me based on the dialogue we've had. 14 Is there a timing decision to be made? Or is that 15 a done deal? In terms of when the regulation 16 would be effective for both the Lot 11 and the 17 circulator pool pump piece of it. 18 19 20 21 MR. BARBOUR: Can I just interject a 22 real quick question? Bob Barbour, TACO. I seem

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 357 1 to recall from speaking to some of the advocates 2 that there were other rule makings that had a 3 phased-in type of an approach. And -- 4 MS. KOHL: (Inaudible) agency, 5 Congress has given us some on clothes washers, for 6 example. We have had consensus agreements under 7 Section P4 of 6295 where that has occurred. But 8 we are not in that ball game here. So the general 9 statutory authority is there is no phased-in 10 effective dates. That's where we are with our 11 reading of the statute right now. I know it's not 12 popular in some corridors, but -- in all corridors 13 here, it sounds like. 14 MR. ADIN: Can I just ask a question? 15 I mean, is that -- would that determine the 16 outcome for anyone at this table? 17 MR. CAPPELLINO: Well, I think the 18 resource scarcity issue -- Tom even mentioned it 19 in terms of timing. How do we time the 20 implementation? So I'm just -- that seems to me to 21 be something that we've had dialogue about. And 22 I'm trying to understand is that a decision that

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 358 1 we have some influence over? Or is it just fixed 2 and -- it's just not clear to me. I don't know. 3 So I think we need to either make some kind of 4 decision on the timing. 5 MR. BROOKMAN: Chris Lau has a 6 comment. 7 MR. LAU: Actually I have a 8 clarifying question. Sorry to put you on the spot 9 again, Betsy. 10 MS. KOHL: Sorry. Go ahead. I'm 11 sorry. 12 MR. LAU: I know you said there's a 13 hard implementation that you can't do a phased-in 14 approach where you ratchet up the standard over 15 time. 16 MS. KOHL: Right. 17 MR. LAU: However, is -- does the 18 legal language allow for phase-in by equipment 19 class over time? 20 MS. KOHL: We have not historically 21 done that. And I don't know that we would read 22 the statute that way. I mean we could certainly

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 359 1 take a look at it, but our going practice up until 2 this point has not been to do so. 3 MR. BROOKMAN: Gary. 4 MR. FERNSTROM: So this is Gary. I - 5

- 6 MS. KOHL: And sorry, just to finish. 7 Part of the reason for that is your analysis is 8 keyed off it and you don't do different 30 year 9 time periods for different product classes. So it 10 could cause some analytical problems. 11 MR. HANDZEL: Well, we can make them 12 rerun it. 13 MS. WIDDER: Have you? 14 MS: KOHL: For product class? We can 15 talk about it after. 16 MR. FERNSTROM: So, so I appreciate 17 the legislative constraints. However, I think as 18 a practical matter, as it might affect this 19 negotiation, lacking the capacity to have it 20 tiered to or a later implementation will probably 21 result in a lower standard that we'll agree to, 22 that we'll have to live with for a long time. And

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 360 1 I'd just like to observe that's too bad because I 2 would suspect that probably was not the 3 legislators' intent. 4 MR. BROOKMAN: The question's on the 5 table still, whether there's any flexibility on 6 the five years. I think Betsy pretty much 7 answered it. I thought, Lucas, you were going to 8 say something as well? No. Okay. Louis? 9 MR. HANDZEL: It sounds like the 10 answer is the five years is the five years. 11 MR. BROOKMAN: The five years is the 12 five years. 13 MR. HANDZEL: And there's no possible 14 phase-in -- 15 MR. BROOKMAN: Bob Barbour. 16 MR. BARBOUR: Bob Barbour from TACO. 17 But you aren't telling us that we could not look 18 for legislative relief on this in Congress? 19 MS. KOHL: I don't express any 20 opinion at all. 21 MR. BROOKMAN: And maybe Steve, Steve 22 Rosenstock.

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 361 1 MR. ROSENSTOCK: Steve Rosenstock, 2 EEI. That is an option, but good luck. I don't 3 know what your timeframe is, but, you know, there 4 was an efficiency bill on the Senate floor, but it 5 didn't really go anywhere. 6 MR. BROOKMAN: Yeah. As a longtime 7 observer, I'd say it's definitely a possibility. 8 It's not an easy thing to get done. Louis. 9 MR. STARR: So actually the other 10 thing we probably, maybe the manufacturers can 11 help in this, is that we need -- they did the 12 upper and lower bounds with what the markups could 13 be assuming passing it all on to the customer, and 14 then the other assumption is passing less of it 15 on. 16 So we sort of need an idea of where you 17 think that markup might be, so it helps us to look 18 at those, the graphs with the green and yellow 19 line, that graph, and then on the lifecycle costs. 20 So it doesn't need to be spot-on, but I assume you 21 are not going to be able to pass all the cost onto 22 the customer. It's somewhere in-between those

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 362 1 bounds. 2 MR. BROOKMAN: Yeah. Bob Barbour. 3 MR. BARBOUR: Bob Barbour with TACO. 4 I believe Alison said you were going to give us 5 the percentages of those -- 6 MR. LAU: MIAs where they cross. 7 MR. BARBOUR: (Inaudible) those values 8 were set on. Are you going to do that? 9 MR. LAU: Yes. I'll send the 10 presentation. What specific values are you 11 referring to? 12 MR. BARBOUR: As far as the -- 13 MS. WILLIAMS: Find out which of the 14 yellow and green lines would cross zero. 15 MR. WEINTRAUB: We can eyeball it. 16 MR. LAU: We can estimate it. 17 MR. WEINTRAUB: Yeah, we can probably 18 estimate it. It's hard to reverse engineer the 19 exact crossing point, but we can give it a try. 20 We can do some trial and error first. 21 MR. BARBOUR: I was -- actually this 22 is Bob Barbour again. I was referring to the

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 363 1 percentage of an increase that you thought we 2 would need to pass on to the marketplace in order 3 for it to become whole in the timeframe that you 4 had presented. 5 MS. WILLIAMS: So -- 6 MR. WEINTRAUB: So -- Dan Weintraub 7 now. The markups that were needed for that are in 8 the presentation that Chris showed you. So those 9 markups are there. And those don't quite get the 10 industry whole as we saw because of the delayed 11 implementation. But I think the idea was that we 12 weren't going to look at those even higher markups 13 because we're already past the realm of reality 14 with what we were looking at with the markups at 15 cost increases of 13, 14, 15, and 16 16%. 17 MR. BROOKMAN: So let me ask a 18 question because I believe I heard Alison say this 19 before, and correct me if I didn't. For example, 20 you've calculated PER 25 and PER 40. Should this 21 group ask them to calculate PER 27, PER 20? If 22 this is a lot of work, I'd understand. PER 27,

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 364 1 PER 29, PER 31, PER 33, you know? I'm wondering 2 if you want to seek a midpoint in there or some 3 sort of a thing like that. 4 MS. WILLIAMS: Yeah. I mean if you 5 guys want to suggest like, preferably not every 6 point, but like, hey, can we see PER 30, we can 7 run that scenario. 8 MR. BROOKMAN: Charlie. 9 MR. CAPPELLINO: This is Charlie 10 Cappellino. I think we can just look at the 11 graphs and interpolate off a graph for the 12 purposes of what we have to do today. 13 MS. WILLIAMS: Yeah. Because it 14 wouldn't be fast for us to do this. 15 MR. CAPPELLINO: Save your time to do 16 other more valuable things. 17 MR. ECKMAN: With all due respect, 18 given the precision of any forecast 30 years in 19 the future, we can eyeball it. 20 MR. CAPPELLINO: And Doug, this is 21 Charlie. Just to finish my thought here. I had 22 one other thing that I thought we needed to make a

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 365 1 decision on, that is, whatever we're going to do 2 from an extended product standpoint. I mean it's 3 still not -- I think we ought to as a group say, 4 look, here's our (inaudible) or suggestion or 5 recommendation on extended product (inaudible). 6 MR. BROOKMAN: Yeah. That makes 7 sense to me. Okay. Anybody wish to say anything 8 else before we head out of here today? 9 MS. WIDDER: One thing that I might just 10 ask the Working Group, is if we go back to the 11 agenda, do maybe we want to change the agenda for 12 tomorrow to continue these standard negotiations 13 in the morning? 14 MR. BROOKMAN: Yes. Yes. 15 MS. WIDDER: And then address the 16 metric later on? 17 MR. BROOKMAN: Yes. Let's get that - 18 - let's get that started. Let's see how that 19 progresses, and then let's move to the metric 20 discussion and whatever else you have there. 21 MS. WIDDER: Okay. 22 MR. BROOKMAN: Yeah. I like that a

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 366 1 lot. 2 MS. WIDDER: Okay. 3 MR. BROOKMAN: Because I think we're 4 going to do a couple of different iterations 5 there. I could imagine during the day that we'd 6 have a proposal. We'd consider a proposal. We'd 7 come back and forth a little bit. Additional 8 thoughts and comments before I recess this 9 meeting? We are going to start tomorrow morning 10 at 8:00. We're going to be in 8E. 11 MS. EDWARDS: 089. 8E-089. 12 MR. BROOKMAN: 8E-089, which is a 13 very -- always been a very productive room for us. 14 And Charlie? No? That's it. So the other thing 15 I'd like to say is that anybody that wishes to 16 ought to feel as though they can access the 17 analytic team as they might. Right? And so any 18 clarification, not only on the data, but, for 19 example, on the history previous rule makings and 20 the like. That might just be an interesting bit 21 of -- interesting bit of reflection for different 22 caucuses. Okay. So Steve and Bob Barbour.

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 367 1 MR. ROSENSTOCK: Steve Rosenstock, 2 EEI. Yeah, these will be the new presentations we 3 send out at the end of the day so we can review 4 them tonight. 5 MR. BROOKMAN: I didn't know when 6 they'd be sent out. These two were done today? 7 MR. ADIN: Yeah. We can send them 8 out today. 9 MR. BROOKMAN: That'd be great. 10 Thanks. Thank you, Lucas. Bob. 11 MR. BARBOUR: Could I make a 12 suggestion, that on the postings that go on the 13 SharePoint site, that somehow the dates don't 14 reflect the original date of the presentation, so 15 that we can make sure we're pulling up the most 16 recent ones? Because some of the times I've gone 17 on it and I've looked to try to locate the most 18 recent slide deck, and they seem to be keeping the 19 original dates that they had when they first 20 presented that slide deck as opposed to a new 21 date, which would help us to know we've got the 22 right deck.

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 368 1 MR. BROOKMAN: And this slide deck 2 that's going to go out now, is it going to go out 3 onto SharePoint? Or is it going to go out to 4 individual e- mails? 5 MR. ADIN: For the ones that we 6 presented today, I think we'll go ahead and -- 7 I'll post them on SharePoint anyway, but I'll also 8 e-mail them out because it's probably easier. 9 MR. BROOKMAN: That would be great to 10 e-mail them. That's much better. 11 MR. ADIN: Oh, you're not in your 12 offices. 13 MR. BROOKMAN: Yeah. Thanks very 14 much. 15 MR. ADIN: Thank you. 16 MR. BROOKMAN: Okay. We covered a 17 lot of ground today. And now we're entering this 18 interesting phase where, having seen a whole bunch 19 of analysis, we can actually get down to some 20 discussion that will be fruitful. So we'll see 21 you at 8:00 a.m. in 8E. We'll have someone down 22 there, probably Brenda, 7:15 or so to --

### Capital Reporting Company

Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 369 1 MS. EDWARDS: 7. 2 MR. BROOKMAN: 7, to admit everyone. 3 Okay. Thanks, thanks for a good day. We'll see 4 you in the morning. We have additional copies -- 5 we have additional copies -- we have additional 6 copies of the PowerPoint that was handed out at 7 lunch. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 370 1 CERTIFICATE OF TRANSCRIPTION 2 3 4 I, Penny Knight, hereby certify that I am not the 5 Court Reporter who reported the following 6 proceeding and that I have typed the transcript of 7 this proceeding using the Court Reporter's notes 8 and recordings. The foregoing/attached transcript 9 is a true, correct, and complete transcription of 10 said proceeding. 11 12 13 14 15 _______________ ________________________ June 4, 2014 Penny Knight 16 Transcriptionist 17 18 19 20 21 22

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014 Page 1

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 $ $1,500 182:15 $20 259:21 $200,000 70:13 $500 182:13 0 0 101:16 0% 103:2 0.2 248:14 0.3 250:5 0.5% 319:10 0.76 248:15 0.8 250:4 089 24:19 366:11 1 1 163:14 219:3 1% 103:20 1,000 141:3 154:5 181:15 1,200 162:17 188:13 1,600 188:12 1,800 318:15 1.0 250:5 1.1 324:14 1.34 133:8 1.4 74:13 1.5% 230:21 1.59 133:8 1.8% 231:1 1.87% 230:20 1:10 200:22 201:4 1:30 345:19 10 10:7 48:16 61:17 64:9,14 66:5 68:18 69:3 98:17 99:12 163:14,15 172:13,14 178:11 201:20 238:18 243:12 248:15 268:9 291:8 330:16 332:21,22 333:3 339:15 340:1 10% 51:16 61:9 62:21 70:4 82:19 86:1 98:5,19 134:5 158:19 238:18 319:10 325:7 336:13 339:16,17 340:1 342:21 10,000 130:16 181:15 10.3% 70:7 10:35 110:6 10:50 110:7 100 95:22 101:17 100% 134:2,14 188:16 262:18 266:3,10 1000 1:12 10th 101:14 11 67:1 68:3 172:13,14 178:11 194:2 195:11 317:22 329:10 334:3 338:22 356:5,16 11% 340:2 11.8 53:18 11.8% 172:11 176:17 188:17

1-1/4 155:17 110 319:20 331:19 110% 134:3,16 12 305:6,10 12.2 82:8 12:10 200:21 120 319:21 1-200 273:8 1212 300:18 13 363:15 13% 261:5 291:8 14 363:15 140 319:21 14th 70:21,22 71:2 15 9:8 44:8 192:12 253:18 363:15 15% 52:10 53:6,10,14 56:9 60:12 61:15,17 74:14 238:19 150 319:20 331:22 16 215:5 221:8 16% 175:1 363:16 17 40:15 202:12 17% 133:3 178 268:11,13 269:19 18 40:15 170:12 1800 102:4,8 153:2,9 196:19 197:2,3,4 332:14 19 40:15 152:16 347:16 19.7 99:12 2

2 58:15 59:13,16 2% 47:8,12 50:16 2,500 139:9 144:2 153:11 2.25 337:13 2.5 245:19 246:10 248:9 2.6 152:15 2.7 152:15 2.8 250:4 2:30 253:19 20 44:7 70:10,11,14 103:12 192:20 193:4,5 194:3 198:12 199:16 201:20 268:10 315:17 326:1 333:5 363:21 20% 53:9 103:9,12 139:8,10 143:14 144:1,2,3 149:15 150:19 157:11,21 158:18 159:22 160:3 200 70:13 163:16 262:9 200,000 85:22 2000 215:6 2007 334:3 341:3 2010 215:6 2012 214:14 223:1 224:12 226:9 227:6 230:15 232:8,15 233:15 237:7

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Meeting of Commercial/Industrial Pumps Working Group 05-28-2014 Page 2

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 2013 246:7 262:2 2014 1:16 4:6 239:2 240:12,16 245:11 246:5 247:11 262:2 305:2,11,16 370:15 2015 94:6,7 96:4 305:13,16 341:2 2016 299:9 300:13 2018 263:12 2019 192:19 193:3 226:4 233:15,16 235:1 238:1 259:14 260:6 263:13 2035 193:5 2048 226:9 233:17 235:1 249:4,7 20585 1:14 21 152:16 183:1 21% 105:17 210% 261:14 22% 339:19 25 64:14 71:7 74:5 79:3,11 99:21 107:10 108:5 134:14 135:17 201:22 238:18 266:12 267:19 268:10 323:3 324:15 333:5 335:4 339:15 342:17 363:20 25% 56:8 61:15 92:17 134:4,13,14 325:7 335:4 336:13 27 213:1 265:13 363:21,22 27th 70:21 71:2 28 1:16 4:5 98:6 152:11 28th 24:1 29 364:1 3 3 69:4 105:10 3% 52:3 82:5,8 88:9 240:14 249:21 250:4 3,000 154:4 163:12 181:15 3,500 139:10 144:3 30 71:8 74:16 78:18 79:15 98:6 109:4 110:10 131:9 172:10,15,21,22 176:11 178:1,3,6 188:16 190:3 192:4,6,14 193:1,12,21 194:5,8,12,16,18 ,22 195:10,11,17,21 196:1,4,7,13 201:19 202:8 214:8,10 230:20 235:10 244:7 248:20,21 249:13,17 278:17 347:2 359:8 364:6,18 30% 74:16 109:1 159:22 160:3 300,000 229:6 230:17 30th 45:6 70:21

31 364:1 31,000 153:9 32 226:20 33 80:4 364:1 34 227:18 342 268:12 35 50:7 79:11,15 265:14 36 342:10 3600 102:4,10 153:2 196:20 197:5 321:18 322:20 336:3 339:19 4 4 132:11 141:5 370:15 4% 47:1 105:10 4,000 146:21,22 4,500 146:22 40 48:17 64:9,12,13,22 65:1,16 66:5 68:18 69:2,5,7 73:17 74:5,12,16 77:10 79:11 90:17 93:8,15,21 94:20 96:3 97:4 98:6 166:10,11 230:18 238:3,4,11,19 241:16 244:11 261:14 268:4,11,12 269:18 323:3 326:1 330:16 339:15 340:10 341:5 342:17 363:20

40% 73:20 75:7,15 76:10,12 77:10 78:5,13 93:1 108:22 336:13 347:3 40.6 121:10 420 224:12 420,000 215:12 223:1 224:12 226:8 233:15 271:20 272:14 47% 239:15 490 233:16 5 5 61:9,17 62:21 132:11 141:5 5% 53:10 54:11 105:4 158:19 238:18 5,000 139:11 144:3 154:5 50 71:7 340:11 342:17 50% 134:14 187:1 190:14,18 266:13 336:13 340:12,15 500 219:3 505 305:12 50-50 239:18 50598 301:5,20 302:22 303:16 524 318:1 55 73:17 74:2,13,16 79:3 268:11 335:8

### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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349:1,3 358:5 363:8 Chris'll173:8 Christopher3:5 6:7 Chuck 7:8 67:14,16 256:1 chuckle 256:4 circling107:21 circulation 141:6,14,16,18 142:9,10 143:6 144:14 circulator356:17 circulators 356:6 claim311:1 312:15 claims 311:10 312:9 clarification 9:2 40:13 273:13 290:15 366:18 clarified 168:2 clarifies 29:11 clarify9:19 48:2 106:17 120:14 173:16 178:4 clarifying 60:15 87:13 116:8 333:17 358:8 class 90:6 234:16 237:4 248:5 316:18 317:15 319:3 321:13 322:12 324:1 358:19 359:14 classes 102:3 198:8

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141:5,15 142:4,5,6 144:2,11,12 158:4 159:4 cooperate353:11 copies 168:16 369:4,5,6 copy171:8 corner214:16 Corporation4:18 202:10 corporations 57:2 correct30:10 72:2,5 105:18 106:12,13 114:6 118:20 167:19 216:21 247:10 248:10 249:19 274:21,22 304:3 327:8 363:19 370:9 corrected59:6 correcting 58:15 correctly131:21 corrects 52:4 correlate148:1 correlated 107:22 correlates 148:11 correlation106:16 107:14,22 corridors 357:12 cost49:6,9 51:18,19 52:4,10,15,16,20 ,21 53:3,8,9,10,17 58:14,16,19 59:2,18 61:2 63:7 64:7,13

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335:2 338:4,16 339:1,7 341:12 crosswalks 339:4 crux135:16 crystal 71:22 CSA353:8 cumulative 248:6,20

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339:5,6 341:3,7,9,11,12 342:2,4 343:16,18,19,20 347:4 348:15 352:10 366:18 database140:2 144:19 145:1,8 148:9 152:21 306:10 319:11 dataset 149:12 316:4,6,22 321:17 322:4,16 323:7,8,11 326:10,15 327:17 329:8,9,10 330:4,22 336:17 338:5 datasets 316:7 318:6 323:1 325:15 330:6 336:18 338:2,6,9 date171:19 188:2 222:2 262:2 281:12,13 283:15 347:16 367:14,21 dates 305:18 357:10 367:13,19 day23:21,22 40:20 44:7,8 159:1 216:1 242:17 249:13 259:10 344:4 348:10 366:5 367:3 369:3 days 7:20 8:3 9:3 21:20 25:18 39:16,21 40:14 79:17 136:1

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### Capital Reporting Company

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### Capital Reporting Company

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makings 240:14 246:12 357:2 366:19 man28:18 management 159:11 202:14 Manager4:11 mandated304:12 mandating284:15 manner 33:2 65:16 manufacture 85:13 261:3 294:10 manufacturer 20:21 21:6 22:5 44:10 55:6 65:17 66:3 105:16 108:11 173:15 179:16 191:11 194:14 214:4 254:7,9 268:5 279:18 285:22 286:2,6,9 manufacturers 47:14 52:12 61:5,19 64:11,18,22 65:3 66:3 67:19 69:6 83:11 86:17 92:6 93:17 94:22 109:3 127:17,21 133:1,6 136:21 149:11 165:3,6,9 167:10 172:1 173:18 177:10 179:19 183:7 185:18,20 187:13 189:16 194:16 195:9

### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 mention 14:13 247:15 349:4 mentioned 20:5 31:20 112:4 123:16 126:20 149:8 210:15 236:19 254:20 278:16 280:1 290:17 291:1 306:22 307:2 349:12 355:12 357:18 merge 320:7 323:13 339:7 merged 317:1 320:15 322:16 330:7 merit347:21 message 184:2 messages 190:2,4 method 28:3,6,12,15,16, 20 29:15,20 30:2 31:6,16 35:2,8,11,14,16 37:4 51:12 70:16 83:17,19 84:22 86:5 112:4 113:21 114:13 204:5 242:21 256:19 290:3 295:3 303:8 327:12 328:20 329:20,21,22 339:9 methodology 101:5 290:5,9 301:14 352:13 methods 57:21 331:1 338:15 metric 16:6,10,17,18 24:2,4,6,9 25:11 29:4,8,11 33:3 34:1,10 36:3 37:3,13 39:3 44:2 77:18 78:4,11,13 115:4,5,12,17 116:2 117:8,10 120:17 121:10,19 123:7 125:8 126:20,21 135:1 136:4 286:2 287:8,9 288:11 292:18 295:2 306:7,10 365:16,19 metrics 177:15 308:22 316:16 MIA52:19 175:21 194:13,18 205:19 254:6,9 260:13 278:10 291:14 Miami 158:11 MIAs 362:6 mid65:6 middle104:18 175:16 186:2,13 187:3 198:21 324:20 325:3 347:10,11 midpoint364:2 Mike 172:10 178:9 Miles 220:7 mill9:14 million 73:2 82:8 215:5 218:10 219:1,13 220:19 221:8 259:21 268:10,11,12,13 269:19

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### Capital Reporting Company

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149:21 256:20 352:19 NEEA95:12 108:21 negative71:7,8 180:9 181:5 251:14 262:9,13,18 267:19 282:13 290:19 neglected201:10 negotiate19:15,20

### Capital Reporting Company

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 265:3 offset130:22 offshore 208:17,19 209:1 298:2 oh 8:9 68:1 76:8 80:21 132:2 146:20 147:13 152:19 160:20 162:3 208:2 228:19 238:16 243:9 252:13 253:10,14 259:19 272:15,17 273:1 295:19 319:3 338:4 341:7 349:3 350:14 351:4 368:11 okay7:9 9:4,13,17 10:8,12 12:5,11 14:15 15:15 16:1 18:21 20:14 24:21 27:8 30:11 31:8 32:10 34:11 35:20 39:11 42:7,14 43:6,13 44:14 47:12,21 49:13 51:6,7,8 52:8 55:10,22 57:16 58:9 59:9,11 62:19 63:5,9 64:7 66:13 67:2 68:4 69:13,15,16,18 70:20 71:13 72:12 73:5 74:19 75:16 78:9 80:10,22 81:17,20 86:9,20 87:2 88:1,4 89:2,20 91:11,12 94:14,15 95:21 97:13 99:15 108:7,19 127:20 128:2,15 129:8,18,20 130:8 132:3,13 133:11 134:15 137:16,17 139:1,20 141:17 142:22 143:11 152:6 154:5,18 155:13 156:5,8,10,12,16 160:13 161:3 162:10,13,21 166:14 167:11,12,20,22 168:4 169:10 170:14,15 171:4,12 177:1,17,22 178:14,20 179:3,7,21 180:4 182:7,11 187:16,22 191:21 193:18 195:13,20 197:9 199:8 200:1,14,20 202:15,16 209:5 213:22 216:12 217:10 219:8 220:3,4,13 227:4,10 230:13 231:15 233:18 234:21 238:8,15,16,21 239:12 240:2 241:9 246:2,9,17 249:20 252:18 253:7,16 266:2 273:1 275:21 276:9 277:11 278:2 282:17 291:6 295:19 298:21 304:4 310:9 313:8 315:6,18,21

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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