400 North Capitol St., NW, Washington, DC 20001 ∙ Telephone 202‐824‐7000 ∙ Website http://www.aga.org

October 11, 2011 

To: expartecommunciation@hq.doe.gov (sent via email) 

Re: Memorandum Summarizing Ex Parte Communication 

On October 11, 2011, representatives of the American Gas Association met with staff of 

the U.S. Department of Energy to discuss issues raised by the Department’s direct final 

rule and notice of proposed rulemaking prescribing energy conservation standards for 

residential furnaces, residential central air conditioners and heat pumps (Energy 

Conservation Program: Energy Conservation Standards for Residential Furnaces and 

Residential Central Air Conditioners and Heat Pumps, Direct Final Rule, 76 Fed. Reg. 

37,408 (June 27, 2011); Energy Conservation Program: Energy Conservation Standards 

for Residential Furnaces and Residential Central Air Conditioners and Heat Pumps, 

Notice of Proposed Rulemaking, 76 Fed. Reg. 37,549 (June 27, 2011). AGA raised 

several concerns with regard to the technical analysis underlying the rule, and urged the 

Department to withdraw the direct final rule to take a closer look at the analysis. 

The following persons attended the meeting: 

Representing the Department of Energy 

 Daniel Cohen 

 John Cymbalsky 

 Roland Risser 

 Eric Stas 

 Jennifer Tiedeman 

Representing the American Gas Association 

 James A. Ranfone 

 Andrew K. Soto 

Documents reviewed and discussed at the meeting are attached. 

 Respectfully submitted, 

 /s/ Andrew K. Soto 

 Andrew K. Soto 

 Senior Managing Counsel, Regulatory Affairs 

 American Gas Association 
"Vl- "Vl- ~ ~ 

0 ~ 

0 0 

0 0 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2030 

$ per MMBtu 

"Vl- "Vl- ~ ~ 

N W 

0 0 

0 0 

+ + t + N N N N 

o 0 0 0 ~ ~ 0 0 ~ 0 U) 00 

"Vl-

~ 

~ 

0 

0 

m -

» 

'TI 

o 

tD "'" 

n 

OJ 

'" r+ 

tD 

Q. 

;a 

tD 

'" -. Q. 

NtD o:::S 

o ~. \D!!.. 

'(/)0 "'a 

"'" -. n 

tD 

C'" 

< 

'TI 

o 

tD "'" 

n 

OJ 

'" r+ 

~ OJ 

"'" 
Natural gas price projections are significantly lower than past 

years due to an expanded shale gas resource base 

natural gas spot price (Henry Hub) 

2009 dollars per million Btu 

10 

9 

8 

7 

6 

5 

4 

3 

2 

1 

o 

1990 

History 

1995 2000 

2009 --

2005 2010 

Projections 

$9/MMBtu 

Updated AE02009 

--$71MMBtu 

----------~~~---------

2015 2020 2025 2030 2035 

Sources: EIA, Annual Energy Outlook 2011; EIA, Annual Energy Outlook 2010; and EIA, An Updated Annual 

Energy Outlook 2009 Reference Case 
1.4 

1.3 

;=j 

8 1.2 ... 

1:1 

!:!. 

.II 1.1 

It 

~ " ! 1 .0 

! 

0 .9 

0.8 

60 

FURNACE DFR TECHNICAL ANALYSIS 

80 100 

va H.184IC -o.s17 

R~ . O.9S4 

120 

Cumulltlve Shipments (millions) 

160 

gti 

• Historical 

--Learning Fit 

Figure 62: DOE Projection of Furnace Cost as a Function of Cumulative Historic Shipments 

Source: DOE Direct Final Rule, Technical Support Document Appendix 8-J6 

Furnace Price Trend Learning Curve 

1.4 

1,3 

.. 1.2 . ~ 

~ 

0 

.... 1.1 0 

N 

S 

.. 1 

.~ 

co 

"ii 0.9 '" ..

u .;: 

... 0.8 

0.7 

.. 

~ 

"'-

'" " ~ y = 13. 184x·O•

527 

Historic Projected 

~ 

Shipments Shipments to 2045 ~ 

0.6 

60 80 100 120 140 160 180 200 220 240 260 

Cumulative Shipments 

Figure 63: Extension of DOE Learning Rate to Projected Furnace Prices through 2045 

Page 41 
Multi-Year Program PlanBuilding Regulatory Programs -

u.s. Department of Energy -

Energy Efficiency and Renewable Energy -

Building Technologies Program -

October 2010 

[This plan will be updated based on actual appropriations, future budget requests and other 

program developments; the next significant revision is expected to be completed by spring 2011] 

,'-.. '., ~~r·t .-,--': 111 411 tl 'h 

• '(, fl1 ' g'\' t1I~l'ln i (Fir fi"1l'·'w\I.:l'II;I fllq gy I .. ,. """-~·""'''''''''-!t .... ;P'''' ~-~ 
Product Life Expectancy 

Furnace, Electric 14 years 

Furnace, Warm Air, Gas 16 years 

Furnace, Warm Air, Oil 18 years 

Transformer 32 years 

The estimated cumulative net present value of consumer benefit amounted to $64 billion at the end 

of 2005; standards are projected to save $241 billion by 2030, growing to $269 billion by 2045, 

while the cumulative cost of DOE's program to establish and implement these standards over the 

past 20 years is in the range of$200-250 million. Annual carbon savings reach 38 million tons by 

2020 and the cumulative savings by 2045 is estimated at 1,200 million tons.ll Figure 4-6 shows 

estimated energy savings through 2045. 

Figure 4-6 Cumulative Primary Energy Savings for Residential and Commercial Products 

90 

80 

70 ~ Commercial 

60 ~ Residential 

~ 50 

~ 

a 40 

30 

20 

10 

0 

2005 2015 2030 2045 

Since President Obama took office in January 2009, DOE has finalized seven energy conservation 

standards which may save up to 10 quads of primary energy by 2030. In addition, DOE codified the 

energy conservation standards prescribed by EISA 2007 which may save up to 15.29 quads by 

2030. The seven standards developed by DOE may save consumers up to $103 billion on their 

utility bills by 2030, while the standards prescribed by EISA 2007 may save consumers up to $159 

billion by 2030. 

11 htm://efficiencv.lbl .goY/drupaljiles/eesiRealized%20and%20Proje ted%20Jmpacts%202008%209385I O,pdf 

,;-~' ", us.o..-J1 Gla.u .. 

, '!) tn",ty flYiolllcy [I'If ilBnIMIll/lt; E11Ffgy 3.3 

,.II,. ,.",~",~""~""."" __ ".,_""""",,,,,,,,,~ 
FURNACE DFR TECHNICAL ANALYSIS gti. Table 12: Summary Results for 90% Condensing Furnace - Integrated Scenario Analysis 

North Composite North Retrofit North New 

Construction 

LCC Payback LCC Payback LCC Payback 

Savings Period Savings Period Savings Period 

Median/Av2 Median/Av2 Median/Av~ 

AEO 2010 (DOE $155 10.1/12.8 $90 12.9/15.9 $343 2.5 14.3 Baseline) 

AEO 2011 Ref Case -$4 16.3 /20.5 -$64 20.4 /25.3 $172 4.117.1 13% Fixed Gas Costs 

AEO 2011 High Shale -$18 18.0/22.8 -$78 22.7/28.1 $157 4.3 /7.9 13% Fixed Gas Costs 

AEO 2011 Ref Case -$39 21.7/28.7 -$98 27.0/35.4 $135 5.6/9.9 City gate Gas Price 

AEO 2011 High Shale -$48 23.9 / 31.3 -$107 29.7/38.8 $125 5.9/10.5 Citygate Gas Price 

Northern Retrofit Results - Integrated Scenario Analysis 

$100 ,------------------------------------------------------------, 50 

$50 ~------------------------------------------------__+ 40 

~ .. .. $0 lID 

C 

·s 

.. III 

u DOE NWGF Average u 

..... ($50) 

30 ~ 

~ :. 

... 20 ~ 

J. I 

• 

($100) 10 

($150) ~----------------------------------------------------------~ 0 

AEO 2010 AEO 2011 Ref Case AEO 2011 High Shale AEO 2011 Ref Case AEO 2011 High Shale 

(DOE Baseline) 13% Fixed Gas Costs 13% Fixed Gas Costs Citygate Gas Price Citygate Gas Price 

- lCCSavings - PBP (Median) '" PBP (Average) 

Figure 77: North Region Retrofit LCC and PBP Results for Integrated Scenarios 

Page 52 
NEW CONSTRUCTION COST FOR VARIOUS HVAC SYSTEMS 

EXHIBIT B - SMALL- TO MEDIUM-SIZE HOME - 1,500 to 2,200 SQUARE FEET 

(Costs of HVAC equipment does not include labor or installation; all other categories include material and labor.) 

Evaporator Outdoor Electrical Base 

Description Air Handler Furnace Coil Condenser Thermostat Vent' Gas Line4 Duc1lM:lrk4 Wi ri ng4 Installation 

System 1 - '80% Gas Furnace and 13-Seer AlC 

80%-Efficiency Gas Furnace, 70,000 BTU, 3.0-

Ton Evaporator Coil, 3.0 Ton, 13 Seer, SingleStage Compressor, 1 ,200-CFM Mu~i-Speed 

Blo~r, Digital Thermostat, "B" Vent Flue Piping 

System 2 - '90% Gas Furnace 'and 14-Seer Ale 

90%-Efficiency Gas Furnace, Single-Stage 

Burner, 70,000 BTU, 3.0 Ton, 14 Seer, SingleStage Compressor, 3.0-Ton Evaporator Coil, 

1.200-CFM Mu~i-Speed Blo~r, Programmable 

Thermostat, PVC Flue Piping 

95%-Efficiency Gas Furnace, 2-Stage Burner, 

70,000 BTU, 3.0 Ton, 18 Seer, 2-Stage AlC, 3.0-

Ton Evaporator Coil, 1 ,200-CFM Variable-Speed 

Blo~r, 2-Stage Programmable Thermostat, 

PVC Flue Piping 

Sysfem,4 - ~KW Electric Furnace'and 13-SeecAIC 

3.0 Ton, 13-Seer AlC, Single-Stage 

Compressor, 1,200 CFM, Multi-Speed Air 

Handler, 3.0-Ton Evaporator Coil, 20-KW Heat 

Package, Digital Thermostat 

System 5 2~KW'Etectrfc Fumace amt14-SeerAlC, 

3.0 Ton, 14-Seer AlC, Single-Stage 

Compressor, 1,200 CFM, Mu~iple-Speed Air 

Handler, 3.0-Ton Evaporator Coil, 20-KW Heat 

Package, Programmable Thermostat 

$550 

$1,010 

$1,940 

$950 

$980 

GAS FURNACE AND ELECTRIC AIR CONDITIONER 

$620 $885 $46 $430 ' $1,040 

$650 $1,240 $77 $270 2 $1,040 

$930 $3,565 $98 $270 2 $1,040 

ELECTRIC FURNACE AND ELECTRIC AIR CONDITIONER 

Bui~ In $885 $46 

Bui~ In $1,240 $46 

Note: Red numbers in parentheses indicate savings to the builder. 

$1,480 $185 $1,500 

$1,480 $185 $1,500 

$1,480 $185 $1,500 

$1,480 $490 $1,500 

$1,480 $490 $1,500 

Total 

Incremental 

Cost 

$6,736 Base 

Present Standard 

S7,4G ~. :". ~"e! 

Futu ... DOE~' 

$11,008 $4,272 

$5,351 ($1,385) 

Present Standard 
Evaporator Outdoor Electrical Base 

Description Air Handler Furnace Coil CondenSer ThemiOstat Ven( Gas Une' Duotwork' Wiring' InstaDalion 

Svs1etp 6 - 3.O=Toa, 7,7-HSPf HfBC pump 

3,0 Ton, 7.7-HSPF Heat Pump, Single-Stage 

Compressor, 20-KW Heat Package, 1 ,200 CFM, 

Mulli-Speed Air Handler, 3,0-Ton Evaporator 

Coli. Digital Thermostat 

SVSf!!m 7 - 3.Hoa. 8.3-HSPE H", PumP 

3.0 Ton. 8,3-HSPF Heat Pump, Single-Stage 

Compressor, 20-KW Heat Package, 1,2QO CFM, 

Multiple-Speed Air Handler, 3.0-Ton Evaporator 

SIISt8m 8 - 3.O=Ton. 1f-Seer Hem PumP 

3,0 Ton, 13-Seer Heat pump, 2"Stage 

S950 

$980 

Compressor, 2O-KW Heat Package, 1,200 CFM, $2,075 

Variable-Speed Air Handler, 3.0-Ton Evaporator 

Svs1em,9- OUfl-FueI. BO% G§Eumace-and1B:Seer Heat pump 

80%-Efficlency Gas Furnace, 1-Stage Burner, 

70.000 BTU, 3,0 Ton. 18 Seer. 2-Stage 

Compressor, 3.0-Ton Evaporator Coil, 1;200 

CFM, Mulli~eed Blower, 2-Stage 

programmable Thermostat, "B" Vent Flue Piping 

SIISt8m 10 - Ouaf.'fuel. 95% Gas Furnace and 18-Seer Heat pumo 

95%-Efficiency Gas Furnace. 2-Stage Burner. 

70,000 BTIJ, 3.0 Ton, 18 Seer, 2-Stage 

Compressor, 3,0-Ton Evaporator Coi~ 1,200 

CFM, Variable-Speed Blower, 2-Stage 

Programmable Thermostat, PVC Flue Venting 

AIR-SOUR,CE HEAT PUMP WITH AUXlUARV ELECTR!C HEAT 

Builtin $1 ,550 $77 

Builtin $2,170 $98 

Builtin $4,495 $98 

DUAL FUEL - HEAT PUMP WITH GAS AUXlUARY HEAT 

$550 $930 $4.495 $246 $430 ' $1 ,040 

$1 ,940 $930 $4,495 $246 $270 2 S1 ,040 

Note: Red numbers in parentheses indicate savings to the builder. 

$1,48Q $490 $1,500 

$1,480 $490 $1,500 

$1,480 $490 $1,500 

$1 ,480 $185 $1,500 

$1 ,480 S185 S1,5oo 

Total 

Incremental 

Cost 

$6,047 ($689) 

Present Standard 

",718 CSt8) 

Future DOE Stand8rd 

$10;138 $3,402 

$10,856 $4,120 

$12,086 $5,350 
Figure 3-19. U.S. Residential Energy Consumption by Fuel 

ELECTRIIC TRANSMISSI'ON AND DISTRIBUTION ENERGY LOSS 

GENERATION LOSS 

ELECTRICITY SALES 

) - • NATURAL GAS TRANSMISSION FUELS 

NATURAL GAS 

• HENEWABl E ENERGY 

PETROLEUM - , . • COAL 

) -

) 

1950 11960 1970 1980 1990 2000 

YEAR 

2010 

lewable energy includes woodl and petroleum includes liquefied gases such as propane. 

lergy Information Administration. 

2020 2C