e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 1 UNITED STATES OF AMERICA

+ + + + + DEPARTMENT OF ENERGY

+ + + ++

FRAMEWORK PUBLIC MEETING FOR RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS

+ + + + + Thursday, June 12, 2008

+ + + + + The meeting came to order at 9:00 a.m. in Room 1E-245 of 1000 Independence Avenue, S.W., Washington, D.C. Douglas Brookman, Facilitator, presiding.

PRESENT: WES ANDERSON US DEPARTMENT OF ENERGY MICHAEL KIDO US DEPARTMENT OF ENERGY ANDREW DELASKI APPLIANCE STANDARDS AWARENESS PROJECT

ANITRA GASSETT MITSUBISHI ELECTRIC BILL MCCULLOUGH LENNOX INTERNATIONAL, INC. BRIAN DOUGHERTY NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY BRICE BOWLEY GENERAL ELECTRIC APPLIANCES

CARL BERGT RHEEM MANUFACTURING CO. CHARLIE MCCRUDDEN AIR-CONDITIONING CONTRACTORS OF AMERICA CRAIG MESSMER UNICO INC. DANIEL J. ARNOLD NORDYNE DONALD M. BRUNDAGE P.E. SOUTHERN COMPANY DOUGLAS BROOKMAN FACILITATOR

EDWARD SCHMIDT NORTHEAST ENERGY EFFICIENCY PARTNERSHIPS ERIC STAS US DEPARTMENT OF ENERGYe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 2 PRESENT (continued): FRED J. KELLER CONSULTANT FOR CARRIER CORPORATION GARY FERNSTROM PACIFIC GAS AND ELECTRIC COMPANY GREGORY ROSENQUIST ERNEST ORLANDO LAURENCE BERKELEY NATIONAL LABORATORY HARVEY SACHS AMERICAN COUNCIL FOR AN ENERGY EFFICIENT ECONOMY ANDREW HOLLIDAY AIR-CONDITIONING CONTRACTORS OF AMERICA HUNG PHAM EMERSON CLIMATE TECHNOLOGIES, INC. JAMES RABA US DEPARTMENT OF ENERGY JAMES WALTERS AIR-CONDITIONING, HEATING, AND REFRIGERATION INSTITUTE JAMES LYONS NEWPORT PARTNERS, LLC JIM CRAWFORD TRANE JOHN FOX UNICO, INC. JOHN MANDYCK CARRIER CORPORATION JOSEPH MATTINGLY AIR-CONDITIONING, HEATING, & REFRIGERATION INSTITUTE KARIM AMRANE AIR-CONDITIONING, HEATING, & REFRIGERATION INSTITUTE KEN SAGAN NATIONAL ASSOCIATION OF HOME BUILDERS KYLE GILEY LENNOX INTERNATIONAL INC. LANCE DELAURA SOUTHERN CALIFORNIA GAS

COMPANY LANE BURT NATIONAL RESOURCES DEFENSE COUNCIL LAURA VAN WIE MCGRORY ERNEST ORLANDO LAWRENCE BERKELEY NATIONAL LABORATORY MARK STANGA DAIKIN INDUSTRIES, LTD

MICHAEL CHRISTOPHER NAVIGANT CONSULTINGe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 3 PRESENT (continued): MICHAEL W. WOODFORD AIR-CONDITIONING, HEATING & REFRIGERATION INSTITUTE

MICHAEL MCCABE US DEPARTMENT OF ENERGY MIKE RIVEST NAVIGANT CONSULTING PATRICK O'CONNOR KENT & O'CONNOR INCORPORATED PAUL DOPPEL MITSUBISHI ELECTRIC PAUL KYLLO SOUTHERN CALIFORNIA EDISON ROBERT WILKINS DANFOSS, INC. RONALD LEWIS US DEPARTMENT OF ENERGY SRIRAM SOMASUNDERAM PACIFIC NORTHWEST NATIONAL LABORATORY STEVE ROSENSTOCK EDISON ELECTRIC INSTITUTE TALBOT GEE HEATING, AIR-

CONDITIONING & REFRIGERATION DISTRIBUTORS

INTERNATIONAL

TED POPE ENERGY SOLUTIONS

TIMOTHY BALLO EARTHJUSTICE

TOM ROBERTS CFM DISTRIBUTORS

VINCE MUCCIOLA NATIONAL COMFORT

PRODUCTS

W. VANCE PAYNE INSTITUTE OF STANDARDS

AND TECHNOLOGYe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 4 C-O-N-T-E-N-T-S

AGENDA ITEM PAGE

Welcome . . . . . . . . . . . . . . . . . . . .5

Introduction and Agenda Review. . . . . . . . .7 Opening Remarks from Interested Parties. . . . . . . . . . . . . . . . . . . 13 Rulemaking Overview . . . . . . . . . . . . . 63

Test Procedures . . . . . . . . . . . . . . .104 Market and Technology Assessment, Screening Analysis, Engineering Analysis, and Preliminary Manufacturer Impact Analysis. . . . . . . .141

Lunch . . . . . . . . . . . . . . . . . . . .209 Energy Use Analysis, Markups for Equipment Price Determination, and Life-Cycle Cost and Payback Period Analysis. . . . . . . . . . . . . . . . . .265

Shipments Analysis and National Impact Analysis . . . . . . . . . . . . . .346 Notice of Proposed Rulemaking Analysis. . . .380 Discussion of Issues and Closing Remarks . . . . . . . . . . . . . .382

Adjourne20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 5 1 P R O C E E D I N G S 2 (9:03 a.m.)

3 WELCOME 4 MR. BROOKMAN: Good morning, 5 everybody. Welcome. 6 This is the framework public 7 meeting for residential central air 8 conditioners and heat pumps. 9 My name is Doug Brookman, and I'll 10 be helping to facilitate this meeting along 11 with all of you. 12 We are fortunate this morning to 13 have many representatives from the Department 14 of Energy. Thanks to all of you for being 15 here on time so we can get a start on time. 16 Do you wish to make welcoming

17 remarks here at the outset? 18 Ron Lewis. 19 MR. LEWIS: Good morning, everyone, 20 and thank you for being here. 21 First I want to note that in 22 trying to accommodate some requests to be suree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 6 1 to get this done before the ASHRAE conference, 2 when everybody would be tied up with that, we 3 hurried as best we could, and it didn't give 4 you much notice by the time we got it out the 5 door, and we apologize for that. 6 We were doing our best trying to 7 accommodate the requests, and unfortunately it 8 didn't leave as much advance notice time as we 9 would like. And sorry for that; I apologize

10 for that. 11 But we are glad you are here. And 12 we're glad we've got such good turnout. And 13 this is a very important rulemaking, and we 14 are very interested in your input, and getting 15 everything that you can give us for input to 16 make the right decision. And we look forward 17 to a very active day and good dialogue. 18 And we again thank you for being

19 here. 20 MR. BROOKMAN: Okay. So it's our 21 tradition to ask each person to introduce him 22 or herself. And say your name ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 7 1 organizational affiliation. 2 And not all of this will be 3 captured in the record, but we have a 4 registration list, so we will know who is

5 here. 6 But if you'd simply, I'm going to 7 go around the room, say your name and 8 organizational affiliation please. 9 (Attendees introduce themselves)

10 INTRODUCTION AND AGENDA REVIEW 11 MR. BROOKMAN: Thank you. 12 Okay, thanks again to all of you 13 for being here on time, and for showing up at 14 this meeting. 15 The Department of Energy counts on 16 this kind of consultation and participation to 17 figure out what to do, how to get this right. 18 And so they really appreciate your being here,

19 as do I. 20 All of you have a copy of the 21 agenda in your packet. In the packet also is 22 a whole series of very colorful descriptivee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 8 1 slides. We are going to be going through 2 those as the day proceeds here. 3 There are also some statements, 4 some submissions for the record from 5 individuals for your consideration. 6 I am going to take a quick run 7 through the agenda here, and then we are going 8 to proceed with the day. 9 I'm doing the first element there, 10 introduction and agenda review, right now. 11 Following this agenda review, I am going to 12 provide, we are going to provide, an 13 opportunity for any individual that wishes to 14 do so to make brief opening remarks about 15 issues that are of key concern to you. 16 We hope you will keep them brief. 17 We don't intend for you to read a lengthy 18 statement into the record. There are other 19 avenues to do that. And I guess four or five 20 individuals, six individuals, have asked the 21 department to speak, so we are going to 22 recognize those individuals first. Then anye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 9 1 others that wish to chime in, we'll ask you to 2 do so at that point. 3 Following those opening remarks, 4 we will have a rulemaking overview, and then 5 we will go from there to a description of test 6 procedures. We'll take a break mid-morning,

7 around about 10:45 or so. 8 Following the mid-morning break 9 we'll have market and technology assessment 10 screening analysis, engineering analysis, and 11 preliminary manufacturing impact analysis 12 descriptions. And all that information will 13 be in the packet that is provided to you, 14 those colorful slides. 15 We'll have lunch today around 16 about noon. And you are on your own for 17 lunch. When we get to it, we'll describe that 18 more fully. 19 Following lunch, energy use 20 analysis; markups for equipment price 21 determination and lifecycle costs and payback 22 period analysis; and other series of detailede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 10 1 descriptions on these analyses, plural. 2 And following that, shipments 3 analysis, national impact analysis. We'll 4 take a break mid-afternoon. And then we'll 5 also have more description on the notice of 6 proposed rulemaking analyses collectively. 7 Round about 3:30 this afternoon, 8 if we get there that fast þ there is a lot of 9 content here þ if we get there that fast, 10 there is yet another opportunity for any of 11 you to make closing summary kind of remarks, 12 things you wish to emphasize to the 13 department's benefit. 14 Questions and comments about the 15 agenda? 16 I'd ask for your consideration, as 17 we go along today, what I think is not much 18 more than common courtesy really. Please 19 speak one at a time. Please say your name for 20 the record. You don't need to say your 21 organizational affiliation every time. You 22 can just say your name, that will be enough.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 11 1 This gentleman here, Eric, will 2 have a complete transcript of this meeting, 3 court reporter present. So please say your

4 name for the record. 5 Keep the focus here if you would 6 please. Turn your cell phones on silent, if 7 you would. If you need to have a conversation 8 with someone next to you that is going to last 9 more than about 20 or 30 seconds, please take 10 it out of the room. It's disruptive. 11 And I'm going to ask you as best 12 you can to be concise, to share the air time. 13 There are a lot of people here, and there are 14 a lot of things people want to say. We want 15 to hear all of it. 16 I hope that you seize this 17 opportunity today. This is your opportunity 18 to start to influence these proceedings in a 19 way that benefits you. So please do that. 20 And finally I'm going to be cuing 21 people to speak as best I can by name. I also 22 wish to encourage follow on comments. It ise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 12 1 helpful for the department to hear the point 2 and counterpoint. So that is a little bit 3 challenging for me and for you, but we can 4 make it work. 5 So please help me to make that 6 work. We are going to be both cuing people 7 this week, and encouraging follow on comments

8 as well. 9 I think that's all I've got here 10 at the outset. I already said that the 11 general format is as follows. These slides, 12 which you have copies of, we will have a lead 13 presenter, and that lead presenter will be 14 going through the slides one by one, and 15 occasionally there is a pause with specific 16 questions. 17 So there is an opportunity for 18 question, answer and comment as we go along, 19 and that will be obvious as we look at the 20 slides. 21 Questions, comments, here at the

22 outset?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 13 1 OPENING REMARKS FROM INTERESTED PARTIES 2 MR. BROOKMAN: Okay, do you have 3 the list? So these individuals have asked to 4 speak here at the outset, brief introductory 5 remarks, perhaps summary remarks about issues 6 that matter to you. 7 And the department has listed them 8 alphabetically. And Karim Amrane is the 9 first person. 10 MR. AMRANE: Good morning. My name 11 is Karim Amrane, and I am vice president of12 regulatory and research at The Air13 Conditioning, Heating and Refrigeration 14 Institute. 15 The AHRI is a national trade 16 association of manufacturers of residential 17 and commercial HVAC equipment. HR 350 member 18 companies account for more than 90 percent of19 the residential and commercial air20 conditioning, space heating, water heating and 21 commercial refrigeration equipment 22 manufactured in North America.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 14 1 AHRI appreciates the opportunity 2 to provide input on the framework document for 3 residential central air-conditioners and heat 4 pump. 5 Our members have worked very hard 6 over the past 20 years to improve the energy7 efficiency of residential central air8 conditioners and heat pumps. Today central 9 air-conditioners and heat pumps are over 50 10 percent more efficient than what they were in 11 the early `80s. 12 These achievements are remarkable, 13 and gives credit to an industry that has been 14 pro-active in addressing environmental issues 15 such as ozone depletion and global warming, 16 global climate change.

17 AHRI looks forward to a full and 18 open rulemaking process. We believe that the 19 advanced notice of proposed rule is an 20 important step that should be included in the 21 rulemaking process as it offers an early 22 opportunity for stakeholders to providee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 15 1 feedback, comments and data to DOE.

2 We also look forward to a more 3 thorough and rigorous analysis by DOE. We 4 have seen anomalies during the last rulemaking 5 on residential central air and heat pumps that 6 if not corrected for this rulemaking would 7 result in a flawed standard. 8 DOE needs to step back and review 9 past analysis to understand where improvements 10 need to be made. For example there is 11 evidence that the incremental cost of $33512 between the 10 and 13th SEER, suite air13 conditioner, and DOE predicted was severely 14 underestimated. 15 Further, industry data shows that 16 equipment sales were down by 79 percent in 17 2007, while part sales increased significantly 18 suggesting that many consumers have opted to 19 repair older equipment rather than purchase 20 new products. 21 At the same time sales of full 22 air-conditioners have significantly increasede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 16 1 since 2006 when the 13 SEER standard became 2 effective. 3 These are indications that the 4 last energy conservation standard for 5 residential central air and heat pumps were 6 not economically justified for many consumers. 7 It also means that the energy 8 saving estimated by the DOE were probably

9 overstated as well. 10 AHRI intends to submit for the 11 record data that will support its claims. 12 In moving forward we urge the 13 department to fully consider the impact of 14 climate change legislation being debated on 15 Capitol Hill. The bill before the Senate 16 would set a hydrofluorocarbon HFC cap at 267 17 million metric tons CO2 equivalent in 2016 18 when this rule takes effect, some 39 percent 19 below estimated industry demand. 20 On the other hand, higher energy 21 efficiency, air-conditioners and heat pump, 22 require more refrigerant charge because ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 17 1 large operators and condensers. 2 As an example new 13 SEER products 3 require on average 20 to 30 percent more 4 refrigerant charge than the 10 SEER unit that 5 they have replaced. Therefore it is 6 imperative that DOE carefully study the impact 7 of climate change legislation on the 8 availability and price of HFC refrigerants. 9 There is a real possibility that price will 10 skyrocket, and that not enough refrigerants 11 would be available to meet the new energy 12 conservation standard. 13 Finally if adopted by DOE, 14 regional standard for central air-conditioners 15 and heat pump would present unique enforcement 16 challenges. While the current minimum 17 national standard has been effectively 18 enforced since the enactment of NAECA by the 19 industry, through its voluntary certification 20 program, the same will not be possible if 21 regional standards are promulgated. 22 Any regional standard above thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 18 1 base national standard will require 2 enforcement of product distribution and 3 installation. It is critical for the 4 development of a successful enforcement plan 5 that all interested parties such as 6 manufacturers, distributors, contractors, and 7 code officials be involved in the discussion. 8 AHRI looks forward to working with 9 the department and others in establishing a 10 workable and credible enforcement plan. 11 Thank you for the opportunity to 12 present our views. We will provide more 13 detailed comments in writing. 14 MR. BROOKMAN: Thank you. And the 15 department of course appreciates details and 16 specifics just as you describe there. That is 17 helpful today. 18 Paul, Paul Doppel, Mitsubishi 19 Electric. 20 MR. DOPPEL: As þ speaking today, 21 I'm speaking on behalf of Mitsubishi Electric 22 and the ductless products that we offer to thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 19 1 marketplace. 2 Three things that are important 3 for us in this rulemaking. One is, we would 4 still like to have consideration for a 5 separate product class for the ductless one to 6 one products. Again, they are significantly7 different in application from the central air8 conditioning systems. 9 There is another sort of caveat to 10 that in that most of the ductless products 11 today have incorporated an advanced technology 12 in compressors with inverter-driven 13 compressors, which was not on the list of 14 technologies being looked at by DOE, I think 15 it was on page 29 of the framework document. 16 We believe that the inverters and 17 compressors add a whole new dimension to how 18 comfort is provided. I went into a lot more 19 detail on that in my written comments.20 But because of this inverter21 driven compressor technology, testing should 22 be considered to be done in a differente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 20 1 fashion. We have not explored this with any 2 test laboratories yet, but one concept that we 3 have is maybe a continuous test, changing the 4 temperatures in the test rooms, and allowing 5 the system to adjust to the temperature 6 changes, thereby using its own controls to 7 change the environment. 8 Currently, there are a lot of 9 inconsistencies in the test procedures. In 10 one test procedure ductless products are 11 required to do a pre-purge and a post-purge, 12 which central air conditioners are not 13 required to do.

14 All the controls of the ductless 15 products are disenabled, and the products are 16 forced to be run like a simple unitary on and 17 off system, when these products are made to 18 run over a continuous span. So if there is 19 not a separate test procedure, then these 20 inconsistencies need to be corrected. 21 The multi-splits are a different 22 class. They have been incorporated in thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 21 1 1230 standard with the variable refrigerant 2 flow products. And those products, because of 3 the way their capacities and the way they can 4 be applied are more comparable to the central 5 air conditioning systems. 6 However, there is one very severe 7 penalty that they have to go through with 8 testing, and that is that they are required to 9 turn off one of the indoor units anytime the 10 test is þ or the compressor is run at minimum 11 speed. 12 If you compare this to if you had 13 a central air-conditioning system that was 14 also variable speed, there is no requirement 15 for that central air-conditioning system to 16 block any part of the coil, to do anything 17 other than run the system at normal. 18 But you have a multi-split, and 19 again it is required to turn one of the indoor 20 units off. So you are þ it's being tested 21 unfairly compared to another system. And we 22 feel that this inconsistency needs to bee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 22 1 corrected. 2 And we can provide information on 3 the differences we have seen on the testing 4 previously, and with this new requirement. So 5 we think that needs to be corrected also. 6 So just quickly in summary, we 7 still would like to see a separate product 8 class for the one to ones. We'd like to see 9 the testing inconsistencies done away with in

10 that. 11 We'd like more consideration being 12 given to the converter-driven compressor 13 systems, and testing inconsistencies for the 14 multi-splits, we'd like to see that corrected

15 also. 16 MR. BROOKMAN: Thank you. 17 MR. DOPPEL: Thank you.

18 MR. BROOKMAN: Talbot? 19 MR. GEE: Sure. Since the written 20 copies were provided, we'll spare everybody a 21 line by line reading of our comments. 22 I'm vice president of HARDI, whiche20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 23 1 is the Heating-air-conditioning-refrigeration 2 distributors, international. We represent 3 over 1,000 companies, 450 of which are 4 domestic. Wholesale distributors of heating, 5 ventilation, air-conditioning, refrigeration 6 products, accessory supplies, and controls 7 too; a pretty diverse group. 8 And frankly this is a pretty 9 unprecedented involvement for us, which is 10 part of the reason why our comments were made 11 a little longer, because we felt somewhat the 12 need to introduce ourselves to anybody who may 13 be seeing those. 14 But unprecedented due to the fact 15 that HARDI or its members have not been overly 16 involved in these rulemaking proceedings 17 before, but never before have we seen one that 18 maybe so directly could affect our segment of

19 the channel. 20 We feel it's important to point 21 out that our members recently polled showed an 22 average of 46 percent increase in base unitarye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 24 1 prices of central air-conditioning and heat 2 pump equipment since the last increase in the 3 standard. And while that is attributed to a 4 whole lot of different things, the fact 5 remains that, that is a significant increase 6 in base model prices. 7 Over that same time there has been 8 an average 12 percent decrease in unitary 9 sales by our members. And as referenced by 10 AHRI, we are seeing an increased business in 11 repairs of existing systems as versus 12 replacement. 13 Throwing that all in, our biggest 14 concern is that the DOE fully considers what 15 we've already seen in our industry before 16 making any drastic changes going forward, 17 because we are already having enough barriers 18 and obstacles to selling new higher efficiency 19 HVAC systems right now, and we have serious 20 concerns that are effectively getting closer 21 and closer to pricing out the average American 22 consumer, homeowner. The base level pricese20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 25 1 have increased so much, and the complexity of 2 the installations have gotten more involved, 3 too, to where there are serious disincentives 4 to replacing systems, and keeping on line long 5 old systems, legacy systems that are obviously 6 much less efficient than anything we've rolled 7 off the assembly line recently. 8 We have serious concerns about the 9 limitless unknowns and our belief that there 10 is a major enforcement issue with any efforts 11 to regionalize these standards. 12 We have worked very closely with 13 contractors organizations, and NATE, the 14 technical organizations, to try to help raise 15 the professionalism and the stature of the 16 best installers in this industry. And our 17 concern is, regionalizing in an unenforceable 18 environment will actually encourage all of 19 their competitors who may not be following all 20 the letters of the law. And it would really 21 set up an opportunity for bootlegging and 22 other activities that are frankly markete20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 26 1 driven, because consumers will be demanding 2 lower cost, lower installation cost. And to 3 some they would view that they were serving 4 their customers by working maybe outside of 5 what the written law may be at that given 6 point in time. 7 Secondly, we have some concerns 8 about what the ramifications of 9 regionalization might be on incentive 10 programs, not the least of which would be 11 Energy Star. How would these programs adapt 12 to a regional system where currently right now 13 14 SEER and 8.2 Energy Star levels, but if 14 those are not þ if there are higher minimums 15 in certain regions, what does Energy Star do

16 to address that? 17 Our members have benefitted 18 greatly from the Energy Star label, and do 19 everything we can to try to maintain the 20 integrity of that Energy Star label, and we do 21 have serious concerns that that integrity 22 could be in question if you regionalize it.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 27 1 And there are actually different Energy Star 2 labels across the country. 3 I would also say too that the 4 implications very specific to wholesale 5 distributors with unitary central AC products 6 relates back to the physical size of the 7 products. As they get higher in efficiency, 8 they increase in size. 9 There are basic logistic issues 10 that our distributors have had to deal with, 11 and it's added cost to the channel, not to 12 mention difficulties oftentimes for the 13 installers as well. So we also want to 14 reinforce that for the DOE's consideration, 15 because any look at increasing the standard or 16 anything like that is going to relate back to 17 an increase in the physical size, increase raw 18 materials, increase refrigerant charge, and we 19 do have concerns about long-term availability 20 of our new replacement refrigerants. 21 So in summary, we are happy to be 22 here. We are anxious to be involved in all ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 28 1 this. But we felt it was important to kind 2 of introduce ourselves somewhat because we 3 have not done this before, and we look forward 4 to working to highlight the very unique issues 5 to wholesale distributors in the middle of 6 this channel. 7 Thank you. 8 MR. BROOKMAN: Thank you. 9 The next person that requested to 10 speak is Charley McCrudden. 11 MR. McCRUDDEN: In the interests of 12 brevity I think I am going to just quickly 13 review my comments. 14 ACCA, we support the ANOPR phase 15 as part of this process. We feel that is 16 critical to finding the best possible solution 17 that is out there. 18 And secondly I just want to say 19 that we are very concerned with the 20 implementation and enforcement of regional 21 standards. This is one that will come down on 22 our members. We are the last people touchinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 29 1 the box. And as Talbot highlighted, we are 2 concerned with moonlighters with illegal 3 contractors who can bring what is essentially 4 a perfectly legal product outside an imaginary 5 border, and undercutting, and playing on an 6 unlevel playing field against our members. 7 We are very hopeful that we can 8 find þ we can come to a good responsible 9 conclusion to this rulemaking on time. 10 And we are happy to be here, and 11 looking forward to making contributions to 12 this process. 13 MR. BROOKMAN: Thank you very much. 14 Patrick O'Connor. 15 MR. O'CONNOR: Thank you. 16 MR. BROOKMAN: Thank you. 17 MR. O'CONNOR: Thank you very much. 18 I appreciate the opportunity to speak for a 19 couple of minutes. 20 I represent the American Supply 21 Association. ASA is a national organization 22 serving wholesale distributors and theire20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 30 1 suppliers in the plumbing, heating, cooling 2 and pipe valve and fitting industries. Our 3 members are the distributors and manufacturers 4 and manufacturers' reps of many products that5 DOE regulates, including central air6 conditioning systems and the heat pumps. 7 Our two principal concerns, issues 8 that we'll be commenting on in writing in 9 response to the framework document and 10 throughout the rulemaking, is the impact of 11 the regional standards on the distribution

12 channel. 13 The framework document recognizes 14 that there are three different distribution 15 channels essentially that move products from 16 manufacturers to consumers. Our feeling is 17 that regional standards are going to create 18 distortions in those distribution channels. 19 Currently we have what I would 20 call a national distribution channel, three 21 national channels. With regional standards, 22 we create now a series of sub-distributione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 31 1 channels. 2 Those channels are going to be 3 subject to price sensitivities. Because 4 regional standards are going to be based on 5 what I would call artificial state boundaries, 6 there is nothing to prevent product from 7 moving across those state boundaries, moving 8 from one region into another region. 9 Particularly there are price sensitivities. 10 We would hope that DOE would look 11 at those price sensitivities. 12 There is also the issue of 13 enforcement. Regional standards do not ensure 14 that there will be enforcement of those 15 standards within a region. We would expect, 16 for example, say in the Northeast, that there 17 will be some states in New England that will 18 choose not to enforce a regional standard in

19 those states. 20 Lack of enforcement again creates 21 distortions in the distribution channel. And 22 we would hope that DOE would look at that ine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 32 1 your economic analysis of regional standards. 2 We will be trying to assist you with that in 3 the comments that we submit. 4 I will say that we will be under 5 the gun in trying to meet your July deadline

6 to comment on the framework document. 7 Therefore I would echo the earlier document 8 that we would support the ANOPR process, to 9 provide for a more thorough robust addressing 10 of some of these key economic issues. 11 Thank you very much. 12 MR. BROOKMAN: Thank you very much.

13 Tom Roberts. 14 MR. ROBERTS: Tom Roberts with cfm 15 Distributors. I'm sure some of you are 16 probably wondering where is there a 17 distributor here. Why is there a small 18 distributor from the Midwest here. 19 But I guess maybe that is the most 20 interesting part is that this proposed 21 rulemaking affects people like me as you have 22 heard from my counterparts possibly as much ore20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 33 1 more than anyone else. 2 I also serve as chair of the HVAC 3 systems council for HARDI right now. So I 4 represent also those people. 5 And the demographics or the size 6 description of our company just happens to 7 about hit the average distributor in the U.S. 8 who performs this function. 9 And I too am going to summarize my 10 comments so I don't torture you with a slow 11 reading. But several things that really occur 12 to us are that the role of distribution, 13 whether it's an independent distributor or a 14 company owned distribution function, performs 15 that function of the dissemination of the 16 equipment; the proper matchup of the 17 equipment; and in effect the application of 18 split-system components. 19 And that role is somewhat complex, 20 and although we pride ourselves on having 21 relatively fast moving product through our 22 channel, we have long tails of slow movinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 34 1 items that last in the channel, and for us to 2 transmit the change to the contractor base is 3 always expensive, and it's always a cost that 4 seems to get overlooked. 5 The distribution role, and the 6 change effect in that role. So those costs I 7 think really need to get properly accounted

8 for. 9 Then we are also concerned, very 10 concerned, about the impact of the potential 11 for climate change legislation on the 12 availability of refrigerants, and what that 13 does to higher efficiency equipment. 14 We are very concerned about 15 regional standards. I think they make just 16 about as much sense as a state-by-state CAF 17 requirement. Why not have a corporate average 18 fuel requirement for each state? 19 It just þ it's one of those ideas 20 that sounds like a good idea until you look at 21 a climate change map and realize that the 22 shapes on that map are a whole lot differente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 35 1 than the state borders. 2 So we would like to find an 3 alternative to that because we don't believe 4 that is workable for all the reasons that Lou 5 stated previously. 6 And then the price, the pure 7 price. I go out on projects everyday with my 8 contractor customers, and I'm customers of

9 most of the manufacturers here. And I can 10 tell you that consumers are making bad choices 11 today. It's not possibly solely the cause of 12 the previous rulemakings, but because of the, 13 in our case, 45 percent increase in base model 14 costs, there are consumers that are making the 15 decision to continue to use a product that but 16 for that cost increase they would have 17 replaced with a much more efficient system at 18 a lower cost. And they are prohibited for 19 doing that for obvious reasons with their 20 household budget or business budget. 21 And so they are continuing to use 22 a product that while on paper it may look likee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 36 1 that old 9 SEER or 8 SEER or 10 SEER unit, it 2 isn't that bad. That 16-year-old 8 SEER, or 3 9 SEER or 10 SEER unit may be operating at 5

4 SEER or 6 SEER or 7 SEER. 5 So when you really drill down to 6 the street level and see what's happening, we 7 put people in the position to make bad 8 decisions if we are not careful. And that

9 concerns me a lot. 10 And unfortunately, the people who 11 can least afford to pay those continuing 12 energy bills are the ones that are making the 13 worst decisions. 14 We look for ways to sell high 15 efficiency equipment. There is no one in the 16 channel that wants to sell high efficiency 17 equipment more than the distribution side. We 18 make higher gross margins on higher efficiency 19 equipment, so why wouldn't we? 20 However, we see this tradeoff. 21 I'll give you one specific example. One of 22 the more popular systems right now for thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 37 1 clever consumer or contractor is a hybrid 2 system utilizing an electric heat pump and a 3 fossil fuel backup source. 4 And yet if you take þ if you look 5 at the example of making a minimum efficiency 6 requirement or a regional standard that 7 increases the efficiency of say the furnace 8 from an 80 percent to a 90 percent furnace, 9 even though that is not the subject of this 10 rulemaking, that may preclude the customer 11 from putting the hybrid system in if he only 12 has a choice of a higher cost component, a 13 minimum efficiency standard within the system. 14 So he is back to putting in a 15 system that actually will use more energy 16 because he has priced himself out þ the 17 regional standard or national standard has 18 priced him out from putting in a flexible fuel 19 system. And that we're really concerned 20 about, because that system has become very 21 popular and in the absence of a national 22 energy policy having a consumer make their owne20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 38 1 energy policy based on flexibility is a really 2 important decision. 3 So again, we are interested in 4 being a part of the process, and we know that 5 the desire for higher standards is well 6 intended. But we think that there are 7 unintended consequences of these decisions 8 that aren't fully understood at the 9 policymaking level. 10 Thank you. 11 MR. BROOKMAN: Thank you. 12 Those are all the individuals that 13 told the department in advance that they wish 14 to speak. 15 We want to provide also an 16 opportunity to others to do so. 17 Yes, why don't you come forward to 18 the microphone. And I'll start, though, with 19 Jim first. 20 Please say your name, everybody 21 that speaks for the record. 22 MR. CRAWFORD: This is Jime20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 39 1 Crawford, Training Company. And I did request 2 in advance. 3 MR. BROOKMAN: Sorry, we didn't get 4 your name. 5 Jim, go ahead. 6 MR. CRAWFORD: The point I'd like 7 to make, several points I'd like to make. 8 One is, the fact that we are in a 9 period of unparalleled uncertainty and 10 political volatility and we need somehow 11 collectively to work much more closely 12 together than we have in the past. There has 13 been a lot of þ here's an analysis. Throw it 14 over the wall in the past. 15 And that simply is not going to 16 work, and I won't go into details on that. I 17 think it is fairly obvious. 18 I will cite now a few facts, and I 19 will give the reporter these notes so he's got 20 the website links to some assertions that I'm 21 making. 22 The bills in Congress have beene20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 40 1 mentioned, and that simply cannot be2 overstated that the impact of Lieberman3 Warner, Boxer, Marky, can have on this 4 industry. And they will come home to roost at 5 exactly the time that this process will be 6 going into force. 7 If we look at some of the examples 8 of the volatility, aluminum prices are up two 9 to one in the last five years. It makes it 10 very difficult to make precise estimates of 11 the cost of a product. 12 Copper prices are up four to one 13 in the last five years. There is a national 14 epidemic of stealing condensing units to 15 recover the copper from the coils. 16 Natural gas prices for the 17 electric utilities are up by 50 percent in the 18 last five years. They are up about two to one 19 in the last six years. 20 Coal prices, coal being the 21 principal energy source for generation of 22 electricity, coal prices are up three to onee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 41 1 over the last five years. 2 Additional factors, the decoupling 3 of utility sales and earnings makes future 4 utility rates and consumer savings from 5 reduced energy consumption very uncertain. At 6 least seven states have considered or are 7 experimenting with decoupling. Others are 8 engaged in discussions through NARUC and

9 elsewhere. 10 So the volatility that we are 11 facing requires a very realistic view to the 12 precision that one can achieve with analyses, 13 and running wild guesses through a crystal 14 ball just gives you a crystal ball view of 15 wild guesses. And in the past that has been 16 treated as, oh, somehow or other an additional 17 dimension of precision came out of that 18 process, and it doesn't. 19 Thank you. 20 MR. BROOKMAN: Thank you.

21 Please. 22 MR. BRUNDAGE: Don Brundage,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 42 1 Southern Company. The last time we gathered 2 for this four-year round of fun, one of my 3 major concerns was the effect of higher 4 standards on the dehumidification capability 5 in hot humid climates. Those concerns are 6 even stronger now with some of the proposed 7 changes in building codes. The proposed IECC 8 2010 standard would dramatically improve the 9 requirements for windows and for building 10 envelope, reducing sensible load, providing a 11 much poorer sensible latent ratio. 12 And the fact is standard minimum 13 efficiency equipment will not þ with a home 14 built to those sorts of standards þ be able to 15 maintain proper humidity conditions without a 16 supplemental dehumidification system, which if 17 you built a second system in there rather than 18 an integrated piece of equipment that is well 19 designed, it is going to use much more energy 20 than a system specifically designed for it. 21 But your current test standard þ I'm not an 22 expert on this, but I think your manufacturerse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 43 1 would have a difficult time with the current 2 SEER test procedure the way it is written, 3 designing something with good dehumidification 4 capability that could meet the SEER 13

5 standard. 6 I would be much more þ I'm 7 officially neutral right now on regional 8 standards. I'd be much more enthusiastic if 9 Congress had in its wisdom allowed other 10 performance standards requirements other than 11 SEER, such as latent capacity in the bill. 12 But coming out of this process needs to be 13 products that are functional and work in hot 14 humid climates, which the current path we've 15 been on in the past just doesn't happen. 16 This is a complex issue, and I 17 don't know all the answers to it, but it would 18 appear to me that regional standards would 19 provide a good opportunity to address these 20 specific issues.

21 I know the manufacturers and 22 distributors have spoken a lot about thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 44 1 problems of that. To some extent it's sort of 2 like locks sort of keep honest people out. If 3 you have a state that enforces building codes, 4 and does their job properly, this will not be 5 a problem, because something that doesn't meet 6 the regional standard will not get a building 7 permit. 8 States that don't, maybe that's an 9 incentive for them to start enforcing what 10 they ought to do for public health and welfare

11 better. 12 There are a number of other issues 13 related to this that I will address in 14 comments, but one way or another, whether 15 through original standard or through a single 16 national standard, the humidity issues in hot 17 humid climates need to be addressed better 18 than they are currently. 19 Thank you. 20 MR. BROOKMAN: Thank you.

21 Please. 22 MR. FERNSTROM: I'm Gary Fernstrom,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 45 1 consultant to the Pacific Gas & Electric 2 Company. And I'd like to compliment the 3 industry for the 50 percent improvement in 4 efficiency of these products that has been 5 accomplished over the last 20 years. 6 However, in opening remarks I 7 heard a number of reasons why the current 8 standards or for that matter more rigorous 9 future standards are not merited. 10 These included lack of cost 11 effectiveness, and a number of other reasons. 12 So I would just like to agree with 13 the comments of the Southern Company, and say 14 out in California, we have a serious need for 15 a hot dry climate air conditioner, and we 16 believe regional standards are the only way to 17 get there. 18 We also believe that California 19 has done a good job of enforcing its building

20 standards. 21 So for the millions of consumers 22 that we serve, that have trouble paying theire20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 46 1 electric and gas bills, we believe there 2 should be more emphasis on improved 3 efficiency, and focus on the operational cost 4 of this equipment, rather than simply the 5 first cost. 6 If we expect to meet California's 7 climate change goals, and make our customers 8 able to afford to use the air conditioning 9 equipment they purchase, we are going to need 10 to find a way to make it more efficient. 11 MR. BROOKMAN: Thank you.

12 Steve Rosenstock. 13 MR. ROSENSTOCK: Steve Rosenstock, 14 Edison Electric Institute. 15 I just wanted to, again, 16 appreciate the department for its openness and 17 all the information that they are trying to 18 provide as soon as they can. 19 One issue that I know that we'll 20 be discussing that will be of concern to 21 utilities, it came up last time, is the issue 22 of the connection between SEER and EER.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 47 1 For many utilities SEER gives a 2 great annual type of information in terms of 3 energy usage, electric usage. But then there 4 is the EER issue, which at that test condition 5 is really kind of a better indicator of what 6 is happening on those peak days. 7 And for many utilities that are 8 planning or deciding about, what does the 9 future look like in terms of their needs for 10 generation if they are vertically integrated, 11 or if they are working with the regional ISOs 12 in terms of, there's regional planning in 13 terms of what are the region's needs in terms 14 of new generation. 15 The issue of EER, and the 16 connection or disconnection as it were between 17 higher SEERs and EERs is important to many 18 member companies, and I know that Energy Star 19 now has one of the metrics is not only SEER 20 and HSPF, but it's also EER for the Energy 21 Star heat pumps. 22 And I know that by law that DOE ise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 48 1 required to look at SEERs and HSPFs as we look 2 at higher and higher SEERs, and if there is 3 disconnect, where higher SEER units have flat 4 or even lower EERs, it might be time to 5 consider looking at EER requirements as part 6 of this. 7 Again, I don't want to add any 8 burdens or costs, but from an industry 9 perspective, we need to kind of keep track of 10 what is going on with EERs as you raise the

11 SEER levels. 12 Thank you very much. 13 MR. MANDYCK: Let me see, Lance

14 Delaura. 15 MR. DELAURA: Just very briefly, I 16 wanted to say the two separate energy utility 17 companies, Southern California Gas Company and 18 STG&E are fully supportive of the regional 19 standards concept, for all of the reasons that 20 Gary Fernstrom mentioned. 21 We also think it is very important 22 to include the EER as was just mentioned ae20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 49 1 minute ago. That is very important to us with 2 peak demand. It's a very large issue in 3 California. We think it's going to be an 4 issue for others across the country. 5 We think there are ways þ and we 6 can explore this as we discuss today þ there 7 are ways to strike a balance between the 8 regional standard. I definitely hear the 9 concerns of the manufacturers, and we work 10 with all of you guys, and we depend on you, 11 and I think to a certain extent you depend on 12 us. And my hope is that we can find a way to 13 make this work in everybody's best interest, 14 but I do think that the regional standards are 15 the right thing to do. 16 Thank you. 17 MR. MANDYCK: Thank you. 18 Harvey Sachs. Please speak close 19 to the microphone. 20 MR. SACHS: Harvey Sachs, ACEEE, 21 worrying about tipping my empty coffee cup

22 here.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 50 1 First I'd like to acknowledge the 2 process here and to thank everybody. 3 Second I'd like to echo the 4 comments of my friend and colleague, Jim 5 Crawford of TRANE, that the assumption that 6 analytical precision tracks with accuracy has 7 proven poorly founded, and it is important for 8 us to work on a process that gets us speaking 9 the same language and driving toward results 10 that will work for everyone. We are certainly 11 open to that. 12 I'd like to raise þ well, 13 secondly, we certainly support the concept of 14 regional standards. We have been thinking 15 about this for a number of years. 16 But I'd like to make two comments 17 in that regard. The first is, the test method 18 is busted. If we try to do this without 19 thinking about the test method, I believe we 20 are going to get ourselves further and further 21 into trouble. 22 Among other things it plays one20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 51 1 both hot dry and hot humid, is the strong2 difference between fuel-determined, fuel3 measured external static pressures and those 4 assumed in the test. 5 And among other things, we are 6 imposing a major challenge on the 7 manufacturers to produce equipment that both 8 works well on the test and rates well, and 9 actually serves customer needs in the field, 10 where we have typically 2-1/2 to perhaps 4 11 times as much external flow resistance as is 12 assumed in the rating method. 13 There are a lot of other problems 14 with it. We don't have to go into them now. 15 And I think I want to stop at that 16 þ well, one other little thought which is 17 just, if we are thinking in terms of the 18 rating method as the underlying foundation, we 19 open ourselves to consideration of regional 20 standards that reduce to regional rating 21 formulas, regional weighting changes that can 22 be normalized to a national SEER level,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 52 1 whether that is 13, 14, 19 or some other 2 number, and thereby preserve the ability of 3 manufacturers and incentive programs to market 4 nationally, while giving us the regional 5 differences in design and performance that 6 will matter in delivering efficiency including 7 necessary health and safety precautions for 8 all regions of the country. 9 Thank you. 10 MR. BROOKMAN: Thank you.

11 Other comments here at the outset? 12 Andrew Delaski. 13 MR. DELASKI: Andrew Delaski, 14 Appliance Standards Awareness Project. 15 Is this one? 16 MR. BROOKMAN: I think so. Mikes 17 are working better than normal today, for some

18 reason.

19 MR. DELASKI: You must know me as a 20 regular here. 21 First of all I want to 22 congratulate DOE on getting the fuel measuringe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 53 1 off the ground. I know it's a busy time for 2 the office, for the building technology 3 program, and particularly for the standards 4 program. 5 I think Ron told me that there are 6 now 35 rulemakings underway. What's the 7 latest count, Ron? Is it up from that? But 8 it's a busy time. 9 MR LEWIS: It's like 37 projects; 10 they are not all rulemakings. There are some 11 other things. 12 MR. DELASKI: One of your ways to 13 consult and make the work go more smoothly is 14 to consolidate your projects into one 15 rulemaking. 16 So I want to congratulate DOE on 17 doing a good job of sticking with its 18 schedule. I know meeting the schedule 19 deadlines are an imperative that has been 20 impressed upon the agency and upon staff from 21 very high up in the agency. I think it is 22 doing a commendable job.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 54 1 Both with respect to those items 2 that are þ all the items int eh schedule, 3 those that are subject to the consent decree, 4 and those that are subject to more recent 5 congressional deadlines. 6 I also want to take a couple of 7 minutes to provide my perspective and a little 8 bit of context for this particular rulemaking. 9 This is an extraordinarily 10 important rulemaking. Among the work the 11 department is currently undertaking in the 12 standards program, this rulemaking ranks among 13 the one or two top priorities in my view, and 14 to the impact on the nation potentially in 15 energy savings, energy consumption. 16 There are a lot of reasons why the 17 potential impact is big for the nation as well 18 as for the industry. You've heard discussion 19 of climate change legislation, and there are 20 very broad far-reaching potential impacts on 21 this rulemaking. 22 It stands to reason, I think wee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 55 1 all know, I don't have the data in front of 2 me, but air conditioners are a very large 3 portion of national energy consumption. 4 Residential central air conditioners remain, 5 I don't have the data in front of me as I 6 said, but I think it remains the single 7 largest residential electric consumption, and 8 it's certainly one of the top one, two or 9 three residential energy electricity consuming 10 products. 11 At the national level it rolls up 12 into a considerable portion of national 13 electrical consumption goes to air 14 conditioners. 15 It's also, as you have heard from 16 utilities that just spoke, a very important 17 contributor to peak demand. Central air 18 conditioners define summer peak. Anybody who 19 is on the north þ on the East Coast last week

20 knows that. 21 In my local paper they reported 22 the other day that the peak in NSTAR servicee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 56 1 territory was 4,100 megawatts on Tuesday, up 2 from our normal peak of 3,300 megawatts. 3 And that was because it was 98 4 degrees in Boston. 5 Air conditioners define summer 6 peak. It is incredibly important rulemaking 7 for addressing the peak level of demand in the 8 country which relates to the need to build new 9 power plants, the need to improve our 10 transmission and distribution systems, NERC, 11 the National Electrical Reliability Council, 12 has put out the call. We have an electrical 13 reliability crisis in this country over the 14 next 20 years as we look at how are we going 15 to address the need of increased peak demand 16 to address the need for increased transmission 17 and distribution. 18 Efficiency is a big part of that 19 solution. Air conditioners are the chief 20 contributor to peak electrical demand. This 21 will make a unique opportunity and play a key 22 role in how are we as a nation going toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 57 1 address this electrical reliability challenge 2 as NERC has defined it. 3 We've made tremendous progress in 4 air conditioner efficiency. Gary pointed out 5 a 50 percent improvement over the last 20 6 years, and that improvement goes, I think lays7 at the doorstep of the engineers of the air8 conditioner manufacturers, who have improved 9 products tremendously over the past 20 years. 10 Standards have played a key role 11 in driving that forward. It's clear that the 12 manufacturers care a lot about efficiency. 13 They care a lot about climate change; they 14 care a lot about the environment. 15 Look at their marketing materials. 16 Look at their websites. It's clearly part þ 17 unlike many other products, the efficiency is 18 a defining characteristic of air conditioners; 19 it's how you sell the product in significant

20 measure. 21 Not true for many other products 22 regulated by the department.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 58 1 So but at the same time

2 manufacturers have to meet the needs of 3 consumers for comfort, for cooling, to 4 broadcast and deliver the comfort needs, as 5 Southern Company pointed out; and they also 6 have to meet the builders' market, or that 7 part of the market that focuses primarily in 8 most instances on give me the thing that costs 9 the least; price remains a very important 10 driver in the marketplace, one that often 11 works at odds with improved efficiency. 12 The SEER 13 standard established 13 in 2001 was the result of the last rulemaking 14 on this product effective in 2006 made a big 15 contribution. We advocated strongly for that 16 standard, the coalition that I work with. It 17 was þ the industry came to embrace it. The 18 manufacturing side of the industry came to 19 embrace it first, Goodman supporting the 20 standard initially, the second largest 21 manufacturer by volume. Then the other 22 manufacturers in time, in the fullness ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 59 1 time, came to support that standard. In the 2 industry now as a whole, we today have the 3 standard in place, and it's making significant 4 contributions to energy savings. 5 Subsequent to promulgation of SEER 6 13, the industry has deployed a range of 7 efficient products, and I congratulate you on 8 that; it's a significant improvement. 9 Sine then the Energy Star program 10 is working. We are seeing products with SEERs 11 as high as 21. 12 As has been noted, the test method 13 is broken. It's not clear what the limits are 14 in terms of the current SEER test method, and

15 where that can take us. 16 The final reason I want to 17 emphasize why this rulemaking is particularly 18 important is that it's the first rulemaking in 19 which the DOE will consider using the 20 authority to establish regional standards as 21 established by ESA 2007. 22 Some argued for regional standardse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 60 1 in the last rulemaking. The Consumer 2 Federation of America for one argued for the 3 notion that we should have had regional 4 standards coming out of the last air 5 conditioner rulemaking. 6 Many of us argued for regional 7 standards in the furnace docket. Now thanks 8 to in very large parts to the actions of 9 Chairman Boucher, Chairman Dingell, the 10 ranking members on the Republican side, 11 Chairman Bingaman and his counterpart on the 12 Republican side, we now have regional 13 standards authority in the law in DOE. It's 14 incumbent on DOE to act on that authority in 15 this rulemaking to consider regional

16 standards. 17 Also that language specifically 18 was hammered out between the manufacturing 19 industry and ACEEE. The authority in the law 20 is now clear, and DOE has to act on that 21 authority to consider regional standards. 22 So in summary, we've made in mye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 61 1 view we've made tremendous progress in air 2 conditioner efficiency thanks in considerable 3 part to standards, but certainly not 4 exclusively to standards. 5 And we look very much forward to 6 participation in this process as we determine 7 where to go to next. 8 MR. BROOKMAN: Thank you.

9 MR. DELASKI: I also have a comment 10 on process, but maybe that is appropriate for

11 later. 12 MR. BROOKMAN: We will get to that 13 later, yes. 14 Other comments? I see I'm going 15 to let everybody go through first, then we 16 will return. 17 Other comments from individuals 18 who wish to emphasize a point or two at the

19 outset? 20 Okay, Jim, do you want to make 21 another comment? Jim Crawford. 22 MR. CRAWFORD: Yes, Jim Crawford.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 62 1 In response to a few comments about regional 2 performance of air conditioners, quite simply 3 some of the assertions made are not consistent 4 with the facts of how air conditioners 5 operate, and I think that collectively we have 6 got to run this thing to ground, because 7 otherwise we are going to be proceeding on 8 false premises. 9 Air conditioners have a remarkable 10 ability that they automatically without any 11 controls adjust themselves thermodynamically 12 in response to the load, providing higher 13 latent capacity when there is a high latent 14 load, and providing no latent capacity when 15 the indoor relative humidity is very low. 16 And that has to be recognized as 17 very important. Which is a different point 18 than part of what Don said, because there are 19 very definite changes taking place in building 20 loads, due to for example super insulation. 21 MR. BROOKMAN: Okay. So then let's 22 proceed then with the rulemaking overview.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 63 1 The slides, you have them in your possession 2 here, and Wes Anderson is going to lead off.

3 RULEMAKING OVERVIEW 4 MR. ANDERSON: Good morning, ladies 5 and gentlemen, my name is Wes Anderson. 6 I'm the project manager for this 7 particular rulemaking. And this is the first 8 of a series of public meetings. 9 And as I would like to emphasize, 10 we are looking for your comments, as some of 11 you have spoken so far. 12 What we are going to do today is 13 to give you our broad overview of our 14 analytical approach, methodologies, and on 15 energy conservation standards and residential 16 central air conditioners and heat pumps. 17 This is a forum for public 18 comment, so it should be a 60-40, 60 you, 40 19 us, to encourage you guys to þ we also want to 20 get your input as far as data, as some of you 21 have promised, your analysis, and some of your 22 hypotheses.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 64 1 As Doug mentioned earlier, in the 2 framework document as well as in this 3 presentation you will see blue boxes that will 4 be time for þ we'll present questions to you. 5 And we want your inputs, get your thoughts, 6 and on the issues for that specific question, 7 so that helps us organize our input data from 8 you. 9 Feedback: when you want to submit 10 comments, please, there is an email address 11 here. Also you can mail it by snail mail to 12 Ms. Brenda Edwards, who mostly views mail 13 already, and as far as notice, there are two 14 different addresses for courier, if you want 15 to have a courier deliver it, versus snail 16 mail or email. 17 With email if there is a comment, 18 please have a signature in there, so it's 19 proof of submission.

20 The docket number needs to be 21 placed for the RIN, or the Regulatory 22 Identification Number, needs to be on there toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 65 1 keep our records straight. 2 Very important, the comment period 3 of July 7th is also a holiday weekend, so be 4 cognizant of that, if you are doing 5 information through the post office. 6 This is another þ this is our 7 agenda for the day. 8 This slide talks about the reasons 9 why we are doing this. I want to emphasize 10 that this is a backlog rule-making. It's 11 under consent decree, so the schedule has to 12 be maintained.

13 The second bullet addresses the 14 historical statutory statements, and the final 15 paragraph gives you why we are doing it now. 16 This slide is sort of to give you 17 a correlation of how our analysis relates to 18 the EPCA requirements that were set forth for 19 DOE to look into. 20 For instance, the impact on 21 utility performance would be done in the 22 engineering analysis, and screening analysis.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 66 1 Each one of these seven factors will be 2 addressed on the right today. We will give 3 you, like I said, the overview so you will 4 have some understanding of what our approach 5 is. 6 Today, as I said, this framework 7 document presentation, this is a kickoff. 8 There will be subsequent meetings to this. 9 The reason for it is to give 10 notice to the public, and availability of 11 framework. Also the framework is on the web 12 page previously. 13 But there is, at the end of the 14 slide, there will be the web page address. 15 And if you have any questions or concerns, 16 some of you have called me about that, and we 17 are going to make those adjustments later on. 18 The presentation will be placed on 19 the web page as well as the minutes subsequent 20 to this meeting. 21 The web page is at the bottom of 22 this slide.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 67 1 These are the dates, the 2 milestones that we are trying to reach, or we 3 will reach. July 7th is the close of the 4 comment period, the advanced notice of 5 proposed rulemaking published in the fall of 6 2009. The ANOPR will be in the late fall of 7 2010, for final rule publication on June 2011. 8 And for which the effective date 9 is five years hence. 10 MR. CRAWFORD: Jim Crawford. Is 11 there any flexibility on that July 7th date? 12 That is very short notice for us to respond to 13 the many, many questions that are posed in the

14 framework document. 15 MR. BROOKMAN: Ron Lewis. 16 MR. LEWIS: As you know, Jim, we 17 are on a real tight schedule to try to get a 18 lot of things done, and this is only the

19 framework document. 20 So we established a date, and 21 trying to encourage everybody to get their 22 input in by then. Certainly if we get somee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 68 1 input in after that we are not going to ignore 2 it. It's trying to þ in trying to keep the 3 urgency to this, and encourage people to get 4 things in in a hurry, we have set those dates. 5 And in some cases, to move 6 forward, to get all the analysis done and get 7 all the reviews and approvals and all the 8 rest, those dates become important to have. 9 We can't do the analysis 10 significantly until we've got the input from 11 people, the analytical or the framework 12 document is theþ just the starting point. So 13 it's not as critical as it is when we get 14 further down the stream. When we get into 15 like the NOPR, if there have been any delays 16 we'd have very little time to adjust to it. 17 It's really to be able to consider 18 the input, and put it into our analysis. And 19 if we startedþ we don't have the time to do 20 re-analysis a whole lot if we get input that 21 changes directions. So we are trying to 22 encourage everybody to get the input in ase20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 69 1 early as possible. And as we get later down 2 into like the NOPR, we are going to have to be 3 pretty strict about it. 4 But on this phase, and looking at 5 the short time available, we certainly would 6 not ignore something that came in shortly

7 thereafter. 8 MR. CRAWFORD: Do you know the 9 people will be out of the office during this 10 time, for a week to 10 days, between now and 11 then, for the ASHRAM meeting?

12 MR. BROOKMAN: We have several 13 additional people who I think wish to comment 14 on this.

15 Tom and then John and then back to 16 Harvey briefly.

17 MR. BRUNDAGE: You mean Don?

18 MR. BROOKMAN: Yes. 19 MR. BRUNDAGE: Don Brundage, 20 Southern Company. 21 MR. BROOKMAN: Thank you, Don.

22 MR. BRUNDAGE: I echo the commentse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 70 1 of Mr. Crawford, because I'm in a lot of the 2 same meetings. 3 Also I'd like to make the point 4 that 10 days notice from the time of the 5 notice in the Federal Register to having a 6 meeting is just not acceptable, especially for 7 those of us who are not in the Washington 8 area. This is incurring significant 9 additional costs to my company for making last 10 minute travel arrangements. I would request 11 you go back to the usual 30 days notice on 12 meeting arrangements. 13 MR. BROOKMAN: Thank you. 14 John Mandyck. 15 MR. MANDYCK: I would just like to 16 þ John Mandyck from Carrierþ echo theþ I 17 appreciate, Ron, your offer of flexibility on 18 that date, and just echo the fact that the 19 department gave us less than 10 days notice 20 for 55 major questions that affect the future 21 of this industry. I can tell you our industry 22 will not be able to respond by July 7th. Ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 71 1 so we do need that flexibility to give you the 2 thoughtfulness and the data that is required 3 to answer the questions that you asked at the 4 thing. 5 MR. BROOKMAN: Thank you. 6 Harvey. 7 MR. SACHS: I also would support þ 8 Harvey Sachs þ I also would support modest 9 relaxation of that date, given the factors 10 that have been mentioned above, noting that 11 you are offering 1.5 months from Federal 12 Register notice to final remarks due, and then 13 a subsequent 15 months for your ANOPR 14 analysis. 15 That is striking only because in 16 the work that this industry has been doing on 17 commission of buildings we increasingly find 18 that a front-end investment of time in getting 19 a better understanding of everyone's 20 objectives has more than paid off in high 21 quality, better results, and more likelihood 22 of keeping the time span.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 72 1 So we think that there is some 2 transferability from lessons, from the complex 3 project management of construction to this 4 process, and again for that analogy we would 5 support some extension. 6 MR. BROOKMAN: Ron Lewis. 7 MR. LEWIS: I appreciate all those 8 remarks. And I again offer apologies for the 9 short notice. We were working desperately to 10 get this out before the ASHRAY meetings, which 11 were requested by many people, so that you 12 could have that opportunity also to gather 13 together and collectively share your thoughts 14 and concerns in that group format. 15 So the delays along the way were 16 not intentional, and we did our very best, and 17 it was a close call whether we were going to 18 hold this or not, and we decided at the last 19 minute that we would try to do that, and 20 certainly connected to that, then, extending 21 the comment period would be a rational thing

22 to do.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 73 1 So we don't have any problem with 2 considering that, and we may publish another 3 date or just the email list that we've got, we 4 may notify people of another date. 5 But it's a kind of issue where we 6 want to maintain a sense of urgency, and to 7 Harvey's point, we realize doing it right at 8 first, that is our preference as well. The 9 problem we have, especially in the backlog and 10 consent decree area, is it's a date certain we 11 have to deliver by, and any delays on the 12 front end, the cumulative build-up effect, 13 it's a tremendous effort to get these things 14 out the door by the time that is required. 15 So we are trying to keep the sense 16 of urgency in everybody's face as it is in 17 ours, because we are held under court order to 18 deliver these.

19 MR. ANDERSON: And also make sure 20 we get your information; that's very 21 important, especially your email address. 22 MR. BROOKMAN: I want to ask Ron,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 74 1 do you think you might know whether it would 2 be possible to extend the deadline by the end 3 of the day today, orþ

4 MR. LEWIS: Yes. 5 MR. BROOKMAN: Yes? Okay, that's 6 good to know. 7 So then I'll just go right down 8 the line here: you first, and then toþ 9 MR. DOPPEL: Ron, how is it 10 possible to know for sure that we are on your 11 email list? 12 MR. LEWIS: I guessþ I was just 13 talking to the general counsel here. We will 14 have to do a short announcement in the Federal 15 Register as well. But the more time effective 16 is to email everybody. So just make sure that 17 your email address is at the table here. Make 18 sure you leave your card and your email

19 address there.

20 MR. BROOKMAN: So that was Paul 21 speaking, and now Hung. 22 MR. PHAM: Hung Pham, Emersone20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 75 1 Climate Technologies. Considering ANOPR is 2 not until fall `09 I wonder if we could 3 request a little change in the procedure, is 4 that you know it would be more collaborative 5 if DOE could publish the comments after the 6 July receipt of those. 7 Traditionally we don't get to 8 review those until the ANOPR or even later. 9 MR. LEWIS: We will take that as 10 input, and then we'll have to make some 11 decisions back here, soþ

12 MR. BROOKMAN: A lot of these 13 process features are pretty well mapped out. 14 Kyle. 15 MR. GILLEY: I support the comments 16 made regarding the July 7th deadline. But I 17 also wanted to bring up one other date that is 18 of great concern to our industry, and that is 19 the effective date of the standard being June

20 of 2016. 21 June is not at all appropriate as 22 far as implementing an AC heat pump newe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 76 1 standard in the marketplace. We are in the 2 middle of a summer season, we're in the peak 3 season for air conditioners and heat pumps. 4 There needs to be some consideration given to 5 changing that June date. 6 MR. LEWIS: What would you 7 suggest? 8 MR. GILLEY: Certainly in the past 9 we have gone with a January date. I can't 10 speak for our side, but that seems to be more 11 reasonable from a Lenox perspective, not 12 something in the middle of peak summer season. 13 MR. BROOKMAN: Thank you. Andrew, 14 and then I'm coming to this side of the room

15 next.

16 Yes.

17 MR. DELASKI: So a few comments on 18 some of these process issues, I want to go

19 back to.

20 MR. BROOKMAN: Yes. These are 21 important, yes. 22 MR. DELASKI: Regarding the date, Ie20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 77 1 think it's fine to extend the date a week or 2 two. I think it's critical that the 3 department extend the date formally. I think 4 this sort of open, get-them-in-when-you-can 5 kind of notion, we are open to hearing your 6 comments whenever we can get them, I think 7 that doesn't serve the public and it doesn't 8 serve the department. There needs to be a 9 firm deadline.

10 MR. BROOKMAN: You want a formal 11 submission in the Federal Register or 12 something like that? 13 MR. DELASKI: That is my second 14 point. Which is that email lists don't 15 substitute for the Federal Register notice. 16 There are people who would like to be here 17 today who are not here, okay? Not everybody 18 is on your list. I don't know who is on your 19 list. It's not a matter of public record. 20 The email listþ I appreciate the 21 notice; I got the notice last Tuesdayþ some of 22 the folks in the room got the notice tooþ bute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 78 1 some folks here I think didn't get the notice. 2 There are a lot of folks who are not in this 3 room today who might have been here, if they 4 had had adequate notice. 5 So the email list is great; I 6 appreciate the early heads-up for those of us 7 who are on the inside, and we are all sitting 8 on the inside right hereþ that is useful. 9 But there are manyþ it's a public process, as 10 a matter of good public process, I think it's 11 a problem to not use the Federal Register. 12 That's why it exists. 13 So I would really strongly 14 recommend that you publishþ if you are going 15 to revise the dates, just revise the firm 16 date. The department is obligated to look at 17 those comments, and if you get in beyond that, 18 then you are kind of taking a risk, I think. 19 MR. BROOKMAN: Okay, Pat, and then 20 I'm coming back to thisþ 21 MR. DELASKI: I have a couple more, 22 Doug, but you can come back to me if you'de20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 79 1 like. 2 MR. BROOKMAN: Well, I'm sorry. 3 No, go ahead, say it now. 4 MR. DELASKI: On the issue of the 5 notice for this workshop, by my count it was 6 six days notice in the Federal Register. It 7 came out last Friday. That is not much 8 notice. I mean, it's better than we get on 9 the lamp proceeding, where the notice came out 10 after the workshop. 11 (Laughter) 12 MR. DELASKI: So you all should 13 count yourself lucky you're not a part of the 14 lamp industry. 15 But I would mention that my 16 understanding is that in that particular 17 docket, the department got two comments, one 18 from a group of advocates that I work with, 19 and one from the industry. Not exactly broad 20 public participation at that particular 21 juncture, and that was in the ANOPR phase of 22 the rulemaking.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 80 1 Now the department in the 2 framework document note, outlines as a 3 commitment to an open public process, and we 4 all agree with that. An open public process 5 is critical to this. But I don't think that 6 six days' notice achieves that objective of an 7 open public process designed to, as you ask 8 for in the framework document, to facilitate 9 and encourage participation. 10 I think thatþ for instance, I 11 spoke with staff from two states, state of 12 California staff, and public officials from 13 the state of California and the state of New 14 York. They would have liked to have been here 15 today, they told me, but they could not be 16 here today, because of travel restrictions. 17 If you are a state employee in California, and 18 you say, "Hey boss, I want to go to Washington 19 with three days' notice, the fares are 20 $2,000," the answer is, you can't. The 21 governor could approve it, but we are not 22 getting that kind of staff. As a civile20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 81 1 servant at the DOE you understand the 2 restrictions that the state employees face on 3 travel. It's a financial burden to a utility 4 company, but for state government officials, 5 you set up a burden that is insurmountable 6 with this kind of notice. 7 And that framework workshop, you 8 know, is a problem. But I suggest that at the 9 ANOPR or NOPR stage, I think we are talking 10 about really aþ something that is not 11 reasonable in terms of the definition of what 12 would be a reasonable public process, for what 13 as we've all talked about, a very important 14 rule-making. Those have got to be fixed. 15 I have a couple of ideas on how it 16 could it be fixed. One idea was that you 17 could have noticed this workshop two months 18 ago. Don't lose time on the schedule; notice 19 the workshop two months ago, notice it on 20 April 12th. I know the framework document 21 wasn't ready yet, but the framework document 22 didn't go into the Federal Register. Noticee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 82 1 the workshop, you have to stick to your 2 schedules, that would be one notion of how you 3 could do it. 4 Another suggestion would be the 5 same as Don's suggestion, which is just give 6 30 days' minimum notice. I don't think it 7 would have set us back that far, the 8 department back that far, if we had 30 days' 9 notice, and this workshop had occurred 21 days 10 from now, or 24 days from now, other than 11 today. And I think you would have had much 12 better participation from a broader set of

13 stakeholders. 14 My next comment, Doug, I'm 15 shifting topics here, but I have another one

16 for the 2015 date. 17 MR. BROOKMAN: Let's stay on this 18 frame, please. 19 Yes, Pat. 20 MR. O'CONNOR: Yes, just one 21 question. 22 MR. BROOKMAN: Say your name, Pat,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 83 1 for the record.

2 MR. O'CONNOR: Excuse me? 3 MR. BROOKMAN: Say your name for

4 the record. 5 MR. O'CONNOR: Oh, Pat O'Connor, 6 American Supply Association. Sorry. 7 Is there an electronic docket set 8 up for the framework document? And if so will 9 the comments that are submitted to the 10 framework document be available electronically 11 through that docket?

12 MR. ANDERSON: That was one of the 13 earlier questions. We are going to talk about 14 putting access to the comments. Generally we 15 justþ we'll talk about that later, but there 16 is a web page that has all the information 17 that you would want to find either on the 18 public meetings, the announcements, the 19 framework document or the Federal Register

20 note. 21 Everything that goes into the 22 Federal Register goes to this web page. Ite20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 84 1 says at the bottom of the page here.

2 MR. O'CONNOR: I understand that. 3 I want to know there will be electronic access

4 to all the comments.

5 MR. ANDERSON: Not all the 6 comments, no. 7 MR. O'CONNOR: Why? 8 MR. ANDERSON: That's justþ 9 generally we don't address all the comments, 10 even in the final rule. We address the

11 comments. 12 MR. O'CONNOR: I'm not talking 13 about addressing the comments. I'm talking

14 about access to the actual comments. 15 MR. BROOKMAN: Yes, the ones that 16 are submitted.

17 MR. O'CONNOR: The ones that are 18 submitted. Will they be electronicallyþ 19 MR. BROOKMAN: Let me recognize Ron 20 Lewis.

21 MR. LEWIS: We have never done that 22 to date. We are working to try to do that.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 85 1 We have not done that. We are not set up at 2 this point. We are working towards that 3 endpoint, and I can't promise you when that 4 is going to happen, but we are working 5 towards that as part of our activities right

6 now. 7 So we take your input and your 8 desire, and we note that, we agree with that, 9 and we are working towards that. 10 MR. BROOKMAN: Hey Ron, some people 11 are new to this proceeding it seems to me. 12 Maybe you could describe briefly what your 13 standard practice has been. 14 You respond toþ selectively, to 15 major comments, typicallyþ as the process 16 goes on; is that correct? 17 MR. LEWIS: Yes, the comments are 18 all considered. They are all looked at. 19 Most frequently they are aggregated together 20 where there is a commonality, where there are 21 things that fit together. They are addressed 22 many times, because they are duplicative,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 86 1 where there are several people with the same

2 comment. 3 And there is consideration given 4 to those thematically, rather than by the 5 person giving that input, and they are 6 addressed in the narrative in the ANOPR. 7 There are occasions when there is 8 a single commenter that has an issuer that no 9 one else has commented on, and that's noted. 10 Normally there is an attribution 11 in there of where comments have come form. 12 Mike Rivest from Navigant has been here for a 13 long time. I don't know if there is anything 14 else, Mike, that youþ 15 MR. BROOKMAN: Mike Rivest. 16 MR. RIVEST: I think the question 17 pertains to the availability of comments for

18 other commenters to see what each other have 19 written about. And that's typically been a 20 hard copy docket here at the department.

21 MR. BROOKMAN: Are all comments 22 that are received by the department, are theye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 87 1 available in hard copy through the 2 department? 3 MR. RIVEST: Yes, they are. 4 MR. BROOKMAN: They are? Okay. 5 I want to stay on these process 6 issues. You go ahead, follow on and say your 7 name please. 8 MR. POPE: Ted Pope. Ron, if I 9 could just put a sharper point on it, and I 10 think following up on what Pat was trying to 11 say, I understand you are working on probably 12 a formal process for access to the comments 13 on the website. But it seems to me it would 14 take very little effort for Brenda or 15 somebody on staff to simply circulate 16 informally the comments electronically 17 through the email list. 18 And I realize that is not the full 19 public process Andrew is talking about, but 20 as an interim solution until you get a more 21 formal process, I don't see why that couldn't 22 be done with virtually no effort at all, ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 88 1 I do agree with those folks that have made 2 the comment that we need to work together. 3 This is getting more complicated every time 4 we go through this cycle, and if we can see 5 each other's comments in real time I think it 6 will accelerate the discourse and result in a 7 better product sooner. 8 MR. BROOKMAN: I want to stick with 9 these process issues right now until we have 10 exhausted this comment. 11 Charley and then to Andrew. 12 MR. McCRUDDEN: Charlie McCrudden, 13 Air Conditioning Contractors of America.

14 Last week's heat wave sort of 15 drives home for my members, July 7th date is 16 going to be very tough. This is our busy 17 time, and my members don't sit in offices. 18 They are pretty much in vans going house to 19 house. So for them to provide me with their 20 comments on these 55 questions is something 21 they are going to have to do at night. 22 Then on Kyle's point about thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 89 1 June 2006 effective date, it's going to be 2 very awkward for my members to sell one 3 system one day in the middle of the busy 4 season, and then a much more expensive system 5 the next day. Because the questions that we 6 all solve here impact really my members, 7 because they are the face of the industry. 8 They are the ones handing the bill to the 9 homeowner. If they are forced to sayþ if a 10 consumer says to them, "My cousin just bought 11 a system last week, and only paid for the 12 basic system this much; what happened?" 13 It's my member who has to say, 14 "Well, there is this long process that 15 started back in 2008, and here is where we 16 are, and this is what happens." 17 So I think that there is probably 18 a much more appropriate date to make the 19 transition. I think in the middle of the 20 very busiest time of the year for us is much 21 þ 22 MR. BROOKMAN: Ron Lewis.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 90 1 MR. LEWIS: If you look at the 2 date, the mathematics, it was simply five 3 years from the time that it is required, that 4 we are required to deliver this, and that was 5 the time it said in the prior rule for 6 effective date. So we will certainly 7 reconsider that and take a look at it. 8 MR. BROOKMAN: Okay. Andrew, and 9 then I will come back to the two of you. I 10 want to see if we can summarize these

11 comments here. 12 MR. DELASKI: On the issue of 13 making the material on the website, on the 14 department's website, I think it's a great 15 idea. 16 I think it's important that the 17 department follow the principle that all the 18 public gets equal access to the material the 19 department is producing. I think using the 20 email list for notices is a fine mechanism. 21 If there is some delay for everyone to see 22 it, that is fine. But sending stuff just toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 91 1 some select group of stakeholders I think is 2 probably a problem from a public process 3 point of view. 4 It also strikes me that putting 5 PDFs up on a website isn't rocket science. 6 And I know you have internal processes that 7 are þ you can't just do things willy-nilly, 8 you have to go figure out who in the 9 department should process that. And I think 10 it's also notþ the technology, you put up 11 this framework document probably pretty 12 quickly, I guess putting up another 20 to 30 13 documents as PDFs is fine for the framework. 14 MR. BROOKMAN: Ron Lewis. 15 MR. LEWIS: I'm not going to go 16 into great detail of all the things going on 17 at DOE. But there are a lot of things that 18 we do with websites and securityþ there are 19 things that are complicating this. I have a 20 contractor looking at, that they're getting 21 comments off that we are working towards 22 that, integrating that with other largere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 92 1 initiatives along the way... I totally agree 2 with the desirability and the efficacy of 3 having those available. We are working

4 towards that. 5 MR. BROOKMAN: Robert, and then

6 Paul. 7 PARTICIPANT: Well, I tell you, one 8 convenience of having not been engaged in the 9 previous ones wasþ previous rule-makings on 10 this is, we didn't know that this incredibly 11 tight schedule was unusual. Because we had 12 real concerns about that, and we want to 13 point out not only the extension for these 14 initial comments, but also the effective 15 date, but specifically when you are talking 16 about regional standards, where you are not 17 looking at an existing bit of regulation that 18 you are tweaking, but really starting from 19 scratch, for us it's a whole new world as far 20 as how to pull up the analysis on that. 21 So thatþ I don't see how we could 22 possibly meet that July deadline either.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 93 1 But that effective date, I want to 2 tie into that that all the members of the 3 channel coordinate their marketing and sales 4 programs well in advance for that peak 5 season, and our members have to forecast 6 their inventoring and stocking requirements, 7 and so that even extends out the requirements 8 for that þ to happen even earlier. 9 And we already had matching 10 component system issues with the 13th SEER 11 transition which happened at the end of 12 January, so you can only imagine what it'd be 13 like during peak season. So then you may be 14 able to get the new standard condensing 15 system, but you may not have access to the 16 necessary matching components. 17 So again, we echo Kyle's and 18 others comments that that effective date 19 needs to be in off-peak times. 20 MR. BROOKMAN: Okay, thank you.

21 Paul. 22 MR. DOPPEL: Paul Doppel. Twoe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 94 1 thoughts on the implementation date, 2 effective date. That date in the past has 3 been for the manufacturers to change what 4 they're manufacturing, and not the consumer

5 or the contractor. The contractor doesn't 6 have to make that change from one day to the 7 next; the product is made before that. 8 So that's going to be the same? 9 Okay. 10 The second point, those of us who 11 import products would like to have 12 consideration given also to products 13 manufactured on the date could still be 14 brought into the country after, because with 15 things that go on in the ports, the last time 16 we had to have the product in country on the 17 effective date, andþ 18 MR. LEWIS: To that point. 19 MR. BROOKMAN: Ron Lewis. 20 MR. LEWIS: I'll have to check with 21 the general counsel. I believe we need to 22 refer to the definition of manufacture. Ie20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 95 1 think it's a clearly broad definition that 2 includes importation. So we'll have to check

3 that. 4 MR. DOPPEL: Well, and the last 5 time we did have to have the product in 6 country before January 1st, and again, we lose 7 control of that in being able to bring things 8 into ports, if there is a ports record, 9 things like that, then we could be severely 10 impacted on that. So we'd like 11 consideration given to that. 12 MR. BROOKMAN: So we are moving 13 towards the kind of content that we are going 14 to cover as a natural course as we proceed 15 here and during the course of this workshop. 16 And I just want to get these 17 overview comments on process issues and 18 limitations now, and then we will proceed 19 with the content that's stacked and

20 scheduled. 21 Harvey. I would like to make 22 these as brief as possible so we can move on.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 96 1 MR. SACHS: I would like to thank 2 our colleague for the suggestion that 3 comments be posted. And Ron, this really 4 winds up being a major bureaucratic issue for 5 the department. I think some of us will urge 6 you to post a link to an external site where 7 we can work to have all our comments posted. 8 We would much rather have you do 9 that, because we think it's much more 10 appropriate. 11 Since the hope has offered this, 12 and since the general has asked for greater 13 collaboration. 14 MR. BROOKMAN: Karim, and then Pat. 15 MR. AMRANE: I just wanted to 16 respond to Paul on the issue of importation. 17 It's really vague as part of the language. 18 So I think... it's really for importaters... 19 at the same time. 20 MR. BROOKMAN: Pat, you're next. 21 Thank you. 22 Final comments then on thesee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 97 1 process issues? The department I guess is 2 going to try then to give you an answer by 3 the end of the day on the submission date for 4 the comment related to this meeting, and 5 perhaps other things.

6 And then Andrew.

7 MR. DELASKI: I want to comment on 8 the effective date.

9 MR. BROOKMAN: Yes. 10 MR. DELASKI: Can you put back a 11 couple of slides please, Wes, to the slide 12 that shows the authority in NOPR where this 13 will be conducted. Can you give a citation? 14 MR. BROOKMAN: It's slide 12. 15 MR. DELASKI: We want the citation. 16 The slide #10. 17 So this will make me, as I 18 understand it, is being conducted under 42 US 19 Code 69-5(e)(3)(b). So this is the second 20 required rule-making under NACA for central 21 air conditioners. 22 I just want to read from that,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 98 1 this (e)(3)(b) section. It's very short, 2 Doug, I promise..

3 MR. BROOKMAN: Go ahead. 4 MR. DELASKI: The secretary shall 5 publish a final rule after January 1st, 1994, 6 and no later than January 1st, 2001, to 7 determine whether the standards in effect for8 central air conditioners and central air9 conditioning heat pumps should be amended. 10 Such rule shall provide that any amendment 11 shall apply to products manufactured on or 12 after January 1st, 2006. 13 Now I just want to highlight this, 14 so this is not confused with the rule that 15 was completed in 2001. The rule that was 16 completed in 2001 is that required under 17 paragraph A. So this is the language in 18 which we are operating. 19 So my question for the department 20 is, where is January þ where does June, 2016 21 come from as your effective date on this 22 slide?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 99 1 MR. BROOKMAN: Maybe we should 2 give the department a chance to figure out 3 how to respond to that, and thenþ and they 4 can do that a little later on in the day, 5 because they don't seem to have an answer at 6 this very moment. 7 Eric Stas. 8 MR. STAS: Eric Stas. I think the 9 answer from what you read there, Congress had 10 prescribed a five-year lead time. And 11 obviously you didn't hit the initial target 12 of the statute, that's why we're in the fact 13 of the situation. So this, what we propose 14 here reflects maintaining that five-year lead 15 time. 16 MR. DELASKI: I see. So it's a 17 question of interpretation. It doesn't say 18 five-year lead time. That's not what the 19 language says. It says 2001. You are just 20 taking that five-year lag, and you are saying 21 "Well, we missed it by a decade. We are 22 going to go ahead and push this one forwarde20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 100 1 by a decade as well." 2 MR. STAS: Right, but what it says 3 is, we shall issue an effective date or 4 whatever, it's five years. 5 MR. DELASKI: The lag, it doesn't 6 say five years, it specifies 2006. But I 7 think the point I'm trying to make here is 8 that you are not, under the plain meaning of 9 the law, you are not bound to any particular 10 date when this rule would go into effect. 11 Since January 1st, 2006, has gone by. 12 So myþ I think you have some 13 flexibility here to go to January start date. 14 I also think that the lag time between the 15 final rule and the effective date is a matter 16 that has to be inserted in this rule-making 17 to meet the criteria of 320.50. That is, 18 that you need to meet the criteria, taking 19 into account how are you going to maximize 20 energy savings, cost effective energy 21 savings, taking into account effective date, 22 and minimize manufacturing impact. We'vee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 101 1 heard a lot about manufacturing impacts being 2 high for the June date. So you'd have to 3 meet the NACA criteria, using date as a 4 variable. 5 And that may mean four-and-a-half 6 year lead time or five-and-a-half year lead 7 time, it may be a three-year lead time. I 8 think the department has to be open to 9 looking at what the appropriate lead time 10 would be to help you meet the NACA criteria. 11 MR. BROOKMAN: So one obvious 12 question would be, does the consent decree 13 stipulate, mandate, this stuff? Or is it not 14 mandated, stipulated? Ron Lewis. 15 MR. LEWIS: The issuance is 16 stipulated. The effective date is up to the 17 interpretation by general counsel. So we are 18 not going to answer that today. And most of 19 these issues, by the way, we are taking your 20 input, and there are things that we still 21 don't have the answers for, and we are going 22 to have to get back to you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 102 1 MR. DELASKI: I think the good news 2 on this is that it gives you flexibility to 3 address some of the concerns that you are 4 hearing today about minimizing some impacts 5 on the industry. 6 MR. LEWIS: That's why we have our 7 crack legal staff here, to hear your input. 8 MR. STAS: Eric Stas, DOE. We want 9 to encourage everyone to give us their 10 comments or detailed comments on this issue, 11 and what your flexibility is. Is it a 12 January 1 date that is best? Is it something 13 in the spring, do you want to move closer to 14 that five-year period or some other period?

15 MR. BROOKMAN: Thanks to all of 16 you for commenting. This is useful, useful 17 comment for the department to hear. 18 Now then let's proceed with the 19 slides. 20 PARTICIPANT: Shall we go to test 21 procedures with Sriram's source on it? 22 MR. BROOKMAN: Yes, let's do that.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 103 1 Sriram is up next.

2 TEST PROCEDURES 3 MR. SOMASUNDERAM: Good morning. 4 My name is Sriram Somasundaram. 5 As with any products standards rulemaking, we 6 have to make sure that the product has a 7 relevant and updated test procedure in the

8 books. 9 For this particular covered 10 product of central air conditioners and heat 11 pumps there was a test procedure final rule 12 published last Octoberþ October 22nd, 2007, 13 and the test procedure itself is listed in 10 14 CFR 430, subpart B, appendix M. 15 Since then, EISA 2007, the Energy 16 Independence and Security Act, amended EPCOT 17 to direct DOE to consider updated test 18 procedures for any products whose standards 19 were going to be revised or updated before 20 2010, or by 2010. 21 And therefore this product falls 22 under that amendment, and EISA requires DOEe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 104 1 to include standby mode and off-mode energy 2 consumption within the test procedure. 3 It also directs DOE to include 4 these criteria in the standard þ in the 5 efficiency descriptor itself while setting 6 the standards, or independently as a separate 7 measure of the standard rule-making. 8 DOE understands that the standby 9 mode and off mode energy consumption for the 10 case of the central air conditioners and 11 heat pumps means it is the energy consumed by 12 the equipment when essentially the equipment 13 is off, turned off, or on a standby mode, 14 which means that when the equipment is not 15 providing heating, cooling, or ventilation. 16 Finally, I wanted to say that DOE 17 expects to propose an amendment to the test 18 procedure as required by the amendment to 19 EPCOT, and as you know, the timeline for test 20 procedures final rule is before the NOPR, 21 before the standards rule-making is 22 published, which as you saw in the timelinee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 105 1 slide, was fall of 2010. 2 So what I wanted to clarify here 3 on the last bullet was that DOE expects to 4 publish a proposed rule for test procedure 5 later in 2009, and then a final rule by 6 October 2010, so it'll precede the NOPR 7 publication of the standards rule-making. 8 MR. BROOKMAN: Okay, Karim on this 9 point first, and then to Don. 10 MR. AMRANE: Karim Amrane, HOI. 11 We have a very different 12 understanding of the Energy Policy Act with 13 respect to standby power for central air. 14 In fact there is no mention of 15 central air in the Energy Policy Act. So I 16 guess I'm not sure why DOE is interpreting 17 the legislation as being mandated to look at 18 standby power where they are not listed at

19 all. 20 And I hope that my friend, Harvey, 21 will support me here, because we worked 22 together at removing central air from thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 106 1 language in the bill. 2 MR. BROOKMAN: Thank you. 3 I see we are looking at the

4 statute here. 5 Do we have other comments of this 6 ilk while we are doing our research over 7 here? Please, Don, and then I'll come to 8 you, Ted, I believe. 9 MR. BRUNDAGE: Don Brundage, 10 Southern Company. 11 Just a quick comment on the test 12 procedure issue. I was ready to jump up and 13 object after reading this text here. 14 What you just described on what 15 you are going to do for test procedure is 16 very reasonable, but it is not what you have 17 on the slide, what is itþ can this bullet be 18 corrected on the version that is posted on 19 the DOE website? 20 Because youþ it really makes no 21 sense to have a test procedure that is not 22 integrated, and part of the NOPR. Becausee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 107 1 that is the definitionþ that is the ruler for 2 measuring efficiency, and that needs to be 3 done by the new test procedure in the NOPR. 4 And that's not what this bullet says. It 5 says you are going to propose amendments by 6 October, 2010, not have a finished test 7 procedure that you extend the NOPR for to the

8 fall of 2010. 9 MR. BROOKMAN: I believe Sriram 10 said a proposed amendment by 2009, and then þ 11 MR. SOMASUNDARAM: Final rule. 12 MR. BROOKMAN: þ a final rule by

13 2010. 14 (Simultaneous voices)

15 MR. SOMASUNDARAM: We'll correct 16 it. 17 MR. BROOKMAN: So we will correct 18 that slide. Thank you for calling that to 19 our attention. 20 Other comments on this slide, #16? 21 Yes, Ted, please. 22 MR. POPE: Ted Pope. I just wante20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 108 1 to confirm my understanding that EISA 2007, 2 that DOE is required to assess the full test 3 method, and not just the standby mode 4 component. I think that is what the slide 5 says, but while you are looking at the 6 language I just want to be clear on that. 7 MR. BROOKMAN: Can you respond to

8 that one?

9 MR. SOMASUNDARAM: Yes. You mean 10 the EISA requirement? The EISA requirement 11 is specifically to look at this aspect into 12 any of the covered products. And the 13 relevant test procedures. In other words to 14 specifically address the standby mode and 15 off-mode energy consumption as a factor. 16 MR. BROOKMAN: So I see Michael 17 Kido. 18 MR. KIDO: Yes, there is actually, 19 if you look at EISAþ I can give you precise 20 citationþ 21 MR. BROOKMAN: You can't hear him? 22 Michael, you've got to speak up a little bit.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 109 1 MR. KIKO: All right, can you hear

2 me now? 3 MR. BROOKMAN: Yes, that's good. 4 MR. KIKO: If you go to EISA, there 5 isþ if you looked at 121 stack 1562, that's 6 the precise site, there is a section covering 7 test procedures, and itþ there is a section 8 in there that basically states that standby 9 mode and off-night energy consumption have to 10 be considered as part of the test procedure

11 measurements. 12 So if you would like, I can show 13 it to you right now.

14 MR. SOMASUNDARAM: I have the 15 document here. And actually if you go 16 further down there is a section that talks 17 about deadlines, and then lists the product 18 for which DOE has to do theþ has to look at 19 the standby power, and they list the dates by 20 which DOE has to issue a final rule on test 21 procedures. 22 And central air are not listed.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 110 1 MR. KIDO: That is correct. Those 2 are specific deadlines for those specific 3 products. But there's still the requirement 4 that standby mode and off-mode be considered 5 as part of the test procedures that the 6 department promulgates. 7 So that isþ

8 MR. BROOKMAN: For all covered 9 products. 10 MR. KIKO: Right, for all covered 11 products. This is an outgrowth of that 12 particular provision. 13 MR. BROOKMAN: Maybe since there is 14 a statutory interpretation and text involved, 15 the two of you could put your heads together 16 at the break, the coffee break, and anybody 17 who wishes to join you can huddle right over 18 here next to the door, and maybe you can 19 arrive at a shared interpretation at that 20 point. 21 Hung, and then to Harvey. 22 MR. PHAM: Hung Pham, Emersone20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 111 1 Climate. 2 Again, that issue, I thought the 3 test procedures today does have an on-off 4 cyclic test, and I think it does reflect that 5 today, because when we run those tests today 6 it's measured. 7 I wonder if the department has

8 looked at that? 9 MR. BROOKMAN: Can you respond to 10 that one, Sriram?

11 MR. SOMASUNDARAM: I am not sure of 12 the particular intricacies.

13 MR. BROOKMAN: Your tests show that 14 those features are included?

15 MR. PHAM: Yes. 16 MR. BROOKMAN: Karim. 17 MR. AMRANE: This is Karim again, 18 and I second what Hung is just saying. 19 That's correct, it is. And maybe Brian 20 Dougherty from NIST can here also testify to 21 that as well, because he writes with this 22 procedure.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 112 1 MR. BROOKMAN: Brian, do you want 2 toþ just find a microphone, and let us know 3 what you got. 4 Brian, your name please. 5 MR. DOUGHERTY: They are correct. 6 Brian Dougherty at NIST. There is a cyclic 7 test procedure to give the C sub D value, and 8 that is 20 percent on, 80 percent off. So 9 that standby period of that 80 percent is 10 accounted for in the C sub D. 11 MR. BROOKMAN: Thank you. 12 MR. DOUGHERTY: So it's 13 incorporated into SEER and into HSPS. 14 MR. BROOKMAN: Explain to us what 15 the confusion is. Where are people confused? 16 I'm serious. 17 MR. DOUGHERTY: I mean standby 18 power is a big issue. So it just gets 19 globally thrown across. But certain test 20 procedures do cover it, and this is one case 21 that it is. 22 MR. BROOKMAN: Your name, thise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 113 1 gentleman first, and then we'll go around. 2 This gentleman here. 3 MR. McCULLOUGH: Bill McCullough 4 with Lenox. 5 One of the points of confusion I 6 think is for an air conditioner, many times 7 the standby power is in the furnace, and 8 there is a transformer that provides power 9 for the control side. 10 This is focused on air 11 conditioning and heat pumps, and so that part 12 gets hidden. 13 MR. BROOKMAN: Okay, your name, 14 please? 15 MR. KELLER: Fred Keller, Carrier. 16 And I think part of the confusion is that the 17 current standard includes the standby power 18 when the unit is in the operating mode. So 19 the unit can cycle on and off, the control 20 system is still powered. But it does not 21 include the power for like the heating period 22 of time when you are in theþ if it's thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 114 1 heating mode, you have got the cooling system 2 completely turned off. It doesn't include 3 that power in the number. 4 MR. BROOKMAN: Okay, Andrew. 5 MR. DELASKI: It strikes me that if 6 the test method includes standby and includes 7 the documentation, that the department would 8 come to the conclusion that no revision is

9 needed for the test method. 10 So this is simplyþ it strikes me 11 as being a data question that could be 12 answered just through analysis. But the 13 department under the law is compelled to 14 answer that question. 15 MR. BROOKMAN: Harvey, I dropped 16 you out of the queue. I'm sorry, you're

17 next. 18 We have specific questions we wish 19 to put up, some of which will lead us towards 20 these answers. But Harvey go ahead, and then

21 we'll move on. 22 MR. SACHS: I want to defer gettinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 115 1 þ this is Harvey Sachsþ I want to defer 2 getting back to Karim on his question to me 3 about last year's conversations. But in the 4 meantime, what strikes me about the test 5 procedure questions, and this goes on what 6 Don and Hung I think both have alluded to is, 7 the test procedure, the rating method, is 8 absolutely key for the analysis. It is the 9 yardstick, and this is intimately tied up 10 with the regional questions. 11 If we are going to do a hot dry, 12 which is shifting the bin hour waiting to 13 some economic value, that is absolutely key 14 for any further analysis, and I just do not 15 understand why the department has not 16 included this in its framework. 17 MR. BROOKMAN: So let's then, in 18 your comments, if you would, please, make 19 sure and describe fully how the departments 20 should sequence these things. 21 Gary. 22 MR. SACHS: Oh, we will addresse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 116 1 that in large type, sir. Thank you. 2 MR. FERNSTROM: So Gary Fernstrom 3 for PG&E. I'd absolutely like to agree with 4 Harvey. Harvey stated earlier the test 5 procedure was broken, and we need to 6 reevaluate it in order to get the information 7 to determine the performance of this 8 equipment in the various climate zones that 9 we would like to see its efficiency improved. 10 MR. BROOKMAN: Karim. 11 MR. AMRANE: Karim Amrane, HOI. If 12 you want to re-evaluate the test procedures 13 the way you want to re-evaluate, Harvey, I 14 mean this is going to requireþ it's not going 15 to require one month or two months; it's 16 going to require years. So I don't see how 17 you will be able to finish this rule-making 18 in three years, honestly. 19 So let's stop the discussion and

20 make sure that we understand what we are 21 talking about here. We are talking about the 22 revamp of the test procedures; we are talkinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 117 1 about years. 2 So if you want to do that, then we 3 are not going to come up with new efficiency 4 standard by 2016. I mean it's not going to 5 happen. 6 MR. BROOKMAN: Harvey. 7 MR. SACHS: I appreciate Karim's 8 comments. I think that we have a lot of 9 variables to consider, including lead time 10 for design, including the rating method, to 11 arrive at 2016. 12 If the benefits are important 13 enough we might think that late 2016 works. 14 But I think that these issues are important, 15 and to defer this may give us the wrong 16 outcome in terms of stringency versus waiting 17 methods, where we are thinking stringency 18 will satisfy hot dry needs or hot unit 19 issues, when they are just not related as far 20 as I can tell to a higher SEER. 21 So I think that I speak for a 22 number of people in believing that if wee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 118 1 don't address the rating methods in some way, 2 and understand their impact, we are really 3 beating our drums, and not going to achieve 4 any meaningful gains either for the 5 manufacturers or the energy budget. 6 MR. BROOKMAN: I want to recognize 7 Ron Lewis. But I'm thinking at this point 8 that perhaps some of you are more empathetic 9 towards the department's positions.

10 Ron. 11 MR. LEWIS: I just wanted to 12 correct that the focus date is not 2016; it's 13 2011, because that's in the consent decree. 14 That's when we have to issue this by, so 15 that's what our eye is on, is delivering 16 that, the effective date with the help of GC, 17 we will find out what our flexibility is 18 there. But that has no impact on what we 19 have to accomplish by 2011 in issuing it. 20 The test procedure on AC has been 21 updated probably more frequently and more 22 recently than almost anything else that wee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 119 1 have got, and there has been input on that. 2 MR. SACHS: And we were invited not 3 to participate, if I might interrupt, in the 4 test procedure update, last round. Harvey

5 Sachs. 6 MR. BROOKMAN: So Ron, please.

7 MR. LEWIS: So what would be most 8 helpful is, in this dialogue that has been 9 going on here, is specifics of what people 10 feel are necessary and not just a general 11 kind of approach, but if there are things 12 that you think are missing, or things that 13 you think we need to do specifically, to give 14 it to us in specifics and not generalities. 15 MR. BROOKMAN: Just to confirm, 16 Ron, you anticipate that the timetable that 17 Sriram laid out is doable? 18 MR. LEWIS: The time that we have 19 that's limited, and I think it's been 20 reinforced here that in order to move forward 21 with a standard, you need to know the test 22 procedure, and that the tradition over thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 120 1 last 10 years, I guess, maybe longer than 2 that, I don't know before that, was to have 3 the test procedure, the final rule, done 4 before the NOPR, before the standard was

5 done. And that was the model that we're 6 working by, and that is in the report to 7 Congress, I believe. 8 So that is the model that is up 9 there, to have that accomplished by then. So 10 to get that accomplished, to have time to put 11 out a NOPR on a test procedure, get comments, 12 be able to respond to that and get a final 13 rule out in time, we are in a crunch. There 14 is not a whole lot of time to look at. 15 So if you have issues, you have 16 specifics, it's very important that you lay 17 those out early, because we have such limited 18 time. 19 MR. BROOKMAN: Okay, so I have 20 several people who wish to speak. Lance and 21 then Paul and then Jim. 22 MR. DELAURA: This is Lance. Ie20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 121 1 absolutely agree with what was said in terms 2 of the test procedure being updated. It's 3 really the essence for each of the regions. 4 There really needs to be a specific testing 5 method that matches the regions. 6 We will file more about this in 7 our written comments, but a couple of 8 thoughts. We mentioned EER earlier, that we 9 think that is essential. The test protocols 10 should accommodate other technologies beyond 11 air-cooled expansion unitary equipment. 12 We think the protocols should 13 reflect a more realistic static pressure. 14 And then there is a whole series 15 of issues in terms of rates for the area that 16 this is going to be considered. So are there 17 time-of-use rates in effect for those areas? 18 California is one of the areas that is 19 working with time-of-use rates that creates a 20 different scenario. 21 There is the time value of energy 22 that is to be considered. Is energy on-peak,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 122 1 off-peak, those sorts of things. So there is 2 a lot of detail to get into. 3 But we will submit, I think the 4 other California utilities will do the same, 5 detailed explanations and recommendations 6 along these lines. 7 MR. BROOKMAN: Thank you.

8 Paul. 9 MR. DOPPEL: Paul Doppel. And 10 while we are on test procedures I'd just like 11 to reiterate that there are several issues12 where the ductless mini splits and multi13 splits have inconsistencies with central air 14 conditioning products in the test procedure 15 that need to be corrected by the 2010. 16 MR. BROOKMAN: Thank you. And so 17 the department really requests specifics, and 18 specifically the fixes, I think. 19 MR. DOPPEL: Those will be 20 provided. 21 MR. BROOKMAN: Jim. 22 MR. CRAWFORD: Jim Crawford. Ie20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 123 1 want to agree with what I thought Harvey was 2 saying earlier, and the first thing is, if 3 these changes we are talking about, if these 4 are changes that are going to affect how one 5 measures and establishes the efficiency 6 performance under the law, then they are 7 going to impact every aspect of the analysis 8 process. 9 And if we went so far as to 10 incorporate some of the thoughts that the 11 last speaker suggests, we probably could be 12 working on this for another 10 or 15 years. 13 And until such time as we know 14 what changes the department is proposing on 15 the test procedure, it's virtually impossible 16 for us to intelligently comment on those 17 changes. 18 And that has got to be resolved 19 before, again, before you can go very far 20 with the analysis process. If you take the 21 discussion that has been floating around here 22 for the last 20 or 30 minutes, if all thosee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 124 1 factors have to be considered, you need to 2 haveþ you need to be at your final rule on 3 the test procedure probably two to three 4 years before your final rule on the product 5 itself. 6 MR. BROOKMAN: So let's leave it to 7 the department, then, to define looking 8 ahead, how they intend to address the test 9 procedure issue, what their timetable would 10 be, what the steps they are going to take 11 are, and I'm going to suggest that we move to 12 the next slide, and try and answer the 13 question so we stay fairly much on track here 14 this morning. 15 And Sriram, you have a comment

16 before we move to 17?

17 MR. SOMASUNDARAM: Yes. Just to 18 add to what Ron Lewis was saying earlier, DOE 19 has contracted with NIST toþ and Brian 20 addressed this issue earlierþ to help us get 21 the updates to the test procedure done in 22 time.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 125 1 So we do have a task for NIST to 2 give us all the updates, both from the 3 industry standpoint, and also from the 4 regulatory standpoint, and it needs to be

5 addressed. 6 MR. BROOKMAN: Ron, and to address 7 this issue, DOE will lay out a schedule or a 8 set of steps that it intends to follow? Or 9 is it just something that NIST is going to

10 do? 11 MR. LEWIS: We will take theþ NIST 12 is working in a support role to help us to do 13 what we are responsible for. So it's not 14 NIST's responsibility to do this. And we 15 will þ we have to have a plan to act to. So 16 we are taking all the input, and although 17 this is very helpful, a lot of the input, we 18 are not going to have the answers to 19 everything right away. We are going to take 20 all the input and go back and re-huddle, and 21 take a look at what we have heard today, and 22 take a look at where we are and where we goe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 126 1 from here. 2 So there are a lot of things that 3 are variable. That is the reason for this 4 public meeting is to get this input, so we 5 can go back and take a look at it, and get 6 comments on what weþ our starting point. 7 This is the starting point, and 8 the starting point only. So we have laid out 9 what our thoughts are right now, we are 10 getting input, and then the natural process 11 is to go back, consider all the comments 12 given, and devise our plan from here forward. 13 MR. BROOKMAN: Thank you. 14 Okay, so then, Don, final comment 15 before we move to slide #17. 16 MR. BRUNDAGE: Yes, Don Brundage, 17 Southern Company. 18 This is one of those things that 19 it's hard to figure out where to fit in but 20 may simplify the discussion of test procedure 21 changes. 22 One of the comments in discussinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 127 1 this issue in the state of Florida, and I 2 have discussed it with Andrew also, is that 3 if you haveþ for health and safety reasons 4 a local jurisdiction wants to establish a 5 minimum sensible ratio for equipment sold in 6 the area, not to try to pre-empt NACA on 7 efficiency, but to set performance standards 8 to make sure that public health and safety is 9 protected, is that allowed under NACA? Could 10 a state not allow certain NACA limited 11 products as part of its building code that 12 did not have, say, adequate dehumidification 13 capability? 14 If the department would clarify 15 that, some of the need for dramatically 16 changing the test procedure might go away if 17 the states were provided flexibility to not 18 allow equipment that is still suited to meet 19 the cooling needs in the local jurisdiction. 20 MR. BROOKMAN: Okay, thank you,

21 Don. 22 Now on to slide #17. As you looke20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 128 1 at these items, we will start with 1.1, and 2 it's a rather, a couple of very specific 3 questions. 4 Sriram, do you want to read them 5 so we have them in the record? 6 MR. SOMASUNDARAM: Right. So these 7 are the first three questions that we are 8 requesting feedback on. 9 And they also appear in the 10 framework document under Section 1. 11 So the item 1.1 is specifically 12 requesting comment and feedback on how DOE 13 might address the standby power modes and the 14 magnitudes of the standby power consumption 15 when the unit is turned off or on standby

16 mode. 17 Item 1.2þ

18 MR. BROOKMAN: Let's do one at a 19 time. 20 MR. SOMASUNDARAM: Sorry.

21 MR. BROOKMAN: Comments on that one 22 first. I want to establish some momentume20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 129 1 here. Comments on power modes and magnitudes 2 of standby power consumption. 3 MR. ROBERTS: This is Tom Roberts. 4 That is adequately addressed by the current

5 standard. Tom Roberts. 6 MR. BROOKMAN: Other comments with 7 respect to this? Karim. 8 MR. AMRANE: Karim Amrane. I wish

9 we had done the homework here. I mean those 10 are addressed in the test procedure, and very 11 strange that DOE is asking questions on its 12 own test procedures that apparently DOE 13 doesn't know it covers already. 14 MR. BROOKMAN: Okay. Craig, you

15 want to add on? 16 MR. MESSMER: Craig Messmer. Are 17 you looking for like specific wattage when

18 the fans are turned off? Transformers?

19 MR. SOMASUNDARAM: In terms of the 20 control systems, what may be turned onþ or 21 what may remain on when the compressor is not 22 providingþ the compressor or the fanþ is note20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 130 1 providing any airflow for cooling, heating or 2 ventilation. 3 MR. BROOKMAN: So Craig, can you

4 address that? 5 MR. MESSMER: Well, we make fan 6 coil units, and I know that some of our 7 circuit boards are under 10 - 12 watts. So 8 you want to use that number, that's what we

9 would have. 10 MR. BROOKMAN: Yes, Jim. 11 MR. CRAWFORD: Doug, I think that 12 if there is a question here of merit, it 13 needs to be fleshed out and submitted to the 14 industry so that considered responses can be 15 made rather than knee-jerk responses sitting

16 around the table. 17 MR. BROOKMAN: You think this is 18 too specific, and the answer requires 19 consultation inside the industry? 20 MR. CRAWFORD: I think it's not 21 specific enough.

22 MR. BROOKMAN: I see.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 131 1 MR. CRAWFORD: I don't think the 2 question is specific enough. And I don't 3 think that the answers that we would give 4 today would be a legitimate basis for any 5 decisions.

6 MR. BROOKMAN: What about the 7 second question? DOE invites comments on 8 whether it would be technically feasible to 9 incorporate standby power consumption into 10 the SCER metric, or whether it instead 11 should be considered as a stand-alone measure 12 for this rule-making. 13 MR. CRAWFORD: Until I see the 14 question for 1.1, it's kind of difficult to 15 measure 1.2, to answer 1.2. But any presumed 16 power consumption that is added to the test 17 procedure without adding cooling capacity to 18 go along with it is automatically going to 19 suppress the performance rating number. 20 That creates all kinds of rather 21 difficult problems throughout the industry 22 where today it's a 13 and tomorrow it's ae20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 132 1 12.5. That'sþ I'm concerned that we are 2 changing the yardstick, and the public has 3 gotten pretty well accustomed to a yardstick. 4 It doesn't say that maybe it shouldn't be

5 some other measure.

6 MR. BROOKMAN: Let's hear from a 7 few others. Gary and then Andrew. 8 MR. FERNSTROM: Okay, from PG&E's 9 point of view, when we assess the energy 10 efficiency performance of a product, we need 11 to know what power that product is demanding 12 each of 8,760 hours a year. 13 So it would be important for us to 14 know what the standby power is, irrespective 15 of what cooling that product may or may not 16 be delivering.

17 MR. BROOKMAN: Andrew. 18 MR. DELASKI: Gary addressed the 19 part I wanted to say. But also I think with 20 respect to a change in the questions, if we 21 suddenly begin taking into account modes that 22 are not currently reflected in the energy, ine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 133 1 the current test method, my understanding of 2 the law is that DOE is obligated to true-up 3 test methods, or true-up the standard in a 4 way that things that comply today, a machine 5 that complies with standards today complies 6 tomorrow, so we are not changing the standard 7 by changing the test method. 8 I think that I just wanted to 9 confirm that.

10 MR. BROOKMAN: Lance. 11 MR. DELAURA: Just a quick comment. 12 Standby power loss is in quick comment. 13 Standby power loss is in general, regardless 14 of the type of equipment. It's a large focus 15 for California and the California Energy 16 Commission which unfortunately because of the 17 timing was not able to be here today so I 18 guess I'll speak for them, that we don't want 19 to ignore that issue. It's very large, and 20 it impacts demand. It impacts the peak load. 21 MR. BROOKMAN: So will they or you 22 or somebody submit those as comments to thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 134 1 department? 2 MR. DELAURA: Yes, we will make 3 sure that the California Energy Commission is 4 aware of what is discussed here today, and 5 they will make their own independent

6 comments. 7 And when I say I'm speaking for 8 them, I am speaking as an observer of their 9 process.

10 MR. BROOKMAN: Thanks for 11 clarifying that as well. 12 I'm going to go then to Kyle, and 13 then to Brice. Please. 14 MR. McCULLOUGH: Bill McCullough. 15 One of the things, there is more to the 16 question that we can't answer here but we 17 would need to consider in this for an air 18 conditioner when in the off cycle if there is 19 a call for heating in a gas furnace 20 technically it would not have any standby 21 usage. And what percent of the time would 22 that period be?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 135 1 MR. BROOKMAN: Okay.

2 MR. McCULLOUGH: And so that would 3 need to be considered in exactly do you 4 account for the transformer off power, you 5 could get the VA of that differently from a 6 heat pump to an air conditioner. 7 MR. BROOKMAN: Okay. Brice. 8 MR. BOWLEY: Brice Bowley, General 9 Electric. I think part of the question is, 10 is really what is standby power. I think 11 that is why the cycle portion of the test 12 method has been included with evaluating 13 these units, it's really the unit isn't 14 performing its intended function whenever 15 it's turned on, which is why you need to 16 address these different modes and energy 17 usage, at the hope, during the entire 18 operation of the unit. 19 I think the question is, you could 20 design a unit such that the fan runs 21 continuously, so is there really a standby 22 mode in that unit? Again, I think it's muche20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 136 1 better to address it with the test method as 2 it is with the cyclic portion. 3 MR. BROOKMAN: Harvey Sachs? Jim, 4 did I drop you out? I think I dropped Jim 5 out. Go ahead, Jim, and then Harvey. 6 MR. CRAWFORD: The question sort of 7 touched on here is what is standby. And one 8 of the things that is not recognized, 9 certainly on Capitol Hill, and maybe in this 10 building, is that there is a reason for the 11 power consumption for transformers, for

12 thermostats and controls. 13 And a principal reason is personal 14 safety and fire safety. The most egregious 15 example of standby power is doorbells. That 16 little transformer sits there and sucks up 17 watts, 8,760 hours a year, and gets pushed 18 three times a year for about two seconds. 19 Why do you do that? You do that 20 to avoid line voltage switching. You do that 21 in an HVAC system to avoid line voltage 22 thermostats, which are notoriouslye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 137 1 unreliable, notoriously wide dead bands. 2 That power supply is providing a 3 useful function every hour of every day of 4 the year. It's notþ it doesn't know it's in 5 standby, because it's working. 6 MR. BROOKMAN: Gary, follow on, and 7 then I'm coming to Harvey. 8 MR. FERNSTROM: Okay, just a real 9 quick comment. There is no dispute there. 10 These transformers are impedance protected, 11 and that's a safety issue. That's why they 12 have the standby mode they do. 13 However, that usefulness that 14 utility could be provided more efficiently 15 with a different type of product other than a 16 magnetic transformer. 17 So what we are looking at in 18 California is how the efficiency of that 19 service can be improved. And I think there 20 is an enormous opportunity to improve 21 doorbell transformer efficiency. 22 (Laughter)e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 138 1 MR. BROOKMAN: Harvey Sachs. 2 MR. SACHS: I only want to ask two 3 questions, one is that given that the service 4 of continuous ventilation is being provided, 5 and used in a reasonable fraction of houses, 6 we are again back to the so-called furnace 7 fan issue of where the efficiency of that 8 service provision is to be evaluated. 9 And I state that as a question. 10 The other one that is much more 11 important to me today is what I call item 12 1.4, that we have not asked forþ given any 13 request for feedback on what, if anything, 14 has to be done to the rating method to enable 15 the department to adequately consider 16 regional standards? 17 I mean we've got this 800-pound 18 gorilla sitting over in the corner of the 19 room, and we are worrying about the mice. 20 MR. BROOKMAN: So Harvey and 21 others, if you could advise the department of 22 what that information would be, I'm certaine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 139 1 they would appreciate that. 2 MR. SACHS: I assure you, we will 3 require no second invitation. 4 MR. BROOKMAN: Thank you. 5 I want to provide an opportunity 6 to comment on item 1.3. I also want to 7 provide an opportunity shortly for us to take 8 a break. So take a peek at it. DOE also 9 invites comments on the necessary changes to 10 the existing DOE test procedure for central 11 air conditioners and heat pumps to account 12 for standby power consumption and its

13 measurement. 14 I think we have touched on this 15 considerably already, but final comments

16 before we move on? 17 Okay, we have made good progess. 18 We have had really very straightforward and 19 effective dialogue already today. 20 It's 10 minutes after 11:00. I'm 21 going to suggest we take a break. We will

22 resume at 11:25.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 140 1 While you are walking in this 2 building, make sure to wear your building 3 pass, and also we are likely now since we are 4 taking a late coffee break to work at least 5 until 12:30 before we break for lunch. So if 6 that means you need a banana for your blood 7 sugar, go get it. 8 (Whereupon at 11:10 a.m. the 9 proceeding in the above-entitled

10 matter went off the record toe

11 return on the record at 11:28 12 a.m.) 13 MR. BROOKMAN: Okay, let's start. 14 So we are proceeding as the agenda 15 lays out, and next we are going to hear 16 market and technology assessments, screening 17 analysis, engineering analysis, and 18 preliminary manufacturing impact analysis 19 from Mike Christopher. 20 Hey, folks, let's settle down 21 please. Mike Christopher is our next 22 presenter.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 141 1 MARKET AND TECHNOLOGY ASSESSMENT, SCREENING 2 ANALYSIS, ENGINEERING ANALYSIS, AND

3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS 4 MR. CHRISTOPHER: Thank you, Doug. 5 I'm Mike Christopher with Navigant 6 Consulting. And the next few chunks of the 7 agenda we are devoting to the analyses that 8 will be conducted for ANOPR, the Advanced 9 Notice of Proposed Rulemaking. 10 Those analyses will begin 11 following the conclusion of the comment 12 period for the framework whenever that may 13 be, and will finish in the fall of next year. 14 So the first four analyses in 15 this, that are conducted for the ANOPR, are 16 market technology, screening, engineering and 17 a preliminary manufacturing impact analysis. 18 The first of these, the market and 19 technology, is a collection of data by DOE to 20 characterize the industry and the market for 21 residential central air conditioners and heat 22 pumps, and also is a chance to identify thosee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 142 1 technologies and designs that can improve the 2 efficiency of these products. 3 So what DOE does is looks at data 4 such as shipments, trends in the market and 5 forecasts, looks at regulatory and 6 nonregulatory initiatives that may also have 7 impacts on efficiency; and as I mentioned, 8 identifies the technologies that can be used 9 to improve efficiency. 10 This is just a general request for 11 feedback, item 3.1. DOE is looking for any 12 information that stakeholders can provide 13 that would assist in developing this 14 characterization and this list of 15 technologies. 16 MR. BROOKMAN: Yes, please, Kyle. 17 MR. GILLEY: Kyle Gilley. Just a 18 clarifying question. When we talk about 19 market trends, does that also include things 20 like repair versus replacement phenomenon 21 that we've been seeing in the marketplace? 22 MR. CHRISTOPHER: That is typicallye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 143 1 looked at I believe in the LCC analysis. 2 Shipments analysis and LCC; so that would be 3 a different analysis. 4 MR. GILLEY: So that goes into the 5 shipment analysis?

6 MR. CHRISTOPHER: Yes. 7 MR. BROOKMAN: Which comes later. 8 Which comes later. 9 MR. CHRISTOPHER: We will talk 10 about that later in the day. 11 MR. BROOKMAN: Gary. 12 MR. FERNSTROM: So there is a broad 13 range of technologies, some of which have 14 been identified to us from the California 15 Cooling Technology Center, which we work 16 closely with. They are going to be 17 submitting some comments regarding that. But 18 one I'd like to mention right now is, we 19 should definitely be looking at water cooled

20 condensers. 21 MR. BROOKMAN: Thank you. 22 So other comments on informatione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 144 1 sources? 2 Karim, thank you. 3 MR. AMRANE: Karim Amrane, AHRI. I 4 believe that water cooled condensers are 5 outside of the scope of this rulemaking. I 6 think we are talking about air conditioned 7 cooling only. 8 MR. BROOKMAN: Okay. What about 9 the other products, Karim?

10 MR. AMRANE: Water cooled 11 condensers are covered under a different part 12 of the regulation. 13 MR. BROOKMAN: Just to follow on, 14 Gary, but I want to return to Karim in a

15 moment.

16 Go ahead. 17 MR. FERNSTROM: Well, my responding 18 question would be why this type of equipment 19 is available in California in residential 20 models which are within the scope of this 21 rulemaking. 22 MR. BROOKMAN: That was Gary.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 145 1 Go ahead.

2 MR. CHRISTOPHER: I don't want to 3 quote the CFR without it in front of me, but 4 if anyone has the definition on hand of what 5 a central air conditioner is, I believe it's 6 air cooled. 7 MR. BROOKMAN: Yes, Ted. 8 MR. POPE: Would that also apply to 9 a system that uses evaporatively cooled air 10 to cool the coil?

11 MR. CHRISTOPHER: I don't have an

12 answer to that. 13 MR. FERNSTROM: Gary from PG&E. If 14 we exclude water cooled condensers simply 15 because they are deemed to be outside of the 16 scope, we are foreclosing a look at a 17 significant energy efficiency improvement 18 opportunity here.

19 It would seem to me that would be 20 a mistake. 21 MR. BROOKMAN: Thank you. 22 Jim Crawford.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 146 1 MR. CRAWFORD: I guess as a 2 manufacturer of water cooled equipment, I 3 want to thank the gentleman for his promotion 4 of water cooled equipment. But this is an 5 air cooled air conditioner heat pump standard 6 that we are dealing with. And if we want to 7 open it up and try to put all kinds of 8 equipment under one rating system, we will be 9 here when the youngest of you retires. 10 MR. BROOKMAN: Thank you. Yes, let 11 me go with Don and then Harvey. 12 MR. BRUNDAGE: A quick comment. 13 It's not all a disadvantage if this is not 14 within the scope. Because if it's not within 15 the scope of the NACo rulemaking, then that 16 leaves it free for your local jurisdiction to 17 set its own standards, which in the case of 18 California tends to be a preferable route 19 anyway. 20 MR. BROOKMAN: Let me let Karim

21 follow on there. 22 MR. AMRANE: Karim Amrane frome20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 147 1 AHRI. No, I mean water cooled, a culvert for 2 example, and actually I think they are 3 covered. It's not like they are not. 4 (Simultaneous voices) 5 MR. BROOKMAN: Okay, Harvey. 6 MR. SACHS: Harvey Sachs. Just for 7 the record I get the sense we are compounding 8 two classes of equipment, water cooled 9 equipment versus water sprayed evaporative 10 condensive units. And I think that 11 distinction is important, and I believe that 12 Gary Fernstrom was referring to the former, 13 and Ted Pope to an indirect form of an 14 evaporative cooled condenser, not to water to 15 refrigerant heat exchange. 16 MR. BROOKMAN: Okay, thank you for 17 that clarification. 18 I am going to suggest we move on 19 to slide #22 then, current product classes

20 and standards.

21 MR. CHRISTOPHER: The current 22 product classes which I'm sure most of youe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 148 1 are familiar with, and the current standard 2 levels are here. They include split and 3 single package, air conditioners and heat 4 pumps; small duct high velocity systems 5 currently have their own product class; as 6 well as space constrained air conditioners 7 and heat pumps; and currently through the 8 wall systems, both split and package, have 9 their own product class. However, the 10 definition of through the wall products is 11 such that this product class ceases to exist 12 on January 23rd, 2010. And we will talk a 13 little bit more in a minute as to the 14 implications of that. 15 Another note to make here is that 16 although small duct high velocity systems 17 have a standard that is codified in the CFR 18 of 13 SEER 7.7 HSPF, there currently is 19 exceptional relief in place for the three 20 manufacturers that have applied for that in

21 the form of standards at 11 SEER and 6.8

22 HSPF.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 149 1 DOE intends to look at these 2 product classes, in this rulemaking, 3 maintaining split and single package air 4 conditioners, heat pumps, as well as small 5 duct high velocity systems. 6 And continuing with space 7 constrained air conditioners and heat pumps. 8 And there are two items for feedback here, 9 the first of which DOE is looking for 10 feedback on these product classes. And item 11 3.3 would like to know, are there other 12 classes that DOE should look at, and should 13 all of these classes be considered. 14 MR. BROOKMAN: Don first. 15 MR. BRUNDAGE: Don Brundage, 16 Southern Company. There are products under 17 development which are not really commercial 18 now, but likely would be by the time of the 19 final rule to independently control humidity 20 and space cooling, either through residential 21 systems for things like hot gas reheat from 22 GHP AC system.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 150 1 My question is, would that fall 2 under one of the existing product classes as 3 defined, and if not, should it potentially 4 have a separate class? My concern is that, 5 and this is all the chicken or the egg issue 6 because of test procedure, if you have 7 something that directly goes after humidity 8 control and doesn't produce more sensible 9 cooling, it's going to show þ it's going to 10 do very poorly under the current test 11 procedure, and probably would have trouble 12 making SEER 13. 13 If it does fall under the 14 definition with existing product classes, I 15 would suggest that it might be useful to 16 carve out a separate class for a premium 17 separate controller, humidity þ 18 dehumidification, and space cooling to 19 prevent restrictions on this product entering

20 the market. 21 The manufacturers could probably 22 answer better on this than I could, but thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 151 1 numbers I have seen, these things use 2 substantially more energy for the same amount 3 of sensible cooling. But they dehumidify 4 quite well.

5 MR. CRAWFORD: But SEER and EER 6 are not predicated just on sensible cooling. 7 It's total cooling. 8 MR. BROOKMAN: That was Jim

9 Crawford. 10 MR. CRAWFORD: And latent cooling 11 is often actually more efficient than 12 sensible cooling. 13 MR. CRAWFORD: I guess my question 14 is, is it a different enough product in 15 characteristics and performance that it 16 deserves a separate product class. 17 MR. BROOKMAN: Yes, please, your

18 name for the record.

19 MR. ARNOLD: Dan Arnold of 20 Nordyne. I'd like DOE's legal counsel to 21 comment on whether my interpretation of NACA 22 is incorrect. Because I believe that NACAe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 152 1 prohibits consideration of technologies that 2 are currently not available in the market. 3 So in other words the standard 4 cannot be set for something that is in 5 development or is conceivable but not 6 commercially currently available. 7 MR. BROOKMAN: Eric Stas. 8 MR. STAS: Eric Stas, DOE. DOE has 9 traditionally looked at things which are a 10 working prototype for example that could be 11 brought into the commercial realm, things 12 that are strictly R&D we haven't considered. 13 MR. BROOKMAN: Don Brundage. 14 MR. BRUNDAGE: Don Brundage, I want 15 to clarify þ I'm not suggesting setting a 16 standard for it. I'm suggesting defining the 17 product classes to not unduly prohibit these 18 products when they come into the market. 19 I think it'd be premature to set a 20 standard, but I don't want to have the way 21 the product classes are defined, it'd be a 22 barrier when they are introduced. But bye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 153 1 forcing them into one of the existing classes 2 þ 3 MR. BROOKMAN: So is there a simple 4 answer to this question? Yes, Karim. 5 MR. AMRANE: Karim Amrane, I think 6 the answer is the waiver process. I mean 7 they can always file a waiver if they cannot

8 meet the standards. 9 MR. BROOKMAN: Okay, so then the 10 questions that are on the table here now are 11 these product classes, what you think of 12 them, and should there be other product 13 classes considered. 14 Paul and then to Harvey.

15 MR. DOPPEL: For the ductless 16 products, again we would recommend that17 consideration be given to the ductless mini18 splits as a separate product class, because 19 they are installed differently; they cover a 20 different market segment than central air 21 conditioning; and their general size usage, 22 their average size usage in the industry ise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 154 1 somewhere around between 12 - 15,000 bTUs, as 2 compared to the larger central air 3 conditioning systems, and also the variable 4 refrigerant flow products have sort of 5 included the ductless multi-splits, and we 6 feel that the BRF products need to have a 7 separate product class also. 8 MR. BROOKMAN: Thank you. 9 Harvey. 10 MR. SACHS: The comment would just 11 be on Mr. Brundage's request for alternative 12 ways to deal with the enhanced 13 dehumidification products. And one of those 14 would be a rating method change which might 15 involve moving from 8067, interim conditions, 16 to some other set, and there are a lot of 17 ways, and this is not the place nor time to 18 get into the details, but to suggest that an 19 alternative rating route might be a 20 possibility for that class of products. 21 MR. BROOKMAN: Is that what you 22 would suggest for the department to consider?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 155 1 MR. SACHS: Darn straight I want to 2 consider it. I'm not sure it's the answer. 3 MR. BROOKMAN: Okay, please, your

4 name for the record. 5 MR. MUCCIOLA: Vince Mucciola. 6 MR. BROOKMAN: If you would please 7 use the microphone. This is fully recorded

8 here. 9 MR. MUCCIOLA: Vince Mucciola, 10 National Comfort Products. 11 We are the only member of AHRI 12 that is a through-the-wall condensing unit 13 and heat pump, and I would like to see us be 14 able to continue that through-the-wall 15 classification in these planning states. 16 MR. BROOKMAN: Thank you. 17 MR. CHRISTOPHER: Just a quick 18 comment. We will look at that in a couple of 19 slides, and any comments you have then we'd 20 appreciate. 21 MR. BROOKMAN: Okay, Mike then Jim. 22 MR. CRAWFORD: The point has beene20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 156 1 made twice that VRF is something new and 2 unique. Variable refrigerant load 3 implemented in various ways has been in the 4 market for well over 30 years, and the 5 current test procedures accommodate that and 6 recognize it and have for over 20 years. 7 MR. BROOKMAN: Okay, so it's Bill. 8 MR. McCULLOUGH: Bill McCullough 9 with Lenox. I guess I would second Jim's 10 comment on the VR, variable refrigerant 11 volume units, and for many splits, while they 12 are installed differently, the consumer uses 13 them still for the same purpose, and I think 14 they should remain in the same product class, 15 much as air conditioning in single package 16 units are in the same product class. 17 MR. BROOKMAN: Okay, thank you. 18 Did you have a comment? Is it 19 Brice? No? Okay. So then additional 20 comments on, are these the product classes 21 that the department should use? Should there

22 be others?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 157 1 I guess we've heard þ Harvey. 2 MR. SACHS: Bill, Bill McCullough, 3 the comment you made is most interesting in 4 terms of defining product classes by 5 consumers' view of service. And I guess it's 6 intriguing, because it would argue for 7 example for integrating the ground-source 8 heat pump rating method with the one at issue 9 today. 10 It's seen as providing the same 11 service by the consumer. 12 MR. BROOKMAN: You wish to expand 13 to that class as well, Harvey? 14 MR. SACHS: I don't think that that 15 is going to enable us to get this proceeding 16 done within two lifetimes, but I'm just 17 trying to suggest that the service argument 18 while being important is one that the 19 industry itself has resisted in conjunction 20 with other categories of equipment. 21 MR. BROOKMAN: Yes, Hung. 22 MR. PHAM: Hung Pham, Emersone20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 158 1 Climate. I just listening to the comments 2 here have a concern relative to whether DOE 3 needs to relook at what the intent is for the 4 efficiency and test procedure standard. 5 Looking back 20 years ago it came 6 about as a means to compare different 7 equipment under the same conditions, as much 8 as possible. 9 The intention is for the consumer 10 to be able to buy equipment A and equipment B 11 and know that a 14 SEER is X percent better

12 than a 13 SEER. 13 I think we are now raising 14 questions that are not along the line of the 15 uniform test standard. We are talking about 16 DOE coming up with an application standard, 17 something that can reflect two refrigerators, 18 one in a home here and I open the door 10 19 times, and the other guy only opens it three 20 times, and I want to reflect that energy 21 savings. 22 I think we need to realize thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 159 1 there is a limit on how far DOE can go with 2 that, time of use, and heat loading, and all 3 of those things. I think if we continue to 4 want to handle those, it may have to be a 5 very different approach, meaning DOE may have 6 to modularize this somehow so there is a 7 platform, and then somebody else can take it 8 and plug in different numbers, whatever. But 9 then it will lose the meaning of the national

10 standard. 11 MR. BROOKMAN: Lance first. 12 MR. DELAURA: This is my soapbox 13 statement. I think that this is our chance 14 to get it right, as a group, and this is 15 going to be difficult no matter what we do. 16 And I think to make the right choices, and to

17 look at all the embedded elements that are 18 going to be affected by this, not only now 19 but for the foreseeable future, is extremely 20 important. So if there is extra pain, now is 21 the time to do it. 22 MR. BROOKMAN: Paul, Gary, thise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 160 1 gentleman, and then Karim as briefly as 2 possible. 3 MR. DOPPEL: Okay, just to þ Paul 4 Doppel þ just to clarify what we are 5 referring to as variable refrigerant flow, or 6 VRF systems, the definition from the draft 7 standard at ARI 1230, an engineered direct 8 exchange multi-split system incorporating at 9 least one variable speed compressor, variable 10 capacity compressor, distributing refrigerant 11 through a piping network to multiple indoor 12 fan coil units each capable of individual 13 zone temperature control, to proprietary zone 14 temperature control devices and common 15 communications network. 16 And those are þ there are two 17 further subcategories, VRF multi-split, and 18 VRF heat recovery and multi-split systems, 19 and these types of systems are newly 20 introduced to the U.S. market within the last 21 six years. 22 MR. BROOKMAN: And your citatione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 161 1 again is what? 2 MR. DOPPEL: This is the ARI draft

3 standard 1230.

4 MR. BROOKMAN: So I'm not sure I 5 got it there. So what are you saying about 6 the product classes and this list. 7 MR. DOPPEL: This is what þ there 8 was some exception taken to my call for a 9 separate product class, and just to make sure 10 that everyone understands what we are calling 11 VRF, this defines what VRF is. 12 MR. FERNSTROM: So Gary Fernstrom, 13 I'd like to go back to the application issue 14 briefly. We have--for automobiles--city and 15 highway mileage rating. I don't think it's 16 at all unreasonable to have for air 17 conditioning equipment two or three different 18 application relative ratings. 19 MR. BROOKMAN: Thank you. 20 Your name, please? 21 MR. ARNOLD: Dan Arnold of Nordyne. 22 I'm glad you brought up the automotivee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 162 1 analogy, because that, as an engineer who 2 works and lives with this test procedure 3 everyday, people ask me, how do I describe 4 SEER in layman's terms, and I tell them it's 5 basically like city miles per gallon, cyclic 6 measurement of energy efficiency of the unit, 7 and EER, now that we have that published and 8 available, is the steady state; it's like 9 your highway miles per gallon, but Hung 10 Pham's point, I'm not quite agreeing with the 11 fact that the test procedure is broken. I 12 don't really understand the assault on the 13 test procedure. It does serve as a 14 comparison for consumers to compare one unit 15 to another unit. In my 25 years in the 16 industry we have done our own analysis 17 internally that shows the energy efficiency 18 that was represented by SEER is fairly 19 accurate as a general rule. 20 We do publish extended performance 21 ratings. All manufacturers do it different, 22 different conditions, different wet bulb/drye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 163 1 bulb conditions, they are available on 2 websites. People do use them, so if you want 3 to compare an air conditioner other than the 4 standard 8067 indoor test procedure rating 5 point, that information is freely out there

6 for dealers and contractors to use. 7 So I just am not agreeing that the 8 test procedure is broken. I think it served 9 us pretty well over the years. 10 Karim and then Paul. Go ahead,

11 Paul.

12 MR. DOPPEL: As a result of the 13 October 22nd final rule, the multi-split 14 products now carry three different efficiency 15 ratings, SEER ratings, one for ducted 16 combinations, one for non-ducted 17 combinations, and one for a mixed 18 combination. 19 So if we were to do this by 20 regional, then that would multiply that to 21 probably nine different þ possibly nine 22 different ratings for those products.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 164 1 MR. BROOKMAN: Gary, go ahead. 2 MR. FERNSTROM: Gary Fernstrom. 3 I'd like to go back to the highway and city 4 analogy again. You know we in effect have 5 the supercongestion of high humidity in the 6 south, and we have the ultra hot temperature 7 in the California central valley, with low 8 humidity, which might be the super highway 9 with a high speed limit. 10 So I think it all has to do with 11 the temperature and humidity issues that we 12 are taking the measurements out. 13 MR. BROOKMAN: Jim Crawford. 14 MR. CRAWFORD: Jim Crawford. I 15 guess two points or two things floating

16 around here. 17 One is, I think the department 18 needs to very promptly identify what measures 19 are legitimately under consideration, 20 consistent with the law so that we can see 21 how far these horizons are spreading. 22 We are talking about a lot ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 165 1 things that are fine at the philosophical 2 level, but are they consistent with the law? 3 MR. BROOKMAN: You say measures, 4 you mean the stuff that þ 5 MR. CRAWFORD: The SEER, EER, 6 whatever, hot and dry, hot and wet, all these 7 various measures that we've talked about, do 8 they have anything to do with the law? And 9 if not, perhaps this is not the venue for 10 discussion. 11 The second point, I will come back 12 to the VRF issue, a Japanese manufacturer not 13 present here today, Daikin, imported VRF 14 systems back about 25 years ago. They were 15 multi-splits, and they were modulated in 16 terms of refrigerant flow. It was nothing

17 new. 18 MR. BROOKMAN: Dave. You'll pass?

19 Lance? 20 MR. DELAURA: I think just a quick 21 comment. The very essence that we are going 22 to have really three regions, if twoe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 166 1 additional regions are adopted, is the real 2 reason that all of these technical issues are 3 being discussed. 4 If there was a one-size-fits-all 5 approach, you wouldn't have two additional 6 regions. It would be the same old same old. 7 You've got two new regions which is going to 8 make three; it is going to be a complicated 9 process. And as I said before, I think it is 10 our opportunity to get it right. If we are 11 going to have the regions, the rigor needs to 12 be there to ensure that having those regions 13 is reasonable, and that it actually makes 14 sense, and that it makes sense for consumers. 15 MR. BROOKMAN: So what is your þ 16 what would you be advocating with respect to

17 these measures? 18 MR. DELAURA: I think it's the same 19 thing we said before. Depending on the 20 region that you have the standard for, there 21 are going to be intricacies. And at some 22 point we should talk about that as well.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 167 1 What are those regions? What do they look 2 like? And that is going to drive a lot of 3 those processes. If the regions look very 4 similar, which they won't, then the test 5 procedures will be similar. The fact that 6 they will be different, there is going to be 7 different dictates in terms of what the

8 elements are. 9 MR. BROOKMAN: Kyle. 10 MR. GILLEY: Just a couple of 11 clarifications there. DOE has the authority 12 to make it up to two regions. The other is, 13 there has to be justification for doing so. 14 That statement implied that it's just a 15 foregone conclusion, that there is 16 justification for regional standards, which 17 will be a debated point throughout this 18 entire discussion. 19 The other thing I would point out 20 as it relates to regional standards, is that 21 it was a political solution brought about by 22 Congress in reaching a compromise during thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 168 1 legislative discussion. 2 So to assume that there is any 3 technical justification whatsoever for 4 regional standards is a stretch. 5 MR. BROOKMAN: Okay, I want to 6 return to final comments with respect to 7 these product classes, and then we are going

8 to move on.

9 Yes. 10 MR. ROBERTS: Tom Roberts, and this 11 is kind of a carry over question, but I had 12 to get this in. The regional discussion is 13 interesting. We hear a lot about California. 14 So just for a real layman here, could you 15 just tell me what region California is in, 16 and is it hot and dry or is it average? 17 MR. DELAURA: It is undefined yet. 18 MR. ROBERTS: But could it be? 19 MR. DELAURA: It could þ part of it

20 could be.

21 MR. ROBERTS: Part of the state? 22 MR. DELAURA: Yes, the coastale20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 169 1 portion maybe not. But yes. 2 MR. ROBERTS: I think that is a 3 perfect answer.

4 MR. BROOKMAN: Let's move on then. 5 Michael, 24.

6 MR. CHRISTOPHER: So we wanted to 7 call attention to a couple of these products, 8 one of which is the SDHV systems, and as I've 9 noted, the three manufacturers that have 10 filed for exception relief have received that 11 in the form of standards at 11 SEER and 6.8

12 HSPF. 13 This was effective January 23rd, 14 `06, and remains effective until DOE issues a 15 new standard if any. 16 So in this rulemaking DOE is 17 considering keeping SDHV a separate class, 18 and conducting an analysis to determine what 19 the most appropriate standard level for the 20 system is. 21 And to that end, DOE is looking 22 for feedback in particular on SDHV systemse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 170 1 including the information that is listed here 2 in NM 34. 3 MR. BROOKMAN: Yes, Craig. 4 MR. MESSMER: Craig Messmer with 5 Unico. It looks like I'm the only SDHV 6 manufacturer here today. 7 Absolutely we want to continue the 8 separate product class. We do have a 9 separate product test standard, and it is 10 considerably different than the normal 11 products that you have, and we also think 12 that that is probably one of the criteria of 13 having a separate product class of any type 14 is to have a separate test standard. 15 DOE did an analysis on SDHV in 16 2002. We have þ we thought that was an 17 excellent analysis. Unfortunately it didn't 18 get done in time to be included before the 13 19 SEER rule. We would love to see some kind of 20 legislative action that would allow the 21 separate product class to actually have an 22 official minimum standard instead of thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 171 1 exception process. 2 That's not anything that DOE can 3 do, we understand that. But we strongly 4 encourage them to do some kind of analysis or 5 whatever is appropriate for this product 6 class, if the standards do change. We 7 certainly would work with the department in 8 establishing what an appropriate standard 9 would be for this class. So we'll submit 10 information on that. 11 MR. BROOKMAN: Thank you. 12 Yes, Harvey. 13 MR. SACHS: ACEEE supported the 14 waiver for these terms under the proviso that 15 a firewall was erected. That firewall was a 16 change in the rating method to 1.25 inches

17 ESP. 18 This effectively limits the 19 possibilities of this class being sold into 20 conventional markets, as a way of þ that and 21 the economics as a way of subverting 13 SEER 22 in the mainstream market.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 172 1 We think that is an example of the 2 use of rating methods, and if that is more 3 easily done with the appropriate firewalls as 4 a separate class, we are okay with that. 5 MR. BROOKMAN: Okay. Other 6 comments with respect to SDHV systems, and 7 particularly you see what the department is 8 asking for þ market shares, shipments, cost 9 and performance data, design specifications. 10 Craig? 11 MR. MESSMER: Since we are the only 12 ones in this room, I would hope that we could 13 get more data than just our company on that. 14 So I would encourage the DOE to contact the 15 other manufacturers the same, since they are 16 not here today. 17 MR. BROOKMAN: Okay, Karim, is that 18 data you would gather, or you have gathered? 19 MR. AMRANE: We have really two 20 manufacturers within the þ

21 MR. MESSMER: Three. There are

22 three.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 173 1 MR. AMRANE: There are three. So 2 far we can gather the information. 3 MR. MESSMER: That would be great. 4 And the department would greatly appreciate 5 that. Thank you. 6 MR. CHRISTOPHER: To your knowledge 7 are there any other manufacturers of SDHV? 8 MR. AMRANE: I believe that's about 9 it. 10 MR. CHRISTOPHER: Okay. So as I 11 mentioned, we would come back to through the 12 wall þ 13 MR. LEWIS: Before you proceed. 14 MR. BROOKMAN: Ron Lewis. 15 MR. LEWIS: Just looking at the 16 time and the number of pages and where we 17 are, we are way way way behind schedule, and 18 if there are ways to be more succinct, it is 19 important that we get your input, and if we 20 want to put in a placeholder and say you've 21 got a concern and express an interest, and 22 promise to submit comments, if there is a waye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 174 1 that we can get through it. Nobody wants to 2 be here until midnight tonight, and we want 3 to cover all the topics. 4 So it's just a request that as we 5 move forward, if we would be conscious that 6 we have lost a lot of ground here. It's good 7 time spent, and a lot of good input, but just 8 be conscious of that as we move forward.

9 MR. CHRISTOPHER: A lot of the 10 comments, a lot of the issues raised in this 11 section are really looking for written 12 feedback and data. So it's not necessary to 13 make a comment unless there is a serious 14 concern, you can put that forward. 15 MR. BROOKMAN: That's good. That's 16 helpful. 17 MR. CHRISTOPHER: Okay. So I18 mentioned we come back to these through-the19 wall products. These include two main types, 20 the split systems which are condensers that 21 use conventional air handler, and package 22 systems which are similar to package terminale20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 175 1 air conditioners and heat pumps; however the 2 air is ducted to the interior space as 3 opposed to being a ductless system. 4 There are currently standards that 5 are the result of an engineering analysis 6 that was conducted several years ago, I don't 7 know the exact year. Split systems currently 8 at 10.9 SEER, 7.1 HSPF, and package are at 9 10.6 SEER, 7.0 HSPF. 10 And as I mentioned before, this 11 class in the definition there is a provision 12 often referred to as the sunset provision, 13 where this class is no longer in existence as 14 of January 23rd, 2010. And in review of the 15 previous rulemakings and the discussion that 16 went on leading up to the final rules of the 17 13 SEER, it's our understanding that these 18 through-the-wall products were originally 19 part of the so-called space-constrained 20 products, and therefore the intent is that 21 they become part of the overall space 22 constraining class, when that sunsete20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 176 1 provision is reached. 2 And therefore DOE will assume þ 3 and because that provision expires in 2010, 4 standards would be effective 2016, that's 5 when the analysis assumes the þ it's in our 6 analysis, that's when we assume all the 7 factors. DOE will assume a 12 SEER baseline,8 7.7 HSPF, or 7.4 HSPF for the through-the9 wall systems. 10 So we are looking for feedback on 11 that, and any available data that are for 12 through-the-wall products, or any other 13 space-constrained products. And it's item

14 3.5 here. 15 MR. BROOKMAN: Yes, Jim. 16 MR. CRAWFORD: Jim Crawford, Trane. 17 And I would cite page 26 of the framework 18 document, which makes the point that these 19 products are being used in new construction, 20 and I find it strangely inconsistent that we 21 have various product classes that don't meet 22 the performance of the mainstream productse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 177 1 and we are preparing apparently to continue 2 to let that situation exist far into the

3 future. 4 I don't understand why we can 5 allow 10s and 12s in a market that requires a 6 minimum of 13, and talk about þ and we are 7 going to continue that practice in the

8 future. 9 MR. BROOKMAN: Thank you. 10 Please, Tom. 11 MR. ROBERTS: Was there þ I was 12 trying þ I'm stumped by that too. Is there 13 any meat on that bone? Is there some logic 14 to it? I guess it was replacement logic 15 possibly at the beginning. 16 I agree with Tom, that it goes 17 into new construction an awful lot. It's the 18 chosen system because it does dive under the

19 rate. 20 MR. BROOKMAN: Okay, thanks for

21 that comment. 22 Kyle.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 178 1 MR. GILLEY: As a manufacturer of 2 this equipment that has a very special 3 application, we will file formal comments on 4 it. 5 MR. BROOKMAN: Okay. 6 Other comments on through-the-wall 7 air conditioners and heat pumps. 8 Yes, your name again, please. 9 MR. MUCCIOLA: Vince Mucciola, 10 National Comfort Products. I understand the 11 concern about the new construction, but we 12 are really turning our backs to existing 13 openings that would be catastrophic for 14 people to do replacements, high rises and 15 what have you, and we are turning our backs 16 to the public who would have to incur those 17 costs to try to change openings on the 20th 18 floor, or look for other ways to provide air 19 conditioning. 20 It only leads back to the question 21 that we had about repairing old systems, that 22 these old systems that are out there are 4,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 179 1 5, 6 SEER units by today's standards, and at 2 least it gives them efficiencies that are 3 better than what they had before. 4 MR. BROOKMAN: Thank you. 5 MR. CRAWFORD: But that is no 6 reason to permit its use in new construction 7 in the future. 8 MR. MUCCIOLA: We didn't say 9 anything about new construction. We said we 10 could have a new construction unit, but we 11 should still continue to look at, what do we 12 do about existing openings out there. 13 MR. CRAWFORD: I refer you to the

14 framework document.

15 MR. BROOKMAN: So those last few 16 comments from Jim Crawford. 17 Okay, final comments on this 18 subject? 19 All right. Yes, one more, and 20 your name please for the record. 21 MR. STANGA: My name is Mark 22 Stanga, and actually I am here for Daikine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 180 1 Industries. I am here just to þ I'm afraid 2 that maybe we've moved a couple of slides 3 past where the last reference to Daikin came 4 up, and I wanted to set the record straight

5 about that. 6 Daikin in fact did have a 7 distributor selling multi-split modular 8 refrigerant flow systems of some type some 9 years ago, but Daikin has not had any 10 equipment for sale in the U.S. that is 11 inverter driven of the kind that as Paul 12 Doppel from Mitsubishi mentioned is within 13 the scope of the new AHRI draft standard

14 1230. 15 I just wanted to make that clear.

16 MR. BROOKMAN: Thanks for that 17 clarification. 18 Okay. 19 MR. CHRISTOPHER: Thank you Doug. 20 Okay, the last type of product that we want 21 to call attention to are the ductless split 22 systems. We have had some comments ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 181 1 discussion on already. These include both2 mini-splits, the one-to-one, and the multi3 splits. 4 And it's our understanding they 5 still represent just a small bit of the 6 market, the domestic market. 7 And in the final rule for the test 8 procedures that was in August of last year, 9 DOE did state that it believes the ductless 10 splits compete primarily with the 11 conventional split systems. Therefore in 12 this rulemaking DOE is considering keeping 13 those as part of the conventional product 14 split system product class. I think we have 15 heard some comments already contrary to that, 16 and we appreciate those. 17 Again, item 3.6 is asking for any 18 information data that relates to ductless 19 splits. 20 MR. BROOKMAN: Yes, Paul. 21 MR. DOPPEL: Question for DOE. 22 What þ you mentioned there that it is a smalle20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 182 1 fraction of the domestic market. At what 2 point of market share would we become more 3 significant? What is the threshold, 1 4 percent, 2 percent? 5 MR. BROOKMAN: Lewis. 6 MR. LEWIS: Not only are we not 7 prepared to answer that question right now, 8 but I'm not sure that it's the kind of 9 question that adds to clarification right

10 now. 11 I think what we want to do is we 12 are putting up a straw man of what our 13 understanding is right now. And if somebody 14 has other data that counters it or says you 15 are wrong, to show us different. 16 I don't know that there is a 17 definition or an exact percentage or 18 something, but evidently the data we have 19 does not show it to be significant in large 20 portions. So if you would have data that 21 would help us to better understand that, the 22 plea will go out several times today, pleasee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 183 1 to help us to see more clearly on issues. 2 So it's a matter of, we are 3 dealing with the data we've got right now, 4 and anybody that has other information that 5 could help us to see more clearly it would be 6 beneficial. 7 MR. DOPPEL: Okay, Paul Doppel 8 again. We will try to provide what we can 9 within ARI guidelines, and just for further10 clarification, we would concede that multi11 splits would compete with central air12 conditioning systems, but not the mini13 splits. Mini-splits should be a separate 14 product class, because there again they are 15 used for room air conditioning, and not 16 central air conditioning. 17 MR. BROOKMAN: Additional comments? 18 Let's move on to technology assessment. 19 MR. CHRISTOPHER: Okay, so the 20 other part of the market, technology 21 assessment, is the technology assessment. 22 This is where DOE identifies differente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 184 1 technologies that can be used to improve the 2 efficiency of air conditioners and heat 3 pumps. We have received several comments 4 today so far on this. 5 I am not going to list all of 6 these. But just for example, as you know, 7 increased evaporator-condenser coil area; 8 higher efficiency compressors; and 9 evaporator-condenser fan motors for example. 10 And general requests for comment, 11 what technologies or design options if any 12 should DOE add to or remove from this list? 13 And please provide any rationale.

14 MR. BROOKMAN: Tom Roberts. 15 MR. ROBERTS: Tom Roberts What is 16 the nature of the request? I don't 17 understand it. I mean the standard is really 18 a prescriptive standard, and I don't 19 understand the specific reference or the need 20 to include the specific technologies. 21 MR. CHRISTOPHER: Well, the 22 standard is actually not a prescriptivee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 185 1 standard. 2 MR. ROBERTS: No, I'm sorry, I said 3 it the opposite way. In other words, why the 4 specific use of technologies? I don't 5 understand it. 6 MR. CHRISTOPHER: Well, we'll get 7 to an engineering analysis, that we are 8 primarily taking an efficiency level 9 approach. But we still conduct a screening 10 analysis and a technology assessment just as 11 we do with every rule, and that information 12 will supplement that efficiency level 13 approach as we are looking at how 14 manufacturers þ what it means to go from a 13 15 SEER to a 14 SEER, and does that involve a 16 particular technology, or are there many 17 different ways to go about it. 18 MR. BROOKMAN: So you can see the 19 list, and what do you think? Should there be 20 technology approaches that should be added? 21 Or should some of these items be removed from 22 the list?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 186 1 Bill. 2 MR. McCULLOUGH: I would say one of 3 the things that needs to be considered in 4 this, and someone mentioned earlier a view, 5 is this currently on the market, close to the 6 market, or is it a research mode? And I am 7 jumping ahead a bit here to slide #30, 8 because the cost difference of that would be 9 strikingly different if it is available now 10 on the market versus something that may 11 become available on the market. Things like 12 fuel cells. Can you do it? Sure, but is it 13 þ does it provide a good cost benefit for the 14 consumer? Probably not. 15 So it was both a comment and a 16 question: is there going to be consideration 17 given to what stage that we believe this 18 technology is in? And then will that be 19 considered. 20 MR. BROOKMAN: Ron Lewis. 21 MR. LEWIS: One of the analyses 22 that we do is engineering analysis, and theree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 187 1 is a screening analysis that is done that 2 looks at the feasibility and availability and 3 other things. There is a tight focus given 4 to the practicality and what is available. 5 It is þ we are required, one of the first 6 slides that we showed were the seven factors 7 that Congress requires us to consider. 8 And they require us to start at 9 max tech and work our way down and go through 10 the feasibility of things. They have to be 11 economically justified, I always get the two 12 of them confused, and technologically 13 feasible. 14 And in going through that, we go 15 out of our way to try to know as much as we 16 can about the universe of the products that 17 are available; what is their state; and then 18 go through the consideration. That then 19 further gets into the lifecycle costs and all

20 that. 21 So there is a lot of detail gone 22 into looking at þ we don't just go on thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 188 1 promise of something to come, and its 2 potential. We need to get some substance to 3 try to back up what we are considering. 4 So it's not to rule it out. We 5 are required to start at max tech, the way 6 max tech has been looked at before is, it's 7 something that is not R&D. It's something 8 that is close to commercialization, or in the 9 stream right now, something that has been 10 validated, and is here and real. It's not 11 conceptual. 12 So the process is pretty robust in 13 all those considerations.

14 MR. BROOKMAN: Ted. 15 MR. POPE: Ted Pope. Particularly 16 assuming that there is ongoing discussions of 17 regional standards, PG&E and I'm sure the 18 other utilities, and energy commission and so 19 forth, in the West, would strongly recommend 20 consideration of evaporatively precooled air 21 conditioning systems. 22 MR. BROOKMAN: Thank you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 189 1 Other candidates for adds or 2 subtracts from this list? 3 Jim Crawford. 4 MR. CRAWFORD: What is a dual port 5 expansion valve?

6 MR. CHRISTOPHER: I don't have a 7 technical definition for you. 8 MR. CRAWFORD: Well, unless you can 9 define it, I suggest you take it off the 10 list. 11 MR. BROOKMAN: Harvey. 12 MR. SACHS: Harvey Sachs. I would 13 just ask Mr. Lewis for the definition of 14 "here." In terms of these technology 15 options. Does "here" mean available in U.S. 16 products, or available in substantial scale 17 of the global market, and particularly it 18 might refer to things like modulated 19 compressors that are here niche products, and 20 very high in premium products, and may be 21 more common as a fraction of the market in 22 some other countries. So they are listed.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 190 1 They are listed, but Mr. Lewis 2 brought up the term "here". 3 MR. LEWIS: I take your challenge 4 to add greater precision to that. I am not 5 going to do it right here. There's the word, 6 here, again. I will take into consideration 7 your sensitivity to that, of what is the 8 geography or the universe it's in. So thank 9 you for that question.

10 MR. BROOKMAN: Fred.

11 MR. KELLER: Fred Keller. I would 12 just suggest that DOE adopt the NASA 13 technology readiness levels, and have a level 14 of TRL-7 or greater as a technology being 15 included. It's a fairly well documented 16 method of rating technologies for their 17 readiness to go to market. 18 MR. BROOKMAN: Thank you. 19 MR. LEWIS: Excuse me, is there a 20 place where that is on their website? 21 MR. KELLER: I think you can just 22 Google massive technology readiness levels,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 191 1 and you will get a wealth of information. 2 MR. BROOKMAN: Thank you. 3 So other comments, final comments 4 perhaps, on this list, what should stay in, 5 what should be supplemented, what should be

6 removed? 7 MR. CHRISTOPHER: This goes to what 8 Ron was talking about, the screening 9 analysis. So in technology's estimate, we 10 sort of take an all-encompassing view of 11 everything that is out there. And there are 12 these four factors, that really come from the 13 seven factors in APCA that requires you to 14 look at the technological feasibility, 15 practicability of manufacturing still in 16 service, any impacts on product utility, or 17 availability to consumers, and impacts on 18 health or safety. 19 And so from this all-encompassing 20 list of technologies, if one of these factors 21 is not met, then DOE does not look at it any

22 further.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 192 1 So typically what that means is 2 that technologies that are not commercially 3 available or not close to commercialization 4 are not typically included. 5 So following the screening 6 analysis with this filtered down list of 7 technologies, DOE conducts the engineering 8 analysis. And the purpose of the engineering 9 analysis is to construct what we call a cost 10 efficiency or a manufacturer's selling price 11 efficiency curve, which is really just the 12 relationship of price or cost to the SEER or 13 HSPF level, and this relationship is used in 14 the analyses that are conducted downstream, 15 including LCC and payback period, 16 manufacturer impact analysis, employment 17 impact analysis. 18 It's a methodology that DOE will 19 follow in conducting these curves, these 20 cost-efficiency curves, will be to first 21 establish a baseline, and in this rulemaking 22 that's fairly simple. DOE will use thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 193 1 current standards in each product class. 2 From establishing a baseline, do 3 you estimate the cost of these baseline 4 units, and that will be done through a 5 reverse engineering approach, also called the 6 tear-down approach, through which you 7 estimate the costs of products in each class 8 at a representative capacity. 9 Once the cost of baseline units is 10 established, you will look at the cost of 11 units above that baseline up to and including 12 the max tech, which runs both to what we said 13 earlier, and then DOE will document the 14 results including supplementing with any data 15 or information from any manufacturer 16 catalogs, websites, trade publications, and

17 other sources. 18 So there are three items here for 19 comment. In general DOE is looking for 20 feedback on the use of an efficiency level 21 approach, and this approach is used in the22 previous rulemaking, to determine the coste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 194 1 efficiency relationship. 2 Item 5.3 is looking for feedback 3 on what appropriate representative capacity 4 to use for each product class. And for the 5 conventional split and single package product 6 classes, DOE will typically use a three-time 7 unit. 8 But DOE is also looking for 9 information on how it could consider the 10 limitations of products that are not at the 11 representative capacity. Those are at much 12 smaller and much larger capacities, and how 13 it can take that into account as well. 14 MR. BROOKMAN: Several specific 15 questions. 16 Yes, Lance. 17 MR. DELAURA: This sort of goes to 18 the point about the time-of-use rates, when 19 you talk about payback and lifecycle, why it 20 would be important if you were considering 21 the regional standard, let's say in 22 California, where there are those types ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 195 1 economics, it will make the economics of 2 payback look very different for high 3 efficiency units. 4 MR. BROOKMAN: Thank you.

5 Andrew. 6 MR. DELASKI: Can you back up a 7 slide, please?

8 MR. CHRISTOPHER: Sure. 9 MR. DELASKI: So on your third 10 chevron there, estimate costs of units above 11 baseline, could you just elaborate a bit on 12 how you make those estimates? 13 MR. CHRISTOPHER: Sure, well some 14 of that comes from physical tear downs. Some 15 of that comes from just knowledge of our 16 experts in determining what it costs to 17 increase the surface area of a coil for 18 example. And then some of that comes from 19 data on specific design options like motors, 20 and things like that. 21 MR. DELASKI: My memory is getting 22 a little bit fuzzy here, but I think in thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 196 1 last rulemaking we ended up with three sets 2 of costs, costs that were submitted by the 3 manufacturers, that were then published along 4 with costs that were developed by DOE, which 5 led to a lot of confusion. I hope we can 6 avoid that in this particular rulemaking, but 7 I wonder how does manufacturing input to your 8 process in how you come up with these costs? 9 MR. CHRISTOPHER: The intent here 10 is to do the cost estimation through DOE and 11 its contractors. 12 MR. BROOKMAN: Karim. 13 MR. AMRANE: Karim Amrane, AHRI. 14 As I stated this morning, I think there is 15 evidence that whatever those cost efficiency 16 curves þ and it's not just the curve, it's 17 the markup and everything else that comes up 18 with that, ended up underestimating literally 19 the cost of a 13 SEER unit today. As Andrew 20 was saying, we provided data last time that 21 was at the end of the process not taken into 22 consideration.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 197 1 But we believe that our data was 2 much closer to reality than what DOE came up 3 with. 4 So I guess while not opposing DOE 5 doing what DOE wants to do, in terms of using 6 its own reverse engineering analysis. But we 7 believe you need to step back and look at 8 what you've done, and assess where things 9 need to be improved. 10 MR. BROOKMAN: Thank you. 11 MR. DELASKI: I support the notion 12 of some sort of retrospective analysis to see 13 how good a job did you do last time in coming 14 up with cost estimates? 15 The challenge, and I think Jim 16 Crawford did an excellent job early on of 17 saying þ talking þ stepping us through what 18 had happened to commodity prices over the 19 past five years or so. The challenge is 20 going to be to disentangle the impact of the 21 standards from things that are happening on 22 the market independently of the standard.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 198 1 But knowing þ having some 2 retrospective analysis would be very, very

3 valuable.

4 MR. BROOKMAN: Fred. 5 MR. KELLER: I agree with the need 6 for retrospective analysis, and I think it 7 should include more than just the cost 8 estimate. It should also look at the 9 technology assumptions that were made in the 10 prior rulemaking. It said higher efficiency 11 compressors were going to be available; et 12 cetera, et cetera. I think you ought to look 13 at all of those and see how many of those 14 actually became reality. 15 MR. BROOKMAN: Thank you. 16 Yes, Talbot. 17 MR. GEE: Yes, Talbot Gee with 18 Hardy. From the distributor's standpoint, I 19 don't know if this was considered in previous 20 cost evaluations too, but the total system 21 cost, not just the condensing unit, but 22 everything else that is required to achievee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 199 1 that rating, that performance, which has been 2 a telling point to our members who have tried 3 to fulfill this upgrade.

4 MR. BROOKMAN: Tom. 5 MR. ROBERTS: And just real 6 quickly, the last go round seemed like it was 7 a theoretical addition of components. When 8 you can jump to the end and say, really it's 9 all about what the consumer cost difference 10 is. 11 And that's the thing where we lost 12 þ left out lots of components. The 13 additional freight cost due to larger units, 14 et cetera, et cetera, et cetera. 15 And I don't know how you could do 16 that other than to get better interaction 17 from manufacturers' distribution and 18 contractors to give you a landed cost to the

19 consumer to use real numbers. Then when we 20 do the next retrospective, I think you would

21 be much closer. 22 MR. BROOKMAN: Thank you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 200 1 Bill. 2 MR. McCULLOUGH: Bill McCullough. 3 I would also ask that one of the things that 4 I'm not sure was considered with the April 5 23rd, 2006 NACA, to consider the cost of the 6 units, as the SEER goes higher, the units get 7 bigger, manufacturers can ship less product 8 on trucks. That therefore drives the cost 9 up, and that is a very real cost. 10 MR. BROOKMAN: Thank you. 11 Additional comments: efficiency 12 level approach, representative cooling 13 capacity, and very small and very large 14 capacities, all three. 15 Jim Crawford. 16 MR. CRAWFORD: Jim Crawford, item 17 5.3, I think that for some of your products, 18 one capacity may not be adequate to get the 19 variabilities that they have to deal with. 20 In particular as you get into the larger 21 residential product there are physical 22 constraints that you deal with that causee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 201 1 that to be not well represented. 2 And one example today would be in 3 inverters. A compressor inverter, to drive a 4 five-ton unit, you are in a totally different 5 price curve or cost curve than you would be 6 for say a two or three-ton unit. 7 MR. BROOKMAN: Thank you. 8 Yes, Andrew. 9 MR. DELASKI: I wanted to just 10 briefly come back to this issue of a 11 retrospective. I mean the reason to do a 12 retrospective isn't so much to beat up on 13 somebody one way or the other on how well did 14 we estimate the last time. It's obviously to 15 inform doing a better þ can we get closer 16 this time in doing the DOE estimates. 17 I think it's a mistake though to 18 go back and say, well, did manufacturers 19 build it the way that we thought would be 20 most cost effective? Because the answer is 21 going to be no. No. You had a performance 22 standard, and the manufacturers go aboute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 202 1 their business of meeting that performance2 standard, the best that they can, as cost3 effectively as they can. 4 Once they put their engineering 5 expertise to it, it far outdistances the 6 engineering expertise the department could 7 apply to it. 8 So I think you are going to find 9 that, no, it wasn't complied with the way DOE 10 thought they might comply with it, at least 11 cost basis. It would have been complied 12 quite differently, maybe differently by 13 different manufacturers, though.

14 I would look at the overall cost 15 impact you estimated, and how close was that, 16 as opposed to, did we get each step of the 17 process right. 18 MR. BROOKMAN: Yes please, Ron 19 Lewis. 20 MR. LEWIS: I was going to try to 21 sum up this great exchange of inputs here. 22 But it's one thing to say you got it wrong,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 203 1 but to have any sense of pointing to the 2 areas where it was wrong, and what was wrong 3 to your observation--that sense of precision 4 can save us time, and I'm going to stress 5 throughout the day, we are under court order. 6 We've got a delivery date certain that 7 anything that you can give us that gives us 8 clarity versus just a general request to go 9 back and revisit something which just can 10 gobble up a lot of time, and we may not come 11 to the same conclusion you do after that. 12 So if you want to make your point, 13 you want us to see through your perspective, 14 I just recommend highly that in a timely 15 basis you give us the most specific input you 16 can, so we take another look at it through 17 that perspective, and understand what your

18 concerns are. 19 Just in general to go back and 20 redo it may not serve either of us very well. 21 MR. BROOKMAN: Jim Crawford. 22 MR. CRAWFORD: To elaborate just ae20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 204 1 little bit on the point that Andrew was 2 making, there are design technologies that 3 are brought up repeatedly by the department, 4 and for which they paid for studies on and 5 off about the last 35 years having to do with 6 air movement. 7 And the conclusions that they come 8 up with are always wrong. They want us to 9 use backward inclined fans, and they want us 10 to use air coil blades on prop fans, and 11 we've been aware of those technologies. 12 We in our industry are well aware 13 of various fan technologies. Some of us 14 manufacture big backward inclined fans with 15 airfoil blades. We know about those things, 16 and they simply don't work in cost-effective 17 residential product.

18 MR. BROOKMAN: So let's then 19 provide a final opportunity for comment on 20 the questions you see on slide #32 related to 21 the efficiency level approach first, and 22 representative cooling capacity, we havee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 205 1 heard a comment or two on that one. And I 2 don't think we've heard much yet on very 3 small versus very large capacities, and very 4 large capacities, and the limitations on

5 those.

6 Paul. 7 MR. DOPPEL: Paul Doppel on the 8 representative cooling capacity. What may be 9 typical for a central air conditioning system 10 would be somewhere in the range of around 11 30,000. However, for ductless mini-splits 12 it's 12,000, so again, that's a need for a 13 possible separate class, a prior class for 14 those. Because again the typical size is so 15 much smaller, and the application is 16 different. 17 MR. BROOKMAN: Hung. 18 MR. PHAM: Hung Pham, Emerson 19 Climate. I think in the last round I believe 20 DOE probably didn't treat the indoor section 21 more explicitly. 22 I think as we went through thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 206 1 higher SEER that turned out to be a much 2 bigger impact, particularly to the point that3 Jim brought up there about two-ton, three4 ton, five-ton indoor size is really a factor 5 I think, may need to be looked at very 6 carefully. 7 MR. BROOKMAN: Yes, thank you. 8 Craig. 9 MR. MESSMER: Craig Messmer. We 10 absolutely have to consider the smallest and 11 the largest. If you look into the directory12 today, you will find almost no one-ton split13 system units, heat bumps. If you look at the 14 higher efficiency units, they have again 15 missing capacity tonnages. So this has to þ 16 you can't just pick the middle size which is 17 representative. That's the easiest perhaps. 18 But we are going to be faced with 19 the phasing out of certain capacity units if 20 we continue to increase efficiencies without 21 regard to capacity. 22 MR. BROOKMAN: Okay. Thank you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 207 1 So final comments on this set of 2 slides? I think we have pretty much covered 3 it. 4 Then I am going to suggest we take 5 lunch. Before we go to lunch, though, we

6 have an announcement. 7 Ron Lewis. 8 MR. LEWIS: I realize that a lot of 9 times that the meeting carries on for longer 10 than some people had planned, and they are 11 trying to make airplanes, et cetera. So 12 rather than wait until the end of the day, we 13 did discuss the options on getting comments 14 in, and we will in a Federal Register notice, 15 announce that we will extend the date from 16 the current date for comments of July 9th to 17 the end of the month, July 31st, giving 3-1/2 18 more weeks. So we appreciate that input. We 19 don't want to put you in an uncomfortable 20 position. 21 We are just asking that if you 22 would, please, our history has been that moste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 208 1 people take all the time available, and we 2 get all the comments in like the last 24

3 hours. 4 If you do have the comments early, 5 if you have them done, we are extending the 6 time, but we would appreciate your getting 7 them to us as soon as you can so we can 8 thoroughly put the attention to your 9 comments, before we are just flooded with 10 everybody's. 11 Thank you. 12 MR. BROOKMAN: We are a little bit 13 behind schedule, but we will make it up when 14 we return from lunch. It's pretty hard to do 15 lunch in less than an hour here. So it's now 16 12:30. I'm going to suggest that we return 17 at 1:30 and resume promptly at that point. 18 This room will be locked, so you 19 can leave stuff in it. Please wear your 20 badge here in the building. 21 How many of you, is this your 22 first trip here to Forrestal? A few of you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 209 1 There is a cafeteria, a sandwich kind of a 2 place, and some hot food, just one floor 3 below where you got your coffee. Most 4 everybody will be trooping en masse 5 underneath, down one floor and all the way 6 over to the cafeteria on the far side. So 7 follow the crowd, and we will resume at 1:30. 8 (Whereupon at 12:32 p.m. the 9 proceeding in the above-entitled

10 matter went off the record to 11 return on the record at 1:32 p.m.) 12 MR. BROOKMAN: Thanks for being 13 back here on time. We're a little bit 14 behind, but none of us are going to be here 15 at seven o'clock this evening. So we'll see 16 if we can stay as focused on the content and 17 the comment as possible. 18 As I understand it, Brenda, at the 19 break you're going to hand out a list of 20 participants today so that we'll have that 21 available to people as well. 22 So, Mike, are you ready to go?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 210 1 Not quite? Close? 2 I appreciate this morning. There 3 was a lot of good exchange, and that's very 4 helpful to the department. So let's keep 5 that up and also stay focused at the same 6 time. 7 MR. CHRISTOPHER: Okay. I'm 8 ready. 9 MR. BROOKMAN: Okay. 10 MR. CHRISTOPHER: All right. So 11 DOE will look at baseline all the way up to 12 mass tech and a number of levels in between. 13 These are some of those, not all inclusive, 14 but some of the ones that DOE will look at 15 are the Energy Star and the Consortium for 16 Energy Efficiency Levels. These are listed

17 here. 18 For example, for split system air 19 conditioners, Energy Star which corresponds 20 to CE-01s, 14 SEER, CEE Tier 2, 15 SEER, et

21 cetera. 22 The maximum available that DOE hase20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 211 1 identified in the three ton size is 21 SEER 2 for split and 16.6 SEER, I should say, for 3 packaged. 4 For heat pumps, the maximum 5 available DOE has identified is 19 and a half

6 SEER and 10.8 HSPF and 16.4 SEER and 9.0 HSPF 7 for packaged. 8 MR. DOPPEL: If I may --

9 MR. BROOKMAN: Paul. 10 MR. DOPPEL: Paul Doppel. 11 There are ductless products that 12 are at the 23 SEER level for the heat pump. 13 MR. CHRISTOPHER: Okay. Thank 14 you. 15 MR. BROOKMAN: Thank you.

16 MR. CHRISTOPHER: So as I 17 mentioned, DOE is going to look at the levels 18 that we listed, but there may be other levels 19 analyzed, and DOE is required to look at the 20 maximum technology level. However, that does 21 not necessarily correspond to the maximum 22 available, those four that I just listed.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 212 1 So there's two items for feedback 2 here. DOE is looking for input on the 3 efficiency level of the plants to use, and is 4 also seeking input on what appropriate mass 5 tech levels are for each product class. 6 And then DOE is also looking for 7 what are appropriate levels for SDHV systems 8 and space constrained products. 9 MR. BROOKMAN: Okay. Yes, please. 10 Hung first and then Karim. 11 MR. PHAM: Hung Pham, Emerson 12 Climate.

13 One concern I have about the mass 14 tech is that it is a variable speed 15 technology. That is a new technology that

16 I'm not sure that we have all looked at the 17 impact of how the power is measured with 18 inversion and all of that. If we're going to 19 go to talk about millions units and like 20 that, I think there is probably some need for 21 defining the measurement a little bit better. 22 I'm not talking about the teste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 213 1 procedure. I'm talking about the power

2 measurement.

3 MR. BROOKMAN: Let's let Don 4 follow on, Karim. 5 Are you following his stream of

6 comment? 7 MR. BRUNDAGE: I have a separate

8 comment. 9 MR. BROOKMAN: Okay. Karim then. 10 Thanks, Don. 11 MR. AMRANE: Karim Amrane, HRI. 12 I guess the level that you're 13 looking at, for example, you're picking the C 14 level. I mean, why is it that you're picking 15 the C level? Is it because they're out

16 there? 17 MR. CHRISTOPHER: They're there. 18 They're out there, yes. 19 MR. AMRANE: I know they are out 20 there, but is there any particular reason? 21 Because we are assuming here, yes, 22 you are assuming that, for example, on heate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 214 1 pumps that whatever the 15 SEER, 8.5 HSPF is 2 something that makes sense, and it might not

3 make sense. 4 MR. CHRISTOPHER: It may not be 5 cost effective. It may not work. 6 MR. AMRANE: It might not be cost 7 effective. It might not even make sense. I 8 mean, the fact that CE came up with those 9 levels doesn't mean that they are really 10 something that you need to look at. 11 I think specifically heat pumps, 12 you look at the relationship between CR and 13 HSPF like you did, for example, in the 14 previous rulemaking -- 15 MR. CHRISTOPHER: That is 16 something that --

17 MR. AMRANE: -- to be sure that 18 there is correspondence between the SEER and

19 the HSPF. 20 MR. CHRISTOPHER: Okay, and that's 21 something that we intend to do, and we 22 started to look at it.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 215 1 MR. BROOKMAN: Mike, so these are 2 products that you know are generally 3 available and they're listed and they're in 4 catalogues and they're being sold? 5 MR. CHRISTOPHER: Yeah, and AHRI 6 has a database of products that we've looked

7 at that we can use to look at the 8 relationship such as SEER and HSPF. 9 MR. BROOKMAN: Okay, okay. Don. 10 MR. BRUNDAGE: Just to clarify, 11 you say you're going to look at 14, 15, 16 12 and 21 for split systems. You're also 13 looking at the base level of 13, aren't you?

14 MR. CHRISTOPHER: Correct. 15 MR. BRUNDAGE: Okay. Because the 16 way this is written implies that 13 isn't 17 even on the table on this rulemaking. So 18 that may be something that needs -- to just 19 take a base level in this chart may make it 20 clarify things. 21 MR. BROOKMAN: Thank you. Thank 22 you.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 216 1 Lance. 2 MR. DELAURA: Just a quick comment 3 on CE as a CE number. These may not be the 4 right levels, but CE does look at the 5 national perspective when they're setting 6 program standards, and they do look at the 7 availability of equipment, and they certainly 8 don't just look at a particular state. They 9 look at what's out there, what customers 10 demand, and what they can provide rebates on. 11 So generally the CE levels are 12 pretty good in terms of a proxy of what sells 13 in the marketplace. 14 MR. BROOKMAN: Thank you. 15 Yes, Jim. 16 MR. CRAWFORD: Jim Crawford,

17 Trane. 18 I'm not sure exactly what point 19 Hung Pham was making, but I think I know, and 20 it's a point that maybe deserves a little bit 21 of elaboration. Some of the technologies 22 that we are going to consider do not drawe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 217 1 sinusoidal currents from sinusoidal way 2 forms, and as a consequence they generate 3 lots of harmonics, and those harmonics can be 4 managed to a degree, but those harmonics are 5 of concern to the utilities, legitimate 6 concern to the utilities. 7 And if you get into a situation 8 where you were to have a very large installed 9 population of those, then those air 10 conditioners would begin to look like a bunch 11 of battery chargers, and the battery charger 12 is a very unpleasant load to the electric 13 utility. 14 Maybe that should be monetized in 15 some way also. 16 MR. BROOKMAN: That's interesting. 17 MR. PHAM: Thank you, Jim. 18 MR. BROOKMAN: Yes, please.

19 MR. ARNOLD: Dan Arnold. 20 I just want to make sure that 21 what's included in the analysis is the fact 22 that I think we can all agree in this roome20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 218 1 that it would be preferable to sell a heat 2 pump to a straight air conditioner with 3 electric resistance back-up heat. So the 4 consumer does have a choice when they go to 5 either install a heat pump or replace a heat 6 pump, and that is an air conditioner with 7 electric resistance back-up heat. 8 I know it was discussed at the 9 last rulemaking. I'm not sure how to capture 10 it in the analysis, but it should be 11 considered. 12 MR. BROOKMAN: Thank you. Thank 13 you. 14 And what about the second item, 15 SDHV and space constrained products? Yes, 16 Craig. 17 MR. MESSMER: Craig Messmer of

18 UNICO. 19 All of the SDHV product 20 manufacturers do not make enough for a unit, 21 and we believe that whatever minimum 22 efficiency for conventional systems, whatevere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 219 1 condensing units, heat pumps come out of that 2 rule would be used as the baseline for 3 analyzing the SDHV product line. So we'd 4 start there and then work up. 5 Certainly having the mass 6 technology relooked at again would be useful, 7 but I wouldn't like to see any statements

8 based on that. 9 MR. BROOKMAN: What is suggested 10 as mass tech in the table above, does that 11 comport with your view of reality? 12 MR. MESSMER: No, no. There's a 13 separate document that DOE published in 2002 14 that shows the mass technology for SDHV 15 that's not on this chart, but they showed, I 16 believe, 13.4, and that's assuming a 14 SEER 17 nominally sized outdoor unit. 18 Certainly it might be a higher 19 maximum today, but we don't believe that SDHV 20 should be required to have two-stage 21 condensing units when the minimal for 22 conventional might be single stage, fore20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 220 1 example. 2 So anyway, we probably would have 3 to have a separate chart for efficiency 4 levels to be looked at, but since it's such a 5 small product class, we would agree they 6 would just start with the baseline and 7 consider that the outdoor unit.

8 MR. BROOKMAN: John. 9 MR. MANDYCK: John Mandyck with 10 Carrier. 11 Is there anything compelling DOE 12 to look at whole numbers only in the analysis

13 for the SEER standard?

14 MR. CHRISTOPHER: The short answer 15 is simplicity, but if there's compelling 16 reason to look at fractional SEER, you know, 17 we'd like to hear your opinions on that. 18 MR. BROOKMAN: John, do you think 19 there's a benefit in that? 20 MR. MANDYCK: I was just curious 21 as to why there were only whole numbers here. 22 MR. BROOKMAN: Yes, please, Fred.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 221 1 MR. KELLER: I would just 2 elaborate. Is it possible that DOE would set 3 a SEER minimum, a fractional number rather

4 than a whole number? 5 MR. CHRISTOPHER: It's certainly 6 possible. I think DOE would not be precluded 7 from doing that for any reason. 8 MR. BROOKMAN: Yes, Talbot. 9 MR. GEE: Yes, Talbot Gee. 10 One thing just for consideration 11 is when you're looking at market penetrations 12 at these various levels and everything like 13 that into the cost analysis, take into 14 consideration that a lot of these levels are 15 incented in some way, shape or form, that 16 should this become a new minimum, it might be 17 reasonable to assume that those incentives 18 might not any longer exist. 19 So I'm not sure exactly how you 20 get to that endpoint, but take into 21 consideration what role current incentives 22 might have had in the market adoption ate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 222 1 these levels and the effect of there 2 potentially not being any incentives at these 3 levels should a minimum raise any of these 4 points. 5 MR. BROOKMAN: Okay. Lance. 6 MR. DELAURA: Just to go back to 7 the CE point and also from a utility 8 perspective, the levels rise on efficiency 9 for many different pieces of equipment, and 10 the utilities and others that provide rebates 11 continually look at this. There's going to 12 be a new baseline established whenever the 13 regional standards and the national standard 14 goes into effect, and it will be measured 15 against that. 16 So typically what we see with CEE 17 is CE becomes Energy Star at some point. 18 Energy Star moves up. The bar just keeps 19 getting raised, assuming equipment is 20 available that you can rebate, and you just 21 keep raising the bar. It's the cycle of 22 doing this that's been going on for nearly 30e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 223 1 years.

2 So I wouldn't be as concerned 3 about the rebates or the incentives to 4 customers going away. It will just be at 5 different levels for different pieces of 6 equipment.

7 MR. BROOKMAN: Go ahead. Follow

8 on. 9 MR. GEE: Yeah, I guess I should 10 go farther and say the concern is the 11 percentage of that rebate or that incentive 12 has to grow in alignment with the increased 13 cost of product. So if the minimum SEER goes 14 up, then you can't just take that same level 15 of rebate and push it up. 16 And our concern is that those 17 funds are finite, and you get to a point of 18 diminishing returns. 19 MR. DELAURA: I think that's a 20 good point, but the rebates are typically 21 provided for the energy saved. It's not so 22 much based on what the cost of equipment is.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 224 1 It's looking at what the energy savings are. 2 So assuming that savings is there, 3 there will be the analysis that will back 4 rebates that will go with that. 5 MR. BROOKMAN: Okay. Jim. 6 MR. CRAWFORD: Jim Crawford. 7 I'm just going to state the 8 obvious. As we go to higher and higher SEERs 9 and HSPFs, we are in a territory of 10 significantly decreasing return. For every 11 point that you make, you get less than you 12 did for the point before, and in the 13 territory that we seem to be headed for, 14 that's a very significant factor. 15 MR. BROOKMAN: Some final comments 16 on this slide? I'm going to keep pressing us

17 ahead.

18 Andrew. 19 MR. DELASKI: Yeah, I just want to 20 reiterate for this slide the point that I was 21 going to make earlier about the 22 appropriateness of SEER as a regional metric;e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 225 1 that these levels appear to be appropriate to 2 evaluate for the base national standard, but 3 the right levels to consider for the regional 4 standards that should be considered at the 5 point, I think, could very well be different 6 depending on what that metric is, or looking 7 at alternate metrics, and EER brought up 8 earlier today potentially a useful metric for 9 determining performance in a hot, dry 10 climate. 11 I mean, let's just be real clear. 12 It doesn't make sense to measure efficiency 13 in Phoenix the same way using the climate of 14 Chicago. So looking at a regional standard 15 that puts Phoenix -- and these aren't the 16 right levels. We should be looking at 17 something else that tells us how that air 18 conditioner operates in Phoenix. 19 MR. BROOKMAN: So how would you 20 suggest the department modify it? 21 MR. DELASKI: Well, one suggestion 22 that has been brought up earlier today woulde20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 226 1 be to look at the EER levels for the hot, dry 2 climate. That was a suggestion that I think 3 should be considered. 4 MR. BROOKMAN: Yeah, I figured 5 we'd get some push-back on that. 6 Karim. 7 MR. AMRANE: Karim Amrane with

8 HRI. 9 I think we've been there before on 10 this EER issue, and the last time we looked 11 at it, DOE decided not to adopt an EER 12 because of concerns that we won't be getting 13 the savings that we would be getting with a 14 SEER rating only. 15 So, again, I mean, what you're 16 asking, Andrew, and what others are asking as 17 far as the test procedures is something that 18 maybe as a group here we could look at, but 19 we're talking about two different things. 20 We're talking about test procedures versus 21 minimum energy efficiency standard, and if we 22 want to link the two together, we need firste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 227 1 to address the test procedures, and that on 2 its own will require much more time than 3 three years that DOE has to finish this 4 rulemaking. 5 MR. BROOKMAN: Okay. 6 MR. DELASKI: Yeah, a middle 7 ground, I guess, might be to get EER-95, 8 which is the current test method. You're 9 right, Karim. Many of the advocates 10 recommended in the last rulemaking that the 11 department set a standard which would have 12 two parts, a minimum SEER and then a minimum 13 EER that would be a median value of products 14 meeting that SEER to assure performance. 15 The department at the time said we 16 could do that, but they choose not to in 17 large part -- there were several reasons, but

18 one reason was that SEER and the EER 19 correlated quite well after CR-13. 20 But the department also showed 21 that once you got past CR-13, the correlation 22 broke down and that peak performance as youe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 228 1 get to the higher and higher temperatures if 2 the SEER goes up it can be a significant

3 concern. 4 So the determination in the last 5 rulemaking, I think, doesn't tell where this 6 natural median might go. 7 MR. BROOKMAN: Okay. Jim. 8 MR. CRAWFORD: Jim Crawford. 9 And I think that this little bit 10 of discussion highlights the fact that one of 11 the things that the department should be 12 doing first is defining what metrics they are 13 authorized to require in this rulemaking, and 14 out of that range, whatever that set of 15 metrics is, whether it be one or ten, which 16 metrics they are going to use for the 17 national standard and what metrics they would 18 use for regional standards. Because without 19 that, we're in a game here where nobody knows 20 the players or the cast.

21 MR. BROOKMAN: So let me note that 22 the next slide refers to regional standards.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 229 1 Briefly, Don. 2 MR. BRUNDAGE: Yeah, I think to 3 clarify a little, what I would like I realize 4 it's way too early to say what regional 5 standards ought to be, but some sort of legal

6 statements from DOE on what the rules are and 7 how much flexibility they have on regional 8 standards and what the metrics can be because 9 I've set in this room several times before 10 and heard from DOE that SEER is the only 11 thing you can measure air conditioners on. 12 That's the only thing you can use, and we 13 hear different things. 14 And just state plainly and not 15 make you look through court cases on what are 16 the ground rules we're operating under. 17 MR. BROOKMAN: Okay. Thank you. 18 Let's proceed. This is 35. 19 MR. CHRISTOPHER: Okay. I think 20 we're all pretty familiar with the 21 requirement in the EISA 2007's regional 22 standard in Section 306, and it does permite20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 230 1 DOE to establish standards for one or two 2 regions on top of a base national standard. 3 So effectively that would be like three 4 regions. 5 The standards for the additional 6 regions are intended to be more restrictive 7 than the base national standard, and the 8 boundaries that DOE, the Secretary can define 9 are contiguous states only, and Alaska and 10 Hawaii can be included in one of those 11 regions. 12 So Doug, I don't know if you want 13 to flip a few back again, but these questions 14 cover a lot of what we've already talked 15 about so far today. 16 MR. BROOKMAN: Yeah, exactly, a 17 good portion of this, but maybe people could 18 be more specific about the first question: 19 what would be appropriate regions. Maybe 20 there's a map somewhere or something that you 21 could point us to, Pat.

22 MR. O'CONNOR: Yeah. When thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 231 1 legislation was being considered on the Hill, 2 we tried to convince without success to the 3 Congress to make sure that the regions do not 4 split a metropolitan area. Neither the 5 manufacturers nor the ACEEE would agree with

6 us on that. 7 But we're very concerned if you 8 split a metropolitan area, for example, and 9 this isn't a good example, but you've got 10 northern Virginia, Washington, D.C., and 11 Maryland. It's a metropolitan area, actually 12 consolidated statistical metropolitan area. 13 For the distribution channel, that whole area 14 product moves back and forth across the 15 river. To split that metropolitan area would 16 have significant competitive impact, 17 particularly if there's a price difference 18 between the higher efficiency unit and the 19 national unit. 20 This is not a good example. 21 Better examples are other states where you 22 have smaller metropolitan areas, but stille20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 232 1 significant areas. Several hundred thousand 2 people, I think, in the Quad Cities area,3 Illinois and Iowa, some of the Kansas4 Missouri areas. 5 We would hope that DOE would look 6 very closely at that because that really 7 impacts Item 1-6 because if you split 8 metropolitan area, you are going to have an 9 impact on distribution and distributors and 10 installers in those metropolitan areas. 11 So I hope regardless of the fact 12 that Congress in its wisdom didn't see fit to 13 write that into the bill, that you would look 14 at that very carefully. 15 MR. BROOKMAN: Thank you. 16 And I'm hoping in this 17 conversation we're about to have about 18 regional standards that we're not going to 19 re-trod the ground we already went over this 20 morning. 21 Harvey. 22 MR. SACHS: I very much appreciatee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 233 1 that comment, and I believe that ACEEE's 2 position was to be supportive of giving the 3 Secretary authority to consolidate a region, 4 a metropolitan area into one of the two 5 contiguous regions that it touched.

6 MR. BROOKMAN: So we want 7 additional comment on how this might get 8 configured by the department. 9 Gary. 10 MR. FERNSTROM: Gary Fernstrom. 11 So a point that I hadn't raised 12 previously with respect to California is that 13 we have coastal regions as well as hot, 14 central valley regions, and if the regional 15 standards are implemented through the states 16 or if they're enforced through the states, I 17 believe California would want to have the 18 option of requiring the more rigorous 19 standards in the climate zones where they 20 make sense and not in the coastal climate 21 zones where perhaps they don't make so much

22 sense.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 234 1 MR. BROOKMAN: Okay. John 2 Mandyck. 3 MR. MANDYCK: This is John 4 Mandyck, Carrier. 5 That question was resolved in the 6 legislation. I mean, that was debated over 7 and over. So that decision has been made.

8 MR. BROOKMAN: And what was the 9 resolution?

10 MR. MANDYCK: That the whole 11 states can be (speaking from an unmiked 12 location.) 13 MR. BROOKMAN: Thank you.

14 Steve Rosenstock.

15 MR. ROSENSTOCK: Steve Rosenstock. 16 Yeah, I guess as a follow-up, it's 17 interesting if you look at the climate mass, 18 and you discussed it earlier, I assume. 19 California, 16 climate zones; so, you know, 20 to have 16 separate regulations within 21 California might not make too much sense 22 unfortunately, and other areas. I knowe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 235 1 someone was talking about Phoenix. Well, 2 Flagstaff, Arizona has a similar climate zone 3 to parts of Idaho. So there's actually other 4 data just to see kind of how the climate 5 zones all kind of go, and that might have an 6 impact on some of your analysis.

7 Thanks. 8 MR. BROOKMAN: Charlie. 9 MR. McCRUDDEN: Charlie McCrudden, 10 Air Conditioning Contractors. 11 Let me just to sum up what I was 12 going to say, everywhere that Pat said 13 distribution channel or referred to 14 wholesalers or distributors, insert the word

15 "contractors" because we have the exact same 16 concerns, whether it be with a metropolitan 17 area or how this all works. 18 I'm anticipating your next 19 question, which is: what is the solution? 20 And I don't know what the solution is in part 21 because I don't know precedent that we can

22 look to that we can sort of model thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 236 1 solution after. Maybe there is one that 2 exists on another product. I don't think

3 there's one under NECA. I don't know. 4 And I think that stresses the 5 importance of doing this very carefully, 6 because this is precedent setting.

7 MR. BROOKMAN: Lance. 8 MR. DELAURA: One potential 9 solution for California would be to have the 10 national standard, whatever it is, as the 11 coastal standard so that you don't have the 12 coastal residents paying the extra cost for a 13 benefit that they wouldn't receive, and then 14 for those hot or more extreme climates have 15 that be the regional, if you will, standard. 16 MR. GILLEY: Again, we don't 17 believe DOE has the authority. 18 MR. BROOKMAN: Kyle, please, say 19 your name for the record. 20 MR. GILLEY: Kyle Gilley. 21 I mean, based on the statute, we 22 don't believe DOE has the authority to doe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 237 1 that.

2 MR. BROOKMAN: I see John and 3 Karim. Both of you go ahead. 4 MR. AMRANE: Exactly same. 5 MR. BROOKMAN: The same response, 6 John, yes. 7 Andrew, gop ahead. 8 MR. DELASKI: I guess I just 9 wanted to make the point. I agree. The law 10 is pretty clear. It says state boundaries. 11 I think it's pretty clear on that point. 12 The point that I wanted to make 13 though is that when you have a one size fits 14 all national standard, it applies to every 15 climate zone in the United States. Regional 16 standards create the opportunity to have 17 greater cost effectiveness for consumers by 18 breaking the U.S. up into having one base 19 national standard and two regional standards. 20 I would submit that boundaries 21 should be drawn in a way that maximize cost 22 effective energy savings as required by thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 238 1 statute for the buyers and users of the 2 product. 3 MR. BROOKMAN: Craig. 4 MR. MESSMER: Craig Messmer. 5 I'm going to agree with what he 6 just said sort of. Instead of thinking about 7 climate zones, we should be thinking about 8 hours of operation and how they may closely 9 align with one another, but really we're 10 talking about, I think, justifying the cost 11 justification of an air conditioner. So 12 generally the northern regions don't operate 13 an air conditioner as long as they do in the 14 south. So that maybe should be the way the 15 map is drawn rather than by climate. 16 Something to consider.

17 MR. BROOKMAN: Pat. 18 MR. O'CONNOR: Pat O'Connor, 19 American Supply Association. 20 I hope when DOE looks at drawing 21 these boundaries it takes into account the 22 willingness of the state when forced thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 239 1 standard. We have some history with this 2 back with water heater standards in the late 3 '80s and '90s, where states had the 4 opportunity to set their own standards.

5 The State of New York had a heater 6 standard, a very efficient heater standard, 7 but chose not to enforce it. Entities like 8 the State Housing Authority of New York were 9 contracting with out of state vendors to 10 provide nonefficient heaters because the 11 state was choosing not to enforce it. 12 We went to the Attorney General of 13 New York and his Secretary of Energy at the 14 time and were not able to compel compliance 15 by the State of New York. 16 So I hope as you draw these 17 boundaries you consider the willingness of a 18 state to enforce the standard that's applied 19 to it. Again, we would guess that there are 20 some states, using New England as an example 21 within the New England region, that will 22 probably just choose not to enforce ite20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 240 1 because it's against their traditional values 2 to enforce it. 3 So there are benefits to these 4 higher efficiency standards. I'll concede 5 that, but those benefits only accrue if 6 there's a true enforcement mechanism, and to 7 just rely on the goodwill of consumer as the 8 enforcement entity, I don't think that makes

9 sense. 10 So, please, DOE, as you go forward 11 look carefully at establishing some metrics 12 to determine if the states want to 13 participate or not. I understand California 14 does. The State of New York probably does,

15 but other states I don't know. 16 MR. BROOKMAN: Please say your

17 name. 18 MR. SCHMIDT: Ed Schmidt, 19 Northeast Energy Efficiency Partnerships. 20 I would encourage as we look at 21 regions and as we look at, again, the issue

22 of EER that we also look at wholesalee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 241 1 electric markets and think about how many 2 hours of peak we're talking about and the 3 impact of a very few number of hours of peak 4 on prices at the retail level both for the

5 consumer as well as the manufacturer and 6 distributor up and down the supply chain. 7 A case in point would be New 8 England where it was 98 degrees Tuesday in 9 Hartford, and there was a lot of humidity and 10 there was a lot of air going. It will be 45 11 degrees tonight. EER in that region and 12 defining that region based on these dynamics 13 is huge. 14 MR. BROOKMAN: Thank you. 15 Joe Mattingly. 16 MR. MATTINGLY: Joe Mattingly,

17 AHRI. 18 We don't want to get into it here. 19 It would be a big argument, but we had the 20 issue of enforcement of federal standards by 21 a state in previously litigation with the 22 California Energy Commission, and I think thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 242 1 result of that taken by all the parties, and 2 certainly I would maintain that states, in 3 fact, do not have legal authority to enforce

4 federal standards. 5 MR. BROOKMAN: I guess you've 6 gotten a rise out of Andrew first and then 7 we'll go to Don. 8 Let's try and make this brief

9 here. 10 MR. DELASKI: Yeah, I'll make it 11 real brief. I think we need to look at the 12 law. I think it was negotiated as part of 13 the regional standards compromise that states 14 could adopt a regional standard into the 15 building codes, but I'll look at the 16 language.

17 MR. BROOKMAN: That would be 18 helpful and supply that language to the 19 department. We're not going to put a fine 20 point on legal interpretation here today I 21 don't think.

22 Ted and then I'll come back toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 243 1 Don. 2 MR. POPE: Ted Pope. 3 I'm not a lawyer, and I'm not sure 4 PG&E's lawyers have looked at this in detail 5 yet, but I think I want to make sure we're 6 being clear. We agree that the statute says 7 the lines are drawn on the state boundaries, 8 but what I think we're suggesting now is that 9 we'd like DOE to look at when it crafts the 10 rules for state implementation and 11 enforcement or compliance that there's an 12 allowance for states to enforce the regional 13 standard in some places and the base federal 14 standard in others. I think that's what 15 we're looking for and not trying to rewrite

16 the federal law. 17 MR. BROOKMAN: Thank you.

18 Don. 19 MR. BRUNDAGE: I just want to make 20 a point that for the hot, humid climate 21 standard the driving force is not going go be 22 degree days. It's going to be humidity.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 244 1 What I would like to see out of a hot, humid 2 standard is something that is a requirement 3 that better meets the needs of hot, humid 4 climates.

5 MR. BROOKMAN: And that would be? 6 MR. BRUNDAGE: Some to find a way 7 to require better humidity control, and maybe 8 it's as simple as going to CR-14, and that by 9 default tends to get variable speed, which 10 helps a lot, but there needs to be some way. 11 The most important criteria to us 12 is to have equipment that works, not 13 something that on paper is a little more 14 efficient. 15 MR. BROOKMAN: Let me direct your 16 attention, folks, if you would, to Item 1.5 17 and 1.6 on Slide 36. That's why I want to 18 make sure I give you a final chance to 19 comment should you have something additional 20 that's not been said already.

21 Tom. 22 MR. ROBERTS: Just briefly, thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 245 1 micro climate consideration in California is 2 duplicated throughout the United States, and 3 you'd have to address micro climates 4 everywhere. For example, in Missouri, we 5 have the Ozarks, a very hot, humid 6 environment around a bunch of lakes. There 7 contractors recommend and select different 8 systems, and the consumers generally choose 9 humidity control systems. 10 However, the answer to it, I 11 think, is definitely not raising the SEER 12 standard to 14 because no one is going ot get 13 a variable speed, two stage product at 14 14 because we're all going to reengineer to the 15 least common price point at 14. 16 So I think we mistake standards 17 with choice, and the comment about systems in 18 Phoenix and systems in Chicago, we don't 19 design those the same way. The contractors

20 don't select them and offer them the same 21 way, and the consumers don't choose them the 22 same way.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 246 1 So there's already an awful lot of 2 choice going on. 3 MR. BROOKMAN: Okay, Bill. Go

4 ahead. 5 MR. McCULLOUGH: One item that I 6 think is going to be very important to this, 7 and it's really your Item 1-6, is who

8 enforces these standards. We have customers 9 that regard us -- I mean, I can't imagine 10 that a regional standard with some region, 11 there's not going to be a dealer or a 12 customer or a contractor that's not going to 13 wind up serving both areas.

14 So who enforces and looks at and 15 verifies that that product installed meets 16 that standard? And it becomes very complex 17 even now, today. It's very confusing for 18 consumers. With the energy guide label we 19 say the unit is 13, and we install it with 20 variable speed, and it may get 14, or we 21 install a unit that it says for higher SEER 22 it has to be installed with a variable speed,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 247 1 but yet it doesn't. 2 So that's a key part of this, and 3 who owns this, how is it going to be 4 enforced, and what's the penalty for not 5 following the law. 6 MR. BROOKMAN: Okay. So then a 7 final comment from Talbot, but I do want to 8 encourage all of you to make very detailed 9 comments and submit them to the department 10 because we're moving on. 11 MR. GEE: Right, and frankly, I12 think Harvey just wanted to kind of re13 address the basic assumption here. We're 14 kind of jumping ahead assuming that this 15 region were this standard, this region were

16 that standard. 17 I think there's still a question 18 as to just simply raising the standard, be it 19 federally or regionally. Does that directly 20 lead to energy savings? I think there's a 21 concern there because we've seen the increase 22 in the repair business of existing systems.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 248 1 So the assumption that this is all 2 based on is that if you raise the standard 3 you're automatically going to save energy, 4 and we're not necessarily convinced that's 5 true federally or regionally. 6 MR. BROOKMAN: Okay. Then on to

7 37. 8 MR. CHRISTOPHER: Okay. I'm going 9 to try and go through these a little faster. 10 In engineering analysis, one of 11 the things we do is we look at the 12 manufacturing markup, and this is a way to13 convert the production cost that the tear14 down analysis, the reverse engineering 15 analysis develops to a manufacturer selling 16 price, and that selling price is what goes 17 forward to the down stream analyses where 18 other markups are applied throughout the 19 distribution channels. 20 So components of manufacturer 21 production costs are listed and manufacturing 22 markup as well. The way that DOE goes aboute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 249 1 developing the markup is looking at perfectly 2 available reports, such as SEC filings, 3 company annual reports, and then some private 4 reports. 5 In a minute I'm going to discuss 6 the preliminary manufacturer impact analysis, 7 and during those interviews DOE discussed 8 this information with manufacturers to 9 refine, clarify. 10 So DOE is looking for feedback on 11 this planned approach for developing an 12 estimate of the manufacturing markup. 13 MR. BROOKMAN: John Mandyck. 14 MR. MANDYCK: John Mandyck. 15 Where is transportation and 16 warehousing accounted for in your analysis? 17 MR. CHRISTOPHER: Transportation 18 as in freight?

19 MR. MANDYCK: Yes.

20 MR. CHRISTOPHER: That would be 21 part of the distribution chain and the 22 markups analysis. So that's a separatee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 250 1 analysis. This goes up through looking at

2 what the --

3 MR. MANDYCK: But the manufacturer 4 has to ship it to a warehouse and then 5 warehouse it, and there's an impact on that 6 from a standard chain. So if you have larger 7 units, we have to put more trucks on the road 8 and get bigger warehousing space before it 9 even leaves our premises to go to the next 10 step in the distribution chain. 11 So I'm wondering where that's 12 factored into your manufacturer impact 13 analysis. 14 MR. CHRISTOPHER: Okay. Well, I

15 can't comment as to whether that's 16 specifically included in the shipments 17 analysis. I don't know if it's going to be 18 addressed later today -- or the markups 19 analysis. 20 MR. ROSENQUIST: It's in the 21 manufacturing (speaking from an unmiked 22 location).e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 251 1 MR. BROOKMAN: So the comment was 2 that it's in the manufacturer's markup. 3 MR. ROSENQUIST: In the production

4 class. 5 MR. BROOKMAN: Please say your 6 name again. 7 MR. ROSENQUIST: Greg Rosenquist, 8 Laurence Berkeley. 9 MR. BROOKMAN: Greg Rosenquist. 10 Okay. We got it. 11 MR. MANDYCK: I guess a follow-on 12 question. Was that included in the 13 SEER 13 analysis? The impact of the standard on the 14 transportation warehousing, was that included 15 in the 13 SEER analysis?

16 MR. BROOKMAN: I'm not sure we 17 know the answer to that question right now. 18 MR. DELASKI: We can get back to 19 you on that. 20 MR. BROOKMAN: Okay. Karim. 21 MR. AMRANE: Karim Amrane, HRI. 22 It was not included. We madee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 252 1 those comments during the last rulemaking. 2 We disagreed with the markups. Actually we 3 provided you with markups, and in the end we 4 opted not to use our numbers. 5 So we had a lot of disagreement 6 with the analysis that DOE did last time on 7 the markups, and I'm hoping that this time 8 you will listen a little bit more to the 9 industry. 10 MR. BROOKMAN: Okay. Thank you. 11 Yes, Charlie. 12 MR. McCRUDDEN: And I think if you 13 can extrapolate those comments to beyond 14 manufacturers, to the distributors and to the 15 contractors, I've heard stories about my guys 16 who had to buy trucklifts because the higher 17 SEER products were so much bigger. They had 18 to buy different trucks, and also have two 19 people to make deliveries. 20 So it's not just going to be on 21 the manufacturers, and I may be jumping ahead 22 of myself on where this analysis is done,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 253 1 but that's something that I think is also of

2 concern. 3 MR. BROOKMAN: Final comments on 4 markups. Tom.

5 MR. ROBERTS: Tom Roberts. 6 Not to jump ahead, but on the 7 manufacturing side now that we have been 8 through this a couple of times, the 9 manufacturers have a much better idea as to 10 obsolescence, obsolescence and work in 11 process, obsolescence of finished goods, and 12 transitional costs associated with change, 13 such as loss of economies of scale in certain 14 sizes. 15 I'd just like for those to be 16 included since we all know retroactively now

17 about what those are.

18 MR. BROOKMAN: So then the 19 department would really like to see that 20 information, you know. Make sure that's

21 there for them.

22 Talbot.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 254 1 MR. GEE: And does this -- Talbot 2 Gee -- does this also include the indoor 3 components that are required to achieve a 4 certain given SEER level?

5 MR. CHRISTOPHER: Yes.

6 MR. GEE: It does?

7 MR. CHRISTOPHER: Yes.

8 MR. BROOKMAN: So then on to 9 proprietary designs.

10 MR. CHRISTOPHER: So the 11 department may encounter proprietary designs 12 when it's looking at particular technologies 13 that are used to increase efficiency, and it 14 will evaluate those that are available in a 15 working prototype. 16 However, proprietary designs that 17 are the only path to a given efficiency level 18 will not be considered, and that's to protect

19 manufacturers that don't have access to those 20 designs. 21 And any discussions of proprietary 22 designs, of course, confidentiality will bee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 255 1 maintained. 2 And Item 5A asks are there any 3 proprietary designs that DOE should be aware 4 of and, if so, how should DOE go about 5 acquiring any cost data necessary to evaluate 6 those designs? 7 MR. BROOKMAN: Harvey Sachs. 8 MR. SACHS: I would just like to 9 note the superficial irony of being willing 10 to consider proprietary designs, but not the 11 problem of well established Western tradition 12 of water cooled evaporators.

13 MR. BROOKMAN: Other comments on 14 proprietary designs? 15 Charlie, we didn't get that.

16 Pardon me. 17 MR. SACHS: I said it was on -- 18 MR. BROOKMAN: Harvey, we didn't 19 get it. 20 MR. SACHS: I'm sorry. I used the 21 word "ironic," not "moronic." 22 (Laughter.)e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 256 1 MR. BROOKMAN: So I guess we'll 2 let that one pass. Okay. So no comments, 3 additional comments, on proprietary designs. 4 Keep going. 5 MR. CHRISTOPHER: Yeah, thanks. 6 As part of the engineering we also looked at 7 outside regulatory changes, and these are --8 I guess the big example would be the phase9 out of refrigerants, obviously the big one 10 being R-22. Manufacturers are currently 11 transitioning R-410A. 12 The ban on R-22 is beginning in 13 early 2010, and because this falls before the 14 final rule for this rulemaking, DOE's 15 assumption is that manufacturers will be 16 fully transitioned to some new refrigerant by 17 the time standards become effective, and the18 clear alternative to R-22 at this point is R19 410A.

20 DOE understands there are other 21 issues here, such as the reduced availability 22 of R-22 and the price, slightly increases ine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 257 1 prices. So DOE is looking for feedback on2 central impacts of reduced availability of R3 22 and any other outside regulatory changes 4 that DOE needs to consider. 5 MR. BROOKMAN: Perhaps we can 6 consider these together. Hung first and then

7 Lance. 8 MR. PHAM: I think we talk a 9 little about R-22, but actually the concern 10 is R-410A that we are trying to transition 11 into. We are barely switching into it, and 12 we already get faced with Lieberman bill and 13 everything trying to phase it out again. 14 So I think those are the big 15 factors that I think DOE needs to consider. 16 Even the supply of the new refrigerant might 17 be in question, let alone R-22. 18 MR. BROOKMAN: Thank you.

19 Lance. 20 MR. DELAURA: This isn't a 21 refrigerant comment. It's a time of use 22 rates comment, that we think it would bee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 258 1 appropriate in this section to have a comment 2 about that. We'll submit written comments. 3 MR. BROOKMAN: Okay. Okay. Thank 4 you. 5 Charlie. 6 MR. McCRUDDEN: Charlie 7 McCrudden. I don't know the answer to this 8 question. So I'm curious. Is this 9 considered a major rule? And if so, does the 10 Small Business Administration chime in with 11 the impacts on small businesses and such? 12 MR. BROOKMAN: Mike Kiddo. 13 MR. KIDDO: Yeah, it's my 14 understanding that this would be a 15 significant rule. 16 MR. BROOKMAN: Louder, Mike. 17 MR. KIDDO: It's my understanding 18 that this is a significant rulemaking, and 19 with respect to the SBA, they may provide 20 some kind of comment, but that would probably 21 be during the NOPR process, not here.

22 MR. BROOKMAN: Fred.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 259 1 MR. KELLER: Yes, just a comment. 2 The question 5.9 you have in your 3 presentation is not the same as the question

4 5.9 --

5 MR. CHRISTOPHER: I understand. 6 MR. KELLER: -- in the framework

7 document. 8 MR. CHRISTOPHER: Right, yeah.9 MR. KELLER: Which refers to R10 410A, not R-22. 11 MR. CHRISTOPHER: Right.

12 MR. ROBERTS: Tom Roberts.

13 It needs to be both.

14 MR. CHRISTOPHER: It should be

15 both.

16 MR. ROBERTS: There's a 17 transitional shortfall in the gap on 210 for 18 22, but definitely it will affect that.

19 MR. BROOKMAN: Thanks for that 20 clarification. So then it should reflect

21 both.

22 MR. CHRISTOPHER: Yes.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 260 1 MR. BROOKMAN: Okay. Good. 2 Thanks. That's helpful.

3 Tom. 4 MR. CRAWFORD: Jim Crawford. 5 MR. BROOKMAN: Jim Crawford. 6 MR. CRAWFORD: I just wanted to 7 underscore the fact that in his opening 8 remarks Dr. Amrane provided some quantitative 9 information on this availability issue for 10 the HFC refrigerants. This is by far the 11 most serious issue facing our industry, and 12 the corresponding changes the most serious 13 issue facing our society. 14 MR. BROOKMAN: Thank you. 15 Okay. Then let's --

16 MR. CHRISTOPHER: Let's move on.

17 MR. BROOKMAN: -- move on.

18 MR. CHRISTOPHER: So the fourth 19 analysis that I'm speaking about today is the 20 manufacturer impact analysis, and the MIA has 21 three main phases. 22 The first phase is conducted fore20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 261 1 the ANOPR and phases two and three are 2 conducted for the NOPR, and in phase one DOE 3 looks at conduct industry profile and 4 conducts preliminary manufacturer impacts or 5 -- sorry -- preliminary MIA interviews. 6 The industry profile is intended

7 to evaluate the structure and market 8 characteristics, and this has some overlap 9 with the market technology assessment. 10 Produces an industry profile 11 report with aggregated findings and 12 characteristics and identifies any critical 13 issues that require special consideration. 14 Examples are types of subgroups of 15 manufacturers, access to technology, 16 potential regulatory scenarios.

17 And when DOE conducts MIA 18 interviews, these occur during the 19 engineering analysis and include topics such 20 as shipments projections, conversion costs, 21 cumulative regulatory burden, for example. 22 So we don't have any specifice20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 262 1 items of feedback on the preliminary MIA, but 2 at this point, Doug, do you want to? I'm 3 ready to hand off to Sriram. I don't know if 4 you want to. 5 MR. GILLEY: One clarifying 6 question. 7 MR. BROOKMAN: Kyle, please. 8 MR. GILLEY: This says preliminary 9 manufacturer impact analysis, but given that 10 you're also looking at regional standards, it 11 appears to me that this also should include 12 everyone in the distribution channel. Some 13 of these things apply to our friends in the 14 distributor and contracting community, and 15 they will incur a burden that needs to be 16 analyzed in this rulemaking. 17 MR. BROOKMAN: Do you wish to 18 respond? 19 MR. CHRISTOPHER: It's taken into 20 consideration, but the idea of the analysis 21 is to look at impacts on manufacturers.

22 MR. GILLEY: It's a flawede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 263 1 analysis if you're looking at regional 2 standards and you don't include everything in 3 the distribution channel.

4 MR. BROOKMAN: Talbot. 5 MR. GEE: Well, and I actually 6 hadn't brought up because I thought I had 7 heard you say that there was a section -- I 8 haven't peeked ahead -- a section on 9 distribution impacts. If that's true, then 10 just make sure that that point is expressly 11 included. 12 MR. ROBERTS: Sorry, Talbot. This 13 is Tom. 14 I did peek ahead, and that point 15 is very well taken because the downstream 16 portion is way over simplified, and you need 17 to consider the total channel impact, meaning 18 factory driveway to consumer driveway all the 19 way through with the whole broad scope of the 20 project to get an accurate -- 21 MR. BROOKMAN: Since you peeked 22 ahead, where is it about?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 264 1 MR. ROBERTS: It's the 2 distribution channel discussion. 3 MR. BROOKMAN: Okay. So let's 4 make sure we land on that when we get there. 5 yes, Paul. 6 MR. DOPPEL: I'd like to recommend 7 that you add some consideration to 8 manufacturers who import product. There 9 should be an impact analysis. 10 MR. BROOKMAN: So how would you 11 suggest that gets addressed? 12 MR. DOPPEL: The time and cost it 13 takes to bring products in. It's just talked 14 about shipment and other types of things. So

15 manufacturers who make overseas and then 16 bring into the U.S. face some different 17 issues.

18 MR. BROOKMAN: Pat.

19 MR. O'CONNOR: Pat O'Connor. 20 Could you give us a little bit of 21 feedback as to what the rationale would be 22 for not including the entire supply chain ine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 265 1 the manufacturer's impact analysis to help us

2 focus our comments on the framework document? 3 MR. CHRISTOPHER: This is a 4 question on the process of the rulemaking, 5 and I don't know. You know, that's not a 6 question that I'm prepared to answer. 7 MR. BROOKMAN: Okay. Then I'm 8 going to suggest we move on to the next 9 slide, and Sriram is our presenter. 10 MR. SOMASUNDARAM: Can you hear me

11 now? 12 The next few steps of the analysis 13 are the energy use analysis, the markups. We 14 will get to that in the next step, and then 15 the life cycle costs and payback period 16 analyses are the next three analyses steps. 17 So in the energy use analysis, 18 essentially this is the step where DOE 19 determines the annual energy consumed by 20 these equipment, and we then multiply that by 21 the electricity price to get the energy cost 22 or the annual operating cost of the equipmente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 266 1 to feed into the life cycle cost and payback 2 period analysis. 3 And we also are able to capture 4 the energy savings potential of products with 5 increased efficiencies in this step. 6 For households or for residential 7 buildings, we propose to develop residential 8 building samples or household samples from 9 RECS data. RECS is the residential energy 10 consumption survey data, and in terms of what 11 the latest available source for RECS data is, 12 it's the 2001 survey data that is available 13 right now. 14 Unfortunately, the 2005 survey 15 data may not be completed and available for 16 our use at least in the ANOPR stages of the 17 rulemaking. So we suspect that given that, 18 we may have to use the RECS 2001 data. 19 Now, in combination with the RECS 20 data, we will also be using the efficiency

21 levels and the cost curves that the 22 engineering analysis produces to develop thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 267 1 annual energy use for these households. 2 To elaborate this a little 3 further, I thought I'll show you a graphic 4 representation of how we intend to capture 5 the annual energy use from utility bill data 6 that is available as part of the RECS survey. 7 Combine that with the SEER of the stock 8 equipment within the households. 9 We then scale the annual energy 10 consumption of the household by the higher 11 SEER levels that the engineering analysis 12 would propose us to develop costs for. So we 13 will have scaled up the unit energy 14 consumption that is REC here for every 15 efficiency level per household. 16 And that's the final figure in the 17 right extreme box that we will use to assess 18 the energy consumption of the unit, and this 19 will be done for each product class, each 20 representative unit of a product class. 21 So at this point I'd like to pause 22 and say DOE seeks comments on this particulare20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 268 1 methodology to be used. This is essentially 2 the same methodology that was used for 3 previous rulemaking. So there's nothing 4 different about it, except for the date of

5 the RECS data. 6 MR. BROOKMAN: I'll start with 7 Lance and then go to Tom. 8 MR. DELAURA: Yeah, just a quick

9 comment. The same comment that I made 10 before, that the time of use rates are really 11 going to be critical to use to do the 12 appropriate calculation not only for 13 California, but if there are any other parts 14 of the country that have time of use to make 15 sure that gets plugged into the analysis 16 region specific. 17 MR. SOMASUNDARAM: And that will 18 be addressed in a subsequent presentation. 19 MR. BROOKMAN: Thank you.

20 Tom.

21 MR. ROBERTS: Tom Roberts. 22 Am I correct in assuming thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 269 1 you're going to look at savings potential 2 versus 2001 actual data? Savings potential

3 versus 2001 actual Census data?

4 MR. SOMASUNDARAM: I'm not sure 5 what you're referring to, Census data. 6 MR. ROBERTS: Well, here's the 7 point. The point is our products last an 8 average of 17 years. We're using seven year 9 old data. So the installed population is 40 10 percent replaced off of the data that we're 11 looking at, referencing. So the potential 12 for savings is a lot less than what it looks 13 like if you're using 2001 baseline data. 14 MR. BROOKMAN: Jim.

15 MR. SOMASUNDARAM: If I understand 16 your question correctly, what I meant to say 17 way we will use the utility bill data from 18 the 2001 survey that was completed by 19 DOE/EIA, but will scale up the consumption 20 for the efficiency levels that we'll be 21 analyzing. 22 So we'll simply be saying thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 270 1 whatever the SEER of the existing unit in the 2 household is, we will assume that that has 3 been scaled up to the SEER level that we are 4 analyzing and hence what the energy 5 consumption will be for that SEER of that 6 equipment. 7 MR. ROBERTS: But do you 8 understand my point, that since then about 30 9 to 40 percent of those units have been 10 replaced.

11 MR. SOMASUNDARAM: That's correct.

12 MR. ROBERTS: And so the 13 assumption is invalid. 14 MR. BROOKMAN: Okay. Jim. 15 MR. CRAWFORD: Jim Crawford. 16 I had a question. I notice in the 17 framework document you make reference to the 18 RECS, CBECS and the American housing survey. 19 Do you have access to those in a level of 20 detail deeper than what we do?

21 MR. SOMASUNDARAM: Yes. The RECS 22 and CBECS, I believe we do have detailede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 271 1 access to their survey data, but that's the 2 one that may not be available for the 2005 3 survey data. 4 MR. CRAWFORD: I understand that, 5 but my point is that it seems in the 6 framework document that you make reference to 7 some finer grain data than I think I have

8 access to. 9 MR. SOMASUNDARAM: That's right. 10 MR. CRAWFORD: And that makes it 11 very difficult for those around the table to 12 try to shadow the analysis to see whether or

13 not we concur. 14 MR. BROOKMAN: Harvey. 15 MR. SACHS: May we return to Slide 16 47 for just a second? 17 MR. SOMASUNDARAM: yes.

18 MR. SACHS: I'm concerned about 19 the lower text in the left-hand bullet, SEER 20 per household deduced from equipment age, et 21 cetera. And my concern is that the energy 22 used at high temperature bin hours is highere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 272 1 in ways that SEER may not completely reflect.

2 MR. SOMASUNDARAM: That's correct. 3 MR. SACHS: And so I'm curious 4 about the details. When you say SEER, are 5 you assuming that equipment operates at high 6 temperatures as estimated by SEER or are you 7 actually looking at the degradation of 8 performance as perhaps reflected by EER? 9 MR. SOMASUNDARAM: Neither of the 10 above. We simply deduce the SEER number, the 11 number, the SEER level of that piece of 12 equipment in that household from the RECS 13 survey results, and that will be based on the 14 vintage data that they provide us. 15 There is no way of knowing exactly 16 what equipment goes into which household.

17 MR. SACHS: But that seems to be 18 assuming that the SEER rating, the back 19 computed SEER rating with a piece of 20 equipment in the central valley of California 21 or in Mobile, Alabama is reflected by or 22 related to in some significant way SEER, ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 273 1 that goes to the heart of this question of 2 regional standards.

3 MR. BROOKMAN: A follow-on and 4 then I'm coming to you next. 5 PARTICIPANT: I think on a volume 6 weighted basis it should all wash out because 7 you're going to have -- 8 MR. SOMASUNDARAM: These are just 9 representative.

10 PARTICIPANT: -- some of those 11 units that are going to be located in St. 12 Louis, which is close to where your national 13 average is. Some are located in Minnesota. 14 Some of them are in a hot, dry climate. 15 So I think overall when you're 16 using SEER and then looking at this big 17 population of units, it should wash that. 18 MR. SOMASUNDARAM: yeah, we're 19 only capturing the representative households. 20 I don't want to get into details here, but 21 it's a representative household for around 22 the country. And then we'll do a populatione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 274 1 weight for doing a state-by-state calculation 2 of the energy consumption. So it's all on a 3 national level. That's the SEER metric

4 that -- 5 MR. BROOKMAN: Your name, please. 6 MR. WILKINS: I'm Robert Wilkins 7 with Danfoss. 8 I think your approach on the cost 9 analysis is good, assuming that you have all 10 of the factors from the manufacturers through 11 the distribution channel, and these 12 industries can help you with that. 13 However, keep in mind that about 14 one-third of the market for central air 15 conditioning is new housing, and this is 16 probably the appropriate analysis for that. 17 Two-thirds of the market approximately is 18 replacement, and that's where I'm missing a 19 point because those consumers have a choice, 20 and it creates an elasticity of demand, and 21 as we raise the cost of high efficiency 22 equipment to 13, 14, 15, 16, it becomese20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 275 1 increasingly attractive to replace that old 2 compressor so that you have a unit at five, 3 six, seven, eight, and we miss a huge 4 opportunity to save energy when that occurs. 5 And I would urge the department to 6 look at that elasticity to see what happens 7 to those consumers in two-thirds of the 8 market that have a choice, that can repair 9 that old, inefficient piece of equipment. 10 MR. BROOKMAN: Thank you.

11 Don.

12 MR. BRUNDAGE: A more subtle 13 comment on the energy analysis approach, and

14 I went back and looked at the TSD from 2001 15 on this. As best I can tell, and correct me 16 if I'm wrong, the department is assuming that 17 the SEER of a unit is the same from the time 18 it is installed until the time perhaps 17 or 19 20 years later that it is scrapped and 20 replaced, and there is no degradation of 21 performance during that time. 22 Is that a correct assumption aboute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 276 1 your analysis?

2 MR. SOMASUNDARAM: Yes. There's 3 no way of capturing the degradation 4 information at all. 5 MR. BRUNDAGE: It's not possible 6 to know it accurately, but it does exist, and 7 some sort of realistic assumption, even if 8 it's a one percent per year degradation would 9 be better than the overly optimistic implicit 10 assumption that you have. 11 MR. AMRANE: Karim Amrane, HRI. 12 But, Don, the same is true when 13 they forecast saving the future as well. DOE 14 doesn't assume that the new standard will 15 degrade over time. 16 So I think, you know, if you want 17 to do it that way, you have to be consistent 18 all the way. 19 MR. BRUNDAGE: Oh, I agree. 20 You're overstating the savings by not 21 figuring the degradation.

22 MR. AMRANE: Yes.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 277 1 MR. BROOKMAN: Talbot. 2 MR. GEE: I was curious as to what 3 consideration is made for increases in 4 building code improvement, envelope 5 improvements that might affect sizing, 6 equipment, obviously energy consumption. 7 Therefore if you're basing it on, say, '01, I 8 mean, there are significant changes that will 9 happen between '01 and this rule. 10 MR. SOMASUNDARAM: Going forward, 11 we're going to talk about shipment analysis 12 and efficiency related shipments in a 13 subsequent presentation. Greg will address

14 that. 15 But going backward, there is, 16 again, no way of knowing how the building has 17 changed or how the usage has changed. So the 18 only way we're going to account for that is 19 by assuming that the SEER level is scaled up 20 to the present analysis levels. 21 MR. BROOKMAN: Charlie. 22 MR. McCRUDDEN: Charlie McCrudden.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 278 1 Do the life cycle costs and 2 payback period analysis consider rebates, tax 3 incentives and other things out there 4 available to the consumer? 5 MR. SOMASUNDARAM: That's actually 6 captured in a separate analysis at the NOPR 7 stage called the regulatory or nonregulatory 8 approaches to the regulation that we are 9 looking out right now. 10 So options such as incentives and 11 rebates and Energy Star kind of incentive 12 programs, impacts of that are considered in 13 that step. 14 MR. BROOKMAN: Jim. Final 15 comments now on the DOE's proposed approach. 16 Jim. 17 MR. CRAWFORD: Jim Crawford. 18 I think that the point that 19 Southern California Gas made is an important 20 point, and I would urge the PNNL staff to 21 have the right hand talk to the left hand 22 because the international energy conversatione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 279 1 code center of expertise is PNNL, and they 2 perhaps could give you reasonable estimates 3 as to what is happening relative to load 4 reduction on new construction as we go

5 forward. 6 You know, we're talking about a 7 period here that's the latter half of the

8 next decade. 9 MR. SOMASUNDARAM: Absolutely, and 10 some of the same people are involved.

11 MR. BROOKMAN: Don. 12 MR. BRUNDAGE: I would like to see 13 just as a sensitivity analysis to run these 14 numbers on what you get out of a new 15 building, such as the 2010 IECC, because it 16 seems like there's an awful lot of assumption 17 of what happens when you stick in an old, 18 inefficient building with some of the new 19 changes in building code standards. Some 20 comparison of what it would be for a very 21 well insulated building would be useful. 22 MR. BROOKMAN: Let's press on toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 280 1 rebound effect. 2 MR. SOMASUNDARAM: Yes. This step 3 is referred to in several sections of the 4 framework document if you noticed. The first 5 time it occurs is in the energy use analysis, 6 and essentially this is one of a statement 7 that DOE will consider this effect in the 8 determination of the annual energy 9 consumption. 10 And for those of you who are not 11 familiar with this effect, it essentially 12 occurs when more efficient equipment is used 13 more extensively. In other words, it's run 14 longer or it's operated longer. 15 So the projected energy savings 16 may not be realized in the analysis, and the 17 literature out there that suggests that this 18 rebound effect may vary all the way from zero 19 to 50 percent for space cooling equipment, 20 and therefore, we're asking you for comments 21 that you might have on how DOE might consider 22 the rebound effect in this step of thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 281 1 analysis.

2 MR. BROOKMAN: Steve Rosenstock. 3 MR. ROSENSTOCK: Steve Rosenstock, 4 Edison Electric Institute. 5 A lot of utilities have run rebate 6 programs for high efficiency air conditioners 7 and heat pumps. I know what I'm going to do. 8 I'm going to ask member companies if they run 9 programs have they done some sort of load 10 research analysis for those customers in 11 house every couple of years before, couple of 12 years after, if they've noticed rebound 13 effect after the high efficiency equipment 14 has been installed. 15 So hopefully there will be some 16 data for you to look at to do your analysis. 17 MR. BROOKMAN: Thank you.

18 Other comments on rebound effect 19 and how that might be anticipated,

20 calculated? 21 Jim. 22 MR. CRAWFORD: I'm against thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 282 1 opinion of some of us that that effect is so 2 small it's not worth bothering to calculate. 3 I'm facing putting in a new air conditioner, 4 and I don't think it's going to change my 5 criteria or my wife's criteria for the 6 standard of comfort. I just don't see us 7 changing the thermostat setting because we 8 got a new unit.

9 MR. BROOKMAN: Other comments? 10 Okay.

11 MR. SOMASUNDARAM: There's ten 12 percent of shipments of these equipment, the 13 central air conditioners and heat pumps, that 14 get installed in commercial buildings. 15 That's the assumption that was used in the 16 previous rulemaking for this product, that 17 ten percent was the figure. 18 Here on this slide we're basically 19 saying that if DOE decides to do a separate 20 analysis for those ten percent of their 21 shipments that get installed in commercial 22 buildings, we intend to determine the energye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 283 1 consumption, annual energy consumption, those 2 buildings, using a whole building simulation 3 approach and using a small office building 4 prototype that has already been doubled up

5 for some of our other work for DOE and 6 conducting that simulation over different 7 climate zones and using the CVEX data here to 8 characterize the small office building 9 prototype and then to determine the annual 10 energy consumption from that, using the 11 simulation approach. 12 So the questions on the next slide 13 are essentially two questions. One is 14 whether the ten percent number is still a 15 pretty accurate estimate of the products that 16 go into small commercial buildings, and the 17 second question is what do you all think 18 about the approach that we have proposed here 19 for this particular analysis. 20 MR. BROOKMAN: Jim. 21 MR. CRAWFORD: The first 22 observation is that if you're going to starte20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 284 1 delving in this area, you need to separate 2 split systems from packaged goods. I think 3 you're going to find that there's a 4 significantly higher percentage of package 5 that will be in the commercial application 6 than you will for split systems. 7 And you may find that there are 8 some classes of equipment that may be single 9 phase that you're not even considering, like 10 the package system with a strip heat or gas 11 heat in the package system. 12 MR. BROOKMAN: Thank you.

13 Other comments on these two 14 questions, particularly the ten percent 15 estimate? No endorsement, no refute? 16 (No response.) 17 MR. BROOKMAN: Okay, and what 18 about the second item, 6-5? 19 MR. CRAWFORD: This gets back to 20 the question I asked earlier about whether or 21 not you're looking at information in greater 22 depth than we have available to us when we goe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 285 1 on the EIA Website. It's my use of that 2 Website which is fairly frequent. They don't 3 cut it very fine, and almost anything would 4 fit in almost any of their classifications. 5 So if you've got a definition that 6 you'd like us to evaluate, then write the 7 definition down and we'll evaluate it. 8 MR. BROOKMAN: Okay. 9 MR. SOMASUNDARAM: Okay. So now 10 we do come to the markups. This is the stage 11 at which the economic information will be 12 generated to go into the life cycle cost 13 analysis. So the engineering analysis would 14 give us the manufacturer's selling price. In 15 other words, as the equipment leaves the dock 16 of the manufacturer, that's the price that we 17 have at this stage. 18 And at this step of the analysis 19 is when we calculate the individual markups 20 as the equipment goes through the 21 distribution chain, through the 22 wholesaler/distributor to a contractor ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 286 1 eventually to a consumer. And so we do need 2 to develop these data in order to get the 3 total installed cost of the equipment, which 4 goes into the life cycle cost analysis, and 5 this slide basically says the data sources 6 that we will be using to obtain some of these 7 markups. 8 The next slide, shows the proposed 9 distribution channels that we will be using 10 for this particular analysis. As you can 11 see, the Channel 1 goes through the steps of 12 manufacturer, distributor to a dealer or 13 contractor and eventually to a customer. 14 Channel 2 is slightly different in 15 the sense that the dealer-contractor is 16 replaced by a builder, a spec builder or a 17 custom builder that interfaces with the 18 wholesaler of the equipment and sells it or 19 installs it in the house for the customer to

20 use. 21 The third channel is unique in the 22 sense that it goes directly from thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 287 1 manufacturer to a large retailer, as in Sears 2 or Home Depot, and the customer basically has 3 the store install it in their households, and 4 so it's a shorter step to getting to the 5 product.

6 MR. BROOKMAN: Tom. 7 MR. ROBERTS: Yeah, Tom Roberts. 8 I think if you apply the Slide 43 9 to this slide and you really understood how 10 the market works, and if you sort of change 11 Slide 43 from manufacturer impact analysis to 12 market impact analysis, you know that 13 distribution Channel 3 virtually doesn't 14 exist. It's meaningless really, and 15 distribution Channel 2, at least the way you 16 portray it -- now, there's something that 17 looks like that, but it has all the same 18 functions as distribution Channel 1, and 19 distribution Channel 2 actually looks kind of 20 like distribution Channel 2, but it really is 21 distribution Channel 1 again. 22 So if you did Slide 43 and reallye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 288 1 understand the way our whole distribution 2 channel works, you'll see that there's just a 3 need for one model for the most part, and it 4 will give you much better, accurate costs. 5 MR. BROOKMAN: Okay. Thank you.

6 Other comments on these 7 distribution channels? Yes, Pat.

8 MR. O'CONNOR: Pat O'Connor. 9 I agree with what you said about 10 that there's probably just one distribution 11 channel if you drilled down into it, but that 12 being said, this slide assumes that there's 13 one national supply chain distribution 14 channel because there's a national standard. 15 I think DOE has to look at the 16 geographical distinctions that will be added 17 to the distribution channel with regional 18 standards. When I say "geographical," you 19 may have a distributor in Richmond who is 20 distributing product to contractors in a 21 number of different states. Why? Because 22 Richmond is on the axis of I-64 and I-95.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 289 1 So you really have to factor in 2 the geographical distinctions of regional 3 standards, and in the slide before that when 4 you said the DOE will characterize 5 distribution channels, we will certainly 6 submit written comments as to how you should 7 characterize those distribution channels, but 8 we would hope that we would be invited in, 9 whoever would like to, would be invited in to 10 sit down with you and talk through the 11 distribution channels because otherwise you 12 may not understand our written comments, and 13 I think a sit-down session would be much more 14 productive because, again, the distribution 15 channel is going to be distorted because of 16 the regional standards. 17 MR. SOMASUNDARAM: Two responses. 18 One is the characterization of the 19 distribution channels is what would be kind 20 of described here as a kind of proposal, 21 proposed picture that DOE has presently. 22 The regional differences commente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 290 1 is very appropriate because that's the last 2 question of Item 7-1, in fact. Are there any 3 regional differences in the distribution 4 channels? And we would very much like to 5 hear if there are differences and what they

6 are. 7 And going back to the previous 8 comment, I was going ot say that, in fact, we 9 would, if you would look at Item 7-2, we, in 10 fact, ask for specific fractions of shipments 11 that occur through each of the three channels 12 described earlier. In other words, if you 13 think that most of the shipments occurred 14 through Channel 1, then we want you to 15 comment on that, and not so much through 16 three or vice versa. 17 MR. BROOKMAN: Go ahead, Pat. 18 Keep going. 19 MR. O'CONNOR: Yeah, to follow up 20 on that, I think first we need an agreement 21 between industry and DOE as to what the 22 distribution channel is. If we disagree thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 291 1 there are three different distribution 2 channels, then it's kind of senseless for us 3 to try to tel you what percent of product 4 flows in which one of those channels. 5 We have to come to some agreement 6 or agree to disagree before we really can 7 help you identify what's coming through the

8 channel. 9 MR. BROOKMAN: Okay. Tom. 10 MR. ROBERTS: He said it. 11 MR. BROOKMAN: Okay. Talbot. 12 MR. GEE: Well, and I think I'd 13 expand on our dear distributor colleague 14 across the table that I think this needs to 15 be two separate analyses basically. Frankly, 16 there is the one based on the single national 17 standard, and then, frankly, a whole 18 different analysis on a regionalize standard. 19 They're really apples and oranges, the type 20 of analysis. 21 And, frankly, I think our opinion 22 looking back, and it's our own fault for note20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 292 1 having been engaged more in the front end the 2 last time, but this whole segment has been 3 under characterized in the national 4 discussion. So I don't know if we can even 5 get past a national discussion to a regional 6 discussion until this part is done. 7 The second part to it is there's 8 varying models within distribution that, you 9 know, I mean, I think there are worthy 10 discussions about central distribution 11 systems versus localized distribution 12 systems, which I mean, that of itself could 13 be a discussion that could go for a very, 14 very long time. 15 MR. BROOKMAN: Harvey. 16 MR. SACHS: Two observations. One 17 of them is that this proposal misses two 18 distribution channels that have been 19 mentioned today. One of them is the dealer 20 direct model used by at least one of the 21 major manufacturers which rolls up the 22 distribution and manufacturing, and the othere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 293 1 is the import model. 2 And given that and the 3 difficulties of this analysis, the question 4 comes whether cutting straight to the chase 5 of looking at a retail price survey, which is 6 a difficult thing because of the way 7 different contractors price the markup on the 8 equipment versus the installation, but 9 looking strictly at the retail and perhaps 10 the manufacturer costs, the manufacturer's 11 free on board price and not worrying about 12 the details and what happens within the 13 distribution network might be adequate, might 14 allow us to more easily look at the regional 15 questions, and might be more honest. Don't 16 know, but it is a question that I would like 17 to raise.

18 MR. BROOKMAN: Tom. 19 MR. ROBERTS: I completely 20 disagree with that. You might as well use 21 $335. 22 MR. SACHS: It's okay with me.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 294 1 MR. ROBERTS: It's the essence of 2 the whole thing, and until you get into the 3 texture of it, the two models you just 4 mentioned, importing, for example, primarily 5 goes through the same distributor-contractor 6 thing, and to my worthy brand competitor who 7 operates the one-step thing, he has the same 8 buildings with the same people driving fork 9 lifts. The functionality is all the same. 10 So until you get into a full 11 understanding of the market impact analysis, 12 you don't accurately get a good idea of the 13 cost and so your whole payback analysis is

14 flawed. 15 MR. SACHS: Let me just follow 16 that if I might with a question, and it will 17 put you on the spot a little bit.

18 MR. ROBERTS: Perfect. 19 MR. SACHS: You believe DOE is 20 capable of carrying out the analysis you 21 requested.

22 MR. ROBERTS: I couldn't hear thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 295 1 question. 2 MR. SACHS: You believe that DOE is 3 capable of carrying out the analysis you've 4 requested. 5 MR. ROBERTS: Oh, yes, I do, with 6 our help because we would offer -- I can 7 honestly say this -- we look forward to 8 offering or providing a benchmark for you to 9 check against, a series of chain -- of 10 distribution markup multipliers that you 11 could check your results from. 12 MR. BROOKMAN: -- in that you can 13 provide the beginnings of those comments in 14 writing, and then DOE certainly will follow 15 up with you to get a more complete

16 understand. 17 Yes, Jim.

18 MR. CRAWFORD: I don't know 19 whether I'm close to an understanding or not. 20 Certainly I think everybody in the room who 21 is in the industry agrees with the comments 22 that are coming from the distributors heree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 296 1 about there being basically one model, and it 2 would be kind of nice to hear DOE say that 3 they at least think that that might be 4 possible and might be right so that we know 5 where we're going. 6 Because until we know that, as was 7 just pointed out, we're looking at a chart 8 that's got three months and there aren't

9 three.

10 MR. BROOKMAN: Yeah. 11 MR. CRAWFORD: And we can spend 12 the rest of the day talking about why there

13 aren't three.

14 MR. BROOKMAN: No need to do that. 15 I think we've covered it adequately here. 16 Go ahead, Talbot. 17 MR. GEE: Well, and I want to 18 reinforce Pat's statement, too, that I don't 19 think we can accomplish this solely by 20 written comment alone. 21 MR. BROOKMAN: Yeah, right. No, I 22 think that DOE acknowledges that ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 297 1 appreciates your willingness to sit down with 2 them, discuss this, find a way to get enough 3 information for them to have an accurate 4 representation of the primary distribution 5 chain. 6 MR. GEE: You can even include the 7 single step guys. 8 MR. BROOKMAN: Yeah, okay. So 9 then I'm going to suggest we move on. 10 MR. SOMASUNDARAM: Okay. One 11 other I forgot to mention was somebody 12 mentioned U.S.' replacement products. That, 13 again, is as we understand a different 14 market. We need to develop markups and 15 distribution channels for not only the new 16 products, but also replacement products. So 17 that's where probably the chain stores come 18 in to Channel 3. 19 MR. GILLEY: I didn't understand 20 what you just said.

21 MR. SOMASUNDARAM: Where the 22 customer goes to purchase a replacemente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 298 1 product, it may be a different way of getting 2 their product. 3 MR. GILLEY: That customer still 4 goes through a dealer. 5 PARTICIPANT: Yeah, and a

6 wholesalers. 7 MR. GILLEY: That customer may 8 physically go into a retailer outlet, but 9 that dealer still makes a home visit for 10 himself. 11 MR. SOMASUNDARAM: No, they don't.

12 MR. BROOKMAN: Because of the 13 installation requirement and all of that. 14 MR. ROBERTS: But they do. 15 MR. GILLEY: Yes, they do. That's 16 the business model. Yes, they do.

17 MR. ROBERTS: There's a 18 misunderstanding there. That serves as the 19 place where you can walk in and meet someone 20 who will come out to your place, but there is 21 no place where you can go buy a retail 22 replacement system. I mean, it looks likee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 299 1 it. It would seem that you're going into the 2 big orange store and buying an air 3 conditioner, but actually the people come out 4 in blue trucks.

5 MR. CRAWFORD: And I know who -- 6 Jim Crawford -- I know who supplies them. 7 (Laughter.) 8 MR. CRAWFORD: The orange door, 9 and what he's saying is right. 10 MR. BROOKMAN: Okay. John 11 Mandyck, go ahead. 12 MR. MANDYCK: This is John Mandyck 13 from Carrier. 14 I know the outfit that supplies 15 Sears, and it's the same model. 16 (Laughter.) 17 MR. BROOKMAN: Okay. I'm glad 18 we've got some people that know some things 19 in this room. That's good. Okay.

20 MR. SOMASUNDARAM: And there were 21 two more questions of use of baseline 22 incremental markups. The difference betweene20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 300 1 the two is the baseline markup applies to the 2 baseline efficiency equipment, and to that we 3 apply and to the higher efficiency equipment 4 we apply what's called incremental markup. 5 In other words, what is a cost markup for 6 higher efficiency equipment beyond baseline 7 efficiency? 8 And so any comments, written, 9 pertaining to these questions are welcome. 10 MR. BROOKMAN: Yes, Talbot. 11 MR. GEE: I just suggest we may 12 find that those aren't exactly increment.

13 MR. SOMASUNDARAM: Pardon? 14 MR. GEE: As you go up in 15 efficiency levels. 16 MR. SOMASUNDARAM: Right. They're 17 not incremental. That's right. 18 MR. BROOKMAN: Okay. 19 MR. SOMASUNDARAM: So can I go 20 into life cycle cost and payback period 21 analysis?

22 MR. BROOKMAN: Yes.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 301 1 MR. SOMASUNDARAM: Okay. This 2 particular step, again, assesses in a 3 spreadsheet format. We calculate what life 4 cycle cost of having the equipment installed 5 as well as operating the equipment over the 6 year is, and we determine this based on 7 several inputs and we're going to talk about 8 each of the inputs separately during the 9 course of the next five or six slides. 10 But as part of the LCC analysis, 11 we also report a simple payback in the number 12 of years it takes to pay back the investment. 13 The general approach is to use a Monte Carlo 14 type stochastic analysis to consider not only 15 variability in the input variables but also 16 to look at different scenarios of the input 17 variables. 18 And for each product class we will 19 develop one analysis spreadsheet in the 20 workbook in the Excel format. 21 This particular graphic 22 illustrates the various inputs that go intoe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 302 1 this particular analysis. This is ultimately 2 the economic impact analysis. Having gone 3 through the process of the engineering and 4 the energy use used by the equipment, we 5 ultimately have to determine whether the 6 standard is economically justified, and this 7 is one of the ways of doing that. 8 And as you can see in this 9 graphic, there are inputs all the way from 10 engineering analysis, which gave us the 11 manufacturer's selling price to which the 12 markups are multiplied including sales tax to 13 get to a equivalent price to the customer. 14 We also develop the installation 15 cost as an input to the LCC analysis, which 16 we then obtain the total installed cost of 17 the equipment. 18 From the bottom half of the figure 19 we obtained the energy consumption multiplied 20 by the electricity price to get the annual 21 energy expense or operating expense of the 22 equipment, to which we input the repair ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 303 1 maintenance cost to get the annual operating 2 expense over the year's operation. 3 At that point then the lifetime 4 discount rate and future electricity and 5 future electricity price trends or 6 projections of how the electricity prices 7 might change over the analysis period are 8 further inputs to the LCC analysis, which 9 then gives us the lifetime operating expense 10 that we have to use for the LCC analysis. 11 And each of the steps, each of the 12 yellow boxes that are on the right side of 13 the diagram we will explain individually. 14 And now I'll call upon Greg 15 Rosenquist to talk about electricity price 16 and discount rate assumptions. 17 MR. ROSENQUIST: Okay. Thank you, 18 Sriram. 19 I'm Greg Rosenquist from Lawrence 20 Berkeley National Laboratory. I'll be 21 talking about two of the inputs to the LCC 22 and payback period analysis, and that's thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 304 1 electricity prices and the discount rates. 2 I'll first be starting with the electricity 3 prices. 4 They are used to convert the 5 energy consumption data from the energy use 6 analysis into energy costs, and DOE intends 7 to use marginal electricity prices in this 8 analysis to come up with the energy cost 9 savings. The marginal price is the price 10 paid by the customer for the last kilowatt 11 hour of electricity purchased. 12 For residential electricity 13 prices, because typically, now, typically 14 they consist only of energy use charges and 15 not demand charges or time of use rates. 16 Simpler methods can be used which are 17 sufficiently accurate for developing marginal 18 prices. The department proposes two 19 approaches for doing this based upon two 20 different data sources. 21 One is the residential energy 22 consumption survey, or RECS. It providese20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 305 1 utility bill data by households. So you can 2 plot the monthly bill data against monthly 3 consumption data, fit a line to those points, 4 which actually you'd be surprised. On a 5 household basis that linear fit is pretty 6 good, and that slope is the marginal price 7 for that particular household. 8 Again, the problem with it, as 9 Sriram has pointed out earlier, is that all 10 we have is RECS 2001 data at this point, and 11 if the RECS 2005 isn't available, that means 12 if DOE decides to go forward with the RECS 13 data, we'll be dealing with seven year old

14 data. 15 The other option is to use data 16 from the Edison Electric Institute. EEI 17 produces typical summer and winter reports 18 where they produce monthly bills for 19 residential, commercial, and industrial 20 customers. And for residential customers, 21 their usage or their bills are provided at 22 three different usage levels fore20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 306 1 approximately 180 different utilities. 2 So a marginal price can be deduced 3 between the two consumption levels. The most 4 recent data is from 2007, and so the benefit 5 of using this data is that it's very recent. 6 Another alternative, of course, is 7 to take the 2007 data and to scale up the 8 data from RECS 2001, and the advantage to 9 that is we can keep things at the household

10 level.

11 MR. BROOKMAN: You had a comment

12 now. Steve Rosenstock. 13 MR. ROSENSTOCK: Hi. Steve 14 Rosenstock, Edison Electric Institute. 15 By all means feel free to use the 16 EEI data. It's publicly available data, and 17 it's published. We do it twice a year, the 18 summer and then the wintertime. So as you go 19 through the analysis the data will be updated 20 basically annually in terms of the summer 21 usage. 22 I just wanted to say one caveate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 307 1 though is that the EI data only covers, as 2 far as I know, just the investor owned 3 utility segment of the marketplace. So 4 that's covering, let's say, about 72 percent 5 of the population. Our data does not include 6 that information for municipals and co-ops. 7 So, again, it's covering 70 8 percent. It's not covering 100 percent. The 9 RECS data might be more representative of 100 10 percent of the data that's out there. So my 11 suggestion, use the EI data as you wish as a 12 supplement, not as the only data set I would 13 suggest. 14 Thank you. 15 MR. BROOKMAN: Thank you. thank 16 you very much. 17 Yes, Gary. 18 MR. CRAWFORD: Jim Crawford. 19 Two points. One is the when you 20 are considering regional standards, I don't 21 see how you can do that without considering 22 much more fine grained utility coste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 308 1 structure. I mean, the national average 2 figure is useless. 3 The second point that I would make 4 is that I think that if DOE, if the right 5 hand would talk to the left hand, EIA 6 publishes costs, I believe, on a monthly 7 basis. So you don't have to go back to 2001. 8 You may have to go back to 2001 for an 9 estimate of use, but you don't have to go 10 back to 2001 for the price. 11 MR. ROSENQUIST: Can I make a 12 comment about that data? That data provides 13 sales and usage by utility. So you can 14 deduce an average electricity price from that 15 data, but you can't derive a marginal price 16 from it. 17 MR. CRAWFORD: Well, you know, 18 back in the dark ages when we did this 19 before, there was a massive analysis 20 undertaken by a noted West Coast laboratory 21 comparing marginal prices and average prices, 22 and I seem to recall that after 20 man-yearse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 309 1 of work, you came to the conclusion that 2 there wasn't a heck of a lot of difference. 3 And within the precision of this 4 whole process that we're talking about, the 5 difference is insignificant. 6 MR. BROOKMAN: So Gary. 7 MR. FERNSTROM: Well, when we 8 consider regional standards, it seems to me 9 imperative that we use regional prices, and 10 at least for our utility, PG&E, there is 11 quite a bit of difference between the 12 marginal cost and the average cost. This is 13 because of the current tiered rate structure, 14 and for that matter, as Lance has pointed out 15 several times, the time of use cost behind 16 that rate structure and the movement in 17 California toward time dependent pricing. 18 I don't think your methodology for 19 determining marginal price necessarily works, 20 given our rate structure. 21 MR. DELAURA: Can I just add on 22 something?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 310 1 MR. BROOKMAN: Lance, please do. 2 And if you can suggest the way that this gets 3 fixed, that would be helpful.

4 MR. DELAURA: Just to add onto 5 what Gary said, in California certainly 6 within the time frame of this rulemaking, 7 when the rule actually goes into effect, 8 there will be time of use rates for 9 customers, and so this notion of the marginal 10 rate for a customer is going to be very 11 different, and the value of energy is going 12 to be treated very differently. 13 And so I guess this all goes back 14 to the regions. If we know there's going to 15 be a specific region that's considered, at 16 least, if not adopted, and California happens 17 to be a part of that, then I think what we 18 can do is we can have our rate design people 19 and certainly people from the California 20 Energy Commission would be happy to work with 21 you in doing that specific potential regions 22 analysis.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 311 1 But I agree with Gary completely 2 that to assume that we're going to take an 3 average of a marginal cost and assume that's 4 reflective of California is absolutely 5 incorrect. 6 MR. ROSENQUIST: Can I make a 7 couple of comments in response?

8 MR. BROOKMAN: Go ahead. Please

9 do. 10 MR. ROSENQUIST: First Jim's. 11 We've looked at that EEI data from 2007, and 12 you're exactly right. The average prices 13 actually for every region, every Census 14 division in a large state, with one of the 15 large states being California, the average 16 price is greater than the marginal price. 17 In California though, the marginal 18 price is significantly greater than the 19 average price. So it would be interesting to 20 see, and once the time of use rates do come 21 out, whether that current difference that 22 we're seeing in California with the currente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 312 1 rate structure basically reflects what would 2 happen under a TOU rate structure. 3 MR. BROOKMAN: Yes, please. 4 MR. WILKINS: Robert Wilkins with

5 Danfoss. 6 I am a little concerned about 7 using the average of 180 or 200 utilities, 8 the marginal cost of 180 or 200 utilities. 9 From my own experience a few years ago in the 10 electric utility industry I saw there's a 11 wide variation in rates from low to high. 12 So I would urge you if you look at 13 that average -- I'll just pull a number out, 14 ten cents per kilowatt hour, 12, whatever it 15 is now -- also do a test to see what effect 16 your decision would have on those that were 17 actually paying six cents per kilowatt hour 18 or those that were paying 15 cents per 19 kilowatt hour, and take that into 20 consideration as a sensitivity analysis. 21 Now, in fact, the consumer who's 22 paying that higher rate has the ability toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 313 1 choose. He can always buy a more efficient 2 piece of equipment. That consumer that's 3 paying the six cents and might not be able to 4 justify whatever is justifiable at the 5 national average, we don't leave him any 6 choice. So he gets penalized. 7 And I just urge the department to 8 look at that on a sensitivity analysis basis. 9 MR. ROSENQUIST: Can I just 10 respond to that real quickly? 11 A point of clarification. On the 12 EI data, again, we can develop a marginal 13 price for each one of those 180 utilities, 14 and so when I said that the EI data shows 15 that the average price is greater than the 16 marginal price everywhere except California, 17 what I'm saying is that we've aggregated the 18 prices for all of those utilities in the 19 particular regions based upon the number of 20 customers that they serve.

21 So we can reduce that back down to 22 the utility level.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 314 1 MR. WILKINS: But I'm not speaking 2 of the average versus the marginal cost. I'm 3 speaking of the average of the average across 4 the 180 utilities, that we're basing the 5 whole thing base on that one number, which 6 is, let's say, to illustrate ten cents per 7 kilowatt hour, but there are millions of 8 Americans that are paying 15 to 18, and there 9 are also millions that are paying five and 10 six.

11 MR. BROOKMAN: Steve Rosenstock.

12 MR. WILKINS: And we'll be able to

13 test that. 14 MR. BROOKMAN: Okay. Or John. Go 15 ahead, John. 16 MR. MANDYCK: I think to some 17 extent we're losing perspective on this. 18 This is a rule that doesn't go into effect 19 until 2016, and when you figure getting 20 enough of the product on the market subject 21 to the new rule to have much impact, you're 22 talking the biggest effect is 2020 and later.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 315 1 You can make some broad 2 assumptions based on EIA forecasts of what 3 overall electricity or gas prices will be 4 then, which will be wrong, but we'll at least 5 have some quasi-logical basis on which they 6 came up with it. 7 But the difference between 8 marginal and average price is subject to 9 things like whether you're in a dereg market 10 or a regulated market, the regulatory whims 11 and fads of the day, and we are talking about 12 things that are 14 or 15 years from now. 13 It's also speculative. There's 14 more important parts of the analysis to spend 15 a lot of time on. 16 Thank you. 17 MR. BROOKMAN: Thank you. 18 Final comment, Steve Rosenstock. 19 MR. ROSENSTOCK: Just, again, just 20 in terms of trends, I think, you know, there 21 was talking about time dependent and time of 22 use, and there are several utilities that aree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 316 1 dealing with residential customers I'll say 2 dead ahead real time pricing and critical 3 peak pricing. 4 What the future rates are going to 5 be, it's anybody's guess when you get right 6 down to it, and I'm not trying to complicate 7 the analysis. I'm just saying that if you're 8 trying to incorporate it, what you have to do 9 is incorporate what I call rate chaos 10 because, you know, there are some years 11 during the summer a residential customer 12 might be paying as much as, you know, during 13 a, quote, peak hour, as much as 50 cents a 14 kilowatter hour, but the next summer even if 15 it's hotter, they might only be paying ten 16 cents a kilowatt hour because of different 17 supply conditions or they've cut back. 18 And on the other hand, as well, is 19 that customers do respond such that that 20 could change the consumption patterns quite 21 dramatically as well. So you know, all of 22 these things could make it quite a bit moree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 317 1 difficult, but let's try to use as good data

2 as we have. 3 MR. BROOKMAN: Did you cover the 4 slide on commercial? 5 MR. ROSENQUIST: Not yet. 6 MR. BROOKMAN: Yeah, go ahead, 7 Gary. Go ahead. 8 MR. FERNSTROM: Gary Fernstrom. 9 One quick, last comment. You 10 asked for recommendations. California uses 11 time dependent valuation. That assigns a 12 marginal cost to a kilowatt hour in a 13 particular climate region for every hour of 14 the year, and that would be a good 15 methodology for getting at this for 16 California anyway. 17 MR. BROOKMAN: thank you. 18 I want to see Slide 62, commercial 19 electricity prices, and then I want to ask 20 you after he's reviewed this and you've 21 commented whether you want to take a break or

22 not.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 318 1 go ahead. 2 MR. ROSENQUIST: Okay. In the 3 event that we do airlines, the commercial 4 applications of central air conditioners and 5 heat pumps, and it seems like we will be, 6 we're going to have to develop commercial 7 electricity prices, and the commercial 8 electricity prices are at least today much 9 more complex than residential prices. They 10 include demand charges, and typically a lot 11 of tariffs these days characterize those 12 demand charges as what I call hours charges, 13 where the energy use charges are a function

14 of the customer's demand. 15 In any case, we can use electric 16 utility tariffs to characterize marginal 17 electricity prices, and all the tariff is is 18 just the sort of rules that utilities use to 19 calculate the customer bills. 20 In coming up with the marginal 21 price, we determined the bills associated at, 22 let's say, a particular baseline level ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 319 1 then standard level, and then we come up with 2 the marginal cost savings, and those are 3 calculated by taking the marginal energy 4 price and multiplying it by the energy 5 savings, then adding the demand charges times 6 the demand reduction. 7 Now, this relationship between 8 marginal cost savings and marginal energy 9 price, demand price, energy savings and 10 demand savings have all been rolled up into a 11 relationship for two prior DOE standards 12 rulemakings, one on commercial unitary 13 conditioners and one on distribution

14 transformers. 15 And what it does is it rolled up 16 the demand charges and energy charges into 17 what's called an effective marginal price, 18 which is a function of what's called a 19 marginal load factor. The marginal load 20 factor, which is a value between zero and 21 one, represents the demand savings from the 22 particular efficiency measure to the averagee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 320 1 energy savings. 2 So for an end use like air 3 conditioning, which is relatively peaky, the 4 value is like between 0.1 to 0.3. In other 5 words, it means that the demand charges 6 represent more of the cost of the bill than 7 the energy charges, and since demand charges 8 are more costly, that means that the relative 9 marginal energy price is much higher or 10 significantly higher than the average 11 electricity price. 12 So this relationship has been 13 built upon 2004 tariffs, and we can go ahead 14 and use this in the central AC analysis, 15 assuming that prices haven't changed 16 significantly since then.

17 MR. BROOKMAN: Steve Rosenstock. 18 MR. ROSENSTOCK: Steve Rosenstock,

19 EEI. 20 I've looked at the analysis, and 21 I've learned to live with it basically. I'm 22 not exactly totally convinced about it, bute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 321 1 one thing I want to say especially for this 2 rulemaking, and again, it was discussed 3 earlier -- forgive me if I was out -- in the 4 last analysis when there's a nice correlation 5 between SEER and EER both going up at the 6 same time, I don't have a problem with it. 7 But now, based on what I've heard 8 and what I've seen where there's a disconnect 9 between SEER and EER as you get up the SEER 10 chain above 14, 15, et cetera, there is a 11 possibility, a very high possibility if, 12 depending on your modeling, if you say the 13 EER stays flat or decreases as you increase 14 the SEER. It's not marginal demand savings. 15 It's marginal demand costs to the customer. 16 You have energy savings. You have 17 energy costs go down, but demand costs go up, 18 and I believe that, again, it depends on how 19 you model and what the availability of the 20 equipment is out there, but in the commercial 21 side it's very easy to get energy savings at 22 demand costs by doing this.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 322 1 Thank you. 2 MR. BROOKMAN: Thank you. 3 MR. ROSENQUIST: And the 4 commercial electricity prices would reflect 5 that. If there wasn't a reduction in demand 6 from a particular SEER level, again, that 7 would be reflected in the commercial prices. 8 MR. ROSENSTOCK: And if there was 9 an increase in demand, would that also be -- 10 MR. ROSENQUIST: Yes, certainly. 11 MR. ROSENSTOCK: Okay.

12 MR. BROOKMAN: Let me ask the 13 presenters, Wes and Sriram and Greg. We have 14 at least another hour at this pace, right, 15 before we're concluded? I'm going to suggest 16 we take a short break, and the coffee shop is 17 now closed. However, downstairs on the 18 opposite side of the hall there are a whole 19 bunch of Coke machines, soft drink machines. 20 Okay? 21 So let's try just for ten minutes 22 so as best we can, which means we're going toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 323 1 resume at about 3:25. 2 (Whereupon, the foregoing matter 3 went off the record at 3:16 p.m.

4 and went back on the record at 5 3:26 p.m.) 6 MR. BROOKMAN: So Greg is back on. 7 Let's stay focused here if we can. 8 Okay. Go. 9 MR. ROSENQUIST: Okay. I'm going 10 to move on to the price forecasts. So after 11 we've developed marginal electricity prices 12 for a specific year, then issue then is how 13 do you forecast that out into the future, and 14 the way DOE plans to do that is by using the 15 Energy Information Administration's annual 16 energy outlook. 17 And the AEO has several price 18 projections, but what's typically used in 19 these analyses are the reference case and the 20 high and low growth economic cases. 21 So at this point I'll stop and see 22 if you have any comments on using the AEO toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 324 1 forecast a marginal price out into the

2 future. 3 MR. BROOKMAN: Ted, and what the 4 supplements or replacements might be. Ted. 5 MR. POPE: I don't know what year 6 AEO that you're using, but I think it was 7 2007 I looked at last, and I may have looked 8 at it wrong, but it looked to me like that 9 forecast showed electricity in real terms not 10 coming back to the cost of 2006 until several 11 -- a decade and a half or two decades in the 12 future, and that just struck a lot of us in 13 California as a fairly improbably outlook, 14 given the probability of cap in trade in that 15 sort of policy framework in the future. 16 MR. BROOKMAN: Thank you. 17 MR. SACHS: Havey Sachs, ACEEE. 18 Given the historical record of the 19 EIA forecasts, I've come to the conclusion 20 that there are others who ought to have their 21 votes weighed as well. There are a number of 22 private sector forecasts. EIA has beene20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 325 1 consistently low for the last five years or 2 so, and we would recommend that the 3 department pay attention to forecasts from 4 other nationally acknowledged organizations. 5 MR. BROOKMAN: Thanks, Harvey. 6 Other comments? Because I'm eager 7 for us to keep moving rapidly. 8 (No response.) 9 MR. BROOKMAN: We're moving ahead

10 then. 11 MR. ROSENQUIST: Okay. The next 12 input is the life cycle cost and payback 13 period analysis that I'll discuss is the 14 discount rate, and discount rates are used to 15 convert streams of annual cost savings to a 16 present value. 17 And for residential discount 18 rates, the plan is to use a similar approach 19 to what's used for most fairly recent 20 residential product rulemakings that DOE has 21 conducted. It's based upon deriving 22 estimates of the finance cost of purchasinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 326 1 the appliance, and that finance cost is based 2 upon one of two things, either the cost of 3 debt that's used to purchase the appliance or 4 the opportunity cost associated with equity 5 that can be pulled from things like savings 6 accounts and money market funds to purchase 7 the appliance. 8 The Federal Reserve Board's survey 9 of consumer finances has most of the data 10 that allows DOE to calculate, again, the 11 discount rates associated with the equity and 12 debt that's used to purchase these products. 13 Again, assuming we're going to be 14 doing commercial applications on this 15 product, we'll have to come up with 16 commercial discount rates, and again, the 17 plan is to use a purchase that had been used 18 in prior DOE rulemakings, specifically to use 19 this technique called the weighted average 20 cost of capital, and what that does is 21 determined the equity in debt that firms that 22 purchased this product use to finance thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 327 1 purchase of acquiring the particular product. 2 MR. BROOKMAN: So comments on this 3 means of estimating discount rates. Steve 4 first. 5 MR. ROSENSTOCK: Steve Rosenstock,

6 EEI. 7 Just for that last part in terms 8 of weighted average cost of capital, for the 9 last rulemaking, was that basically just for 10 small businesses that most likely are the 11 same entities that are likely to use this 12 product rather than all small versus 13 including weighting in the Wal-Marts and the 14 large entities that are going to have lower 15 costs of capital? 16 MR. ROSENQUIST: The attempt will 17 be made to try to specifically identify the 18 types of firms that buy these products. So 19 they could be small firms, and they could be 20 the large firms that you're talking about 21 like Wal-Mart. 22 Granted we're going to try to bee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 328 1 somewhat consistent with what's being done in 2 the energy use analysis where there a small 3 office prototype is being used to 4 characterize the type of buildings that are 5 using this product. 6 MR. ROSENSTOCK: I was going to 7 say the Wal-Marts aren't going to use these 8 products. 9 MR. ROSENQUIST: Right. 10 MR. ROSENSTOCK: So if you can 11 discount those out of your calculation. 12 MR. BROOKMAN: Tom and then Jim. 13 MR. ROBERTS: Quickly, if you're 14 going to use the incremental, if you're 15 trying to be consistent with your energy use 16 and use incremental, last unit numbers, why 17 don't you do that with credit? Why aren't 18 you using the incremental rate to the

19 consumer? 20 MR. ROSENQUIST: Simply because 21 we just don't have enough data to indicate 22 what the last type of debt or equity basede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 329 1 vehicle that consumers used to purchase the 2 product. 3 So instead we just look at the 4 full breadth of debt and equity holdings that 5 they have to figure out a distribution. 6 MR. BROOKMAN: Jim. 7 MR. CRAWFORD: Well, I'm going to 8 have to record this myself so that I can play 9 it back each meeting. The average consumer 10 debt is what, somewhere now around $8,000, 11 per capita that is carried on short-term 12 credit? That means that we do know the 13 marginal rate. The marginal rate is the 14 price of plastic, and that's what is going to 15 be the cost of this whether they buy it on 16 plastic or whether they buy something else on 17 plastic and use some other resource for this. 18 The cost for these purchases is the price of 19 plastic.

20 MR. BROOKMAN: Ted. 21 MR. POPE: I'm trying to recall. 22 Greg do you -- Ted Pope -- do you factor ine20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 330 1 default rates on credit cards as a negative 2 interest rate when you're calculating credit 3 card interest rates and in your factor? 4 MR. ROSENQUIST: No, we don't.

5 MR. POPE: Then we would recommend 6 you consider that. 7 MR. BROOKMAN: Thank you.

8 Are there comments on these

9 methods? And also other comments related to 10 discount rates. 11 (No response.) 12 MR. BROOKMAN: Okay. 13 MR. ROSENQUIST: Okay. I'm going 14 to turn it over now to Sriram to talk about 15 the rest of the inputs to the LCC analysis.

16 MR. SOMASUNDARAM: Two other 17 inputs to the LCC analysis. The first is the 18 maintenance repair. 19 Now, the two bullets are the 20 assumptions we are proposing to make, and 21 that is DOE believes that routine repair and 22 maintenance costs may increase with moree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 331 1 efficient equipment simply because it may 2 incorporate technologies that are not 3 currently available and, therefore, may 4 require a more sophisticated maintenance 5 routine to account for that. 6 And the second assumption is that 7 installation costs we assume are not going to 8 change because of higher efficiency 9 equipment, and so on what are those 10 assumptions DOE seeks feedback? Whether it 11 is correct to assume that changes in 12 maintenance repair costs are warranted and 13 whether we can assume that the installation 14 costs would remain the same with high 15 efficiency equipment. 16 MR. BROOKMAN: Yes, Karim. 17 MR. AMRANE: Karim Amrane, HRI. 18 Well, you seek feedback on that at 19 the last rulemaking, and we provided comments 20 to you, and we disagree with this assumption, 21 and you opted to again reject our comments. 22 So we disagree. Those installation costse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 332 1 will increase with bigger units just because 2 of the fact that transportation will increase 3 and things like that. 4 So, again, we've made those 5 comments, but you've decided last time to 6 ignore them. So hopefully we'll make those 7 comments again and this time you will accept

8 them. 9 MR. BROOKMAN: Thank you. 10 Harvey. 11 MR. SACHS: Karim, be prepared. 12 I'm going to largely agree with you. 13 (Laughter.)

14 MR. BROOKMAN: There was a 15 qualifier in that statement.

16 MR. SACHS: For those 17 manufacturers who are not adopting micro 18 channel heat exchangers, but on the other 19 side of this, it's not clear whether the new 20 technologies will lead to higher maintenance 21 costs when those new technologies look to us, 22 from reading the literature and talking toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 333 1 manufacturers, include a great deal of 2 foregone advanced diagnostics and automated 3 diagnostics. That should lead to smarter4 machinery that will be to some extend self5 correcting and to some extent will notify the 6 maintenance technician what to bring and what

7 to do. 8 So it's not at all clear that you 9 might not have it backwards.

10 MR. BROOKMAN: Talbot. 11 MR. GEE: I think just a 12 noticeable difference would probably between 13 the last rulemaking and this one when it 14 comes to maintenance cost could be the 15 potential price of refrigerant, especially 16 when you're talking the higher efficiencies 17 that require larger charge sizes and 18 potential scenarios where that refrigerant 19 could possibly even exceed the value of the 20 warranty on the product. 21 MR. BROOKMAN: Gary. 22 MR. FERNSTROM: Gary Fernstrom.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 334 1 So the higher efficiency equipment 2 we've found, anyway, tends to maintain its 3 actual field performance better over a range 4 of charge, and it would seem to me that as 5 the equipment may lose charge, it may 6 continue to perform fairly well, which would 7 tend to reduce the cost of maintenance. 8 So I think there are indicators 9 going both ways with respect to the cost of 10 maintenance.

11 MR. BROOKMAN: Steve Rosenstock. 12 MR. ROSENSTOCK: Steve Rosenstock,

13 EEI. 14 MR. BROOKMAN: Well, wait, wait. 15 Gary, so how do they address that? 16 If it's going both ways, how does the 17 department approach that?

18 MR. FERNSTROM: I don't know that 19 I have a specific recommendation other than 20 we think to the maximum extent possible DOE 21 ought to consider field performance issues in 22 its investigation.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 335 1 MR. BROOKMAN: Does California

2 have that data?

3 MR. FERNSTROM: We do have data on

4 that. John Proctor and others have done 5 extensive study on the state of charge and 6 the opportunity associated with maintenance 7 in the field. 8 MR. BROOKMAN: So you'll send us

9 that?

10 MR. FERNSTROM: So we'll be 11 submitting it. 12 MR. BROOKMAN: Thank you.

13 Steve.

14 MR. ROSENSTOCK: Steve Rosenstock

15 EEI. 16 I know this came up last time, but 17 especially the size issue and space 18 constrained areas, especially in multi-family 19 buildings where HVAC equipment and water are 20 shoved in the smallest closet possible. So 21 if you need to retrofit and there's a bigger 22 size, then the installation costs, you know,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 336 1 there is a dramatic -- you almost have to 2 build a new closet. 3 I'm not an expert. We have 4 experts here. Hopefully they can provide 5 information to the department about what 6 about those retrofit cases going from ten to 7 13 or 14 in space constrained areas. What 8 kind of impact was it on the installation 9 costs? Hopefully they can provide 10 information to DOE because that will be good

11 data. 12 MR. BROOKMAN: Charlie. 13 MR. McCRUDDEN: Yeah, and we do 14 plan on providing that data. 15 My question, not a comment, but a 16 question. On the two bullet points you have 17 there, is there a place where you lay out 18 your assumptions or describe your assumptions 19 so that they can be commented on? 20 MR. SOMASUNDARAM: We will when we 21 present the ANOPR analysis. 22 MR. McCRUDDEN: That will layoute20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 337 1 the assumptions that you're making already? 2 MR. SOMASUNDARAM: The assumptions 3 and the specific figures, yeah. 4 MR. BROOKMAN: Thank you. 5 Please, Tom. 6 MR. ROBERTS: Quick question about 7 do you have something in your model for -- 8 MR. BROOKMAN: This is Tom 9 speaking. 10 MR. ROBERTS: I'm sorry. Tom

11 Roberts. 12 Do you have anything in the model 13 that takes into account the degradation for 14 noncompliant installations, like, for 15 example, now we have a lot. We know they're 16 units, 13 SEER units being installed on 17 improperly matched evaporators, especially to 18 multi-family, to your point, and I don't know 19 how to get data on it, but does the model 20 have a C sub D for noncompliant 21 installations? 22 MR. SOMASUNDARAM: I don't believee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 338 1 so. 2 MR. ROBERTS: Well, it really 3 should because it's a larger number than a 4 lot of the other things we've discussed. 5 MR. BROOKMAN: Could you estimate 6 that for the department?

7 MR. ROBERTS: I would.

8 MR. BROOKMAN: That would be 9 helpful. 10 MR. ROBERTS: It will be 11 anecdotal, but I'd be happy to. 12 MR. BROOKMAN: That would be okay.

13 That's a start. 14 Bill. 15 MR. McCULLOUGH: Bill McCullough. 16 On the first comment about the 17 repairs is DOE assumes that the maintenance 18 repair and installation costs will be 19 negligible for more efficient product. What 20 we have seen is higher efficiency product, 21 because of the price of it, is driving more 22 repairs of older product, and also highere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 339 1 efficiency product, as we've mentioned here 2 many times before, is in many cases much 3 larger and clogged coils have a bigger effect 4 than they would have in the past because it's 5 so important for that difference. 6 And the other one, somebody 7 mentioned micro channel. While that may or 8 may not have made smaller units in R-22, the 9 court is still in session about smaller unit 10 for R-410A, and then if you do have a leak in 11 that, then you're replacing probably the 12 entire coil, which gets back to the first 13 item that the replacement costs would be 14 driven up. 15 MR. BROOKMAN: Jim. 16 MR. CRAWFORD: Jim Crawford. 17 Relative to maintenance costs, 18 part of the analysis will certainly get into 19 the range where modulation will be used. 20 We'll be using ECMs on blowers, fans, and 21 possibly on compressors, and I would urge the 22 department to go out and get some replacemente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 340 1 part costs of induction motors versus ECM 2 motors, and the conventional contact for 3 mechanical control board versus the 4 electronic control board, and I don't think 5 that you will come to the conclusion that you 6 can service those at the same cost as you can 7 an electromechanical system. 8 MR. BROOKMAN: Thank you. 9 Equipment lifetime.

10 MR. SOMASUNDARAM: Yes. The last 11 input of the LCC analysis is the equipment 12 lifetime assumption, and we assume that the 13 lifetime will be the same for both baseline 14 and higher efficiency units. 15 In the last rulemaking, DOE used 16 an average lifetime of 18.4 years as the 17 assumption, and DOE seeks comments on this 18 particular input factor. 19 MR. BROOKMAN: Yes, go ahead. 20 MR. CRAWFORD: I think the 18.4 21 years is not supportable, and I think that 22 the Census data and RECS support somethinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 341 1 more like about 11 or 12 years, and I think 2 that the model that you're using, as I recall 3 last time you used a model that kind of said 4 they all survived until about 18 years, and 5 then died that way. That's not the way 6 things happen. 7 You have an exponential loss with 8 a constant hazard function. So by the time 9 that you are out to the average life, you 10 have lost just under two-thirds of the 11 population. 12 MR. BROOKMAN: Karim. 13 MR. AMRANE: Karim Amrane, HRI. 14 And, again, this question, we 15 submitted comments last time, and we pointed 16 out that others like ASHRAE, for example, 17 goes for 15 years, something like that, and 18 you rejected our comments, too. 19 So we will be submitting comments 20 again and hopefully this time you will take

21 our comments. 22 MR. BROOKMAN: Looking at this, ate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 342 1 equipment that is at higher levels of 2 efficiency, that doesn't change any of the 3 assumptions and the way it plays out.

4 Yes. 5 MR. MESSMER: Craig Messmer. 6 I think when you do the equipment 7 lifetime you should also put a factor in 8 there for equipment warranty. It has been my 9 observation that some of these repairs are so 10 expensive and the warranty doesn't justify 11 doing it. So people would rather just 12 replace the whole unit. So I'm not sure if 13 the assumption that we have one compressor 14 change-out in a lifetime is really an 15 accurate way to look at it. 16 MR. BROOKMAN: Okay. Robert. 17 MR. WILKINS: I presume you're 18 getting to the end of the section that had to 19 do with the analysis and the approach.

20 MR. BROOKMAN: Yes. 21 MR. WILKINS: And just one further 22 comment going back to your flow chart, Ie20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 343 1 think this flow chart is on target for 2 selecting the possibilities when the unit is 3 going to be replaced, especially for new 4 housing. But keep in mind the homeowner has 5 another choice as we've learned in the past 6 two or three years in the replacement market, 7 which is two-thirds of the market, and that 8 is to replace that compressor and not put a 9 new until in there. 10 So I'd urge you to look at not 11 only what's the best option when you replace 12 it, but trade that off against the consumer 13 repairing that old, outdated piece of 14 equipment. 15 MR. BROOKMAN: Harvey Sachs. 16 MR. SACHS: Thank you. Harvey

17 Sachs. 18 I'm awe of the opportunity to sit 19 here with some of the best technical people 20 in the country from industry, as well as the 21 department's analysts. What I have heard 22 today, and particularly in this discussion ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 344 1 life cycle analysis is an enormous amount of 2 anecdote and opinion, and I submit that the 3 entire life cycle analysis approach is two 4 steel beams floating on quicksand. 5 The department has shown a 6 tendency to use the life cycle analysis as 7 the driving agent to make its determination 8 when there's incredible uncertainty in every 9 one of the assumptions we've made, from 10 service life to the trajectory of electricity 11 prices. Life cycle analysis is the servant. 12 It's not the master, and I believe the 13 department has an obligation, and this really 14 builds on something that Jim Crawford said, 15 to let us know what window is considered to 16 be equal life cycle costs. 17 We saw in a recent proceeding life 18 cycle cost differences much less than a half 19 percent, $13 on a huge number for all of the 20 options considered. This is meaningless, and 21 I think the department owes itself and the 22 industry some statement on how life cyclee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 345 1 analysis is used because it's getting in our 2 way when we use trivial differences to make 3 important judgments, trivial and 4 unsubstantiatable differences that are 5 compounded through the analysis to draw 6 important legal conclusions. 7 Thank you. 8 I think Jim would have said the 9 same thing, but with different worlds. No? 10 MR. BROOKMAN: No need for you to 11 say the same thing. 12 MR. CRAWFORD: As long as you 13 weren't referring to my stuff as the

14 anecdotal. 15 (Laughter.) 16 MR. BROOKMAN: Okay. So we got 17 good comment on equipment lifetime. Are we 18 ready to move on? Here we go.

19 MR. SOMASUNDARAM: So the last and 20 final step is shipments and NIA analysis that 21 Greg will talk about. 22 MR. ROSENQUIST: Okay. We come toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 346 1 the last two components of the ANOPR 2 analyses, which are, again, the shipment 3 analysis and the national impact analysis. 4 Both outputs from the life cycle 5 cost analysis and life cycle cost and payback 6 period analysis and the shipment analysis fed 7 into the national impact analysis. 8 First, let's start with the 9 shipments analysis. Its purpose is simply. 10 It's basically to quantify the impact of 11 standards on product shipments. The method 12 relies on developing a shipments model, which 13 relies on various data sources, but most 14 importantly historical shipments data. 15 The model only considers shipments 16 of the covered products, that is, of central 17 air conditioners and heat pumps, and again, 18 this shipment model that's developed is 19 intended to forecast shipments over the 20 forecast period from the assumed effective 21 date, 2016, out 30 years to 2046. 22 The first part of the shipmente20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 347 1 analysis is to develop what's called a base 2 case shipments forecast, and this is the 3 shipments forecast when no new standards are 4 adopted. 5 And for residential shipments, we 6 characterize two markets primarily for where 7 shipments are going to, product sales to new 8 construction and product sales to units that 9 have failed and need replacement. DOE will 10 use this general approach to characterize the 11 shipments to split systems into single packet 12 systems. 13 For new construction systems, the 14 basic method is to take housing starts and 15 multiply it by the saturation rate or product 16 ownership rates in that new housing. The 17 forecasts of new housing come from the Annual 18 Energy Outlook, while the saturation rates 19 come from the U.S. Census Bureau in a report 20 called "Characteristics of New Housing."

21 Both sets of data are at the 22 national level and also disaggregated down toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 348 1 the census region level. Census regions are 2 the four main regions of the U.S., the 3 northeast, the midwest, the south and the 4 west, and so at least for new construction we 5 can characterize shipments possibly down to 6 the regional level, that census regional

7 level. 8 For replacement shipments the 9 methodology is to use a retirement function 10 that's built on the lifetime estimates in the 11 LCC and payback period analysis and apply 12 that to an existing stock of central air 13 conditioners and heat pumps, and that 14 existing stock is built up from historical 15 shipments data. So we will be asking 16 stakeholders, particularly industry, for that 17 historical shipments data. 18 And since we're intending to do 19 this at the product class level, we're hoping 20 to receive that shipments data at the product 21 class level. And because we also may need to 22 do it at the census region level, we'll alsoe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 349 1 be asking for that data at the census region

2 level as well. 3 The next step then is to finally 4 calibrate the model, and we'll be looking at 5 the historical forecasts or what I like to 6 call back casts to the actually historical 7 shipments data, and any discrepancy will be 8 attributed to existing households that don't 9 already own the appliance. And so we will be 10 looking at trying to develop an historical 11 adoption rate in these households, and then 12 once we do, we'll carry that forward to 13 forecast future shipments. 14 Now, one thing that isn't in this 15 list that's come up in the course of today's 16 discussions is the issue of how standards 17 will impact replacements versus repairs, and 18 again, just to maybe hold off on any 19 questions you have on that topic. I'll 20 hopefully get to that on the next slide. 21 MR. BROOKMAN: Jim. 22 MR. CRAWFORD: Jim Crawford.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 350 1 You mentioned the use of census 2 regions, and that shows up several times in 3 the framework document. The census regions 4 are nowhere near fine grained enough if 5 you're going to start trying to establish 6 regions along state boundaries. 7 As you said, there are four census 8 regions. There are 50 states, and there's no 9 reason a priori to assume that the census 10 boundaries are appropriate boundaries for 11 regions for HVAC. 12 MR. BROOKMAN: Let's let him 13 finish and then we'll take every comment 14 following the next slide. 15 MR. ROSENQUIST: This continues 16 the discussion of base case shipments 17 forecast, but again, for the commercial 18 sector, and again, this is under the 19 assumption that the analysis will have to be 20 done for commercial applications of central 21 air conditioners and heat pumps. 22 The methodology for calculatinge20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 351 1 commercial shipments is basically identical 2 to that for residential, and I don't know if 3 I needed to go through each one of these 4 bullets, but it's basically, again, to 5 characterize the shipments, the new 6 construction, determine the shipments as 7 replacements to failed units, and then also 8 characterize the shipments to existing 9 commercial buildings that don't already have 10 the appliance. 11 Finally, we come to the other 12 product classes, which aren't the primary 13 ones, which aren't the split systems and 14 single package systems, but the small duct, 15 high velocity systems in the space 16 constrained units. And here the plan is not 17 to use a detailed shipments model that I just 18 described, but just extrapolate off 19 historical trends because the assumption here 20 is that the shipments are not that great. 21 And of course, to be able to do 22 that, we're going to need that historicale20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 352 1 shipments data from stakeholders. 2 So at this point there's a request 3 for comment or actually a request for data 4 from stakeholders for historical shipments 5 data down to the product class level, and 6 also down to the census region level, and if 7 needed, to go down to even a finer level of 8 disaggregation, possibly to the state level.

9 MR. BROOKMAN: So has AHRI 10 supplied that information previously? And 11 can you do it again this time? 12 Karim. 13 MR. AMRANE: Karim Amrane, HRI. 14 I believe we did supply some of 15 the information in the past and probably we 16 will. Again, we'll have to consult with the 17 membership first, but I don't see why we

18 shouldn't. 19 No, you're asking much more 20 information than you used to in the past. As 21 far as the product classes, duct through the 22 wall, and small duct, high velocity system,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 353 1 I'm not sure that we have historical data. 2 They were lumped within the rest before. So 3 I don't know. It's something we'll have to 4 look into and see whether we can do it. 5 Now, the regional data, it's also 6 something we'll have to see what we can do

7 here. 8 MR. BROOKMAN: Okay. Yes, please,

9 Talbot.

10 MR. GEE: I would also add --

11 Talbot Gee -- I'd add another level of what 12 we're going to have to help supply, and not 13 to speak for the contractors, but 14 contractors, too, because shipments simply 15 out of manufacturer docks even to where they 16 get shipped to still won't answer your 17 question. You're going to need to know 18 final, if you can, where units are going, and 19 then also have some account, frankly, for the 20 stuff that gets made and purchased, but 21 doesn't actually ever end up getting 22 installed, too.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 354 1 MR. BROOKMAN: Paul. 2 MR. DOPPEL: Paul Doppel. We're 3 going to try to get some information on the 4 ductless products so that we can show that 5 we're a little bit bigger than a small 6 fraction of the market. 7 MR. BROOKMAN: Good. Thank you. 8 That's helpful. 9 Okay. Additional comments on 10 this, on the shipments forecast and the 11 approach? 12 (No response.) 13 MR. ROSENQUIST: Okay. I'll go on 14 to the next slide, which is after we've 15 developed our base case shipments forecast, 16 we have to do it now for the standard case 17 shipments forecast, and that's the case where 18 energy efficiency standards are imposed on 19 the product. 20 The exact same data is used to 21 develop the standards case shipments 22 forecast. With the exception of onee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 355 1 important exception, here we try to take into

2 account the effect that standards have on 3 purchase price and also on operating costs to 4 figure out the sensitivity of sales, of 5 purchases of this equipment based upon what 6 the standards do to purchase price and what 7 they do to the operating cost. 8 And typically what we try to do is 9 we search the literature to see whether or 10 not there's any information on the 11 sensitivity to purchase price and operating 12 costs, but many times it's very difficult to 13 get that information. There's not a lot of

14 data out there. 15 So DOE may for this rulemaking 16 forecast specific shipments drops associated 17 with specific standard levels, and of course, 18 we'll be looking for input from stakeholders 19 on that possible approach. 20 The other thing that will be 21 considered in coming up with these shipments 22 forecasts is the effect of market pulle20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 356 1 programs, things like manufacturer tax 2 credits, consumer tax credits, and the Energy 3 Star program. 4 And finally, for heat pumps and 5 only for heat pumps, DOE will consider fuel 6 and equipment switching. So if a standard is 7 determined to drop the sales of heat pumps, 8 what we plan to do is to allocate that drop 9 in sales to increases in shipments of fossil 10 fuel fired furnaces, as well as electric 11 resistance furnaces. 12 Now, we realize that this is sort 13 of a maximum impact situation. But with this 14 maximum scenario what we want to do is carry 15 this forward into the national impact 16 analysis to see what sort of maximum effect 17 could happen to the national energy savings 18 associated with a particular heat pump 19 standard level and also with the effect on 20 national consumer economic benefits. 21 Now, again, one thing I haven't 22 covered in these bullets is the possiblee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 357 1 effect of standards on extending the repair 2 of units that would have failed if a new 3 standard hadn't been imposed, and this is 4 something that we considered in the last 5 rulemaking, and we made some very basic 6 assumptions about that. 7 We assumed a particular 8 sensitivity to purchase price, and we also 9 assumed that the equipment would last another 10 six years after the repair. So if we're 11 going to incorporate that into our models, we 12 would certainly like input on sensitivity to 13 purchase price and operating cost savings, on 14 a consumer's decision to extend the unit if 15 it was going to fail, but they choose to 16 repair it instead, and how much longer that 17 unit would last.

18 MR. BROOKMAN: Steve Rosenstock. 19 MR. ROSENSTOCK: Steve Rosenstock, 20 Edison Electric Institute. 21 I think for this one you are good 22 that you're trying to look at substitutione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 358 1 and repair. So based on what I heard 2 earlier, I think you might need to track for 3 central air conditioners and heat pumps just 4 room air conditioner sales. If people are 5 substituting room air conditioners for 6 central air conditioners because they think 7 it's too expensive to repair or replace, if 8 that's happening, I think DOE needs to 9 account for it somehow.

10 And then there was talk of the 11 hybrid systems. Again, I don't know what 12 percentage of sales those are in certain 13 regions, but, again, I don't know in terms of 14 substitution, but they might play a role. 15 And then in terms of the 16 resistance, I'm pretty sure I remember from 17 last time in Florida it's not necessarily

18 furnaces. It can be baseboard heat or even 19 just basically room heaters, portable room 20 heaters just like I'll all it the warm room 21 effect, that maybe especially in Florida. 22 They just heat up one or two rooms, ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 359 1 that's all they care about in the wintertime 2 when they have the freak cold snap. 3 So I'm just saying that's another 4 possible substitution in certain parts of the 5 country that you need to look at. So, yeah, 6 and you have some data now. I mean, I think 7 you're going to get data from what happened 8 starting in 2006 in terms of some of the 9 substitutions. So you can use that as well.

10 MR. BROOKMAN: Robert.

11 MR. WILKINS: Yes. Robert 12 Wilkins, Danfoss. 13 2006 central air conditioning 14 sales in the U.S. dropped by two million 15 units a year and remained flat in 2007. At 16 the same time, room air conditioning sales 17 increased by two million units a year and 18 remain flat in 2007. 19 So you've got curves that are 20 consistently going along together that 21 sharply diverged in 2006. 22 The other interesting statistice20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 360 1 is, and several of my colleagues and the 2 equipment manufacturers have told me very 3 consistently that sales of replacement 4 compressors have jumped from 25 to 30 percent 5 in the year 2006. 6 So there's strong evidence that 7 people aren't replacing them. They're 8 repairing them or they're working around 9 them, and I think that simply needs to be 10 included in the evaluation. 11 MR. BROOKMAN: Thank you. 12 MR. CRAWFORD: Doug, just very 13 quickly.

14 MR. BROOKMAN: Yeah. 15 MR. CRAWFORD: Jim Crawford. 16 If you're willing to replace 17 parts, there's no intrinsic life limit to a 18 condensing unit. Every part of a condensing 19 unit is replaceable, the same as an 20 automobile. I mean, as long as the thing 21 doesn't rust out, you can just keep on 22 replacing the compressors, motors, fans,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 361 1 coils, cabinet panels, anything. 2 MR. BROOKMAN: Okay. Thank you. 3 Additional comments on standards 4 impacts on shipments? 5 MR. ROSENQUIST: This slide is 6 just a couple of items from the framework 7 document they were looking for input on. The 8 first is that impact of standards on 9 shipments. That's a very important aspect of 10 doing the standard case shipments forecast, 11 and so as part of the preliminary 12 manufacturer impact analysis, there will be 13 requests made to manufacturers on what they 14 believe the impact of standards would be on 15 shipments. 16 And of course, DOE will also 17 accept any input from any other stakeholders 18 that want to chime in on that subject. 19 The other item is the effect of 20 market pull programs at affecting change in 21 the market and promoting more efficient 22 central air conditioners and heat pumps ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 362 1 how that may play in a situation where you

2 have new standards. 3 MR. BROOKMAN: Harvey Sachs. 4 MR. SACHS: Harvey Sachs. 5 One difference of this standard 6 relative to the 2006 transition is that it 7 will take place after the refrigerant 8 transition to 410A or other alternatives. As 9 I understand it, these require a very 10 different class of refrigerant lubricants, 11 and consequently it would seem to me the 12 department would want to pay attention to the 13 feasibility of doing component replacements 14 rather than system replacements when you're 15 trying to move from an R-22 system that may 16 well have been capped to the expansion device 17 to a 410A system that is using different 18 lubricant, using different refrigerant and 19 quite likely using different controls. 20 I don't have the answer, but I 21 think it's a study area that's very germane 22 given the concerns that have been brought upe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 363 1 about the replacements following 2006. 2 MR. BROOKMAN: Thank you. 3 Kyle.

4 MR. GILLEY: Just one echo of 5 concern, to address a concern in one of 6 Harvey's statements. That was that we would 7 fully transition to 410A, and that would be 8 different from the last go-around. That's 9 not necessarily the case, given the 10 uncertainties around climate change 11 legislation and potential regulation. We 12 could definitely be going through another 13 refrigerant change at the same time this new 14 rulemaking is effective. 15 MR. BROOKMAN: Thank you, Kyle. 16 MR. SACHS: Thank you. 17 MR. BROOKMAN: Any comments on 18 market pull programs? 19 MR. SACHS: We support them. 20 (Laughter.) 21 MR. GILLEY: Well, and a passing 22 through on them is Robert just gave you somee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 364 1 numbers as what's happened to the industry 2 since 13 SEER. In effect, those same pool 3 programs were in place during that 4 transition. 5 MR. BROOKMAN: Okay. 6 MR. ROSENQUIST: Okay. I'll now 7 talk about the national impact analysis, and 8 the purpose of this is to determine the 9 national energy savings and the national 10 consumer economic benefits or burdens from 11 the energy efficiency standards are going to 12 be analyzed. 13 The method is developed from 14 looking at annual time series of annual 15 energy consumption for the stock of 16 appliances that are in the market and also 17 looking at the annual time series of the 18 associated operating costs and increased 19 equipment cost of that stock.

20 What the model does then that we 21 use is it accumulates all of those values, 22 and then it takes the difference between ae20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 365 1 base case and a standards case to come up 2 with the impact from the standards case. 3 The model that we developed for 4 the NIA utilizes the shipments model that I 5 talked about earlier. Again, that shipments 6 model provides us with a shipments forecast, 7 and again, from those forecasts we build up a 8 stock or inventory of units which we track by 9 vintage. 10 Another aspect of it is that we 11 utilize many inputs from the LCC and payback 12 period analysis, specifically the per unit 13 total installed cost increase due to a 14 particular efficiency standard as well as the 15 per unit operating cost savings and per unit 16 annual energy savings. 17 We take those per unit values and 18 then aggregate the up to national values in 19 the NIA analysis. 20 We report energy savings in terms 21 of quads or quadrillion BTUs or ten to the 22 15th BTUs, and while in the LCC analysise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 366 1 things are done at the site, that is, where 2 the unit is being used, at the particular 3 household or building, for this analysis we 4 do things at the source or at the primary, 5 which takes into account the transmission and 6 distribution of the electricity, as well as 7 the efficiency of the power plants. 8 National net present value is 9 determined in dollars, and again, it's an 10 annual time series of the effect, and what we 11 do is we use discount rates or discount 12 factors to get those annual time series of 13 money back down to a present value. 14 This flow diagram gives you a 15 conceptual idea of what we do when we 16 calculate the national energy savings. We 17 start with the shipments analysis, which 18 provides us with base case and shipments 19 case, shipments projections. 20 In the case of the base case, 21 those shipments projections are used to build 22 up, again, a stock or inventory of aire20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 367 1 conditioning and heat pump units that are 2 serving the nation, and we calculate the 3 associated annual energy consumption of that 4 stock for every year from the assumed 5 effective date of the standard all the way

6 out to 2046. 7 We do the exact same thing on the 8 standards case side, and then we assimilate

9 both the base case and the standards case 10 energy consumption, apply our site to source 11 conversion factors to convert the site energy 12 consumption into source energy consumption, 13 and the difference between the two is the 14 national energy savings due to the standard. 15 This flow diagram gives you, 16 again, a conceptual framework of what we do 17 when we calculate the national net present 18 value, and again, starting with the shipments 19 analysis, we use it to provide us with both

20 base case and standards case forecasts of 21 shipments. 22 In the case of the base case, wee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 368 1 use that, again, to build up the stock of 2 units, and we calculate the associated 3 electricity cost, the associated repair and 4 maintenance cost, and also the equipment cost 5 associated with that stock. 6 We do the exact same thing on the 7 standards case side. We then accumulate the 8 energy electricity cost and maintenance costs 9 associated with that stock for both the base

10 case and standards case and take the 11 difference between the two, and that gives us 12 our operating cost savings to the nation from

13 the standard. 14 We do the same thing with the 15 equipment cost, and so the difference between 16 the standards case and the base case is the 17 increase in equipment cost to the nation of 18 the particular standard that we're looking

19 at. 20 We apply discount rates, of 21 course, to get this back down to a present 22 value, and we take the difference between thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 369 1 two. If the operating cost savings are 2 higher than the equipment cost increases, 3 we've got a net present value which is a net 4 benefit to the nation. If it's ten other way 5 around where the installed costs are greater 6 than the operating cost savings, then we have 7 a net burden to the nation from the standard. 8 This next slide talks about a very 9 important input to the analysis, which is the 10 shipment weighted efficiency data, and the 11 reason why it's important is because many of 12 the inputs to the analysis coming from the 13 life cycle costs and payback period analysis 14 are dependent upon efficiency. 15 So in the case of determining 16 national energy savings, we rely on the LCC 17 to give us the per unit annual energy 18 savings, and again, that's dependent upon the 19 efficiency of the product. 20 The same thing with the 21 determination of NPV, which is based upon the 22 per unit installed cost and the per unite20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 370 1 operating cost savings. Again, both of those 2 are dependent upon efficiency. 3 In the past we've gotten 4 historical trends of efficiency from AHRI, 5 and these trends, these historical trends, 6 are used to forecast what happens in the base 7 case, that is, the case without standards, to 8 figure out how the various per unit energy 9 consumptions and per unit costs change in the 10 future, again, with efficiency. 11 And you can see this figure here 12 shows you the historical data for unitary air 13 conditioners as a whole and heat pumps as a 14 whole. We're hoping to get this type of data 15 at the product class level and also hoping to 16 get it at some level of regional 17 disaggregation. 18 And this next slide talks about 19 the impacts of standards on efficiency, 20 particularly the impacts of standards on the 21 distribution of product efficiencies, also 22 called the market share efficiency data, ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 371 1 again, we use this historical market share 2 efficiency data to tell us how a particular 3 standard will impact product efficiency 4 distributions in the year the standard takes

5 effect. 6 So what you see here are two 7 figures, which correspond to two types of 8 scenarios that DOE has used in the past. The 9 first on the left is the roll-up scenario, 10 and what you see there with the blue bars is 11 the current distribution of products 12 according to the number of models available. 13 And under a roll-up scenario, what 14 happens is that that 13 SEER product rolls up 15 to the standard that I'm hypothetically 16 considering here, a 14 SEER. So you see that17 big bump-up as indicated by the yellowish18 green bar. 19 Under the roll-up though, none of 20 the products after 14 SEER are affected. In 21 the shift scenario what happens is you 22 basically shift your current distribution,e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 372 1 reorient it, if you will, to around the new 2 minimum efficiency standard. In this case 3 we're looking at a hypothetical of 14 SEER. 4 So you're retaining the same 5 efficiency distribution. Now, you may ask 6 what's so important about this. Well, the 7 resulting shipment energy efficiency that you 8 get from these two scenarios has a definite 9 impact on what you estimate in terms of the 10 national energy savings and the impacts of 11 the consumer economics from that standard. 12 And then after we've developed the 13 impact in the year that standards become 14 effective, then we forecast that out into the 15 future basically with the same efficiency

16 trend that we use for the base case.

17 MR. BROOKMAN: Robert.

18 MR. WILKINS: The data I've seen 19 from the standards in the early 1990s was the 20 first case happened immediately in that you21 had the -- what did you call it? -- the roll22 up phenomenon to take place, but then after ae20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 373 1 year or two it tended to spread back out 2 again, if I recall, Karim. 3 And I suspect though that it's 4 actually the roll-up case because we were in 5 an increasing mode anyway, and after a year 6 or two of being under the 10 SEER, it started 7 moving on up following its natural market and 8 technology shift patterns. 9 MR. BROOKMAN: Thank you. 10 MR. WILKINS: For what it's worth. 11 MR. BROOKMAN: Thank you. 12 Yes, Steve Rosenstock. 13 MR. ROSENSTOCK: Steve Rosenstock,

14 EEI. 15 And I mentioned this last time 16 because as I recall there was the pipeline 17 effect of the ones that met the previous 18 standard. Back then it was like eight SEER 19 and then it was bumped up to ten SEER. Even 20 after 1992, there were still eight SEERs 21 being sold on the market for X months or X 22 years after the standard took effect. Soe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 374 1 that also had an impact on any sort of 2 national energy savings. 3 It has happened twice, you know. 4 Ten SEERs were sold after January of 2006. 5 It did happen. That's a fact. So, again, 6 this time I think there should be some sort 7 of modeling to the effect that I'll just say 8 pipeline effect or time lag effect for the 9 units that met the previous standard being 10 sold after the standards become effective. 11 MR. BROOKMAN: Harvey. 12 MR. SACHS: I'd just like to take 13 a slightly different perspective on these14 excellent, illustrative graphics. The left15 hand diagram roll-up would probably be called 16 by some people the co-modification model of 17 the market's transition. The one on the 18 right is what I consider to be one of the 19 principal goals of the voluntary programs, to 20 maintain the pull for the higher efficiency 21 products, the differentiated products. 22 Now, I'm not sure exactly how thate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 375 1 folds into your analysis, Greg, but it is 2 something I will probably be using in our 3 community to illustrate one of the goals. 4 MR. BROOKMAN: Okay. Thank you. 5 Additional comments on these two 6 scenarios? Yes, please. 7 MR. BURT: Lane Burt, NRDC. 8 I would just also like to point 9 out that the time frame when this standard is 10 going to take into effect is going to be a 11 good deal different than previous standards, 12 and you have a lot of pressures that are 13 going to -- we talked about the pressures 14 that forced the roll-up scenario. There's 15 also going to be some corresponding pressures 16 that will force it toward the shift scenario 17 in terms of primary legislation and increased 18 market pull programs. 19 MR. BROOKMAN: Thank you. 20 Yes, please, and your name for the

21 record. 22 MR. BERGT: Yes. Carl Bergt.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 376 1 Question: how the standards 2 impact or shipment analysis that may take 3 into account room air conditioners and 4 replacement air conditioners. What I don't 5 see is when you do your national energy 6 savings document, what's the negative impact 7 of that. It's like you've totally discounted 8 that impact, the negative impact, that those 9 would have because you only look at what was 10 shipped, not actually what the impact is on 11 energy. 12 MR. ROSENQUIST: Yeah. I mean, 13 first of all, let me talk about the possible 14 equipment switch to room air conditioners. 15 If that actually does happen, if we get 16 inputs from stakeholders who say that will 17 happen, then that will be modeled and the 18 energy consumption associated with those room 19 air conditioners will be taken into account. 20 So that will be a drag, in other 21 words, on the national energy savings that 22 you would get from a prospective standard.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 377 1 MR. BROOKMAN: Tom. 2 MR. ROBERTS: Yes, just to 3 clarify, I think we heard that very clearly, 4 that room air sales are up the two million, 5 that central systems were town two millions. 6 You're saying that needs to be submitted in 7 writing? 8 MR. ROSENQUIST: Well, of course, 9 we're going to have to look at the data 10 ourselves, as well, right? And since it's 11 now part of the official record, it's going 12 to be part of the public transcript. It 13 becomes an official comment. 14 But anything you could do to 15 clarify that particular comment further would 16 be greatly appreciated. 17 MR. BROOKMAN: Okay. Thank you. 18 So additional comments on these 19 two scenarios? And I want to refer also to 20 the next slide. 21 Jim. 22 MR. CRAWFORD: In the discussione20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 378 1 associated with, oh, 79, I guess it was, and 2 some of those earlier charts, Greg was 3 describing a level of disaggregation of data 4 that I don't think he's going to get because 5 I think I got my product class, my efficiency 6 level. It didn't say my capacity, but you 7 can't go very far without that by geography. 8 That level of data may or may not 9 exist in the industry, but once that data is 10 available, it tells altogether too much to 11 competitors about what's happening in the 12 market, and that's a level of disaggregation 13 that you're just not going to get. I don't 14 think I could. 15 MR. BROOKMAN: Karim. 16 MR. AMRANE: Karim Amrane, AHRI. 17 Again, as I said, subject to 18 approval from the members, this is something 19 that we might or might not, you know, 20 proceed. I mean, I think we will have to 21 discuss it amongst ourselves and see whether 22 it's something that we can.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 379 1 MR. ROSENQUIST: I mean, if you 2 can't provide us with actual data, then maybe 3 some guidance as to maybe if we do things 4 regionally, for example, how things may shift 5 between different regions of the country. 6 MR. BROOKMAN: So scan through. 7 Greg, do you want to just set up 10-1, 10-2

8 and 10-3? 9 MR. ROSENQUIST: Yeah, yeah. Item 10 10-1 talks about, again, our request for 11 historical shipment weight efficiency data by 12 product class and by some level of regional 13 disaggregation, and also if there's any 14 market share data out there as well, it can 15 even be provided at an aggregate level for 16 all product classes. That better than 17 nothing would be greatly appreciated.

18 Item 10-2 talks about comments 19 that we would like to have on, you know, the 20 use of these different scenarios to --

21 MR. BROOKMAN: We have had comment 22 on those already.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 380 1 MR. ROSENQUIST: Okay, and 2 finally, just any general comments you might 3 have on the NIA analysis approach.

4 MR. BROOKMAN: So are there 5 additional comments on the NIA analysis, the 6 approach therein? 7 (No response.) 8 MR. BROOKMAN: Okay. I don't see 9 any. 10 Wes handed me a note about 15, 20 11 minutes ago suggesting that maybe on this 12 occasion since people are starting to leave 13 and it's 4:20 in the afternoon, that we might 14 be able to skip the Notice of Proposed 15 Rulemaking analyses today. Do you want to

16 talk about that? 17 MR. ANDERSON: This is Wes 18 Anderson, DOE. 19 If everybody is in agreement with 20 this, sine the ANOPR is in 18 months and the 21 NOPR is in 2010, that we skip a detailed 22 discussion on that and table that for thee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 381 1 ANOPR presentation. If someone has some 2 comments on the different subject matters, if 3 they'd turn to Slide 83, page 42, and if you 4 haven't spoken yet on those and you want to 5 speak on those particular issues, we can take 6 that time now to do that. 7 First, let me ask: are we in 8 agreement with that? 9 MR. BROOKMAN: Since there's so 10 much time looking ahead before we get to the 11 NOPR analyses and there will be other 12 workshops. 13 MR. SACHS: There's one exception. 14 MR. BROOKMAN: Harvey Sachs. 15 MR. SACHS: Environmental impact 16 analysis, do you want comments on issues like 17 that? I'm sure we're going to go through the

18 whole number. 19 MR. ANDERSON: Yeah, instead of 20 going through, if you want to make comments 21 on the particular bullet items or the 22 chevrons on the page, I would say go aheade20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 382 1 and make your point now, if everybody's in 2 agreement with trying to end this early 3 without going into detail with the NOPR. 4 I don't want to force upon the 5 public that we're trying to skip over your 6 issues. 7 MR. BROOKMAN: Yes, Talbot. 8 MR. GEE: Another suggestion, that 9 manufacturer impact analysis just be adjusted 10 to channel impact analysis. 11 MR. BROOKMAN: Okay. Yeah, there 12 was suggested that it become market impact 13 analysis to reflect the entire distribution 14 chain. 15 Please, Lane.

16 MR. BURT: Lane Burt. 17 To speak about the environmental 18 impact analysis and specifically the 19 monetization of CO2 question, there really 20 needs to be considered in terms of the 21 financial side in the life cycle costs and 22 net present value. We've commented on thise20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 383 1 before, but we see that by the time this 2 ruling takes effect, there's going to be a 3 price on carbon, and refusing to set a price 4 on carbon and put it into the analysis is 5 effectively speculating a zero cost, which is 6 going to be very incorrect. 7 MR. GILLEY: I would just ask for 8 support from our friends from NRDC that, 9 again, this makes the case that there needs 10 to be some balance in this rulemaking to what 11 we do from a refrigerant standpoint. If 12 you're asking for that on CO2, there needs to 13 be some consideration given in the process of 14 this rulemaking to the impact climate change 15 is going to have on the refrigerants we use. 16 MR. BROOKMAN: So that was Kyle 17 speaking, and now here to Harvey.

18 MR. SACHS: We look forward to 19 those conversations. I think our record is 20 pretty clear in terms of T-WEE (phonetic) and 21 concepts like this. We very much look

22 forward to that.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 384 1 MR. BROOKMAN: Don Brundage.

2 MR. BRUNDAGE: Just make a comment 3 that while it is likely there would be 4 factors like this included, you're changing 5 parts of analysis and not others, and the 6 Annual Energy Outlook makes assumptions of no 7 changes in regulation after the date that it 8 is issued. 9 So making those sorts of changes 10 unless it's just separately in an 11 environmental impact, you need to be careful 12 that you're not inconsistent in the way 13 you're -- if you did just an environmental 14 impact, it's one thing, but to put it in the 15 depths of a study, you're running into 16 inconsistencies because the other things in 17 the forecast are not done that way. 18 MR. BROOKMAN: Okay. Thank you.

19 Tom. 20 MR. ROBERTS: And one quick thing 21 will be the carbon equivalent monetization of 22 the increased cost of the carbon footprint ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 385 1 the higher efficiency units on the credit 2 side. 3 MR. BROOKMAN: Thank you.

4 Steve. 5 MR. ROSENSTOCK: A couple of6 things since we're skipping ahead. Twenty7 six states have RPS mandates. Four states 8 have RPS goals. That's probably going to 9 increase over time. So that should be 10 accounted for in this analysis. 11 Number two, there's another slide 12 since we're --

13 MR. BROOKMAN: Yes. 14 MR. ROSENSTOCK: -- going ahead to 15 utility impact analysis. It says method, 16 energy savings translated to a reduction in 17 the electrical demand faced by the utility 18 systems over time. If EERs try to go down, 19 no way to do that. I'm sorry. That's a 20 totally incorrect modeling, totally incorrect 21 analysis. 22 Again, based on if EERs stay flate20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 386 1 or go down. 2 MR. BROOKMAN: Okay.

3 MR. ROSENSTOCK: You can't do 4 that. I'm sorry. 5 MR. BROOKMAN: Okay. Thanks,

6 thanks. 7 So, yeah. I appreciate those of 8 you taking advantage of this opportunity to 9 talk about issues that matter to you, and 10 let's make sure everybody gets a chance to do 11 that. So any other comments that are 12 presently in the slides incorporated in the 13 NOPR section?

14 Wes. 15 MR. ANDERSON: I just want to make 16 clear that even though we did not cover this 17 -- this is Wes Anderson, DOE -- that we did 18 not cover this, you can still submit your 19 comments to the questions that are in the

20 framework documents. 21 MR. BROOKMAN: Their detailed

22 comments.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 387 1 MR. ANDERSON: Their very detailed 2 comments. We want as much detail as 3 possible. 4 Thank you. 5 MR. BROOKMAN: Okay. So the last 6 item on the agenda, we still want to provide 7 an opportunity for anybody to raise an 8 additional issue, perhaps something you 9 didn't cover today. Anything else left over 10 that needs to be stated at the end of the day 11 here today?

12 Steve Rosenstock. 13 MR. ROSENSTOCK: Again, Steve

14 Rosenstock. 15 Again, I apologize. I was out of 16 the meeting. Any change on the due date for 17 comments? July 31st? 18 MR. ANDERSON: This is Wes 19 Anderson, DOE. 20 To reiterate Ron's, let's go to 21 the last page. Everyone has the handouts. 22 MR. BROOKMAN: And since some ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 388 1 you are heading for the door, let me note 2 also that past after the packet is the 3 evaluation form. Please take a minute to 4 fill it out. The department reads them 5 carefully.

6 MR. ANDERSON: We have 7 instructions on how to submit comments. I 8 talked about those earlier. And the date has 9 changed to July 31st, 2008, for deadline on

10 comments. 11 MR. BROOKMAN: Ron Lewis also 12 requested if it's possible to send them in 13 not all on July 31st, that would be a good 14 thing. A whole rath of comments come in, and 15 so they can start being read as soon as they 16 show up at DOE. 17 Yes, Karim. 18 MR. AMRANE: Karim Amrane, HRI. 19 I guess I have a question about 20 process here. I mean, what's going to happen 21 between now and the ANOPR? What, a year, 22 15 months more time lag?e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 389 1 MR. ANDERSON: Yeah. 2 MR. AMRANE: Is there any plan 3 from DOE to interact with stakeholders to see 4 where you are? I don't know. I mean, I 5 think we need to. 6 MR. ANDERSON: Right now we're 7 going to rely on the comment period, and if 8 we do have questions or you have questions 9 for us, please submit those as well on the 10 process. We will address the comments at 11 this point, and there will be some 12 interaction. 13 MR. CHRISTOPHER: Mike Christopher 14 with Navigant Consulting. 15 Karim, there is at least the 16 preliminary manufacturer impact interviews. 17 So that's an opportunity to work face to face 18 with manufacturers, and we do make an effort

19 to ask. 20 MR. AMRANE: Karim Amrane again. 21 I think I'm find with that, but I 22 think in addition to that, I think I woulde20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 390 1 like to suggest that maybe we do halfway 2 through have maybe like a form conference 3 call. I don't know. Something we did in the 4 past on the commercial side where DOE will 5 update us on what we have done. 6 I think it would be very helpful 7 to everybody.

8 MR. BROOKMAN: Thanks for that 9 process note. Thank you.

10 Wes. 11 MR. ANDERSON: This is Wes. 12 I want to hold off on committing 13 right now. We'll get back to you on that. 14 If you want to submit that as a comment, but 15 we'd like to keep all of our communications 16 open to the public, not just to the 17 manufacturers and that kind of thing. So 18 that's one of the reasons why we're hesitant

19 to talk. 20 MR. AMRANE: I was not suggesting 21 just for the manufacturers. I was suggesting 22 for the entire group.e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 391 1 MR. BROOKMAN: Okay. Thank you. 2 Yes, Don.

3 MR. BRUNDAGE: One of the areas 4 that's so glaring in that there's uncertainty 5 in what DOE can and can't do is regional

6 standards. It's hard to even make comments 7 at this point on regional standards. 8 I've made a number of questions to 9 DOE which I presume will get answered when 10 the ANOPR is issued on what the limitations 11 are on regional standards, but it would 12 appear to me that unless we're going to not 13 really address whether there's going to be 14 regional standards until the ANOPR set of 15 hearings starts, at some point after some of 16 these short-term legal questions on what DOE 17 feels it can and can't do, I think you need 18 to have a whole other meeting just on 19 regional standards so that we can hash those 20 out because that has not been adequately 21 addressed today because there's so much 22 uncertainty on what DOE thinks it can ande20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 392 1 can't do. 2 It's just very speculative, and 3 it's hard to even comment on the merits of it 4 at this point. 5 MR. BROOKMAN: And what would you 6 suggest the form for that would be? 7 MR. BRUNDAGE: to have a day 8 meeting like this after some of the legal 9 questions on what DOE feels its flexibility 10 is and what it can and can't do, and we can 11 discuss some basic issues like which states 12 ought to be hot, humid, which ones ought to 13 be hot, dry, and which ones ought to be in 14 the everybody else. 15 I mean there are just a lot of 16 issues related to this, and it hasn't been 17 addressed adequately, and without some 18 answers from the DOE and some interaction, I 19 don't see how it can be. 20 MR. BROOKMAN: Jim Crawford.

21 MR. CRAWFORD: A follow-on to 22 Don's point. I would certainly add theree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 393 1 whether or not that type of classification 2 that he just iterated is even the right 3 classification at all for regions. It was 4 mentioned earlier that heat in degree-days or 5 cooling degree-days may be the more 6 appropriate measurement. 7 And I think that we have 8 articulated during the day numerous areas 9 where there is not a common understanding, 10 much less a common viewpoint, on central 11 issues in this entire analytical process. 12 In my opening remarks, I suggested 13 that we consider periodic workshops, open 14 workshops to everybody here and everybody 15 that should have been here, so that we can 16 begin to nail these things down. 17 And in the area of establishing 18 regional regions, the very first thing is 19 what's the criteria, and we have not had 20 that. this framework document is written to 21 elicit from us a data dump, and with the 22 implication that the DOE and the contractorse20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 394 1 will then go off and do their analysis, and 2 then they'll throw it over the wall. 3 And that's simply not the way to 4 get the kind of results that I think you want

5 and we want.

6 MR. BROOKMAN: Robert. 7 MR. WILKINS: Yeah, in a lot of 8 ways I'd like to reiterate that. I think 9 that's a great point. I think we had very 10 open discussion today, which will prove quite 11 fruitful. We had great exchanges, resolved 12 some things, I think, and I think the idea of 13 continuing to having open workshops is a 14 great idea. We can build on the cooperation 15 that we've had here today and move forward 16 together. 17 MR. BROOKMAN: Kyle. 18 MR. GILLEY: I would defer to my 19 friends from the distributor and contracting 20 community, but even before you start having 21 discussions about appropriate regions and 22 things of that nature, I think you ought toe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 395 1 address the enforcement issue. It's 2 meaningless unless there can be some 3 enforcement in regional standards. It's 4 almost you need an entire workshop just to 5 talk about enforcement because if you can't 6 develop an enforcement mechanism, it's a 7 meaningless exercise. 8 And in all due respect to my 9 friends from California, we're starting to 10 see that in that market now where CDC has 11 been very active in a number of fronts 12 resulting in, you know, meaningful benefit to 13 well intentioned benefits from the rules. 14 Unfortunately they've ignored 15 enforcement and now it is starting to 16 manipulate the marketplace in California. 17 You don't want to do that on a regional basis 18 with this rulemaking.

19 MR. BROOKMAN: Paul. 20 MR. DOPPEL: I'd again like to 21 thank DOE for the good discussion today and 22 having this meeting. Probably the moste20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 396 1 disappointing thing today was not having any 2 more idea about what the regional standard is 3 going to be based on, and just to augment 4 also what Mr. Crawford was saying, that you 5 know, that could be very important to how 6 products are designed in the future, and 7 right now we don't know if DOE is going to 8 establish what those regional standards are 9 or what they mean, if you're going to do that 10 in the dark, if you're going to invite more 11 comments from industry. 12 So we'd like to encourage, as was 13 suggested, having, you know, maybe another 14 meeting, a collaborative type meeting to help 15 orchestrate some sort of definition about 16 what the regions are and what the impacts of 17 those are going to be. 18 MR. BROOKMAN: Okay. Yes. 19 MR. McCRUDDEN: To Kyle's point, 20 you know, on a workshop or something on 21 enforcement, you know, the language that you 22 ended up getting from Congress says that note20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 397 1 later than 90 days after the date of the 2 issuance of the final rule that establishes 3 regional standards, the Secretary shall 4 initiate a rulemaking and develop and 5 implement and effective enforcement plan. 6 I mean, that's the cart before the 7 horse. How do we know it's going to work if 8 we don't know what's going to work? 9 So I think that's a very 10 appropriate workshop to host at some point in

11 the near future.

12 MR. BROOKMAN: So Talbot and then 13 I'll go to Tom. 14 So I think the department welcomes 15 now in these final comments your thoughts on 16 process issues and other issues if you'd 17 queue up for them to consider looking ahead. 18 MR. GEE: And I would just say 19 that HUD has spent the entire summer of the 20 energy bill debate trying to figure out a 21 potentially workable way in any type of 22 regional stance, and frankly, we were stumpede20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 398 1 to do so because of the enforcement issues 2 primarily. 3 So I'm not trying to sound like 4 we're punting here, but I don't think you'll 5 see from us a proposal for how these regions 6 would be established because we couldn't 7 figure that out a year ago. So I'm not sure 8 why we'd be able to figure that out now. 9 So the strong proponents of a 10 regionalization format already have ideas of 11 how they might want to draw these lines and 12 enforce them. Then let's perhaps see those 13 and debate those in these discussions.

14 MR. BROOKMAN: Tom.

15 MR. ROBERTS: Tom Roberts. 16 The only thing we know is we know 17 the grain of the regional standard is state 18 sizes, right? So starting with that, then to 19 really do this right we'd have to do all the 20 work we're talking about doing today state by 21 state, 50 studies like this; then mix them 22 and match them in a huge matrix the size ofe20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 399 1 the state of Philadelphia or Pennsylvania -- 2 sorry -- and then we'd have some answers. 3 But that doesn't seem realistic to 4 even study what this possible implication of 5 regionality could because the climate has yet 6 to choose to align itself over state lines. 7 So if we could punch through that 8 and see what is it beneath regional standards 9 that people are looking for, like better 10 functioning systems in hot, dry, better 11 functioning systems in warm, humid, and other 12 possibly EER considerations, then maybe we 13 could make real progress. 14 MR. BROOKMAN: Harvey.

15 MR. SACHS: To some extent I bear 16 some blame for articulating this question, 17 and I'm happy to circulate through Brenda a 18 manuscript that several of us worked on that 19 really does have a strawman, a point at which 20 we can begin the discussion. 21 There will be some conversation on 22 this at the ASHRAE meeting at Salt Lake Citye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 400 1 on Tuesday morning. You're certainly invited

2 to that as well.

3 I would offer that strawman not as 4 the answer, but as one place to start from, 5 and I would join with Jim and with others in 6 the suggestion that we do need to have some 7 collaborative effort. We do need to have 8 some talk. We can't do this stuff in the 9 dark and expect it to be accepted. We have 10 precedent for that in the furnaces 11 electricity workshop that Gammel organized a 12 number of years ago, and even though we'll be 13 out gunned and out personed and everything 14 else by industry, we still believe that 15 having this kind of iterative, collaborative 16 work is likely to be beneficial to the 17 process. 18 And finally, with respect to the 19 issue of whether the regulatory mechanism 20 ought to come first or last, I think the law 21 is fairly clear. We may as well just work 22 within in that and see if the savings aree20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 401 1 worth pursuing by developing a regulatory 2 mechanism, and that's something which we can 3 do together with some simulations and some 4 discussion and move from that to the 5 questions that are much harder because they 6 involve people and laws and regulations. 7 Thank you. 8 MR. BROOKMAN: Thank you. 9 Final comments? This last 10 discussion I think has been very useful from 11 the department's perspective.

12 Lance. 13 MR. DELAURA: Just a quick 14 comment. I agree with the notion that we 15 really need to tie up the ends on the 16 regions. I heard what Harvey just said, and 17 that makes a lot of sense to me, but at some 18 point, it would make sense to have all of 19 these players involved in the discussion that 20 speaks specifically to those regions. Is it 21 a state? Is it five states joined together? 22 Is it the West, the East, you know, wherevere20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 402 1 it might be? 2 The two elements, I mean, it's one 3 of the key elements, and it's sort of the 4 chicken and the egg. Which one comes first? 5 You do the technical analysis, and then you 6 get to this or do you get to this and then do 7 the technical analysis? 8 That isn't so important, but I 9 think what is important is that everyone at 10 this table and in this room has a chance to 11 give input on what those regions, if there 12 are to be regions, what they look like and 13 what the rationale is and why, and if there's 14 one region, two, three, whatever it ends up 15 being the base case plus two, everyone buys 16 into that or at least everyone gets a chance 17 to express their thoughts and feelings and 18 that they can walk away and go back to their 19 respective companies and say this is it and 20 here's why. Here's the rationale for it.

21 MR. BROOKMAN: Talbot. 22 MR. GEE: Is there an opportunitye20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 403 1 to use the two-plus year old increase of 13 2 SEER to try to see maybe if that was 3 justified and if so where as maybe the 4 starting point? Because, frankly, I think 5 that's a big question mark, too. 6 So before you're thinking about if 7 the number was even higher, maybe use what 8 data might already be there based on 13 and 9 see maybe if there were place where it was 10 justified that could even open the discussion 11 about raising it in those areas. 12 PARTICIPANT: It is aggregated 13 national into winners and losers. 14 MR. BROOKMAN: Jim. 15 MR. CRAWFORD: Jim Crawford. 16 Just to reiterate a point I made 17 earlier, and that is that the whole issue of 18 metrics has to be resolved pretty quickly. 19 What metrics does DOE feel that they're 20 authorized to use in this process, and we 21 start there because until we know that, a lot 22 of what we've talked about today may bee20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 404 1 totally academic. 2 MR. BROOKMAN: Okay. Thank you. 3 So then from my perspective, I 4 just thank all of you for what I thought was 5 a very productive exchange today, and I'll 6 turn it back to Wes for closing remarks. 7 MR. ANDERSON: Wes Anderson, DOE. 8 I would like to thank you guys for 9 coming out, ladies and gentlemen for coming 10 out and expressing your opinion. Contrary to 11 popular belief, this is not a data dump. We 12 really want your specific, detailed responses 13 to our questions. We will take that. We do 14 listen; we will listen, and so I want to 15 enforce that request. Please, please, please 16 get your comments in as soon as possible, as 17 early as possible to help us so we can help 18 you. 19 Thank you.

20 MR. BROOKMAN: Save travel to 21 everyone. 22 (Applause.)e20eff95-de4f-48c5-a002-460c4a4d244d 202-234-4433 Neal R. Gross and Co., Inc. 

### Page 405 1 MR. BROOKMAN: Please turn in your 2 evaluation forms. That helps us. 3 (Whereupon, at 4:40 p.m., the 4 meeting in the above-entitled matter was 5 concluded.)

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