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UNITED STATES DEPARTMENT OF ENERGY PUBLIC MEETING ON ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL CLOTHES DRYERS AND ROOM AIR CONDITIONERS Holiday Inn Capitol 550 C Street, Southwest Washington, D.C. 20024 Wednesday, October 24, 2007

9:00 a.m. Participants DOUG BROOKMAN, Facilitator

STEPHEN WITKOWSKI Department of Energy (DOE)
JUDITH REICH Navigant Consulting

CONSTANTIN VON WENTZEL Navigant Consulting GREGORY ROSENQUIST Lawrence Berkeley National Laboratory

RON LEWIS Department of Energy (DOE)
DAVE CALABRESE Association of Home Appliance Manufacturers

ANDREW DeLASKI Appliance Standards Awareness Project
DAVID GOLDSTEIN Natural Resources Defense Council
MIKE RIVEST Navigant Consulting, Inc. (NCI)

STEVE ROSENSTOCK Edison Electric Institute (EEI)

HARVEY SACHS American Council for an Energy Efficient Economy (ACEEE) EXECUTIVE COURT REPORTERS, INC.

(301) 565-00642 Participants: (Continued)

PHIL MANTHEI Alliance Laundry Systems

MICHAEL BEYERLE GE Consumer and Industrial

DEBRA BRUNK Association of Home Appliance Manufacturers

TOM ECKMAN Northwest Power and Conservation Council

J.B. HOYT Whirlpool Corporation

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A G E N D A
AGENDA ITEM: PAGE: Opening Remarks, Introductions and Agenda Review Doug Brookman 5 Comments from Participants 11 David Calabrese, AHAM Rulemaking and Analytical Methodology overview 13 Stephen Witkowski Market and Technology Assessment 31 Judith Reich Screening Analysis and Engineering Analysis 68 Judith Reich Preliminary Manufacturer Impact Analysis 112 Constantin von Wentzel Afternoon Session Markups for Equipment Price Determination, 117 Energy Use Determination and Life

-Cycle Cost and Payback Period Analysis Gregory Rosenquist Shipments Analysis and National Impact Analysis 56 Gregory Rosenquist Life-Cycle Cost Subgroup Analysis 175 Gregory Rosenquist Manufacturer Impact Analysis 178 Constantin von Wentzel

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AGENDA ITEM: 4

PAGE: Utility Impact Analysis, Employment Impact 185 Analysis, Environmental Assessment, and Regulatory Impact Analysis Gregory Rosenquist Other Issues and Comments/Closing Remarks 98

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(301) 565-00645 1 P R O C E E D I N G S 2 9:00 a.m. 3 Opening Remarks, Introductions, and Agenda Review 4 Doug Brookman 5 MR. BROOKMAN: Okay. So let's start, if we 6 may, please. Good morning, everybody, and welcome. 7 This is the U.S. Department of Energy's Public Meeting 8 on Energy Conservation Standards for Residential 9 Clothes Dryers and Room Air Conditioners. Today is 10 October 24th, 2007. My name is Doug Brookman. I'll be 11 facilitating this meeting today for Public Solutions in 12 Baltimore. 13 It's our tradition to start off these 14 meetings by providing an opportunity for everybody to 15 introduce him- or herself and so I thought I'd like to 16 do that right here at the outset. And, maybe start 17 right over here to my left. Your name and 18 organizational affiliation. We'll just go around the 19 room. 20 (Introductions) 21 MR. BROOKMAN: Thank you. Thanks very much. 22 So then, let's push -- who's handling the slides? 23 (Pause) 24 MR. BROOKMAN: I would ask for your 25 consideration today in the conduct of this meeting. EXECUTIVE COURT REPORTERS, INC.

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1 Please listen as an ally. Please try and keep your 2 comments short and to the point. I'm going to ask that 3 any sidebar conversations that need to happen today, if 4 they're going to last more than about 20 seconds, 5 please take them out of the room. 6 We're going to be focusing on the issues and 7 try to keep this on track and on time today. Please 8 speak one at a time and say your name for the record 9 each time you speak. I'm going to ask also that you 10 set your cell phones and your electronic devices on 11 vibrate so that you don't interrupt the proceedings 12 today. 13 As we get on towards lunch we can talk about 14 lunch-keeping options, but I'm going to do an agenda 15 review right now. 16 I am now concluding the first substantive 17 element you see. I think all of you received a packet 18 when you registered this morning. In the packet is an 19 agenda and also a thick packet of PowerPoint slides and 20 also the actual Federal Register document. They're all 21 included there. 22 Following this agenda review, the Department 23 wants to provide an opportunity for individuals to make 24 briefing opening remarks about key issues from your 25 perspective. So well do that. And then from there EXECUTIVE COURT REPORTERS, INC.

(301) 565-00647 1 well be going to a rulemaking and analytical 2 methodology overview by Stephen Witkowski. Following 3 that, a market and technology assessment overview. 4 We'll take a break midmorning, round about 10:30 or so. 5 Following that, we will return and do a screening 6 analysis and engineering analysis. 7 Just prior to lunch, preliminary manufacturer 8 impact analysis. We'll break for lunch round about 9 noon or so. And when we return at one, we'll be doing 10 markups for equipment price determination, energy use 11 determination, and life-cycle cost and payback period 12 analysis. Moving on from there, shipments analysis, 13 national impact analysis, LCC subgroup analysis. 14 We'll take a break mid-afternoon. Move on 15 from there to manufacturer impact analysis and then 16 utility impact analysis, employment impact analysis, 17 environmental assessment and regulatory impact 18 analysis. That's a whole lot of analysis. This is 19 called the framework meeting because it gives those of 20 you that are not familiar with this rulemaking process 21 a complete overview of all the many steps that will be 22 taken in the process. 23 At the end of the day, round about 3:45, 4 24 o'clock or so, there's another opportunity for anybody 25 that wishes to comment and raise any additional issues EXECUTIVE COURT REPORTERS, INC.

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### 8 1 that you might wish to raise at this opening meeting. 2 We'll also have closing remarks. 3 We do intend to adjourn today round about 4 4:30 or so. If we get through it faster than that, 5 we'll seize that opportunity. 6 Okay. So that's all I had to say here at the 7 outset. Questions and comments here before we move 8 into the subject matter of the day? 9 (No response) 10 MR. BROOKMAN: Okay. I see none. I would 11 ask -- 12 MR. LEWIS: I just want to welcome everybody. 13 MR. BROOKMAN: Ron Lewis. 14 Remarks by Ron Lewis 15 MR. LEWIS: I want to welcome everybody for 16 making the trip in here. I understand the highways are 17 considerably congested this morning. I hope that for 18 many of you driving into the meeting this morning, 19 evidently the first time in months of getting rain, 20 that it's really upset some of the drivers. So, 21 appreciate you putting up with the hassle factor. 22 Just of interest. How many of you were here 23 on November 15th, 2005, when we addressed all the 24 issues that the Appliance Standards Program had to 25 confront and accomplish? EXECUTIVE COURT REPORTERS, INC.

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1 (Show of hands) 2 MR. LEWIS: That was what we called, I think, 3 a schedule-setting meeting. At that time we took an 4 inventory because we were being highly criticized that 5 we were pretty slow getting things out. We had 6 statutes on the books that we were required to 7 accomplish. We had new legislation that was in our 8 face, and there were a lot of rightful concerns, people 9 that said we need to get about life and get this over 10 with. 11 And so at that meeting, the few of you that 12 were at that meeting, it was a well-attended meeting 13 and we thrashed through a lot of items. We put 14 together -- that was the starting point and that was 15 the organization of some 115 items that I took an 16 inventory of that we put together into the report to 17 Congress that is on our website, on the Appliance 18 Standards website, which is basically our operating 19 plan at this point. 20 So if you want to know the things that are 21 coming up, its on our website in that report to 22 Congress. There is a separate schedule on the website 23 without even opening the report to Congress. 24 We have other things that have been 25 interjected into that. We have a few things that have EXECUTIVE COURT REPORTERS, INC.

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1 been accelerated. But by and large, that is our 2 schedule. 3 This is one of the many, many, many 4 activities that's on that schedule. We've been having 5 a lot of these meetings lately. I was surprised that 6 Doug had to look at the agenda to talk about the things 7 that we're going to do, the sequence, because it's the 8 same sequence that we used to try to have a methodology 9 that's familiar and give you the courtesy of not making 10 you adapt to different approaches to every single thing 11 that we do. 12 So again, I want to welcome you for being 13 here. We're looking for a good dialogue and hearing 14 what's on your mind. We're presenting what we're 15 starting out with, our starting point, our approach, 16 our thoughts as we kick off this rulemaking process. 17 And if there's something -- we'd like to hear things up 18 front. We'd like to have issues up front so we've got 19 time to consider them and work with you on those. So 20 please feel free to tell us what's on your mind. Thank 21 you very much. 22 MR. BROOKMAN: Thank you, Ron. This now is 23 an opportunity for anybody who wishes to do so to make 24 brief opening statements about the issues that matter 25 most to you. I'll start with Dave Calabrese. EXECUTIVE COURT REPORTERS, INC.

(301) 565-006411 1 You will note that you need to push the 2 button on your microphone in order for it to be -- this 3 is a court-reported session today. There will be a 4 full transcript of this meeting. So please help us by 5 both saying your name and getting yourself close to the 6 microphone. 7 Comments from Participants 8 Dave Calabrese, Association of Home Appliance 9 Manufacturers 10 MR. CALABRESE: Dave Calabrese with AHAM. 11 Thank you for the opportunity today. We look forward 12 to presenting comments. 13 On the whole, for the appliance manufacturing 14 industry, we think that the approach that the 15 Department is taking is correct in many respects. 16 There are some significant issues that we will be 17 commenting on today, starting with test procedures, 18 which I think is maybe first up. There are some 19 significant issues there in regards to the clothes 20 dryers, some in regard to room air conditioners that we 21 will be commenting upon. 22 Overall, when DOE looks at product classes, 23 efficiency bins and gap fill levels, we have some 24 issues there, some comments we wish to make to either 25 clarify or add categories that we think will make their EXECUTIVE COURT REPORTERS, INC.

(301) 565-006412 1 -- your analysis more robust and will be able to more 2 effectively, we think, determine what are the products 3 out there in the marketplace right now. 4 I think as an overall comment, and this is 5 something that we will be reiterating throughout the 6 process, for instance, for clothes dryers, we believe 7 that the data will show that there really are not many 8 great opportunities at this time to increase the 9 efficiency of these products. 10 As the Department knows, there was a clothes 11 washer rulemaking a number of years ago that resulted 12 in clothes washers becoming of course much more 13 efficient but the end result being clothes being 14 actually dryer as they come out of a clothes washer. 15 That of course has an effect on how dryers operate and 16 the energy used to dry clothes. So we think that that 17 will be a factor that the Department will need to 18 consider, and I think that the Department understands 19 that clearly. 20 Room air conditioners as well. These are 21 products that there is quite a bit of change in how 22 they're produced over the years. They're primarily 23 produced outside the United States. In some respects 24 they become commodity products. So we'll be commenting 25 and providing -- helping with data collection to show EXECUTIVE COURT REPORTERS, INC.

(301) 565-006413 1 where the industry is at this time. 2 But overall, we appreciate this opportunity 3 and look forward to the discussion. 4 MR. BROOKMAN: Other brief comments here at 5 the outset? 6 (No response) 7 MR. BROOKMAN: No additional comments at this 8 time. So then let's proceed, then, with the slide 9 packet. I think all of you have a copy of what's going 10 to be presented up on the screen here. Stephen 11 Witkowski. 12 Rulemaking and Analytical Methodology overview 13 Stephen Witkowski 14 (PowerPoint presentation) 15 MR. WITKOWSKI: My name is Stephen Witkowski 16 with the Department of Energy. I want to welcome you - 17 - 18 MR. BROOKMAN: Turn your microphone on. 19 MR. LEWIS: Is that turned on, Steve? Either 20 you have to adjust it or turn it on. 21 MR. WITKOWSKI: Is that better? 22 MR. LEWIS: Yes. 23 MR. WITKOWSKI: Okay. Thank you. 24 My name is Stephen Witkowski with the 25 Department of Energy. I want to welcome you all here EXECUTIVE COURT REPORTERS, INC.

(301) 565-006414 1 today again. The purpose of my brief discussion is 2 just to go over the framework document public meeting 3 procedures and the rulemaking procedure. I'm not going 4 to go into all the bloody detail that's in the slides. 5 I think most of you are aware of it. But as you know, 6 it's not a simple process. 7 This meeting, being the first step, is an 8 opportunity to present the procedural and analytical 9 approaches to evaluate energy conservation standards in 10 certain products, clothes dryers and air conditioners. 11 As has been stated before, this is an 12 informal meeting. Please feel free to make comments. 13 The Department is looking forward to all of your input. 14 We want to provide a forum for public discussion on 15 rulemaking issues and we definitely encourage 16 stakeholders to submit data, information, and written 17 comments. 18 In terms of submitting comments, again all of 19 the information is provided in your packet here. It's 20 also been provided in the notice of public meeting that 21 was posted in the Federal Register. 22 Here's the actual information again on 23 providing feedback. I won't go through this. It's all 24 there. If you need to get in touch with any of us, you 25 have our telephone numbers. Please feel free to call EXECUTIVE COURT REPORTERS, INC.

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1 me or anyone else on the team. 2 Background. I think you're all pretty much 3 familiar with the background, but the rulemaking 4 procedures have their source in the various 5 legislation, the Energy Policy Conservation Act, the 6 EPCA of '75, and various amendments, and the 7 establishment of prescriptive energy conservation 8 standards for these dryers, performance energy 9 conservations for room air conditioners, and so on. 10 DOE is directed to conduct two cycles of rulemakings 11 for both products to determine if more stringent 12 standards are justified. 13 Previous rulemakings. Again, the history is 14 all here. You have final rules in 1991. We have 15 second standards that were initiated for publication in 16 1994. Again in 1998 more work was done on clothes 17 dryers, and then the time frame for room air 18 conditioners is also here. You don't need the details. 19 The current rulemaking for residential 20 clothes dryers and room air conditioners. This chart 21 basically shows the process. As you know, there was 22 the schedule that -- the schedule-setting process that 23 Ron Lewis mentioned before that started in -- it took 24 place in 2006. The framework document which was 25 recently published and which you should all have a copy EXECUTIVE COURT REPORTERS, INC.

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1 of or have access to. From there we go to the advance 2 notice of proposed rulemaking, or the ANOPR. Then on 3 to the NOPR, the notice of proposed rulemaking. And we 4 hopefully end up with a final rule. There may be other 5 finer steps that take in place in there based on 6 comment, test procedures, and so on and so forth. 7 Again, I'm not going to read all of the 8 history. It's all pretty straightforward here. But 9 this is the basic time frame. 10 Now, test procedures, which I'm sure many of 11 you will have comments on, we'll be discussing in more 12 detail later. For residential clothes dryers, the 13 first final rules for the dryer test procedures were 14 published in May of 1981. Manufacturers informed DOE 15 that the test procedure is unable to test vent-less 16 dryers, and that's an issue that I'm sure will come up 17 today and will be discussed. 18 DOE proposed an alternative test procedure in 19 2006 for vent-less dryers. Final determination on 20 alternative test procedures has not yet been made. DOE 21 seeks comment on amending the clothes dryer test 22 procedure to adequately measure the effects of 23 remaining moisture content, or RMC, average number of 24 use cycles, and automatic cycle termination. 25 For room air conditioners, again here's the EXECUTIVE COURT REPORTERS, INC.

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1 time frame, starting with June of 1979. ANSI national 2 standards -- ANSI National Standards Institute, or ANSI 3 -- and ASHRAE are the test procedures that have been 4 updated to more recent versions which could be 

### 5 incorporated into DOE test procedures by reference. 6 Both test standards have been updated. DOE 7 also seeks comments on amending the room air 8 conditioner test procedure to adequately measure 9 effects of technologies that improve part-load 10 performance and annual operational hours. 11 And again, we have requests for comments. 12 While you have the information as to how to get 13 comments to us, we do emphasize that we look forward to 14 these comments. 15 MR. BROOKMAN: Thank you. For those of you 16 that are new to these proceedings, this is how the 17 Department cues you to provide comments in a systematic 18 sort of a way. You can see both Item 1-1 and 1-2 on 19 the screen provides an opportunity for you to comment 20 on the test procedure issues that Stephen referred to. 21 Dave Calabrese. 22 MR. CALABRESE: Dave Calabrese with AHAM. 23 I'll start off with dryers. We agree the Department is 24 properly looking at changes to the test procedures. 25 Identified in my opening comments, this -- the products EXECUTIVE COURT REPORTERS, INC.

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### 18 1 have changed over the years and most particularly 2 because of the changes to the way -- to clothes washers 3 and to the change to the test procedure there. An 4 issue that needs to be addressed is this one of 5 remaining moisture content, RMC. 6 I think the Department has identified 7 changing that level to around 56 percent or so. From 8 the industry standpoint, we agree that it certainly 9 should come down. We think 56 is probably a good 10 number. We'd like to look at this some more and get 11 back to you with more specifics, whether -- where we 12 think it should be. But at this point I think that 13 number is a fair representation of remaining moisture 14 content for dryers, but we'd like to get back to you 15 with additional input. 16 You also talked about -- asked about the 17 cycle times, or use -- numbers of cycles and cycle 18 termination. These are also issues where we agree 19 there should be changes to the test procedure. I might 20 actually defer to Debra Brunk, our expert on this, in a 21 moment. 22 But yes, we agree that those changes should 23 be done, and most particularly the issue of vent-less 24 dryers. The current test procedure, as DOE 25 acknowledges does not address vent-less dryers and as EXECUTIVE COURT REPORTERS, INC.

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### 19 1 we understand it, its not a simple matter of on the 2 current procedure just simply perhaps closing a vent 3 off, that it would be -- require some more significant 4 change or addendum or something or else to the test 5 procedure to appropriately measure the energy use of 6 vent-less dryers. So we would commit to work on 7 developing something that we could present to the 8 Department that you could use to measure that energy 9 use. 10 I can turn to Debra, if you have some 11 comments. 12 MS. BRUNK: It's your turn. 13 MR. CALABRESE: Okay. So -- 14 15 dryers. 16 17 MR. BROOKMAN: Useful comments on clothes

MR. CALABRESE: And on room air conditioners

18 MR. BROOKMAN: Let's -- 19 MR. CALABRESE: Okay. Let's -- okay. 20 MR. BROOKMAN: Any additional comments from 21 other people on clothes dryers? Harvey Sachs. 22 MR. SACHS: Harvey Sachs, American Council 23 for an Energy Efficient Economy, subsequently to be 24 referred to as ACEEE. We support changes in the test 25 procedure that will reflect the best possible field and EXECUTIVE COURT REPORTERS, INC.

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1 other performance data and make the tests as relevant 2 as possible to the generations of clothes dryers that 3 were starting to see. 4 We are concerned that the devil is in the 5 details. We would be concerned about changes being 6 used to drag out the process of moving to 7 implementation of a new standard. But we certainly 8 look forward to working with all parties to get this 9 right. Thank you. 10 MR. CALABRESE: I'd like to ask a question, 11 perhaps. How does the Department intend on proceeding 12 in that there need to be changes to the test procedure 13 at the same time you need to collect data to, as Harvey 14 says, to keep the process going. Does this all happen 15 concurrently? Does it happen -- best case, it happens 16 where the test procedure change is done first. But I 17 don't know if you have any comments on that. 18 MR. BROOKMAN: Ron Lewis. 19 MR. LEWIS: It's happening concurrently 20 because, as you're more than well aware, in trying to 21 collect data and get the input that we need to make the 22 right decisions, the requests are going out. That's 23 part of the purpose of this meeting. And what's 24 necessary for both test procedures and the standard, 25 we're collecting information having dialogue with EXECUTIVE COURT REPORTERS, INC.

(301) 565-006421 1 stakeholders that all that is being assembled into the 2 degree of complexity and issues. We are trying to hold 3 to having test procedures finalized before the NOPR is 4 finalized, or the standard. 5 So we get started on it to collect the data, 6 look at it. They will be running concurrently, and we 7 try to bring closure to the test procedure before were 8 in the final rule stage of the standard. 9 MR. BROOKMAN: Okay. Thank you. Yes. Steve 10 Rosenstock. 11 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 12 a quick follow-up. It sounded like the test procedure 13 might not be ready before the ANOPR stage. Won't that 14 kind of cause a lot of possible confusion because the 15 ANOPR might be based on the previous test procedure 16 where the NOPR might be based on a new test procedure? 17 MR. BROOKMAN: Ron Lewis. 18 MR. LEWIS: We certainly would like to be 19 through quickly with that. The reason for this meeting 20 is to raise issues. If we've got things that are easy 21 to resolve, you know, we will post haste try to do 22 that. But we -- our commitment is to try to get test 23 procedures done before the completion of the NOPR, 24 before the publication of the NOPR. 25 So its a balance. We're hopeful that we'll EXECUTIVE COURT REPORTERS, INC.

(301) 565-006422 1 get quick input and get all the issues on the table 2 quickly and be able to resolve those. But if not, our 3 tradition, our process, our methodology is trying to 4 have it completed by the end of the NOPR, so. 5 MR. BROOKMAN: Dave Calabrese. 6 MR. CALABRESE: Dave Calabrese. We would 7 commit from AHAM's standpoint to try to provide our 8 input to this change as soon as possible. I can't give 9 you a specific time, but I would anticipate it could be 10 done within a period of months, or perhaps shorter. So 11 if that would help to keep this process moving. 12 MR. BROOKMAN: Mike Rivest. It's not on. 13 Come to the table and hit the -- Michael. Mike. Come 14 forward and sit there. 15 MR. RIVEST: Mike Rivest, Navigant 16 Consulting. Our goal would be to have a proposed rule 17 for the test procedure by the ANOPR for the rulemaking 18 so that, you know, things are in sync. Then we would 19 have the final rule for the test procedure with the 20 NOPR for the rulemaking. 21 MR. BROOKMAN: Okay. Thank you. Thanks very 22 much, Mike. He just said the goal is to have the test 23 procedure ready before the ANOPR. 24 MR. RIVEST: Excuse me. The proposed. And I 25 was talking about finalizing the test procedure. So EXECUTIVE COURT REPORTERS, INC.

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### 23 1 were talking two different stages here. They're both 2 the same thing. So we would be much like this, 3 throwing out our thoughts, et cetera, on the test 4 procedure, handling it, but the finalization of the 5 test procedure we would have done before the final rule 6 is started. 7 MR. BROOKMAN: Thank you for clarifying that. 8 We have people in the back of the room who are having 9 a hard time, so I'm going to be tweaking the sound 10 system here a little bit as we go along. So keep 11 flagging us if you can't hear what's going on back 12 there. 13 Okay. So, any additional and perhaps final 14 comments on residential clothes dryer test procedures 15 as we move towards test procedure issues related to 16 room air conditioners? Yes, Harvey Sachs. In the 17 microphone. 18 MR. SACHS: Just an administrative question. 19 This is Harvey Sachs. Would this be an appropriate 20 time just to introduce a number of people who have come 21 into the room since our first round? 22 MR. BROOKMAN: We'll do that in a little bit. 23 MR. SACHS: Thank you. 24 MR. BROOKMAN: Dave Calabrese. 25 MR. CALABRESE: Dave Calabrese with AHAM. In EXECUTIVE COURT REPORTERS, INC.

(301) 565-006424 1 regards to the test procedure for room air 2 conditioners, there are really two issues I understand 3 that the Department was asking for questions or asking 4 for comment, which we are commenting. That would be on 5 the part-load performance being -- that concept being 6 applied to the test procedure, as well as considering 7 changing the energy rating from an EER to a SEER. 8 On part-load performance, our view is that 9 that is not applicable to room air conditioners because 10 of the nature in which they operate. They are 11 essentially an on or off product. Either they're on 12 and they're running or they're off. And because of the 13 fact these are becoming today, as I mentioned before, 14 commodity products, very inexpensive, the part-load 15 performance -- the devices used for that are rather 16 expensive and aren't necessarily -- aren't appropriate 17 for that type of product. 18 As well, the -- moving from an EER to a SEER 19 rating -- our friends with the ARI are not here. I 20 don't know as much about the SEER rating. However, as 21 we understand it, that is, again, not appropriate for 22 room air conditioners because of the way they function. 23 I would actually defer to someone who is more familiar 24 with that, but from our input, it is not an appropriate 25 change to the test procedure or an appropriate change EXECUTIVE COURT REPORTERS, INC.

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1 to the standard. 2 MR. BROOKMAN: Thank you. Harvey Sachs. 3 MR. SACHS: Harvey Sachs, ACEEE. I agree 4 with Mr. Calabrese on this issue, in particular because 5 room air conditioners can have an impact on utility 6 peak demand and service issues. We do not believe that 7 moving to a SEER type seasonal estimate for room air 8 conditioners would be helpful to the country or even to 9 providers as we see large segments of the country 10 considering time of day or peak pricing for residential 11 consumers. 12 MR. BROOKMAN: Thank you. Yes, David 13 Goldstein. 14 MR. GOLDSTEIN: I'm David Goldstein, NRDC. I 15 also want to basically agree with the AHAM position, 16 with a bit of a variant. The most important criterion 17 for room air conditioner performance is peak 18 efficiency, which is EER. If there's going to be a 19 standard based on one parameter, that should be the one 20 that you do for the DOE standard. 21 You might want to consider a second standard 22 that includes part-load performance and set 23 requirements on both. You'll recall that we 24 recommended that the Department do this for central air 25 conditioners and the Department agreed that they were EXECUTIVE COURT REPORTERS, INC.

(301) 565-006426 1 authorized legally to do that but chose not to. 2 So again, we would prefer to see standards 3 that include part-load and full-load. So that would 4 entail developing a test procedure for part-load. But 5 the part-load performance is less important of a 6 parameter both because of peak load and because, 7 looking at the SEER test procedure for central air 8 conditioners, it's hard to get it right. The test 9 procedure for SEER for central air conditioners 10 diverges considerably from the real-world performance, 11 and so it's just an inherently tougher procedure to do. 12 MR. BROOKMAN: Additional comments on test 13 procedure issues related to room air conditioners? 14 Steve Rosenstock. 15 MR. ROSENSTOCK: Steve Rosenstock, EEI. To 16 reiterate, I would say that most of the utilities would 17 still like to see the EER rating, especially if they're 18 doing incentive programs. It does help with a lot of 19 their calculations in terms of peak demand reductions 20 for summer programs. Thank you. 21 MR. BROOKMAN: Thank you. So, is that it for 22 test procedure issues? Okay. Steve. 23 MR. WITKOWSKI: Then, some more history and 24 some diagrams, schematics on the energy conservation 25 standards. EXECUTIVE COURT REPORTERS, INC. (301) 565-006427

1 MR. LEWIS: Steve, you need to speak into the 2 microphone. 3 MR. WITKOWSKI: I'm sorry. I will now move 4 on to some more history and some schematics of the 5 procedures itself for setting standards. 6 Based on the public laws mentioned here, they 7 direct DOE to take into consideration seven factors 8 when setting energy conservation standards for 9 residential clothes dryers and room air conditioners. 10 I'm sure most of you are familiar with these, but the 11 EPCA factors, number one, is the economic impact on 12 consumers and manufacturers, lifetime operating cost 13 savings compared to increased cost for the product, 14 total projected energy savings, impact on utility or 15 performance, impact of any lessening of competition, 16 need for national energy conservation, and other 17 factors that the Secretary of Energy considers 18 relevant. 19 And for the corresponding factors, the DOE 20 analysis is essentially for, number one, life-cycle 21 cost analysis, manufacturer impact analysis, life-cycle 22 cost analysis, national impact analysis. And again, I 23 apologize for repetition, but this is the process. 24 Number four is engineering analysis and screening 25 analysis. Five, again, manufacturer impact analysis. EXECUTIVE COURT REPORTERS, INC.

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### 28 1 Six, the national impact analysis, and then for the 2 Secretary, environmental assessment, utility impact 3 analysis, and employment impact analysis. 4 Here is a diagram showing the time frame of 5 the stages for energy conservation standard -- for the 6 energy conservation standard rulemaking process, our 7 milestones. Again, as I mentioned before, starting 8 with the 2006 schedule-setting. This meeting based on 9 the framework document that you've all seen. Next will 10 come the ANOPR and the ANOPR public meeting. Then the 11 NOPR publication, the NOPR public meeting, and finally, 12 at the end or near the end of 2010, final rule 13 published, and then the applicable standards at the end 14 of 2013. 15 The relevant points for stakeholder 16 participation are shown on this slide, also. 17 For the framework document, here we are 18 today. We have the document and it was published in 19 the Federal Register, as you're aware. Again, we 20 encourage interested parties to submit comments. The 21 rest of it we've already talked about on the framework 22 document. I'm not going to go into all the details. 23 Here are the steps in the standards for 24 rulemaking at the ANOPR stage, which is the next stage 25 after this one. And again, we have market and EXECUTIVE COURT REPORTERS, INC.

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1 technology, screening analysis, engineering analysis, 2 markups for equipment price determination, below the 3 engineering analysis the preliminary manufacturer 4 impact analysis, and so on. And then down to the 5 national impact analysis. I think you're all capable 6 of following the schematic. 7 Here is my favorite slide, or one of my 8 favorites, because it shows how simple the rulemaking 9 process is.Because it's so simple, I won't go into 10 the details. 11 Again, the purpose of the public meeting 12 today is to present methodologies for the ANOPR 13 analysis -- excuse me. The purpose of the ANOPR public 14 meeting, which will be the next stage, is to present 15 methodologies for ANOPR analysis and characterize 16 results, to discuss specific issues related to the 17 ANOPR analysis,to seek input from attendees on 18 methodologies,assumptions, and data sources, and to 19 describe upcoming analyses and next steps and seek 20 future -- excuse me, seek further input. 21 And then again,here is a similar schematic 22 for the NOPR stage. I'm sure you can all follow this 23 as we move on down toward a final rule. 24 And here's another one of these in-depth 25 slides that, again, I'm not going to go into. EXECUTIVE COURT REPORTERS, INC. I think

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### 30 1 you've all seen them, showing how simple the process 2 is. 

### 3 And then the purpose of the NOPR public 4 meeting is to hear the views of stakeholders on DOS's 5 proposed standard levels, to obtain input on any 6 remaining issues relating to the notice of proposed 7 rulemaking. DOE will consider all verbal and written 8 input in preparing its final rule. 

### 9 And then a schematic for the analysis for the 10 final rule, which will end up in the result being the 11 final rule. 12 And that is pretty much the breakdown of the 13 process. Any questions on that? 14 15 

### 16 (No response) MR. WITKOWSKI: Thank you. MR. BROOKMAN: So the next item on the agenda 17 is to take up the market and technology assessment. 18 Before we go to that, any other comments or questions 19 related to the overview that was just provided? 20 21 22 23 24 (No response) MR. BROOKMAN: I see none. Okay. So then, Judy Reich, market and technology assessment.

Yes? MR. LEWIS: Before you move on. 25 MR. BROOKMAN: Yes. EXECUTIVE COURT REPORTERS, INC.

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1 MR. LEWIS: -- asked if you could introduce 2 people in the meeting. This would probably a good 3 break time here. 4 MR. BROOKMAN: Okay. So let's provide an 5 opportunity for anybody that has not yet had a chance 6 to introduce him- or herself to do so now. We'll start 7 with you, David. 

### 8 (Introductions) 9 MR. BROOKMAN: Okay. Thanks. Thank you. 10 Judy. 11 Market and Technology Assessment 12 Judith Reich 13 (PowerPoint presentation) 14 MS. REICH: Thanks, Doug. This is Judy Reich 15 from Navigant Consulting, and I will be kicking off the 16 discussion of the ANOPR analyses. Let me just begin by 17 saying I recognize that most of you probably have been 18 through this process before and are very familiar with 19 some of the topics I'm going to be describing. But I 20 want to go through it in some detail because there are 21 going to be some discussion of the decision-making 22 processes and the results, the key results, of those 23 decisions that will be very important to follow through 24 to see where we wind up with the energy conservation 25 standards. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

### 32 1 So as you'll see at various points, as we've 2 been doing already, there are opportunities to provide 3 comment on topics that we've identified, but please 4 feel free if there are other issues that you'd like to 5 bring up to do so at that time. 6 I'm going to be starting off by talking about 7 the three upstream analyses. I'm going to go through 8 the market and technology assessment, the screening 9 analysis, and the engineering analysis, and those three 10 together will culminate in the definition of the cost 11 efficiency relationships for each of the products in 12 this rulemaking. 13 Since we have both the room air conditioners 14 and the clothes dryers covered today, I'm going to go 15 through each analysis for both products before I move 16 on. 17 At the beginning, we start off with our 18 market and technology assessment. This is our starting 19 point where we define the products that are covered and 20 the technologies that are available to improve energy 21 efficiency. This is our launching point for the ANOPR 22 analysis. 23 In the market assessment what we do is we 24 look at the existing state of the industry. It's a 25 snapshot of the room air conditioner and clothes dryer EXECUTIVE COURT REPORTERS, INC.

(301) 565-006433 1 industries. We look at historical trends leading up to 2 the point we are at. We look at, for example, 3 historical data for product shipments for the values of 4 those product shipments. We look at trends in retail 5 prices. We look at market saturation, how many 6 consumers are using these products. 7 We also look at trends outside of the 8 industry itself but that affect manufacturers. For 9 example, we'll look at housing starts to see where 10 opportunities are for changes in product shipments. 11 Also as part of the market analysis we look 12 at the market shares of manufacturers for both room air 13 conditioners and dryers with the idea that we want to 14 understand the competitive landscape, and again, that 15 will be our starting point for later on where we 16 determine in our manufacturer impact analysis how that 17 landscape could be affected by different energy 18 conservation levels. 19 In the technology assessment, we look at the 20 entire universe of technologies that are available that 21 can positively impact energy efficiency. At this point 22 we want to cast a very wide net. We want to look at 23 things that are perhaps in the research stage as well 24 as those that have been implemented in prototypes or 25 that are currently available on the market. So we want EXECUTIVE COURT REPORTERS, INC.

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### 34 1 to understand everything that's out there. 2 We also look at databases of product 3 information to understand the distributions of energy 4 efficiency among models that are already on the market. 5 In addition to -- this is really part of the 6 market assessment. We also look at where -- what the 7 existing regulations are for the products. We look at 8 the federal and state level regulations and we also 9 take a look at voluntary labeling and certification 10 programs, Energy Star for example, so that we 11 understand what incentives are available right now for 12 products to have their efficiency at higher levels. 13 The outputs of the marketing and technology 14 assessment are in two areas. I'll discuss in a moment 15 product classes. That's a very important category 16 because we -- that will set the starting point for how 17 we group the products together according to their 18 function and according to the means that are available 19 to improve their efficiency. Each one of those product 20 classes will wind up going through its own analysis and 21 eventually with the potential for its unique energy 22 conservation standard. 23 The second output would be the technology 24 options that we've identified, which right now will be 25 very broadly identified but in the screening analysis EXECUTIVE COURT REPORTERS, INC.

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### 35 1 will be narrowed down by a very specific set of 2 criteria to just those that are going to propagate 3 through to the engineering analysis. At that point we 4 designate those as design options. 5 MR. WITKOWSKI: Steve Witkowski. You might 6 just want to point out the difference in this slide. 7 We didn't get a chance to correct this page. 8 MS. REICH: Oh, okay. The page that you have 9 in your handout apparently is different. In the 10 handout we also had incorrectly identified that the 11 baseline definitions would be coming out of the market 12 and technology assessment, but in fact that happens 13 later on in the engineering analysis. 14 MR. BROOKMAN: Thank you. So this is the 15 point at which DOE welcomes your input on information 16 that would contribute to market assessment for both 17 residential clothes dryers and room air conditioners. 18 If there are any comments now. 19 MR. CALABRESE: Dave Calabrese with AHAM. 20 Well, I guess the question is there is going to be 21 discussion on product classes and the like coming up. 22 So we have comments on those issues. I would reserve 23 that for that point. I don't know what additional 24 comments the Department is looking for at this point. 25 MR. BROOKMAN: Is there anything specific -- EXECUTIVE COURT REPORTERS, INC.

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1 MR. LEWIS: No, not at this time. 2 MR. BROOKMAN: Yes. Harvey Sachs, please. 3 MR. SACHS: Harvey Sachs, ACEEE. Two 4 comments, or a comment and a question. One, heat pump 5 dryers are now on the market, particularly in 6 Switzerland, and we feel this would be an approximate 7 max tech to be included in the engineering analysis. 8 The question, which I address to the 9 Department today, even to the manufacturers, is we've 10 talked about the remaining moisture content as input to 11 the clothes dryer. Are there points in the present 12 tense method where there is the possibility for 13 ambiguity or less than optimum results in terms of 14 cycle termination when the clothes are defined to be 15 dry? If so, we think this ought to be thought about. 16 Thank you. 17 MR. BROOKMAN: Additional comments at this 18 point? 19 (No response) 20 MR. BROOKMAN: Okay. 21 MS. REICH: Well, let me begin at this point 22 by discussing the definitions of which are covered 23 products for this rulemaking. SPCA has provided 24 definitions for both clothes dryers and room air 25 conditioners. EXECUTIVE COURT REPORTERS, INC.

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### 37 1 For clothes dryers, these are units that are 2 both electric and gas. I want to point out in this 3 definition that both of them describe a tumble action 4 for the drying process. So for example, cabinet dryers 5 would not be covered under this rulemaking. 6 For room air conditioners, were looking at 7 refrigeration-based products, specifically other than 8 PTACs. They are also defined as having the possibility 9 of including a reverse cycle so that they could be 10 operated for both heating and cooling. 11 MR. BROOKMAN: Yes. Steve Rosenstock. 12 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 13 guess a follow-up on what Harvey was saying. In terms 14 of the definition of the electric clothes dryer, I 15 remember some EPRI studies of microwave clothes drying. 16 I don't believe they had a tumble-type drum. I'm not 17 sure about the heat pump clothes dryers that Harvey was 18 referring to. 19 I'm wondering if the definition may or may 20 not need to be expanded to cover some of the new 21 technologies. Again, I'm not sure, you know, again, 22 what the market share is, but just in case for whatever 23 reason they don't have a tumble-type drum for whatever 24 reason that would -- would a new tech like Harvey was 25 describing be covered under this standard. Again, it's EXECUTIVE COURT REPORTERS, INC.

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### 38 1 something to think about in the definition. 2 MS. REICH: Right. And as you'll see, 3 microwave drying is a technology that we're 4 considering. At this point we are not -- we're going 5 to rule without. 6 MR. ROSENSTOCK: Right. Okay. Steve 7 Rosenstock. But under the definition, if it didn't 8 have a tumble-type drum would it still be part of the 9 program? 10 MS. REICH: You know, that's something that 11 would have to be looked at because currently the 12 definition does exist for the tumbling action. 13 MR. BROOKMAN: David Goldstein. 14 MR. GOLDSTEIN: David Goldstein, NRDC. I 15 want to add my voice to the previous ones about 16 expanding the definition. Whether or not according to 17 the current legal definition you can do that doesn't 18 matter because DOE has the authority to regulate 19 additional products. So if you had to do a two-step 20 process of defining a different type of dryer as a new 21 product and then analyzing it in the same box as 22 everything else, you could certainly do that legally. 23 We wouldn't want to create either loopholes 24 or foreclose the opportunity that the test procedure 25 could cover completely different technologies of dryer EXECUTIVE COURT REPORTERS, INC.

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1 that are more efficient and without them the 2 manufacturers wouldn't be able to certify that this new 3 product is that much better than the existing product. 4 So it's going to affect not only the standards 5 analysis you're doing but the market transformation 6 programs that program administrators might develop. 7 To me, the utility of the product is you 8 start off with wet clothes and you end up with dry 9 clothes. Whether it's through tumble action, the 10 addition of heat, those are technical issues the 11 consumer doesn't care about. 12 MR. BROOKMAN: Additional comments on 13 definitions? We've talked about clothes dryers. How 14 about gas and room air conditioners. 15 (No response) 16 MS. REICH: Okay. Well, as I mentioned, the 17 definition of the product classes are going to be 18 critical because each one of those product classes 19 winds up with its own energy conservation standard.So 20 we have to examine each during our analysis and look at 21 the efficiency levels for each product class. So we 22 take a great deal of care in figuring out how to group 23 and categorize various types of dryers and room air 24 conditioners so that we define the product classes most 25 appropriately. EXECUTIVE COURT REPORTERS, INC.

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1 The criteria that we use to define the 2 product classes, there are three of them. The first is 3 quite straightforward. It's the type of energy that's 4 used, whether it's electricity or gas. The second 5 would be capacity, and that's defined according to 6 parameters that are appropriate for each product. In 7 the case of dryers, that's the drum volume measured in 8 cubic feet. And for room air conditioners, it's Btu 9 per hour of cooling capacity. 10 Then the third criteria that we use are the - 11 - any sort of unique utility that's defined. That's 12 how the consumer uses it, potentially how the product 13 is installed. For example, if it requires connection 14 to higher voltage input power or if it requires a water 15 drain, that these are unique features that would, 16 again, create a separate product class. 17 For clothes dryers, the -- we're proposing 18 six product classes. If you're familiar with the 19 previous rulemaking, you'll note that the first four 20 product classes come directly from that rulemaking. 21 These are dryers that are designated as vented. That 22 is, that the moist, hot air that's used to circulate 23 through the clothing needs to be exhausted from the 24 unit to some external location. So we call these 25 vented dryers. EXECUTIVE COURT REPORTERS, INC.

(301) 565-006441 1 Within that category we are subdividing them 2 into electric units and gas units, depending on what 3 type of energy supplies the heat for that drying air. 4 Within electric, we subdivide it further into 5 standard-size, which is drum capacities of 4.4 cubic 6 feet or greater, and compact ones, which are less than 7 that. 8 And then within the compact capacity, that 9 again is divided into two categories, two classes, that 10 are differentiated by the power requirement, either 120 11 volts or 240. In those we make the differentiation for 12 a couple of reasons. One is that there is a unique 13 utility of only having a 120-volt power requirement 14 because it offers the opportunity to install it in 15 locations that just have standard residential wiring. 16 You don't need to necessarily have the 240-volt 17 capability. 18 Also, we consider these separate product 19 classes because potentially the efficiency 20 characteristics are different. A 120-volt heater has 21 fundamentally different efficiency performance than a 22 240-volt. So we want to make sure that we're comparing 23 two types of products that have equal opportunities for 24 efficiency improvement. 25 So those were the four product classes that EXECUTIVE COURT REPORTERS, INC.

(301) 565-006442 1 came from the previous rulemaking. For this one we are 2 proposing the addition of two new product classes that 3 we are considering to be categorized as vent-less 4 dryers. Typically this technology is condenser drying, 5 but we want to describe these as vent-less because we 6 want to capture the unique utility of the dryers rather 7 than a specific technology. It's really the ability to 8 install it in locations where a vent is not possible or 9 not desirable. 10 So within these two categories we have 11 defined two based on electric energy input. There are 12 no gas units on the market because the combustion 13 products from a gas dryer would need to be vented. So 14 the only possibility here is for an electric dryer. 15 The two product classes were proposing here 16 are compact, and we've defined it as 240 volts based on 17 our survey of available products on the market. They 18 all are operating off of 240 volts.19 The second would be a combination washer20 dryer. This would be a unit that offers the -- both 21 the washing and drying function within the same drum in 22 sequence. We believe that these would warrant a 23 separate product class because there may be some design 24 tradeoffs associated with providing both of those 25 functions in the same unit that might affect the EXECUTIVE COURT REPORTERS, INC.

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### 43 1 efficiency characteristics. 2 So we recognize that these vent-less product 3 classes are going to require a change to the existing 4 test procedure that Steve had discussed. Namely, 5 there's going to be required a definition of which 6 types of dryers would be categorized as vent-less and 7 also there would be the removal of the requirement for 8 an exhaust simulator so that you could test them in 9 vent-less mode. 10 MR. CALABRESE: Dave Calabrese with AHAM. 11 Are you asking for comments at these points? 12 MR. BROOKMAN: -- comment right now on this. 13 MR. CALABRESE: Okay. 14 MR. BROOKMAN: And then we'll move on to the 15 others. 16 MR. CALABRESE: Okay. 17 MR. BROOKMAN: Since you know already you 18 have comments on product classes. 19 MR. CALABRESE: Sure. We would support the 20 classes as identified here one through six. We do have21 an addition we would like to propose under the vent22 less category. As the Department has identified, this 23 is a new category and we're all trying to find our way 24 as to what are those products. They are a very small 25 portion of the market right now, but they perhaps will EXECUTIVE COURT REPORTERS, INC.

(301) 565-006444 1 become a larger portion in the future. 2 So what we would recommend is a seventh 3 product class under vent-less, and this would be 4 identified as an electric, standard, 240 volts, 4.4 5 cubic feet or greater capacity. Otherwise, we don't 6 have any further comments on the categories. 7 MR. BROOKMAN: Okay. Additional comments? 8 Yes, Harvey and then Steve. 9 MR. SACHS: Doug rules. Harvey Sachs, ACEEE. 10 In terms of the discussion we've had earlier this 11 morning about the possible need to revise or augment 12 the definition because there are non-tumbling products 13 on the market, we certainly would ask under which of 14 these categories you would want to think about 15 microwave and heat pump water heaters as max tech or in 16 other ways for your analysis. 17 We recognize that these are not now a factor 18 in the United States market, but they do represent a 19 reference point of what can be done and it is important 20 that they be analyzed by the same methods we're using 21 for other technologies. 22 MS. REICH: Well, as I mentioned before, 23 these right now are technologies that we are going to 24 be examining without specifically associating them with 25 individual product classes. You'll see when I go EXECUTIVE COURT REPORTERS, INC.

(301) 565-006445 1 through the list of technology options we are open to 2 considering all technologies for any product class to 3 which it could be applicable. 4 MR. BROOKMAN: Let's let Dave Calabrese 5 follow on, and then I'm coming back to you, Steve. 6 MR. CALABRESE: Dave Calabrese. You know, on 7 behalf of AHAM, we're not opposed to changes to the 8 definition that make it more descriptive. However, and 9 we were going to reserve some of these comments for the 10 discussion of the technology options. I mean, for 11 instance, the microwave technology as we understand it, 12 and I might let others speak to it in the industry. 13 It's not really a valid technology at this time. 14 And so to -- to certainly change it to the 15 definition to make it more effective we would support. 16 At this time, at least for that one technology, we 17 don't see that as a valid one. So in terms of changing 18 definitions or even perhaps identifying the max tech, 19 we would disagree. But I don't know; as we move 20 forward we can discuss these issues further. 21 MR. BROOKMAN: That sounds good. Steve 22 Rosenstock. 23 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 24 a quick one. The combination washer and dryers, 25 they're covered under the clothes washer -- a question, EXECUTIVE COURT REPORTERS, INC.

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1 I guess. Are they covered under the current clothes 2 washer efficiency standards? 3 MS. REICH: I'm going to have to defer that 4 question to -- okay. 5 MR. BROOKMAN: As I cast my eyes around the 6 room, I think we're not certain what the answer to the 7 question is at this point. The Department is going to 8 have to check on that. 9 MR. ROSENSTOCK: Steve Rosenstock. Just a 10 follow-on. Ideally they are because it wouldn't make 11 sense. You know, you're regulating them on the dryer 12 side, not on the washer side. It doesn't really make 13 sense, so. 14 MS. REICH: Right. And they are not 15 currently covered on the dryer side. Okay. 16 MR. BROOKMAN: Thank you. So then, let's 17 move on to room air conditioner product classes. 18 MS. REICH: Okay. For room air conditioners, 19 NAECA originally specified 12 product classes, and 20 these were units that are designed for window -- single 21 or double-hung window installation or through the wall. 22 The way that they were categorized was according to a 23 cooling capacity and certain features that impact 24 consumer utility. For example, the presence of 25 louvered sides which allow different types of EXECUTIVE COURT REPORTERS, INC.

(301) 565-006447 1 installation and the capability of operating in a heat 2 pump mode, which we designate as reverse cycle, so that 3 it can heat as well as cool. 4 During the last rulemaking, four more product 5 classes were added, two based on subdividing some of 6 the -- two of the initial 12 product classes and two 7 that were brand new. 8 So the 16 resulting product classes are 9 listed here. They're grouped together by those without 10 reverse cycle and with and without louvered sides, 11 which were among the original 12. And then for both 12 types -- both groups that had heat pump capability, the 13 reverse -- with reverse cycle, with and without 14 louvered sides, each of those originally was a single 15 product class that was subdivided into two levels -- 16 two groups of capacities. 17 And then the final two, numbers 15 and 16, 18 were added based on the ability to install them in19 casement windows, not just standard single or double20 hung windows. 21 Because of the large number of product 22 classes listed here and because of the, you know, very 23 large number of permutations of designs and 24 efficiencies that are available among these product 25 classes, we're proposing to conduct a full analysis on EXECUTIVE COURT REPORTERS, INC.

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1 three of them. We base these on the product classes 2 that have the highest number of product shipments, 3 namely those that don't have the reverse cycle but do 4 have louvered sides. 5 The capacities that are selected are those -- 6 the smallest units, those that are less than 6,000 Btu 7 per hour, a mid range that's 8- to 14,000 Btu per hour, 8 and the 20,000 Btu per hour capacity or greater. 9 One of the advantages of selecting these 10 three is that by choosing the minimum and maximum 11 capacities within this category we feel confident we 12 have spanned all the potential technologies and 13 efficiencies that are available within this category. 14 So it gives us confidence that when we numerically 15 extend it to product classes that we're not conducting 16 a full analysis on that the results will be valid. So 17 we're going to be interpolating between these to obtain 18 the 6- to 8,000 Btu per hour and the 14,000 to 20,000 19 Btu per hour product classes. 20 We further propose that we're going to then 21 extend the analysis, the results of those calculations, 22 to other categories besides that to go to the 23 categories with louvered sides and the ones with 24 reverse cycle and casement. 25 I think I've lost the -- okay. EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Keep going. 2 MS. REICH: Okay. We have some precedent for 3 doing this because we have done a similar approach when 4 we analyzed dehumidifiers. So, you know, what we 5 expect that we would be doing is to look at, at a 6 baseline level, what the increments are in efficiency 7 among the product classes and then increment from those 8 baselines for product classes that didn't get a full 9 analysis, that we would increment efficiencies based on 10 the results from the ones that we do. 11 MR. BROOKMAN: So we have heard comment 12 already on clothes dryer product classes and want now 13 comments both on air conditioner product classes and 14 also on the Department's planned approach to analyze 15 the three representative product classes. Dave 16 Calabrese. 17 MR. CALABRESE: Dave Calabrese with AHAM. We 18 would support, first of all, the 16 categories, or I 19 guess adding the additional categories at the end. 20 Now, as far as the analysis and which to 21 choose from, certainly one, three, and five are 22 appropriate and they represent a large portion of the 23 market. However, there was some concern that in the 24 analysis that would do quite a bit of extrapolation to 25 other categories, which is reasonable in light of the EXECUTIVE COURT REPORTERS, INC.

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1 fact there are so many. 2 We would like to propose that the Department 3 add a fourth category for its analysis and that's 4 number eight, 8,000 to 13,999 Btus per hour. That 5 would capture the without-louvered sides units. Thank 6 you. 7 MR. BROOKMAN: Thank you. Additional 8 comments on room air conditioner product classes and 9 the Department's proposed approach. 10 MS. REICH: May I add one comment here? 11 MR. BROOKMAN: Please do. 12 MS. REICH: To your point, we will also plan 13 to do some spot checking of units, a small sample of 14 units that are outside the primary product classes that 15 we're analyzing so that it will, you know, further 16 validate our approach to make sure that the 17 extrapolation to the other product classes is 18 appropriate. 19 MR. BROOKMAN: Final comments on this set of 20 slides before we move on? Yes, please. Your name for 21 the record. 22 MS. BRUNK: Debra Brunk with AHAM. I just 23 noticed that we missed Item 3-3 where we're looking for 24 input on vent-less clothes dryer product classes. We 25 did talk about that a little bit but did just want to EXECUTIVE COURT REPORTERS, INC.

(301) 565-006451 1 mention something along the lines of the energy 2 calculations for the vented and the vent-less and just 3 that the industry feels that those energy calculations 4 should be approached a little bit differently, maybe 5 with the vent-less dryers looking at a more holistic 6 approach because you will also be affecting potentially 7 the surrounding air in the room that that piece of 8 equipment is in. Thank you. 9 MR. BROOKMAN: So certainly the Department 10 would welcome more details about how to take that 11 holistic approach. Yes, Harvey Sachs. 12 MR. SACHS: Harvey Sachs. I certainly 13 appreciate Debra's comments on the ambient effects and 14 would ask the Department at least to do a little bit of 15 thinking about whether the induced infiltration 16 associated with vented clothes dryers has an energy 17 impact that's worth considering in terms of the 18 descriptors. 19 MS. REICH: Okay. And I think that would 20 factor into the potential modifications to the test 21 procedure. 22 MR. SACHS: Yes, it would. 23 MS. REICH: Any inputs in that area would be 24 welcomed. 25 MR. SACHS: And that of course is an annual EXECUTIVE COURT REPORTERS, INC.

(301) 565-006452 1 issue. It's not an easy one. It cannot be done 2 perfectly. But the question is whether it would have 3 consumer value proportional to the difficulties of 4 doing it. Thank you. 5 MR. BROOKMAN: Thank you. Andrew DeLaski. 6 MR. DeLASKI: Kind of in the same vein, I 7 think I'm concerned about, and not just from a consumer 8 perspective but also from a national impact 9 perspective, that we don't go down a rat's hole. This 10 is a very complicated analysis for a product that may 11 sell a relatively small portion of the overall market. 12 It's a pretty complicated analysis to get into overall 13 building impacts. The impact for the consumer may be 14 minimal. The impact for the nation I suspect is even - 15 - is microscopic, so. 16 MR. BROOKMAN: Okay. Additional comments? 17 Steve Rosenstock. 18 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 19 looking at this table with reverse cycle categories, 20 with one it's less than 20,000 and then 20,000 Btu or 21 more, and then go to 13 and 14 and there seems to be a 22 little gap. 23 MS. REICH: Oh. Yeah. 24 MR. ROSENSTOCK: It says less than 14,000 and 25 then 20,000 or more. Was that a typo? EXECUTIVE COURT REPORTERS, INC.

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1 MS. REICH: It's a typo. Yes, I believe that 2 should be -- Product Class 14 should be 14,000 Btu per 3 hour or more. 4 MR. ROSENSTOCK: Thank you very much. 5 MR. BROOKMAN: Thank you. Thanks for 6 spotting that. 7 MS. REICH: Good catch. 8 MR. BROOKMAN: I want to make sure, following 9 Debra's comment, that we don't slight Item 3-3, listed 10 as -- on Slide Number 38. Are there any additional 11 comments on vent-less clothes dryer product classes? 12 Anything else that needs to be said there? 13 (No response) 14 MR. BROOKMAN: Okay. 15 MS. REICH: Most of the technology options 16 that I'm going to be presenting are drawn from previous 17 rulemaking because in many cases we believe that the 18 technologies have not significantly changed since the 19 time of the previous rules. So the list that we are 20 considering for clothes dryers contains technologies 21 that are largely already probably well known to you. 22 We have grouped them into three categories. 23 The first would be technologies that affect the control 24 or operation of the drum or design of the drum itself. 25 These may include the termination -- automatic EXECUTIVE COURT REPORTERS, INC.

(301) 565-006454 1 termination strategies, modified operating conditions 2 where the heat input rate or the cycle time may be 3 changed, and also technologies that we've identified by 4 looking at product literature for improvements made to 5 the drum itself, features incorporated to surface 6 textures or paddle designs that will improve the 7 tumbling action. 8 The second category would be technologies 9 that attempt to recapture some of the heat energy 10 that's ordinarily lost through vented models in the 11 exhaust vent that include perhaps injecting some of the 12 exhaust air back into the drum or running it through a 13 heat exchanger so that you can capture -- extract some 14 of that heat and use it to preheat the inlet air. 15 The last category includes technologies that 16 impact how the heat is generated, or in one case 17 actually it's how heat would be removed. Here is where 18 we would be examining heat pump designs and the 19 microwave drying technology. 20 We're also going to be looking at two of 21 these technologies which are new since the rulemaking 22 which consist of the modulating gas option, in which 23 the gas burner is provided with the capability of 24 adjusting its rate higher or lower depending on the 25 load requirements, and water cooling. This is for EXECUTIVE COURT REPORTERS, INC.

(301) 565-006455 1 condenser dryers that, rather than having an air-to-air 2 heat exchanger you would have an air-to-water heat 3 exchanger. 4 The last technology may be one that people 5 aren't too familiar with. We've designed it as 6 indirect heating. This is a hydronic-based system in 7 which the hot water from the residential heating system 8 would be routed through the dryer to provide the air 9 heating for the drying action. 10 MR. BROOKMAN: Comments now. Yes. 11 MS. REICH: Oh, yes, and I just wanted to 12 add, we recognize that the -- for this hydronic system, 13 that too would require -- have significant impacts on 14 the test procedure because it would require some means 15 to capture the efficiency of the primary water heating 16 system, not just within the dryer. 17 MR. BROOKMAN: So let's hear comments now on 18 this array of technology options for clothes dryers. 19 Dave Calabrese. 20 MR. CALABRESE: Dave Calabrese with AHAM. We 21 do have some comments on these various options. I'll 22 turn to Debra with AHAM as well. 23 MS. BRUNK: Debra Brunk with AHAM. I think 24 an overall comment I think we have from our industry is 25 this is a very long list and it will be a difficult EXECUTIVE COURT REPORTERS, INC.

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### 56 1 analysis. I think one recommendation we might have is, 2 and I think this is part of the analysis, is to cut 3 this down to some degree, particularly with the design 4 option approach where the industry will need to come 5 back with costs for all of these. That could be a very 6 difficult process. 7 But in general, just a few comments as we 8 went through this document. On Item 2, which is 9 increased insulation, in general industry feels that 10 increased insulation would have little impact on energy 11 efficiency for the current type models that are out 12 there. As soon as you do start getting into some of 13 these other heat generation options that may have a lot 14 more of an impact. 15 There are a few areas, again going back to 16 the design option approach, which I know well get into 17 a little bit later, that the industry feels we need a 18 little bit of clarification on where, again, you start 19 asking for cost information. One would be Item 3 in 20 terms of modified operating conditions. What might 21 those be specifically. Improved drum design would be 22 another one. Again, what might be some specifics when 23 it comes to looking at cost. 24 Another comment we had was on the water 25 cooling, and you mentioned it with the indirect EXECUTIVE COURT REPORTERS, INC.

(301) 565-006457 1 heating. That's just, again, calculations would need 2 to include water use cost and that kind of information 3 as well. 4 And then finally, to go back, we've talked a 5 little bit about the microwave technology. Just to 6 reiterate Dave's point that this is an area that was 7 looked at heavily many years ago. Since then there has 8 not been a lot of work on it that has been successful, 9 and we feel it may not be relevant out of the heat 10 generation options that are -- the other heat 11 generation options that are listed there. Thank you. 12 MS. REICH: I'd just like to point out that 13 the list that you see here are -- is the comprehensive 14 list that we're starting out examining. These are not 15 necessarily the technologies that are going to 16 propagate through to be the final design options that 17 we analyze and that we request cost information from 18 manufacturers on. 19 So it's likely that it will be a subset of 20 these that we would be trying to obtain that 21 information for. 22 MR. EROOKMAN: And so the Department would 23 request your detailed comments on what should be in and 24 what should be out and the rationale for that. Yes, 25 Steve Rosenstock. EXECUTIVE COURT REPORTERS, INC.

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1 MR. ROSENSTOCK: Steve Rosenstock, Edison 2 Electric Institute. Excuse me. I know that EPRI did a 3 lot of research on microwave clothes dryers back in the 4 late 1990s and results were not that good. I think 5 that the last research paper I saw they said they might 6 look at maybe like a countertop microwave clothes 7 dryer, like a portable one, as a technology option for 8 small drying loads. 9 I'm not familiar with recent research. I 10 don't know if EPRI has done anything in the last five 11 or six years in terms of research on that. EPRI does 12 have a Washington office. You may want to contact them 13 to see. They might have a research project coming up. 14 I know they're doing a lot more end-use technology 15 research. They're kind of getting back into that game. 16 So it might be worth a phone call or e-mail to see 17 what they're doing. Thank you. 18 MR. BROOKMAN: Thank you. Yes. 19 MR. MANTHEI: Phil Manthei, Alliance Laundry 20 Systems. We also would support removal of the 21 microwave technology from the list. 22 Thank you, also, for some definition as to 23 what modified operating conditionswereand the 24 improved drum design because we were clueless. 25 MR. BROOKMAN: Thank you, Phil. EXECUTIVE COURT REPORTERS, INC.

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1 MR. MANTHEI: We also would request to remove 2 reverse tumble. I think most of that has been looked 3 at in the commercial business. We're heavily into the 4 commercial laundry market, and it's, you know, looked 5 at for improved -- removal of wrinkling, mostly. 6 MR. BROOKMAN: Thanks, Phil. Andrew DeLaski. 7 MR. DeLASKI: I have kind of more of a 8 process question. I don't have specific comments on 9 these specific options. But you said in coming up with 10 the options that you primarily looked at the prior 11 rulemaking to come up with the options, and that 12 rulemaking was initiated I think in the early '90s. So 13 we're talking, you know, more than 15 years ago. 14 So I'm curious what other sources you went to 15 to help flesh out the list or figure out what else 16 should be in the list and to what extent did the 17 Department go outside of it. Because I'm just 18 concerned that we're repeating mistakes that happened 19 15 years ago, if mistakes were made. I'm not -- where 20 else are we looking for options. 21 MS. REICH: Sure. In coming up with this 22 list we did fairly extensive literature searches where 23 we reviewed test reports and data that was generated 24 from various sources. We do product information 25 reviews where we, you know, look at the published EXECUTIVE COURT REPORTERS, INC.

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### 60 1 literature from the manufacturers. And in doing this 2 also, well be speaking with various manufacturers to 3 verify those technologies and to maybe learn about some 4 others. 5 When we go through the process -- approaches 6 where you do wind up condensing the moisture out, it 7 would require some sort of collection or draining. 8 MR. DeLASKI: The only trick being that in 9 general most of the dryers are designed to remove -- 10 when the air leaves the dryer it's typically at about 11 100 percent RMC. Any effect upon that temperature at 12 all will begin to condense out the moisture. So I 13 mean, it's just pretty close right now. You're going 14 to have trouble taking out much heat and not affecting 15 the systems. 16 MR. BROOKMAN: Okay. 17 MS. REICH: For room air conditioners there 18 are a number of approaches that can be taken to improve 19 the efficiency. The most straightforward ones are 20 associated with increasing heat transfer, either by 21 increasing the surface area available to carry that out 22 or by optimizing the heat transfer coefficient. 23 So within the increased surface area 24 technologies that you could implement are increasing 25 the coil cross-sectional areas or the number ofrows in EXECUTIVE COURT REPORTERS, INC.

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### 61 1 the coil. You could also redesign the fins to increase 2 the density or add a sub cooler to the condenser. 3 We understand that there may be certain 4 limitations to implementing those based on the 5 requirement to fit within a window. That dictates the 6 chassis size and therefore the ability to implement 7 some of these changes. 8 On the side of optimizing the heat transfer 9 coefficient, there are possibilities to improve the 10 designs of the tubes or fins themselves or you can 11 spray condensate on the condenser coil. These are all 12 technologies, again, that were drawn from the previous 13 rulemaking. 14 One that has been added in for this 15 particular rulemaking is the micro channel heat 16 exchangers, wherein it's a technology that's widely 17 used in the automotive industry in which the cooling 18 passages are actually incorporated directly into the 19 fins. We have some information on research that was 20 done that indicates that it would be possible to 21 incorporate that into a room air conditioner. 22 So another approach that can be taken would 23 be to improve the efficiency of the individual 24 components themselves: the blower, the motors, the 25 compressor itself. These largely depend on the EXECUTIVE COURT REPORTERS, INC.

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### 62 1 availability of higher efficiency components from the 2 suppliers. 3 Finally, we've identified technologies that 4 can improve efficiency in the event that the effects of 5 offload operation can be captured by the test 6 procedure. That is, to go from a single-point EER 7 measurement to a SEER measurement. These would include 8 variable speed or multiple speed compressors or TXV5 9 and various control strategies. 10 MR. BROOKMAN: Yes. 11 MS. REICH: We had some comment? 12 MR. BROOKMAN: Dave Calabrese. 13 MS. REICH: Okay. 14 MR. CALABRESE: Dave Calabrese with AHAM. On 15 these proposed -- on these various technologies, the 16 first overall comment is that one of the critical 17 issues to consider -- and well discuss this as we talk 18 more about the efficiency levels -- is the impact of 19 the -- what we expect to be in 2010 the ban on the 20 import of HCFCs in room air conditioners, as well as 21 other products that use HCFC5. Currently the law 22 provides for and allows for that import. In 2010 it 23 will be, presumably, banned. 24 So it will have a significant impact on room 25 air conditioners, which are primarily produced abroad, EXECUTIVE COURT REPORTERS, INC.

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### 63 1 which are using R22 and HCFC as the refrigerant. 2 So as kind of a threshold issue to reiterate 3 this point. We'll be mentioning it again as we discuss 4 further the efficiency issues. 5 Now, as far as some of the technologies here, 6 we've looked at these, talked to the membership. We'll 7 come back with written comments that identify these in 8 more depth. 9 Items 1 through 3, these involve the 10 increased frontal coil area, increased depth, and 11 increased fin density. As we understand it, these all 12 are -- changes to address these technologies would 13 affect size, weight, and the noise of the unit, and in 14 these -- in certain categories of room air conditioners 15 -- they're very small. They're the highest market 16 share in the market, and they -- if you were to make 17 some of these changes, it would perhaps negatively 18 affect the size and therefore utility for consumers. 19 So those are some initial comments on those 20 categories -- on those items. I refer to these 21 numbers. I'm referring to the ones in the framework 22 document that DOE put out. 23 Item Number 8, and that is the micro channel 24 heat exchangers. As we understand it, this would 25 require a very significant retooling of the whole EXECUTIVE COURT REPORTERS, INC.

(301) 565-006464 1 process and therefore that would be something that 2 perhaps need not be considered as one of these 3 technologies. 4 Items 12, 13, and 14, again as we discussed 5 previously, part-load performance, part-load technology 6 we don't think is appropriate for a room air 7 conditioner and therefore the Department may not wish 8 to consider those technologies. Thank you. 9 MR. BROOKMAN: Thank you. Harvey Sachs. 10 MR. SACHS: Harvey Sachs, ACEEE. I very much 11 appreciate David's comments. We obviously would not 12 feel that change to the manufacturing process such as 13 the transition to micro channel heat exchangers is 14 necessarily ipso facto a reason not to consider the 15 technology. That change is in process in other 16 segments of the industry. It's a widely available 17 product, product class or technology class. We think 18 it should be evaluated. We have no idea whether it 19 should be something that's determinative at this stage 20 in the process. 21 MR. BROOKMAN: Thank you. Mike -- is it 22 Varney? 23 MR. BEYERLE: Beyerle. Yes. Mike Beyerle 24 with GE. Just to give a little more to what Dave said 25 earlier in terms of the technology, you need to keep in EXECUTIVE COURT REPORTERS, INC.

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1 mind that most of the units sold in terms of these room 2 air conditioners are small, lightweight units. People 3 are hot some afternoon, the summer has come early, 4 whatever it is, they go out and buy a small unit 5 quickly. It's a very inexpensive unit. They take it 6 home, they put it into place, they begin to use it. 7 The size, the weight, big difference as far 8 as the ability of a person to take that product home 9 and put it in their house and achieve a little bit of 10 comfort. 11 In addition, most of these units, a lot of 12 these units anyway, are often undersized for the use -- 13 the rooms they're put into. Someone wants to take 14 something small and easy home regardless of the size of 15 the unit. They don't do a lot of calculations. They 16 don't spend a lot of time figuring out exactly how many 17 Btus per hour they need for that room. They just buy 18 something small, lightweight, and inexpensive and drop 19 it into place, turn it on. They run it full tilt. 20 If they're lucky, in general it will make the 21 room comfortable enough for them. It will always make 22 the room more comfortable, but it seldom achieves 23 exactly, you know, a level of comfortable which you 24 acquire by putting in a nice central air conditioning 25 system. So the size and the weight makes a big, big EXECUTIVE COURT REPORTERS, INC.

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1 difference to the consumers in terms of that. 2 As far as the micro channel, they certainly 3 do affect the performance. They will make the unit 4 more efficient, but there's a big difference between a 5 $30,000 automobile and a $100 room air conditioner. 6 The units are inexpensive. People want them 7 inexpensive because they buy them quickly when the 8 summer has come early and it's just too hot. 9 MR. BROOKMAN: Thank you. Harvey Sachs. 10 MR. SACHS: So my comment -- hearing an 11 endorsement of micro channels is something that adds 12 efficiency and makes it smaller and lighter. Was that 13 your intent? 14 MR. BEYERLE: It makes it more efficient. I 15 never said it made it smaller and lighter. It's really 16 much more expensive. 17 MR. SACHS: It's certainly the experience 18 with some centralized air conditioner condenser units, 19 so they become very small and presumably the 20 substitution of aluminum with heat exchange area per 21 pound of material for copper might have some effect on 22 the take-home weight as well. But I appreciate your 23 comments. 24 MR. BEYERLE: But there's a big difference 25 between a $5- or a $10,000 -- or, a central air EXECUTIVE COURT REPORTERS, INC.

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### 67 1 conditioning system and a $100 portable room air 2 conditioner. 3 MR. BROOKMAN: Thank you, Mike. Andrew 4 DeLaski. 5 MR. DeLASKI: I guess my take on this is that 6 at this stage of the analysis you're looking at 7 technology options. You're not prejudging manufacturer 8 impacts or consumer utility impacts. That's a 9 different part of the analysis. So to knock something 10 out here because we suppose -- you're presuming aspects 11 of what happens in other parts of the analysis on the 12 consumer or the manufacturer, those are valid concerns. 13 They should be brought up at that point of the 14 process. 15 But we don't knock out a technology -- we 16 shouldn't be knocking out technologies because we're 17 concerned that consumers won't be able to buy them. 18 That's a concern that should be addressed in the 19 analysis but not at this stage, in my view. 20 MS. REICH: That's correct, yes. Those are 21 all issues that will be addressed during the screening 22 analysis, and that's where we will be vetting the 23 technologies to see which ones meet exactly some of 24 those concerns that you have. 25 MR. BROOKMAN: Okay. Additional comments on EXECUTIVE COURT REPORTERS, INC.

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### 68 1 these technology options for room air conditioners at 2 this time? 

### 3 (No response) 4 MR. BROOKMAN: That's all you have, right? 5 MS. REICH: Yup, that's -- 6 MR. BROOKMAN: Okay. So we're just a little 7 bit behind schedule. Not much. Let's take a break at 8 this point. It's now 10:40 by my watch. Let's take a 9 15-minute break, and we will resume at 10:55. 10 Okay. So, thanks for a good start on the 11 day. We're making good progress here and we're 12 covering a lot of ground. 13 (Brief recess) 14 MR. BROOKMAN: We are now moving on to a 15 discussion of screening analysis and engineering 16 analysis. Once again, Judy Reich. 17 Screening Analysis and Engineering Analysis 18 Judith Reich 19 (PowerPoint presentation) 20 MS. REICH: Okay. The second step in the 21 ANOPR process is the screening analysis, which is the 22 point at which we take all these technology options 23 that we have identified, this whole universe of them, 24 and we apply criteria to reduce them to the ones that 25 we consider to be viable and to be carried through to EXECUTIVE COURT REPORTERS, INC.

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### 69 1 the engineering analysis. 2 The criteria that DOE is planning to use, is 3 required to use, to evaluate each technology option, 4 there are four of them. The first involves 5 technological feasibility. Again, because when we 6 survey the landscape of potential technologies that we 7 are considering everything, we are now going to narrow 8 it down to only those that have been demonstrated in 9 working prototypes or have been commercialized. We are 10 going to eliminate those that are only at the research 11 stage. 12 The second issue, the second criteria that 13 DOE uses is practicability to manufacture, install, and 14 service. It is further qualified by the fact that it 15 has to be -- meet these criteria on a time scale that 16 is compatible with the effective date of the ruling and 17 that it has to be manufacturable and able to be 18 installed in service on a scale that would be 19 appropriate for the market size. 20 The third criteria DOE uses is the impact on 21 the consumers, whether this is product utility, whether 22 there are features that are unique that the consumer 23 relies upon, and availability to the consumer. It is 24 not acceptable to create a standard that would 25 eliminate a particular class of product that is EXECUTIVE COURT REPORTERS, INC.

(301) 565-006470 1 currently on the market, things that would have unique 2 sizes or capabilities that would be eliminated. 3 Finally, of course, there can't be any 4 adverse impacts on health or safety. 5 Although we don't have a comment slide here 6 called out, we would certainly welcome stakeholder 7 inputs at this point on the screening process. 8 MR. BROOKMAN: I have the general parameters 9 listed here on Slide 43. Any additional comments on 10 those? 11 12 

### 13 14 15 

### 16 (No response) MR. BROOKMAN: Okay. MS. REICH: So let me --

MR. SACHS: Excuse me. MR. BROOKMAN: Yes. MR. SACHS: Harvey Sachs. This 17 practicability to manufacture and technological 18 feasibility, you have said you will screen out 19 approaches which are in the research stage and not 20 available commercially as products. What is the 21 boundary of -- the geographic boundary of that study? 22 Is that North America or is that global? 23 The example I would use is if the -- if some 24 unnamed country has 10 percent market share for heat 25 pump approaches to clothes dryers, is that considered EXECUTIVE COURT REPORTERS, INC.

(301) 565-006471 1 to be commercially available? 2 MS. REICH: The way I -- my personal 3 interpretation, and certainly correct me if I'm wrong, 4 that that goes hand in hand with the practicability to 5 manufacture. If the technology is on the market 6 elsewhere and it is likely to be able to be 7 manufactured domestically, then I believe that would 8 meet the screening criteria. 9 MR. SACHS: Okay. If you'll allow me one 10 follow-up. This is Harvey Sachs. Without prejudice 11 and just as a matter of intellectual curiosity, but 12 considering the difference between the two product 13 classes at stake today, I'm not sure how the criterion 14 of practicability for manufacture in the United States 15 is brought into play. 16 MS. REICH: It is the -- 17 MR. BROOKMAN: Ron Lewis. 18 MS. REICH: Yes. Okay. 19 MR. LEWIS: Good questions, Harvey, and we're 20 here, as you're well aware, to listen and receive input 21 and not to answer everything definitively today. So to 22 Judith it's relatively new. 23 Its a lengthy process. Judy actually was 24 very modest earlier in describing the fact-gathering 25 process of trying to gather information. That's much EXECUTIVE COURT REPORTERS, INC.

(301) 565-006472 1 more comprehensive and aggressive than I was hearing 2 her say in trying to look and identify technologies. 3 The screening process of looking at it and 4 looking at the practicality and everything is something 5 that -- they go through all the work to identify things 6 and the decision point is not something that's cut and 7 dry, easy, there's a one-sentence answer, we can say 8 this is absolutely, you know, the way it's going to be. 9 But we're trying to be comprehensive at the beginning 10 and identify things to be considered. 11 So in due time you'll -- as you're well 12 aware, you'll see, you know, the results of the 13 screening process in the ANOPR and have a chance to 14 interact with us again. 15 MR. BROOKMAN: Harvey, do you have a simple 16 answer to your own question about the -- I guess the 17 technology options as they are deployed predominantly 18 in U.S. manufactured products versus, for example, the 19 world? I'm paraphrasing. 20 MR. SACHS: Harvey Sachs again. It's very 21 complicated issues. I don't have an answer. My 22 concern is that we not use arbitrary criteria for 23 screening out technologies that have been adopted 24 elsewhere and are worthy of consideration at least to 25 the stage of max tech. EXECUTIVE COURT REPORTERS, INC.

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### 731 Do I expect us to cut over to unobtanium2 based clothes dryers or room air conditioners in the 3 next cycle? No. But I would hope that we're focusing 4 on what is being done elsewhere as part of our 5 obligation for national energy savings and as part of 6 the value for manufacturers who are increasingly faced 7 with global competition as well as for consumer choice. 8 So I'd like to keep it strategic. Thank you. 9 MR. BROOKMAN: Dave Calabrese. 10 MR. CALABRESE: Dave Calabrese, AHAM. I 11 would -- I politely disagree with Harvey. I think what 12 you're saying makes some sense. The one comment I 13 would make; when looking at technologies that are 14 manufactured, sold in Europe as opposed to the U.S., 15 there are some significant differences as to consumer 16 preferences, even home size and the like, where you may 17 have different sizes. There's always of course the 18 different issue of the types of electricity and the 19 like. 20 So I understand what Harvey's saying and I do 21 -- that makes some sense. We should consider carefully 22 when looking at a European or some other technology 23 that -- take into account the fact that there may be a 24 different environment in which those products are sold. 25 MR. BROOKMAN: Thank you. Final comments on EXECUTIVE COURT REPORTERS, INC.

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1 this before we move on? 2 (No response) 3 MS. REICH: Okay. Let's move into the 4 engineering analysis. I'm going to step through the 5 first couple of slides fairly quickly because I think 6 this is a process you folks are quite familiar with. 7 But basically, the purpose of the engineering analysis 8 is to define for each product class the relationship 9 between the increments in manufacturing costs that are 10 going to be required for incremental improvements in 11 efficiency. This relationship is going to be input to 12 the further analyses that would be used to calculate13 the net cost impacts on the consumers, namely the life14 cycle cost and payback period calculations, the impacts 15 on industry and the national energy impacts. 16 The methodology that we plan to use and that 17 we have used before is first to very carefully define 18 our baseline models. Typically, these are units that 19 are common or have really fundamental characteristics, 20 and we use these as the benchmark that were going to 21 assess the changes in cost and efficiency against. 22 So typically, for products that have existing 23 energy conservation standards, the baseline models will 24 be those that just meet that particular efficiency. 25 We then go through a quite extensive reverse EXECUTIVE COURT REPORTERS, INC.

(301) 565-006475 1 engineering process in which units that are selected 2 based on a range of characteristics are taken apart, 3 they're examined for -- to understand what types of 4 technologies are implemented in them, what types of 5 costs would be associated with manufacturing them. 6 We look at component costs and material costs 7 and develop an overall "green-field" model. This is a 8 model which captures the cost to produce the unit 9 itself as well as to set up a factory from ground zero. 10 These numbers that we are producing are intended to 11 represent industry-wide aggregated values. 12 To supplement and validate them, we conduct a 13 series of interviews in which we attempt to gain a 14 better understanding of the strategies that may be 15 taken to improve efficiency and what the costs 16 associated with those are, and we also go through some 17 data collection to produce supplemental points that we 18 can compare against our cost efficiency curves. So 19 ultimately, at the end, we are left with a series of 20 cost efficiency relationships again for each product 21 class. 22 Just to show it a little bit more 23 graphically, the baseline model could be considered as 24 a zero incremental cost, so that point represents the 25 intercept on the manufacturing cost curve along with EXECUTIVE COURT REPORTERS, INC.

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### 76 1 the particular efficiency associated at that baseline 2 level. 3 And then the reverse engineering fills in the 4 curve to develop a straw-man cost efficiency curve. 5 The third step is to take a look at validating data to 6 make sure that the particular characteristic of that 7 curve is reasonable. Where we identify particular 8 discrepancies, if they're notable, then we would go 9 back and perform additional reverse engineering at 10 specific points to help us have confidence that the 11 curve really represents the nature of the -- of that 12 relationship. 13 So let's talk about the -- what we have 14 defined as the baseline for clothes dryers. For the 15 four product classes in the vented category, there are 16 existing energy conservation standards that are defined 17 according to -- the metric used is energy factor, 18 defined as pounds of clothing load per kilowatt-hour 19 per cycle. So these range from 2.67 to 3.13, depending 20 on whether it's gas or the capacity. So that is quite 21 well defined. 22 For the new product classes that we're 23 adding, the vent-less units, we don't have any 24 information right now to set those baseline values 25 because there's no test procedure and no existing EXECUTIVE COURT REPORTERS, INC.

(301) 565-006477 1 standards. So we are really looking to stakeholders to 2 provide input for us to be able to set those values. 3 MR. BROOKMAN: Steve Rosenstock. 4 MR. ROSENSTOCK: Steve Rosenstock, EEI. DOE 5 is still planning to use the same efficiency metric, 6 though, right? Energy factor, same as the other ones 7 for the -- 8 MS. REICH: Correct, yes. 9 MR. ROSENSTOCK: Okay. For the market. 10 Okay. Thanks. 11 MR. BROOKMAN: Dave Calabrese. 12 MR. CALABRESE: Dave Calabrese with AHAM. 13 You know, we would agree with the baseline levels. 14 They are of course what is available, what we 15 understand to be -- well, they are the standard as they 16 are now. 17 On the vent-less dryers, of course we don't 18 have any data. We would commit to be, of course, 19 collecting this as part of the whole rule-making 20 process and perhaps even prior to it to try to begin 21 some of the data collection to assist the Department as 22 it begins its analysis. So we'd like to help at these 23 earlier stages. 24 MR. BROOKMAN: Harvey Sachs. 25 MR. SACHS: Harvey Sachs, ACEEE. Just a EXECUTIVE COURT REPORTERS, INC.

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### 78 1 cautionary note that there is some indication in the 2 literature and in the results of prior DOE rulemakings 3 on other classes of equipment that at least the lower 4 part of your presumed cost efficiency curve is 5 hypothetical if we move from cost to manufacturers to 6 consumer prices that historically, for a variety of 7 reasons, an increase in standards has not necessarily 8 been associated with an increase in prices, leaving 9 aside the commodity effects of the recent central air 10 conditioner rule. 11 I just want to make sure that were applying 12 sufficient skepticism again at the lower end of this 13 cost efficiency curve, where standards are likely to be 14 implemented, about whether this will actually be 15 revealed as a consumer price increase. 16 MR. BROOKMAN: Thanks. Additional comments 17 on Slide 48, the energy factor? 18 (No response) 19 MR. BROOKMAN: Okay. 20 MS. REICH: For room air conditioners -- 21 MR. SACHS: Excuse me. One other point. 22 MR. BROOKMAN: Harvey Sachs. 23 MR. SACHS: Harvey Sachs again. On Item 4, 24 Slide 48, the energy factor presumably for gas is not 25 in pounds per kilowatt-hour but in appropriate units. EXECUTIVE COURT REPORTERS, INC.

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1 MS. REICH: My understanding is that it is -- 2 it may be -- it takes into account the energy 3 consumption but that is converted into a kilowatt-hour 4 metric. 5 MR. SACHS: Okay. Thank you. I'm sorry to 6 reveal my ignorance. 7 MS. REICH: For room air conditioners there 8 are existing energy conservation standards for all 16 9 product classes listed out here. Of course, the ones 10 that were going to be most interested in are the three 11 product classes that we are analyzing, and you can see 12 that those values range from an EER of 8.5 to 9.7, 13 which almost represent the full range of EER levels for 14 all of them. So that's some added confidence in 15 selecting these product classes. 16 The metric for room air conditioners is a Btu 17 per hour cooling capacity per watt. So this is a bit 18 of an eye chart with a lot of values here, so maybe we 19 can digest this for a moment and collect input. 20 MR. BROOKMAN: David Calabrese. 21 MR. CALABRESE: Dave Calabrese with AHAM. 22 The -- as had noted before, we had suggested an 23 additional category for DOE's consideration, Number 8. 24 In addition, again I'll be mentioning this 25 throughout our discussions here, is the impact of the EXECUTIVE COURT REPORTERS, INC.

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### 80 1 change in refrigerant. DOE recognizes that there is an 2 energy penalty to change from HCFC -- R22 and HCFC to 3 an HFC. I think DOE estimates about a 5 to 7 percent 4 penalty. We would agree with that assessment. That is 5 probably at the higher end, more at the 7 percent 6 penalty. 7 So when DOE conducts its analysis, this will 8 have to be foremost in their -- in your mind as you 9 consider costs going to new efficiency levels as you 10 look at the baseline. So we as well in the industry 11 will have to consider that as we consider moving to 12 higher efficiencies. In and of themselves, moving to a 13 higher efficiency product will involve added cost and 14 there will be certainly additional added cost as a 15 result of changing the refrigerant to new compressors 16 and addressing that energy penalty. 17 So its just -- its something we want the 18 Department to keep foremost in its mind as it moves 19 forward with this analysis because it will have a 20 significant effect. 21 MR. BROOKMAN: David Goldstein. 22 MR. GOLDSTEIN: Yeah, David Goldstein, NRDC. 23 I wanted to comment on the change of refrigerant and 24 how DOE does the analysis of this. I can't remember 25 how -- what number of rulemaking this is where our EXECUTIVE COURT REPORTERS, INC.

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### 81 1 research showed that the efficiency of a compression 2 device would go down when you changed the refrigerant 3 as a prediction and then when the change was actually 4 made that didn't happen and in many cases it actually 5 went up. 6 So I would encourage the Department to look 7 at predicted versus actual changes in efficiency upon 8 change in refrigerant in air conditioners and 9 refrigerators. We have a pretty -- and chillers. We 10 have a pretty good, I think, data set of when these 11 changes have occurred, and we ought to look at what 12 really happened as opposed to what was predicted to 13 happen. 14 MR. BROOKMAN: Thank you. Harvey Sachs. 15 MR. SACHS: I would scarcely hold myself out 16 as an expert on refrigeration technologies, but I think 17 there's reconciliation between the two Davids. Mr. 18 Calabrese has given us the decrease in efficiency if we 19 substitute 410A for R22. This is a rather stupid 20 approach that has not been followed in most industries, 21 and it is my understanding from the literature that if 22 in fact we redesign the product to work properly with 23 410A rather than just substituting the refrigerant we 24 can get improved efficiency and we certainly do not 25 need to take a hit. EXECUTIVE COURT REPORTERS, INC.

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### 82

1 Now, I haven't discussed all of the cost 2 tradeoffs, but the blanket assertion that we will have 3 lower efficiencies because of the transition does not 4 seem to be well supported as Mr. Goldstein has said. 5 MR. BROOKMAN: Mike. 6 MR. BEYERLE: Mike Beyerle with GE. I think 7 what Dave's implying is that basic thermodynamics will 8 show you that if you substitute you will have a less 9 efficient system, which is what he's saying. We have 10 to deal with that less efficient system. 11 If you make a more efficient air conditioner, 12 you will have a more efficient air conditioner. I 13 think that's all we're kind of saying, is that if we 14 have to do the substitution it will immediately become 15 less efficient. To get it back up to meet standards we 16 will have to make it more efficient. If we have to 17 make it more efficient beyond that, it becomes very, 18 very difficult for the product. 19 MR. BROOKMAN: Steve Rosenstock. 20 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 21 guess for DOE I think the main thing is that since, you 22 know, the final rule for this rulemaking will occur I 23 believe in 2008 for an effective date of 2011 -- I'll 24 have to look back at the calendar in here. Wait a 25 minute. 2008 or 2009. Oh well. It was back -- it's EXECUTIVE COURT REPORTERS, INC.

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### 83

1 in the beginning somewhere. I'm sorry? Oh -- 2 MR. CALABRESE: 2014. 3 MR. ROSENSTOCK: Oh, 2011. Okay. So, okay. 4 The final rule in 2011, to take effect 2014. The 5 manufacturers will already have had to adjust their 6 product for 2010 and that will probably impact the 7 baseline cost. So that might be the key parameter, is 8 how much did the cost of the baseline unit change 9 because of the refrigerant change. Just another factor 10 to consider. Thank you. 11 MR. BROOKMAN: David Calabrese. 12 MR. CALABRESE: Dave Calabrese. I agree with 13 what Steve is saying. The concern that we had is that 14 the data gathering will be commencing shortly. So we - 15 - our manufacturers are not yet -- have not yet 16 determined how in fact they are going to make this 17 switch. It will involve a new compressor; we are 18 almost certain of that. The current R22 does not work 19 in the existing compressors because of many issues that 20 I don't fully understand. However, it will require a 21 new compressor. 22 So the concern is still where we are right 23 now in this moment in time, which presumably DOE begins 24 the collection in January. Manufacturers may still yet 25 be in a stage where they don't know exactly how they're EXECUTIVE COURT REPORTERS, INC.

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1 going to be adjusting. So that is our primary concern. 2 MR. BROOKMAN: Thank you. Additional 3 comments on these? 4 (No response) 5 MR. BROOKMAN: Did we miss anything that you 6 wanted additional comment on? 7 MS. REICH: Not yet. 8 MR. BROOKMAN: No. Okay. 9 MS. REICH: Okay. We have a very important 10 choice to make when we are conducting the engineering 11 analysis. That is to choose which approach to use to 12 perform the reverse engineering to come up with the 13 costs associated with each efficiency level. 14 There are two possible approaches. The first 15 would be a design option approach, and this is the -- 16 what we are proposing to use for clothes dryers. In 17 this strategy, you take a look at what particular 18 design options are used and which design options -- or, 19 what the costs associated with each of those design 20 options are. You then layer possible combinations of 21 these options to come up with incremental costs in 22 efficiency levels above the baseline. 23 The reason that we're proposing to do that 24 for dryers is that there just isn't a wide range of 25 efficiency of units currently so that there -- it makes EXECUTIVE COURT REPORTERS, INC.

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### 85 1 much more sense to be looking at the individual details 2 of them as potential efficiency improvements rather 3 than trying to draw a representative sample at 4 different efficiency levels. 5 As part of the reverse engineering, there 6 would also be limited testing that's conducted so that7 we can verify what we have come up with in the tear8 down process. 9 So as part of this, what we are asking from 10 stakeholders is that we can come up with industry-wide 11 data that would be disaggregated on the basis of each 12 particular design option rather than -- sometimes we 13 collect it as a function of efficiency level. But 14 we're trying to get at what the appropriate costs would 15 be for each of these technologies that can then be 16 combined. 17 Conversely, for room air conditioners we're 18 proposing to use an efficiency level approach. In this 19 case, where there is a broad range of units that have 20 various efficiencies already, it is reasonable to 21 expect that we could pull out samples at, for example, 22 baseline efficiency and an Energy Star level that we 23 can use as the basis of our reverse engineering. 24 So in this case, what the validation data 25 that DOE is seeking will consist of are those EXECUTIVE COURT REPORTERS, INC.

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### 86 1 incremental manufacturing costs as a function of 2 efficiency level themselves. So then the cost 3 efficiency curves are directly generated from those 4 incremental costs. 5 To go through a little bit more detail on the 6 reverse engineering, it is critically dependent on the 7 units that are selected to undergo this process. So 8 it's -- a lot of effort is spent in determining which 9 platforms are going to be analyzed and which units 10 within each platform in an attempt made to span a full 11 range of various technologies so that we can get a true 12 representation of the state of that particular product. 13 We subject them to physical tear-downs, where 14 we take them apart and catalogue everything that's in 15 there, which would include the individual components, 16 the raw materials that are used, and even looking at 17 what fabrication and assembly steps are used to turn 18 the raw materials and parts into the finished product. 19 So at the end of this process we wind up with 20 the green-field model which would be performed for 21 either the efficiency levels at -- for an efficiency 22 level approach or aggregated into efficiency levels 23 from the individual design options. 24 What we seek as validation data would be 25 industry-wide shipment-weighted data that would be EXECUTIVE COURT REPORTERS, INC.

(301) 565-006487 1 broken down into the components that relate to the full 2 production costs for the individual products, as well 3 as the one-time conversion costs that would be required 4 to shift to a different standard level. For the full 5 production cost, these would consist of your direct 6 material on labor, factory overhead, and we also seek 7 information on the depreciation method that 8 manufacturers are using to expense their conversion 9 capital. 10 For the non-production costs we're going to 11 be looking at sales and marketing and R & D, but also 12 assuming that potentially there could be investments 13 required for a new facility. We would want to know 14 what the building costs would be and new tooling and 15 equipment costs. So the net result from those 16 categories would be the manufacturer cost data that 17 would be used as a validation and to supplement the 18 cost efficiency curves from the reverse engineering. 19 MR. BROOKMAN: So, comments on, as you see on 20 Slide 55, on the use of the design option approach for 21 residential clothes dryers and also the efficiency 22 level approach with respect to room air conditioners. 23 David Goldstein. 24 MR. GOLDSTEIN: David Goldstein, NRDC. The 25 approach sounds pretty good with one or two cautions EXECUTIVE COURT REPORTERS, INC.

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### 88
1 here. The first caution is on the efficiency level 2 approach. Existing high efficiency models of almost 3 anything usually offer non-energy benefits as well as 4 the efficiency benefit, and you want to make sure -- 5 and your methodology would allow this, but you have to 6 be careful in applying it. You're costing those things 7 that provide only energy benefits and you're not adding 8 costs for features that offer additional consumer 9 values that they're just willing to pay for right now 10 in Energy Star and better product. 11 If a new plant has higher labor productivity 12 than the old plant, that's a benefit, and you've got to 13 consider both sides of the equation. 14 MR. BROOKMAN: David Calabrese. 15 MR. CALABRESE: David Calabrese with ARAM. 16 We would support the Department's approach on both 17 products, the design option on clothes dryer and 18 efficiency level approach on room air conditioners. I 19 would caveat that by saying that the design option 20 approach is the less preferable for the -- we believe 21 that to do it in that manner there are some drawbacks. 22 However, in light of the fact there is limited data 23 available for these products, it appears to be the most 24 reasonable way for the Department to proceed. So we 25 would support that. EXECUTIVE COURT REPORTERS, INC.

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### 89
1 And of course, we would be collecting this 2 data -- assisting the Department to collect the data 3 and to aggregate it, as we have done in the past and 4 have even begun the process now to consider such 5 collection. Thank you. 6 MR. BROOKMAN: Thank you. Additional 7 comments on these two approaches before we move on? 8 Ron Lewis. 9 MR. LEWIS: One comment on the aggregation of 10 data. Sometimes -- there is a long process to be able 11 to acquire and put things together, and sometimes at 12 the end of the pipeline the aggregation ends up that 13 its very difficult to use that to benefit the 14 analysis. We've had some episodes in our history where 15 that's happened. 16 So one of the requests would be before you go 17 through a lot of effort to collect data, if we could be 18 in dialogue to look at what level of detail would be 19 useful. Because if it's too or too aggregated, 20 sometimes it doesn't help us to make decisions. That's 21 a frustration for all of us and a lot of wasted effort 22 on both our parts, so. 23 MR. BROOKMAN: Okay. 24 MS. REICH: So, in defining the efficiency 25 levels, first of all, these are going to be defined for EXECUTIVE COURT REPORTERS, INC.

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### 90 1 every product class uniquely. DOE is going to look at 2 all efficiency levels between the baseline and the 3 maximum that's technologically feasible, what we refer 4 to as the max tech level. 5 What I'm going to present in a few moments is 6 a maximum efficiency level that has been determined 7 according to what products are currently on the market. 8 So that really is more correctly termed a maximum 9 available efficiency level. So for example, there may 10 be a max tech level associated with a technology that's 11 not widely available yet or commercially available. 12 So we specifically are seeking stakeholder 13 input on how to resolve what this discrepancy is 14 between max available and max tech. 15 Let me show you the efficiency levels that 16 DOE is proposing for clothes dryers. For these 17 products there is not currently an Energy Star program, 18 and as we talked about before, there isn't a wide range 19 of efficiency among available units. 20 So there are three efficiency levels that are 21 being proposed. The first would be, of course, the 22 baseline level. Level Number 3 is the maximum 23 available based on a survey of various databases of 24 recent product distributions so that we can, for most 25 of the product classes, come up with a max available EXECUTIVE COURT REPORTERS, INC.

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### 91

1 level. 2 In between those two we have proposed two 3 gap-fill levels. The purpose of the gap-fill is to 4 fill out the cost efficiency curve in areas where 5 there's a big jump between the baseline and the max 6 tech. So we're able to specify values for those for 7 the electric standard and for the gas clothes dryers. 8 In each case we tried to also associate a 9 gap-fill level with particular efficiencies that are 10 well represented by products already on the market. 11 For electric compact, 240 volts, I just want 12 to point out that we were unable for the Efficiency 13 Levels 1 through 3 to obtain any information on models 14 in the U.S. and we did then proceed to use the NRCAN, 15 the Canadian energy agency's database, for electric 16 clothes dryers, presuming that there is a close 17 connection between these two markets. 18 For electric compact at 120 volts, we were 19 just completely unable to find information for a second 20 gap-fill level. So for that in particular we are 21 seeking input. 22 MR. BROOKMAN: Yes. Mike Rivest. 23 MR. RIVEST: Mike Rivest, Navigant 24 Consulting. Of course one of the decisions that we 25 talked about was doing efficiency level approach versus EXECUTIVE COURT REPORTERS, INC.

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### 92 1 design option approach. I think what this illustrates 2 is the verynarrowband that exists in existing product 3 offerings. So to the extent that we would approach 4 this with the design options, the concept of defining 5 set levels for data aggregation is not necessarily 6 relevant if were going to be proceeding with defining 7 a baseline model and then capturing data at the design 8 option level, where we would then be looking for 9 efficiency and cost data of design options and creating 10 a cost efficiency curve with those. 11 I guess it becomes a matter of who performs 12 that aggregation and provides the curve. So I just 13 want to downplay a little bit in the design option 14 concept this notion of set levels of efficiency. It 15 gives us an expectation of what's in the market, but I 16 wouldn't want to presuppose the outcome of the design 17 option analysis. 18 MR. BROOKMAN: Dave Calabrese. 19 MR. CALABRESE: I appreciate that 20 clarification. We had similar questions as, if you 21 were to proceed with it as a line option approach, how 22 this would be relevant. In light of the fact that this 23 may have some value in the analysis, just to make a few 24 comments. The gap-fills -- and I know that DOE is 25 trying their best to identify some of these levels EXECUTIVE COURT REPORTERS, INC.

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1 our view is, on some of these, for instance electric, 2 standard and gas, the differences between a 3.10, a 3 3.16, or, on the gas side, a 2.75 and a 2.77, is 4 minimal and perhaps even non-measurable in the sense 5 that if you were to look at products and what the cost 6 would be to get to various levels. 7 So our suggestion would be perhaps to take 8 those and merge them into one level, one gap-fill 9 level. 10 Again, this probably has less of an impact 11 because of the fact you're using a design option 12 approach. But if you were to use this to validate, I 13 think, as you described perhaps merging those gap-fills 14 into one may be more practical. 15 MR. BROOKMAN: Andrew DeLaski. 16 MR. DeLASKI: A couple of comments or 17 questions. In response to your comment, Mike, then, 18 about downplaying the relative importance of these 19 levels, and I may be jumping ahead here, but then when 20 you get to the ANOPR phase and you're developing -- the 21 Department is publishing candidate standard levels, how 22 does that work as a design option? Because normally 23 you would see this and you would say, okay, that's 24 looking like a candidate standard level for the ANOPR 25 phase. But you're suggesting that perhaps not. Am I EXECUTIVE COURT REPORTERS, INC.

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### 94 1 reading -- am I hearing you right? 2 MR. BROOKMAN: Mike Rivest. 3 MR. RIVEST: That's correct. It may turn out 4 that discrete technologies that we examine have 5 different breakpoints or the range of efficiencies we 6 come up with is different. We may be higher. So I 7 wouldn't want to -- if we were collecting data at set 8 efficiencies today it would be important to determine 9 what those levels are. As you say, they could become 10 candidate standard levels. But since we're not hinging 11 the data collection on any specific efficiency levels, 12 I don't think this is a critical discussion right now. 13 MR. DeLASKI: Okay. Even though it's not 14 critical, I would point out that as we're -- to the 15 extent there's a big move to validate the design option 16 approach, I would suggest that you do need another -- 17 another gap needs to be filled which is between levels 18 two and three. 19 I mean, to the extent -- Dave Calabrese just 20 pointed out how close one and two are together just 21 from a mathematical perspective. You have a bigger gap 22 between two and three. That's where the biggest gap 23 remains. So I think there's a bigger -- there's a gap 24 between two and three for electric and gas, which to me 25 indicates that you would want to have another level EXECUTIVE COURT REPORTERS, INC.

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### 95
1 added in there. Keep the first two and add a third 2 level. 3 MR. LEWIS: Doug? 4 MR. BROOKMAN: Yes. Ron Lewis. 5 MR. LEWIS: I believe that the tables were 6 constructed from things that we found. We didn't 7 construct this by design or say we want to have certain 8 predetermined levels. So what we've got -- were 9 constrained by what exists. So I think we didn't have 10 things to fill in in that increment that you're talking 11 about. This was a summary of what we found for the 12 levels, if I understand it correctly. 13 MS. REICH: That's correct, yeah. 14 MR. LEWIS: So I understand your desire, but 15 the reality of what we could populate this with was 16 what was out there, what we found available, so. 17 MR. DeLASKI: I guess my point is to the 18 extent that technology -- and this is where the design 19 option approach will take you, I guess -- the 20 technology may result in options that don't exist on 21 the market today, but you need to examine those options 22 and there needs to be a level to consider those 23 options. 24 MR. BROOKMAN: That was Andrew DeLaski. 25 Additional comments related to the design option EXECUTIVE COURT REPORTERS, INC.

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1 approach? Yes, Tom Eckman. 2 MR. ECKMAN: I presume that because maximum 3 available is defined differently than max tech that 4 this will be extended to include max tech at some 5 point. 6 MS. REICH: What we are particularly 7 interested in is the -- how does the max tech relate to 8 the max available. Can they be considered equivalent 9 or are there other technologies available that would be 10 -- produce a different max tech. 11 MR. ECKMAN: Well, certainly on your list of 12 potentials for screening there are technologies that 13 may -- I don't know what their ratings might turn out 14 to be, but there are technologies that might push it. 15 To my knowledge, there's no heat pump dryer available 16 in the U.S. market and I have no idea what they might 17 test out at with respect to the rating system we have 18 here. But they may or may not fall within this range. 19 MS. REICH: That's right. 20 MR. ECKMAN: Not knowing that, it would be 21 useful to ascertain whether they would or whether that 22 would be a max tech level. 23 MS. REICH: Right. 24 MR. BROOKMAN: David Goldstein. 25 MR. GOLDSTEIN: David Goldstein with some EXECUTIVE COURT REPORTERS, INC.

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### 97 1 follow-up on that. For room air conditioners in 2 particular, you could not possibly expect that the 3 maximum available technology would have anything to do 4 with the maximum technically feasible because the 5 economics are so disconnected that no one ever has the 6 incentive to go to the cost effective level. 7 If I go out and spend $100 on a room air 8 conditioner, 6,000 Btu/h, it will -- 5,000 Btu/h, it 9 will consume 600 watts. My local utility, or whoever 10 they buy from, has got to go construct 600 watts. 11 Actually, more because the real temperature is not 95 12 degrees on the condenser coil, it's probably more like 13 120. 14 But forgetting that even, 600 watts at the 15 cost the utilities around here are paying for new watts 16 is $1,800. So I'm spending $100 and society is 17 spending $1,900, and I'm not even counting transmission 18 and distribution, to buy an air conditioner and run it 19 one hour a year. 20 No one ever sees the economic advantage of 21 saving 10 percent of that other $1,800. So there is no 22 economic reason for anyone to produce a product 23 anywhere near the optimum and no sign that it's going 24 to happen in the past. You basically -- because for 25 central air conditioners utilities at least could say, EXECUTIVE COURT REPORTERS, INC.

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### 98 1 well, I'm going to -- its going to cost me $1,800, I 2 can give someone a rebate so they will buy the more 3 efficient, more expensive product. For room air, you 4 can't do that because if only one out of 10 of your 5 rebate recipients wouldn't have bought the room air 6 conditioner anyway then you've got more peak load 7 problems, not less. 8 So standards become the only mechanism in 9 this very broken marketplace for getting efficiency out 10 there, and you couldn't possibly expect that the market 11 would be anywhere near reflective of the life-cycle 12 economics of the product. 13 So specifically, I think suggests an analytic 14 direction for this product which is different than 15 almost any other product DOE has analyzed. And that 16 is, you should look at the first cost minimizing 17 efficiency on a societal basis because someone is going 18 to pay that extra $1,800 and it's going to be 19 disproportionately poorer people, by the way, because 20 electricity is a bigger fraction of the bill of poor 21 people, whether or not they even run an air 22 conditioner. 23 MR. BROOKMAN: Thank you. Yes, Phil Manthei. 24 MR. MANTHEI: Phil Manthei, Alliance Laundry 25 Systems. I just wanted to point out that you used the EXECUTIVE COURT REPORTERS, INC.

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### 99 1 California Energy Commission database as of June. I 2 think its October 5th California Energy Commission 3 required manufacturers to report their data based on 4 the results of the litigation. So there should be new 5 information coming. 6 MS. REICH: Yeah. They've been -- yeah. 7 These levels will be revised based on further inputs 8 that we do during the ANOPR analysis. 9 MR. BROOKMAN: Thank you. Do you wish to 10 comment? No. Okay. 11 Okay. Other comments? Yes, yes. Steve. 12 MR. ROSENSTOCK: Steve Rosenstock, Edison 13 Electric Institute. In terms of life-cycle cost 14 analysis, I don't know if DOE has ever tried -- done -- 15 well, you know, in terms of a societal cost analysis 16 for an individual product, it -- the factors vary so 17 much. Like, for electric generation, depending on the 18 technology, can be anywhere from I'll say $600 per k-w 19 for combined cycle gas turbine up to $2,000. It really 20 depends on the technology you're looking at. 21 And you know, on the gas side too, well, how 22 much does it cost to, you know, drill a new well versus 23 importing from overseas. You're importing LNG. There 24 could be costs on that side, too. And then, well, if 25 you're producing in the U.S. versus producing overseas, EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064100 1 how much of a cost impact is -- I mean, when you start 2 down that road there can be so many varying factors and 3 the standard deviation gets so large it could be very 4 difficult to -- for the standards rulemaking process. 5 Thank you. 6 MR. BROOKMAN: Thank you. Yes. Let's go to 7 Harvey. 8 MR. SACHS: Following up on earlier comments, 9 I wish to call attention to Slides 57 and 58. The 10 maximum available for both of these slides is footnoted 11 as sources for information on products available in the 12 United States. By using that criterion, we are 13 excluding, as far as I know, technologies like heat 14 pump water heaters. So that, as the dialogue with 15 David earlier illustrated, it's very important to think 16 about a broader sourcing and broader availability, 17 particularly the European and advanced oriental 18 markets. 19 MR. BROOKMAN: Thank you. Yes, David 20 Calabrese. 21 MR. CALABRESE: Dave Calabrese with AHAM. I 22 think that this discussion between max tech and max 23 available is traditionally one where there is some 24 difference of opinion on both sides. I think I 25 understand David Goldstein's comments and Harvey's EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064101 1 comments in regards to looking at these maximum 2 technology products. I think there is a great amount 3 of rationality and reason for the Department to look at 4 what is available at this time. 5 There are many prototypes out there and many 6 -- in some regards, in the previous rulemaking there 7 was a max tech considered for dish -- for clothes 8 washers or dishwashers that actually ended up being a 9 hybrid. It was half of one product that was on the 10 market and half of another. I think the Department was 11 trying to find the best way to look at what was 12 available, yet that wasn't a really rational approach 13 in that the product, frankly, could exist but really 14 didn't. 15 So we think looking at this maximum available 16 is a reasonable approach to what is working on the 17 market and what's available right now. So we would 18 encourage this consideration. 19 MR. BROOKMAN: Additional comments? 20 (No response) 21 MS. REICH: We'll move to room air 22 conditioners. I just want to point out that here there 23 are several voluntary programs, the Energy Star program 24 and CEE Tiers, Tier 1 and Tier 2, that have been 25 specified for each of the three product classes that we EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064102 1 are proposing as our initial -- for initial analysis. 2 So I want to point out that we noted 3 something interesting with the max available here, 4 which is, again, just based on the survey of available 5 information on CEC database. There were -- in the 6 Energy Star database there were -- in two cases for the 7 less than 6,000 Btu per hour and the 20,000 Btu per 8 hour or more product classes that the CEE Tier 2 was 9 actually more stringent or was a higher metric 10 efficiency level than what was currently available on 11 the market. So we can't actually propose a max 12 available level that's above the Tier 2 level. 13 So, you'll do comments on -- 14 MR. BROOKMAN: Yes. Comments on Slide 58, 15 air conditioner representative product classes. Harvey 16 Sachs. 17 MR. SACHS: This is of course preliminary and 18 based on information that's not nailed down hard. It's 19 my understanding, which may have errors, that the 20 market share of the Energy Star room air conditioners 21 is somewhere in the range of a third to a half of total 22 sales. If that's the case, it's not clear to me why 23 the Level 1 gap fill would be an important adjunct to 24 the analysis. 25 MS. REICH: That gap fill was proposed EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064103 1 because the increments between Energy Star and higher 2 levels are fairly small, whereas the difference between 3 the current standard and Energy Star is a relatively 4 larger change in efficiency. So we're attempting to 5 simply fill in the section of that cost efficiency 6 curve where the slope might be important. 7 MR. SACHS: I'm suggesting, I guess, that 8 it's remarkable to the manufacturers that in this 9 commodity market that you have identified there is 10 sufficient existing differentiation that the Energy 11 Star level is already a major factor in the market. 12 Therefore, it's not clear why analysis of a gap fill at 13 a level lower will help this proceeding. 14 MR. BROOKMAN: Mike Rivest. 15 MR. RIVEST: Mike Rivest, Navigant 16 Consulting. If there were no gap fill, you would 17 predetermine that the standard level, should there be a 18 new one, could never be less than Energy Star. 19 He saw right through that. 20 (Laughter) 21 MR. SACHS: Harvey Sachs. I had never 22 thought of that. Thank you. 23 MR. RIVEST: What happens, Harvey, is that as 24 you analyze the manufacturing impacts particularly, 25 what will happen is there will be a transition of EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064104 1 Energy Star at that point to a higher level. The 2 combined cost of moving the baseline product to the new 3 baseline and the Energy Star product to the new Energy 4 Star is cumulative. 5 MR. SACHS: I'm sorry. It didn't occur to me 6 that the manufacturer impact of Energy Star is part of 7 this proceeding. 8 MR. RIVEST: This has nothing to do with 9 manufacturing impact of Energy Star. 10 MR. SACHS: Isn't that what you just said? 11 MR. RIVEST: I -- the reality is that the 12 effect of a new standard -- when we analyzed the effect 13 on the shipments and the shipments impact, we looked at 14 the base case where there is no new standard and we 15 look at a world where there is a new standard, and it's 16 recognized that after a new standard there is a new 17 Energy Star. So we simply recognized that fact in our 18 shipments forecast. That's all. I think that's been 19 done as long as we've been rulemaking. 20 MR. SACHS: I appreciate that, but by the 21 Energy Star criteria as I understand them, the Energy 22 Star level is due to change anyhow because it's over a 23 quarter of the models, assuming that models track at 24 all with sales. So that, if there's any such 25 correspondence, regardless of whether this standard EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064105 1 changes, I believe the current sales data would trigger 2 a change in Energy Star. 3 MR. RIVEST: If that's something you believe, 4 that's something that can be commented on and should be 5 incorporated in the baseline forecast. 6 MR. BROOKMAN: Dave Calabrese. 7 MR. CALABRESE: I don't think it's assumed 8 for the Energy Star room air conditioner program 9 they're going to be changing the standard. I 10 understand what you're saying about the current market 11 share. The program, as I understand it, doesn't have - 12 - hasn't made plans to revise it at this time. 13 It's not an automatic change. There are a 14 number of programs with a wide range of market share. 15 In some cases they do change at 25 percent, 30 percent, 16 but there are many other factors that the program 17 considers before they make a standard or specification 18 change. So it has not been announced and as far as I 19 know, I am not aware of any imminent change. 20 MR. SACHS: Harvey Sachs. Thank you, David. 21 That's very helpful. Am I able to infer from your 22 comments that in fact Energy Star does represent a 23 market share of sales roughly in the range that I've 24 suggested? 25 MR. CALABRESE: You cannot. I'm not EXECUTIVE COURT REPORTERS, INC.

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### 106 1 acknowledging that whatever -- you commented it was 25 2 percent to 50. I do not have the data in front of me. 3 So I don't have any available data to comment upon 4 that market share. 5 MR. SACHS: Thank you. 6 MR. BROOKMAN: Thank you. Additional 7 comments with respect to room air conditioners, these 8 product classes, and these efficiency levels? 9 (No response) 10 MR. BROOKMAN: Okay. 11 MR. SACHS: If I might, Doug -- 12 MR. BROOKMAN: Yes. 13 MR. SACHS: -- offer one other observation. 14 I very much appreciate the data that have been brought 15 together. I find them very useful. I would just want 16 to observe that the ranges of efficiencies in each 17 column, excluding CEE Tier 2, which is not necessarily 18 available, are relatively large compared to the 19 efficiency ranges in some other products such as water 20 heaters. They're on average two or three times the 21 range that we see as product availability differences 22 for water heaters. 23 MS. REICH: Just a couple other issues that I 24 want to touch upon as part of the engineering analysis. 25 The first concerns the topic of proprietary designs. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064107 1 When DOE evaluates all the design options 2 that are available, some of these may include 3 proprietary technologies. We are very careful to try 4 and make the process as transparent as possible while 5 at the same time not appearing to favor one 6 manufacturer over another. 7 So when we come upon proprietary designs that 8 result in a unique efficiency level and there's no 9 other means by which that efficiency level can be 10 achieved, then in order to maintain confidentiality, 11 that's going to be an efficiency level that we do not 12 consider, that will not be analyzed. 13 I'm just going to move ahead to the 14 regulatory changes. This is a topic that's been hit 15 upon already but that as part of this rulemaking DOE 16 considers outside changes that are beyond just the 17 energy conservation standards. In particular, the one 18 that has been most clearly identified for room air 19 conditioners would be the phase-out of the R22. 20 My understanding is that there isn't really a 21 consensus yet on which refrigerant is going to be 22 replacing it but that the most likely candidate right 23 now is going to be R410A. The information that we have 24 observed so far indicates that there is an efficiency 25 penalty associated with R410A that's on the order of 5 EXECUTIVE COURT REPORTERS, INC.

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1 to 7 percent. 2 So how this plays out of course is going to 3 depend on the compatible components that become 4 available to the room air conditioner manufacturers. 5 So it's not really clear yet what the types of 6 compressors, for example, are going to look like. But 7 we recognize that this will come into bear in this 8 rulemaking and will potentially affect what the 9 manufacturing costs are going to be to achieve even the 10 baseline efficiency level, let alone the higher 11 efficiency levels. 12 MR. BROOKMAN: Dave Calabrese. 13 MR. CALABRESE: A quick comment in that 14 regard. First of all, is this the point, Mike Rivest, 15 where you're looking at the manufacturer's impact -- 16 the cumulative regulatory burden or is this a separate 17 part of your analysis here as far as other regulations 18 that could have an impact on a manufacturer as a whole 19 but not specifically on manufacturing of room air or 20 clothes dryers? 21 MR. RIVEST: You know, in the context of the 22 engineering analysis, that would be more changes to the 23 product, the baseline product for example, and other 24 parts of the analysis would be more broadly. 25 MR. CALABRESE: I have only one small point, EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064109 1 then, to make in regards to refrigerant. This is 2 proposed legislation right now in the Congress. We 3 don't know if it will be enacted. However, it is 4 proposed. 5 There is a proposal for adding a fee, a levy, 6 at the time of purchase of a virgin refrigerant. This 7 proposal is contained in a bill offered by 8 Representative Waxman and would require manufacturers 9 to pay this additional levy. The monies collected 10 would go into a bank. The bank would use that money to 11 encourage reclaimers of used refrigerant to reclaim 12 these at the end of life. 13 For a manufacturer, the impact would be 14 increased cost of refrigerant at the time purchasing it 15 from the manufacturer of that refrigerant. So if this 16 legislation, which has been introduced, is enacted, the 17 system would be put in place and the law, or the bill 18 at this time calls for a 30-cent-a-pound levy for the 19 sale of any HFC, CFC, or HCFC. So we'll make that in 20 our comments when we submit them. 21 MR. RIVEST: Mike Rivest. The relevance to 22 the engineering analysis is that anything that would 23 change the cost efficiency curve. So here you're 24 talking about a cost per pound. Now, the assumption is 25 that because of the timing of this regulation the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064110 1 baseline product will be one without R22. So that's 2 our baseline product. Then, as we push the efficiency 3 on it, if there's a correlation between pounds of 4 refrigerant and efficiency, then that would have an 5 effect on the curve. 6 MR. BROOKMAN: Thank you. Harvey Sachs. Oh, 7 Harvey, let's let Phil go. 8 MR. SACHS: Please. 9 MR. BROOKMAN: Phil. 10 MR. MANTHEI: I'm not sure if it's set at 11 this point, but the clothes dryer has an outside 12 regulatory issue potential that Underwriters Laboratory 13 is changing the electric clothes dryer standard to 14 include a fire containment requirement. We're 15 understanding it probably will have a four-year 16 implementation period. So if they would implement or 17 publish the standard here this next year, we're kind of 18 coming up on the same timing as this rule. So how that 19 impacts the baseline product, we have to consider that. 20 MR. BROOKMAN: So, additional comments to 21 that point would be very helpful to the Department. 22 Harvey Sachs. 23 MR. SACHS: Phil, I hope that your comments 24 will address whether this will have an efficiency 25 impact as well as a regulatory input. The fire EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064111 1 suppression for electric clothes dryers. 2 MR. MANTHEI: I guess all I'm saying is we 3 have to take into account that there is this regulatory 4 issue going on. I'm not aware how that may or may not 5 impact the efficiency. 6 MR. SACHS: This is Harvey Sachs. I would 7 like to turn back to Slide 62 and suggesting that I'm 8 not real comfortable with all of the bullets. As Mr. 9 Rivest has said, our baseline will include the 10 conversion already to non-ozone-depleting refrigerants. 11 Dave Calabrese earlier said that the room air 12 conditioner manufacturers have not yet seriously turned 13 their attention to the design of models for that, if I 14 understood him correctly, which would imply roughly a 15 two-year -- assuming even a doubling of that, there are 16 thermodynamic issues. 17 But the fact is that there are few compatible 18 low-capacity rotary compressors on the market today, 19 which seem to be irrelevant for a product for which the 20 regulation will take effect in 2014. And I'm concerned 21 that we not depend overly on assumptions like this when 22 we've seen over and over again in a lot of fields that 23 as the needs become clearer the component 24 manufacturers, as well as the equipment manufacturers, 25 respond in very creative ways. EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Thank you. Other comments on 2 Slide 62 before we move on? 3 MR. SACHS: Of course, that -- Harvey Sachs 4 again. That just reiterates my comments where there is 5 a divergence of opinion of the 5 to 7 percent decrease 6 in efficiency due to the refrigerant changeover. 7 MR. BROOKMAN: Right. The substitution. 8 MR. SACHS: The substitution versus redesign 9 issue. And clearly there are differences in opinion 10 there. 11 MR. BROOKMAN: Thank you. Okay. 12 So now were moving on to preliminary 13 manufacturer impact analysis. Constantin von Wentzel. 14 Preliminary Manufacturer Impact Analysis 15 Constantin von Wentzel 16 (PowerPoint presentation) 17 MR. von WENTZEL: Good morning, ladies and 18 gentlemen. I'm here to talk to you about the process 19 we're going to use for the preliminary impact analysis. 20 That comes out of a legislative requirement that Judy 21 talked to you earlier about on Slide Number 18, which 22 is to assess the economic impact of standards on 23 manufacturers, any impacts that energy efficiency 24 standards may have on energy efficiency. 25 In 2006 we changed the process such that we EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064113 1 actually conduct these interviews before the ANOPR as 2 well as after the ANOPR to get a better input from 3 manufacturers regarding their key issues, baseline unit 4 design, and any other factors. 5 In particular, were at this point trying to 6 -- the Department would basically like to establish the 7 impact in terms of the conversion capital requirements, 8 the research and development that may be required to 9 achieve certain efficiency levels or the implementation 10 of design options, and so on. 11 So we've got three main phases in the MIA 12 process. We develop an industry profile where 13 basically -- where the Department conducts a lot of 14 research to establish the environment that an industry 15 is operating in, which is to say how profitable is an 16 industry, how many people are employed in it, what 17 kinds of products are being manufactured and where and 18 why. 19 We then develop an interview guide and then 20 conduct these interviews with manufacturers to 21 basically come to a better understanding of, you know, 22 what is a baseline unit, what kinds of efficiency 23 improvement opportunities are out there, comments 24 regarding product classes, key issues, shipments, 25 markets, and so on and so forth. We use that in the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064114 1 ANOPR -- in drawing up the ANOPR because we would like 2 to understand as best as possible what the key issues 3 are for manufacturers. 4 So typically, manufacturers can give us very 5 good feedback regarding the potential impacts of energy 6 conservation standards. They basically allow us to 7 verify that our market research was correct. 8 So as I discussed earlier, we evaluate the 9 current market industry structure and produce an 10 industry profile. We also try to identify any 11 subgroups potentially at this stage if we can and come 12 up with shipment projections, as is stated here, 13 conversion costs, product mix, market shares, and any 14 cumulative regulatory burdens such as the one that Phil 15 just described. 16 And that, I believe, is it. Any questions? 17 MR. BROOKMAN: Mike Rivest. 18 MR. RIVEST: Thank you. The -- we've just 19 gone through a first set of ANOPRS, if you will. We've 20 just completed -- completing the ANOPR for AHAM 1 and 21 for lamps and commercial refrigeration equipment. 22 These -- having early interviews with manufacturers has 23 been, I think, very, very valuable in that it's allowed 24 us to narrow the field in terms of what the important 25 issues are and to bring those forward early in the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064115 1 rulemaking process and have them out on the table. 2 But also, it's been very valuable for us in 3 validating our engineering analysis. I think in the 4 past -- in past rulemakings there has been a concern 5 that where DOE generates cost data and industry 6 generates cost data sometimes they have been at odds. 7 This has given us the opportunity to hopefully achieve 8 some convergence through better understanding of how 9 we're generating these curves. 10 So I think the preliminary -- the interview 11 guides that you'll see for the manufacturer impacts 12 you'll see have two components to them. They have an 13 engineering analysis component and a manufacturing 14 impact component to them, and the guides that are 15 prepared are actually included in the TSDs for you to 16 look at. 17 MR. BROOKMAN: Questions or comments on this 18 set of slides, culminating in Slide Number 68 19 describing the methodology and these products? 20 (No response) 21 MR. BROOKMAN: So, that's all we're supposed 22 to do before lunch? 23 MR. von WENTZEL: Yeah. 24 MR. BROOKMAN: Yes? 25 MR. von WENTZEL: That's it. EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: We've made good progress. 2 It's now 12:10 by my watch. It takes just about an 3 hour typically to get lunch and get back. I have some 4 suggestions for you for places close by which I'll say 5 in just a moment. But let's do return and start back 6 at 1:10 and make it through the rest of these detailed 7 descriptions of the various analyses.

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1 A F T E R N O O NS E S S I O N 2 1:10 P.M. 3 MR. BROOKMAN: So we made really good 4 progress this morning, and we're just about right on 5 schedule, just a few minutes behind. That's really 6 good news. So we are moving on to, on your agenda, the 7 one o'clock time frame, markups for equipment price 8 determination, energy use determination, and life-cycle 9 cost and payback period analysis. Greg Rosenquist. 10 Markups for Equipment Price Determination, Energy Use 11 Determination, and Life-Cycle Cost and Payback Period 12 Analysis 13 Gregory Rosenquist 14 (PowerPoint presentation) 15 MR. ROSENQUIST: Okay. Hello,everyone. As 16 he said, I'm Greg Rosenquist from Lawrence Berkeley 17 National Laboratory. I'm brand new to this.I'm only 18 in my seventeenth year. So my hair is getting shorter, 19 I'm getting older. 20 (Laughter) 21 MR. ROSENQUIST: Hope you haven't had too big 22 of a lunch and can stay awake during the afternoon for 23 all these details I'll be presenting. 24 I'll be carrying you through the rest of the 25 ANOPR analyses, all the way through the national impact EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064118 1 analysis, and I'll be starting with the markups for 2 equipment price determination. 3 What we're doing here is we're taking the 4 manufacturing cost information that's generated in the 5 engineering analysis and converting them into consumer 6 retail prices and feeding that into the life-cycle cost 7 and payback period analysis. We've already done some - 8 - a little bit of work in this area to characterize how 9 the products are currently being distributed from the 10 manufacturers to the consumers. We've looked at some 11 data, the ARAM fact book that says that over 93 percent 12 of the products are distributed from manufacturers 13 through retailers, retailers like Best Buy, Home Depot, 14 Lowe's, Sears, those type of outfits. 15 So what we plan on doing is developing a 16 markup for each one of those parties in the 17 distribution channel. That is, a manufacturer markup 18 and a retailer markup. For the manufacturer markup we 19 plan to use filings to the Securities and Exchange 20 Commission, these 10K reports, to calculate again those 21 markups. For retailer markups we're going to be using 22 U.S. Census Bureau business expenditure survey data, 23 specifically for home appliance retailers. 24 What we may also do is go to Internet 25 retailers and collect retail prices from those sites as EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064119 1 a way to validate the prices that we calculate from our 2 markups approach. If we do go ahead and do that, we'll 3 investigate the variability of those retail prices. 4 So at this point we're -- Doug, do you want 5 to -- 6 MR. BROOKMAN: Yes. Any comments or 7 suggestions related to these estimates? You see a host 8 of them there on Slide 70. 9 MR. ROSENQUIST: I just want to repeat; this 10 is an approach that we've used in relatively recent 11 rulemakings, so. 12 (No response) 13 MR. ROSENQUIST: If not, I'll move ahead with 14 the next step in the process, which is the energy use 15 determination. 16 The purpose of this analysis is to develop 17 the annual energy consumption data for each of the 18 efficiency levels that are being analyzed in the 19 engineering analysis. These get fed into, again, the 20 life-cycle cost and payback period analysis to 21 eventually develop annual energy costs, coupling them 22 with energy prices. 23 Our method is going to be relying on using 24 EIAs, the Energy Information Administration's, 25 residential energy consumption survey. So what we'll EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064120 1 be doing is developing these household samples that use 2 clothes dryers and household samples that use room air 3 conditioners. 4 I should go back and say that RECS is a 5 survey that's conducted by EIA and it's 5,000 or so 6 household records. That's representing the over 100 7 million households in the U.S. housing population. 8 So we'll be using this RECS data again to 9 develop these household samples for each one of the 10 products and then coupling that data -- coupling that 11 with the data coming out of the engineering analysis, 12 specifically capacity and efficiency data. We'll be 13 using that to develop the annual energy use. 14 This provides a little bit more detail about 15 exactly the approach we will be using to determine 16 annual energy consumption. Let me first start with 17 clothes dryers. The first step is to, again, use RECS. 18 RECS provides to us directly the annual usage of the 19 clothes dryers and cycles per year for each household 20 record that has a clothes dryer. 21 So because we have that usage information, we 22 can couple that with the energy factor data from the 23 engineering analysis to develop an annual energy use 24 for each household in the sample by efficiency level. 25 Now, for room air conditioners it's generally EXECUTIVE COURT REPORTERS, INC.

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1 the same approach, a little bit more involved. Again, 2 using RECS, it provides us with the annual energy 3 consumption for that room air conditioner for each 4 household. We'll then be deducing from the room air 5 conditioner's age the EER of that particular room air 6 conditioner by using shipment weight and efficiency 7 data. That's provided in AHAN's fact book. 8 And then finally, we'll be deducing the 9 cooling capacity of that unit from the cooled square 10 footage based upon basic sizing criteria. 11 So knowing those three values and using the 12 DOE test procedure equation for calculating energy 13 consumption, we can come up with the usage for each 14 room air conditioner in the household sample. That 15 will be in operational hours per year. 16 That DOE test procedure equation is annual 17 energy consumption equals cooling capacity divided by 

### 18 EER multiplied by hours. And since we know three of 19 those four inputs, we can calculate the annual usage. 20 Now, we're going to couple that usage with 21 the data coming from the engineering analysis, 22 specifically the EER and cooling capacity, to develop 23 an annual energy use for each household record by 24 efficiency level. 25 Yes, Steve. EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Steve Rosenstock. 2 MR. ROSENSTOCK: Steve Rosenstock, Edison 3 Electric Institute. For the room air conditioners, 4 does RECS have information about number of room air 5 conditioners -- when they're doing their survey, number 6 of room air conditioners per household? The reason I 7 bring that up is because of diversity factors in usage 8 of the room air conditioners. 9 And also, does it show what percentage of 10 room air conditioners are also in the same household as 11 a central air conditioner, where it's like a -- I'll 12 say it's a supplemental or secondary unit being used? 13 MR. ROSENQUIST: Yes to both those questions. 14 What we plan to do is exclude those households that 15 have a central air conditioner and a room air 16 conditioner because that annual energy consumption will 17 be for all space cooling and not dedicated specifically 18 to the room air conditioner. 19 For unit -- for households that have multiple 20 room air conditioners, we're still thinking through 21 this process but we're thinking that we'll just divide 22 the annual energy consumption by the number of units to 23 get an annual energy consumption per unit. Of course 24 that implies a lot of things about the usage of the 25 room air conditioner, but we think that will give us a EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064123
1 good rough estimate ultimately of the usage of the air 2 conditioner. 3 MR. BROOKMAN: Yes, J.B. 4 MR. HOYT: J.B. Hoyt, Whirlpool Corporation. 5 So as I understand it, you're using the RECS data, 6 which is somewhat dated and a very small sample size. 7 But you're using that for your cycles per year input 8 only; is that correct? 9 MR. ROSENQUIST: Yeah. For clothes dryers 10 the cycles per year, yeah. 11 MR. HOYT: Okay. And yet we've got a test 12 procedure that would have presumably a different 13 number. So, is that a disconnect in the process? 14 MR. ROSENQUIST: Well, that's one of the 15 issues that's been pointed out with the test procedure 16 for clothes dryers, that the current cycles per year 17 are probably overstated. By how much is unknown, but 18 from the clothes washer test procedure we know it's -- 19 that was 392 cycles per year, I believe. It has a 20 usage factor for the dryers of 84 percent. That brings 21 it down to 329. 22 We have actually done some calculations 23 already, and the number we're getting out of RECS is 24 even a little bit less than that, maybe on the order of 25 10 percent. So we're thinking that the usage data out EXECUTIVE COURT REPORTERS, INC.

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1 of RECS is -- seems reasonable, in other words. 2 MR. HOYT: Oh, okay. I think most of us in 3 the room would agree, given what's happened with 4 clothes washers, that the dryer test procedure is today 5 invalid in that regard. But if you're saying the RECS 6 data is really supportive of that 329 or something in 7 that neighborhood, then that's okay. 8 MR. ROSENQUIST: That's right. 9 MR. HOYT: I just -- disparate numbers there 10 because the analysis would be invalid. 11 MR. ROSENQUIST: Right, right, right. 12 MR. BROOKMAN: J.B., before you go away, is 13 that consistent with your knowledge and your 14 experience? Does industry have data relating -- along 15 those lines? 16 MR. HOYT: A little bit of data. I've not 17 had a chance to explore what we might have in as much 18 detail as I'd like, very honestly. The logic presented 19 in the framework document, however, does appear 20 reasonable to us. 21 MR. BROOKMAN: The logic? That's different 22 from the data? 23 MR. HOYT: Well, no, I mean, taking it from 24 where it was, 416 or something, down to 329. 25 MR. BROOKMAN: Okay. EXECUTIVE COURT REPORTERS, INC.

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1 MR. HOYT: We're comfortable with both the 2 approach, and the outcome is in the right realm. 3 MR. BROOKMAN: Okay. David Calabrese. 4 MR. CALABRESE: Dave Calabrese. What Greg 5 was saying does sound reasonable, as J.B. has noted. 6 We do collect, of course, data on our products and 7 consumer use data and the like. So I don't want to 8 commit to anything here. I do want to further 9 determine whether we have something that can perhaps 10 supplement this, you know, considering this data is 11 dated to 2001, so. 12 MR. BROOKMAN: David Goldstein. 13 MR. GOLDSTEIN: David Goldstein, NRDC. I 14 have a couple of concerns about relying on the RECS 15 database related to the fact that nothing is really 16 being measured of these parameters. You're not 17 measuring number of uses per year. At best, you're 18 relying on self-reports and you haven't metered the air 19 conditioner or the number of hours that it's on. 20 So if there's any other sources you can get 21 that would corroborate or change the RECS-based data, I 22 would encourage you to look into them. 23 I'm not saying that I can -- that they're 24 biased in any way that I can predict, but they just -- 25 the method doesn't seem very reliable. Self-reports on EXECUTIVE COURT REPORTERS, INC.

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1 energy use aren't very good. I know from travel 2 behavior, travel surveys underestimate actual travel by 3 different factors depending on different trip purposes 4 and days of the week. So I would presume people are 5 equally mistaken about reporting how many dryer loads 6 or air conditioner hours they're using. 7 Secondly, I have a specific problem with 8 relying on any residential number for room air 9 conditioners because a lot of them are used in 10 commercial facilities where the number of hours is 11 drastically longer than the 500-ish range. I usually 12 stay in a hotel in Washington, D.C. that conditions its 13 space with room air conditioners, residential, consumer 14 products, and they use 500 hours a month, not a year. 15 I don't think that's that atypical. 16 So we need to take some look at where these 17 things are ending up. 18 MR. ROSENQUIST: Dave, are you talking about 19 an actual room air conditioner as opposed to a package 20 terminal air conditioner? 21 MR. GOLDSTEIN: I can tell the difference, 22 yes. 23 MR. ROSENQUIST: Okay. I just wanted to make 24 sure. 25 MR. BROOKMAN: Thanks for clarifying that. EXECUTIVE COURT REPORTERS, INC.

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1 (Laughter) 2 MR. BROOKMAN: Let's be clear what we're 3 talking about here. That's good. 4 Okay. Additional comments on this one? On 5 this graphic. Yes, Andrew. 6 MR. DeLASKI: Just, Greg, in response to your 7 calculation on dryers, I don't have any data on dryer 8 annual energy or annual number of cycles. The one 9 number that I'd urge you to think about and push on a 10 little bit is the notion that only 84 percent of the 11 laundry that goes into clothes washers gets -- goes 12 into a dryer. I'm not sure where that number comes 13 from or what it dates from. 14 It just -- I just think it needs to be 15 thought about a little bit, whether that's an accurate 16 -- the notion that 16 percent of the laundry is getting 17 line-dried just doesn't sort of meet with my -- doesn't 18 seem right to me intuitively. So I'd like to see where 19 that data came from and if it still holds up. 20 MR. ROSENQUIST: Actually, if anything, it 21 strikes us as being a little on the high side because 22 you -- while there is some instance of line-drying, 23 there are a number of things that don't get dried at 24 all, that are just air-dried in the home, delicates and 25 things like that. So I'm not sure 84 percent is -- it EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064128
1 may be too high. 2 MR. DeLASKI: My only point is that we should 3 look at that number and see if maybe it's too high, 4 maybe it's too low, where it came from, if there's 5 alternate sources, whether industry has got them or 6 someone else has got them. Let's look for other 7 sources. 8 The other thought on room A/C is that you 9 might check in with the folks in New York, who -- 10 NASERDA and the PUC there, who's invested a lot of 11 money in encouraging efficient A/C -- programs and 12 such. They may have some data on room A/C energy 13 consumption. They've invested a lot of rate-payer 14 dollars in encouraging efficient room A/C. So NASERDA 15 and the PUC may be good data sources for you. 16 MR. ROSENQUIST: Thank you. 17 MR. BROOKMAN: Did you -- no? Okay. Please. 18 MR. ROSENQUIST: So this is just our slide 19 requesting comment. I think all the comments are now 20 out on energy use determination. So we'll be turning21 to the next step in the analysis, which is the life22 cycle cost and payback period analysis.23 The purpose of this is to determine the life24 cycle cost impacts and the payback period of standards 25 relative to a baseline efficiency level for each one of EXECUTIVE COURT REPORTERS, INC.

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1 the product classes that we'll be analyzing in the 2 engineering analysis. 3 The life-cycle cost, it's basically comprised 4 of two components. It's the first cost, the total 5 installed cost of that particular appliance, plus the 6 lifetime operating expenses. Since, again, we're 7 looking at operating expenses over the life of the 8 equipment, we'll be using discount rates to get it down 9 to a present value. 10 Again, this is being done from -- to 11 emphasizes, it's being done from the perspective of the 12 consumer. We're going to be implementing this analysis 13 within a spreadsheet tool using Microsoft Excel for 14 purposes of trying to make the spreadsheet tool as 15 transparent as possible. So we'll be distributing that 16 spreadsheet tool once it is developed. 17 We'll again be looking at results that are 18 expressed as LCC differences. That is, the life-cycle 19 cost difference between a particular efficiency level 20 or standard level and a baseline level. We'll also be 21 calculating payback, which is the change in the total 22 installed cost over the change in the first year's 23 annual operating expenses. 24 Now, the approach that we plan on using, as I 25 think some of you may be familiar with, it relies on EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064130 1 using this Monte Carlo simulation technique. It relies 2 on characterizing all the inputs to the analysis with 3 probability distributions rather than single point 4 values. 5 So what this Monte Carlo simulation technique 6 will do is, going back to that RECS household sample, 7 it will sample a household based upon its 8 representativeness or its weight and then take from 9 that the associated annual energy consumption that 10 we've calculated for that household as well as its 11 energy price. So even though each household will have 12 a unique value, when you look over the breadth of the 13 whole household sample we'll be capturing the 14 variability in that annual energy consumption and in 15 the energy prices. 16 Then we'll be combining that with these 17 probability distributions that will be developed for 18 the other inputs into the analysis, like the discount 19 rates and equipment lifetimes. If we do use 20 distributions for manufacturing costs, we'll be 21 incorporating that as well. 22 One thing not itemized on this bulleted list 23 is that this Monte Carlo simulation technique will be 24 done by running 10,000 iterations. So we'll be 25 basically performing 10,000 LCC and payback period EXECUTIVE COURT REPORTERS, INC.

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1 calculations. So we'll have a distribution of results 2 which we can in turn calculate an average value from or 3 a median value from as also a standard deviation. 4 We plan to conduct the analysis for each of 5 the product classes that are going to be analyzed in 6 the engineering analysis. That includes all six 7 product classes for clothes dryers. That includes the 8 vent-less clothes dryer product classes and the three 9 product classes that were identified in the engineering 10 analysis. Those are the ones that are without reverse 11 cycle and with louvered sides and in those three 12 capacity categories you see here on the overhead. 13 Another very critical part of this approach 14 is to characterize how consumers are currently 15 purchasing products today and capturing which consumers 16 are already purchasing products above the baseline 17 efficiency level. I'm calling this the base case 18 efficiency distribution. What this does is to ensure 19 that if a consumer is already purchasing a more 20 efficient piece of equipment that they're not going to 21 be counted in as part of the people benefiting from a 22 particular efficiency level or standard. So this 23 prevents overstating any possible benefits from a 24 particular efficiency level that we'll be analyzing. 25 So this slide goes over the type of EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064132 1 hopefully the type of information we'll get from 2 stakeholders on the base case efficiency distributions. 3 For clothes dryers we're asking for efficiency 4 distributions for four product classes, the four vented 5 product classes, in the particular efficiency bins that 6 you see in this table. Of course, the efficiency bin 7 values can change depending upon the input that 8 stakeholders provide us. 9 I also wanted to note that we're not asking 10 for information on vent-less product classes just 11 because those products currently aren't rated and we're 12 assuming that there's just no information on those 13 products right now. But if there is, we would 14 certainly love to take that. 15 On room air conditioners, again you can see 16 we're looking for these base case efficiency 17 distributions on these three particular product classes 18 in, again, those particular efficiency bins that you 19 see up there on the overhead. And again, those 20 efficiency bins can change depending on the information 21 we get from stakeholders. 22 So at this point we're looking for any 23 stakeholder input on this approach of using Monte Carlo 24 simulation for the LCC and payback period analysis. 25 MR. BROOKMAN: David Goldstein. EXECUTIVE COURT REPORTERS, INC.

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1 MR. GOLDSTEIN: David Goldstein, NRDC. This 2 approach puts a lot of detail and effort into 3 calculating the smaller impact on the consumer and 4 ignores the larger impact on the consumer which I 5 alluded to earlier, which is the subsidy by the utility 6 system of the cost of electricity over the lifetime of 7 the product. 8 Quantitatively, rough numbers, one watt of 9 air conditioner at 500 hours a year is going to have a 10 discounted present value of about 50 cents of lifetime 11 consumer payments for the electricity. However, 12 producing that one watt is $3,000 based on the actual 13 costs of plants that are being approved or not right 14 now by utilities in this general region of the country. 15 Power has come up with that number and its pretty 16 typical for coal plants. Mr. Rosenstock presented some 17 lower numbers. His lowest number, 60 cents, is still 18 higher than 50 cents. 19 So the big impact is that you buy a watt of 20 air conditioning and the utility spends from 10 cents 21 to $2.50 on subsidizing your use of the air conditioner 22 over its life. They get that money back from charging 23 every other consumer on their system higher tariffs. 24 As I mentioned, this is a distributional 25 impact. This is a winners and losers effect, and it is EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064134 1 bigger at its smallest than the effects that you're 2 proposing to put so much effort into studying. So I 3 think this is an essential piece of the calculation 4 that needs to be done. 5 MR. ROSENQUIST: I guess the one comment or 6 possible response is that I think Steve already alluded 7 to the electricity prices being paid by consumers. I 8 guess sort of a perfect regulated market should reflect 9 the price -- the cost of supply to those consumers. So 10 I mean, the intent is to capture, you know, that effect 11 that you're talking about by using current electricity 12 prices in the analysis. 13 MR. GOLDSTEIN: Well, no. The -- you're 14 assuming something which is demonstrably wrong, which 15 is that the regulatory system prices electricity 16 properly. In California, where we've studied it in 17 detail, we've come up with time of use pricing, and the 18 price of a kilowatt-hour on peak is more than 10 times 19 what it is off peak. And until your consumer pricing 20 reflects I think it's 30 cents a kilowatt-hour -- maybe 21 it's 50 cents -- for a lot of the times that these air 22 conditioners are on, it will not give the right answer 23 from a societal perspective. 24 If it's right from a consumer perspective, 25 you're ignoring the subsidy. The subsidy, again, is EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064135 1 the big economic effect that's going on in terms of 2 impact on the consumer, which is one of the criteria 3 that DOE has to use under NAECA in evaluating economic 4 justification. 5 MR. BROOKMAN: So David, I'm certain the 6 Department would welcome your detailed comments about 7 how DOE would consider these issues in their analysis. 8 MR. GOLDSTEIN: Sure. I mean, it doesn't 9 have to be that detailed. It wouldn't be a tremendous 10 amount of work to collect what the cost is of 11 incremental generation and transmission and what the 12 diversity factor is on room air conditioners and, on 13 the other hand, the transmission losses and the 14 performance at field conditions as opposed to the 15 modest 95 degree condenser rating condition. You know, 16 those are pretty straightforward, and even if you get 17 it wrong by 10 percent, it's better to be approximately 18 right than exactly wrong. 19 MR. BROOKMAN: Steve Rosenstock. 20 MR. ROSENSTOCK: Steve Rosenstock, Edison 21 Electric Institute. There will be a trend for more 22 advanced metering and technology where consumers will 23 be able to see their electric prices change depending 24 on their suppliers. I know that there are many places, 25 such as California, where they have gone to critical EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064136 1 peak pricing. As I recall, the critical pricing tariff 2 is the numbers that Mr. Goldstein was referring to 3 where the critical price was about 10 times higher than 4 the regular prices. Again, more or less. I'll say 60 5 or 69 cents a kilowatt-hour during critical peak times. 6 However, at other times it might be lower 7 than the standard offer rate. If the standard offer is 8 14 cents, the non-critical peak time price might be 10 9 cents, and that critical peak price might be limited in 10 terms of the number of hours per year. It can get 11 pretty complicated depending on where you are and how 12 the tariff is going to be structured. 13 I see where that could be going, but again, 14 the problem that comes in is trying to predict that 15 trend throughout the country could be rather difficult. 16 But that is -- for this product in particular, that 17 might have an impact for some of the hours but not for 18 all of the hours. 19 So it's kind of -- and also, the other thing 20 is also with some of these tariffs that critical price 21 might be up to 100 hours a year but might really depend 22 on grid or temperature conditions, where some years it 23 might be 10 hours, other years it might be 100 hours. 24 So again, it just adds a lot of chaos. 25 MR. BROOKMAN: -- rely on written comments. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064137 1 So if people want to -- these methodologies, that -- I 2 would like, though, right now for everybody to take a 3 peek at Slide 79 and any additional comments on what 4 should be there. Particularly, there are a lot of 5 light boxes in this slide. If there are any comments 6 to be made at this point on those. 7 MR. ROSENQUIST: Again, just to explain 8 further, let's say for vented electric standard, the 9 market shares that we're hoping to get for these 10 efficiency bins would add up to 100 percent. 11 MR. BROOKMAN: Right. Dave Calabrese. 12 MR. CALABRESE: Dave Calabrese. AHAM will be 13 collecting data, as we have done previously, and we 14 will know more after doing that whether these bins are 15 appropriate or not. At first glance some of them -- 16 the level of detail may be too much. There may not be 17 products in various bins. But we will collect the data 18 and see what's available. 19 MR. BROOKMAN: Okay. Thank you. Other 20 comments? Andrew DeLaski. 21 MR. DeLASKI: I'm sure you can find the data,22 but of course EPA has got data for Energy Star23 compliant room air conditioners if you don't have it 24 already. That would help fill in some of these boxes 25 for you. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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1 MR. ROSENQUIST: That's definitely one source 2 of information for room air conditioners. You know, 3 that's basically either in or out, though. I mean, 4 we're asking for a little bit more detail about the 5 actual distribution rather than what percentage are 6 Energy Star. But again, that's definitely one source 7 of information we can use. 8 MR. BROOKMAN: I wonder if there's any other 9 source of that data. I see several -- for the record, 10 several were shaking their heads no. 11 Okay. So let's proceed then. 12 MR. ROSENQUIST: Okay. What I'm showing you 13 in this slide is something I think a lot of you have 14 seen before, which is the flow chart for the 15 calculation of the life-cycle cost and payback period 16 and how all the inputs feed into that final 17 determination of LCC and payback period. Let's just 18 work through it. 19 On the upper left-hand corner are the inputs 20 we get from the engineering analysis, which are the 21 baseline manufacturing costs and the stair level 22 manufacturing cost. Essentially that manufacturing 23 cost curve by efficiency for each one of the product 24 classes that we intend on analyzing. 25 The next set of inputs come from the markups EXECUTIVE COURT REPORTERS, INC.

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1 for price determination, which I just talked about. 2 That's the manufacturer markup, the retailer markup, 3 and the sales tax, which is used to convert the 4 manufacturing cost into an equipment or consumer retail 5 price. 6 That's combined with the installation cost, 7 which is the cost of materials and labor to install the 8 piece of equipment, if it's applicable, into a total 9 installed cost to the consumer. 10 The next input, which I just got done talking 11 about, the energy use, comes from the energy use 12 determination. That's coupled with energy prices to 13 give you an annual energy expense. That in turn is 14 coupled with repair and maintenance costs to give you 15 an annual operating expense, and then we're using 16 lifetime of the product, discount rate, energy price 17 trends to get lifetime operating expenses for the 18 particular appliance. So when we add that with total 19 installed cost, that gives us the life-cycle cost and 20 the change in total installed cost and the change in 21 the first year's annual operating expenses gives us the 22 payback period. 23 So I'm going to go into a little bit of 24 detail on the first one of these inputs, which is 25 energy prices. Again, these are used to convert the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064140 1 annual energy consumption into annual energy costs that 2 again turn into annual operating costs. 3 What we plan on doing, what we want to do, is 4 take information from the Energy Information 5 Administration. This is Form 861 data. It provides 6 the revenues and sales of utilities in the U.S. for -- 7 also, the number of customers that those utilities 8 service. So for each utility in the U.S., we can 9 divide the revenues by the sales to get an average 10 electricity price by utility. 11 Then, since we know the number of customers 12 that are being served, then we can develop regional 13 energy prices based upon whatever regions we want to 14 look at. In our case, we're going to be looking at the 15 nine census divisions and four large states. So we'll 16 be looking at California, Texas, Florida, and New York. 17 So, a total of 13 regions. So by developing average 18 electricity prices for each one of those 13 regions, 19 we'll be capturing at least at that level the regional 20 variability of those electricity prices in our 21 analysis. 22 For natural gas prices, because we need to do 23 that for gas dryers, we'll be using EIA natural gas 24 monthly data, which provides us with an annual average 25 price of gas for each one of the 50 states. And again, EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064141 1 by using population data, we plan to aggregate that up 2 into the 13 regions were going to be looking at, the 3 nine census divisions and the four large states. By 4 doing that well be able to capture, again, the 5 regional variability in those natural gas prices into 6 our analysis. 7 We then plan to forecast those prices out 8 into the future, because we have to look at the 9 lifetime operating costs of operating the appliance, by 10 using forecasts from the Annual Energy Outlook. That 11 provides us with three price forecasts that we 12 traditionally use, which is our reference case 13 forecast, a high growth forecast, and a low growth 14 forecast. 15 We also consider, you know, other types of 16 credible forecasts that stakeholders may identify as 17 sensitivities to forecast future energy prices. 18 So at this point I would like to take any 19 input on this planned approach to develop energy prices 20 for this analysis. 21 MR. BROOKMAN: Tom Eckman. 22 MR. ECKMAN: Tom Eckman, Northwest Power and 23 Conservation Council. On -- as I recall, when we were 24 involved in the commercial air conditioning rulemaking 25 you guys went to some trouble to identify what the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064142 1 pricing differential was for those air conditioners 2 because they were running during peak periods of time. 3 It strikes me a comparable kind of methodology ought 4 to be applied here because, particularly in the large 5 states, California, Texas, both are restructured. I 6 think New York may have real-time pricing. The average 7 revenue per kilowatt-hour is nowhere close to what the 8 actual kilowatt-hour charge will be when these systems 9 are running during the summer months. 10 So as David was trying to get at, you know, 11 you can't get all the way to the avoided cost, but the 12 prices that consumers will be paying during those 13 periods of time may be quite different than they do pay 14 on average. So, looking at the load shape of this 15 equipment like we did commercial air conditioners and 16 trying to identify what those prices might be, the RECS 17 data and the EIA data doesn't reveal that. So you need 18 to look beyond that first window. 19 MR. ROSENQUIST: Yeah. Again, what we did in 20 that commercial unitary air conditioner analysis was 21 actually take tariffs from a sample of 90 utilities. 22 So we had on the order of 220 tariffs. By looking at 23 those tariffs we were able to develop a marginal 24 electricity price that corresponded with the load of 25 representative commercial unitary air conditioners. EXECUTIVE COURT REPORTERS, INC.

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1 So that was a very in-depth analysis, and the 2 question becomes whether or not, again,that's 3 appropriate for room air conditioners.But I'll leave 4 that for you guys to decide whether or not that is 5 appropriate. 6 MR. ECKMAN: Well, if we're going to get the 7 right prices that will be paid by consumers,and I 8 think the trend is more towards real-time pricing than 9 away from it based on all the automated meter-reading 10 systems that are going in across the country that allow 11 that. I'm pretty certain that by 2014 you'll see more 12 than you do today of that kind of approach. 13 So forecasting that is -- it's a higher 14 probability than probably was actually the case when we 15 did the unitary air conditioners. So while the 16 differentials clearly -- they're in some states now,so 17 the tariffs are there. 18 MR. BROOKMAN: Thank you. Additional 19 comments on energy prices? Yes, Harvey. 20 MR. SACHS: As a moderate but following on 21 from what Tom has said, many of us, and I suspect it's 22 approaching the majority in this country but I have not 23 reviewed the data recently, pay rather different rates 24 in the summer months than the winter months. They're 25 rather higher in the summer months than the winter EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064144 1 months. And again, even if you don't believe Tom and 2 David about peak pricing trends, the reality today is 3 that we must acknowledge that most of us use our air 4 conditioners very little during the winter but tend to 5 operate them when the cost is high and the price is 6 high. 7 So we must at very minimum base our LCC 8 analysis on summer electricity rates rather than 9 average. 10 MR. ROSENQUIST: Can I comment on that? 11 MR. BROOKMAN: Please do. 12 MR. SACHS: Please. 13 MR. ROSENQUIST: Again, you know, I'm 14 thinking back into the analysis that was done for 15 central air conditioners, and in there we used bill 16 data -- the Residential Energy Consumption Survey. At 17 that point -- at that time it was the 1997 survey. And 18 from there we found that the marginal prices for 19 central air conditioner consumers were actually lower 20 than the average prices. The reason is because most of 21 the air conditioners are in the south, which typically 22 have declining block rates as their tariffs. So 23 they're basically being charged less per kilowatt-hour 24 for the electricity they use. 25 Now, again, that was 10 years ago. I don't EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064145 1 know if things have changed since then in the south, 2 for example. I know things have always been different 3 in the west and in the northeast. But again, the 4 average marginal price, if you want to call it that, 5 will really depend on where these room air conditioners 6 are and of course how consumers are being charged. 7 MR. SACHS: I'm sorry, Greg. I appreciate 8 your efforts in this area, but this is not an approach 9 that looks toward national energy savings. It's not an 10 approach that looks toward demand -- the ability to 11 meet peak demands in areas where many of these units 12 are installed. It just strikes one as being a rather 13 academic castle that's not looking at -- looking 14 realistically -- 15 MR. ROSENQUIST: Well, the 2001 RECS has bill 16 data that we've been able to obtain as well that we 17 could develop our residential margin prices like we've 18 done in the past. The problem is with the 2005 update 19 I think EIA has said that they're not going to release 20 that bill data any longer. But we'll certainly double 21 check with that as another possible source in addition 22 to possibly using tariffs. 23 MR. ROSENSTOCK: Again, Steve Rosenstock, 24 EEI. If you want to collect data from investor-owned 25 utilities, and I have contacts to the other ones too, EXECUTIVE COURT REPORTERS, INC.

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1 let us know. Well be happy to make requests to our 2 member companies to provide that data to you. That's 3 no problem whatsoever. 4 MR. BROOKMAN: Tom Eckman. 5 MR. ECKMAN: Greg, I think EIA -- I mean, I 6 think you can get a spreadsheet from EIA that gives 7 monthly revenues and sales. 8 MR. ROSENQUIST: Yeah, so that -- yeah. 9 During the summer months for those -- 10 MR. ECKMAN: Yeah. 11 MR. ROSENQUIST: -- get the better price than 12 the -- 13 MR. ECKMAN: Be easier than the tariffs, so 14 at least you get something approximately them. 15 MR. ROSENQUIST: Right. 16 MR. BROOKMAN: So let's move on, then, to 17 maintenance, repair, and installation costs. 18 MR. ROSENQUIST: Yes. Maintenance, repair, 19 and installation costs. The maintenance cost is the 20 cost to maintain the operation of the equipment -- of 21 the appliance over its entire life. The repair cost is 22 the cost to repair or replace a component that's failed 23 in the appliance. As I've said before, the 24 installation cost is the labor and materials associated 25 with installing that appliance. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064147 1 Currently we don't have a lot of information 2 about how the repair and maintenance costs change with 3 efficiency, so we sort of want to move ahead with 4 possibly an assumption of saying that those costs don't 5 change appreciably as you increase the efficiency of 6 the product. 7 On the installation cost, the same thing. 8 Again, we don't have very much information to show how 9 installation costs will very with efficiency, although 10 we sort of think that they will change if the product 11 gets significantly heavier or larger due to the -- due 12 to being more efficient. 13 So basically, we're looking for stakeholder 14 input on whether or not we can assume that maintenance, 15 repair, and installation costs basically stay constant 16 as you move product efficiency upward. 17 MR. BROOKMAN: Comments. Yes, Dave. 18 MR. CALABRESE: Dave Calabrese. I think as 19 you look at more new technologies like the heat pump 20 technology and others that are being proposed, this 21 assumption doesn't follow. They are more complex. 22 They require more parts and technology and therefore 23 there would be enhanced repair as well as installation 24 costs. That's one caveat. 25 MR. BROOKMAN: Yes. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064148

1 MR. MANTHEI: Phil Manthei, Alliance Laundry 2 Systems. We would echo what Dave has just said. 3 Obviously, heat pumps and parts for those are much more 4 heavier and complex than the traditional clothes dryer 5 parts that maintenance people are carrying today. 6 MR. BROOKMAN: Thank you. Yes, please. 7 Mike. 8 MR. BEYERLE: Mike Beyerle with GE. In 9 addition, as you get -- particularly on dryers, as you 10 get more complex you start heading into the realm of 11 condensation, dryers which either reuse the heat and 12 allow the moisture to condense back out, or use water 13 to condense the moisture from the hot air. Both of 14 those require plumbing being added to the dryer, they 15 require drains being added to the dryer, things which 16 don't currently exist in installations today. They 17 will add to both cost of installation as well as 18 complexity of the systems. 19 MR. BROOKMAN: Thank you. 20 MR. ROSENQUIST: The next input are the 21 appliance lifetimes, and the first thing is that we -- 22 DOE plans to use the same appliance lifetime for the 23 baseline product as the more efficient product. Were 24 not going to assume that the lifetime of the product 25 changes as you increase the efficiency of it. EXECUTIVE COURT REPORTERS, INC.

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1 Past DOE analyses have shown that clothes 2 dryers have an approximate lifetime of around -- 3 average lifetime of around 13 years and room air 4 conditioners 12 and a half years. So -- but although 5 these DOE analyses have been conducted, we're still 6 looking for stakeholder input as to whether or not 7 these lifetime values are actually still representative 8 of room air conditioners and clothes dryers. 9 MR. BROOKMAN: Dave Calabrese. 10 MR. CALABRESE: We've looked through some of 11 the materials we have as well as publicly available 12 information. First of all, on clothes dryers, 13 Appliance Magazine just this year, this past year in 14 September, reported lifetime for dryers at 12 years. 15 So, one year shorter than what you have identified 16 here. 17 Room air conditioners, that 12.5 years is 18 quite long for a product that, depending upon the 19 category, can be as short of a lifetime as five years 20 and for some of the others perhaps a little longer. 21 We've seen data that we need to confirm around a 8- to 22 9-year product lifetime for those products on average. 23 MR. BROOKMAN: Other comments on product 24 lifetimes? 25 (No response) EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064150

1 MR. ROSENQUIST: Okay. And the last input 2 I'll be discussing for the LCC and payback period 3 analysis are the discount rates. These are used to 4 convert those streams of annual operating expenses over 5 the lifetime of the equipment down to a present value. 6 We plan to use a similar approach that we've used for 7 recent residential product rulemakings, and that's to 8 develop a discount rate from the finance cost of 9 purchasing the appliance. 10 What we'll do there is basically determine 11 the interest rates associated with a purchase that's 12 done with debt, like a credit card or a home equity 13 loan, and also the interest rates associated with the 14 opportunity cost of equity, such as money being pulled 15 out from stocks or bonds or savings accounts or mutual 16 funds to purchase the appliance. 17 We plan to use the Federal Reserve Board's 18 Survey of Consumer Finances, which gives us that data 19 that shows how consumers handle their debt and equity. 20 They also provide some of the interest rates 21 associated with that debt and equity. 22 So again, we're looking for input on this 23 planned approach to develop discount rates. 24 MR. BROOKMAN: And potentially other sources, 25 if there are any. Harvey Sachs. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064151

1 MR. SACHS: Harvey Sachs, ACEEE. This is 2 certainly a good stratospheric view of what you all are 3 planning to do. But I assume that you'll be 4 documenting -- what I'm hearing is sort of an approach 5 that will blend various sources of money to the 6 consumer and assume that this will be done rather 7 transparently with adequate reference to particular 8 percentages of consumers you expect to be doing 9 particular things. 10 MR. ROSENQUIST: Yeah, that is correct. That 11 Survey of Consumer Finances gets down to the consumer 12 level and identifies what percentage of them hold a 13 particular amount of debt and what percentage hold a 14 particular amount of equity. And then again, since we 15 have this approach of developing the finance cost based 16 upon their debt and equity, that survey allows us to 17 develop an appropriate weighted average discount rate 18 for consumers. 19 MR. SACHS: Thank you. 20 MR. BROOKMAN: Dave Calabrese. 21 MR. CALABRESE: Two questions. First of all, 22 is this the same approach you've used in the past? 23 The second one is, and maybe answering 24 Harvey's question will get to this, is that for a 25 product that's -- this is getting somewhat simplistic, EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064152 1 but a low-price product, a $90 room air conditioner, 2 you may not be using your home equity line or credit 3 card for that. You're more likely to pay cash and the 4 like. Would your formula take into account the low 5 cost of some items and perhaps the higher cost on 6 others? Is that possible? 7 MR. ROSENQUIST: First of all, let me answer 8 your first question. Yes, it is the same sort of 9 approach we've used in the past. 10 And the second is that, no, I mean, this 11 Survey of Consumer Finances doesn't get down to that 12 level of what type of purchase is being made, for 13 example, and what sort of debt or equity could be used 14 to make the purchase. So if you have any data to say 15 that, you know, its more likely that consumers of room 16 air conditioners or clothes dryers would use debt more 17 than equity and one type of debt more than another type 18 of debt, that would certainly be really useful 19 information. 20 MR. BROOKMAN: Tom Eckman. 21 MR. ECKMAN: Greg, I'm not familiar with the 22 Federal Reserve Board's survey. Do they include in 23 that how many consumers are paying their credit cards 24 off monthly so they're not incurring those interest 25 rates? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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1 MR. ROSENQUIST: Actually, I believe it does. 2 Actually, I believe it does. I can't say for certain, 3 though, unfortunately. 4 MR. ECKMAN: Because it seems to me that -- I 5 mean, there are a fraction of the population that still 6 manage to do that despite the preponderance of evidence 7 to the otherwise. 8 MR. ROSENQUIST: Right. Where you're going 9 with it, and that's that they use a credit card. In 10 actuality they're not paying with the interest rates 11 associated with the credit card. 12 MR. ECKMAN: Right. So, weeding that in, 13 whatever that fraction is, I have seen data on that in 14 the past but I haven't seen it -- I don't know whether 15 that survey contains it. But that ought to be part of 16 the weighting. 17 MR. ROSENQUIST: Okay. This is supposed to 18 be a break point. Should we keep it rolling? 19 MR. BROOKMAN: Keep going for a little bit 20 longer, yeah. 21 MR. ROSENQUIST: Okay. 22 MR. BROOKMAN: We didn't reconvene till 23 almost ten after one. Harvey Sachs. 24 MR. SACHS: This seems to be about the end of 25 the road for the life-cycle cost portion of our EXECUTIVE COURT REPORTERS, INC.

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### 1 discussion today? 2 MR. ROSENQUIST: Yeah, for the most -- yeah. 3 But we can always return to it, but yeah. 4 MR. BROOKMAN: Let me state also that any of 5 you that wish to emphasize a point or make a comment at 6 the end of the day, you're welcome to do that. 7 MR. SACHS: This is Harvey Sachs at ACEEE. 8 There are two things that are very striking about the 9 discussion of life-cycle cost, and one of them is the 10 tremendous amount of uncertainty involved in so many of 11 the parameters that are important -- are key inputs to 12 it. To some extent you attempt to compensate for that 13 with the Monte Carlo analysis. 14 The second thing that's really striking to 15 me, not from this analysis which we haven't seen 16 because it hasn't been done, but from the recent 17 furnaces and boilers is how often a large number of 18 possible recommendations for standards levels have 19 inconsequential, meaning less than 1 percent, 20 differences in life-cycle cost. 21 So I've sort of felt that life-cycle cost is 22 an important guide, but when it comes down to making 23 decisions with all the uncertainties we've seen on the 24 basis of a $50 difference in a $17,000 life-cycle cost, 25 we're putting the tail ahead of the dog. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064155 1 So the question is specifically formulated as 2 the extent to which the life-cycle cost analysis with 3 its uncertainties will be taken as the rule as opposed 4 to a guide from which there is called an uncertainty 5 band and we will be making decisions based on a list of 6 parameters that Ron shared with us earlier on how the 7 standards should be set. Thank you. 8 MR. BROOKMAN: Okay. Then, on to shipments 9 analysis. 10 MR. LEWIS: Doug? Just one point here. 11 MR. BROOKMAN: Yes. 12 MR. LEWIS: In the seven criteria that were 13 mentioned earlier this morning, Slide 18, there are -- 14 the first two items that statutes have directed us to 15 use and consider the way of providing -- showing that 16 we've considered those is through the life-cycle cost. 17 So that doesn't directly answer Harvey's question, 18 statement, stand, whatever, but it's a -- I mean, we do 19 have to consider it, but we'll take into account here 20 his advice of considering how heavily to weigh that. 21 MR. SACHS: Again, Harvey Sachs. Ron, the 22 point is only that the goal of the standards process is 23 to save the maximum energy, technically feasible, and 24 all that sort of good stuff. And economically 25 justified. I didn't mean to leave that out. EXECUTIVE COURT REPORTERS, INC.

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1 (Laughter) 2 MR. SACHS: I am approaching senility from 3 the senile direction. 4 And it seems to me that the other factors are 5 boundaries placed on our process. And it's only to be 6 hoped that your group will have the wisdom to 7 understand the limitations and that a difference in the 8 fourth decimal is not necessarily a basis for choosing 9 between one standard level and another, particularly 10 given the uncertainties. 11 So I'm sure Dave and I would disagree on 12 which side that judgment should go, but we'll keep -- 13 each of us will keep pushing. 14 MR. BROOKMAN: Shipments analysis. 15 Shipments Analysis and National Impact Analysis 16 Gregory Rosenquist 17 (PowerPoint presentation) 18 MR. ROSENQUIST: The shipments analysis is 19 conducted to develop shipments forecasts that are fed 20 into the national impact analysis. Again, the purpose, 21 again, is to quantify the product shipments or the 22 shipments forecast for a base case -- that is, the case 23 without standards -- and the various standards cases 24 that we'll be looking at. 25 The method will rely on developing a EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064157 1 shipments model, which will rely on a range of data 2 sources, including historical shipments, which will be 3 used to help calibrate that shipments model. 4 I want to emphasize that the only products 5 that we're considering here are room air conditioners 6 and clothes dryers. No other products will be 

### 7 considered. 8 Again, that shipments model will have two 9 purposes. One is to estimate shipments over the -- 10 from the effective date of the standard to the life -- 11 over this 30-year analysis period that's typically used 12 by DOE. And we'll also be keeping track of the stock 13 of appliances that come into the market over that same 14 period and keeping track of the age of that equipment 15 so we can appropriately assign the annual energy 16 consumption and the annual operating cost for that 17 equipment. 18 The first step in our shipments analysis 19 again is to develop a shipments forecast for the base 20 case, and I'll emphasize the base case is the case 21 without standards. We do that through accounting for 22 two primary market segments, the new construction 23 market and the market of replacements. That is, for 24 units that are failing, the shipments that are going to 25 replace those units. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064158 1 In doing this estimate, the shipments 2 forecast, we also develop a historical forecast, what I 3 like to call a "backcast," and we calibrate that 4 backcast to see how good our model is to historical 5 shipments data. 6 Any discrepancy between the backcast and the 7 historical shipments we plan to attribute to existing 8 households that don't already own the appliance. So 9 we'll be determining a historical adoption rate for 10 those existing households that don't already have the 11 appliance and carrying that forward to estimate the 12 shipments that are going to that particular market 13 segment. 14 Our data requirements for new construction 15 will be using the housing construction forecast from 16 EIA's Annual Energy outlook, and we'll combine that 17 with historical rates of product ownership or 18 saturation rates that we know are available already 19 from RECS and also from the AHAM fact book. 20 We'll be calculating replacements using 21 product lifetimes and the retirement functions that we 22 develop in the life-cycle cost and payback period 23 analysis. And of course, most importantly, we'll be 24 using historical shipments to again help calibrate our 25 shipments model. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064159 1 So although I've already said that, you know, 2 we're calculating -- we're determining saturation rates 3 with the AHAM fact book and the RECS data, we're also 4 looking for any other data that might be out there for 5 determining those values. 6 MR. BROOKMAN: For the entire forecast 7 period. 8 MR. ROSENQUIST: Well, you know, we're -- 9 well, for the year -- for recent years, recent 10 historical years. Because that will guide us in terms 11 of, you know, the current stock of appliances. And 12 also, we would like a saturation rate -- adoption rate 13 of new construction, again to tell us how -- what 14 percentage of the appliances are going to be going to 15 new construction. 16 MR. BROOKMAN: Yes. Steve Rosenstock. 17 MR. ROSENSTOCK: Steve Rosenstock, EEI. At 18 least in terms of new homes, single-family homes, NAHB 19 does do saturation of central air conditioners. So 20 there -- and they do it year by year. So there should 21 be that data available nationally if not regionally 22 from NAHB. I've gone -- they have a good website. 23 They have data on their website. 24 The second thing, following up to Mr. 25 Goldstein, I don't know if there's a way to do it, but EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064160 1 especially from air conditioners, I don't know if 2 there's a way to get any sort of residential versus 3 commercial saturation for room air conditioners. As he 4 said, there are room air conditioners used especially 5 in older buildings, around here older government 6 buildings that never had central air conditioning. 7 They've just put room air conditioners in a lot of 8 available windows in the D.C. area for some of the old 9 buildings you'll see. 10 I don't know how to get that data, but if 11 there's a way to, at least kind of current saturation. 12 I don't know about future. That might help your 13 analysis as well in terms of hours of operation. Thank 14 you. 15 MR. ROSENQUIST: On that note, for central 16 air conditioners, back when we did that analysis, ARI 17 provided us with the percentage of shipments that are 18 going to commercial applications. At that time they 19 estimated that 90 percent of shipments went to 20 residential households and the remaining 10 percent 21 went to commercial buildings. 22 So that would be great, if we could get that 23 information. If AHAM or any manufacturers or any 24 people from industry have that information, it would be 25 very useful.EXECUTIVE COURT REPORTERS, INC. (301) 565-0064161

1 MR. BROOKMAN: Yes. 2 MR. MANTHEI: Phil Manthei, Alliance Laundry 3 Systems. Just an inquiry. Was there a forecast made 4 in the -- I guess we did up to 1998 -- with the prior 5 rulemaking for clothes dryers? 6 MR. ROSENQUIST: The last rulemaking for 7 clothes dryers was back in -- I think it ended in 1991. 8 So for clothes washers they did a forecast of clothes 9 washer shipments, but not for clothes dryers, I 10 believe. 11 MR. MANTHEI: Okay. 12 MR. BROOKMAN: Okay. So, other comments and 13 particularly sources for shipment data? 14 (No response) 15 MR. BROOKMAN: Okay. 16 MR. ROSENQUIST: So this slide for clothes 17 dryers just asks in tabular form the type of historical 18 shipments data that we want. We already know -- we 19 already have AHAM fact book and Appliance Magazine. 20 That gives us total clothes dryer shipments. But we 21 want shipments in each of the six product classes that 22 were going to have to analyze. So that includes not 23 only the four vented product classes but those two 24 vent-less product classes. 25 And this slide shows you the information that EXECUTIVE COURT REPORTERS, INC.

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1 we want for room air conditioners in terms of 2 historical shipments data. Again, that AHAM fact book 3 and Appliance Magazine, they provide us information on 4 the total shipments, but again we need to break that 5 down by the 16 product classes that are out there for 6 room air conditioners. 7 MR. BROOKMAN: Dave Calabrese. 8 MR. CALABRESE: Just a comment. We will be 9 attempting to collect that data and provide that to 10 you. 11 MR. BROOKMAN: Thank you very much. Other 12 comments related to Slide 90 and 91, the air 13 conditioner and -- room air conditioner and clothes 14 dryer historical shipments? You can see how they've 15 subdivided those data. 16 (No response) 17 MR. BROOKMAN: Okay. 18 MR. ROSENQUIST: Okay. Let's move forward. 19 Now that we will develop these shipments forecasts for 20 the base case -- again the base case is the case 21 without standards. We're going to have to develop 22 forecasts for the standards case. That's the case with 23 standards. 24 And essentially, we'll be using the exact 25 same shipments model and the exact same data to develop EXECUTIVE COURT REPORTERS, INC.

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1 our standards case shipments, with one important 2 exception. We'll be trying to take into account the 3 purchase price increases and the operating cost savings 4 caused by the standard to figure out how that impacts 5 the shipments forecast. 6 Typically, this data is very difficult to 7 obtain. It's very difficult to get information on 8 exactly how standards have affected product shipments. 9 So if it becomes too difficult to do any sort of type 10 of analysis, we may use scenarios to estimate 11 particular shipments forecasts for specific standards 12 cases. So we may assume, let's say, a 5 percent drop 13 in shipments for a relatively stringent standard level 14 or something along those lines. 15 We'll also consider any future market poll 16 programs, like Energy Star or tax credits, and how that 17 possibly could work into estimating the shipments. 18 MR. BROOKMAN: Steve Rosenstock. 19 MR. ROSENSTOCK: Just a quick data point. 20 Since room air conditioners, the new standards went in 21 22 23 24 25 effect in 2001, I believe? Or 2000.

MR.ROSENQUIST: 2000.

MR.ROSENSTOCK: 2000?

MR.ROSENQUIST: Yeah.

MR.ROSENSTOCK:Was there any change in EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064164 1 shipments that year? Just as kind of a -- 2 MR. ROSENQUIST: Well, actually, shipments -- 3 I mean, room air conditioner shipments are relatively 4 volatile, but over the last four years they've been 5 going like gangbusters. So it's -- from that, too, it 6 would be hard to determine whether or not any sort of 7 effect was due to the standard. 8 So as part of this preliminary manufacturer 9 impact analysis we'll be asking manufacturers for their 10 input as to how standards may impact shipments. And of 11 course, any other stakeholder will also -- can also 12 provide information as to how they think these 13 shipments forecasts will be impacted by standards. 14 We're looking for that type of information. 15 We're also looking for any information on 16 market pull programs and how, again, that might affect 17 our estimates of shipments. 18 MR. BROOKMAN: David Goldstein. 19 MR. GOLDSTEIN: Yeah, David Goldstein, NRDC. 20 It really does strike me from this quick dialogue as 21 worth going back and seeing what the effect on 22 shipments was predicted to be from the last rule and 23 what it was because these models are very speculative 24 and assumption-driven, and if you can normalize them to 25 real-world data, that's going to help. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064165 1 And if you can't determine what the effect 2 was from real-world data, that's an interesting 

### 3 observation, too. 4 MR. BROOKMAN: Other sources of data for 5 market pull programs? I guess they don't -- Tom, they 6 don't sell all that many room air conditioners in the 7 northwest? 8 MR. ECKMAN: More all the time. 9 MR. BROOKMAN: More all the time. Yeah, 10 Steve. 11 MR. ROSENSTOCK: I will send in my written 12 comments. There is an organization called -- it's the 13 Solar Center in North Carolina. They have a very nice 14 database of basically all efficiency programs, kind of 15 state by state. I'll try to send you that link because 16 they do a very nice job. 17 MR. ROSENQUIST: That would be great. 18 MR. ROSENSTOCK: So that's another source. 19 In terms of market pull programs that's a good data 20 source. 21 MR. ROSENQUIST: Okay. Finally, the last 22 analysis step in what we do for the ANOPR, and that's 23 the national impact analysis. The purpose of this 24 analysis is to determine the national energy savings 25 and the national consumer economic impacts from EXECUTIVE COURT REPORTERS, INC.

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### 166 1 standards that we'll be analyzing for clothes dryers 2 and room air conditioners. We do this by developing an 3 annual series of values from the first year that the 4 standard becomes effective over this 30-year analysis 5 period. We do that for both national energy and the 6 economic impacts. 7 We utilize that shipments model that we're 8 going to be developing to estimate a total stock of 9 appliances in service at any given -- for each year 10 during that analysis period in order to estimate the 11 corresponding national energy consumption of the stock 12 and also the total installed cost and the total 13 operating cost of that stock. 14 To get the per unit information for cost and 15 energy, we'll be getting that from the life-cycle cost 16 analysis, and then, again, we'll be aggregating that up 17 to national values by using stock -- by coupling the 18 stock with that. 19 We'll be reporting national energy savings in 20 quads, or quadrillion Btus, or 10 to the 15th Btus, and 21 we'll be also reporting that in source energy 22 consumption. In the LCC we do things in terms of site 23 energy consumption. For this part of the analysis we 24 actually convert those energy savings into service 25 energy savings using cited source conversion factors EXECUTIVE COURT REPORTERS, INC.

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1 that take into account losses in transmission and 2 distribution, and in the case of electricity the 3 efficiency of the power plant. 4 We're reporting our estimates of the economic 5 impact with a national net present value, or NPV, and 6 that will be expressed in dollars or billions of 7 dollars. 8 And again, since we're calculating this 9 annual time series of money, we'll be using discount 10 rates to convert that to a present value. 11 This gives you a depiction of this flow 12 diagram of how we intend to calculate the national 13 energy savings. It starts out by using the shipments 14 analysis to develop our base case shipments forecast 15 and our standards case shipments forecast. 16 And again, looking at what we do in the base 17 case, we calculate the annual energy consumption 18 associated with the stock of appliances for every year 19 from when the standard becomes effective out over this 20 30-year period. We get that per-unit annual energy 21 consumption associated with each one of those stocks 22 from the LCC analysis. 23 We do the exact same thing for the standards 24 case to develop this standards case annual energy 25 consumption for every year throughout the analysis EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064168 1 period. 2 And then we accumulate the base case energy 3 consumption and the standards case energy consumption. 4 Before we actually do that accumulation, we multiply 5 them by the cite-to-source energy factors to get them 6 into source energy consumption, and then we take the 7 difference of the base case and the standards case to 8 get national energy savings. 9 This is a similar flow diagram to show you 10 how we're calculating net present value. Again, it's 11 very, very similar. I'm not showing all those series 12 of boxes for the energy cost, maintenance repair cost, 13 and equipment cost, but just imagine those same sort of 14 boxes going from the year that the standard becomes 15 effective out over that 30-year period. 16 Again, we start with the shipments analysis 17 that provides us with our base case and shipments case 18 forecasts, and those are, again, used to develop the 19 energy cost, the maintenance repair costs, and the 20 equipment costs associated with the stock of appliances 21 over this analysis period. We do that for both the 22 base case -- that is, the case without standards -- and 23 the standards cases. 24 We then accumulate the operating cost savings 25 by looking at the difference in the energy, EXECUTIVE COURT REPORTERS, INC.

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1 maintenance, and repair costs for the base case versus 2 the standards case, and we look at -- then we 3 accumulate the total equipment costs and look at the 4 difference there by comparing, again, the base case and 5 the standards case. 6 We apply discount rates to these annual time 7 series to get a present value, and we take the 8 difference between the two to get a net present value. 9 If the operating cost savings are greater than the 10 equipment cost increases, we're getting a net benefit 11 to the nation from the standard, but if it's the other 12 way around -- that is, the equipment cost increases are 13 greater than the operating cost savings -- we're 14 getting a burden to the nation from the standard. 15 MR. GOLDSTEIN: David Goldstein, NRDC. I 16 just wanted to reiterate that this is a very backhanded 17 and approximate, meaning not very accurate, way of 18 getting at the direct social benefit, which is 19 calculating the number of power plants that don't have 20 to be built and the number of other pieces of 21 infrastructure that don't have to be built. That is 22 clearly the benefit. On the cost side, you go to the 23 manufacturer costs and the markups. 24 Putting the consumer in the middle of this 25 when the consumer is dealing with a regulated pricing EXECUTIVE COURT REPORTERS, INC.

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1 system throughout the country whose future can't be 2 predicted is a very error-laden and backhanded way at 3 getting at what is a pretty simple calculation if you 4 did it right. 5 MR. DeLASKI: This is Andrew DeLaski. I 6 think have sort of a different way of saying what David 7 just said, which is that you just said this gives you a 8 way to calculate the cost and benefits to the nation. 9 Well, I think it should weigh the cost and benefits to 10 the people who buy and use the room air conditioners, 11 which I think is a different thing. 12 Dave was making the point that there are13 costs and benefits that happen here that are to non14 users of the equipment, and the Department historically 15 just hasn't done a good job of capturing those costs 16 and benefits in other rulemakings. This is an 17 opportunity to -- in a rulemaking where you have to -- 18 utility impacts, to capture those costs. 19 I'm not sure where it is in the analysis. 20 You have the utility analysis. Typically we do -- you 21 do calculate the impact on peak electricity use, which 22 I think is valuable, but you don't monetize it. I 23 think monetizing that is really important so that we do 24 accomplish what you just said, which is what are the 25 costs and benefits to the nation, not just what are the EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064171 1 costs and benefits to the people who happen to buy and 2 use the particular products. 3 They're two questions. They're both 4 important, but they're different and you shouldn't get 5 them confused. 6 MR. BROOKMAN: Other comments related to this 7 flow diagram before we move on to shipment-weighted 8 efficiency and market share efficiency data? 9 (No response) 10 MR. ROSENQUIST: Okay. There are two 11 important sets of efficiency data that are critical to 12 doing the national impact analysis. The first are the 13 shipment-weighted efficiency data, and again, this 14 represents the average efficiency of shipments coming 15 into the market for any given year.16 What we do is we develop these shipment17 weighted efficiency trends that we use to characterize 18 what happens in the base case; that is, the case 19 without standards. We essentially take the per-unit 20 annual energy consumption data and annual cost data 21 from the LCC analysis to calculate the national 22 consumption and costs corresponding to those shipments 23 coming into the marketplace. 24 What the market share efficiency data is used 25 for is to figure out or help us try to figure out how EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064172 1 standards will impact that shipment-weighted efficiency 2 trend that we have in the base case. 3 Again, this market share data is equivalent 4 to these base case efficiency distributions that I was 5 talking about earlier in the life-cycle cost analysis. 6 They show the distribution of appliance efficiencies 7 currently being purchased by consumers. 8 So what well do is well run these 9 scenarios. For example, one of them is a roll-up 10 scenario where we assume that all the products below a 11 particular standard level will move up to that new12 standard level and then calculate a new shipment13 weighted efficiency that results from the standard and 14 then project that out into the future. So you 15 essentially have now two efficiency trends, one for the 16 base case and one for the standards case by conducting 17 such scenario analyses. 18 - Does anyone have any questions on that 19 particular aspect of the analysis? 20 MR. BROOKMAN: David Goldstein. 21 MR. GOLDSTEIN: David Goldstein. I don't 22 know whether this is a question or a comment. But for 23 years DOE has done these projections of what would 24 happen to the distribution above the standards level as 25 if DOE had never set a standard before, and you hadn't EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064173 1 in many of those. But you have now, and there ought to 2 be some pretty good historical information on what does 3 happen after standards that would make this less 4 speculative, although there's still obviously going to 5 be some uncertainty. 6 MR. ROSENQUIST: Okay. This slide for7 clothes dryers shows the type of historical shipment8 weighted efficiency data that we're hoping to obtain 9 from stakeholders. Again, for clothes dryers we're 10 only asking for it on the four vented product classes 11 because the two vent-less product classes, they're 12 currently not being tested for efficiency. So we're 13 just assuming that that data doesn't exist. But if you 14 do have any data that would give us any insight as to 15 what the vent-less shipment-weighted efficiencies are, 16 we certainly would love to have that. 17 This slide shows you the historical 18 efficiency data we're looking for for room air 19 conditioners. This just emphasizes the fact that we're 20 looking for shipment-weighted efficiency data for all 21 16 product classes. 22 So back to looking for input from 23 stakeholders on -- to repeat, just looking for that 24 historical shipment-weighted efficiency data, hoping to 25 get that for both, again, clothes dryers and room air EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064174 1 conditioners. And were also looking for any input on 2 our approach that we plan to use to conduct the 3 national impact analysis and develop national energy 4 savings and national net present value. 5 MR. BROOKMAN: So, any additional comments on 6 this approach, what's being suggested here? Dave 7 Calabrese. 8 MR. CALABRESE: From an AHAM standpoint, as I 9 said before, we'll be collecting data. I'm not sure 10 how far back we can go. We'll go as far back as we 11 can. There's a request here back to '93. I mean, we 12 always endeavor to go back as far as we can. I think 13 in previous years we've gone back five years or so, 14 whatever is out there. So we'll do what we can. 15 MR. BROOKMAN: Thank you. Do we have 16 comments on additional data sources for historical 17 shipments or historical efficiency, I should say? 18 (No response) 19 MR. BROOKMAN: No? Okay. So let's do one 20 more here. 21 MR. ROSENQUIST: Okay. You want to? 22 MR. BROOKMAN: Yeah. 23 MR. ROSENQUIST: Okay. Now we're heading for 24 the next agenda item, which is the NOPR analysis. Now, 25 we're leaving the ANOPR analysis and entering into -- EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Why don't we take a break? 2 MR. ROSENQUIST: Yeah, I think this is a good 3 point for a break. 4 MR. BROOKMAN: Let's take a break. It's 2:31 5 by my watch. So let's return at 2:45 and resume. 

### 6 (Brief recess) 7 MR. BROOKMAN: Okay. So now we are on Slide 8 103 and back to Greg Rosenquist. 9 Life-Cycle Subgroup Analysis 10 Gregory Rosenquist 11 (PowerPoint presentation) 12 MR. ROSENQUIST: Okay. So I'll start with -- 13 what I'll be starting off with is a discussion of the 14 analyses that we plan to conduct for the NOPR. So 15 these are analyses that we won't be conducting for 16 probably on the order of a year to a year and a half. 17 I'm returning to a slide that was presented 18 in the introduction showing what analyses are conducted 19 for the NOPR. What's done there is that there is a 20 revision to the ANOPR analyses based upon stakeholder 21 input and comments, and then, in addition to that, we 22 conduct the life-cycle cost subgroup, manufacturer 23 impact, utility impact, environmental -- employment 24 impact, environmental impact, and regulatory impact 25 analyses. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064176 1 Now, the first one I'm going to touch on here 2 is the life-cycle cost subgroup analysis. The purpose 3 here is to determine if there's any subset of consumers 4 who may be disproportionately impacted by efficiency 

### 5 standards. The way we do this is by extending or 6 applying the LCC analysis to the general population, to 7 those particular subset of consumers that we want to 8 look at. 9 In the past we've typically looked at the 10 low-income subpopulation or seniors, for example. So 11 we're looking for any input from stakeholders on what 12 particular subgroups you think we should be looking at 13 for room air conditioner and clothes dryer consumers. 14 MR. BROOKMAN: Yes, David. 15 MR. GOLDSTEIN: David Goldstein, NRDC. I 16 just wanted to preface this by saying I'm trying to 17 bring up a lot of important and difficult issues now 18 because it's early in the process and it's going to 19 give the Department and its contractors the longest 20 amount of time to figure out how to deal with them. 21 But there are some very significant groups 22 that may have specific impacts that I want to bring up. 23 The first one is non-users, people who don't buy air 24 conditioners or clothes dryers, and they're affected by 25 a standards decision in two different ways. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064177 1 One of them is the way that we've discussed 2 extensively in the furnace proceeding, and the 3 Department has agreed with us, as well as the 4 transformer proceeding, which is that when we save 5 natural gas directly through a gas dryer or indirectly 6 through an electric appliance, we are reducing price7 pressures on natural gas. Natural gas is very price8 sensitive to demand, so the effect is big. So some of 9 the biggest beneficiaries of standards could be10 industrial firms that have to buy natural gas or low11 income consumers who are paying lower or higher utility 12 bills depending on what decision the Department makes. 13 And then secondly, as I mentioned before, 14 because of the immense cost subsidies involved in 15 highly peaked energy use in air conditioners, non-users 16 of central air conditioners would be affected in an 17 additional way beyond the natural gas effect. 18 I would suggest you divide this up into a 19 low-income subclass of non-users. I suggest that you 20 look at renters as a separate class because renters 21 can't choose the efficiency of their appliances or the 22 other elements of their house. I think you should look 23 at states that have pollution restrictions such as 24 California's AB32 or the northeast states with REGI, 25 where there are effectively going to be fees for carbon EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064178 1 emission and someone is going to pay them, and they're 2 going to pay less if DOE makes one decision on 3 standards for these two appliances than they would if 4 it makes a different kind of decision. 5 MR. BROOKMAN: Thank you. Other comments on 6 subgroups that would be, I guess, used or 7 disproportionately affected? 8 (No response) 9 MR. BROOKMAN: No additional comments. Okay. 10 MR. ROSENQUIST: Next up is Constantin von 11 Wentzel to talk about the manufacturer impact analysis. 12 Manufacturer Impact Analysis 13 Constantin von Wentzel 14 (PowerPoint presentation) 15 MR. von WENTZEL: So in the NOPR phase we 16 have another manufacturer impact analysis which differs 17 primarily from the MIA in the ANOPR phase that it's 18 qualitative and quantitative whereas the ANOPR MIA is 19 typically more qualitative. 20 As you can see here, the idea is to assess 21 the impacts of standards on manufacturers, identify any 22 subgroup of manufacturers that might be impacted more 23 than others because, let's say, they're more 24 concentrated in a particular space, look at the 25 cumulative regulatory burden on the industry, and then EXECUTIVE COURT REPORTERS, INC.

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1 also construct the government regulatory impact model, 2 or GRIM. 3 As you can see here, the second MIA consists 4 of phases two and three. So where we've developed an 5 industry profile and conducted preliminary MIA 6 interviews in the ANOPR phase, in the subsequent two 7 phases we develop the straw-man GRIM, the second 8 interview guide, where we confirm our assumptions and 9 conduct those interviews, and then assess employment, 10 competition, and cumulative burden. 11 So here are the specific steps in their 12 detail. The idea is to basically calculate the impact 13 on the industry as a whole of standards such that we 14 can assess the change in net present value as a 15 function of efficiency standards being proposed. So we 16 look at, for instance, the impact on manufacturer 17 prices, the shipments, the capital expenditures, the 18 research and development costs, marketing costs, and 19 our sources of information for that are lOKs, 20 manufacturer's interviews in the ANOPR phase, and the 21 cost models we develop as a result of our tear-downs. 22 In the interview guide you can see we have a 23 number of topics, and each of these topics typically 24 has at least five or six questions. So there's a lot 25 of information that we ask for. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064180 1 In the third phase we go through the 2 interviews, and the idea is that we have these 3 confidential discussions with manufacturers such that 4 we can aggregate the data and show it to all 5 stakeholders without divulging any confidential 6 information. Here the question becomes one of how much 7 money the industry will have to spend to achieve 8 certain efficiency levels and then, if there are 9 smaller manufacturers who are manufacturers that are 10 disproportionately impacted, to identify such 11 manufacturers and the issues that they face. 12 Naturally, if standards are projected to have 13 an impact on things like employment levels, factory 14 presence in the United States, so on and so forth, we 15 try to capture that as well. 16 Lastly, there is the issue of the cumulative 17 regulatory burden. We've already identified the CFC 18 and HCFC phase-out by 2010. Some other standards also 19 affect manufacturers in this phase, particularly the 20 ones who are more diversified. If they are exporting 21 to the EU or to China, then you might also be subject 22 to the reduction of hazardous substances. 23 So we try to capture all of those impacts and 24 report them for all stakeholders to comment on and for 25 DOE to make a decision with. EXECUTIVE COURT REPORTERS, INC.

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1 So our questions or our request for comment - 2 - Doug, do you want to read this? 3 MR.BROOKMAN: Well just read it into the 4 record. 5 MR. von WENTZEL: Read it for the record? 6 MR.BROOKMAN: Yeah. Into the record. 7 MR.von WENTZEL: Okay. 8 MR.BROOKMAN: Why don't you go ahead? 9 MR.von WENTZEL: Okay. DOE would welcome 10 comment on what potential manufacturer subgroups for 11 residential clothes dryers and room air conditioners it 12 should consider in a manufacturer subgroup analysis. 13 MR.BROOKMAN: Let's stop there. Comments on 14 this question?There's a whole lot of content here. 15 So let's -- anybody that has comment related to this 16 cluster of issues? 17 (No response) 18 MR.von WENTZEL: No? I guess -- 19 MR.BROOKMAN: Not at this point. Okay. 20 MR.von WENTZEL: No comment? 21 MR.BROOKMAN: Yeah. 22 MR.von WENTZEL: And DOE welcomes comment on 23 whether there are other regulations or pending 24 regulations that it should consider in its examination 25 of cumulative regulatory burden. I believe,Phil, that EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064182 1 would be speaking to your point about the UL clothes 2 dryer fire standard. Any other comments? 3 MR. SACHS: Harvey Sachs, ACEEE. I'm not 4 sure if the detail's requirements are adequate to cover 5 this, but to me it seems that cumulative regulatory 6 burden includes the cumulative regulatory burden on 7 stakeholders beyond the manufacturers of the equipment. 8 In particular, it includes the burdens, if such that 9 they be considered, on utilities who are attempting to 10 deliver efficiency to their customers. 11 MR. BROOKMAN: Thank you. J.B. 12 MR. HOYT: J.B. Hoyt, Whirlpool. You 13 mentioned in the framework document the clothes washer 14 standard that took effect January 1, 2004. It's 15 appropriate. I remind the Department that it's the 16 second one that took effect January 1 of 2007, which is 17 another burden. 18 We are in the process of looking at 19 additional standards in both clothes washers and 20 dishwashers, as well as changes to Energy Star levels 21 for those products, along with refrigerators, and the 22 prospect of a refrigerator rulemaking, which would 23 impact many of us who are multiproduct manufacturers. 24 So those are potential -- some are scheduled and some 25 are potential future burdens that are expected. EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Thank you. Yes, Harvey Sachs. 2 MR. SACHS: Dave, you were out of the room a 3 minute or so ago, but the question really is to Dave 4 Calabrese whether he would feel comfortable identifying 5 manufacturer subgroups who might be differentially 6 impacted under the regulatory burden criteria. 7 This is sort of a heads up. It's not a data 8 request or anything. 9 MR. CALABRESE: I appreciate that. At this 10 point we don't have -- I don't have that information. 11 I don't have any input for you, but you know, we'll be 12 considering more comments coming up. I mean, in other 13 rulemakings and other product categories there have 14 been such subgroups, and at this point what we don't 15 have -- I don't think we have that -- I don't think we 16 have that situation right now. 17 MR. BROOKMAN: David Goldstein. 18 MR. GOLDSTEIN: Yeah. Just a suggestion. 19 This is more for the policy decision-makers rather than 20 the analysts. Cumulative regulatory effects are 21 interesting are relevant here. The word "burden" 22 suggests that this is a bad thing and a reason not to 23 go with a stronger standard.24 I'm concerned of a structure of decision25 making in which doing something is a reason not to do a EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064184 1 standard and not doing it is also a reason not to do a 2 standard. I'm referring in specific to the EU 3 directive. I can easily see how an EU standard could 4 be a burden on manufacturers. 5 I could also equally easily see how an 6 argument could be made, well, this is the only country 7 that's regulating this. The EU doesn't do anything. 8 That's the reason why we shouldn't do a standard. If 9 the same -- if going this way is bad and going the 10 opposite way is also bad, then you've got a flawed 11 decision-making structure. 12 MR. BROOKMAN: J.B. 13 MR. HOYT: I would point out that the phrase 14 "burden" has been used to represent the impact on us as 15 manufacturers and the cost of doing multiple things 16 that are not demanded by the marketplace does place a 17 demand on our companies and a burden on our ability to 18 do other things that might be more desired by our 19 consumers and/or our stockholders. As public 20 companies, which many of us are, I think in that regard 21 it is potentially a burden. 22 MR. BROOKMAN: Okay. Additional comments on 23 what is characterized here as cumulative regulatory 24 burden? 25 (No response) EXECUTIVE COURT REPORTERS, INC.

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1 MR. von WENTZEL: Okay. In that case, on to 2 the utility impact analysis. 3 MR. BROOKMAN: Greg Rosenquist. 4 Utility Impact Analysis, Employment Impact Analysis, 5 Environmental Assessment, and Regulatory Impact 6 Analysis 7 Gregory Rosenquist 8 (PowerPoint presentation) 9 MR. ROSENQUIST: Yes. Back again. Hello, 10 everyone. I'll be covering now the rest of the 11 analyses that are in the notice of proposed rulemaking, 12 starting with the utility impact analysis. The purpose 13 of this is to determine the impacts from standards on 14 domestic energy suppliers. In other words, electric 15 and gas utilities. 16 The method that we've used in the past and 17 that we plan to use in the future is to use the 18 National Energy Modeling System, or NEMS. NEMS is used 19 to develop the forecast that you see in the Annual 20 Energy Outlook. Again, it's the basis that we'll use 21 to conduct our utility impact analysis. 22 Some of the outputs out of the Annual Energy 23 Outlook include forecasts of electricity and gas sales, 24 electricity and gas prices, and for electric utilities, 25 avoided generation -- generation capacity. EXECUTIVE COURT REPORTERS, INC.

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### 186 1 So what we'll be doing in this analysis is 2 inputting the national energy savings we get from the 3 national impact analysis into NEMS to see what sort of 4 effect standards have on these various qualities. That 5 is, the electricity and gas sales, the prices, and the 6 installed generation capacity. 7 MR. BROOKMAN: So there you see the request 8 for comments. Steve Rosenstock. 9 MR. ROSENSTOCK: Steve Rosenstock, EEI. Does 10 NEMS also have information about avoided gas production 11 from reduced gas usage from products? 12 MR. ROSENQUIST: In the form of reduced sales 13 of gas. 14 MR. ROSENSTOCK: But how about capacity -- 15 you know, avoided new wells or avoided imports of 16 natural gas? 17 MR. ROSENQUIST: Well, the imports I believe 18 would be captured. I mean, sales coming from, you 19 know, non-domestic sources, that would be captured. 20 But if you're alluding to the capacity like pipelines 21 and things like that, no. 22 MR. BROOKMAN: Okay. Yes. Harvey. 23 MR. SACHS: I guess I'm getting old, but over 24 the years what's struck me about NEMS has been two 25 attributes. One of them is it's volatile. Life-cycle EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064187 1 cost estimates, again for the furnace and boiler rating 2 -- rulemaking recently changed by 20 percent depending 3 on whether you used the 2006 or 2007 NEMS. 4 So I would -- well, the second attribute has 5 been that it's had a great deal of difficulty, had to 6 use exogenous inputs for the future cost of emerging 7 technologies, which would include the products under 

### 8 discussion here. 9 For these two reasons I think it's important 10 to ask you all how NEMS works as a backcasting method. 11 We certainly can't ask for standard deviations on our 12 forecasts, but we can ask how NEMS has done in the past 13 and why it should be trusted now. I don't have the 14 answers, but I think that's an important part of the 15 process of understanding the limitations for analyses. 16 MR. BROOKMAN: Thank you. 17 MR. ROSENQUIST: Okay. If there's no other 18 comment I'll move on to the -- 19 MR. SACHS: Wait a minute, Greg. Are you 20 going to do it? 21 MR. BROOKMAN: So then, moving on. 22 MR. ROSENQUIST: Well, let me try to address 23 it. I was trying to avoid it. 24 (Laughter) 25 MR. ROSENQUIST: Basically, it's no secret EXECUTIVE COURT REPORTERS, INC.

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1 that if you look at past, for example, price forecasts 2 that come out of HEMS and what's published in the 3 Annual Energy Outlook, like Harvey has said, they have 4 been volatile and they haven't always been on the mark 5 in terms of forecasting energy prices in the near term. 6 With that said, though, it is the federal 7 government's national energy model for determining what 8 happens in the energy sector throughout our economy. So 9 I don't know what else to say besides that other than, 10 you know, they have a large team over there at EIA 11 trying to deal with this stuff and we're trusting that 12 they're producing a model that will give us decent 13 forecasts of the type of things we're looking at. 14 MR. BROOKMAN: Employment Impact Analysis. 15 MR. ROSENQUIST: Okay. What we do in the 16 employment impact analysis is to assess the overall 17 impact on employment in the U.S. from the efficiency 18 standards. We determined two impacts, a direct impact 19 on those manufacturers or those service industries for 20 the particular appliances that we're looking at, and 21 that's done in the manufacturer impact analysis. 22 And we also calculate the indirect impacts 23 resulting from shifts in how consumers spend their 24 money on goods and services as a result of having 25 increases in these appliances caused by standards and EXECUTIVE COURT REPORTERS, INC.

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### 189 1 decreases in the amount of money they spend on energy. 2 The model that we use is an input/output 3 model that's been developed by Pacific Northwest 4 National Laboratory. Its name is ImSET. It stands for 5 Impact of Sector Energy Technologies. We've used 6 versions of those model in previous rulemakings. In 7 those cases it was called the ImBUILD. 8 So now we're looking for comment on this 9 approach to use ImSET to do the indirect employment 10 impacts analysis. 11 MR. BROOKMAN: Steve Rosenstock. 12 MR. ROSENSTOCK: Steve Rosenstock, EEI. I'm 13 just going to kind of put this for room air 14 conditioners. What I heard -- it sounded like most of 15 them are manufactured overseas at this point these 16 days. If all the manufacturing is overseas, how does 17 this model -- does this model address overseas 18 manufacturing? 19 I'll throw out a number. Suppose if 80 20 percent of the room air conditioners are manufactured 21 overseas, how does this model handle that? 22 MR. ROSENQUIST: Well, this model is only 23 analyzing the indirect impacts. So how consumers will 24 change their spending behavior based upon, you know, 25 increases in the appliance price and changes in energy EXECUTIVE COURT REPORTERS, INC.

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1 cost, that issue will be handled in the manufacturer 2 impact analysis. 3 MR. BROOKMAN: However, the Department does 4 request comments both on the direct and indirect 5 effects or impacts. So if anybody has any additional 6 comments that way, that would be helpful. 7 (No response) 8 MR. BROOKMAN: No additional comments on 9 that. Okay. 10 MR. ROSENQUIST: Okay. Moving on to the 11 environmental assessment. The purpose of this analysis 12 is to calculate the environmental impacts for moving to 13 higher efficiency standards. Again, were going to be 14 -- plan to use the same model that we plan to use in 15 the utility impact analysis, which is NEMS, or National 16 Energy Modeling System. 17 Outputs of NEMS include forecast of C02 18 emissions from power plants, S02 emissions, NOx and 19 mercury emissions. 20 So what well do is, again, implement the 21 energy savings that we calculate from the national 22 impact analysis into NEMS to see how each of those 23 emissions from the power plants are affected. 24 Now, there's existing legislation that 25 currently caps S02 emissions, and there's recent EXECUTIVE COURT REPORTERS, INC.

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1 rulemakings that have been passed by the EPA that 2 basically cap the emissions of NOx and mercury. So for 3 all intents and purposes, the only emissions that will 4 be impacted from power plants by appliance standards 5 will be C02. 6 Now, well have to carry out a separate 7 analysis of in-house emissions because NEMS doesn't 8 address those particular emissions. So we'll be 9 looking through the literature and developing emission 10 factors to apply to the energy savings that we 11 calculate for gas dryers to get the impacts on in-house 12 emissions of S02, NOx, and carbon, C02. 13 So, are there any other environmental factors 14 that you think the Department should be looking at in 15 this rulemaking and do you think there's any other 16 approaches that we should use for doing the 17 environmental assessment? 18 MR. BROOKMAN: David Goldstein. 19 MR. GOLDSTEIN: David Goldstein, NRDC. I 20 have two suggestions, one analytic and one policy 21 decision-making. They start off with where you're 22 going. I think the quality of the analysis plan is 23 good as far as it goes. Where it stops is monetization 24 of the value of the benefits. You need to monetize the 25 C02 benefits. That should be pretty easy to do now EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064192 1 that there are starting to be markets throughout the 2 world in trading C02. 3 You need to monetize the economic benefits of 4 making it easier to meet the other capped pollutants 5 that are capped by other legislation because by doing 6 it through efficiency you're requiring less through the 7 more expensive kinds of controls. 8 A second suggestion concerns decision making. 9 DOE is supposed to consider environmental impacts as 10 part of its establishing legislation. Every final rule 11 I've ever read has done a recitation of environmental 12 impacts and there's no logical train to suggest that it 13 has influenced the decision-making in any way, shape, 14 or form. 15 That would be particularly a problem with 16 this administration now because in the past couple 17 weeks the White House has stated that they would oppose 18 mandatory caps on greenhouse gas emissions because they 19 could accomplish reductions in greenhouse gas emissions 20 through other policies such as appliance efficiency 

### 21 standards. 22 It seems to me if you're to take that 23 statement with any grain of directness, it would have 24 to mean that appliance efficiency standards will be set 25 differently because of the desire to constrain carbon EXECUTIVE COURT REPORTERS, INC.

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### 193 1 emissions than they would have been had carbon not been 2 a factor. 3 So monetization is perhaps one way that that 4 can be directly incorporated into the decision-making, 5 but I would expect and hope that there would be some 6 other, more qualitative ways that the environmental 7 effects could be incorporated into decision-making so 8 that we can follow through on this commitment that's9 already been made at a higher level than the decision10 makers who are going to be deciding on this rule here 11 in DOE. 12 MR. BROOKMAN: Thank you. Harvey Sachs? No? 13 Okay. Other comments related to this slide on 14 environmental assessment, particularly the impacts? 15 Steve Rosenstock. 16 MR. ROSENSTOCK: Or Mr. Steve Sachs, 17 whichever you prefer, Harvey. 18 (Laughter) 19 MR. ROSENSTOCK: Again, this analysis -- the 20 environmental analysis, there are C02 markets in 21 Europe. The price has fluctuated quite dramatically 22 because of the way they've been allocated and trying to 23 monetize when you have fluctuating prices for anything 24 in a market is going to be -- could be rather 25 difficult, especially when you're trying to project. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064194 1 The other thing is that if there is cap and 2 trade legislation in the U.S. over the next couple 3 years, it would go into effect before 2014, I would 4 guess. You might be in the same situation as your 5 analysis for the other emissions that you're referring 6 to in that. Since they're capped, I don't know how you 7 might -- you might be -- might have to take the same 8 modeling approach. Thank you. 9 MR. BROOKMAN: Thank you. Harvey Sachs. I 10 knew I could count on Harvey. 11 MR. SACHS: I think the other obvious 12 environmental factor to be considered as we move is the 13 environmental impact of water-cooled condensing dryers. 14 To the extent that they do have market share, they 15 will represent an impact on water use and that's a 16 commodity of increasing value in most parts of the 17 country, even Virginia. 18 MR. ROSENQUIST: Okay. Finally, the last 19 analysis step for the NOPR, the regulatory impact 20 analysis. The purpose here is to explore alternatives, 21 non-regulatory alternatives to mandatory efficiency 22 standards. The types of things we typically look at 23 here are voluntary standards, things like Energy Star, 24 tax credits, and other things like that. 25 We'll be trying to base the savings that we EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064195 1 determine for these non-regulatory alternatives on past 2 historical data to give us an indication again of how 3 those particular programs impact the market. Again, 4 we'll be comparing that to the savings that we 5 calculate from our mandatory efficiency standards. 6 There's not a comment slide for the RIA, but 7 we certainly would like to hear if you have any 8 comments on this particular aspect of the analysis. 9 MR. BROOKMAN: Yes, definitely. Comments on 10 regulatory impact analysis? Yes, Dave Calabrese. 11 MR. CALABRESE: From the industry standpoint, 12 you know, we see these voluntary initiatives, market 13 pull, market push initiatives, as having great effect 14 and should be taken very seriously. There are tax 15 credits that my friend David Goldstein is a supporter 16 of and that we have agreed to that are pending in the 17 Congress right now and are in effect. They've had a 18 dramatic effect on the industry. Unfortunately, they 19 don't have -- for these products they're not 20 applicable. 21 But these voluntary initiatives, Energy Star 22 and other voluntary incentives, provide a great effect 23 and we have always felt, and will continue to say so, 24 that while there is a place for standards, the 25 voluntary initiatives have a very important aspect. In EXECUTIVE COURT REPORTERS, INC.

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1 fact, as you develop your models, and you mentioned 2 this earlier, providing -- showing that there may be 3 significant market share at various efficiencies will, 4 I think, effectively demonstrate what the true energy 5 savings would be from a new standard, not just looking 6 at what's the baseline but realizing there's stuff at 7 the baseline, there's going to be product at the Energy 8 Star level, and sometimes even beyond because of these 9 tax credits. Thank you. 10 MR. BROOKMAN: Thank you. Other comments 11 related to the regulatory impact analysis? 12 MR. GOLDSTEIN: David Goldstein. I agree 13 with what Mr. Calabrese just said on the effectiveness 14 of programs like Energy Star. Other market 15 transformation efforts are much more problematic for 16 these two products than they are for almost anything 17 else, tax credits, utility programs, and so on, because 18 these are discretionary products. One can argue about 19 whether we're better off or worse off with more of them 20 being sold, but in terms of energy use, more of them 21 sold will mean more energy use at the range of 22 efficiency improvements that we're talking about being 23 technologically reasonable here. 24 So you really are limited to very creatively 25 designed incentive programs or recognition programs EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064197 1 like Energy Star and standards much more than you would 2 be for the other products covered by DOE. 3 MR. BROOKMAN: Steve Rosenstock. 4 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 5 in terms of data points, again, you know, the federal 6 government has had their tax credits in effect for the 7 last couple of years on appliances. I don't know if 8 the IRS has data, but you know, people -- to get tax 9 credits, taxpayers had to fill out forms to get the tax 10 credit. So the IRS might have some data points in 11 terms of -- especially for the appliances, the HVAC 12 appliances and water heating appliances that were 13 eligible for federal tax credits. It might be an 14 interesting data point to use in your analysis. 15 Also, I know certain states also had like 16 sales tax holidays on Energy Star appliances in 17 October. Virginia was one of them. In combination 18 with the manufacturer tax credits, I don't know if 19 there's any data from state governments. I know 20 Virginia did it earlier this month. I think Georgia 21 did it as well. There might be some data at the state 22 level. 23 MR. BROOKMAN: Thank you. Other comments on 24 regulatory impact analysis? 25 (No response) EXECUTIVE COURT REPORTERS, INC.

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1 MR. BROOKMAN: Okay. I think that then is it 2 for you, Greg. Thanks very much, Greg. Let me take 3 the initiative to thank all the presenters today. 4 This is the occasion now when the Department 5 wanted to provide yet another opportunity for anybody 6 that wishes to make closing remarks to emphasize an 7 issue or two. Right now is your opportunity to do 8 that. 9 Phil. 10 Other Issues and Comments/Closing Remarks 11 MR. MANTHEI: Phil Manthei, Alliance Laundry 12 Systems. I want to thank the Department for the nice 13 presentation materials and the overhead slides. I'll 14 be presenting them in our company. Of course, we're 15 more focused on the commercial laundry aspects and so 16 it's interesting. We'll have to go back and make sure 17 everybody is up to speed with some of the new people 18 that are in place with residential products. It helps 19 when you have good materials that they can use and 20 refer back to. Thank you. 21 MR. BROOKMAN: Thank you. David Goldstein. 22 MR. GOLDSTEIN: David Goldstein, NRDC. I 23 wanted to thank the Department and its contractors for 24 getting this kicked off and going in the right 25 direction. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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1 MR. BROOKMAN: Thank you. Dave Calabrese. 2 MR. CALABRESE: I want as well to echo the 3 thanks for this very thorough job. Again, I think that 4 while we have some disagreements over some issues, I 5 think it shows the Department is really taking this 6 very seriously and looking at the issues in a thorough 7 way. 8 MR. BROOKMAN: Thank you. Yes, Harvey Sachs. 9 MR. SACHS: Harvey Sachs, ACEEE. I also 10 would join with everyone else in thanking the 11 Department, the presenters, and our professional 12 colleagues around the table and in the room for the 13 seriousness. I guess I'd say that you've outlined a 14 daunting series of steps and trust the Department will 15 be open to thinking about alternative means of 16 converging on standards as well. 17 MR. BROOKMAN: Phil, did you have something 18 else you wanted to say? No? Okay. Any other comments 19 here before we move towards closure? 20 (No response) 21 MR. BROOKMAN: So then, I would ask you, the 22 last page of your packet is an evaluation form. So if 23 you'd take a peek at that. It only takes a minute or 24 two to fill it out. The Department reads them 25 carefully. Please fill them out. EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064200 1 And then from my perspective, the last thing 2 I would say is I just thank all of you for the 3 cooperative spirit in the room, for the level of 4 disclosure and good humor, and many thanks to all of 5 you for staying on time and making this an effective 6 meeting. 7 And then I'll turn it back to Steve Witkowski 8 for closing remarks. 9 MR. WITKOWSKI: I just want to thank all of 10 you for coming today and for helping us in this 11 process. I look forward to working with all of you in 12 the future. We really are looking forward to as much 13 input, to new ideas, to whatever you have to help us in 14 this process. 15 The last page, on page 127 of the slides, 16 also I believe on page 9. Again, a reminder on how to 17 submit written comments. All the information is on 18 this slide. The comment period closes on November 6th, 19 so please, if you have comments, get them in and get 20 them in to us on time if you can. 21 Additionally, in the Federal Register notice, 22 my contact information is there. Don't hesitate to 23 contact me either by telephone or e-mail if you have 24 any questions or any other issues you want to discuss. 25 I'll also be sure that they're passed on to the rest EXECUTIVE COURT REPORTERS, INC.

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1 of the members of the team. 2 And again, Doug,thank you very much. I want 3 to thank all the people who helped put this together 4 and everyone who came, and let's hope that we have a 5 successful rulemaking here.Thank you. 6 (Whereupon, at 3:25 p.m., the meeting was 7 concluded.) 

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EXECUTIVE COURT REPORTERS, INC. (301) 565-0064202 1 REPORTER'S CERTIFICATE 2 3 This is to certify that the attached proceedings 4 before: 5 

### 6 UNITED STATES DEPARTMENT OF ENERGY In the Matter of: 7 PUBLIC MEETING ON ENERGY CONSERVATION STANDARDS FOR 8 RESIDENTIAL CLOTHES DRYERS AND ROOM AIR CONDITIONERS 9 10 Were held as herein appears and that this is the 11 original transcript thereof for the file of the 12 Department, Commission, Board, Administrative Law Judge 13 or the Agency. 14 Further, I am neither counsel for or related to 15 any party to the above proceedings. 16 17 18 Wendy freeif2C'' n 19 Official Reporter 20 Dated: November 14, 2007

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