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## U.S. DEPARTMENT OF ENERGY

**+ + + + + CENTRAL AIR CONDITIONER REGIONAL STANDARDS**  **ENFORCEMENT WORKING GROUP**

**+ + + + +**
**PUBLIC MEETING**

**+ + + + + Thursday**  **September 25, 2014**

**+ + + + + The Public Meeting met in Suite GH-019, 1000**  **Independence Avenue, S.W., Washington, D.C., at 9:09 a.m, Neil Eisner, Meeting**  **Facilitator, presiding.**

**PRESENT NEIL EISNER, Meeting Facilitator**  **DANIEL ARNOLD, NORDYNE TIMOTHY BALLO, Earthjustice**  **GARY CLARK, Goodman Manufacturing Company JORDAN DORIA, Ingersoll Rand**  **V. RAY ELLIS, Lincoln Electric Cooperative GARY FERNSTROM, California Investor Owned**  **Utilities JOHN GIBBONS, Carrier Corporation**  **DAVID HUNGERFORD, California Energy Commission**  **JOHN HURST, Lennox International CHARLES McCRUDDEN, Air Conditioning**  **Contractors of America JONATHAN MELCHI, HARDI**  **KAREN MEYERS, Rheem Manufacturing Company ELIZABETH NOLL, Natural Resources**  **Defense Council (via teleconference)**

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## DOUG RAWALD, U.S. Department of Energy, **General Counsel BRYAN ROCKY, Johnson Controls**  **ANIRUDDH ROY, Goodman Manufacturing Company HARVEY SACHS, American Council for an**  **Energy-Efficient Economy AMY SHEPHERD, Air-Conditioning, Heating and**  **Refrigeration Institute CHARLES WHITE, Plumbing-Heating-Cooling**  **Contractors - National Association**

**ALSO PRESENT**

**MEG WALTNER, Natural Resources Defense Council KARIM AMRANE, Air-Conditioning,**  **Heating, and Refrigeration Institute**  **LAURA DEGITZ, Navigant Consulting**

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**TABLE OF CONTENTS**

**Discussion on Manufacturers. . . . . . . . . . . . . . .3**

**Discussion on Distributors . . . . . . . . . . . . . . 32**

**Discussion re: caucuses. . . . . . . . . . . . . . . . 75**

**Presentation by Doug Rawald. . . . . . . . . . . . . . 78**

**Final Discussion Brochure Changes. . . . . . . . . . .292**

**Prohibited Acts. . . . . . . . . . . . . . . . . . . .296**

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## 1 P-R-O-C-E-E-D-I-N-G-S **2 9:09 a.m. 3 MR. EISNER: Why don't we get**  **4 started. Do we want to start off with what 5 you met with manufacturers on last night?**  **6 MR. RAWALD: Sure, so yesterday I 7 met with the distributors, contractors, and**  **8 the manufacturers with the distribution 9 asparts of their business and went over the**  **10 proposed ideas for record retention. So I've 11 put together these slides that kind of**  **12 summarize what our thoughts were. Now they 13 didn't necessarily agree to everything, but**  **14 this is kind of what I wanted to put before 15 the group after having some feedback from**  **16 those folks. 17 So if we go to the first slide, so**  **18 here's what we were looking at. We discussed 19 what possibly contractors and dealers would**  **20 have to keep. So looking at split system 21 central air conditioners, the things that we'd**  **22 want would be for outdoor condensing unit, the**

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## 1 manufacturer, the model, and serial number. **2 For the indoor unit, the evaporating unit, 3 evaporating coil in this case, the**  **4 manufacturer and model number. And if the 5 ducted air mover is being installed with it,**  **6 then the manufacturer and model number of that 7 as well because from the AHRI database those**  **8 three components together will often be a 9 certification. So that's why I want to keep**  **10 all those together. 11 MR. SACHS: Excuse me, Doug. This**  **12 is Harvey. Will you be circulating these or 13 just the next iteration?**  **14 MR. RAWALD: So this is for us to 15 talk about. We can circulate a copy. I don't**  **16 have a copy. I just finished the slides like 17 literally 20 minutes ago. But we can give you**  **18 a copy to bring back to your interests, if 19 you'd like.**  **20 MR. SACHS: We'd appreciate it. 21 Thank you.**  **22 MR. RAWALD: So single package air**

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## 1 conditioner because it is a concern in the **2 Southwest, the manufacturer, model, and serial 3 number. And then for all the units for the**  **4 contractors and dealers to keep, where they're 5 installed, when they're installed, and who**  **6 they bought it from. That was a general 7 thought on what we want contractors and**  **8 dealers to keep for record retention. 9 Any reactions from the folks that**  **10 weren't part of that discussion? 11 MR. FENSTROM: That's good. So**  **12 what's the consequence if the record isn't 13 there when you might want to see it?**  **14 MR. RAWALD: Right, so we didn't 15 discuss all of that, but we have on the table**  **16 what we talked about before was the 17 possibility of a prohibited act for not**  **18 producing records. But we had discussed that, 19 the consequence. We can discuss just**  **20 basically what would be required to keep. 21 MR. SACHS: This is Harvey. And my**  **22 guess, but I want to get it clarified, is this**

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## 1 would be a DOE requirement for all SEER 13 **2 condensing units sold anywhere in the country 3 or only in the South or --**  **4 MR. RAWALD: So we had a lot of 5 discussion of that. We didn't come to an**  **6 accord about whether this would be a 7 nationwide requirement of all, any split**  **8 systems, whether we focus only systems that 9 are below 14 SEER or whether it would be only**  **10 people working in the Southwest and Southeast. 11 We didn't come a final decision on that.**  **12 In my -- what I am putting forward 13 here is a nationwide idea, but I'm open to**  **14 judgments or any sort of narrowing of the 15 scope. So Charlie, in particular, wanted to**  **16 think about it overnight because he had some 17 real thoughts and he was going back and forth**  **18 on what we thought would be the right scope 19 for him.**  **20 MR. WHITE: I'm surprised. Well, 21 this is Chuck White, PHCC. One of our issues**  **22 is if we require everyone with SEER 13, that's**

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## 1 the people in the North. So the people in the **2 North are going to be doing all the 3 registration and with equipment that's**  **4 legitimate to install. 5 The people in the South, if you're**  **6 following the rules, you have nothing to 7 register. If you're not following the rules,**  **8 you're probably not going to register. 9 MR. RAWALD: I want to avoid the word**  **10 "register" because this is all about 11 recordkeeping. We're not getting to this yet,**  **12 registering. 13 MR. WHITE: Yes but, it puts the**  **14 onus, the work, and the issue kind of in the 15 wrong area. You're still going to keep**  **16 records, but we couldn't really settle on 17 should this be 13, should this just be the**  **18 South. We couldn't really settle on it. 19 MR. FENSTROM: So this is Gary. If**  **20 the prohibited act is to use your term failure 21 to register, or Doug's term, failure to keep**  **22 the record, then if we go out and do some**

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## 1 auditing and we find an absence of records, **2 then you know, there's a civil penalty 3 associated with it.**  **4 MR. AMRANE: Why would this 5 requirement apply to contractors while you're**  **6 dealing, installing units in the North? 7 MR. RAWALD: Right, so I think it's**  **8 a fair question. So why would a contractor in 9 the North have any sort of requirement at all?**  **10 So there's two reasons that I can think of. 11 One, a nationwide standard is always easier to**  **12 kind of teach and get people to understand 13 than variants. So if a guy works mostly in**  **14 the North, but then he goes to the South 15 occasionally and he forgets what he's supposed**  **16 to do because it's not a common practice for 17 him.**  **18 The second thing is as I've 19 described a couple of times, there are two** **20 scenarios by which there could be a non 21 compliant product. There's the first which we**  **22 talk about all the time which is the product**

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## 1 labeled 13 is installed in the South and **2 shouldn't be. The second is a product labeled 3 as 14, tested by DOE and determined to be**  **4 13.8. So the manufacturer has to figure out 5 what went where because they don't want to be**  **6 liable for all the 13.8s that were installed. 7 So they didn't want to reconstruct, okay,**  **8 these 25 are installed in the North, so 9 they're in the clear.**  **10 So the manufacturer may want dealers 11 and contractors in the North to keep track of**  **12 what they're installing to help minimize their 13 liability. So that's the only other incentive**  **14 I would see. Otherwise, I think it makes more 15 sense to focus on the regions from a**  **16 contractor/dealer point of view than on the 17 SEER value, I think, because you want to have**  **18 a kind of consistent pattern of practice from 19 the Southwestern and the Southeastern guys to**  **20 keep these records so we can ask them and 21 prove that they didn't do something or they**  **22 did do something. I think that's probably**

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## 1 what I would prefer as opposed to looking at **2 the SEER value. 3 But I'm open to thoughts. I'd**  **4 definitely want to get some dialogue on this. 5 MR. ROCKY: Doug, this is Bryan**  **6 Rocky. The discussion on indoor unit, I'm 7 assuming with the third bullet saying ducted**  **8 air mover that the indoor unit is considered 9 the evaporator coil?**  **10 MR. RAWALD: Yes, yes. I changed it 11 to the indoor unit from the evaporator coil.**  **12 When we were discussing it yesterday, we were 13 talking about the evaporator coil.**  **14 MR. EISNER: Other comments, 15 questions?**  **16 MR. SACHS: Doug, this is Harvey. 17 Perhaps this is a surprise, but I'm going to**  **18 remain in the listen mode, question mode. I 19 need to hear a lot more responses, pluses and**  **20 minuses. 21 MR. RAWALD: Okay, so you're asking**  **22 one of us to volunteer some more thoughts. So**

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## 1 Charlie, I don't know if you've come to a -- **2 MR. McCRUDDEN: So this is Charlie 3 at ACCA. I reached out to my folks. I**  **4 haven't heard from our Board to sort of 5 definitively say one way or another. The**  **6 issue -- I mean, these are for the most part 7 records that contractors already keep in some**  **8 form or another. And Doug and I in our 9 discussions I'm comfortable with sort of how**  **10 they need to be kept. There was a -- 11 MR. RAWALD: It'll be the last slide.**  **12 MR. McCRUDDEN: Okay. 13 MR. RAWALD: It'll be the last slide.**  **14 We'll discuss that. 15 MR. McCRUDDEN: I'll get to that in**  **16 a second. But essentially, there's not a 17 tremendous burden on the contractor. The idea**  **18 is that the only time a contractor would have 19 to produce these records are upon request.**  **20 There may be some legwork to find all the 21 records necessary because they're not going to**  **22 be associated in a database, in a relational**

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## 1 database. Some may have that, some may not. **2 I believe that the DOE would use its 3 discretionary authority for the smaller folks**  **4 in these instances. 5 MR. RAWALD: This is Doug, and I**  **6 would interject, the less sophisticated folks. 7 So people --**  **8 MR. McCRUDDEN: The less 9 sophisticated. But I'm just not sure what to**  **10 do about nationwide versus narrow, from a 11 narrow scope. Nationwide offers the**  **12 opportunity for consistency. It offers the 13 manufacturers an opportunity to mitigate a**  **14 case where they may be on the hook, but as 15 Chuck noted, the burden is being carried by**  **16 the contractor who really is just going to 17 have its standard operating procedure as it**  **18 always was. 19 The focus -- we've been so focused**  **20 on the Southeast/Southwest, clients in 21 Southeast/Southwest, this record-keeping**  **22 requirement has not been a part of that in a**

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## 1 sense. **2 MS. MEYERS: This is Karen with 3 Rheem. Is this just for 13 SEER units or is**  **4 this for all split system central air 5 conditioners of which there are millions sold**  **6 yearly. 7 MR. SACHS: Karen, this is Harvey.**  **8 Can we finish up the other one? I had a 9 question on the other side of this. I'm very**  **10 much interested in the 13/14. In fact, it 11 confused me that there are two things in play.**  **12 MS. MEYERS: Okay with me. 13 MR. RAWALD: Right, and so I think**  **14 Charlie and I discussed it there. They're 15 totally -- they can't coexist. Either we**  **16 narrow the scope to what's less than 14 which 17 has the real unintended consequences of burden**  **18 really will be borne by the Northern 19 contractor much more than the Southern**  **20 contractor -- which is not the consequence I 21 think I'm really in favor of --- or we narrow**  **22 the scope to only those who operate in the**

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## 1 Southeast and the Southwest which I think is **2 more consistent with the idea of regionalizing 3 the standard, but requires them to keep track**  **4 of not just 13s, but all installations they 5 do.**  **6 Now I don't think it's anything that 7 they don't already keep track of as Charlie**  **8 and I discussed. I don't think it's all that 9 burdensome, but I do think we have to make**  **10 clear that that's what they're keeping. 11 I think for me from an investigative**  **12 point of view, it would be helpful if I'm 13 going to go to a Southeast contractor and if**  **14 I can look at and see what is positive as well 15 as -- it might be negative, it's helpful. So**  **16 I would want it to be not just 13, but also 17 all above SEER so I can look at a record and**  **18 say oh, you had 25 installations and only one 19 was a mistake. That would be helpful. I**  **20 think that makes sense to me. 21 So if I were going to narrow the**  **22 scope, I would just narrow it to Southeast and**

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## 1 Southwest, but that's just me talking out **2 loud. And I don't know how hard this is to 3 sell and I don't know from the manufacturer's**  **4 point of view how much you want to insulate 5 your liability for this concern if you put out**  **6 in the universe a unit that tests less than 14 7 to be able to track back what actually was**  **8 sold in the South and installed in the South. 9 MR. SACHS: Doug, this is Harvey.**  **10 Again, a question. 11 MR. RAWALD: Okay.**  **12 MR. SACHS: The proverbial 13.8 13 condensing unit that's revealed as a result of**  **14 DOE testing, or it fails in AHRI, strikes me 15 as being an issue for what records the**  **16 manufacturer wants to demand from down the 17 chain. Do the manufacturers want DOE's, air**  **18 quotes, help on that issue or is that 19 something which can be left to them?**  **20 MR. RAWALD: I think I had the exact 21 same question. That is my exact same**  **22 question. There's an ability here because**

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## 1 we're negotiating, to create by regulation **2 that for the manufacturers or to not. And so 3 I want to hear from the manufacturers whether**  **4 they want that assistance. 5 MR. FENSTROM: Doug, this is Gary.**  **6 Let's talk about a hypothetical. 7 MR. RAWALD: Okay.**  **8 MR. FENSTROM: So I'm a small 9 contractor in a region that requires**  **10 compliance and we collectively decide that 11 only compliance-required regions are going to**  **12 be reporting, so we're going to exempt the 13 rest of the country.**  **14 MR. RAWALD: Maintaining, not 15 reporting.**  **16 MR. FENSTROM: Maintaining, thank 17 you. We're only going to report noncompliant**  **18 units where there's no need to report 19 compliant units. So you come up to my place**  **20 of business and I say well, Doug, I don't have 21 anything to report. Everything I installed**  **22 was compliant. Thank you.**

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## 1 MR. RAWALD: Right, I don't want **2 that outcome. 3 MR. FENSTROM: No, and I just put**  **4 that out there to show that if we do exempt 5 the rest of the country and just require**  **6 retention in compliance-required areas, we'd 7 have all the equipment that was shipped into**  **8 that area and installed in that area. 9 MR. RAWALD: No, I wouldn't agree**  **10 with that. It's got to either be across the 11 board, below 14 SEER, or just focus on a**  **12 region, but all that were installed. I think 13 it's got to be one or the other.**  **14 From what I heard from Charlie, that 15 he's in agreement with that as well as he**  **16 thought about it. If any at all, if any 17 narrowing at all. Because the third option is**  **18 no narrowing and everyone has the burden. 19 MR. FENSTROM: Well, this is Gary**  **20 again. So let me throw out a position. I 21 don't see value in having the whole rest of**  **22 the country required to retain records. There**

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## 1 may be some slippage where contractors in the **2 rest of the country do occasional business in 3 compliance-required areas. But that slippage**  **4 is probably going to be small. 5 MR. RAWALD: Right.**  **6 MR. FENSTROM: And correcting it or 7 capturing it wouldn't merit the burden on the**  **8 entire rest of the country. 9 MR. MELCHI: Jon Melchi from HARDI.**  **10 To Gary's point, that still wouldn't prevent 11 DOE from asking those contractors in the**  **12 northern regions for those records. It just 13 maybe takes away the guarantee that it will**  **14 have -- that that contractor will have 15 absolutely every piece of information.**  **16 MR. RAWALD: Because they're not 17 familiar with the regulation.**  **18 MR. MELCHI: Yes. 19 MR. RAWALD: Right, I agree.**  **20 MR. MELCHI: They still may have 21 those records.**  **22 MR. RAWALD: Any other thoughts on**

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## 1 this? We haven't heard from any manufacturers **2 at all in response to Harvey's question 3 whether they want help.**  **4 MR. SACHS: They may want to caucus. 5 MR. RAWALD: Yes, I don't mind. If**  **6 you guys want to talk about it, we can move on 7 and we can come back to this later. I just**  **8 want to present the topics. 9 MS. MEYERS: So this is Karen with**  **10 Rheem. I think as we said in the past eight 11 meetings and the issue is the border states,**  **12 so that's North and South. So -- and that's 13 probably where you're going to have your**  **14 issues. So not that I want to burden the 15 whole North, but I think just making this a**  **16 requirement for the South and the Southeast 17 regions is probably not really going to even**  **18 get to -- I mean if you're not going to 19 require Minnesota, I don't think you should**  **20 require Texas because Texas isn't going to be 21 an issue either. So I'm not sure how this is**  **22 solving the issue, just a --**

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## 1 MR. McCRUDDEN: So this is Charlie **2 of ACCA. You could say all installs in the 3 North and South, so then let's say you've got**  **4 the case where you've got a Michigan 5 contractor that does a lot of multi-family or**  **6 multi-family housing and he'll take a job 7 anywhere. In fact, that's his specialty. He**  **8 travels around the country. This was the case 9 we talked about yesterday where the equipment**  **10 may be shipped, like with -- what was it, 11 Hobbs or whatever it was, where you've got the**  **12 manufacturer shipping directly to Atlanta a 13 bunch of 13 SEERs that are going to get on a**  **14 truck. 15 In that case, you could say okay, if**  **16 you're doing a job in the Southeast or 17 Southwest, you must maintain the records of**  **18 that information from those jobs. That, of 19 course, requires that the contractor**  **20 essentially self-certify or declare that 21 they've done jobs in the South and Southwest**  **22 and so the contractor from Ohio, on the border**

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## 1 there, could just claim well, I didn't do any **2 jobs in the South, when in fact, they did. 3 And I'm playing devil's advocate**  **4 against myself in this situation, but these 5 are the things we've sort of got to unpack,**  **6 figure out and I think it's just what's going 7 to be most effective is the question not**  **8 what's -- do we do record keeping requirements 9 or not.**  **10 MR. FENSTROM: So this is Gary. 11 That's the very reason why we need what I**  **12 would call a sweep, some sort of minimal, 13 random audit at the installation level.**  **14 MR. RAWALD: Gary, I hear that you 15 want DOE as part of their investigative tools**  **16 to use the robocalling or the surveying and I 17 think it's a good idea. I put it before for**  **18 the Department. I don't think it's going to 19 be regulated under the regulation. I think**  **20 that's something that we can do and I 21 certainly hear that and I think we will look**  **22 into doing that.**

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## 1 MR. FENSTROM: Well, I would hope **2 that as an outcome of this working group and 3 the term sheet, we create the expectation that**  **4 DOE will do certain things, rather than just 5 listing DOE's authority or capability and**  **6 leaving it entirely up to DOE because we're 7 supposed to come up with a plan to assure**  **8 compliance and I would want to see some 9 expectation of minimum survey work. That's**  **10 not so necessary in the current paradigm, 11 because with national standards it's pretty**  **12 conspicuous when something doesn't comply. 13 But with regional standards, it's not at all**  **14 so conspicuous. 15 MR. RAWALD: Okay. Well, we can put**  **16 an item for the term sheet whether it's some 17 sort of proactive DOE robocall on an annual**  **18 basis as part of the regulation, so -- Harvey? 19 MR. SACHS: I have a question that**  **20 was -- this is Harvey. The question was 21 sparked by Karen's question. It's two parts.**  **22 The first part is would it be within this**

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## 1 group's capabilities to suggest to ASRAC a **2 record-keeping requirement for contractors 3 within one state of the North, South,**  **4 Southwest, North boundary and would that be an 5 advisable compromise? It will not catch the**  **6 multi-family guy, but it would certainly ease 7 the record keeping where we feel the trauma is**  **8 likely to be concentrated. 9 MR. RAWALD: So your first question,**  **10 of course, is within the boundaries of this 11 group. I think at DOE, to pose that question**  **12 would not support that proposal. We don't 13 want to have a hodgepodge of states. We**  **14 really want to have it coexistant with the 15 region or nationwide. That's easier for us**  **16 for a number of reasons and it helps, at 17 least, keep a clear message in some way. So**  **18 we're not going to be -- it would be hard for 19 DOE to support that.**  **20 I'll go back and ask the question, 21 if the group wants it and consensus comes to**  **22 that, but I think it would be awfully hard for**

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## 1 us to maintain that position. **2 MR. SACHS: I would like for us to 3 please get some reactions before you ---**  **4 MR. RAWALD: Before I close this? 5 MR. SACHS: Before you can say no or**  **6 go back. 7 MR. RAWALD: Right.**  **8 MR. ARNOLD: This is Dan Arnold. I 9 think we'd want to caucus on this. I have my**  **10 own personal feelings, but I don't want to be 11 out there and I don't want to impose my**  **12 feelings on contractors and others that are 13 part of our business model.**  **14 MR. RAWALD: Can I propose that we 15 go through the rest of the record retention**  **16 slides and then possibly caucus in small 17 groups?**  **18 Okay, let's go to the next one. So 19 we talked about distributors. And one thing**  **20 at the bottom here, I do want to -- 21 MR. SACHS: As Karen parked one item**  **22 and I'm not sure we got back to it.**

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## 1 MS. MEYERS: I think my question was **2 all efficiencies. Are we doing this for all 3 efficiencies or just 13 SEER units or just --**  **4 MR. RAWALD: Right, this is Doug. 5 And so I think it's got to be either by region**  **6 or by below 14 SEER. It can't be both. My 7 preference -- because I don't want to walk**  **8 into a situation where a guy says I only do 9 compliant installation as Gary describes, so**  **10 he has no records at all. That, to me is not 11 an acceptable outcome. I'd rather it be all**  **12 SEERs that you install and that way I can look 13 at your records and say these are all good.**  **14 Or he's falsified the records and he's saying 15 13 SEERs or 14 SEERs, at least he has some**  **16 sort of records so I can see there what's 17 going on. That's my preference. I think it**  **18 makes a lot more sense. I'm more supportive 19 of the region. I'm not supportive of**  **20 narrowing it by SEER. 21 MR. BALLO: When you say region,**  **22 you mean the region of installation, not the**

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## 1 region that the contractor is located in? **2 MR. RAWALD: Absolutely correct. 3 The region of installation. It would not be,**  **4 once again, I don't want it to be where you 5 are housed. You know, in Louisville, you can**  **6 cross the border and still work in the South. 7 It's where the install takes place.**  **8 MS. MEYERS: So it would only be for 9 products subject to regional standards so**  **10 condensing units of package air conditioners. 11 So you're not required to keep records on heat**  **12 pumps? 13 MR. RAWALD: Absolutely correct.**  **14 That's correct, Karen. Let's assume it's in 15 the cycle package.**  **16 MR. McCRUDDEN: And Karen, I'll say 17 -- this is Charlie with ACCA. Again, most**  **18 contractors are keeping these records in some 19 form or another. It may not be paper. It may**  **20 not be electronic, but this is for the most 21 part a standard operating procedure. The less**  **22 sophisticated contractors may have to make**

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## 1 adjustments, depending on how this works out. **2 For that contractor, if they're essentially 3 exempt, then there's no change in how they**  **4 operate. 5 MS. MEYERS: So then just for**  **6 clarification, we're calling a 14 SEER unit 7 what?**  **8 MR. McCRUDDEN: I don't think we've 9 made that definitive or a determination yet.**  **10 MR. RAWALD: I don't understand the 11 question.**  **12 MR. McCRUDDEN: I think she -- well, 13 I'll let her.**  **14 MS. MEYERS: Well, so if I've got a 15 15 SEER unit that I put with an oversize coil**  **16 and an air handler so the efficiency -- 17 because its installation demands it, but it**  **18 brings the efficiency rating that I've 19 certified the 14.8, do I have to keep a record**  **20 on that? 21 MR. RAWALD: Yes, in my opinion, I**  **22 want to keep records of all installs,**

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## 1 regardless of SEER value, I want to do it by **2 region. Now if we were to do it by SEER value 3 those questions would come in, maybe a lot**  **4 more complicated I think. 5 MR. McCRUDDEN: More complicated --**  **6 this is Charlie at ACCA. More complicated, 7 but potentially less burdensome in a sense.**  **8 MR. RAWALD: In burdensome, you keep 9 less records, but more burdensome you have to**  **10 keep it in the first place, otherwise you have 11 a complete -- hey, I did a job, I keep a**  **12 record. So if you have to think about whether 13 you're keeping a record that's time wasted**  **14 possibly or eternally to keep the records, I 15 don't support.**  **16 MS. MEYERS: If the product is not 17 subject to a regional standard, I don't know**  **18 why the enforcement rule would have a 19 requirement that they have to keep a record on**  **20 it. So if it's a 15 or a 16 or an 18 SEER, 21 the contractor may elect to do that because**  **22 it's simpler to do it for everything, but I**

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## 1 don't know why we would include it as part of **2 the enforcement rule. 3 MR. RAWALD: And this is Doug. So I**  **4 would push back on the notion that the product 5 is not subject to regional standards because**  **6 the way we view product, it is subject to to 7 regional standards. It's just that particular**  **8 model meets or exceeds the standard. So just 9 because it meets or exceeds doesn't mean that**  **10 it's required to reported. In fact, in DOE's 11 parlance, we require reporting of meet or**  **12 exceeds standards from manufacturers every 13 day. So I think it's consistent with our**  **14 practice. And we require manufacturers to 15 keep records on things that meet or exceed**  **16 standards currently. 17 MS. MEYERS: But you couldn't be**  **18 bringing an enforcement action against one of 19 those units.**  **20 MR. RAWALD: But, Karen, I'm not 21 bringing it against the unit. I'm bringing it**  **22 against the contractor and so the existence of**

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## 1 compliant installs or at least recorded to be **2 compliant installs could be helpful for me in 3 trying to figure out what happened in the**  **4 course of the investigation. 5 So it can indicate either the guy is**  **6 doing everything right and this one thing was 7 a one-off. It could be the guy is faking all**  **8 these records and all the installs are 9 actually bad installs and he's lying on the**  **10 record. So I need to be able to, I think, see 11 the complete record of what the installer is**  **12 doing to build a good enforcement case. 13 MR. SACHS: This is Harvey. Looking**  **14 at it a slightly different way, I think it's 15 baked in, once everything hinges on a routine**  **16 violator. 17 MR. McCRUDDEN: Yes, this is**  **18 Charlie. And that's what I think, too. I do 19 want to hear what the manufacturers are saying**  **20 and I'll let you guys caucus, but I'm curious 21 because in the instance where there is a 14**  **22 that's not 14 and you can under this factor**

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## 1 method say well, only 25 of the product that **2 didn't meet the rating we said it did, ended 3 up in the South, versus the 15,000 we made.**  **4 MS. MEYERS: Yes, that makes sense. 5 MR. McCRUDDEN: The other question I**  **6 have is what happens in the case of a 13 SEER 7 product that winds up rating or testing at**  **8 less than 13. 9 MR. RAWALD: Right, that's a**  **10 national standard. The manufacturer is 11 responsible for it period. That's**  **12 specifically how we do things -- 13 MR. McCRUDDEN: I guess you're**  **14 right, it doesn't matter. 15 MR. RAWALD: It would be --**  **16 MR. McCRUDDEN: Well, I'll let that 17 one go.**  **18 MR. BALLO: Just one question, the 19 real value to DOE of seeing those compliant 14**  **20 plus installations is for the routine violator 21 assumption could then or determination could**  **22 you just have it that it's not a requirement**

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## 1 to keep the 14 SEER records, but if you don't **2 keep it, you're assumed to be a routine 3 violator if we catch you with the --**  **4 MR. RAWALD: We could adopt that. I 5 don't think the contractors would want that.**  **6 MR. BALLO: Well, if they don't want 7 to keep the records --**  **8 MR. RAWALD: Right. I don't hear the 9 contractors pushing back as hard as I hear**  **10 Karen pushing back on the manufacturer point 11 of view on behalf of the contractors.**  **12 MS. MEYERS: I'll withdraw. I was 13 just questioning. You won me over.**  **14 MR. McCRUDDEN: This is Charlie. 15 You're talking about two different types of**  **16 violations. One is an installation violation 17 and the other is a record-keeping violation.**  **18 I think they are separate functions. I don't 19 think you should be able to move from one to**  **20 the other based on -- I don't think you should 21 be able to move from record-keeping violation**  **22 to a routine violator for installations. That**

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## 1 may not be the case. **2 MR. RAWALD: Right, I was just 3 offering you a compromise which is hey, if the**  **4 guys want to keep records, fine, but if they 5 done one thing wrong, we assume all their**  **6 things are wrong. So that's a compromise 7 we're offering which I would not be surprised**  **8 you'd want to take it. But you can think 9 about it.**  **10 So let's move to distributors. So 11 distributors is basically the same form of**  **12 information on the units and for them we want 13 them to keep the date they buy and who they**  **14 buy it from and the date they sell it and who 15 they sell it to. And I then I added the last**  **16 one after meeting with these folks, so we had 17 not discussed this, if it's delivered, where**  **18 was it delivered to. I think that would be 19 something that they would be maintained**  **20 already since it's a delivery record, but at 21 least having that possible piece. So that's**  **22 a new piece that we've not discussed before.**

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## 1 And I do want to make sure I call it out to **2 folks. 3 Understand, it may not be delivered**  **4 to the contractor or not even to where it's 5 being installed. So that might not give us**  **6 everything we want, but still, it's something 7 that it's already being kept. We would like**  **8 to have it be considered still kept. 9 MR. FENSTROM: This is Gary.**  **10 Furthermore, if the distributor has retained 11 a complete record of what was sold to the**  **12 contractor and the contractor is obligated to 13 keep records of all equipment, compliant or**  **14 not, you can match what was sold to what the 15 contractor said they installed and it would**  **16 make your job much easier and complete. 17 MR. RAWALD: Everything Gary is**  **18 saying is completely true from my point of 19 view. That's part of the reason for why I**  **20 would want to have the complete record on the 21 part of the contractor so I can build this**  **22 picture when I compare it to the distributor**

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## 1 record. **2 MR. ROCKY: This is Bryan from 3 Johnson Controls. My question is to John and**  **4 Chuck and Charlie, what's the impact of this 5 on your cash sales?**  **6 MR. RAWALD: There were a lot of 7 discussions about that yesterday, Bryan.**  **8 MR. SACHS: Before we get to that, I 9 think in the next to last bullet, it's party**  **10 to whom? 11 MR. RAWALD: Right, it should be to**  **12 whom, you're correct. We'll take that from 13 to. That's correct, Harvey. That goes to show**  **14 I did it this morning too fast. 15 MR. SACHS: That's fine. I just**  **16 wanted to make sure I wasn't misunderstanding. 17 MR. RAWALD: No, you are correct.**  **18 John, you had a point, too? 19 MR. GIBBONS: Well, I was the one**  **20 who brought up the cash sale and I did some 21 surveying last night. We got domestically,**  **22 the United States-wise, we have roughly 14**

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## 1 brands. I checked on the Carrier side which **2 the guy said we require a license and we also 3 take names and numbers of who we sell to,**  **4 whether it's a cash sale or a credit card sale 5 or whatever.**  **6 And then I was checking on our ICP 7 side of the fence and it was probably 50-50.**  **8 I checked with two different distributors, 9 both from the West Coast that said, yes, we**  **10 track everything because we don't want -- in 11 case there's a consumer recall, we want to**  **12 make sure we know where the unit is at. 13 And then the one guy said, well --**  **14 he got a little iffy, he said, probably about 15 half of what we sell over the counter, it's**  **16 what he was calling selling over the counter 17 was tracked, the other half was kind of --**  **18 vaporizes. 19 MR. MELCHI: This is Jon from HARDI.**  **20 When we're talking cash sales ---- those of 21 you who haven't had the privilege of visiting**  **22 a distributor. Customer comes in, he's not**

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## 1 a regular customer. Maybe, you know, and **2 maybe they're looking to purchase a coil, a 3 simple coil. This supply house is the closest**  **4 one to the job. I'm going to pay cash for it. 5 The distributor is not going to take the time**  **6 to put in the information of the customer. 7 He's never seen him really before. No need to.**  **8 You know, line is out the door. It's just a 9 busy, quick transaction. It happens pretty**  **10 regularly. Call up my members yesterday they 11 would -- typical industry-wide, somewhere**  **12 around 20 percent of transactions are 13 conducted on a cash, over-the-counter basis.**  **14 Now that transaction could be parts 15 and pieces and it could be --**  **16 MR. RAWALD: And Jon, with or 17 without accounts?**  **18 MR. MELCHI: Yes, without an 19 account. Particularly, the scenario would be**  **20 like, for instance, one of our members last 21 night and I think it was brought up as we were**  **22 talking about this. And this was the issue**

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## 1 with serial number on the outdoor condensing **2 unit is I come ---- somebody comes to the 3 counter, they want to buy a system. They're**  **4 not a typical customer, but they have a client 5 that wants Brand X. That's what they've**  **6 always had. They want Brand X, but they want 7 their customer to install it. The contractor**  **8 comes to the store and says I will buy this 9 one time. I don't typically do business with**  **10 you, I never do business with you. I'm a 11 Brand Z contractor. If there's a premium to**  **12 be paid, they'll for it. They'll pay cash. 13 They'll get a bill at a sale. They roll their**  **14 truck around back. If my distributor doesn't 15 have a scanning system, we wouldn't know which**  **16 serial number is going to be loaded on the 17 truck. We would know what model number.**  **18 They'd be able to tell you that because you're 19 going to hand them a billing slip that is**  **20 going to tell them what to put on the truck. 21 But they're not going to know the serial**  **22 number.**

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## 1 So this was not how I expected to **2 spend my evening last night on the phone on 3 this one, but there was a heck of a lot of**  **4 opinions on this. For 80 percent of our 5 members and their customers, this information**  **6 is pretty easy and standard to track. This 20 7 percent though is a huge, huge change to our**  **8 industry. 9 Now we have gone through, in the**  **10 limited time we had between last night and 11 today, trying to figure out what the cost of**  **12 this would be. We're assuming that this is 13 going to be nationwide because that's a**  **14 commitment that I made to Doug that 15 distributors would keep these records -- try**  **16 to keep records on a nationwide basis. 17 Because of the regionality of distribution,**  **18 it's going to be really tough for one of my 19 members that straddles the border of different**  **20 regions to say, well, you keep these records 21 in this branch, but not in this branch. It**  **22 just doesn't really make any sense. And that**

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## 1 was a commitment we're trying to make to make **2 this go along. But you were talking at a 3 minimum for those three pieces at least four**  **4 million, probably substantially more than 5 that, transactions a year that are conducted**  **6 on a cash out basis. Now -- 7 MR. HURST: That's not condensing**  **8 units. That's all ---- total. 9 MR. MELCHI: That's condensing**  **10 units, ducted air movers -- 11 MR. HURST: ---- parts and supplies.**  **12 MR. MELCHI: Yes -- no, and coils. 13 So somewhere around that time.**  **14 MR. SACHS: That doesn't count the 15 duct tape sales?**  **16 MR. MELCHI: No. 17 MR. SACHS: Okay.**  **18 MR. MELCHI: Let's say that takes 15 19 minutes to try to capture that information at**  **20 each transaction for each -- at least right 21 off the bat. Because you're talking**  **22 nationwide. You're trying to get this**

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## 1 information. You're looking at a cost to my **2 members, in the distribution neck of this, in 3 excess of $10 million annually to change a**  **4 practice. The way one of my members put it to 5 me -- this is the biggest change to the HVAC**  **6 industry since the implementation of 608 regs 7 from the EPA, in as far as deviating**  **8 practices. 9 Having said all that, we're not**  **10 opposed to trying to do this. We think that 11 as far as the one -- the continued question we**  **12 heard was the serial number piece on the 13 condensing unit is going to be problematic and**  **14 it would require, in addition to a change in 15 the behavioral practices and SOPs of a counter**  **16 guy, it would take, you know, you're talking 17 changes to your ERP system and implementation**  **18 of scanning and things like that that not all 19 distributors have. If it's just a**  **20 manufacturer or model number which given that 21 we do have the pending guidance which we think**  **22 solves a lot of -- answers a lot of these**

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## 1 questions, it makes it easier to swallow. **2 Just so there's no shock, when we go 3 to OMB, if this implemented -- and we're**  **4 talking including cash sales, it's going to be 5 -- it's a huge cost. I mean it's a**  **6 massive cost to our industry. And again, just 7 the behavioral change. In a lot of our**  **8 markets -- one of my guys mentioned to me, I 9 mean we've got language barriers, you know,**  **10 where somebody can come in and point to 11 something in the catalog and you can kind of**  **12 communicate that way. There's a lot of 13 challenges that distributors are going to face**  **14 in this right off the bat. 15 I will be perfectly honest. I don't**  **16 think there's any way that we would be able to 17 change the entire practice of how distributors**  **18 do this by January 1, 2015. There's just no 19 way. We're not against trying to do it**  **20 though, if it means to helping this -- they're 21 trying to do this to try to help it along.**  **22 I'm going to get absolutely killed**

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## 1 because, as Gary mentioned, we're going to **2 have a distributor in Milwaukee or Detroit who 3 does -- a perfect example. I've got a guy in**  **4 Detroit who does almost entirely cash 5 transactional business. That's just the way**  **6 the market is up there. And they do a lot of 7 it. Now he is -- his business practices are**  **8 going to have to change. The guy from Detroit 9 is not going to be running south of the**  **10 border, but that's kind of the -- if that's 11 the way it's going to have to be, we're**  **12 willing to try -- admitting that that's going 13 to be the hardest part of this.**  **14 For 80 percent of our business 15 stuff, this is not going to be -- we don't**  **16 necessarily -- the serial number thing varies 17 from -- but the manufacturer and model number.**  **18 We've got that. And for customers that we 19 have, that will be information that we would**  **20 be able to provide. The delivery address, 21 I'll have to check with. I am 99 percent sure**  **22 nobody keeps those records for 5 years, so**

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## 1 there's going to be an additional cost to that **2 and I don't know how those -- or if those 3 records are even kept outside of notation in**  **4 an account. So I'll have to go back and check 5 those.**  **6 MR. RAWALD: Right, and I didn't 7 mean to spring that on you, it's just that**  **8 those were asked this morning. It was in 9 regard to our chat about the zip code and**  **10 everything else, this was the ask. So I want 11 to make sure that we have it out there for**  **12 discussion because we had talked about it. I 13 told these guys yesterday and I've told them**  **14 before -- my personal love for the serial 15 number is not great, but there's a Department**  **16 interest in the serial number. And there 17 seems to be interest from other people in the**  **18 -- stakeholders in the serial number. So I 19 don't want to give up on the serial number so**  **20 lightly, but I will ask the question of the 21 serial number for both the distributor -- I**  **22 think it's the biggest shift for the**

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## 1 contractor as well. I think it's the hardest **2 thing for them because ---- definitely I'm not 3 all that confident with giving serial numbers.**  **4 So that is the hardest task, I think, for 5 that.**  **6 MR. MELCHI: The date code? We 7 talked a little bit about --- you mean as far**  **8 as -- 9 MS. MEYERS: Can they keep track of**  **10 the date code? 11 MR. RAWALD: Karen, if you guys want**  **12 to be on the record, we're not getting any of 13 this --**  **14 MR. MELCHI: She asked him ---- can 15 you keep track of the date code. Are you**  **16 talking about the date purchased? 17 MS. MEYERS: No, the date code of**  **18 the manufacturer. 19 MR. MELCHI: I don't ---- it's not**  **20 something we typically track. I can ask and 21 take that back for sure. Without knowing how**  **22 the manufacturers are going to handle this,**

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## 1 are we looking at January 1 for -- I mean for **2 model number? Will there be different -- are 3 the model numbers going to stay pretty**  **4 consistent or are we looking at wholesale 5 changes is one thing -- question, that we had.**  **6 I wouldn't suspect that there would be a ton 7 of difference.**  **8 MR. ROCKY: This is Bryan Rocky. 9 We're going to do everything to keep it as**  **10 simple as possible because a model number 11 change is a significant thing, as you know.**  **12 It goes through the whole thing from bill of 13 materials and structures, or engineering bills**  **14 and model numbers and DOE ratings and 15 technical literature and sales information to**  **16 our customers. We're going to try to keep 17 things as simple as possible.**  **18 I'm going to have product that will 19 not have a model number change because of the**  **20 sell-through process. The only way to track, 21 which it is, is going to be the serial number**  **22 because that's where my date code is. And**

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## 1 it's got to be required that that's what's **2 tracked if you ---- Doug's really looking for 3 an enforcement because of the sell-through**  **4 period. 5 I've got units that are going to be**  **6 built December 30th, December 31st. They'll 7 have the same model number as units built**  **8 January 2nd. So tracking model -- 9 manufacturer and model number doesn't do**  **10 anything for the enforcement of product built 11 in 2015 and beyond. Some model numbers will**  **12 change. I'm sure other manufacturers are 13 going to do the same thing. But we don't like**  **14 changing model numbers if we don't have to. 15 MR. McCRUDDEN: So this is Charlie**  **16 at ACCA to follow up on that. How would a 17 contractor determine compliance with a sell**  **18 through? 19 MR. ROCKY: So we're looking at, as**  **20 a manufacturer -- this is Bryan, at do we do 21 -- and we talked a little bit about it in the**  **22 last meeting. I have requests from my**

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## 1 distribution partners and Mr. Porter is one of **2 them. They want an additional label on the 3 outside of the package beyond the FTC label,**  **4 beyond everything else that says 2015 -- 5 something that is big and bold, so that this**  **6 unit, if it has it, it's easily identifiable 7 in my warehouse, in Steve's warehouse, and for**  **8 the pick up for the guy at the contractor 9 level, the OTC guy. And that's what we're**  **10 probably going to do to protect ourselves. I 11 do not think that's something we want to**  **12 require because again, every manufacturer is 13 going to look at this differently, but we've**  **14 had a lot of discussions about what the 15 manufacturer is liable for, so we're looking**  **16 at doing everything we can to make it easy 17 down the chain to identify a unit.**  **18 MR. MELCHI: I have just been 19 advised that the Energy Guide label is going**  **20 to be changing roughly on the first of the 21 year -- although I guess it wouldn't prevent**  **22 a manufacturer from putting it on earlier.**

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## 1 But ---- so my advice has been if the Energy **2 Guide label changes, that's when you -- 2014, 3 2015, you put a piece of paper with the two**  **4 Energy Guide labels and maybe that should 5 help, but we appreciate -- we've never done**  **6 this before. We've never had an issue where 7 after the sell-through date ---- you can sell**  **8 this product now, but you can't sell it 9 tomorrow and if it's built for this date, it**  **10 has been a manufacturing ban. We have it. We 11 can sell it. Now if you have it, you might**  **12 not be able to sell it. You've got to figure 13 out if you can sell it. Oh, and if you still**  **14 have it by X date, it's dead. I mean there's 15 a lot of stuff that I can't tell you how we're**  **16 going to handle it, because I don't know. 17 We've never done it before and a lot of guys**  **18 are going to do it a lot of different ways. 19 MR. RAWALD: Though I would hope the**  **20 18 months is a sufficient period to get rid of 21 it --**  **22 MR. MELCHI: That's why -- yeah,**

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## 1 well, that's why -- that was part of the **2 factor into it because, quite frankly, we 3 didn't believe the first go around during the**  **4 initial standard that all those factors were 5 factored into the cost of the regulation.**  **6 MR. RAWALD: John Hurst had his hand 7 up before.**  **8 MR. HURST: I was just going to -- 9 John Hurst with Lennox. We're going to do**  **10 something similar. We've been asked by -- 11 MR. RAWALD: To Bryan Rocky.**  **12 MR. HURST: Yes but -- to Bryan, our 13 independent distributors have asked that we**  **14 put something on the packaging that clearly 15 identifies 2014 versus 2015 product.**  **16 I think the other point is this 17 isn't all -- I'm not going to speak for all**  **18 contractors, but a lot of the contractors know 19 how to read the serial number better than we**  **20 do. They know what they're looking at. They 21 know what model it is. They know when it was**  **22 made. They know the date code, so there is a**

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## 1 -- I want there to be a recognition that **2 contractors don't look at that as gibberish. 3 They understand how the serial numbers are**  **4 broken down and what they mean. So they can 5 fairly easily figure out what the date code is**  **6 -- both on the box and on the unit. 7 MR. BALLO: Doug, earlier you said**  **8 that you didn't view the serial number as 9 particularly important and I'm wondering why.**  **10 MR. RAWALD: No, no. So I still 11 view it as important. I'm just less in love**  **12 with it than others is what I was saying. I'm 13 more willing to compromise than possibly the**  **14 people I work with are because I think we get 15 a lot of information from the model number and**  **16 from the end of the manufacturer to help me 17 enforce.**  **18 Now trying to track a product 19 through its life, the only way to do that is**  **20 with the serial number. And trying to 21 determine the sell-through option is only with**  **22 the serial number. So there have to be some**

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## 1 presumptions made if there's no serial number **2 -- going back to your idea of presumption. 3 So I guess, I'm more willing to kind**  **4 of look at other options, but there are folks 5 that I work for and there are folks I've heard**  **6 from in the stakeholder world that think 7 serial numbers are much more important than I**  **8 do and I am willing to ask the question, but 9 I don't think the serial number is something**  **10 we'll compromise on. That was my point. And 11 Harvey had another question.**  **12 MR. SACHS: Jon, I very much -- this 13 is Harvey Sachs -- hear the concerns about**  **14 serial numbers, it's a possible issue and I'm 15 looking forward to hearing much more on this.**  **16 The one place where I'm a bit uncomfortable 17 with what you said is that -- a couple of** **18 times a month, I involuntarily do an a over 19 the-counter transaction when I walk into the**  **20 auto parts house for stuff that broke. And 21 these are not 15-minute transactions no matter**  **22 how hard it is to look it up. As I think**

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## 1 about those lines, an over-the-counter retail **2 transaction that takes more than two minutes 3 on average would be very surprising. And**  **4 that's the one thing that led to the estimate 5 of cost because it did make me a little**  **6 uncomfortable and I'd like to understand that 7 better.**  **8 MR. MELCHI: Yes, I think our 9 counter people are oftentimes charged with**  **10 helping the contractor find a good solution, 11 so maybe they say, maybe he doesn't know what**  **12 kind of coils you have in stock, so you have 13 to go through that and explain. You go to the**  **14 auto parts store. You know what kind of car 15 you have. You tell them what kind of car you**  **16 have, what's wrong. And they can typically 17 pick ---- so in that scenario, yeah, you might**  **18 have a pretty quick transaction. 19 MR. SACHS: But that's not a**  **20 different cost structure for the OTC versus 21 your standard mainline customer.**  **22 MR. MELCHI: But it's a huge**

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## 1 difference when you say, okay, well now I need **2 to -- keep in mind the guys at the counter 3 aren't at the counter because they're really**  **4 good at data entry. They're at the counter 5 because they're really good at what they do --**  **6 sales and taking care of their customers. 7 There's just an absolute cost to**  **8 trying to capture information in addition to 9 the normal transaction stuff that you do.**  **10 Cash sales tend to take longer than those with 11 an account where you can just put -- click to**  **12 the bill, you know? It takes time. There's 13 a reason that your supermarket has self**  **14 scanning checkouts now. There's an absolute 15 cost. I mean if you want to get into parsing**  **16 10 minutes and 15 minutes. 17 MR. SACHS: I also pay more on my**  **18 over-the-counter sales. 19 MR. ROCKY: Well, this is Bryan**  **20 Rocky. So the point, Harvey, that I got out 21 of this, your question is valid, but you're**  **22 missing the key thing. You go into an auto**

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## 1 parts store and you want an alternator for **2 your '72 car, vintage car. Those are not 3 serialized. Your parts aren't serialized.**  **4 Almost everything you buy at an auto parts 5 store, everything you buy at a hardware store,**  **6 every consumer appliance -- you go to Best Buy 7 or Home Depot, has serial numbers, but they're**  **8 not tracked as part of the sale. They require 9 you to put that on warranty information, but**  **10 if you don't have a serial number that's 11 tracked or your need for it, the cost of your**  **12 transaction is tremendously different. 13 MR. HUNGERFORD: We're not talking**  **14 about $15 parts. We're talking about $1,000, 15 $3,000 units.**  **16 MR. SACHS: I did start out by 17 saying I understand the serial number issue.**  **18 MR. ROCKY: So I have to respond to 19 David's comment. A replacement coil that**  **20 Harvey starts with might be $300, not 21 thousands of dollars. A replacement condenser**  **22 unit from a ---- that a contractor is buying**

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## 1 from a distributor could be up to $1,000. **2 MR. MELCHI: David, this is Jon 3 Melchi from HARDI. The question is, my guys**  **4 sell a heck of a lot more coils than they do 5 condensing units because it's a replacement**  **6 part. The condensing unit may be good, we've 7 just got to change the coil out. That factors**  **8 into the total transactions that we're talking 9 about. It's not -- we did really crude math**  **10 in trying to guess the number of condensing 11 units and just overestimating. I would wager**  **12 that a significant number of more ducted air 13 movers and coils are sold nationally than are**  **14 condensing units. And those transactions are 15 less -- maybe -- are less expensive than your**  **16 condensing units. It's just a lot of 17 transactions.**  **18 And when you're talking about a 19 distributor, there's typically, it's not an**  **20 even -- I mean some have an even flow of 21 business throughout the day, but typically**  **22 it's mornings that's got lines out the door --**

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## 1 maybe at lunchtime. Then you'll have business **2 throughout the day, but you're adding costs as 3 your peak hours is the point I think that**  **4 people were trying to make. They're not able 5 to service their customers as quick.**  **6 MR. EISNER: Other comments? 7 MR. MELCHI: This is Jon from HARDI.**  **8 I just want to go on the record again, we're 9 not opposed to trying to do this. We're not**  **10 opposed to trying to do this. But it's a heck 11 of a list and to Charlie's point, we've got --**  **12 the people that this penalizes the most are 13 the small distributors in the North who now**  **14 have to change their practices because of a 15 regulation that's in the South and Southwest.**  **16 MR. RAWALD: Okay, so let's go on to 17 the next slide, please.**  **18 So we put up kind of the 19 manufacturer records. I think manufacturers**  **20 keeping these is just kind of what would be 21 the complete expectation, so everyone on the**  **22 chain of commerce would have the same playing**

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## 1 field. If the manufacturers want to take a **2 quick look at this. Half the manufacturers 3 were in the room yesterday were discussing it**  **4 so they kind of got ahead in this, but I think 5 this is all stuff that you guys already have.**  **6 I don't think it's any additional burden at 7 all.**  **8 Any reactions to that from the 9 manufacturer point of view? You guys can talk**  **10 about it in your caucus and then come back. 11 MR. GIBBONS: You didn't change**  **12 anything? 13 MR. RAWALD: Nothing has been added**  **14 or changed from the discussion last night. As 15 a matter of fact, I removed reference to**  **16 manufacturer and I removed serial number from 17 the handler and brand.**  **18 Okay. This last slide is basically 19 the last issues that were ---- some of which**  **20 were teed up by Charlie. So we want ---- from 21 the DOE's point of view, we would like five**  **22 years because that matches our statute of**

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## 1 limitations for bringing actions so that seems **2 to make sense from us. 3 For dealers, contractors, I'd go**  **4 from the date of installation. For 5 manufacturers and distributors, it would be**  **6 the date of when you sell the item. 7 We'd want record -- this is what**  **8 Charlie was talking about -- to organize and 9 index in a fashion that makes it readily**  **10 accessible for review by DOE upon request. 11 It's very standard language in all record**  **12 retention requirements. What that means 13 essentially is if I ask for it, you have to be**  **14 able to figure out where it is and give it to 15 me.**  **16 So we're not dictating how you keep 17 it. We're not dictating that it be kept**  **18 electronically, that there be an electronic 19 search or any of that. It's just -- we're not**  **20 dictating how you do forms. You could have 21 basically three forms: your bill of lading,**  **22 your invoice and your receipt and that could**

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## 1 be -- catalog all the information together. As **2 long as you have the information available so 3 you can provide it, that's what we ask, and**  **4 that you do it in a timely fashion. That's 5 the basic premise of a record retention**  **6 requirement with production upon request. 7 Any questions about this?**  **8 MR. SACHS: This is Harvey. The 9 only question is does the industry want**  **10 guidance on the words that you've just spoken 11 about, what this really means?**  **12 MR. RAWALD: As far as how to keep 13 them?**  **14 MR. SACHS: Yes, right. 15 MR. RAWALD: I think what would** **16 probably be easiest would be in a preamble 17 type discussion, to explain what we mean by**  **18 that. So we would have the standard language 19 in the regulation that explains in the**  **20 preamble that, hey, when we say that, this is 21 what we're saying. We're not creating new**  **22 forms, unless you don't have it already.**

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## 1 We're not requiring you to have electronic **2 database. It just needs to be producible upon 3 request in whatever way that you think works**  **4 best for you in keeping your records. 5 There are some people who like to**  **6 have a mess on their desk because they find 7 things wherever they know where it is. Some**  **8 people are very meticulous and organized in 9 keeping things in a different fashion. We're**  **10 not going to dictate what works for you as 11 long as when we ask for it, you can find it**  **12 and give it to us. 13 MS. MEYERS: This is Karen with**  **14 Rheem. I'm just going to say for the record, 15 I would rather it be for three years versus**  **16 five years. 17 MR. RAWALD: Okay.**  **18 MS. MEYERS: I'm not going to throw 19 a big huge objection to the five years, but I**  **20 think three years is much more reasonable than 21 five years.**  **22 MR. RAWALD: And the reason why I**

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## 1 think the Department prefers five years, from **2 our discussions internally, is because of what 3 Harvey raised with how soon will someone**  **4 actually have the incident spotted. When will 5 the first time a home inspector looks at it or**  **6 its purchase for sale or when would be the 7 first time you get your unit serviced.**  **8 Hopefully, you get your unit serviced annually 9 as the contractors would prefer, but when will**  **10 something actually go wrong. 11 So we think five years maximizes the**  **12 opportunity, but keeps into consideration the 13 fact that we can't bring in a case after it's**  **14 been more than five years old. So that's why 15 I can't go to Harvey eight to ten years out.**  **16 There's no reason for it. 17 MS. HARIHARAH: This is Johanna from**  **18 the Department of Energy. What is the ---- is 19 there any kind of estimate of the financial**  **20 burden that there would be to contractors for 21 this requirement?**  **22 MR. RAWALD: What, so -- Johanna's**

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## 1 question is, can you estimate how many dollars **2 it would cost to keep records five years 3 versus three years?**  **4 MR. WHITE: Not this minute. 5 MR. RAWALD: Right. That might be**  **6 something for you to think about long term and 7 come back to us if you can't give a ball park,**  **8 but that's always a question for us when we 9 have to do a Paperwork Reduction Act request,**  **10 this would require -- we have to give a 11 ballpark of what it's going to cost people to**  **12 do this. So for us to explain what the costs 13 will be, which is seemingly minimal to me**  **14 because most of the things you're keeping 15 already. That's what we're trying to really**  **16 focus on. We're trying to focus on making 17 sure that the records we're asking for are**  **18 ones folks are already keeping. So -- and 19 that's what we're asking you to look at. So**  **20 if it's beyond that because of the length of 21 time, then tell us that, too, so we can kind**  **22 of estimate the cost that would be on folks.**

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## 1 MS. MEYERS: This is Karen with **2 Rheem. And I just think there is still a 3 conflict between five years and readily**  **4 accessible. So I think if you want both of 5 those, that's a stretch. So I think you need**  **6 -- I think one of the things we might need to 7 discuss is what's more important. Five years**  **8 and readily accessible is a problem. 9 MR. RAWALD: Okay.**  **10 MR. AMRANE: What the question to 11 ask, for the manufacturers, the contractors,**  **12 and everybody else is how long do you usually 13 keep this? Five years or less? Maybe that's**  **14 a way. 15 MR. MELCHI: This is Jon Melchi with**  **16 HARDI. Certain records are required by IRS to 17 maintain for seven years. That could be your**  **18 purchases and your sales. But what those 19 records don't contain are serial numbers and**  **20 model numbers or anything like that. It could 21 just be, I sold ten coils to this buyer**  **22 somewhere around there or this was a cash sale**

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## 1 of five coils. It doesn't require us to say **2 who we sold it to or who we bought it from, 3 but we typically have those for seven years**  **4 which is -- and most folks didn't think that 5 maintaining some of the records that Doug was**  **6 asking for for five with specificity of detail 7 was going to be too hard of an ask is ----**  **8 since it's a moving forward date and not 9 retroactive.**  **10 MR. SACHS: This is Harvey. The 11 records that we talked about certainly**  **12 involves things like real estate transactions 13 six years afterwards and stuff. We try to be**  **14 pragmatists. We can live with five years. 15 Karen has raised a very interesting point and**  **16 I would translate it as, do records have to 17 have the same amount of accessibility for the**  **18 entire five years? Could you live with 19 something which said, archiving is lowest once**  **20 we get them out of the archive -- is easy for 21 the last two years of that five-year period.**  **22 I think that's what you're driving at.**

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## 1 MS. MEYERS: We archive after three. **2 So you know, readily accessible ---- you're 3 going to have to probably define what that**  **4 means because archive records are much more 5 difficult. It's not that they can't be**  **6 accessed, but they're not as readily as -- we 7 keep active data is three years. Everything**  **8 after that is archived. 9 MR. RAWALD: Right, this is Doug,**  **10 and this goes to the point of level of 11 sophistication that we also have, so the guy**  **12 with all file cabinets ---- it's going to be 13 a little hard for him to look through five**  **14 years of information than three years of 15 information. I get that ---- just looking for**  **16 forms. So there's layers of complexity to 17 this. I'm certainly amenable to explain that**  **18 further. And of course, within our discussion 19 and understanding, hey, if you give us the**  **20 first three and say, oh I'm working on the 21 last two years, okay, we get that. We can**  **22 build that in somehow. We can make that**

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## 1 explanation pertinent. **2 MR. WHITE: Well, this is Chuck 3 White. Readily accessible, you're not going**  **4 to come and say, I want them right now. 5 You're not going to walk in my office and say,**  **6 please hand them to me. You're going to say 7 produce these in a time frame. What we talked**  **8 about was 30 days. 9 MR. RAWALD: That's correct.**  **10 MR. WHITE: It's not formal, and 11 then probably you could say, I need some more**  **12 time and given your discretion you could grant 13 some extensions, but that all depends on the**  **14 players you're dealing with. 15 MR. RAWALD: No, I 100 percent**  **16 agree. We would look at each case 17 individually and if we're dealing with a non**  **18 sophisticated actor who has a number of 19 records and is trying their best to find them**  **20 and gives us what they have and says, well, I 21 need 45 more days, we'll consider that. Okay,**  **22 how about 15, we would work with them to see**

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## 1 what they need. **2 If we're dealing with a manufacturer 3 who has three years data readily available,**  **4 but has two more years they have to comb 5 through the archives to give us the three**  **6 years, then we'd say, okay, come back in 15 7 days with the rest or 20 more days. We'd work**  **8 things out. So there is a lot of discretion 9 there.**  **10 MR. WHITE: From a contractor's 11 perspective, in lots of codes, things are**  **12 readily accessible. And to a contractor, 13 readily accessible means you can walk right up**  **14 to it. 15 MR. RAWALD: Okay.**  **16 MR. WHITE: So I walk right up ---- 17 it's cleaned out, it's readily accessible.**  **18 It's there. I don't have to move anything. 19 I don't have to do anything. It's right**  **20 there. So in my language, when you tell me 21 readily accessible, that means I can hand it**  **22 to you ---**

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## 1 **2 MR. RAWALD: Immediately upon request. 3 MR. WHITE: Right.**  **4 MR. RAWALD: So lots of things for 5 us to make clear.**  **6 MR. WHITE: It's your standard 7 language, but again in the preamble it could**  **8 be explained that readily accessible is an X 9 amount of time to --**  **10 MR. RAWALD: Okay. Any other 11 comments or do you folks want to caucus for**  **12 a little bit about this record retention 13 issue?**  **14 MR. EISNER: Do you want to caucus 15 now?**  **16 MR. ARNOLD: Sure. 17 MR. EISNER: How much time do you**  **18 think you'll need for caucusing, 20 minutes, 19 30 minutes?**  **20 MR. ARNOLD: Twenty. 21 MR. EISNER: Twenty minutes. Come**  **22 back at 10:30 everybody.**

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## 1 (Whereupon, the above-entitled **2 matter went off the record at 10:11 a.m. and 3 resumed at 10:41 a.m.)**  **4 5 MR. EISNER: Okay. Why don't we get started?**  **6 Anybody want to fill us in on what you talked 7 about in the manufacturer caucus?**  **8 All right. Somebody want to raise 9 what was resolved, if anything, in the caucus?**  **10 MR. ARNOLD: This is Dan Arnold from 11 NORDYNE. I'll take a shot at it.**  **12 The three versus five years, I mean, 13 that's something again Karen's passionate**  **14 about. From my company's perspective, I don't 15 know, to be honest. And so several of us want**  **16 to go back and check with our organizations to 17 see if that was an issue or not.**  **18 MR. EISNER: Okay. 19 MR. ARNOLD: So that's kind of where**  **20 we left at. 21 On the other issue of record**  **22 retention and serial numbers, kind of came**

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## 1 away with the same perspective I went in with. **2 That's not my business. So I'd have to defer 3 to Jon and his organization.**  **4 MR. EISNER: Okay. 5 MR. ARNOLD: So we didn't really**  **6 reach a consensus on manufacturers having one 7 point of view and saying this is the way we**  **8 see the world and want the world to be. There 9 was varying opinions, so we really didn't**  **10 reach a consensus on that again, not wanting 11 to impose manufacturer's will on somebody**  **12 else's business. I mean, there's reasons why 13 the manufacturers would like serial numbers,**  **14 to be honest. I mean, from my standpoint, I'd 15 love to know where everything went in case we**  **16 have to go do, heaven forbid, a recall or have 17 a defective product or a defective part from**  **18 a supplier, if we had to do that. But again, 19 it's not for me to say. Jon's members, you**  **20 need to go do this and here's how they have to 21 do it.**  **22 MR. EISNER: Okay. Aniruddh?**

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## 1 MR. ROY: Aniruddh Roy with Goodman. **2 We also have a distribution network, and we 3 kind of share some of Jon's sentiments when it**  **4 comes to the cash transactions. So we would 5 propose that -- you think on the lines of**  **6 something like 70 percent or 80 percent record 7 keeping and account for the fact that some of**  **8 those cash transactions are done impromptu and 9 it would be tough to account for the serial**  **10 numbers in those cases. 11 MS. WALTNER: May I ask a follow-up**  **12 people? Meg Waltner from NRDC. 13 So would you ask that for 80 percent**  **14 just for the tracking of the serial numbers or 15 all of the other information as well? I**  **16 understood the issue with tracking the serial 17 number because you don't know that when you're**  **18 at the counter, but -- 19 MR. ROY: It would also be the other**  **20 information as well, because as Jon had 21 mentioned that example, sometimes it's either**  **22 you have an account or you don't have account,**

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## 1 someone just needs an indoor coil and just **2 comes and picks it up from the facility and 3 it's just a cash transaction. So it's not**  **4 always possible to get all the information for 5 that person. It's done in an emergency**  **6 situation sometimes, so -- 7 MR. RAWALD: So this is Doug, and so**  **8 quite the -- the issue that came up last night 9 last when we were talking about this, with the**  **10 over-the-counter sales, was -- is it possible 11 that the actors who are more likely to be**  **12 trying to service them are going to be the 13 ones who are going to be doing the over-the**  **14 counter cash/no account sales. And so are we 15 thereby creating a loophole that allows those**  **16 people who we think are the most likely to 17 commit to get through? And that's the**  **18 concern. 19 And then also are we going to drive**  **20 the market in some way so people who otherwise 21 ---- would otherwise have accounts would have**  **22 a preference for not having an account. Now,**

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## 1 there are probably a lot of reasons to not do **2 that, but I don't know if there's any 3 unintended consequences by us not documenting**  **4 a certain part of the market. Would that 5 drive people to then take advantage of that**  **6 part of the market? I don't know the answer 7 to that at all. That's just merely a kind of**  **8 question really. 9 So there=' two concerns there from**  **10 my point of view. Meg has a -- 11 MS. WALTNER: Yes, well -- just**  **12 another thought on that is whether we should 13 talk about condensing units and coils**  **14 separately, because those sort of cash coil 15 replacement sales seem to be an issue. But**  **16 are there cash sales of condensing units and 17 how burdensome would it be to track those and**  **18 would that get at a big chunk of what we're 19 looking for here?**  **20 MR. RAWALD: Right, and my 21 understanding from Jon -- I guess he could**  **22 best respond to this ---- is that there are**

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## 1 cash sales of condensing units and they do **2 represent a sizeable part of the market of 3 what cash sales are. And when I say cash**  **4 sales, I mean cash with no account. But 5 that's the concern. A cash with account**  **6 doesn't matter to me. I mean, if you're 7 paying cash but you have an account, we know**  **8 who you are, it doesn't matter. It's the no 9 account where we don't know who you are is the**  **10 concern. 11 MR. MELCHI: Yes, this is Jon from**  **12 HARDI. I think it's probably -- I think to 13 Aniruddh's point about the coil -- if you had**  **14 to do a weight of the three product classes, 15 what is paid for mostly cash/no account, I**  **16 think condensing units would probably be 17 slightly under the duct air movers and the**  **18 coils. That's just a guess. There's nothing 19 scientific to that. But it does happen**  **20 regularly, especially in major metro markets. 21 MS. WALTNER: Right, but it seems**  **22 like what we really care about is tracking the**

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## 1 condensing unit sale and that would be less **2 burdensome than the whole tracking everything. 3 MR. MELCHI: I would agree. But --**  **4 yes, as far as tracking one thing versus two 5 from the cash sales, yes.**  **6 MR. SACHS: This is Harvey, and I 7 share Doug's concern about market distortions,**  **8 but I think it's pretty clear to me that since 9 we've got our compliance built around the**  **10 condensing unit as being SEER 14 ---- I don't 11 see any reason why I care about tracking the**  **12 OTC sales. 13 And I keep thinking -- no account**  **14 has two different meanings, both of which 15 might be applicable.**  **16 (Laughter) 17 MR. SACHS: I think I don't -- I**  **18 haven't heard any reasons why in this context, 19 as opposed to manufacturer warranty or other**  **20 things, I care about tracking anything but the 21 condensing unit itself.**  **22 MR. RAWALD: Right. So I guess --**

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## 1 so I'm hearing two different things from you. **2 So you would still want to keep track of 3 condensing units over-the-counter sold though?**  **4 MR. SACHS: Yes, sir. 5 MR. RAWALD: Okay. That's what I**  **6 want to make sure we're -- 7 MR. SACHS: I don't see any other**  **8 way to avoid significant market distortions. 9 I don't care if those records are kept by**  **10 photographing the driver's license, but I do 11 think we need to have those.**  **12 MR. FERNSTROM: So ---- this is 13 Gary. I think having an account in the term**  **14 ---- in the context of cash sales has two 15 different meanings. Whether you have**  **16 established credit with the institution and 17 you have a business account there or whether**  **18 you buy something over the counter and they 19 fill out an invoice with your name and**  **20 information on it. So that's a cash sale. 21 And I frequently go buy things on cash basis**  **22 at ---- but, at Grainger, for example, but**

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## 1 where I get a detailed invoice and they keep **2 a copy of it -- I don't have an account there. 3 MR. RAWALD: Right, I think what --**  **4 when I heard Jon and Gary yesterday talk about 5 no accounts, they were talking about folks**  **6 that didn't provide any information about who 7 they were purchasing it. They simply provide**  **8 the cash and they get the receipt with the 9 item they're purchasing. Is that correct?**  **10 MR. MELCHI: Yes. 11 MR. RAWALD: And so we're trying to**  **12 capture that. So if we were to winnow this 13 down ---- to get off the ducted air mover and**  **14 the coil from all phases, would that relieve 15 a lot of burden?**  **16 MR. MELCHI: Yes, I think it would. 17 I absolutely think it would. And I appreciate**  **18 that point. I think your -- the number of 19 transactions that we're talking about**  **20 capturing has just shrunk substantially. 21 MR. RAWALD: It seems to me that**  **22 with the 14 SEER guidance that we discussed**

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## 1 and that the Department still agrees with ---- **2 and I mean, so we're still on that basis, and 3 I think it's the presumption we're all going**  **4 on here, which is that the least efficient 5 combination of the condensing unit with other**  **6 things must be 14. Condensing is what really 7 matters. And so, if we're tracking the**  **8 condensing unit throughout the process, maybe 9 we don't need to track the ducted air mover**  **10 and the coil at all. So I could bring that 11 idea back to the Department -- it's more**  **12 palatable because the Department wants to 13 track over-the-counter sales at least for the**  **14 condensing unit, I can tell you that, that's 15 for sure.**  **16 MR. MELCHI: Yes, and we understand 17 --**  **18 MR. RAWALD: ---- it's not even a 19 compromise.**  **20 MR. MELCHI: Yes, we commit that -- 21 you know, is that -- Meg had mentioned the --**  **22 I'm sorry. This is Jon Melchi out of HARDI.**

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## 1 You know, just from a practical SOP the **2 concern that some of our guys had on -- with 3 regarding this particular sales was capturing**  **4 that serial number exactly, because it would 5 almost -- the contractor would have to come**  **6 back in the store and give it to you and -- 7 but we would certainly have the unit number**  **8 and the name -- the model number and the name, 9 and contact information of to whom it was sold**  **10 and -- depending the system, what time and day 11 it was sold, too.**  **12 MR. RAWALD: Right. Well, this is 13 Doug. So I live in a practical world in some**  **14 way, even though Harvey wants me to not listen 15 to the fact that we're not going to be 100**  **16 percent compliant because ---- you know, I 17 have my government mandate, which is to ensure**  **18 100 percent compliance, but I understand that 19 we live in a real world. And I expect that**  **20 when I get records from people they're not 21 always 100 percent complete. So if I can go**  **22 to the Department and say, hey, most of the**

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## 1 time in a transaction involving a condensing **2 unit, they're going to have the serial number 3 -- there are occasionally ones where they**  **4 won't. I think we'll expect that as a 5 practical reality, even if we have a**  **6 regulation requiring you keep the serial 7 number.**  **8 MR. MELCHI: I think that's probably 9 -- I mean, I think your realism is probably --**  **10 is pretty practical in that, especially those 11 who have customers. They're dealers. They're**  **12 contractors. That information will be within 13 our records.**  **14 MR. RAWALD: Okay. 15 MR. MELCHI: And that's the vast**  **16 majority of that. And we will do everything 17 we can on that percentage that's not to**  **18 capture that information. 19 MR. RAWALD: Okay. So what I will**  **20 do is this, I will come back and -- I will 21 leave this meeting and I will let the people**  **22 I work with know that if we dropped the ducted**

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## 1 air mover and the indoor unit and focus only **2 on the outdoor condensing unit as a tracking 3 item, that would at least alleviate a lot of**  **4 burden and be more palatable to the group. 5 And of course alleviate the number of records**  **6 that were kept. So, and ---- I'll see if that 7 will work for folks.**  **8 MR. MELCHI: Okay. Thank you, Doug. 9 MR. McCRUDDEN: This is Charlie of**  **10 ACCA. So would that be for -- 11 MR. RAWALD: Everyone.**  **12 MR. McCRUDDEN: Everyone? Okay. 13 MR. RAWALD: Yes. I'm not going to**  **14 keep only one -- it makes no sense to me. If 15 I'm not tracking it, keeping it makes no**  **16 sense. 17 MR. McCRUDDEN: Just checking.**  **18 MR. RAWALD: So it would be -- my 19 ask would be, let's just track the condensing**  **20 unit, which will be the thing that matters the 21 most from the way that we view the guidance**  **22 we've issued regarding 14 SEER that I think**

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## 1 Harvey is focusing in on. **2 MR. SACHS: Now, this is Harvey. 3 Charlie, we really do want -- for new**  **4 construction, all of the information, as well 5 as the duct tightness.**  **6 (Laughter) 7 MR. McCRUDDEN: I mean, Doug, if you**  **8 could -- and this is what I'm supposed to ask 9 -- make sure that our quality installation**  **10 standard is part of every installation, great. 11 MR. SACHS: And we second that**  **12 motion. 13 MR. McCRUDDEN: Right, and this --**  **14 MR. RAWALD: And I have been 15 interested in that, but I don't know how**  **16 effectively we could do that. So ---- but 17 that's for a different day.**  **18 Okay. Any other -- so the other ask 19 was regarding the scope, southwest versus**  **20 southeast and 13 versus above 14. So, did 21 anybody have any thoughts on that in their**  **22 meetings individually outside the room?**

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## 1 (No audible response) **2 MR. RAWALD: Everyone is famously 3 silent. No one has any thoughts.**  **4 Contractors, are you still thinking 5 on it, Charlie?**  **6 MR. McCRUDDEN: Yes, I mean I need 7 to go back. I still haven't heard from enough**  **8 folks. 9 MR. RAWALD: Okay.**  **10 MR. McCRUDDEN: And I just -- 11 MR. RAWALD: My strong preference**  **12 would be for the contractors to be southeast, 13 southwest.**  **14 MR. McCRUDDEN: I understand that. 15 And that's where we're leaning -- the sense I**  **16 get from my folks, I just want to make sure 17 I get the cross-section --**  **18 MR. RAWALD: Okay. 19 MR. McCRUDDEN: -- because this is**  **20 implications for the people who thought 21 potentially there are no implications.**  **22 MR. RAWALD: Okay. Now Harvey had**

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## 1 the air quotes question for the manufacturers **2 -- on whether you need the Department of 3 Energy's help to minimize your liability. And**  **4 so did you guys get to talk about that while 5 you were caucusing or is that not an issue you**  **6 guys broached or feel comfortable sharing with 7 the group at this point?**  **8 MS. SHEPHERD: This is Amy Shepherd. 9 We didn't talk about that.**  **10 MR. RAWALD: Okay. 11 MS. SHEPHERD: Karen was so worked**  **12 up about the three versus five years, it 13 was --**  **14 MR. RAWALD: I can understand. She 15 can be distracted.**  **16 MS. SHEPHERD: So we still need to 17 discuss that, I think.**  **18 MR. RAWALD: Understood. Okay. 19 Well, that's fine.**  **20 Okay. So that's kind of where we'll 21 -- so the distributors would be nationwide**  **22 still, as far as we're discussing. We'll**

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## 1 consider ---- the contractors will look at **2 whether they want southeast, southwest or 3 possibly at -- below 14 SEER only. But I have**  **4 to say that I would be very reluctant to agree 5 to that. And then we'll come back and talk**  **6 about that at -- next meeting. So and I will 7 have the ask about whether we can just make it**  **8 the condensing unit only. So, okay? So 9 everyone fair about where we are with the**  **10 record retention then? Any other questions? 11 I'm also going to try to --**  **12 MR. EISNER: Records retention? 13 MR. RAWALD: Yes, record retention.**  **14 MR. EISNER: Where are we then? Is 15 it still an open question?** **16 MR. RAWALD: Well, we have these do 17 outs that people are going to have, so --**  **18 which is the contractors are going to go back 19 and try to ascertain whether their comfortable**  **20 with southeast or southwest, whether they 21 want, you know, something else. I'm going to**  **22 look at the condensing unit issue. And the**

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## 1 manufacturers are also going to let us know **2 their thoughts on southeast/ southwest from 3 the dealer point of view, because it could**  **4 help them have, nationwide, minimized their 5 liability for a 14 SEER that tests as a 13.6**  **6 -- that scenario. 7 MR. SACHS: This is Harvey, and I**  **8 think, given the concerns we've heard about 9 the archiving schedule for records, if the**  **10 OEMs were to say they really wanted something 11 in the preamble ---- or whatever, that**  **12 differentiates between the two types of 13 accessibility, the first three years versus**  **14 later, that's not a make or break for me. 15 MR. RAWALD: Okay. Yes, what I**  **16 think I'll do is I'll circle back with folks 17 on some language regarding readily accessible**  **18 -- that you didn't mean preamble or in the reg 19 text, to kind of parse out what that means and**  **20 understanding the realities of the business of 21 currently available records versus those that**  **22 are older and explain that, at least in the**

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## 1 preamble if not somewhere else. **2 MR. SACHS: Is the question for you 3 guys whether the term readily, has to be**  **4 included? 5 MR. RAWALD: Well, so Chuck hasn't**  **6 necessarily written readily accessible. From 7 us, it's pretty much standard language in all**  **8 record retention things. And so folks are 9 comfortable with it ---- that they see it**  **10 regularly. So I'll have to go back and talk 11 to make sure everyone is comfortable with**  **12 that. That's a term that we're all familiar 13 with, and so I'll have to go back and just**  **14 push some buttons and see what I can get. 15 MR. WHITE: Well, this is Chuck. I**  **16 think if you kind of explain that in the 17 preamble, I think that will --**  **18 MR. RAWALD: I think so, too. I 19 think that will assuage the concerns.**  **20 MR. WHITE: Yes, that readily is a 21 timeframe.**  **22 MR. RAWALD: Right, but I want to**

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## 1 make sure that -- I want to make everyone else **2 comfortable here so we can all agree to it and 3 vote on it and have it on the term sheet and**  **4 everything will be finalized with it. 5 But I think, pending those answers,**  **6 we could vote on that next week without a 7 problem and put that behind us, I think,**  **8 right? Does everyone else feel good about 9 that?**  **10 (No audible response) 11 MR. RAWALD: Okay. Seeing a lot of**  **12 nodding of heads. 13 Okay. I have another slide show for**  **14 you folks, if you want to do that one now. 15 MR. AMRANE: Maybe you could --**  **16 MR. RAWALD: Karim, yes? 17 MR. AMRANE: Can you give us an**  **18 update on this guidance that you're working 19 on?**  **20 MR. RAWALD: Okay. So which 21 guidance? So we have --**  **22 MR. AMRANE: The guidance for the**

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## 1 14. **2 MR. RAWALD: Okay. So -- and Amy 3 and I talked about this last week. So four**  **4 weeks ago now, I announced to this room that 5 the Department views 14 SEER essentially to be**  **6 the least efficient combination of a 7 condensing unit when it's paired with -- so in**  **8 other words, on the Energy Guide label that -- 9 as FTC currently has it, if you're below 14 on**  **10 the range, it wouldn't be allowed to be sold. 11 And the Department still agrees with that.**  **12 Everyone agrees with that. 13 The question, when I ask people to**  **14 write guidance on it, the responses I received 15 over some while was we think it's better to**  **16 put it in the regulation text as part of the 17 rulemaking that you're currently engaged in.**  **18 So if the room wants to vote on that and say 19 this is a precondition for everything else**  **20 we're doing, this would be the understanding. 21 If you feel comfortable, we can do that.**  **22 I talked to Amy last week. Amy told**

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## 1 me the manufacturers are feeling pretty **2 uncomfortable with that state of affairs, so 3 I went back to the Department. I said, here's**  **4 what we really need. Johanna and I have both 5 worked on something that -- and are hopeful**  **6 that something will come of that, but I can't 7 say what will happen.**  **8 So it's possible we can issue 9 guidance or not, and I will be able to give**  **10 you more information as we develop that. But 11 I'm herding these requests. I understand it's**  **12 a pertinent issue. What I can say is, 13 everyone's on board with the notion. There is**  **14 no -- it's just a question about, how do we 15 document best given the current state of**  **16 affairs of the regs and the way we do things, 17 as far as regulatory rulemaking.**  **18 And so I'm not an administrative 19 lawyer, so when I say I need things, I have to**  **20 of course acquiesce to those who know how to 21 do rulemaking better than I do. So we're**  **22 working on that, but that's where we are.**

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## 1 Does that answer your question, Karim? **2 MR. AMRANE: Yes. 3 MR. RAWALD: Okay.**  **4 MR. MELCHI: Doug, this is Jon with 5 HARDI. The only caveat to that -- I**  **6 understand the Department's wanting to put it 7 in the rule, but our members, they're**  **8 operating still under the -- kind of the 9 assumption that 13 can be made 14 to achieve**  **10 -- 11 MR. RAWALD: I understand.**  **12 MR. MELCHI: -- compliance. And 13 we're getting close to or have already passed**  **14 last call for stocking for orders placed and 15 it has caused significant kind of confusion.**  **16 Just last week I was at a conference 17 and I told members about the draft guidance**  **18 and where I anticipated this going, and they 19 said, well, that just changes everything for**  **20 how we're going to place our orders. The 21 sooner the better for us and our purposes**  **22 because we're already pushing lead times for**

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## 1 end-of-the-year construction. **2 MR. RAWALD: I understand that. And 3 one -- hopefully at least the fact that the**  **4 sell-through minimizes some of that, but I do 5 understand the frustration.**  **6 MR. MELCHI: Yes. 7 MR. RAWALD: I know there's a number**  **8 of comments, especially the -- I read 9 Johnson's Controls the other day and I read**  **10 AHRI's to the other guidance included adding 11 this particular portion to the guidance we**  **12 already had out there. So I've asked the 13 question of, hey, folks have asked for it.**  **14 Can we just slide it in, what we already have? 15 So that's a possibility.**  **16 Once again, I'm not the regulatory 17 rulemaking attorney, so I can't say what we**  **18 can do and what we can't do. So I'm going to 19 work on that some more over the next couple**  **20 days and have information to you guys. So but 21 we're doing -- we're working hard on this. I**  **22 mean, I can guarantee you that we're working**

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## 1 on that. **2 MR. MELCHI: Thank you. I 3 appreciate that.**  **4 MR. RAWALD: Okay. And as for the 5 other guidance, because Karim did not ask this**  **6 question, but there was guidance. Comments 7 were due last Friday. We received comments**  **8 all through the weekend even. 9 (Laughter)**  **10 MR. RAWALD: So we are looking at 11 them. There's a lot of good comments. I**  **12 think having seen a lot of these comments 13 periods go on before, this was a very**  **14 productive comment period, I thought. People 15 had really good comments. So people are**  **16 working on it today even how to -- the 17 Department will approach responding to those**  **18 comments. So I'm very hopeful by the time we 19 get back next week -- if we don't have final**  **20 guidance, I can at least tell you when it's 21 going to be at least hopefully coming. So I**  **22 know it's very important. So, but I think**

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## 1 it's -- we're very close to having this thing **2 very good. And I really appreciate all the 3 comments we received on that. I thought it**  **4 was very helpful. 5 So, any other questions on guidance**  **6 at all? 7 (No audible response)**  **8 MR. RAWALD: Well, you guys are 9 easier on me than I thought you were going to**  **10 be. I thought you'd be a little harder and 11 meaner. You can yell at me.**  **12 MS. MEYERS: We're holding our 13 yelling and screaming to see what the outcome**  **14 is next week. 15 MR. RAWALD: Okay. Well, and I told**  **16 Neil I really hope that next week is our last 17 meeting. I like you guys, but I think we can**  **18 finish this next week. I'm very hopeful about 19 where we are today.**  **20 So let's go to the next -- the other 21 slide show that I prepared.**  **22 So I promised folks that I would**

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## 1 outline based on what we've discussed so far **2 how I would see a DOE investigation going so 3 we can all kind of see how these pieces fit**  **4 together with what we've been building here. 5 And so none of this is final. None of this is**  **6 DOE-approved. It's what we have talked about 7 combined with Doug's experience to kind of**  **8 show you how we would do things. So the 9 general process would be that we'd get a**  **10 complaint or DOE would have some reason to 11 think that something happened based upon our**  **12 own proactive efforts through robo-calling or 13 through surveying or other things. And then**  **14 we'd investigate. We'd make a finding of an 15 individual violation. And then we'd look at**  **16 whether or not there's evidence of a routine 17 violation. And if it's a routine violation,**  **18 we'd then issue some sort of finding or 19 determination that there's been a routine**  **20 violation. And then we'd examine the possible 21 manufacturer liability given the prohibited**  **22 act that we have from Congress.**

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## 1 So let's go through the -- **2 MR. EISNER: On the first slide when 3 you say "makes a finding of violation or not"** 
**4 -- 5 MR. RAWALD: Right.**  **6 MR. EISNER: -- is the finding, 7 especially if it's a negative, public?**  **8 MR. RAWALD: Well, that's an open 9 question. So what will people want, so -- and**  **10 we'll get to that in a moment. 11 So we have the complaint, which when**  **12 we were talking with Chuck yesterday, Chuck 13 voiced the opinion of, hey, I'm really**  **14 concerned about a complaint being there that's 15 frivolous and then the Department mobilizing**  **16 its activity and therefore wasting the time of 17 contractor whose competitor narc'ed him out in**  **18 order to cause this frustration for the 19 contractor.**  **20 And so I've offered the possibility 21 of having a possible threshold for initiating**  **22 an investigation. And so as I was thinking**

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## 1 about this, the kind of ideas that came to me **2 were, well, the things that I would want to 3 actually feel like a credible investigation** **4 could be started would be a location of a non 5 compliant installation or an attempted sale,**  **6 a bid sheet saying we're going to try to sell 7 this to you.**  **8 MR. McCRUDDEN: This is Charlie. 9 MR. RAWALD: Yes?**  **10 MR. McCRUDDEN: Attempted sale? 11 MR. RAWALD: Yes. Why would that**  **12 cause an investigation? 13 MR. McCRUDDEN: Yes.**  **14 MR. RAWALD: So that would raise the 15 question of if the person is doing this once,**  **16 have they done it before? So if the person is 17 offering to sell some 13 SEER to a homeowner,**  **18 is it possible if I go look at his records I'm 19 going to see four or five other 13 SEERs he**  **20 sold? 21 MR. McCRUDDEN: I get it. It's just**  **22 it's not a sale. And actually it's not an**

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## 1 installation. **2 MR. RAWALD: Right. That particular 3 event would be a non-event. You're correct.**  **4 MR. McCRUDDEN: Okay. I get it. 5 MR. RAWALD: So but it might be**  **6 indicative of the fact that that person has 7 other events that I want to be interested in.**  **8 So I would assess it. I mean, if someone came 9 to me, handed a report to me, hey, I was in a**  **10 home with someone -- and the homeowners gave 11 me a bid sheet from my competitor and here it**  **12 is and can you look into this. I would 13 probably call that contractor and say let me**  **14 look at this. I think it would be worthwhile 15 to follow up on.**  **16 Now if the group here thinks that's 17 not, then tell me and then we'll parse it out.**  **18 But I think that's credible enough information 19 for me to at least investigate the contractor**  **20 we alleged to have given that bid. Yes, 21 Harvey?**  **22 MR. SACHS: This is Harvey, and this**

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## 1 relates very closely to Chuck's concern and a **2 flip side that it's what would wind up 3 allowing a contractor to do his own sting.**  **4 MR. RAWALD: Yes. 5 MR. SACHS: He could have his**  **6 sister-in-law down the street try to get bids 7 for SEER 13s from Joe Sixpack.**  **8 MR. RAWALD: And is that a good 9 thing or a bad thing?**  **10 MR. SACHS: I'm only making an 11 observation.**  **12 MR. RAWALD: Okay. 13 (Laughter)**  **14 MR. SACHS: I mean it could be 15 harassment, but it also could be kind of the**  **16 only tool that a contractor has to fight back. 17 MR. RAWALD: Right.**  **18 MR. DORIA: So, Doug, this is 19 Jordan. I think just so I understand it; and**  **20 I had the same reaction I think that Charlie 21 did, the attempted sale is merely something**  **22 that could trigger an investigation. If that**

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## 1 investigation only concluded was that an **2 attempted sale had happened, there would be no 3 violation.**  **4 MR. RAWALD: Absolutely. There 5 would be no violation --**  **6 MR. DORIA: Yes. 7 MR. RAWALD: -- because nothing was**  **8 installed. 9 MR. DORIA: Correct.**  **10 MR. RAWALD: So we'd probably send 11 that person a sternly-worded warning saying**  **12 you shouldn't do this. And those are 13 educational in large part.**  **14 MR. DORIA: Sure. 15 MR. RAWALD: Here's what the**  **16 regional standards are. We're aware you 17 released this bid. Don't do that. That's how**  **18 I would see that concluding. That's how I'd 19 wrap that matter up. And I wouldn't see it**  **20 taking awfully long. And so, but I think that 21 that would be enough to me to trigger us**  **22 looking into it.**

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## 1 MR. McCRUDDEN: And I think that's **2 one of the ways I'm going to sort of watch 3 this slide show is what actions does DOE take**  **4 I would almost say between DOE and an 5 individual contractor and DOE in a public way?**  **6 MR. RAWALD: Yes. 7 MR. McCRUDDEN: And so you just**  **8 said sending a letter. I'm assuming that 9 letter is not public.**  **10 MR. RAWALD: Right. Our warning 11 notes are routinely not public. So I mean I**  **12 can't control what someone does when they 13 receive it --**  **14 MR. McCRUDDEN: Right. 15 MR. RAWALD: -- but the Department**  **16 does not post our warning notices, so I 17 probably would not do that. Now I'm leaving**  **18 open with the group here for discussion as we 19 go along on what things you want to be**  **20 transparent and public on. I think that we 21 can talk about that more. And there are**  **22 reasons for why we might want to make these**

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## 1 public that otherwise we might not. So I want **2 to hear your thoughts on that as we go along 3 here.**  **4 So, and the question is whether we 5 want some sort of -- so I'd also want to have**  **6 an identity. If you don't tell me who the 7 person is that's supposedly doing this thing,**  **8 I can't do anything about it. I need to have 9 that. And then possibly some levels of**  **10 evidence. I mean, do we want to require some 11 sort of photo of a nameplate, the photo of the**  **12 nameplate, especially as Bryan was showing us 13 that says not to be installed here? Do we**  **14 want to have a bid? Like, is there anything 15 else that we'd want to have as sort of a**  **16 necessary minimal level of evidence for DOE 17 then to begin investigating? So I don't know**  **18 if folks have thought of this at all, but it's 19 something I put out to you. If you want to**  **20 put in our regulations some sort of threshold 21 for me to start investigating, this is kind of**  **22 how I could approach it.**

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## 1 MR. BALLO: This is Tim. I guess I **2 have a concern about the identity of the 3 contractor/dealer/distributor. If all you**  **4 have is -- I see a unit out here that's a SEER 5 13, you're not necessarily going to know any**  **6 of that, but you know it's installed out of 7 region. If you know the serial number, it**  **8 should be easy for DOE to determine the 9 identity.**  **10 MR. RAWALD: Right. So I hear what 11 you're saying. So you're afraid that if a**  **12 contractor goes into a home and sees a unit 13 they're servicing is non-compliant and he**  **14 can't complain because he doesn't know 15 actually who put it in, what's it going to be**  **16 worth? That's a valid point. 17 MR. HURST: I would just add to the**  **18 evidence the actual work ticket of the 19 completed installation. So you have a bid.**  **20 And then once the job is done, you may 21 actually have this was the invoice and -- the**  **22 invoice, yes.**

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## 1 MR. RAWALD: Okay. **2 MR. HURST: Work ticket or invoice. 3 MS. WALTNER: That sounds like; this**  **4 is Meg Waltner from NRDC, that would be 5 helpful information, but I wouldn't**  **6 necessarily see that as a necessary threshold 7 if there's just a bid and the job hasn't**  **8 actually been completed. 9 MR. HURST: No, but I'm --**  **10 MS. WALTNER: Yes. 11 MR. HURST: -- trying to get back to**  **12 what the DOE is going to find as useful 13 information.**  **14 MS. WALTNER: Right. 15 MR. HURST: Hey, Bobby's doing bad**  **16 stuff in Toledo. 17 (Laughter)**  **18 MR. RAWALD: Right, but a work 19 ticket alone would seemingly be enough for me**  **20 to then go on and investigate that. It would 21 be sufficient.**  **22 MR. HURST: Yes.**

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## 1 MR. RAWALD: Yes, in my opinion. **2 MR. WHITE: Well, I would think that 3 would give you pretty much everything on a**  **4 number of things. Can you check my mic? I 5 would think this probably is not an all**  **6 inclusive list.**
**7 MR. RAWALD: No. 8 MR. WHITE: That this is something**  **9 that you take all the factors, again our 10 factor approach, and the more of these you**  **11 have, the more realistic the case seems, but 12 you may have only one or two of these things**  **13 that are pretty convincing and you're missing 14 a couple others that -- so it's not**  **15 necessarily this is all and, and, and. 16 MR. RAWALD: Right. And so this is**  **17 -- to get to the answer, it's to whether or 18 not we would start an investigation.**  **19 MR. WHITE: Right. 20 MR. RAWALD: And so the point is how**  **21 do we make sure we avoid frivolous claims? So 22 I want to address your frustration and make** 

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## 1 sure that we're maintaining a minimum **2 threshold. And so to me there are some ideas 3 here we can -- and I'm -- this is open for**  **4 opinion. I mean, this is the first time I've 5 thought of this was after you mentioned it**  **6 yesterday. So I want to give people ideas and 7 give people the opportunity to tell me what**  **8 else do you think would be enough? 9 So I hear Tim's concern that**  **10 identity probably would be too much. And so 11 I want to make sure we caveat that that may be**  **12 more than what we're asking for. 13 So what else?**  **14 MR. GIBBONS: This is John Gibbons 15 from Carrier. How do you know the photo,**  **16 unless it's next to a palm tree, is actually 17 in the south?**  **18 MR. RAWALD: Right. Right. Okay. 19 So a photo alone with some sort of other**  **20 information verifying where it is? 21 MR. GIBBONS: Yes, I mean, address**  **22 and phone as well.**

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## 1 MR. RAWALD: Right. Okay. **2 MR. EISNER: Some cameras will 3 actually give you the GPS location. So it**  **4 will tell you taken in Des Moines, Iowa on 5 September 5th, 2015.**  **6 MR. MELCHI: Your iPhone does that. 7 MR. EISNER: Well, if you do it with**  **8 a phone, it's going to have the GPS location. 9 (Simultaneous speaking)**  **10 MR. RAWALD: Right, that makes 11 sense. That makes sense. So we need to have**  **12 something else with it. 13 MR. GIBBONS: I'm really mad at**  **14 Chuck because Chuck is undercutting me in just 15 normal course of business, if I have one unit**  **16 maybe. 17 MR. RAWALD: Right.**  **18 MR. HURST: I don't understand -- 19 this is John Hurst from Lennox -- there "may**  **20 be too much" comment than the identity of the 21 contractor, dealer or distributor.**  **22 MR. RAWALD: So what Tim is saying**

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## 1 it may be too much to require an investigation **2 to be initiated that the person complaining 3 know who actually installed the bad unit.**  **4 MR. HURST: Right. Yes. 5 MR. RAWALD: That it would be too**  **6 high of a bar. 7 MR. HURST: But if you have the work**  **8 ticket or the invoice you most likely would 9 know who the contractor --**  **10 MR. RAWALD: Certainly if we knew 11 it, that would be great, but what Tim's point**  **12 was -- I think DOE should at least follow up 13 on it even if you don't know who did the bad**  **14 installation. 15 MR. HURST: Oh, absolutely.**  **16 MR. RAWALD: So I agree with that. 17 So, okay. Any other thoughts on things you**  **18 want as a minimal threshold kind of an entry 19 of DOE to this foray?**  **20 (No audible response) 21 MR. RAWALD: We're going to give you**  **22 slides to take with you so you can think about**

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## 1 it over lunch. So I definitely don't want to **2 make you feel like you're required to come up 3 with ideas now.**  **4 So let's go to the next slide. So 5 there's the question what do we do with that?**  **6 And so from my approach seemingly the first 7 thing I'd want to do is actually talk to the**  **8 homeowner, because to Jon's point I want to 9 verify that the unit actually is in that**  **10 person's house. So I don't want to just 11 presume the assumption that, okay, I've got an**  **12 address and a picture. I can now bother the 13 contractor. I want to verify that that**  **14 actually is a real legitimate complaint. 15 So I'm going to probably contact the**  **16 homeowner first. I'm going to call them and 17 hope that they're going to be compliant with**  **18 me or caught it in some way and say, okay, we 19 have this picture of your unit in your house.**  **20 Can you verify this is your unit, that kind of 21 thing. And then they may know who installed**  **22 it and that may actually have given you that**

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## 1 lead in the case. **2 So then the question is we have 3 these subpoenas that we could issue. And so**  **4 -- and typically I want to give -- well, 30 5 days to respond. That's what we do under the**  **6 statute. And so the various actors we could 7 subpoena would be contractor, dealer,**  **8 distributor, manufacturer. 9 Now to assure everyone, I would not**  **10 do all of those at the first foray. Like I 11 would not say, okay, I want everyone to talk**  **12 about this. So I think it would be a targeted 13 request to the person that is alleged to have**  **14 done the bad thing; either the contractor, 15 dealer, or the distributor depending on who's**  **16 alleging what, and then I would look into the 17 matter. And then possibly make sure what I**  **18 get from them I verify or pair to information 19 received from the distributor or from the**  **20 manufacturer upstream. So that's how I would 21 kind of build this is by looking at those**  **22 pieces together.**

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## 1 And then question is, okay, now I **2 look at the records and I see clearly Chuck 3 has installed four 13 SEERs in Florida. So**  **4 what do I do with that? So I think it would 5 be on the Department then to say to Chuck,**  **6 well, Chuck, this is what we found. Can you 7 explain these? And so give Chuck the chance**  **8 to explain whether they're right or not to 9 involve some process here. And then based**  **10 upon what response I receive from Chuck, then 11 we make a finding as to those individual**  **12 violations. 13 So the possibility is do we want**  **14 provide a warning notice at some point to the 15 person under investigation that they're being**  **16 investigated? So do we want to make that part 17 of the process? And would we want that to be**  **18 public? So that's the second question I had 19 for the group. So how public do you want this**  **20 to be while we're investigating a matter? So 21 I could see pluses and minuses about it.**  **22 What DOE typically does is we do not**

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## 1 publicize investigations until they're **2 complete. So if we don't want people 3 prejudging the outcome. We don't want it**  **4 affecting what's going on with their product 5 until we know the outcome. So I think from a**  **6 Department point of view I'm very comfortable 7 with waiting until the investigation is**  **8 complete or we've made a finding to making it 9 then someway public, but I want to hear folks'**  **10 kind of thought if they have a different 11 thought.**  **12 Harvey? 13 MR. SACHS: This is Harvey, and I**  **14 guess my question is in terms of what might 15 have moved through the channel. How long does**  **16 your investigation typically take? Is it 60 17 days or 90 days or 180 days?**  **18 MR. RAWALD: Right. So with the 19 manufacturer case, because we involve testing,**  **20 it's always the long pole in the tent. But 21 without the manufacturing, without the testing**  **22 part of it we can typically be done with our**

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## 1 investigation, the information part of it, **2 within 60 to 90 to 120 days is probably the 3 realm of reasonable time frame. So hopefully**  **4 faster, but it just depends on -- we give a 5 lot -- we have a lot of discretionary ability**  **6 to people. As they're looking for records 7 they're hard to find sometimes. So we do take**  **8 more time. But I would say that kind of time 9 frame.**  **10 So I would want this to be quick. I 11 mean, I'd want this to be a very quick process**  **12 to looking at records and moving on. So I'd 13 hope we get through this within 90 days, would**  **14 be my hope. 15 MR. HURST: So, John Hurst from**  **16 Lennox. I'm a little conflicted on this. It 17 would be nice to know the information so that**  **18 you kind of know who's being investigated so 19 you might change your behavior towards that**  **20 potential violator. 21 MR. RAWALD: YES.**  **22 MR. HURST: But I said potential.**

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## 1 The flip side of it is we're kind of **2 convicting the potential crime committer 3 without being proven guilty. So I don't know**  **4 if I'd want to start treating my customers 5 differently if 90 days later you come back and**  **6 say their claim -- there's erroneous 7 information or a misunderstanding, or whatever**  **8 the situation is. 9 So presuming that the process goes**  **10 relatively quickly, between 60 and 120 days, 11 my preference would be to not know until an**  **12 actual finding has been -- an actual 13 determination has been made.**  **14 MR. RAWALD: Okay. 15 MS. MEYERS: This is Rheem with**  **16 Karen. I concur with that. 17 MR. RAWALD: Karen with Rheem**  **18 actually. 19 MS. MEYERS: Yes, with Rheem.**  **20 (Laughter) 21 MR. RAWALD: Or the Rheem with**  **22 Karen.**

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## 1 MS. MEYERS: Rheem with Karen. **2 Karen with Rheem. 3 MR. McCRUDDEN: So this is Charlie**  **4 with ACCA. So to either Karen or John or any 5 of the manufacturers, if you've got a -- or**  **6 actually to John, I guess, if you've got a 7 subpoena or if you issued a subpoena, is it**  **8 going to be tied to potentially the serial 9 number that they could trace to a contractor?**  **10 And is that the clutch there going to be an 11 alert to you?**  **12 MR. RAWALD: Right. So potentially, 13 right? So I mean we would try not to do that**  **14 if we were trying to keep it not public, but 15 it's possible that an industrious manufacturer**  **16 could try to track down, well, what's this all 17 about? So, and I can't do anything about that**  **18 -- 19 MR. McCRUDDEN: Right.**  **20 MR. RAWALD: -- because that's going 21 to be on the manufacturer.**  **22 MR. McCRUDDEN: And that's why I'm**

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## 1 not sure that the question -- **2 MR. HURST: So in our case, part of 3 our business where we deal in distribution, we**  **4 would -- once you come and ask for that 5 information, I can surmise -- I'll know who I**  **6 sold it to. So I will know that there is some 7 sort of action or investigation against a**  **8 particular dealer. 9 Now when it goes through independent**  **10 distribution I'll know that I have somebody 11 with an issue in North Carolina, but that's**  **12 about all I'll know. 13 MR. BALLO: Doug, I think at least**  **14 some of the time you have to go up the chain 15 just to protect against the possibility that**  **16 when you ask for records from a manufacturer 17 they're selectively providing --**  **18 MR. RAWALD: Right, in order to 19 verify the information of the installer I**  **20 would probably have to lay it against 21 information from the distributor. I mean, I**  **22 think that would be helpful. So that's why we**

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## 1 want this. So I think if I don't have that up **2 the chain linkage, I have to really just blind 3 faith believe the person I think is possibly**  **4 cheating. So those are two hard things to 5 coexist in my mind, right? So checking data**  **6 is always important. 7 MR. BALLO: With that being the**  **8 case, it's sort of hard to keep people from 9 finding out the identity of the person you're**  **10 investigating. 11 MR. RAWALD: Right. Right. But**  **12 there's a difference between them figuring out 13 and the Department publicizing it. My**  **14 preference, I think the prior practice of the 15 Department is not to publicize an ongoing**  **16 investigation. I think it's our practice 17 across the board for a number of reasons. I**  **18 think it's a very good practice for the 19 Government not to publicize investigations**  **20 that are ongoing. But I want to make sure 21 everyone's comfortable with that.**  **22 MR. McCRUDDEN: So this is Charlie**

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## 1 of ACCA. Let's say you subpoena a contractor **2 and this is a case where it's an honest 3 mistake, it's a mistake, but it's an honest**  **4 mistake, are you satisfied that it's a one-off 5 if they tell you, or are you sort of going to**  **6 want to say, okay, let's see -- let's trace 7 this up --**  **8 MR. RAWALD: Right. 9 MR. McCRUDDEN: -- and see if there**  **10 are other -- I mean, where does the 11 investigation go to routine violator**  **12 investigation? Is that sequential or is it 13 concurrent?**  **14 MR. RAWALD: So I'll probably be 15 investigating -- I want to focus on the one**  **16 allegation, but if there are other things that 17 are appearing, I'm going to look at those as**  **18 well. But you're correct in that every case 19 is different. And so, you may deal with**  **20 someone that they are very open and honest and 21 they give you all the records and say, no,**  **22 this is a one-time thing. Here's all my**

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## 1 records for the past three years. Look. I'm **2 really sorry. 3 And I'll say, okay, this guy was**  **4 very forthright, very forthcoming. This is 5 very well documented records. They're very**  **6 easy to follow and understand. I can't see 7 how he could have done anything else. I am**  **8 familiar with these model numbers. They're 9 all ones that make sense to me. I may call a**  **10 couple of the homeowners and verify that 11 possibly rather than bothering his -- who he's**  **12 selling to or getting from. So I may look at 13 different approaches to try and solve that**  **14 rather than trying to alert the entire chain 15 and getting everyone else mobilized to produce**  **16 records that might not need to. 17 So each case is different, so I**  **18 don't want to prejudge how we -- this is the 19 kind of the breadth of the things that we**  **20 could do, so you'll understand what we're 21 talking about here.**  **22 MR. SACHS: This is Harvey. To me**

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## 1 it circles back to an earlier safe harbor **2 question, a little simpler case as John's that 3 you asked him for some of his distribution**  **4 records. And at that point he knows there's 5 an investigation of Chuck.**  **6 COURT REPORTER: I'm sorry, I'm 7 having trouble picking you up.**  **8 MR. SACHS: Oh, I'll pull back in. 9 COURT REPORTER: Thank you very much.**  **10 MR. SACHS: I'm sorry, ma'am. This 11 is Harvey and the question becomes -- the end**  **12 point is safe harbor, I guess is what I would 13 call it, that John Hurst becomes aware that**  **14 there is an investigation of Chuck. At what 15 point is John liable if he doesn't quit**  **16 selling to Chuck when everyone knows that 17 stopping his sales to Chuck is going to have**  **18 a major impact on Chuck's business? And 19 that's the question I don't have an answer to,**  **20 the sort of due process side of this. 21 MR. RAWALD: Right. And I think**  **22 that people have to make their own business**

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## 1 decision on this, because I can't dictate **2 what's the outcome going to be. But if you 3 think Chuck is a good guy and you think this**  **4 is all going to blow away, then you keep 5 dealing with Chuck. But if you're worried**  **6 about Chuck and you're saying, well, maybe I 7 should stay away from Chuck, maybe you choose**  **8 to stay away from him. So I can't dictate the 9 outcome there. And I can't say that I've**  **10 discussed the idea of a safe harbor in that 11 sense.**  **12 Now there's one that we'll talk 13 about later on for the manufacturer prohibited**  **14 act, but -- that I put in here so folks can 15 discuss it. But that particular scenario I**  **16 haven't really thought through how we would 17 provide such safety for folks to continue**  **18 operating in that fashion. 19 Okay. So next slide. And so this**  **20 is the violation we talked about before, so 21 I'm just putting it here again. So you'll**  **22 have the slides to bring home with you for**

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## 1 lunch. Nothing different than what we talked **2 about yesterday. 3 The next slide. So DOE then issues**  **4 for a finding that a violation or -- and so 5 the question is if we don't find a violation,**  **6 would you want a finding saying, oh, we didn't 7 have a violation, or would you not? And would**  **8 you want a finding of that individual 9 violation to be public?**  **10 Now in the case where we were to 11 have a prohibited act, then we would -- this**  **12 would be the point where we'd have a public 13 action of getting civil penalty authority. So**  **14 if we were to find there was a violation and 15 we had a prohibited act saying I could charge**  **16 money, I would follow this up with a notice 17 saying, okay, Chuck, we found that you had a**  **18 violation and you owe us now $200 for that 19 violation. And that's how we would -- and**  **20 that would be public. So if we don't have a 21 prohibited act, then the question is would you**  **22 want this finding to be public or not, the**

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## 1 individual violation? Not the routine one, **2 but the individual violation. And how would 3 folks feel about that?**  **4 MS. NOLL: This is Elizabeth. Can 5 you guys hear me in the room?**  **6 (Chorus of yeses) 7 MR. RAWALD: Very low.**  **8 MS. NOLL: So I have a comment going 9 back a little bit to the John Hurst's concern**  **10 about do I want to or do I not want to know? 11 MR. RAWALD: Could you repeat who**  **12 you are, ma'am? 13 MR. EISNER: It's Elizabeth Noll.**  **14 MS. NOLL: Would DOE consider -- and 15 because all we're really talking about is the**  **16 sale of the non-compliant product through a 17 contractor or distributor who's potentially**  **18 under investigation. And would DOE consider 19 a modification in that sale of that product**  **20 sufficient for manufacturers being protected? 21 I guess my thinking is that if somebody -- if**  **22 you made the violation known that you're**

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## 1 investigating this person for a violation and **2 then you're not putting that person out of the 3 building business and you're not impacting**  **4 their sales, if all you're doing is saying I'm 5 not going to sell you a 13 SEER product**  **6 because you're under investigation, but you're 7 more than welcome to 14, 15, 16 whatever else,**  **8 other products you might want, then the only 9 time when you really throw the hammer down is**  **10 when you're considered routine and then you 11 are not allowed to have business done with you**  **12 from anyone. Does that make sense? 13 MR. RAWALD: So I think your**  **14 question is to the manufacturers about their 15 conduct vis-á-vis the individual that's under**  **16 investigation? 17 MS. NOLL: And distributor.**  **18 MR. RAWALD: Okay. 19 MS. SHEPHERD: This is Amy Shepherd**  **20 from AHRI. But, Doug, do you agree with the 21 way she characterized that in terms of the**  **22 product that would be sold? So DOE would not**

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## 1 view it that way. DOE would view that you **2 can't sell -- like you could be liable for 3 anything you sell, any central air**  **4 conditioning seller. 5 MR. RAWALD: Right, and we'll get to**  **6 that. So that's the routine violator. 7 MS. SHEPHERD: Right, but she was**  **8 saying you would only have to not sell them 9 13s.**  **10 MS. NOLL: No, I was not. No, I'm 11 saying at the time -- if we decide that we**  **12 want to make this person who's under 13 investigation public so everyone knows that**  **14 this person is under investigation, the really 15 only action that you would not want to**  **16 continue doing business with them is on the 17 restricted product. They can continue to do**  **18 business with that person as long as it's 19 not --** **20 MS. SHEPHERD: A central air 21 conditioner.**  **22 MR. RAWALD: Well, what I view,**

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## 1 Elizabeth, is offering an alternative to **2 keeping it public with curbing the 3 manufacturer reactions some way by making it**  **4 public. So is there any sort of desire to 5 make the investigation public before the**  **6 finding because of the -- by changing what 7 people would do conduct-wise? So I'm still**  **8 preferring keeping the investigation not 9 public until a finding has been made. I think**  **10 that's the preferred approach from my point of 11 view. But I'm hoping that we'll --**  **12 MR. McCRUDDEN: This is Charlie with 13 ACCA. I think since there is potentially a**  **14 due process that has to occur that I guess the 15 burden of proof would switch back and forth.**  **16 It would first come from you and then come 17 from the contractor. And we don't know the**  **18 outcome. I think publicizing the existence of 19 an investigation may prejudice manufacturers**  **20 because of the hammer that does come down if 21 that contractor winds up as a routine**  **22 violator. And so I would prefer that**

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## 1 investigations remain just between you and **2 that contractor. 3 MR. RAWALD: Okay.**  **4 MR. WHITE: This is Chuck White. I 5 would second that. Until there is a finding**  **6 you're severely limiting the contractor's 7 options. And if there is no finding, if he's**  **8 in the clear, you've harmed him unnecessarily. 9 MR. RAWALD: Right.**  **10 MR. ROCKY: Yes, this is Bryan from 11 JC. I'd say the finding itself of a violation**  **12 should not be public. And if we're going to 13 talk about a finding of routine violations,**  **14 then that's a different story. 15 MR. RAWALD: Okay. So if we found**  **16 one violation -- unless we have a prohibited 17 act, which would be separate, the prohibited**  **18 act then would become public. But the actual 19 finding that it's a one-time violation, you're**  **20 saying you prefer it not to be public? 21 MR. ROCKY: At this point that is**  **22 correct. I would rather the Department notify**

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## 1 the affected user, look, we found you did **2 something wrong. Here's your slap on the 3 hand. Don't do it. If we find it's routine,**  **4 then we're going to take further actions and 5 go from there.**  **6 MR. RAWALD: So how does everyone 7 else feel about it? So Bryan is advocating**  **8 for not making the finding of a one-time 9 violation public.**  **10 MS. MEYERS: Well, this is Karen 11 with Rheem. A one-time violation is not -- it**  **12 wouldn't trigger a prohibited act, right? 13 MR. RAWALD: Right.**  **14 MR. HURST: Just for clarification, 15 a one-time violation is one unit, not one**  **16 truckload of fifty units? 17 MR. RAWALD: Right. So I would view**  **18 50 units as 50 violations. 19 MR. HURST: Thank you.**  **20 MR. RAWALD: Yes, ma'am? 21 MS. WALTNER: So I guess I'm sort of**  **22 caught up in whether we're considering this a**

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## 1 prohibited act or not and that sort of affects **2 whether it's public. And for the prohibited 3 act do we have a decision of any of the single**  **4 violations of a prohibited act or is a routine 5 violation a prohibited act?**  **6 MR. RAWALD: So we have not any 7 decision at all about whether a contractor or**  **8 a dealer should have a prohibited act. The 9 room seemed to generally be in consensus**  **10 yesterday that distributors would not face a 11 prohibited act for this conduct, so how that**  **12 would be described for a dealer, whether it's 13 a one-time thing or multiple thing. So the**  **14 statute the way it's set up now is we charge 15 every violation as a prohibited act.**  **16 So we could say you have to have at 17 least five bad violations, but then the**  **18 minimum threshold would be $1,000 as opposed 19 to having a $200 penalty. So that's something**  **20 for the room to consider, to talk about 21 prohibited acts. But if we develop a**  **22 prohibited act, it will by nature of the**

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## 1 prohibited act, because of how we collect the **2 money, become public. That will always be the 3 thing. So if we don't create a prohibited act**  **4 that allows us to collect money, then we could 5 decide to keep the finding of the one-time**  **6 violation not public. 7 So and the question is do you want**  **8 there to be a finding of no violation to be 9 similarly created? If our investigation**  **10 concludes, hey, we looked at you and nothing 11 happened, what we would typically do in the**  **12 case that we deal with now with the 13 manufacturers is I write a letter closing the**  **14 case. I say, hey, manufacturer X, you gave me 15 -- and I asked you about this. You gave me**  **16 the documents. Everything seems fine. Case 17 is closed. That's how I handle it now.**  **18 There's no official finding. I just close the 19 case. And so we could do that as well in the**  **20 case of a guy we're investigating from the 21 installer/dealer, if folks are comfortable**  **22 with that.**

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## 1 MR. FERSTROM: So this is Gary. **2 Following David's thinking, I think we want to 3 make the penalties so onerous that it**  **4 encourages a paradigm of compliance. 5 MR. RAWALD: I'm not sure what**  **6 thought of David's you're looking back to -- 7 (Laughter)**  **8 MR. RAWALD: -- but I hear what 9 you're saying individually here certainly.**  **10 MR. FERNSTROM: And thanks to the 11 manufacturers we have a label where I think on**  **12 inspection we can readily identify whether a 13 product is compliant or not. We'll get out**  **14 our phone and the GPS location and we'll know 15 where we are and be able to check it. But**  **16 it's going to be hard to find these things, 17 and then secondly to get the records that we**  **18 need, even though retention is required. So 19 there isn't much -- there aren't many teeth**  **20 there to encourage compliance. So I think we 21 need to make these things prohibited acts and**  **22 make them public and have a penalty system**

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## 1 that just encourages people not to take the **2 risk. 3 MR. RAWALD: Okay. And I think**  **4 it's consistent with what you said throughout 5 the -- and I think there are folks here that**  **6 support that and folks here that are against 7 that. So possibly -- I want to get the whole**  **8 thing out there so people can see what we're 9 dealing with so they could figure out how this**  **10 would play into what a -- how important it 11 would be to have a prohibited act or not. And**  **12 then maybe after lunch we could sit down and 13 really debate the topic. But I think we need**  **14 to debate and finish up whether we're going to 15 have a prohibited acts for contractors and**  **16 dealers or not. I think it's a good thing for 17 after lunch. Let's just deal with that.**  **18 So let me go through the rest of 19 this and then we'll come back to that after**  **20 lunch. 21 MR. FERNSTROM: Okay. Can I just**  **22 make one additional point?**

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## 1 MR. RAWALD: Yes. **2 MR. FERNSTROM: So as far as the 3 distributors or dealers are concerned,**  **4 yesterday we had this discussion about whether 5 the settlement agreement let the distributors**  **6 off the hook, and I think we'd like to discuss 7 that some more this afternoon.**  **8 MR. RAWALD: Okay. Let's put that 9 back on the table then. That's fine. So**  **10 because we certainly didn't come to a final 11 answer. I mean, Harvey at least reserved time**  **12 to talk about it with his people and certainly 13 we want to talk about it. So that's fine.**  **14 Okay. Next slide. So then the 15 question becomes assessing how it's routine.**  **16 And so yesterday we outlined a bunch of 17 factors that we could look at to decide**  **18 whether they're routine violations. And so we 19 had a number of violations, and I would say**  **20 both in my current investigation and any past 21 ones. So if I already investigated Chuck's**  **22 company four times, that's going to be a**

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## 1 contributing factor to my assessment of **2 whether he's a routine violator. 3 The length of time over which the**  **4 violations were committed. The ratio of 5 compliant to non-compliant installations or**  **6 sales. The percentage of employees committing 7 the violation. If all their employees are**  **8 doing it, then probably they're a violative 9 entity versus if they have one employee that**  **10 keeps breaking the rules and they fire that 11 employee, as Jon Melchi mentioned, maybe**  **12 that's a cure. 13 So and then what subsequent remedial**  **14 actions they've taken. How they're replacing 15 non-compliant units, as Tim mentioned. Have**  **16 they fired the person as Jon Melchi mentioned? 17 And any other ideas folks may have for**  **18 subsequent remedial actions that we'd want to 19 consider.**  **20 So that's kind of the things that I 21 would look at then and try to assess, okay, is**  **22 it a routine violation going on here?**

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## 1 Any other thoughts based on our **2 discussion yesterday? 3 MS. SHEPHERD: This is Amy Shepherd.**  **4 My only thought is the same point I made 5 yesterday, which I think kind of goes back to**  **6 Jordan's, the diversions Jordan thing we 7 talked about, which is that there's no way**  **8 that a manufacturer can look on that list and 9 figure out whether DOE is going to find that**  **10 that's a prohibited act. 11 MR. RAWALD: Right, we'll get to**  **12 that. 13 MS. SHEPHERD: Okay.**  **14 MR. RAWALD: We'll get to that. So, 15 yes, I get that. So, okay.**  **16 So then if DOE decides that -- yes, 17 Harvey?**  **18 MR. SACHS: This is Harvey. I'm 19 trying to think while listening and the**  **20 distributor is different from the installer, 21 in degree at least. And if I'm a 17-year-old**  **22 kid who's been told to go install this unit,**

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## 1 I'm not sure as a 17-year-old kid who's doing **2 the physical installation I'm the one who 3 ought to be held responsible as opposed to the**  **4 salesman who sold the job or the owner of the 5 company, or whatever.**  **6 MR. RAWALD: And so let me be clear. 7 So I consider -- DOE action is taken against**  **8 a corporate entity, a company, not against the 9 individual installer. But what might be the**  **10 case is that it turns out that the company is 11 trying to do the right thing, but they have**  **12 one installer that's out there buying his own 13 parts and installing them and making money off**  **14 on the side. So the company fires that 15 person. And so it's not the company that**  **16 should be held the routine violator if there 17 was somebody who routinely violating in their**  **18 pay and they've gotten rid of that problem. 19 So I don't want to hold the company**  **20 responsible for one rogue actor in the 21 company's pay that they've gotten rid of.**  **22 Does that make sense?**

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## 1 MR. SACHS: Yes, I just hadn't **2 thought about the guy doing it on his own time 3 as being doing it as an employee.**  **4 MR. RAWALD: Right. Well, I don't 5 know. I'm trying to cover all the scenarios**  **6 I've been hearing people across the board 7 here. So I think you're making a sound point.**  **8 MR. AMRANE: Doug? 9 MR. RAWALD: Yes?**  **10 MR. AMRANE: This is Karim. Are you 11 also then going to require then the**  **12 contractors to keep record of who has 13 installed the unit as well then?**  **14 MR. RAWALD: That's a good point. 15 So on the record retention we don't have a**  **16 retention requirement for who installed the 17 units. And Charlie McCrudden looks very upset**  **18 about the idea. 19 (Laughter)**  **20 MR. McCRUDDEN: I just shot a look 21 at Karim, that's all.**  **22 MR. RAWALD: Yes, so that may be**

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## 1 worthwhile, Karim. **2 So see from my point of view, the 3 production would be the company responsible**  **4 until the contractor shows otherwise, right? 5 So I think the contractor -- I don't want to**  **6 require the contractor to keep those records, 7 but if the contractor wants to bring back**  **8 records showing, no, no, it's only one guy 9 who's done all those jobs and here he is, we**  **10 fired him, that would be something that the 11 contractor would bring to me voluntarily**  **12 without me requiring it by regulation. That 13 I think might be the right solution to that.**  **14 MR. SACHS: Doug? 15 MR. RAWALD: Yes?**  **16 MR. SACHS: The point here as I 17 understand that end of the business; and it's**  **18 far from being perfect, is that I want my 19 lowest paid employees doing the routine**  **20 installations, among other things, because it 21 involves a heck of lot of just plain sitting**  **22 time waiting for the pump down there, and I**

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## 1 don't want to get into a situation that we're **2 encouraging shortcuts by having the most 3 qualified people watching that gauge.**  **4 MR. RAWALD: Okay. 5 MR. SACHS: So that's what I'm**  **6 trying to say here -- 7 MR. RAWALD: Yes, I don't know how**  **8 to address that. 9 MR. SACHS: -- about that 17-year**  **10 old whoever. 11 MR. WHITE: This is Chuck White. I**  **12 don't think I necessarily agree with your 13 sentiment of the installers in the industry.**  **14 Certainly there are some people that view 15 installations as entry level, but quality**  **16 installations are done by trained and skilled 17 individuals. So --**  **18 MR. SACHS: I wish they were so. 19 MR. WHITE: -- please don't minimize**  **20 the skill and integrity of installers, because 21 there's a lot of very good ones out there.**  **22 And, yes, we watch a vacuum pump run, but it**

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## 1 doesn't take that long on most systems these **2 days. So there are operations where you start 3 in installations, but that's not the first**  **4 thing you do. You advance to being an 5 installer, and there's a lot of skill to that.**  **6 MR. SACHS: We may have a 7 nomenclature issue, but thank you very much.**  **8 MR. RAWALD: Okay. So now if the 9 Department finds a routine violation, we would**  **10 issue a notice saying that a routine -- and 11 that would be public. So that would be akin**  **12 to our notice, not the fine determination that 13 we make now for manufacturer products where we**  **14 would do something like that. 15 And then as part of the notice we**  **16 want to build and discuss some sort of appeal 17 right. So either through the boss of my boss**  **18 who issued the notice or through an outside 19 agency, which we can look at further. So it**  **20 seems to me that that would give you the 21 appropriate level of due process people are**  **22 worried about here. So, but we're open to**

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## 1 thoughts on that. So please come back to us **2 with more thoughts on that. 3 MR. DORIA: This is Jordan. Can I**  **4 ask a clarifying question? So assuming this 5 were for a distributor, they must file an**  **6 appeal within 30 days. If we're a 7 manufacturer, during that intervening 30-day**  **8 period can we continue to sell product to that 9 distributor?**  **10 MR. RAWALD: Right. So I haven't 11 addressed that question squarely --**  **12 MR. DORIA: Okay. 13 MR. RAWALD: -- and I haven't**  **14 thought about it. So we need to talk about it 15 more.**  **16 So let's go to the next slide, 17 because it's really -- that's what we're**  **18 talking about here, is, okay, what's the 19 manufacturer liability in all of this?**  **20 Because they had a prohibited act which I'm 21 reminding you of here.**  **22 Next slide, please. And we have the**

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## 1 knowingness -- knowingliness defined in that, **2 so we've talked about that ad nauseam. 3 Next slide. So, and we've talked**  **4 about the products and what the product means, 5 so we have all seven classes here that are**  **6 found, that these are all the things that you 7 could not sell that person who was found to be**  **8 a routine violator. These are the things that 9 you couldn't sell them. Those are the things** **10 that are defined to be central air 11 conditioners under 432(c). So selling them**  **12 any of those things to the guy found to be a 13 routine violator, regardless of SEER value,**  **14 would be a violation. 15 MS. MEYERS: So this is Karen with**  **16 Rheem. Can we just discuss that? 17 MR. RAWALD: Yes.**  **18 MS. MEYERS: So it's not that I 19 disagree with that, but if he's a routine**  **20 violator you can't sell him -- it doesn't make 21 sense, because he could not be in violation of**  **22 installing a heat pump or anything else.**

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## 1 MR. RAWALD: No, I hear that. I **2 hear the question. 3 MS. MEYERS: So he's out of**  **4 business. So we're saying if he's a routine 5 violator we are putting this guy out of**  **6 business? 7 MR. McCRUDDEN: It's the death**  **8 penalty. 9 MS. SHEPHERD: And I think from --**  **10 MS. MEYERS: It is? Okay. 11 MS. SHEPHERD: -- this is Amy**  **12 Shepherd. I think also that I really question 13 this from the Department's perspective because**  **14 that means all the high-efficiency equipment 15 that you could be selling to a person that**  **16 could be installed in this region, it's not 17 going to happen. It's not stopping the**  **18 installation of non-compliant product. It's 19 putting someone out of business.**  **20 MR. RAWALD: Right, so -- 21 MS. SHEPHERD: That's the remedy.**  **22 MR. RAWALD: Right, so and I -- what**

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## 1 I can assure you is I've discussed all those **2 points. The legal analysis is based upon the 3 term "product" and how it's defined in the**  **4 statute and how we treat it otherwise. And so 5 this is what we view to be the Congressional**  **6 intent of that restriction. So that's where 7 we're coming down on this.**  **8 So I'm certainly willing to bring 9 back the frustration of the group at that**  **10 idea, though it seems like some people may 11 feel it to be the appropriate reaction thereby**  **12 obviating the need for a prohibited act, 13 because you're saying, oh, well, this is so**  **14 much worse than any $200 fine, so why do we 15 need to go down that path of creating a**  **16 prohibited act? We already have this option 17 that's going to make it so the guy is**  **18 penalized for doing these bad things. So I 19 think there's a balance here people have to**  **20 strike. 21 MS. MEYERS: Yes, it just seems like**  **22 an overreach of the Department.**

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## 1 MR. EISNER: But Doug is saying the **2 statute requires no one can sell the product 3 to this person. So how is the Department**  **4 overreaching? 5 MS. MEYERS: You're putting him out**  **6 of business. I guess you're taking -- 7 MR. EISNER: The Department is**  **8 simply implementing the statute, isn't it? 9 MS. SHEPHERD: Well, that's the --**  **10 this is Amy Shepherd. That's the Department's 11 interpretation of the difference between a**  **12 product and the product. I don't think -- and 13 there's nothing explicit in the statute.**  **14 That's how the Department is interpreting the 15 difference between a product and the product.**  **16 And I think there's also an argument that when 17 it talks about the product it could be talking**  **18 about the product that has a regional standard 19 applicable to it. I mean, so I don't really**  **20 think this is as cut and dried from an 21 interpretive standpoint as the Department**  **22 does.**

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## 1 But I guess my follow-up question to **2 Doug would be does the Department view that 3 this group has any authority for the purposes**  **4 of the enforcement rule to clarify or to make 5 a different -- have a different outcome or a**  **6 different impact for purposes of the 7 enforcement rule?**  **8 MR. RAWALD: Right. So I asked all 9 those questions. And I want to --**  **10 MS. SHEPHERD: Good. 11 (Laughter)**  **12 MR. RAWALD: I don't think this is 13 an easy question. I mean, I don't think the**  **14 Department takes this lightly. I think we've 15 really thought about it and we've thought**  **16 about the legal implication and trying to be 17 consistent with our regulations and how we**  **18 interpret the statute. 19 So our perception is this is a legal**  **20 question squarely within the Department's ball 21 court and not within this group. Now if the**  **22 group comes to a consensus that they disagree**

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## 1 and they want to narrow the scope of this, **2 then you put that on a term sheet and we'll 3 move forward with that. And I will ask the**  **4 Department how they fell about that so I can 5 vote accordingly.**  **6 But what I'm telling you at the 7 moment based upon the information we have**  **8 before us, this is how the Department views 9 the term as described in the statute. So I**  **10 think it's worthwhile for folks to think about 11 that some and come back with a more narrow**  **12 view of that. 13 MS. HARIHARAH: This is Johanna from**  **14 the Department of Energy. And the way the 15 statute reads is products and not products**  **16 class. So just because there are regional 17 standards only applicable to split-system air**  **18 conditioners, does not mean that it's a 19 product class. Under 6291(21) a central air**  **20 conditioner is a product. If a split-system 21 central air-conditioner was a product, then we**  **22 could talk about it. But the way the statute**

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## 1 reads right now is product. **2 MR. BALLO: Let me ask the question 3 in a different way: My sense from what you're**  **4 saying is that the Department views this 5 interpretation as the most reasonable**  **6 interpretation of the statute, but there may 7 be other plausible interpretations that the**  **8 statutory language could support. Would you 9 say that's accurate?**  **10 MR. RAWALD: Right, I would say 11 falling along the Chevron line there exactly.**  **12 (Laughter) 13 MS. MEYERS: Yes, so I guess I would**  **14 say that the action of this group is 15 enforcement of products subject to regional**  **16 standards. So I mean, is it better to have a 17 prohibited act than this?**  **18 MR. RAWALD: I think it's up to the 19 group to --**  **20 (Simultaneous speech) 21 MS. MEYERS: I mean, I'd rather get**  **22 a $200 fine than be put out of -- I mean, I**

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## 1 agree we don't want these people to -- but it **2 juts seems a lot. You're putting these guys 3 --**  **4 MR. RAWALD: Well, so what's more 5 likely to cause you to not do the bad thing?**  **6 MR. HURST: That. Absolutely. 7 MR. RAWALD: Right. So isn't that**  **8 what we want to -- isn't that what we're -- 9 we're trying to stop conduct. We're not**  **10 trying to make money. We're not trying to put 11 people out of business. We're trying to stop**  **12 conduct. And if the most deterrent value is 13 by this, then isn't that what we want?**  **14 MS. SHEPHERD: No, but if you -- 15 MR. RAWALD: I'm just putting it out**  **16 there. 17 MS. SHEPHERD: But if you prohibit**  **18 anybody from selling let's say even -- like if 19 you prohibit them from selling the product**  **20 that will violate the standard, then you can't 21 -- that person can no longer violate the**  **22 standard because they don't have the**

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## 1 equipment. But if you -- **2 MR. RAWALD: After they violate it 3 once.**  **4 MS. SHEPHERD: Right. 5 MR. RAWALD: After they violated it**  **6 already. 7 MS. SHEPHERD: Right. Right.**  **8 MR. RAWALD: Right. So the point is 9 --**  **10 MS. SHEPHERD: So I mean, I guess we 11 are getting down to like how much deterrent do**  **12 you want? Is this -- and I think given 13 especially that we don't have any background**  **14 in this particular enforcement regime, because 15 we haven't had these standards, I really just**  **16 would question whether we think we need that 17 much deterrent before we have any idea of how**  **18 prevalent this is going to be or whether or 19 not we can say, well, let's see what happens**  **20 if we just try and deter the -- we try and 21 stop prohibited conduct. And if it turns out**  **22 that's just completely ineffective, then**

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## 1 maybe, yes, then you want to start putting **2 people out of business as a look what happens 3 to you.**  **4 MR. HUNGERFORD: This is David 5 Hungerford. I guess we're missing half of the**  **6 equation, because the deterrent effect is a 7 function of the expected value for the**  **8 contractor. So an expected value is the 9 probability of an event times the cost of an**  **10 event. 11 So, Doug, how many of these**  **12 investigations is DOE capable of doing in a 13 year?**  **14 MR. RAWALD: I would not even be 15 able to -- I have no idea.**  **16 MR. HUNGERFORD: Order of magnitude? 17 One? Ten? A hundred? A thousand? Ten**  **18 thousand? 19 MR. RAWALD: I mean, certainly not**  **20 10,000 or 1,000. I think we're talking about 21 double-digits, likely.**  **22 MR. HUNGERFORD: Like 20, 40, 60**

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## 1 maybe? **2 MR. RAWALD: Maybe. 3 MR. HUNGERFORD: Okay. So the**  **4 deterrent effect is a function of how likely 5 it is you're going to get caught times the**  **6 weight of getting caught and getting in 7 trouble with it and getting a violation. So**  **8 if there's a very, very low probability of 9 getting caught and the consequence is a slap**  **10 on the wrist, there is no deterrent incentive 11 at all.**  **12 MS. SHEPHERD: This is Amy Shepherd. 13 But I think that, sure, that's theoretically**  **14 true. And so if we had a huge problem to 15 address where we knew there was a lot of this**  **16 going on and we weren't able to stop it any 17 other way, then, yes, maybe that's worth it.**  **18 But I mean you are coming down with a hammer 19 at a time when people are -- this is a huge**  **20 change. We've never had regional standards 21 before. So nobody knows what to do. And so**  **22 that's the moment we're going to pick to say,**

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## 1 well, you don't know what to do? Well, guess **2 what, you better get it right because we're 3 going to blow up your entire business. So as**  **4 opposed to saying whether or not -- I'm just 5 saying if we've looked at this by product**  **6 class then, then -- and we said, look -- as we 7 start this we're going to say you can't sell**  **8 them product that would violate the standard. 9 You're stopping any violation of the standard.** **10 You'd only be having them install higher 11 efficiency equipment, which seems like is the**  **12 point. 13 MR. HUNGERFORD: But if there was**  **14 low consequence, there would be -- if the guy 15 down the street who's doing the same thing**  **16 doesn't get caught, he's going to look at what 17 happens to the guy that got caught and say**  **18 it's not a big deal for me. 19 MR. MELCHI: This is Jon Melchi from**  **20 HARDI. I think maybe the point Amy is making 21 is -- and Chuck and Charlie would probably be**  **22 able to answer this most, representing**

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## 1 contractors -- is you go on to -- every bid **2 that have to make, every time you sit at that 3 kitchen table, you're going to be selling a**  **4 higher-efficient equipment at presumably a 5 higher cost than your competitor who can sell**  **6 that larger margin, it's a significant penalty 7 in that you're likely to lose a lot of**  **8 business. 9 MR. RAWALD: But you're losing it**  **10 because it's not compliant in the first place. 11 That's a policy --**  **12 MR. MELCHI: No, no, no, no. 13 (Simultaneous speech)**  **14 MR. RAWALD: So you can't be bidding 15 a job at 13.**  **16 MR. MELCHI: No, I'm talking -- But 17 Amy is serious.**  **18 MR. RAWALD: You can still sell a 14 19 SEER to the guy, so he's doing a minimally**  **20 compliant thing. He longer can sell the 13.6 21 that he shouldn't have been selling in the**  **22 first place.**

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## 1 MR. MELCHI: Okay. I was **2 thinking -- 3 MR. RAWALD: That's the problem with**  **4 that. 5 MR. MELCHI: -- that you wouldn't be**  **6 allowed to sell 14 in the South. You would 7 only be able to sell 15s. That's the way I**  **8 viewed it. 9 MR. RAWALD: That's not what**  **10 Amy's -- 11 MR. MELCHI: I'm sorry.**  **12 MR. HUNGERFORD: But I wanted to add 13 one thing: I guess this is a question for**  **14 Doug. Is there an opportunity for DOE to 15 express some sort of judgment during this**  **16 investigation process such that the degree of 17 the violation affects how far it goes in the**  **18 enforcement process, and how much of a penalty 19 is assessed? Is there a way to -- if you've**  **20 got some guy that's really moving truckloads 21 of equipment across the border and selling**  **22 them in the wrong places, the extreme solution**

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## 1 seems reasonable. **2 MR. RAWALD: Yes. 3 MR. HUNGERFORD: But if you've got a**  **4 guy that gets caught for one installation 5 because somebody made a complaint, is there --**  **6 or two. Two for routine. Right. Well, I'm 7 saying -- but a small routine violation versus**  **8 a large routine violation. I'm thinking of 9 the guy that's running a small business that**  **10 is subject to the competitive pressure. His 11 competitors are selling 13 units with a wink**  **12 and a smile and he's going to have to try to 13 compete. If that guy gets caught, does DOE**  **14 come down with the full weight on that guy in 15 the same way that they would someone who's**  **16 with intent and purpose trying to make -- 17 (Simultaneous speech)**  **18 MR. RAWALD: Well, this is the 19 problem that we have from the statute, right?**  **20 So what we're talking about is market-based 21 outcomes because of the prohibition that**  **22 penalizes manufacturers. So manufacturers are**

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## 1 the ones who are prohibited from dealing with **2 the person who otherwise would be deemed 3 toxic, essentially. And so the question is**  **4 how could I change that, right? The outcome 5 is a person routinely violates and the**  **6 manufacturer sells to them no matter how -- 7 what degree of routinely violative they were.**  **8 The manufacturer is on the hook for each item 9 they sell to that person. And so the**  **10 Department in our -- what we believe to be a 11 reasonable view of and consistent with how we**  **12 view the statute views to be the word 13 "product" there to be all products that are**  **14 under the caveat of central air-conditioner. 15 So there is no real way to narrow**  **16 that. The only curative would be the ability 17 to be taken off the routine violation finding,**  **18 which I'm open to an idea, as Kim proposed the 19 other day, things that you do after, like**  **20 fixing your bad installation, would take you 21 off the routine violation list. So things**  **22 that could be done to get you out of being**

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## 1 considered a routine violator. **2 MR. DORIA: So this is Jordan. I 3 guess the one thing I want to say to that is,**  **4 I mean, I think there is potentially one other 5 sort of way we could push on this without**  **6 passing judgment on whether we agree with that 7 definition or whether I think we should sort**  **8 of abandon that. You could just set the bar 9 for being determined to be a routine**  **10 incredibly high, which in my mind, assuming we 11 stick with that definition of "product," that**  **12 is a prudent course of action. 13 So I think, to make a point, that**  **14 small routine and big routine -- well, you're 15 still a routine violator, that we can't allow**  **16 for that. There can be no such thing as a 17 small routine because the net effect is you're**  **18 still out of business, right? So the bar for 19 being determined to be routine, as long as**  **20 we're operating with that definition, needs to 21 be incredibly high from my perspective.**  **22 MR. GIBBONS: This is John with**

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## 1 Carrier. When you say "public notice on known **2 violators," what exactly -- my fear; let me 3 tell you where I'm coming from, is that, okay,**  **4 I know -- I'm tired of picking on Chuck, so 5 I'll pick on Roy C. Cooling Guy. So I know**  **6 he's a bad actor, so I stop selling to him. 7 But what's going to stop him from changing his**  **8 company name and doing it as John Hurst 9 Heating and Cooling and buying from that**  **10 distributor? 11 MR. RAWALD: Right.**  **12 MR. GIBBONS: I just want to know 13 how public we ought to get. Should we have**  **14 planes with banners behind them or advertise 15 on the Redskins -- I'm sorry, the**  **16 Washington -- 17 (Laughter)**  **18 MR. GIBBONS: How public are we 19 going to get?**  **20 MR. RAWALD: Right. So we're not 21 diverge from our standard practice, which is**  **22 the Department maintains a Web page where we**

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## 1 put all of our public actions on. And so this **2 would just be another thing put on that. 3 Now, if because the manufacturers**  **4 live in a world where they want -- once we've 5 issued the notice, dealing with that person**  **6 would make them be at risk, we could possibly 7 talk about the ability or desire to blast that**  **8 to manufacturers so they're aware, but that 9 would be a divergent from the current**  **10 practice. 11 So what I would prefer would be the**  **12 manufacturers are going to have to pay 13 attention to our Web page and if they see**  **14 somebody pop up there as being found to be a 15 routine violator, they have to then be be**  **16 concerned about that person. 17 MR. SACHS: This is Harvey, and I'd**  **18 like to try to recast the mental image of the 19 contractors going back to discussion the first**  **20 or second time we were together. There are 21 different kinds of contractors, whether it's**  **22 a small well-trained, long-time-in- business**

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## 1 contractor or a larger production contractor **2 running 100 trucks. Let's call them invested 3 contractors. We also have a huge turnover at**  **4 the bottom end of people who spin out of the 5 contracting companies thinking they can make**  **6 more their boss did and last an average of a 7 year or two.**  **8 My mental model is that those guys, 9 who are on some basis at least a quarter of**  **10 the business in any given year, even though 11 their turnover is incredibly high -- those**  **12 guys don't have much stake. They don't 13 understand their overhead. And they're the**  **14 ones who are most likely to be cutting all 15 sorts of corners, whether it's not doing**  **16 proper transitions or trying to skirt the law 17 on SEER 13s in the south.**  **18 My sense is this death sentence 19 approach, at least in part; this nuclear**  **20 option in John's words, is in part trying to 21 tip the scales a little bit toward quality**  **22 contractor use and discourage the kind of**

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## 1 rogue competition that they have had so much **2 trouble with in the absence of effective 3 licensure in some many states.**  **4 MR. RAWALD: And so you have trouble 5 with this because it has that?**  **6 MR. SACHS: I can certainly be 7 talked about of that. I can be talked out of**  **8 anything. But it is a consideration that this 9 is not likely to hit the contractor with 100**  **10 trucks who did the most recent install at my 11 house.**  **12 MR. RAWALD: Okay. So you just feel 13 there's a desirable market out there possibly**  **14 I guess is what -- 15 MR. SACHS: I think that that public**  **16 hanging has a deterrent effect. 17 (Laughter)**  **18 (Simultaneous speech) 19 MS. MEYERS: I definitely agree.**  **20 (Simultaneous speech) 21 MR. SACHS: I'm just trying to say**  **22 that there is another perspective on this and**

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## 1 it does require some judicious consideration **2 of what constitutes routine violation. 3 MR. MELCHI: Doug, this is Jon with**  **4 HARDI. A quick question. So Charlie's 5 company, boom, routine violator. You're going**  **6 to put him out of business. All right. Well, 7 can Charlie sell his company at least**  **8 including all that information to somebody 9 else and continue to work for them, or is he**  **10 out of the industry for good? 11 MR. RAWALD: Right. So we make**  **12 findings about companies. So if Charlie 13 opened a new business under his own name as**  **14 the boss again, would he still have the 15 moniker of routine violator? Probably not,**  **16 right, because we wouldn't know that Charlie 17 McCrudden has now become Charlie MacCrudden.**  **18 (Laughter) 19 MR. RAWALD: So I mean, you went**  **20 from the Irish to Scottish overnight. 21 (Laughter)**  **22 MR. RAWALD: So we wouldn't know.**

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## 1 So now -- **2 MS. MEYERS: Would the same apply to 3 the distributor?**  **4 MR. RAWALD: So I think it's more 5 difficult for a distributor to close up shop**  **6 and reopen because of the difficulty -- 7 MS. MEYERS: No, I mean that we as a**  **8 manufacturer can no longer sell to a 9 distributor any of that product. So they --**  **10 MR. RAWALD: If a distributor has 11 been found to be a routine violator, which is**  **12 obviously more difficult because of the layers 13 involved --**  **14 MR. MELCHI: So I'm just putting 15 myself in -- okay, I'm a bad distributor and,**  **16 boom, I got busted. My question is, okay, I'm 17 going out of business one way or the other.**  **18 Can I at least sell my business and my 19 employees can at least continue to work if I**  **20 sell my business to a competitor, or are we 21 shutting the doors, those people are out of**  **22 work and everything is basically -- all the --**

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## 1 well, going out of business sale at the **2 warehouse and those people are out of work? 3 That's just a question I -- if somebody's a**  **4 violator like in this instance, do they have 5 the ability to sell their business and say --**  **6 MR. RAWALD: I would think yes, but 7 this is somewhat market-driven, right, because**  **8 -- 9 MR. MELCHI: Yes.**  **10 MR. RAWALD: So, because the 11 consequences are on the manufacturers. So the**  **12 manufacturers no longer are able to deal with 13 them, but would someone who subsequently buys**  **14 your business still have the -- 15 MR. MELCHI: Yes.**  **16 MR. RAWALD: -- imprimatur of being 17 a routine violator?**  **18 MR. MELCHI: Even if they've 19 maintained the name. Just because in a lot of**  **20 purchasing the brand name of McCrudden's 21 Heating in Youngstown is extremely popular,**  **22 according to Charlie, and McCrudden's Heating**

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## 1 Supply is bad. But I buy him and I want to **2 keep that name, that's still -- 3 MR. RAWALD: Right. Well, I get**  **4 that. And so there are asset-only sales. 5 There are a lot of corporate questions here**  **6 that go beyond the level of law that I have. 7 MR. MELCHI: Yes.**  **8 MR. RAWALD: So I think would all 9 come into play. So I can't say the definitive**  **10 answer, but my gut reaction would be, no, it 11 follows the bad actor, the bad --the business**  **12 gets sold, but the business might have to sell 13 it as well because it had that bad name**  **14 attached to it. So I don't know. I don't 15 have an answer for you. I think it's a**  **16 complicated question. 17 MS. SHEPHERD: This is Amy Shepherd.**  **18 But, Doug, the Department is not going to 19 change anything, right? They would have that**  **20 corporate name and that would be the routine 21 violator and that's going to stay there.**  **22 MR. RAWALD: Right. That would be**

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## 1 okay. **2 MS. SHEPHERD: That's going to stay 3 there.**  **4 MR. RAWALD: Right. 5 MR. SACHS: But it could become**  **6 McCrudden DBA Melchi. 7 MR. RAWALD: Right, but I guess --**  **8 what also could happen is that when the new 9 person buys Melchi Company, they could go to**  **10 the Department and say, Department, I know 11 when John owned this company that he ran it**  **12 into the ground, but he sold it to me and so 13 now can we now be taken off the routine**  **14 violator list? And we can create a process by 15 which people in either by selling or by**  **16 themselves being a good actor to be off the 17 list.**  **18 MR. MELCHI: And that was one of the 19 questions I had for -- okay. So a lot of**  **20 times -- this is Jon with HARDI. I'm sorry. 21 Sorry, reporter.**  **22 A young guys starts out in the**

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## 1 business, to take think Chuck's scenario from **2 weeks ago, takes a few classes at the trade 3 school, knows enough to be a tech, works for**  **4 six months and says you know what, I'm going 5 to start my own thing. I can do this. Well,**  **6 maybe he skirts around the edges, gets caught. 7 He's 21 years old. Goes to work for a**  **8 reputable company, kind of just the 9 rehabilitation process and reapplying.**  **10 So now that he's got the experience, 11 he realized he screwed up earlier. Can he**  **12 come back in? He's been good actor for a good 13 company and his name has not been tied to any**  **14 violation after an act when he was 21. But 15 now he's 30 years old and he wants to open his**  **16 own shop again. Is that something that he'd 17 be able to do?**  **18 MR. RAWALD: Right. 19 MR. SACHS: Has he gotten ACE**  **20 certified? 21 MR. MELCHI: Of course.**  **22 MR. RAWALD: And so this is Doug.**

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## 1 And so I would think yes. **2 MR. MELCHI: Okay. 3 MR. RAWALD: And I would think we**  **4 would want to have a process by which people 5 who have deemed to be a routine violator can**  **6 then be un-deemed. But that's me speaking, so 7 I'd like to hear from the group. If we want**  **8 to develop that sort of process, we possibly 9 can.**  **10 Well, it's almost lunch time, so 11 maybe can just --**  **12 MR. ROCKY: One last question, and 13 this is something that may need some**  **14 discussion, but notice of routine violation is 15 published. The person who did that violation**  **16 has a right to appeal. 17 MR. RAWALD: Yes.**  **18 MR. ROCKY: Within 30 days was kind 19 of the discussion. There is an appeal process**  **20 that will take some part of some time. 21 Manufacturers are required -- by this**  **22 discussion as soon as that becomes a notice of**

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## 1 violation, we're supposed to stop doing **2 business with them. No time frame indicated. 3 So we can't do business with someone who's**  **4 appealing a ruling of violation. At time of 5 notice of violation are we as manufacturers**  **6 required to stop doing business with that 7 individual or that company?**  **8 MR. RAWALD: Right, so we haven't 9 discussed that. And so I don't think there's**  **10 a definitive answer for you on that. 11 So if we go to the very last slide**  **12 here about what the -- so after the notice is 13 issued, you're on notice that the Department**  **14 believes that person is a bad actor. So my 15 opinion would be then any sales to that person**  **16 would then be a violation, even during the 17 pendency of an appeal. So now if it turns out**  **18 at the end of the appeal the guy is no longer 19 on the list, then, hey, you've been in the**  **20 clear. You've been selling to them and no 21 problem. So you kind of take the risk.**  **22 So if you want to keep selling to**

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## 1 that person, well, you just might adopt **2 yourself a $200 per sale, actually a fee if we 3 keep up the -- after the end of the appeal the**  **4 fact that he is a violator. That's how I 5 think we would view it because this is how we**  **6 do things otherwise. But I can't say with 7 certainty the Department would take that**  **8 approach, and so I'm open to other options. 9 Well, you keep on playing while your**  **10 appeal is pending. That's right. You're 11 correct, John.**  **12 MR. EISNER: Do you want to continue 13 talking or do you want to break for lunch now**  **14 and -- 15 MR. RAWALD: This is the very last**  **16 slide. And so after the notice is issued, I 17 think everyone has knowledge that they're a**  **18 bad actor. The question between Jordan and I 19 has been, okay, what about before the notice**  **20 is issued? And what I would suppose it would 21 be only if DOE has evidence the manufacturer**  **22 was aware of the bad actor. So if you knew**

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## 1 what they were doing and you kept selling to **2 them, then that would be a cause for us 3 assessing some sort of penalty against the**  **4 manufacturer for those sales and it would be 5 mitigated entirely in my opinion by the**  **6 manufacturer who came into such knowledge, 7 reporting it to the Department within a**  **8 reasonable length of time that we could then 9 dictate.**  **10 So I think that would be the safe 11 harbor of sorts that you realize this guy is**  **12 doing something bad, you don't want to be 13 associated with it, you let the Department**  **14 know and then any sort of thing you're doing 15 with that we mitigate it because you let us**  **16 know what's been going on. 17 MR. DORIA: Mitigate -- excuse me.**  **18 This is Jordan. Mitigate meaning to 19 continuing to sell during an investigative**  **20 period? 21 MR. RAWALD: Right. So I think**  **22 that's open for discussion. I haven't had a**

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## 1 decision on that. **2 Okay. So that's the last of the 3 slides. So lots to think about over lunch**  **4 obviously. I don't know if people want to 5 take a longer lunch to talk? Gary's shaking**  **6 his head yes. So if you want to come back -- 7 MR. EISNER: Everybody back by 1:30.**  **8 (Whereupon, the above-entitled 9 matter went off the record at 12:03 p.m. to**  **10 resume at 1:30 p.m. this same day.) 11 MR. EISNER: All right, it looks**  **12 like we've got everybody back. Charlie White 13 asked if he could have some -- could we have**  **14 everybody's attention? All right, Doug, I'm 15 going to have to ask you to yell and start**  **16 from -- 17 MR. RAWALD: Okay everyone, we're**  **18 ready to start. 19 MR. EISNER: Big difference there.**  **20 You're military. 21 MR. RAWALD: My command voice.**  **22 MR. EISNER: Yes. Charlie White**

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## 1 asked if he could have some time at the **2 beginning of the meeting after lunch. It's 3 yours.**  **4 MR. WHITE: Chuck White with PHCC. 5 So, I've had discussions with my folks**  **6 upstream, and I need to really, directly ask 7 Doug a question that we keep kicking around**  **8 and dancing around. And I've talked to a few 9 people around the table about this, but we**  **10 keep making reference and joking about it, but 11 it's a really serious question.**  **12 Is there a method by which this can 13 become SEER 14 across the country, that -- and**  **14 I'm not asking for a yes or no now. I really 15 -- think about it. I don't think any of us**  **16 can really come up with a definite firm 17 position for our respective organizations on**  **18 this short notice. 19 But we've spent nine days with lots**  **20 of words flying around -- and I know we've 21 gained ground, and I know we've established a**  **22 lot of things, but we have a complex**

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## 1 implementation program. In some instances the **2 word unworkable has been used to me. And I 3 don't know that I necessarily agree with all**  **4 that, but SEER 14 across the nation resolves 5 a huge portion of the issues.**  **6 I know we have the Southwest EER 7 issues, and that's a point. I don't think I'm**  **8 suggesting that that would become the national 9 standard. And I'm just going to be**  **10 stream-of-conscious for a little bit here, and 11 you can pick on me later.**  **12 Building codes, HVAC codes, tell you 13 how to do the job, and they reference**  **14 standards. In the plumbing world it's a 15 standard, 1.6 gallons per flush toilet.**  **16 That's a federal standard. If I violate that, 17 I'm in trouble. And the inspection agency,**  **18 the authority having jurisdiction has a way to 19 recognize that. They can look at the standard**  **20 on the product and know it complies. 21 So if we say that we have to be SEER**  **22 14, the HAs have the ability to look and**

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## 1 verify that. If in the Southwest we say it **2 meets those EER values that we've -- kick 3 about that I haven't memorized, I think that's**  **4 a function of the HA to determine compliance 5 of the product in their regions.**  **6 And with all due respect to DOE, I'm 7 not sure this is their thing, to go chasing**  **8 down every installation in every state. I'm 9 not sure, to borrow his phrase the other day,**  **10 they have statutory authority. Maybe they do, 11 maybe they don't**  **12 And I don't want to get into that 13 particularly, but I don't think I'm willing to**  **14 grant it voluntarily. Now if they already 15 have it, so be it. But I don't know that**  **16 there is an easy way to do that, and I 17 recognize, we're pretty far down the path.**  **18 I recognize that people have made 19 changes in forecasts and productions and**  **20 planning and a variety of things. So perhaps 21 that all needs to be factored in there, too,**  **22 but it takes the death penalty off the table.**

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## 1 It takes the tracking of the manufacturers, of **2 distributors, of contractors and I don't know 3 who did what when, it takes that off the**  **4 table. 5 We keep saying we want to be**  **6 business as usual. We don't want to disturb 7 the way we're doing things now. We can't**  **8 change this because, you know, that's business 9 as usual. Doing this keeps us business as**  **10 usual, or as near as we can. 11 The contractors, I recognize from my**  **12 perspective and Charlie's -- I'm not putting 13 words in his mouth, but our members in the**  **14 north have a little bit of a cross to bear 15 there. We're going to have to tell people,**  **16 we're going to put SEER 14 in and, you know, 17 we -- that's a trade-off.**  **18 The trade-off is, how are we going 19 to comply with this otherwise? Because no**  **20 matter what system we create, no matter how we 21 think about the bad actor or the good actor,**  **22 the accident, the whatever, it's still going**

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## 1 to happen. And there's still going to be ways **2 around this. 3 If there's no SEER 13 product out**  **4 there, there's no way around it. And if there 5 is, and you find it installed, it's an easy**  **6 discussion. So that, there really -- these 7 discussions I've had upstream, it's not an**  **8 official position. 9 It really is a question, I think,**  **10 more from me, as a member of this Committee, 11 to recognize, we've done a lot of work here**  **12 and we've gained some ground, but we're not 13 there yet. Doug thinks maybe we'll get done**  **14 next week. I think Doug's an optimist. But 15 that's okay. Be optimistic as you like.**  **16 I just want to throw that out there. 17 I would like an official answer. And you**  **18 don't have to give me an answer now. But is 19 there a mechanism that that could happen,**  **20 whether that is a rulemaking, whether it's 21 some kind of consensus agreement, how -- I've**  **22 never done a rulemaking.**

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## 1 I've said it before, I'm not an **2 attorney. I'm not a politician. I'm a guy 3 that turns wrenches and got dragged into**  **4 representing the viewpoint of those people at 5 meetings like this.**  **6 MR. HURST: Well, and you do it very 7 well.**  **8 MR. WHITE: Well I try, and 9 sometimes I get a little agitated, but I do**  **10 pretty good to keep that under control too, so 11 --**  **12 MR. FENSTROM: Well, this is Gary -- 13 MR. WHITE: Comments?**  **14 MR. FENSTROM: -- and that would be 15 great. And I think there's a simple solution.**  **16 It's just that all the contractors have to 17 tell their customers' clients that the 14**  **18 isn't that much more expensive, it would be 19 better for them, and that's all they're going**  **20 to sell. And it would be great. 21 MR. EISNER: Doug, do you have any**  **22 thoughts on whether it can be done? Or even**

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## 1 if you don't want to do that, do you want to **2 talk about what you see as some of the issues? 3 MR. RAWALD: Right so, I mean, it's**  **4 -- this is an administrative law rulemaking 5 problem. So we have a regulation in place**  **6 that's effective in mere months. And so we'd 7 have to go through some sort of rulemaking**  **8 procedure by which to increase the standard 9 for those places where it's not currently in**  **10 place. 11 Now, anyone can petition the**  **12 Department at any time to amend the standard, 13 so PHCC or anyone else could approach the**  **14 Department and say hey, we'd like you to look 15 at doing this, submit a petition to consider**  **16 it. So that's one approach. 17 I don't know of any way that this**  **18 group, that has been formed solely for 19 purposes of looking at how to enforce the**  **20 standards, could in any way actually come back 21 with a recommendation of just making an above**  **22 the board increase in standards, nor do I know**

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## 1 that everyone else would be in consensus with **2 that approach. 3 Frankly, I'm not sure all the**  **4 manufacturers would be on board because they 5 have probably invested money in 13 product for**  **6 this year, at least. 7 So I don't know how this particular**  **8 body could do it. But I can go back and ask 9 the question of the Department, and we can see**  **10 if there's any sort of thought at all. 11 But it's not a question that they**  **12 have spent a whole lot of time thinking about 13 how this body could increase the standard, and**  **14 it would not be a usual course of business 15 activity. I mean, it would be, may require**  **16 some effort and difference in the approach. 17 MR. WHITE: Chuck White again. I**  **18 appreciate that, and I'd say the whole thing's 19 not a usual course of business --**  **20 MR. RAWALD: True. 21 MR. WHITE: -- so what's one more**  **22 thing, but it's helpful to me if I have an**

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## 1 answer, yes or no, because that helps me **2 direct my upstream, my constituency, and bring 3 them along to whichever direction things have**  **4 to be. So I thank you for listening to me. 5 MR. MCCRUDDEN: And this is Charlie**  **6 with the ACCA. I've heard a very similar 7 question from a lot of my members, and I've**  **8 out talking about these regional standards, 9 and I get a lot of questions, well, why don't**  **10 you just make it a national standard again? 11 So, it's a question that's being**  **12 posed, and to have a real answer, sort of 13 official answer back, would be helpful to sort**  **14 of, I think, better our understanding of sort 15 of this process, how we got to this, and our**  **16 eventual outcome. 17 MR. EISNER: Others have comments,**  **18 questions, issues to raise? 19 MR. FENSTROM: This is Gary. I**  **20 think I have a quick comment on the issue of 21 the national versus regional standards in**  **22 general. And while there are a lot of reasons**

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## 1 why it's desirable to have this single **2 national standard for these energy efficiency 3 things, it's hard to reach a single number**  **4 that really satisfies the public need in 5 different parts of the country.**  **6 So for example, in California, the 7 climate is different. The operation of the**  **8 utility system is a little different with 9 respect to air conditioning. The prices are**  **10 higher. 11 And, you know, it would be great to**  **12 have the rest of the country come up to the 13 hot dry states or the warm wet states' level,**  **14 but that doesn't mitigate the reality that 15 different parts of the country might merit**  **16 different standards on account of the 17 climactic conditions and utility systems and**  **18 costs. 19 So, you know, we've to balance the**  **20 simplicity of one standard, nationally, 21 against meeting the public need in different**  **22 parts of the country for different standards.**

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## 1 That's why we have, or we've been advocating **2 for this regional standard thing for over a 3 decade.**  **4 MR. EISNER: Do you have any sense 5 of how much you narrow the difference in price**  **6 because you require two different items to be 7 manufactured, and then you require labels to**  **8 be put on some of them about where they can be 9 sold, and then you require additional steps in**  **10 record keeping? 11 Does there come a point where there**  **12 isn't much difference in price, at least 13 compared to what there would be right now,**  **14 though? 15 MR. FENSTROM: Well, this is Gary,**  **16 and I believe the answer to that is yes. As 17 these products have to meet the standard, and**  **18 the volume of manufacturing increases and they 19 become commoditized, the incremental price**  **20 drops, so it's not that much different. 21 All I can say to the rule is DOE**  **22 determined that the incremental price**

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## 1 associated with these higher efficiency units **2 is justified by the energy saving benefit they 3 offer customers.**  **4 MR. HUNGERFORD: And this is David. 5 And the inverse of that is that the low -- you**  **6 could -- it wasn't possible to justify, when 7 the analysis was done, a higher standard in**  **8 the North, because the savings, given the duty 9 cycles in the North and the temperatures in**  **10 the North, the amount of use in the North, and 11 the prices, could not justify the additional**  **12 investment, from the consumer perspective. 13 Could you guys correct me if I'm**  **14 wrong on that? But that's my memory of how 15 that went. The more technical differences**  **16 between the hot dry weren't given, or hot 17 humid difference, which requires more of a**  **18 different configuration approach, where you're 19 using different -- that's why the EER versus**  **20 the SEER ratings, right? 21 The engineers here can explain that**  **22 better than I do, but the -- that's where that**

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## 1 justification, the 13. The 14, from **2 north-south -- but I'm using my hands to 3 indicate north and south, for those on the**  **4 phone, was a -- couldn't justify a higher 5 standard on the basis of cost effectiveness,**  **6 if my understanding is correct, if my memory 7 of how that process works.**  **8 MR. EISNER: Would that, did that 9 process consider the costs of an enforcement**  **10 role being added on? That's what I'm asking. 11 MR. HUNGERFORD: I do not know the**  **12 answer to that question. 13 MR. MCCRUDDEN: This is Charlie with**  **14 ACCA. Going back to the original law in 2007, 15 the DOE was instructed that the next time they**  **16 had a chance to write regional -- write 17 standards for HVAC products, they could impose**  **18 regional standards. 19 Once they finished the regional**  **20 standard, then they would write enforcement 21 rulemaking for those regional standards. And**  **22 so they weren't contemplated at the same time.**

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## 1 It was one, then the other. **2 And that was possibly a mistake. It 3 may have moved the numbers around a little bit**  **4 had they looked at enforcement, but then they 5 may not have and the ability to sort of**  **6 consider all of the aspects of enforcement. 7 They have just been lumped in with all the**  **8 tables and data with that. So enforcement was 9 not considered as part of the standard itself.**  **10 MR. SACHS: This is Harvey, and I 11 would try to respond to the first presented**  **12 question. From our community's perspective, 13 I think we would have to separate out two**  **14 aspects, our true national standard versus 15 dropping the EER in the Southwest.**  **16 In terms of the SEER 14, taken by 17 itself, there is no loss of national energy**  **18 savings by going in that direction, therefore 19 our question immediately would be, why would**  **20 we object? 21 We would, as part of an informal**  **22 coalition, have to look at the question, if**

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## 1 that's part of Chuck's proposal, of the impact **2 of loss of the EER, in terms of the 3 time-dependant valuation that California does,**  **4 and is symbolic for other areas. 5 MR. WHITE: This is Chuck White. I**  **6 think we're going to respond to that 7 sentiment. I'm not suggesting we drop EER in**  **8 the Southwest. I'm suggesting we don't apply 9 it across the entire country.**  **10 If it remains in the Southwest, it 11 becomes an enforcement issue for the states**  **12 affected by their authorities having 13 jurisdiction.**  **14 MR. SACHS: Okay, well this is 15 Harvey again, and thank you, Chuck. I**  **16 appreciate that, and that's very important. 17 But in terms of position I think you all could**  **18 expect us to take as a community, what would 19 we have to object to the national standard**  **20 with 14 instead of this split 13 and 14? 21 Let me just finish with one thing.**  **22 My -- I would have some concern about**

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## 1 reopening the whole ball of wax. For example, **2 we had some, I think some significant 3 electricity crisis or issues in the**  **4 intervening years. 5 MR. BALLO: So, my point is not an**  **6 objection, because I agree with Harvey but, 7 you know, we really have no objection to**  **8 increasing to 14, but I just want to remind 9 everyone that we're seated around this table**  **10 because back around 2010, maybe -- 11 MS. WALTNER: Nine.**  **12 MR. BALLO: -- a bunch of other 13 people were seated around the table and**  **14 thought regional standards were a great idea. 15 And there was a lawsuit that came out of that,**  **16 because we didn't have everybody around the 17 table that we ultimately really needed to have**  **18 at the table. 19 And I wonder if that's the case**  **20 here, because I can already think of, if I was 21 unhappy with the move to a 14 standard at the**  **22 national level, there are arguments that I**

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## 1 think are at least plausible for why that **2 would be unlawful for DOE to go to a 14 level 3 at the national level.**  **4 So if really there is nobody out 5 there opposing it, it's a great idea, but I**  **6 don't know that we know whether really no one 7 would oppose.**  **8 MS. WALTNER: This is Meg from NRCD. 9 Just another thought to add to this is, I**  **10 agree with Harvey and Tim that yes, SEER 14, 11 nationally would provide greater energy**  **12 savings, but there may be future benefits of 13 regional standards looking at other SEER**  **14 levels. 15 You know, the next time we do a**  **16 standard revision, that I think we would want 17 to think through further before just sort of**  **18 saying okay, never mind, the enforcement was 19 too hard, let's go back to a national**  **20 approach. 21 Because as Tim said, what, four**  **22 years ago, whenever it was, we sat around our**

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## 1 table and said we thought this made sense. **2 And I think there may be future benefits that 3 we would want to think through further.**  **4 MR. FENSTROM: So this is Gary. 5 After Chuck finished suggesting this idea, I**  **6 semi-jokingly said, well all the contractors 7 have to do is sell 14 units.**  **8 You know, we have yet to see what 9 the market is going to do, and irrespective of**  **10 what the DOE regulation is, if there's a good 11 economic reason for it, hopefully the market**  **12 would just aspire to that level across the 13 country, at least to a greater extent than it**  **14 currently does. 15 MR. ARNOLD: This is Dan Arnold with**  **16 NORDYNE. I didn't know we were going to 17 debate this issue again. I'll try, but since**  **18 we have all salesmen or the three or four 19 people I think I recognize that were around**  **20 the table five years ago or whenever it was. 21 And yes, if we knew we'd find**  **22 ourselves here five years later, I think we**

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## 1 would have probably tried for a different **2 outcome. 3 (Laughter)**  **4 MR. WHITE: He's been here one day. 5 MR. ARNOLD: So, you know, I think**  **6 the -- you know that this goes one day, but of 7 course I've been going to these rulemakings**  **8 for about 15 years. So, but we are where we 9 are.**  **10 And, you know, what I always have 11 said is that, you know, manufacturer's have a**  **12 voice, everybody has a voice here. The one 13 voice that's not being heard is the consumer's**  **14 voice. And, you know, there is not a linear 15 cost curve from 13 to 14 to 15 to 16**  **16 and on up. 17 And I appreciate the comment about**  **18 setting a precedent, because when we get to 15 19 it's going to get tougher, and when we get to**  **20 16 it's going to get really tough, well, to be 21 cost effective plus to have some kind of**  **22 enforcement, because then you really have to**

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## 1 consider it as a system. **2 And really, you do now. We talk 3 about indoor units and outdoor units. It's**  **4 really a system. And I'm an engineer. So you 5 can't have just an outdoor unit that provides**  **6 any cooling. There's got to be an indoor 7 piece to that exposed system.**  **8 And you don't really know what the 9 efficiency is until you have that indoor piece**  **10 and you have that air flow and everything else 11 set up.**  **12 But having said that, you know, 13 again, knowing what I know now, we wouldn't be**  **14 opposed to the national standard other than we 15 are always concerned about the cost**  **16 effectiveness of air conditioning. 17 You know, we've never recovered from**  **18 the high that the industry had before the 19 recession of about 8-1/2 million units. Karen**  **20 can recite those numbers better than I can, 21 but we've been bumping along at about 5-1/2**  **22 million units since.**

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## 1 We just don't have the ability to **2 reduce cost because we're making more of them 3 -- we're not making more of them. We're**  **4 making fewer of them. Room air conditioner 5 companies are making a lot more units because**  **6 one of our key markets is manufactured 7 housing.**  **8 Those folks are on fixed incomes, 9 they're senior citizens. They have an option**  **10 of central air conditioning. They go down to 11 Lowe's or Home Depot and buy a couple of**  **12 window units for 150 bucks apiece. And that's 13 what people are doing.**  **14 So, you know, we've had these 15 continual increases in cost drivers, from**  **16 refrigerant changes to standard changes to 17 commodity price increases and, you know,**  **18 somebody who only needs air conditioning three 19 or four weeks out of the year really shouldn't**  **20 have to pay $3,000 for that system, or $4,000, 21 and have it keep going up over time. So**  **22 that's kind of where we're at.**

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## 1 Again, knowing what I know now, the **2 national standard sounds really good, but we 3 are where we are, and going forward, you know,**  **4 we're not going to want to enforce 16 SEER on 5 the North, 18 SEER, 20 SEER, wherever it goes.**  **6 I mean, the dynamics show that the efficiency 7 levels are going to keep going up.**  **8 MR. FENSTROM: So this is Gary, 9 guys. I'd like to follow up on that point**  **10 from a utility perspective. The worst 11 possible thing that could happen to the summer**  **12 peaking electric utility, from an economic 13 point of view, is for somebody to go down to**  **14 the retail store and buy a couple of window 15 units that collectively may be drawing 2-1/2**  **16 kWh or so. 17 They add tremendously to the peak**  **18 demand, and because they may only be used 19 three or four days a year, don't add that much**  **20 to the energy user revenue that the utility 21 sees.**  **22 So the consequence is that utility**

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## 1 economics are really damaged by the sale of **2 inexpensive window and wall units. 3 MR. EISNER: Does anyone else want**  **4 to make a comment? Any suggestions that we 5 follow up on this, to find out what DOE's**  **6 legal position might be, whether they think 7 there's room for change here? Or do you want**  **8 to drop it? 9 MR. FENSTROM: Well it'd make our --**  **10 Gary again, make our life a lot easier if 11 there were some flexibility here. It's**  **12 important for the Southwest utilities not to 13 lose this EER factor, because air conditioning**  **14 use is very coincident with high temperatures 15 in the Southwest, and most of the use is when**  **16 it's really hot and dry out. 17 So we're more concerned about the**  **18 efficiency performance under those weather 19 conditions than we are the conditions that are**  **20 reflected at the SEER value. 21 MR. HUNGERFORD: And this is David.**  **22 And it's also the case that if you -- at this**

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## 1 stage, if we're, if we've established that 14 **2 SEER is, or the Department has established 3 that 14 SEER is cost effective in the South**  **4 and, but not in the North, and we move to 5 bring the North up to 14 SEER, then first of**  **6 all they'd probably need to reach a new 7 finding of cost effectiveness across that**  **8 region, which might happen with an increase, 9 the more recent increases in utility costs.**  **10 But the precedent for future 11 rulemakings is that we fall in the same place**  **12 we were before regional standards, which is a 13 national standard. The level of efficiency**  **14 that you can get out of a national standard 15 and justifiable cost effectiveness basis is**  **16 going to be a lowest common denominator. 17 And the separation between the**  **18 intense, more intense needs in the South and 19 the less intensive needs of the North would**  **20 always lead to a cost effectiveness 21 calculation at a higher efficiency level**  **22 that's appropriate in the South, and maybe not**

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## 1 in the North. **2 And we'd be driving down potential 3 for future energy savings, from the**  **4 perspective of an efficiency advocate and an 5 agency that works at trying to improve**  **6 efficiency, observing the rest of the country. 7 That would be a concern that I address.**  **8 MR. FENSTROM: So this is Gary 9 again. So David, your comment kind of relates**  **10 to the statement I made about the rationale 11 for having regional standards.**  **12 MR. HUNGERFORD: I was reiterating 13 that, I suppose.**  **14 MR. FENSTROM: Yes. I think the 15 more significant thing from a utility point of**  **16 view, with respect to the need for regional 17 standards, is the EER, not the SEER.**  **18 So if we could maintain that 19 differentiation, and alleviate all the**  **20 compliance and enforcement issues, that would 21 be great.**  **22 MR. RAWALD: Okay. Well I hear what**

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## 1 everyone's saying, and as I said I will bring **2 the question back to the Department. It 3 certainly would require a rulemaking, which**  **4 would require work and time, and probably 5 would not be done before January 1st of 2015.**  **6 So, regardless, no matter what we 7 decide, this issue will still be pertinent,**  **8 and we still have a session remaining to 9 address this issue, regardless of what we**  **10 decide with regional standards down the road 11 in the rulemaking.**  **12 So, and we've long delayed beyond 13 our statutory obligation to address the**  **14 enforcement issue. So regardless of what we 15 decide or whether it's palatable or not to**  **16 seek a 14 standard, we have to issue a rule, 17 whether this group does it or the Department**  **18 does it on its own. 19 So it has to be focused back on**  **20 doing that, if we can, unless we come to a 21 point where we can't come to an agreement, and**  **22 then the Department will take action on its**

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## 1 own, in an effort to at least be done with **2 this issue, from our point of view. 3 MR. EISNER: Okay. Shall we get**  **4 back to your -- 5 MR. RAWALD: Aniruddh had a point he**  **6 wanted to make on a separate issue. 7 MR. EISNER: Oh.**  **8 MR. ROY: Aniruddh Roy with Goodman. 9 Actually, Doug, I wanted to bring the**  **10 conversation back to you and Johanna and the 11 point you made about working SEER guidance.**  **12 I would recommend -- 13 MR. SACHS: Aniruddh, could you**  **14 speak up just a bit? 15 MR. ROY: Sure, sure. So I would**  **16 recommend that the Department come up with 17 some kind of a position early next week, we**  **18 have a first meeting. Because a lot of the, 19 you know, revisions that have been submitted**  **20 to you by the manufacturers are contingent 21 upon that.**  **22 And so our ultimate vote will really**

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## 1 rely on that guidance. My personal fear is **2 that, as far as not issuing the guidance is 3 concerned, if it's addressed in the CFR, there**  **4 will be a gap between the January 1st, 2015 5 date and the final rule. And it will be open**  **6 to interpretation and a free for all. So -- 7 MR. RAWALD: No. And Aniruddh, I**  **8 get that. And I am sensitive to that. And so 9 I have tried to sensitize everyone else to the**  **10 fact that we need to give some clarity. The 11 Department, in my position, has already**  **12 spoken, and we -- this is what we believe. 13 This is the 14 SEER as I described it. It is**  **14 what it is. 15 But it would be comfortable, I**  **16 think, for everyone to actually see that in 17 writing from the Department as opposing from**  **18 my voice, and I get that. And so we will 19 endeavor to do that.**  **20 What I would submit to you is that 21 on a term sheet, that the very first term that**  **22 we have is, this is all based upon a premise**

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## 1 of this particular condition. **2 So it's clear to everyone that all 3 the decisions we're making are based upon that**  **4 premise, which I think we're all in agreement 5 on, that it should be the basic premise, that**  **6 14 SEER is determined the way I discussed 7 earlier. So -- but I do hear that.**  **8 MR. ROY: Thank you. 9 MR. EISNER: Anybody else have any**  **10 comment on that? Okay. You want to go back 11 to your slides? Is there a good place to go**  **12 back to the earlier discussion? 13 MR. RAWALD: Well I want to go**  **14 wherever the group wants to go, I guess, at 15 this point. So I've done all -- I've talked**  **16 to you about all my thoughts now, based on 17 what we have. So that was a particular area**  **18 where folks were ready to jump back in and 19 look at some things.**  **20 There were a couple of things on the 21 table to talk about with your groups over**  **22 lunch, so I'm ready to go wherever anybody**

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## 1 else wants to go. **2 MR. MCCRUDDEN: So, this is Charlie 3 with ACCA. I think where we left, I think we**  **4 had a sort of a time to think about maybe 5 there, I think it was whether -- in terms of**  **6 the death penalty, and how we want to look at 7 that.**  **8 And I think part of it is routine 9 violation. Part of it is violations, so**  **10 transparency of those. And I get the sense 11 from everybody around the table including**  **12 those who don't manufacturer products, 13 distribute products or install products, that**  **14 this concept of the death penalty doesn't 15 really make sense. Am I correct there or not?**  **16 MR. BALLO: I would say on that -- 17 MR. MCCRUDDEN: Without having**  **18 defined routine violation yet. 19 MR. BALLO: There's a tension**  **20 between -- if there is no prohibited act -- 21 If all we have is routine violation**  **22 and that's the only way to get at this**

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## 1 problem, then I -- that sort of forces us into **2 supporting the death penalty. I don't think 3 -- I can't speak for everybody, but that's**  **4 not, to me, the best way to do this. But if 5 that's all we have.**  **6 MR. RAWALD: And I do -- I know 7 we're trying to use terms that are helpful for**  **8 you right now. 9 (Laughter)**  **10 MR. RAWALD: I do push back on the 11 notions of the death penalty and --**  **12 MR. MCCRUDDEN: This is what Frank 13 Lutz told me to say.**  **14 MR. RAWALD: Right. There are, of 15 course, contractors who have plumbing,**  **16 heating, cooling businesses, so their cooling 17 side would be eliminated but they have other**  **18 businesses. So there are parts to this that 19 are driven by that.**  **20 There is, as Dave pointed out, the 21 order of magnitude issue, which is how many**  **22 businesses actually would be affected by this**

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## 1 on a regular basis, probably not very many, **2 whereas the deterrent value of it would be, 3 obviously be immeasurable, right.**  **4 So that's the most deterrent thing 5 that could be possible to me is the risk of**  **6 your business put in by acting like a scofflaw 7 is high. And so that has a large impact,**  **8 versus the risk of a $200 fine that you pass 9 along to your consumer is pretty low.**  **10 And so from that point of view, it's 11 a much more effective remedy in that sense.**  **12 Now, I'm not wedded to anything. I'm just 13 pointing out that I don't think it's the death**  **14 penalty for all, and I think it at least has 15 some more equilibrium here than what might**  **16 present. 17 MR. MCCRUDDEN: And I had a chance**  **18 to talk to a couple -- 19 MR. EISNER: Did anyone else have**  **20 comments? 21 MR. HURST: Well, yesterday we**  **22 talked about having a graduated scale. And I**

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## 1 don't like the term death penalty either, but **2 I -- and I don't like sports analogies, but 3 I'm going to use both.**  **4 (Laughter) 5 Living in Dallas, Texas, you become**  **6 very familiar with SMU football. Back in the 7 80s they received the NCAA death penalty, and**  **8 it's not because they did one or two things 9 and got caught and stopped doing it. It was**  **10 egregious. It was repeated. It was flagrant. 11 And quite frankly, as a manufacturer**  **12 and as a distributor, if you have somebody in 13 the marketplace that just kind of doesn't**  **14 really care about the law, and repeatedly and 15 flagrantly violates the law, I've got no**  **16 problem with that person going out of 17 business.**  **18 And I'm sorry but, you know, I don't 19 agree with it one time or two times, or made**  **20 a mistake here and there, but I think there 21 ought to be a graduated scale that if somebody**  **22 just flagrantly and repeatedly violates the**

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## 1 law, regardless of what happens to them, they **2 shouldn't be in business. 3 I'm sorry. We do that in many other**  **4 things, and you all may disagree, but I think 5 if there are reasonable measures that lead to**  **6 that, I don't want to take it off the table. 7 And I think it would preclude people**  **8 -- once somebody does get the death penalty, 9 it's a wake-up call for everybody else. And**  **10 then we don't have to mess around with 11 hundreds of investigations, because people**  **12 know that the stakes are real. I'm done. 13 MR. RAWALD: So from my vantage**  **14 point, though, the way I would see the 15 possible implication of a graduated scale is**  **16 -- so the things that we have at our disposal 17 now at the Department, is we have warning**  **18 notices that lead to actions. 19 And so we could, of course, give a**  **20 warning notice to someone saying hey, you did 21 this. You're found in violation. If you**  **22 continue to do this, this is what the**

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## 1 consequence could be. Manufacturers face a **2 penalty for selling to routine violators, and 3 that could have some consequences on your**  **4 ability to do business at the end of the day. 5 So, because the Department, in our**  **6 action, is only taking action against 7 manufacturers. Let's be clear. So it's the**  **8 market that's eliminating the business from 9 the other folks, because the manufacturers are**  **10 going to have to make the choice of do I want 11 to risk myself by doing business with these**  **12 folks. 13 And so I wouldn't be able to say in**  **14 my notice, well you'll go out of business if 15 you keep doing it. So I would make that**  **16 clear. But that's how -- that's the approach 17 we have now.**  **18 Now we could build on the thing into 19 the process. I just want to hear how we would**  **20 want to approach that. That would be the 21 analogy we have currently, from what we**  **22 currently do. Meg, do you have a point?**

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## 1 MS. WALTNER: Well you just said, **2 make sure, assumed in the statement you just 3 made that we're not adding a prohibited act.**  **4 MR. RAWALD: That's what I'm 5 assuming at the moment, right. I'm taking the**  **6 world as we have it at the moment, which is no 7 prohibited act. So if we were to have a**  **8 prohibited act, then that would change the 9 calculus some, I think.**  **10 MR. MCCRUDDEN: And I haven't really 11 conferred with Chuck on this, but from the**  **12 comment from ACCA's point of view, agreeing to 13 a prohibited act, or accepting a prohibited**  **14 act, would be essentially contingent upon the 15 threshold of which we've set routine violator**  **16 and how soon we get to a routine violator 17 situation.**  **18 MR. RAWALD: Right. I think it's on 19 -- how I would see it would be, without a**  **20 prohibited act, the routine violator threshold 21 would want to be lower to some folks, because**  **22 it would have to be palatable.**

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## 1 MR. MCCRUDDEN: I would too. **2 MR. RAWALD: Whereas with a 3 prohibited act you'd want to make it higher so**  **4 you could say to your people, look, we're 5 doing this so you can avoid the ultimate**  **6 outcome. 7 MR. MCCRUDDEN: But what I think**  **8 also has to be built in there for the 9 protection of the contractor, is -- and this**  **10 is where it becomes the wild card, wherever we 11 set that routine violator threshold, the**  **12 manufacturers are likely to set it one less, 13 internally, or two less, or five, depending on**  **14 how the market is. 15 And that's the concern that I have,**  **16 is that this unknown threshold, that would be 17 an internal situation, because then -- and you**  **18 can't control it. I can't control that, but 19 that has to be considered. And I think we**  **20 heard earlier from some of the manufacturers 21 that under this construct, that would play**  **22 into it.**

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## 1 And I'll have to admit, when we left **2 -- we did talk about this a little bit 3 yesterday, and I didn't see heat pumps here**  **4 when we talked. I mean, I didn't assume heat 5 pumps. When you said central air**  **6 conditioning, I sort of thought -- 7 MR. RAWALD: No, I did say**  **8 yesterday, heat pumps. I didn't make -- I 9 included heat pumps, and some people nodded**  **10 their heads, but I guess they weren't all 11 listening, so --**  **12 (Laughter) 13 MR. MCCRUDDEN: It didn't --**  **14 MR. RAWALD: Yes. Chuck's verifying 15 me here, so at least one of the --**  **16 (Simultaneous Speaking) 17 MS. SHEPHERD: I'll stand behind you**  **18 on that, too. 19 (Simultaneous Speaking)**  **20 MR. MCCRUDDEN: You have to tell 21 them three or four times before it sinks in --**  **22 MR. RAWALD: That's why I made that**

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## 1 slide so big today, so -- **2 (Simultaneous Speaking) 3 MR. RAWALD: Because I really wanted**  **4 to drive the point home. I mean, I'm trying 5 my best to be as transparent with you guys as**  **6 I can. 7 (Simultaneous Speaking)**  **8 MR. MCCRUDDEN: Yes. That was my 9 advice, so.**  **10 MR. FENSTROM: So this is Gary. We 11 were nodding our heads all right, but it**  **12 wasn't necessarily in agreement. 13 MR. BALLO: This is Tim, and I have**  **14 been thinking about this issue of people up 15 the chain, and their over-reacting to a**  **16 finding of a violation that is not, you know, 17 not routine, just a one-off or even a two-off.**  **18 It takes a couple to get to a routine 19 violation.**  **20 And we could have, either in 21 guidance or in the criteria for that person up**  **22 the chain to be a violator that -- some**

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## 1 language to the effect that the past findings **2 of a violation for anyone that they're dealing 3 with, do not or cannot be used to arrive at**  **4 the determination that they are dealing with 5 a routine violator.**  **6 So it sort of takes that off the 7 table for the person up the chain, the**  **8 distributor or the manufacturer from being 9 penalized for dealing with someone who has, in**  **10 the past, violated. 11 MS. WALTNER: But not yet determined**  **12 a routine violator. 13 MR. BALLO: Yes.**  **14 COURT REPORTER: I'm sorry, who said 15 that?**  **16 MS. WALTNER: Sorry, that was Meg. 17 MR. RAWALD: Well see, but that**  **18 really just gets us back to the Amy Shepherd/ 19 Jordan request, which would be nobody actually**  **20 would be found to be dealing with a routine 21 violator, absent a DOE finding of them being**  **22 a routine violator.**

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## 1 And then after that, they would be a **2 toxic entity, dealing with that person would 3 be a lot of --**  **4 MR. BALLO: Well, I don't know if it 5 gets all the way there. They could still be**  **6 found to be dealing with a routine violator at 7 the time they're determined to be a routine**  **8 violator with the mere fact that they have 9 violated in the past, I guess.**  **10 MR. SACHS: I guess I'm concerned -- 11 this is Harvey, and I would be a bit concerned**  **12 about that, too. But I think that is asking 13 DOE to make the business judgment, that I**  **14 think the OEMs would like to reserve for 15 themselves. I can see different legal**  **16 strategies before this person is indelibly 17 stamped as a routine violator.**  **18 MS. WALTNER: This is Meg from NRDC 19 again. One thing we discussed this morning,**  **20 that I think we should make them keep on the 21 table is this idea that you might be able to**  **22 remediate for a routine violation.**

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## 1 So if you, you know, you go and fix **2 all the noncompliant units, or go through a 3 training program or whatever, you know, we**  **4 decide that is, that there be some way that 5 you can recover from being deemed a routine**  **6 violator. 7 MR. RAWALD: Okay. So let's turn**  **8 back briefly, so I know what the topics -- had 9 some thoughts on what would be -- having been**  **10 found a routine violator, what would be the 11 things that would allow you readmission into**  **12 the community of being sold to by a 13 manufacturer? What would be some things you**  **14 could do? 15 Obviously, the most obvious example**  **16 is fixing the problem, but what other things 17 could there be that would be worthy of saying,**  **18 okay, this is a way of correcting it? 19 And we have an analogous thing in**  **20 the Department, so we have okay, the notice of 21 allowance. So if I find a product**  **22 noncompliant, and you go back out and you make**

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## 1 it compliant, then I issue a notice of **2 allowance saying hey, you now can sell that 3 product again.**  **4 So we have an analogous provision. 5 So I think it's -- there's an idea that we can**  **6 gain some traction on, with that. 7 MR. SACHS: So we're talking about**  **8 the price of indulgences. 9 MR. WHITE: Well, it's Chuck White.**  **10 I guess in the spirit of the law, the goal is 11 to save energy. So you need to make whole.**  **12 And we keep having our discussions about these 13 things like we're in our own little hamster**  **14 globe and we're not. 15 A customer that's been wronged**  **16 certainly has civil opportunities to sue a 17 contractor for those issues, outside of**  **18 whatever the DOE should choose to do. There's 19 a possibility he defrauded them. There's lots**  **20 of other things that could be attached to 21 this, if it's not an outright error.**  **22 If you knowingly and intentionally**

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## 1 are out cheating, there's opportunities for **2 you to be dealt with appropriately, or 3 inappropriately.**  **4 Speaking personally, if my business 5 put the wrong thing in, I would make it right.**  **6 And that's pretty painful, folks. I'm going 7 to go out and take a brand new piece of**  **8 equipment out, that -- and I can probably sell 9 it to somebody else somewhere, but it's now a**  **10 used piece of equipment, so I'm not going to 11 get my money out of it.**  **12 I've got to buy another piece of 13 equipment, and I have to spend the labor to**  **14 take it out and put it back. Doing a job once 15 is bad enough. You've effectively done it**  **16 three times. That's a pretty big penalty. 17 So having said all that, and my**  **18 favorite phrase, it depends, if I'm in a 19 one-time situation, or two, maybe that's a**  **20 doable opportunity. If I did an apartment 21 complex with a thousand units, it's a pretty**  **22 rare contractor that can stand that type of a**

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## 1 hit and stay afloat. That's probably not **2 likely. So -- 3 MR. RAWALD: Well that's what I want**  **4 to say. The guy who does 1,000 bad 5 installations, do we want him to really have**  **6 the ability to climb back out of the morass, 7 or should he be there because he chose to be**  **8 there? So -- 9 MR. HURST: I think it depends on**  **10 your investigation also. I mean, I put -- 11 it's hard to believe that a thousand units**  **12 would be an honest mistake, but if it's 13 flagrant, then I think you know the answer to**  **14 the question. But I think judgment comes into 15 play also.**  **16 MR. WHITE: Well, I guess what I'm 17 saying is, the guy that makes a thousand-unit**  **18 mistake, he's probably going to take his own 19 death penalty option. He's going to close up**  **20 shop and that's going to be that. And that's 21 -- unless he has a big errors or omissions**  **22 policy or bond or some such, that's -- it's**

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## 1 going to be a different outcome. **2 But in smaller scale, probably he's 3 going to do what he can to make the situation**  **4 right. Or he's going to close. 5 MR. RAWALD: Okay. So what I hear**  **6 folks saying is at least the most simplest and 7 powerful method of either avoiding being**  **8 labeled a routine violator in the first place 9 or having it obviated once labeled, would be**  **10 replacement of the units that you installed 11 that were noncompliant.**  **12 Is there anything else that we want 13 to say would be sufficient to lower someone**  **14 from being a routine violator back to being 15 just an ordinary citizen doing their job?**  **16 MR. WHITE: I know you've talked 17 about -- this is Chuck White again. In other**  **18 situations you have a penalty or -- and I -- 19 if that kind of thing is palatable, I suppose**  **20 that's an option. But I -- again, the spirit 21 of things, that's not really what you're**  **22 after.**

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## 1 You're after the energy savings, the **2 -- I don't know. I guess I'm not saying that 3 replacing with compliant should be the only**  **4 opportunity, but I don't know what else there 5 is.**  **6 MR. MCCRUDDEN: This is Charlie with 7 ACCA. I don't know what would satisfy DOE.**  **8 And so I could say that the contractor has to 9 demonstrate an understanding of the rules,**  **10 going forward. 11 So is that demonstrated through a**  **12 test that is given? That's, you know, it's 13 almost like going back to driver's ed, when**  **14 you've been, you know, you've got a couple of 15 moving violations.**  **16 There's nothing like that, really, 17 for this. And I don't -- you don't want make**  **18 that. And -- 19 (Simultaneous Speaking)**  **20 MR. RAWALD: I'm open to 21 suggestions, but seeing as this is a**  **22 bureaucratic issue --**

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## 1 (Simultaneous Speaking) **2 MR. MCCRUDDEN: Yes. I'm just 3 trying to figure out what might satisfy you,**  **4 because so much -- I mean, replacing the unit 5 is permanent and it's visible. I mean, if**  **6 there are very few of these, there's no 7 purpose in developing a test or certification**  **8 or a certificate that I did this. 9 Are there other -- do you let --**  **10 what do you do when you go after 11 manufacturers, and how do you let them back**  **12 in? 13 MR. RAWALD: Right. So our process**  **14 is much simpler, in that we find somebody 15 noncompliant, we announce it. We give the**  **16 manufacturer the opportunity to change the 17 product and they can sell it in the changed**  **18 form, but they have to change the model 19 number.**  **20 Regardless, they -- we then assess 21 full penalties for all the ones they sold that**  **22 were bad. Now, in assessing the appropriate**

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## 1 civil penalty we consider certain things, as **2 Tim has talked about, and I gave you the 3 guidance in that sense, personally.**  **4 And many of those things include how 5 bad it was, how many you sold, but also, you**  **6 know, how bad the product was at failing, was 7 it close or was it far off, you know, what**  **8 you've done since then, how cooperative you 9 were with the course, in the course of the**  **10 investigation and those kind of factors. 11 So those are unique to that case,**  **12 though. I can't see how a lot of those would 13 apply to the incidence of trying to mediate or**  **14 mitigate the finding of a routine violator. 15 MR. MCCRUDDEN: And potentially they**  **16 could just create a -- the manufacturer could 17 create a new model number, just through**  **18 commerce, that is compliant. And so they have 19 the automatic opportunity to get back, whereas**  **20 this takes that opportunity away. This is -- 21 you've got a --**  **22 MR. WHITE: This is Chuck White**

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## 1 again. If I understand from our discussion of **2 your definition, unless it's a prohibited act, 3 you can't collect money from me.**  **4 MR. RAWALD: Right. I have no 5 mechanism by which I can collect money. And**  **6 I think it would be difficult for me to say, 7 pay this thousand dollar fine and we'll get**  **8 you off the bad person list. That would be 9 hard for me to square that with the statutory**  **10 scheme. So -- 11 MS. SHEPHERD: But Doug, do you**  **12 think, could you do that bullet, to get them 13 off the list, to say -- because I'm assuming**  **14 this is at their cost, right? And do you have 15 the authority to do that, do you think?**  **16 MR. RAWALD: Demonstrate an 17 understanding, I mean, I think that would be**  **18 -- 19 MS. SHEPHERD: No, no, not that one.**  **20 The one above it. So can you being, just be, 21 to say that you could get off the list if you**  **22 -- could you --**

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## 1 MR. RAWALD: Right. I think it's **2 because this went with our policy, which has 3 always been remedial actions are from, you**  **4 know, the Department will consider. And I 5 think the Department could view its authority**  **6 broadly enough on the determination of a 7 routine violator to say, somebody who fixes**  **8 bad things is no longer a routine violator. 9 MS. SHEPHERD: Right. And so you**  **10 --it would be comfortable, like at their cost? 11 MR. RAWALD: Yes. I would be**  **12 comfortable with that. 13 MS. SHEPHERD: Okay.**  **14 MR. RAWALD: And I think the 15 Department would probably, too. I haven't**  **16 asked the question but I think it's a pretty 17 fair one. I think it's the easiest one, of**  **18 all the ones I can think of. 19 MR. SACHS: This is Harvey, and I,**  **20 of course, am very sympathetic to that. But 21 if my colleague, Charlie Harak was still with**  **22 us, he would be insisting that remediation**

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## 1 does not replace the lost energy savings while **2 it was in use, and imposes additional burdens 3 in terms of scheduling the remediation and all**  **4 that sort of stuff. 5 So Charlie, being a good attorney,**  **6 would probably be arguing that it should be 7 remediation plus.**  **8 MR. RAWALD: Plus a paycheck to the 9 consumer for their lost --**  **10 MR. SACHS: I don't want to talk 11 about driving the consumers, but it --**  **12 MR. RAWALD: Right. 13 MR. SACHS: -- might be that other**  **14 considerations, whether it's a dinner at a 15 good restaurant --**  **16 (Laughter) 17 MR. SACHS: -- or replacing it with**  **18 a SEER 15 or -- I just want to make the case 19 that the consumer who has been defrauded is**  **20 not made whole just by the replacement. 21 MR. RAWALD: Right.**  **22 MR. SACHS: It could be an extended**

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## 1 warranty, for example. That might be a very **2 appropriate thing to give someone a service 3 contract. Things like that take away --**  **4 provide real consumer benefits to make the 5 gesture of making the consumer whole.**  **6 MR. RAWALD: Okay. 7 MR. HUNGERFORD: Beyond the other**  **8 year of useful life he's getting out of the 9 new unit.**  **10 MR. SACHS: Or three. 11 MR. HUNGERFORD: Or three.**  **12 MR. WHITE: And I will say to you -- 13 Chuck White again, if you make it too hard --**  **14 MR. SACHS: Well understood. 15 MR. WHITE: -- you got your unit and**  **16 I'm no longer in business. And you go get 17 your SEER 14 wherever you'd like. So I**  **18 understand that there's some lost opportunity, 19 but the contractor's -- if he's changing that**  **20 unit out of pocket, he's got a lot of skin in 21 that fold, that's --**  **22 MR. SACHS: I'll pass that along to**

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## 1 Charlie, Charlie Harak. **2 MR. RAWALD: Yes. 3 MR. WHITE: Go right ahead.**  **4 MR. SACHS: Right. 5 MR. RAWALD: And this is Doug. And**  **6 so I guess, in some way, we have to keep in 7 mind that while Department of Energy cares**  **8 about consumers and everyone else involved 9 here, you know, our goal is the saving of**  **10 energy, right. So that's the primary goal. 11 And so citizens have the ability to,**  **12 if they feel they're not made whole by the 13 regulatory repair scheme we have evolved, they**  **14 can bring an action against the contractor for 15 the rest of the thing they feel necessary to**  **16 make themself whole. 17 So they could always sue the**  **18 contractor and say, in addition to that, I 19 still need 500 bucks for those extra energy**  **20 bills. I want to pursue it. So there's that 21 concept that always goes for the consumer.**  **22 MR. FENSTROM: So this is Gary. We**

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## 1 talked about this remediation as an **2 alternative to being forced out of business, 3 the execution, and to look at the way building**  **4 standards work, if you apply for a permit and 5 do something that the building inspector deems**  **6 to be incorrect, the building inspector 7 requires you to fix it.**  **8 So far as I'm concerned, if the 9 violating contractor fixes it, that should**  **10 allow them to get off the hook with DOE. 11 MR. RAWALD: Okay. And I think once**  **12 again, it's the easy one. That's the most 13 easy answering one. I guess the question is,**  **14 is there any other things that would -- and I 15 don't think there's anything else that rises**  **16 to that level, right? 17 So everything else seems much -- to**  **18 fall short, and not meet the needs of the 19 Department, that I can even think of, so I**  **20 don't know. I'm open to ideas, but I can't 21 think of anything else.**  **22 MS. MEYERS: So this is Karen with**

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## 1 Rheem. Would this information be made known **2 to manufacturers? Because I can see what 3 would happen. They're going to go in there**  **4 and punch holes in the coils, and then claim 5 a warranty claim on them to get a new unit.**  **6 They're going to process a warranty 7 to help pay for having them -- them having to**  **8 replace the noncompliant unit in some way. 9 MR. RAWALD: No, that the thing --**  **10 MS. MEYERS: And it's not an 11 uncommon practice. So I want to make sure**  **12 that, as a manufacturer, I'm not somehow 13 getting, having to pay for this unit.**  **14 MR. RAWALD: Well, and that's a 15 valid concern. You know, so we're addressing**  **16 two possibilities. One is, I've found someone 17 to be a repeat violator, so it's been**  **18 announced and everyone is aware of that, and 19 now they're trying to take action to cure**  **20 that, to get off that list. 21 And there's a possibility that**  **22 before I ever do anything, they said, no, no,**

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## 1 I fixed that issue, I fixed it. So in this **2 latter case, the investigation would be 3 completed without a public finding unless you**  **4 felt there should be one. 5 And I don't mind doing that. I**  **6 don't mind embedding in there, for remedial 7 actions, a discussion with the manufacturer**  **8 about what took place over replacing that 9 unit.**  **10 MS. MEYERS: You think that you will 11 have the serial number with the non -- if you**  **12 were to find a violation, would you capture 13 that serial number --**  **14 MR. RAWALD: Well -- 15 MS. MEYERS: -- in your, on your**  **16 website, or I don't know what -- I've got to 17 be careful what I'm asking here, but --**  **18 MR. RAWALD: Right. I see what 19 you're asking. And so I would hope we could**  **20 but, you know, we're -- I mean, if they 21 replace it before we ever know about it, and**  **22 so they -- we'd never actual see the original**

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## 1 unit they replaced. It wouldn't happen. **2 If I saw a unit, I had the serial 3 number, we said this is bad, the guy said, I'm**  **4 replacing it, then yes, we'd be able to trace 5 it back and let you know, hey, serial number**  **6 XYZ, did you get that back, and what happened 7 with it?**  **8 MR. ROCKY: Okay, so -- 9 MS. WALTNER: What -- go ahead.**  **10 MR. ROCKY: Go ahead. 11 MS. WALTNER: Karen, wouldn't you**  **12 know if you're getting a service call for a 13 SEER 13 unit installed in a state where it**  **14 shouldn't be? Because, I mean, you know from 15 the serial number what the manufacture date**  **16 is. 17 MS. MEYERS: I don't personally get**  **18 that information, so that's going to go to my 19 warranty department.**  **20 MS. WALTNER: Right. 21 MS. MEYERS: They may have no idea**  **22 about anything about a violation or whether --**

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## 1 it's really an automated process that may not **2 have any human intervention in it. 3 MS. WALTNER: Okay. Because it**  **4 seems -- I mean, it seems like you could add 5 a check in your warranty process of whether**  **6 this was illegally installed. 7 MALE PARTICIPANT: You'd have to**  **8 know a lot more information. 9 MS. MEYERS: Yes, I have to -- and**  **10 it may not just be the unit. They may be 11 trying to recapture some of the savings by**  **12 claiming the compressor, which is, you know, 13 80 percent of the cost of the -- well, that's**  **14 probably not true but, you know, they may not 15 -- they may file three warranty claims on this**  **16 unit over the cost of, you know, the 17 compressor, then the motor, then --**  **18 MR. ROCKY: So I'm -- yes. So I'm 19 going to go another tack. Because I know**  **20 where you -- 21 MS. MEYERS: This is going way**  **22 beyond, I think --**

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## 1 MR. ROCKY: So we're talking about **2 remedial action to get off the list of being 3 a violator. Where do they buy new equipment?**  **4 MR. RAWALD: Where do they buy the 5 equipment they no longer can buy?**  **6 MR. ROCKY: The new equipment, that**
**7 -- 8 MR. RAWALD: Right.**  **9 MR. ROCKY: The 14 SEER or 16 SEER 10 --**  **11 (Simultaneous Speaking) 12 MR. RAWALD: Ostensibly, they'd have**  **13 to, we'd have to all work together to allow 14 it, and the Department would then say to the**  **15 manufacturer -- 16 MR. ROCKY: Okay.**  **17 MR. RAWALD: -- you can sell it to 18 them. So yes, but we'd all have to know.**  **19 MR. ROCKY: How are you going to fix 20 what you can't buy?**  **21 MR. RAWALD: That's what I'm saying. 22 I'm saying --** 

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## 1 MALE PARTICIPANT: Catch 22, you're **2 burning up. 3 (Simultaneous Speaking)**  **4 MR. RAWALD: So I with you on it. I 5 have the same question, which is, you know,**  **6 they wouldn't be able to just buy without 7 letting us know. So they'd have to let us**  **8 know they want to fix it. 9 MR. ROCKY: So, so --**  **10 MR. RAWALD: We'd have to facilitate 11 the --**  **12 MR. ROCKY: -- a dispensation from 13 DOE to go to a manufacturer, to a distributor**  **14 that said, yes John -- 15 MALE PARTICIPANT: Here's my note.**  **16 MR. ROCKY: -- here's my note. I 17 can buy this unit. I understand. And this --**  **18 I'm trying to think of all the -- I had the 19 first thought that I didn't say, was like**  **20 Karen said, you know what, if I'm a contractor 21 and I'm on this list, I'm going to have all**  **22 sorts of warranty issues to get units because**

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## 1 as Chuck said, this is important. **2 I'm not going to spend the money if 3 I don't have to. And if I can figure out how**  **4 to get the manufacturer to give me a unit 5 under warranty for the homeowner, that the**  **6 homeowner doesn't have to pay for, you know, 7 holes all over.**  **8 But then I realized, and this is 9 Bryan, how do I buy a unit if I'm on the**  **10 no-sell list? 11 MR. RAWALD: Right. You have to**  **12 come through me. I have to let the 13 manufacturer know you will be exempt from**  **14 civil penalties for selling to this person for 15 this purpose.**  **16 MR. ROCKY: And then we have -- 17 MR. RAWALD: Then we have complete**  **18 track of what's going on. 19 MR. ROCKY: Yes. And then -- so**  **20 there has to be -- this can't be a -- we go to 21 the website of the manufacturers and see if**  **22 Chuck's Heating and Air Conditioning has had**

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## 1 a status change. **2 There has to be a special process, 3 right, that allows notification that this is**  **4 an acceptable remediation. And then at some 5 point they're going to come off the list,**  **6 right. And there's another notification. It 7 says -- goes through the chain, up and down.**  **8 Yes, Chuck's Heating and Air Conditioning is 9 now good, you know, we can do business with**  **10 them again. 11 MR. RAWALD: I like how logical you**  **12 always are, Bryan, because it really helps me. 13 And I absolutely agree with all that thought,**  **14 so. 15 MR. HUNGERFORD: This is David. As**  **16 a practical matter, we're still tracking less 17 than 100 events a year. Given the**  **18 investigation capability of DOE, it seems like 19 DOE could pick up the phone and call reg**  **20 affairs at the manufacturer and say this 21 person's now off the list.**  **22 MR. MCCRUDDEN: This is Charlie.**

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## 1 It's just -- **2 MALE PARTICIPANT: Who won't buy, 3 yes.**  **4 MR. MCCRUDDEN: Okay. What we're 5 talking about here is getting someone off the**  **6 routine violator list. So they're already on 7 that routine violator list. But let's take a**  **8 few steps back. 9 There is an incident where you have**  **10 suspicion -- and so you've started an 11 investigation into the violation, not an**  **12 investigation into sort of deeming someone a 13 routine violator. Would these remedial**  **14 actions work for keeping a violation from 15 occurring?**  **16 MR. RAWALD: Right, from us finding 17 a violation?**  **18 MR. MCCRUDDEN: From you making a 19 finding of a violation.**  **20 MR. RAWALD: Right. Like I told you**
**21 -- 22 (Simultaneous Speaking)** 

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## 1 MR. MCCRUDDEN: In that case, **2 they're not on the list yet. They can buy the 3 equipment to remediate, and I think it's more**  **4 likely that if it's the one-off situation, the 5 person we don't want to penalize, they'll take**  **6 that remediation because they want to avoid 7 the violation notice.**  **8 MR. RAWALD: Right. But that -- 9 which is Karen's concern that they'll be the**  **10 person to do the warranty -- 11 MR. MCCRUDDEN: I understand that.**  **12 MR. RAWALD: So what I think what 13 will have to happen is, is that I would need**  **14 proof from the person of the serial number of 15 the unit they took out, and the serial number**  **16 they're replacing. 17 I would go back to Karen and say,**  **18 Karen, here's what they had. Did they do this 19 appropriately or did they, you know, do some**  **20 unsavory methods in order to get it back to 21 you?**  **22 And you'd say, oh, that's the one we**

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## 1 got back full of holes. And I'd say, okay **2 contractor, we understand what you're doing 3 and I don't -- I still think you're a**  **4 violator. 5 MR. MCCRUDDEN: Do you care that**  **6 that happens? 7 MR. RAWALD: Do I care?**  **8 MS. MEYERS: Yes he does. 9 MR. RAWALD: Well, I will if you --**  **10 (Simultaneous Speaking) 11 MS. MEYERS: I want you to care.**  **12 MR. RAWALD: Right. 13 (Simultaneous Speaking)**  **14 MR. MCCRUDDEN: Do you want to 15 insert yourself in that transaction?**  **16 MR. RAWALD: I think I do, because I 17 think that to me, he's still a violator,**  **18 right. Like, I mean, he's trying to skate any 19 way possible, which --**  **20 MR. MCCRUDDEN: Okay. 21 MR. RAWALD: -- we don't want --**  **22 part of the thing is that you feel the**

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## 1 financial pain of replacing the unit as the **2 reward for your effort to skate in the first 3 place. And if you don't feel the financial**  **4 pain, then you're avoiding the consequence. 5 MR. MCCRUDDEN: At this point,**  **6 there's no transparence -- there is 7 transparency that this is a public -- it's not**  **8 public, but there -- the relationship between 9 that contractor and that manufacturer now has**  **10 this black mark. 11 Because they may not reach the**  **12 violator level because they may remediate and 13 they may not take the actions that Karen's**  **14 concerned about, but now they've got, whether 15 it's in their own database, internally or in**  **16 the back of their mind, they say oh, this guy 17 almost got a violation.**  **18 And that takes me back to things I'm 19 concerned about. I can't control this. I**  **20 just want to make sure we're thinking about 21 that and how --**  **22 MR. SACHS: Charlie? This is a**

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## 1 question for you but also for Jon. This is **2 Harvey. It seems to me that that's sort of a 3 notice that's at the same level as this guy's**  **4 check bounced. This is something that becomes 5 a legitimate business concern.**  **6 It's not a death penalty, but it may 7 mean that that branch of Jon's distribution**  **8 starts saying, we've got to watch people who 9 come in from Chuck's contracting.**  **10 MR. MCCRUDDEN: I agree. And I 11 think that the check bounce sort of analogy is**  **12 pretty good, because there are times when your 13 bank calls you before they send it through a**  **14 second time. 15 And so, in this case, the check**  **16 doesn't bounce, because you've been able to 17 dump some funds in there, not that I would**  **18 have any experience with that. 19 MR. HUNGERFORD: It doesn't happen**  **20 that way anymore. We don't have paper checks. 21 MR. MCCRUDDEN: I don't know. I was**  **22 just call it --**

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## 1 MR. HUNGERFORD: It goes instantly. **2 MR. MCCRUDDEN: But it still doesn't 3 become a bounced check violation, but there,**  **4 the bank still knows that technically, 5 somebody else knows.**  **6 MS. SHEPHERD: Or the manufacturer 7 knows, though, because I'm sorry to say**  **8 Shepherd, vis a vis the contractor, and how 9 often is the manufacturer selling directly to**  **10 the contractor, such as they're going to say, 11 oh this is my contractor list of bad**  **12 contractors, so all distributors I work with, 13 I want you to make sure you don't deal with**  **14 Charlie. I don't how long that it -- 15 MR. RAWALD: Right. And I also say**  **16 that you might also have the market outcome of 17 maybe he'll be more careful before they make**  **18 a lot of mistakes because they know that they 19 might be seen to -- might be found out that**  **20 way. So they'll be more careful than they 21 otherwise would be, because there are**  **22 consequences.**

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## 1 MR. SACHS: This is Harvey, and what **2 I'm appreciating now is that this conversation 3 is really about building the non-nuclear**  **4 options, the non-death penalty options. I 5 think that's an important part of our task.**  **6 MR. RAWALD: Okay. 7 MS. SHEPHERD: This is Amy Shepherd.**  **8 Is it feasible that before the Department were 9 to take someone off the routine violator list**  **10 that they got a confirmation from the 11 manufacturer there had been no warranty claim?**  **12 MR. RAWALD: I think so. I think 13 that's very doable.**  **14 MS. SHEPHERD: I'd -- so I guess I 15 ask the manufacturers, like how burdensome**  **16 would that be if you were contacted -- like, 17 so my question is, to avoid your issue --**  **18 MALE PARTICIPANT: That'd be pretty 19 easy for us. You're asking whether or not,**  **20 well we could tell whether or not -- 21 MS. SHEPHERD: They can't get off**  **22 the list until DOE receives notification from**

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## 1 the manufacturer there's no warranty claim **2 made on whatever -- 3 MALE PARTICIPANT: What, the**  **4 registration warranty claim, compliant? 5 MALE PARTICIPANT: On the**  **6 noncompliant unit. 7 MS. SHEPHERD: On the --**  **8 MALE PARTICIPANT: On the 9 replacement unit.**  **10 MS. SHEPHERD: On the noncompliant 11 unit.**  **12 MALE PARTICIPANT: That they haven't 13 shot it full of holes, or --**  **14 MR. RAWALD: Right. 15 MR. HUNGERFORD: Question, this is**  **16 David. That's triggered something for me. 17 What kind of evidence would be required in**  **18 order to demonstrate that the remediation had 19 occurred, that the new unit had been put in?**  **20 Would you need a bill of sale for the -- from 21 the distributor, for a unit to be installed at**  **22 that address?**

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## 1 MR. RAWALD: Yes, that's a good **2 question. So I haven't really thought through 3 what we want. So it seems like you want to**  **4 have confirmation from the homeowner that the 5 thing is in their house. So that would be the**  **6 most -- 7 MR. HUNGERFORD: And a bill of sale**  **8 showing -- maybe a bill of sale. In that case 9 you might already have the information you**  **10 need to demonstrate that a warranty claim 11 wasn't made, wouldn't you?**  **12 MS. SHEPHERD: I think only the 13 manufacturer would know that.**  **14 MALE PARTICIPANT: So you think he 15 would.**  **16 (Simultaneous Speaking) 17 MR. HUNGERFORD: Is there some way**  **18 that can be constructed in such a way that 19 that piece of information is included?**  **20 MR. ROCKY: You're talking about a 21 system tracking where you'd have to go back in**  **22 and literally cross reference an old model**

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## 1 number and indicate that that had been taken **2 out of service and could no longer be used by 3 anybody, and this was replaced by another**  **4 serial number as a valid system. 5 MS. SHEPHERD: No. I was thinking**  **6 more along the lines that you could -- and I 7 don't know if this is possible. Can you just**  **8 check to see whether if you have a serial 9 number? Like so -- because that, they'll have**  **10 the replacement parts number, right? 11 MR. HURST: If you give me a serial**  **12 number, I can tell you whether or not I've had 13 a warranty claim.**  **14 MS. SHEPHERD: How hard is that? 15 How hard is that?**  **16 MR. ROCKY: Or whether it's 17 registered as a warranty -- a registered**  **18 warranty. 19 MR. HURST: I can tell you if it's**  **20 registered and if it's had a warranty claim 21 against it.**  **22 MR. ROCKY: Yes.**

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## 1 MS. SHEPHERD: I just thought, yes, **2 so -- because that could be one of the pieces 3 of evidence that you've got to present before**  **4 you are off the list, assuming that that isn't 5 too burdensome.**  **6 MR. HURST: Yes. 7 MR. HUNGERFORD: Yes. I was just**  **8 trying to think of a way that the evidence 9 that they presented sort of made -- puts DOE**  **10 on the hook to be able to prove that it didn't 11 have the warranty claim, and it sort of just**  **12 leaves the manufacturers out or makes it very 13 simple.**  **14 MR. RAWALD: Okay. So with this 15 remedial action built in to the concept of the**  **16 prohibited act based upon violations, are 17 people more comfortable than you were before**  **18 lunch on this issue? 19 MR. MCCRUDDEN: This is Charlie.**  **20 I'm more comfortable. I still want to see 21 what the routine violator threshold is, where**  **22 we set that, okay, and review the factors that**

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## 1 go into all that. **2 MR. RAWALD: So you -- let's go back 3 to the factors.**  **4 MR. MCCRUDDEN: Well actually, why 5 don't we go to -- I think we'd better go to**  **6 routine violator threshold. 7 MR. RAWALD: Okay.**  **8 MR. MELCHI: Doug, this is Jon from 9 HARDI. So, just under that remedial actions,**  **10 so say Chuck's company put out that he's got 11 -- I mean, would termination of an employee**  **12 also kind of count towards that, or are we 13 just talking about things that --**  **14 MR. RAWALD: So I list that as 15 things that would help me, before I ever --**  **16 MR. MELCHI: Okay. 17 MR. RAWALD: -- found someone a**  **18 routine violator. So if I have got to Chuck 19 and I said, hey Chuck, I see here you had five**  **20 installations of SEER 13, and what's happening 21 is those were all Tommy's jobs and we fired**  **22 Tommy, so they figured it out.**

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## 1 MR. MELCHI: Okay. All right. **2 MR. RAWALD: So then I might not 3 find Chuck to be a routine violator because he**  **4 already took action, so it wouldn't even get 5 to that level.**  **6 MR. MELCHI: Okay. 7 MR. RAWALD: So.**  **8 MR. MELCHI: Thank you. 9 MR. RAWALD: I would be -- I'd**  **10 prefer it if he said, yes, we fired Tommy and 11 we replaced all those bad units. That'd be my**  **12 preference, right. But so we take it case by 13 case, I think.**  **14 MR. SACHS: Well, we fired Tommy and 15 replaced two out of five.**  **16 MR. RAWALD: Right, something. Yes. 17 MR. WHITE: I got warranty claims**  **18 pending on the other three that -- 19 (Laughter)**  **20 MR. WHITE: I'm short on shopping. 21 MR. SACHS: One point for you,**  **22 Chuck.**

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## 1 MR. HUNGERFORD: This is David. I **2 just want to add just a little information to 3 that. We -- the Energy Commission of**  **4 California -- found itself presiding over a 5 complaint at one point, where a -- I won't go**  **6 into the details, but a business owner who 7 employed a number of employees that were doing**  **8 things that were regulated by the Energy 9 Commission.**  **10 Would the -- a couple of individuals 11 were found to have cheated on the paperwork,**  **12 and they were summarily fired by the owner. 13 As it turned out, we ended up presiding over**  **14 complaints where those two employees filed a 15 complaint saying, we were directed to do this**  **16 by the owner. 17 We were told this was the only way**  **18 we could do it. We were given a set of 19 responsibilities where we had to perform these**  **20 many functions in a day, which are half-day 21 functions, 12 functions in a day that we could**  **22 only do it once or twice a day.**

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## 1 And so it was clearly the owner's **2 fault. But yet the blame was on the 3 employees. So just to be -- feeling a little**  **4 bit, feeling a little for the little guy. 5 MALE PARTICIPANT: Right.**  **6 MR. HUNGERFORD: I wouldn't want to 7 set up the situation that inadvertently**  **8 through -- gave a contractor that employed a 9 number of people the opportunity to throw**  **10 their employees under the bus to protect 11 themselves.**  **12 MR. RAWALD: Okay. But that -- I 13 would also understand that that employee would**  **14 have the remedy by suing the contractor, once 15 again, for firing him, and they could, you**  **16 know -- 17 MR. HUNGERFORD: That's hard. They**  **18 don't have a job. They don't have an income 19 and they've got to feed their kids.**  **20 MR. RAWALD: Right. 21 MR. HUNGERFORD: You know, it's**  **22 unusual that they would have the opportunity**

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## 1 to actually take -- hire a lawyer. Well, it's **2 a burden for them to have to do that. 3 MR. RAWALD: Okay.**  **4 MR. HUNGERFORD: So I'd like to set 5 it up so that that's not an option, a**  **6 possibility. 7 MR. RAWALD: Okay.**  **8 MS. SHEPHERD: Well, I was assuming 9 Doug isn't just looking for a sacrifice,**  **10 right? You're going to want them to have some 11 ability to prove to you that this was one**  **12 person and this is who it is, and this is how 13 we know it's not -- this one person, so.**  **14 MR. RAWALD: Right. Right, and I 15 would probably talk to that person as well.**  **16 So, since I'd like to talk to you, if you 17 want, you guys can help.**  **18 So we had no slide that you 19 referenced, which was a threshold for**  **20 routinely -- 21 MR. MCCRUDDEN: No. And I'm looking**  **22 back, and it's really kind of factor of number**

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## 1 of violations. So go back to the "Assess **2 whether violations is routine", and it's the 3 first factor there, is what I was thinking.**  **4 But I'm also now, I'm wondering if 5 we actually should look at determination of**  **6 violation first. 7 MR. RAWALD: Okay.**  **8 MR. MCCRUDDEN: And then go from 9 that point to routine violator.**  **10 MR. RAWALD: Okay. 11 MR. MCCRUDDEN: Because**  **12 determination of violation, if you've got the 13 flexibility of building in remediation, there**  **14 may be points where violations don't occur 15 over a long period of time. It may happen, it**  **16 may get fixed, and therefore that contractor 17 isn't a violator.**  **18 MR. RAWALD: Right. 19 MR. MCCRUDDEN: Are you -- is that**  **20 how you see it? 21 MR. RAWALD: I'm comfortable with**  **22 that scenario.**

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## 1 MR. MCCRUDDEN: Okay. **2 MS. SHEPHERD: So just to clarify -- 3 this is Amy Shepherd, so this slide is then a**  **4 violation? It's not routine? 5 (Simultaneous Speaking)**  **6 MR. MCCRUDDEN: This slide, 7 basically, is the threshold to get from a**  **8 couple of violations -- 9 MS. SHEPHERD: Okay.**  **10 MR. MCCRUDDEN: -- one violation, to 11 a routine violator, which is what you care**  **12 about. 13 MS. SHEPHERD: Right. Which would**  **14 -- but we wouldn't be using these factors for 15 a violation, is what you're saying. So are we**  **16 talking about -- 17 MR. MCCRUDDEN: Perhaps.**  **18 MS. SHEPHERD: Okay. 19 (Simultaneous Speaking)**  **20 MS. SHEPHERD: All right. 21 MR. MCCRUDDEN: I think determining**  **22 a violation is a one -- it just, once, it**

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## 1 happens once. **2 MR. RAWALD: It's really a factual 3 inquiry.**  **4 MS. SHEPHERD: Yes, right. 5 MR. RAWALD: It's, is it bad or not.**  **6 MR. MCCRUDDEN: Right. 7 MR. RAWALD: And then if you did**  **8 something to fix it, then okay, then maybe I 9 said, well you fixed it, so we're going to**  **10 write this one off. 11 MR. MCCRUDDEN: Right.**  **12 MR. RAWALD: So -- 13 MR. MCCRUDDEN: Is there a way to**  **14 spell that out? 15 MR. RAWALD: Yes there is.**  **16 MR. MCCRUDDEN: Okay. So I think 17 that -- let's do that first.**  **18 MR. RAWALD: So we have here the 19 subsequent remedial actions we see are**  **20 replacing noncompliant with a compliant unit. 21 So I wouldn't find you to be a routine**  **22 violator because you have fixed the things you**

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## 1 did. **2 So, and the finding of violation is 3 meaningless because it's just between me and**  **4 you. We're not publicizing that, so --**
**5 MR. MCCRUDDEN: We're not? 6 MR. RAWALD: Right. We're not.**  **7 We're going to -- unless it's a prohibited 8 act, unless we have civil penalties associated**  **9 with it, so and then it's a whole different 10 ball of wax.**  **11 MR. MCCRUDDEN: Right. 12 MR. RAWALD: But as long as it's a**  **13 private transaction between me and the 14 contractor, then when I'm looking at the**  **15 assessment of whether he's a violator, I say, 16 well he did this one thing but he then fixed**  **17 it, so he's not going to be a routine violator 18 because he fixed it.**  **19 And I'll write it off that way, and 20 it won't be in the math equation for the**  **21 assessment of a routine violation. 22 MR. ROCKY: So this is Bryan. This** 

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## 1 is where I come back to having a little bit of **2 an issue now, relative to the thinking on 3 discussions on warranty claims and things for**  **4 violation by a contractor. If I don't know 5 about it, I have nothing to check.**  **6 MR. RAWALD: Right. No, I have to 7 do some legwork myself. I have to verify --**  **8 MR. ROCKY: But so -- 9 MR. RAWALD: I'm not just going to**  **10 just say okay, fix that. I'm going to have to 11 verify with folks that it was fixed in the**  **12 right way, without sneaking in and going -- 13 MR. ROCKY: So now you -- yes. So**  **14 you'd have to -- but I think to follow the 15 process, Doug, DOE now has to notify a**  **16 manufacturer that there was a violation that 17 has been remediated in the field.**  **18 And then we're going to have to go 19 back to our chain and say, did this particular**  **20 serial number have warranty claims or any 21 outstanding concessions, which can be done by**  **22 sales people as well as service people as well**

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## 1 as distribution, relative to that serial **2 number? 3 And if so, then we now have to track**  **4 back to that contractor and say, you can't 5 have us pay for fixing your mistake.**  **6 FEMALE PARTICIPANT: Why are you 7 pointing at Chuck?**  **8 MR. ROCKY: No. I was pointing in a 9 general direction, not pointing at Chuck.**  **10 MR. RAWALD: Right. No, I hear 11 that, and I understand that manufacturers want**  **12 to build -- I think that's a -- I think that 13 makes -- I can understand --**  **14 MR. ROCKY: So I think we're headed 15 back around to where we said earlier -- and I**  **16 said it, I don't want to know of a violation. 17 Now I think I have to.**  **18 MR. RAWALD: You don't have -- well, 19 to an extent, you're right. I mean, we don't**  **20 have to identify the violator, in looking at 21 it. You don't have to contact the contractor.**  **22 All you have to say to me is well, he made a**

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## 1 warranty claim on that. **2 And then I can go back to him and 3 say, it doesn't count, buddy. You made a**  **4 warranty claim on that. So we're not going to 5 -- you know, and then I'm going to say you're**  **6 -- I'm not going to talk, not going to obviate 7 my decision to make you a routine violator.**  **8 MR. ROCKY: Yes, I got to think 9 about this.**  **10 MR. RAWALD: Okay. I don't mind. 11 MR. WHITE: But once you look**  **12 something up for a warranty claim, if the 13 warranty claim is there, the appropriate**  **14 information is there, where it was, whose 15 house, the installer.**  **16 MR. MELCHI: If he registered the 17 right address.**  **18 MR. WHITE: But if I turned it in as 19 a warranty, and I want to get reimbursed or a**  **20 new product or whatever, my name is attached 21 to that warranty claim.**  **22 MR. GIBBONS: Well, and timing, too.**

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## 1 This is John. The timing of that, too. A **2 claim may not show up for who knows when. 3 MR. HURST: Yes. Well, and you're**  **4 assuming that the person that sees the 5 warranty claims is full up on federal**  **6 regulations. It could be Mabel stuck down in 7 the accounting department. She doesn't have**  **8 a clue as to what -- she just processes 9 transactions, so.**  **10 MR. WHITE: Well what I'm saying is 11 if he goes and accesses the database, and it**  **12 is there, there was a claim, you're going to 13 know --**  **14 MALE PARTICIPANT: We have the 15 information.**  **16 MR. WHITE: You're going to know who 17 it was. You can't very -- maybe it's the next**  **18 screen, but I would assume it pops up with the 19 record of the unit, and all the stuff is**  **20 there. 21 MR. ROCKY: So this is Bryan. So**  **22 I'm trying to figure out, Chuck, if I get**

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## 1 notified by the Department of a violation, not **2 a routine but a violation that included 3 remediation, I think I have to immediately go**  **4 through the entire process of flagging that 5 model serial number in my systems, wherever it**  **6 appears, warranty, field service, sales, 7 whatever, and put a flag on it that said this**  **8 unit has been identified as a potential 9 violation of federal law, and pop the flag up.**  **10 And anything comes to this, we're 11 going to have to investigate, including**  **12 possible -- turn that back to that contractor 13 through our distribution partner that says**  **14 they violated and they remediated. 15 MR. WHITE: Right.**  **16 FEMALE PARTICIPANT: Did they -- 17 MR. ROCKY: Great. Now we have to**  **18 do something because they did it by warranty 19 claims or sales concession or whatever.**  **20 (Simultaneous Speaking) 21 MR. WHITE: Correct. I agree.**  **22 FEMALE PARTICIPANT: Should we --**

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## 1 MR. EISNER: Doug, do you have to **2 notify when they're in violation, or can you 3 simply notify them that you want to know**  **4 whether there was this, a warranty claim? 5 MR. RAWALD: They're saying it**  **6 doesn't matter. Once I give them the serial 7 number, they're going to be able figure it**  **8 out. That's the point. So -- 9 MR. EISNER: Only if they know that**  **10 it was installed in -- 11 (Simultaneous Speaking)**  **12 MR. RAWALD: Why else would I be 13 asking about a warranty?**  **14 (Simultaneous Speaking) 15 MR. EISNER: No. Because we've**  **16 already been told that a lot of the times that 17 the contractor is the one that puts his or her**  **18 address under, for the address. So you don't 19 necessarily know that it's been installed in**  **20 the wrong place. 21 MR. ROCKY: So Neil, at this point,**  **22 if the Department sends me something that**

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## 1 says, check on this serial number, I'm going **2 to have to assume it's a violation. And then 3 we're not liable under knowingly or should**  **4 knowing discussion. 5 We're going to have to follow up**  **6 with that, and find out, and flag that unit, 7 that record to see if there was an actual**  **8 violation or a new -- this is part of a 9 routine violation.**  **10 It's that -- you do something here, 11 it's going to force me to all these other**  **12 things, and if nothing else, for my own 13 protection as manufacturer.**  **14 MR. ELLIS: This is Ray Ellis from 15 Lincoln Electric. Doug, this is after you've**  **16 made a determination that there's been a 17 violation?**  **18 MALE PARTICIPANT: It could be 19 before.**  **20 MR. RAWALD: Well, still -- 21 MR. ELLIS: Because if you do**  **22 determine that there's a violation, can you**

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## 1 not tell the contractor that he cannot turn **2 this in on a warranty? 3 MR. RAWALD: Right. I can make that**  **4 to clear to them. I can say, listen, if this 5 -- I certainly, what I'm saying to them --**  **6 MR. ELLIS: To preempt all this? 7 MR. RAWALD: -- that they should not**  **8 be -- we're going to track it back. I can 9 inform them of that fact.**  **10 MR. ROCKY: And that might be the 11 appropriate discussion, and it still provides,**  **12 as Chuck was talking about, it means 13 dis-incentive to the contractor to try to game**  **14 the system, because if nothing else, there's 15 an awareness that DOE says hey, we're going to**  **16 be tracking this, and we get to go back to the 17 manufacturer. We might still come back to you**  **18 if you try to pass this off as warranty or 19 some other thing.**  **20 If the remediation is you as the 21 contractor fix what you did wrong, then you're**  **22 liable to do that and not try to pass the cost**

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## 1 of that off to somebody else. Maybe that's **2 the terminology that Chuck and Charlie can get 3 to work on.**  **4 MR. HUNGERFORD: Yes. This is 5 David. See, it seems like -- maybe I missed**  **6 part of the conversation, but it seems like we 7 were talking about remediation as potentially**  **8 happening on both sides of the violation 9 decision.**  **10 (Simultaneous Speaking) 11 MR. RAWALD: The routine violation**  **12 decision. On the deeming, the making of the 13 finding is only with a routine violator.**  **14 MR. HUNGERFORD: Okay. 15 MR. RAWALD: So, I mean, ostensibly**  **16 someone might decide to replace the unit 17 before I ever find the violation's happened,**  **18 but that would be pretty early in the process. 19 What I think is most likely is I'm**  **20 going to say, well the violation is -- oh, 21 well I'm going to go fix that, or I'm fixing**  **22 it now.**

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## 1 And then, so okay, well just so you **2 understand, as part of this process, if you 3 claim a warranty on that in order to do your**  **4 remediation, I will find that out, and that 5 will not count as remediation.**  **6 And your contractor -- and your 7 manufacturer will not view that kindly when**  **8 they find that out and they will have a black 9 mark when you're dealing with them in the**  **10 future. So there's a lot of unintended 11 consequences of your trying to save the money**  **12 to do, to fix what you broke. 13 MR. MCCRUDDEN: But in that scenario**  **14 you just described, it's still not up for 15 violation, because they've remediated.**  **16 MR. RAWALD: Well, so it's -- 17 MR. HUNGERFORD: Violation**  **18 remediation prevents routine violation. 19 MR. RAWALD: Right. That's how I**  **20 view it. And so what I would say is, so if 21 you have skirted the system in order to**  **22 remediate, I would think that would not**

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## 1 actually count as remediation. **2 MR. MCCRUDDEN: Okay. So what 3 you're saying is, looking at your time line**  **4 here, complaint, investigation -- the 5 investigation is discussion, or possible**  **6 subpoena for the records. 7 The contractor knows this. He gives**  **8 you the records. He sees, oh my gosh, I know 9 what you're talking about. I'm going to go**  **10 out and fix this. So before we get to you 11 finding a violation, they've fixed it. But**  **12 what you're saying is, that's still going to 13 be a violation.**  **14 MR. RAWALD: Because between you and 15 I, I'm going to say it's a violation but it's**  **16 not going to count for anything. It's going 17 -- because you fixed it. And so you and I**  **18 will -- there's a fact there that the 19 violation's been committed, but it not will be**  **20 weighed in any sort of analysis toward a 21 routine violation because of the fact that you**  **22 fixed it.**

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## 1 MR. MCCRUDDEN: Oh okay. Now I have **2 a better understanding of it. 3 MR. EISNER: But then next week you**  **4 find another one by the same contractor.**
**5 MR. MCCRUDDEN: Sure. 6 MR. RAWALD: Right.**  **7 MR. EISNER: He fixes it, so you 8 don't put it in the file as a violation. Then**  **9 the third week you find another one. Are you 10 going to say he's never going to be a routine**  **11 violator because he's always going to fix them 12 when you catch him?**  **13 MR. RAWALD: Right. So that's not 14 what I'm saying. What I'm saying is that in**  **15 the analysis I'm going to look at, if he fixes 16 it, it's a violation, but I'm taking into**  **17 consideration he fixed it. 18 So it could be -- if he has 20**  **19 violations with 20 fixes, like I said, this 20 guy's a routine violator. He just -- that's**  **21 past the point of any sort of reasonableness. 22 MR. HUNGERFORD: This is David. I** 

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## 1 guess I'm wondering at what point in the **2 process you initiated action, before or after 3 you've done enough investigation to figure out**  **4 whether there were multiple violations. 5 Because, for instance, if somebody**  **6 -- if you hadn't pulled all his records, or 7 you didn't have access to them, or he just**  **8 didn't give you records that you don't know 9 exist, and so you can't know whether he,**  **10 you're given all the records. 11 He could come in for a -- he gets**  **12 cited for a violation. He could remediate 13 that. But in the meantime, he might have five**  **14 other installations that he doesn't get caught 15 with that he starts punching holes in the**  **16 lines and getting, making warranty claims on 17 those others before you know they exist.**  **18 MR. RAWALD: Right. 19 MR. HUNGERFORD: And it's extreme**  **20 case, but -- 21 MS. MEYERS: But this is Karen with**  **22 Rheem. Didn't you say -- wasn't the**

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## 1 conversation when we were talking about record **2 retention, that you wanted records kept for 3 all units, so if you were doing an**  **4 investigation on one unit, on one installation 5 you could determine at that point if there**  **6 were multiple violations?**
**7 MR. RAWALD: Yes. 8 MR. HUNGERFORD: Okay.**  **9 MR. RAWALD: Right. I think -- once 10 again, there are possibilities that a million**  **11 things that can happen in order to get around 12 whatever we regulate here. But I think this**  **13 is getting us closer to answering a lot of 14 people's questions and concerns you have.**  **15 MR. HURST: I just -- I think you 16 started to say it, but I want to make sure, be**  **17 clear is that it's not just warranty that the 18 contractor may try to skirt the issue.**  **19 There's, you know, the no-hassle guarantees, 20 100 percent satisfaction guarantees, things**  **21 like that, that may not show up in a warranty 22 bucket. I just want to make sure --** 

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## 1 (Simultaneous Speaking) **2 MR. RAWALD: Yes, I'm not writing -- 3 I take the language from you guys, because I**  **4 don't know what those terms are. So you guys 5 need to give me kind of the term that would**  **6 encompass all those things, or the individual 7 term that matter across the industry, so that**  **8 you can make sure that we're capturing that in 9 whatever we put together --**  **10 MR. HURST: I just want to make sure 11 that you have the conversation. The guy says**  **12 no, I didn't turn in a warranty claim but I 13 did turn in their no-hassle guarantee.**  **14 MR. RAWALD: Right. 15 MR. HURST: And I know it's --**  **16 MR. RAWALD: No, and Bryan's thing 17 about service concessions and other things**  **18 too. 19 MR. HURST: Right.**  **20 MR. RAWALD: So there are terms that 21 I'm not familiar with, but I'm hoping you guys**  **22 will give them to me, so that I can**

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## 1 appropriately insulate everyone from people **2 trying to cheat this process. 3 MR. HURST: Yes, there's not --**  **4 manufacturers don't always get all the claims. 5 Sometimes a distributor will take it upon**  **6 themselves to do a concession that we don't 7 get visibility to, so we don't see that.**  **8 MR. RAWALD: Okay. 9 MR. HURST: So we got to make sure**  **10 that there's no concession in general. 11 MR. RAWALD: Okay.**  **12 MR. ROCKY: So an example of that, 13 just for clarification for people, the**  **14 manufacturer may have a good warranty, but the 15 distributor, to maintain their good business**  **16 with a contractor may provide, as John's 17 saying, a no-hassle replacement unit.**  **18 If the compressor goes out, the 19 manufacturers, we say, okay that's good. You**  **20 know, if it happens within five years, that's 21 fine. That's our standard warranty. But the**  **22 distributor may, to improve their business**

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## 1 standing with customers say, we're going to **2 replace that unit at no charge to the 3 contractor if there is this kind of failure --**  **4 MR. RAWALD: Right. 5 MR. ROCKY: -- to the homeowner,**  **6 right. And it may or may not have labor, so 7 that the homeowner doesn't suffer for a**  **8 warranty failure of extreme consequence. 9 MR. RAWALD: Understood.**  **10 MR. ROCKY: In those cases, that 11 goes to Jon's members, not to us, necessarily.**  **12 MR. WHITE: But -- this is Chuck 13 White, you're not going to give me a SEER 14**  **14 unit for a SEER 13 unit I turn in. 15 MR. ROCKY: It's going to be the**  **16 exact unit. 17 MR. RAWALD: Right.**  **18 MR. ROCKY: Well, okay. Let me 19 rephrase that. Different manufacturers word**  **20 that differently, but I believe everybody's 21 policies in those cases talk about the**  **22 equivalent model if available, or something to**

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## 1 that effect. **2 So if a 13 SEER model has been 3 turned in, you're going to get a 13 SEER model**  **4 unless that model is no longer available by 5 that manufacturer. So now we're getting into**  **6 discussions as well. It's terms and those 7 type of sales promotion guarantee policies**  **8 that are not really at warranty. 9 MR. RAWALD: Right. But I can hear**  **10 Chuck's point is, if I shoot my SEER 13 full 11 of holes and then claim a warranty on it, I'm**  **12 not going to get the SEER 14 I want to replace 13 it. I'm going to get another SEER 13.**  **14 MR. ROCKY: I think the people that 15 monitor warranty claims are going to have some**  **16 interesting questions on those. 17 MR. HUNGERFORD: Yes. So you**  **18 install it down the street -- 19 MS. MEYERS: Well --**  **20 MR. HUNGERFORD: -- and buy a SEER 21 14 unit for a replacement.**  **22 MS. MEYERS: So actually that is not**

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## 1 true. **2 MR. HUNGERFORD: Okay. 3 MS. MEYERS: Because we -- if he had**  **4 put a 13 in a 14 SEER area, and then through 5 the warranty process, we would say, well the**  **6 unit that you shot holes in is no longer 7 available for installation in that area. So**  **8 you would get a 14. 9 MR. RAWALD: Okay. So they would?**  **10 MS. MEYERS: They would get a 14. 11 (Simultaneous Speaking)**  **12 MS. MEYERS: And in that case, your 13 warranty is the, what's legally available to**  **14 sell in that area. 15 MR. RAWALD: I had no idea.**  **16 MS. MEYERS: Same happened with 10 17 and 13. If you had -- you know, you had to**  **18 replace it with a 13. You couldn't replace it 19 with a 10.**  **20 MR. RAWALD: At no extra expense to 21 the contractor? Very well. Right. Okay.**  **22 Then I understand the concerns, so I think**

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## 1 we're trying to address that here as we build **2 this, so I think that this was -- I think we 3 have at least some sound ideas on how to make**  **4 this work. 5 MR. EISNER: If the homeowner says,**  **6 I don't want that crook in my house again, or 7 I don't want a mess made in my house with a**  **8 new installation, I just want you to 9 compensate me for your illegal act, what would**  **10 you do? 11 MR. RAWALD: Is "you" me again?**  **12 MR. EISNER: You. 13 MR. RAWALD: Okay. So --**  **14 MR. EISNER: It's a capital I. 15 MR. RAWALD: So no, I don't have an**  **16 answer to that. I don't know. 17 MR. WHITE: It's Chuck White. You**  **18 can -- other contractors could perform the 19 service.**  **20 MR. EISNER: Which would solve the 21 problem of having to go back to the**  **22 manufacturer. Make the penalty where you've**

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## 1 got to hire another manufacturer -- another **2 company. 3 MR. WHITE: Well, it would mean**  **4 handing the contractor the bill, but that's 5 something that would have to be worked out.**  **6 MR. RAWALD: Right. So Chuck would 7 come to me and say, so I did a bad**  **8 installation. They wouldn't let me back in. 9 I paid Charlie. Charlie went ahead and did**  **10 it. Here's all the proof of it. Can you 11 please let this go by the wayside?**  **12 And I'd say, okay, everything's 13 going to get solved here. Okay, no problem.**  **14 MR. WHITE: Right, which when we 15 originally talked about if you're on the list**  **16 and you can't buy equipment, that was my first 17 thought, I'll just sub it out. I'll just get**  **18 somebody else to do it for me that can buy it, 19 and make things whole.**  **20 MR. RAWALD: Okay. 21 MR. WHITE: As long as I make the**  **22 thing whole, as long as I make it right at the**

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## 1 end of the day. **2 MR. DORIA: Well, this is Jordan. I 3 mean, I understand the point, and I think it's**  **4 conceivable that a homeowner might want -- but 5 it could be the other side of it, they may**  **6 just not care. We're going to force 7 remediation on a homeowner who doesn't want**  **8 it, right? I mean, I think we're giving them 9 the option, right?**  **10 And yes, their decision to take up 11 that option might impact the Department's**  **12 discretion in terms of determining routine 13 violation, I suppose, but I think also if a**  **14 contractor said, I tried to do the remediation 15 here, and here's the email from the homeowner**  **16 telling me to get lost, I would assume that 17 the Department could do that.**  **18 I guess what I'm trying to say is 19 we're not saying remediation has to occur,**  **20 right? I mean, so. 21 MR. BALLO: Well, we don't want to**  **22 be in the contractor slips 50 bucks to the**

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## 1 homeowner in exchange for an email saying **2 don't come here. 3 MR. WHITE: Yes. Yes. We can try**  **4 for 20. 5 MR. SACHS: At this point, hearing**  **6 short silence, I guess -- 7 MR. RAWALD: I wonder who let one of**  **8 those go. 9 (Laughter)**  **10 MR. SACHS: I know I'm among friends 11 when I start getting teased.**  **12 I just thought I'd toss one thing 13 out. I ran a few very rough numbers the other**  **14 evening for my own entertainment, on the cost 15 to the consumer of having had a 13 SEER**  **16 installed instead of a legally mandated 14. 17 And I did that for Virginia as being**  **18 a relatively northern state, and for Georgia 19 as a relatively southern state, because that's**  **20 just where the data allowed me to look at the 21 individual states.**  **22 The direct consumer harm -- this is**

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## 1 ignoring things like differences in **2 dehumidification capability, just looking at 3 those numbers for energy use and cost, look to**  **4 be in the range of $17 to $21 per year per 13 5 installation where a 14 should have been**  **6 installed. So are these 50 percent -- 7 MR. HUNGERFORD: Fifteen year useful**  **8 life? 9 MR. SACHS: This is the annual cost.**  **10 MR. HUNGERFORD: Right. 11 MR. SACHS: And then you can figure**  **12 the 15 year annual loss -- annual life. You 13 can present value if you want. It's just a**  **14 number that I thought would give us a scale 15 for the direct harm.**  **16 And if you run those numbers, you 17 would of course say that for a moderate**  **18 incremental cost of the 14, it certainly would 19 have been the more cost effective furnace. So**  **20 the consumer does have some harm. 21 MR. FENSTROM: So Harvey, this is**  **22 Gary. You didn't do it for California because**

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## 1 it would have exceeded the floating decimal **2 point capability of your calculator? 3 MR. SACHS: Mostly because I don't**  **4 care about California. 5 MR. RAWALD: So are there any more**  **6 thoughts on this scheme here I've put 7 together?**  **8 (Simultaneous speaking) 9 MR. DORIA: Doug, this is Jordan. I**  **10 do have one question. I mean, I've been 11 assuming but it's not, I guess not perfectly,**  **12 but that's still not here. I've been assuming 13 that a person could go from having no**  **14 violations to being deemed a routine violator. 15 But that's possible, right?**  **16 MR. RAWALD: Yes. 17 MR. DORIA: So, okay. I just, I**  **18 think that's an important point right, there's 19 not necessarily that stepwise progression,**  **20 right, from nothing to violator to routine 21 violator. You could potentially just become**  **22 a routine violator?**

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## 1 MR. RAWALD: Right. If somebody **2 calls me and says, I'm out here in the tract 3 housing they're building in Florida, and**  **4 everywhere I look there is 13 SEER product 5 being put in these homes.**  **6 And so then I talked to that 7 contractor and I found out, yes, that's what**  **8 we're using. We're using 13 SEER in all 55 of 9 these houses we're building, then it's a**  **10 routine violation. That's -- 11 MR. DORIA: And again, I -- like I**  **12 think we've all sort of intuited that from the 13 discussion, but I think from, when we're**  **14 talking about what -- to the extent that the 15 penalties have a deterrent effect, people in**  **16 seeing that there are violations and routine 17 violations could conclude, I can potentially**  **18 do certain things and now, early on I'm just 19 a violator.**  **20 But no, you can actually be, for 21 your first, say set of transgressions, you can**  **22 actually be a routine violator. I think**

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## 1 that's just an important point to potentially **2 just make clear in this process. 3 MR. RAWALD: Right. I think -- and**  **4 every time you commit a violation, the 5 probability increases that you're going to be**  **6 caught, and for everything that you've done in 7 the past, then suddenly it -- you become**  **8 exposed to -- the more of those things you've 9 done, the more you're going to likely be**  **10 deemed routine. 11 MR. EISNER: So everybody's okay for**  **12 now, with this being in the rule, the factors 13 that will be considered?**  **14 MR. MCCRUDDEN: This is Charlie with 15 ACCA. I mean, I'd almost be a little more**  **16 comfortable a number of violations, having a 17 number. Or maybe that's not beneficial.**  **18 MR. RAWALD: Well the problem is 19 that we -- well first we'd be guessing, right,**  **20 because we don't have any sort of empirical 21 data to base upon how often this is happening.**  **22 And secondly, we be kind of creating**

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## 1 a safe haven for someone to commit a certain **2 number of violations without any risk to the 3 actual enterprise, which we don't want to do.**  **4 MR. MCCRUDDEN: Well, but again, 5 subject to -- one, two marks could be enough**  **6 to get the manufacturers to say, I don't want 7 to deal with you.**  **8 MR. RAWALD: Right. I mean, one or 9 two is not going to be enough for me, right.**  **10 I mean, I think that the word routine has a 11 meaning in the dictionary, and it's going to**  **12 have at least some sort of import to me. As 13 I look at these cases I'm going to want to see**  **14 a sufficient number. 15 But it's going to be hard to put a**  **16 hard and fast number without people then being 17 able to model their business off not hitting**  **18 that number. 19 MR. MCCRUDDEN: Right. Yes.**  **20 MR. EISNER: Aren't you going to 21 have a problem with one or two over a week,**  **22 and one or two over a year, or two years?**

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## 1 Then you start having to put more and more **2 tails on the number. Does it depend on the 3 size of the company and the number of**  **4 installations they do in a given time period? 5 MR. MELCHI: But I think that the**  **6 ratio that you just said -- oh I'm sorry. 7 This is Jon at HARDI. I think that ratio is**  **8 important, I think, in considering that 9 routine nature, correct?**  **10 MR. RAWALD: I think it's important 11 to me. I mean, it seems to think -- to me, I**  **12 mean, if 100 percent of your business is what 13 it is, and it's only been a few but it's all**  **14 you've done, then it seems pretty routine. 15 So it's at least a data point, I**  **16 think, worthy of consideration. 17 MR. GIBBONS: So, John from Carrier.**  **18 We had a discussion a couple of weeks ago, 19 think Chuck, you started it, about like, is**  **20 there an opportunity at some point -- because 21 I see July 1st, 2016, there could be -- I'm**  **22 just envisioning, let's take a multi-family**

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## 1 installation where, you know, all the units **2 have been delivered to the job site. 3 They're not going to all get in by**  **4 July 1st. Is there some kind of waiver 5 process we could initiate to say hey, I got --**  **6 you know, I bought them all legal, and they 7 were supposed to be installed but, you know,**  **8 the rain or, you know, things that are beyond 9 my control, I didn't get the job done, is**  **10 there a waiver process we could entertain? 11 MR. RAWALD: Right. So standing up**  **12 a waiver process is difficult because we have 13 a standard, and so the Department's method of**  **14 waiving the standard is to have people go to 15 the Office of Hearing and Appeals and apply**  **16 for relief from the standard. 17 And that's what manufacturers**  **18 typically do when they want to have a standard 19 not apply. They'd say -- like in the case, we**  **20 have this case with a fluorescent lamp 21 standard that got up and folks said, oh, this**  **22 is all based upon our ability to obtain in**

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## 1 China a lot of minerals that we can't. And so **2 can we have two extra years? 3 And so the Office of Hearing and**  **4 Appeals said yes, that makes sense. So that's 5 the typical mechanism. So a contractor could**  **6 apply that and say hey, Office of Hearing and 7 Appeals, I've got these 200 extra units that**  **8 I ordered and I thought was going to have them 9 in place, and due to construction delay that**  **10 I'm still here with them, can I get some 11 relief here?**  **12 That's a default mechanism. Now we 13 could talk about our creating one here. I**  **14 don't know what the legality of that would be, 15 so I'd have to have all the lawyers look into**  **16 that. And so we have to talk about that more, 17 but we could talk about doing that.**  **18 MR. DORIA: This is Jordan. I guess 19 the question I would have is, I mean, doesn't**  **20 the pass-through significantly decrease the 21 likelihood that a waiver would be needed, the**  **22 18th on?**

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## 1 MR. GIBBONS: No. Because jobs, **2 like multi-family, how many months lead are 3 they? They're nine months lead sometimes.**  **4 You order the equipment, and again, things 5 beyond your control where a workforce strike,**  **6 a tornado, hurricane, I don't know, things 7 that preclude you from getting the work done.**  **8 And you may have to have a waiver 9 just for 30 days, 60 days to get the job done.**  **10 Because I have a feeling, just knowing the 11 multi-family business, where cost is king,**  **12 they're going to go buy 13 SEER to the bitter 13 end, and they're going to want to try and**  **14 extend that as long as they can. 15 And if it's available, which it may**  **16 not be by then, to your point but, you know -- 17 MR. RAWALD: Right. I think**  **18 Jordan's point is the stock will be gone, so 19 --**  **20 MR. GIBBONS: I think there needs to 21 be some kind of waiver.**  **22 MR. DORIA: I mean, I understand,**

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## 1 yes, but -- **2 MR. GIBBONS: You would think. They 3 may put it in a warehouse, you know.**  **4 MR. DORIA: I guess my -- so where I 5 was going with that is not saying it's not a**  **6 problem, but I think the pass-through at least 7 addresses it to an extent.**  **8 But the question of whether or not 9 we need to create a separate waiver process**  **10 for something that ultimately is a diminishing 11 problem, and eventually will go away.**  **12 MR. GIBBONS: Well, I'd like to be 13 able to coach our distributors to say, hey**  **14 look, advise your contractors that if they 15 expect delays or if there's something that --**  **16 you know, they're not -- it's like there's a 17 wall they're going to run into if they're not**  **18 done. 19 MR. WHITE: Well I --**  **20 MR. GIBBONS: That's what happens. 21 MR. WHITE: This is Chuck White. I**  **22 think you have -- if the products were**

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## 1 manufactured before December 31, or before **2 January 1, 2015, and they didn't get 3 installed, I think you have a good case to**  **4 come and say look, we bought them, we shipped 5 them and they're all before that date. And we**  **6 didn't make July 31st. Sorry. We need a 7 little more time. They're probably going to**  **8 be interested. 9 MR. GIBBONS: Well I just want to**  **10 make -- I would like to say -- 11 MR. WHITE: But if you come to them**  **12 and say, I've bought a bunch of stuff that was 13 made January 1 of 2016, they're going to say,**  **14 sorry. 15 And this is going to pose a problem**  **16 to developers and builders and designers and 17 construction managers that on these longer**  **18 term programs, I designed it, we bid it and 19 it's going to be a while before it gets out**  **20 there. I may have designed when 13 was okay. 21 MR. GIBBONS: Yes. And I --.**  **22 MR. WHITE: And if it gets delayed**

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## 1 -- **2 MR. GIBBONS: I can tell you, all 3 the OEMs here --**  **4 MR. WHITE: -- and that's -- 5 MR. GIBBONS: -- had conversations**  **6 with some big developers -- 7 MR. WHITE: Oh I'm sure.**  **8 MR. GIBBONS: -- management -- 9 MR. WHITE: I'm sure.**  **10 MR. GIBBONS: -- trying to make 11 something about that exact thing.**  **12 MR. WHITE: And so that sets up the 13 contractor and all those folks in that chain**  **14 for a -- this is a change order discussion, 15 and nobody wants to have that discussion.**  **16 (Simultaneous speaking) 17 MR. GIBBONS: Especially not at the**  **18 end of a job. 19 MR. WHITE: No. Well, and so that's**  **20 a problem. And you are correct, they're going 21 to have to be educated that we have this time**  **22 frame when something has to happen. I can go**

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## 1 you a little better here, I need 100 units and **2 you have 80 of them with the right date. I 3 need 20 more. What do I do?**  **4 Am I updating 20 of the units on the 5 property to 14? So now I've got mismatched**  **6 install product, and the owner doesn't want 7 that. They want cookie cutter. So I think**  **8 there's -- 9 MR. GIBBONS: You'll be on the**  **10 Internet buying them. 11 MR. WHITE: I mean, just -- you**  **12 know, SEER 14 anybody? 13 (Laughter)**  **14 MR. WHITE: Anybody? 15 MR. GIBBONS: 13.**  **16 MR. ROCKY: We already know, Chuck, 17 you're going to go down the street to the next**  **18 manufacturer or distributor and say, have you 19 got ten units? Have you got ten units?**  **20 MR. WHITE: But the owner doesn't 21 want that.**  **22 MR. ROCKY: But that's what the**

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## 1 product's available. **2 MR. WHITE: I know, but the owner 3 wants the same brand, the same -- they want**  **4 the same everything, so their maintenance 5 people --**  **6 MR. ROCKY: Then they better buy 7 them early.**  **8 MR. RAWALD: Or they have to buy 9 them higher than what they otherwise would.**  **10 I mean, that's -- but that's -- those are some 11 realities that unfortunately, I can't do**  **12 anything about. 13 MR. MELCHI: This is Jon with HARDI.**  **14 I, you know, I understand the pressure. And 15 I agree that there's probably going to be**  **16 somebody pushing it but, you know, I think 17 when we settled 18 months sell-through was a**  **18 pretty substantial period of time. And we've 19 got to do it, fit it in within that scenario.**  **20 I used to live in a condo, and 21 coincidentally, every building in the condo,**  **22 each building had a separate air conditioner**

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## 1 from a different manufacturer, so it's **2 obviously whatever was on sale at the time. 3 I won't tell which one I'm in.**  **4 MR. EISNER: Thanks. You ready for 5 a 15-minute break? Get some fresh air.**  **6 (Whereupon, the foregoing matter 7 went off the record at 3:06 p.m. and went back**  **8 on the record at 3:25 p.m.) 9 MR. RAWALD: So, before people**  **10 leave, can you, Harvey has given me edits. 11 John Hurst has given me edits.**  **12 If anyone else has any written edits 13 to the brochure they think would be helpful**  **14 for us to work for next week, that would be 15 helpful.**  **16 So I don't know if it's helpful to 17 sit around and talk about the brochure as much**  **18 as if you have anything to write down, give it 19 to us before you leave today.**  **20 And then we could incorporate that 21 and make the brochure better for next week.**  **22 MR. MCCRUDDEN: I can give you an**

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## 1 oral one. This is Charles with ACCA. We **2 talked about a label and the label is changing 3 by January 1st. It may make sense to put that**  **4 label. 5 MR. RAWALD: The new one or the old**  **6 one or both? 7 MR. MCCRUDDEN: Both.**  **8 MR. RAWALD: Okay. 9 MR. MCCRUDDEN: Old label, new**  **10 label, region, region and sort of just because 11 if we're, this is for consumers and we're**  **12 looking at the customers to understand how 13 this works, it may make sense to help them**  **14 understand that if you're going to process 15 this label --**  **16 (Off microphone comments) 17 MR. MCCRUDDEN: It is. This label,**  **18 then that might be an easy one for now. 19 MR. RAWALD: Okay.**  **20 MR. MCCRUDDEN: I don't know if 21 there's space, but there's things that I would**  **22 take off. And I'll put that in there. But**

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## 1 I'll send you written. This one is a PDF or **2 a -- 3 MR. RAWALD: It's a PDF. We don't**  **4 even have a Word copy, so we have to go back 5 and work with some people to change it. But**  **6 it's fine. 7 If you could pencil any thoughts**  **8 before you leave that would be helpful, but if 9 you want to email me, that's fine, too.**  **10 MR. EISNER: Anything else anybody 11 wants to raise orally on that? Okay then we**  **12 probably should go on next to prohibited acts. 13 Folks said there was some more stuff we might**  **14 be able to get out. 15 MR. RAWALD: Right, so Gary**  **16 specifically asked to readdress the issue vis 17 a vis the distributors, and I know that**  **18 overall folks had not really engaged with the 19 idea of adding a prohibited act for the**  **20 dealers and contractors. 21 So I guess we can explore that for**  **22 the rest of the time we have here today if**

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## 1 folks want to. **2 MR. FENSTROM: Tim is our 3 spokesperson.**  **4 MR. BALLO: All right, so I don't 5 know where to start with this. I guess we do**  **6 see value in having a prohibited act up and 7 down the chain, not just taking everything**  **8 over to the manufacturers. 9 Absent a prohibited act, I think it**  **10 sort of forces us to emphasize the routine 11 violation because it's the only way we have to**  **12 police this, to lower the threshold for what 13 gets qualified as routine to encourage**  **14 movement towards the death penalty. 15 And I guess just to look at the**  **16 contractor level we've decided or we have on 17 the board that if you violate as a contractor**  **18 you can remediate. 19 And that will be taken into account**  **20 in determining whether you are routine, so 21 what is having a prohibited act for**  **22 contractors add?**

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## 1 To my mind at least it adds the **2 potential for a $200 fine if you don't 3 remediate. If you choose not to remediate you**  **4 say well that was a one off. 5 I'm not going to do it again. I'm**  **6 never going to get classified a routine 7 violator. I'm pretty comfortable I wouldn't**  **8 be caught again. 9 The possibility of a $200 fine**  **10 particularly as a vehicle for steering the 11 contractor towards remediation, takes care of**  **12 the customer. 13 The $200 goes away. I think we see**  **14 value in that. But it's also the issue of, I 15 guess I have concern that absent a prohibited**  **16 act that there's no public finding that 17 there's been a violation.**  **18 And I understand the reasons for 19 that. I'd rather deal with those reasons,**  **20 which I understand is the concern. 21 Up the chain people would get**  **22 nervous. I'd rather deal with that in some**

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## 1 other way than keeping the violation a secret **2 just because as efficiency and consumer 3 advocacy at the table, we've still been**  **4 talking to them. 5 We have concerns about how do we**  **6 know this is actually being enforced. If 7 violations are happening, they're being found**  **8 and it's kept a secret, all we basically have 9 is we can go to Doug and say Doug is this**  **10 being enforced. 11 And he could say yes. That doesn't**  **12 make us feel comfortable that this is, that we 13 actually have an effective enforcement or team**  **14 operating on the ground. 15 Having that record that there were**  **16 violations found at least does give us more 17 confidence about that.**  **18 At the distributor level it seems to 19 me just an issue of fairness, that if**  **20 contractors, if manufacturers have skin the 21 game distributors should do.**  **22 I say that, and I don't want to make**

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## 1 more about this issue than it needs to be. I **2 think it's so rare that a distributor could 3 ever get tripped up in this, would ever be**  **4 stupid enough to participate in what amounts 5 to almost a conspiracy to get product**  **6 installed in the wrong regions. 7 I almost would say that it's fine**  **8 for us to just agree to disagree on this point 9 and not take up the workgroup's time with it.**  **10 But I just want to get it out there 11 that we do not agree that there should not be**  **12 a prohibited act for distributors. Anyone 13 else want to jump in?**  **14 MR. FENSTROM: Well, this is Gary. 15 So I have something to add that you talked**  **16 about with respect to the settlement agreement 17 and the possibility, if not likelihood, that**  **18 the settlement agreement exempted distributors 19 from being subject to prohibited acts.**  **20 So if I understand the wording 21 correctly, that all has to do with violations.**  **22 It does not have to do with record keeping, so**

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## 1 we might want to see the record keeping aspect **2 of violations be subject to prohibited acts 3 for distributors.**  **4 And in a way that might be more 5 troublesome and onerous because of**  **6 administrative glitches that are sure to 7 happen in record keeping than actually just**  **8 accepting violations as a prohibited act from 9 the distributors' prospective.**  **10 Now we heard the intent of the 11 meeting of distributors and how they came to**  **12 the recommendation and the settlement 13 agreement.**  **14 But nonetheless it's entirely 15 possible that the importance of avoiding**  **16 record keeping violations would not be subject 17 to being deemed a prohibited act.**  **18 MR. RAWALD: And so, and Gary this 19 is Doug. I want to read you the exact**  **20 sentence from the policy statement we issued 21 in light of the settlement.**  **22 After consideration of the comments**

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## 1 received to date, so that's important. It was **2 based upon information we had then which could 3 be different over time, which is missing.**  **4 DOE will not assert civil penalty 5 authority for a violation of the regional**  **6 standard for central air conditioners as 7 defined in 10 CFR Part 430 over parties that**  **8 are distributors as defined by EPCA. 9 So that's the sole universe of what**  **10 we said. So I think what you're saying is 11 that covers for violation of the standard but**  **12 doesn't cover for failure to produce records 13 when requested by the Department. Is that**  **14 what you're saying? 15 MR. FENSTROM: Yes, the suggestion,**  **16 did we want to get into really parsing the -- 17 MR. BALLO: And not to say that**  **18 there isn't authority for the Department to 19 get records that it needs.**  **20 It obviously has the subpoena power. 21 It just seems to me that having the prohibited**  **22 act sort of makes it an easier process to get**

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## 1 the records because you don't have to have **2 that extra step of getting the subpoena or 3 potentially having to enforce that.**  **4 The Department can sort of do the 5 enforcement of the civil penalty in house.**  **6 MR. RAWALD: Right, so this is Doug. 7 And so I guess I can only give you the**  **8 database pull that we've done. And so, 9 certainly it's easier from a performance point**  **10 of view to hold it ourselves. 11 And so if we have the penalty**  **12 authority, we're able to act upon it rather 13 than relying upon the Department of Justice to**  **14 go to the federal court to get an order that 15 then is not obeyed or some attempt to action**  **16 by the court. 17 So it's obviously an easier process.**  **18 To date, in the defense of distributors, any 19 time we've subpoenaed the distributors, they**  **20 have given us documents in any case. 21 And we have subpoenaed at least a**  **22 sample size large enough of distributors that**

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## 1 I could say that that's been the practice. **2 So there at least is some value to 3 what Jon and Steve have told us has been the**  **4 distributors' role, comply because they don't 5 want to go to court over this.**  **6 But I do understand what you're 7 saying, and so this is, I understand both**  **8 sides of the argument. 9 MR. FENSTROM: So this is Gary. So**  **10 for us to reach consensus there needs to be 11 significant enough consequences of violations**  **12 that we're comfortable key stakeholders would 13 simply wish to avoid the consequences and**  **14 comply with the regulations. 15 MR. RAWALD: Well, one thing I've**  **16 heard him say is that part of it, concern 17 about a prohibited act for contractors and**  **18 dealers would be that would be the trigger by 19 which the violation being investigated and**  **20 found would be public. 21 So if we were to agree as a group to**  **22 make that process, make that resolution**

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## 1 public, posted in a finding of routine **2 violation, what if it's an individual 3 violation?**  **4 That way it's seemingly alleviating 5 some of that concern. The question is whether**  **6 the group will be amenable to that at all. Is 7 what I'm hearing, too?**  **8 MR. BALLO: That's certainly a 9 possibility, I think especially talking to the**  **10 consumer advocates. They really want to do 11 what we can do steer towards remediation for**  **12 the consumer. 13 So I think that's the number one key**  **14 thing they want out of this process. To me, 15 having the $200 out there, if you don't do**  **16 that, it's not going to make a huge 17 difference.**  **18 But it will encourage that step by 19 the contractor, so I think that's the more**  **20 important motivation for us at least in the 21 contractor level to seek a penalty.**  **22 MR. RAWALD: So just as an observer**

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## 1 of single companies and how they -- **2 (Off microphone comments) 3 MR. RAWALD: -- one question I**  **4 always ask myself is, are people who are 5 committing violations building in the cost of**  **6 paying for the violation to the cost they pass**
**7 on to consumers. 8 So that's the one thing I do want to**  **9 I guess have the consumer folks thing about, 10 maybe you can ask Charlie to think about that.**  **11 Is it more likely that a contractor 12 would then build that $200 expense into his**  **13 bid for a job knowing that that's what he's 14 going to have to pay if he gets caught.**  **15 And if he doesn't get caught, well 16 then he has an extra $200. And so he's**  **17 winning out. I don't know. I just want to 18 make sure people think about that.**  **19 MR. FENSTROM: So, this is Gary, I 20 can't speak for the trade, but I can certainly**  **21 reason that competitive pressures would make 22 trying to cover that in every case difficult.** 

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## 1 MR. ARNOLD: Yes, this is something **2 that may not carry any weight because I 3 realize we got to follow the rule.**  **4 But the reality is we monitor social 5 media. We have people that monitor social**  **6 media. We have a Facebook page. We monitor 7 Angie's List.**  **8 I'm sure all our competitors do, 9 too. I'm sure all the major contractors, even**  **10 smaller contractors. There's so much pressure 11 now, pages that have reviews of product.**  **12 I mean the second we found out that 13 somebody's tagged us, a Maytag, a Westinghouse**  **14 unit that we produce, on social media, we will 15 be all over that.**  **16 We'll make that consumer whole that 17 day. We'll figure out who to get the money**  **18 from later if we have to, the contractor, but 19 we don't want to be associated with that**  **20 contractor. 21 That contractor will be on Angie's**  **22 List or whatever as well. I mean you always**

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## 1 talk about the really fly by night people **2 because with social media that media is 3 probably the most powerful enforcement for**  **4 anything once it's made public. 5 If it's not public, I think it**  **6 probably eventually will. If the owner finds 7 out, and they say to their neighbor hey I**  **8 bought this unit. 9 We'll get tagged with it, once it's**  **10 Maytag unit or I bought this care unit and it 11 turned out it wasn't what I paid for. I got**  **12 ripped off. 13 And Joe Blow installed it. They'll**  **14 be on some social media site almost 15 immediately, and it'll spread. And nobody's**  **16 going to want that. 17 We have people monitor those.**  **18 There's HVAC blogs with the trade monitors, 19 and like I said, we monitor those. I mean we**  **20 go fix those problems real quickly. 21 MR. DORIA: To your point, this is**  **22 Jordan. I think it brings up two important**

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## 1 points. One is you said there is sort of **2 external compliance of A in the form of social 3 media.**  **4 But the other is, are we kidding 5 ourselves and saying that a violation against**  **6 a contractor is actually not going to be 7 public regarding of what the Department does.**  **8 That I think is a bigger question. 9 I don't know. It sounds like what you're**  **10 saying is at least for a significant portion 11 of them, it would eventually become**  **12 effectively a matter of public knowledge. 13 MR. ARNOLD: How about think if you**  **14 spent $3000 for a system, and you find out 15 that now DOE or somebody's contacted you,**  **16 either DOE or us as a manufacturer, somebody 17 and said hey Mr. and Mrs. Jones, you didn't**  **18 get what you paid for? 19 Wait a minute. What? I just paid**  **20 $3000 for this. What do you mean? Where's my 21 iPad? This is not right.**  **22 It doesn't matter who's at fault at**

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## 1 that point. They're not going to care. **2 They're not going to know if it was the 3 contractor picked up the wrong unit, if he was**  **4 a bad contractor or a bad distributor or bad 5 manufacturer.**  **6 They won't know, and they won't 7 care. They know they paid $3000 --**  **8 MS. MEYERS: I mean what are they 9 going to do?**  **10 MR. ARNOLD: -- for this Maytag, 11 Carrier or Rheem unit.**  **12 MS. MEYERS: They're going to call 13 1-800-RHEEM.**  **14 MR. ARNOLD: They'll write us, and 15 then our people, all of us will be like take**  **16 care of this homeowner I mean like now. 17 MR. RAWALD: So the one point that**  **18 Amy brought up before that I think is only 19 worth noting is that at least she puts forward**  **20 the hypothesis, which I think is some value to 21 that, that sometimes homeowners are going to**  **22 be complicit in getting less than the standard**

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## 1 because they want to pay less. **2 And so if the contractor says well, 3 I have a 13 SEER. It's going to be $1000**  **4 less. I'm not supposed to give it to you, but 5 I'm willing to do that, so it's always that**  **6 scenario as well that we have to keep in mind. 7 It's not always the homeowner did**  **8 get what they paid for because they got 9 exactly what they paid for, so just put that**  **10 out there. 11 MR. SACHS: Doug, this is Harvey,**  **12 and I've tried to give sort of round numbers 13 of the cost of the energy used.**  **14 We've never talked to the part for 15 competitive reasons, anti-trust reasons about**  **16 the differential and the cost between the 13 17 and 14s.**  **18 And I do not believe that a $1000 19 differential would ever represent a cost**  **20 difference to the contractor. 21 It may well represent a very**  **22 different feature set, amenities that are also**

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## 1 incorporated, or it may be a question of the **2 contractor pricing to perceived value. 3 But at the commodity level, I think**  **4 the DOE's analyses, common sense would 5 indicate that a single stage 14 is not that**  **6 different from a single stage 13. 7 MR. RAWALD: Right, and I hear you**  **8 Harvey. I just said $1000 as a media graphic 9 example, not to indicate the actual difference**  **10 in the two. 11 MR. SACHS: And I just wanted to**  **12 make sure that that wasn't the metaphor that 13 got planted in all our minds.**  **14 MR. RAWALD: Okay. I understand 15 that. So the delta is different than what I**  **16 put out there for illustrative purposes. 17 MR. SACHS: And I think the comment**  **18 was made. An overwhelming fraction of the 19 installs today in one state in the deep south**  **20 are 14s, of which that just in Texas in which 21 I take back the end level cost, can't.**  **22 It's a terribly significant cost.**

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## 1 I'm just saying this is a bound on the **2 incentives to cheat and one of the things that 3 may make us feel that it's less common. I**  **4 feel that's it going to be less common. 5 MR. RAWALD: So I guess as I see it**  **6 we have three issues, right. So we have the 7 imposition of a prohibited act on distributors**  **8 for the violation of the statute itself by 9 doing the things that we consider violations**  **10 on the board. 11 We have the imposition on**  **12 contractors and dealers for committing these 13 things on the board, and then the imposition**  **14 on any of these parties for failing to comply 15 with the record request from the Department.**  **16 That seems to be three acts that I'm 17 hearing from the advocates. Is that correct?**  **18 MR. BALLO: Yes. 19 MR. RAWALD: Okay.**  **20 MS. MEYERS: This is Karen with 21 Rheem. Are you including the, an additional**  **22 prohibited act against manufacturers for**

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## 1 record retention? **2 MR. BALLO: I think there already is 3 one.**  **4 MR. RAWALD: Right, so we already 5 have an existing prohibited act with**  **6 manufacturer records. 7 MS. MEYERS: So you do?**  **8 MR. RAWALD: Yes, it's already part 9 of our standard operating procedures, so I**  **10 don't think that's an issue. 11 MS. MEYERS: For business record**  **12 retentions? 13 MR. RAWALD: Well --**  **14 MS. MEYERS: I don't think that's 15 correct.**  **16 MR. RAWALD: So the prohibited act 17 worded in that is pretty broadly, and anything**  **18 we ask for from, and I think it's beyond 19 simple tech reports. But I have to go back**  **20 and look at it, so that's all I would about 21 the regulatory text because we actually think**  **22 that are broader than that than simply just**

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## 1 data. **2 So it would be a 10 CFR 3 429.102(a)(1) would be the prohibited act I'm**  **4 referring to. 5 MR. MCCRUDDEN: Scary.**  **6 MR. RAWALD: What? 7 MR. MCCRUDDEN: That you just pulled**  **8 that number out of the sky. 9 MR. RAWALD: Well, unfortunately we**  **10 live in a world where I have to do these 11 things, right?**  **12 So that's the reality of my job, 13 which goes to show you how actually important**  **14 that particular prohibited act might be and my 15 ability to respond to information requests.**  **16 MR. MCCRUDDEN: I think Tim found 17 it, and it was useful.**  **18 MR. MELCHI: This is Jon with HARDI, 19 and it's surprising in view of Tim, Gary and**  **20 I have a different interpretation of the 21 broadness of our settlement agreement.**  **22 I want to reiterate Doug's point**

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## 1 that to date that distributors have the good **2 record in complying with requests from DOE. 3 I think it's safe to say that**  **4 manufacturer and distribution agreements, 5 which are the cornerstone of a lot of these**  **6 relationships are likely to include and 7 require distributors to do things.**  **8 That'll vary for manufacturing 9 distributor, but I don't view, I got a tough**  **10 time with this. 11 MR. MCCRUDDEN: This is Charlie with**  **12 ACCA. On the issue of the prohibited act 13 about record keeping, it just gets tacked on**  **14 the system. 15 That's not really my fish bowl. It**  **16 feels tacked on because there's a gap. I 17 think we have to respect the settlement**  **18 agreement. 19 And I think that when you**  **20 characterize it as some people, I think you 21 are capturing people who were on the**  **22 settlement agreement, who signed the**

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## 1 settlement agreement and say that now there **2 are notes. 3 That's tricky because there's a lot**  **4 that went into that and then to, I don't know 5 if those folks are now saying not to put this**  **6 in agreement. 7 I can't say that. But to go after a**  **8 record keeping violation with certain 9 penalties feels almost arbitrary.**  **10 MR. FENSTROM: This is Gary. I 11 think it's a matter of consistency and equity**  **12 and perception. 13 So the argument against it is hey,**  **14 we've been good citizens. We've exercised 15 good behavior. We don't need a regulation**  **16 because we're behaving properly anyway. 17 On the other hand, to give the**  **18 efficiency advocates confidence, we think 19 there needs to be some regulatory authority.**  **20 And if you're doing it anyway, what 21 difference does it make you see. So that**  **22 argument comes up often.**

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## 1 MR. MELCHI: Gary, this is Jon from **2 HARDI. This morning we talked a little bit 3 about the costs at cost of these record**  **4 keeping requirements. 5 Harvey's $21 difference, $17 to $21**  **6 difference that you cited is blown out of the 7 water by the $10 million plus that this record**  **8 keeping requirement is going to cost my 9 members immediately per year.**  **10 And it's a significant cost, which 11 in truth probably costs more to my members**  **12 than the energy savings that would be 13 hypothetical. And it's just onerous.**  **14 MR. FENSTROM: And I, correct me if 15 I'm wrong, but is not record keeping already**  **16 stipulated and we're just discussing whether 17 failure to do so would be a prohibited act and**  **18 could result in a $200 penalty? 19 I don't think we're discussing**  **20 whether record keeping is or is not already 21 agreed to.**  **22 MR. RAWALD: Right, I thought the**

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## 1 general consensus is that everyone agreed **2 there's going to be record retention 3 requirements of some sort.**  **4 I think what Jon's saying is hey, 5 we've already put skin in the game. This idea**  **6 that putting us at risk for this $200 whole 7 penalty is not a necessary one.**  **8 You have to understand that we're 9 already going to bring so much more to the**  **10 table by agreeing to the records retention. 11 I think that's what his point was if I**  **12 understood correctly. 13 MR. MELCHI: Yes.**  **14 MR. FENSTROM: Well, I'm still not 15 --**  **16 MR. MELCHI: Well, let me take a 17 different tactic.**  **18 MR. FENSTROM: I'm still not getting 19 it, so I want to better understand Jon's**  **20 point. 21 MR. MELCHI: Well, I'll just be**  **22 quite frank with you is that our members, in**

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## 1 order to sign this, did not want to be **2 assessed civil penalty under anything. 3 So, and that was, and a lot of that**  **4 had to do with, to Chuck's point earlier I got 5 caught onto that because I hear it from my**  **6 members all the time about who can regulated 7 in this sort of space.**  **8 And it was key to us. We do not 9 want to be penalized by DOE regarding**  **10 enforcement of this standard. It was a key 11 thing for us.**  **12 MR. FENSTROM: So our perception is 13 there may be some room for different**  **14 interpretation in the settlement agreement 15 around record keeping.**  **16 And we intend to explore that. It's 17 not that we're so much interested in penalties**  **18 for failure to keep records properly. 19 We're really interested in**  **20 prohibited acts having to do with violations, 21 but the fact that this door may be partially**  **22 opened would cause us to ask you to rethink**

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## 1 how you feel about prohibited acts for **2 violations given that we might be able to 3 implement prohibited acts for record keeping.**  **4 MR. SACHS: Jon, I just, this is 5 Harvey. And I very much understand where you**  **6 all are coming from. I just want to make sure 7 that we're talking the same basis of**  **8 arithmetic, the $21, $17 to $21 very crude 9 estimate, order of magnitude, was per consumer**  **10 for a year. 11 So it's a much larger number over**  **12 the lifetime. And how that compares with your 13 numbers depends on how much of your costs are**  **14 implementation of ERP changes versus ongoing 15 costs.**  **16 Hard to believe that the $10 million 17 we did onboarding costs, but I don't know the**  **18 inside of your business. But in any event, I 19 don't think it's a question of $21 versus $10**  **20 million. 21 It's very much, even the cost**  **22 benefit is very much dependent on the number**

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## 1 of units involved. **2 When you get into a few hundred 3 thousand units that were sold as 13s versus**  **4 14s, then the numbers are pretty much 5 complementary.**  **6 MR. FENSTROM: This is Gary again. 7 MR. SACHS: Let Jon respond, Gary.**  **8 MR. MELCHI: I'm not going to 9 quibble math with you Harvey. I just said a**  **10 number. You crudely said something. I 11 crudely said something.**  **12 I appreciate that. It's a 13 substantial cost. Listen, I don't know how to**  **14 be, our interpretation of us this is one 15 thing. Your guy's is another.**  **16 MR. SACHS: That's the key issue. 17 MR. MELCHI: And I think it's a**  **18 different interpretation than we've had. And 19 I chuckle at the term fairness from Tim**  **20 because it's not fair. 21 And part of the reasons we have this**  **22 settlement is that my members didn't get a say**

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## 1 in the development of this standard and we're **2 tasked with absorbing a substantial cost 3 because of that.**  **4 And there was a settlement agreement 5 to help remedy that. And now six months later**  **6 people that got a say in the development of 7 the standard are telling us that we have a**  **8 different interpretation of this, too. 9 So you're excluded from the**  **10 rulemaking process, and an agreement that we 11 had, six months later is no longer good.**  **12 MR. FENSTROM: This is Gary. Tim 13 indicated, and I believe it's true, that any**  **14 action against distributors is going to be 15 extremely unlikely because of all the other**  **16 things. 17 If there's something lacking in the**  **18 settlement agreement, it doesn't seem to me to 19 be unfair that we take a look at it with**  **20 respect to getting all the traction we can 21 with this.**  **22 MR. DORIA: This is Jordan. I want**

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## 1 to say, I mean I think it's reasonable to have **2 different interpretations, perhaps, of the 3 actual language.**  **4 I think what the intent was, was 5 pretty clear. I don't think we're going to**  **6 resolve these differing interpretations. 7 In fact, I'm quite sure we will not.**  **8 So I guess what I would ask is with that being 9 so clear, let's instead ask how important is**  **10 having a prohibited act for distributors to 11 creating an effective enforcement plan.**  **12 And I will just give you my opinion, 13 which is we made a lot of progress towards**  **14 that. I can believe we also agree that there 15 are other areas where we may be able to push**  **16 that wouldn't necessarily run afoul of 17 something.**  **18 And that maybe we should talk more 19 about what are those other things that could**  **20 help us make this effective and part of the 21 plan instead of what may not be the 11th hour**  **22 but like the 10th potentially really take a**

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## 1 few steps backwards. That would be my **2 concern. 3 MR. FENSTROM: So --**  **4 MR. EISNER: Meg, did you want a**
**5 turn? 6 MS. WALTNER: Well, so I was just**  **7 going to add, I think the part of this that I 8 find most concerning and sort of my desire for**  **9 some sort of prohibited act has to do with 10 this idea that you could have a contractor**  **11 that was a routine violator and then a 12 distributor knowingly selling to that**  **13 contractor and then also needing to be caught 14 as a routine violator before anyone is**  **15 penalized. 16 And then that all comes up to the**  **17 manufacturer. That a distributor could be 18 knowingly selling to a contractor that's on a**  **19 list of do not sell to this contractor. 20 They are a routine violator and**  **21 essentially have no penalty for that -- 22 MR. MELCHI: I think we talked about** 

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## 1 there was a penalty out there that was pretty **2 substantial if DOE were to find that there 3 were, if a distributor was routinely and**  **4 knowingly violating. 5 MS. WALTNER: Right, but it's a**  **6 second time they have to catch a routine 7 violation.**  **8 MR. RAWALD: Yes, what I hear Meg's 9 point being is their concern is that in order**  **10 for the distributor to really feel any sort of 11 concern, there has to be first be a full**  **12 investigation of the contractor and dealer, 13 finding the violation, which is lengthy**  **14 process of sorts and then observation and 15 investigation of a distributor, them being**  **16 involved with that person on a regular basis 17 before their distributor actually would feel**  **18 any heat for their action. 19 I think that's what I'm hearing her**  **20 say. So, which is a fact that it's a two 21 stage process for the distributors unless we**  **22 have the distributor knowingly selling to an**

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## 1 individual. And then that's a one stage **2 process. So I hear that. I do. 3 MR. WHITE: This is Chuck White.**  **4 Can I ask how does $200 make you feel better? 5 That's the penalty they're going to pay. How**  **6 does that make you feel there? 7 MR. BALLO: So --**  **8 MR. HUNGERFORD: Well, ideally they 9 wouldn't be just doing it. They wouldn't be**  **10 paying a penalty because they wouldn't have 11 violated it.**  **12 MR. WHITE: If you want that because 13 you need to bring up in an act and DOE and**  **14 maybe it's not $200, but for the sake of our 15 current discussion, what is the prohibited act**  **16 is really looking to do is assess civil 17 penalties against you of $200.**  **18 MS. WALTNER: For a violation. 19 MR. WHITE: How does it make you**  **20 feel better? How does that change anything? 21 MR. MCCRUDDEN: That's $200 for not**  **22 keeping records.**

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## 1 MR. FENSTROM: So this is Gary. **2 We're not really so much after the records as 3 we are after the installation violations.**  **4 It just so happens that there may be 5 a weakness in the settlement agreement around**  **6 the records. And that's why we're addressing 7 that.**  **8 Your question is how does $200 make 9 us feel better. In either case, well, $200**  **10 isn't much. Let's face it. 11 Let's turn the question around. How**  **12 does $200 make the distributor feel so 13 concerned that they have to be exempted from**  **14 this prohibited act and civil penalty. 15 It's a catch-22. It seems like the**  **16 efficiency advocates are put in a position of 17 having the consequence of violation either be**  **18 a very extreme outcome where the manufacturers 19 might not any longer be able to sell to them,**  **20 which would effectively put them out of 21 business or nothing.**  **22 And we'd like to see some little**

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## 1 consequence in between so we don't have to **2 rely on such an extreme consequence. 3 And we hope that would be enough not**  **4 to find a lot of violations and do a lot of 5 penalties but just to give us confidence that**  **6 behavior would be discouraged. 7 MR. MELCHI: This is Jon with HARDI.**  **8 I think Doug had mentioned this yesterday. 9 We've talked over and over again about the**  **10 threat of going, of fighting a subpoena from 11 DOE and providing those records is motivation**  **12 enough. 13 I think there are a lot of things**  **14 that are going to happen within the channel 15 with our manufacturing partners that would**  **16 alleviate a lot of your concerns. 17 I don't know that they all need to**  **18 be in a regulation. 19 MR. BALLO: Well, okay. Let me**  **20 address what I think is my main concern with 21 that civil penalty or the prohibited act of**  **22 failing to provide records.**

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## 1 It's that DOE has the resources to **2 do, we've heard, a few dozen enforcement 3 actions a year. I want to do everything I can**  **4 to make sure they can commit the least amount 5 of resources to getting the records that they**  **6 need. 7 So is there something that's**  **8 non-regulatory that potentially gives us the 9 assurance that DOE can just send you an email**  **10 that says please give me the records and they 11 get the records.**  **12 We don't have to go through the 13 subpoena process to have to necessarily**  **14 enforce that. 15 MR. MELCHI: Yes.**  **16 MR. BALLO: But I don't know what 17 that is.**  **18 MR. MELCHI: This is Jon from HARDI. 19 I mean the only thing I can tell you is we do**  **20 have a track record here. It's not had to 21 have been used to date.**  **22 Again, if this is somehow written in**

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## 1 as not a prohibited act of the records that **2 we've discussed, I can guarantee you that 3 every manufacturer is going to have into their**  **4 distributor agreements the need to comply with 5 regional standards or applicable federal laws.**  **6 They already have that in the 7 agreements today. They're going to comply.**  **8 I don't know what more we can tell you. 9 We have a track record of complying.**  **10 We're going to work with our manufacturers to 11 comply will be a part of the agreements that**  **12 my members have. 13 There's a substantial cost to not**  **14 complying in that you will be going to court, 15 and it will become, if they have to go to**  **16 court and start getting records and at that 17 becomes public records, which all of these**  **18 manufacturers and the entire industry would 19 know.**  **20 I mean those are pretty substantial 21 things, Tim.**  **22 MR. BALLO: Yes, but they're --**

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## 1 MR. MELCHI: But it's not just $200. **2 MR. BALLO: No, it's not that it's 3 $200. It's their time taking you to court**  **4 rather than just slapping you with the $200 5 penalty and moving on to something else.**  **6 MR. MELCHI: This would make a lot 7 more sense to me if we had a history of**  **8 non-compliance. 9 MR. FENSTROM: This is Gary. Since**  **10 you have a history of very high compliance, 11 why are you so --**  **12 MR. MELCHI: Because my members are 13 not interested in being penalized by DOE for**  **14 this regulation. 15 MR. FENSTROM: If they have a**  **16 history of very high compliance, they won't 17 be.**  **18 MR. MELCHI: And a lot of this has 19 to do with setting precedent and things down**  **20 the road. We trust Doug. 21 We think Doug and the Department**  **22 will do the right thing, but we can't trust**

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## 1 who's going to be in Doug's seat five years **2 from now, four years from now or three years 3 from now.**  **4 And that was part of the, listen. 5 Gary, I don't know what to tell you. That's**  **6 why we settled it. 7 MR. FENSTROM: Okay. So this is**  **8 Gary. Let me propose this temporary resolve. 9 We may choose in the end to agree to disagree**  **10 on this. 11 However, Jordan suggested that we**  **12 look at other things that are going on that 13 might mitigate our concern that we need**  **14 prohibited act and civil penalty here. 15 And I think in the meantime we'd**  **16 appreciate hearing all those things, and we'll 17 take them into consideration.**  **18 MR. MELCHI: This is Jon from -- 19 MR. RAWALD: Well, if I can jump in**  **20 here guys. I think we're pretty well 21 established the battle lines, at least on the**  **22 distributor.**

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## 1 We're all pretty clear on where **2 everyone stands, and I don't want to give 3 anyone, I want everyone to have the chance to**  **4 try to persuade one another. 5 It looks like we're pretty**  **6 unpersuadable at least on some issue of this. 7 So we kind of have a couple of things that we**  **8 could do, right? 9 We could vote on adding this**  **10 endeavor, and it seems they'll be some votes 11 for and some votes against. And there might**  **12 be three votes against it so that it won't be 13 added.**  **14 Or we can wait until we get to the 15 final term sheet. I think we're pretty close**  **16 now. My discussion with Laura is that we're 17 going to work on a final terms sheet here**  **18 based on how we've discussed this today for 19 bringing it up next week.**  **20 I think that we're very close to a 21 conclusion here. So I don't think there's**  **22 much further to kick the can down the road.**

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## 1 So either we could look at it when **2 we get to the whole package and say okay. 3 Yes, seeing the total package we can live**  **4 without it, or we can push it to a head today. 5 And so what I'm hearing from Gary is**  **6 let's see what else is going to be in this 7 whole package, and then if we're okay with**  **8 that, then we're content to let it be known 9 that we don't like it.**  **10 But we'll live with it for the deal, 11 or we don't like it. And so we're not going**  **12 to be able to get anywhere because we won't 13 cut a deal without this portion. And then**  **14 we'll have to go back and readdress it. 15 MR. BALLO: Well, I guess there's a**  **16 third option which is we vote in support of 17 the total package but continue to oppose this**  **18 aspect of it, and it's kicked to DOE to make 19 a decision up or down on prohibited acts,**  **20 which I'm fine with doing that. 21 I just, I will not sign on to not**  **22 having prohibited acts up and down the board.**

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## 1 MR. DORIA: Tim, this is Jordan. **2 You say up and down the board. You mean for 3 all three parties?**  **4 MR. BALLO: Yes. 5 MR. DORIA: And there's nothing that**  **6 can be done to change that, at least for 7 distributors?**  **8 MR. BALLO: Not that there's nothing 9 that can, I haven't heard what could be done**  **10 yet that would take that off the table. 11 MS. MEYERS: Is there like, so this**  **12 is Karen with Rheem. So to Jordan's point, is 13 there a death penalty option or a nuclear**  **14 option that we can put in there for 15 distributors that's more than what's in there**  **16 today? 17 Or we could find what number of**  **18 violations is for distributor differently than 19 how we've kind of talked about it for**  **20 contractors, just some ideas that can we add 21 additional requirements for distributors such**  **22 as annual compliance statements that they have**

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## 1 to submit to DOE or something like that to **2 just get some more ideas on the board to try 3 and move this forward.**  **4 MR. RAWALD: Well, I guess in 5 Karen's vein, so one of the two violations for**  **6 distributors is the routine violation of 7 selling to somebody who's on the list.**  **8 Do we want to make it just a one or 9 a two time? Hey, if distributor, if you deal**  **10 with somebody on the list, that's a violation. 11 Do we want to lower that threshold to make it**  **12 so Meg's two tier approach is less concerning 13 because the second tier is easier to achieve?**  **14 So once the dealer is copied on the 15 list, the distributor has got to stay away**  **16 from them. And if they, I mean if they 17 unknowingly do it, that's different then.**  **18 But if they knowingly go ahead and 19 deal with the person then even the one time**  **20 affair is enough that the manufacturer should 21 be careful of the distributor. That's a**  **22 possibility to put out that.**

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## 1 MR. FENSTROM: So this is Gary, **2 following Jordan and Karen's suggestions that 3 we explore alternatives, I think we're open to**  **4 considering all of those alternatives. 5 But for the moment, we need**  **6 something more than what we've got. And it 7 won't cause us not to reach consensus. There**  **8 might be just one issue where, again, we agree 9 to disagree.**  **10 MR. SACHS: I have one factual type 11 question. Before that I strongly endorse the**  **12 path Jordan has suggested and Karen has 13 amplified.**  **14 And the question really is to Jon, 15 do we have some sort of an estimate of what**  **16 fraction of total air conditioner shipments 17 are represented by HARDI members?**  **18 If the contractor -- 19 MR. EISNER: Can you speak up? I**  **20 didn't hear the last part of that sentence. 21 MR. SACHS: What fraction of the air**  **22 conditioner shipments are handled by HARDI**

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## 1 members? **2 Or let me put it this way, are not 3 handled by HARDI members or manufacturer-owned**  **4 distribution, because with the contractors 5 we've worried about the rogues.**  **6 We haven't worried about Chuck and 7 Charlie's members. Our mental image has been**  **8 the fly by night. 9 And is there an analog in**  **10 distribution among people who are not John 11 Hurst types and not your independent members?**  **12 I just don't know. 13 MR. MELCHI: Yes, I couldn't give**  **14 the number. I think the folks, the 15 manufacturers would probably have a better**  **16 idea. And that's history of dealing with very 17 small --**  **18 MR. SACHS: Very small means 5 19 percent, 10 percent but certainly not 25**  **20 percent? 21 MR. MELCHI: I would think that for**  **22 sure. I think where the challenge, I mean**

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## 1 it's hard to pinpoint because what you're **2 talking about may not really be a distributor 3 in the sense that we call a distributor.**  **4 It could be somebody else. So 5 again, I can't give you a percentage.**  **6 MR. SACHS: Again, it's something 7 that affects my mental image of the industry,**  **8 and I appreciate it. 9 MR. EISNER: Jordan, did you want to**  **10 say something? 11 MR. DORIA: Well, I was just going**  **12 to say I was actually thinking along the line 13 of what Doug said before because actually when**  **14 Meg made her comment I realize that I probably 15 didn't fully understand maybe what that**  **16 violation of a distributor is, that right now 17 as it's written, a distributor could sell to**  **18 somebody who has been deemed a routine 19 violator at least once.**  **20 Is that correct, Gary? So I think 21 as a general point, I'm inclined to say we**  **22 should try and find ways to prevent that.**

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## 1 I mean if you're already been deemed **2 a routine violator, that means it's in public 3 record. I think we should try to work toward**  **4 that. 5 I think where Jon, chime in on this,**  **6 what I'm trying to understand is the concern 7 there that there are these cash, over the**  **8 counter, no account people for whom you would 9 not be looking at their license to cross**  **10 reference it with the list. That's the 11 concern?**  **12 MR. MELCHI: Yes. 13 MR. DORIA: Okay.**  **14 MR. MELCHI: That's a scenario that 15 could come up.**  **16 MR. DORIA: Yes. 17 MR. MELCHI: I think what we're**  **18 doing prevents an awful lot of that. 19 MR. DORIA: I guess what I'm trying**  **20 to get at is there a way to maybe work that in 21 then somehow because that's not the majority**  **22 of the business, right?**

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## 1 MR. MELCHI: And if we assume that **2 the actual routine violators are going to be 3 such a small percentage of people.**  **4 MR. HUNGERFORD: And this is David 5 Hungerford. I'm not as concerned about the**  **6 issue of the reaching violators because as you 7 point out, they're going to be a very small**  **8 percentage of the population because they're 9 so few prosecutions or actions that will take**  **10 place compared to the market size. 11 I'm more concerned about the first**  **12 bullet, the idea of a distributor who can move 13 a truckload of products to a job site in an**  **14 area that the equipment in that trailer is not 15 compliant for that area.**  **16 And right now there's no harm that 17 the distributors can suffer for violating**  **18 that. 19 And that's what seems to be, that's**  **20 where my sticking point is, that the 21 manufacturers can't do these things. And they**  **22 can be punished if they do.**

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## 1 The contractors cannot do these **2 things, but they can be punished if they do. 3 But the distributors cannot be punished for**  **4 knowingly moving product into the wrong area. 5 And that's fundamentally where my**  **6 concern is, and I understand what the 7 settlement agreement says.**  **8 MR. MELCHI: I guess also my members 9 would say it is not illegal for me to move**  **10 product into that region. It's an install. 11 (Simultaneous speaking)**  **12 MR. HUNGERFORD: If it's delivered 13 to a job site, it's not unreasonable to expect**  **14 that they will be installed at that job site. 15 MR. MELCHI: And that would trigger,**  **16 and that sort of conduct from what we 17 understood could trigger a violation which**  **18 would result in that distributor being cut 19 off. Correct?**  **20 MS. MEYERS: Only if you were found 21 routine.**  **22 MR. MELCHI: If we were found**

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## 1 routine. I mean so -- **2 MR. WHITE: But excuse me. If it's 3 a truckload of equipment it's going to be**  **4 routine because each unit on the truck counts**
**5 as one. 6 MR. MELCHI: Yes. They're cut off.**  **7 MR. WHITE: So you're going to be a 8 routine violator for the first time, and**  **9 you're out of business. 10 MR. BALLO: That's the best solution**  **11 for you because to me that doesn't seem like 12 the best solution because I hate to put**  **13 someone out of business for something that 14 happened one time, even if it was a truckload**  **15 of equipment. 16 It could've been somebody screwed**  **17 something up. 18 MR. MELCHI: Well, and I thought**  **19 that as we discussed with Charlie and Chuck, 20 there are things I think we didn't get to how**  **21 a distributor could remedy a violation. 22 We talked about how a contractor** 

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## 1 could remedy a violation. I think there's **2 ways that distributors could make good on 3 violation if something happens.**  **4 I was thinking about this at lunch. 5 You have a counter guy who screws up. Okay.**  **6 Well, we're going to put him through training, 7 or we're going to let him go.**  **8 And we're going to try to find out 9 what happened and work to make this customer**  **10 whole. I think it's our job, too. 11 We're knowingly violating, we also**  **12 have, we have a role in making the customer 13 whole as well. Maybe that contractor has**  **14 flown the coop. 15 And we can't track him down. I**  **16 think the onus would then fall on us to make 17 that customer whole.**  **18 I think that's a, if you're 19 knowingly doing this. If you are plotting and**  **20 scheming to get 13s in Texas, or somebody is 21 and facilitates this knowing that a guy is**  **22 going to make a run from Indiana down to**

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## 1 Texas, you're going to have to remedy that. **2 I don't want to say that we don't 3 have a role in making a consumer whole because**  **4 we do if we're found to be knowingly 5 violating.**  **6 MR. FENSTROM: So, this is Gary. 7 Did we decide that knowingly means plotting**  **8 and scheming and intentionally, or you should 9 have known better?**  **10 MR. RAWALD: Knowingly is defined in 11 the statute. Knowingly as a term is defined**  **12 in the statute. I put it up on the screen 13 before. We can get to it. It means both**  **14 actual and constructive knowledge, so it's a 15 defined term.**  **16 MR. FENSTROM: Okay. Thank you. 17 MR. HUNGERFORD: So just to test**  **18 that because I'm not a lawyer, if the 19 warehouse in Ontario where thousands of units**  **20 are shipped through and moved to Oregon also 21 has a counter.**  **22 And that distributor or an employee**

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## 1 at that distributor at that counter sells a 13 **2 HVAC unit to a guy in a pick up truck who is 3 not driving to Oregon, can we reasonably**  **4 assume that an HVAC contractor that lives in 5 Orange County, California, San Bernardino**  **6 County, California is going to be installing 7 in that area?**  **8 Does that meet that threshold? 9 MR. RAWALD: Well, I don't want to**  **10 speak a hypothetical without having the full 11 facts because I'm just guessing here, but it**  **12 seems that it would be possible that we would 13 find a finding of violation.**  **14 MR. HUNGERFORD: You're 1000 miles 15 from the closest edge to the southwest**  **16 territory. 17 MR. RAWALD: You're giving the**  **18 scenario you're bringing forward, and I'm 19 saying it's possible that we could find it to**  **20 be a violation. 21 And then if it happens multiple**  **22 times or on a regular basis, then it would be**

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## 1 a routine violation such as they would be **2 found to be violating. 3 So yes, I think that would be**  **4 incumbent upon the distributor -- 5 MR. HUNGERFORD: Would the**  **6 contractor have to be a routine violator in 7 order for this to be a routine violation?**  **8 MR. RAWALD: No, because that's a 9 scenario, if you go back to the violations,**  **10 that's scenario number two, which is the, 11 what's their number one, that they will sell**  **12 or install their products. 13 (Simultaneous speaking)**  **14 MR. RAWALD: It's a one tier thing I 15 think. So I think that has some teeth. I**  **16 think that puts Jon's people at some risk. I 17 think that makes them want to do the right**  **18 thing. 19 MR. MELCHI: This is Jon. I've had**  **20 members that have talked about what they're 21 going to do with this, and things that was**  **22 floated was on the 13 SEER condensing unit.**

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## 1 Maybe they'll be on the packing **2 slips where it says by accepting this I agree 3 that I will install this product in accordance**  **4 with the regional standard. 5 And aside from asking the guy at the**  **6 counter what he's going to do with it and say 7 you know you can't install this in California,**  **8 correct? 9 And the guy would say presumably**  **10 yes, and he will take possession of this with 11 a slip that says I cannot, I should not**  **12 violate the regional standard. 13 I don't know what more we can do**  **14 other than you can tell somebody no. I guess 15 you can no sell them.**  **16 MR. HUNGERFORD: That would be my 17 preference.**  **18 MR. MELCHI: Well, I guess, David, 19 most of these manufacturers aren't going to be**  **20 shipping to that Ontario location. 21 And typically a store would not**  **22 necessarily have access to the entire**

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## 1 distribution center. It's a different **2 process. So that's -- 3 MR. HUNGERFORD: What about the**  **4 distributor moving product to the local store 5 that sells to the local market? Is there a**  **6 problem with that? And is the distributor at 7 any risk for doing that?**  **8 MR. GIBBONS: This is John from 9 Carrier. It's not installed. They get there.**  **10 They sit there forever. I don't know. 11 If they're not installed, there's no**  **12 violation, and I think all of the distributors 13 here we've already kind of talked about, we're**  **14 all working on for our distributors, the ones 15 we can sell to, point of sale material,**  **16 placard and the mats that sit on the counter 17 that say hey, it's labeled blah blah blah.**  **18 We're all working on ways to help 19 enforce this. Our consumer relations**  **20 department, our 1-800-CARRIER, all these 21 people are getting coached, instructed,**  **22 trained to help distribution in the**

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## 1 contractors be compliant. **2 I mean it's a big undertaking for a 3 manufacturer to aid the whole channel. It's**  **4 huge. Talk about 10 million. I'll wager 50 5 million to 100 million for manufacturers,**  **6 frightened about $200. 7 MR. HUNGERFORD: I guess I have in**  **8 my mind the appliance shop that I used, or the 9 appliance repair parts store that I use when**  **10 I buy a replacement fan or other parts for my 11 HVAC unit.**  **12 And it's Standard Appliance Parts, T 13 Street, Sacramento, California. They move at**  **14 least dozens of HVAC units a day through their 15 old quantum hub to local contractors.**  **16 What I want to know is how the 17 distribution supply chain or somebody is**  **18 accountable in that distribution supply chain 19 for having a store full of 13 SEER units in**  **20 Sacramento, California and how that's going to 21 be prevented, how the distributor, large scale**  **22 distributor with big warehouses distributes to**

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## 1 the small scale distributor who's the retail **2 establishment, both described as a distributor 3 in our definitions.**  **4 Who in that supply chain is 5 responsible for making sure those contractors**  **6 who are all competing with each other are not 7 coming to the counter and trying to undercut**  **8 each other by buying the cheapest unit that 9 they can get from that store, from that**  **10 business? 11 And I'm at the point where I really**  **12 don't want to blame the actual contractor who 13 is trying to make a living because if he**  **14 doesn't buy that 13 SEER unit that's available 15 to him, then somebody else will and underbid.**  **16 And so in terms of getting this all 17 to work, it seems like the incentive structure**  **18 should be such that it's hard to get such a 19 non compliant unit in places where you**  **20 shouldn't be putting the unit. 21 I've said before, the border issue**  **22 doesn't really concern me nearly as much as**

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## 1 the loss of savings are not that great. **2 Harvey disagrees. 3 But, because they're all the same**  **4 climate. But that's the scenario I'm trying 5 to think of. And I'm trying to figure out**  **6 where are disincentives. 7 There's no disincentive anywhere in**  **8 that chain other than the potential for one of 9 those contractors to get caught in the 60 odd**  **10 enforcement actions the DOE engages in every 11 year. Might as well be no enforcement at all.**  **12 MR. MELCHI: I think, go ahead Dan. 13 MR. ARNOLD: Dan Arnold, yesterday**  **14 we talked about everybody was excited about 15 this label.**  **16 And again, I don't think it would 17 take too long for a consumer to see the label**  **18 in their backyard, get on Facebook and say 19 hey, I've got a unit that was just installed**  **20 and I paid umpteen thousand, several thousand 21 dollars for it.**  **22 And it says it's illegal to be**

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## 1 installed in California where I live. Does **2 anybody know what the heck is going on? In a 3 heartbeat, I mean that's what it would take to**  **4 put this on Facebook. 5 MR. HUNGERFORD: Well, if they got**  **6 inspected it would be fine, too, but we know 7 inspection is under 20 percent.**  **8 MR. ARNOLD: Where in the chain does 9 it get caught? I think that's where it's get**  **10 caught, and then again, it's pretty quickly 11 put to bed by those of us who we fear for our**  **12 reputations as clean contractors, 13 manufacturers and to a certain extent**  **14 distributors. 15 I think that's a --**  **16 MR. HUNGERFORD: But do they get in 17 trouble if that happens?**  **18 MR. ARNOLD: It corrects itself at 19 that point. I don't want that contractor.**  **20 I'll be glad for Rheem to take that contractor 21 because they're not a good contractor.**  **22 They're not going to be in business**

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## 1 long anyway, so Gary can have them. **2 MR. WHITE: Let me say this, Chuck 3 White. It's really hard for me to sit here**  **4 and have my livelihood be run down right and 5 left.**  **6 Yes, there are bad actors. I'm not 7 happy about it, but I can guarantee you, I**  **8 can't speak of outside Sacramento, California. 9 Maybe it's a den of thieves.**  **10 But in most communities you have 11 people that do the right thing, and if they**  **12 know I have a supply house with a stack of 13 SEER 13's going out the back door and I'm**  **14 getting cheated out of work because everybody 15 else is doing it, not every one of them is**  **16 going to say well, I'm doing it, too. 17 Some of them are picking up the**  **18 phone, and they're giving my friend Mr. Rawald 19 here a call and saying there's something going**  **20 on out there. 21 Our industry does not get near the**  **22 respect it deserves, and I would like to get**

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## 1 some for a change. **2 We have some honest people. We have 3 some qualified contractors. We have**  **4 professional contractors. Charlie has some,**
**5 too. 6 MR. HUNGERFORD: And I did not mean**  **7 to interpret it as insulting the industry 8 because I know that there are good actors in**  **9 the industry. 10 (Simultaneous speaking)**  **11 MR. WHITE: And I understand that. 12 MR. HUNGERFORD: My concern is**  **13 depending on that mechanism to enforce policy. 14 MR. WHITE: My point is I'm**  **15 concerned about the cheaters, too. And a lot 16 of my brethren are concerned about the**  **17 cheaters, too. 18 And we're going to look for them.**  **19 Are we going to be able to turn everybody in? 20 No, I don't think so. But we're going to look**  **21 for this kind of stuff. 22 The answer, if I'm being beat by** 

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## 1 people using wrong equipment, isn't to use **2 wrong equipment. It's to make the other 3 people use right equipment.**  **4 And okay. Not every contractor is 5 going to do that, but a lot of us are. I've**  **6 said my piece for contractors. 7 MR. EISNER: Any other comments on**  **8 this subject? 9 MR. RAWALD: So we did focus a lot**  **10 of discussion. Chuck's antenna went up on 11 some of the negative things about the**  **12 prohibited acts vis a vis the distributors. 13 We didn't say a lot about the**  **14 prohibited act vis a vis dealers and 15 contractors. I don't know if the advocates or**  **16 any particular individual has an argument for 17 that that are separate and apart from what you**  **18 voiced for the distributors. 19 Obviously it's a different question**  **20 because there's no settlement agreement 21 regarding those parties.**  **22 But what I hear Tim saying is he**

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## 1 wants everyone to be treated the same across **2 the board. So I'm not sure how comfortable, 3 I don't know where you folks are as far as if**  **4 there's no prohibited act towards a 5 distributor you wouldn't want one for a dealer**  **6 or you want one regardless, I guess. 7 I don't know where you fall on that.**  **8 MR. BALLO: I think we're still in 9 the same position in that absent the $200 fine**  **10 which is wholly inadequate. 11 It's just another thumb on the scale**  **12 that forces us to come down harder than I 13 think it makes sense on routine violators. So**  **14 I don't know if anyone else has more thoughts 15 on that.**  **16 MR. RAWALD: I did hear Karen say at 17 one point that she'd rather have the $200 fee**  **18 than the extreme option. Is that something 19 you thought about more and to the field, or**  **20 have you changed your opinion on that? 21 MS. MEYERS: Well, so I don't have**  **22 factory owned distribution. So --**

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## 1 MR. RAWALD: This is from the dealer **2 and contractor point of view. 3 MS. MEYERS: Yes, I mean I'm not in**  **4 their shoes, but just from an outsider's 5 perspective, the prohibited act appears to me**  **6 to be the preferable path versus the death 7 penalty.**  **8 So $200 fine, I mean it's a $200 9 fine. If you sell one unit, or you install**  **10 one bad unit you're going to have a $200 fine. 11 If you install five, then you're a**  **12 routine violator and DOE, but I do think that 13 many around this table did make an agreement**  **14 with the settlement agreement. 15 And then there's a part of me that**  **16 says there was this agreement that there would 17 not be any civil penalties assessed against**  **18 distributors. 19 So with that in play, I think we**  **20 have to respect that to a degree. Now whether 21 the prohibited act can be assessed on records**  **22 retention and all those other things, I guess**

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## 1 I'm a little more open to those ideas. **2 But the two step approach here that 3 we have, I agree, adds some teeth for the**  **4 distributor. 5 I think it puts me as a manufacturer**  **6 more at risk in bullet number one because I 7 don't know what happens to me as the**  **8 manufacturer, how the prohibited act kicks in 9 with me.**  **10 If he sells one product to a dealer, 11 can I no longer sell to that distributor at**  **12 all if I find out about it? 13 Or is it then again only if there's**  **14 a violation determined by DOE? So I'm really 15 unclear on this. I get Number 2 because**  **16 there's probably going to be a DOE action. 17 Number 1 I think adds a lot of teeth**  **18 to make sure the distributor doesn't do that. 19 But I guess my concern then is how do I, how**  **20 does the OEM and the prohibited act all 21 interact with the first bullet.**  **22 MR. RAWALD: Right, so your concern**

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## 1 really is this question that goes back to **2 Jordan and Amy's point, which is how much is 3 it based on DOE determination versus the**  **4 internal business model that's going to forced 5 to go on.**  **6 And so with understanding all those 7 points, I'm going to bring that back to the**  **8 Department tomorrow and really focus our 9 efforts on trying to ferret out what would be**  **10 comfortable there. 11 You guys raised a very valid point**  **12 for me to consider and bring back on that. I 13 think I get all that. So I guess, Karen, and**  **14 I was trying to focus you only on dealers and 15 contractors.**  **16 And I understand where everyone is 17 on distributors --**  **18 (Simultaneous speaking) 19 MS. MEYERS: Yes, if we were the**  **20 contractors, I think that's for them to ask. 21 I think the nuclear option is definitely**  **22 appropriately named.**

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## 1 MR. RAWALD: The nuclear option to **2 me was the John Hurst you can't sell them 3 filters or compressors. That was the nuclear**  **4 option. Mine is a little bit less 5 restrictive.**  **6 MS. MEYERS: But I think John 7 brought up a great point. If this is a guy**  **8 who is routinely violating and routinely as we 9 defined, we don't want this guy in business.**  **10 He brought up a good point, but it 11 depends on if we keep that extreme routine.**  **12 And now that we have the remediation options 13 and stuff like that, it may be, that's a path**  **14 forward as it the $200 fine prohibited act 15 option.**  **16 So that may, I guess I'm not as 17 strong on that as I once was with the**  **18 contractors. We did come up with some ways 19 for them to get out of jail essentially.**  **20 MR. SACHS: This is Harvey, and I 21 can only say where I am, not where you all are**  **22 right now.**

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## 1 And that is a feeling that the **2 prohibited act for the contractor helps to put 3 people on notice up and down the chain without**  **4 being nuclear. 5 It's just like the metaphor we**  **6 talked about this morning of the bounced 7 check. It says you want to be careful in your**  **8 dealings with that contractor because there 9 has been a finding that there was a violation.**  **10 He's not a routine violator, so 11 that's my instinct that it is a diffusing of**  **12 the nuclear while getting the information to 13 people who may be affected in their business**  **14 decisions. I can be disabused of that, but 15 that's where I am now.**  **16 MR. RAWALD: So Harvey, I want to 17 put the thought forward that I offered to Tim**  **18 a little while ago, which is if the finding of 19 the individual violation was public, would**  **20 that therefore address it even if there was no 21 actual outcome as far as the contractor be**  **22 charged money, $200 or less, the fact that it**

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## 1 was made public, the one time violation. **2 And any new action they take would 3 of course be out there as well because you**  **4 want to give the guy a full, fair record. But 5 would that address your concern?**  **6 MR. SACHS: I think it would because 7 it gets to them, and I just don't completely**  **8 understand all the realities of when you're 9 finding and when you're not.**  **10 But it gets to the point of advising 11 Karen and John that there may be**  **12 ramifications, and you want to be careful to 13 assure that particular actor is only doing**  **14 installs where they're appropriate. 15 So the $200 is not even important.**  **16 It's having the information available for wise 17 business decisions.**  **18 MR. BALLO: So, channeling our 19 consumer advocate allies, I think what would**  **20 work for me or for them I guess, since they're 21 interested in remediation. It doesn't have to**  **22 be a $200 fine as long as there's remediation.**

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## 1 But I think even though it's a **2 wholly inadequate thumb on the scale, it is 3 still a thumb on the scale that pushes the**  **4 contractor towards remediating the bad 5 installation or at least offering remediation.**  **6 So to me that's I guess still the 7 value that's still there for the prohibited**  **8 act. 9 MR. RAWALD: Well, how about this?**  **10 If the remediation happens, then it doesn't 11 become public. Would that be something that**  **12 would be seen as, that's more concerning? 13 So if the matter doesn't become**  **14 public because they remediate it, does that 15 provide a powerful incentive?**  **16 MR. SACHS: I think that that's a 17 question I'd like to think about those who are**  **18 upstream from that dealer, and I try to keep 19 in mind Dan's strong feeling that word is**  **20 going to get out anyhow on social media. 21 MR. FENSTROM: This is Gary. My**  **22 opinion is that if we don't know about it, we**

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## 1 don't know that DOE is truly enforcing these **2 regulations. So I believe we've got to. 3 MR. SACHS: The bully pulpit.**  **4 MR. MCCRUDDEN: So, this is Charlie 5 with ACCA. I think that the potential to**  **6 remediate a violation to avoid the 7 determination of a violation through**  **8 remediation may be beneficial. 9 And I know Tim is, or at least I**  **10 thought I heard Tim being sensitive to the 11 public notification at the violation stage or**  **12 at least at the civil penalty stage. 13 And so it sounds like now you**  **14 proposing that there is this sort of spot in 15 between the point where you receive a**  **16 suspicion or information that there could be 17 a violation and that violation, which is,**  **18 there could be remediation without getting 19 into the violation because that may trigger**  **20 the manufacturers. 21 And there are implications there for**  **22 all of us to do. I think I would support**

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## 1 that. We've got a very different product now **2 than we had say yesterday about all this. 3 And I'd love if I can have a chance**  **4 to take this back up to my folks and see where 5 they are.**  **6 I think I said earlier, I think 7 we're getting to the point where there is a**  **8 path to us accepting a prohibited act, a civil 9 violation or some pathway by which there are**  **10 steps that we haven't really contemplated yet 11 so that there's protections for the one off,**  **12 but yet we can always make sure the folks who 13 shouldn't be doing this, keep doing this.**  **14 One thing I also say though is lack 15 of violations or lack of public notice doesn't**  **16 mean things are happening and no one knows. 17 It could be that what we come up**  **18 with is perfect, and the fact that Doug is not 19 taking any actions against anybody is the fact**  **20 that it's working. 21 But I don't want us to set up this**  **22 idea that if Doug's not sending out notices**

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## 1 and letters, that he's failed. **2 MR. BALLO: Right, and there are 3 other ways to address the concern. I mean**  **4 Doug could, DOE, sorry to heap this on you, 5 Doug.**  **6 (Simultaneous speaking) 7 MR. BALLO: You could do like a --**  **8 MR. RAWALD: At least they spell the 9 last name correctly.**  **10 MR. BALLO: -- quarterly report. 11 During the last quarter we found X amount of**  **12 violations, or we investigated X number of 13 complaints.**  **14 I think that would go a long way 15 towards helping us.**  **16 MR. MCCRUDDEN: And this is Charlie, 17 and I say that because if we haven't learned**  **18 that maybe every violation results in a 19 violation, and if we can resolve them before**  **20 they become public in some way, and I don't 21 know how you'd do that if you've got a civil**  **22 penalty that you have to publish.**

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## 1 MS. MEYERS: That's a good point. **2 MR. RAWALD: No, and it's the 3 standard practice. And listen, I can't even**  **4 guarantee that we wouldn't naturally view it 5 a legal obligation to make public a lighter**  **6 action. 7 It's not been our practice to**  **8 publish warnings, and I will consider that to 9 be at least consisting of a warning, that type**  **10 of finding of a violation but nothing further. 11 We're telling you hey, you did**  **12 something bad. You shouldn't do it again. So 13 I think that would be within our standard**  **14 practice. 15 Now why they will stop a FOIA**  **16 request for that if Gary sent me a FOIA 17 request saying give me all the actions you're**  **18 taking, I don't know how that would stand up 19 in a court, would say Doug, put all those**  **20 things out there to Gary so he can look at it. 21 So that's a legal question I have to**  **22 look at, but I think what I want to say is if**

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## 1 we want to address the Harvey-Tim underlying **2 concern, which is the publicity of it may make 3 encouraging for folks to remediate.**  **4 And let's just make it public in the 5 first place, if we think that's going to cause**  **6 the behavior they want. Those might be 7 addressed by risks, so that may be a way to**  **8 kind of get there. 9 I think we should all brainstorm**  **10 here over the next few days and think about 11 other ideas that may be better. I think it's**  **12 something worth looking a little more. 13 MS. MEYERS: So this is Karen with**  **14 Rheem. And since you brought up publicity, 15 something I'd like us to talk about maybe next**  **16 week is what will that public notice say? 17 Because I'm going to have a real**  **18 problem if it says four Rheem units were found 19 to be illegally installed in the south.**  **20 If I had no thought in that action**
**21 -- 22 MR. RAWALD: No, that seems unfair.** 

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## 1 MS. MEYERS: So, or pictures of, so **2 I want us to really as part of this term sheet 3 to outline really what that's going to say**  **4 because that's, to me, going to, I don't want 5 that to say that.**  **6 MR. RAWALD: I understand. 7 MR. EISNER: We'll say Carrier**  **8 instead of Rheem. 9 MS. MEYERS: Perfectly fine. I can**  **10 sign off on that all day long. So yes, I do 11 want that to be part of the term sheet on**  **12 exactly what that wording -- 13 MR. RAWALD: Right, there's not a**  **14 whole lot of benefit from the Department's 15 point of view about advertising the**  **16 manufacturer of the unit somebody else 17 installed.**  **18 It's the fact that the unit was not 19 non compliant. That's what's important. Now**  **20 if it became a litigation situation where we 21 had a prohibited act, which therefore entitles**  **22 the person who we're bringing the civil action**

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## 1 against to bring us to court, then it would **2 become part of the court record that here's 3 this picture and here's this.**  **4 So the more we have the prohibited 5 act with us collecting money, there's more the**  **6 possibility of us having a court action that 7 would involve evidence and those kinds of**  **8 things going public. 9 So something else to consider I**  **10 guess as we look at this issue. 11 MS. MEYERS: Absolutely.**  **12 MR. RAWALD: So do people feel 13 comfortable that we can get to the answer next**  **14 week? I really do feel comfortable we can 15 finish this next week.**  **16 I feel really confident. I don't 17 know. I think we're close. Does anybody else**  **18 feel this way? 19 MR. HUNGERFORD: Does saying that**  **20 make you feel better? 21 MR. RAWALD: I feel really good**  **22 about it.**

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## 1 MALE PARTICIPANT: We're halfway **2 there. 3 MR. RAWALD: I feel really good**  **4 about it. 5 (Simultaneous speaking)**  **6 MR. WHITE: Well, this is Chuck -- 7 MR. EISNER: We're still on the**  **8 record, so side conversations. 9 MR. WHITE: -- you have this sort of**  **10 skeleton going of the framework, and if we saw 11 that and could kind of see the ornaments**  **12 hanging on the tree, I think we might, I think 13 we're kind of still off in the woods a little**  **14 bit about where we are. 15 So it's kind of hard to determine --**  **16 MR. RAWALD: Right. My goal is on 17 Tuesday, or next Wednesday, to bring to you a**  **18 package of here's where we think we are based 19 on all the things that we have.**  **20 And Laura's been taking really good 21 notes. We're going to try to put it all**  **22 together. I think we're going to bring you**

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## 1 the package of where we are. **2 And I think we even chisel it around 3 the edges. I think we're pretty close to**  **4 something that's workable here. 5 MR. EISNER: This last one in**  **6 particular, it might benefit from describing 7 some detail. For example, what if they**  **8 remediate as soon as they realize you've come 9 to look at it?**  **10 What if they wait to remediate until 11 after you tell them it looks like you're going**  **12 to bring action against them? 13 And what if they remediate right**  **14 after you find that they're in violation? Is 15 that something you would post?**  **16 So is there a reason to handle them 17 differently, and if so, what does that mean?**  **18 And that might help a little bit in this 19 regard.**  **20 But I think you should also think 21 over the next few days about some other ways**  **22 you can get what one side is asking for in**

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## 1 terms of something equivalent to a prohibited **2 act but not a prohibited act because that's 3 troubling to some of the parties.**  **4 And whether you want to make it a 5 prohibited act for the contractor if you're**  **6 not making it a prohibited act, even if it's 7 just record keeping, you're not making it a**  **8 prohibited act for the distributors. 9 So I realize it has a different**  **10 effect when it's a smaller party with the 11 responsibility for installing it. But you**  **12 need to think about all that because if we're 13 going to finish next week, we're going to have**  **14 to have some real clarity on what this is 15 going to say.**  **16 You're going to be unhappy with the 17 final document.**  **18 MR. HUNGERFORD: This is David. I 19 do realize we're at the end of the day, but I**  **20 wanted to tee something up for the future 21 unless it can be dismissed immediately, the**  **22 idea of is there, we haven't talked directly**

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## 1 about any kind of remediation from the **2 distributor. 3 We've talked about it from the**  **4 contractor but not from the distributor. If 5 we have a violation, not a prohibited act,**  **6 from the distributor where product was moved 7 in a way that was known or should have known**  **8 that they would have been installed in a non 9 compliant way, is there possibility for having**  **10 that as one of the solutions? 11 MR. RAWALD: Right, and this is**  **12 Doug. So I guess when I was viewing the 13 remediation we were offering, I was thinking**  **14 it's both ways, which is the replacement would 15 apply to whoever was the party that was**  **16 involved with the making of it. 17 Once again, if it's going to be the**  **18 only way the dealer gets out of it is by 19 replacing it, I think the distributor's in the**  **20 same boat, which is by making sure the right 21 unit gets in there whether they pay a**  **22 different contractor than the one they had**

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## 1 before, they bear the cost of that getting it **2 into the house and into the hands of the 3 consumer.**  **4 So that's how I view it. So I think 5 that's what Jon offered out there as what he**  **6 thought would make sense as well. 7 MR. MELCHI: Yes, absolutely. I'd**  **8 be willing to take back SEER level above the 9 minimum standard.**  **10 MR. RAWALD: Let's not go too far. 11 MR. EISNER: You'll ruin your**  **12 reputation. Anything else before we break for 13 the day?**  **14 MR. SACHS: I'd just like to say 15 thank you. I think it's been a good day.**  **16 MR. HUNGERFORD: A good set of 17 meetings. It was nice to be in the room with**  **18 you folks. I won't be next week. I'll be the 19 disembodied voice right here in this little**  **20 spider phone. 21 MR. RAWALD: So please, if you have**  **22 any comments, give them to Laura before you**

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## 1 leave, on the brochure so we can get working **2 on that. We'll bring an updated version next 3 week.**  **4 MR. EISNER: Remember next week 5 we're in --**  **6 MR. RAWALD: Upstairs. 7 MR. EISNER: We're on a different**  **8 floor. 9 (Simultaneous speaking)**  **10 MR. EISNER: Does everybody know 11 that, that the numbers we got for next week's**  **12 meeting, 6097, that's going to be on the 13 eighth floor, not the sixth floor?**  **14 (Whereupon, the above-entitled 15 matter went off the record at 4:44 p.m.)**  **16 17**  **18 19**  **20 21**  **22**

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## 401 45:15,16,18,19,21 47:2,10,19,21 48:7,9 51:19 52:8,15,20,22 53:1,9 56:10,17 57:10 57:12 59:16 68:18 73:17 79:18 81:4,7,8 82:2,7 83:5 94:7 105:7 107:4 117:9 119:17 135:19 185:3 223:19 224:17 232:11 232:13 233:3,5,15 240:14,15 248:1,4,9 248:10,12 252:7 253:9 254:22 259:20 260:2 263:5 264:7 265:1 282:14 285:16 285:17 286:2,14,16 286:18 287:2,3 307:13 317:8 323:11 323:22 324:10 338:17 341:14 350:10,11 362:6,15,17 370:12 numbers 37:3 46:3 47:3

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## 402

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## 404 private 258:13 privilege 37:21 proactive23:17 97:12 probability 153:9 154:8

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## 405 qualified 141:3 299:13

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50:3 51:15 109:5 201:5 203:4 292:2 2016 287:21 292:13 21 170:7,14 22 236:1 25 1:8 10:8 15:18 32:1

341:19 292 3:19 296 3:21 2nd 48:8 3 3 3:11 3:06 296:7 3:25 296:8 30 68:8 70:19 112:4

143:6 170:15 171:18 290:9 30-day 143:7 30th 48:6 31 292:1 31st 48:6 292:6 32 3:13 4 4:44 380:15 40 153:22 429.102(a)(1) 317:3 430 304:7 432(c) 144:11 45 68:21 5 5 44:22 341:18 5-1/2 195:21 50 130:18,18 280:22

282:6 353:4 50-50 37:7 500 229:19 55 284:8 5th 109:5

### (202) 234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

## 418

6 60 114:16 115:2 116:10

153:22 290:9 355:9 608 42:6 6097 380:12 6291(21) 149:19 7 70 73:6 72 56:2 75 3:15 78 3:17 8 8-1/2 195:19 80 40:4 44:14 73:6,13

234:13 294:2 80s 208:7 9

### NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 

### C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of:

Before:

Date:

Place:

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.

----------------------- Court Reporter 419

Central Air Conditioner Regional Standards Enforcement Working Group

US DOE

09-25-14

Washington, DC