1 U.S. DEPARTMENT OF ENERGY

3 *** 

# 1 J 4 WATER HEATER WORKSHOP 5 *** 6 7 U.S. Department of Energy 8 1000 Independence Avenue, S.W. 9 Room 1E-245 10 Washington, D.C. 20585 11 12 Tuesday, June 14, 1997 13 14 The above-entitledmatter commenced pursuant to 15 notice at 9:05 a.m., before Jim Raba, Facilitator 16 17 18 19 20 21 22 23 24 25

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00342 1 DEPARTMENT OF ENERGY STAFF PRESENT: 2 JIM RABA 3 CARLADAMS 4 BRYAN BERRINGER 5 BILL HUEY 6 TERRY LOGEE 7 EUGENE MARGOLIS 8 9 ATTENDEES: 10 C. EDWARD BARBOUR,Arthur D. Little Inc. 11 JOHN E. BATEY, Oil Heat Manufacturers Association 12 DONALD M. BRUNDAGE, Southern Company 13 DAVID C. DELAQUILA, Honeywell Inc. 14 CHUCK FOSTER, Edison Electric Institute 15 DAVID B. GOLDSTEIN, Natural Resources Defense 16 Council 17 MARIE C. GUERRERO, National Rural Electric 18 Cooperative Association 19 WILBUR L. HAAG, JR., A.O. Smith Water Products 20 HAROLD W. HEISS, American Electric Power 21 ROBERT J. HEMPHILL, Gas Research Institute 22 CARL HILLER, EPRI 23 BERTRAM KALISH, American Gas Association 24 MARK KREBS, Laclede Gas 25 B.J. KUMAR, Energetics

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00343 1 KIRSTIE L. KUMMER,AmericanGas Association 2 GEORGE M. KUSTERER, Bock Water Heaters 3 JOHN P. LANGMEAD, Water Heater Consortium 4 ERIC M. LANNES, Bradford White Corporation 5 JEFF LEMEN, Otter Tail Power Co. 6 DAVID F. LEWIS, Lennox International Inc. 7 STANLEY T. LIU, National Institute of Standards 8 andTechnology 9 QUENTIN LOONEY, PRA, Inc. 10 JOSEPH M. MATTINGLY, GasAppliance Manufacturers 11 Association 12 JAMES McMAHON, Lawrence Berkeley National 13 Laboratory 14 LAWRENCE S. MELENCHEK, Pennsylvania Power & 15 Light Company 16 PIERRE MOFFROID, Controlled Energy 17 R. DEANMORRISON,RheemManufacturing Co. 18 STEVENM. NADEL,American Council for an 19 Energy-Efficient Economy 20 JOHNNORTON, Controlled Energy 21 DARRELL PAUL, Battelle 22 MIKEL D. PISTOLE, Effikal International Inc. 23 WILLIAMM. PRYOR, State Industries, Inc. 24 JIMRANFONE, AmericanGas Association 25 ELLA C. ROGERS, Tennessee ValleyAuthority

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-00344 1 STEVE ROSENSTOCK, Edison Electric Institute 

# .a 2 MIKE RIVEST,ArthurD. Little 3 JAMES SAWRUK, General Machine Corporation 4 GLENNR. SCHLEEDE, EMPA Inc. 5 FRED SCHREINER, State Industries 6 SRIRAM SOMASUNDARAM, Battelle Pacific Northwest 7 National Laboratory 8 ANDREWG. STADNIK,U.S. Consumer Product Safety 9 Commission 10 FRANKA. STANONIK, GasAppliance Manufacturers 11 Association 12 RICHARD STEIDL, Otter Tail Power Co. 13 CHARLIE STEPHENS, OregonOffice of Energy 14 OTTO Z.VAGO, State Industries, Inc.



# . 15 TEDA. WILLIAMS, American GasAssociation 16 RICK ZAMBEK,American Water Heater Group 17 18 19 20 21 22 23 24 25

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00345 1 PROCEEDINGS 2 MR.RABA: Goodmorning. Welcome, everyone. I'm 3 JimRaba. I'll be your facilitator. Onbehalf of the 4 Department of Energy,welcome. Thankyou for the time 5 you're taking to participate in today's workshop. We need 6 process for the water heater standards rulemaking. 7 Todaywe'll focus on the analytical framework and 8 information-gathering process for the water heater standards 9 rulemaking. We're going to lay out the tools and examine 10 them that are going to be used in the process. 11 My role is to observe, encourage and helpyouwith 12 yourdiscussions and, tomake the meetingmore successful, 13 to helpyou work effectively. Bryan Berringer is the team 14 leader for the waterheater rulemaking standards.



# . 15 If you have not alreadydone so, please fill out 16 the information requested at the table, the check-in, and 17 check to see if you've pickedup a copy of the draft water 18 heater rulemaking framework we're discussing today and the 19 AppendixB supplement, the Technology Assessment and 20 ScreeningAnalysis. 21 Also, for those at the table, Iwould ask that you 22 would sign inwithyourname andorganization in the order 23 in whichyou're sitting. Thankyou. As we're doing this, 24 this is a good time to askyou to introduce yourselves, too. 25 Please speak into themicrophone. This is for the record.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00346 1 Thankyou. Go ahead, Otto. 2 MR.VAGO: Otto Vago, State Industries. 3 MR. BRUNDAGE: Don Brundage, Southern Company. 4 MR. ROSENSTOCK: Steve Rosenstock, EdisonElectric 5 Institute. 6 MR. BATEY: John Batey, Oil Heat Manufacturers 7 Association. 8 MR. BERRINGER: Bryan Berringer, Department of 9 Energy. 10 MR. LOGEE: Terry Logee, Department of Energy. 11 MR. HILLER: Carl Hiller of the Electric Power 12 Research Institute. 13 MR.GOLDSTEIN: David Goldstein,Natural Resources 14 Defense Council.



# . 15 MR. LANGMEAD: Jack Langmead, WaterHeater Joint 16 IndustryResearch andDevelopment Consortium. 17 MR.HAAG: Wilbur Haag,A.O. SmithWater Products. 18 MR.HEMPHILL: BobHemphill, Gas Research 19 Institute. 20 MR.RANFONE: JimRanfone, AmericanGas 21 Association. 22 MR. KUSTERER: George Kusterer, BockWater 23 Heaters. 24 MR. MORRISON: DeanMorrison, RheemManufacturing. 25 MR. STANONIK: Frank Stanonik, GAMA.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00347 1 MR. MATTINGLY: Joe Mattingly, GAMA. ^ 2 MR. LEWIS: Dave Lewis, Lennox. 3 MR. SOMASUNDARAM: Sriram Somasundaram, Battelle 4 Pacific Northwest Laboratory. 5 MR. RABA: Thank you. Let's see if this one 6 works, too. We'll pass this around. 7 MR. PISTOLE: Mike Pistole, Effikal International. 8 MR. SAWRUK: Jim Sawruk, General Machine 9 Corporation. 10 MR. McMAHON: Jim McMahon, Lawrence Berkeley 11 National Lab. 12 MR. STEPHENS: Charlie Stephens, Oregon Energy 13 Office. 14 MR. RIVEST: Mike Rivest, Arthur D. Little.



# . 15 MS. GUERRERO: Marie Guerrero, National Rural 16 Electric Cooperative Association. 17 MR. PAUL: Darrell Paul, Battelle Columbus. 18 MR. WILLIAMS: Ted Williams, American Gas 19 Association. 20 MS. KUMMER: Kirstie Kumar, American Gas 21 Association. 22 MR. PRYOR: Mike Pryor, State Industries. 23 MR. SCHREINER: Fred Schreiner, State Industries. 24 MR. ZAMBEK: Rick Zambek, American Water Heater 25 Group.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00348 1 MR. MELENCHEK: Larry Melenchek, Pennsylvania 2 Power & Light. 3 MR.DELAQUILA: Dave Delaquila, Honeywell. 4 MR. LIU: Stanley Liu, NIST. 5 MR. HUEY: Bill Huey,DOE. 6 MR. LEMEN: Jeff Lemen, Otter Tail Power Company. 7 MR. STEIDL: Richard Steidl, Otter Tail Power 8 Company. 9 MR.HEISS: HaroldHeiss, AmericanElectric Power. 10 MR. FOSTER: Chuck Foster, Edison Electric 11 Institute. 12 MR. BARBOUR: EdBarbour, ArthurD. Little. 13 MS. ROGERS: Ella Rogers, TennesseeValley 14 Authority.



# . 15 MR. KUMAR: B.J. Kumar, Energetics. 16 MR.ADAMS: Carl Adams, DOE. 17 MR. MARGOLIS: Eugene Margolis, DOE. 18 MR. RABA: Thankyou. Good group, good group. 19 Thanks a lot, everybody. 20 Now, for the opening remarks, I turn themeeting 21 over to Bryan Berringer. 22 MR. BERRINGER: Goodmorning. Thank you, 23 everybody, for coming today. As Jim said, I'm currently the 24 team leader forwater heaters in the Office of Codes and 25 Standards. We also have on the team Bill Huey,who is not

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-00349 1 here now. 2 MR. HUEY: I'mhere. 3 MR. BERRINGER: I'm sorry, Bill. Hidingback 4 there. Okay. JimRaba is helpingus facilitate today; Carl 5 Adams; Barry Berlin is not here; Gene Margolis from the 6 General Counsel; andMark Friedrichs fromOffice of Policy 7 and InternationalAffairs, who is not here at this time. 8 There is a recent change in the office. There are 9 some personnel changes. Terry Logee, who introduced 10 himself, will be taking over as lead onwater heaters. I'll 11 also be involved on the team. I'll bemoving over to 12 clothes washer team lead, and, again, Iwill be still 13 involved on that. 14 Again, on behalf of the Department of Energy, I 15 would like to thank everybody for coming andparticipating 16 at thismeeting today, the first under the new process for 17 water heaters. This is ourkick-off meeting to discuss the 18 procedures that were outlined in the July 15thprocess rule. 19 Again,we want to discuss the draft framework 20 report. We sent that out onJune 11th. Ihope everybody 21 has received that. Ifnot, you can see Sandy. Today, we're 22 discussing theAppendix B as a supplemental to that report, 23 talking about, more or less, the technology in screening, 24 which we would like to discuss today in the afternoon and 25 get in a little bit more detail on that. Realizing that

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003410 

### 1 you've just seen it today,we'll open it up for comments 2 and,hopefully,we'll have agooddiscussionas far as those 3 are concerned. 4 Also, Carl Hillerhas ahandout, if youhaven't 5 received it. EPRI has some meetings -- training seminar, 6 WATSIM, different things -- so ifyou're interested in 

### 7 those, those are alsoavailable on the table. 8 Again,the screeningand engineering analysis has 9 beendoneprior to this, so obviously itwas done awhile 10 back for the 1994notice. Under the newprocess, all this 11 work -- the screening and engineering analysis -- wouldbe 

### 12 donebefore anANOPRwas issued. Here,we've already issued 13 aNOPR -- anotice of proposal making -- so we will be 

### 14 reissuing that, andwe'replanning todo that in Julyof 15 1998. 16 Again,we senta letter out on May22nd announcing 17 this workshop andalso, on June 11th, thedraft report. 18 Again,the supplementalAppendixB is beingprovided today. 19 There also was aFederal Registernotice on June 10thof 20 '97. 21 Comments receivedhere today and those submitted 22 duringwrittencomment will be assisting the department in 23 developing arevisednotice of proposalmaking. Written 24 comments, data submission for theworkshop shouldbe 25 submittedby July 31st of '97unless otherwise justified.

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034

### 11 1 We can discuss that whenwe talk about the schedule. All 2 comments and data will be considered before we go forward 3 with the engineering analysis and a revised proposed rule. 4 Late comments will not be considered due to the time 5 committed as far as the schedule. Again, we'll discuss that 6 today. 7 I am the presiding officer for the workshop. Jim 8 Raba is facilitating the workshop today. In approximately 9 two weeks, we should have the transcripts available in the 10 Freedom of Information room, which is located right across 11 the hall in Room 1E-190. If you want to purchase them,you 12 can also talk to the court reporter about that. 13 Theworkshop will be conducted in accordance with 14 the Administrative Procedures Act and the DOE Organizational 15 Act. To provide the Department with as much pertinent 16 information that maybe viewed reasonable, we ask that you 17 express your views for the record. 18 The workshop will be conducted in accordance with 19 the following procedures. The focus of the workshop will be 20 to listen to your comments based on the framework document 21 and the supplemental Appendix B. We'll review the agenda, 22 expand on it if necessary, give everybody an opportunity to 23 discuss their topics. 24 DOE will remain the main lead speaker, but we're 25 going to have an open forum. We'll go through and have open

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003412 

### 1 discussion, sowedon'twant todo toomuchpresentation. 2 Most of the slides are laid out foryou. I would just like 3 togo through those and thequestions. 4 We'll have abreak about noon for lunch. Lunch 5 will be onyour own. There is a snackbar one floorbelow 6 us forbreaks. There is acafeteria intheWest Building, 7 and there's also restaurantsup the street at L'Enfant 8 Plaza. 9 We ask thatyoudo speak intothemikes. Sayyour 10 name andyour company first before speaking, forthe court 11 reporter. We ask thatyoukeepall side conversations toa 12 minimum. Ifyou needto, you can go inthe backcorner or 13 out in thehallway, if a lengthydiscussion is needed. 14 Again, we'll tryto keep to the schedule andget 15 everything in today. Wemayhave to cut off some 16 discussion, so if anything is not completed today, there is 17 an opportunity forwrittencomments forthat. We're looking 18 at a time frame of July 31st for commentperiod. Again, 19 that's somethingwe candiscuss. 20 All writtencomments willbe available forpublic 21 inspection in the Freedom of Information room. Thephone 22 number there is 202-586-6020. Written comments shouldbe 23 addressed to theDepartment of Energy, asnoted in the 24 FederalRegisternotice. Ifyouneed that information,you 25 can get that fromSandy.

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003413 1 We request that eight copies of the comments and 2 data be submitted. In addition, we would appreciate 3 electronic copies. We're currently using Word Perfect 6.1. 4 No faxed comments, please. 5 Any person submitting information that you feel is 6 confidential, you should submit one complete copy and then 7 six copies with the information deleted. In accordance with 8 the federal regulations, the department will determine 9 whether the information is exempt frompublic disclosure or 10 not. That cite is 10 C.F.R. 1004.11. 11 In keeping with the regulations of this facility, 12 there's no smoking allowed in the building. Rest rooms are 13 located on either ends of the hall. Again,we appreciate 14 the time and effort you've spent to come here today, and we 15 appreciate receivingyour comments and your opinions. 16 I would just like to reiterate, we would like to 17 go over the draft report. I hope everybody has had a chance 18 to see that and review it, and also theAppendix B with the 19 supplement, which you received today. 20 At this time, I would like to turn it over to Jim 21 Raba for agenda review. 22 MR. RABA: Questions? Go ahead. Joe. 23 MR. MATTINGLY: Joe Mattingly fromGAMA. Bryan, I 24 had one administrative question, too. Can we assume that 25 comments made during the workshop have the same status as

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003414 1 written comments submitted later, so that we don't need to 2 repeat everything we've said during the workshop? 3 MR. BERRINGER: Yes. It will be on the transcript 4 and in the official record. 5 MR. RABA: Everybody get that? The comments in 6 today's workshop will be in the official record. Go ahead. 7 MR. LEWIS: Dave Lewis, Lennox. Since you had 8 made the comment that you would like to get comments, will 9 you be making the transcripts of these meetings available on 10 the Internet, as well? 11 MR. BERRINGER: We do have an Internet site. I 12 don't know that we've gone to that capability yet. We're 13 just starting up a web site. It's fairly new. 14 MR. LANGMEAD: Could I just -- even if you can't 15 right now, as you're requesting electronic submissions from 16 us. 17 MR. BERRINGER: Sure. 18 MR. LEWIS: So it would seem like it would be good 19 to have electronic submissions from you. 20 MR. BERRINGER: That's a good suggestion. 21 MR. RABA: That's good. Thank you. Good idea. 22 Other questions? Administrative questions? Housekeeping 23 items? Take a look at your agenda, please. Pull it out. 24 The purpose of today's workshop, the objective of 25 the workshop will be to discuss the process andmethodology

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003415 1 tobe utilized throughout the waterheater standards 2 rulemakingprocess. Again, we're going to examine the tools 3 of the process, and the outcomes, we hope, will be to agree 4 upon theprocess and the tools to be used for the water 5 heater rulemaking and tomake some determination onhow to 6 proceedwith the screeningand engineering analysis. 7 Now, for the agenda. We're going over the agenda 8 review right now. That's between 9:00 and 9:30. We'll keep 9 pressing on that and the topics for discussion today. 10 Looking at the rulemaking schedule, the framework 11 report, the issues for analysis, the analytical methods and 12 toolswe're going to use, data requirements and data 13 collectionmethods == this will bevery interesting

-- 14 industry characterization, identification of experts and



# . 15 other interestedparties, identification of contractor 16 qualifications. 17 Other issues, things that will comeup -- we'll 18 put the other issues, when theydo come up, on the parking 19 lot. They'll be later onyour agenda, as well. And then, 20 the next steps. Wherewill we go from herewhenwe're done 21 with today's meeting? An overview of the rulemaking 22 schedule. 23 MR. BERRINGER: That's getting into the next item. 24 Does anybody have anything else on the agenda they think is 25 missing orneeds tobe added or deleted from the agenda?

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003416 1 Does it look acceptable? 2 MR. RABA: Thankyou, Bryan. Imissed that. But 3 yeah. Anything else for the agenda, any topics? We can 4 pickup some of those, too, as we go along. Theremight be 5 some item that does come upyou'll think about, and again, 6 we canput it under other issues orwork it in. Carl. 7 State yourname, please. 8 MR. HILLER: This is Carl Hiller from EPRI. 9 MR. RABA: Thankyou. 10 MR. HILLER: The issue of greatest contention in 11 the lastANOPR was, of course, bottom line translated as 12 outlawing electric resistance water heaters. Iwould like 13 to see a direct discussion of that point on the agenda. 14 It's kind of implied by some of these issues, and I think we 15 need to take amore direct approach to addressing that 16 issue. 17 MR. BERRINGER: Some of thatmaybe addressed when 18 we go over the supplemental B, as far as the screening. 19 MR. RABA: And that issue again,please, Carl? 20 MR. HILLER: About whether or not you're going to 21 requireheat pumpwater heaters -- translate, require heat 22 pump water heaters and/or outlaw resistancewater heaters, 23 which was the effect of the last proposal. 24 MR. RABA: Okay. We'll have that in theparking 25 lot. That will be in the screening analysis part of the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003417 1 phase. We'll look there for the process. Thank you. We'll 2 keep that in mind. Charlie. 3 MR. STEPHENS: Charlie Stephens, Oregon Energy 4 Office. I don't see anything explicit here about the test 5 procedure status. Is that something that we're going to 6 discuss?? 7 MR. BERRINGER: In the slide, slide number 3, we 8 have the schedule. We're looking at July to finish up, the 9 July time frame. In order to meet that, we're working on it 10 now. We had some discussion ofmaybe doing some peer 11 review, possibly, before we release that, before we go to 12 final rule, so we canmeet that July time frame. 13 Right now, it's in the drafting phases, and we 14 still have to go through all the steps, as far as 15 internally, to get that approved. We didn't get into 16 detailed discussion on slide 3 inyour handouts. We just 17 put it as finishing that by the end of July. 18 MR. STEPHENS: Yeah, I remember the workshop. I 19 haven't heard anything since the workshop, so I'm kind of 20 curious as to where we're going or what got changed, if 21 anything, or, you know, kind of an update on what you're 22 doing. 23 MR. BERRINGER: Well, we need to discuss more of 24 that with GC and Policy before we do that, but one of the 25 things, before we go to final rule, is to possibly do a peer

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003418 1 review and send it out for comment. But before we talk to 2 General Counsel and Policy, Iwould like not to discuss the 3 issues or determinations until they're finalized. 4 MR.HILLER: I strongly encourage another round of 5 peer reviewbefore you go final. As long as we're on that 6 subject, Iwould just point out -- it will come up in the 7 discussions today, presumably -- but there are some energy 8 efficiency issues that either can be met or notmet, 9 depending onwhat you do to those standards, like the 10 inclusion of the smallerwater heaters and the smaller 11 gallons perday to do that. You can'tmeet the standards if 12 you do that. 13 So there are some issues that cannot be resolved 14 in the energy efficiency side of things until we resolve the 15 testing standards. 16 MR. RABA: Goodpoint, goodpoint. Thankyou. 17 Further agenda items at this time? 18 [No response.] 19 MR. RABA: Just an overview of the schedule. 20 We're committed topublishing a final rule by July '99, not 21 too far away. Now,we're going to be asking, is this date 22 realistic? Shallwe ask this now, Bryan? Is this date 23 realistic, July '99? 24 MR.MATTINGLY: That depends. 25 MR. RABA: What does the group think about it, the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003419 1 team? 2 MR. MATTINGLY: This is Joe Mattingly fromGAMA. 3 One thing that's bound to come up today -- IknowDOE is 4 sick of hearing memention this, I'vementioned it somany 5 times -- there is another activity going on that may affect 6 the designof gas waterheaters, and that is something 7 that's being closely supervised by the Consumer Product 8 Safety Commission. It has to dowith an attempt tomake gas 9 waterheaters resistant to flammable vapor ignition. 10 Some of the water heatermanufacturers have formed 11 a joint research project to try to attempt this and are in 12 that process, I think,well into it. Jack Langmead is here 13 representing the Water Heater Consortium. 14 The interpretive rule has in it apledge byDOE to 15 mitigate the effects of overlapping regulation. We think 16 this is something that falls right under that rubric. It 17 will affect, ormay affect, the schedule, not just the final 18 rule, but theproposed rule. 19 I can see itmaybe complicating this whole 20 information-gathering activity,which is difficult enough as 21 it is, but if you're trying toproject ahead in order to 22 publishaproposed rule, what thepredicted cost, price, 23 shipments of gas water heaters are, this is going to 24 complicate it, I think. 25 Of course, I think themanufacturers, if they're

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003420 1 going to redesign gaswater heaters, would like to do it all 2 at once, rather than one oneyear and the nextyear another. 3 And,more importantly, I think we better keep our 4 priorities straight here. We're certainly in favor of 5 energy conservation, but this other issue has to do directly 6 with public safety, and Iwant you all to keep that inmind. 7 Like I say, I've said this many times. We said it ayear 8 ago, andwe've said it several times since. 9 MR. RABA: Thankyou. Health and safety are 10 always very important. We'll be sure webring it up in the 11 screening. Bryan. 12 MR. BERRINGER: That's one of the reasons for the 13 next question. Keeping that inmind, ifwe can do some sort 14 of negotiated rulemakingwherewe could look at changes with 15 the safety issues and efficiencies at the same time andwork 16 together on those issues. 17 MR. MATTINGLY: Again,whether it's negotiated or 18 whether it's done in amore traditional way, if it's more 19 difficult to predict the future because you don't knowwhat 20 the technology is going to be to address these other issues, 21 it doesn't matter howyou do it, it's still going to be 22 difficult. 23 MR. RABA: Indeed. Thank you. Steve. 24 MR. NADEL: Steve Nadel, ACEEE. Joe, since you 25 raised the issue about coordinating the schedules of this

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003421 1 rulemaking with the work that's going on to address the 2 flammable vapor ignition issue, I was wondering whether you, 3 or perhaps Jack, could talk a little bit more directly about 4 what is the schedule and plan regarding addressing vapor 5 ignition so we can best understand it and try to get the two 6 schedules to coincide. 7 MR. LANGMEAD: Yes, I can address that, Steve. 8 The answer is no. No,you can't address that issue at this 9 time. Steve asked if you could address the schedule, and I 10 said no, you cannot at this time. 11 MR. RABA: The technologies are still being 12 explored? 13 MR. LANGMEAD: The technologies are being 14 explored. What they're doing is proprietary and



# . 15 confidential. It can't be done at this point in time. 16 MR. NADEL: Anything about when you're hoping to 17 have certain information by or make certain points, or do we 18 just sort of keep going and hope that later they can 19 coincide? 20 MR. LANGMEAD: We have been asked to reevaluate 21 our schedule by CPSC. We have not completed that 22 reevaluation yet. Matter of fact, we haven't even started 23 that reevaluation yet. So I don't know when it will be 24 completed. But Steve, when we can coordinate, when we get 25 in a position that we can coordinate, we will coordinate.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003422 1 We are not in a position to coordinate at this present time, 2 but when we can, we will. 3 MR. RABA: Okay. That's good. Thank you. 4 MR. RANFONE: Just a question for DOE. If you 5 were to come out with a final rule in July of 1999, what 6 leeway does the law allow DOE to set an effective date? Is 7 there a five-year? Does it have to be five years after the 8 final rule? Could it be ten years? 9 Is there anything in the law that allows DOE to 10 take into consideration other attributes of what's going on 11 in the industry to establish a different effective date? 12 MR. RABA: Can I call upon our general counsel to 13 answer that question? 14 MR. MARGOLIS: We heard yesterday that the Program 15 Office was acting as general counsel. 16 MR. RABA: That's Gene Margolis, general counsel. 17 [Laughter.] 18 MR. MARGOLIS: The statute says that the effective 19 date shall be, say, three years or five years. That does 20 not say that it cannot be greater than that. I want to take 21 a look, and I'll give you an answer after the break this 22 morning. But I think that, in refrigerators, we have 23 slipped and given an effective date that's beyond what is 24 stated in the statute. Therefore, I don't see any reason 25 why we cannot do that with water heaters.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003423 1 MR.RABA: Thank you, Gene. I'll put that in the 2 parking lot for you. Any comments or questions on the 3 agenda? 4 MR.GOLDSTEIN: No, this is a comment on the 5 discussion of date. I think we need to hit at least the 6 schedule that's up there on the board of 1999 for the final 7 rule and should try to accelerate that asmuch as possible 8 within the Department's capabilities, the reasonbeing that 9 the Department is already several years behind the statutory 10 requirement forwhen the standard is supposed to be out. 11 As far as coordinating with the Consumer Product 12 Safety Commission, Iwould certainly support anything that 13 coordinates and reduces the need to design twice, but you 14 can't coordinate withamoving target. 15 Somyproposal is that the DOE go aheadwith this 16 rulemaking, keeping inmind all opportunities for 17 coordination and taking advantage of them if they are 18 timely. But let's notwait for something whenwe don't know 19 what the schedule of it is. 20 MR.RABA: Now,you domake a good point there, 21 David. The second question here, what canbe done to 22 elevate this schedule? Are there any thoughts as to what 23 canbe done to elevate the schedule,make itmove along 24 faster? Also, the question, is an effective date of 2002 25 acceptable, to the question that Jimhad over there, too.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003424 1 So these two, let's take a look at these, as well. 2 What could we do to accelerate this? 3 MR. MATTINGLY: Jim, I think when you say, 4 "accelerate," I think Steve would say this, not that I'm 5 proposing negotiated rulemaking or anything, but you could 6 negotiate certain things tomake the process work faster. 7 That doesn't mean you automatically accelerate the effective 8 date of the standard. 9 MR. NADEL: Right. 10 MR. RABA: Sure. Good point. Thank you. Steve 11 Nadel. 12 MR.NADEL: I would agree with Dave and Joe. I 13 think it's in everyone's interest to try to move this 14 rulemaking along as quickly as possible so that we have a 15 final decision, which doesn't mean that the effective date 16 is necessarily three years beyond. The sooner we resolve 17 it, the sooner the water heater manufacturers know what they 18 have to deal with. If we can do it sooner, that may give 19 you more than three years to prepare, for example. 20 MR. RABA: That's good. 21 MR. MATTINGLY: Steve, I think you just 22 mischaracterized what I said, but I wanted to clarify the 23 record on that point. 24 MR. RABA: Do youwant to restate that? 25 MR. MATTINGLY: No. It's just that I said I

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003425 1 wasn't necessarily advocatinghere anegotiated rulemaking. 2 I'm just saying that that wouldn't automatically accelerate 3 the effective date of the standard if we did it. 4 MR.NADEL: I'm agreeingwith you. 5 MR. RABA: So I guess the thing is to get on with 6 theprocess, make some decisions, and then give the 7 manufacturers and everybody enough time when the effective 8 date goes into effect to fulfill what their requirements 9 are. 10 MR. STANONIK: Ifyou lookat the schedule that 11 you'vemapped out here

-- 12 MR. RABA: What page is that on, Frank? 13 MR. STANONIK: Three. 14 MR.RABA: Three? Okay. Your agenda,your 15 handout, the big draft. 16 MR. STANONIK: The only thing Iwant to point out 17 is that I think, for all parties, ifwe focus on the block 18 of time from,basically, this July to next July -- I'm 19 saying, I think, maybe in another way what people have said. 20 If we focus on that andhopefully resolve many of 21 the issues of difference orwhatever, it seems tome, if 22 anything, that the last time periodpotentially could end up 23 being shorterbecause, in fact, we've worked everything out 24 one way or another. Some of those final reviewperiods 25 couldbe shorter.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003426 1 Iguess mypoint is that if there is opportunities 2 to accelerate things, I see themhappening not in the coming 3 year, but the year after that. Itmight be a little too 4 soon to predict that, but tome the period fromJuly '97 to 5 July '98 is the critical one. 6 MR. RABA: Okay. Carl first. Go ahead. 7 MR.ADAMS: On some of our other rulemakings on 8 both refrigerators, as Gene Margolis hasmentioned, as well 9 as the work that we're doing on clothes washers, our intent 10 is to try to get through the rulemaking process as quickly 11 as we can. At leastby this schedule, if there areways to 12 accelerate it, thatwould bevery good. 13 That is not necessarily going tomean -- in fact, 14 it's not going tomean -- that we wouldpull the effective 15 date alongwith it, which is what we have done previously in 16 rulemakings. But in both the refrigerator rulemaking,where 17 we had some negotiations going on, the effective date is 18 beyond three years from the issuance date, and we are 19 exploring that possibility for clothes washers, as well, so 20 this could also be applicable in this case. 21 If we canget through the rulemaking, it wouldn't 22 mean that the effective date gets movedup with it. The 23 effective date is something that wouldbe open for 24 discussion, certainly to the extent that it could be 25 coordinatedwith other things that are going on, such as the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003427 1 Consumer Product Safety Commission work. 2 MR. LANGMEAD: I just wanted to point out some of 3 the things that are going to be extremely difficult, as 4 Frank noted, to handle. That's why I answered Steve Nadel 5 as I did. 6 During the '97-'98 time frame you've got two 7 activities in there that are extremely difficult to get 8 done. One is the revised engineering analysis, about the 9 third one or fourth one down. Down further on, you've got 10 the manufacturing impact analysis. In those time frames, in 11 the time frames you've got set, it's going to be extremely 12 difficult to do those tasks that are critical in looking at 13 whatever standardyou're setting. They can be done. 14 MR. RABA: Sounds like a challenge. How could we 15 do those, do you think? We'll have to cross it when we come 16 to it. Steve. 17 MR. NADEL: Yeah. Picking up onmy understanding 18 of what Joe said, what I'm wondering is if we should proceed 19 with the rest of the agenda and then come back at the end to 20 the agenda. To the extent we worked out certain approaches 21 to deal with different issues, it will give us a much better 22 sense to say, okay, it's two months here, four months here. 23 There may be some things we have shortened. There may be 24 some things we'll lengthen. But let's work on the process 25 and then come back to the schedule.

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003428 1 MR. RABA: That sounds good. How does the team 2 feel about that? Are you okay about that? Because then I 3 thinkwe'll get some idea of what's involved as we go 4 through and see what these little gray bars up here really 5 have inside them, in the details there, too. So we could do 6 that. We'll come back to this. We can take a look at this. 7 But this will just give you an idea of aballparkwhere the 8 schedule is, at least projected that it could be, and we can 9 always take a look at that for sure. 10 We'll have discussionon the rulemaking framework 11 and the items thatwill be included in the framework 12 discussion, the issues for analysis. 13 MR.KUSTERER: Excuse me. Ihave a question. 14 MR. RABA: Yes, go ahead, George. 15 MR.KUSTERER: Onpage 2, we have three questions. 16 MR.RABA: Okay. 17 MR. KUSTERER: Each sentence ended in a question 18 mark,yet Ididn't hear any answers. Am Imissing 19 something? 20 MR. BERRINGER: I thinkwhat wewere suggesting is 21 that we come back to the schedule afterwe've gone through 22 theprocess and see what we can do tomodify the schedule. 23 Sowe'll come back to this later on -- the schedule, itself. 24 MR.RABA: I think any timewe do things like that 25 we have a tendency to lose them, and then it's 4:00 and

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003429 1 everybody wants to leave. 2 So we have those in the parking lot for later on, 3 and I appreciate the emphasis, also, that we do capture 4 those as we go along. Thank you, George. 5 So in our open discussion on the framework for the 6 rulemaking, the issues for analysis, the methods and tools 7 of the analysis, the data requirement and data collection 8 methods, industry characterization, identification of 9 experts and other interested parties, and the contractor 10 qualifications. Again, you can see the breaks. Discussion 11 of the rulemaking framework pretty much throughout the day 12 today. Any final issues to be resolved andmaybe even 13 revisit the schedule a little bit. If someone does have to 14 catch a plane early, we can maybe readjust as we go along 15 later in the day, see howwe progress through the breaks and 16 after the lunch, to see where we are in our workshop today. 17 Imay make some adjustments to the schedule if we need to 18 today. Then the next steps thereafter will reallybe based 19 upon what the outcome of today's session is about, what 20 we're going to do next. Then, how to improve future 21 workshops, give you a handout, some suggestions to get fed 22 back to us how we can make these better for your behalf. 23 and then, I guess, dismissed for the summer or something. I 24 don't know. School's out. So anyway, let's proceed. 25 From that agenda, is there anything else, any

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003430 1 comments, other issues? We'veheard some already about 2 what's going to happen to heat pumpwater heaters and 3 resistance waterheaters and the effective date of the rule 4 and the schedule. These are agenda items to add, issues. 5 In the back,your name, sir. 6 MR.NORTON: JohnNorton from Controlled Energy. 7 Ihave a question about the agenda. The TDS is appended to 8 the document, and I'mwondering if the assumptions that are 9 contained in the TDSwill be addressed at all in the agenda 10 today so that we canput them into the process. 11 MR.RABA: Bryan, canyouhelp me? Will the 12 assumptions in the TDS be addressed today? 13 MR. BERRINGER: You're referring to the TSD? 14 MR.NORTON: I'm sorry, TSD.



# . 15 MR. BERRINGER: That's one of the items, whenwe 16 talk about engineering analysis and so forth, as far as what 17 needs to be updated in that, but I think, if we go through 18 the slides and the framework, I think a lot of the issues 19 will come out, and that's one of the things that we will 20 talk about, updating the analysis and so forth. 21 MR.NORTON: Thankyou 22 MR. RABA: Okay. So today's workshop is in 23 keeping with theprocess rule thatwas published in the 24 Federal Register on 15 July '96. It's open to two-way 25 communication, that communication beingbetween the

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003431 1 Department and the stakeholders during theprocess of 2 rulemaking. 3 So this, as you can see, is amuchmore open 4 forum, certainly more give-and-take discussion, not the 5 talking heads there used to be in the past. I think we've 6 come a longway with improvement in the process of our 7 rulemaking as we go along. 8 Inotice a lot of familiar faces here, some new. 9 We did it the first time we met -- oh, somemonths ago -- 10 forwaterheaters. Wewent over some ground rules for our 11 workshop. I think we're close enough to each other

-- 12 figure of speech, of course -- that we can change it into 13 norms, norms for ourmeeting. 14 If we can take a look at these and see if we can 15 kind of adopt some of these -- that we could speak one at a 16 time. Say the name and organization for the record,please. 17 Listen as an ally; we'reworking together. Focus on the 18 process, the information-gathering issues in the process, 19 and not on individual products. They're very important, but 20 we're looking to use the process to get to those. 21 The format for our discussion is informal. Maybe 22 if you see less ofme andmore of Bryan inyour own 23 discussions youwouldbe better off. But indeed, informal 24 discussion today and, yes, there will be apublic comment 25 period afterwards. What we capture today inyour comments,

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### 1 in the transcript,will be certainly carryingagreat 2 weight, as theywould forwritten comments, aswell. 3 Any othernorms orground rules or things toadd 4 to this list,perhaps, that wouldhelp? 5 [No response.] 

### 6 MR.RABA: Okay,great. Everybodyhappy? Okay. 7 Thankyou. Sowedo appreciate the time and the effortyou 8 put intopreparing and spendingwithus today at the 9 workshop. SoBryan, overtoyou. 10 MR. BERRINGER: Jim, if youwouldput up slide 11 number 4. Basically, the slides fromhere on in address the 12 process in the draft, anoutline of thedraft framework 13 report. 14 If you could turn topage 2 in the draft framework 15 report, this is the frameworkor, really, theprocess. 16 Obviously,not everything is in there,but themajor steps 17 and the approaches, the inputs and the outputs andhow 18 everything should flowunder thenewprocess is laid out 19 there. Of course, thenumberedblocks are themajor steps 20 and,really, the outline ofwhatwe're goingto discuss 21 today. 22 Doesanybodyhave any commentsabout this 23 particular figure, as faras theway it's laid out? Is 24 there somethingmissing? Iknow alot of thewaterheaters, 25 we've gone tothe TSD stage. Wehaven't gone throughall of

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003433 1 the full analysis of flowwaterheaters. Does anybody have 2 any comments, questions about the flow chart? 3 MR. KUSTERER: What flow chart are you looking at? 4 MR. BERRINGER: Page 2 in the draft report. 5 MR. HILLER: Myprimary comment wouldbe, the 6 devil is in the details. While you list this here, the 7 success or failure of this approach -- the approach is 8 somewhat vaguehere depending on exactlywhat it is that 9 gets considered and how it gets considered, and it's those 10 details that make orbreak the success, more so than the 11 general outline. 12 MR. ROSENSTOCK: I guess one thing that alsomight 13 be nice -- I guess following upwith Carl Hiller -- is to 14 give some sort of estimated weighting -- you have basically 15 15 steps here. Some peoplemight be interested to see, you 16 know, is there any sort of impact orwhat -- for example, 17 let's say step 11 has somuch impact on the overall 18 analysis, ormaybe akey gate on some of these, as well. 19 Imean it shows kind of equal weighting at the 20 various times. Imean is there an equal weighting for all 21 of these steps, or do certain steps have ahigher impact on 22 the process than others? That's my only comment. 23 MR. BERRINGER: Iwould say, at this point, 24 different products will have different weights. We're just 25 looking at the key outputs for all theprocess. So, at this

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003434 1 point, we do not have any specific weight, but that's 2 somethingwe could look at. 3 MR. HILLER: Just to expand on what I was talking 4 about, if you looked at the box that says Life Cycle Cost 5 Analysis, you could come up with just about any answer you 6 want out of that, depending on how you do that. There are 7 so many ways of doing life cycle cost analysis. 8 For example, certain technologies, like heat pump 9 water heaters, ought to be done on a regional basis, because 10 theymake some sense in some areas and don't in other areas. 11 If you analyze it that way, thenyou'll find that out. If 12 you don't analyze it that way and you try and use some 13 national average, you get an entirely different result. So 14 there's a lot of details about exactly howyou do things 15 that will determine your conclusions. 16 MR. BERRINGER: Are there anymore comments about 17 the figure? We can get into a little bit more detail as we 18 go through the report and the different areas. 19 If there's other issues for specific engineering 20 analysis, life cycle costs, any of the major steps, we can 21 raise that as we go through there. We're really looking to 22 see what tools the water heater industry,what this group 23 wants to use in the process that we can use to come up as 24 far as a good rulemaking, to see if we can get some sort of 25 agreement on that and what the best methods and approaches

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003435 1 are. So if we could go ahead andproceed. 2 One of the things -- and a lot of this information 3 is in theAppendix B, talking about the technology and 4 market assessment. We're just concerned what information 5 should be in themarket assessment, and should the 6 informationbe distributed for a comment period? 7 A lot of the information that we're looking at is 8 public information, so we're not looking to lookat 9 confidential information,but would people feel that this 10 information shouldbe distributed, and what information can 11 be collected? 12 MR. RABA: Comments? Thoughts? 13 MR. BERRINGER: What about any initiatives? I 14 know therewas waterheating collaboration. Are there any 15 other groups, like voluntaryprograms that are out there 16 thatwould be advocatingefficiencies, thatwe could look at 17 also? Is anybody aware of any initiatives from that 18 standpoint, non-regulatory programs? 19 MR.GOLDSTEIN: Yeah. At least a couple of years 20 ago, the northwest put together specifications for electric 21 water heaters withan EF of .94, maybe. At any rate, it's 22 something that canbe looked up and you should find, because 23 a lot of products were redesigned tomeet that. 24 MR.HILLER: Therehave been avariety of 25 encouragement efforts, ifyouwant to call them that, by the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003436 

### 1 electricutilities around the country,youknow, for a 2 number ofyears, giving incentives forpeople to put in 3 higherefficiency waterheaters or giving rebates forheat 4 pumpwaterheaters, that sort of thing. So there havebeen, 5 and there are still, some of thoseprograms ongoing, and 6 theywork. 7 MR.ROSENSTOCK: To followupwithCarl Hiller, 8 therehasbeen a lotof publications information and 9 seminars onwaterheaters, advances inwaterheaters. EPRI 10 has put out software. TheACEEEhas there consumerguide to 11 savings that lists awhole range of, on the residential 12 side,what waterheaters areout there and what the 13 efficiency ranges are. 14 So there are plentyofnon-regulatory information 15 out thereandprograms out there. Some are on anational 16 bases; some are regional; and then some are local. Idon't 17 know howmuchdetail you're looking for,Bryan. There's 18 activities all over theplace. Soagain, Idon't know. 19 Somehave obviouslybeenmore successful than others,but 20 there's a lot out there. 21 MR. STANONIK: A couple ofpoints. First of all, 22 as faras gathering informationon whatproducts are out 23 there, you canprobably identifywhat is offered. I'm not 24 aware -- in fact, I would love to see, if somebodyhas got 25 it, information that tellsyouwhat's actually in the field

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003437 1 at different levels of efficiency. We've never collected 2 that data, and I'm not aware that other folks have. 3 As far as the issue of other initiatives, you can 4 consider this second-hand information, but, certainly for 5 the last few years, I've been hearing that utilities are 6 tending to get out of the incentive business rather than 7 adding or having more andmore companies getting involved in 8 it. 9 Now, I don't pretend to even know what's driving 10 that, but I think what I'm hearing is that, in fact, that's 11 becoming a less popular thing and, as I say, a lot of 12 utilities are looking to stop doing that. 13 Changing slightly in this market assessment, one 14 of the things you mentioned in the draft is looking at 15 manufacturermarket share. I just want topoint out, I 16 think it is probably worthwhile and necessary for DOE to 17 have a sense of -- I'm going to call them orders or 18 magnitude of types of manufacturers. 19 I don't know that you need -- in fact, I would 20 encourage you not to get to the level of detail of trying to 21 figure out, okay, exactly within plus or minus 2 percent, 22 what is eachmanufacturer's share. That's really not 23 critical to the analysis. 24 What will be critical to the analysis is the 25 ability to distinguish, perhaps, from -- I'll give you an

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003438 1 extreme example -- somebody like a Bock,whoseprimary 2 product is residential oil-fired waterheaters, where the 3 whole industry probably sells 50,000 ayear, give or take, 4 as opposed to amanufacturerwho has a full line of gas, 5 electric and oil, where, if you totaled all those shipments 6 now, you're looking at more like 8-1/12, 9million ayear 7 for the whole industry. 8 So I think the keypoint, whenyou look at 9 manufacturers/market shares is, again, to identify -- and 10 I'mnot surewhat those categories are going tobe -- but 11 identify categories of manufacturers relative to their 12 levels of business, rather than saying CompanyX has this 13 much of themarket, Yhas this much, whatever. You don't 14 need that. Plus it's a lot easier. 15 MR.NORTON: This market assessment, Ipresume it 16 addresses the U.S. market forwaterheaters but I think it 17 shouldbe useful forDOE to look, at least in abroad brush, 18 at themarket share of technologies outside of the U.S., 19 because that distribution of technologies tomarket share is 20 considerably different than it is in the United States, and 21 it would informyourprocess here, I think. 22 MR.RABA: Thankyou. 23 MR. STANONIK: With all due respect to that 24 opinion, I think if DOE goes too far into thatwe're going 25 to have anotherheat pumpwater heater rule situation,where

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003439 1 you're going to, in fact, try and turn the industryupside 2 down. Or we can talk about horizontal clothes washers or 3 whatever. 4 Ifyou start considering other technologies that, 5 in fact, aren't the mainstream in the United States, you're 6 asking everymajor waterheatermanufacturer to turn their 7 production upside down,and we'll beback here in another 8 three years talking about another schedule and everything, 9 because it will be a replay of the heat pumpwaterheaters. 10 MR. KUSTERER: I agree withmy colleague, Frank. 11 We have the technologyhere in the United States. In fact, 12 not to disagree with the gentleman fromCEC, but the 13 majority of water heating appliances throughout the worlddo 14 not usewater heaters. It is anAmerican technology, and 15 most of us actually ship overseas. So Iwould strongly, 16 strongly say thatwe evaluate what we have here andnot look 17 at othermarkets. 18 MR. RABA: In the back, please. 19 MR. MOFFROID: Yes, PierreMoffroid, president of 20 Controlled Energy, to dispute that and tomake an analogy. 21 For example, theworld uses themetric system; the United 22 States is still not using themetric system. Theworld is 23 using a technology that is not a storage tank; it is mostly 24 instantaneous, on-demand waterheater. We just ask that 25 that kind of technologybe recognized, since it is worldwide

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### 1 and that ithas a testmethodto it specifically. 2 MR.RABA: Goodpoints onboth sides. Youmight 3 want tohangon to that down there fornow. Thankyou. 4 Steve. 5 MR.NADEL: Just toadd one or two comments on 6 some of thepoints that havebeenbrought up. Therehas 7 beenalot of activityby electricutilities in thepast to 8 promotehigher efficiencywaterheaters. 9 Therehas alsobeen some activitybygas 10 utilities,as well. I think,particularly in thenorthwest, 11 therehavebeen anumber ofprograms where thegas utilities 12 havebeenpromotinghigher efficiency equipment, as I 13 recall. Typically,and theywere .61, .62 energy factor 14 type range. 15 The other thing is, Iwould agreewithFrank in 16 termsof lookingatmarket share information. Youdon't 17 need to go into toomuchdetail, but there are acouple of 18 published industry summarieswhere peoplehavemade educated 19 guesses and soon, and those shouldbe adequate --youknow, 20 things like theNews inAppliancemagazine and a fewothers. 21 MR.RABA: Okay. We got that, too. Thanks, 22 Steve. I'vegot the idea ofboth comments preceding, too, 23 on theboarduphere. We captured those, aswell, keeping 24 themfor evaluation for lateron. 25 Further questions orcomments on this topic?

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003441 1 Bryan? Go ahead, Steve. 2 MR. ROSENSTOCK: Just a quick one. On the last 3 line, Data Request Forms, inAppendix A, it asks about the 4 shipment-weighted energy factors. The only comment I would 5 have is that, if the test procedure is changing and the 6 definition of energy factor is changing, for the data 7 request form, I don't knowwhether you're going to be able 8 to go back to the old definition or new definition. 9 If it changes in the next month with the new test 10 procedure, you might want to highlight that on the form, 11 because theymight be using the old definition, rather than 12 the new definition. 13 MR. GOLDSTEIN: I think that's a really important 14 point, that if you're going to go to all the trouble of 15 collecting data, you've got a test procedure teed up, you 16 should make sure that it's timed such that the new procedure 17 is out first and the data collection is on the new test 18 procedure, because otherwise you have the risk of comparing 19 apples and oranges. 20 MR. RABA: Say that again, David, about the test 21 procedure. 22 MR. GOLDSTEIN: I'm saying it is crucial to get 23 the new test procedure published and out in the real world 24 so that, when the data requests go to manufacturers, the 25 data received is in terms of the new test procedure.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003442 1 MR. RABA: Thankyou. Continue. 2 MR. BERRINGER: One of the things that I have next 3 is Appendix B. We'll save the detailed discussion for 4 later. There was a question about the TSD. On page B-7, 5 Table 6 lists the design options for gas, oil, and electric 6 storage type water heaters. Again, a lot of this 7 information was in the TSD, and if you had seen the data 8 collection forms, it was addressed there. 9 Are there any technologies or design options that 10 needed to be added? Again, we'll discuss later what should 11 be eliminated as far as the screening process. Also, one of 12 the things we'll talk about that Joe had brought up is the 13 baseline unit for gas may change with the redesign, as far 14 as the CPSC requirements. But based on what we know today,



# . 15 these design options look reasonable. 16 MR. HILLER: I think it is unfair to hand us 17 something and, five minutes later, ask us to comment on the 18 appropriateness. I, at least, need most of the day to read 19 through this document that you gave us and see what's in 20 here and what's not in here. I'm not prepared to glance at 21 this list in 10 seconds and say yes, everything's in here 22 that needs to be in here. 23 MR. BERRINGER: Okay, fine. 24 MR. HILLER: I'm on page 2 of the document so far. 25 MR. STANONIK: Bryan, are you specifically looking

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003443 1 for additions, or -- which? 2 MR. BERRINGER: If there's additions or if there's 3 things that you think that should -- we can discuss it later 4 this afternoon. I realize, Carl, that we gave this out to 5 you today, and that's why we're leaving comment period. 6 But, based on what was already out in the TSD and what was 7 in the framework document as far as in the data collection, 8 people had an idea of what technologies made sense and what 9 technologies didn't. But again, I have that for further 10 discussion this afternoon, so we can do that then. A 11 question in the back? 12 MR. RABA: There's one in the back there. 13 MR. NORTON: We're in a bit of a quandary here 14 because, in the first page of the TSD, it says that the 15 water heater technology that we represent will be considered 16 within the rubric of the gas-fired storage tank water 17 heater. I'm speaking specifically of the gas-fired 18 instantaneous water heater. We've got a problem with that 19 whole idea. 20 But then, when you move to this discussion of the 21 technology options, you're looking only, Ipresume, at 22 technology options related to the improvement of the 23 performance of storage tank water heaters. 24 If that's correct, then we have no comment on that 25 particular table, but we definitely want to make the point,

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003444 1 hopefully not ad nauseam, that the gas-fired instantaneous 2 water heater is a different technology that needs 3 consideration in a different context in the storage tank. 4 MR. HILLER: Just very quickly looking at the 5 list, I see one right off the bat that ought to be on here 6 that's not, and that's consideration of the use of outdoor 7 air for combustion. 8 MR. STANONIK: Disagree. 9 MR. HILLER: I didn't say they had to use it. I 10 said they should consider it. 11 MR. STANONIK: It's not a design option. In terms 12 of the efficiency of the water heater, it's not a design 13 option. If we want to drag in whole-house energy combustion 14 and all that it entails, we can drag it in, but in terms of 15 the test procedures and the efficiency of the water heater, 16 the issue of whether it uses outdoor air or indoor air 17 doesn't matter, not to any high degree. 18 MR. HILLER: There may be other activities that 19 will force all gas appliances to look outdoors for their 20 air, but they shouldn't be efficiency standards. 21 MR. RABA: I'll just capture that up on the board. 22 We have both sides, now, of that, too. Just the notion of 23 considering the outside -- it may be unconsidered, but we 24 can still put it up here. George, you had your hand up. 25 MR. KUSTERER: There are a few that I disagree

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003445 1 with, but one that strikes me right away is condensating 2 flue gases for oil-fired equipment. On B-17 it says it 3 doesn't work; your Brookhaven National Laboratory says it 4 doesn't work; and everybody else in the world says it 5 doesn't work, so why do we have it in there? 6 MR. BATEY: I'm formerly with Brookhaven National 7 Laboratory, and I concur with what George said. There was a 8 lot of effort going into this programmany years ago. 9 Basically, when you look at what the benefits are versus the 10 cost, it doesn't make sense. That's why the program for 11 boilers was terminated many years ago. 12 MR. KUSTERER: I would also have to eliminate 13 pulse combustion. It works fine for gas, but it doesn't 14 work for oil. 15 MR. MATTINGLY: Bryan, are we going to have a 16 chance to do this this afternoon? 17 MR. BERRINGER: Yeah. I just wanted to see if 18 there was anything that's missing, but we will get into 19 further detail this afternoon. 20 MR. RANFONE: I have a question for Bryan on the 21 baseline unit. 22 MR. BERRINGER: Yes. 23 MR. RANFONE: Inyour write-up, you chose to use 24 .57. Are you suggesting you're going to use .57 as a 25 baseline unit, or .56? Why wouldn't youuse the NAECA

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003446 1 requirement of .54? 2 MR. BERRINGER: That's somethingwe can discuss. 3 As far as what the baseline, out of the GAMA directory, I 4 know we've discussed it off-line. What the baseline is now, 5 what's showing in the GAMA directory, is why that level is 6 high. 7 MR. RANFONE: Well, mypoint is, it says on 8 section 2.2 on page 5, for each product class the baseline 9 unit generally represents a model with the maximum allowable 10 energy use specifiedby NAECA, as amended. If that's the 11 case, then that would be the .54 for a 40-gallon water 12 heater, not .57 or .56, because I don't think you do that 13 for the other energy sources. I think an analysis of a 14 directory doesn't give you an indication of what the cost 15 effectiveness of it is. Imean it doesn't mean anything. 16 MR. GOLDSTEIN: David Goldstein, agreeing with Jim 17 Ranfone on that. What is clearly going on there is at least 18 a two-part national market, one for the new construction 19 market in Californiawhere there are credits for 20 high-efficiency water heaters. 21 I don't have any data, but anyone who works with 22 builders knows that about at .60 is the typical water heater 23 for a new construction in California. That's going to 24 weight the national average up, but it's not typical of what 25 the standard is affecting. So I think Mr. Ranfone is on the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003447 

### 1 right trackwithhis recommendation. 2 MR.RABA: Jim,which water heaterdid that 3 effect, please? 4 MR. RANFONE: It's thegas water heater analysis, 5 section 2.2, the comment inthere of usingabaseline of 6 .56. 7 MR.RABA: Okay. Thankyou. 8 MR.HILLER: Just toask for clarification,you 9 got the .56by counting thenumber ofmodels in the 10 directory, ordid youget that frommanufacturer-weighted 11 shipments? It certainly looks like you've been inconsistent 12 between the three types ofwaterheaters. I'mtrying to 13 understandwhy. Maybe it was justan oversight. You 14 certainly can't count thenumber ofmodels listed and take



# . 15 the average that way,because that doesn't represent a 16 market-weighted average. 17 MR.BERRINGER: Well, those are someof the things 18 that we've asked, if these values are correct or if the 19 descriptions are appropriate for this. Sowe are looking 20 foryour feedback if there's betternumbers and what should 21 beused. 22 MR.HILLER: It seems tomeyou ought tobeusing 23 theminimums allowedbythe current regulations,unless 24 you've got some other really strong justification forusing 25 somethingdifferent. You've certainlydone that in the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003448 1 other two cases. 

# ._2 Matter of fact -- Ihaven't finished reading this 3 document yet -- but for the electrics, in the original 4 preliminary mailing on June 11th, you were using an energy 5 factor that was below what was allowed by the legal minimums 6 -- I'm hoping due to round-off error. But the inconsistency 7 was very visible. 8 MR. RABA: Thank you. 9 MR. STANONIK: Just one final point regarding to 10 whatever extent youmay have used our directory. Even just 11 counting the listings in the directory and taking the 12 average, that's just plain incorrect, because what you need 13 to identify is what are the base models. 14 There is a lot of name branding that goes on the



# . ~15 in the water heater industry. There is a lot of redundant 16 listing, because if Sears wants a listing, we're going to 17 give them a listing. But Sears is getting models from 18 somebody else, and that's just a redundant listing. 19 So when this draft document talks about average EF 20 for models on the market in 1995 was .564, if you just 21 counted all the listings and did the math and came to an 22 average, the fact is that fact is wrong. 23 Whoever is doing that has to apply some additional 24 knowledge to identify what are the basic models, pull those 25 out, and then look, if you want to see the average of what's

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003449 1 offered. But, following up what Carl said, that doesn't 2 tell you what got sold, which is the critical thing. 3 MR. BERRINGER: In the Appendix B on Tables 4 or 5 4 and 6 is where the models are listed. Now, as you said, 5 they may not be the sales. It may be just something else we 6 have to look at. These models are out there, and maybe 7 they're not the average model or the best-selling models. 8 So that's something we have to look at. 9 MR. STANONIK: These energy factors look high to 10 me compared to what probably is being mostly sold. 11 MR. NADEL: Let me ask a question on this. Does 12 GAMA collect data from its members and try to develop a 13 sales-weighted average? I know the other trade associations 14 do. I know you do for furnaces. Do you do it for water 15 heaters? 16 MR. STANONIK: Not on water heaters. 17 MR. HILLER: My comment about looking highwas 18 specifically on the gas water heaters. 19 MR. McMAHON: Bryan. 20 MR. BERRINGER: Yes. 21 MR. McMAHON: Jim Lutz from LBL was involved in 22 this. I'm sorry that he's not here. He's ill. I believe 23 the methodology here was to try to identify from the 24 directory the baseline model for each manufacturer. So I 25 guess the question is, are there models that have lower

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003450 1 energy factors than the ones in these tables that should be 2 used as the baseline models, or are these the baseline 3 models currently offered for sale on themarket? 4 MR. STANONIK: No, there'smodels at the federal 5 minimum, .54. They're listed. 6 MR. ROSENSTOCK: Just as another clarification for 7 the electric storage water heaters -- I think Carl was 8 saying -- I think there is a rounding off error. The 9 calculationwouldmake theminimum .864, rather than .86. 10 So in some of your calculations itwill. Idon't know 11 whetheryou want to take it out to three digits ornot. 12 MR. BERRINGER: No. 13 MR. ROSENSTOCK: Youmight want to. 14 MR. RABA: Do some speed reading. Further 15 comments at this time? We can revisit this later on, as 16 well, whenyou've had a chance to look at it and digest it 17 somemore. 18 MR. HILLER: I think we're all going to need time 19 to read thisAppendix Bbefore wemake toomanymore 20 comments. We're all shooting from the hip now. 21 MR.RABA: I read it on the bus last night, coming 22 home, in about 45 minutes. It was good. It kept me awake. 23 It was good. It's good reading. 24 Let's move on, then. What do you say? Want to? 25 We can pick this up as we go along. I'll keep this posted,

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003451 1 andwe can keep adding to some of these ideas and thoughts 2 and issues andwhatever as we go along so that we capture as 3 weproceed. 4 MR. BERRINGER: We'll get into that. Again,we'll 5 leave AppendixB as, definitely, we anticipate comments. We 6 didn't expect you to do that. We justwanted to look at 7 what technologies you thought that were out there and leave 8 it open for furtherwritten comment and discussion. 9 So if we could just go into preliminarybaseline 10 shipment forecasts. We askedwhat existing baseline 11 initiatives -- examples, DSMprograms -- should DOE 12 consider? What approaches could beused to establish the 13 base case shipments? What information sources show past 14 shipment data be efficiency level, whichwe've sort of 15 touched on? Are the data requests inAppendixA 16 appropriate? So this is sort of what we touched on. 17 I think -- pointing to what you're saying, Frank 18 -- we don't reallyhave any shipment data as far as 19 efficiency levels. Are there any sources or any place that 20 we canobtain that type of information? Manufacturers 21 willing to give that information, as far as confidentially? 22 MR.MATTINGLY: I think, in the past, a lot of 23 information gathering has been done through GAMA. Again, 24 it's basedon the willingness of ourmembers, of course, but 25 GAMA continues to offer its good offices to collect and

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003452 1 aggregate average -- whatever has to be done -- information 2 you need, if we can get it. 3 MR. BERRINGER: One of the things we looked at as 4 far as the base case and as far as shipments and so forth, 5 methods, are there any other methods that we could use to 6 look at efficiency levels versus shipments or project the 7 sales or anything as far as that? Is there another option 8 we could use for the analysis that anybody is aware of? 9 MR. STANONIK: This might be a -- let's call it 10 kind of a secondary approach. I think somewhere in here I 11 remember seeing that DOE was also planning to do some kind 12 of forecasts of energy prices. I believe that, if you had a 13 forecast of energy prices that you had some pretty good 14 level of confidence in, you could almost use that data to 15 predict product shipments in the absence of new standards. 16 That's easier to do after the fact if your 17 forecast predicts that there's not going to be a lot of 18 change in energy prices, because in that case you could 19 reasonably say the market's not going to changemuch. 20 Conversely, if DOE's crystal ball said that, ohmy 21 God, in the new millennium energy costs are going to go 22 through the ceiling, you would be totally justified in 23 saying that the shipment forecasts without new standards are 24 going to change dramatically. History shows you that. But 25 granted, that wouldnot be a direct measurement or a direct

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003453 1 forecast. As Joe said, to the extent we canget 2 information,we'll provide it, but itmight give another way 3 to do it. 4 MR. RANFONE: Question for Bryan. How did you do 5 it for the first round,whenyou proposed it? How didyou 6 get those numbers, theprojection? 7 MR. BERRINGER: Idon't know. Would you know, 8 Jim? 9 MR. McMAHON: Themethodwas to use the 10 residential energymodel, the forecasting model that's at 11 LBL, and that has algorithms that are sensitive to energy 12 price and the price of the equipment. We ran that out using 13 the DOE forecast of energyprices to get the shipments. It 14 was done for twomarkets -- hew construction and exiting



# . 15 homes. 16 MR.RANFONE: As far as the gas proposal, I think 17 it was adequate, and Iwouldurgeyou to continue using the 18 samemodel with the same assumption. 19 MR. LEWIS: While I generally agree withwhat Jim 20 Ranfone just said, Iwould also state that if you are going 21 tobe using the historicblack boxmodels, which had a lot 22 of discussion during several workshops, it would certainly 23 be beneficial foravery simple explanation tobe available 24 to the public, to the manufacturers, as to how those results 25 came about, because I think thewhole goal of this is amuch

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003454 

### 1 more transparent process. @s 2 I'mconcernedwhenever Ihear that wewould go 3 back towhatwehad been using before,wherea lot of 4 suspicion existed. That's not to say that themodel is bad, 5 necessarily. It's just that the information andhowyou got 6 thereneeds tobe available toall ofus. 7 MR.RABA: Yeah,part of theprocess improvement, 8 certainly, is tomakemore transparent thatproverbial black 9 box, surely. We'll do thebestwe can there. 10 MR.GOLDSTEIN: That's somethingveryeasy to 11 implement, and, for all Iknow, the contractorsmay be 12 trying to do that already. Ifyou comeupwith asimple 13 spread sheet model that predicts shipments,youwill see, 14 first of all, that it tracks within reasonable accuracy the



# . ~15 LBLmodels, soyoucan see that there aren't anymistakes 16 beingmade. 17 Secondly, it gives someonea chance toplay "what 18 if?" andcome at least in theballpark ofwhat the right 19 answer iswithout having torun themore complexmodel. 20 MR. RABA: Goodpoint, David. Thankyou. 21 MR. BERRINGER: All right. We touched on the 22 screening a littlebitwhenwewere looking at the 23 AppendixB,and therewere comments as far as the product 24 classes,whatwasproposed in theTSD andas far asgas 25 instantaneous.

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003455 1 Does anybody have any other issues out of the 2 draft report pertaining to screening analysis in the classes 3 specified? 4 MR. ROSENSTOCK: In the draft report, the 5 June 11th draft, there's a box on page 5 about the product 6 classes listed in the 1993 TSD. The last sentence in the 7 first paragraph says, "The efficiency levels determined for 8 storage water heaters will apply to classes 4 and 5 9 according to fuel type," classes 4 and 5 being gas-fired 10 instantaneous and electric instantaneous. 11 We have talked to some members, and we have 12 problems with that, because it's not really consistent with 13 the test procedures. They have lumped storage and the 14 instantaneous together in terms of efficiency levels. We 15 just wanted to note that. We thought that that last 16 sentence should be deleted, probably. 17 MR. HILLER: Just to reiterate, that's one of the 18 issues where you can't make statements of that nature until 19 we know what the test standards say. 20 MR. STANONIK: Steve, are you asking that they 21 should have higher levels for instantaneous? Recognizing 22 the issue or the situation with instantaneous water heaters 23 in the United States, I think that's a totally reasonable 24 statement. Just to take the efficiency levels determined 25 for storage water heaters, apply it to instantaneous, and

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003456 

### 1 move on. 2 The only otheroption is you set ahigher level 3 for instantaneous, andallyou're going todo ismake it a 4 littlemore difficult for thoseproductswhere itmay 5 alreadybedifficult in themarket anyhow. 6 MR.BRUNDAGE: Sowhat you're saying is, even 7 though the test procedure is not applicable for 8 instantaneouswaterheaters, since instantaneouswater 9 heaters inherentlywill havehigher efficiency than storage 10 typebecauseyoudon't have tank losses, youwouldapply the 11 efficiency level obtained through the storage tank test 12 procedures to the instantaneous ones, giving thema lower 13 level of efficiency? 14 MR. STANONIK: Not exactly, because I'mnot sure



# . 15 where the issue is. Certainly,right now, the test 16 procedures apply togas instantaneous. I'mnot surewhat 17 kindof electric instantaneousyou have inmind,but I 18 imagine that -- I'm thinking in terms -- andmaybe this is 19 my problem -- I'm thinking in terms of an electric 

### 20 equivalent of agas instantaneouswaterheater,not the 21 little -- excuse the plug -- not the little Insinkerator 

### 22 thing orwhatever. 23 So I'mthinking of the equivalent of agas-fired 24 instantaneous waterheater, and if they're coveredin the 25 test procedures, they'll be there, and if they're not, good

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003457 

### 1 foryou. 

# .0 2 MR.BRUNDAGE: Thepointwasthe testprocedures 3 for a storagewater heaterare not really applicable to an 4 electric instantaneouswaterheater. If you're looking at 5 takingaone-numberpercent efficiency factor from the 6 electric storage andapply it toan instantaneouswithout 7 applying the same test procedure -- is that what you're 

### 8 saying? 9 MR. HILLER: Letme just refresheverybody's 10 memory aboutwhatwe did orwhat we talkedabout at that 11 meetingon February 12th. A lot of instantaneous water 12 heaters,when testedunder theDOE energy factor test 13 procedure,will deliver coldwater. Theywon'tdeliverhot 14 water. They can't deliver that higha flow rate.



# . 15 So to try and give theman efficiency ratingon 16 that ratingwhen theydon't deliverhotwaterwouldn't be 17 correct. Giving them a lower flow rate -- as soon as you 

### 18 startplayingwith the flow rates and the gallons delivered, 19 now you'renot comparingapples andapples. 20 So thegeneral consensus of thatmeetingwas, if 21 we're goingto have some sort of a testprocedure anda 22 standard for instantaneouswaterheaters, it ought tobe 23 different and clearly stated than the tank types, because if 24 youtry and give it anything that looks like the same 25 rating,peoplewill think they're equivalentwhen they're

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003458 1 not. 

### 2 MR. STANONIK: All right. I'll restate what I'm 3 trying to say, because Ithink I've got thepicturehere. 4 Youguysmaywant toput this down somewhere andhold it 5 forever,but Itrust theDOEwill have the right test 6 procedures when theywrite themand that theywill establish 7 requirements consistent with the testprocedures. 8 I still think -- if youbelieve my assumptions

-- 

### 9 that the test procedureswill be okay. Whatevernumber they 10 pick forelectric storagewaterheater, Ithink, can still 11 be theminimum for anelectric instantaneous. 12 MR.HILLER: Very trusting, Frank. 13 MR.NORTON: Iagreewith Frank. We're 14 comfortable with the efficiency standardbeing the same. 15 We're not comfortablewith the testprocedure, because I've 16 done the testprocedure on thegas instantaneous. As it's 17 currentlywritten, it's not the same as agas storage tank 18 waterheater, andyouget results that areall over themap. 19 So I wouldagreewith Frank that the standard can 20 staywith the storage tank,but theprocedure has tobe 21 writtenrecognizing how the technologyworks. Otherwiseyou 22 get garbage, and it'snot going tobenefit anyof us. 23 MR.HILLER: Iguess I'mnot as trustingas Frank. 24 Since Iknow that the testprocedures are going tohave to 25 bedramaticallydifferent, I'mnot going to assumeapriori

ANNRILEY &ASSOCIATES,LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003459 1 that the efficiencies that you get from the test procedure 2 are going to compare in any way to the current tank-type 3 test procedure, and they may even change that for all we 4 know at this point. I'm not willing tomake that 5 assumption. 6 MR. RABA: Go ahead. 7 MR. BRUNDAGE: This is an issue where it's 8 important to emphasize the need for adequate time between 9 the issuance of the final rule for test procedures and 10 making comments on this matter in this proceeding, because 11 what you decide on test procedures will determine the 12 reasonableness of what you have here. 13 MR. RABA: Interesting issue. 14 MR. BERRINGER: We've talked briefly about the 15 baseline unit already, as far as the descriptors and what 16 information shouldbe used as far as the minimum values. 17 We've also discussed issues as far as the CPSC is concerned. 18 This may, for gas water heaters, change the design. We've 19 talked about the time frame, and when we come back to 20 schedule, when we find more information, we can maybe detail 21 with that. 22 As far as the design options, we have who should 23 do peer review for this particular section? We may have 24 peer reviewers different for different stages, the 25 engineering analysis versus the manufacturing impact.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003460 1 Does anybody have any suggestions as far as who 2 may orwho wouldbe acceptable as peer reviewers to look 3 over this information? Obviously, wewould send it out to 4 stakeholder,but are there anyparticular experts in the 5 field that somebodywould suggest? 6 MR. MATTINGLY: Arthur D. Little does everything 7 else. 8 MR. STANONIK: OrBattelle. 9 MR. GOLDSTEIN: Iwould suggest a strong caution 10 against financially interested peer reviewers, that is 11 someonewho has done business or expects to dobusiness with 12 any stakeholder here, whether it's amanufacturer or a 13 public interest organization or a state. 14 MR. BERRINGER: What we've done with clothes 15 washers, we also had retired industry experts, too. So if 16 there's anybody that does consultingwork that is familiar 17 with the products, if you have a name, if you could let us 18 know that. 19 MR.HILLER: While Iunderstand the intent of what 20 you're saying, Dave, you could eliminate all experts from 21 consideration if you're not careful. The people in the 22 field are the people who are involved in some aspect of the 23 industry, and they are the experts. Ifyou remove anybody 24 whohas any kind of an interest, then there's nobody left to 25 examine.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003461 1 MR.GOLDSTEIN: Well, Ididn't say remove people. 2 I said bias against, in the sense that if there arepeople 3 who are independent theywouldbe stronglypreferable. If 4 they'renot, then it seems tome you wouldneed enough 5 consultants that you get abalancebetween the significant 6 interests that might disagree. 7 I think it should be pretty obvious from the 8 attendance listwhat sorts of axes of balance you would 9 need. Youwould clearly need industry, compared to public 10 interest or state energy office. You would clearlyneed gas 11 industry versus electric industry. 12 MR. KUSTERER: The so-called experts, basically, 13 are the design engineers, themanufacturers, and I think 14 thatwe all have an interest in what goes on. Ihave no



# . 15 problemwithArthurD. Little or any of these other 16 organizations, but without getting the actual design 17 engineers, the people that put these things together, I 18 thinkyou'remaking abigmistake. 19 We do live inAmerica. We are one nationunder 20 God, and I thinkwe all have to be kind of trustworthy. So 21 I guesswe're all interested. Mybiggest fear is giving 22 someone a gas-fired water or anoil-fired water heater that 23 has never even seen one and then evaluates it. 24 So I thinkwe have to, if we're going to go to the 25 experts, let's go to the experts. Let's not horse around

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003462 1 andplay games. We've been doing that long enough. 2 MR. RABA: Thank you, George. In the back, 3 please. 4 MR.MOFFROID: If it's of interest at all to the 5 Department of Energy, I would consider the Europeans 6 definitely the experts when it comes to instantaneous water 7 heating, since they've been at it for quite a while. If 8 there was interest at all, we have the European standards 9 that have been published. They're in English; they're in 10 German; they're inwhatever you want. That could be 11 furnished. 12 MR. RABA: Thank you. 13 MR. KUSTERER: One last comment. I totally 14 disagree with my colleague. All that information was 15 basically developed here in this country, and we far exceed 16 any standards that are anyplace in the world, and why are 17 we looking outside of the United States? Thank you. 18 MR. HILLER: If we come at this from assumingwe 19 want to get peer review fromknowledgeable people in the 20 field, then let me go on the record as saying, in terms of 21 the minimum of who you ought to distribute things to for 22 review would be all of the industry trade organizations like 23 GAMA, GRI, AGA, EPRI, EEI. 24 We all have our own distribution networks within 25 these organizations for sending it out for review. All the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003463 1 manufacturers. Anybody think of anybody else? Ifyou hit 2 those, at aminimum,you'll get apretty good set of 3 reviews,because most of those will distribute within their 4 own community. 5 MR.MATTINGLY: Now, Ihad assumed youwould be 6 doing that, too, that you were looking for a so-called third 7 party. 8 MR. BERRINGER: Right. 9 MR. MATTINGLY: Iwould assume that theplayers 10 get to do peer review, too. 11 MR. BERRINGER: Right. We've sent it out to that 12 group. Whatwe've gotten into before is DOE selectedpeer 13 reviewers, andwe've come backand we've gotten comments 14 that, "Well, you said in the newprocess, the stakeholders 15 get input onwho those should be." 16 Forus to sayA.D. Little or Battelle or anyone 17 else or have them comment maynot be acceptable to the 18 stakeholders. Sowe don't want to waste any effort on 19 something that's not going to be acceptable. That's what 20 we're looking for. 21 MR.ROSENSTOCK: Bryan, areyou asking uswhether, 22 for thepeer reviews, that you wouldpay these third parties 23 to review it? What, exactly, areyou saying. 24 MR. BERRINGER: That's apossibility,yes. 25 MR. ROSENSTOCK: With all these stakeholders

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003464 1 around you, Idon't thinkyou would necessarilyhave to. 2 MR. HILLER: You probablywastedyourmoney. 3 You're going to get pretty good reviews from all the 4 stakeholders as it is. 5 MR. BERRINGER: Well, as George suggested, one of 6 the options would be a retiree that has done design 7 engineeringwork, that has worked for awaterheater 8 manufacturer, has done that for his life andwouldbe a 9 reputable source of information and therewouldn't be any 10 dispute. That's the type of things we're looking for. 11 MR.RABA: Other comments and suggestions? 12 [No response.] 13 MR. RABA: Well, this has been really a good 14 discussion. Ihate to cut it off, but we're due for a 15 break. What do you say? What does the group think? Come 16 backat 11 o'clock? Thankyou. 17 [Recess.] 18 MR. RABA: It's 11 o'clock, and it's a good time 19 to start again. At the reception table there is the 20 statement from Controlled Energy Corporation. Youmight 21 want to take this foryour consideration. Bryan is handing 22 out a status report onGas-Fired Water Heater Ignition, 23 flammablevapors, October 1996, from the CPSC. I commend 24 this to your attention, also. 25 Steve haspointed out, onpage 3 of this handout,

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003465 1 that right above the 3.2 heading, the last sentence says, 2 "Based on that estimate, CPSC staff currently expects that 3 the revised standard incorporatingvapor ignitionprotection 4 will be sent toANSI in 1999 for approval as anational 5 standard." That's what they say. 6 MR. LANGMEAD: I think that needs some 7 clarification. 8 MR. RABA: Yes. 9 MR. LANGMEAD: That standard is a test method. 10 That standard isn't a level or something else, it's a test 11 method. 12 MR. RABA: Goodpoint, Jack. Oftentimes in the 13 industry the word, "standard," is used interchangeablywith 14 a recognizedprocedure for testing, also. So thank you for 15 your clarification. That's good. 16 Let's pickup now. Is there any further 17 discussion about this morning's topics? Carl. 18 MR. HILLER: Somehow,whenwe were on the subject 19 of product classes, we jumpedvery quickly to baseline 20 units, and Ihad a question and a comment. Ihadbegun to 21 readAppendixB here, and where it talks about product class 22 onpage B-3, gas-fired outdoorauxiliarywater heaters, it 23 says, "Anotherproduct class coveredby the standards for 24 gas...water heaters are gas-fired outdoor auxiliary units." 25 Now, if Iunderstand,what that's saying is that

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003466 1 DOE is labeling remote-mount, remote-connected gas-fired 2 water heaters that would hook up to some other storage 3 tanks, they are considering that a separate product class 4 from tank-type gas water heaters. Is that correct? 5 MR. RABA: Helpme out, Bryan. 6 MR. BERRINGER: At this point, we're not 7 considering it a separate class, but we were just looking at 8 that as a design. 9 MR. HILLER: On page B-3, it says, "Another 10 product class." 11 MR. HEMPHILL: I'mnot aware of any remote 12 gas-fired water heater effort. 13 MR. HILLER: They exist. They're already on the 14 market. There's one product called the Seahorse unit, for 15 example. 16 MR. HEMPHILL: Is that a degree of market 17 penetration that would even indicate the need for amethod 18 of test or, much less, involvement as a part of this ruling? 19 MR. HILLER: Yeah, I understand the method-of-test 20 issue. I'm coming to another point here in just a second, 21 but first I want to get this point clarified, because it 22 looks tome, the way this is stated on B-3, that DOE is 23 saying that they consider that anotherproduct class. I 24 want to see if that's true or not. 25 MR. HEMPHILL: On that issue, the second paragraph

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003467 1 refers to work that GRI is doing, andGRI is not doing any 2 work ona remote gas-firedunit that uses an internal tank. 3 MR. RABA: Thank you. We have averypatient 4 gentlemanat the microphone. Go ahead, sir. 5 MR.KREBS: Thankyou. Mark Krebs, Laclede Gas. 6 Earlier this morning, the subject came up onnon-regulatory 7 alternatives, and there was some discussion onutility 8 efforts to promote high-efficiency waterheaters. I think 9 it would behoove DOE to investigate that further and 10 determine the percentage of those programs that require 11 taking out agas water heater to qualify. Thank you. 12 MR.RABA: Thankyou. 13 MR. HILLER: Restatingmy question again, I am 14 still waiting to hear the answer from DOE. 15 MR. BERRINGER: I'll have to get back to you. 16 We'll put that on the parking lot. 17 MR. HILLER: Let me follow on, then. It looks to 18 me, theway this is stated, whetheryoumeant to or not, 19 you're saying you're going to consider a remote-mounted gas 20 water heat that hooks up to another tank as a separate 21 product class. If you're going to do that, you ought to do 22 the same for heat pumpwaterheaters. They arevery 23 comparable products in terms that they're remote-mounted and 24 they hook to the tank. 25 MR.GOLDSTEIN: I think Carl's raising an

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003468 1 importantpoint. It is our recommendation thatyoudo not 2 consider the gaswater heater that Carl referred to as a 3 separate product class, the reasonbeing that it provides 4 the same utility to the consumer as the storage gaswater 5 heater. You can choose to analyze it ornot -- that's a 6 different question -- but I can't see any reason formaking 7 it a separate product class, particularly given there are so 8 few exemplars of it out there in themarketplace. 9 MR.RABA: Other comments? Steve. 10 MR.NADEL: A couple of comments, and I'm not 11 exactly clear where in the agenda these go, so I'll make 12 thembrieflynow, andwe can either discuss them later or 13 get intomore detail now. 14 First, in terms of some of themeasures that are 15 included in the engineering analysis, it appears tome, 16 based on the review of the last TSD, that some measure were 17 missing that are in themarket but are not reflected in the 18 analysis. 19 Specifically, in the case of electric water 20 heaters, the analysis onlywent as high as anenergy factor 21 of .93 foran electric resistance heater, and there's quite 22 anumber ofmodels on themarket now or .94 or .95, even 23 .96. 24 The question is, has DOE since gone back, as some 25 commenter suggested, and looked at what are the features in

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003469 1 these higher efficiencymodels and added those to the



# . 2 analysis? I'mnot saying that they're going to necessarily 3 screen as themost cost effectivemeasures, but clearly 4 there are commercialized products with higher efficiencies 5 that are not there. 6 Similarly for gas, theprevious analysis went up 7 to an energy factor of .57 and then jumped to condensing, 8 basically, or enough condensation that youhad to reline 9 flues. 10 If you look at the GAMA directory, basically,more 11 than half of themodels in the directoryare above .57 12 energy factor, but have recovery efficiencies of 80 percent 13 or less. So there's clearly something in themarket, and 14 more than half themodels in the market, that was not 15 reflected in the DOE analysis. 16 So the question is, has DOE gone back and added 17 things or are there things in this list that try to get at 18 that? Like Inoticed for baffles, they've decided to divide 19 it into three categories now. Iwaswondering if Bryan 20 could tell us a little bitmore about what they're doing to 21 examine what's in themarket andmake sure that those 22 measures are adequately reflected in these design options. 23 MR. BERRINGER: One of the things that LBLwas 24 working on, too, was trying to get product literature and 25 seeing what was on themarket, but the gas, youhave

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003470 1 different combinations to get to the same level. Imean I 2 don't have any information. There hasn't been any 3 additional work done since, really, as far as the TSD. 4 That's one of the things we can discuss here, is 5 what additional information shouldbe looked at for these 6 products, but there hasn't been any additional work. 7 MR. GOLDSTEIN: I think Steve's comment should 8 then be turned into a recommendation for the path for 9 analysis, that there shouldbe a track where you look at

-- 10 actually, I would suggest two separate tracks. 11 The one Steve described is a track wherein you use 12 measures that improve the energy factor while keeping the 13 recovery efficiency low enough that there's no condensation 14 problem in existing installations. 15 The second track is that you do the same thing but 16 assure that there's no condensation problem in new 17 construction applications. In other words, this may be the 18 kind of water heater where, if you put it in an existing 19 flue that's combined with the one in existing use for a gas 20 furnace, you would have a problem, but if you put it into 21 new construction, you wouldn't have aproblem. 22 And then, finally, the full condensing is a 23 separate category. 24 MR. RABA: In the back. Comment, please. 25 MR. PAUL: The issue of looking at water heaters

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003471 

### 1 with higherenergy factors that have recovery efficiencies 2 less than 80percent is somethingwe, in fact, did look at 3 back in 1990-91. Whenwe issued our report. In fact, I 4 think there is some confusionhereas aresult ofpeople 5 confusing recovery efficiencywith flue loss efficiency. 6 Flue loss efficiency is typicallyequal to 7 recovery efficiencyplus the standby losses. Now, standby 8 losses canbe anywhere between 3, 4percent, depending on 9 the waterheater. Sowaterheaters in theGAMAdirectory 10 that have recovery efficiencies of 76 percent actuallyhave 11 flue loss efficiencies close to 80 percent. 12 So if you lookat the guidelinesbased onwater 13 heaterswith flue loss efficiencieshaving tobe less than 14 80percent beforeyou have to relinemasonry chimneys or do 15 other costmeasures forventing requirements, we in fact 16 have takenthat intoaccount, and it's inourGRI report 17 thatwas issuedback in 1991. 18 MR.NADEL: Ihave reviewedyour report. I still 19 think that there's an awful lot ofmodels andmeasures that 20 seemto fallbetween the cracks, aswell, inyourreport and 21 need to be reflected inthis revisedDOEanalysis. 22 The otherpoint I say -- and this gets intomy 

### 23 secondpoint -- is a critical issuewith respect to thegas 24 waterheater. Atwhatpoint doyou start getting enough 25 potential for condensation thatyouneed to reline chimneys?

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003472 

### 1 I've seenpeople suggest recovery efficiencies of 80, 80.5, 2 82, different levels. 3 That's going tobe akey issue, I think,here, and 4 IthinkDOE shouldplan ondevoting alittle bit of 5 resources to lookingat the literature, talkingwith some of 6 theexperts, andDOE's goingtohave tomake its judgment 7 call about wherewedraw that line. 8 MR.HEMPHILL: You can look at the directoryall 9 youwant. Ithinkyou ought tomaintain technical 10 competence inknowing thedifference betweenrecovery 11 efficiencyand flue loss efficiency --don't confuse the two 12 -- and get the technical facts straight. 

### 13 You canmake a policydecision. That's fine. But 14 don't say it's a policydecisionbased on technology if it's 15 not correct. Again,you use theword, "recovery 16 efficiency." Thathas nothing todo, except by, perhaps, a 17 formulaof some sort,with flue loss efficiency. Flue loss 18 efficiency iswhat is themeasure. It's not a well-known 19 number; it's a number that themanufacturers have on their 20 individual designs. It'snot a publishednumber. That's 21 whatyou need tousewhenyou talkabout condensing in 22 chimneys. 23 MR. KUSTERER: Ialso agreewithmycolleague. 24 We're talking about combustionefficiencyor flue loss 25 efficiency. There is gas-fired equipment out there that's

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003473 

### 1 runningat 84, 85percent combustion efficiency that's not 2 condensating, so let's not compare apples todoughnuts. 3 Let's staywith the recoveries and let's not talk about our 4 combustion efficiencies or our flue loss efficiencies, 5 because it has nothing to dowith condensation. 6 MR.NADEL: Idon't knowwherewewant toput it 7 on the agenda,but there are two issues here. One, howdoes 8 DOE decidewhat is thepoint where you have to start 9 worrying about condensation, and two,how dowe review 10 what's in themarket andmake sure that wehave the 11 appropriate efficiency levels in this analysis? 12 MR.RABA: Thankyou, Steve. 13 MR.LANGMEAD: Ijustwant to cautionDOE that 14 you're headed into an area, again,that gets into some 15 trade-offsbetween efficiencyand safety. Asyou start to 16 push the area toward condensingevents, you're getting into 17 a safetyarea, andyoubetterbe careful, darned careful, 18 awfully careful abouthowyougo andhow faryougo in that 19 direction. 20 If you're goingto err in thatdirection, youhad 21 better errback on the side of safety,which is backingaway 22 frommaking chimneys fall downorvents collapsewith time. 23 Andyes, there is a lot toknowand a lot ofdifferent 24 terminology, and it's adifficult and complex science about 25 what is going to cause condensate in thatvent andwhat

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003474 1 isn't and when it's going to happen, but it's an important 2 subject. 3 I couldn't agree with Steve more, but let's do it 4 thoroughly and do it correctly, and if there's any error on 5 the side, leave it back on the side of safety. 6 MR. RABA: David. 7 MR. GOLDSTEIN: To elaborate a littlebit, the 8 safety issue, again, is different for new construction than 9 it is for retrofit. This standard is preemptive of state 10 building codes, so this is an important issue to bring up. 11 I would want DOE to consider, at least in the 12 analytical stages, whether there aren't two numbers that 13 ought to be promulgated, one number which is a standard 14 applied at the point of manufacture and another higher



# . 15 numberwhich is available as a non-preemptive level for 16 states to use in building codes. 17 So, in other words, this higher number would say 18 -- and I'm not sure whether there are some legal issues 19 here -- this second numberwould say that a state that 20 wanted to use that number would not be preempted from 21 putting that into a code for new construction. 22 There is certainly interest by a number of states 23 in doing something to improve the efficiency of the water 24 heater, and I think it would be a lot better for industry 25 and for everybody else if those state actions converged on a

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003475 1 single number everywhere that a state chose to do it, rather 2 than coming up with different proposals and going through 3 this argument in 10 different states. 4 MR. MATTINGLY: That's some other program that 5 hasn't been invented yet, David, because I think, under 6 NAECA, there's no context provision for that kind of 7 multiple standards. 8 MR. GOLDSTEIN: I'm not sure that's right. 9 MR. RABA: Engineering analysis? 10 MR. STANONIK: Did youwant to address the 11 engineeringmodels issue? 12 MR. BERRINGER: We're just going to go through 13 that. Let's just go down the list. As far as the 14 engineering analysis we have discussed, the TSD was brought 15 up. I know that some people said they support the analysis. 16 Obviously, a lot of it was done. It's 1990 data. 17 We just want to get a feel for if we can go, if 18 it's proportionally changed, if we can use what's existing 19 or do we need to update it, and if so, what information 20 should be updated as far as the current engineering 21 analysis, the '93 TSD? Any comments? 22 MR. STANONIK: Bryan, speaking specifically on 23 manufacturing costs, I'm not so sure it it's a question of 24 being updated, as opposed to maybe just revisited, because I 25 think, in this process, themanufacturers may have a little

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003476 

### 1 more opportunity toprovide some critical comments as to 2 assumedmanufacturingcosts orwhatever. 3 Itmaybe an issue ofdoweneed to revisit those 4 just to see if they're reasonable values, rather than trying 5 to regenerate them. As faras the energyusedata, Iguess 6 Iwouldhave togoback. Ihaven't lookedat it. Iguess, 7 at this point, Iwouldn't see that it needs tobe updated, 8 because I'm not sure howmuchyouwouldadd to it. Maybe 9 anotheryear. Themost recent TSD was,well -- Iguess two 10 years ago. 11 MR.HILLER: It's hard forme to tell exactly 12 where thebestplace to throw some of these comments is. 13 Letme throwone out here. It seems like thismight be an 14 appropriateplace. 15 Heat traps, forexample. Ithinkheat traps are a 16 good thing,butwe've hadawhole series of tests runat ETL 17 testing laboratories that confirmwhat themanufacturers of 18 heat traps have toldus, and that the newerones, with the 19 vented seats, aren't asgood as theoriginal data on the 20 ones withunvented seats. 21 So Ijust cautionyou, ifyou're goingto look at 22 the cost effectiveness of heat traps, tomake sureyou're 23 workingwithmoderndata andnot theold data,because the 24 old oneswerebetterthan thenew ones because theold ones 25 didn't havevented seats, especiallythe hot heat trap.

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003477 1 They're still pretty good, but they're not as good. That's 2 modern data on heat traps. 3 MR. BERRINGER: Next, we talked about, in the data 4 collection, the uncertainty of -- maybe this is something 5 that Jim McMahon can talk a little bit about -- as far as 6 data uncertainty and variability when we're looking at the 7 data collection, competence levels and so forth as far as 8 that's concerned. 9 Should we continue to use the same assumptions for 10 uncertainty? Are there any suggestions as far as the data 11 collection? Again, we're looking at information that, if it 12 needs to be updated, what factors should we consider as far 13 as uncertainty and variability and, also, the approaches? 14 It has been talked about in other workshops as far 15 as a design option approach, which has been in the past, 16 versus an efficiency level approach, which is addressed in 17 Appendix C. Some people considered the ASHRAE approach, 18 where you're just looking at cost efficiency curves and 19 ranges and so forth. 20 What tools shall we use? Again, Carl Hiller has 21 WATSIM, and there's TANK. He has brought some of that, if 22 people want to look at lunch or during the breaks. He has 23 that available as far as what models and tools could be used 24 in the engineering analysis. 25 Again,what contractor qualifications are we

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003478 

### 1 lacking contractorqualifications? Shouldwe lookatmore 2 peer review again? In the newprocess,we're opening it up. 3 Anythingwe dowe'reputting out for reviewand comment, so 4 if peoplehave any suggestions onhowwe can improve the 5 engineeringanalysis orwhatwe shoulddo togo forward. 6 MR.HILLER: Iwould just like topoint out that 7 the first significantupgrade toWATSIM,which is going to 8 be calledWATSIM forWindows,will be outbefore theend of 9 theyear. 10 MR.RABA: I'll reservea copy. Thankyou. 11 Others,please? Other models we coulduse or take into 12 consideration? 13 MR. KREBS: Any suchmodel ought tobepublicly 14 available. I'mnot surewhat the status is of EPRI's



# . 15 models. Perhaps theman from EPRIwould address that. 16 MR.HILLER: In anticipation of theneed for that 17 foruse in regulatory purposes, the original WATSIMhas been 18 put in thepublic domain and anyone canbuy it. 19 MR.RABA: Very good. Thank you. 20 MR.BERRINGER: What about the approaches? Iknow 21 therehas been supportas far as the engineering analysis, 22 thatwe justneed to revise or revisit it. In the clothes 23 washer industry, they like that particularmethodas faras 24 that. Is there any support foran efficiency level type of 25 approach?

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003479 1 MR. KUSTERER: First, do people understand the 2 difference between the two approaches? 3 MR. HILLER: What? Water heaters and washers? 4 [Laughter.] 5 MR. BERRINGER: They both use hot water. 6 MR. HILLER: No. One makes hot water; one uses 7 it. 8 MR. BERRINGER: Basically, you're looking at 9 efficiency levels. We're looking at the efficiency method. 10 You're looking at percent increases andplotting those. We 11 might have ranges, soyou might not know a specific design 12 option, or we wouldn't really be looking at what it takes to 13 get to that level. You would just look at costs of that 14 efficiency level for each manufacturer. 15 One of the drawbacks is you wouldn't have, as we 16 had in the Appendix B, a detailed design option, knowing how 17 that would approach, to arrive at the various efficiency 18 increases. 19 MR. STANONIK: At this point, that may be a little 20 difficult to respond to, only because, talking specifically 21 about water heaters, the fact is that, up to this point, in 22 terms of whenever we've been addressing efficiencies -- and 23 I'm going to talk about traditional storage water heaters

-- 24 we always thought in terms of specific identifiedmeasures 25 you can do and then try andmake some estimate as to what

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003480 1 benefit that gives you in terms of the efficiency 2 improvement. 3 So, even if we were to change the approach and 4 say, "Okay, let's just look at this analysis in terms of 5 efficiency levels," anddo the analysis on that basis, I 6 think that manymanufacturers would still, nonetheless, see 7 that number and, in their ownmind, translate it to 8 identifiable discretemeasures because, in fact, with the 9 storagewater heater, there just aren't thatmany things you 10 can do, anyhow. 11 So Idon't know that, right now, we can really 12 tell you that, yeah, let's go for the efficiency level 13 analysis kind of approach. Imean theoretically, it's a lot 14 purer. It doesn't tell you how to do it. It just says this



# . 15 is where you've got to get to, andyou're up toyour own 16 ingenuity. 17 Ithink, on a theoretical basis, really, that's 18 the way it should work, but thepractical reality is that 19 we've always, in this industry, looked at you do this oryou 20 do that. It's adiscrete thingyou can do to the product, 21 andwhat benefit does it do you? 22 So I'mnot sure that, necessarily,manufacturers 23 have a good grasp at thispoint of is it worth going to a 24 different system? I think that's going to require a little 25 more discussion.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003481 1 When we get off of this subject, if we're not 2 already, we've got to go back tomanufacturing costs. 3 There's a major thing we've got to talk about. 4 MR. BERRINGER: Okay. 5 MR. RANFONE: Before you go on, your question 6 about the efficiency analysis approach, I guess we'll call 7 it. How wouldyou take into account ancillary things that 8 would have to be done to an installation -- for example, 9 upgrading the venting system, adding electrical supply in 10 the proximity of a gas water heater which currently doesn't 11 require it, or a battery option? How wouldyou do that 12 under the efficiency analysis? 13 MR. BERRINGER: I'm not sure how we would 14 incorporate that, other than, when we the economic analysis



# . 15 for it, to consider it then. 16 MR. RANFONE: I think that's a very important 17 aspect that we really have to keep in consideration as you 18 go this route, or if you take a look at the efficiency 19 analysis approach, because I think you wouldn't capture all 20 the added costs for upgrading a system. 21 MR. BERRINGER: Thank you. 22 MR. NADEL: I guess, hearing all the comments and 23 knowing that you need to proceed, I suggest that maybe we 24 should continue doing the analysis on this product the way 25 we have been in the past with the engineering approach. We

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003482 1 already have a lot of information. People understand it. 2 We can get new data. We can add and subtract measures. 3 I'm certainly interested inpursuing ways that we 4 canmaybe simplify it a bit so we don't have quite as many 5 parallel paths going on. But tomake a major change now 6 strikes me as a lot of work for unclear benefits. I throw 7 that out for comments from other people as a suggestion. 8 MR. LANGMEAD: Once again, I find myself in the 9 unusual position of supporting Steve. 10 [Laughter.] 11 He's right on track. Why change it? You know, it 12 has worked, and the analysis is there. It would force you 13 do redo all your old analyses. You don't want to do that. 14 There has been a lot of time andmoney spent in those old 15 analyses. They aren't perfect. People have disagreements 16 about them. But we know what those are. If anything, work 17 at trying to refine those old analyses, rather than 18 inventing new analyses. 19 MR. RABA: Carl. 20 MR. ADAMS: I guess, picking up on that -- and I 21 realize we have it, I think, in the parking lot -- about the 22 base case unit, if we're going to go with a component 23 engineering approach, it seemed like, earlier, at least in 24 my opinion, there seemed to be some consensus that we ought 25 to be starting with a NAECAminimumwater heater in each of

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003483 1 those cases of gas, electric, and oil. 2 This seems like maybe a good place to pick up on 3 that again, and if we're going to do component engineering, 4 is that where we should start from? 5 MR. NADEL: Carl, to attempt an answer, I think I 6 heard around the room, the answer is yes. I wouldpoint out 7 that, in your last TSD, you did start, in the case of gas, 8 from .54. So it's actually less work to start at the 9 baseline than it is to do a new baseline as you were 10 suggesting earlier. 11 MR. McMAHON: Let me address that. What I think 12 happenedhere is that Jim Lutz did some checking in major 13 markets with distributors andwas unable to find .54's 14 actually available for sale. They are in the directory.



# . 15 The question came up whether that's the appropriate 16 baseline, given that they may not be being sold. 17 MR. KUSTERER: Where was that? Was that west 18 coast, east coast, mid-Atlantic states? 19 MR.McMAHON: He didphone checks with several 20 places. I'm sorry that he's not here to answer that 21 question. We can giveyou more details later. 22 MR. KUSTERER: Because they are available in the 23 northeast and the mid-Atlantic, so I'm not sure where that 24 was taken. 25 MR. McMAHON: I don't have the specifics. I know

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003484 1 he checks not just on the west coast but in other markets, 2 but I don't know specifically which ones. 3 MR. KUSTERER: Thank you. 4 MR. HILLER: Actually, if you just call people 5 cold and try and find out what energy factor water heaters 6 they're selling, that's not an easy thing to determine. You 7 have to really ask them the model number and then track down 8 the model number against the listing. 9 MR. HAAG: The .54 is not exclusively, but are 10 more congregated in the stubby class of water heater. They 11 typically are not quite as easy to get the higher energy 12 factors. Although there are some available, typically, your 13 .54would be a short one. 14 MR. RABA: Thank you. 15 MR. BERRINGER: You had a question? 16 MR. STANONIK: Yeah. Going back to the 17 manufacturing costs, I just realized there is certainly one 18 that needs to be updated. We're looking at an effective 19 date of, potentially, 2002, thereabouts. The issue of what 20 foam insulation is going to go on water heaters in -- HCFC's 21 get phased out in 2003, but if you're in the water heater 22 business, very likely by 2002, if not a little earlier, 23 you're going to know -- in fact, probably the earlier the 24 better -- you're going to know what your substitute is. 25 I'm sure people are having some considerations.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003485 1 Tomyknowledge right now -- andyou can correct me if I 2 don't have the right knowledge or information -- but all 3 manufacturers currently are using some HCFC-based blowing 4 agent, so they're going to have tomake another change. 5 Somypoint is, in themanufacturing costs, to the 6 extent we can get the information -- and I'm saying GAMA 7 will try and helpyou get the information -- you'regoing to 8 need to try andget some information or assumptions onwhat 9 the newblowing agents are going to be andwhat they're 10 going to cost. 11 Thenyou just start from what the cost is just to 12 maintain the current level and then look at increases. But 13 that specific issue,youwill have anew set of costs, I 14 believe. 15 MR. STEPHENS: I think that information is going 16 to be available,probably within the year,before the end of 17 thisyear, fromAllied Signal. At thevery least, they've 18 got aproduct that they've alreadywritten to DOE that they 19 will be making available to the industryby theyear 2000, 20 third quarter of theyear 2000. So it's the likely 21 replacement. 22 Idon't knowwhat the cost is. That's the one 23 thing that Ihave not seenyet. But itwill probablybe 24 availablebefore the end of theyear. Ihave talked to the 25 people at Allied Signal, and theybasicallyhave said that

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003486 1 itwill be available,but it isn't now. 2 MR. LANNES: What material are you talking about? 3 MR. STEPHENS: 245-FA. 4 MR. LANNES: This is Eric Lannes from Bradford 5 White. You have to remember,we're talking liquid versus 6 gas. Whenyou talk towater heater andwhatwe're using 7 with CFC's and HCFC's, it's being appliedwith liquid. 8 Whenyou're talking about the processingand mean 9 tank temperatures that you're experiencingwith water 10 heaters, you're going to be in a gaseous state. So it's 11 going to require -- the K's are naturallygoing to be 12 higher. This is going to have adirect impact onwhat's 13 going on. 14 MR.VAGO: All indication that the cost will be 15 higher,we don't knowwhat that cost is going to be, at 16 least so far, what informationwehave been given. What we 17 are quite sure about is that insulating valuewill be going 18 down, whether there be awater-blown system orwhatever 19 system they will be comingup with. 20 MR. BRUNDAGE: If I remember correctly, therewas 21 some language in the refrigerator standard issued earlier 22 this yearwhere therewas apresumption that the new 23 refrigerant blowingagent, non-HCFC, would be certified as 24 safe foruse. 25 There was some language in that final rule, I

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003487 1 believe, that DOE would revisit the issue and open the 2 standard if necessary, if that refrigerant was not available 3 for use as a blowing agent in insulation. A similar 4 approach couldbe done here, operating under the assumption 5 that the refrigerant is available andmake necessary changes 6 if it turns out not to be. 7 MR. NADEL: If we were going to a final rule in 8 the next couple of months, yes, we would need to. In this 9 case, my understanding is that the safety certifications are 10 pretty close, and those issues will long since be resolved 11 before we get to a final rule on this product. 12 The other thing is to address the comment from the 13 gentleman from State. My understanding is the new blowing 14 aid, 245-FA, is basically the same type of U factor as the 15 existing, I believe it's 141-B. There is a cost premium

-- 16 we don't know howmuch -- but there shouldn't be a 17 performance penalty. 18 MR. LANNES: That's not true. That's not true at 19 all. The K of the vapor may be equivalent, but when you get 20 into a solubility issue and with regard to the way you trap 21 that within the cell, that's not a true statement at all. 22 Freezers and refrigerators have to be looked upon 23 much, much differently than a water heater. When you talk 24 about amean storage tank temperature of a water heater of, 25 let's say, in excess of 100 degrees, versus a freezer or

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003488 1 refrigerator, that's where the issue comes in. 2 Whenyou start looking at mean temperatures 3 40 degrees andbelow,you're going to see closer to the 4 equivalency of an HCFCmaterial to a 134-A or the HFC-HFA 5 issues, butyou cannot say that's equivalent based on the 6 vapor K's or the U's. That's not true. You have to look at 7 the applied situation. 8 MR.NADEL: No, I agree. You need testing data in 9 actual water heaters. It's not just laboratory K factors. 10 And so any data youhave on theblowing agent in tests of 11 water heaters wouldbe veryuseful. 12 MR. RABA: This is certainly avery complex issue, 13 as these are, for engineering. If there are anydata out 14 there that couldbe sharedwith the Department, wewould 

# ., 15 most welcome that data so we couldhave a good basis for the 16 process of gathering information for the engineering 17 analysis. 18 Good discussion. Keep it up, gentlemen, ladies. 19 Go ahead. 20 MR. KUSTERER: So then, in actuality, Otto's 21 statement was correct, and I just wanted tomake sure that 22 that remains on the record. 23 Also, I'm somewhat concerned, the constant 24 misinformation with regard to refrigerators and water 25 heaters. Iwould ask themoderator to keep the discussion

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003489 1 towater heaters and let's leave refrigerators out of this 2 fornow. 3 MR. RABA: Thankyou, George. David. 4 MR.GOLDSTEIN: Iwould suggest you also check 5 with Michael Martin of the California Energy Commission. He 6 did some testing of water heaters probably sixyears ago, a 7 while ago. One of the other issues on insulationareas that 8 things couldbe improved was to remedy some of the thermal 9 short circuiting or quality control problems in water 10 heaters. 11 In other words, therewere some issues he 12 discovered then that may ormay not be issues today with 13 respect to whether, for example, three inches of insulation 14 was three inches everywhere, rather than five inches 15 someplace and one inch someplace else -- tomake upnumbers 16 just to illustrate what I'm talking about -- and also 17 whether thermal short circuiting around the insulation could 18 be remedied as anotherway of improving the recovery 19 efficiencywithout necessarily going to thicker levels of 20 insulation overall. 21 MR. RABA: Any other comments or questions on the 22 engineering analysis? 23 MR. HILLER: Canwe assume that you're going to 24 useWATSIM and TANK,or dowe have tomake a specific 25 recommendation that you're going to useWATSIM andTANK?

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003490 1 MR. BERRINGER: I think we need to have specific 2 recommendations frompeople, what they feel we should use. 3 That has come up in the past. If you support something or 4 ifyou don't support something, don't assume becauseyou 5 support something that ano comment means somethingwill 6 happen. So please, one way or the other, comment if you 7 agree ordisagree with something. 8 MR. HILLER: In that case, I recommendyou use 9 WATSIM and TANK inyour analysis. 10 MR. STANONIK: Carl, Ihave almost nil experience 11 with WATSIM,but I always assumed that it wasmore a tool 12 forpredicting usage and consumption of electricwater 13 heaters. Is that a correct assumption, or is it in fact a 14 toolyou can look at to, for lack of abetter wordhere, 15 tinker with the design andpredict energy factors? 16 MR. HILLER: WATSIM is adetailed second-by-second 17 full transient analysis model which accepts all engineering 18 details on the tank. For example, you put in the wall 19 thickness; you put in the thermal conductivity of the wall; 20 youput in the insulationvalues for top, side, andbottom, 21 and their thermal conductivities. 22 You put in the height of the support ring on the 23 bottom, or if there isn't one, the location of the fittings 24 soyou canmove the fittings around. So it's a engineering 25 model that's capable of predicting theperformance of tanks

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003491 1 that have neverbeenbuilt. 2 MR. STANONIK: Okay. 3 MR. HILLER: And it has been very thoroughly 4 verified. We had ETL do independent tests on it. It cando 5 bothgas and electric, by the way. It was originally 6 developedmostly for electric and heat pump kind of things. 7 It does a reasonably good job of at least the simpler types 8 of fossil. Idon't claim it to be and itwasn't meant to be 9 a fossil model,but weput factors into it like input 10 efficiency, et cetera. 11 Soyou coulduse TANK -- Darrell canprobably 12 comment on this to some extent. Iunderstand that TANK's 13 inputs areprettymuch limited to the waterdraws for the 14 DOE test cycle and the conditions for the test cycle. I 15 don't know if that hasbeen changed. Certainly theversion 16 of TANK that Ihave is that way. 17 WATSIM can take any input condition that youwant 18 toput into it. You could, for example -- and I'll analyze 19 some caseswith TANK, which is limitedunder certain 20 conditions, and then take the results from that to tweak the 21 WATSIMmodel to simulate that kind of a tankunder amore 22 broad range of operating conditions. 23 MR. HEMPHILL: We'veworked verywell with LBL in 24 the past with ourTANKmodel, and we look forward to working 25 with any of the DOE contractors and the DOE in the future.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003492 1 If there's aproblem,we'll help resolve any issues. 2 MR.RABA: So Iheard recommendations both for 3 WATSIM andTANK. 4 MR. BERRINGER: The last questionwas, is there 5 anything as faras contractor qualifications for doing any 6 of this thatpeople have suggestions or recommendations on? 7 MR. RANFONE: Gowith lowbidder. 8 MR. HILLER: Letme just make one recommendation 9 thatwhoeveryouhire to do that work shouldbe adequately 10 trained on the analysis tools to beused. 11 MR. BERRINGER: Manufacturing costs. One of the 12 things I seewith data -- again,data is fairly old on the 13 information as far as doing themanufacturing impact 14 analysis. Again, this is somethingwe're going to comeback 15 to,maybe afterwe finish the framework document, come back 16 to the schedule and look at what data such as engineering 17 data, cost data, needs tobe collected or revised,updated, 18 revisited. 19 So, as far as your first question, we'll come back 20 to the timetable. We're looking at July-August time frame. 21 Again, that's the next couple of months. Iknow that people 22 want to have time to look at what information is requested 23 and time toprepare for that, so that's somethingwe can 24 comeback to this afternoon. 25 I'mnot sure if people are familiar as far as the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-003493 1 GRIM analysis, using that as far as cash flow. Can it be



# . 2 

### individual data collected fromthemanufacturers? At the 3 manufacturing impact workshop -- I'mnot sure how many 4 people participated in that from the water heating industry 5 -- there were suggestions, again using spread sheets to do 6 some of the analysis, that individualmanufacturers could 7 use their own input and supply that orusing, again, 8 somebody likeGAMA as a thirdparty, to collect and 9 aggregate the information. That's another thing, if people 10 have apreference on what theywould prefer to do. 11 MR. LANGMEAD: I just want to point out again, 12 you're back into an area that, with the time frame that you 13 have specified for this task and in ourposition in trying 14 tobuild safer waterheaters thatwon't ignite flammable



# . 15 vapor when it's spilled outside awater heater,we are 16 unable to be in aposition to advise you as to evenwhat 17 type of product we're going to be using at this time. 18 Sowhenwe start toget intomanufacturing costs, 19 it's not there. The schedule has aproblem. We stated that 20 earlier, just want to restate it here. 21 MR.NADEL: Maybe away to proceed, let's proceed 22 with the engineering analysis, and thenwe'll have, I guess, 23 aworkshop or something to discuss the engineering analysis 24 and, hopefully, at that point we'll have amuch better idea 25 of where things stand in terms of the vapor ignition issue

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003494 1 and discuss how to proceed. But we do havemultiple months 2 of work on the engineering beforewe have to get into the 3 manufacturing. 4 MR. LANGMEAD: There areways toproceed. That's 5 one of them,yes. 6 MR. BERRINGER: Again, we talked about 7 characterizing uncertainty, data collection, competence 8 levels that were done in the past. I guess there'smostly 9 support for continuing to use existing information,use 10 methods that have done in the past. Is there any other 11 suggestions as far as the average manufacturing costs, 12 approaches and so forth? The same thing,variability 13 between costs, between themanufacturers, GRIM analysis. 14 That's something, again, ifpeople werewilling to supply 15 the information to a thirdparty, if they want to run the 16 analysis themselves. Iknowwehave copies thatwe gave out 17 of themanufacturing impacts, so ifpeople want to get a 18 copy of the GRIM analysis run on Excel, that's available. 19 We've talked about the different approaches as far 20 as costing approach and engineering analysis. I think what 21 Ihear is that we stick with the design option approach, the 22 manufacturing impact analysis was performed using GRIM, the 23 design option approach is used. 24 Mike Rivest, doyou have anything to sayas far as 25 GRIM? Are people familiarwith GRIM?

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003495 1 MR.RIVEST: Ihave been involvedwith theprocess 2 improvement over the last year or so andmore recently in 3 developing a genericmethodology formanufacturing impact 4 analyses. A general comment, what strikesme is that -- I 5 guess this is a good thing -- just how different people this 6 rulemaking is approaching themethods and tools, compared to 7 the clothes washers, contrasting the selection of the design 8 option approach here, compared to the efficiency level 9 approach. So in that sense, the ability to customize is a 10 good thing. 11 Recognizing also that the difficulty at this time 12 of proceedingwith detailedmanufacturer-specific type cost 13 analysis, given the uncertainty of the base case and 14 proprietarydesigns, it seems that one option is to have the 15 GRIM analysis conducted later and the analysis of data 16 necessary to run those cash flows would be available later 17 in the rulemaking. If there are anyquestions concerning 18 the GRIM analysis at this time, Iwould be happy to answer 19 them. 20 MR. LANGMEAD: What is it? 21 MR. RIVEST: The GRIM is the standard financial 22 modeling spread sheet which calculates net presentvalue of 23 future cash flows. So, for a given standard level, for each 24 manufacturer or sub group ofmanufacturer chosen, you would 25 try to assess the impact on cash flow of a standardby

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003496 1 tracking changes inmanufacturing costs, shipments, prices, 2 andkey financial indicators of the firms. 3 MR.LANGMEAD: Would it catch the impact of 4 separate and different rulemakings on the same product at 5 closely associated times? 6 MR.RIVEST: The GRIM is currently being revised 7 tobe able to take into account cumulativeburden, which is 8 different rulemakings at different times, and trying to 9 assess that specific to onemanufacturer, as opposed to 10 doing the whole industry. So, for example, if one 11 manufacturer's full line has to consider redesigns ongas 12 water heaters and others to stress heat pumps, that couldbe 13 modeled specifically that way. 14 MR. LANGMEAD: That isn't finishedyet? I've been 15 retired fouryears now. 16 MR.RIVEST: The decision thatwas taken at the 17 workshop inMarch is that furthermodifications to the GRIM 18 wouldbe product-specific so that howwe handle any 19 enhancements toGRIM forwaterheaters wouldbe decided 20 here. 21 MR. BERRINGER: Thankyou, Mike. 22 MR. LANGMEAD: Okay. Maybe I'm still holding it 23 up. 24 MR.NADEL: Excuse me, Michael. That last 25 statement youmade, does that say that, while most of the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003497 

### 1 discussionabout the specifics ofhowwe do this 2 manufacturing impact modelhas been postponeduntil later, 3 that ifwewant tohave revisions made to the model, now 4 mightbe agood time to figure out ingeneral what changes 5 so that the changes couldbemade so that at future 6 workshopswe canhave amodel available and start talking 7 about inputs to themodel? 8 MR.RIVEST: Whatwe'vedone so far is, we've 9 compiledall comments receivedon suggestedenhancements to 10 theGRIM,and what Ioffered todo -- I'm lookingatyou, 11 Bryan -- iswe couldperhaps send those suggested 

### 12 enhancements to thepeoplehere inattendance and to the 13 associations, andwe could solicit furthercomment. 14 MR.BERRINGER: Sounds like agood suggestion. 15 Proprietarydesigns, obviously this reallywasn't looking at 16 the CPSC or thevapor proprietarydesigns,but designs as 17 far as efficiency concerns, sowewill consider them in the 18 engineeringand economic analysis. 19 We just wanted toget an ideaofwhat proprietary 20 designs might be out there thatwe shouldconsider that we 21 haven't thatmaybe something that we add to theAppendixB 22 as far asdesign options. 23 What stage indevelopment? Are they inprototype? 24 Are thereworkingmodels? Arethey on themarket? Again, 25 beingproprietary, shouldDOE collect andreport the costs?

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-003498 1 Should there be a thirdparty involved in collecting the 2 data, a confidentiality agreement or something to that 3 effect? Is anybody aware of anyproprietary designs that we 4 should consider in the rulemaking? 5 MR.HILLER: Letme just voice a concern. I 6 notice in some of thematerials -- notably themailing on 7 June 11th -- that you comment that you do have some 8 proprietarydesigns inmind. I'mguessing that some of 9 those have to do withheat pumpwater heaters and what not. 10 Idon't know at all what you have inmind, butyou domake a 11 statement to that effect. 12 Ihave a great concern. My experience -- and I've 13 been involved in a numberof product development efforts 14 over theyears -- is, again, the devil's in the details. 15 You can come up withwhat looks like a simple, low-cost 16 design,but when you actually start tomanufacture it onan 17 assembly line and see what happens on the assembly line and 18 seewhat actually makes it reliable in the broadest sense in 19 the field, the costs tend to goup. 20 Soyou got tobe careful exactly how you apply 21 that analysis to decision-making on the federal level. My 22 experience is costs have nevergone down. They've always 23 gone upwhen youhit the fieldwith something. 24 MR. STANONIK: Letme add one other thing to that. 25 Certainly, if you're looking at proprietary designs actually

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-003499 1 relative to all field types, I think it's absolutely 2 necessary that DOE be assured that those designs have 3 satisfied all applicable safety requirements and, in fact, 4 can continue to pass those requirements on amass-produced 5 basis. 6 Imean Carl pointed another issue of actually 7 going from adesign to something that actuallyworks theway 8 youwant it to, but with these products it's equally 9 important that unless, very early in the game, if not 10 initially in the game, DOE is certain orhas enough 11 knowledge to be certain that these products will complywith 12 safety standards, then they shouldn't be considered. Waste 13 of time. 14 MR. BERRINGER: That's one of the thingswe looked 15 at whenwe start getting into screening. Health and safety 16 is one of the criteria thatwe've address there. Thankyou. 17 Was there any other questions, comments on the 18 manufacturing costs, life cycle costs of payback analysis, 19 just to ask as far as the variables that we're considering, 20 what data sources are available, looking at retailprice, 21 annual hot wateruse, energyprice, lifetime discount rates, 22 again taking into consideration, service, and installation 23 costs. Do these look like acceptable variables to consider? 24 Are there additional? 25 MR. HILLER: I think it is extremely important

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034100 1 thatyou consider geographic or climatic effects. There is 2 a strong impact of both the entering coldwater temperature 3 on the cost effectiveness of products it dramatically 4 impacts the energy consumption. 5 Also, there's adramatic difference in the 6 application. That's preciselywhywe have somanywater 7 heating options out there now, because ifyou look, for 8 example, at what water heaters aremost commonplace in the 9 south versus what water heaters aremost commonplace in the 10 north, you can find out that you canget away with a smaller 11 water heater in the southbecause the entering coldwater 12 temperatures arewarmer. 13 Even for the same application, for the same total 14 gallons at thepoint of view, youuse less hotwater out of 15 the tank when the entering coldwater temperature is warmer, 16 at least in humanuses. So it's very important that you not 17 simply do analyses ona national averagebasis, but you look 18 at different applications and different geographic regions. 19 MR. ROSENSTOCK: To followup with that, the 20 industry advisory committeemet yesterday and received 21 recommendations from the working group involvedwith energy 22 pricingand life cycle cost analysis. Some of the people 23 that are in this room today were at themeetingyesterday. 24 Iwould highly recommend thatyou follow the 25 recommendations of that working group,because I think a lot

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034101 1 of groundwas coveredyesterday, and I think it's going to 2 be a lot of improvements. It will help improve the 3 analysis, again. Have you had a chance to see any of the 4 reports or any of the subgroup? 5 MR. BERRINGER: No. If you could forward those to 6 us, that wouldbe great. That's one of the things, what 7 data sources are available. 8 MR.ROSENSTOCK: We went over that -- at least on 9 the electric side, we went over that at themeeting and some 10 of the work that was done for the working group. 11 MR. BERRINGER: Great. Did the variables look 12 acceptable that are on there -- retail price, energy,hot 13 water use, and so forth? Are those reasonable factors to 14 consider?



# . 15 MR.HILLER: The annual hotwater use issue is 16 application-specific, and worseyet, the averages that DOE 17 has beenusing in thepast -- the 64.3 gallons -- were 18 pretty much sure, even if you did anational average 19 analysis, that's not the right number anymore. We're 20 trying to comeup with some recommendations out of anASHRAE 21 subcommittee right now. 22 MR. RABA: Response fromJimMcMahon, then the 23 question or comment in the back. 24 MR.McMAHON: I think this is an appropriate time 25 tomake a comment of what LBL hasproposed to the Department

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034102 

### 1 in terms of the analysis for life cycle costs. 2 Whatwe're proposing is todo, basically,a 3 house-by-house simulation wherewe take accountof the 4 demographics and the household characteristics -- things 

### 5 like inlet water temperature, ambient air, all of those 6 appropriate characteristics -- todevelop anational sample 7 ofhouseholds anddo thisanalysis thatway so that we can 8 account for thevariability. 9 It's clear for thisproduct that that's critical, 10 andwe agree that national average values are not going to 11 tell youverymuch. 12 MR.RABA: Comment in theback? 13 MR.NORTON: This is aquestion. The annualwater 14 usage seems tome -- if this is apayback analysis based 

### 15 against the energy factor that is thebaseline criteria for 16 thewaterheater, Iwonderhow that relates to apayback 17 analysis where you lookat annual energyuse that's not 64.3 18 gallons aday. Ijust want tounderstandhowDOE's going to 19 sort that difference out. 20 MR.BERRINGER: Ithink one of the things we're 21 goingto look forthis is a sensitivityanalysis and lookat 22 the different ranges as far as that's concernedandnot just 23 lookat onevalue. 24 MR.RANFONE: Bryan, just a comment. Even thought 25 youhave themall here lumped together, Ithinkyou need to

ANNRILEY &ASSOCIATES,LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034103 1 separatemaintenance, service, and installation costs. I 2 think each one ishighly important in your life cycle cost 3 analysis, and I guess thewayyou've approached it here, it 4 looks like they're all going tobe considered in a lump. 5 Perhaps that wasn'tyour intention, but that's the way it's 6 presented, and they're substantiallydifferent aspects that 7 will impact your life cycle costs. 8 MR. BERRINGER: Thank you. 9 MR. STANONIK: I'm sittinghere trying to -- I'm 10 listening to this discussion and the recognition that you 11 have awide variety of variables across the United States, 12 and I'm trying to understand -- I guess it's not clear to me 13 how that gets used to come up withwhat is still going to be 14 a federal minimum for the United States. 15 Iguess it's true that, yeah, retail pricesvary; 16 energy pricesvary; hot wateruse varies. You could even 17 take that further andyou could evenprobably create a 18 separate range of hot wateruse for eachvolume size of 19 water heater. 20 But I guess I'mnot quite sure how that comes back 21 to establishing a federal minimum,unlessyou're going to 22 take the -- I'mgoing to call it the base set of variables. 23 Imean the one that has theminimum acceptablepayback under 24 the worst casevariable conditions. 25 But Ihave one other question. The gentleman from

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034104 1 LPL, wouldyou just give me a littlemore detail about this 2 average -- you didn't say average -- this simulated 3 household orwhatever you're creating. 4 MR. McMAHON: Yeah. 5 MR. STANONIK: I'mnot sure I quite understood 6 that. 7 MR.McMAHON: The intention is to develop amodel 8 that simulates the hotwater draw for aparticularhousehold 9 and then use information for anational sample of households 10 to drive that. So, for example, the number of people in the 11 house, the location of the house in terms of water 12 temperature on energyprice -- just for some of the 13 variables. Iwon't go through the whole list. 14 And then youwould step through that and say, if 15 there's this manypeople -- in fact, we're looking at 16 demographics, so if it's a single senior, theyuse much less 17 hot water thana single 20-year-old, that kind of stuff. 18 Sowe'll segment the population, simulate a sample 19 of households, for each house estimate howmuch hotwater 20 they're using, look at the inlet water temperature and 21 performan engineering analysis with TANK orWATSIM to see 22 what the energy consumption is going to be. All of that 23 goes into this population, so wewindup withnot one life 24 cycle cost calculation,butmaybe a thousand. 25 MR. STANONIK: What do you dowith it?

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034105 1 MR. McMAHON: Well, we're going to report back to 2 the Department, this is the life cycle cost increase or 3 decrease for X percent of the population, and the Department 4 is going to have to decide, based upon that, what an 5 acceptable standard is. 6 If, in fact, there are very low users with very 7 low energyprices, they may be impacted by the standard such 8 that they don't recover any increased cost. On the other 9 hand, there's going to be a population of high users that 10 are going to get much more than average benefits. The 11 Department is going to have more informationwith which to 12 make a determination where they can set the standard that's 13 fair. 14 MR. MATTINGLY: We got some of this yesterday at 15 the meeting, and I think it's impressive and amuch more 16 sophisticated approach that I think will provide a muchmore 17 defensible and wise basis for a national standard where 18 you're not just trying to average everything, but you're 19 looking at the impacts from regions, subgroups, et cetera. 20 MR. HILLER: I forget who it was yesterday at that 21 advisory meeting who said this, but I'll try and paraphrase 22 what they said, because I thought it was a good point. What 23 you're really doing, people always have the option of going 24 up in efficiency. You can buy a better water heater. You 25 know,you don't have tobuy the minimum efficiency one.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034106 1 So, by settingminimum energy efficiency 2 standards, you don't benefit those people. All you do is 3 penalize the people who can no longer buy the less efficient 4 model. So it's minimizing the deficit, because there's no 5 limit on the up side. 6 MR. GOLDSTEIN: I just need to respond on the 7 record. People do not always have the option of goingup. 8 The whole point of NAECA is that there aremass national 9 markets inwater heaters and otherproducts. If you could 10 just say, "All right. These guys want it .73 and these guys 11 want it .54," you couldhave separate state standards, and 12 the stateswith high energy costs would pick the high 13 numbers, andmaybe stateswithout masonry flues would pick 14 highnumbers.



# . 15 The whole point of this proceeding and the law 16 it's operatingunder is that that kind of choice is 17 illusory. There is plenty of reports about people who try 18 to buymore efficient water heaters, and if you don't want 19 to wait threeweeks without hotwater, you can't do it. 20 So there arepeople whobenefit froma standard 21 because they get topurchase ahigher efficiencypiece of 22 equipment that they just couldn't have done in the real 23 world, in themarket, notwithstanding what economic theory 24 says markets ought to look like in the ivory tower in 25 abstract.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034107 1 Soyeah, the analysis is going to show winners and 2 losers. Iwould suspect, given the previous analysis, that 3 all this is going to do is show that there are a lot of 4 winners and few, if any, losers for the levels of efficiency 5 that are likely to be considered seriously in this 6 rulemaking. 7 Imeanmaybe ifwe went back and looked at the 8 proposals that DOE made or considered last time around, 9 there mightbe more of a distribution of winners or losers, 10 but with themore modest goals of efficiency improvement 11 that I think the Department has inmind now, this shouldn't 12 be amajor controversial point. 13 MR.RABA: Comments on the life cycle costs and 14 payback analysis at this point? 15 MR.NADEL: One or two other little comments. I 16 note that in this report you refer to using average 17 electricity, gas, and oil prices to residential customers 18 for theyear 2003. My understanding is that we're using the 19 EIA projection, thoughyou have projections for lots of 20 different years -- 2003, 2004, 2005. 21 I think the price of electricity they're showing 22 is thatprices will go down slightly. Rather than just take 23 a singleyear, you should look at that series of prices. 24 That will give you abetter estimate of what the likely life 25 cycle cost impacts are.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034108 1 The other issue is to come back to something that 2 someone else mentioned,what size household areyou using 3 for the analysis? Certainly, for the life cycle costs, 4 where you're doing lots of individual households, that 5 sounds verygood,but for the engineering analysis, there's 6 also the question of what is the baseline hot waterdraw? 7 Is it a family of four or is it a "average" family,which I 8 believe is 2.3 people or something like that? I sayyou 9 probably should use the average rather than the test 10 procedure. 11 MR. RABA: Comment in the back? 12 MR.NORTON: Yes. This is a question, at the risk 13 ofmaybe creating a lot of problems. Is this group resolved 14 on the outlet water temperature of the water temperature of 15 thewater heater? Ipresume that, if that number moves 16 around, that's going to affect the engineering analysis and 17 the calculation of annual energy and the life cycle costs. 18 Right now, it's 135 degrees, Ibelieve, or thereabouts. Is 19 that an accepted number? Considering state jurisdictional 20 or safety issues. 21 MR. ROSENSTOCK: Yeah, I guess the revised test 22 procedure will really dictate that, won't it? 23 MR. BERRINGER: Yeah. Again, the analysis -- the 24 testprocedure is separate as far as that goes. We cando, 25 again, some sort of sensitivity analysis to look at the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034109 1 temperature ranges andusage as far as that's concerned,but 2 as far as the testprocedure, yeah, it's currently 135. 3 MR. KUSTERER: I seems that we've been there 4 before. We've done that. It has kind of been resolved. I 5 mean didn't we do this in February? Why arewe bringing it 6 up again? Imeanwe're not even through our agenda. To the 7 best of ourknowledge, that was resolved. Am I correct, 8 Joe? 9 MR. MATTINGLY: Well, I'm trying to -- what was 10 resolved? 11 MR.KUSTERER: Thewater temperature issue, that 12 we were going to staywith 135. Isn't that correct? 13 MR. MATTINGLY: Idon't recall that. 14 MR. HILLER: Letme just paraphrasewhat I just 15 heard Bryan say. For the test procedure, there's some set 16 of temperatures thatyou use to evaluate whether itmeets 17 the standard ornot. 18 MR. KUSTERER: Right. 19 MR.HILLER: But for the evaluation of options to 20 decide what to set the level to, they don't necessarilyhave 21 to limit themselves to that same temperature. They can look 22 at the impact of temperature for evaluating the cost 23 effectiveness and the sensitivity of the cost effectiveness 24 to that. 25 MR. KUSTERER: Right.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034110 1 MR.HILLER: So they're somewhat decoupled. You 2 know, onceyou decide what you're going to go for, then 3 setting the standard to determine it. But you don't have to 4 use the same temperatures. 5 MR. KUSTERER: We'vebeen there. We've done that 6 already, and I thinkwe should continue onwith this agenda, 7 rather than try to bring in something else that's just going 8 toprolong the program. 9 MR. RANFONE: What's DOE's target for life cycle 10 cost analysis in terms of payback? What's the reasonable 11 payback that DOE is looking for? Life of the appliance? 12 Threeyears? Fiveyears? What's your criteria? 13 MR. BERRINGER: I think one of the criteria is the 14 three years, but that's just one of the criteria as far as 15 payback. 16 MR.RANFONE: Well, whenyou make yourdecision on 17 what number to propose, what's going to be the criteria? 18 MR. BERRINGER: Carl, do you have any response for 19 that? 20 MR.ADAMS: There is no fixed number. There is no 21 formula, that I've everbeen aware of, of selection. The 22 many factors are all looked at, the paybackbeing one. 23 The three-yearpayback, which is often talked 24 about is in the legislation that says, if something has a 25 three-yearpayback or less, it's assumed tobe economically

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034111 1 justified,but that can be rebuttedby other factors. But 2 there's not anything that says that we cannot consider 3 paybacks greater than three years. 4 So again, there is no fixed number. Ibelieve we 5 did say, for example, that we wouldnot consider paybacks 6 that exceed the life of theproduct, which seems certainly 7 reasonable, but there is no fixed number. 8 [Laughter.] 9 MR. RANFONE: Ithink this is a key aspect of this 10 entire rulemaking, and Iunderstandyour comments, Carl, but 11 Idon't completely agree that you can't establish some kind 12 of a level. You've done itbefore on otherproducts

-- 13 dryers. Idon't understandwhyyou wouldn't do it forwater 14 heaters ormake it public and let us at least understand 15 what that number is, what that criteria is. Even though 16 you've got different variables here, I think it's prudent 17 that the Department does provide that. 18 MR. BERRINGER: I think it's kind of arbitrary, 19 though, too, until you doall the analysis, thatyou can 20 come up with the criteria and sit there and say that we 21 won't consider something. 22 MR.RANFONE: Well, looking ahead in some of your 23 options already, I've seenyou made some decisions or are 24 proposing some decisions, and I think that's what has 25 promptedme to ask this questionnow.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034112 1 MR. GOLDSTEIN: I didn't want to let the morning 2 endwithout having agreed with George on something, so I 3 wanted to endorse sticking with 135 degrees for the 4 analysis. 5 Not only is it simple and straightforward, but if 6 you change it, then you've got to get into the issue of how 7 does that affect the annual gallons of use, because some 8 things, like clothes washers, just take gallons and don't 9 know the temperature. Other things, like bath water, it 10 depends. So you just open up a Pandora's box of other 11 things you've got to consider if you change it from 135. 12 MR. KUSTERER: You've made my day. Thank you. 13 MR. STANONIK: If the analysis is going to look at 14 the impact of varying inlet water supply temperature, if 15 you're going to include that, you have to consider the 16 effect of differing outlet water temperatures, because it's 17 the same -- the people in the south who have their inlet 18 water coming in at 70 degrees or whatever are also the 19 people most likely to, if you will, get by with lower 20 thermostat settings because, in fact, the energy they need 21 delivered -- which is what we're really talking about -- to 22 get a comfortable temperature when they're mixing hot and 23 cold is less than somebody living in the upper reaches of 24 the north that's trying to get a comfortable bath water 25 temperature when they're mixing 35-degree water in the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034113 1 middle of thewinter. They're going to want ahigher 2 temperaturewater coming out of theirwater heater. 3 So I think the previous discussion, therewas some 4 confusion about what's going to be in the test procedure and 5 what should be in the analysis, but if you think it's 6 important to factor in the effect of different inlet water 7 temperatures, I think you have tohave at least some 8 sensitivity analysis of the effect of different water 9 thermostat settings. 10 MR. MATTINGLY: Especially since we're encouraging 11 thepublic to set their thermostats at 120 degrees. 12 MR. ROSENSTOCK: Again, it's anothervariable with 13 a range. Iwouldhave to concurwithmy GAMA colleagues 14 there. 15 MR.NADEL: I think the bigger question is, is the 16 data available? We donot have the time or resources to do 17 a survey of 1,000 household on their outlet temperature. I 18 don't know to what extent is this data readily available. 19 Jim,maybe you could answer. 20 MR. GOLDSTEIN: One other comment on that. I did 21 a study anumber of years ago on the number of gallons per 22 day, and the data availability issue is something DOE needs 23 to confront, or its contractors, because a lot of gallonage 24 is back calculated, assuming you know the outlet temperature 25 at 135 or 140.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034114 1 If you relax that assumption,you're going to have @s 2 to goback to all of the original source studies and see 3 whether that changes the gallons number, because the two are 4 linked, as all of the speakers have been indicating. 5 Toget into a regional analysis, you would also 6 have to askdata questions. Are there regionally different 7 patterns of usage of hot water? Iwould assume, without 8 having anydata, that if you live in ahotter southern area 9 you're going to takemore showers andwash your clothesmore 10 often than if you live in anorthern area. So it's 11 complicated, and if you have the data, that's fine. 12 MR. HILLER: Letme put yourminds at ease to some 13 extent. If you indeed use WATSIM to do a lot of this 14 analysis andyou do the regional type of analysis that the



# . ~15 gentleman from LBLwas describing,WATSIM works on 16 point-of-use draws, so if you change the tank setpoint 17 temperature,WATSIM will automatically change the amount of 18 hot water taken fromthe tank duringhuman usage. So all 19 youhave to do is parametrically -- the issue of what 20 temperatures to use for the analysis, especially if you're 21 using aWATSIM-like analysis, is separate fromwhether that 22 represents some national average. You can do 120, you can 23 do 135, and you can see the difference, and that's pretty 24 straightforward, because itwill automatically adjust for 25 the amounts of draws taken from the tank.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034115 1 MR. RABA: Charlie.



# . 2 MR. STEPHENS: I thinkyou really are on apretty 3 slippery slope there. Once you start that, you not only 4 have to be able to know what the impact is for a particular 5 household when you change that temperature, but you have to 6 know then which households have what temperature. Imean 7 when they get it and a year later and five years later or 8 whatever. 9 And then, on top of that, you may find that the 10 location of the water heater, whether it's in the garage or 11 the basement or if it's in a southern climate outdoors or 12 something, starts to have an impact on things like standby 13 losses. You can really go down that road. 14 The problem I see is exactly what David was 15 suggesting, that even though you can calculate what the 16 impact is on a water heater and water heater use in a 17 household, I'm not sure we know or have the data to say who 18 has what conditions around the country after that to scale 19 it up. 20 MR. MATTINGLY: I just remember that we got in a 21 lot of trouble with heat pump water heaters when we relied 22 on test procedure figures as if that reflected the real 23 world, and we were using the wrong water usage. It seems 24 like we would be doing the same thinghere, if we're trying 25 to do a real world analysis based on test procedure figures.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034116 1 If we can do better than that, whynot try? 2 MR. BERRINGER: Any other comments? This looks 3 like a good time to take a lunchbreak. Comeback in about 4 an hour. 5 [Whereupon, at 12:30 p.m., themeetingwas 6 recessed for lunch, to reconvene at 1:30 p.m., this same 7 day.] 8 9 10 11 12 13 14



# . 15 16 17 18 19 20 21 22 23 24 25

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034117 1 AFTERNOON SESSION 2 [1:35 p.m.] 3 MR. RABA: Thank you for coming back. We have 4 some positive and negative feedback. The positive has to do 5 with the ladies and gentlemen on our team, all of you. The 6 negative feedback is in the microphone system, somehow, in 7 that there's a ringing, a constant ringing. 8 We thought that by not touching themikes would be 9 of help, or maybe tipping them down lower, away from the 10 overhead might be helpful. Those that would like to speak 11 in the back can use the passed-around microphone, the 12 portable. Themikes may be fine-tuned too much that it's 13 still very sensitive, soplease bear with us on that and 14 help us out. 15 Is there anything that you would like to bring up, 16 anything we might tie up from this morning before we proceed 17 to this afternoon's discussion and pick up with our agenda? 18 MR. BERRINGER: Retail prices, life cycle costs. 19 In the report, we said that there's three potential 20 approaches -- conducting surveys of existingmarket, 21 surveying manufacturers and othermarket experts, and 22 applying various markups overvariable costs. The question 23 is, are these approaches sound approaches? Are there other 24 options or other ways of verifying prices? 25 MR. STANONIK: Bryan, just a caution in terms of

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034118 

### 1 conducting asurvey of existingprices, DOEwill, Iassume, 2 inaddition to lookingat, let's say, themajor retailers, 3 will alsobe talking toplumbers,whichare really the other 4 way that theproducts endupbeing sold. 5 My caution is only that,whenyou talk to that 6 segment of themarket, it needs tobe clear thatwe're 7 distinguishing theprice of theunit from theprice of 8 installation,because Ithinkthepractice is often that the 9 plumber just says, "All right. Youwantanewwaterheater 10 installed in the next three hours. Here it is, Xdollars." 11 The consumerpays forthat, without necessarily knowing 12 which costwaswhat. It's just thebottomline, so to 13 speak. 14 MR.BERRINGER: That was one of thequestions, how



# . 15 should DOE considerdifferentmarkup structures relative to 16 distributionchannels? You'rereferring tothe plumbing 17 distributorsversus the retailers. 18 MR. STANONIK: We'll justdeal. 19 MR.KUSTERER: IndependenceDay is coming. 20 MR.BERRINGER: Iknowwehave issues as far as 21 shipments, but as faras futureprices, are there any 22 resources thatwe coulduse? Would the industrybewilling 23 togive any type of suggested futureprices? Iknow this 24 comes tobe a big issue as farasmarkup,pass-throughs, all 25 those type of things. Are there any other sources out

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034119 1 there? 2 Again,we talked about industry cash flow 3 approaches, determiningmanufacturerprices. Would 4 manufacturers be willing to provide futuremanufacturing 5 prices if there's any information or confidential 6 information, stuff that could be done through GAMA, third 7 party, someway of aggregating information. 8 MR. RABA: Charlie has a question. 9 MR. STEPHENS: To what extent was this an issue in 10 the last analysis? Imean did the last analysis and the way 11 prices were developed last timework out well enough for 12 everybody, or do we need to invent somethingnew? 13 MR.HILLER: The answer to that is no, they 14 weren't done verywell. Ifyou look at what happened last 15 time -- I'm talking about the 1994 proposal -- there were 16 some very arbitrary assumptions about themanufacturing 17 costs and the cost to the consumer of heat pump water 18 heaters that weren't borne out bywhat was going on in the 19 field. There reallywasn't much scientific justification 20 for the numbers. They were kind of pulled out of thin air. 21 MR. GOLDSTEIN: But heat pump water heaters are 22 proposed to be screened out. So the question is, aside from 23 that, are there any gross errors that peoplehave identified 24 in the previous analysis? 25 MR. BERRINGER: I thinkmainly in the analysis in

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034120 1 thepast itwas more or less fromthe oil side in the design 2 options that were trying to look at gas options and oil 3 options as the same design options, but Idon't know as far 4 cost. Idon't know. 5 MR. GOLDSTEIN: Well, I think that's important, 6 because we can save a lot of money. We can advance the 7 schedule ifwe're just talking about incremental refinements 8 and edits on what was done before. On the otherhand, if 9 there's something fundamentallywrongwithwhat was done 10 before, then weneed to go back andmore comprehensively fix 11 it. 12 MR. LANNES: There were comments submitted that 13 identified gross errors onboth gas and oil. 14 MR.HEMPHILL: As far as Iknow, the numbers that



# . 15 were used in our report for costing forwater heaterswere 16 accurate, as well as the best we could come up withand 17 resulted in a gooddetermination. Imean Iwould hate to 18 throw out those numbers just because other numbers may be 19 challenged. 20 MR. MATTINGLY: Again,we've heard the issues of 21 the blowingagent using the insulation on electric water 22 heaters being still kind of undetermined and, of course, the 23 gas water heaterswith the new design for flammable vapor 24 resistance. At this stage, part of ourprocess in 25 predictingprices is we don't knowwhat the product is yet.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034121 1 MR. BERRINGER: Yeah, we realize that could affect 2 the baseline model, just looking at that. Any other 3 comments, questions about manufacturing? Prices, retail 4 prices, so forth? 5 [No response.] 6 On the shipments, as far as forecasting shipments, 7 we've heard earlier that there's not really any information 8 on shipments and so forth. Is there any type of spread 9 sheet models using residential energy model or other experts 10 or historical trends that could be used? 11 MR. MATTINGLY: GAMA does publish some shipment 12 information for gas and electric and oil water heaters. For 13 what it's worth,we can make that available. That's 14 historical shipments. 

# O 15 MR. BERRINGER: Any other suggestions as far as 16 shipments? 17 MR. ROSENSTOCK: Arthur D. Little has a report 18 that went out, put out by NCIS recently, in terms of 19 historical shipments. It's on the Internet, too. I've 20 downloaded it off the Internet. It's put out by NCIS, 21 National Computer Information Service. 22 MR. STANONIK: Bryan, you have two questions 23 there. Are you just looking for, let's say, a forecast of 24 overall shipments? You also mentioned some kind of forecast 25 for shipments of various efficiency levels.

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034122 1 I would say that that second question, I don't 2 think you're going to get an answer to that one. Again,we 3 have not, as a matter of course, tracked shipments by 4 efficiency for the industry at all, so I'm not sure how 5 anybody would come up with a forecast on that one. 6 Imean, conversely, if you just want to forecast 7 overall shipments, we do some of that on a kind of a 8 five-yearprojection that, with the manufacturers' 9 agreement, we could probably provide. 10 But I think equally useful there would be if you 11 could get, also, some projections on housing starts, and 12 that obviously becomes one of the factors. At least today, 13 most new houses have a water heater when they're built. 14 That is one segment of it, but it becomes another valuable



# . ~15 data point. 16 MR. BERRINGER: Any other comments, questions 17 about shipments? Should the Department use the residential 18 energy model or simple spread sheets? Again, trying to move 19 away from the black boxes. 20 Jim, do you want to give a brief description about 21 the residential energy model, talk about that at all? 22 MR. McMAHON: The LBL residential energy model is 23 an end use-specificmodel that was built originally at Oak 24 Ridge Lab. It combines the engineering information with 25 economic information.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034123 1 The major drivers of the future forecast have to Is 

### ~2 do with housing starts, housing stocks, future energy 3 prices, income projects, and those kind of macroeconomic 4 things. Energy prices are clearly important. This is the 5 model that has been used to date in all of analyses of 6 appliance standards and was used for water heaters 7 previously. It couldbe used again. 8 Alternatives are the REFS model, which was 9 developed by EPRI as another residential end use forecasting 10 model. DOE has the NEMS model, which doesn't have the level 11 of detail and technologies that the LBL model does, but is 12 another alternative. 13 With regard to spread sheets -- should I continue? 14 MR. RABA: Please.



# . 15 MR. McMAHON: We have begun some preliminary work 16 to create a spread sheet that has the basic elements of REM 17 but not all the detail. I think, in answer to Dave Lewis's 18 question earlier this morning about black boxes, we view 19 this as a teaching tool that would explain what's going on 20 in the programming code of REM so that it couldbe more 21 accessible and people could do a reality check andmake sure 22 that it makes sense. 23 Does that provide what you need, Bryan? 24 MR. BERRINGER: Thank you. 25 MR. ROSENSTOCK: Also, just to mention that report

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034124 1 I was talking about earlier for the industry advisory is 

### ~2 committee, the working group also looked at calculations of 3 energy savings, as well, on the electric side, and again, it 4 will be in that report. Some of the recommendations that 5 talked about that are in that report that discussed it. 6 So I'll forward that on in terms of future 7 projections of marginal heat rate and things like that. On 8 the electric side, you get to the quad calculations, so that 9 will be forwarded to you, as well. But again, it's part of 10 that working group for the industry advisory committee. 11 MR. BERRINGER: It sounds like the past methods, 12 nobody really has, other than the initial data part using 13 the residential energy model, to be for consistency, 14 verification, also using other means to back up and verify



# . 15 data is acceptable. 16 Employment impacts. Are there any ways or methods 17 or models that we shouldbe using to look at employment, 18 impacts on employment? Is there any type of data that we 19 can utilize that's out there? 20 MR. RABA: Tough group after lunch. 21 MR. BERRINGER: Again, if anybody has comments 22 when they take this back and have more time to look over the 23 draft report, please provide us comments. We would 24 appreciate it. 25 Revisedpre-ANOPR. Basically, going back to

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034125 1 figure 1, a lot of this work will be done under the new 2 process before the advance notice is issued, so the 3 engineering would have workshops such as this. 4 We're really sort of at a starting point, although 5 we've already done the engineering analysis. We just want 6 to go back. We're committed to using the newprocess for 7 water heaters, by opening up the process, but we have issued 8 a notice before, so we're just going to reissue the notice, 9 but all the analysis and so forth that's laid out in the 10 schedule would be done prior to the revised notice. 11 Consumer impacts, consumer sub-group analysis. As 12 far as how many households are not better off with standards 13 and by how much, is there any type of information that we 14 have or that is available for doing consumer-type analysis?



# . ~15 I guess we're missing Glenn Schleede here to talk about our 16 consumer aspect this afternoon. 17 Variations in energy prices? Are there any data 18 sources that can be used that look at the consumer 19 sub-group? Appropriate market segmentation and analysis 20 methods? Variables to be considered? 21 This morning we talked about households and so 22 forthbefore, but if there's any consumer information or 23 consumer groups that can be represented or talk about the 24 operation and so forth of the water heaters. Is anybody 25 aware of any studies or data that couldbe used?

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034126 1 MR. LANGMEAD: If you get into howmany household 2 would be better off with standards, I think you've got to 3 look at how many might not be as well off with standards, if 4 you are basing it on efficiency alone and not taking account 5 water heaters that would resist the ignition of flammable 6 vapors. 7 If those two come into play against each other, 8 you're going to create a problem. I don't want to drub on 9 that too much this afternoon, but be it noted here. Here's 10 an impact on consumers, potentially. 11 MR. ROSENSTOCK: Some of these last categories 12 were already kind of discussed previously in some of the 13 other aspects, so I don't really think there's any special 14 need in this area. It has been covered in other areas, 15 really, when you get right down to it. 16 MR. BERRINGER: Potential impacts, first costs, on 17 consumers -- affordability, financing. Again, if there's 18 any type of consumer information or studies that would 19 address these issues, if there's any information on consumer 20 decision-making as far as thinking on the product classes. 21 MR. GOLDSTEIN: This is related,but it's not 22 covered in one of your categories. If you're looking at 23 differential impacts, it's important to look at the 24 differential health impacts of the failure to have 25 efficiency standards.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034127 1 NRDC did a study that tried to use epidemiological 

# O0 2 data to relate airpollution levels to mortality, and so 3 there are ways of estimating, at least in a ballpark, how 4 many lives are going to be lost due to given levels of 5 efficiency or inefficiency. 6 That can be compared, both with safety impacts

-- 7 if there's a trade-off, which there hopefully isn't -- and 8 also can be used in terms of the differential impacts on 9 poor andminorities, because there's lots of information 10 showing that poor andminority citizens are exposed 11 differentially to the health-related impacts of lack of 12 efficiency. 13 MR. BERRINGER: Thank you, David. We did talk 14 about demonstration projects, consumer groups. Is anybody



# . ~15 aware of any consumer groups that can be contacted that are 16 involved? Trying to get consumer groups involved in the 17 process has been very difficult, even in the advisory 18 committee, to keep the interest up. If there's anybody, if 19 they have points of contact or so forth, if they could let 20 us know. 21 MR. ROSENSTOCK: Consumer Federation of America

-- 22 that's Mark Cooper -- addressed the Industry Advisory 23 Committee recently. AARP has sent a representative who 24 works on consumer issues. Jane Hardin, I believe her name 25 was. Mark Cooper is on one of the working groups from

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034128 1 Consumer Federation ofAmerica. I'm sure there's other 2 groups out there, as well, who work with consumers. 3 There have been lots of studies before on consumer 4 preferences. Utilities have done studies. Other 5 manufacturers and retailers have done consumer studies. If 6 it's available and if it's not proprietary, youmight want 7 to ask for some of that information, because a lot of 8 companies do market research that try to predict consumer 9 demand for products. It's out there. 10 MR. STADNIK: My name is Andy Stadnik, CPSC. CFA 11 is probably the biggest one to look at for a varied input 12 from that side of things. They probably have a big network 13 that they can use to tap into. 14 MR. BERRINGER: Okay. Thank you. 15 MR. STADNIK: Have you gotten involved with any 16 retailers that sell the water heaters? I didn't see a lot 17 of Walmarts or Home Depot types involved in the process. 18 From their perspective, youmight want to contact them. 19 MR. BERRINGER: I think Circuit City and Home 20 Depot are involved in the Advisory Committee. 21 MR. STADNIK: The Advisory Committee? 22 MR. BERRINGER: But yeah, that's another source. 23 I know that Circuit City has been involved and so forth in 24 the last year with ourprocess. 25 Let'smove on to section 11, industry cash flow.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034129 1 Just looking at some of the data on some of thevery last 2 page, AppendixD of the draft framework report, just looking 3 at these numbers as default values, if they make sense. 4 People are familiarwith the GRIM analysis, if these are 5 starting points or assumptions. Ifyou feel there need to 6 be changes or suggestions for thosevalues. 7 This is page D-1, the very lastpage of your 8 document. It has tax rate, interest rate, working capital, 9 depreciation capital. 10 MR. GOLDSTEIN: The general comment is you should 11 try toverify these with real numbers fromdata on the 12 industry. The one that I can assure you iswrong is the 13 interest rate at 12 percent, which is 12 percent plus 14 inflation, the wayyour models work. 15 There are two things that's wrong with that. 16 First of all is that the cost of capital has to be 17 desegregated intodebt and equity. Debt is taxdeductible. 18 The model needs to account for that. What's the cost of 19 debt? It's probablyprime rate,maybe prime plus 1,maybe 20 primeminus 1. But prime rate is 8-1/2 nominal, which is 5 21 real, so 12 is nowhere close. 22 For equity, the rate of return fromAmerican 23 corporations for the past 80 yearshas beenno higher than 24 6percent, so 12 is way out of the ballpark. Again, real 25 dollars. Nominal will be higher.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034130 1 MR. BERRINGER: Any other comment son those 2 values? 3 MR. MATTINGLY: I seem to recall, didn't we have 4 an exercise in this -- was it a year ago or two years ago, 5 where each of us provided information, economists' 6 information? I guess it was when we were arguing about 7 discount rates. I'm just saying there may be some 8 information there

-- 9 MR. KUSTERER: '94. 10 MR. MATTINGLY: -- that's worth resurrecting and 11 taking a look with. 12 MR. KUSTERER: That variable overhead percentage 13 seems to be a little on the low side. I do agree with my 14 friend from the NRDC. We're even. 15 MR. GOLDSTEIN: All right. 16 [Laughter.] 17 MR. BERRINGER: Are there any other comments, 18 suggestions as far as the Appendix D or the cash flow? 19 Charlie. 20 MR. STEPHENS: The question is, the depreciation 21 of what? Buildings? Or equipment, or some combination of 22 both? 23 MR. KUSTERER: Employees. 24 [Laughter.] 25 MR. STEPHENS: There's a big difference in the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034131 1 treatment of those things, at least for taxpurposes. I 2 justwant to knowwhat it is. 3 MR. LEWIS: Couldyou just explain what we're 4 looking at inAppendixD as far as how this is going to be 5 used? 6 MR. BERRINGER: These are basically inputs that 7 are used in the GRIM analysis as far as the inputs. They 8 just wanted as the initial inputs for doing their factual 9 analysis and so forth. 10 MR. LEWIS: So, in fact, that 3-1/4 percent would 11 come off of the interest rate of 12 percent? 12 MR. BERRINGER: I'mnot sure on that. We'll try 13 andget somemore clarifications on the definitions for 14 these as far as depreciation and so forth, what they're 15 talking about. 16 MR. LEWIS: And also, obviously -- Iknow DOE is 17 aware of this -- but it's clear that what amanufacturer 18 experiences and what a consumer experiences are obviously 19 different. When a consumergoes out and buys something, 20 they'rebuying it at, generally,what the credit card rate 21 is, and obviously amanufacturer is not going to be exposed 22 to the exact same number. 23 MR. LANGMEAD: I just wonder if anybody around the 24 roomhere remembers how much of what the industry 25 recommended on the government regulatory impact model was

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034132 1 adopted andwhat wasn't adopted from the recommendationmade 2 some several years ago. There was awholemajor studydone 3 onmy industry on that model and awhole series of 4 recommendations. Idon't knowwhether these recommendations 5 match that or don't. Arewe reinventing the wheel? 6 MR.RIVEST: The GRIMmodelwas adopted as is, as 7 submitted by industry. The onlymodifications that have 8 been madehave been to increase its user friendliness by 9 providing aWindows interface, but the functionality is the 10 same. 11 MR. BERRINGER: Again, onmanufacturer sub-group 12 analysis, contractor qualifications, what type of 13 qualifications will beneeded to do this analysis? Has the 14 past analysis been acceptable? Do we just need to revise 15 it, update it? 16 We're looking at possibly, as faras part of the 17 data collection, going out anddoing interviews. Are there 18 any suggestions as far as what manufacturers -- all of them, 19 large, small, medium? Is there anyway of categorizing them 20 as far as who we should interview and howwe should look at 21 themarket and so forth? 22 We've talked about market earlier andpercent 23 market share and what methods shouldbe used to do this type 24 of analysis. Should weput them in certain categories, 25 individuals, again using the GRIM analysis? What type of

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034133 

### 1 information shouldwe collect? 2 MR. RIVEST: Maybe Ican say a fewwords. 3 Essentially, as Iunderstand it, there's not a consensus 4 yet,but there was a feeling that themanufacturing cost 5 data thathas beenpresented in thepastwas reasonable. 6 Theremaybe someupdating and somedesign options that have 7 tobe lookedat, but there was nomajorproblemwith some of 8 the cost data. 9 But thedatawas not collected to reflectback 10 that somemanufacturersmayhave largelydifferent cost 11 structures than others. Eventually,aswe do a 12 manufacturing impact analysis,we'll need to consider that a 13 high-volumemanufacturer mayhave largelydifferent impacts 14 fromthenorm, if youwill, or from the average. 15 Whenwe collect thatdataandwe run our 16 spreadsheets, lookingat netpresent value of these 17 different firms,we'll have toeither doaGRIM analysis for 18 each firm -- which Idon't know if it's realistic or 

### 19 practical -- orwemight try and categorize the firms toget 20 representative samples of the impacts on different groups -- 21 oil versus gas versus full line, forexample. 22 So Ithink that's down in the future, but if we 23 can start thinkingabout howwemight collect any future 24 information so that it willbe easy, then, to incorporate 25 within those categories.

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034134 1 MR. BERRINGER: Thank you, Mike. Competitive 2 impacts, having CPSC, trying to make sure we get other 3 people involved early in the process. We have been in touch 4 with EPA as far as environmental. We talked about the 5 phase-out of the HCFC's and CFC's and how that would affect. 6 So if they become issues, EPA will say they're willing to 7 get more involved or to be involved in the process. So 8 we're just trying tomake sure we get other government 9 agencies involved early in the process. 10 In cumulative burden, we've talked about CPSC's 11 involvement, EPA. We talked earlier about ways we could 12 maybe work together and come up with a rulemaking that 13 wasn't a burden on the manufacturers, get some sort of 14 negotiated rulemaking, if that's acceptable, if there's 15 other ways of doing it. 16 Andy's here from CPSC. He wasn't here earlier. 17 Does anybody have any general questions for him while we're 18 on this subject, as far as the flammable vapor ignition? 19 MR. GOLDSTEIN: This isn't a specific question, 20 but the real issue is DOE has proposed a schedule for 21 completing this rulemaking. They're already, on that, seven 22 years behind the statutory schedule for a standard that was 23 supposed to come out in '95. This would have it coming up 24 in 2002. So, waiting to see what you do and then starting 25 their analysis isn't the best approach.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034135 1 The question is, how can the twoprocesses be 2 integratedbest so that we get an expeditious answer out of 3 the DOE process and we get one that allows industry to 4 redesign once tomeet both safety and energy efficiency? 5 MR. STADNIK: In answering that question, it 6 really comes down to, DOE has changed their process, and how 7 they bringus into the fold is something that's sort of 8 beginning to evolve, which is adifferent process than what 9 wasused before. 10 Clearly, there's a requirement, from our 11 perspective, that we want to see dealt withand eliminate 12 part of the hazard in a particular class of products. How 13 industry is choosing to do that, we're cautiously optimistic 14 of the progress they're making. 15 As they arewell aware in this room about the 16 pressure that my colleague, Don Sweitzer, andmyself and our 17 chairman puts on them, so theyare moving as best one could 18 move with the threat of our regulatory actionbehind it. 19 Not that regulatory action is a threat, but it's 20 an issue wewant pushed along real quick,because right now, 21 today,with at least 17 to 20 people ayeardying from 22 flammable vapor issues, we're not happy with that. In our 23 mode of operation, that's roughly $100 millionof societal 24 cost right there, because the average value of a life, from 25 our economicmodels, is $3 to $7million. Clearly, we feel

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034136 1 that the benefits of moving along here can outweigh that. 2 How they meld together -- clearly, if the industry 3 isworking on the flammable vapor issue, theyhave to be 4 keeping in the backs of their mindswhat DOE is doing and 5 participating in that process. 6 Hopefully -- we don't knowwhat the design is 7 going to be, ultimately. Imean there's lots of different 8 promises out there, lots of technologies that are in the 9 trade press of ways to deal with things. Until we see some 10 success in that area, in the test methods that we're talking 11 about in the standards development process, we can't predict 12 howwell they're going to perform. 13 Theremaybe things that are being considered, 14 when we get into some of the trade-offs and some of the 15 design options that are being considered -- not heat traps, 16 themselves, but other types of things, issueswith changing 17 the flue designs and things -- so that mayalso impact the 18 flammable vapor issue. 19 We're just coming to see thosenow in this revised 20 output from DOE, and those are issues weneed to think 21 about, andwe're just starting to look at those. 22 MR.GOLDSTEIN: Okay. 23 MR. STADNIK: We're trying to get togetherwith 24 DOE. We're just going to start to increase that dialogue. 25 MR.GOLDSTEIN: Iwould encourage you to do that.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034137 1 From mypoint of view,my organization is very concerned 2 with thepublic health as perhaps our primary environmental 3 issue. We look at hundreds of deaths per year caused by the 4 airpollution emitted to power waterheaters, and the 5 potential of saving -- Idon't know -- 10 percent, tomake 6 up anumber from this rulemaking, couldbedozens or 7 hundreds of deaths peryearprevented. 8 And so, again, the schedule from getting an energy 9 standard is just as important as the schedule from getting a 10 safety standard. The challenges to find a waywhere we're 11 not sequentially -- you know,youwait forDOE tomake some 12 decision before you canproceed, and thenDOE waits for you 13 tomake some decision before they can, and soboth processes 14 get delayed despite the goal to protect public healthby 

# .| 15 moving forward. 16 MR. KREBS: On the issue of flammability of vapors 17 that maybe spilled, it's futile to try to regulate out of 18 existence stupidity. You can only regulate it in. 19 MR. BERRINGER: Are there any other regulatory 20 burdens that we haven't accounted for, any other factors 21 that we should think about in this particular segment? 22 MR.VAGO: Theremightbe NOX requirements in the 23 State of California. 24 MR. BERRINGER: Okay. Let's move on to utility 25 impacts

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034138 1 MR. GOLDSTEIN: A brief comment on that. I guess 2 Iwould recommend that you reallydeemphasize this analysis 3 at this stage. I can't imagine anyone in this room or out 4 of it who wouldwant to get up inpublic and say that they 5 could describe the shape of the utility industry in the year 6 2003 with enough accuracy to do any kind of analysis. You 7 know? 8 Theremay ormaynot be restructuring bills in 50 9 states and at the federal level, and theymay ormaynot 10 require utilities to be compensated for lost revenues from 11 efficiency standards. Theymay ormaynot allow the 12 continuation of vertically integrated utilities. 13 There's no wayyou canpredict how that's going to 14 turn out. Somaybeyou have to do something that's the



# . 15 least amount of workand recognize thatyou're hitting one 16 of 100 possible scenarios for how this mightwork out. 17 MR. ROSENSTOCK: Again, for themodel, just for 18 clarification, is it publicly available wherepeople could 19 use it, or is this aproprietaryDOEmodel? That's one 20 aspect. And again, in terms of having your energy and 21 avoided reliability costs, Idon't really see that as being 22 a factor in any sense 23 Also, again, the future will bemuch different. 24 Again, it mightbe interesting to see, does themodel assume 25 vertically integrated utilities, be it gas or electric, when

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034139 1 you get right down to it. So in the future it is going to 2 be a little more difficult, but I think it's auseful 3 exercise. 4 MR. LEWIS: Idon't see howyou could go through 5 this process and say that utility impacts are too difficult 6 to figure, therefore, let's leave them out, because they'll 7 be controversial. 8 It'sprobably a good argument. Imean Ithink 9 they will be controversial, and I think theywill be 10 complicated,but the impact on the consumer, who ultimately 11 is supposed to benefit from this whole process, must be 12 taken into consideration as far as, you know, if gasprices 13 drop in half or raise half again above where they are today, 14 thatwould be a tremendous impact as far as the efficiency 15 standard that DOE sets. Similarly, on the electric side. 16 So Idon't have a good suggestion as far as what's 17 done on the utility side, but I just can't believe that 18 neglecting this important area thatwill have tremendous 19 impact, with 43 states today that are already looking very 20 aggressively at deregulation, I just don't see how it could 21 be written off. 22 MR. RABA: Charlie, in the back. 23 MR. STEPHENS: Looking at one of the questions on 24 your outline there, as far as gas utilities, Iknow Ihave 25 at least three gas utilities who can tell youwhat the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034140 1 impact on themwouldbe. 2 Their analyseshave already been done. They're 3 public; they're recent; and theywill make thempublic, 4 alongwith, I think, if I asked they to do it, theywould 5 probably provide you a summary of what they think this 6 means, what their analysis means in terms of impact of a 7 standard on theirwater heaterpopulation. 8 Like I say, they've already done it, and it's 9 public already, and none of the analyses is more than two 10 years old, so if you want it, I'm sure we canget that for 11 you. Imean it's one little piece,but it's there. 12 MR. BERRINGER: That wouldbe useful. Thank you, 13 Charlie. 14 MR. RABA: Steve, doyou have a comment? 15 MR.NADEL: Yeah. Iguess Iwould like to agree 16 with bothDave andDave -- and letme explain how I could 17 agreewith both of them. 18 MR.GOLDSTEIN: How doyou do that? 19 MR.NADEL: I agree withDave Lewis that it is 20 important -- you can't just ignore -- but I agreewith Dave 21 Goldstein thatwe shouldprobablykeep this analysispretty 22 simple, because the assumptions will drive the analysis, and 23 the assumptions, suchas what plantswill bebacked out, are 24 highly speculative. You don't need abig, fancy computer 25 model when certainkey assumptions will drive it.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034141 1 So I think we should keep the analysis relatively 2 simple. You talk about spreadsheet models; you have an 3 existing model which you want to use. Try to keep it at 4 that level. Let's not get too fancy. 5 MR. RANFONE: I guess, legislatively, you would 6 have to take a look at impact on utilities anyhow, and you 7 picked out gas utilities, because I think you haven't done 8 that, really, in the past. It has basically been on 9 electric utilities, the analyses that I've seen. We would 10 be glad to help you there. 11 One of the questions, the last question, says, 12 should the Department consider what elements to assess the 13 likelihood of impacts of fuel switching? I guess, when I 14 readAppendix B and I see the analysis eliminating a number 15 of design options from the electric storage water heater, 16 what this leads me to believe is that the DOE is looking at 17 strictly gas side right now. 18 You're going to disagree with me, but if you take 19 away the design options for heat pump, add on integral, then 20 what you're left with on the electric side is very little. 21 So, basically, what you're looking at is impacting the gas 22 water heater. 23 If you indeed do establish minimums that provide a 24 substantial or even aminimized increase in cost -- I guess 25 we'll leave it at that -- then you are going to cause fuel

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034142 

### 1 switching. Now, if that's in thebest interests of the 2 consumerand the energyuse of our country, thenyou should 3 continue down thatpath. 4 Numberone, Idon't likeyou to leave ananalysis 5 out that doesn't includeheatpumps. Ithink it shouldbe 6 there. You've includedgas-fired condensingunits. You've 7 outlinedawholebunchof options thatyou're going to 8 consider. Yet, through thisdraft, this AppendixB, you've 9 loppedoff somemajoroptions. 10 Now, I'mnot sayingthat'swhat theminimum is 11 going tobe, but Ithinkyouneed to consider it inyour 12 analysis and not just go thispath and lop it off right at 13 theup-front becauseyoureceive 6,000 comments on the first 14 proposal. Ithinkyouneed to continue that.



# . 15 AGAand gasutilities werenot surprisedby the 16 minimumefficiency requirements for gas water heaters 17 becausewe did ourhomework. Wewere supportive of that. 18 Whatyou did on electricwasyour business, not ours. 19 But whenyouask this question now about fuel 20 switching, if indeedyou do lopoff those options anddon't 21 consider them, thenyou're going tohave fuel switching. If 22 that's whatyouwant andyou raises the minimums forgas 23 that causes that, that's whatyou're going towindupwith. 24 MR.RABA: Steve. 25 MR.NADEL: As apracticalway toaddress this

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034143 1 issue, I would recommend that we postpone deciding howwe're 2 going to deal with it until after we have the draft 3 engineering analysis and look at what measures and what 4 efficiency levels are most likely to emerge as candidate 5 standard levels and, as Jim pointed out, look at the 6 incremental costs for those technologies. 7 If they're comparable, thenwe may not need to do 8 a whole detailed fuel switching analysis, whereas if there 9 are very significant differences in the incremental costs 10 between electric and gas, then probably a muchmore rigorous 11 analysis will be needed. That doesn't deal with the issue, 12 which we'll get to later, on the screening analysis and 13 whether heat pump water heaters is or is not screened out at 14 this point in time.



# . 15 MR. STEPHENS: I guess I shouldmention now -- 16 we're at that point -- we also have a substantial amount of 17 data out where we are on fuel switching and the thresholds 18 for that between gas and electric. I admit that our five 19 and six cents a kilowatt hour is a little bit different than 20 most of the rest of the country, but, if anything, it tends 21 to buy us things in the wrong direction, if you will. 22 So we can provide that, too. It's all in the 23 public domain. 24 MR. RABA: Thank you, Charlie. Jim McMahon. 25 MR. McMAHON: There was a question asked about the

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034144 1 availability of this model. The assumedmodel is a 

# .s 2 spreadsheet that was built at LBL. It has been in use for 3 some years. It's applied to electric utilities. It's in 4 the public domain. We'll be happy to give you a copy. 5 We do not have a similarmodel for the gas utility 6 side. There was some work done some years ago, but starting 7 two years ago in the budget cuts, those staff were laid off 8 and that work was suspended. We would be happy to take that 9 up again if so directedby the Department. 10 MR. RABA: Further comments, questions? 11 MR. MATTINGLY: We're still going to be talking 12 about design options a little bit later; right? 13 MR. BERRINGER: Yeah. I thinkwe're about there. 14 Environmental analysis again. Again, we've talked about the



# . ~15 model that Jim just mentioned. Is it appropriate as far as 16 environmental analysis? Are there additional factors the 17 DOE should consider as far as NOX, SOx, carbon dioxide? 18 MR. RABA: Steve, comment? 19 MR. ROSENSTOCK: If you're not using anymonetary 20 values, then obviously it does not impact the life cycle 21 cost analysis at all. 22 My question is, you're looking at three, but 23 you're not looking at the other ones that are products of 24 the water heaters. Imean either try to do all or try to do 25 none is what I would say. So to just use those three and

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034145 1 ignore the fact that there's carbonmonoxide or 2 multi-organic compounds or particulate matters produced by 3 water heaters just seems to be absurd. 4 Also, to make it easier on yourselves, I would say 5 just try to avoid an environmental analysis at all and then 6 just concentrate on the energy side. But if you're going to 7 do it, do them all. 8 MR. GOLDSTEIN: Some of this is so obvious I'm not 9 even going to have to say it. I think there is a clear 10 statutory requirement in the DOE Authorization Act, if not 11 NAECA, to consider environmental impacts. That's obviously 12 one of the motivations for the whole program and interacts 13 with a lot of other issues like safety, where you're also 14 talking about mortality andmorbidity consequences, which



# . 15 can be calculated. 16 I do agree with Steve to the extent that it would 17 be useful to add these additional pollutants to the extent 18 that it's possible to do that, particularly particulate 19 matter, since that is directly implicated in a lot of the 20 epidemiological studies. 21 If you can do it, you would be even better to 22 separate it in terms of particle size, PM 10 and PM 2.5 23 handled separately. But you know, it's like any other set 24 of analyses. You havemodels that are capable of doing 25 what's up there, so you got to do it. If you can get the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034146 1 data and do the analysis for otherpollutants, you should do 2 it, but we can't ask you to do the impossible. 3 It goes without saying that everythinghere needs 4 to be done even-handedlybetweengas and electric. There 5 are obvious fuel-sharing competitive issues that need to be 6 addressedproperly in the analysis so that you canhandle 7 these things as much as possible onapolicy and analytic 8 basis and not on apolitical basis. 9 MR. RANFONE: I assume, on this analysis, you're 10 talking about the overall environmental impacts, 11 source-based overall impacts of these rulemakings. You're 12 not talking about it on a site-based appliance-by-appliance. 13 Is that correct? Imean the law says -- Ibelieve it says 14 your environmental impact is on source-based overall what 15 the impact is going to be. 16 MR. BERRINGER: That's open to you. 17 MR.RANFONE: Isn't that what the law says? I'm 18 not talking abut the efficiency level at site, how it's 19 measured. I'm talking about the environmental impact. 20 MR. LEWIS: Ido think that the Department should 21 go ahead and recognize the past work that has been done in 22 the environmental externalities area -- the findings that 23 the Department reachedwhen that issue was discussedat 24 length -- and, Iwould trust,move on from there, rather 25 than reopen an issue thatwas very contentious and, I think,

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034147 1 really without resolution. 2 MR. RANFONE: I think we'll disagree on that. 3 MR. ROSENSTOCK: Like I said before, too look at 4 one and not look at the other is pretty absurd. 5 MR. KUSTERER: David Goldstein. 6 [Laughter.] 7 With regard to the amount of emissions that have 8 to be considered, again, at the point of origin for the 9 energy, so for the electric it would have to be at the power 10 plant and at the source, or if it were a residential model, 11 such as gas or oil, obviously, at the source. 12 On David Goldstein's behalf, I would like tomove 13 that data up, because if we have to check all the 14 considerations that were asked to be checked, could we go to 15 the year 2010 for the possible proposal? 16 [Laughter.] 17 I'm only joking. Sorry, David. 18 MR. BERRINGER: Are there anymore issues, then, 19 as far as environmental analysis? 20 [No response.] 21 I had proposed on the agenda that we look at 22 Appendix B after this. Now that we've gone through the 23 report, do we want to focus on Appendix B, the screening, or 24 wouldpeople like to go back to the schedule and talk about 25 the schedule now that we've sort of gone through.

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034148 1 MULTIPLE PARTICIPANTS: The screening. 2 MR. BERRINGER: Okay. The screening,Appendix B. 3 Realizing that everybody has just gotten this today and 4 looked at it briefly earlier, on B-7, table 6 lists the 5 various design options. It just sort of puts together gas, 6 oil, and electric. There may be questions as far as where 7 it's applicable, where it's marked X. 8 Basically, if you cut to the chase and you look at 9 page B-21, look at tables 7 and 8, it shows you basically 10 the design options that are eliminated and the design 11 options that are remaining. There's reasoning throughout 12 the document if something was eliminated. 13 We've already heard fromJim Ranfone that he feels 14 the heat pump should be left in. Can we just go down the 15 list andmaybe, on table 7, see if there's agreement on the 16 items that are eliminated thus far? Table 7 is page B-21. 17 MR. ROSENSTOCK: Bryan, just a quick -- under 18 table 8, should that be plastic tank? 19 MR. BERRINGER: Yes. Thank you. 20 MR. MATTINGLY: Is this the time to add to 21 table 7? 22 MR. BERRINGER: If we just want to go down the 23 list and just if people agree or disagree, and then we can 24 do like you said, Joe, add to that. 25 MR. KUSTERER: One quick question. Table 7, you

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034149 1 have submerged combustion as being deleted or eliminated, 2 yet on table 8you have it back in again. 3 MR. BERRINGER: Yeah. There's two different ones. 4 You'vegot submerged combustion chamber. 5 MR.KREBS: Their definitions are different in the 6 document. One is the combustion chamber; the other is 7 direct contact between the gases and thewater. 8 MR. BERRINGER: This is still a draft. We can 9 change that if there's better wording. Inoticed that, too. 10 MR.NADEL: Unless someone objects, we're about to 11 eliminate one of them. If Iunderstand the question, Bryan, 12 the question is, are there any objections to any of the 13 eliminations on table 7besides the issue that JimRanfone 14 raised? 15 MR. KREBS: Iwould like to add to Jim's 16 objection. Whenyou look at the add-onheat pump, DOE's 17 language states, "This design option involves a separate 18 heat pump that canbe attached to an existing electric 19 storage type waterheater." 20 Maybe some drug screening analysis is in order 21 here or something, becausemost of those add-on heat pumps 22 are added on to electric units. They've beendone so for at 23 least 10 or 15 years -- been added on to gas units, I should 24 say. It hasbeenwell demonstrated, as an electricutility 25 load-buildingDSMprogram. DSM stands for deceptive

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034150 

### 1 strategicmarketing. 2 MR. ROSENSTOCK: We don't have to get into 3 name-calling here, I don't think. DSM programs forboth gas 4 and electric utilities have increased the amount of 5 efficient products used in the marketplace on both side, so 6 I don't think we should get into any sort of name-calling 7 like that. I think it distracts from the process. Thank 8 you. 9 MR. RANFONE: Just to comment on your rationale 10 for deleting some of these, "The Department believes that 11 this design option should be screened out due to the lack of 12 demonstrated practicability to manufacture, install and 13 service and lack of product availability." Is that what 14 you're standing behind on eliminating these design options? 15 I assume. Imean is there anymore detail to that 16 statement? 17 MR. BERRINGER: What we've heard, as far as even, 18 out in Monterey, the manufacturers that were out there 19 seemed to

-- 20 MR. RANFONE: Out inMonterey? I'm sorry. 21 MR. BERRINGER: I'm sorry. There was an EPRI 22 meeting

-- 23 MR. RANFONE: Oh, okay. 24 MR. BERRINGER: -- last year which a lot of the 25 manufacturers that are here were at. What I heard was the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034151 1 manufacturing, the commercial marketwould probably be an 2 option, but itwas just the residential, betweenproblems 3 with installation -- what I've heard in the past -- you 4 know,plumbers versus heating and air conditioningpeople

-- 5 and just theproduct availability. 6 MR. HILLER: Infrastructure issue there. 7 MR.RANFONE: You can do this with any 8 above-the-baseline options andmake the same kind of 9 arguments. There is product available, and I think Mr. 10 Nadel at one time -- weren't you heading up an electricheat 11 pumpwater heater consortium? Do you agree with this 12 rationale for deleting it? 13 MR.NADEL: Ingeneral, we're for doing an 14 analysis where the analysis is going to help inform the 15 decision andnot doing an analysis for analysis' sake. We 16 have and continue to work onheat pumpwater heaters; we're 17 very interested in the technology. 18 However, Iwould say that the technologyprobably 19 has made a couple of steps backwards, compared to '94, in 20 terms of where we think we're at -- anumber of 21 manufacturerswithdrawing products from themarket; some of 22 theproducts that are out there have some technical 23 problems. 24 We're not as comfortablenowpromoting them to 25 consumers as we were a couple of years agobecause of these

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034152 1 problems. I think with time this will develop, but, at this 2 point, to mandate them, I think, would be very 3 problematical. 4 MR. RANFONE: Well, I'm glad to hear what your 5 position is, because I think it's a little different now 6 than it was a few years ago. I hope you take the same kind 7 of view when you look at the gas side and the options, 8 because I think that's going to have a similar type impact 9 on those products. 10 We had this discussion this morning about the 11 difference between flue loss efficiency and recovery 12 efficiency, and you seemed to gloss over some of that, but 13 we would be glad to provideyou with more detailed in so we 14 couldbe very clear as to what's at stake here. 15 MR. MATTINGLY: Why don't we go down table 8, and 16 maybe we can address some of these concerns. 17 MR. RABA: We could do that in just a moment. We 18 have two other commenters first. Thank you, Joe. 19 MR. KREBS: Before we leave table 6, I don't think 20 that DSM as deceptive strategic marketing is name-calling. 21 That termwas coined by Joe Gilbert, a consultant to EEI and 22 EPRI. 23 Basically, what you've done, once again, is set a 24 higher standard for natural gas. The upshot of table 6 25 appears to be an attempt to set the installed cost of

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034153 1 natural gas water heaters significantly higher, thereby 2 incenting the speculative builder to install electric 3 resistance water heating, thereby gainingmarket shares, 4 taking the consumer out of the loop. 5 MR. RABA: Thank you. David. 6 MR. GOLDSTEIN: I'm going tomake a couple of 7 comments that I hope are somewhat of amiddle ground between 8 what you've been hearing between my colleagues in the 9 electric and the gas industry. 10 NRDC is willing to accept the screening that's in 11 the tables that screens out heat pump water heaters, 12 conditionally and because of some other things that are 13 going on. 14 The condition is that this is consistent with the 15 schedule that sounded pretty fast track at DOE. I don't 16 believe that it would be possible for DOE to establish a 17 heat pump water heater standard within that schedule. 18 I don't want to get into what the technical merits 19 are. I think, practically, that is not going to happen and 20 that we would be better off, from an energy-saving point of 21 view, in coming up with a program -- which you've got here 22 -- for a more modest increase in electric efficiency and do 23 it quickly. So the schedule is intimately connected to 24 NRDC's acceptance of this kind of a screening. 25 Regarding what my friends at AGA have said, I

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034154 

### 1 believe that it is appropriate to leave inthemore advanced 2 gas options at this stage of the analysisbecauseDOE is 3 required todo impact analyses laterdownstream thatwill 4 address the truth of the allegations that theAGA folks have 5 made. 6 Ibelieve their statements will turn out tobe 7 correct andborne outby the analysis, that if DOEwere to 8 require condensinggasproducts, but only small improvements 9 inelectricproducts, that itwould result in fuel shifting 10 that would increase consumer costs on averageand increase 11 pollution on average. 12 However, I would like to actuallydo theanalysis, 13 rather thanmaking theassumption now onwhat itwill come 14 outwith. But again, Ithinkthat's the likely state, so I 15 wouldpredict that, if we follow thepath that this document 16 proposes we go down,we'll get some useful information on 17 cost effectiveness of condensingproducts, andyouwill find 18 lateron that amodest improvement in efficiencyon the gas 19 side, coupled with themore modest improvement on the 20 electric side,willbe a standard thatmeets the economic 21 justificationtests. 22 MR.RABA: Thankyou,David. 23 MR.KREBS: The onlyproblemwiththat is that you 24 won't get any informationon theheatpump options. 25 MR.RABA: Charlie,want to address that?

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034155 1 MR. STEPHENS: We're among the organizations that 2 developed some of the information on the heat pump water 3 heating side. We still have units in the field right now 4 that wemonitor on an ongoing basis, and we have been doing 5 it. 6 We know what the costs are. We know what the 7 infrastructure issues are. We are among the people who are 8 recommending that it would not be a good idea to be 9 recommending this product for a standard at this time. It 10 is not ready for the market, based on our experience with it 11 thus far, though we do like the concept, and we're going to 12 stay with it until we think it is. 13 But for now, we would be among those people that 14 would recommend that, for reasons that don't have to do, 15 necessarily, with cost effectiveness -- for whichyou do 16 need an analysis, and we've done some preliminary analyses 17 -- it shouldn't be considered. It's not cost effectiveness 18 there. 19 Now, in other cases, there is gas product. We 20 have a lot of gas utility and electric utilityDSM programs 21 going on. They've been going on for some years now. 22 We have a really good handle on what the 23 incremental cost is for the higher efficiency gas products, 24 for the higher efficiency electric products, how consumers 25 respond to these things and howmany they buy, what kind of

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034156 

### 1 market shareyou canget forhowmuch incentive. 2 We thinkweknow where the standards should 3 probably land on that basis,which leads me to disagreewith 4 the gas-electricwar goingonhere,aswell. I'mwith 5 David. Ithink we're going toend up in aplace that 6 probablyeverybodywillbe okaywithbythe timewedo the 7 analysis. 8 But there are substantialnumbers of things, 9 options on this list that Idon't reallyknowasmuchabout 10 that Iwould like toknow at least alittlebit about so I 11 can feel comfortable saying, "Yeah,that's going tobe too 12 costlytomake sense," or "That isn't going tomeet safety 13 requirements," or whatever it is, I would like toknowwhat 14 those are onpaper so Ican say, "Yeah,okay. That's good." 15 MR. RABA: Joe is beingverypatient here. Two 16 more, then we'll go onwithJoe's request. Jimwas up 17 first. 18 MR. RANFONE: Tomake sure ourposition is clear, 19 wedon'tmindDOE looking at all thesedesignoptions for 20 thegasproducts. Our comment is that it has reallybeen 21 done already. The reports thatwerepresented toDOEduring 22 thehearing, after thehearing inwritten comments, are 23 documents and analysis that we standbehind. We don'twant 24 yougoingbackandreinventing thewheel. Lookingat these 25 analyses for thewaterheaters, cost effectiveness, economic

ANNRILEY &ASSOCIATES,LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034157 1 justification, the technical feasibility, it's all there. 2 That's what we're saying to you. That's it. 3 MR. RABA: Thank you. Go ahead. 4 MR. LANGMEAD: Jim just said most of what I was 5 going to say, but let me remind you again that we are 6 working on an effort right now to improve the safety of gas 7 water heaters, to reduce their potential of igniting 8 flammable vapors, that is based on the technology that is 9 non-condensing technology. 10 As we go down and we have to depend on not going 11 to non-condensing technology, we're scrapping one research 12 program and going on with another R&D program on top of 13 another R&D program. We're going to have difficulty 14 tailoring these programs altogether. 15 I'm sure, once we go through the process, we'll 16 find out that condensing water heaters, number one, aren't 17 economically feasible and, number two, would cause fuel 18 switching. 19 But we're going to go through this whole process 20 of going through all that documentation to wind up where we 21 could concentrate our effort on what you can do to a gas 22 water heater to look at improving its efficiency, short of 23 condensing. I don't know why we're complicating the devil 24 out of what we're trying to do. 25 MR. RABA: Thankyou. Let's go on, now. Go

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034158 1 ahead, Joe. 2 MR. MATTINGLY: Well, Idon't guess Ihave 3 anything left to say. Jack said it prettywell. I think, 4 if we're trying to move things along anduse our time 5 efficiently, I think we ought todecide right now to 6 eliminate condensing gas waterheaters and use our timemore 7 profitably. 8 Ifyou want to have some academic exercise to look 9 at them somewhere elsebesides this proceeding, go ahead, 10 but I thinkwe are complicating things whenwe alreadyknow 11 the answer. Let's not waste our time doing it. 12 MR. RABA: Werewe going to go down through the 13 list now? Was that what DOE wanted to do? I'll getyou in 14 just a second, Charlie. 15 MR. STANONIK: Iwas just going to say that, as 16 far as what's in table 7, the original questionwas, does 17 anybodydisagree as to those that already are listed as 18 being eliminated, and I just want to say that I agree that 19 all of those should be eliminated. Iwas interested in 20 moving on to table 8, so let's talk about some other things 21 that really are not reasonable design options that should be 22 eliminate. 23 MR. RABA: Charlie. 24 MR. STEPHENS: I'ma little bit confused after 25 this morning. My impression from thismorning, at least on

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034159 1 the gas side, that there was an awful lot of stuff up in the 2 air right now because of this Consumer Product Safety 3 Commission redesignwork. That left me wondering just what 4 a gas waterheater is going to look like by the time that's 5 done. 6 Iwouldbe a little nervous about going too far 7 into anymore reanalysis, whichmeans, to that extent, I 8 really side on the side of let's not reanalyzewhat has 9 already beenanalyzed if everybody in the industry agrees 10 that what has been done is still valid. 11 But I am a little leery about what's going to 12 happen whenwe finish the CPSC redesign. What's agas water 13 heater going to look like, andwhat's it going to cost then 14 for the same level of performance we have today? 15 Until you know that, you don't even knowwhat the 16 base case is, Idon't think. Thenwe look and see what's 17 cost effective in relation to that, Iwouldguess. 18 MR. KREBS: Just to give you an analogy, couldyou 19 imagine an automobile designed by OSHA? That's probably 20 what anatural gas water heater designedby CPSCwill look 21 like. 22 MR. STEPHENS: I rest my case. 23 MR. STADNIK: You couldprobably buy ahouse for 24 cash,but the water heateryouwould have to take amortgage 25 on.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034160 1 [Laughter.] 

# .s 2 MR. STADNIK: I'mnot going to let that go. Just 3 for the record, first of all, the CPSC is not designing the 4 water heater. The industry, the consortiumwithwhich Jack 5 is involved, is in the process of doing that. 6 In the business that they're in -- and they can 7 speak for themselves -- they'reworking real hard tomake 8 sure that their product is going to be very cost competitive 9 out there. So Idon't envision that you're going to see a 10 gas water heater that costs as much as a Jaguar. 11 MR. RABA: Steve. 12 MR.NADEL: A couple of issues on the table I 13 wanted to address. First, Jimwas concerned that, 14 basically, we're taking all the electric options off and



# . ~15 lots of gas options on. 16 Here's a point, to reiterate thepoint Imade 17 previously, that there are some electric resistance options 18 that are not on here, that the electric resistance analysis 19 tops out at .93 energy factor, and we should look at the 20 higher efficiency options because there are higher 21 efficiency electric resistance products on themarket that 22 will address somewhat the point Jimmade. 23 Second, Iwould be supportive of, I guess a couple 24 of people have made the comment that it doesn'tmake sense 25 to analyze the condensing, the full condensing gas options.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034161 1 They're not going to screen in. As Jack mentioned, there 2 are safety issueswith them. I've also heard how readily 3 can they be applied to all the existing homes? 4 As Joe said, let's not spend lots of time 5 analyzing something thatyou know is not going to be the 6 standard. 7 Finally, in terms of what we shouldbe analyzing 8 for gas, I think, in order to keep the energy standard and 9 the vapor ignition issue on somewhat parallel tracks, we do 10 need to be doing the analysis soon. 11 My understanding -- and this is based on avery 12 imperfect knowledge of some of the options being considered 13 forvapor ignition -- thatmost of these design options here 14 should apply, and therefore, our first cut engineering 15 analysisbased on the current baseline will get us into the 16 ballpark. 17 At thatpoint, we shouldhopefully have amuch 18 better idea on what specificallywill be done to deal with 19 thevapor ignition issue and have to do some revisions, 20 revising baseline andmaybe some other revisions tomake it 21 mostuseful for our final rule. But to do adraft now, 22 based on current baseline, I think,will beuseful and will 23 help advance theprocess. 24 MR.RABA: Thankyou, Steve. Was Ihearing that 25 table 7 lookspretty good as it is? Was that what everybody

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034162 1 was nodding theirheads yes? 2 MR. MATTINGLY: No, it needs to be edited. 3 MR. RABA: No? Yes, edited? 4 MR. STANONIK: Well, that's whywe want to go to 5 table 8, so we can add to it. 6 MR.RABA: Right. So I'm saying, there's nothing 7 to change as it is on 7 except, maybe, to add other things. 8 MR. LANGMEAD: A lot of other things. 9 MR. RABA: Okay. So we're going to turn the page 10 over to table 8 on page B-21. 11 MR. STANONIK: We don't have to turn thepage. 12 MR. RABA: Oh, okay. Ihave a different version. 13 Okay. I've got it on onepage. So, at least on table 8, we 14 would start withheat traps at the top, the first item. 15 Over toyou, gentlemen, ladies. How wouldyou like us to 16 look at these different design options? What are your 17 thought on these? How shouldDOE look at these? How would 18 you propose we look at these? 19 MR. STANONIK: Iwould suggest let's just go down 20 the list. 21 MR. RABA: Fine. 22 MR. STANONIK: Get either discussionor general 23 consensus orwhatever. 24 MR.NADEL: Frank,doyouwant to kick it off and 25 make a list of thing that you suggest moving from 8 to 7?

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034163 1 MR. STANONIK: Well, okay. I'll give you 2 Stanonik's version, and then everybody cankick at that. 3 Heat traps can stay as adesign option, although I think 4 they're basically implemented inmost models today. 5 Plastic tank, Iwould recommend deleting,putting 6 that as adesign option tobe eliminated. Frommy 7 perspective, Idon't really consider it an efficiency design 8 option. 9 MR.MATTINGLY: Remember, Frank, these are going 10 to apply to both gas and electric at this point, the way 11 table 8 is written. 12 MR. STANONIK: Iknow. That's why I'm suggesting 13 it be eliminated. A minor point, but rather than just 14 characterize certain levels of insulation, I think the 15 design option is increased insulation. 16 MR.RABA: Right. 17 MR.MATTINGLY: Just whatever amount is cost 18 effective to do. 19 MR. STANONIK: The next three, the gas-filled 20 panel, the aerogel, and the evacuatedpanel insulation, I 21 would recommend all of those be eliminated. All of those 22 involve, basically, you wouldbe asking the industry to 23 completelyrestructure how they do appliance insulation. 24 I just can't envision that the cost involvedand 25 the capital to do that, to reset or redesign their

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034164 

### 1 production lines andall of the related changes that would 2 be needed, would in anyway justify those. Imean they've 

### 3 beenkicked around foryears, and I've just never seen 4 anything that says howyou couldpracticallyput them into 5 production. 6 Forceddraft, as far as adesign optionto look 7 at, can stay. Imean it canbe looked at. The improved 8 fluebaffling, thatwould stay on the list. 9 Thenext two, submerged combustion chamberand 10 multiple flues, Iwould recharacterize that as increased 11 heat exchanger areaandnot get intohowyoudo that, 12 whetheryoumake a combustionchamber lookdifferent or 13 whetheryouprovide more flue tube, thebottomline in 14 either case isyou've increased the surface area forheat 15 exchange. 16 MR.HILLER: Idon't think that's 100 percent 17 true. I thinktheybothwould include that,but there's 18 another aspect, and that's tankheat loss reduction whenyou 19 havea submerged combustion chamber. 20 MR. STANONIK: The submerged combustionchamber 21 producthasbasically disappeared. 22 MR.KUSTERER: Nonexistent. 23 MR. STANONIK: Wilbur,areyouguysmakingyours 24 anymore? 25 MR.HAAG: There's a smallmarket in the

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034165 1 Netherlands. 2 MR. STANONIK: In the Netherlands. Okay. The 3 other company thatwas in that business, they have somebody. 4 Iguess my response is on the basis of the fact we had a 5 couple of majormanufacturers making thatproduct several 6 years ago, and themarket interest, which was, "We're not 7 impressed." 8 Rather than identify that as adistinct option, I 9 would just say that the real optionhere is, somehow, you 10 increase your heating stage area. 11 MR.NADEL: Frank, one clarification. On that 12 improved heat exchange area, is that now -- 13 MR. STANONIK: Increased. 14 MR.NADEL: Increased? 15 MR. STANONIK: Yeah. 16 MR.NADEL: Is that a condensing option or a 17 non-condensing option? 18 MR. STANONIK: I'm looking at itwithin the 19 context of still being non-condensing. 20 MR.NADEL: Okay. 21 MR. STANONIK: Air-atomizedburner, I'll defer to 22 the oil burner experts, since I assume that's what we're 23 talking about. That's an oil burner option, Ibelieve. I 24 don't knowwhat slow recovery is. I'm going to put that one 25 aside.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034166 1 MR.KUSTERER: That's the opposite of fast 2 recovery. Just the opposite, Frank. 3 [Laughter.] 4 MR. RABA: I see ahead nod from George. Go 5 ahead,George. 6 MR. KUSTERER: Ibelieve that the air-atomization 7 burner for oil-fired equipment is extremelybeneficial and 8 shouldbe left in. 9 MR. RABA: Thankyou. Go ahead, Frank. You were 10 on a roll there. 11 MR. HILLER: The description that's in this 12 document of the slow recovery is basically is basically a 13 conventional fossil-firedwater heater, but with a smaller 14 burner in it. Therefore, the effective ratio of heat 15 exchange area goes up because the firing rate is less. 16 MR. STANONIK: On that basis, Iwould suggest 17 eliminating it. Since the dawn of efficiency regulations, 18 the first actionmanufacturers tookwas to derate, to create 19 a slow recoverywater heater. 20 Since then, they've been trying to find ingenious 21 ways to in fact give the consumer what theywant, which is a 22 waterheater that has more input, that gives themmore hot 23 waterat an efficient operation, and this would be takingus 24 back to 1975 orwhatever. Idon't think it's a reasonable 25 option to consider. It's true it wouldbe efficient, but

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034167 

### 1 it's efficientbecauseyou're not giving anybody alot of 2 hotwater. 3 MR. HILLER: It's really asubset of increased 4 heat exchangearea. 5 MR. STANONIK: That's right. Flue damper,asJim 6 and otherpeoplehavementioned, that onehas been visited 7 already. Idon't knowwhetheryou keep it therebecause the 8 work is already done oryou move itbecause thework is 9 alreadydone. Iguess Iwould look for some comment from 10 otherpeople. I'm not interested in redoing it. Ithink 11 the analysis has beendone. 12 This flue damper,buoyancyoperated, is in fact 13 what Ihad inmindwhen Iraised thequestion aboutmaking 14 sure the thing complieswith safety standards. This one 15 absolutely shouldbe eliminated. Without a lot of 16 additionalwork andalot of additional research, this has 17 potential major safety problems. You're talkingabout a 18 product that is going torely on thebuoyancy of the 19 product's combustionto openthe flue damper. 20 Anybody in the gas industry is becoming more and 21 more aware of the concerns ofdepressurization inhouses, 22 which, in fact, drives things the otherway. Sonow, the 23 buoyancywhen theappliance is operated is going tobe 24 theoretically, in somehouses that haven't beenput together 25 right, lost, so that damper is going to close. It'snowhere

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034168 1 near a marketable, practical idea. 2 MR. HILLER: It's an unvented water heater. 3 MR. STANONIK: That's right. We canmake it an 4 unvented water heater. But I think it should go into the 5 eliminated list. 6 Indirect heating -- I guess I'll put it this way. 7 I think that one has also been examined, been analyzed. I 8 guess I have the same answer as the flue damper one. That 9 means you can leave it on the list because you've already 10 done the work or you could eliminate it. Again, I'm on the 11 fence on that one. 12 The two phase thermosyphon, as I understand it, is 13 what I'm going to call an advanced heat pipe design of 14 sorts. Maybe that's only how I can understand it. I don't 15 know much about that. I do know that manyyears ago, now, a 16 manufacturer tried tomarket a heat pipe water heater. It 17 didn't make it. 18 I think that it's going to have cost problems in 19 terms of being competitive, in terms of whatever benefits 20 efficiency-wise. Not knowingmuch about it, I would say 21 eliminate it, but again, I'm really talking about what I 22 don't know about in this case. 23 MR. HILLER: If Imay, I know that the 24 manufacturer involved is probably not going to step forward 25 and tell you who they are, so I'll just tell you what I

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034169 1 know. I've heard that there is at least onemanufacturer 2 who'splanning to reintroduce aproduct like this. Idon't 3 know exactlywhat the timing or anything is. 4 Itwouldn't have a central flue any more. It 5 would be an external combustion devicewith aheat pipe 6 transferring the heat into the water. I'mnot so sure that 7 it's not going to be cost effective. It's going tobe anew 8 product, so there are other issues associatedwith it, but 9 ithas got some promise technologically, I think. 10 MR. KUSTERER: Just not to stopmy colleague on a 11 roll, but since there is only apparently oneprototype and 12 it's going to be years down the pike, Idon't think it 13 should evenbe in consideration. 14 MR. LANGMEAD: Wewalked this pathwith heat pump 15 waterheaters. 16 MR. KUSTERER: Yeah,we did. So let's just get 17 rid of it. I agree with Frank. 18 MR. LOGEE: But you don't have any rationale. 19 MR. KUSTERER: Idon't have any rationale? 20 MR. LOGEE: Well, just because it was done before 21 doesn'tmean that it's

-- 22 MR. KUSTERER: Ididn't say itwas done before. I 23 said there's one prototype out there. Nobody knows anything 24 about it. How canyou consider it? 25 MR. LOGEE: But you're saying availability.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034170 1 MR. KUSTERER: There's no availability. It's not 2 there. 3 MR. STEPHENS: Are we talking about design tomeet 4 the CPSC requirements? 5 MR. STANONIK: The next one, flue gas dilution

-- 6 and again, Imissed what that one is supposed to be, so I 7 would like to skip that one for now, because I don't know 8 what they're talking about. 9 Electronic ignition has been analyzed. The work 10 has been done, so I would put that in the same category as 11 the flue damper and the indirect heating. I don't know what 12 you want to do with that. 13 Interrupted ignition, it seems to me that's the 14 same thing as electronic ignition. I'm not sure about that 15 one because I'm not sure what the difference is. 16 MR. VAGO: Let me try to differentiate between hot 17 surface ignition and spark ignition. I'm guessing, but I 18 think that's what they are trying to do, differentiate 19 between spark ignition -- spark to pilot versus hot surface. 20 MR. RABA: Remember our norms, one at a time 21 speaking. Thankyou. Go ahead, Otto. 22 MR. VAGO: I'm guessing. 23 MR. STANONIK: I just read it, and all they're 24 talking about is a specific form of electronic ignition. So 25 again, my opinion, I can't see it's worth a separate

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034171 1 listing. It's just the fact that the ignition source shuts 2 off once the burner is established, rather than being on the 3 entire burner operationperiod. 4 MR. KUSTERER: Basically, it only applies to oil. 5 MR. STANONIK: Well, it could apply to gas. 6 They're applying it to oil, Iguess, but

-- 7 MR. KUSTERER: Primarily, it's oil, interrupted 8 ignition. 9 MR. HILLER: Ithink the bottom line here, in 10 addition to the oil issue, is if you're talking conventional 11 center flue type of waterheaters, you don't buy anything, 12 because you're offsetting one loss for another. But they 13 mightmake sense with some of the other options. I'mnot 14 saying you should consider or not consider, just point out 15 that if you're going to consider, it only makes sense with 16 something that's not a central fluewater heater. 17 MR. KUSTERER: And basically, interrupted duty 18 ignition has absolutely nothing to do with the efficiency of 19 the product. Absolutelynothing to dowith it. 20 MR.RABA: What was Ihearing? Was that just a 21 yes or no? No? 22 MR. LEWIS: Well, as long as there isn't any 23 efficiencybenefit. 24 MR. KUSTERER: There is no benefit. 25 MR. HILLER: There mightbe. Letme give you an

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034172 1 example. If you have a side arm heater andyou put a pilot 2 light on it, it's going to be less efficient than if you 3 have an electronic ignition device. 4 MR. LEWIS: Can you name any product that exists 5 in the marketplace todaywhere that is applied? 6 MR. HILLER: There are some that have side arm 7 heaters that are usingpilot lights. 8 MR. LEWIS: You know, it gets back to the argument 9 that I think was presented earlier this morning, and that 10 is, unless a product has some clear commercial position as 11 far as representing some segment of the marketplace, it's 12 difficult to consider how an application of this sort should 13 valance out on what the efficiency of a water heater should 14 be. I would like to see this list simplified wherever it 

# .B 15 can be, because I think it's going to help the process move 16 better. 17 MR. RABA: Next comment, please. 18 MR. STANONIK: The next two, condensed flue gases 19 andpulse combustion -- pulse combustion is just a 20 specialized way of condensing flue gases. Based on a 21 previous discussion that we've had, I think those should be 22 eliminated. I think it's fairly straightforward that that 23 product for residential uses, practical uses, we see in the 24 field it's not going to be cost effective. In some ways, 25 some limited ways, it presents problems similar to the heat

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034173 1 pumpwater heater as far as installation applicability, and 2 in some cases the replacement situations wouldpresent some 3 difficulties. The bottom line is, I think they should be 4 added to the eliminated list. 5 MR.RABA: One comment, please, before you go on, 6 Frank. 7 MR. STANONIK: Yes. 8 MR. HEISS: My questionwas regarding timer 9 controls, what did you mean? What entails timer controls? 10 It's aprogram that's very,very important tomy company, 11 something we've invested a lot of money in, and Iwould like 12 to see it if it wereproperly done. So Iwanted to know the 13 definition of timer controls. What were you thinkingwhen 14 youwrote that down, Bryan? 15 MR.RABA: This is for interrupted ignition? 16 MR. HEISS: No, timer controls, afterpulse 17 combustion. 18 MR.RABA: Thank you. 19 MR. BERRINGER: Iwould say it's like the 20 utilities. They're interested in demand. 21 MR.HEISS: Well, it's ademand avoidance 22 strategy. It seemed to be here without any details. It's 23 very important tome, and I just wanted to ask this 24 question. 25 MR. RIVEST: Bryan, I can shed some light on some

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034174 1 of the issues here. I was party to a conversation at one 2 point, and it was explained to me as being sort of a setback 3 on the water temperature so there would be fewer losses. So 4 there is some savingbenefit. I don't know if they're 5 important or not. 6 MR. HILLER: Please, if Imay, let me -- there's 7 really two kind of issues associated with this, and there 8 are two common types of practices out in the field. One are 9 devices that turn the water heater off at night when you 10 don't need hot water. The fact of thematter is, those 11 don't save energy. 12 Turning the water heater off or turning its 13 thermostats down when the thing is already hot doesn't buy 14 you much. What you gain from is turning the water heater 15 off or turning the thermostat down when a significant 16 portion of the tank is cold and therefore can't incur heat 17 loss, i.e., off-peak water heater control in the utility 18 industry. 19 So turning the water heater off at night, it buys 20 youvery little. Turning the water heater off in the 21 daytime can get some not insignificant energy savings. 22 My concern, however, is that, if you're going to 23 keep the customers happy, you probably ought to give them a 24 bigger tank. So I'm not sure I want to see that mandatedby 25 federal law that everybody has got to start using bigger

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034175 1 water heaters, even though there may be some efficiency 2 benefits. It's a significant first cost impact. 3 MR. STANONIK: The timer control issue much more 4 is an issue of cost savings to the consumerbecause the 5 utility gives them an incentive to use this technology to, 6 in fact, consume electricity off peak so they can sell it to 7 them cheaper. It really doesn't addmuch to the efficiency 8 side of that. On that basis, I would take it out as a 9 design option. 10 MR. HEISS: I would agree. Take it out if it's 11 going to be on that basis. 12 MR. STANONIK: And by no means am I intending to 13 discourage the whole idea, but it is really driven towards 14 gettingpeople to use their electricity at a different time, 15 but still to use it. 16 MR. HILLER: How this really originally got on the 17 list was, in the testing and rating procedures part of it 18 there's currently nomethod to recognize the benefits of 19 turning the water heater off during the daytime. So it 20 would be nice to see something that recognizes the benefit 21 of that. But that's a separate issue from requiring that. 22 MR. RABA: So I hear you saying let's take it off? 23 MR. HILLER: That's correct. 24 MR. RABA: Thank you. 25 MR. STANONIK: The next three -- solar pre-heat,

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034176 1 drain waterheat recovery system, tempering tank -- tome, 2 all of those are not water heater design issues. If someone 3 -- DOE orwhoever -- is interested inusing these techniques 4 to achieve efficiency savings, then let's talk about doing 5 them in the house. 6 All of theseyou could doat the time of 7 installation. They have nothing to do withwhat thewater 8 heater looks like orhow it's designed or any of that, but 9 they're all features anyone could choose to build into their 10 installation to, in fact, lower their waterheatingbill. 11 Anybody canput a solar pre-heater on their house 12 or in the installation. Anybody can, assuming they have the 13 space, hookup one of these drain water heater recovery 14 systems. Well, I take that back. If DOE wants to say that 15 every installation shall have two tanks, at least from 16 GAMA'sperspective, I thinkwewould support that. 17 [Laughter.] 18 But all of those arenot things that the 19 manufacturer is going to do to the design of thewater 20 heater. Those are things that canbe applied at the 21 installation, and as long as we're talking about design 22 options, then I think they should be eliminatedbecause 23 they're not design options. There's no fancy design 24 involved in developing a tempering a tank and likewise with 25 the solarpre-heater. Imean everybodyknows how to do

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034177 1 that. 2 And sediment removal features

-- 3 MR. MOFFROID: For that issue, can I address 4 something? Am I totally out of line to speak here, as far 5 as speaking for the technology that I referred to this 6 morning, tankless energy? 7 MR. RABA: Please go ahead. 8 MR. MOFFROID: To contradict over here -- Imean 9 I'm representing a company that makes close to a million 10 water heaters. The name is Robert Bosch of Germany. 11 Ourwater heaters address exactly that issue as a 12 booster to solarheat, in the sense that our water heater is 13 either made with a thermostat sensor that will modulate the 14 gas valve down to nothing if the solar water heating comes 15 in at the regular temperature that you can use, 16 automatically checked by the thermostat. So my water heater 17 is exactly designed for that application. 18 Now, granted, for the storage tank it's a whole 19 different issue. 20 MR. STANONIK: I think you're misunderstanding. 21 The design option they're talking about is using solar 22 collectors as pre-heaters for your supply water going to 23 your water heater. 24 MR. MOFFROID: If that's the case, then I 25 misunderstood.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034178 1 MR. STANONIK: That's what they're talking about. 2 MR. MOFFROID: Okay. 3 MR. BRUNDAGE: Additional notes for the gentleman 4 fromGAMA. Whenyou start talking about items like the 5 solar pre-heater, the drain water heat recovery system, when 6 you start talking about something applicable to all 7 equipment and all applications, you'll have scenarios where 8 it's not applicable, where you may have a water heater 9 installed in the building very far from anyplace you could 10 get solar. It may be impractical to run it back past the 11 drain. 12 Some of these options are not really appropriate 13 for -- while theymay have very good energy characteristics, 14 you run into some of the same problems you do with heat pump 15 water heaters or other things, where there'll be times where 16 they're just impossible to use. 17 MR. RABA: Thank you. 18 MR. STANONIK: Sediment removal features. DOE's 19 description of this is on there only because of the 20 potential benefits ofmaintaining a certain level of 21 efficiency over the life of the product. 22 That's not discussed or even that question raised 23 anywhere else in any of the analyses. I just don't consider 24 that it's really a design feature relative to meeting a 25 minimum efficiency requirement of a product as it's

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034179 1 manufactured and sold to the consumer, and I think it should 2 be eliminated. 3 MR. HILLER: Just to reinforce Frank's point, 4 number one, these swirl-type diffusers don't affect 5 efficiency of electric resistance water heaters at all. It 6 doesn't matter if you bury the elements or not, they're 7 still 100 percent efficient because it's run hotter to do 8 that. 9 In terms of the fossil-fired water heaters, yeah, 10 theymight help keep the efficiency up. None of the test 11 procedures reflect that, so there's no way you can enforce 12 mandate on it. 13 MR. RABA: Thank you. Now, we have a list that we 14 canmake some comments about screen in or screen out. 15 Terry? 16 MR. LOGEE: There's one that wasn't covered 17 because, I guess -- flue gas dilution. 18 MR. STANONIK: Right. Flue gas dilution -- and 19 now that I've read the description, as it's described here, 20 we're talking about gas water heaters that are actually 21 mechanical venting means on top of the water heater and, in 22 the process of venting it, they draw in additional excess 23 air to cool down the parts for combustion so you can use 24 plastic piping for venting. That is not an efficiency 25 design option.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034180 1 What drove themarket for horizontal venting and 2 plastic pipe venting orwhateveryou want to call it for gas 3 water heaters was the issue of installation convenience or 4 gettingwater heaters in areas where,maybe, you couldn't 5 install itbefore -- gaswater heaters. So, on the basis 6 that it really isn't an efficiency option, Iwould say it 7 shouldbe eliminated. 8 MR. RABA: Right below that, also, Inote 9 electronic ignition. Ihave noplus orminuswith that, 10 also. Is there further discussion on electronic ignition? 11 MR. NORTON: I thought youmight have mistakenme 12 for Michael Martin earlier. I'm not that CEC. 13 [Laughter.] 14 There are a numberof items on the list which 

# O 15 we'vebeen discussing. There's some question inmy mind how 16 this works. As I asked earlier, we're eliminating options 17 or putting options in that affect the design of electric and 18 gas storage tankwater heaters. 19 David alluded earlier to the question of 20 condensingburners as something that shouldbe kept in for 21 new installations, and the technology that we represent

-- 22 condensing burners, electronic ignition -- all make 23 significant impacts on the efficiency,unlike some of the 24 comments earlier about storage tank where an electronic 25 ignitiondoesn't affect efficiency. Well, it certainly does

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034181 1 on an instantaneous water heater. 2 Iguess what I'm concerned about is eliminating it 3 from this list does not recognize -- somebodymade an 4 allusion earlier to recognizing the benefit of having this 5 as an option carried forward for design. So this is 6 partially a question. If these are eliminated fromthe 7 list, what does that mean for this technology? 8 And then Ibelieve there are on themarket storage 9 tank waterheaters whichare seal combustion, and Ibelieve 10 that a seal combustionwaterheater could work with a 11 condensing fluewithout anyproblems, so I'mnot sure why 12 that wouldbe removed from this designunless there's a 13 concern that it's driving the whole design of the industry. 14 So Iguess that's a larger question about how this



# . 15 list relates towhat we do as manufacturers in the future. 16 MR. RABA: Thank you. David. 17 MR.GOLDSTEIN: We donot agree with GAMA onmost 18 of these positions. Thebasis at this point for 19 disagreement, I first note that the industry talking here in 20 front of DOE today seems to accept as inevitable that you 21 might totally redesignwater heaters at abig cost increase 22 to satisfy CPSC and save up to 20 lives ayear, and then 23 it's telling DOE that we shouldn't consider totally 24 redesigning water heaters for energy efficiency,whichmight 25 save even more than 20 lives ayear.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034182 1 We haven't done the analysis yet, sowe don't know 2 the number, but I think the same amount of respect is due 3 both federal agencies as far as what's doable, what makes 4 sense, and the trade-off between the cost issues, whatever 5 they are, and the health and safety and environmental 6 issues. 7 There may be some favorable interactions at this 8 point that we wouldn't want to rule out. It may turn out, 9 for example -- just to pick one possible solution -- you 10 would totally eliminate the possibility of vapors combusting 11 if the water heater could draw nothing but outside air and 12 exhaust only to the outside. 13 If you had to do that anyway, it might turn out 14 that condensing or some of the other high efficiency options



# . 15 that don't make as much sense in the abstract wouldmake a 16 lot of sense if that's the specific path that we're going 17 down. 18 So those are examples of the reasons why I 19 wouldn't accept most of the screen-out recommendations that 20 GAMA has made at this point. 21 I would agree with screening out slow recovery, 22 because I think that essentially amounts to just down-sizing 23 the tank, and if you have a more efficient tank and people 24 go up 10 gallons to get the same first hour output, that's 25 not really helping anybody.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034183 1 Iwouldprobably accept theGAMA recommendation on 2 buoyancy operated flue damper. I'm not an expert on the 3 safety issue, but if their technology discussion is right, 4 then Iwould agree with them there. 5 Timer controls, Iwould also agree, because I 6 don't believe that's reflected in the test procedure, and 7 similar reasons, Iwould agree with themon the sediment 8 removal features, that it maybe a good idea, but they're 9 not going to get credit in the testprocedure for it, so you 10 can't really require it in the standard. 11 MR. RABA: Which is that, David, please? 12 MR. GOLDSTEIN: Sediment removal feature. 13 MR.RABA: Okay. Thankyou. Do you have other 14 ones? 15 MR. GOLDSTEIN: No. Those are the one, two, 16 three, four that we agree with them on, and the rest we 17 would not accept at this stage. 18 MR. RABA: Ihave three. You said four? 19 MR.GOLDSTEIN: Slow recovery,buoyancy operated 20 flue damper, timer control, and sediment removal feature. 21 MR. RABA: Thankyou. Ihave ahand over here on 22 the left. 23 MR. RANFONE: Just a question for David on the 24 screeningprocess, which you commented thatyou didn't want 25 to screen out condensingwaterheaters. Is anybodymaking a

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034184 

### 1 residential condensing waterheater? Is thatproduct 2 availableon themarket? 3 MR.NADEL: Yes. 4 MR.RANFONE: Storage type? So the question is, 5 then,you agree in the screening process to eliminate the 6 heatpump as anoption because of theproblems outlined in 7 this document,which says lack ofproduct availability. To 8 myknowledge, there isn't aresidential storagewater 9 heater, full condensing, that justprovides water heater, 10 not domestichotwater,yetyoudon'twant torule that one 11 out. Is that correct? 12 MR.GOLDSTEIN: It's not completelycorrect 13 because I wouldwantmore elaboration of the 14 non-availability explanation,which Ithinkexists, forme 15 tobe comfortable withthat as the reason. 16 The refrigerator standards thatwere recently 17 adoptedbyDOEwithunanimous support fromallmanufacturers 18 rely in the engineeringanalysis on compressors thatyou 19 cannotbuy today,and that'sbecause the industrywas 20 comfortable that theywouldbecome available in time tomeet 21 the standardandthe technologies thatwouldbeusedby 22 thosemanufacturers are consideredreliable. 23 For the heatpump water heater, Idon'tbelieve 24 there is a consensus in the technical community that the 25 technologies thatyouneedwould exist andwouldbe

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034185 1 available andmaintainable and serviceable within the time 2 period. 3 So it's not just these don't exist on themarket, 4 but that even though some people may think that they could 5 exist were there a standard, that doesn't look like a 6 position tome that's going toprevail in a rulemaking 7 process. 8 As far as the gas condensing water heater, Ihave 9 a gas condensing water heater inmybuilding. It's a 10 nine-unit building, so it's stunningly cost-effective. If 11 you divided the energy savings by nine, it wouldnot be 12 cost-effective. So there's no question in mymind that you 13 can build it andmake it reliable simply by scalingdown a 14 technology that I've livedwith for thepast twoyears. 15 The question is, is it cost-effective? Does it 16 have other safety or installationproblems or costs? I 17 believe that further analysis on that wouldbe useful. 18 I suspect that that analysis will not lead to the 19 recommendation for a standard,either because of the 20 cost-effectiveness or even if it passes cost-effectiveness 21 because of fuel switching issues, but I'mnot sure that's 22 right because, again, the Consumer Product Safety Commission 23 interactionmay conceivably change that result or other 24 elements in the analysis. 25 If it turns out that the economically justified

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034186 1 standard for electric waterheaters has a comparablyhigh 2 first cost increase to gas, and so there's no fuel switching 3 impact, conceivably it mightmake sense. So there are 4 enoughpossibilities Iwould like to see the analysis go 5 forward, although I think the result is not going to be a 6 condensingwater heater standard for gas. 7 MR. RANFONE: And I agree with that, and that's 8 our position. Look at all the design options anddon't 9 eliminate themup front as what's beingdone now. Wedon't 10 have any problemwith that. 11 I guess Iwas still not clear onyourposition 12 and, also, ACEEE's on a technology that has been touted, 13 that has beenmarketed, that's in the field, that's being 14 sold, as not being available. That's okay. We don't have 15 to take a look at that option. And our concern isn't just 16 condensingwater heaters beingmandated. There is a lot of 17 interim steps to get to condensing. That also would impact. 18 MR.GOLDSTEIN: That's right. And thosemay -- 19 MR. RANFONE: Andwe don't mind going through 20 that. 21 MR. GOLDSTEIN: Thosemaydisappear later on or 22 theymay not. I amnot recommending forNRDC that heat 23 pumps be screened out of the analysis. I am simply not 24 objecting to aDOE tentative decision that they should be. 25 MR. BATEY: With regard to the air atomizing

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034187 

### 1 burners, this is anarea thatBrookhavenNational Labhas 2 been looking at foranumber ofyears. Therewas amodel 3 about 15 yearsago, theBabbingtonburner, that was never 4 commercialized. Therewere opportunities todo that. 5 Currently they'reworking onan air atomizing 6 burnerthat's a prototype. There'sno commercially 7 availableproduct right now froman oilburner manufacturer 8 that's air atomizing. Ithinkwhatwe're looking at is at 9 least 10 years down the roadbefore something like that 10 wouldbe available. 11 So, on thatbasis, Irecommend that that be 12 deleted fromthe list. It just isn't aviableproduct right 13 now. 14 MR. RABA: Thank you. 15 MR. HILLER: Icertainlyunderstand the concerns 16 thatmy colleague from thegas industry hasmentioned. Let 17 me see if Icankind ofparaphrase my feelingon this. Heat 18 loss is oneof the thingswe've got togo after somehow, and 19 thereare certain optionswithwhich todo that. There are 20 probablymore options in atypical fossil-fired waterheater 21 than an electricwater heater currently. 22 Should we considerall options? Probablynot. 23 But there are certain options, inmymind, that it's not so 24 obvious tome that they're so outof the ballpark whendone 25 on aresidential scale. Ithink Iknow the answer tomost

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034188 1 of them. Theyprobably wouldn't pass all the tests and 2 wouldbe dropped. But Idon't know that for sure. 3 Idon't knowwhere I feel comfortable that 4 something's obviously toomuch. Idon't know enough. For 5 example, Iknow that there are condensing residential water 6 heaters out there now. Iknow they cost $3,000, but that's 7 because they're also a spaceheater, and they're waybigger 8 than theyneed to be to just be awater heater. 9 Idon't knowwhat that thing is going to cost if 10 it's just done forwater heating. There are otherpeople, 11 other expertise that probablyhas abetter feel for that 12 than Ido. If Iknew that the residential size that was 13 just forwater heatingwas going to cost $3,000, Iwould say 14 "Yeah, don't consider it." But Idon't know. I'mnot as 15 comfortable. 16 I thinkwe all probably agree we know what's going 17 to pass the ultimate test and what's not, Idon't know 18 exactlywhere the line is forwhere it's a no-brainer or 19 not. 20 MR.RANFONE: You are comfortable eliminating the 21 heat pumpwater heateras an option? 22 MR.HILLER: As muchas Ihate to do that, yes. I 23 mean I'mworking likemad to get rid of some of those 24 barriers. 25 MR.RANFONE: Well, again, a lot of the

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034189 1 information that was provided to DOE for the technical 2 support document came out of EPRI documents. 3 MR. HILLER: Oh, Iknow. 4 MR. RANFONE: Okay. 5 MR. HILLER: Itpains me to no end to have to say 6 that. Trust me. 7 MR. RANFONE: So the analysis that was done was 8 flawed,but it was based onyour information, so -- you 9 don't want to go back and revisit that as adesign option? 10 MR. HILLER: I'mnot givingup onheat pumpwater 11 heatersby anymeans. We're going to continue to develop 12 themuntil we get rid of some of the problems. 13 MR.RABA: Steve Nadel. 14 MR.NADEL: Yeah. I'll throw inmy two cents here 15 and also try tomove towards resolution on some of these. 16 It sounds like themost contentious issues are what to do 17 about the heatpumpwater heaterand the condensing water 18 heater. There are somepeople who feel very strongly that 19 those should be included. 20 One option is to basically limit the number of 21 options we have for each of those to one. We don't need to 22 look at three or fourversions of a condensing waterheater. 23 We don't need to look at three or fourversions of aheat 24 pumpwater heater. Justpick one, analyze it, keep inmind 25 the limitations.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street,N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034190 1 The discussion around the tablehere says they're 2 probably going to eliminate it, but it's pretty easy. Just 3 include one option now. You prettymuchhave the data, and 4 we're all pretty sure it will get eliminated later. 5 In terms of the other options, which I think are 6 more seriously inplay, Iguess Iwould like to be working 7 on,understand exactlywhere we are andquickly review some 8 things and see if we can reach further agreement on a few of 9 them. I think everyone agrees that heat traps is akeeper. 10 Plastic tank, it's unclear whether that is ornot. 11 I think the issue there -- my understanding that the energy 12 savings, if there are any, isdue to the fact that you have 13 less heat loss associated around the fittings or something, 14 lessmetal tometal or something like that. My guess is the 15 savings areprettyminimal to justify the cost, but that 16 will probably -- we'll find that out from the analysis. 17 I thinkwe alreadyhave the data on that one, so 18 it's just a question of whether to keep it in the analysis 19 ordrop it. So it's not abig deal tome. I'm fine to keep 20 it. If people want tomake a strong case to drop it, fine. 21 I think it will drop out later. 22 The insulation, as Iunderstood, we're looking at 23 kind ofmore of a continuum of insulation. It's not just 24 two discrete steps, ormaybe it's a couple of discrete 25 steps, particularly given questions about blowing agent.

· 1t^~ BANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034191 1 You know,maybe it's not. We need more steps or a continuum 2 than what we have here. 3 The next three, the insulation. I thinkwhat we 4 havewith this rulemaking,unlikemany other rulemakings

-- 5 because we're trying to coordinate with the vapor ignition 6 issue, and that's moving ona relatively rapid time schedule 7 -- we're probably not going to have the option of delaying 8 extra days or an extra three years to allow some newproduct 9 to reachmarket. 10 Those next three, I think, it's more the 11 refrigerating industry that woulddrive that. It doesn't 12 look like they're going to go to that for the 2001 standard. 13 Idoubt the water heater industrywill drive it, so Iwould 14 be comfortable dropping those next three. 15 Forceddraft, let's keep; I agree. Improved flue 16 baffle, let's keep. I like thewayDOE has it. There's a 17 couple of different steps beforeyou get to condensing. For 18 the onewhere you get clear condensing, just include that. 19 If we include a condensing option, just include one. You 20 don't have to sayhow you get there. 21 I like Frank's suggestion about having increased 22 heat exchange area as ameasure, and I like his suggestion 23 of keeping that to the point where you don't have to worry 24 about condensation problems, bringing it up to thepoint 25 where condensation is not an issue.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034192 1 MR. RABA: That's akeeper? 2 MR.NADEL: Keeper. Particularly right. It's 3 clearly non-condensing. Again, theremaybe gradations 4 there. Idon't knowwhether it's onemeasure or it maywind 5 up breaking into two. Idon't knowwhere the costs lie, but 6 it strikes me it's a continuum. Youprobably don't want to 7 do a continuum,but is it onemeasure or two? I'mnot 8 clear. 9 In general, a reason to eliminate something is not 10 because it's not commercialized now. What is apotential 11 way to eliminate it, goingback to the screening document, 12 is item number -- I think it was onpage B-8, item number 2, 13 practicality tomanufacture, install and service -- whether 14 this is going to be practical tomanufacture, install and 15 servicewithin the time frame we're talking about for this 16 standard. It sounds like the air atomized burner doesn't 17 meet that. 18 Slow recovery, I think everyone agrees there's a 19 potential consumerutility issue there, so not to include 20 it. Likewise the buoyancy operated, eliminate -- safety 21 concerns -- but we will keep the electromechanical as an 22 option to analyze. We've done the analysisbefore. Iwould 23 bevery surprised if it screens through,but we have the 24 data. Let's keep it in. Likewise indirect heating. Let's 25 keep it in. Again, it will probablydrop out.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034193 1 The two phase thermosyphon,my sense is that is 2 probably too long-term to bepractical tomass produce for 3 the entire industryby 2002, and I'm okay to eliminate it on 4 that basis. 5 Flue gas dilution isbasically, as Iunderstand 6 it, avariation on forceddraft, and sowe don't need the 7 second option. 8 Electronic ignition, let's keep it in as an 9 analysis. Interrupted ignition,myunderstanding is there's 10 no energy savings, sowhy keep it in? I cango eitherway 11 on condense flue gases, but if we dohave condensing, let's 12 keep it to one option; let's nothave multiple. So, 13 clearly, pulse should be eliminated. 14 Timer controlled, it doesn't sound like there's 15 much energy savings, so eliminate it. The various solar and 16 separate tanks, these are impractical, I think, to install 17 in all homes, and let's save out time. Likewise sediment 18 removal. It doesn't sound like there's much of any energy 19 savings. So that hopefully adopts most, but not all, of 20 Frank's things andmaybe a way tomove forward. And then I 21 would saywe do need to

-- 22 MR.RABA: Say it again,your insulation call, 23 Steve. 24 MR.NADEL: Insulation is going to be a continuum, 25 so it's not just R16, R25. It's either a continuum or

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034194 1 multiple steps, more steps than you have there. 2 MR.RABA: Thank you. 3 MR. STANONIK: The issue is to find, if there is 4 some amount, howmuch is it? 5 MR.RABA: Very good. Others? Charlie. 6 7 MR. STEPHENS: Real quick, Iwould endorse Steve's 8 assessment of Frank's work. I feel a little bit stronger 9 about the condensing equipment, not because I feel that it 10 might notmake it or it will, but rather, I just don't know 11 what the base case is yet. There's just toomany design 12 issues having to dowith safety raised today forme to 13 understandwhat the base case is yet. 14 Imight bemore comfortable with eliminating it 15 later, but I'll wait and see what the base case is beginning 16 to look likewhen we can find out. 17 MR. STANONIK: So that was akeep it? 18 MR. STEPHENS: That's akeep it for now because, 19 again, Idon't knowwhat the base case looks like. Iwould 20 like to have at least some notion of how different these 21 newer ones are going tobe, compared to what we've already 22 analyzed. 23 MR. RABA: Others? George. 24 MR. KUSTERER: Inmy absence -- and I apologize 25 for that, although naturedid call, andwe didn'tmake our

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034195 1 break as per schedule -- Idohave to apologize. Imisread 2 one itemwith regard to airatomization, and I'mglad that 3 my colleague from OHMA -- which is the Oil Heat 4 Manufacturer's Association -- brought it up, that that 5 technology is anywhere from five to 10 years away and should 6 not be considered. 7 So Iwould like to go on record as retracting the 8 air atomized burner. I think it should be eliminated. 9 MR. BATEY: Actually, there are three negatives 10 there. The one underAI should beAAB. 11 MR. RABA: This one here? 12 MR. BATEY: Eliminate one of those negatives and 13 put it down at AAB. 14 MR. STANONIK: The plus was actually -- we went on 15 George's word, and, so since he has retracted his word,you 16 ought to scratch out that plus. 17 MR. KUSTERER: Yeah, that's aminus. I apologize 18 tomy colleagues fromGAMA. I justmisread that, and Iwas 19 thinking air atomization someplace else. The other thing 20 is, with the elimination of the condensing flue gases and 21 the pulse gases, Ido agree. We hadmade a number of units, 22 and the failure rate has just beenphenomenal, not with the 23 units, but with associated controls andventing. As far as 24 water heatergoes, it's our professional opinion that that 25 should be scrapped.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034196 1 MR. RABA: Any other calls, screen in or screen 2 out? Considerablymore Spartan ladies andgentlemen 3 participatinghere todaywho have made it through the break 4 unscathed. I'm sorry, Ihad to do that, George. 5 MR. KUSTERER: That's all right. Ihave broad 6 shoulders. I'mbuilt likemy cows. When theywant to be 7 milked,youmilk them. 8 [Laughter.] 9 MR. HAAG: Iwould like to support all the 10 recommendations that Frank Stanonikmade nominees for 11 deletion. Iwould like also to suggest that the Department 12 correct the terminology regarding indirect waterheaters. 13 On page B-14, you domention, in parentheses, side arm after 14 you mention indirect heating, but in the industry, indirect 15 heating is heating your water with high temperature water or 16 steam. You typically have a heatingboiler with a coil in 17 it thatyou call your indirect heater. So suffice it to 18 say, for the description youhave there, it should just say 19 side arm heater. InANSI's E-2110 terms, that wouldbe 20 describedas a circulating tankheater. Side armhas been 21 used. 22 MR.RABA: Thank you. Others, please? Other 23 notes or comments? 24 [No response.] 25 Now, since George hadmentioned the break, does

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034

### 197 1 anybodywant totake aquickbreaknow or shouldwepress on 2 to finishingup? We still have some other issues to cover 3 fromourparking lot. 4 MR.HILLER: Ithinkwe ought topress on. Some 5 ofus have to catchairplanes. 6 MR.RABA: Everybody like the idea ofpressing on? 7 MR.HILLER: Therewas an issue of adding things 8 more to the list that Ibrought up earlier. 9 MR.RABA: Sure. Now, thiswas the other issues. 10 What Carl is bringingup -- andmaybe this is appropriate

-- 

### 11 it's okay? Sincewe're lookingat screen inand screenout, 12 thoughts about the heatpump waterheaters, resistancewater 13 heaters. 14 MR.HILLER: The specific one Ihad inmindwas 15 theuse of outside air ornot, and I wanted to ask a 16 questionon that, among other things. Whatdo we do now 17 withgas furnaces? Is there arequirementnow foruse of 18 outside airwithgas furnaces? 19 MR. STANONIK: Arequirement forwhat? 20 MR. HILLER: Is there currentlyarequirement to 21 use outside air in gas furnaces? 22 MR. STANONIK: No. They're testedusing outside 23 air. 24 MR.RABA: Testedusing outside air? 25 MR.HILLER: Somebody said that in furnaces

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034198 1 they're using outside air in testing, but the standard 2 doesn't require the use of outside air. Frank has got a 3 goodpoint in that it's probablynot going to affect onan 4 energy factor test orwhatever test weuse to determine 5 efficiency. As long as we specify, the temperature outside 6 versus inside is irrelevant, but there are some issues 7 safety-wise, et cetera, that come intoplay there. 8 Idon't really fullyunderstand, under the energy 9 efficiency rule, if that's even the appropriateplace to 10 have that or if it ought tobe in a safety ruling separate 11 from this orwhat. 12 MR. LANGMEAD: Carl, what are you talking about? 13 MR. HILLER: Well, in terms of efficiency in 14 place, if you put any combustion appliance inside the 15 conditioned space that uses conditioned air, there's a loss 16 associatedwith that. But that's not under the current test 17 procedures. There is energy efficiency to be gained bywhat 18 youuse. 19 MR. LANGMEAD: On the furnace test procedure, 20 you're assuming you use outside air, and it has only effect 21 on what goes up thevent stack. 22 MR. HILLER: Right. 23 MR. LANGMEAD: Nothing else. On thewater heater, 24 you're assuming it takes inside air. You'remeasuring Btu's 25 intowater. Your test procedure onyour furnace and your

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034199 1 test procedure onyourwater are quite different. One is 2 measuring Btu's into the heated space or -- excuse me, the 3 furnace one is 100 percentminus losses. The waterheater 4 is determining Btu's into the heated water. Quite 5 different. 6 MR.HILLER: Right, but neither one of those 7 procedures currently account for the loss caused by the 8 infiltration tomake up for that air that goes up the flue. 9 Shouldwe? Idon't know. I'm not saying we should or 10 shouldn't. I'm just saying they don't. 11 MR. KREBS: We could get into adialogue about 12 siteversus source if you reallywant to. Your choice. 13 MR. HILLER: Iam observing the loss mechanisms. 14 MR. KREBS: So am I. 15 MR. HILLER: I'mnot saying we woulddo it or 16 shouldn't do it. I'm raising it as an issue. 17 MR.VAGO: I say let's not do it. 18 MR. STEPHENS: There are codes, I think, in some 19 places that are beginning to deal with this in new 20 construction, if not retrofit, and Idon't know that it is a 21 water heaterproduct issue as much as it is an installation 22 issue that local codes are probably in theprocess of taking 23 care of as it is. 24 So I'mnot sure that this is the right forum to 25 raise that, really.

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034200 1 MR.KUSTERER: Don't want to go here. 2 MR. STEPHENS: Even though I think it wouldbe 3 nice to eliminate the loss of indoor air. 4 MR. STANONIK: As George said, you really don't 5 want to go there. If we're going to go down that path, then 6 you need to embrace it wholehog, and thenwe can start 7 talking about standby losses not being losses but, in fact, 8 additions to heating the space in the heating season and all 9 that other stuff, and then we can get intowhat it does in 10 the cooling season and all that other crap. 11 It doesn't relate to the efficiency of the water 12 heater, andwe shouldn't godown the road. 13 MR. KUSTERER: Right. 14 MR.BATEY: What we're talking about here doesn't 15 really impact efficiency that greatly. 16 MR. KUSTERER: It's more of a safety factor than 17 it is anefficiency factor. 18 MR. BATEY: But it's covered elsewhere. 19 MR. KUSTERER: Why go there? 20 MR.RABA: So Ihearwe would like to take this 21 out? 22 MR. KUSTERER: Throw it out. 23 MR. RABA: The other twowere heat pumpwater 24 heaters and resistance water heaters. 25 MR. BERRINGER: I thinkwe've answered that

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034201 1 question as faras the screening out. We've discussed that. 2 I think it has already beendiscussed. 3 MR. RABA: Okay. One other item, too. Back to 4 you, Bryan. Go ahead. Iwas going to ask just one last 5 question here. 6 MR. BERRINGER: Okay. We haven't gone over the 7 schedule. Idon't know if peoplewant to lookat that. I 8 mean there's a lot of questions that have come up today as 9 far as that goes. It's one of the things we saidwe would 10 come back to that George wanted to discuss. 11 MR.LEWIS: Prior to our getting into the 12 schedule, is there anything that you've heard today that 13 will speed or slow the schedule fromwhat you would have 14 presented first thing this morning? Because Imean, before 15 we start looking at the schedule as faras a reality check, 16 it seems tome thatyou've received a lot of input through 17 the day. The schedule you'representing here still will 18 stand? 19 MR. BERRINGER: Well, that's our goal, but we have 20 the big issue as far as how do we dealwith the issue of 21 redesign as far as the CPSC, the flammable vapor issue, if 22 we move forward and use existing data -- and then, as was 23 suggested, go to existing data and come back and look later 24 and reassess that afterwe've gone through the analysis? 25 I think there's ways that we canprobablymove

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034202 1 into doing the schedule that, later on, we can readjust or 2 do things. As we discussed, when we get into it, we might 3 be able to shorten things once we get down into the meat of 4 the process. But right now, a lot of it is still up for 5 your best guess or best estimate at this time. 6 MR. LEWIS: Maybe I'mbeing too pragmatic, but it 7 just seems to me that you've put together on paper your best 8 estimate on how you can proceed on the schedule. I'm sure 9 each and everyone around this table could adjust it in some 10 way. We've proven that even just by this last list we've 11 gone over. 12 There will be 39 different opinions, and unless 13 there's something really grotesque inyour planning that 14 hasn't come to light so far, it seems like we're going to 15 have to start taking some steps down that path before we can 16 really adequately give you input as far as saying how are we 17 doing. 18 MR.MORRISON: Bryan, where do you see the next 19 point where the schedule couldbe adjusted? 20 MR. BERRINGER: Well, our next steps, if we just 21 want to look at -- what I addressed as far as next steps 22 here was engineering analysis, slide 23. Iput on here, 23 "Data collection for revised engineering analysis, if 24 necessary." Can we use the existing data? Should we move 25 forward with the existing data? Can these be revised?

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034203 1 We've screened out a lot of things. We've gone a 2 long way as far as doing that. So some of the reanalysis or 3 reengineering maybe isn't necessary for some products, since 4 they're screened out. 5 We talked about, in the schedule, doing plant 6 visits to try and collect data. The data collectionwould 7 be the next thing in the next couple of months, and try to 8 get with the manufacturers individually. That would be our 9 next step as far as reducing it. 10 If we need to update or revisit the engineering 11 analysis, send it out for peer reviewers from industry, 12 design engineers, as discussed. That would be our first 13 step as far as shortening the schedule. That's the first 14 step we have to get through to get through the process. 

# .0 15 Manufacturing impacts, again, certain things we 16 can negotiate or agree upon, sort of like we did here at the 17 screening. Maybe we don't have to do detailedmanufacturing 18 impact if industry advocates, everybody agrees that these 19 steps aren't necessary and we have some sort of agreement on 20 what's acceptable. Then a lot of detail and all of these 21 model issues would fall out, too, as far as using detailed 22 models or black boxes and so forth. 23 MR.MORRISON: The area that caught my attention 24 is the one that affects the gas products, gas storage 25 heaters. The flammable vapor issue may drive significant

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034204 1 redesign in that product line. How do you anticipate 2 handling that problem? 3 MR. BERRINGER: Well, as was suggested today, if 4 we move forward with existing analysis, and then, as that 5 came up and the redesign came into play, thenwe could 6 reassess that data before we issued a final rule. 7 Again, we have no idea as far as schedule, as far 8 as when the prototypes would be available. I know there's 9 field testing that has to be done on those prototypes. As I 10 thinkDavid Goldstein suggested, we don't want to -- you 11 know, somehow we have to move forward. If CPSC is waiting 12 for us, and we're waiting for them, we may never get a 13 rulemaking done either one way or another. So I think 14 that's the way wewould have toproceed. 15 MR. GOLDSTEIN: One comment on that. It's 16 important to rememberNAECA requires a minimum three-year 17 lead time from DOE, and the process, even with the 18 improvements, requires at least another year between when 19 there's some idea of what standard levels DOE is considering 20 and when they can issue a final rule. That isn't going to 21 be shortened. 22 So if CPSC is on a shorter time frame, then the 23 goal of having one redesign cannot be achieved unless DOE 24 moves forward very quickly and simply keeps an openmind and 25 keeps communication with the officials in CPSC on a high

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034205 1 enough level thatproblems can be seen and solved early in 2 advance. 3 I figure if DOE canworkwith EPA, they can 4 probablywork withany other federal agency, given the 5 history that those two have had in the past. So I'm 6 confident that that can be worked. 7 FromNRDC's point of view,what we view,what we 8 have beenkind of offering as far as ourpredictions of how 9 this might come out is acceptance of amore modest standard 10 if theproceeding moves quickly. 11 The other side of it is, if this thinggets bogged 12 down, thenwe would be a lot less willing to accept the 13 weaker standard, inpart because we just see technologies 14 developing. 15 While Iwould feel it was difficult forme to 16 prevail with the case onheat pumpwater heatersbeing 17 acceptable in a 1-1/2-year proceeding, Imight be a lotmore 18 confident that the technical information couldbe there if 19 the proceeding dragged out for three years. So there's a 20 definite trade-off going onhere. 21 I'm saying I think it's in the best interests of 22 all stakeholders here that we try to keep this thing on 23 track andmoving forwardpromptly towards a resolution for a 24 modest improvement inboth electricity andgas ona fair 25 level between the two fuels.

ANN RILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034206 1 MR.MATTINGLY: I know, when I recall the process 2 of developing the interpretative rule and this whole new 3 approach, I think we thought that a proposed rule would be 4 pretty far along in the game, the issuance of a proposed 5 rule, and that, really, the only difference between a 6 proposed rule and a final rule would be some fine tuning, 7 that all the controversy would have come and have been dealt 8 with before the publication of a proposed rule. I think the 9 publication is the most significant event in the whole 10 thing. 11 I'm concerned that this morning you said we were 12 committed to a certain schedule and we're going to publish a 13 proposed rule, byGod, in -- what is it? July '98 or 14 whatever that date was. I'm just concerned that that's 15 going to drive everything when we know we've got this big 16 problem right now of a lot going on, not knowing what the 17 products are going to be, especially on gas water heaters. 18 I don't think you shouldpublish a proposed rule 19 until we've got the answers to those things, because the 20 proposed rule, according to the newplan, is not supposed to 21 be controversial. 22 MR. NADEL: I've heard it two different ways from 23 DOE. On the one hand, the idea was the proposed rule was 24 very far along, and to the extent there are disagreements, 25 there are just a couple of little refinements, and they can

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034207 1 do it quickly. 2 On the other hand, though, I've heard them saying. 3 all their schedules say that they have to allow lots of time 4 for review, lots of time for reanalysis, and that it needs 5 to be a year. To the extent that secondview holds, then 6 that contradicts the first view, and yes, they need to come 7 out with a proposed rule in July '98 in order to come out 8 with a final rule in July '99. 9 If DOE can find ways, working with OMB and others, 10 to shorten that cycle, lend it some more flexibility, but 11 when push comes to show, they haven't been able to find ways 12 to shorten that process between proposed rule and final 13 rule, which gets into the issues of, well, therefore the 14 proposed rule is not quite as far along as we all would have 

# O 15 liked. 16 MR. MATTINGLY: CPSC, watch out. You can hear it 17 coming right now. DOE is committed to a schedule and, by 18 God, they're going to have it. You ought tobe watching 19 real carefully now. We're being driven by a schedule. I 20 don't think the priorities are right. 21 MR. GOLDSTEIN: Well, Joe, if you don't think the 22 priorities are right, what is your proposal for solving 23 them, other than the same thing that we've heard from trade 24 groups in the past when they're being recalcitrant, which 25 is, delay, delay, delay, delay, delay.

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034208 1 MR.MATTINGLY: We're not being recalcitrant here. 2 MR.GOLDSTEIN: Ididn't sayyouwere. I'm saying 3 don't act like you are. What is yourproposal? How doyou 4 propose to solve the problem? 5 MR.MATTINGLY: I'm just saying Idon't see howwe 6 canpublish aproposedrule when there's still thevapor 7 ignition issue still up in the air. 8 MR. RABA: This mightbe something to work out 9 betweenCPSC and DOE. I thinkwe've alreadyheard a lot of 10 gooddiscussion on this. Otto, and then Steve. 11 MR.VAGO: Thankyou for stating that. That's 12 exactly what Iwas going to suggest or comment, that that's 13 somethingDOE and CPSCwould have to work on andwork things 14 out. 15 MR. RABA: Steve. 16 MR.NADEL: As apractical matter, I think what we 17 need to figure out now is the next steps, and I think the 18 next steps are for DOE tomake some final decisions onwhat 19 measures they're going to analyze and then do their site 20 visits, get any additional data that theywant from 21 manufacturers to revise the existing analysis, and let's 22 plan on an engineering analysis circulated to the group in a 23 workshop in about October. 24 At that point, hopefully,we'll know a lot more 25 about what the schedule is for the vapor ignition, and that

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 IStreet, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034209 1 maybe abetter time. We canmake more informeddecisions 2 about how to proceed from there. 3 MR. KUSTERER: We also have the foam issue. 4 MR. LANGMEAD: Imightpoint out, you've gone 5 through awholebunch of design options. We went through to 6 include everything, and that's fine. We can start down that 7 process and include all those things. I think that tends to 8 drive aprocess in one direction. 9 It maynot be in the direction that is where 10 you're going to be taken for other reasons, but which 11 complicates the devil out of the process, becausewe've got 12 one analysis going on over here. We've got another analysis 13 going on over there. In some places, theymay mesh, but 14 some places they don't. 15 So we'll proceed. It's an insolvable problemat 16 this point in time, and I'mnot going to suggest any 17 solutions. Iwould if Ihad one, but the issue has been 18 raisedhere enough that Iwouldhope DOE would take 19 cognizance of that issue andyou would look at and say, 20 "I've got to look back at my schedule, and Ineed to look at 21 not only what's inmy schedule,but whatmy schedule says to 22 make itmake sense around this issue." 23 Just to ignore the question doesn't solve it. I 24 don't say that is has to all be delayed. It needs to be 25 looked at in away that is -- andwe'll try topull things

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034210 1 together as soon as the information is there to pull it 22 together. 3 MR.RABA: Steve Nadel. 4 MR.NADEL: Idon't mean to belittle the fact that 5 there are great difficulties. We're kind of in a Catch-22. 6 Which comes first, and how doyou get these two tomesh? I 7 thinkwe made good progress todayby dramatically reducing 8 the numberof design options, so that shouldmake it a lot 9 easier. 10 I'mverymindful of the fact that this analysis 11 we're doing now is to see if we're in the ballpark to get a 12 lot of the stuff behind us, but that a lot of it will have 13 tobe at least reviewed carefully and, at aminimum, tweaked 14 once the new baseline is established.



# . ~15 I'malso mindful of the fact that George mentioned 16 about the foam. Before Iwould recommend that DOE plan on 17 doing some technical work to summarize what the state of 18 current knowledge and thinking is regarding condensation and 19 where you have tobe careful about condensation, Iwould say 20 you should also be planning ondoing some technical work to 21 get the best informationyou can on the likelyperformance 22 and costs of the different blowing agents. 23 We can anticipate that those are two issues that 24 may come down, theremaybe a lot of contention on. Let's 25 get all the information as soonas possible we can on the

is*4~~ kANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034211 1 table. Hopefully, we can agree onmost it andnarrow it 2 down to the point the disagreements disappear. 3 MR.RABA: David. 4 MR.GOLDSTEIN: How doyou get the two rulemaking 5 programs tomesh? It seemed tome that anyone who's 6 interested in constructively getting them tomesh would have 7 asked the following question, which I'masking now, showing, 8 Ihope, that I am interested in that. That is, what time 9 constraints is this Consumer Product Safety Commission 10 under? If theypromulgate aproposed rule by a given date, 11 how long does it take them to finalize the rule? What are 12 their constraints on lead times? Okay. So that's the first 13 thingyou need to know. 14 The second thingyou need to know is what kind of 15 standard are they legally allowed to prescribe? Because the 16 DOE standard is an energy factor, and though it maybe 17 derived assuming certain design options, that's not what 18 manufacturers usuallywindup usingwhen the standard is 19 actually something that has to be complied with. 20 How about the safety standard? Is it an 21 engineeringdesign standard, or is it some kind of test 22 procedure for fire safety? Because that's going tomake a 23 difference as far as does one standard preclude compliance 24 with another in a particularway, and it works both ways. 25 Ihope thatmy confidence that the officials in

ANNRILEY & ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034212 1 both agencies canwork together is validated, but I think 2 this is a solvable problem. 3 MR. STADNIK: I think it's avery solvable 4 problem,David, and we operate under, basically, theAPA

-- 5 Administrative Procedures Act -- with a few caveats thrown 6 in under the Consumer Product SafetyAct to how we have to 7 do ourbusiness. 8 With respect to how longwe have to take in 9 between stages, there is no necessarily set mandate. A lot 10 depends on the comment periods that are asked for in the 11 earlypart of theprocess. Typically,you follow the 12 standard routine of publish, 60-day comment period, somuch 13 for analyzing comments, and thenpublish, another 60-day 14 comment period, et cetera. Now I guess it's 75 days in some 15 cases for certain actions. 16 In terms of wherewe're at andwhat we want to do 17 with DOE, we understandwhere they're at with this changes 18 that has occurred, andwe're committed towork closelywith 19 them and keep them abreast of things as best as we can and 20 work with the consortiumpeople in that. 21 MR. GOLDSTEIN: And about lead time, if you 22 promulgated a final rule tomorrow, are there any limits on 23 when it could take effect? 24 MR. STADNIK: In terms of when we set an effective 25 date for a regulation, in general, the agency looks at the

ANNRILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034213 1 cost benefit analyses and the terms of what the impact on 2 industrymight be in terms of you've got to do the full 3 regulatory impact analysis, small business environmental 4 impact. 5 Those reviews get done by our economics group in 6 helping to formulate a proposed effective date. Typically, 7 we use 12 months to 18 months, sometimes longer. 8 MR. GOLDSTEIN: But that's very important 9 information for this process since DOE requires by law a 10 minimum of three years. It means that, to keep the schedule 11 going, you are probably going to wind up with the 12 possibility of DOE acting first, and in order to make that 13 work out, they have to act first in a way that doesn't 14 foreclose your agency from doing things that are reasonable 15 from apublic health point of view and from the industry's 16 point of view. 17 MR. STADNIK: And the other thing is, right now, 18 our rulemaking process is in a hold mode because of the 19 commitment by the industry. Okay? If you're not aware of 20 that process, that's where we're at. But we have the 21 ability to go out and start that whole process againwith an 22 ANPR -- or I guess ANOPR, as it's used in DOE-speak. 23 MR. RABA: Thank you. Good exchange. Any final 24 comments to wrap up? We are past the adjournment time. My 25 hat is off to you fromyour persistence in going through

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034214 

### 1 such arigorous agenda. Therehas been alot of issues on 2 the table. 3 You've seenwhat theprocess looks like. You've 4 seenhowdifficult it is toget through some of these areas, 5 and ourhope thatyouwill, in thesenextdays andweeks, 6 send toDOE or talk tous about someof the areas of 7 consideration,whatyour thoughts are, and thewhats and the 8 hows toget these things done. 9 Certainlyvery good questionshavebeen raised, 10 andyou've accomplishedquite abit, too. Again, Iapplaud 11 alot of that andyourpersistence in going through sucha 12 rigorous agenda, especially on therulemaking frameworkand 13 the screeninganalysis, too, howthatwas taken care of. 14 We will certainlykeepall these things in 15 considerationand safetyversus efficiency, certainlyavery 16 noteworthy topic that will certainlybe foremost on two 17 rulemakings, not just one. Soyougot really doubleyour 18 money foryour trip today. We've got twoprocesses thatwe 19 wereable toexamine, as well. 20 MR.GOLDSTEIN: You forgot EPA,what theymight do 21 with theCleanAirAct. 22 MR.RABA: Does theDOEhave any closingremarks 23 or comments? 24 MR.BERRINGER: No. I would just like to thank 25 everybody for comingtoday. Iknow therewas a lotof good

ANNRILEY &ASSOCIATES, LTD. CourtReporters 1250 IStreet,N.W., Suite 300 Washington,D.C. 20005 (202) 842-0034215 1 issues, a lot of things discussed today. I appreciate 2 everybody coming. 3 MR. GOLDSTEIN: Have you set a deadline for 4 comments? 5 MR. BERRINGER: I said earlier, comments due July 6 31, 1997, for this part of the process. Is that acceptable? 7 MR. RABA: Is July 31st for comments enough time? 8 You want shorter, perhaps. Is the 31st okay? 9 Thank you very much. You've been great. We've 10 accomplished a lot today, and we appreciate your inputs. 11 Right now, we're looking at July 31st for comments. Then we 12 can revise the screening and the framework accordingly. 13 Again, thank you very much. A good job, ladies 14 and gentlemen. 15 [Whereupon, at 4:10 p.m., the meeting was 16 concluded.] 17 18 19 20 21 22 23 24 25

ANN RILEY &ASSOCIATES, LTD. Court Reporters 1250 I Street, N.W., Suite 300 Washington, D.C. 20005 (202) 842-0034