UNITED STATES OF AMERICA

+ + + + + DEPARTMENT OF ENERGY

+ + + + + OFFICE OF CODES AND STANDARDS

+ + + + + WORKSHOP ON STANDARDS FOR WATER HEATERS

MONDAY, NOVEMBER 9, 1998

+ + + + +

Theworkshop was held in Room 1E245, 1000 Independence avenue, S.W., Washington, D.C., at 9:00 a.m., Terry Logee, presiding. PRESENT: TERRY LOGEE, DOE DOUG BROOKMAN, Facilitator MICHAEL McCABE, DOE SANDY BEALL, DOE BRYAN BERRINGER, DOE QONNIE LAUGHLIN, DOE CARL ADAMS, DOE 

### NEALR.GROSS COURT REPORTERS AND TRANSCRIBERS 1323RHODEISLANDAVE., N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com2 PRESENT (Continued): CYRUS NASSERI, DOE JIM RABA, DOE BRENDA EDWARDS-JONES, DOE MIKE RIVEST, A.D. Little JIM McMAHON, Lawrence Berkeley National Laboratory EUGENE MARGOLIS, DOE/GC FRANCINE PINTO, DOE/GC JIM LUTZ, Lawrence Berkeley National Laboratory TIM SHELLENBERGER, American Water Heater Group ROBERT HEMPHILL, Gas Research Institute WILBUR HAAG, A.O. Smith Water Products KELLY TRONCALLI, Rheem Manufacturing Company STEVE ROSENSTOCK, Edison Electric Institute STEVE NADEL, American Counsel for an Energy Efficient Economy MARK TAYLOR, Bradford White Corporation GREG NAGY, Beckett Air OTTO VAGO, State Industries, Inc. DAVIDGOLDSTEIN,NaturalResourcesDefense Council

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PRESENT (Continued): JAMES VAUGHAN, Vaughan Manufacturing Corporation CHARLES STEPHENS, Oregon Department of Energy JAMES RANFONE, American Gas Association FRANK STANONIK, Gas Appliances Manufacturers Association, Inc. JOSEPH MATTINGLY, Gas Appliance Manufacturers Association, Inc. GEORGE KUSTERER, Bock Water Heaters CARL HILLER, Electric Power Research Institute DAVID WINIARSKI, Pacific Northwest National Laboratory



### NEALR.GROSS COURT REPORTERSANDTRANSCRIBERS 1323RHODE ISLANDAVE., N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com4 C-O-N-T-E-N-T-S PAGE Review of Agenda 10 Overview of the Water Heater Rulemaking Schedule 14 EngineeringAnalysis Methodology and Results, Ed Barbour 71 Discussion of Preliminary Engineering Analysis, Jim Lutz 92 Discussion of Oil Fire Water Heater Analysis, David Winiarski 162 Comparison of Payback Between Gas and Electric Water Heaters, Jim McMahon 186 Discussion of Life Cycle Costs, Jim McMahon and Jim Lutz 188 Discussion of Marginal Energy Rates, Jim McMahon 282



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is 1 P-R-O-C-E-E-D-I-N-G-S 2 (9:02 a.m.) 3 MR. BROOKMAN: Good morning and welcome. 4 My name is Doug Brookman. I'll be 5 facilitating the meeting today. 6 I've met many of you previously. It's 7 good to see you. Thankyou so much forbeing on time 8 and allowing us to get started here punctually. We 9 have a full day ahead of us. 10 This is the workshop on standards for 11 water heaters, and with no further ado, let me 12 introduce Terry Logee from theDepartment of Codes and 13 Standards. 14 MR. LOGEE: Good morning. I presume all 15 of you can hear me. 16 As Doug mentioned, I'm Terry Logee. I'm 17 the team leader at DOE for the water heater energy 18 efficiency standards rulemaking, and we'll go around 19 the room shortly to introduce all of the other key 20 players on our team and to have you introduce 21 yourselves as well. 22 Again, letmere-echowhatDoug just said. 

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1 Welcome to this workshop. We certainly appreciate 2 your taking your time and energy to get here. We're 3 hoping for a very interactive workshop with your 4 comments. We're here certainly to listen towhat you 5 have to say. 6 We will be bringing up our concerns as we 7 go throughout this workshop and hope that you will 8 provide us with lots of valuable feedback. 9 With that, I think we can begin the 10 introductions, and I'd like to start on the left side 11 here withEd Barbour. Ed,whydon't you just sayyour 12 name and your affiliation, and we'll just go around 13 the table and get to the back of the room. 14 MR. BARBOUR: Hi. I'm Ed Barbour. I'm 15 with Arthur D. Little. 16 MS. PINTO: I'm Francine Pinto with 17 General Counsel's Office. 18 MR. LUTZ: Jim Lutz from LBL. 19 MR. SHELLENBERGER: Tim Shellenberger, 20 American Water Heater Company. 21 MR. HAAG: Wilbur Haag, A.O. Smith Water 22 Products Company. 

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1 MS. TRONCALLI: Kelly Troncalli, Rheem 2 Manufacturing Company. 3 MR. ROSENSTOCK: SteveRosenstock, Edison 4 Electric Institute. 5 MR. TAYLOR: Mark Taylor, representing 6 (inaudible) BreakAway Corporation. 7 MR. NAGY: Greg Nagy, Beckett Air, 8 Incorporated. 9 MR.VAGO: Otto Vago, State Industries. 10 MR. GOLDSTEIN: David Goldstein, NRDC. 11 MR. STEPHENS: Charlie Stephens, Oregon 12 Energy Office. 13 MR. RANFONE: Jim Ranfone, American Gas 14 Association. 15 MR. STANONIK: Frank Stanonik, GAMA. 16 MR. MATTINGLY: Joe Mattingly, Gas 17 Appliances Manufacturers Association. 18 MR.KUSTERER: George Kusterer,Bock Water 19 Heaters. 20 MR. HILLER: Carl Hiller of the Electric 21 Power Research Institute. 22 MR.WINIARSKI: David Winiarski, Pacific 

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1 Northwest National Laboratory. 2 MR. McMAHON: Jim McMahon Lawrence 3 Berkeley National Laboratory. 4 MR. MARGOLIS: Eugene Margolis, Office of 5 General Counsel. 6 MS. BEALL: Sandy Beall, Office of Codes 7 and Standards. 8 MS. NADER: I'm Victoria Nader 9 (inaudible). 10 MS. EDWARDS-JONES: Brenda Edwards-Jones. 11 (Inaudible introduction.) 12 MR. BERRINGER: Bryan Berringer, 13 Department of Energy, Office of Codes and Standards. 14 MR. WETHJE: Larry Wethje with the Air 15 Conditioning and Refrigeration Institute. 16 MR.MORANTE: PeterMorantewith Northeast 17 Utilities. 18 MS. LEWIS: Thedra Lewis, American Gas 19 Association 20 MR. KREBS: Mark Krebs, Laclede Gas. 21 MR.WILLIAMS: TedWilliams, AmericanGas 22 Association. 

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1 MR. HOSLER: Daryl Hosler, Southern 2 California Gas Company. 3 MR. ECKMAN: Tom Eckman, Northwest Power 4 Planning Council. 5 MR. MINNIEAR: Max Minniear. I'm a 6 consultant with Lawrence Berkeley. 7 MR.LANGMEAD: JackLangmead, consultant. 8 MR. McCABE: Michael McCabe, National 9 Institute of Standards and Technology. 10 MR. SOMASUNDARAM: Sriram Somasundaram, 11 Pacific Northwest National Laboratory. 12 MR. BRUNDAGE: Don Brundage, Southern 13 Company. 14 MS. WILKINS: Anne Wilkins, Natural 15 Resources Canada. 16 MR.GATLEY: StuGatley,FASCO Industries. 17 MR. RAVEST: Mike Ravest, Arthur D. 18 Little. 19 MR.McCABE: MichaelMcCabe,Department of 20 Energy. 21 MR. BANNEN: John Bannen, Teledyne Laars. 22 MR.WICHER: Allen Wicher, Thermodisc. 

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1 MR. MILLER: Mike Miller, Thermodisc. 2 MS. MARTIN: MariaMartin, sitting in for 3 Michael Martin (inaudible) the ASHRE meeting, 4 California Electrical. 5 MR. LOGEE: And Steve Nadel, who just 6 walked in. Just raise your hand. Thank you, Steve. 7 Again, let's review the agenda at this 8 point, and Doug will do that for us. 9 One thing. We did review the agenda 10 recently, as recently as last week, andwe did send it 11 out to some of those folkswe had on themailing list. 12 So please take a look at this. We found out that we 13 needed more time for our engineering and life cycle 14 cost analyses presentations and review. So we 15 increased the time on those and moved other things 16 around and reduced the time on a few things. 17 Andwe'vereordered the first daya little 18 bit toput themarginal energy ratepresentation right 19 at the end of the day, which we will do if we don't 20 run over too much. Otherwise we'll slide that to 21 tomorrowmorning. 22 MR. BROOKMAN: It does seem like a very 

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1 full agenda. If having moved some of these pieces 2 around conflicts with your travel plans or puts 3 anybody in a really bad way, please talk with me at 4 the break, and we'll see what we can do to reorient 5 the agenda, but we're going to have to move 6 consistently and quickly to get through all of this 7 today. 8 You can see the purpose of the workshop 9 listed at the top of your agenda, which is to discuss 10 the analyses and computer models that have been 11 derived, and the workshop outcomes are also listed. 12 This morning the first thing, we've 13 finished the introductions andwe're doing the agenda 14 review. We'll have the kind of boilerplate opening 15 remarks by the department on, you know, where 16 everything's located and other details on the day. 17 We'll move from that directly into a 18 discussion on engineering analysis, methodology, and 19 results. The basic format for that will be a brief 20 presentation by the department and other supporting 21 contractors of the department, followed by question 22 and answer and discussion. 

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1 We see that taking essentially the entire 2 morning. We'll take a break midmorning whenever the 3 group sags most, but we'll try and keep going as far 4 as we can before we do take a break. I'll just warn 5 you in advance. 6 Andwewill take a lunchbreak right about 7 12:15. You're onyour own for lunch. We'll showyou 8 and tellyouwhere the cafeterias are. We dowantyou 9 to stay close. We don't want you to go too far 10 because we want you to get back in time for us to 11 commence immediately after lunch. So don't plan on 12 any extended luncheon dates, please. 13 Immediately after lunch, we'll begin 14 talking about life cycle costs and particularly the 15 spreadsheet model that has been put in place. 16 At the end of the day around about four 17 o'clock,we'llbe talkingaboutmarginal energyrates, 18 and we'll do a summary at the end of the day on what 19 we've covered, what yet needs to be covered, and the 20 like. 21 The shape of November 10th might change 22 slightly,depending onhowmuchwe get done today,but 

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1 I think the basic elements that you see there are 2 likely to be what we'll be doing tomorrow, especially 3 the first thing in the morning. At 8:30 we'll start. 4 We'll have a brief discussion surrounding issues and 5 gaps from today. 6 In the 8:45 time frame, manufacturer 7 impacts. The GRIM spreadsheet model will be 8 discussed. 9 We'll take a break midmorning. Around 10 about 10:15, national energy savings. The baseline 11 results will be presented and other items as you see 12 there. 13 A brief presentation inmidmorning on the 14 consumer subgroup, and just prior to lunch, 15 environmental and utility impacts and also the 16 technical research findings, presentation on theNIST 17 result using water and HFC-245 agents. 18 And then into the lunch hour we're going 19 to work so that we can stop midday tomorrow. We'll 20 be, justbeforewe adjourn,describingnext steps, any 21 issues to be resolved, identification of any 22 additional data requirements, and the like. 

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1 So that's the basic gameplan, and Iguess 2 the question now is -- and you don't need to answer 3 now. We can startwith this after Terry finishes the 4 rest of his comments -- are there any major gaps in 5 the agenda. That's what we'd like to know before we 6 commence here this morning. 7 Any significant omissions? Any issues 8 that need to be raised that don't fit into these other 9 agenda items? Wewant tomake certain there's aplace 10 holder for everything that matters at this time and 11 place. 12 (Noresponse.) 13 MR. BROOKMAN: Okay. 14 MR. LOGEE: Thank you, Doug. 15 And with that, we have our usual opening 16 statement. I will read that. 17 On behalf of the Department of Energy, I 18 would like to thank all of you for taking the time to 19 participate in this public workshop. The purpose of 20 theworkshop is todiscuss theanalysismethodologies, 21 engineering, life cycle costs, manufacturing impacts, 22 national energy savings, consumer environmental 

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1 impacts, andutility impacts forthe residentialwater 2 heater rulemaking, and some preliminary results for 3 the engineering and life cycle cost analysis. 4 The department is seeking comments on the 5 analysis methodologies, the input data, and the 6 technological issues of venting, prevention of 7 flammable vapor ignition on gas water heaters, 8 phaseout of the HCFC-141(b) insulationblowing agent, 9 and any others that you wish to bring to DOE's 10 attention. 11 The department sent a letter on September 12 14th to organizations having an interest in today's 13 workshop, providing them the draft agenda and 14 indicating how to obtain the analysis reports and 15 methodologies. 16 A public notice of this workshop was 17 published in the Federal Register on September 25th. 18 Anyone attending today's workshop or submitting 19 written commentswill be added to our list for future 20 mailings. 21 The comments received here today, along 22 with any other comments obtained as a result of 

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1 today's workshop, will assist the department in 2 developing a notice of proposed rulemaking concerning 3 these products. 4 I am the presiding officer for the 5 workshop, and Mr. Brookman will facilitate today's 6 workshop. I will set the guidelines for conducting 7 the workshop andprovide otherpertinent information. 8 Copies of the engineering and life cycle 9 cost reports and the other methodologywrite-ups are 10 available at the table where you came in. Please see 11 Brenda if you didn't get these reports. 12 In approximately two weeks, a complete 13 copy of the transcript will be available for 14 inspection and copying at the Department of Energy's 15 Freedom of Information Reading Room located in Room 16 1E190. Anyone wishing to purchase a copy of the 17 transcript may make arrangements with the court 18 reporter to my right. 19 To provide the department with as much 20 pertinent information and as many views as can be 21 reasonably obtained and to enable interested persons 22 to express their views, theworkshopwillbe conducted 

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1 in accordance with the following procedures. 2 We have discussed the agenda and will 3 expandon anyof the topics as necessary. Please note 4 that due to the amount of material to be presented in 5 the engineering and LCC reports, life cycle cost 6 reports, DOE has revised the draft agenda. We faxed 7 that revised agenda to some of you, and there is a 8 copy in your folder of workshop materials. 9 DOE contractors will present most of 10 analysis methodology information. Questions are 11 welcome throughout thesepresentations unless you are 12 advised otherwise. It maybe necessary, however, to 13 cut off debate on some topics to remain on schedule, 14 although there maybe time at the end of the workshop 15 for additional discussion of significant issues. 16 I encourage everyone present to 17 participate asmuchaspossible sothat the department 18 may get a full spectrum of opinions on these topics. 19 Theworkshop is scheduledto adjourntoday 20 at 4:45 and at 12:30 tomorrow. 21 Topics which have not been completely 22 discussedby that time canbe addressed in additional 

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1 writtencommentswhichare duebyDecember 11th, 1998. 2 All written comments and data submissions will be 3 available forpublic inspection at the DOE Freedom of 4 Information Reading Room. The phone number is area 5 code 202, 586-6020. 6 Written comments should be addressed to 7 Brenda Edwards-Jones at the Department of Energy. 8 Please refer to Docket No. EE-RM-97-900 when you 9 respond. 10 The comment periodwill close on December 11 11th, 1998. Instead of the usual ten copies of the 12 comments, the department prefers one signed copy and 13 an electronic copy of the comments or data using Word 14 Perfect 6.1 or Microsoft Excel. No faxed comments 15 will be accepted. 16 Please send ten copies of any additional 17 materials not included on the disk, like your back-up 18 materials. 19 Anypersonsubmitting informationwhichhe 20 or she believes to be confidential and exempt by law 21 from public disclosure should submit one complete 22 signed copy and a copy on a disk from which 

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1 information claimed to be confidential has been 2 deleted. 3 In accordance with the procedures 4 established at 10 CFR 1004.11, the Department of 5 Energy will make its own determination as to whether 6 the information shall be exempt from public 7 disclosure. 8 Again, we appreciate the time and effort 9 you have taken in preparing for thisworkshop and are 10 pleased to receive your comments and opinions. 11 I would like to reiterate the purpose of 12 the workshop is to listen to your views. 13 Thank you all, and I believe now that we 14 canbegin, andunfortunately,you'll have to listento 15 me -- oh, you have one thing, Doug? 16 MR. BROOKMAN: Can I say one more thing? 17 MR. LOGEE: Sure. Go ahead. 18 MR. BROOKMAN: About two or so, more than 19 two years ago whenwe startedprocess improvement, we 20 created ground rules for the conduct of these 21 workshops. Over time they have emerged as norms, and 22 I'm pleased to say that people have been willing and 

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1 graciously accepted these as standards for these 2 workshops. 3 That is, I would request that you speak 4 one at a time; that you sayyourname anduse themic. 5 This is a recorded session, and there will be 6 transcripts made of this meeting. 7 Please be concise. Try to share the air 8 time. Wewant asmuch discussion and asmuch exchange 9 as possible during the course of the meeting today. 10 This really is the occasion to listen as an ally. I 11 find that the discussion, the follow-on discussion, 12 hinges on clarity and the quality of the listening. 13 So please try hard to listen. 14 And I use a format that's a little more 15 complex than some. I queue people to speak, but also 16 I allow for follow-on comments because I'm trying to 17 create as muchdiscussion as possible. Sopleasebear 18 with me and be patient. If I've got you in the queue 19 and drop you out or leave you, don't let me get away 20 with it. Acknowledge that I've done it, and we'll 21 bring you back in. 22 So this is what we're suggesting as ways 

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1 that we can keep this as detailed and richan exchange 2 as possible today. 3 Questions before we proceed? Yes, Steve. 4 MR. ROSENSTOCK: Just real quick one. 5 Steve Rosenstock, EEI. 6 Mr. Logeeput areference number thatwhen 7 we sent in our comments, like a code number. Ididn't 8 write it down quick enough. It was EE, dash. 9 MR.LOGEE: Let me repeat that, and,Doug, 10 you can write that on the top of the easel there as 11 soon as I can find it. 12 EE-RM-97-900. 13 MR. ROSENSTOCK: Thank you. 14 MR. LOGEE: And those are due December 15 11th, this year. 16 MR. BROOKMAN: And before we do proceed 17 with this, you will help me a lot if you take your 18 table tents and turn them so that they're visible to 19 me. Thanks very much. 20 Is there any major substantive area, any 21 content area that would not find its place in the 22 agenda as written? 

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1 Ithinkthedepartmenthasdone everything 2 it could to anticipate what the issues were for this 3 workshop. So I'm seeing nothing. There's nothing 4 that doesn't fall into what's here? 5 Okay. Then let's proceed. 6 MR. LOGEE: Thank you, Doug. 7 We're missing one. Well, letme just see 8 if it's here. We'll start again. 9 The first slide that Ihave, and Ibelieve 10 that it's in your packet, is objectives. We want to 11 discussthe costdata, specificallymanufacturing cost 12 data, but we want to also call to your attention the 13 retail data as well. Weneed to give equal timehere. 14 We're going to be, as I said, presenting 15 a number of analysis methodologies. We're going to 16 leadyou through those, andwe expect andwelcome your 17 comments and suggestions on those. 18 Iwant to emphasize that we'representing 19 preliminary results fortheengineering and life cycle 20 cost analysis, and I'll get into some details about 21 particularlywhy they're preliminary at thispoint in 22 time. 

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1 The analyses, the eventual final analyses 2 and the revised results and the final results will be 3 used,of course, in aproposed rule, and above all, we 4 seek tounderstandyour comments. Sopleasebearwith 5 us. If we ask from perhaps two or three of the 6 contractors the same question in a slightly different 7 way, it is important that weunderstand your comments 8 as completely as possible. 9 Now we can go to the first slide on the 10 machine. 11 Thewater heater status. We received new 12 or amended GAMA data on October 20th. This data is 13 not reflected in the analyses that are on the Internet 14 or in thepacket of back-up material that wehave here 15 today. So that is one of the areas we will have to 16 revise for. 17 We're presenting preliminary results 18 today, and I saidweneed to stress that because there 19 are a numberof reasons for revisions. Another reason 20 is eventually in the springtime we expect to have 21 marginal energy rates for both gas and electric, and 22 we'll be incorporating those into our analyses. 

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1 Aswementioned, Idon'twant tobeat this 2 to death, but the comments are due by December 11th, 3 and we expect to revise these preliminary results to 4 additional preliminary results inperhaps a couple of 5 months. 6 I'mnot goingtomakea promise there, but 7 some time in January I would expect to have some 8 revised reports with these results on the Web. 9 Our schedule atpresent,we'regoing tobe 10 conducting manufacturers' interviews to get the 11 results of the manufacturing cash flow analysis for 12 the trial standard levels. We show here we'd like to 13 start those in February, and they'll run through 14 April, but I'd like to back up on that and say thatwe 15 may be able to start one or two of those in January. 16 We acknowledge that our schedule is very 17 aggressive and rather tight, andwe're trying tomove 18 it up as rapidly as we can. 19 The draft technical support document

-- 20 that's the TSD -- will be available in May of next 21 year, 1999, and a final technical support document 22 will be available in August. The draft document will 

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1 have the complete analyses in it. 2 At thispoint wehave results foronly the 3 engineeringand lifecycle costs anda draftdocument, 4 a draft TSD, will have the national energy savings, 5 the manufacturing impacts, and all of those other 6 things. 7 And eventually, finally, in November of 8 1999, we expect to public the notice of proposed 9 rulemaking. 10 Our analysis approach, GAMA and the 11 manufacturers requested that we do a design option 12 approach. So we evaluate specific design changes and 13 the estimated energyefficiency improvements fromthem 14 with this approach. So this is not a five, ten, 15 15 percent energy efficiency improvement approach in our 16 analyses. 17 The engineering analysis, just the 18 engineering analysis now, is based on the DOE test 19 procedure andaverage costs. Asyou're aware, some of 20 you anyway, the DOE test procedure is a 64.3 gallons 21 per day per household kind of test procedure with 77 22 degrees temperature rise. 

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1 Weuse that in theengineering analysis to 2 get a preliminary evaluation to get the energy 3 efficiency, since that is what the manufacturers 4 eventuallywill test to, and then to get apreliminary 5 estimate of paybacks. 6 When we get to the life cycle cost 7 analysis, we use a new methodology. There we can 8 account for data distributions, and we use 9 simulations, computer simulations and a couple of 10 other programs to determine the set point and the 11 amount of water use per day. 12 Are there any questions on any of these? 13 Okay. 14 MR. BROOKMAN: Steve Nadel. 15 MR. NADEL: Yes. A couple of questions 16 going back a few slides. 17 First, you mentioned that you have just 18 received some new data from GAMA, that you'll be 19 incorporating those later. 20 MR. LOGEE: That's correct. 21 MR. NADEL: Are those data going to be 22 presented here so others of us could also comment or 

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1 review and potentially comment on that data? 2 MR. LOGEE: We have some of the average 3 numbers in one of the slides that Ed Barbour will 4 present shortly. We don't have the data itself to 5 present, but it is in that slide in an average way. 6 MR.NADEL: Sowe can look at it later and 7 say either this looks sufficient or request that you 8 provide additionaldatawith GAMA'spermission. Okay. 9 MR. LOGEE: That's right. 10 MR. NADEL: Okay. 11 MR. LOGEE: That's our approach. We're 12 not trying to hide anything,but events have somewhat 13 overtaken us in trying to get all of the materials 14 together for this workshop. So we had to cut off our 15 analyses and so forth actually before we got that 16 revised data. 17 We havebeenback totalkwithGAMA,Frank 18 Stanonik, and we have alerted him to some of our 19 concernsabout it, and Ipresumehe's already begun to 20 talk with the manufacturers about that, but we will 21 get into that a little bit later. 22 MR. NADEL: Okay. My second question 

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1 regarding the schedule, I know we just had a meeting 2 last week of the Appliance Standards Advisory 3 Committee, and at that meeting it was discussed that 4 in general, there was a real lumping of the schedules 5 between a lot of different rulemakings and that in 6 some cases there seemed to be some extra time. 7 And there was a commitment made at that 8 time to revise the schedules and potentially 9 accelerate some of the schedules. Is this schedule 10 you're presenting now basically the same schedule as 11 presentedbefore, beforethat revisionandrevision is 12 taking place, or is this a quick revision on that? 13 Ididn't bring those documents withme to 14 compare them. 15 MR. BROOKMAN: I see Michael McCabe has 16 stepped to the mic. 17 MR.McCABE: This isMichael McCabe, DOE. 18 This is essentially the same schedule. 19 The review Steve is referring to to go over the 20 schedule to look at opportunities is underway, and it 21 has not been completed, therefore, is not reflected in 22 here. 

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1 MR. BROOKMAN: Joe Mattingly. 2 MR. MATTINGLY: Joe Mattingly of GAMA. 3 I think in the past when we were talking 4 about the new way of doing things that we had hoped 5 that the proposed rule would be a fairly clean 6 document, you know, sort of just fine tuning it for 7 that point with a public hearing. 8 But I would suggest that depending on how 9 things go in the draft TSD and the final TSD, if 10 there's still a lot of controversy, there might be 11 consideration for another, you know, call it a 12 workshop or whatever you want to call it, but before 13 we go to the real formal talkingheads mode, which can 14 be the case after a proposed rule. 15 MR. LOGEE: Now, that's an excellent 16 suggestion, Joe. You did notice that we had back 17 perhaps a year ago or six months or so -- were 18 considering an extra workshop after the manufacturing 19 impact analysis and before the proposed rule. 20 In the interest of trying to expedite our 21 schedules, we've cut that out. We don't mean to cut 22 out your involvement or your comments, however. We 

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1 will put these notices, these reports or the TSD, as 2 itwere, on theWeb, andwewill ask foryour comments 3 based on that. 4 And we will, as much as possible, try to 5 alert you either through GAMA and your other 6 organizations, alerting them that it's on theWeb and 7 where it can be found, and individually through the 8 mailing list probably by E-mail where that's 9 practical. 10 So, Joe, you're right. Ifwe get a lot of 11 comments and there's some sticky issues there, we'll 12 have to consider how we'll handle that. 13 MR. BROOKMAN: Additional questions? 14 (Noresponse.) 15 MR. BROOKMAN: Let's proceed, Terry. 16 MR. LOGEE: Okay. 17 MR. BROOKMAN: One more from Steve 18 Rosenstock. 19 MR. ROSENSTOCK: It's not really a 20 question. It's a comment. Steve Rosenstock. 21 It sounds like the speakers are kind of 22 coming in fuzzy a little bit. 

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1 MR. BROOKMAN: Are you picking this up on 2 the mic? Yes? 3 THE REPORTER: Yes. 4 MR. BROOKMAN: Go ahead, Steve. 5 MR. ROSENSTOCK: That was it. It just 6 sounded like whenpeople were makingpresentations in 7 themic, it just sounded a little fuzzyor "staticky." 8 MR. BROOKMAN: Thank you. 9 MR. LOGEE: All right. The next 10 presentation, and Ipromise I'll try to step down and 11 let someone else take the mic after this, is really 12 the introduction to the engineering analysis. You 13 have thatpackage or should have that package inyour 14 packet as well. 15 And I'd like to discuss just briefly the 16 design option screening requirements. We publish 17 those in a couple of places, and we published our 18 supplemental screening analysis last January. 19 There's a requirement to, of course, make 20 sure that they're technically feasible. We want to 21 make sure there are practical to manufacture and 22 service. We want to try to avoid adverse impacts on 

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1 product utility, and we also obviously avoid adverse 2 impacts on health and safety. 3 We are going to revisit all of these 4 screening issuesbefore theNOPR,before the notice of 5 proposedrulemaking, tomake sure that ourreasons are 6 fullydocumented. At thispoint in time Idon't know 7 just how we're going to provide that information to 8 you folks. It perhaps will be contained in the 9 revision of the engineering report, much like we've 10 added a screening section at this point in time. 11 We've selected these design options, and 12 I'm not going to try to read them, except to note that 13 with the increased jacket insulation, there are two 14 sizes, nominally a two inch thickness and a two and 15 a half inch thickness. 16 We did not go to a three inch thickness 17 for the obvious reasons. They get ratherbulky to get 18 through doorways. So we stayed at two and a half 19 inches. 20 And you'll note that the plastic tank on 21 the gas water heater is only used with the side arm 22 heater option. 

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1 We've eliminated some of the design 2 options that we thought we had previously stated in 3 the screening document we were going to consider. We 4 found out that the air atomized oil burner wasn't 5 practical tomanufacture yet. They're just beginning 6 to try to get a prototype together for regular oil 7 furnaces. They don't have them; they haven't even 8 thoughtabout using themon gas firedwaterheaters or 9 oil fired water heaters. 10 Power vented gas water heaters were 11 eliminated because they require special venting 12 systems, and the increased heat exchanger for gas 13 waterheaters wasreally considered tobemore costly, 14 and thepreferreddesignwas the improved fluebaffle, 15 andwe foundout that we could get the same efficiency 16 improvement with the improved flue baffle. So we've 17 gone to that single design option. 18 And heat pump water heaters, we have an 19 expanded discussion on the next page. We found some 20 more documentation in addition to the numerous 21 comments that we received from the 1994 notice of 22 proposedrulemakingoncost,noise, space, reliability 

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1 and electric rate increases. 2 There's a federal technology alert which 3 has shown that theses designs are only cost effective 4 in a few select regions. 5 Yes? 6 MR. BROOKMAN: Jerry, it seems like there 7 is a question on the preceding slide. 8 MR. LOGEE: Oh, good. You've got to stop 9 me. You've got to shout. 10 MR. STANONIK: Well, I was being polite 11 and waiting. It's still early. It's Monday. 12 MR. BROOKMAN: Frank Stanonik, GAMA. 13 MR. STANONIK: Terry, the increased 14 heating danger surface area, in the previous 15 screening, is that the submerged combustion chamber 16 option? 17 MR. LOGEE: I think that's one of them. 18 I don't remember. 19 Jim Lutz, do you recall what else that 20 might

-- 21 MR. LUTZ: The other thing that wewere -- 22 MR. BROOKMAN: Please use the mic, Jim. 

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MR. LUTZ: The other thing we were 2 considering was the internal bends on the flue like 3 the Boch water heater. 4 MR. STANONIK: Oh, okay. All right. So 5 it's really a combination of those two or not -- 6 MR.LUTZ: Anything you cando to increase 7 the recovery efficiencywas what -- any technologies 8 that we were aware of that we were looking at. 9 MR. STANONIK: Okay, all right. 10 MR. LUTZ: Whatwe saw was the flue baffle 11 seemed to do the job and seemed to do it most cost 12 effectively. 13 MR. LOGEE: Okay. Back toheat pumpwater 14 heaters. 15 MR. BROOKMAN: We have additional 16 questions. Please use the mic and say your name. 17 MR.GATLEY: StuGatley,FASCO Industries. 18 Just a comment on the eliminated power 19 venting for water heaters. You said they were 20 eliminatedbecause of specialventconsiderations, and 21 I assume you mean below like 83 percent where you're 22 pulling in dilution air, so everybody presently can 

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1 use PVC pipe. 2 Well, that wouldn'tbe arequirement. You 3 could still use the same venting if you didn't pull 4 dilution air in. Just a comment. 5 MR. BROOKMAN: Thank you. thank you for 6 that. 7 Okay, Terry. 8 MR. LOGEE: Let me respond to that a 9 little bit. We had made a determination among the 10 contractors and the department that that PVC piping 11 andventing, although itwas being used frequently in 12 new homes, was not necessarily applicable in all 13 situations in replacement use. 14 So that'sprettymuchwhat Irefer towhen 15 I say a special venting system. I mean, it is 16 different and unique, and it's not perhaps that 17 expensive and certainly works in many applications. 18 But to consider any of these designs for 19 a minimum standard, that means a broad national 20 application across the entire spectrum of consumers. 21 MR. BROOKMAN: One more comment. A 22 follow-on. 

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1 MR.GATLEY: Well,what Iwasreferringto 2 is in the replacement market, that you wouldn't have 3 to change your venting at all with water heaters now 4 if you didn't pull dilution air in. In other words, 5 you're still going to send that hot gas up the flue, 6 and it's still going to be the same temperature. 7 MR. LOGEE: Okay. That's useful, yes. 8 Thank you. 9 Let's see. Back to heat pump water 10 heaters, as I mentioned, there's a very small or 11 almost nonexistent sales and service infrastructure 12 since heat pump water heaters generally cross the 13 boundaries of several technician technologies, 14 requiring the HVAC type folks to connect them up in 15 some cases or at least to service them and plumbers, 16 the usual plumbers and electricians. 17 Andwe've been told inmanyways andmany 18 times that that infrastructure doesn't exist and to 19 try to gear up to develop an infrastructure for 20 roughly four million water heater sales, sales of 21 water heaters a yearwould be extremely difficult and 22 take a lot of time.

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1 Andwe have a couple of surveys from some 2 utilities where roughly 50 percent of the respondents 3 reported that their existing utility closet was too 4 small. 5 Yes, Jim. 6 MR. RANFONE: Yeah, Jim Ranfone, the 7 American Gas Association. 8 On the deletion of the heat pump water 9 heater design option, a couple of questions. First, 10 you stated that you will reviewing the screening out 11 of these design options. 12 MR. LOGEE: Yes. 13 MR.RANFONE: Andyou also saidwewant to 14 make sure that theyare fullydocumented as towhyyou 15 screened them out. 16 MR. LOGEE: That's correct. 17 MR. RANFONE: Are you indicating that 18 there maybe a possibility of making some adjustments 19 in these design options and including them? 20 MR. LOGEE: That is a possible outcome. 21 It's not one that we're anticipating. We believe we 22 have the fulldocumentationnecessaryto continuewith 

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1 the design options we've chosen, but we need to 2 assemble all of that and review that. 3 MR. RANFONE: Well, that's an important 4 question because, I mean, if you aren't sure that 5 you're fullydocumented, it appears thatyou are going 6 to be taking another look at these design options, 7 that you're not comfortable with the way you've 8 approachedit at thispoint because that's thewayyou 9 stated it. 10 I'm just trying to get a clarification. 11 MR. LOGEE: Iwouldn't characterize it as 12 not comfortable; justrealizing that wedidn'texplain 13 carefully enough in the current two documents on 14 screening that are out there, and we need to revisit 15 it and do that. 16 MR. RANFONE: Okay. The second question 17 is the federal technology alert that you say is cost 18 effective only in select regions, howdoes that differ 19 -- and, you know, I'm not familiar with that 20 particular document. Who developed it, and how does 21 that differ from the documentation that DOE used in 22 the original notice of proposed rulemaking from 1994 

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1 on heat pump water heaters? 2 MR.LOGEE: Well, thisdocument comes from 3 the Federal EnergyManagement Program, and I see Dave 4 Winiarskihasmore familiarity with that. So I'll let 5 him address that. 6 Go ahead, Dave. 7 MR. WINIARSKI: Jim, that document was 8 developed for a federalbuilding typically. It was a 9 review of existing use of heat pump water heaters in 10 federal buildings, as well as looking at cost 11 effectivenessbasedonmodels thatwere on themarket, 12 and the studywas done about three years ago. 13 MR. RANFONE: Okay. So that study is 14 available. 15 MR. WINIARSKI: Yeah. It's avery limited 16 study in that -- I see that there's a copy of it 17 right back there. Would you like one? 18 MR. RANFONE: Okay. Yeah, I'd like to 19 have a copy of it, but the point is that it is a 20 limited study, andwhat is the differencebetween that 21 and the technical analysis that was done and the 22 economic analysis that was done in 1994? 

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1 MR. LOGEE: We regard that the analysis 2 that was done in 1994 is not very accurate anymore, 3 and I don't know otherwise what the difference was. 4 I believe that this is probably based on actual site 5 data rather than estimated data. 6 MR. RANFONE: Okay. The last three 7 bullets thatyou have here, comments to the 1994 NOPR, 8 cost, noise, space, reliability, and electric rate 9 increases? 10 MR.LOGEE: That's right. That'swhat some 11 comments were. 12 MR. RANFONE: Okay. So -- 13 MR. LOGEE: They're afraid that their 14 electric rates would increase. I don't know how. 15 they didn't elaborate, but that's what the comment 16 was. 17 MR. RANFONE: So you accept these as the 18 reason, all three of these as reasons, for not 19 pursuing heat pump water heaters as a design option 20 then? 21 MR. LOGEE: These are part of our 22 rationale. 

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1 MR.RANFONE: Yeah,well, that'smypoint. 2 You're accepting these three bullets onno service and 3 sale -- sales and service infrastructure, anda survey 4 from some utility customers as rationale for not 5 including heat pump water heaters as a design option. 6 MR. LOGEE: Well, I think that that is 7 where we're at right now, and this is why we expect 8 and we know that we have to revisit this issue. 9 MR. RANFONE: Okay. So you are going to 10 revisit the issue. That is the point I wanted. 11 MR. LOGEE: That is correct. 12 MR. RANFONE: Thank you. 13 MR. LOGEE: If you notice, I just asked 14 Doug to make sure that we put that on our easel as an 15 issue and a topic that we need to address. 16 MR. RANFONE: Well, as you're aware, we 17 believe that it should be a design option,and wehave 18 provided comments to that effect. 19 MR. LOGEE: That's right. 20 MR. RANFONE: And we just want to make 21 sure when you go through the documentation that it 22 includes more than these four bullets. 

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1 MR. LOGEE: Right. We have receivedyour 2 comments, and we're well aware of them. 3 MR. BROOKMAN: Francine. 4 MS. PINTO: Francine Pinto. 5 What I wanted to say is that whenever 6 we're putting together a NOPR, we always look at all 7 of the

-- 8 MR. BROOKMAN: Francine, closer to the 9 mic. 10 MS. PINTO: Okay. Thank you. 11 Wheneverwe'reputtingtogetheraNOPR,we 12 always look at all of the aspects of what we've done, 13 but if and only if we consider that we have a problem 14 would we take action. So Terry's comments are not 15 meant to say that there is a problem at the current 16 time, but obviously the review process, when we go 17 toward conclusion, we always look at everything. 18 MR. RANFONE: Yeah, Jim Ranfone. 19 I just want to make sure that I am clear 20 that this design option can be reconsidered during 21 this time period. 22 MR. BROOKMAN: I saw Joe Mattingly and 

### NEALR.GROSS COURTREPORTERSAND TRANSCRIBERS 1323RHODEISLANDAVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com44 1 then Joel. 2 MR. MATTINGLY: Joe Mattingly from GAMA. 3 I just want to remind you that we 4 submitted extensive information in response to the 5 1994 proposed rule showing that the heat pump water 6 heater proposal was not viable, and we believe that 7 would have been supported in a court action if it had 8 come to that. 9 MR. BROOKMAN: Mark Krebs. 10 MR. KREBS: Go ahead and let the sitting 11 committee here answer first. I'll be happy to wait. 12 MR. BROOKMAN: Go ahead, Steve. Steve 13 Rosenstock. 14 MR. ROSENSTOCK: SteveRosenstock, Edison 15 Electric Institute. 16 I remember there was a workshop where a 17 lot of the design options were basically put on the 18 board, and I think there were like 25 or 30 of them, 19 and everyone got a chance to comment on them, and 20 there were a lot of design options that were at that 21 pointdiscussedandbasically to, say,eliminated from 22 further consideration, and basically from my 

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1 understanding, it's that you have these nine or ten 2 that are remaining to go forward in the process. 3 I thought as a result of one of the 4 previous workshops that basically this was the 5 discussion time and that these are the nine design 6 options that are left. 7 But to revisit, Imean, there are like 20 8 or 30 other design options that were left out. To 9 revisit themwould just delay the process a lot more. 10 MR. BROOKMAN: Mark, Mark Krebs. 11 MR. KREBS: Mark Krebs, Laclede Gas. 12 I'd like to comment briefly and ask some 13 questions on all the bullet points shown on this 14 slide. 15 MR. LOGEE: Mike, would you speak up? I 16 can't hearyou down here. Maybe I'll stand forward of 17 the microphone. 18 MR. KREBS: Can you hearme? 19 MR. LOGEE: Yes. That's better. 20 MR. KREBS: I'd like to comment on all the 21 bullet points on this slide and ask a couple of 22 questions as well. 

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1 First is a question on the first bullet 2 point. It says "cost effective only in select 3 regions." To the best of my knowledge, DOE has never 4 defined cost effectiveness. Does thatmean something 5 which would be reasonable to your average consumer, 6 like a three-year payback, ordoes that mean anything 7 that pays for itself within the lifetime of the 8 appliance, or exactly what is it? 9 And maybe this is a question for DOE's 10 legal counsel 11 MR. LOGEE: We'll review that in that 12 technology document, but I'm not going to respond to 13 that here. 14 MR. KREBS: Well, does anyone else here 15 apparently? 16 MR. LOGEE: I'm not going to give the 17 definition here either. 18 MR. KREBS: Well, can I get a legal 19 definition at some point in time? 20 MR. LOGEE: If that's necessary in the 21 document, what has to be presented at the screening, 22 yes, we'll include it in that. 

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1 MR. KREBS: Oh, after it's all said and 2 done. Thank you. 3 Okay. Movingonto the nextbulletpoint, 4 comments in the 1994 NOPR, cost, noise, space, 5 reliability, and electric rate increases. You know, 6 I can see how rebates for heat pump technologies no 7 matter what they are can cause electric rate 8 increases, but you know, was that what you meant by 9 thatparticularpart, electric rate increases? Doyou 10 know what they were referring to? 11 Okay. You'd rather not. 12 MR. LOGEE: I don't know precisely what 13 they related to. We have a comment summary, and that 14 was on the summary,and I'd like to -- Idon't want to 15 avoid these issues,but Iwant to get your comments on 16 them. 17 MR.KREBS: I'm tryingto givemycomments 18 on them. Weren't all of those comments, as I recall, 19 weren't they all from electric utilities? 20 MR. LOGEE: I believe those particular 21 comments were fromelectric utility customers. Okay? 22 Not all of the comments were from electric utilities. 

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1 MR. KREBS: Well, on that. Okay. On 2 space reliability and electric rate increases, those 3 were from customers? 4 MR. LOGEE: Ithinkmanyof them were, but 5 not all of them. I think the report addresses that as 6 well. 7 MR. KREBS: I see some people shaking 8 their heads. 9 MR. BROOKMAN: I don't know if we're 10 procedurally on target here. It seems like we're 11 revisiting stuff, and Terry's presentation was meant 12 to generally characterize and not get into the depth 13 and definition issues here. 14 MR. KREBS: Oh, okay. Letmemove on real 15 quickly then. 16 The third bullet point, no sales and 17 services infrastructure. Yeah, that might be true 18 when you're talking about plumbers, but there's 19 another group of technicians called HVAC technicians 20 who would probably love to take on that business. 21 There's no shortage of them. 22 And then finally, the last bullet point, 

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1 50 percent of some utility customers reported space 2 too small, Iassume that's ina retrofit situationand 3 not new construction. Fair enough? 4 MR. LOGEE: I believe that's true. 5 MR. KREBS: Thank you. 6 MR. BROOKMAN: Okay. Several people 7 wanted to comment. I saw Carl. I also saw Charlie, 8 and I saw perhaps David. 9 Carl. 10 MR. HILLER: Carl Hiller from EPRI. 11 In fairness to DOE, this is a very 12 shortened summary of the kinds of comments and 13 considerations. We should note that for the record. 14 There were many, many pages of written 15 comments submitted and many pages of oral comments 16 submitted. We shouldn't be hammering this to death. 17 Thereare literallyhundreds ofpages ofdocumentation 18 for this position. 19 MR. BROOKMAN: Which are available. 20 MR. HILLER: Which are available. 21 Charlie Stephens. 22 MR. STEPHENS: Yeah, Charlie Stephens. 

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1 I'll just be really quick. We are one of 2 theparties who commented in '94 extensivelyon all of 3 these, in part, because we probably have more 4 experience as a region with heat pump water heaters 5 than any other region of the country and have had for 6 a number of hears now. 7 And Ibelieve that theeliminationof this 8 is probably very consistent with the comments that 9 were received during the reinvention of this process 10 about eliminating or screening out design options as 11 early as possible and expending as much time and 12 trouble on them later when it's appropriate. 13 And from our perspective, it was 14 appropriate to screen this one out. 15 MR. BROOKMAN: Final comments before we 16 move on? Yes, George. 17 MR.KUSTERER: GeorgeKusterer,Boch Water 18 Heaters. 19 Having been involved in the 1994 NOPR 20 discussions, this is now 1998 going into 1999. 21 Nothing here has changed. There's still no sales or 22 service infrastructure as far as the manufacturers. 

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1 We're not talking about HVAC people, which are highly 2 competent. Unfortunately there are no sales 3 structures. There's no service infrastructure from 4 the manufacture of these products. 5 And as Steve Rosenstock said, hey, let's 6 get on with the program. 7 MR. WINIARSKI: The only comment that I 8 was going to make is for anyone who is interested in 9 that federal technology alert, make the request of 10 Terry and I'll see that there's a copy we'll send out 11 to folks, and if anyone has further questions on the 12 report, I can pretty much talk with them, you know, 13 in the next month or so. 14 MR. BROOKMAN: That was Dave Winiarski. 15 Okay. Let's proceed. 16 MR.LOGEE: All right. I'malready there. 17 Oops. I flipped mypages the wrong way. 18 We have, as I mentioned earlier, three 19 technological issues: new blowing agents, the 20 prevention of ignition of flammable vapors for gas 21 water heaters, and venting of high efficiency gas 22 water heaters. 

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1 Onthe new blowing agents, HCFC-141(b) is 2 being phased out by the Montreal protocol and EPA 3 requirements by 2003. Since our rule, assuming that 4 we stay on schedule, it would be effective some time 5 late in 2003. We realize we have to have an 6 alternative. 7 We've chosen HFC-245fa. We believe it's 8 a good alternative. The refrigerator industry is 9 contemplating using this. So we feel that there will 10 be adequate availability of this material. 11 It does show a three percent increase in 12 conductivity based on tests that Bayer and another 13 company hadmade, and it's more costly, $4 a pound, I 14 believe, as an estimate from Allied Signal, the 15 company provides it, rather than the dollar or pound 16 or so that HCFC-141(b) now costs. 17 We've tested the materials at NIST, all 18 three of these, includingwater,CO2 foams, andHunter 19 Fanningwillbe here tomorrow todiscuss those results 20 in detail. 21 Let me just say we tested them both as 22 flat sheets of insulation in a guarded hot plate, and 

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1 we also ran water heater tests with electric water 2 heaters foamed with these agents. We replicated the 3 tests on four different water heaters. 4 The results inapreliminary wayarevery 5 similar with the HFC-245 to HCFC-141(b). Those are 6 kind of tongue twisters. 7 Moving forward to preventing ignition of 8 flammable vapors, the Water Heater Consortium, CPSC, 9 the Consumer Product Safety Commission, and the gas 10 research industry is currently working on this 11 problem. This is something that has come up in the 12 last couple of years. 13 The Consumer Product SafetyCommission is 14 concerned about it and is either ready to put out a 15 rule on it or is certainly considering that. 16 The water heater manufacturers, to their 17 credit, have developed, put together this consortium 18 to address these issues, and there are two issues 19 there, both testmethod, which is being circulated for 20 comment now by ANSI, and the designs. 21 I saw a demonstration of a prototype 22 design last April. It was very effective, but there 

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1 are no exact costs. This was, I guess, a very early 2 prototype. It worked. It doesnot mean that itwould 3 be manufacturable, but the design itself worked. 4 It seems like this problem will be 5 technically possible to fix, but we don't have an 6 exact estimate of the cost. We talked with the 7 consortium andcameupwithan eyeball cost of $35 for 8 the baseline design, and we were informed that there 9 would be little or no impact or essentiallyno impact 10 on the efficiency. 11 As they proceedwith these designs and we 12 have more information, we will certainly incorporate 13 that into our analyses. We will try to make that

-- 14 get away from the estimate and more into the real 15 world with those numbers. 16 Yes, Carl. 17 MR. HILLER: Carl Hiller from EPRI. 18 I'd like to know how I can get more in 19 touchwith thisprocessandget the informationcoming 20 out of it. You know, I hearwords thatyou just said. 21 I hear bits and pieces, but you know, we're in the 22 business of developingnew water heating equipment at 

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1 EPRI or through EPRI, and I need to know what these 2 developing standards look like before they're 3 promulgated. 4 How do I get into this process? 5 MR. LOGEE: Darrel Hosteller, of course, 6 I believe is conducting theANSI comment process, and 7 he can provide that information. 8 The other part of the Water Heater 9 Consortium, Ibelieve that's a closed consortium, and 10 only the members are privy to what's happening there 11 and possibly the Consumer Product Safety Commission. 12 So I don't believe there's -- I don't think there's 13 any informationthat they'vemadepublic about that at 14 this point in time. 15 Darrel. 16 MR. HOSTELLER: Excuse me. Darrel 17 Hosteller, representing Southern California Gas 18 Company and the Z-2183 Committee. 19 Carl, I'm sure that you're aware thatyou 20 can contactMr.Al Callaghan, Secretary for the Z-2183 21 standards process and let him know that you're 22 interested in getting the review and comment text on 

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1 waterheaters and the schedule of meetings for the gas 2 water heater subcommittees, and you can attend, and 3 you'll have as much information as everyone else has, 4 other than the manufacturers. 5 MR. LOGEE: Thank you, Darrel. 6 Okay. Venting issues. When we went 7 around the country last fall and talked with 8 manufacturers, we soon learned that there were some 9 concerns with venting systems, particularly 10 replacement situations where there are masonry 11 chimneys or older vent systems or the situation that 12 occurs when someone has replaced an older gas furnace 13 with a newer gas furnace and caused the water heater 14 to be orphaned, to be left alone venting into the 15 existing vent system. 16 And we had PN&L do some research on this 17 looking into what already had been done by in this 18 case the GasResearch Institute anddetermined that if 19 the flue loss efficiency is greater than 83 percent, 20 there is a safety concern on replacement systems if 21 they're not relined or in some other way adequately 22 protected. 

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* 1 We also discovered there's no 2 technological barrier to high efficiency water 3 heaters, but our design options are less than 78 and 4 a half percent recovery efficiency, and we believe 5 that this gives an adequatemargin, somewhat belowthe 6 83 percent flue loss efficiency to reduce the safety 7 concerns there. 8 However, to be on the safe side and to be 9 conservative,we've includedthe cost of a Type Bvent 10 connector in those replacement installations. 11 Yes, sir. 12 MR. BROOKMAN: State your name, please. 13 MR.GATLEY: StuGatley,FASCO Industries. 14 We manufacture draft inducers. So we do 15 have a vested interest here, and I just wanted to ask 16 one question. You hadmentioned that venting of high 17 efficiency water heaters. What do you consider high 18 efficiency, 80 percent? 19 MR. LOGEE: Idon't have an exact comment 20 on that. I suspect that that's probably a good ball 21 park number. 22 MR. GATLEY: Yes. Well, when it comes to 

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1 venting, the way I see it, there's basically three 2 thingsyou cando. One,which is themost costlyway, 3 is the present methods that all of these water heater 4 manufacturers are using today. When you pull in 5 dilution air, for example, if you need 20 CFM for 6 combustion, you're going to need two more times that 7 air flow. So you need 60 CFM now out of a blower to 8 provide combustion and to cool those gas temperatures 9 down. 10 So in order to make a long story short 11 here, you could replace everything you have out there 12 with a draft inducer below 83 percent efficiency 13 without changing the venting at all on an existing 14 water heater. 15 The second statement is that the reason 16 why PVCpipe is desired now, that works real good for 17 new installations and things because you can also 18 horizontal that with PVCpipe, whichyou can't dowith 19 the sheetmetal pipe, including B vent. 20 The third thing is are we not by 21 eliminatingdraft inducers eliminating thefutureneed 22 for, say, a 90 percent efficient water heaterbecause 

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### 1 a 90 percent efficient water heater is actually less 2 costly for the draft inducer people to manufacture 3 than is the present way today. 4 So Iwonder if that's being considered in 5 the cost. 6 Thank you. 7 MR. LOGEE: At this point we're not 8 considering those water heaters with efficiencies 9 greater than the 78 and a half percent recovery 10 efficiency we've stated here for safety concerns. I 11 wouldbe interested,however, Steve, in information or 12 data that you could provide to the department, you 13 know, that would help to substantiate some of your 14 comments. 15 MR. GATLEY: Okay. 16 MR. LOGEE: We certainly would like to 17 review that and consider it. 18 Iwould like to also note that because we 19 have eliminatedcertaindesignoptions in ouranalysis 20 doesn't mean that they won't be on the market. They 21 just won't be considered for a minimum standard in 22 this rulemaking. 

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1 You know, anything that the market can 2 support above and beyond the minimum efficiency will 3 certainly still be there. 4 MR. GATLEY: Okay. Thank you. 5 MR. BROOKMAN: Additional -- Steve Nadel. 6 Go ahead. Carl Hiller. 7 MR. HILLER: Carl Hiller, EPRI. 8 Just wanted to ask a couple of clarifying 9 questionshere. QuestionNo. 1, does the 78.5percent 10 recovery efficiency, 83 percent flue loss 11 efficiency -- are those meant to be equivalent 12 statements? Doyoumean bothof those simultaneously? 13 In other words, you're saying that the 14 difference between flue loss efficiency and recovery 15 efficiency is the difference in those two numbers? 16 MR. LOGEE: No, not exactly. Right now 17 the GRI venting report uses about a three percent 18 efficiency. It's somewhat of a rule of thumb, and so 19 what Imeant here is that, to be on the safe side, we 20 don't know. GRI has done a substantial amount of 21 research on this, but we don't know for sure. 22 We had ameeting with them some time last 

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1 summer, late last summer, and they had found some new 2 information that they claimed would show an increase 3 of up to perhaps six percent difference between flue 4 loss and recovery efficiency. 5 However, when we asked them for 6 substantiation, they couldnot provide it or theydid 7 not provide it, at any rate. That's still on the 8 books. We're still open to that. 9 There were very few -- it's a small study 10 with that extra substantiation of the six percent 11 difference, maybe six to eight or nine units. So 12 we're going with the published report that we have 13 fromGRI on this venting efficiencydiscussionat this 14 point in time and the algorithm that they include in 15 the tank water heater simulation model. 16 MR.HILLER: Okay. Thenextquestion then 17 is exactly what do you mean by flue loss efficiency. 18 For example, is that the same as saying the input 19 efficiency fromgas that actuallygets into thewater? 20 MR.LOGEE: I'mgoing to either letDarrel 21 respond to that or one of my contractor folks because 22 I don't want to get tied up in knots on that issue. 

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1 MR. PAUL: Darrel Paul, Battelle. 2 We conductedalot ofinitial research for 3 GRI concerning venting of gas water heaters, and 4 through our work, we base things on flue loss 5 efficiency, which is the efficiency of the water 6 heaterbased on the amount of heat that actually gets 7 into the flue. 8 And so ifyou lookat recovery efficiency 9 and flue loss efficiency, they vary depending on the 10 water heater design. Some water heaters which have a 11 lot of insulation,very few heat losses, the flue loss 12 efficiency andrecoveryefficiencywillbeveryclose. 13 Others, theyvary, canvaryquite a bit, and we found 14 variations that ranged from around two percent on the 15 low side to upwards of six percent on the high side. 16 All of the venting tables in the national 17 fuel gas code are based on flue loss efficiencies 18 because that's actuallywhat goes into the vent. That 19 essentially determines the amount of heat or energy 20 that you have to provide buoyancy for natural draft 21 systems. And, therefore, when we generate venting 22 tables, we base it on flue loss efficiencies. 

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1 The current tables in the national fuel 2 gas code for gas appliances' natural draft are based 3 on roughly a 78 percent flue loss efficiency, and so 4 if the efficiency of gas water heaters increases 5 substantially above that, someoneneeds to gobackand 6 look at those venting tables and potentially revise 7 them accordingly. 8 MR. BROOKMAN: Darrel, are you able to 9 provide the specifics of this information to Carl and 10 others that wish to have it? 11 MR. PAUL: Yeah, absolutely. I've got 12 Carl's information back in the office. I can have 13 it

-- 14 MR.BROOKMAN: Okay. So those ofyou that 15 have other specific questions like this can get to 16 Darrel or somebody else designated. 17 Steve Nadel. 18 MR.NADEL: Was Carl finished, first? He 19 had several question. 20 MR. HILLER: Just one more. What I was 21 tryingto get at is, forexample, recovery efficiency, 22 theway I'mused to thinking of it, would be the heat 

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1 input efficiency minus losses during the recovery 2 test. Inotherwords, heat loss off the tank wouldbe 3 the difference as I think about it. 4 I'm trying to make sure that I'm not 5 missing some other loss mechanism here. 6 MR. BROOKMAN: George, do you wish to 7 follow on, or maybe someone could respond to this? 8 MR. KUSTERER: George Kusterer with Boch 9 Water Heaters. 10 Flue loss efficiency is somewhat of an 11 oxymoron. Imean, how can you have a loss and still 12 be efficient? 13 I think what they're trying to say is 14 that's combustion efficiency, and again, the 15 combustion efficiency of the equipment deducted from 16 100. 17 MR. BROOKMAN: George, areyou suggesting 18 that Carl's sense of the definition is consistent with 19 what's being said here? 20 MR. KUSTERER: Yeah, but it's kind of 21 misleading because we're talking about flue loss 22 efficiencies. There's no efficiencywith flue loss, 

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1 and again, that would be noted as combustion 2 efficiency. Theymight want to change that, although 3 I could be wrong. 4 MR. BROOKMAN: Okay. 5 MR. LOGEE: Let me just make a note here 6 that flue loss efficiency is what GRI and Darrel 7 Paul's group referred to in their reports, and DOE 8 refers and uses in their analysis and in the test 9 procedure -- uses recovery efficiency, and there are 10 slight differences pretty much as Carl Hiller just 11 pointed out. 12 Therecoveryefficiencygenerallyincludes 13 those heat losses that go up the chimney or up the 14 flue and the heat losses from fittings and the jacket 15 and so forth and the convection into the water pipes. 16 MR. BROOKMAN: Steve Nadel. 17 MR. NADEL: Okay. Steve Nadel, ACEEE. 18 I'malso tryingtounderstandsomethings. 19 You have a lot of information you've condensed into a 20 few simple bullets. 21 MR. BROOKMAN: And I think these 22 definitional issues are important, and just keepgoing 

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1 with it and get on to the other specifics. 2 MR. NADEL: Okay. First, I must be 3 missing something. What I hear you saying is that 4 you're trying to have a flue loss efficiency of less 5 than 83 percent. I understand there's not an exact 6 mathematical correlation, but you said the most 7 commonly used rule of thumb that you tried to use is 8 to subtract three percent. 9 So ifyouhave 83 percentminus three, how 10 do you get 78.5? What am I missing? 11 MR. HILLER: That's exactly what I was 12 getting at. 13 MR. LOGEE: What you're missing is that 14 anything less than 83 percent does not require a 15 relining of the venting system, and correctme if I'm 16 wrong, Dave or Jim Lutz, Ed Barbour, and our design 17 options thatwe'recurrently assessingonlygoas high 18 as 78.5 percent recovery efficiency. 19 I wasn't trying to imply that this was 20 necessarily a five and a half or four and a half 21 percent difference or rule of thumb. What the GRI 22 reports come up with is an average of three percent, 

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1 but as you heardDarrel Paul say, that depends on the 2 type of design. 3 MR. NADEL: Okay. If I understood 4 correctly,you're sayingthe 83percent is not exactly 5 related to the 78.5 percent. Where does the 78.5 6 percent come from? Did DOE pick it out of the air? 7 Did it come from

-- 8 MR. LOGEE: No, that came from our -- 9 we'll get into that eventually in more detail, but 10 that came from the design simulations that we ran 11 using the tank water heater simulation model. 12 MR. BROOKMAN: So while they're included 13 in the samephrase or frame here on this bullet, there 14 is no explicit linkage

-- 15 MR. LOGEE: That is correct. 16 MR. BROOKMAN: -- between these two. 17 MR. NADEL: So you are saying -- I mean, 18 it sounds like we'll get to it later -- but you were 19 saying that the 78.5 percent came from some tank runs 20 and once you get beyond 78.5 percent you ran into 21 certain problems and we'll discuss that later? 22 MR. LOGEE: We chose design options that 

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^*^ 1 in this instance we had screened out other design 2 options, and the ones that we endedupwith didnot go 3 beyond 78.5 percent. 4 MR. NADEL: I think we're talking past 5 each other a littlebit. The key question I'm asking 6 is how didwe come up with 78.5 because I can suggest 7 there are -- 8 MR. LOGEE: Well, let me -- 9 MR.NADEL: -- design options at 79, 79.5, 10 et cetera. 11 MR. LOGEE: Let me -- that's not the 12 important issue at this point in time. I would like 13 to let Jim Lutz address that a little later in the 14 engineering analysis. 15 MR. NADEL: So we will come back? 16 MR.LOGEE: We will get to that. We don't 17 mean to leave that out. 18 MR. BROOKMAN: Let's make a note. 19 MR. LOGEE: Right nowwe're talking about 20 venting, and I think we've clarified that there's no 21 connection between the two numbers, two percentage 22 numbers that Iused on the slide. I'm sorry Iput the 

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1 83 percent there. I thought it was going to clarify 2 things. 3 MR. NADEL: Okay. One other clarifying 4 question. On your last bullet you said "include the 5 cost of Type B vent connectors and replacement 6 installations." Is that included in all replacement 7 installations or is there some criteria based on flue 8 loss efficiency or recovery efficiency where you 9 included it in some and not others? 10 MR. LOGEE: No, we went through and 11 applied it. We actually used an average cost, but we 12 took the 53 percent or so of houses that presently 13 don't have any kindof newventing system, and weused 14 that essentially to -- we averaged it over the whole 15 group of houses, but it's 53 percent that don't have 16 or that have the old fashioned venting system. 17 MR. NADEL: But that applies both to the 18 base case as well as the various different design 19 options, if I understood correctly. 20 MR. LOGEE: It applies to just the design 21 options. 22 MR. NADEL: So any design option, no 

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1 matter -- so the

-- 2 MR. LOGEE: Well, it applies to certain 3 design options that have these higher efficiency

-- 4 higher recovery efficiencies. 5 MR. NADEL: Are we going to get into that 6 later, too? 7 MR. LOGEE: Yes, we will. 8 MR. NADEL: Okay. 9 MR. BROOKMAN: Ithinkwe are getting into 10 specifics that we will cover later. 11 Carl. 12 MR. HILLER: Carl Hiller, EPRI. 13 I'd like to summarizewhat Ithink Iheard 14 Terry say so that we're all clear. 15 MR. BROOKMAN: Un-huh. 16 MR. HILLER: He didn't do anything with 17 flue loss efficiency. The limitation is purely on 18 recovery efficiency; is that correct? 19 MR. LOGEE: That's correct. 20 MR.BROOKMAN: Thanks forclarifyingthat. 21 Okay. 22 MR. LOGEE: Okay. We can move on now to 

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1 Ed Barbour. 2 MR. BROOKMAN: By the way, these are all 3 in your packets, all of these slides. 4 MR. BARBOUR: Hi. My name is Ed Barbour. 5 I'm with Arthur D. Little. 6 Haseverybody found this intheback, left 7 side? 8 PARTICIPANT: Oh,you're starting fromthe 9 back? Oh, man. 10 MR. BARBOUR: Not onlydid we try to hide 11 it. We also tried to hide it up here, too, so that B* 

### ~ 12 way you can't really tell. 13 I'mgoing toprovidea little bit of lead14 in into the engineering analysis that will be 15 presentedby LB&L and sort of a tie-in to Terry. What 16 I want to talk about today is -- we have Bill's built 17 in. Hold on -- talk a little bit about how we 18 received data from GAMA. I want to talk about the 19 data collection methodology. Then we'll talk about 20 how we used those manufacturing cost submittals to 21 come up with a distribution; how we handled the 22 uncertainty and variability; and then I'm going to 

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1 present both the previous GAMA data, as well as the 2 latest, which I believe addresses Steve Nadel's 3 question. I'm going to present the point averages of 4 both data submittals. 5 The department approached GAMA toprovide 6 data or approached the manufacturers to provide data 7 for three different models for different fuel types. 8 We askeddata on 50 gallon electricwithanEF of .86; 9 40 gall gas withan EF of .54; and 32 gallon oil with 10 an EF of .53. 11 Besides that, we provided very detailed 12 engineering definitions of what those units were to 13 represent to each of the manufacturers in the data 14 request. 15 In turn, the manufacturers then provided 16 the cost databack to GAMA,who then compiled the data 17 for DOE. 18 Thedatawaspresentedor submittedbythe 19 manufacturers as a range of costs associated witheach 20 designoption thatwe've alreadydiscussedpreviously, 21 and what we did then is we developed a spread sheet 22 that aggregates the manufacturers' costs at each 

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1 design option using ranges that the manufacturers 2 provided themselves, and the ranges were 3 representativewith triangulardistributionsthat show 4 a minimum, a most likely, and a maximum cost. 5 In the data request, the department asked 6 for thosecosts associatedwith fullproduction costs. 7 Essentiallywe're lookingat thispart of the business 8 unit, and so we basically asked for direct labor, 9 direct material, and overhead, and by overhead we 10 meant indirect labor, indirectmaterial, maintenance, 11 depreciation, taxes, and insurance to related assets. 12 Additionally, we also asked for capital 13 cost conversions fordifferent design options, aswell 14 as product design costs. 15 Okay. After the manufacturers submitted 16 their data to GAMA, this is basically what you would 17 have before we run the spreadsheet. Essentially this 18 is 401 design option. Manufacturer A, B, and C would 19 provide costs, and these represent the minimum, the 20 most likely, and the maximum, and as you can see, 21 there's a certain amount of variability we would 22 expect. 

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1 Any questions? Please feel free to stop 2 me as I go through if there are any questions. 3 MR. BROOKMAN: We'll get into the depthof 4 it here. So if you do have questions, let me know. 5 MR. BARBOUR: The samples were meant to 6 characterize both uncertainty and variability 7 associated with the manufacturing costs. 8 Webasically used the spreadsheet todraw 9 out from each one of the manufacturers individual 10 distributions to create an industry distribution for 11 each design option. The results were reported as 12 distributions when we received them from GAMA. They 13 were reported by percentile levels, zero to ten 14 percent, 20 percent, 30 percent, and they also 15 reported a simple average of the most likely costs as 16 a point value of incremental cost. 17 To give you an idea how the spreadsheet 18 produces adistribution,this shows twomanufacturers' 19 data, and this assumes that they both have equal 20 market shares. And what we would do is then sample. 21 The spreadsheet would then sample from each 22 manufacturer to create sort of a combined 

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1 distribution,andthis iswhat'spresentedorgivento 2 DOE. 3 The distribution herewill beused in the 4 life cycle cost analysis. For the engineering 5 analysis, we use point values, which I'm actually 6 going to present in just one second. 7 Here's theactualdata, and this, Ithink, 8 addresses Steve Nadel's questionpreviously. What I 9 have up here is the material, labor, overhead, 10 transportation,capital cost, andproduct design cost 11 as reported by the manufacturers to GAMA. 12 The data in parentheses are the latest 13 update from GAMA that was submitted on October 21st 14 1998. The other data is what you're going to see in 15 almost all of the analyses presented today, and that 16 was what was used in both the engineering and life 17 cycle cost. 18 GAMA provided data on a baseline unit, 19 that unitcurrently manufactured, the heat trapdesign 20 option, and increased insulation for the electric 21 water heaters. 22 Similarlyforgas firedwater heaters they 

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1 provided data for the baseline, heat traps, increased 2 insulation, improved flue baffle, improved combustion 3 chamber, and flue damper and IID, and again, the data 4 in the parentheses is the latest update submitted by 5 GAMA on October 21st. 6 MR. BROOKMAN: I'm going to give you just 7 a second to look at this data. Ed's going pretty 8 fast. So if you want him to back up, let me know. 9 Charlie. 10 MR. STEPHENS: Charlie Stephens. 11 One quick question, Ed. Improved 12 combustion chamber, your slide here is the onlyplace 13 I've seen that. Can you explain? 14 MR. BARBOUR: Right. It actually was 15 eliminated, but it just so happened when we did the 16 data submittal back in the fall of last year, it was 17 still on the list, and we actually got data for it. 18 So I thought I'd present that. 19 MR. BROOKMAN: Yes. 20 MR. GATLEY: Stu Gatley, FASCO. 21 Is the improved combustion chamber -- is 22 that draft inducer? What's your definition on that? 

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1 MR. BARBOUR: I honestly don't remember 2 what the definition is it's been so long since I've 3 looked at it. 4 MR. BROOKMAN: I've heardyou say that is 5 an option that's been eliminated? 6 MR. GATLEY: Yes. 7 MR. BROOKMAN: Okay. You just want the 8 definition? 9 MR. GATLEY: Right. 10 MR.BROOKMAN: Can someoneprovidethat to 11 Stu? Who has that information? 12 Frank? Or maybe we could take this 13 discussion off line. 14 MR. STANONIK: Quickly, Frank Stanonik 15 with GAMA. 16 It was basically from my response, was a 17 combination of submerged combustion chamber, whichwe 18 would argue is, in fact, a dying technology, and just 19 other ways to, in fact, increase the surface area of 20 the combustion chamber. It's got nothing to do with 21 draft inducers or anything else. 22 MR. GATLEY: Okay. 

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1 MR. BROOKMAN: Glenn Schleede. 2 MR. SCHLEEDE: Glenn Schleede, consumer, 3 taxpayer. 4 In one previously workshop, and I'm not 5 sure which one it was, some time back, a person 6 describing these estimates like this, but for other 7 products, indicated that what manufacturers were 8 providingwere purelyguesses, not -- theywere based 9 on theoretical designs, not anything that they 10 happened to be working on. 11 Could I ask in connection with these 12 estimates: are these estimates basedon designs that 13 themanufacturers are actually working on or are they 14 designs that are handed to an engineer and said, "If 15 we were to do something like this, here's what it 16 might cost"? 17 I'm looking for some indication of how 18 good these estimates are that are being provided by 19 GAMA here. 20 MR. BARBOUR: Whatweprovided them in the 21 datasubmittalwasbasicallyvery detailed engineering 22 for their baseline unit. Now, in that case, I mean, 

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1 Frank may be better off to answer it because he 2 actually got to see the data and talk to the 3 manufacturers about this, but we provided design 4 option descriptions, but not detailed sort of cut 5 sheets or engineering specifications toprovide data. 6 MR. BROOKMAN: Frank, do you would to 7 comment? 8 Frank Stanonik. 9 MR. STANONIK: Frank Stanonik with GAMA. 10 Do you give me the choice? 11 (Laughter.) 12 MR. BROOKMAN: Will you please comment? 13 MR. STANONIK: Well, first of all, it's 14 the best data available, but in fact, certainly could 15 go through the first three on the list: heat traps, 16 increased insulation, improved flue baffles. Those 17 features are included inwhat might be categorized as 18 the better or best water heaters out there. 19 Improved combustion chamber, as I 20 mentioned, really is reflective of what the industry 21 learned at least from some companies who dabbled with 22 the submerged combustion chamber. 

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1 And the flue dampers and IID, while right 2 now I guess there are probably a handful of 3 residentialmodels that have IIDson them,fluedamper 4 information could probably be obtained from the fact 5 that manufacturers do build commercial models with 6 flue dampers. So they do have some knowledge, but I 7 don't think there's a residential product out there 8 that hand that feature. 9 MR. BROOKMAN: Does that answer your 10 question, Glenn? 11 MR. SCHLEEDE: Maybe. 12 MR. BROOKMAN: Okay. George, you had a 13 comment as well. 14 MR. KUSTERER: I'm a little confused, and 15 maybe there's a misprint. This IID, can you explain 16 that a little bit further for some people whomaynot 17 know what it is? 18 MR. BARBOUR: It's intermittent ignition 19 device. 20 MR. KUSTERER: Thank you. 21 MR. BROOKMAN: Okay. Thank you. 22 Okay. Other comments on this slidebefore 

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1 we move on? 2 (Noresponse.) 3 MR.BARBOUR: And the final slide, for the 4 remaining design options -- and Jim Lutz is going to 5 talk a little bit about this -- in the engineering 6 analysis we went to industry consultants in order to 7 provide data for oil fired designs; HFC-245 8 insulation, which Terry has talked about a little 9 earlier; the plastic tank design option, as well as 10 the side arm heater design option. 11 And at this point I'd like to wrap up. 12 Any other questions concerning this? If not, I'm 13 going to hand it over to Jim Lutz. 14 MR. BROOKMAN: I saw Steve Nadel. I saw 15 Tim Shellenberger first. 16 MR. SHELLENBERGER: Ed, just a quick 17 question. 18 MR. BARBOUR: Sure. 19 MR. SHELLENBERGER: On transportation 20 costs, how didyou arrive at those? Did you use some 21 cubing software or -- 22 MR. BARBOUR: We asked the manufacturers 

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1 to provide transportation software. 2 A littlebit of background. Whenwe went 3 out and visited all of themanufacturers last fall to 4 talk about that, one of the issues that came up was 5 thedifference intransportation costsassociatedwith 6 different designoptions, and soone of their requests 7 was to add in transportation cost. 8 So that was actually put on the data 9 submittal after we had actually given it to them. 10 MR. SHELLENBERGER: Well, I agree it's 11 important. One of the things that Inoted in theheat 12 trap, transportation cost is identical to the 13 baseline, and depending on what heat trap you pick, 14 the carton could get taller. 15 And so is the cartoncost includedandhas 16 the transportation been considered appropriately? 17 MR. BARBOUR: I honestly don't -- one of 18 the advantages of this was that it maintained 19 proprietary information for the manufacturers. So 20 nobody in the department actually saw the raw data 21 that's submitted to GAMA. So what we got are the 22 outputs. 

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1 So I really can't answer that question. 2 MR. BROOKMAN: Frank, are you in a 3 position to respond to that question? 4 MR.STANONIK: Ididn'thear the lastpart 5 of the question. 6 MR. BROOKMAN: Use the mic, Tim. 7 MR. SHELLENBERGER: Depending on the heat 8 trap design that's chosen, the carton could get 9 taller, and I was wondering if the material costs 10 reflect that and if the transportation costs reflect 11 that. 12 The transportation costs are identical. 13 So I don't think that it has. 14 MR. STANONIK: I can tell you -- well, I 15 mean, Tim, to the extent I could I tried to identify, 16 you know,what the transportation costs -- what was to 17 go inthat column, and the responses that we gotback, 18 I guess, would indicate that the assumption was that 19 most of the heat traps will not -- well, two things. 20 Most of the heat traps will not add to the height of 21 the water heater, and I guess the other thought is 22 that theway things are right now,you canalways just 

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1 throw the heat traps in the box so that that would be 2 the otherway to avoid that extra one inch or two that 3 all of a sudden screws up your shipments. 4 MR. BROOKMAN: Ibelieve I also saw Steve 5 Nadel. 6 MR. NADEL: Yes, two things. One, going 7 back to the sheet with the gas fired water heater 8 option, I'll ask you the question, Ed, but it may be 9 a question for Frank. 10 I noticed in the

-- 11 MR. BROOKMAN: Referring to the large 12 matrix on page 9. 13 MR. NADEL: Right. I noticed in going 14 through the stuff that was posted on the Web that 15 there are two different improved flue baffle measures 16 used, one that just results in a verymodest increase 17 in our recovery efficiency, another a much more 18 substantial increase in recovery efficiency combined 19 with induced draft, but they were both at different 20 points called improved flue baffle. 21 Myquestionherewherewehave these costs 22 for improved flue baffle: is that clearlyonemeasure 

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1 or the other measure or maybe do the two measures 2 somewhat get confused and mixed? 3 The reason I ask it is that the capital 4 costs and prior design costs seem quite substantial 5 and imply maybe that those might have been the more 6 efficient, the muchmore efficient induced draft unit 7 rather than just a simple piece of metal in the flue. 8 MR. BROOKMAN: Frank Stanonik. 9 MR. STANONIK: Frank Stanonik with GAMA. 10 Steve, it is the basic -- let's say it's 11 themore convoluted fluebaffle. So it is the simple, 12 as you describe it, a simple sheetmetal in altering 13 it. 14 MR.NADEL: Yeah. 15 MR. STANONIK: But I think what some of 16 those capital product design costs reflect is that, 17 you know, the current one is if you can envision kind 18 of a flexible piece of metal and you just twist it so 19 that it looks like a helix. 20 MR. NADEL: Yeah. 21 MR. STANONIK: Butwhenyou start getting 22 into, in fact, doing a little more so that you have 

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1 little tabs and stuff like that, in fact, thatbecomes 2 a -- well, it seems like a minor change, but it 3 becomes a little more difficult because one of the 4 concerns would be in terms of where you place those 5 tabs and where they are. You, in fact, maybe asking 6 for some combustion problems, i.e., a little more CO 7 production than you would want to have or would be 8 allowed to have. 9 Those kind of things creep in there, and 10 I suspect some of it is, in fact, the issue of 11 realizing -- well, I will be careful with this one 12 because I'm not sure about this one. We're dealing 13 with a baseline product, but in terms of manufacture, 14 if you're looking at improved flue baffles, he has 15 baseline. Then he has short and, you know, in16 betweens and stuff in different volumes, and some of 17 that just may be the fact of -- may increase some -- 18 what would be the right word here? I don't want to 19 say variability in his production, but may increase 20 what he has to handle. 21 I mean, again, think of the long ribbon 22 one you just twist. Okay. Well, if you've got a 

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1 short model, maybe you twist a little more, but you 2 can cut it off. It's fairly straightforward. 3 But if you essentially have a strategic 4 placement of tabs and fins and stuff, all right, and 5 you'vedesigned it around a certain length andnowyou 6 have to look at other things, it's just not aquestion 7 of, well, I just take what used to be -- I don't know 8 -- 30 inches long and cut it off and make it 26. It 9 doesn't quite fit that way. 10 It becomes a little more -- I don't know 11 how to put it -- it becomes a little more of a 12 science. It becomes a little more of a fine science 13 to come up with that flue baffle that you can still 14 make fairly easily, that still getsyouwhereyouwant 15 to go. 16 MR. NADEL: We can talk maybe off the 17 record a little bit more. 18 MR. STANONIK: Okay. 19 MR. BROOKMAN: Did you have another 20 question, Steve? 21 MR. NADEL: Yeah. The other question is 22 yourearliermaterial talkedabout thepercentage,the 

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1 distribution as various percentiles. Is that 2 information available that wouldbe useful to help in 3 reviewing this latest set of information? 4 MR. BARBOUR: Yeah, that information is 5 available. 6 MR.NADEL: Is that on the Web page or is 7 that something you send us? How do we get it? 8 MR. BARBOUR: Terry Logee. Microphone. 9 MR. LOGEE: It just gotposted to the Web 10 page. 11 MR. NADEL: Okay. 12 MR.LOGEE: It's ina spreadsheet. Ifyou 13 go and look at the spreadsheet that's now on the Web 14 page, it's in -- yeah, there'sone for gas and there's 15 one for electric, and those distributions are in both 16 of them. 17 MR. NADEL: Okay. If sometime in this 18 workshop -- there's lots of stuff on the Web page -- 19 if you can give us the names of thoseparticular files 20 at somepoint in thenext two days, I'd appreciate it. 21 MR.LOGEE: Icanprobablydo that foryou 22 tomorrow,possibly over lunch, but tomorrow for sure. 

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^&~1 

### ~MR. NADEL: Okay. Thanks. 2 MR. LOGEE: Just a note here. Those Web 3 pages are going to be -- there will be revisions and 4 changes on those Web pages fairly frequently, and so 5 you'll have to bear with the department. We will try 6 to keep them current and updated, and we'll try to 7 indicate, you know, what the most current one is. 8 We'll normallypull the old one off, but 9 I'm not sure that we're fully -- we haven't been able 10 to keep up with the number of changes that have 11 occurred in the last couple of weeks. 12 MR. BROOKMAN: Additional questions? In 13 a little bit we're going to try and go to break here. 14 Mark Krebs. 15 MR. KREBS: Mark Krebs, Laclede Gas. 16 A request for DOE. I would assume most 17 everybody here has an E-mail address. It would be 18 very simple to make an E-mail group and sent out a 19 notificationwhen something is changedor somethingis 20 new on DOE's Web site. 21 MR. BROOKMAN: Thank you, Mark. 22 Additional questions following Ed 

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1 Barbour's presentation? 2 You wereable to finishyourpresentation? 3 MR. BARBOUR: Yeah. 4 MR. BROOKMAN: Yes. Additional questions 5 at this point on his presentation? 6 Those of you that have very specific 7 questions, I'm sure you can approach Ed at the break. 8 Let's take a break now. It's almost 9 10:35. Let's commence at 10:50. We'll start at that 10 point. 11 Thanks. We have a good start on the 12 morning. We'll see you at 10:50 when we will start 13 then. 14 (Whereupon,the foregoingmatterwent off 15 the record at 10:34 a.m. and went back on 16 the record at 10:54 a.m.) 17 MR. BROOKMAN: First and foremost, how 18 many of you have laptop computers with you? 19 Those ofyou whohave laptop computers, in 20 order to leave the building today with those laptop 21 computers in your possession, you need to obtain a 22 pass from Brenda. Otherwise, security will be 

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s n1wondering where you got that laptop. 2 So Brenda is over here. I saw a few 3 hands. Only three or four of you have your laptops 4 with you? Lucky you. 5 PARTICIPANT: May I keep my pen? 6 (Laughter.) 7 MR.BROOKMAN: And then theother issue

-- 8 so, please, if you have a laptop, see Brenda and get 9 the ticket out of here at the end of the day. 10 And then secondly, if you haven't yet 11 handed your business card to Brenda, the department 

### ~*

~ 12 has found that's the most efficientway tomake a list 13 of attendeeswithall of the informationon there. So 14 please hand a business card to Brenda. 15 And then finally, we jiggered with the 16 microphones a little bit at the break, and hopefully 17 they'll be a little closer to audio fidelity as we 18 proceed with the morning. 19 Okay. So Jim Lutz is queued up from 20 Lawrence Berkeley National Laboratory. Jim, it's 21 yours. Take it away. 22 Questions, commentsbeforeweget intothe 

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1 next segment of the morning following on fromearlier 2 this morning? 3 (Noresponse.) 4 MR. BROOKMAN: I see none. 5 Okay, Jim. It's yours. 6 MR. LUTZ: Okay. Iwant to go through the 7 engineering analysis, give you how we did this 8 preliminary analysis, the details, but not too much 9 details because I'vegot toget done and let Dave have 10 room to talk about oil fired. 11 We started with an existing baseline 12 electric water heater rated at 50 gallons, an energy 13 factor of .858, four and a half kilowatt input. We 14 went to one and a half inches of insulation to meet 15 the NAECAminimum, andwe modeled the fitting losses. 16 We'll get to this later. We usedWATSIM. We added a 17 little bit of insulation, reduced conductivity and 18 convection so that we couldmatch the fitting losses 19 the tank had so that we would be consistent between 20 our models. 21 On the gas fired water heaters

-- 22 MR. BROOKMAN: I see a question at this 

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1 point. Please say your name. 2 MR. VAUGHAN: Jim Vaughan of Vaughan 3 Manufacturing 4 Jim, just clear up one thing forme,would 5 you? The base electric water heater

-- 6 MR. LUTZ: Yes. 7 MR. VAUGHAN: -- in the Web site data it 8 described it as being from the manufacturers as an 9 inch of insulation, but then in order to meet the .86 10 energy factor

-- 11 MR. LUTZ: With the modeling, with the 12 simulationmodel wewereusingwith the fitting losses 13 and everythingwewere getting,we had to get it up to 14 one and a half inches of insulation to meet that 15 minimum energy factor. 16 MR. VAUGHAN: So the water heater had an 17 inch. The base water heater had an inch of 18 insulation, but in order to get it up to a .86, you 19 gave it an inch and a half of insulation; is that 20 right? 21 MR. LUTZ: Yes. 22 MR. VAUGHAN: Okay. 

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1 MR. BROOKMAN: The one and a half is 2 additional. 3 MR. LUTZ: No, it's the baseline. That's 4 what we started with. 5 MR. BROOKMAN: That's what I wanted to 6 clarify. 7 MR.VAUGHAN: But it's a half an inch over 8 and above what the actual water heater was. 9 MR. LUTZ: I'll let Carl answer that one. 10 MR.HILLER: Carl Hiller fromEPRI andone 11 of the WATSIM developers. 12 For example, Ihave minimum energy factor 13 tanks in my test lab, and in some of my test sites 14 they have an inch and a half of insulation on them, 15 not an inch. So I'm not sure where the inch is coming 16 from, to start with. 17 MR. BROOKMAN: So what's in this slide? 18 An inch and a half insulation? 19 MR. LUTZ: On the electricweused an inch 20 and a half of insulation. A glass lined steel tank 21 with inch and a half of 141(b) blown insulation for 22 our existing baseline. 

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1 MR. BROOKMAN: Okay. 2 MR. VAUGHAN: And that's consistent with 3 WATSIM in terms of coming up with a .86? 4 MR. LUTZ: Yeah. 5 MR. VAUGHAN: Okay. 6 MR. LUTZ: On the gas fired water heater, 7 we startedwith 40 gallon rated volume, energy factor 8 of .55, .5446, a recovery efficiency of 75.5, 50,000 9 BTUperhour input, 400 BTUper hour pilot light, used 10 the same .981 inch insulation. This is a default 11 value from GRI workshop, technical advisory group 12 workshop on this topic. I guess it was in December. 13 We used the same conductivity on our gas 14 and electric water heaters even though they are two 15 different models and the way they treat the water 16 heaters is different. 17 After the existing baseline, we need to 18 move to what we call an analytic baseline to account 19 for the change in the blowingagent, which is going to 20 increase the conductivity slightly, but the water 21 heaters still have to meet the current minimum. 22 So to do that, we change the insulation 

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1 thickness on the electric, increased it a little bit, 2 and increased it a little bit on the gas fired as 3 well. 4 There were no other changes on this. We 5 assumed that the flammable favor ignition resistant 6 designs had no effect on efficiency. 7 MR. BROOKMAN: Let's stop. Yes, Jim 8 Vaughan. 9 MR. VAUGHAN: Jim, just another quick 10 question for you, and that is on the new insulation. 11 Are we going to get into that further with the NIST 12 studies? 13 MR. LUTZ: Yeah, that's tomorrow 14 afternoon. 15 What we did was took published reports 16 from Bayer and one other company that said it looks 17 like it has a threepercent increase in conductivity. 18 MR. VAUGHAN: So you mean you used the 19 manufacturer's data? 20 MR. LUTZ: We used the manufacturers of 21 the blowing agent's data from test they had done on 22 water heaters. 

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1 MR.VAUGHAN: You can't trust those guys. 2 (Laughter.) 3 MR. LUTZ: Jim, Jim, if you have better 4 data, we want it. 5 MR. BROOKMAN: No, that's a good comment. 6 MR. VAUGHAN: Strike that comment. 7 MR. BROOKMAN: I was worried about what 8 would follow on from that. 9 PARTICIPANT: Just like his father. 10 (Laughter.) 11 MR. BROOKMAN: Iwant tomake sure thatwe 12 get the questions answered for these first two or 13 threepages. Are there additional questions in these? 14 Jim covered a lot of stuff there. 15 MR. LUTZ: I was told to go fast. 16 MR. BROOKMAN: We dohave a lot to cover. 17 We want to be efficient. 18 Anything else? 19 (Noresponse.) 20 MR. BROOKMAN: Okay. I'm not seeing too 21 many confused looks as Icast my eyes around the room. 22 Okay. Keep going, Jim. 

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1 MR. LUTZ: Okay. The simulationmodeling. 2 We used twodifferent simulationmodel tools. We used 3 Watson,developedby EPRI for electric water heaters, 4 and for the gas firedwaterheaters, we used TANK. It 5 was developed by Battelle for GRI. 6 And ifyou have reallydetailed technical 7 questions on them, I'll direct you to the people in 8 this room who can answer those questions better. 9 For the engineering analysis,we used the 10 DOE test procedures, specific temperatures, draw 11 volumes, draw patterns. Wedeveloped apost processor 12 for watts and output to actually go through the DOE 13 test procedure calculations, andTANK has those built 14 in. 15 In the engineering analysis, we used the 16 national average energy prices. 17 Thedata sources formanufacturercost, Ed 18 talked about the cost fromGAMA. We also hada couple 19 of consultants. I don't know if he wants to be 20 pointed out, but one of them is here, to give us costs 21 for sheetmetal, foam insulation, plastic tank, side 22 arm heater, and the oil fired water heaters. 

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1 From Dave Williams as Allied Signal, we 2 got projected foam component costs, including the 3 blowing agents, and from Ian Gilchrist at Perfection 4 we got cost of heat traps. 5 These are themain components of the foam 6 insulationused inwaterheaters. The two topblowing 7 agents, the top one is the current one. It's got a 8 cost of $1.50 a pound. Theprojected cost of the HFC9 245fa is $4.00 a pound. 10 The bottom line, we used as a cost of the 11 total foam $1.00 a pound for the current foam and 12 $1.32 a pound for the projected foam, for the foam 13 that we're projecting will be used in 2003. 14 This is for electric water heaters. The 15 existingbaseline, the cost for the insulation jacket, 16 and then the cost for the new blowing agent. The 17 thickness of the baseline has been increased slightly 18 because of the increase inconductivity,andthe costs 19 go up. 20 This cost includes not just the foam and 21 the sheetmetal for the jacket, but also any dams or 22 controls that the manufacturers use to make sure the 

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1 foamdoesn't come out thewrongholes and go thewrong 2 places. 3 This is the cost of the design options 4 that we used in the engineering analysis. The first 5 two are total costs. The following ones are 6 incremental costs. 7 Wehave twodifferent types ofheat traps. 8 We are calling themmetal andplastic. Themetal ones 9 are the ones that are added on top of the water 10 heater. The plastic ones are the ones that are 11 inserted more into the water heater. And we are 12 looking for comments on these costs if anyone has 13 them. 14 To get the mark-up to go from the 15 manufacturer cost to the retail price, we called 16 around about 80 different suppliers, retail stores, 17 and distributors to get the cost of thewater heaters 18 they are currently selling. 19 We took from those, for the electrics we 20 took 50 gallon water heaters, five year warranty,no 21 extra features, no extra insulation, no heat traps, 22 and with the average sales tax of 5.2 percent, we get 

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1 an average cost of $188.18. Themanufacturer cost, Ed 2 talked about the average we're using for the existing 3 baseline 125.56. This gives a mark-up of almost one 4 and a half. 5 Whenwewere calling around thesewater -- 6 MR. BROOKMAN: Frank Stanonik. 7 MR. STANONIK: Frank Stanonik, GAMA. 8 Jim, having been involved in spittingout 9 the information based on the data that I had and the 10 percentiles that we did, I'm just curious. In terms 11 of the data you collected on cost, and maybe Imissed 12 it in one of the reports that was on theWeb site, but 13 haveyou doneany analysis in terms of distribution of 14 those? 15 In other words, I know we've got an 16 average value here, but Imean -- 17 MR. LUTZ: Yeah, in the engineering 18 analysis we're using straight averages. 19 MR. STANONIK: Right. 20 MR. LUTZ: Point values. The 21 distribution, theeffects of distributions is shown in 22 the LCC which will be

-- 

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1 MR. STANONIK: It is? Okay. 2 MR. LUTZ: -- after lunch. So, yes, we 3 did use that. We didn't make you collect it for no 4 reason. We did use it. 5 MR. STANONIK: All right. 6 MR. BROOKMAN: Jim Vaughan. 7 MR. VAUGHAN: Sorry, Jim. I'm a little 8 thick today. Going back, can you go back to the 9 insulation cost just real quickly? You say that the 10 cost of the material, the component cost was -- 11 MR. BROOKMAN: On page 7, right? 12 MR. VAUGHAN: On page 7, yes. 13 -- was $1.50 a pound. 14 MR. LUTZ: That's for the blowing agent, 15 for the current blowing agents. That's what we were 16 given as a rough estimate, as an estimate. 17 MR. VAUGHAN: Okay, but the total 18 insulation then you show as being $1.00 a pound. 19 MR. LUTZ: Yeah. 20 MR. VAUGHAN: Okay. 21 MR. LUTZ: There's the other components, 22 the isocyanurates, the polyols, the catalysts. The 

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### 1 weightedaverage comes up to that. 2 MR. VAUGHAN: Okay. Thankyou. 3 MR. BROOKMAN: Yes, George. 4 MR.KUSTERER: GeorgeKusterer,BochWater 5 Heaters. 6 With the cost ofdesign options, it shows 7 that the baseline is 125.56. 8 MR.BROOKMAN: Whichpage isthat,George? 9 MR. KUSTERER: Page 9. 10 MR. BROOKMAN: Okay. Thankyou. 11 MR. KUSTERER: And on page 10 you're 12 showing a manufacturer's cost of 125. Was there a 13 chart done for thedesign options,costs, and so forth 14 and so on? 15 MR. LUTZ: When they're all added 16 together? 17 MR. KUSTERER: Yeah. 18 MR.LUTZ: The total costs? Yeah, that's 19 coming. 20 MR. KUSTERER: Okay. 21 MR. LUTZ: Let me finish. 22 MR. KUSTERER: Well, you know, I figured 

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### 1 maybe it would be easier just to put it alongside of 2 it so we couldmake a comparison rather than ruffle 3 pages. 4 MR.BROOKMAN: Charlie,doyouwant toask 5 a question at this point? 6 MR. STEPHENS: Yeah, Charlie Stephens. 7 I just hadone question,Jim. Given that 8 there are water heaters out there that reach the 9 energy factor levels that all of these designoptions 10 add up to at somepoint, didyou alsodo some pricing 11 ofwhat's on themarket out there inthe samemarkets 12 you got the prices for the baseline models for? 13 MR. LUTZ: We did. When we called the 14 distributors,we asked them for the prices of all the 15 waterheaters theyhad for saleat the time. So, yes, 16 we do have those. 17 MR. STEPHENS: So we don't have any 18 results in terms of cross-checkingwhatyou arrive at 19 bybuilding it upfrom costscomparedtowhat's actual 20 retail out there? 21 MR.LUTZ: Not yet. Wehaven'tdone that. 22 MR. STEPHENS: Okay, okay. 

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1 MR. LUTZ: We haven't done that. 2 MR. BROOKMAN: Okay. Jim. 3 MR. LUTZ: On installation cost, when we 4 were calling around to these almost 80 different 5 distributors, retail stores, from the ones that 6 offered an installation price, we got that from them. 7 It's about $160. This includes delivery, removal, 8 permit fees where those are included. 9 And for electric water heaters, it's the 10 same installation costs for all design options. 11 PARTICIPANT: Can you say that again? 12 Explain the installation costs again. 13 MR. LUTZ: When we called to like Home 14 Depot, Lowes, distributors, we would ask them for 15 prices of their water heaters, and if they installed 16 it, howmuch they charged for a typical installation, 17 and depending on the location, some places that 18 includes just the installation. Other places it 19 includes delivery and removal fees, permit fees if 20 those are added in. The average for that was $160. 21 PARTICIPANT: This is nationwide? 22 MR. LUTZ: Yes. And for electric water 

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1 heaters, for the design options we're considering, 2 there isn't any differences. 3 MR. HILLER: And this is in a retrofit, 4 changing out an existing water heater? 5 MR. LUTZ: Yeah. 6 MR. HILLER: Carl Hiller from EPRI. 7 This is a retrofit costing, not a new 8 construction costing. 9 MR. LUTZ: Iwould assume so because when 10 we asked them,mostwater heaters go to retrofits. So 11 that would be it. 12 This is basically the result, the cost 13 efficiency table for electric water heaters, the 14 design options, the energy factors that we got by 15 building up, adding thedesign options oneby one onto 16 the baseline model in the simulation program, the 17 totalmanufacturer cost -- George, there'syouranswer 18 -- and the total installed cost, which includes the 19 retail mark-up from the design option costs that we 20 got from GAMA and the consultants, and the 21 installation cost. 22 The annual operation cost is from the DOE 

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1 test procedure. That's the 64.3 gallons per day, at 2 a national average an electricityprice of 7.87 cents 3 per kilowatt hour. 4 Goingthrough the same thingfor gas fired 5 water heaters

-- 6 MR. BROOKMAN: Steve Nadel. 7 MR. NADEL: I'm going to ask a question, 8 Jim, and you can tell me whether you want to get into 9 it now, if you can go back to the previous slide, or 10 whether wewant to discuss this in anotherportion of 11 the workshop. 12 I look at all your options, and basically 13 what this says, if Iunderstoodcorrectly, is that the 14 maximum tech. feasible is an energy factor of .908. 15 That's the highest option. 16 On the other hand, I look at the GAMA 17 directory, and I see hundreds, if not thousands, of 18 models that are .91, .92, .93, .94, even .95. How do 19 you equate those two things? 20 And first, do you want to get into that 21 now or is there anotherportion of the workshop to get 22 into that? 

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1 MR. LUTZ: This is it. Terry is nodding 2 his head saying this is it. 3 (Laughter.) 4 MR. LUTZ: Two answers to that ormaybe I 5 can let Terry. 6 MR. LUTZ: Well, this is Terry Logee from 7 DOE. 8 That's a very good question, and I don't 9 think that we have all of the answers, but when we 10 started to do this, wewent to the manufacturers, and 11 we talked with them about their efficiencies of both 12 electric and gas, and we told them we were going to 13 use these -- were thinking of using the simulation 14 models. 15 In order to be able to build up design 16 options thatperhaps weren't tested or we didn't have 17 test results for, we said, well, we had to use these 18 models, and so we've used the outputs, the energy 19 factors outputs of those models as estimates of the 20 energy factors. 21 And the models in the GAMA directory may 22 haveother features ormayhave some things thatmight 

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### 1 be proprietary; they may be just ways of putting it 2 together that we're not aware of, and so we're not 3 really able to verify whether, indeed, they're just 4 like what we have here or not. 5 So at this point we're sort of into that 6 mode ofusingthemodel output. Idon't think that we 7 can claim that the model output is necessarily the 8 exact result, but Carl Hiller is probably going to 9 jump in and say that it's been tested a lot. 10 MR. BROOKMAN: Carl Hiller first and then 11 to Charlie Stephens. 12 MR. HILLER: Carl Hiller from EPRI. 13 I think the best way to understand that 14 apparent dichotomy is recognizing they're starting 15 from a standard glass lined steel tank as their 16 baseline, and they're doing things to that tank to 17 make it better. 18 When you look at the .92, .93, .95 tanks 19 listed in the GAMA directory, they're not like that. 20 They're not that kind of tank. They're a completely 21 different kind of tank. Itmight be a concrete lined 22 tank. They might be an all plastic tank. Their 

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1 bottoms are substantially different. For example, 2 where the cold water comes in is different. 3 The Vaughan Manufacturing tank, for 4 example, the cold water comes in at the bottom of the 5 tank, not the top. 6 So to get to those higher levels, there 7 are significantlydifferent construction details than 8 standard glass lined steel tanks. 9 MR. BROOKMAN: Charlie Stephens. 10 MR. STEPHENS: Imight note also most of 11 the tanks that we have at .93 that all of our 12 utilities have been putting in for years now are 13 standard tanks. Every manufacturer has got one, and 14 I suspect they do look a lot like these, but I noted 15 in the outputs of the models, on page 68 for anybody 16 that has the document that was on the Web site at the 17 end of last week, you can look at the recovery 18 efficiencies that were derived out of the models, and 19 they all are at least one percent, if not more than 20 one percent, lower than the .98 that's assumed in the 21 DOE test procedure, and I suspect that at least some 22 of the difference is coming out of that. 

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### 1 But if you take and adjust the model 2 without adjusting the recovery efficiency to .98, I 3 think theymadeother adjustments to the waterheater 4 in the model rather than adjusting the recovery 5 efficiency. You're going to get a different answer 6 and a whole different, kind of an offset set of 7 results. 8 AndI'm just trying tomake sure that when 9 I look at what's out there in the marketplace -- I 

### 10 think the .93 tanks that we're looking at in the 11 marketplace are probably the equivalent of design 12 optionnumber five in terms of performance anyway. I 13 know they can achieve a .93, and if you adjust that 14 forrecoveryefficiency,they'reprobably about .917. 15 MR. BROOKMAN: So that's the adjustment. 16 That's what explains the dichotomy as Carl described 17 it. 18 MR. STEPHENS: Part of it anyway. 19 PARTICIPANT: No. 20 MR. BROOKMAN: No? 21 MR.STEPHENS: Maybenot. Imean, Idon't 22 know where it's coming from. That's just one thing 

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1 that I've seen. 2 MR. BROOKMAN: Jim. 3 MR. LUTZ: The recovery efficiency is an 4 output from the model. It's not an input. So you 5 can't adjust the recovery efficiency in the model. 6 We did not get model water heaters, take 7 them to the lab, test themvery carefully, measure the 8 thickness of the insulation,measureheat flows inand 9 out of them, and then model that directly in the 10 simulation program. So I'm not sure where the 11 difference is coming from. 12 Part of it may be tolerances allowed in 13 the test procedure that the manufacturers report. 14 Some of it may be errors in the way we modeled the 15 program. Some of itmaybe things, badassumptionswe 16 made in the inputs we made to that program. 17 So we are looking forcomments on this and 18 particularly hard, solid data that we can look at. 19 MR. BROOKMAN: Thanks for that 20 clarification. 21 Carl and to Mark. 22 MR. HILLER: Carl Hiller from EPRI again. 

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1 Usingyouranalogy, the .93 tanks thatyou 2 see in the GAMAdirectory are options six and seven on 3 that table, noting that the options listed only go up 4 to number five. They're not on that table. 5 MR. BROOKMAN: And the distinguishing 6 characteristics that would cause them to be six or 7 seven? You already mentioned some of them. 8 MR. HILLER: Yeah. For example, itmight 9 be a plastic tank plus a special bottom, plus maybe 10 even more than two and a half inches of insulation to 11 get that energy factor. 12 MR. BROOKMAN: Charlie. 13 MR. HILLER: Or it might be a different 14 fitting like Vaughan uses. 15 MR. BROOKMAN: Charlie. 16 MR. STEPHENS: Charlie Stephens. 17 No, the tanks that are going in there are 18 pretty much just -- they're well insulated tanks. 19 That's about what it amounts to, with heat traps. 20 There's nothing special about those tanks that are out 21 there as tested. They're very similar to the tanks 22 we've got described here. 

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### 1 It's just Ithink thedifferencemust come 2 in simply between the DOE testprocedure as testedby 3 somebody like ITS and what the model puts out. So 4 there's a difference between the real testing data 5 that comes out of the ITS testing to meet DOE test 6 requirements andwhatwe're getting out of themodel. 7 I really think that the tanks probably do look like 8 optionnumber five. 9 If you were to take that exact tank and 10 run it through the model, you probablywouldn't get 11 .93. That's what you get by running the DOE test. 12 MR. BROOKMAN: Mark, can we finish on 13 this? 14 Frank Stanonik,and then I'll go toMark. 15 MR. STANONIK: Frank Stanonik from GAMA. 16 Jim,youmentionedthat theinformationin 17 here on recovery efficiency is an output of the 18 program? 19 MR. LUTZ: Yeah. 20 MR.STANONIK: All right. So it's saying 21 that, as an example, a unit or model with design 22 number three, design option number three, has an 

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1 estimated energy factor of .901, and that unit would 2 have a recovery efficiency of 97.27. That's what the 3 simulation tells you. 4 PARTICIPANT: Where do you see the 97? 5 MR. STANONIK: I'm looking at what was 6 available on the Web site, "Results and Methodology, 7 Engineering Analysis, October 1998." April 24, yes. 8 MR.BROOKMAN: Andwe shouldprobablyalso 9 note that design option three listed in the table on 10 page 12 says one, which is plus 2.5 inch jacket 11 insulation. 12 MR. LUTZ: So they add together. 13 MR. STANONIK: So. So that number is

-- 14 that simulation says this is the recovery efficiency 15 that gets you to that point. 16 MR.LUTZ: The featureswemodeledon that 17 tankgive youthat recoveryefficiencyand this energy 18 factor. 19 MR. STANONIK: Right, right. Okay. So 20 if, in fact, the actual recovery efficiency, let's 21 say, was something -- well, the default value is 98, 22 but if it was closer to 99, then, in fact, it would 

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### 1 drive your energy factorup. 2 MR. BROOKMAN: Mark. Mark Krebs. 3 MR. KREBS: Mark Krebs. 4 Going back two comments ago of Carl 5 Hiller's, he asked if you knew if this was for 6 retrofits or new construction, and you said you 7 assumed it was for retrofits, Imaintain that there's 8 an absolutely critical difference between the two 9 marketswith significant implications, andyou should 10 orperhaps must differentiate between those two. 11 Inordertomaintainsomeexpediencyhere, 12 I can comment in detail in writing rather than right 13 now if you prefer. 14 MR. BROOKMAN: Thankyou. 15 And the thrust of your comment, Jim, was 16 that because the sources that give you the cost 17 data

-- 

### 18 MR. LUTZ: Would be supplying mostly the 19 retrofit market. So the installation costs would be 20 retrofit costs. 21 MR. BROOKMAN: That's the assumption. 22 Okay. So your comments wouldbe welcome on that. 

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1 Glenn Schleede and then Steve Nadel. 2 MR. SCHLEEDE: I've got a question. I 3 wanted to back up to the price data, but I can hold 4 off until you get through and then go back if 5 that's

-- 6 MR. BROOKMAN: Okay. Thank you. Thank 7 you. 8 Steve Nadel. Okay. Steve Nadel. 9 MR.NADEL: As Isee it, listening to this 10 conversation, we've got an unexplained difference of 11 about .2, .02 energy factor points. I agree with 12 Charlie when I've looked at the data. I think Carl's 13 comment does apply to the .94s and the .95s, you know, 14 made by people like Vaughan and the Sheer Survivor, 15 and so on. 16 But as best as I can tell from all of the 17 manufacturers' catalogs, most of the major 18 manufacturers have your standard glass lined tank at 19 the .93 level. Sowe have a discrepancy of about .02 20 energy factor. 21 My question is: what is DOE proposing to 22 do tobetter understand that? Andbasically I'd like 

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### 1 to hearwhatyoupropose and thenmaybe the rest of us 2 should chime in about other things that we can think 3 to investigate. 4 This is a very significant difference, 5 which is, I think, one of the fundamental issues 6 that's going to be affecting this rulemaking. 7 MR. LOGEE: Steve, I appreciate your -- 8 MR. BROOKMAN: Terry Logee. 9 MR. LOGEE: -- bringing that up. I think 

### 10 that this isexactlywhat thisworkshop isdesignedto 11 do, is to raise these kindof issues. Idon't havean 12 answer foryou right nowother than to say,you know, 13 we've heardyourcomment. We acknowledge that there's 14 a difference, and we're going to look into it. 15 And as soonaswehave it resolved, among 16 these otherthings thatwe'regoingtotry toresolve, 17 then we'll revise these analyses or we'll at least 18 informyou of what our resolution is on it. 19 MR.BROOKMAN: AndI'm sure thedepartment 20 wouldwelcome yourcomment orothercomment thatwould 21 help to explain these differences. 22 SteveNadel. 

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1 MR.NADEL: I was going to suggest it may 2 be useful to put this item on the agenda for later in 3 the workshop. Specifically, I think it would be 4 useful over lunch to have various people talk about 5 various ways, possible theories, and possible things 6 that DOE or someone else could do. 7 Youknow, yeah,we can checkwhether,gee, 8 all of the .93s are plastic or cement. We can do up 9 a whole list of things to check, and we can advance 10 this process along by having people talk over lunch 11 and then getting back either this afternoon or 12 tomorrow with a list of things to check out. 13 MR.STANONIK: Jim, I justwanted topoint 14 out the fact that Ithinkpart of this exercisewas to 15 look at the incremental increase of the various 16 options here and to note that you were starting, 17 whether it's right or wrong,you were startingwith a 18 theoretical .86, and if you added these factors, then 19 you would increase that by, you know,whatever levels 20 you see here. 21 There are certainly .86 waterheaters out 22 there, but seeing as that's the minimum, there 

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### 1 probably aren't a lot of them that are right at that 2 point. So a lot of the othernumbersyou're seeing in 3 the GAMA directory may be by virtue of the fact that 4 the baseline number, if you will, is probably in 5 reality -- a lot of the water heaters are actually 

### 6 higher than that. 7 MR. BROOKMAN: Carl Hiller. 8 I thinking in a little bit we should be 9 moving onwith this. 10 MR. HILLER: Carl Hiller from EPRI. 11 A question for themanufacturers, GAMAor 12 whoever here. Just to refresh my memory, what's the 13 allowedtoleranceonyour claimedversus tested energy 14 factor? 15 PARTICIPANT: Zero. 16 (Laughter.) 17 MR. BROOKMAN: I heard some anonymous 18 source say zero for the record. 19 MR. STANONIK: Three and ahalf percent. 20 MR.HILLER: So one could claim a .93 and 21 actually have a .908; is that correct? 22 MR. STANONIK: What were your numbers? 

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1 MR. HILLER: Point, nine, oh, eight is 2 what they're getting here. That could be listed as a 3 .93 tank; is that correct? 4 MR. STANONIK: Without working that math 5 backwards, the numbersprobably are close,but Iwould 6 characterize it a littledifferently. Imean, theway 7 we're running ourprogram is to say if we get a result 8 within that rangewe think that that's indicative that 9 ifwe tested,youknow, the appropriatepopulationand 10 all of that, we would substantiate the claim, yes. 11 MR. BROOKMAN: Thank you for that 12 clarification. 13 Charlie. 14 MR. STEPHENS: Just one more though. I 15 meanwe're going to have to resolve this issue one way 16 or another because what you're startingwith here, if 17 the same three percent tolerance applies to the .858 18 up here, you know, then maybe that's a .828. 19 But thetestprocedureoutputs, the energy 20 factors as delivered by the test procedure are the 21 things Ibelieve that the standard is enforcedby, and 22 I'mnot sure howyou can set a standard in accordance 

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1 with this set of numbers and then test to a whole 2 differentprocedure that deliversa different scale of 3 results becausewhatyou've got here in the outputs of 4 the model is a rise in energy factor of .05, and in 5 theory, if you test the same waterheaters to the same 6 procedures they're testing to nowand list them in the 7 GAMA directory,you're going to get a .07, in theory. 8 That's the way it reads, and I don't know 9 how you -- if you're going to set the standard in 10 accordance with these numbers, then it seems to me 11 you're going to have to adjust the test procedure to 12 also deliver this same scale of numbers. 13 MR. BROOKMAN: We've noted already here 14 that we need to find someplace to address this issue, 15 but I'd like for us to move on pretty quick. 16 Larry, do you have something additional? 17 Larry Wethje. 18 MR.WETHJE: Iwas justwondering. Oneof 19 the things that might contribute to thediscrepancy is 20 is there still a credit given for heat traps. 21 MR. STANONIK: No, that was not used. 22 MR.WETHJE: It's an actual test. Okay. 

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1 MR. STANONIK: It's not that. 2 MR. BROOKMAN: Carl, a final comment and 3 then we're moving on. 4 MR. HILLER: Carl Hiller from EPRI. 5 I'd just like to point out, you know, 6 we're hitting on an issue here that we shouldkeep in 7 the back of our minds that as you make a tank closer 8 and closer to 100 efficient, it's more and more 9 difficult in the test procedure to determine that 10 efficiency because you're talking about smaller and 11 smaller differences between tank levels. 12 And the same thing happens in the 13 modeling. Thebetter the tank, the higher the overall 14 efficiency,themore and moredifficult it gets to get 15 the last couple of percent accurately. 16 MR. BROOKMAN: Okay. Thankyou for that 17 comment. 18 We're moving on to the next slide. 19 MR. LUTZ: Okay. We did the same 20 procedure for gas firedwater heaters. These are the 21 costs of the insulation, the jacket, any of the foam 22 dams. On the left it's for the existingbaseline. On 

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1 the right it's what we call the analytic baseline 2 using HFC-245fa. 3 MR. BROOKMAN: Let me note that I heard 4 Jim say at the outset that he was interested in 5 comments on these cost figures, and I haven't heard 6 much, aside from the differentiation between the 7 presumed new market and the retrofit markets so far. 8 Keep going, Jim. 9 MR. LUTZ: These are different costs than 10 for electric water heaters. The tank is a different 11 size. There's a different geometry. You can't put 12 foam around the combustion chamber. That's why these 13 costs are different. 14 The next slide is cost of design options. 15 Again, the first two are the total costs. The 16 remainingones are the incremental costs of the design 17 options. These are manufacturer costs. 18 You'll notice on the analytic baseline 19 we've added in the $35 estimate for the flammable 20 vapor ignition resistant design. 21 MR.BROOKMAN: Yes, JamesRanfone. Please 22 say your name. 

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1 MR. RANFONE: Jim Ranfone. 2 Just a question on the side arm heater 3 cost. Does that

-- 4 MR. LUTZ: That was provided by our 5 consultant. 6 MR. RANFONE: Okay. Does that have 7 electrical supply to it though? 8 MR. LUTZ: Yes, it does. 9 MR. RANFONE: Thank you. 10 Does that change your installation cost? 11 MR. LUTZ: Yes, it does. 12 MR. BROOKMAN: Yes, Frank Stanonik. 13 MR. STANONIK: Frank Stanonik with GAMA. 14 Since Jim mentioned it, it gives me the 15 opportunity. I just want to make sure everybody's 16 aware of it, that the one company that was out in the 17 market with a product that could be considered a side 18 arm heater has indicated back in probably early this 19 summer that, in fact, they were dropping that product 20 line. 21 So in case somebody says it's out there, 22 well, it is, but it isn't. 

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1 MR. BROOKMAN: Jim Vaughan. 2 MR. STANONIK: Or won't be. 3 MR.VAUGHAN: Jim, can you answer why the 4 heat trap costs for the gas fired water heater are 5 lower than for the electric? 6 MR. LUTZ: I'll have to direct you to 7 Frank on that one. That was the data we got from the 8 manufacturers. 9 MR. STANONIK: I'mjust a number cruncher. 10 (Laughter.) 11 MR. LUTZ: We used the data from

-- 12 MR. BROOKMAN: Don't shoot themessenger. 13 MR. STANONIK: Yeah, right. 14 MR. VAUGHAN: Just for what it's worth, 15 that's not logical. this does not compute. It's the 16 same fitting. 17 MR.BROOKMAN: Thanks fornoting that. So 18 the data needs to be checked. 19 Any additional comments on this slide? 20 (No response.) 21 MR. LUTZ: Okay. Moving on to mark-up, 22 this is to go from themanufacturer cost to the retail 

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1 price, did the same thing we did on electric, called 2 around to about 80 different suppliers of water 3 heaters, tooka 40 gallongas firedwater heater, five 4 yearwarranty,no extra features, comeupwith 157.74. 5 Manufacturer cost from GAMA for the 6 existing baseline water heater, 137.61. That's the 7 average cost. 8 MR. BROOKMAN: I see George. 9 George. 10 MR.KUSTERER: I'mdefinitely inthewrong 11 business. George Kusterer of Boch Water Heaters. 12 (Laughter.) 13 MR. KUSTERER: On the electric cost, it 14 costs the manufacturer $125.56 to make. That's page 15 10. 16 MR.BROOKMAN: Thankyou forgivingus the 17 page number. 18 MR.KUSTERER: Retail is $188.18. Mark-up 19 is 1.5. Installation is $160. 20 Hereyouhaveatotallydifferentproduct, 21 a gas water heater which should cost more for the 22 manufacturer to make, $137.61. However, retail is 

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1 only $157. I think there's something wrong with that 2 number as the mark-up is only 1.15. 3 And as far as the installation costs, 4 since they have to deal withvent piping and so forth 5 and so on, the cost is lower than installing an 6 electric waterheater. I think there's someproblems 7 with these numbers. 8 MR. BROOKMAN: George, can you give us a 9 sense of what you think the numbers should be more 10 like? 11 MR. KUSTERER: Well, if you keep the same 12 mark-up of 1.15, why shouldwe -- you know,why should 13 there be less of amark-up for the manufacturer? It 14 costs us more to make. 15 As far as the installation costs, it's 16 probably off by about $25. So you know, I mean, 17 you're not looking at fair numbers here. These 18 numbers are way off. 19 MR. LUTZ: We had a big question about 20 these numbers. This is from calling around to stores 21 that sell gas fired water heaters, and this is what 22 the average price was reported. 

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1 MR. KUSTERER: All right. I heard you 2 mention earlier calling around to stores who install 3 waterheaters. Inmany states, Sears,Home Depot, and 4 those particular outlets cannot install gas fired 5 water heaters or oil firedwater heaters because they 6 are not licensed. 7 Now, this may work well for the State of 8 California,but here in the mid-Atlantic from Florida 9 to Maine, it doesn't compute. It doesn't fly. 10 You're looking at HVAC people who are 11 installing gas fired and oil fired units. 12 So I don't know who you're calling or 13 where you're calling,butyou're not calling the right 14 places for the right numbers. 15 MR. LUTZ: In the engineering report, 16 George, there's a listing of the cities that we 17 contacted retailers in for both the retail price and 18 the installation costs. 19 MR. KUSTERER: But how many of them are 20 HVAC people? Are they Sears, Home Depot? 21 MR.LUTZ: Yeah, they weretypically those 22 stores that sell water heaters. 

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1 MR. KUSTERER: Well, that's fine, and 2 selling them and installing them are two different 3 things. Again, we need to look at HVAC people. We 4 need to look at those type of people because here in 5 the East Coast, this is virtually what is installing 6 this equipment. It's not the Home Depots and so forth 7 and so on. 8 As farasyour installationcostsgo, it's 9 just way out of

-- 10 MR. BROOKMAN: Are you suggesting with 11 those calls to those water heater suppliers that they 12 were actually doing the installation as well? 13 MR. LUTZ: That's what they said they 14 would do. 15 MR. BROOKMAN: That's what they said. 16 Okay. 17 I sawTerry Logee, and then, Len, I don't 18 want to lose you, and then to Charlie. 19 MR. LOGEE: Just a very quick follow-up. 20 George, couldyou clarify the $25? Did you mean $25 21 higher than what we had plus 25? 22 MR. KUSTERER: Yes, sir. 

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1 MR. LOGEE: Okay. Thank you. 2 MR. BROOKMAN: And, George, since you're 3 talking of figure, do you have a figure for retail 4 price, what that's more like? 5 MR. KUSTERER: Typically it's got to be at 6 least, again, using the mark-up of 1.5, I would use 7 the mark-up of 1.5. 8 MR. BROOKMAN: Instead of 1.1? 9 MR. KUSTERER: Instead of 1.1. I don't 10 know where that figure came from. 11 MR. LUTZ: This was backed out the other 12 way around. We called the retail stores, asked them 13 what they sell them for. We asked the manufacturers 14 what it cost tomake them. We divide the two numbers 15 and we get the 1.14. 16 MR. KUSTERER: Well, I guarantee you I 17 have a partnership in Home Depot, so my checking 18 account says, on a monthly basis. However, I have 19 not -- 20 (Laughter.) 21 MR. KUSTERER: -- I haven't got a 22 certificate of ownershiporpartnershipyet, but Ican 

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1 tell you where I come from, which is a small, little 2 farming community, and Igo toHome Depot on a regular 3 basis, and I can tell you that when I have to buy a 4 gas fired water heater, the installation cost is at 5 least 20 percent. Thepurchase and installation cost 6 is 20 percent higher than that of electric. 7 So I'm not sure. 8 MR.LUTZ: The other thing Iwant topoint 9 out about this is these are averages. We did see a 10 very, very wide range of both costs and installation 11 prices. 12 MR. BROOKMAN: So that's coming later, 13 that distribution? 14 MR. LUTZ: Yeah. 15 MR. BROOKMAN: Right. Okay. 16 Glenn Schleede and then Charlie Stephens. 17 MR. SCHLEEDE: Glenn Schleede. 18 That's the exact question. What I'm 19 looking for is canwe get access to the raw data, not 20 necessarily identifying the retail stores, but where 21 it came from, and can we see the actual raw data on 22 both the gas andelectric, on the retail costs, andon 

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1 installation costs? 2 MR. LUTZ: Most of that is in the 3 engineering report that's available on the Web. If 4 you look inthere, both the installation costs andthe 5 retail prices that we used to get these average 6 numbers

-- 7 MR. SCHLEEDE: The raw data or the

-- 8 MR. LUTZ: -- are reported for about the 9 50 or 40 or 60 that we used. The actual numbers are 10 there. 11 MR. SCHLEEDE: Okay. Thank you. 12 MR. BROOKMAN: Charlie Stephens and then 13 back to George. 14 MR. STEPHENS: Yeah, I just wanted to 15 comment. Out where we are the installation by a lot 16 of these outfits is somewhat new, but they are 17 contractingwith plumbers, plumbers, not HVAC people, 18 but plumbers to doall thework, and I can't attest to 19 the accuracy of the data, though looking at the 20 northwest data, the limited amount that I see there, 21 we're in the high end of the range, and I find that 22 our prices that are listed arepretty consistent with 

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1 what I see. 2 I can't attest to other areas though. 3 MR. BROOKMAN: With what you see that's 4 listed here in this data? 5 MR. STEPHENS: Right. 6 MR. BROOKMAN: Okay. Thank you. 7 George. 8 MR. KUSTERER: I just calculated it out 9 using a mark-up of 1.5. You're coming up with 206, 10 $207 as opposed to 157, which I think is more 11 realistic. 12 MR.BROOKMAN: Butwe'll get tothe actual 13 distribution a little bit later on. 14 Jim McMahon, a comment? 15 MR. McMAHON: I think there's a 16 misunderstanding here. 17 Jim McMahon at LBL. 18 I just want to make sure there's not a 19 misunderstanding. Wedidnot generate retailpriceby 20 taking manufacturer cost times mark-up. That's not 21 what we did. 22 What we didwas do a survey of what retail 

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### 135 1 prices are. 2 MR.KUSTERER: Well, Ican comment Ihave 3 never ever seen a 40 gallon gas water heater in Home 4 Depot anywhere, and I travel extensively, 50 states 5 plus Canada, for $157. 6 MR. BROOKMAN: That's helpful. 7 Michael McCabe, do you have a comment? 8 MR. McCABE: MichaelMcCabe withDOE. 9 George,yourcomments arewell taken. One 10 of the reasons why this slide was put together or 11 these slideswereputtogether inthis fashion is that 12 wewerevery concernedand have significantquestions 13 regarding these numbers. They do not make sense to 14 us, the difference inmark-ups, andyour comments as 15 far as a suggestion as to the limitations inthe data 16 that we received, Ithink,were well takenbecause it 17 will help us guide to develop a price figure that 18 would seem to be more reasonable. 19 This is one area that we have some 20 substantialquestionsabout,andadiscussionfromthe 21 parties here in response to Jim's presentation as to 22 how to get the price information, if there are other 

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1 approaches to gather from the marketplace or maybe 2 from a completely different approach, we would 3 appreciate hearing that info. 4 MR.BROOKMAN: Additional commentsbefore 5 -- Mark Krebs. 6 MR. KREBS: The first question you should 7 have asked is who's installing water heaters. To 8 think that the Home Depots of theworld are installing 9 the bulk of the water heaters is probably a fairly 10 large assumption. 11 You know, I would think mainly when a 12 waterheatergoes out, thehomeowner frantically calls 13 their localplumber,an independentplumber, or inthe 14 case of new construction, it's the builders. So you 15 should at least be augmenting this information with 16 similar information for independent plumbers and 17 builders. 18 MR. BROOKMAN: Thank you. 19 Additionalcomments onthese slidesbefore 20 we keep going? Yes, Jim Vaughan. 21 MR.VAUGHAN: Just a quick comment. These 22 prices, Jim, these do include permits 

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1 MR. LUTZ: That's in the installation 2 cost. 3 MR. VAUGHAN: That's in the installation 4 fee? 5 MR. LUTZ: Where the suppliers reported 6 that permits were required, we asked what they were. 7 MR.VAUGHAN: Because I think typicallya 8 lot of times, again, the Home Depots of the world, 9 considering the source, there's been some real 10 discussion about whether or not they're actually 11 pulling permits in places, and I know that just from 12 here, I asked the gentleman from Oregon. Their 13 typical permit cost is $25. That can range as highas 14 $60 in the northeast. 15 And of the installation cost of $160, I 16 know that, for example, in the Boston areayou canpay 17 60 bucks for a permit fee. So, you know, that's a 18 wide variable. That's all. 19 MR. BROOKMAN: Frank Stanonik. 20 But before you comment, Frank, Brenda 21 handed me a note that there are a few copies of the 22 engineering report and the life cycle cost analysis 

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1 available here, and Charlie is showing some of the 2 data that is in that detailed report. 3 Frank. 4 MR. STANONIK: Well, first of all, being 5 one of those parties who's always kind of said in the 6 past rulemakings, "Well, just go out and ask people 7 what the price is rather than trying to guess," I 8 applaud the effort. 9 (Laughter.) 10 MR.STANONIK: For two reasons. Imean it 11 does take a lot of effort, and, in fact, it shows you 12 one end of, if youwill, this business. You know, we 13 try and think of things analytically, technically, 14 logically, and then you find out some places logic 15 doesn't work or doesn't appear to work,but anyhow, I 16 applaud the effort. 17 But here comes the other foot. 18 (Laughter.) 19 MR. STANONIK: Or the other shoe maybe. 20 MR. LUTZ: Should I duck? 21 MR. STANONIK: Jim, in my going through 22 the engineering analysis, and I'm not sure if many 

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1 people saw this, but there wasn't a single Bradford2 Whitemodel listed. Okay? Now, Bradford-White -- Rod 3 can verify this -- exclusively deals through the 4 plumbing trades. All right? 5 And on top of that, there's only a very 6 few Smith models. Now, Smith does a lot through the 7 plumbing trade, although not exclusively anymore. 8 Maybe. I don't know. I can't keep track all the 9 time. 10 But anyhow, so I think that there's a 11 possibility that the data you've collected to date is 12 a little leaning towards the -- what do you want to 13 call it? -- the mass merchandiser, the places that 14 would normally be called the do-it-yourselfers, 15 although now they probablypush the installationby a 16 professional. 17 And so I've got a little concernbecause, 18 for the sake of discussion, let's just say that 50 19 percent of thewater heaters being sold and installed 20 were going through these mass merchandisers or 21 whatever you want to call them and the other 50 22 percent were being handled through plumbers, and I 

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1 don't know that those are real numbers. I have no 2 idea. Okay? 3 But right nowthe datayou'vegot seems to 4 be weighed more just on the one aspect of it, and if 5 you've got the time and the resources -- and I realize 6 those are big "ifs" -- it might be worthwhile to 7 specifically aim some calls. You'd probably have to 8 go through Yellow Pages or whatever, but aim some 9 calls a plumbers who would specifically carry, for 10 instance, the Bradford-White line or specialize in 11 Smith line or whatever. 12 But I think, again, I'm gladyou did this 13 because it tells you what's going on out there. I 14 mean, that's what theprices are, andyou know,we all 15 get the Sunday inserts that show the Home Depots and 16 in this area the Hechingers and what they are charging 17 forwater heaters, but I'm a little concernedwe have 18 a slightly distorted picture because they're 19 significant, yes. They do sell a lot of water 20 heaters. They do install a lot of water heaters, but 21 so do the plumbers. 22 MR.BROOKMAN: George,youhada follow-up 

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s 

### c1 comment? 2 MR. KUSTERER: Yes. I agree with Frank, 3 and thank youverymuchfor -- I'ma littlebraindead 4 today. Why should today be any different than any 5 other day? 6 (Laughter.) 7 MR. KUSTERER: It's just that I'm 8 celebratingmy ninthgrandchild. So I'mverythrilled 9 about that. 10 But it's true. Manyof uswhomanufacture 11 water heaters do not sell to the Home Depots. Like 12 the Bradford-White, we sell directly to wholesalers. 13 So we don't have an opportunity to sell to Home 14 Depots. Ourparticularproductsmaycosta littlebit 15 more than someone else's. So therefore, the numbers 16 are going to be skewed. 17 If you ant some raw data, I'm sure that 18 PHCC,who is anationally, internationallyrecognized 19 plumbing,heatingandcoolingcontractorsassociation, 20 could give you some realistic numbers with regard to 21 the installation andmark-up and so forth and so on. 22 MR. BROOKMAN: Do they have a published 

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1 price list or no? 2 MR. KUSTERER: PHCC is just an 3 organization. I can put you in touch with or I can 4 put JimLutz in touch with them, get that information 5 to him,but you can survey contractors throughout the 6 United States and Canada

-- 7 MR. BROOKMAN: Okay. 8 MR. KUSTERER: -- to try to get some 9 realistic numbers. 10 MR. BROOKMAN: Thanks, George. I'm sure 11 they'd welcome you putting them in touch. 12 And I've noted on the list of items or 13 issues that are emerging here to revisit the price 14 data from survey sources. 15 Let's keep going on with the slides. 16 MR. LUTZ: Okay. We've pretty much 17 covered the installation cost. Idowant to note that 18 the installation costs that we got were essentially 19 the same for gas and electric. 20 There were some designoptions that we had 21 extra installation costs for on gas fired water 22 heaters. Where we increased the recovery efficiency 

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1 above 76 percent, we went up to 78 percent. We 2 limited it to 78 and a half. About 51 percent of the 3 householdswillneed to install TypeB vent connector. 4 the cost for that, the weighted average cost of that 5 installation was $54. 6 Forthedesign options that requireadding 7 electricity, the side arm with an intermittent 8 ignition, the flue damper, those ones, about a third 9 of the households will require a new circuit because 10 they don't have an outlet near the water heater, and 11 the weighted average cost of that was $34. 12 This cost data was froma GRI report done 13 for the earlier proposed rulemaking. 14 MR. LOGEE: Jim, wasn't that cost data 15 corrected to '98 by the CPI? 16 MR. LUTZ: Yes, it was. 17 MR. BROOKMAN: That's Terry Logee. 18 Okay. James. 19 MR. RANFONE: Yeah, Jim Ranfone, GA. 20 You say the 33.90 is the average cost for 21 installing an electrical outlet is from a GRI report? 22 MR. LUTZ: I see Darrel trying to stand 

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### 1 up. Iwant to point to him. 2 MR. PAUL: Yeah, I believe that number 3 came from our

-- 4 MR. BROOKMAN: Darrel, your name. 5 MR. PAUL: -- report, and that work was 6 done back around 1990. We recently updated the cost 7 of adding an electrical outlet as part of the range 8 rulemaking, and we submitted some comments, some 9 updated costs for that, and Ibelieve the new figures 10 came out to be some -- and I don't have them right off 11 the top of my head -- but the new average value was 12 somewhere between 150 and $200. 13 So that number is going to be at least 50 14 percent higher. 15 MR. BROOKMAN: That last comment was from 16 Darrel Paul. 17 MR. PAUL: Darrel Paul, Battelle. 18 MR. BROOKMAN: Thank you. 19 Joe Mattingly. 20 MR. MATTINGLY: Joe Mattingly from GAMA. 21 Inever understand whyyou average a cost 22 in a situation like that. Either you need it or you 

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1 don't need it. Averaging just comes out to be kind of 2 an irrelevant number, a weighted average, doesn't it? 3 MR. LUTZ: Let me repeat that for the 4 engineering analysis, we were using average point 5 values to order the selection of design options and 6 the grouping of design options. This is not to try to 7 showthe full range of costs or reasons, you know, and 8 which situations they might be higher or lower. This 9 is just to get an average cost. 10 MR. LOGEE: Just let me point out -- 11 MR. BROOKMAN: Terry Logee. 12 MR. LOGEE: This is Terry Logee from DOE. 13 -- that average costs are easier for 14 people to see and understand. When we get to the 15 distributions and the life cycle costs, it's very 16 difficult to connect one from another and figure out 17 where you end up. 18 And so I think these -- we recognize 19 there's limitations with these, and we're weighting 20 them, but we did, indeed, use the full cost to add 21 electricity to any particular installation that 22 required it in this specific case. 

### NEALR.GROSS COURTREPORTERS ANDTRANSCRIBERS 1323RHODEISLANDAVE.,N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com146 1 |1 So Ithink there's value in lookingat the 2 averages. 3 MR. BROOKMAN: Kelly. Kelly Troncalli. 4 MS. TRONCALLI: Yeah,Kelly Troncalliwith 5 Rheem. 6 Areyouassuming that theplumber isgoing 7 to be doing the electricity or would you require a 8 licensed electrician to come out and do that? That 9 just seems low for an electrician to come out and do 10 it. 11 MR. BROOKMAN: Who can comment on that? 12 MR. LUTZ: We took this data from the GRI 13 report. I'm not sure whether that was assuming a 14 plumber or an electrician. 15 MR. BROOKMAN: Charlie Stephens. 16 MR. STEPHENS: Charlie Stephens. 17 I could speak for a lot of jurisdictions. 18 Most plumbers have a limited electrical license to do 19 that work, and most electricians have a limited 20 plumbing license, depending on what kind of thing 21 they're installing. 22 So inmost states limited licenses for the 

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1 purpose of installing these things that have at least 2 some minor appurtenance of the other fuel, if you 3 will, they show up and they have all of the licenses 4 they need. 5 So you don't call out two people. You 6 just -- the guy who comes has a limited license for 7 the other thing. 8 MS. TRONCALLI: I just know typically 9 where I'm from you have to have an electrician come 10 out anddo one thing, anda plumber comes anddoes the 11 other. 12 MR.LUTZ: That'spretty backwardcompared 13 to the rest of the country. 14 (Laughter.) 15 MS. TRONCALLI: Alabama. It must be 16 Alabama. 17 (Laughter.) 18 MR. BROOKMAN: We'll excise that state 19 name for the record, not to be pejorative in any 20 respect in these. 21 Additional -- yes. Please sayyourname. 22 MR.HOSTELLER: DarrelHosteller,Southern 

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1 California Gas Company. 2 It's kind of an interesting discussion on 3 cost, but just to throw something else into the fire 4 here, so to speak, this morning on CNN they had a 5 discussion on home warranty companies, and I've seen 6 this happen before. The homeowner mentioned that 7 because she had purchased a home warranty, when their 8 water heater died a couple of days after moving in, 9 that they saved themselves $800, which was the cost 10 that was quoted to them for a new water heater under 11 the home warranty program. 12 Andso there's aconnectionbetweenpeople 13 under warranty issues and there's an impact in that, 14 I see, because typically thosenumbers are quite a bit 15 higher, and they get charged back and forth. 16 So how credible CNN is I'm not going to 17 comment on. 18 MR. BROOKMAN: Okay. Steve Nadel, and 19 then we're moving on with the rest of the slides. 20 MR. NADEL: Yes. Jim, you have this 21 comment here about installingaType Bvent connector. 22 Basically whenever the recovery efficiency exceeds 

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1 effectively 76 or exceeds the base case, what's the 2 rationale and support for that? 3 MR. LUTZ: That in an existing venting 4 system, you need the flue products to have a high 5 enough temperature to get out of the chimney and to 6 keep the chimney dry, and in some installations a 7 single wall vent connectorwon't work, and soyouneed 8 to keep the combustion products, the flueproducts hot 9 enough. 10 MR.HOSTELLER: Myquestionmore iswhat's 11 the rationale for why 76 percent or 78 percent or 80 12 percent. How was the number chosen because this 13 number is even lower than the number you were talking 14 about before of 78 and a half percent? 15 MR. LUTZ: These numbers were from GRI 16 reports on recommended venting installation 17 situations, what the limits should be. We certainly 18 welcome andare looking for information to support or 19 change that data. 20 MR. BROOKMAN: Frank -- I'm sorry. 21 MR.LUTZ: That was thebest that we could 22 find at the time onwhat venting installations should 

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1 be at and what they should be, what technologies 2 shouldbeused,what installationprocedures shouldbe 3 used forwhat levels of recovery efficiencies or flue 4 loss efficiencies. 5 MR. BROOKMAN: Frank Stanonik. 6 MR. STANONIK: Frank Stanonik with GAMA. 7 This is at least one example, and again, 8 I'm going to applaud the approach here because it 9 seems tome there certainly is some recognition of the 10 need for a margin of safety as opposed to driving 11 products to operate on the margin of safety, and I 12 think that this is a very reasonable thing. 13 You know, yeah, we all like to save 14 energy, but I think more importantly we don't want 15 anybody to get injuredorworse, and Ithink that this 16 is a reasonable assumption. 17 MR. BROOKMAN: Thank you. 18 Iwant tomake sure that we try to get the 19 presentation onoil fired inbefore lunch aswell. So 20 I want to keep us moving along here. 21 George, did you have a comment? 22 MR.KUSTERER: GeorgeKusterer,BochWater 

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1 Heaters. 2 Just one quickcomment. Rather thanusing 3 efficiency as a criteria of 76 to 78, since you are 4 concerned with condensation and condensating 5 deteriorating thebreaching,my suggestionwouldbe to 6 go to temperature because you can have pieces of 7 equipment that are going to operate at 80, 82, 83 8 percent combustion efficiency and still have a high 9 enough stack temperaturewhereyou'renot going to get 10 a condensating problem. 11 My suggestion would be to go to 12 temperature. Efficiency reallyhas very little todo 13 with it. 14 MR. BROOKMAN: Thank you. 15 Final commentsbeforewe finishwith these 16 slides? 17 Keep going, Jim. 18 MR. LUTZ: Okay. The next page shows how 19 we selected design options and which ones were left 20 out of the engineering analysis. The ones on the left 21 were selected. The ones on the right were left out. 22 We ordered them in order of payback. If a design 

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* 1 option couldn't be applied or had too high of a 2 payback, it wasn't used. 3 This is the final table for the final cost 4 efficiency table for gas fired water heaters, 5 essentially the same as the electric, but with the 6 numbers and design options for gas fired water 7 heaters. 8 MR. BROOKMAN: David Goldstein. 9 MR. GOLDSTEIN: Yeah, David Goldstein, 10 NRDC. 11 Iwanted to bringup a similar comment to 12 the one that we had on electric regarding the 13 correspondence between what's in the table for listed 14 energy factors and what's on the market. 15 I think it's somewhat of a problem that 16 there's a gap between about .59 and .66 on the table 17 here, given the fact that in California in the new 18 construction market, .60, .61, somewhere in that 19 neighborhood, is the standard issue water heater. In 20 other words, the builders find it's far more cost 21 effective as a way of meeting the building standards 22 to go to that level than to do anything else with the 

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* s c1 structure of the building. 2 Soweneed to figure out what technologies 3 correspond to those energy factors andmake sure that 4 those are represented in the analysis, as well, and 5 that goes back to the normalization question, tomake 6 sure that the energy factors that show up here 7 correspond to what a product with that technology 8 would score running through the DOE testprocedure as 9 opposed perhaps to what the real energy use would be 10 in the field. 11 MR. BROOKMAN: George. 12 MR. KUSTERER: I'm sorry for the 13 monopolization. George Kusterer,BochWaterHeaters. 14 If you look at the cost efficiency table 15 of gas fired water heaters and compare it to roughly 16 the electric water heaters, your annual operating 17 costs on the gas are about $200 lower than on 18 electric, but yet your payback is almost twice as 19 high. It just doesn't work out in numbers. 20 MR. BROOKMAN: Thank you. 21 Additional comments? 22 The next slide. 

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1 MR. LUTZ: Iwant to finishwith arequest 2 for stakeholder comments. 3 MR. BROOKMAN: We've been getting some of 4 these as we've been going, but you can see the ones 5 that the department specifically noted there listed. 6 Frank Stanonik. 7 MR. LUTZ: More costs, more prices, more 8 installation costs, maintenance costs, and design 9 options, and they need them. 10 MR. STANONIK: Frank Stanonik with GAMA. 11 Jim, when we submitted the data, we did 12 also include an average data point as what the 13 manufacturer estimated or whatever the projections 14 were as to what kind of energy factor you would get 15 with the measure. Those numbers don't always track 16 with what you've got here. 17 So am I correct to assume that these 18 energy factors were derived from either the tank or 19 the WATSIM, depending on the fuel? 20 MR. LUTZ: Yes, yes. 21 MR. STANONIK: Okay. 22 MR. LUTZ: Part of it is -- there's two 

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1 reasons. One is this normalization question. The 2 other is the design options from the manufacturers 3 were applied singly. 4 MR. STANONIK: Right. 5 MR. LUTZ: Not use of combinations. 6 MR. RANFONE: Jim Ranfone, American Gas 7 Association. 8 Just a question on the inclusion of the 9 electrical consumption in the annual operating cost 10 for the gas water heater. We used the options four 11 and five. I note that you do have the electricity 12 price down there. Did you also include that cost? 13 MR. LUTZ: Yes, we did. Thank you. 14 MR. BROOKMAN: Additional comments? 15 MR.KUSTERER: GeorgeKusterer,BochWater 16 Heaters. 17 Just, again, with the retail pricing on 18 the gas installation costs are way off. 19 Also, what I neglected to mention with 20 regardto installation costs, electricwater heater is 21 basically very cut and dry. There is no testing 22 required. With regard to the installation of gas 

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1 fired equipment, as well as oil, it is significant to 2 mention that most competent HVAC installers will now 3 do combustion efficiency tests. They will have to 4 test their gas pressure to make sure that the unit is 5 firingproperly, that it is not over firing, andmost 6 important, they will have to do a CO2 test. As we 7 know, CO2 has become increasingly a concern for just 8 about everyone living on this planet. 9 So, therefore, the installation costs 10 would also have to reflect that. You know, if the 11 Home Depots and people like that, the Sears who are 12 installing these things themselves, and a number of 13 these companies are hiring their own installers; 14 they're not performing these tests. This, again, 15 would add 25 to $50 to the installation cost. 16 As far as the mark-up on the gas, I think 17 you're way off. Ifyou're going to compare apples to 18 apples, let's put the same mark-up on it, and 19 maintenance costs, obviously there is very little 20 maintenance cost with regard to electric. However, 21 with gas fired units, like any fossil fuel type 22 burning equipment, should be tested and checked on an 

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1 annual basis, again, for safety, formonoxide, and so 2 forth and so on. 3 MR.BROOKMAN: Additionalcomments related 4 to the final slide for this segment, requests for 5 stakeholder comments? 6 Frank Stanonik? 7 MR. STANONIK: Iapologize. It's like the 8 George and Frank show here. 9 And I'm trying, Iguess to get a grasp for 10 the analysis. If we can go back to the cost 11 efficiency table for electric water heaters on page 12 12, and admittedly I'm going to look at this a little 13 different way, but I guess I want to understand why 14 that's either the wrongway to look at it orwhere the 15 problem is. 16 We look at three and four. All right. 17 Three is a standard tankwith two and ahalf inches of 18 insulation, and then number four is number three, 19 except you switch to a plastic tank. 20 Thedifference in the energy factor there 21 is, let's say, nominally one point, 100 -- you know, 22 .01 inenergy factorpoints, andthe difference inthe 

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1 manufacture cost there is $27 roughly. All right? 2 So, on the one hand, I get barely a point 3 improvement. The cost to manufacture is 27 -- let me 4 do round numbers -- $30. Okay. I realize I'm 5 stretching a little bit. 6 And the change in annual operating cost, 7 I've save $2, and yet my payback only went up less 8 than twoyears? Somethingdoesn't track therebecause 9 I keep reading that, and I'm saying I'm basically 10 getting minimal benefit. I've thrown another roughly 11 $30 cost into the product, and the payback is I've 12 saved $2 more. Why has mypayback only increased by 13 a little under two years? 14 MR. LUTZ: I'mnot going to try to do the 15 math up here in front of everybody, but I do want to 16 point out that thepayback is relative to the analytic 17 baseline. 18 MR. STANONIK: All right, all right. 19 Okay. So all right. 20 MR. LUTZ: It's not between design 21 options. It's -- 22 MR.WINIARSKI: Ithinkthe answer is it's 

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1 not incremental. 2 MR.STANONIK: Allright, okay,all right. 3 MR. WINIARSKI: It's all compared to the 4 same -- 5 MR. STANONIK: Okay. The light came on. 6 Okay. 7 MR.BROOKMAN: Additional comments onthis 8 segment? 9 CarlHiller andDavid, come on uphere and 10 get ready to do oil fired. 11 MR. HILLER: Carl Hiller from EPRI. 12 I'd just like to offer an observation 13 here. Onthe fossil firedor the gas options, there's 14 the analytic baseline which has the $35 assumed 15 incremental cost to meet the flammablevapor ignition 16 requirement, and right now none of us are being told 17 what that really is that meets that requirement. 18 I can envision that if whatever turns out 19 towork ends up, you know, requiring electricity, for 20 example, then the $35 probably isn't the right 21 analytical baseline increase. It could be something 22 more. 

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### 1 If, for example, you had to have 2 electricity to solve the flammable vapor ignition 3 problem with some sort of an electronic sensor or 4 whatever, then that would have a strong impact on the 5 relative cost increase of some of the other options. 6 And I thinkwe need to be aware of that. 7 It sounds to me like some of the other options and 8 their cost effectiveness are fairly dependent on the 9 flammable vapor ignition solution. 10 MR. LOGEE: This is TerryLogee from DOE. 11 Let me address that briefly. One of the 12 criteria that theWaterHeaterConsortiumhas in their 13 design prototypes is that they won't require 14 electricitytothesedesigns,and theballparkor the 15 eyeball number of $35 they gave us take that into 16 consideration. 17 Andas Isay, asmore information becomes 18 available, you know, we will make adjustments in our 19 analyses,but at thispoint in time, we'reproceeding 20 with that assumption, that there's no electricity 21 going to be required for meeting the flammable 22 ignition test. 

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1 MR. BROOKMAN: Comment? 2 MR. ECKMAN: Tom Eckman, Northwest Power 3 Planning Council. 4 I just want to ask the analysts up here, 5 Jim and Jim, I guess. It's my view that the 6 incremental cost is what's important here, and so the 7 differential, it's only important if there's a 8 differential intheinstalled cost, installationcost, 9 if themeasure thatyou're installing compared to the 10 prior measure has a different installation cost. 11 Likeyou've got tohave electricity inthe 12 case of the electronic ignition or what have you to 13 the energy consumption; is that right? 14 MR. McMAHON: Yeah, that's correct. 15 MR. BROOKMAN: Jim McMahon. That's 16 correct. 17 Are we ready to go? 18 MR.WINIARSKI: Iguess so. Howmuchtime 19 have I got here? 20 MR.BROOKMAN: Youhave about tenminutes. 21 MR. WINIARSKI: Okay. I'll bebrief here. 22 MR. BROOKMAN: Now, we'll take as much 

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1 time as we need. 2 MR. WINIARSKI: Sure. 3 MR. BROOKMAN: But once it gets to be 4 about 12:30, people start getting grouchy, I find. 5 MR. WINIARSKI: My name is David 6 Winiarski from PacificNorthwest National Laboratory. 7 I'll try and go over the oil fired water 8 heater analysis that you've got before you and is in 9 the engineering document. 10 Some key notes to discuss with the 11 analysis, the oil fired water heaters are a much 12 smallermarket, byat least an orderof magnitude than 13 either gas or electric water heaters. It's also a 14 more expensive product. That's possibly due to the 15 smaller market and also due to some of the particular 16 design components that are in an oil fired water 17 heater. 18 There was no readily available oil fired 19 simulation model. Oil fired water heaters require a 20 powered combustion, and none of the existing models 21 deal with that. 22 The design optionperformance for each of 

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1 the given design options is basically based on some 2 engineering calculations for energy loss, some 3 assumptions about what would be the achievable 4 performance either in terms of reduction in standby 5 losses or an increase inrecovery efficiency,and then 6 feeding those twonumbers intoa waterheater analysis 7 model that consists of an equation based on the DOE 8 test procedure that converts essentially a UA or a 9 heat loss coefficient that's measured in the test 10 procedure and the recovery efficiency that's also 11 registered in the test procedure into an energy use 12 figure for that test procedure. 13 The cost data that's represented in this 14 analysis is based on some data from industry 15 consultants. Myunderstanding is that not enoughdata 16 was presented to GAMA for them to pass it on to DOE 17 for this particular market, and some limited phone 18 surveys that we did in order to get first costs for 19 the baseline models. 20 The analytical model assumptions. Again, 21 there's both a baseline model and analytical model. 22 The baseline model assumed foam, and because of the 

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1 change in the foaming agent to HFC, we provided an 2 analytical model along the same procedure that was 3 used for the gas fired units. 4 Basic model assumptions are shown here, a 5 32 gallon unit, 90,000 BTUs per hour fuel input rate, 6 282 watts electric consumption. Most of that is for 7 the powered blower. It's a foam insulation used for 8 the baseline model. 9 The energy factor andrecovery efficiency 10 are those minimums or the energy factor is theminimum 11 required by DOE. The recovery efficiency is believed 12 to be what is typical for a model that would perform 13 at that energy factor. 14 From that a standby heat loss coefficient 15 is calculated using the WHAM model. 16 MR. BROOKMAN: Steve Rosenstock. 17 MR. ROSENSTOCK: Yes, Steve Rosenstock, 18 Edison Electric Institute. 19 I looked in the engineering analysis. It 20 said for the electrical consumption that the 21 assumption was a one-eighth horsepower motor for the 22 blower and pump. 

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1 MR.WINIARSKI: The actual assumption is 2 not a one-eighthhorsepowermotor. It's the 282 watts 3 which appears to be typical. A one-eighth horsepower 4 motor is what is typical of what appears to be in 5 those blowers. It may vary slightly between blower 6 manufacturer. 7 MR. ROSENSTOCK: Well, okay, because the 8 reason I was saying that is for a one-eighth 9 horsepower motor, 282 watts seems awfully high, by 10 like a factor of two. 11 MR. WINIARSKI: A one-eighth horsepower 12 motor maybe rather inefficient. It's a small motor. 13 MR.ROSENSTOCK: Iknow,but evenwith the 14 inefficiency, then there's also the load on the motor 15 as well that's going tomake a difference, aswell as 16 any sort of power factor consideration. 17 So, again, I just wanted to -- my comment 18 is that seems high for a one-eighth horsepower motor. 19 MR. BROOKMAN: Okay, Steve. 20 Let's let George comment and then we'll 21 keep moving on. 22 MR.KUSTERER: The Frank andGeorge show. 

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1 That number may be high for a one-eighth 2 motor, but you also have to take into consideration 3 that youhave an ignition transformer. You also have 4 a controller, an operating control. So that could 5 probably account. It looks like it's a reasonable 6 number. 7 MR. BROOKMAN: Thank you. 8 MR. ROSENSTOCK: Thanks. 9 MR. WINIARSKI: I'm going to go on here. 10 The design modifications that were 11 considered for oil fired units were the addition of 12 heat traps to that baseline or analytic model, 13 increasing the jacket of insulation from one inches of 14 foam to two inches of foam, improving the flue 15 baffling inside the water heater, and gaining some 16 recovery efficiency improvement that way. 17 Increasing the heat exchanger surface 18 area, that to some extent is a catch-all an example of 19 which is the Boch turbo flu water heaters that 20 basically use an internally finned flue system to 21 capture more heat from the exhaust catcher. 22 Andalso the use of interrupted ignition. 

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1 Typically these units on the baseline model would be 2 intermittent ignition. Interrupted ignition is a 3 system that's used on commercial applications, and 4 it's tending to find its way into residential 5 applications. 6 I'll skip over that. That's the WHAM 7 equation. It's described in the report a little bit, 8 and ifwe need to discuss it, we can discuss it later. 9 The modeling techniques were, again, 10 fairly simple. The analytical model would have the 11 same performance as described for the baselinemodel. 12 There is an increase in cost between a baseline and 13 analytical model due to the new foaming agents. 14 The analyticalmodel plus the use of heat 15 traps, what we did is took the reduction in overall 16 heat transfer coefficient, UA, from the tank 17 simulations that were performed for gas fired water 18 heaters. 19 The design option two up there, the 20 addition of two inches of insulation, what we did is 21 break out the losses for that water heater into a 22 continuous loss and losses for when the flue is 

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1 firing, losses from the flue when it's off. We 2 reduced the continuous loss of space upon some 3 engineeringcalculations, andagain,that loss is only 4 for coveringthe tank,not the combustionchamber. We 5 did not model anything to do with the combustion 6 chamber for these units. 7 Design option three, we simply looked at 8 recoveryefficiencybeing raisedto 0.78 bythe use of 9 the improved baffle. 10 Design option four,we looked at recovery 11 efficiency rates to 0.82. That's a number that 12 appears to be the high end for some of the turbo flue 13 models. 14 For the interruptible ignition design 15 options which were applied to both design options 16 three and four, the assumption is that the igniter for 17 the combustion is only on for 20 seconds in an 18 interrupted system each time the unit fires. That 19 compares to the intermittent ignition where the 20 ignition circuitryis running theentire time theunit 21 is firing. 22 From each of these design options we 

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1 calculated an EF and an RE, and using the WHAM or -- 2 pardon me -- using a UA and RE calculated the EF by 3 using the WHAM equation. Thosevalues are shown here, 4 and any comments that we canget frommanufacturers as 5 to if they're reasonable or not wouldbe appreciated. 6 The cost impact is

-- 7 MR. BROOKMAN: Let's pause and see if 8 those figures do seem reasonable, if manufacturers 9 wish to comment on that. The EF is the energy factor. 10 The RE is the? 11 MR. WINIARSKI: Recovery -- 12 MR. BROOKMAN: Thank you. And UA is? 13 MR. WINIARSKI: Overall heat loss 14 coefficient. 15 MR. BROOKMAN: Thank you. 16 Comments on these number? 17 (No response.) 18 MR. BROOKMAN: Okay. The cost data, 19 again, was obtained mostly from consultants who are 20 familiar with the gas firedwater heater industry and 21 were examining the oil fired waterheater industry to 22 try and develop these costs. 

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1 Thedesign options,again, is shownthere. 2 The manufacturing cost for each design option is, 3 again, from consultants. The retail price for the 4 existing model was based on a limited survey of oil 5 fired equipment dealers. 6 The way that these units are installed is 7 not a home project. So you basicallygo to typically 8 an oil fired equipment dealerwho would also sell you 9 the oil. We basically asked them for their full 10 installation costs and retailprices for the units on 11 the baselinemodel, and thenusing themark-up thatwe 12 calculated between the retail price and the estimated 13 manufacturing costs, amark-up of 3.2, weappliedthat 14 to all of the design options to come up with a total 15 retail price. 16 The annual energy cost was calculated 17 using WHAM and an energy consumption equivalent to 18 that provided by the DOE test method. 19 And what you show here is the simple 20 payback in years for that particular design option. 21 Again, these are comparable to the baseline model. 22 They'renot marginal or incremental paybacks for each 

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1 design option. 2 MR. BROOKMAN: Jim. 3 MR. RANFONE: Jim Ranfone. 4 What was the cost of oil that was used? 5 I don't see it here. 6 MR. WINIARSKI: It's in the report. I 7 don't have it here, Jim. 8 MR. RANFONE: The average cost. 9 PARTICIPANT: Seven dollars and fifty-two 10 cents per million BTUs. 11 MR. RANFONE: Thank you. B 

### ~ 12 MR. WINIARSKI: Again, the analysis was 13 fairly limited, and some of the particular concerns 14 that we have, the first one is the use of additional 15 insulation with existing burners. I know this has 16 been brought up before. 17 The assumption that we used here is that 18 in order to provide the additional insulation, one 19 wouldhave tomodify the burner itself. That wouldbe 20 done by changing the length of the blast tube and the 21 oil nozzle that delivers oil to the combustion 22 chamber. 

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1 There's a cost for that reflected in the 2 earlier slide for that design option and for all 3 subsequent design options for which you've got that 4 extra inch of insulation. 5 The baseline manufacturing cost and 6 manufacture to retailmarket assumed. Idon't know if 7 we're going to get anymore information. It would be 8 helpful if we did on that baseline cost and then 9 calculate the mark-up accordingly. 10 You notice the mark-up for the oil fired 11 units was 3.2, considerably more than for either 12 electric or gas, and that affects the cost 13 effectiveness of all of the design options. 14 MR. BROOKMAN: Carl Hiller. 15 MR. HILLER: Carl Hiller from EPRI. 16 Inote that the incremental cost ofadding 17 heat traps appears to be about $15. How does that 18 compare with what was assumed for gas and electric? 19 I'm not sure. This is without 20 installation or with installation or what is this 21 number and how does that compare to gas and

-- 22 MR. WINIARSKI: Oh, I see what you're 

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1 saying. What you've got there is the relative -- the 2 cost on a per -- the manufacturer cost of the heat 3 trap is something on the order of $4, but you've got 4 this 3.2 mark-up applied to it. I guess compared to 5 themark-ups for -- probablytwice as much in terms of 6 comparing the retail price on those to the retail 7 price for gas and electric. 8 MR. HILLER: What you're telling me is we 9 shouldn't put heat traps on oil fired water heaters. 10 We should give them away because it's far cheaper to 11 go buy one somewhere else than to buy it through the 12 oil fired water heater manufacturer. 13 MR. WINIARSKI: That could possibly be, 14 and that's part of the reasonwhy Iwould like as much 15 input as possible on the cost data for this. 16 MR. HILLER: Just to clarifymyposition, 17 I mean, applying that mark-up across the board, you 18 know, appears to be creating some differences in 19 behavior, and I'm not sure that's a real effect. They 20 might really be able to get a 3.1 mark-up, you know, 21 320 percent mark-up on heat traps versus 15 percent 22 for the gas guys, but are we kidding ourselves here? 

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1 MR. WINIARSKI: It's possible that we are 2 in terms of the fact that even at that rate they 3 appear to be cost effective. I'm not sure that that 4 matters, and in fact, in terms of the entire analysis, 5 if we do not get better cost data since this is what 6 we will proceed with, one may want to look at the 7 implications in terms of the efficiency improvement 8 that we're getting in terms of the final number 9 instead of the particular design options. 10 One of the problems with the oil fired 11 industry is that most of the existingmanufacturers, 12 I believe, produce products well above the baseline. 13 MR. LOGEE: This is Terry Logee fromDOE. 14 Carl raises an interesting issue with 15 mark-ups. I don't want to get into it now, but I 16 think I would like to revisit it perhaps later today, 17 especially if we have time. 18 There are alternative approaches to using 19 them. There's the question of should they be applied 20 at the same rate across all of the design options, and 21 so forth, and it would be worthwhile for the 22 department to hear this body's views on some of those 

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1 approaches, those concerns. 2 MR. KUSTERER: George Kusterer with Boch 3 Water Heaters. 4 Again, Irespect CarlHillerandobviously 5 all of my colleagues here today, but let's compare 6 applies to apples. I mean if there's one million 7 electric water heaters out there and there's 750,000 8 gas fired water heaters out there and there's 5,000 9 oil firedwaterheaters out there, obviously themark10 ups are going to be different. 11 I mean I don't want to put the electric 12 guys out of business, but anybody that wants to buy 13 windmills, I'll sell them to them. 14 I thinkwe're entitled to a fair mark-up. 15 Imean if we sold as many gas fired water heaters as 16 everybody else, our mark-ups would be less. 17 MR. BROOKMAN: I thought also though the 18 thrust of Carl's comment was just questioning the 19 mark-up, I mean, questioning whether that ripple 20 should apply to something like heat traps. 21 MR. KUSTERER: Well, that's fine, but it 22 just seems like somebody's looking intomypocket, and 

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1 I don't particularly appreciate it. 2 MR. BROOKMAN: Okay. 3 MR. KUSTERER: And I don't think this is 4 the forum for it. 5 MR. BROOKMAN: That's for putting a 6 limitation on the discussion. 7 (Laughter.) 8 MR. WINIARSKI: Anyway, I think that 9 covers it. 10 MR. BROOKMAN: Yes. 11 MR. WINIARSKI: If there's anymore 12 questions. 13 MR. BROOKMAN: Is that the end of your 14 slides? 15 Additional comments then on these slides 16 or on the previous. We've noted several things if we 17 have a chance to get back to them to take up after 18 lunch or tomorrow. We've noted to revisit screening. 19 We've talked about 78.5 is the recovery efficiency 20 number. There's a note about trying to notify people 21 in this room and others about changes, revisions, and 22 updates to the Web page. 

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1 We've also noted the energy factor 2 discrepancies that wehad adiscussion onearlierboth 3 for gas and for electric, and that prompted a 4 discussion about the tolerances that are built into 5 the GAMA numbers. 6 And also revisit price data from the 7 survey, and then the other thingwe just notedwas the 8 mark-up on oil fired to see if that's a discussion 9 that requires additional discussion. 10 Terry? 11 MR.LOGEE: It's notmark-uponoil fired. 12 It's mark-up approaches in general. 13 MR. BROOKMAN: Thank you. 14 MR.LOGEE: This is TerryLogee fromDOE. 15 Iwanted to correct the easel there. It's 16 not reallymark-ups on oil fired. It's there are two 17 parts to themark-up discussion, the overall approach 18 ofusing the manufacturer's cost and aretail price to 19 determine themark-up or somealternative, andwhether 20 the mark-up should be applied at the same rate or 21 level across all of the design options. 22 MR. BROOKMAN: I saw someone else. I saw 

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1 Charlie and then Steve Rosenstock. 2 MR. STEPHENS: Yeah, Charlie Stephens. 3 I think my concerns can be characterized 4 with all of that as just trying to true up the 5 analysis methods that you've done on all three types 6 of water heaters with what's actually in the 7 marketplace today,bothin terms of itsperformance in 8 accordance with DOE tests and its pricing because I 9 think inevery case here, at least for the bottom two10 thirds of the measure list, we're talking about 11 product that exists. It's out there in the 12 marketplace now performing at those levels. 13 You can price it today, and it'sprobably 14 anupper limit on the price, given volume adjustments 15 that you'd have to make if it were the standard at 16 that level. 17 But I think DOE somehow needs to plan to 18 checkthemarketplace and theexisting performanceand 19 prices of those things performing at that level to 20 make sure that these two approaches somehow deliver 21 the same answer. 22 MR. BROOKMAN: Okay. Steve Rosenstock. 

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1 MR. ROSENSTOCK: Yeah, just a quick one. 2 In terms of some of the design options, Inotice there 3 were reductions in the electric usage in the oil fired 4 water heater, and there is a pump, the motor for the 5 blower and pump, as well as the igniter, as well as 6 the transformer, as well as the controls that double 7 check to make sure that in all of the design options 8 it came off of the 282 watts. Some of the savings 9 might not be coming off of the total 282 watts. 10 Again, I just wanted to make sure the 11 design optionwas going for the electrical components 12 of actually having impact rather than all of the 13 electrical components when not all of them are being 14 affected by the design upgrades. 15 MR. WINIARSKI: Yeah. If I understand 16 your question, basically the calculations for the 17 energy impact of changing the igniter test are 18 subtracted from the 282 watts. The 282 watts is 19 essentially the blower. 20 The 282 watts was the on cycle power use 21 of the blower, not necessarily just the fan. 22 MR. ROSENSTOCK: Okay. so -- 

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1 MR. WINIARSKI: So that each of those 2 calculations where you're calculating energy savings 3 for changing the -- to interrupt your ignition is 4 calculated independently of that, the blower itself. 5 MR. ROSENSTOCK: Okay. Butyou're saying 6 that one-eighth horsepower motor -- we'll talk later. 7 MR. WINIARSKI: We'll just talk later. 8 MR. BROOKMAN: Additional comments? 9 Stephen Nadel. 10 MR.NADEL: Dave, in response to someone's 11 previous comment, I took out my GAMAdirectory, and I 12 was just curious. How does all of your models relate 13 toproducts that are beingproduced? If I look at the 14 current version, Ithink the least efficient model now 15 being sold in the 32 gallon size is a .54. There is 16 nothingat yourbaseline, andbasically just about all 17 of the models being sold are of efficiencies 18 significantly above here. 19 So is thismore of a theoreticalanalysis? 20 MR. WINIARSKI: It's almost more of a 21 theoretical analysis. There's beenno comparisonback 22 to the performance, and I think that's predominantly 

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### 1 a function of not having a terribly good baseline 2 model for these units. 3 I think that in terms ofwhy the baseline 4 orwhyyou'renotgettingtheperformancesthatyou're 5 seeing in the field, you probably have different 6 losses from the combustion chamber and stuff that are 7 not accounted for in this type of analysis. 8 Again, we only looked at some minor 9 changes, for instance, changingthe insulation around 10 the tank itself, not around the combustion chamber. 11 I think that has an effect. 12 Themass of the combustionchamber itself 13 has an effect on these numbers, but you're right. 14 Therehasbeennobackcalculation forexistingmodels 15 and comparing them and their features to what we've 16 assumed here. 17 MR. BROOKMAN: Additional and perhaps 18 final comments before we go to lunch. 19 David Goldstein. 20 MR. GOLDSTEIN: Yeah, just to clarify, it 21 wouldbe our recommendation that that be donebecause 22 in states, they have often set efficiency standards 

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1 without even knowing anything about the engineering 2 analysis, just looking at costs and efficiency levels 3 in themarketplacebecause that's the worstyou cando 4 since there's no returns to scale of the more 5 efficient products, and they're probably marked up 6 ridiculously. 7 Soanythingthat's cost effectivethere is 8 going to be cost effective under a standard scenario, 9 and just see what results you get out of that. Do it 10 both ways. 11 MR.WINIARSKI: Yeah. Part of the issue 12 is that to a large extent I think some of the more 13 efficient models that are out there are by 14 manufacturers that havea large fractionof themarket 15 share. 16 There's also a number of very small 17 manufacturers for oil firedwaterheaters that are not 18 listed in the GAMA directory. 19 MR.BROOKMAN: Additionalcomments onthis 20 presentation, this series of slides? 21 (Noresponse.) 22 MR. BROOKMAN: I see none. It's now 

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1 12:30. We're going to go to lunch. 2 MR. KUSTERER: Excuse me. 3 MR. BROOKMAN: Oh, yes, George. 4 MR. KUSTERER: We've got one page to -- 5 MR. WINIARSKI: I showed itverybriefly, 6 yeah. 7 MR. BROOKMAN: Do you wish to comment on 8 that, George? 9 MR. KUSTERER: Well, other than the fact 10 that the use of additional insulation with existing 11 burners, it's not applicable. Insulation andburners 12 have nothing to do with one another. 13 MR.BROOKMAN: George, takeus to thepage 14 number, please. 15 MR. KUSTERER: It's the last page. 16 PARTICIPANT: No number. 17 MR. KUSTERER: No number. Use of 18 additional insulation with existing burners. Oil 19 firedwater heaters -- oil firedburners just there's 20 no insulation involved. 21 MR. BROOKMAN: Okay. 22 MR.KUSTERER: Otherthan that, everything 

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1 seems to -- as far as where DOE would like additional 2 comments, I don't know. If you want to do that, we 3 cando that at a later datewith thewritten comments. 4 MR. BROOKMAN: Thank you very much. 5 MR. KUSTERER: To facilitate the time. 6 MR. BROOKMAN: For those of you who wish 7 to have it, there is the attendee list that's 8 available over here at Brenda's table, and it's now 9 12:30. Let's start, that is, start at 1:30. 10 (Whereupon, at 12:30 p.m., the workshop 11 was recessed for lunch, to reconvene at 1:30 p.m., the 12 same day.) 13 14 15 16 17 18 19 20 21 22 

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1 A-F-T-E-R-N-O-O-N S-E-S-S-I-O-N 2 (1:38 p.m.) 3 MR. BROOKMAN: So we have the attendee 4 list and the life cycle cost document over there at 5 Brenda's desk. 6 During the morning session we had a few 7 sidebar conversations going on in the back. 8 If you're going to have a protracted 9 conversation,please take it outside. Wewant tokeep 10 it as much focused on the work here internally as 11 possible. 12 So are we ready to go? Who is presenting 13 now? Jim McMahon? 14 Sowe hadgotten into a lot of ground this 15 morning, covered a lot, and so if we can keep on with 16 it this afternoon, I think we're going to be in good 17 shake. 18 Our first presenter is Terry Logee, 19 followed by Jim McMahon. 20 MR. LOGEE: Actually I'mmostly going to 21 introduce JimMcMahon, whomprobablymost of you know, 22 and my purpose is we need to return just briefly to 

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1 thepayback question and issue between the difference 2 between thepayback on gas and electricwaterheaters, 3 andJimMcMahon is going to hopefullyclarify that for 4 us. 5 MR. McMAHON: Thank you, Terry. 6 There was a question raised this morning 7 about the validity of the paybacks, and I think there 8 were two issues that may have been confusing, and I 9 want to very quickly address those two things and see 10 if we can clear it up. 11 These numbers are correct for the numbers 12 that are in there. I understand the issue is about 13 possibly getting better data for some of the inputs. 14 That's fine. 15 What I have up here is page 12 of the 16 handout you got this morning, the electric water 17 heater cost efficiency table. 18 Two things. Number one is thepayback is 19 calculated always compared to the analytic baseline. 20 Theseare not the incrementalpaybacks comparedto the 21 previous design option. They're always compared to 22 the analytic baseline, and that's one question that 

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1 came up. So that's how you get the numbers on the 2 right. 3 The second thing is there was a question 4 about why it was that the paybacks were lower for 5 electric water heaters even though electricity has a 6 higher operating cost than gas, and that is correct. 7 A simple example. If you go from the 8 analytic baseline to the heat traps, your total 9 installed cost increase is about $6. It goes from 10 $352 up to 358. The operating cost savings are about 11 $7. So you get approximately a one year payback. 12 That's right. 13 When you go to gas, since the operating 14 costs are much lower -- they're roughly half of what 15 they are for electricity -- your $6 increased cost is 16 dividedbya $3 savings inoperating costsbecause gas 17 is cheaper. Therefore, your payback is twice as 18 large, two years instead of one year. 19 MR. BROOKMAN: Questions following on 20 Jim's brief explanation? 21 (Noresponse.) 22 MR. BROOKMAN: Okay. I don't see any. 

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1 MR. KUSTERER: George Kusterer withBoch. 2 I'll reserve my comments in written 3 documentation. It would take too long to explain. 4 MR. BROOKMAN: Thank you. Thank you. 5 Other questions? 6 (No response.) 7 MR. BROOKMAN: Okay. So then here we go. 8 MR. McMAHON: Okay. We're going to move 9 into the agenda item life cycle cost analysis. I'm 10 going to go through the first few slides, and then 11 turn it over to Jim Lutz for the details. 12 The role of life cycle cost analysis in 13 theprocess is to help estimate the economic impact of 14 new standards on consumers. Themajor inputs are the 15 engineering analysis, inparticular the GAMAdata, as 16 well as the additional work that's done to get the 17 costs and the retail prices all the way up to 18 installed costs for consumers as a function of the 19 different design options. 20 The other input that's listed here is the 21 LB&L water heater database, whichwas used to get the 22 retail prices for the baseline unit. 

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1 MR. BROOKMAN: Let me -- pardon me, Jim, 2 for interrupting. 3 MR.McMAHON: Certainly. 4 MR.BROOKMAN: The sheets, the slides that 5 Jim is working off of are entitled "Residential Water 6 Heater Efficiency Standards." They list Jim Lutz's 7 name on the front. It's the life cycle cost analysis. 8 There, that one. Thank you. I wanted to make sure 9 everyone had that. 10 MR.McMAHON: Okay. Page 2of that sheet, 11 I've gone through the inputs. What we get out of it 12 is information that's useful to the department in 13 selecting trial standard levels. There's often a lot 14 of attention to the minimum life cycle cost design 15 option. 16 Some of the outputs are useful the 17 manufacturer impact analysis, in particular, the 18 relationship of the costs to the efficiencies. 19 And finally, the retail price as a 20 function of efficiency is an important input to 21 calculate the national energy savings. 22 On the next page, methodology. We're

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1 doing everything on spreadsheets now. There are 2 different spreadsheets for the different fuel types. 3 There's one for electric and one for gas available 4 from the DOE Web page. 5 Within the spreadsheets, there are five 6 majormodules and supportingdata sheets, andwe'll go 7 into those in detail shortly. 8 The other important feature of this 9 analysis compared to previousyears is the exhaustive 10 treatment of variability of uncertainty, and we'll go 11 into that. 12 The next page -- 13 MR. BROOKMAN: Steve Rosenstock. 14 MR.ROSENSTOCK: This is SteveRosenstock. 15 Yeah,have those spreadsheets been posted 16 on the Web site? I couldn't find them last Friday. 17 MR. LOGEE: Terry Logee. 18 Steve, Igotyourphone call thismorning. 19 I think I had left. You just didn't catch me on 20 Friday. I believe we posted them, but it was, I 21 think, later Friday, but I could be wrong. I didn't 22 have time to check this morning. 

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1 MR. ROSENSTOCK: Neither did I. 2 MR. LOGEE: They're supposed to be up 3 there or will be posted today. 4 MR. ROSENSTOCK: Thank you. 5 MR. McMAHON: Okay. In terms of 6 implementing the life cycle costs, we're using Excel 7 spreadsheets with a commercial add-in that's called 8 Crystal Ball. It's a product you can buy. 9 What Crystal Ball gives us is the ability 10 in each cell of the spreadsheet toput a distribution 11 instead of a single value. 12 All of the inputs are probability 13 distributions, and instead of conducting a life cycle 14 cost for the average consumer in the country, we 15 typically do 10,000 calculations. 16 The reason, 10,000 is more or less an 17 arbitrary number. We want to have a large enough 18 number that we're capturingall of thevariabilityand 19 all of theuncertainty inthedifferentdistributions, 20 but something that's computationally trackable and 21 doesn't take too long. 22 In each calculation the values are 

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1 selected from each of the input distributions. So if 2 wehave twovariables thathave distributionson them, 3 for example, the manufacturer cost and the number of 4 gallons of hot water that are used, in each sample we 5 will draw from that population one from the 6 manufacturer cost and one from the gallons of hot 7 water. So we're doing all of the possible 8 combinations that make sense. 9 Therefore, the results are not a single 10 result. Youdon't get a single life cycle cost number 11 in dollars. What youget is a distributionof results 12 that reflect the 10,000 different conditions that 13 we've examined, and you'll see an example of that. 14 Again, different tank sizes, household 15 sizes, temperatures, and everything else are all 16 captured in those distributions. 17 Page 5, variability and uncertainty. I 18 just wanted to find very quickly the difference 19 between those two. This is theway that I think about 20 them. 21 Variabilityiswhenthevaluedependsupon 22 something else. It's not that it's unknowable. For 

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1 example, you can do a survey and find out what the 2 distribution looks like, but it just means that things 3 vary from house to house. 4 An example, here is the average amount of 5 hot water use daily. It depends upon the number of 6 people in the household. If you go out and take a 7 survey and count people, you can find out how many 8 people there are in the households, but you have to 9 account for the fact that it's different fromhouse to 10 house. 11 Uncertainty is different. Uncertainty is 12 incomplete information, and an example there is the 13 thermostat set points. There is not a good survey or 14 measurement been taken of what the set points are on 15 water heaters in eachof the households. We know that 16 it varies a lot from some limited surveys that have 17 been done, and it's not well characterized. 18 So what we do is put in the best 19 assumption that we canmake forwhat that range looks 20 like, and we're happy to have additional input if 21 there's additional informationtohave to refine that. 22 Page 6, I'm not goingto belaborthis, but 

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1 Crystal Ball isvery flexible. We can use any kindof 2 distribution that the data supports, and I'm not going 3 to go through and define all of these, but these are 4 some of the ones that we use. 5 The triangularwasmentioned byEdBarbour 6 thismorning inthe context of themanufacturer costs. 7 I guess Iwant to make sure that you understandwe are 8 not arbitrarilyassuming someacademic functional form 9 and applying it to everything. We're beingdriven by 10 the data and using whatever distribution makes sense 11 from that particular set of data. 12 I'm going to turn this over to Jim Lutz 13 now, who's going to talk about the details unless 14 there are other questions now. 15 MR. LUTZ: These are the five major 16 modules that we use in the -- I'll use this instead. 17 It always helps to turn the on switch. 18 Use fivemajormodules inthe spreadsheet. 19 Start with hot water use down at the bottom, which 20 depends on the household. You select households from 21 the RECS '93 data set. From there we calculate the 22 energy use. From the energy use we calculate the 

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1 operating cost. The equipment costs are brought in, 2 and then we calculate the life cycle cost payback. 3 Now, for the hot wateruse, it depends on 4 the number andage of people in thehousehold,the air 5 and water temperatures, tank size, appliance, if 6 anybody's home during the day. 7 This is from a study done by Gilbert 8 Associates for EPRI, 1985, 1980, something like that. 9 MR. HILLER: It's pretty old data now. 10 MR. LUTZ: They covered about 110 11 households from ten utilities spread throughout the 12 country. At LB&L we extended it to cover households 13 that did not have clothes washers or dishwashers and 14 a couple of other minor cases. 15 For the households we use RECS, which is 16 residential energy consumption study done by the 17 Energy Information Administration. We're using the 18 1993 data. 19 Take actual households. We only used 20 households that had their own individualwater heater 21 of one of the gas, electric, or oil. 22 The reason we did this was we wanted to 

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1 get real households. So we had a real mix of people, 2 climate, fuel type, energy price. If you just do 3 random distributions, you can get things like 4 preschoolers living by themselves, things like that 5 that don't make sense. 6 For temperatures, we took the air 7 temperature from NOAA, and the inlet temperature we 8 calculated on an annual basis as the annual air 9 temperature plus two degrees Fahrenheit. 10 From the inlet water temperature down at 11 the bottom, we calculate the hot water temperature. 12 This is some survey data from the California Energy 13 Commission study, and you'll see there's a very wide 14 spread on it. So we add an air factor of plus or 15 minus 13 degrees to what we calculate to try to get 16 the range of distribution. 17 The result of this

-- 18 MR. BROOKMAN: Carl Hiller. 19 MR. HILLER: Carl Hiller from EPRI. 20 I understand, I think, how you got these 21 temperatures, but why and what are you going to do 22 with that? 

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1 MR. LUTZ: Okay. There's two reasons. 2 The amount of hot water a household uses depends to 3 some degree on how hot the water is and how cold the 4 cold water is. So we're trying to capture that 5 effect. 6 You're looking lost. 7 MR. HILLER: Does this mean that in the 8 WATSIM code you're changing the set point 9 temperature -- 10 MR. LUTZ: No. 11 MR. HILLER: -- with the time of year or 12 what? 13 MR. LUTZ: No. Let me step back. We did 14 not use WATSIM for the life cycle cost. We felt that 15 would be too difficult, and there's too many inputs 16 that we didn't have well characterized. So we used 17 the WHAM equation, which is essentially WAT simple 18 that Dave talked about, because we can implement it in 19 a spreadsheet. 20 MR. BROOKMAN: And, Jim, say it again. 21 Why do you show -- what is the benefit of showing the 22 water temperature range that is shown here? 

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1 MR. LUTZ: Both the amount of hot water 2 and the energy used to heat the water will vary 3 dependingonboth the coldwater inlet temperatureand 4 the hot water temperature. 5 So we're trying to capture that 6 variability. 7 MR. HILLER: Is this suggesting, for 8 example, that you're changing your set point from 9 summer to winter as your temperature changes? 10 MR. LUTZ: No, no. We're taking an 11 average. We're doing all of the calculations on an 12 annualbasis, but the averageannual inlet temperature 13 in Miami is very different than the average inlet 14 temperature in North Dakota. 15 MR. BROOKMAN: That's what you'd apply to 16 the distribution, that average temperature. Yes? 17 MR. LUTZ: No. 18 MR. BROOKMAN: No. 19 MR. LUTZ: That gives us an average inlet 20 temperature, the coldwater temperature on the chart. 21 There's this equationthat says as the coldwatergets 22 colder, for every degree the cold water gets colder, 

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1 the hotwater average is ahalf degree warmer. People 2 set it warmer. 3 But then there's this plus or minus 13 4 degrees which tries to capture the random spread in 5 temperatures. 6 MR. HILLER: So, for example, if you were 7 doingan analysis inFlorida versus one inAlaska,you 8 would use an average hot water set point off of this 9 curve for the average entering coldwater in Florida, 10 and then you would

-- 11 MR. LUTZ: Calculate the hot water 12 temperature. 13 MR.HILLER: The temperaturerisewouldbe 14 that temperatureminus theaverage enteringcoldwater 15 temperature. 16 MR. LUTZ: Right, and then there would be 17 this distribution because any survey you do of hot 18 water temperatures shows that people use -- even 19 though the tanks are set at 120 from the factory,you 20 get out in the field and plumbers, homeowners, 21 everybody changes them around. There's a very wide 22 spread. We're trying to capture that spread in 

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### 1 addition to regional differences. 2 MR. BROOKMAN: Okay. So that's the 3 difference in the set point that accounts for the 4 majority of that error figure. Yes? Yes. 5 Okay. Frank Stanonik. 6 MR. STANONIK: Well, Jim said something 7 that triggeredaquestionhere. What's thevintageof 8 this data? 9 MR. LUTZ: This is '84 to -- houses built 

### 10 in '84 to '88, and unfortunately it's limited to 11 Californiahouseholds. We are looking forbetterdata y* 12 sources. 13 MR.STANONIK: Allright. So Iguess just 14 recognizing that it is data from ten years ago, I'd 15 just suggest some caution as to any kind of general 16 statements to what extent people are tinkering with 17 their thermostats that are being set at 120. 18 Idon't doubt it happens sometimes, but I 19 would disagree with you as to what degree that 20 happens. 21 MR. BROOKMAN: Terry Logee. 22 MR. LOGEE: Terry Logee from DOE. 

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1 Frank, could I ask you to clarify your 2 statement? You mentioned set point at 120, and I 3 think that's important for the record here. 4 MR. STANONIK: Well, the electric water 5 heaters leave the factory; most of the electricwater 6 heaters, residential, leave the factory todaywith the 7 thermostat set at 120, and admittedly I don't have a 8 good sense of how many of those get subsequently 9 adjusted in the field, but I have a good sense that a 10 lot of them don't, whatever a lot is. 11 And likewise with gas water heaters, 12 granted the final setting in a sense becomes part of 13 the installation process, but there's a lot of 14 information on that gas water heater that suggests 15 setting the water heater at 120, and there's a lot of 16 those installations that will be adequately serviced 17 with gas water heaters set at 120. 18 You know,you're just kind of saying that 19 a lot of them get changed. 20 MR. BROOKMAN: A lot of people wish to 21 comment. Let's set Jim McMahon from LBL follow on 22 first, and then I saw Charlie and George and Carl. 

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1 MR. McMAHON; Frank, we'd be very 2 interested in any data that you have or even a 3 suggestion. If you think this ought to be 120 withno 4 uncertainty, that's fine, or if you think it ought to 5 be 120 with only a high side uncertainty, any comment 6 you can provide will be helpful. 7 MR. STANONIK: We'll try andhelpyouwith 8 that. 9 MR. BROOKMAN: Charlie. 10 MR.STANONIK: Because Irecognize there's 11 not a lot of hard data. 12 MR. STEPHENS: Charlie Stephens. 13 Wehave some, andtherange that typically 14 has been seen in all of the evaluations we've done in 15 the last threeyears is 132 to 136. That's the actual 16 hot water temperature coming out of thewater heater. 17 MR.LUTZ: Charlie, is that the average of 18 your study or the range? 19 MR. STEPHENS: That is I would say 70 20 percent -- I mean, this is coming off the top of my 21 head here -- but about 70 percent, a little more than 22 two thirds of them were in that 132 to 136 range. 

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1 There were some on either side of it. Mine was 146, 2 you know, when I checkedmine, but that's not the set 3 point per se. That's the temperature of the water 4 coming out of the water heater, and it didn't 5 correlate always very well with whatever was set on 6 the thing. 7 And the other thing is that gas water 8 heaters don't have a temperature on them, most of 9 them. They just have a valve,you know,up-down, up10 down, and there's no real numbers on there in a lot of 11 cases. 12 MR. STANONIK: Well, yes, it's true 13 there's no numbers, but there are certain defined 14 identifiedpoints that correspond to anumber. That's 15 required by the standard. 16 MR. BROOKMAN: That was Frank Stanonik. 17 George, I saw you first, and then Carl. 18 MR. KUSTERER: I'm sorry, Carl. George 19 Kusterer, Boch Water Heaters. 20 I remember a number of discussions that 21 we've held right here in this room in previous 22 workshops dating back to as far back as I can 

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1 remember, and at that point we wanted to be very 2 cautious with regard to the set points, again, 3 promoting 120 degree water simply because of the 4 numberof scalding issues that have arisen in the last 5 several years. 6 Also,manyof themanufacturers -- Ican't 7 speak formy colleagues, but I know for a fact manyof 8 themanufacturers have requestedredesigned accustats 9 or devices which limit the water temperature to 120, 10 130 degrees. Many manufacturers will have them set 11 leaving the factory, and they can't be adjusted, 12 supposedly can't be adjusted in the field. 13 I'malsoconcernedabout theaverage inlet 14 water temperature. Anythingnorth ofVirginia,you're 15 looking at 50, 55 degrees. Yet I'm seeing numbers 16 here at 75 degrees, andunlessyou guys arepiped into 17 a geyser, I don't really see that kind of a number. 18 I would be very cautious with this 19 particular chart, especiallywith the high set point. 20 Again, on an average, you will see gas fired water 21 heaters, oil fired water heaters producing anywhere 22 from 120, 125. Anything over 130, you are looking at 

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1 a liability problem. 2 I'mseriouslyconcernedaboutthatnumber, 3 and goingback to 1994, there was a tremendous amount 4 of discussion right here in this room for a number of 5 hours dealing with the set point, that it should be 6 lowered and should be reduced, and I believe we were 7 all in agreement. 8 MR. BROOKMAN: Carl Hiller. 9 MR. HILLER: Carl Hiller from EPRI. 10 I would suggest that what this kind of 11 scattered data really reflects, rather than some 12 slightly sloping curve as a function of -- you know, 13 set point temperature as a function of water 14 temperature is really probably a variation of what 15 your installers are doing when theyput the thing in. 16 It may be a little bit of setting the turn on 17 temperature because of the dead band issue on the 18 thermostat. I doubt that there's very much of an 19 effect of a conscious decision to set a temperature to 20 something. It's just what the installers do so that 21 they insure themselves they're not being called back 22 to readjust it. 

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1 MR. BROOKMAN: Frank Stanonik. 2 MR. STANONIK: Just one last thing. 3 Charlie was very clear that the data theyhad is they 4 weremeasuring the outletwater temperature anddidn't 5 necessarily look or check what the set point was. 6 MR. STEPHENS: We did check. 7 MR. STANONIK: Oh, you did check? Okay. 8 MR. STEPHENS: Oh, yeah, we knew, and 9 there wasn't any correlation. 10 MR. STANONIK: Okay. 11 (Laughter.) 12 MR. STANONIK: That raises

-- 13 MR. BROOKMAN: Charlie says there was no 14 correlation. Use the mic, Frank. 15 MR.STANONIK: Okay,butwhat thatdoes is 16 I just want to confirm that the data in your table 17 here -- are we, in fact, talking -- on the Y axis 18 where you have hot water temperature, are we actually 19 talking about the set point or what was measured 20 coming out of the outlet? 21 MR.LUTZ: What wasmeasured comingout of 22 the outlet. 

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1 MR. STANONIK: Okay. So it's

-- 2 MR. LUTZ: Because what we've -- 3 MR.STANONIK: So it's notnecessarilyset 4 point. 5 MR. LUTZ: No. What we're trying to 6 capture in this whole analysis, and if I'm getting 7 this much discussion on the first slide, I'm sort of 8 worried about the rest of them. 9 MR. BROOKMAN: Let's keep moving here. 10 MR. LUTZ: But what we're trying to 11 capture here is the variability, and where we don't 12 know, try to represent the range of howpeople really 13 use hot water. 14 MR.BROOKMAN: Let'smove on to the second 15 slide and see what happens. 16 Terry Logee. 17 MR. LOGEE: Just one final comment. The 18 department would really like to set this to rest and 19 would really like to reiterate what Jim McMahon 20 offered. Should we use one fixed set point 21 temperature with perhaps some variability about that 22 set point, or should we continue to use this curve? 

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1 And I think we'd like to have, you know, 2 specific comments to that effect in your written 3 comments. 4 Thank you. 5 MR.BROOKMAN: Francine,would you liketo 6 make a comment? 7 MS. PINTO: No, I just want to get put on 8 the list. 9 MR. BROOKMAN: Okay. Yes, I will. All 10 right. Back to the list. 11 George? 12 MR. KUSTERER: George Kustererwith Boch. 13 Just one correction then. Then the set 14 point should be eliminated, taken out and put actual 15 temperature measured, not the set point of the 16 accustat or the controlling device. 17 MR. LUTZ: Okay. From the RECS data that 18 we used, the sample of 10,000 households that reflect 19 real households according to NEIA survey, the number 20 of people using the EPRI equation on hot water use in 21 each of those households, we calculate average daily 22 hot wateruse as gallonsper day. Forhouseholds with 

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### 1 electric water heaters, it's 44.3. For households 2 with gas fired water heaters, it's 48.9. 3 Most of this difference is coming from the 4 difference in the size of households, the number of 5 people that live in the households, with gas fired 6 water heaters compared to the size of households with 7 electric waterheaters, and the other features are -- 8 otherpossible sourcesof this are the distribution in 9 the country of where the saturations of households 10 with gas fired water heaters and households with 11 electric water heaters. 12 You tend to get households withgas fired 13 water heaters, higher concentrations of them farther 14 north in the country. So this is not to say that 15 people with the same household with an electric water 16 heater would use less hot water than the same 17 householdwith a gas fired water heater. It's due to 18 differences in the households. 19 MR. BROOKMAN: Steve Rosenstock. 20 MR.ROSENSTOCK: I'm sorrytoputyouback 21 on the other slide, Jim, but in terms of the equation 22 on the hot wateruse andthe T tank equation, I'll say 

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### 1 that grgression line or the line there that's shown, 2 thatdoes include the impactof theone that's showing 3 180 degrees. There's one that's showing 180 degrees 4 that in the book is showing at 100 degrees, which 5 might be considered -- Iwould almost consider those 6 outliers. 7 MR. LUTZ: That does include those. 8 MR.ROSENSTOCK: It does. Okay. Thanks. 9 MR.BROOKMAN: Carl, acomment, hopefully 10 on the next slide? 11 MR. HILLER: Carl Hiller from EPRI. 12 Jim,you saidfromtheEPRI equation. Did 13 you mean to say the ASHRE TC 6.6 Subcommittee 14 equation? 15 MR.LUTZ: No, from the 4003, the Gilbert 16 Associates study. 17 MR.HILLER: Okay. It's interesting that 18 they come out about the same way as the new ASHRE 19 equation that we looked at. 20 MR. LUTZ: Yeah. 21 MR.BROOKMAN: Additionalcommentsonthis 22 latest slide, page 11? 

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1 MR. GOLDSTEIN: David Goldstein. 2 MR. BROOKMAN: David. 3 MR.GOLDSTEIN: A quickquestion. Iwould 4 expect some small price elasticity effect that would 5 say that the same household would use slightly less 6 water with an electric just because it costs more. 7 Did you see that? 8 MR. LUTZ: We have no way of checking 9 that. I would love to have data that would let us 10 check that, but we haven't found it. If you know of 11 any, please let us find it. Please pass it on. 12 MR.KUSTERER: George KustererwithBoch. 13 Jim, what was the house -- it just says 14 household. Two, three, four and a half, five, 15 what's

-- 16 MR. LUTZ: It was a random selection from 17 the Energy Information Administration's residential 18 energy consumption survey. They take about seven or 19 8,000 households and do a detailed interview with the 20 homeowner, and then they collect the utility bills. 21 So we know the number of people in that 22 household,roughly where it's located,theappliances,

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1 whether theyhave abasement ornot, things like that. 2 MR. KUSTERER: I'm sorry. Maybe you 3 misunderstood my question. How many people in a 4 household? 5 MR. LUTZ: It ranges from one to eight. 6 We're not doing averages. We're trying to -- I think 7 the average, if I remember correctly, for an electric 8 was 2.2, 2.5 and for gas it was 2.8. 9 MR. BROOKMAN: Jim McMahon. 10 Maybeyouhave some additionalthoughtson 11 the data. 12 MR. McMAHON: Yeah, this is Jim McMahon. 13 George, I thoughtyour first question was 14 how many households were in the survey. 15 MR. KUSTERER: No, no. What was the 16 average household. 17 MR. McMAHON: What did the average 18 household look like? 19 MR. BROOKMAN: How many people? 20 MR. McMAHON: Each of these averages 21 represents about 3,000 -- more than 3,000 households. 22 MR. KUSTERER: No, no, no. How many 

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1 people living in the house? 2 MR.McMAHON: It depends uponwhichhouse 3 you look at. 4 MR. KUSTERER: Okay. So I'm looking at a 5 house. There's eightpeople inthere. You're telling 6 me they're using 44 gallons of water a day. 7 MR. McMAHON: No, no. 8 MR. KUSTERER: That's whatyou're telling 9 me. 10 MR. McMAHON: No, no. 11 MR. LUTZ: This is average of all of the 12 houses. 13 MR.KUSTERER: Whatwas the averagepeople 14 living in the house? 15 MR. LUTZ: For electricwater heaters, it 16 was 2.56, and for gas fired water heaters, households 17 with gas fired water heaters it was 2.87. 18 MR. BROOKMAN: Are those on subsequent 19 slides? 20 MR. LUTZ: They're in a different set. 21 MR. BROOKMAN: Okay. 22 MR. LUTZ: I don't know if it got handed

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1 out or not. 2 MR. BROOKMAN: Okay. Carl, a brief 3 comment before we keep moving on? 4 MR. HILLER: Carl Hiller from EPRI. 5 I'd just point out for the record here 6 that there was an ASHRE TC 6.6, which is the service 7 water heatingtechnical committee. A subcommittee was 8 formed to developa newASHRE equation for gallonsper 9 day versus household size, and that equation has been 10 developed as a function of the number of people, with 11 a secondary correlation correlating number of people 12 to housing type, i.e., single family detached versus 13 multi-family. 14 That equation has in it provisions for 15 with andwithout dishwasher, with andwithout washing 16 machine, with and without spot tub, and those 17 equations are going to bepromulgated in the newASHRE 18 90.2 standard. 19 And the average people per household is 20 2.7 and all that sort of thing, and it gives numbers 21 very similar to this. 22 MR. BROOKMAN: Okay. Thank you. 

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1 Keep going. 2 MR. LUTZ: The next slide, page 12, is a 3 different representation of the same data shown as 4 distributions so that you can see the shape of the 5 curve both as a frequency chart and a cumulative 6 chart. 7 Goingon tothe energyuse module, this is 8 the equation we used to calculate average energy use 9 or calculate average energy use for each household. 10 The volume,VOL, is from the hotwateruse 11 module. The recovery efficiency, the UA, and the 12 rated P-onor the rated input are from the simulation 13 models. Sowe take those from the simulationmodels. 14 The temperatures, T-in, is the average 15 outdoorair temperatureplus twodegrees Fahrenheit to 16 give the inlet water temperature. 17 T-tank is thermostats at point 18 temperature, and T-ambient is the ambient air 19 temperature around the water heater. 20 The ambient air temperature around the 21 water heater depends on its location. From calls to 22 installers, we found that if there is a basement, the 

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1 waterheater isusually installed in the basement. If 2 there's no basement, but there's an attached garage, 3 it's put in the garage. If there's no basement or 4 garage, then it's put inside the house. 5 And from the RECS data, these are the 6 percentages of houseswith those characteristics, and 7 then the air temperature that we assumed around the 8 water heater. 9 PARTICIPANT: (Inaudible.) 10 MR. LUTZ: Rated input? Nominal rated 11 input of the water heater. 12 MR. BROOKMAN: Steve Rosenstock. 13 MR. ROSENSTOCK: Steve Rosenstock, EEI. 14 So that 72 degrees was considered for the 15 heated basement in the house constant throughout the 16 year? 17 MR. LUTZ: Yes. 18 MR. BROOKMAN: And Iguess the comment on 19 these two slides, 13 and 14, would be about whether 20 these values seem to make sense. 21 Frank Stanonik. 22 MR. STANONIK: Frank Stanonik, GAMA. 

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1 Jim, if you -- I'm going to point out a 2 discrepancy, and then we can figure out which one is 3 right. 4 If you look at the formula that was given 5 on page 20 of the results of methodology, the stuff 6 that was on the Web site

-- 7 MR. LUTZ: That's the detailed 8 methodology. 9 MR. STANONIK: Right. 10 MR. LUTZ: Yes. 11 MR.STANONIK: All right. The term that's 12 in brackets, the one minus UA, okay, at least in the 13 handout here, you're taking T-tank minus T-in, right? 14 MR. LUTZ: Yeah. 15 MR. STANONIK: In the document or the 16 detailed preliminary report, it's T-tank minus T-am, 17 T-ambient. I think it's T-tank minus T-ambient. 18 MR. LUTZ: On the first equation, the 19 first parentheses? 20 MR. STANONIK: The second one. 21 MR. LUTZ: The second one. You're 22 probably right. 

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1 MR.STANONIK: Doyou wantme to show you? 2 MR. LUTZ: I think you're right, Frank. 3 I think you're right. 4 MR. BROOKMAN: Thanks for pointing that 5 out, Frank. 6 Additionalcommentson theequationandon 7 the values shown on 14? Yes, Jim. 8 MR.VAUGHAN: Jim,you're calculating the 9 temperature. That's the incoming cold water 10 temperature? 11 MR. LUTZ: Yeah. 12 MR.VAUGHAN: Andyou're calculating that 13 by an average outdoor temperature plus two degrees? 14 MR. LUTZ: Yes, yeah. 15 MR. BROOKMAN: Jim Vaughan. 16 Noadditional comments? SteveRosenstock. 17 MR. ROSENSTOCK: Steve Rosenstock, EEI. 18 So with the outdoor temperatures, areyou 19 using like hourly weather data, like typical 20 meteorological year for various areas? 21 MR. LUTZ: We got the NOAA averages, the 22 30 year NOAA averages for 43, 44 different cities 

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1 around the country. 2 Okay. Energy use for electric water 3 heaters using the design options that came out of the 4 engineeringanalysis. Youget this as the averageand 5 the energy savings. 6 MR. BROOKMAN: Steve Nadel. 7 MR.NADEL: Yes, theseenergy figures, are 8 they based on a formula from the energy factor or are 9 they a direct output from WATSIM? 10 MR. LUTZ: They're from this equation 11 that's shownonpage 13 where the recoveryefficiency, 12 the UA,and the rated input are outputs fromWATSIMat 13 testprocedureconditions forthosewaterheaterswith 14 those design options. 15 MR. NADEL: Okay. 16 MR. LUTZ: Because the calculations are 17 being done at different conditions, depending on the 18 household. 19 MR. LOGEE: Just to clarify for the 20 record, the error that Frank Stanonik pointed out is 21 only in the slide. We presume and hope that the 22 equationwas correct inour spreadsheets, and I expect 

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1 that you folks will all look at that and let us know 2 if there's anything to the contrary. 3 MR. BROOKMAN: Steve Rosenstock. 4 MR. ROSENSTOCK: Steve Rosenstock. 5 Yeah, in the long report, October '98, 6 life cycle cost analysis, Table 5.5.7, page 77, it 7 shows the Antarctic baseline. It just says in the 8 report 34.84 versus 35.03. Was it a different run or 9 I'm just kind of curious. You know, I don't know if 10 it's the same as the gas one. 11 MR. LOGEE: Steve, which report do you 12 have? What's the date on that report? 13 MR. ROSENSTOCK: Well, this is just life 14 cycle cost report, the October '98, and I know the 15 engineering analysis -- because we're on the life 16 cycle cost cost side of it. 17 MR. LOGEE: Ibelieve we updated the life 18 cycle cost report on Friday on the Web, and this one, 19 I think, is the latest one. The slides, I believe, 20 weremade froman earlier report, and there were some 21 slight changes in the numbers. 22 I guess I should apologize for the 

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1 department. Thosenumbers are changing somewhat as we 2 go along, and they will continue to change as we get 3 new information and as we find that, like anybody, 4 we've made a few errors in some of our analyses, and 5 that's the reason for the most recent changes. There 6 were some errors there. 7 So there are going to be some slight 8 differences. 9 MR. NADEL: I didn't have a chance to 10 check the incremental. So I just wondered. 11 MR. LOGEE: Right. Well, that's why I'm 12 trying to point that out. It's certainly a good 13 question, and we needed to point that out. 14 MR. BROOKMAN: Carl Hiller. 15 MR. HILLER: Just for clarification, Jim, 16 youuse this simplifiedmethodology, I'll call it, for 17 calculating the annual energy use even thought WATSIM 18 couldhave done it in amuchmore sophisticatedmanner 19 primarily because the tank model and the oil model 20 didn't have comparable sophistication. Is that the 21 reason why? 22 MR. LUTZ: That wasn't the only reason. 

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1 themajor reason was we could include this simplified 2 equation into the spreadsheets and let people see it. 3 It's there. 4 It's also much easier. There are much 5 fewer inputs to use. It's characterized by the 6 recovery efficiency, the standby loss, and the rated 7 input of the water heater. 8 MR. BROOKMAN: Jim. 9 MR. RANFONE: Yeah, Jim Ranfone, AGA. 10 Just for the record, what was your 11 conversion factor to go from kilowatt hours per year 12 to BTUs per day? 13 MR. LUTZ: I believe it's 34.12 to get 14 from BTUs per hour or BTUs to kilowatt hours. 15 MR. RANFONE: So it's all site based? 16 MR. LUTZ: It's all site based. 17 MR. RANFONE: Okay. Now, also on your 18 number four in the gas fired, your 23 kilowatts per 19 hour, is that site based, too? The electric 20 consumption? 21 MR. LUTZ: Yes. 22 MR. RANFONE: Okay. 

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1 MR. LUTZ: Okay. Jim was referring to 2 this slide, which is the equivalent slide for gas 3 fired water heaters, and design option four does use 4 electricity. 5 MR. BROOKMAN: Are we ready to move on? 6 Let's go. Operating costs. 7 MR. LUTZ: Operating cost, we used this 8 basicequation: annual energyuse times future energy 9 price, plus a maintenance cost. 10 Future energyprice is the current energy 11 prices times an energy increase ratio. We used the 12 scenario provided by the AEO, the Annual Energy 13 Outlook. 14 The next slide, 18, shows their 15 projections for future electricity prices andnatural 16 gas prices. 17 Also shown on the slides andavailable in 18 the spreadsheets are GRI's projections for those. 19 So that gives you the following annual 20 operating costs. These are averages. I want to 21 stress again that there's awhole range of these, that 22 this is the average of the range of 10,000 samples, 

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1 calculations done, and the average savings by design 2 option. 3 The nextpage is for gas fired onpage 21. 4 MR. LOGEE: This is Terry Logee. 5 I think you should note that these are 6 average annual savings, not over the lifetime, just 7 each year with no discounting. 8 MR. HILLER: This is based on 64.3 9 gallons? 10 MR. LUTZ: No, this is based on the range 11 of prices, the range of hot water uses that we 12 reported from the hot water use module. So each 13 household has a different

-- 14 MR. BROOKMAN: Carl, use the microphone. 15 MR. HILLER: It sounds like you should 16 explain that module again then. Exactly what 17 assumptions are going into producing these numbers if 18 it's not 64.3? I don't think you explained that 19 earlier, did you? 20 MR. LUTZ: Back on page 7, we are doing 21 this in modules. The spreadsheet has five major 22 modules. Each module or the whole spreadsheet does 

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1 10,000 calculations,does the calculation10,000 times 2 for a different house, different energy price, 3 different number of people in the house. 4 That'sreflectedbasedon samplesfromthe 5 RECS data. 6 After the hot water use is calculated, 7 it's passed to the energyuse module, which again for 8 10,000 households calculates the energy use and then 9 on to the operating cost. Each household has 10 different energy prices. So the operating cost is 11 going to -- and different energy use from their 12 different hot water use. So the operating costs are 13 reported as a range also, and this is the average of 14 those ranges for each design option. 15 MR. HILLER: Carl Hiller again. 16 Does that mean that somehow you selected 17 these 10,000 houses on some population weighted 18 geographic locations or something? 19 MR. LUTZ: Yeah. 20 MR. HILLER: How did you do that? 21 MR. LUTZ: We used the Energy Information 22 Administration's residential energy consumption 

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1 survey. We used the raw data from that, and that 2 survey has about 8,000 some households in it. 3 For the gas one, we pulled out the gas 4 households with gas fired water heaters. For the 5 electric, we pulled out the households with electric 6 water heaters. 7 The EIA puts a weighting on each 8 household. We did a random sampling from that 9 selection based on the weighting that EIA assigned 10 eachhouse. So some houses mayhavebeen sampled four 11 or five times, others once or twice, maybe some not at 12 all, and the weighting reflects the population of 13 that, the number of that type of household that's 14 around. 15 MR. BROOKMAN: Ten thousand separate 16 combinations. 17 MR. HILLER: But did it reflect the 18 geographic dispersion of the population as part of 19 that? 20 MR. LUTZ: Yeah. 21 MR. HILLER: The fact that there's more 22 people south than

--

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1 MR. LUTZ: Right, right. It does. 2 MR. BROOKMAN: Terry Logee. 3 MR. LOGEE: Just for additional 4 clarification, if most of you have this back-up 5 material on life cycle cost analysis back-up 6 materials, in therewe show the distributions, and if 7 you turn to page 8, there's all of the distributions 8 for the different design options, for the change in 9 operating costs on electric water heaters. 10 Sowhatwe're reporting inthe slides that 11 Jim has on the screen are the averages. This page 8 12 shows you the distributions and that output which 13 result from these differences in houses and so forth. 14 MR. LUTZ: Moving on to the gas module, 15 Jim? 16 MR. VAUGHAN: Yeah, I'm sorry. I just 17 have to go back to that slide, the last one on the gas 18 water heater. 19 MR. BROOKMAN: Twenty-one? 20 MR. VAUGHAN: Yeah. 21 MR. LUTZ: Operating costs? 22 MR. VAUGHAN: Yeah, the operating costs.

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1 I see on the baseline it's 159.36. Yet whenyou did, 2 I guess, the engineering cost efficiency tables for 3 gas it was 160-something. I don'thave it in front of 4 me. 5 But on the electric, because of

-- 6 apparently because of the usage, on the engineering 7 analysis it was 390 for electric existing baseline, 8 but whenyou used your assumptions for this table, it 9 comes out to 292. There's a $100 difference on the 10 electric side and about a $6 different on the gas, and 11 that's all because of usage? 12 MR. LUTZ: The usage and the variation in 13 prices also because we're tryingto reflect as bestwe 14 can the distribution of hot wateruses, temperatures, 15 energy prices, and the locations and how those are 16 divided up across the country. 17 MR. VAUGHAN: But the usage difference 18 wasn't very substantial if I remember correctly. It 19 was, based on what you said, two what? What was the 20 difference between the gas and the electric? Ten 21 percent? 22 MR. LUTZ: About ten percent, yeah. 

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*0 1 MR. VAUGHAN: Yeah, I think we need to 2 take a look at that. 3 MR. BROOKMAN: Thank you. 4 MR. LUTZ: Okay. Equipment costs. This 5 ismanufacture cost times amark-up times one plus the 6 sales tax plus the total installed cost, and in this 7 module the manufacture cost, all of these things 8 actually are treated as distributions so that the 9 prices for the manufacture costs are sampled from the 10 survey that we did for thebaseline, and thenwith the 11 added distributions provided by the manufacturers. y* 12 This is where we got the manufacturer 13 costs, again, as distributions, as ranges. The 14 baseline model costs came fromGAMA for 40 gallon gas 15 fired, 50 gallon electric, and were based on the 16 current blowing agent. 17 Design option costs that came from GAMA 18 were for heat traps, two inches of insulation, 19 insulated tank bottom for electricwater heaters, IID 20 improved flue baffle for gas fired water heaters. 21 These costs, the range, theyprovided us 22 a distribution of costs. We scaled that for the cost 

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1 of the new blowing agent. We scaled it for different 2 size tanks. We had a total of five typical size 3 tanks, tank sizes for electric and four typical sizes 4 for gas units. 5 We scaled the two and a half inch jacket 6 insulation costs up from the two inch jacket 7 insulation costs that GAMA provided us, and the 8 plastic tank and side arm heaters we got from 9 consultants. 10 For thebaseline prices, this was fromour 11 water heater database. We contacted nearly 80 12 wholesale andretail distributors nationwide, got the 13 retail prices for all of the models they sold, 14 installation, delivery,removalpermits, parts,costs, 15 where theyprovided them, andthe sales tax for them. 16 We also got from manufacturers product 17 literature, dimensions and features for each of the 18 water heaters, and from the GAMA directory we got the 19 efficiency and the ratings. 20 This is sort of the schematic of the 21 results we got. You'll notice that there's a fairly 22 wide range on retail prices for 50 gallon electric. 

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1 It ranged from 128 to 297, and that especially the 2 larger tank sizes the range is much higher. That 3 total value is much higher. 4 MR. BROOKMAN: Steve Rosenstock. 5 MR. ROSENSTOCK: Steve Rosenstock. 6 Yeah, for these bars, the values in the 7 middle, those are the averages and not the medians, 8 right? Those are the averages? 9 MR. LUTZ: I believe so. 10 MR. BROOKMAN: That is the hatch mark? 11 MR.ROSENSTOCK: Thehatchmark,yes, like 12 for the 50 gallon electric, 179 is the little hatch 13 mark there. 14 MR. BROOKMAN: Right. 15 MR. ROSENSTOCK: Again, it might be of 16 interest to some just because we're not sure what the 17 distributionpattern is just to show themedianvalues 18 because we don't know what the distribution is. 19 MR. LUTZ: I was corrected. It is the 20 median. 21 MR. ROSENSTOCK: Oh, it is median. Oh, 22 thank you. Okay. 

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1 MR. BROOKMAN: Oh, Mark. Sorry. Mark 2 Krebs. 3 MR. KREBS: A quick question here. Can I 4 assume, therefore, that LBL has developed a rather 5 complete database on hot water heater models and 6 performance specifications? 7 MR. LUTZ: Yes. 8 MR. KREBS: Thank you. 9 MR.LUTZ: To get themark-up, we tookthe 10 retail price divided by the manufacturer costs. Both 11 the retail price and the manufacturer costs are 12 distributions, and theybothvaryby size. We got the 13 retail price formodels with five yearwarranties and 14 no extra features, and the manufacturer cost was for 15 the existing baseline. 16 The installation costs we got from the 17 same sources. Again, the distributions are shown. 18 MR. HILLER: Carl Hiller. 19 In looking at these installation cost 20 numbers and noting that for bothgas andelectric it's 21 cheaper to install a bigger tank than a smaller tank, 22 which seems counterintuitive, I'm wondering how you

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1 explain that. 2 MR. LUTZ: On the very large tanks, there 3 were not as many data points because there are not as 4 many of them sold. So you may be seeing some 5 variations due to a small sample size. 6 I don't explain it. This is what we got. 7 MR. BROOKMAN: Steve Rosenstock. 8 MR. ROSENSTOCK: And again, those are 9 median values in those? 10 MR. LUTZ: Yes. 11 MR.ROSENSTOCK: Thoseare themedian,not 12 the mean. Okay. 13 MR. LUTZ: For some of the gas fired 14 technology design options we had extra installation 15 costs, electricity for the side arm heater and the 16 Type B vent connector for improved fluebaffle. These 17 are also put in as distributions and applied only to 18 the fraction of thehouseholds thatwouldneed them or 19 reported to need them. 20 So for theelectricwaterheater equipment 21 costs, this is the average manufacturer cost and 22 average total installed cost. 

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1 MR. BROOKMAN: Mark Krebs. 2 MR. KREBS: Thank you. 3 As per your previous presentation

-- 4 MR. LUTZ: Slide? 5 MR. KREBS: No, your previous 6 presentation,again,are wedealingwithretrofits and 7 not new construction in these numbers? 8 MR. LUTZ: Yes. This would be -- when we 9 called the installers, we didn't ask for a different 10 installation cost for new construction and retrofit. 11 MR. KREBS: Thank you. 12 MR. BROOKMAN: David Goldstein. 13 MR. GOLDSTEIN: Yeah, let me follow up on 14 that. I think in this case, since you have the 15 capability of doing the details, you should, in fact, 16 stratify for new construction being different than 17 retrofit, and the reason is thatyou may come up with 18 a different technically justified standard level for 19 new construction. 20 And this is relevant because of the 21 different preemptive effective that NAECA standards 22 have on building codes compared to national minimum

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1 efficiencies. It would be very useful to know that 2 the optimum, howeveryou define it, energy factor for 3 new construction is some numberwhichmaybedifferent 4 from what is economically justified for a retrofit 5 standard. 6 MR. BROOKMAN: Steve Nadel. 7 MR. NADEL: And the other reason todo it 8 is that new construction is a significant portion of 9 the market, and to ignore that in calculating the 10 overall effects and looking in your sampling, you 11 know, risks having errors. So there's two reasons, I 12 think, to look at new construction separately from 13 existing installations. 14 MR. LUTZ: Okay. This is equipment costs 15 for gas fired water heaters. I want to note that 16 we're starting with the analytic baseline. So that 17 includes the assumed $35 cost for the flammable vapor 18 ignition resistant devices. 19 MR. BROOKMAN: David Goldstein. 20 MR. GOLDSTEIN: Yeah, a similar kind of 21 comment. This one may be harder to do, but what 22 you're doing here is you're going through and saying 

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1 Iknowwhat the designmeasures are. Now let's figure 2 out what the installed costs are. 3 So I'm saying if I put in, say, the side 4 armwater heater, I'm going to average whether or not 5 there's an electric cord there andwhether ornot I've 6 got to do something to the flue. 7 MR. LUTZ: No, we didn't average it after 8 -- we didn't average it before. We said in a third of 9 the houses we won't need to put in or a third of the 10 houses we will need to put in electricity at that 11 house. That price is going to range from I think we 12 used about 100 to $200 toput in the extra circuit. 13 For the other two thirds of the houses 14 there will be no cost. 15 MR. GOLDSTEIN: Okay. I'm not saying 16 you're doing it wrong. I'm saying there's another 17 analysis that might be equally or more interesting, 18 which is to say for the houses where you don't have 19 electric service, you might meet an energy factor 20 standard at a certain level using different measures. 21 In other words, the measure of side arm 22 heater wouldmake more sense if you have the electric 

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1 cord available than if you don't. So if the energy 2 factor standardwas .66, maybe you'dget the .66using 3 a different measure if you didn't have the electric 4 cord. It would be cheaper to put more money into the 5 heater than it would be to bring the cord into the 6 house. 7 MR. BROOKMAN: Jim McMahon. 8 MR. McMAHON: David, I have a follow-up 9 question to that. I'm not sure how that would be 10 helpful. The standardappliesnationwide, and what we 11 wouldreport, as youwill see, is distributions of the 12 life cycle cost impact. So those people who already 13 have an electric cord are in that distribution. I'm 14 not sure I understand why it's necessary to separate 15 them out. 16 MR. GOLDSTEIN: I think you'll get a 17 different answer from doing it a different way 18 because, in other words, this analysis implicitly 19 assumes that all manufacturers use the same 20 technologiesregardlessofcustomercharacteristicsto 21 meet the standard. What I'm saying is given the 22 different characteristics of a customer who either 

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1 does or does not need to modify his flue to get a 78 2 percent recovery efficiency, who either does or does 3 not have electric service, the optimum set of 4 engineering design measures may be different, and so 5 if themarket is functioningproperly,you'llhave one 6 set of measures that's intendedto be sold to one kind 7 of household and a different set of measures with the 8 same energy factor resulting that's intended to be 9 sold to a different household that wouldmore closely 10 optimize the cost. 11 MR. McMAHON: You're asking for a 12 different question, which is what is the optimum 13 design option for a particular household, and we're 14 answering a different question, which is what is the 15 distribution of impacts for a design option across 16 households. 17 MR.GOLDSTEIN: Weagree thatwe're asking 18 different questions. I'm suggesting that thequestion 19 I'm asking, if it is capable of being analyzed with 20 your model, would give some interesting answers. 21 MR. BROOKMAN: Thank you. 22 Yes, please say your name. 

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1 MR. BRUNDAGE: Don Brundage, Southern 2 Company. 3 I'm not clearon thisprevious discussion 4 from Mr. Nadel and Mr. Goldstein whether they're 5 talkingabout aseparate standard fornewconstruction 6 fromretrofit orwhetherbecause of thedifferences in 7 economic characteristics it just needs to be grouped 8 differently in the analysis. 9 Is there reallyamechanismunderNAECAto 10 have a separate standard for new as opposed to 11 retrofit construction? 12 Thank you. 13 MR. BROOKMAN: So can one of the two of 14 you -- 15 MR. GOLDSTEIN: I'll give it a first shot 16 and Steve can add on. 17 There isn't

-- 18 MR. BROOKMAN: Steve Goldstein. 19 MR. GOLDSTEIN: Thank you. 20 I haven't looked to see if there's a 21 mechanism under NAECA for separate standards for new 22 construction compare to retrofit. Offhand I don't 

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1 think there is. 2 However,theconditions underwhichstates 3 can set standards in their building codes are 4 different than the conditions and less restrictive 5 than the conditions under which they can set separate 6 equipment efficiencystandards that applyto thewhole 7 sales. 8 And if there were a different optimum for 9 new construction, it would sure be nice to know even 10 thoughyoumight not use it inthisproceedingbecause 11 you mightuse it in a proceeding relating tobuilding 12 codes, and theremightbe some advantage that if there 13 is an optimum level for building codes, that it be 14 recommended in a form that canbe the same number for 15 all building codes rather thanhaving each statego at 16 it separately. 17 MR. BROOKMAN: George, let's let Steve 18 follow on. Maybe he has something additional to add, 19 and then we'll go back to George. 20 MR. NADEL: Okay. I have something 21 additional. I had my hand up before for another 22 question, but I'll let George answer this one, and 

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1 I'll get back later. 2 MR. BROOKMAN: You're on a different 3 subject? 4 MR. NADEL: Right. The other answer 5 though is in addition, I think it would give a more 6 accurate answer for what is the optimum standard 7 because it would better -- if we're going to all of 8 this trouble to lookat one familyversus two families 9 versus three families and these different 10 temperatures, we should also look at the fact that 11 costs, installation costs, do vary between new 12 construction and retrofit, and by assuming that 13 they're all retrofitwemaybe biasingthe analysis in 14 certain ways because there's a significant portion of 15 the market that is new construction. 16 MR. BROOKMAN: George and then Mark Krebs 17 and then to Otto. 18 George. 19 MR. KUSTERER: George Kusterer with Boch 20 Water Heaters. 21 I'm totally confused, but that's nothing 22 new, being a dumb farmer from Pennsylvania. As a 

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1 manufacturer, when my product or any of my other 2 colleagues' product leaves the factory,we don't know 3 if it's going to be used in new construction or 4 retrofit. So what has that got to do with setting a 5 standard for efficiencies? 6 MR. BROOKMAN: Mark? 7 MR. KUSTERER: It just -- it just -- I 8 don't know. Nobody reports back to me and says, 9 "Well, we're going to use this in new construction." 10 I have no way of following that up. 11 What has that got -- I mean, we're 12 spinning our wheels and spending a lot of time and 13 effort to -- 14 MR. BROOKMAN: Mark Krebs, you have

-- 15 MR. KUSTERER: I'm just confused. 16 MR. BROOKMAN: -- some comments on this? 17 MR. KREBS: Well, hopefully I can help 18 answer that question. Ithink it's widelyagreed that 19 implementing energy conservation is normally cheaper 20 in new construction than going back in and having to 21 retrofit things, youknow, especially if it's somenew 22 kind of flue system or something like that. 

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1 And, you know, new construction is a 2 significant part of the market, and it's therefore a 3 large assumption,you know, when youbase numbers and 4 rulemaking on the assumption that it's all going to 5 retrofit. You know, it's a completely different 6 marketniche, and it desperatelyneeds to be analyzed. 7 MR. BROOKMAN: Okay. Otto was next and 8 then Terry. 9 MR. VAGO: Otto Vago, State Industries. 10 More than 90 percent of the water heater 11 business is replacement market. So two different 12 standards for after market and new construction just 13 doesn't make sense to me at all. 14 MR. BROOKMAN: Terry Logee. 15 MR.LOGEE: Terry Logee fromDepartment of 16 Energy. 17 Typically in the past we have only 18 implemented one minimum energy efficiency standard, 19 and I can't speak for the department, but I don't 20 think we're going to change that procedure. 21 Whatwe cando though is Ihaveheard your 22 concern about the installation costs. 

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### 1 MR.BROOKMAN: Terry. Terry, Iapologize 2 for interrupting. 3 MR. LOGEE: Okay. Go ahead. 4 MR.McCABE: MichaelMcCabe,Departmentof 5 Energy. 6 The NAECA amendments to EPCA stipulate 7 this is

-- 8 MR.BROOKMAN: Doyouwant to spell all of 9 that out, Michael? 10 MR. McCABE: N-A-E-C-A amendments to the 11 EPCA, the Energy Policy and Conservation Act, 12 establish that the standard is to be a manufacturing 13 standard,anational standardthatwouldpreempt state 14 and local standards. 15 We are looking at a single standard. 16 Throughout the history of this rulemaking, this 17 program, we have tried to capture the range of 18 impacts. 19 In the early '80s we were looking at 20 average life cycle costs, average electricity prices, 21 the average impacts. Whenwe looked at the life cycle 22 costs at a particular efficiency level, we were 

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1 getting averages in order to capture some range. We 2 were looking at sensitivity cases and trying to 3 determine what was the range in electricityprice or 4 the range in discount rates in order to get some 5 estimate, but basicallywe were able to say that half 6 of the consumers had their impacts that were below 7 this and their life cycle cost savings, for example, 8 would be less than the value reported. Half of them 9 would have greater life cycle cost savings. 10 Awholehost of individuals,organizations 11 have strongly encouraged the department to look and 12 try to better estimate what the range of impacts are 13 in order tomake amore informed decision. It's been 14 widelyagreed that the size of household, for example, 15 will affect the amount of water used; that the ground 16 water temperature will affect the energyused in that 17 water heater. 18 AndwhatJimLutz andothers are trying to 19 present are the range of variables that can be 20 evaluated in order to look at the impacts and 21 determine what is the economically justified level, 22 and through these studies we have found, for example, 

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1 that it appears that water usage is greater with 2 households that have gas fired water heaters than 3 electric waterheaters, as Jimhad indicated, because 4 those households tend to be slightly larger. 5 And what we're trying to do is cut the 6 analysis into a number of pieces in order to more 7 completely estimate what the impacts are, and we're 8 looking to your guidance both with respect to data 9 that are used,but also whether or not we have missed 10 something or maybe we're going too far in trying to 11 capture too many variables. 12 MR. BROOKMAN: I saw several people who 13 wanted to comment. Terry, do you wish to follow on 14 briefly? 15 MR. LOGEE: Yes, just a brief follow-on. 16 Thank you, Michael. I appreciate your 17 longevity with the program certainly. 18 As far as the installation costs for new 19 housing, we will attempt to get some information and 20 data on that and factor it into our analysis. We 21 have, we think, included the changes or the extra 22 installation costs for those replacement situations 

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1 where electric is or isn't there, and the venting 2 conditions in situations in replacement versus new 3 situations. 4 Sowewill though tryto findout what the 5 installation cost is for new construction. 6 MR. BROOKMAN: Several people wanted to 7 speak. I saw them approximately in this order: Steve 8 Rosenstock,Carl, then Frank, thenCharlie, then Steve 9 Nadel. 10 MR. ROSENSTOCK: Steve Rosenstock, 11 Edison

-- 12 MR. BROOKMAN: See if we can keep these 13 brief. 14 Go ahead. 15 MR. ROSENSTOCK: SteveRosenstock, Edison 16 Electric Institute. 17 If you're talkingabout new construction, 18 then it's all costs to the builders, first, because 19 consumers aren't really paying for it until they 20 purchase the house. 21 And as far as the builder is concerned, 22 once the consumerhasbought the house, it'sbeenpaid

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1 for. The economics are done. Their economic analysis 2 is how soon will they buy the house from me, 3 everything, including the water heater. 4 And then, youknow, the consumer ispaying 5 for it, but, you know, it's kind of a hidden cost. I 6 mean, you're throwing builders into this equation if 7 you really want to do that. 8 The second thing is what's the time lag 9 with some of these houses. I don't know how long new 10 housing sits there, but suppose a house sits there 11 with the water heater installed for like a year, a 12 year and a half. Well, what does that do to some of 13 these economics, anddoyou reallywant to try to take 14 that into account, as well? 15 Thanks. 16 MR. BROOKMAN: Carl. 17 MR. HILLER: Carl Hiller from EPRI. 18 I think the suggestion about looking at 19 new construction versus retrofit, et cetera, is 20 probably outside the scope of this national standard 21 process, but Ithink David andSteve have a veryvalid 22 point, and I would offer the following suggestion. 

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1 There's anawfully lot of reallygoodwork 2 going on here, and we're almost there on a couple of 3 these issues, and it would probably be worthwhile to 4 try and team some of this effortwithmaybe some input 5 and funding from ASHRE and some of the, you know, 6 National Association of Home Builders, state 7 regulatory commissions, et cetera, to complete that 8 part of the equation because it's useful information. 9 MR. BROOKMAN: Thank you. 10 Frank. 11 MR. STANONIK: Well, it's a slight 12 variation of what Steve Rosenstock said. If we're 13 going to look at new construction, you know, we 14 already have as a primary question trying to figure 15 out what the mark-up numbers that came out of the 16 analysis tell us. What kind of mark-up number are we 17 going to use when, in fact, the person that buys the 18 home pays X dollars for the home, and Lord knows what 19 the builder mark-up forwhatever he paid for thewater 20 heater. It's probably not 1.5. 21 MR. BROOKMAN: Charlie Stephens. 22 MR. STEPHENS: Charlie Stephens. 

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1 Actually we know what the builder's 2 generalmark-up is insome cases, and applying that to 3 thewhole house, including thewaterheater,mightnot 4 be too far off the mark. 5 PARTICIPANT: What kind of number? 6 MR. STEPHENS: It ranges between about 15 7 and 21 percent where we are. 8 But that's added onto the wholesale mark9 up that he bought it for. So, you know, there's some 10 other mark-up there, but I mean, I just wanted to 11 reiterate what Michael McCabe said, and that is that 12 if for some of the households the incremental cost of 13 a power outlet forpower ventedmodels is essentially 14 zero,which it arguablyis innewconstruction inmost 15 cases, given the electric code for where and how you 16 have to put 115 duplex receptacles these days, then 17 that's a fairly good size chunk of households that 18 probably could nicely be reflected in the way LB&L 19 does the analysis. 20 It samples. You'll sample those new 21 construction households as nine percent of the water 22 heater sales or whatever, and you'll come up with a 

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1 zero incremental cost most of the time for some 2 measures, and I don't think there's anything wrong 3 with having that reflected in the analysis as long as 4 we're busy sampling from the entire range of 5 everything out there. 6 MR. BROOKMAN: SteveNadel, thank you for 7 your patience. 8 MR. NADEL: I actually wanted to switch 9 the topic a little bit. A while ago I was about to 10 ask a question when we got down

-- 11 MR. BROOKMAN: Well, thank you for your 12 patience. 13 MR.NADEL: Jim, on that chart that is up 14 now, the very last line, I'm trying to understand how 15 we came up with the average total installed cost for 16 the improved flue baffle. On the one hand, it says 17 it's a manufacturing cost of about $7. There's some 18 mark-ups. You know, call it 14 percent. Call it 200 19 percent. That's by and large immaterial. 20 Ibelieve youmentionedbefore that there 21 were average costs for a Type B vent connector of 22 about 50-some odd dollars, but all of those things 

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1 don't quite explain to me how we come up with an 2 average incremental cost of $120. 3 If I take $7 times a 150 percent mark-up 4 plus $60, I don't get anything close to 120. 5 MR. LUTZ: I don't want to do the math up 6 here in front of everybody, but the quick answer is 7 that the Type B vent connectors are only applied in 8 the households, the fractionofhouseholds that should 9 have them, and for those households it's a fairlyhigh 10 expense, and then for the households that don't need 11 it, it's not included. 12 MR. NADEL: But previously you said the 13 weighted average was 50-some odd dollars per 14 household. So this implies aweighted average of more 15 than $100 per household. Which one is correct, or is 16 there some inconsistency? 17 MR. LUTZ: I'll to get back toyou on that 18 one. 19 MR. NADEL: Thank you. 20 MR. BROOKMAN: I'm trying to assess where 21 we are. It seems that we have eight or ten slides at 22 least left before we're finished with this 

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1 presentation. I believe that we should shortly go 2 take a break. I'm starting to lose people as I look 3 around the room. 4 Sowhydon'twe do a fewmore, see how far 5 we can get in the next five minutes here. 6 MR. LUTZ: Actually right nowwould be a 7 good time to break. 8 MR. BROOKMAN: Shall we? Let's do that. 9 MR. LUTZ: Because it shifts over to a 10 different calculation after that. 11 MR. BROOKMAN: Let's do take a break at 12 this point. Let's try and -- can we do this in more 13 like ten minutes than 15 minutes? Otherwise we're 14 going to be here at eight o'clock in the morning, and 15 we won't get done at 12:30 tomorrow afternoon. 16 So let's start up at five minutes after 17 three, and thanks for hanging with us here. 18 (Whereupon,the foregoingmatterwent off 19 the record at 2:55 p.m. and went back on 20 the record at 3:05 p.m.) 21 MR. BROOKMAN: Housekeeping matters. 22 Please, if you leave here today and you want to take 

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1 these slides with you and review them tonight or 2 whatever you wish to do with them, bring them back 3 tomorrow. We don't want to have to provide an extra 4 set tomorrow, and we won't. The department will not 5 provide an extra set tomorrow. So bring back these 6 slides and this material. 7 PARTICIPANT: Where do we get the free 8 laptops? 9 (Laughter.) 10 MR. BROOKMAN: The question was where do 11 we get the free laptops. 12 Also, we need to keep pluggingahead this 13 afternoonbecause ifwe don't get as far as we expect, 14 we're going to have tomake aplan for tomorrowto get 15 throughthis,whether thatmeans showingupat 7:30 in 16 the morning or going later on in the afternoon or 17 what. So just so you'll know,we need to really keep 18 on point for the rest of the afternoon. 19 Are thereadditionalhousekeeping itemswe 20 need to take up? 21 (Noresponse.) 22 MR. BROOKMAN: Okay. Let's proceed. 

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1 MR. LUTZ: Okay. This is Slide 33 on the 2 handout. 3 MR. BROOKMAN: Thirty-two. 4 MR. LUTZ: Well, 33 is the prettyversion 5 of it. 6 MR. BROOKMAN: Oh, okay. 7 MR. LUTZ: This is the equation for life 8 cycle cost. It's the equipment cost. It varies by 9 option. The equipment cost is the total installed 10 equipment costplus the operatingcost for that option 11 for a particular year discounted back to thepresent. 12 The operating cost variesby year because 13 the energy prices vary by year, and then the same 14 equation for pay-back. 15 I want to point out that as with most of 16 the other variables in this analysis, discount rate 17 variesas adistribution. We represent the consumers' 18 discount rate coming from three different sources, 19 that they get the money to buy the water heater from 20 three different sources: cash and savings, mortgage 21 if they buy it in new construction, or credit cards, 22 and the overlap between cash and savings andmortgage 

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1 is actually where they overlap. So it's just those 2 two added together. 3 MR. BROOKMAN: Steve Rosenstock. 4 MR. ROSENSTOCK: Just a quick question on 5 this slide. Steve Rosenstock, EEI. 6 On the slide under relative probability, 7 there are hatch marks on the Y axis there. Each one 8 is five percent or what's the scale? 9 MR. LUTZ: It's a relative scale. Idon't 10 know that the numbers actually mean anything. 11 MR. ROSENSTOCK: Okay, okay. 12 MR. LUTZ: It's just that, you know, 13 you're going to get a higher probability of the ones 14 that are higher up. 15 Again, this is in the spreadsheet, this 16 distribution. Soyou can go look and see how it does. 17 MR. BROOKMAN: So the scale of the 18 vertical bars, is that a representation also? 19 MR. McMAHON: This is Jim McMahon. 20 There is a scale. We can give you the 21 numerical answer for that. 22 MR. BROOKMAN: Okay. Thank you. 

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1 MR. LUTZ: Lifetime is also representedas 2 a distribution. This is for electric water heaters. 3 We got this from Appliance Magazine. There's a 4 similar but slightly shorter one for gas fired water 5 heaters. 6 And plugging in the numbers for all the 7 previous calculations gives the life cycle cost and 8 payback for the various design options. 9 MR. BROOKMAN: Steve Rosenstock. 10 MR. ROSENSTOCK: Steve Rosenstock, EEI. 11 In the report, I guess the previous 12 version of the report, Mr. Logee, but there are some 13 slightly different numbers showing for the different 14 design options in terms of, for example, option five 15 in this October report is 54.1 percent versus in your 16 overheads 59.3 percent. 17 So I just -- you know. It's significant 18 enough of a difference. I just wantedto double check 19 on that. Iguess after furtheranalysis. Is that the 20 latest analysis? 21 MR.LUTZ: Yeah,the slides shouldreflect 22 the latest report. 

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### 258

1 MR. ROSENSTOCK: Okay. 2 MR.LUTZ: These arepreliminary results, 3 and we are catching some of the mistakes as we go 4 along. 5 MR. BROOKMAN: Frank Stanonik and then to 6 Glenn Schleede. 7 MR. STANONIK: The column heading 8 "fractionofpopulationbenefitting," whatdoyoumean 9 there? 10 MR. LUTZ: Thiswhole analysis isdone for 11 each of the 10,000 households sampled. So it's done 12 separately for each household. So each household has 13 a different amount of hot water use, a different 14 amount of energy consumption, a different energy 15 price, a different equipment cost. 16 And so when we get up to calculating the 17 life cycle cost, there are different life cycle costs 18 for each household. The ones with the reduced life 19 cycle costs are going to benefit. The ones with an 20 increase are going to suffer. 21 MR. STANONIK: All right. So like Line 1, 22 heat traps. Are you saying that roughly 95percent of 

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1 the existing households would benefit from this 2 measure? 3 MR. LUTZ: Yes. 4 MR. STANONIK: In other words, they don't 5 have a water heater currently with heat traps? Is 6 that another way to look at it? 7 MR. LUTZ: We're basing it all on 8 comparing -- this is relative to the baseline. 9 MR. STANONIK: Right. 10 MR. LUTZ: If they bought a water heater 11 with a heat trap, 95 percent of them would benefit 12 compared to buying a baseline water heater. 13 MR.BROOKMAN: Butit wouldbeprospective 14 purchases. 15 MR. STANONIK: Oh, okay, okay. 16 MR. BROOKMAN: Prospective. 17 MR. STANONIK: Okay, all right. 18 MR. BROOKMAN: Terry Logee. 19 MR. LOGEE: Just letme ask that you look 20 at the back-up slides again. Page 2 for electric 21 water heaters has the change in life cycle costs. 22 These distributions, now, this is on the back-up 

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1 section of the slides. 2 And all of these benefits, you can get 3 somewhat of an idea. If you chop off the cumulative 4 curve at zero, anything that's above zero is a 5 negative payback, a negative life cycle cost, and so 6 that's where you get these percentages of benefit to 7 people. 8 And thenumbers on the slide are the exact 9 precise numbers, and those are in the spreadsheet as 10 well. There's a table in the spreadsheet, especially 11 if you run the analysis with Crystal Ball. 12 MR. BROOKMAN: Jim, McMahon. 13 MR. McMAHON: Terry, we show a lot of 14 results in this kind of format, and I'm wondering if 15 itwouldbe useful towalk through one of these graphs 16 and explain what it says. I'd be happy to do that. 17 MR. BROOKMAN: Doyou want todo that now? 18 MR. LUTZ: Yes. 19 MR. BROOKMAN: Let's refer to a specific 20 page. 21 MR.McMAHON: Okay. 22 MR.BROOKMAN: This, once again, is in the

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1 back-up. 2 MR. McMAHON: Theback-up materials,page 3 2, the one that Terry just referred to, change in life 4 cycle cost, electric water heaters. 5 MR. BROOKMAN: Let's give everybody a 6 second to find it. 7 MR. McMAHON: Yeah. 8 MR. LOGEE: Yeah, it says life cycle cost 9 analysis back-up materials. 10 Jim, can you put it up on the slides? 11 MR. LUTZ: It's onmy laptop that doesn't 12 have it. 13 MR. McMAHON: Okay. Let me try and walk 14 you through. I'll just take the top left one. Delta 15 life cycle cost of heat trap compared to analytic 16 baseline in 1998 dollars, and it says at the top 95 17 percent benefit, five percent disadvantage. Let me 18 explain what you're seeing here. 19 Thevertical axis has got two scales. On 20 the left it says frequency. You remember that we 21 sampled 10,000 houses. So the height of any of the 22 bars on there, the bar chart, is the number of houses 

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1 that fall in that range. Okay? 2 So I'm going to give you a specific 3 example. If you look right in the middle on the 4 horizontal axis where the zero is, this axis is the 5 change in life cycle cost. Zeromeans the life cycle 6 cost is the same forbuying awater heaterwith a heat 7 trap as not. In other words, the extra cost is 8 balanced out by operating cost savings exactly. 9 That bar is the shorter one just to the 10 right of the tallest one in the middle, and it looks 11 like about 2,000 households fall there. Okay? So the 12 bars represent the frequency. 13 The right vertical axis is a percentage, 14 and that goes with the other line, the one that's got 15 filled in squares on it. So if we start at the left, 16 it says minus 250. That means there is a house, one 17 ormore houses, that save $250. Their life cycle cost 18 is $250 lower in the heat trap case than in the 19 baseline case. 20 As youmove to the right, you get less and 21 less savings until you get to zero, and the ones on 22 the right, the greater than zero, are ones where the 

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1 life cycle cost increases whenyou go frombaseline to 2 heat trap. Okay? 3 So that top line that starts at the left, 4 angles up, and then comes up to the top axis goes with 5 the right side, which is a percent. We're 6 accumulating,adding up the bars as we go across, and 7 that's another way of looking at it that gets you to 8 the 95 percent number. 9 If you go to the zero and go straight up, 10 you'll hit a filled in square that's not quite at the 11 top of the graph. It's just slightly below. It's 12 five percent below. So you've got 95 percent that 13 have a savings in life cycle costs. 14 And all the other graphs are interpreted 15 the same way. So the distribution shows you the 16 10,000 houses and where they fall, and the filled in 17 squares show you how that accumulates across the 18 population. 19 MR.BROOKMAN: And on that samepage, that 20 bottom right-hand graph perhaps makes it more 21 graphically easy to understand how they stack and 22 accumulate. 

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1 Joe Mattingly. 2 MR. MATTINGLY: Joe Mattingly from GAMA. 3 On the chart that's on the screen, I just 4 want to be sure Iunderstand something here. Suppose 5 you did nothing but number five. You just insulated 6 the tank bottom. Forget the three plus. If you did 7 only that, would that payback in 6.79 years or is it 8 dependent somehow on -- 9 MR. LUTZ: Thepayback is tothe baseline, 10 and it includes all of the design options. Sonumber 11 five is insulated tankbottomplus three, and three is 12 two and a half inch jacket insulation plus one, and 13 one is heat traps. 14 So number five has heat traps, two and a 15 half inch jacket insulation, and insulated tank 16 bottom, and the payback is relative to the baseline 17 model. 18 MR. MATTINGLY: And so that would be the 19 whole package has that payback? 20 MR. LUTZ: Yes. 21 MR. MATTINGLY: Okay. 22 MR. LUTZ: Yes. 

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1 MR. BROOKMAN: Before we get too far 2 afield,Glenn,you're next, but let memake sure. Jim 3 just laidout this graphic. Iwant to make sure there 4 are no questions on the graphic. I thought it was a 5 good explanation. 6 Carl and then to Glenn Schleede next. 7 MR. HILLER: Carl Hiller. 8 I have a question. I'm looking downhere 9 at the plastic tanks. Did you assume the same life 10 for the plastic tanks as for all other tanks? 11 MR. LUTZ: Yes, we did. 12 MR. BROOKMAN: Glenn Schleede. 13 MR. SCHLEEDE: I'd just like to observe 14 one of my favorite comments that DOE likes to ignore, 15 and that's the lifetimes assumes that the customer 16 buying this water heater is going to be using that 17 water heater for the time period shown here, and 18 census data tell you that people move muchmore often 19 than this, and this is not a real time period for 20 anyone calculatinglife cycle cost because people just 21 move too often, don't live in the same home for the 22 lifetime of the water heater. 

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1 MR. BROOKMAN: Thank you. 2 Jim McMahon. 3 MR. McMAHON: If I can respond to that, 4 if, in fact, a householdpurchases a water heater and 5 then those people move out, leaving the water heater 6 there for the next occupant, the second occupant has 7 basicallyno cost forthat waterheaterunless there's 8 some salvage value, and they do receive the operating 9 cost benefits compared to having purchased a house 10 with a less efficient water heater. 11 So you're correct that we don't break 12 that, but those savings are still there. It's just a 13 matter of a different person living in the house. 14 MR. SCHLEEDE: I thought you always 15 explained to me, Jim, that it's the focus on the 16 person who's making thepurchase decision that you're 17 focusing the analysis, not on some societal basis. 18 MR.McMAHON: Well,we cando it thatway, 19 Glenn, but then we have to add in -- we could do the 20 first occupant with a five year lifetime, and then we 21 would need to add in a second occupant who got the 22 rest of the life of the water heater. 

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1 MR. SCHLEEDE: That's a different

-- 2 MR. McMAHON: I thinkyou would find you 3 have the same results. 4 MR. SCHLEEDE: But, no, Idon't thinkyou 5 get -- you don't get the same decision for the 6 initial purchaser, and that's where the focus should 7 be. 8 MR. BROOKMAN: Okay. Thank you. 9 MR. LUTZ: The next slide, because of the 10 way we are doing this, we can do a sensitivity 11 analysis, which is a rank order correlation between 12 the inputs and the output of interest. This is the 13 sensitivity of the life cycle cost of two and a half 14 inch jacket insulation. 15 Andyou'll see that the bars higher up to 16 the top of the chart and that are wider have bigger 17 impact on the value, on the final value. So this 18 shows the discount rate is the most important 19 variable. 20 Then the results for gas fired water 21 heaters, the same columns, the fraction of the 22 population benefitting, the average life cycle cost 

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1 savings, and the median payback. 2 MR. BROOKMAN: Steve? 3 MR. ROSENSTOCK: SteveRosenstock, Edison 4 Electric Institute. 5 In the October '98 report on life cycle 6 cost analysis for the gas firedwater heaters, design 7 option five was option two plus the improved flue 8 baffle. On this one it's showing option five being 9 number three plus the improved flue baffle. 10 Are you kind of mixing and matching more 11 of the design options or I'm just

-- 12 MR. LUTZ: I think you caught another 13 mistake. 14 MR. ROSENSTOCK: Oh, okay. Is it 15 typographical? 16 MR.BROOKMAN: That shouldbe two side arm 17 -- four should be two plus side arm, and five should 18 be two plus improved flue baffle? 19 MR. ROSENSTOCK: Well, in the report here 20 it says -- in the October report, number four is three 21 plus side arm, and number five is two plus improved 22 flue baffle in the October report. 

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1 And the reason it really strikes out is 2 that in the October report it shows like 87percent of 3 the population benefitting from design option five 4 versus the overhead saying 21.6 percent. 5 MR. LUTZ: The change in the numbers is 6 not from the error that you pointed out. I believe 7 it's supposed to be two plus improved flue baffle. 8 We did catch a mistake in that we hadn't 9 been including -- in our efficiency calculations, we 10 had used the wrong design option on improved flue 11 baffle in that report, and so that correction. Those 12 numbers are wrong. 13 MR. ROSENSTOCK: Steve Rosenstock. 14 In the October 1990

-- 15 MR. LUTZ: Right, and that was one of the 16 reasons we had an update. 17 MR. BROOKMAN: And just to clarify, on 18 that same page, on page 38, option four, then would 19 that be two instead of three plus side arm heater? 20 MR. LUTZ: No. 21 MR. BROOKMAN: That would be three? 22 MR. LUTZ: Three plus the side armheater. 

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1 MR. BROOKMAN: And then number five would 2 be two plus improved flue baffle. 3 Okay. Thanks for that clarification. 4 Charlie. 5 MR. STEPHENS: Yeah, Charlie Stephens. 6 I want to point out that for those who 7 tend to believe Mr. Schleede's earlier argument, you 8 wouldalso have to argue for the removal of all rental 9 households from this analysis since they never buy a 10 water heater on their own. 11 MR. BROOKMAN: Frank Stanonik. 12 MR. STANONIK: It might be a good 13 suggestion because sometimes they get stuck with 14 paying the fuel bill if they're not buying the 15 product. 16 MR. STEPHENS: Sometimes? 17 MR. LUTZ: Okay. Page 39, slide 39 of 18 your report -- 19 MR. BROOKMAN: Mark Krebs before we move 20 on. 21 MR. KREBS: Please. Similar to the 22 gentleman from Boch WaterHeaters, youknow, I suffer 

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1 fromattentiondeficitdisorder,Alzheimer's,and just 2 dyslexia, but I am really confused on this one. It's 3 all -- I'm looking at the electric water heater. 4 Number one plus two inches jacket insulation. Okay. 5 You said, you know, electricity per BTU is twice as 6 expensive as gas and all of that. 7 So we're saving $52.93 in a 3.49 year 8 payback for the more expensive electric heat, and the 9 same water heater with a less expensive natural gas 10 energy source is saving more money in a 1.87 year 11 median payback. Help me out. What's going on here? 12 MR. BROOKMAN: Wemay need todig for some 13 data here. 14 MR. KUSTERER: George Kusterer with Boch 15 Water Heaters. 16 Thatwas adiscussionthat washeldduring 17 a break, and I'll answer that question to the 18 gentleman after the break. 19 MR.KREBS: Well, Ineed it on the record. 20 MR. KUSTERER: I don't think it belongs 21 here. 22 MR. KREBS: I want it on -- I'd like to 

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1 have it on the record. 2 MR. BROOKMAN: Maybe LBL. 3 MR. KUSTERER: Itwas saidoff the record. 4 I'll discuss it off the record. 5 MR. BROOKMAN: Let's give LBL a chance to 6 look and see what they can do with that. Jim's 7 looking for it. Is he the one? Is that okay? 8 MR. LUTZ: He can look, but my answer is 9 that it

-- 10 MR. BROOKMAN: Do you have it? Okay. 11 MR. LUTZ: -- that it depends on the use 12 of those households, the energy prices of those 13 households and the cost, the installation cost in 14 those households. 15 And I'd have to dig to tell you more. 16 MR. KREBS: Well, maybe we need to follow 17 up on this afterwards. 18 PARTICIPANT: It's not the same gallons, 19 right? 20 MR. BROOKMAN: Jim McMahon, do you have 21 the information? 22 MR. McMAHON: Mark, give us a fewminutes 

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* too1 to look into that one. 2 MR. KREBS: Thanks. 3 MR. BROOKMAN: Okay. Charlie Stephens. 4 MR. STEPHENS: Charlie Stephens. 5 I might just -- those who are looking 6 might check the average versus median. I think you 7 may find that there's a number of electric households 8 that are in the wrong side of zero on their life cycle 9 cost savings, and when you start looking at median 10 versus averages, you may come up with the answer or 11 part of the answer anyway. 12 MR. BROOKMAN: Thank you. 13 I'm going to make a note about this issue 14 and maybe we'll get to some further clarification. 15 MR. LUTZ: The sensitivity analysis for 16 gas fired water heaters. This is on two inches of 17 jacket insulation showing the -- oops. Now I've done 18 it. 19 This analysis shows the rank order 20 correlationof lifetimediscount rate,operatingcost, 21 and total installed costs with the life cycle cost, 22 and then the final slide is just a request for 

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1 stakeholder comments, lifetimes of water heaters, 2 manufacturing costs, retail prices, installation 3 costs, mark-ups formanufacture cost to retail price, 4 the insulation characteristics andcosts thatweused, 5 projected fuel prices, uncertainty on the energy 6 parameters, design options, temperatures, and models 7 to predict hot water use by household. 8 MR. BROOKMAN: Frank Stanonik. 9 MR. STANONIK: Jim, forgive me if this is 10 a wrong or dumb question, but in terms of the -- you 11 know, I understand the methodology of how you looked 12 at the design option,but if you had looked at design 13 option -- I'm talking about the gas fired one. 14 MR. LUTZ: Un-huh. 15 MR. STANONIK: If you look at the design 16 option of one plus improved flue baffle, all right

-- 17 MR. LUTZ: Would we have come up with 18 different answers? 19 MR. STANONIK: Would it give you a 20 different answer? 21 MR.LUTZ: Itwould, and the order and the 22 reasons and the order that we grouped the design 

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1 options were selected in the engineeringanalysis. So 2 you have to go back to that one. 3 We did that to put them in a certain 4 order, put them in order of ascending payback, 5 starting at the lowest payback. 6 MR. STANONIK: Well, Iguess, and I'm just 7 trying to figure this one out. I mean, if you 8 partition the consumption of thewater heater between 9 the energy to actually heat water that's used as 10 opposedto energy that's just tomaintain thewater in 11 the tank, my seat of the pants guess is that it's 12 about -- it seems to me it's about three to one, 13 ratio-wise. Imay be a little off on that one, but 14 about 25 percent of the energy -- maybe it's a little 15 more than that -- is attributable to let's call it 16 replacing standby losses, and the remaining is 17 actually energy to heat the water. 18 If I'm close there, it intuitively seems 19 to me that you get -- I shouldn't say -- more likely 20 payback if I pay attention to heating the water 21 better. 22 MR. LUTZ: The trouble -- and that does 

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1 make sense, but when you become more efficient at 2 heating the water, increase the recovery efficiency, 3 you start getting into regions whereyou have venting 4 costs, additional venting costs. 5 MR. STANONIK: Well, okay. I understand 6 that, but recognizing that in this case the improved 7 flue baffle measure has been kept below the danger 8 zone, I'm just curious. 9 MR.LUTZ: It'sbeen keptbelow the danger 10 zone, but it hasn't beenkept below the zonewhere you 11 have to add in Type B vent connectors in a certain 12 percent of the houses. So to increase the recovery 13 efficiency above the 76 percent that it is now, we 14 assume that you would have to, according to the GRI 15 report, install Type B vent connectors in a certain 16 fraction of the houses, and that adds to the total 17 equipment cost. 18 MR. STANONIK: Okay. 19 MR. BROOKMAN: I saw Steve Rosenstock and 20 then Carl Hiller. 21 MR. ROSENSTOCK: Steve Rosenstock, Edison 22 Electric Institute.

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1 In responsetoMr. Krebs' comments, in the 2 October '88 life cycle cost analysis, the back Tables 3 5.5.7 and 5.5.8, some of these numbers might have 4 changed by now,but it shows the impact of the various 5 measures, the design options on the annual average 6 electricity use and the average energy savings on a 7 BTUbasis. 8 For the electric side, going to design 9 option two, which I believe is what Mr. Krebs was 10 talking about, heat traps plus a two inch jacket 11 insulation, it shows for the electric water heaters, 12 at least in the October version of the report, about 13 a four percent savings, and BTUs per day savings on 14 site, 1,318. 15 On the gas side, it shows about a 7.7 16 percent average energy savings annualized, and 4,841 17 BTUs per day savings. 18 Thatmight explain some of those numbers. 19 MR. BROOKMAN: Thank you, Steve. 20 Carl and then to Steve Nadel. 21 MR.HILLER: Two issues. First, a quick 22 one. Water heater lifetime for gas water heaters, 

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1 same as electrics. 2 MR.BROOKMAN: Yeah, referring then to the 3 -- oh, that's your question, and thankyou for taking 4 us back to the

-- 5 MR.HILLER: You didn't showaplot for

-- 6 MR. LUTZ: I do have a similar plot. I 7 don't have it in the slide show. Iwas trying to keep 8 it short. 9 It's slightly shorter. It's in the 10 spreadsheet. I believe the maximum is 11 years. I'd 11 have to look it up. 12 MR. McMAHON: This is Jim McMahon. 13 The average on gas is nine years, and the 14 average on electric is 12. I don't remember the 15 minimums and maximums in there. It's like four to 14 16 for gas. 17 MR. HILLER: The other issue, and I've 18 been trying to figure out, waiting for anappropriate 19 point to raise it. I'mnot sure if this is the time, 20 but I'll raise it anyway to make sure weget it on the 21 record. 22 All of this analysis so far has been done 

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is* 1 on a 50 gallonwater heater, 40 or whatever. My point 2 is it's fairly small diameterwaterheatersas opposed 3 to like an 80 gallon water heater. 4 MR. LUTZ: Now,we did, and I should have 5 made this clear, back whenwewere calculating energy 6 use, we did look at the RECS household. The RECS 7 survey asked whether they had a small, medium, or 8 large water heater. From that we assigned them a 30, 9 40, 50, 65. We assigned themone of the typical sizes 10 and then the associated UAs and recovery efficiencies 11 that would go with that. y* 12 So we do reflect the market distribution 13 of different size tanks. 14 MR.HILLER: Iunderstand. That's not the 15 point I'm going tomake. The issue is your two and a 16 half inch insulation, for example, is one inch thicker 17 thanyourbaseline, right? You start out with one and 18 a half inch and you added an inch. So that's two 19 inches bigger in diameter. 20 Now, you can do that on a 50 gallon tank. 21 You do that on an 80 gallon tank, andyoumaywell end 22 up significantly impacting the usability of that tank 

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1 for going through doorways. 2 MR. LUTZ: Okay. 3 MR.HILLER: Sowe can't lose that fact in 4 the analysis. Just because it may look cost 5 effective, don't ignore the fact that you may not be 6 able to get it into the house. 7 MR. BROOKMAN: Thank you. 8 Steve Nadel. 9 MR. NADEL: Yeah, Iwas justgoing topick 10 up very briefly on your question about the flue 11 connector, and I was wondering if DOE could please 12 provide citations to those particular reports that 13 were used to reach that conclusion. 14 They're mentioned in the engineering 15 calculation, but only an author and a date. There's 16 no detailedcitation. So it'sverydifficult to track 17 them down. 18 MR. BROOKMAN: Is that on the Web or 19 someplace? 20 MR. NADEL: The Web report just gives 21 author and date without any more detail. 22 MR. BROOKMAN: Okay. Additional 

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1 questions? 2 This listing on page 40, we've covered a 3 lot of these. I want tomake sure we've covered them 4 adequately. These are really many of the central 5 issues we've already gone over. If you could take a 6 quick peek to see if there's anything else the 7 department wouldbenefit fromyouradvice on on these 8 subjects. 9 Prettymuch covered it? 10 MR. LOGEE: Terry Logee from DOE. 11 In particular, if we could find better 12 information onwaterheater lifetimes,you recall from 13 the chart on sensitivities that's a pretty important 14 variable in our analysis, andwe thought just relying 15 on the appliance manufacturing magazine for those, 16 they change year to year and so forth. That's the 17 best we have, but if there's better data out there, 18 we'd certainly like to have access to it and to use 19 it. 20 MR. BROOKMAN: No additional comments at 21 this point? 22 I guess written comments on that subject 

### NEALR.GROSS COURT REPORTERSAND TRANSCRIBERS 1323RHODEISLANDAVE., N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com282 1 would be welcome. 2 Okay. That's the end of that set of 3 presentations. What is the next set? Who presents 4 next? Jim McMahon. 5 We're doing good on time. We're making 6 good progress here. 7 Our next presenter is Jim McMahon. 8 MR.McMAHON: Well, now that we've gotten 9 all of the hard stuff out of the way, consumer 10 marginal energy rates, a very short presentation. 11 As most of you know, the advisory 12 committee to the department on appliance standards 13 recommendedthat thedepartmentmove awayfromaverage 14 energy rates to marginal energy rates. The economic 15 justification indicates that two of the seven factors 16 in the legislation would be affected by this change, 17 the first being the economic impact on consumers, and 18 the second being the lifetime operating cost savings 19 compared to increased price or the life cycle cost. 20 So what is it that is supposed to change? 21 Previously consumer energy bill savings in this 22 analysis were estimated using average interview 

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1 prices. Depending uponwhichproduct you look at and 2 which period of time, those were either national 3 averages or in the case of ballast in the last few 4 years, they were averages by utility. 5 The new approach is to estimate consumer 6 marginal energyrates tocalculate energybill savings 7 for individual households or buildings. In other 8 words, the energy savings are valued at the margin, 9 not at the average. 10 What this means is we're basically going 11 to calculate consumers' energy bills prior to the * 12 standard and then with the new standard and see what 13 the effect is on their bill. 14 What's the method? We're going to obtain 15 a database of individual customers or buildings. 16 We've actually done that. We purchased a commercial 17 data set called MAISY available from Jackson 18 Associates. You can find them on the Web at 19 maisy.com, and I'm sure they'd be happy to sell you 20 the database also. 21 MR. KREBS: Spell MAISY. 22 MR. McMAHON: Sorry? 

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1 MR. KREBS: Spell MAISY. 2 MR.McMAHON: M-A-I-S-Y, daisybutwithan 3 M. 4 This is a database that was constructed 5 originally from the national samples that EIA does, 6 residential and commercial, and I'll talka littlebit 7 about it in a couple of slides back. 8 The next step is to design a nationally 9 representative sample of customers. Let me tell you 10 what I told the advisory committee, which is it will 11 not be possible to analyze each of the 100 million 12 households approximately in this country one by one 13 and tell you the answer house by house. 14 So what we need to do is work from a 15 sample set, and wewant to make sure that that sample 16 set represents different energy suppliers, that is, 17 investor owned utilities, munis., world co-ops, as 18 well as some of the new suppliers, as well as 19 represents the consumers well, represents different 20 regions, different household characteristics, all of 21 the things that we've talked to you about earlier in 22 the context of the water heater analysis. 

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1 The third step is to collect tariff 2 information. By that I mean the rate schedules from 3 the utilities or the energy suppliers, and there's a 4 great deal of data there. 5 The problem that we have is right now 6 there is no single data set that contains both the 7 tariff information,the rateschedule information,and 8 the characteristics of the houses and has themmatched 9 up. 10 So the next step is to develop and test a 11 method for matching the tariffs with the customers. 12 Thenwe'll calculate the marginalrates for our sample 13 of buildings, and we'll use that sample to estimate 14 the marginal rates for the entire population. 15 Okay. How do we extract marginal rates? 16 Eachbuilding has energyuse associatedwith it. The 17 data set that we have, just like the RECS and 18 CBECS data sets available fromEIA,has a total energy 19 consumption for each building. These are gotten from 20 the utility bills, and for the purpose of the water 21 heater analysis, we have them by fuel type. So it's 22 electric, gas, and oil. 

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1 We're going to calculate monthly energy 2 bills for each of the buildings in our sample. Why 3 monthly? We're doing monthly because for some 4 products, we're looking ahead to central air 5 conditioners, for example. The rates change with 6 seasons, as does the usage, and it's going to be very 7 important to capture that seasonal variation. 8 The third step is to calculate annual 9 energy savings due to standards, annual here, and then 10 distribute that across the year to months. So the 11 annual savings will be calculatedbymethods like you 12 have just seen for the life cycle costs. The new 13 information is todistribute that across theyear into 14 the months of the year. 15 And then we can calculate monthly energy 16 bills for the sample. I've got a parenthetical there. 17 We know that some customers have time of use rates. 18 If we are going to capture those customers, we're 19 going to have to deal withhourly energy consumption. 20 That would probably involve simulation models which 21 exist for capturing hourly profiles. 22 That's a lot more work. So that's just 

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1 there as we're aware of that concern. If time of use 2 rates capture a sufficient part of the population, 3 then we'll try and deal with that. 4 Finally, we'll use the marginal rates to 5 estimate national marginal rates, andwe'll calculate 6 the bill savings. 7 The data. There are three sets of data. 8 The first is the buildings database, and we have 9 purchased MAISY, and it's installed at LBL. There's 10 about 90,000 commercial customers, not of interest to 11 this analysis, and 60,000 residential. That's almost 12 ten times as large as the RECS data sample. 13 The advantage of it being larger is that 14 it's stratified by state. The RECS data set that 15 we've talked about so far does not have detailed 16 geographic identifiers for thehouses. Youcan't tell 17 where they are. The MAISY data set has done that for 18 us down to the state level. 19 It also provides lots of energy related 20 customer characteristics. Ithink it's a 600megabyte 21 file. 22 It also has household load profiles. By 

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1 that Imean it has the total household distributionof 2 loads across the year. It doesn't have the end uses. 3 Yes. 4 MR. STANONIK: Frank Stanonik, GAMA. 5 Jim, when you say stratified by state, I 6 guess are you saying that, in fact, the MAISY data 7 wouldhavemorehouseholds inCalifornia because there 8 are morepeople in California? Imean so there's some 9 correlation to how the population is dispersed across 10 the United States? 11 MR. McMAHON: Yes. What I'm saying is 12 each of the households, each of the buildings in the 13 sample is assigned to a state. 14 MR. STANONIK: So it's identified by 15 state. 16 MR. McMAHON: Right, right, and because 17 it's larger, we can take a sample that says here's 18 California. It will have roughly 6,000 households in 19 it. That's enough that we can say something 20 meaningful about California. 21 If you take the RECS set and you've got 22 7,000 houses to start and you say let's look at new 

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1 construction in California or whatever, you start 

### 2 getting down to such a small number of houses. 3 I remember looking at heat pumps. We 4 looked for new construction single family heat pumps 5 inNewEnglandbecause theyhavethecensusdivisions, 6 and there's only one in the sample, and you really 7 don'twant todo ananalysison that onehouse and say 8 this is what's going to happen to New England. 9 (Laughter.) 10 MR. McMAHON: Right? So that's why I'm 11 pointing that out. 12 MR. STANONIK: Okay. 13 MR. McMAHON: Okay. So that's the 14 buildings database. That's one large set of data that 15 we now have in place. 16 The second set of data that has to be 17 brought in andmarried to that is the tariffs. We've 18 looked at the Web sites for the major trade 19 associations for the utilities, APPA, the American 20 Public Power Association, representing the munis.; 21 Edison Electric Institute, represented here, 22 representing the investor owned utilities; and RECA 

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1 for the rural co-ops. Each of those Web sites has a 2 list of their member utilities. It's typically 3 several hundred utilities each, and each of them has 4 live links from that list to the utilityWeb site. 5 Sowewere able to go throughthose andgo 6 back to those individual utilities, look on the Web 7 and capture those tariffs that are already inplaceon 8 the Web. 9 It'snot aswonderful as it sounds. A lot 10 of them do not have the tariff information publicly 11 available, but we can get probably I would guess 12 between ten and 20 percent, maybe a little more than 13 20 percent, of the utilities have tariff information 14 available that way. So we are gathering that 15 information. 16 Therearealso commercialvendorswhosell 17 data sets of rate information, and we're exploring 18 what they have. They tend to be not as comprehensive 19 in their coverage. They tend to focus on large 20 utilities. Some of them are not nationally 21 representative, but in any case, there are other 22 sources. 

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1 Public utility commissions have the rate 2 information if we can gather them from each of the 3 states, and in some caseswe're contacting individual 4 utilities. 5 The third set of data is the part that 6 allows us to get from annual to monthly, and that is 7 monthly end use loadprofiles. There's a fair amount 8 of published literature, particularly in the 1970s up 9 through the middle of the 1980s. There are utility 10 studies. 11 Rightnowthere'sa greatdeal of research 12 going on by energy suppliers in the restructured 13 world. However, almost all of it is proprietary, 14 unlike the situation ten or 20 years agowhere we had 15 good cooperation from energy suppliers to provide 16 information to this process. Most of them are now 17 competing for customers and don't want to share what 18 they know about their customers, but we're trying to 19 track that and see if there's anything we can gather 20 from recent data as well. 21 And that's it. Are there questions? 22 MR. BROOKMAN: Questions following on 

### NEALR.GROSS COURTREPORTERSAND TRANSCRIBERS 1323RHODEISLANDAVE., N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com292 1 Jim's presentation. 2 Mark Krebs. 3 MR. KREBS: Mark Krebs. 4 Jim, going back to your presentation of 5 October 30th, basically all of this is admirable. 6 However, as I recall, it's in essence amoot point in 7 regards to thisparticular rulemakingbecause itwon't 8 be in place in time to make a difference and to be 9 incorporated into this, or am Itotallywrong on that? 10 MR. McMAHON: No, that's not the case. 11 Our intention is to include the marginal rates in the 12 next round of analysis. 13 MR. BROOKMAN: Terry Logee. 14 MR. LOGEE: Let me just clarify that 15 perhaps a little bit. We will definitely include it 16 in our final analysis. I'm not so sure that it will 17 be included in the next round because, as you've 18 heard, there are some errors. There are some concerns 19 that were aired here, and we probably will revise 20 these analyses prior to a final analysis to take 21 account of some of those, and we'll still be probably 22 using the average Annual Energy Outlook numbers at 

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1 that point. 2 MR. McCABE: This is Michael McCabe. 3 Let me add to that. Since the use of the 4 word "final" can be interpreted to be in the final 5 rule as opposed to the proposed rule, based on the 6 information that we've received and some of the 7 discussion we had earlier today about the GAMA 8 submittal, we are going to be quickly revising an 9 updating this analysis. 10 SowhenTerry is talkingabout the revised 11 analysis, the next one, wewill be completing thework 12 on electricity prices and other, which will be 13 reflected in the final, using the phrase that Terry 14 used, the final analysis that will go into the 15 proposed rule, the results that will be consideredby 16 management in reaching the decision on the proposed 17 rule. 18 Sothis is intendedtobe in the technical 19 support document that will accompany the proposed 20 rule, though the next revision of the analysis, which 21 will be quickly done, again, as Terry said, will be 22 based on average electricity prices. 

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1 MR. BROOKMAN: Steve Rosenstock. 2 Thankyou for thatclarification, Michael. 3 MR. ROSENSTOCK: Steve Rosenstock, Edison 4 Electric Institute. 5 For the life cycle cost spreadsheet that 6 was just posted on the Web site, what distribution of 7 electric prices and/or natural gas prices are being 8 shown as I'll say a place holder? You know, what 9 version are we talking about? 10 MR. McMAHON: Right. Everything you've 11 seen so far is using a national distribution from the 12 RECS data set. So it's energy prices reported for 13 each house, but they are average energy prices, not 14 marginal. 15 MR. ROSENSTOCK: Steve Rosenstock. 16 And they include fixed costs? 17 MR. McMAHON: They include fixed costs. 18 MR. ROSENSTOCK: Thank you. 19 MR. BROOKMAN: Glenn Schleede. 20 MR. SCHLEEDE: Jim, couldyou saya couple 21 more words about the MAISY database? First, what 22 does it cost, and second, without buying it, is there 

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1 a descriptionof theway itwas constructed that's not 2 proprietary that you can make available? 3 MR. McMAHON: Yes. Actually, I gave the 4 Web site on purpose. There's quite a bit of 5 documentation on there. You can get a complete list 6 of all of the variables and some good description of 7 how they constructed it. 8 The cost for the residential data set was 9 approximately $25,000. We also bought the commercial 10 set to use with the ballast analysis. 11 MR. SCHLEEDE: How much is that? 12 MR.McMAHON: About the same. 13 MR. BROOKMAN: Additional questions for 14 Jim? 15 Thanks, Jim. 16 We're doing great on time. So, Steve 17 Nadel, I'm going to suggest we plug on through one 18 more agenda item that's scheduled for tomorrow, but, 19 Steve, do you have a question or comment before we 20 proceed? 21 MR. NADEL: It was a question, I guess, 22 for DOE. We're going to all be doing comments. What 

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1 vrversion should we be commenting on? Should we be 2 commenting on the version that was on the Web last 3 week? Should we be commenting on the version that's 4 on the Web today? Should we be commenting on this 5 soon to be available new version? 6 Now, how would you like to proceed? 7 MR. LOGEE: Ouch. 8 (Laughter.) 9 MR. LOGEE: Don't listen to him. He's a 10 snake oil salesman. Not really. 11 Ibelieve theversionon theWeb currently 12 is -- now, there may be two versions, but the later 13 version on the Web would be the one that I think we 14 would comment on. 15 As you realize, government doesn't really 16 move that quickly. So I don't think our revisions 17 will be available in time for the December 11th 18 comment period. So I would prefer that you make 19 comments to this workshop on the latest one. I 20 believe it's dated November, the November life cycle 21 costs. 22 Both the revised engineering report and 

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1 the revised life cycle cost report have a brief 2 addenda section in it. So if you have the report with 3 the addenda section, those are the corrected reports. 4 Those are the ones to comment on, to use to base your 5 comments on. 6 MR. BROOKMAN: Joe. 7 MR. MATTINGLY: Joe Mattingly from GAMA. 8 We want to be as helpful as possible, as 9 always. 10 (Laughter.) 11 MR. MATTINGLY: And there's 'probablya 12 number of comments that we can make by the December 13 11th date, but suppose we have other comments or data 14 orwhatever and we just can't do it by December 11th. 15 Can you still accept it after that point? 16 MR. LOGEE: Yes. Comments are always 17 welcome, and you know, you can send them in up until 18 the time we publish the NOPR. You know, of course, 19 there's some cutoff point at which we'll be doing 20 internal reviews and decision making, and they just 21 wouldn't probably be included at that point. 22 But certainly if you can get the bulk of 

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1 your comment together for December 11th, we would 2 appreciate that, but if there are additional data or 3 other information, if you could let us know, for 4 instance, inyour comment that youhave some follow-on 5 information, we'll certainly await for it. 6 MR. MATTINGLY: Thank you. 7 MR. BROOKMAN: I guess in that case if 8 there was a significant bit of data that was going to 9 be late, you'd like to know something about it. 10 MR. LOGEE: Yes. 11 MR. BROOKMAN: Steve Rosenstock. 12 MR. ROSENSTOCK: Just a quick follow-on. 13 For the life cycle cost analysis,you're talking about 14 addenda or appendices. I know for the engineering 15 analysis there's like 60 pages of appendices in the 16 November version. For the life cycle cost analysis, 17 how much actual material is there, just out of 18 curiosity? 19 And are there a lot of numerical 20 differences between the October andNovember version? 21 MR. LOGEE: There are some numerical 22 differences. Jim Lutz alreadymentioned that there's 

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1 difference inthe improve fluebaffle analysis because 2 of an error. 3 TheNovember life cycle cost analysis has 4 three appendices on it, one for sensitivities, and if 5 I have the -- let's see. 6 MR.NADEL: I think one was -- 7 MR. LOGEE: One for distributions of the 8 manufacturing costs, and the third one is the 9 uncertainty of the energyparameters, EFRE andUA and 10 P-on. 11 I don't know exactly howmany pages that 12 adds, Steve. Probably about 25 pages. 13 Perhaps Steve is alluding to the fact that 14 if you go on to our Web site and you attempt to 15 download these, you have to have a fair amount of 16 space available, like one anda half to two megabytes 17 for either one of these reports. They're very large, 18 and probably some of the databases are also in that 19 same size range. The spreadsheets are for sure. 20 These things are not small anymore. 21 MR. BROOKMAN: Additional questions or 22 comments? Steve Nadel. 

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1 MR.NADEL: I'm just trying to understand 2 the schedule for the rest of today and tomorrow. I 3 know we've made it through the official agenda for 4 today. We do have a list of issues that we said we'd 5 get back to. I'm not sure whether that's today or 6 tomorrow. 7 And then Iknow we have thepresentations 8 for tomorrow. How does Doug or someone already 9 suggested that we proceed? 10 MR. BROOKMAN: Yeah, I was going to 11 suggest something,but Iwantedeverybody to staywith 12 me while I do the suggesting so we could make an 13 informed decision. 14 I was asking whether any of these issues 15 that are posted up here, if they couldkind of easily 16 be addressed, if they were contained enough, 17 circumscribed enough that they could be discussed 18 effectively in this time frame, or whether the 19 departmentwith support of contractorsneeds somemore 20 time to kind of mull over it. 21 I know Jim's working on -- he's ready on 22 one. 

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1 I was also going to suggest that there's 2 one, the consumer subgroup element, which is on for 3 tomorrow. I was going to see. That's another 4 short -- I should say a confined topic, kind of a 5 limited presentation followed probably by fairly 6 limited comment, that we could try to kind of squeeze 7 that in now as well, I think, productively. 8 I'd hate to have anybody show up tomorrow 9 expecting to hear that discussion and miss it because 10 we did it today. That would concern me. 11 But, Brenda, do you know of anybody that 12 was coming specifically that was concerned about 13 consumer subgroup issues? I'm wondering if anybody 14 else knows of anybody else that might be coming 15 tomorrow for that issue specifically. No? 16 Michael, you have a concern about this? 17 MR.McCABE: We'vehadapproximate -- this 18 is Michael McCabe -- we've had approximately half a 19 dozen people who have left who had been attending up 20 until, say, the last houror so, and Idon't knowwhat 21 their topics that they wouldbe interested inare. As 22 amatter of fact, Idon't know if anybodyhasnotified 

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1 us in advance as to specifically what their areas of 2 interest are. 3 So I'mconcernedabout thosewhohave left 4 and any who may be intending just to come for 5 tomorrow. 6 MR. BROOKMAN: Okay. Then maybe as a way 7 of proceeding, Steve, let me suggest the following. 8 Maybewe could rely on Jim to lead off with what he's 9 come up with about the inconsistent data comparison 10 betweengas andelectric life cycle cost stuff, right? 11 Is that a fair description? 12 While he's doing that, Terry, can we put 13 you plus your other support folks from the contractor 14 team thinking about whether there's a way to address 15 these other issues and maybe begin that discussion? 16 And that way we'll hold the agenda for 17 tomorrow intact and no one that's planning on the 18 revised agenda -- okay, Terry. One additional thing? 19 MR. LOGEE: I have one announcement. The 20 ladies are busy handing out the information for 21 tomorrow. They have informed me that if you forget 22 it, if you don't bring it tomorrow,you're just out of 

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1 luck or you'll have to look on with somebody. So do 2 not leave it in yourhotel room ifyou can avoid that. 3 MR. BROOKMAN: They're getting tougheras 4 time passes. There's just no doubt about it. 5 Okay. So then I guess Joe Mattingly. 6 MR. MATTINGLY: Joe Mattingly from GAMA. 7 Idon't know ifwe alreadycovered thisor 8 not. I was gabbing. 9 In the last workshop we did on the 10 commercial, you know, test procedures, et cetera, it 11 was veryhelpful whenDOE sent out that list of issues 12 forwhich they wanted additional comment. Can you do 13 the same thinghere? Canwe review the transcript and 14 provide us a list of things you want comments on as 15 quickly as possible? 16 And that would reallyhelpus to focus and 17 get you what you want. 18 MR. BROOKMAN: And, Terry, did you 19 describe what Brenda and Sandy were handing out there 20 because I'm not sure ifyou did? Okay. Wouldyou say 21 it again? 22 MR.LOGEE: The additional informationare 

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### 1 all of the slides for tomorrow's presentations. We 2 wanted you to have them so you could look at them 3 tonight if you choose rather than HBO. I'm sure this 4 is much more scintillating and interesting. 5 Please don't forget them and leave themat 6 your hotel room because you won't be able to get an 7 additional copy tomorrow. 8 MR. BROOKMAN: Thank you. 9 So Jim McMahon has been working his 10 calculator over here, and he's just about to give us 11 some information. 12 Yes, Jim Vaughan. 13 MR.VAUGHAN: A quickprocedural question 14 about tomorrow. Is there any chance of -- oh, here's 15 a microphone -- is the schedule fairly fixed for 16 tomorrow? I have one suggestion, and that is the 17 technical research presentation by NIST is the last 18 thing on the agenda, and I know that's of particular 19 import to a number of people. Is there any chance of 20 getting it moved up in the agenda? 21 MR. LOGEE: I think so, but I'll have 22 to -- Hunter Fanney is not here right now. So I'll 

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1 have to see if I can contact him, but I believe he's 2 planning on being present for most of the time 3 tomorrow. 4 MR. VAUGHAN: He's not doing anything 5 tomorrow anyway, is he? 6 (Laughter.) 7 MR. LOGEE: I don't know. I know he's 8 planning on being here for this particular 9 presentation. 10 MR.VAUGHAN: I just thinkthat's going to 11 be a major part of tomorrow's meeting. I'd hate to 12 have it wind up at the end. 13 MR.BROOKMAN: Okay. Well, we're going to 14 try andmove expeditiously through the entiremorning 15 I can guarantee you. 16 So, Terry, if you'll be willing to call 17 Hunter. He's typically here in the morning when he's 18 a participant. 19 Are there otherquestions before we start 20 and hand this off to Jim McMahon? 21 (Noresponse.) 22 MR. BROOKMAN: Jim. 

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1 MR. McMAHON: Thank you. 2 The question had to do with the paybacks 3 that were reported, the median paybacks for gas and 4 electric, and I've traced them back. All of these 5 numbers

-- 6 MR. STANONIK: Jim, Jim, either turn on 7 those lights or move the thing under the light, 8 please. One or the other. 9 MR. McMAHON: I'll read them off. I know 10 they're a little hard to read. 11 I wasn't able with my hand calculator to 12 do all of the distributions. So I'm sorry. I just 13 did the average values. So these are all average 14 values. 15 The median results that were questioned 16 are down here on the bottom, 3.49 for electric and 17 1.87 for gas. The averages come out very similar. So 18 if you'll bear with me, we'll just work through the 19 averages. 20 The major reason they're different is we 21 havemanufacturercosts. The increase inmanufacturer 22 costs going from baseline to two inch jacket for 

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1 electric is $27. For gas it's under $19, and that's 2 what's driving this thing. 3 It's amplified by the mark-ups. If you 4 recall, the electricmark-up is 1.5, rounding,and the 5 gas mark-up is 1.15. So that makes the retail 6 difference $40 for electric and $20 for gas. 7 And so whenyou then carry through, these 8 are the operating cost savings, approximately $12 in 9 each case,you get amuch higherpayback for electric 10 than you do for gas. That's where those numbers came 11 from. 12 I can tellyou the page references if you 13 want to check my work. The LCC report, page 46, has 14 the equipment costs for electric. This is page 46, 15 and this is page 48, and page 61 and 63 have the 16 operating costs. 17 MR. BROOKMAN: Steve Nadel. 18 MR. NADEL: These underlying costs 19 differences, these come from thedata submittedby the 20 manufacturers. So if there are questions about this 21 data, it should go to the manufacturers? 22 MR. McMAHON: These numbers, the 

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1 manufacturer cost baseline, jacket and

-- 2 MR.NADEL: Yeah. 3 MR. McMAHON: We did the deltas. These 4 come from GAMA. 5 MR. NADEL: Okay. 6 MR.McMAHON: Themark-ups are derived as 7 we described earlier from a combination of a retail 8 price survey and GAMA data, but, yeah, that's where 9 those come from. 10 MR. BROOKMAN: David Goldstein. 11 MR. GOLDSTEIN: David Goldstein, NRDC. 12 I was kind of puzzled by these numbers, 13 too. So I flipped back into the charts to see if I 14 could come up with explanations, and in addition to 15 everything that Jim put up, which I didn't see, the 16 base insulation apparently on the gas model is worse. 17 So the operating cost savings are bigger because you 18 seem to be starting off at crummier insulation. 19 MR.McMAHON: That's right. 20 MR.GOLDSTEIN: -- one over relationship. 21 So it gets -- 22 MR. McMAHON: It's approximately one and 

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1 a half inch in the electric when you start and one 2 inch in the gas, round numbers. 3 MR. BROOKMAN: Additional cases relative 4 to this? 5 MR. KREBS: I'mgoing todefer. You know, 6 I think that, youknow, Iunderstand the difference in 7 insulation and the effect of the mark-up rate. 8 MR. BROOKMAN: Okay. Yeah. 9 MR. KREBS: Do youwant me to start over? 10 MR. BROOKMAN: You can summarize. 11 MR. KREBS: I'm going to defer judgment. 12 I understand the difference in the insulation values 13 to start with, and I understand the difference in 14 mark-up rates, but you know, the literal person that 15 I am, you know, looking at this slide, it said two 16 inches in each case. 17 MR. BROOKMAN: Okay. Thank you. 18 Additional questions for Jim McMahon, 19 follow-on comments on this? 20 (Noresponse.) 21 MR. BROOKMAN: Okay. Thanks, Jim. Real 22 time analysis. 

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1 Steve Nadel. 2 MR.NADEL: Yeah. Since we seem tobe at 3 a point of wonderingwhat are we coveringnext, I know 4 there's one issue that was going to be presented. We 5 discussed earlier to say we'll defer that to a little 6 later. Itwas the explanation of howDOE cameup with 7 78 percent recovery efficiency as the maximum that 8 theywanted to look at and some confusion about where 9 that came from. 10 Supposedly it came from some tank runs, 11 and it was said at the time, "Well, we'll get to that 12 later." So that may be something since it's more 13 informational so that we can understand where DOE is 14 coming from to just understand what was done. 15 MR. BROOKMAN: I should sayat the outset 16 it's thrilling to be ahead in a situation like this. 17 Seize the initiative here if we can. 18 I was wondering what the department's 19 pleasure would be. Are you in a position to comment 20 on some of these things now or are they best deferred 21 till tomorrow? 22 We don't want to get involved in a 

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1 discussion that's going to go so long that it's going 2 to -- right. We need it to be a fairly confined 3 discussion so that we honor our commitment to let 4 people out at 4:30 today. 5 Steve suggests that maybe the 78.5 6 recovery efficiency issue was one of the ones that 7 would be

-- 8 MR.LOGEE: Yes, Steve,wewant to revisit 9 that, but I'm not prepared to revisit it right now 10 other than to say that an earlier comment, I think, 11 was by Charlie to look at the performance of water 12 heaters inthe marketplace that have -- to trueup our 13 analyses to the performance and the cost, prices of 14 water heaters in the marketplace that have similar 15 design options on them is one of the approaches that 16 we're going to be considering in revising these 17 analyses. 18 I don't know just how effective or how 19 easy thatwill be. It's obviouslypretty difficult to 20 determine what is specifically on a model of a water 21 heaterunless weget a lot of the specific information 22 on that, and when we make calls to get prices, it's 

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1 difficult to get that kind of information over the 2 telephone. 3 But I'm not ready, at least for my part, 4 I'm not ready to discuss exactly whywe stopped at 78 5 percent recovery efficiencyon the gaswater heaters. 6 MR. BROOKMAN: Yes, Jim. Jim Lutz. 7 MR. LUTZ: Most of the issues of venting 8 gas fired water heaters and what efficiency levels 9 requirewhatventingtechnologies,what combinationof 10 double walled vent connectors and relining masonry 11 chimneys, all of that, came from two GRI reports that 12 were done by Battelle. One is called "Gas Water 13 HeaterVenting Issues andAlternatives," and the other 14 is "CategorizationCriteria forResidentialDraft Hood 15 with Gas Water Heaters." 16 PARTICIPANT: Page 98. 17 MR. LUTZ: I'm not sure if you have the 18 latest version. It's page 98, reference 21 of the 19 engineering analysis. Crissa Fuel E (phonetic), 20 that's the one, and the next one, D. Philips. 21 MR. NADEL: Okay, and so I'm just trying 22 to figure out where the figures came from as opposed 

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1 to getting into the technical detail. Before whenwe 2 were asked, we were told that it was not these GRI 3 sources, that DOE did some tank runs, and that's how 4 theycame upwith it. I just want to understand where 5 this came from. 6 MR. LOGEE: They did come from the tank 7 runs. When we initially went through our design 8 options, we had screened out a number of them, and we 9 screened out the power vents for the safety concerns 10 and the fact that we didn't think the venting system 11 was applicable in all situations. 12 So that leftus withthese design options, 13 and we chose some improved level or a level of 14 improvement on the improved flue baffles, and that's 15 what we came out with. 16 I guess that we could go back and attempt 17 to revisit that, but, you know, for a higher level of 18 efficiency, but I don't recall just what we gave to 19 the manufacturers for their pricing, you know, what 20 they're basing their pricing on or whether we 21 indicated a 78 percent improvement or just what it 22 was. 

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1 So we need to check that out before we, 2 you know, can proceed with additional runs. 3 MR.NADEL: All right. Imean, Iguess at 4 this point I'm looking for just background, where it 5 came from. Are those specific numbers, 78 percent 6 recovery efficiency for the chimneys and 76 percent 7 recovery efficiency for the connector, from the GRI 8 reports or, if not, are they based on some DOE 9 calculation, and if so, how did DOE get those? 10 And I'll tell you what. We're getting 11 into too much detail here. Why don't you look into 12 that andyou can report back tomorrow, just the answer 13 to the basic question: where did you get those 14 numbers from? 15 MR. LUTZ: We based the limits on the GRI 16 report, and then from there made sure that our models 17 did not exceed those limits. 18 MR. NADEL: So those 76 and 78 percent 19 recovery efficiency numbers come from GRI reports? 20 MR. LUTZ: Right. 21 MR. NADEL: Okay. 22 MR.BROOKMAN: Thankyou. That's helpful. 

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1 Those previous commenters, Jim Lutz and 2 Terry Logee both. 3 Charlie Stephens. 4 MR. STEPHENS: Sorry about this. One 5 further comment, Jim. 6 Did the GRI report -- how did it 7 characterize those limits? Imean,did it say that in 8 many cases this would cause a problem or one should 9 never exceed these limits? 10 MR. LUTZ: It was inmany cases, and some 11 of them had geographic limitations, that this is okay 12 every place, but these regions, and this is okay 13 everywhere. 14 One of the people that worked on them is 15 back there. 16 MR. PAUL: Again, if anyone is interested 17 in the GRI report, leave me your business card, and 18 I'll make sure you get copies. 19 MR.BROOKMAN: Wouldyou sayyourname for 20 the record again? 21 MR. PAUL: Darrel Paul, Battelle. 22 MR. BROOKMAN: Thank you, Darrel. 

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1 So Darrel has got additional information. 2 Steve? 3 MR.NADEL: One other little -- just so I 4 can track this down, in the report, page 26 of the 5 engineering report, it refers to other publications, 6 Paul, et al., 1992, and Talbert, et al., 1995. Are 7 those now superfluous in the current version or are 8 those additional sources for this information? 9 MR. LUTZ: I don't know. 10 MR. NADEL: If you can check and get back 11 with us tomorrow, that would be great. 12 MR. LUTZ: Do you have the Appendix C, 13 Steve? 14 MR. NADEL: No, I do not. 15 MR. LUTZ: That's a summary of the 16 venting issues. 17 MR. NADEL: Okay. 18 MR. BROOKMAN: Okay. So Jim Lutz is 19 saying for the record that Appendix C is a summary of 20 the venting related issues. 21 MR. LUTZ: Appendix C of the engineering 22 report. 

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1 MR. NADEL: I want that report. 2 MR. BROOKMAN: Terry Logee. 3 MR. LOGEE: I have one other comment. I 4 was just reminded by Ed that when we did our 5 manufacturing interviews last fall, wediddiscuss the 6 appropriate recovery efficiency limitswith them, and 7 talking about 78 percent, and that was agreed that we 8 were stillwithin the safety zoneby them, andwe felt 9 comfortable with staying with that in our tank runs. 10 So some of ourrationale forgoing to only 11 78 percent was based on those interviews with the 12 manufacturers. 13 MR. BROOKMAN: One of the issues that was 14 raised earlier -- Terry,doyou haveanother issue now 15 that you would like that we could raise? 16 MR. LOGEE: Yes. 17 MR. BROOKMAN: It's on our list over here 18 on issues that are pending. 19 MR. LOGEE: Now, this one isn't on the 20 list yet. 21 MR. BROOKMAN: Okay. "Yet," he says. 22 MR. LOGEE: Well, there is some concern 

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1 from some of the participants here about our use of 2 the EIA data, specifically that there's a difference 3 in the average wateruse between the gas and electric 4 waterheaters, and Iwas attempting to explain some of 5 the reasons why that might have occurred. 6 As Jim Lutzmentioned, there was a slight 7 difference in the average daily water use between 8 owners of gas and electric water heaters as reflected 9 in the EIA database, and you recall that that's a 10 database of 7,000 home. Iguess approximately four to 11 5,000 of those homes are single familyhomes thathave 12 water heaters. 13 And there's an additional factor inwhere 14 the various -- there are more gas water heaters, I 15 guess, located in the northern areas than in the 16 southern areas, and so forth, and those kinds of 17 differences begin to addup toa noticeable difference 18 in how much water is used. 19 And I wanted to try tomake that clear to 20 people here, that we didn't dream this up out of thin 21 area. This is a publicly available database. It's 22 fairly recent. It's 1993 that it was published. It 

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1 was data that came from 1992, and Ibelieve therewill 2 be an update by next year. 3 If it's available in time,we'll be using 4 thatperhaps inour final analysis. It depends onhow 5 soon it's available. 6 MR. BROOKMAN: George. 7 MR. KUSTERER: One quick comment. George 8 Kusterer, Boch Water Heaters. 9 And Ican't quote verbatim, but I believe 10 the comment was made with regard to the gas water 11 heater calculation that the houses were bigger. I 12 kind of didn't want to say anything at that point. I 13 figured we'd

-- 14 PARTICIPANT: I thought it had more 15 people. 16 MR. KUSTERER: No, they said the houses 17 were bigger. That's what they said. The houses were 18 bigger, and I don't think they surveyed the size of 19 the house. 20 Probably the reason, the most logical 21 reason that they usedmore hot water is because there 22 was more hot water available. 

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1 MR. BROOKMAN: Glenn Schleede. 2 MR. SCHLEEDE: A question concerning the 3 use of the RECS data. The sample for the RECS survey, 4 itwas stratified topermitprojecting from the 7,000- 5 plus homes to 90 million or whatever the number was 6 they projected to. 7 Now, has anyone talkedwith the EIA folks 8 who did the survey, and do they concur that use of 9 selected data from that sample in the wayyou are now 10 using it, that that's correct use of the sample? Is 11 it still legitimate use of that particular sample for 12 the uses you're making of it? And has someone from 13 EIA said, "Yes, that's a legitimate use"? 14 MR. LOGEE: That's a good comment, andwe 15 haven't done that. It has beenbrought up before,but 16 we have not been able to get to that yet. We will 17 certainly do that. It is a concern. 18 MR. BROOKMAN: Terry. 19 Jim. 20 MR. McMAHON: Jim McMahon. 21 We have not explicitly checked with EIA, 22 and I'll be happy to do that this week. I don't know 

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1 of anyreasonwhy this would create a problem. We are 2 using the statistical sample as itwasdefined byEIA. 3 MR. BROOKMAN: Thank you. 4 Yes. Your name? 5 MR. BRUNDAGE: Don Brundage, Southern 6 Company. 7 I'd like to support what LBL has said on 8 gas water heaters on average having higher uses than 9 electric. At Southern Companywehaveprecious little 10 survey data of actual usage, but your usual variables 11 that you look at on number of persons per household, 12 apartments versus single family, there's a strong 13 correlation that youaremore likely in a large single 14 family house with multiple -- with a large number of 15 people living there to have a gas water heater. 16 It's also correlated to since the heating 17 system tends to drive the -- the space heating system 18 tends to drive the water heating system,, you have a 19 higher correlation -- youhave ahigherpercentage gas 20 homes and larger single family than you do in 21 apartments. 22 Plus you have factors such as outlying 

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1 areas are less likely to have gas. Close in, urban 2 areas are more likely to be multi-family. There's a 3 wholehost of reasons thatyouhavemorewater use out 4 of gas water heaters than electric. 5 Thank you. 6 MR. BROOKMAN: Thank you. 7 Are there anyother issues the department 8 wishes to raise at this point or should we reward 9 people for being so efficient? 10 This is an unusual situation, I should 11 say. When the department has theseworkshops, there's 12 always a lot on the agenda, as you can tell, and to 13 get through it as efficiently as we have today, it's 14 wonderful. 15 Terry, is there anything else, or should 16 we release them until in the morning? 17 Yes? 18 MR. STANONIK: This is really not a 19 question to the issues, but the baseline results and 20 methodology, thisvery small document -- and I got the 21 one that was, I guess, available in October -- it has 22 several very nice graphs, maps of the United States 

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1 showingvarious number of people, drawper capita and 2 all of that stuff. 3 The problem is on my copy the gradients 4 that are -- in fact, the gradientsbetween the various 5 ones Ican just tell light anddark. I can't tell the 6 gradations from the others. Is there some way toget 7 a better copy of that? 8 MR. LOGEE: Zing. I've been complaining 9 to LB&L that we needed to have these copies thatwould 10 photocopy well. We've looked at that, but it's -- I 11 think we can probably improve on it, but at this 12 point, it's -- you know. We can bring it up. 13 MR. STANONIK: Charlie has a nice one. 14 The middle half of the United States -- 15 (Laughter.) 16 MR. STEPHENS: That's what happens when 17 you try to get all of those nice gradations. It 18 overloads the printer, and we're talking about a big 19 printer here. 20 MR. STANONIK: I'm going to have to go to 21 Steve's office. 22 MR. STEPHENS: We'll charge you a very 

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1 reasonable fee. Don't worry. 2 MR. BROOKMAN: Mark Krebs. 3 MR.KREBS: One answer, and I thinkone in 4 general for all of this information, you know, it's 5 all electronic at some point, and it could be put on 6 your all's Web site. 7 PARTICIPANTS: It is on the Web site. 8 MR. KREBS: Well, then you've got to be 9 able to tell there. When you print it is a function 10 of yourprinter,you know, how it's going to turn out, 11 but if it's there on the Web site, you know. 12 MR. BROOKMAN: Thank you. 13 Maybethere'llbe someadditional ideas on 14 this for tomorrow. 15 Terry, shall we? Yes. I'll turn it back 16 to Terry Logee for closing out comments. 17 Let me say before he does though that 18 we're going to start tomorrow at 8:30 sharp. Thanks 19 for being on time today, and I look forward to seeing 20 you tomorrow at 8:30. 21 AndHunter will be here also early in the 22 morning. So we can move up his presentation. 

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1 MR. LOGEE: Okay. Just to go back to 2 Hunter, Hunter Fanney will present the NIST 3 information and will be here at about 9:00 a.m. Sowe 4 can get him in a little earlier in the program. 5 Yeah,we'll take care ofthe adjustment of 6 the agenda in the morning. So that shouldn't be as 7 much of a concern, and I just want to reiterate that 8 we're really pleased to have all of you folks here. 9 This has been an excellent suggestion. 10 Actually I'm operating on data overload 11 now, and I really need to go and crash, I think, and 12 so with that, let's get on home or get on about our 13 business. 14 Thank you. 15 (Whereupon,at 4:21p.m., theworkshopwas 16 adjourned, to reconvene at 8:30 a.m., Tuesday, 17 November 10, 1998.) 18 19 20 21 22 

### NEALR.GROSS COURT REPORTERSAND TRANSCRIBERS 1323RHODEISLANDAVE., N.W. (202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com326 CERTIFICATE

This is to certify that the foregoing transcript in the matter of: Workshop on Standards for Water Heaters

Before: Department of Energy Office of Codes and Standards

Date: November 9, 1998

Place: Washington, DC

represents the full and complete proceedings of the aforementioned matter, as reported and reduced to typewriting. 

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