UNITED STATES OF AMERICA

+++++

DEPARTMENT OF ENERGY

OFFICE OF CODES AND STANDARDS

WORKSHOP ON STANDARDS FOR WATER HEATERS

TUESDAY

NOVEMBER 10, 1998

The workshop was held in Room 1E245,

Department of Energy, 1000 Independence Avenue, S.W.,

Washington, D.C., at 8:30 a.m., Terry Logee,

presiding.

PRESENT:

TERRY LOGEE, DOE

DOUG BROOKMAN, Facilitator

MICHAEL McCABE, DOE

SANDY BEALL, DOE

BRYAN BERRINGER, DOE

QONNIE LAUGLIN, DOE

CARL ADAMS, DOE

CYRUS NASSERI, DOE

JIM RABA, DOE

BRENDA EDWARDS-JONES, DOE

MIKE E. RIVEST, A.D. Little

JIM McMAHON, Lawrence Berkeley National

Laboratory

EUGENE MARGOLIS, DOE/GC

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*J|O~ ~PRESENT: (continued)

FRANCINE PINTO, DOE/GC

JIM LUTZ, Lawrence Berkeley National

Laboratory

JIM SHELLENBERGER, American Water Heater

Group

ROBERT HEMPHILL, Gas Research Institute

WILBUR HAAG, A.O. Smith Water Products

KELLY TRONCALLI, Rheem Manufacturing Co.

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.

DAVID GOLDSTEIN, Natural Resources Defense

Council

JAMES VAUGHAN, Vaughan Manufacturing Corp.

CHARLES STEPHENS, Oregon Dept. of Energy

JAMES RANFONE, American Gas Association

FRANK STANONIK, Gas Appliance

Manufacturers Association, Inc.

JOSEPH MATTINGLY, Gas Appliances

Manufacturers Association, Inc.

GEORGE KUSTERER, Bock Water Heaters

CARL HILLER, Electric Power Research

Institute

DAVID WINIARSKI, Pacific Northwest

National Laboratory

MICHAEL MARTIN, California Energy

Commission

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C-O-N-T-E-N-T-S

PAGE

Technical Research Presentation 8

Review of November 9 Discussions 65

Manufacturer Impacts 107

National Energy Savings 140

Consumer Sub-group 180

Environmental and Utility Impacts 187

Next Steps 196

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Ol 1 P-R-O-C-E-E-D-I-N-G-S

2 (8:35 a.m.)

3 MR. BROOKMAN: Good morning, and thanks to

4 all of you hearty souls that made it here in time for

5 us to start on time. I appreciate it a lot.

6 We're hoping to get through the

7 considerable amount of work here and adjourn today by

8 12:30.

9 A couple of housekeeping items at the

10 outset. Yesterday in your life cycle cost packet

11 there were some pages that were left out, and so the

12 Department has provided -- has today photocopied those

13 pages that were missing yesterday, and they're

14 available over there at the registration table. That

15 would be pages 73 through 86 somehow got left out of

16 the earlier packet.

17 So at the break or sometime today stop

18 over and get what's called here an addendum.

19 Secondly, Hunter Fanney from NIST has been

20 gracious enough to get here early, and he's ready to

21 present, and we're going to let him go first thing

22 this morning based on the request of several

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1 individuals yesterday that we get him early in the day

2 and get a chance to not only hear his presentation but

3 provide adequate time for question and comment on his

4 segment.

5 Then following Hunter's presentation this

6 morning, the Department is going to respond to some of

7 the issues that were left from the discussion

8 yesterday. So that's what we're planning to do next,

9 and then we would return to the agenda as written and

10 try and get through the rest of this by 12:30.

11 Steve Rosenstock.

12 MR. ROSENSTOCK: Hi, Steve Rosenstock,

13 EEI.

14 I just looked around. At least it looks

15 like some of the people who especially requested it

16 aren't here yet. I don't know how you want to handle

17 it. Jim Vaughan and, I think, Mr. Taylor, some of the

18 manufacturers, I think, that seemed most interested

19 aren't here yet.

20 MR. BROOKMAN: Yes.

21 MR. ROSENSTOCK: I don't know how you want

22 to handle that.

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1 MR. BROOKMAN: That's an important

2 footnote. Okay, thank you. Okay. There's a line at

3 the check-in table? Okay. I think -- Based on that,

4 maybe we'll wait just a few minutes and see how many

5 more people we can get in here. I know it does get

6 stacked up at the gate coming in the door. But all of

7 you that are here on time, you should be rewarded

8 somehow. So thank you for that.

9 For those of you who haven't found your

10 way around yet -- probably we will delay at least five

11 minutes before we start -- directly beneath us on the

12 ground floor there is a snack bar that has good coffee

13 and also some pastries and things, if you'd like to

14 stop down there and get something.

15 So let's see how it looks at about 8:45

16 and plan on starting up then or round about then.

17 Okay?

18 (Whereupon, the foregoing matter went off

19 the record at 8:38 a.m. and went back on the record at

20 8:45 a.m.)

21 MR. BROOKMAN: Good morning. My name is

22 Doug Brookman. I'll be facilitating today's session.

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1 This is the second day of the Workshop on

2 Standards for Water Heaters. We are going to suggest

3 a slightly revised agenda, but a few housekeeping

4 items first.

5 For those of you that weren't here at 8:30

6 when I made this announcement the first time,

7 yesterday the life cycle cost document yesterday -- If

8 we could hold down the sidebars a little bit --

9 Yesterday the life cycle cost document had some pages

10 that were omitted. They are pages 73 through 86.

11 The Department has made copies of those

12 pages, not the entire document, just those pages.

13 They're over on the registration table. Please pick

14 up a copy of them.

15 Also, if you would be kind enough to

16 initial next to your name on the registration table so

17 the Department has a record of who is here today for

18 the record. Those of you that have laptops with you

19 today, make certain to talk with Brenda and get a

20 property pass so that you can walk out the door with

21 your laptop when we adjourn today.

22 The basic plan for today is to work hard

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1 and try and adjourn by 12:30. We are revising the

2 schedule, the agenda, somewhat. Based on the requests

3 that we received yesterday, Hunter Fanney is going to

4 go first this morning.

5 Then the Department is going to begin to

6 try to respond to some of the issues that you see

7 listed over here to my left on the wall, issues that

8 came up from the discussion yesterday.

9 Then we're going to return to the agenda

10 as written, and try and get through the rest of this

11 material as efficiently and completely as possible.

12 So that's the basic plan. Questions,

13 comments about the plan and the other things that I've

14 laid out here? I see none.

15 So then, Hunter, are you ready to go?

16 Okay. Now our first speaker is Hunter Fanney from

17 NIST.

18 MR. FANNEY: Thank you, now that you've

19 got me wired up. I'm going to be talking about some

20 measurements that we made for the Department of Energy

21 at the National Institute of Standards and Technology,

22 and these measurements primarily concern the thermal

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1 conductivity of alternative foam materials and the

2 resulting impact on the performance of residential

3 water heaters.

4 Before I get started, I'd like to

5 acknowledge the people that made this work possible:

6 BASF, Michael Kurpa who actually produced the foam

7 materials; Eric Lannis from Bradford White who

8 provided the tanks; at NIST, Keith Eberthart who is

9 our statistician, Jareb Ketay-Paprocki who is a coop

10 student from Virginia Tech, Stanley Morehouse who is

11 a technician in the Heat Transfer Group; and finally,

12 Scott Freeman from Pacific Northwest Laboratories for

13 arranging the shipment of tanks and the foaming of the

14 tanks.

15 What I'm going to discuss this morning --

16 I'm going to go over what the goal of this particular

17 segment of research was, the scope, the approach that

18 we took, the apparatus that we used, the measurements,

19 the experimental measurements that we made, and then

20 summarize it for you.

21 The goal of these measurements was to

22 measure and compare the thermal conductivity of foam

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1 boards that were produced using three different

2 blowing agents, 245fa, 141b and water/CO2 .

3 The second goal was, once those thermal

4 conductivity measurements were made on the individual

5 foam materials, to also measure the resulting

6 performance from water heaters that were insulated

7 with foams blown with those three blowing agents.

8 As I mentioned, I had mentioned the three

9 different blowing agents. The water heaters that were

10 part of this particular study were residential

11 electric water heaters with a nominal 50-gallon

12 capacity.

13 The foam block specimens that were

14 produced at identically the same time were nominally

15 two foot by two foot by approximately 2.6 inches

16 thick.

17 The approach that we took -- and again,

18 this was coordinated by Pacific Northwest Laboratory -

19 - is that the water heaters were produced and the foam

20 samples were produced at exactly the same time. So

21 there were three different occasions in which blocks

22 and tanks were foamed: The initial set, the 141b

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1 measurements were made, produced on April 21. The

2 H2 0/CO2 specimens were produced in early June, and

3 then the 245fa in early July.

4 This chart is showing that one of the

5 things we strive for is that the thermal conductivity

6 measurements were made at exactly the elapsed time

7 from the point at which the foams were produced;

8 because, as many of you in the room are aware of, foam

9 characteristics change with time.

10 So the thermal conductivity measurements

11 were timed basically to be about 26 days after the

12 production of the foams and tanks on all three

13 occasions.

14 The energy efficiency measurements were

15 also timed so that at least one of the tanks was

16 undergoing evaluation at the same time that the

17 thermal conductivity measurements were being made.

18 The apparatuses that we used to make these

19 measurements: The thermal conductivity measurements

20 were made with the NIST 1-meter hot plate, which is

21 the nation's standard for thermal conductivity

22 measurements. All thermal conductivity measurements

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1 are traceable back to this apparatus. It conforms to

2 ASTM test method C177.

3 The water heater testing was done in our

4 water heater laboratory in which we have control of

5 the water, inlet water temperature, the environmental

6 conditions surrounding the tank. It's fully

7 automated, computerized, and we also have an infrared

8 imaging system as part of this laboratory.

9 This laboratory was initially used to

10 assist DOE in development of the simulated use test

11 for residential water heaters a number of years ago.

12 Okay. Let's get to the experimental

13 results. There's really three different areas of

14 results that we're going to talk about. The first

15 will be the thermal conductivity measurements of the

16 foam samples themselves.

17 The second will be measurements of the

18 heat loss from the tank to the surrounding ambient,

19 which, of course, is a measure of how well the tank is

20 insulated. Then finally we'll talk about the energy

21 factor and the energy factors that we measured for the

22 different blowing agents.

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*e 1 The thermal conductivity measurements were

2 made at three different conditions, and this was done

3 to determine -- It was done for a number of reasons,

4 but the primary reason was that we felt that modelers

5 would like to know the thermal conductivity of the

6 material over the range of temperatures that would

7 likely be encountered in use as a water heater

8 application.

9 So on the cold side of the foam material

10 we selected 67.5 degrees Fahrenheit, which is the

11 ambient temperature specified in the DOE test

12 procedure. On the warm side of the foam material we

13 picked three different temperatures to capture the

14 temperature range that would be likely to be

15 encountered by the foam material in the actual

16 application of the tank, which was 100 degrees

17 Fahrenheit, 120, and 140.

18 The measurements were made for each of the

19 three blowing agents at each of these three

20 conditions, and I'll show you the results of that

21 graphically. Okay.

22 MR. BROOKMAN: Can we have a few questions

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1 as we go along?

2 MR. FANNEY: I'd love questions as we go

3 along, yes.

4 MR. BROOKMAN: Frank?

5 MR. STANONIK: Frank Stanonik, GAMA. Two

6 questions.

7 MR. FANNEY: Yes, sir.

8 MR. STANONIK: Going back to the

9 characteristics of the specimens, I assume that that

10 is nominal two-pound density foam.

11 MR. FANNEY: Yes.

12 MR. STANONIK: Okay.

13 MR. FANNEY: It is, and I have the full

14 foam specifications, but I don't have them with me,

15 Frank.

16 MR. STANONIK: Oh, no. I just -- because

17 the measurements like 1.5, 1.9 -- just nominal two

18 pound. Okay.

19 If you missed it, I -- If you said it, I

20 apologize for missing it. The ambient area measuring

21 -- where is that?

22 MR. FANNEY: Okay. Let me back up a

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1 minute. No, that's fine, because I think people may

2 not be familiar with the NIST one-meter hotplate.

3 With a hotplate apparatus, the way the

4 measurements are made, Frank, is that there is two

5 parallel plates, and the foam is sandwiched in between

6 those two plates.

7 One is what's referred to as the cold

8 plate, and the other plate is referred to as the hot

9 plate. In the test conditions that we selected, what

10 we did is for all thermal conductivity measurements we

11 maintained the cold plate at 67.5 degrees Fahrenheit,

12 which would be equivalent to the nominal ambient

13 temperature in the DOE test procedure.

14 The hot plate was maintained at three

15 different -- was used at three different conditions,

16 the 100, 120, 140.

17 MR. STANONIK: Okay, but on your chart of

18 test conditions, the last column says ambient air. I

19 was just trying to figure out where that one --

20 MR. FANNEY: Oh, okay. Okay. The ambient

21 air is what you want to do when you -- You have to

22 make sure that your specimen is guarded in the hot

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Q 1 plate apparatus, Frank. So you want the ambient air

2 surrounding the insulation sample to be at the mean

3 temperature between the cold plate and the hot plate.

4 MR. STANONIK: Oh, okay. All right.

5 MR. FANNEY: That's a good question.

6 MR. STANONIK: It's the size, really,

7 you're worried about.

8 MR. FANNEY: That's right. That's right.

9 Okay.

10 MR. BROOKMAN: It's a bunch of engineers.

11 MR. FANNEY: Right.

12 MR. BROOKMAN: Bunch of damn engineers.

13 MR. FANNEY: Okay. So this is the first

14 set of results that I'm going to present. This is

15 just the thermal conductivity of the foam material

16 blown with the three different blowing agents.

17 What we have on the X axis is the mean

18 temperature. So this is simply the mean of the cold

19 plate and hot plate temperatures. On the Y axis what

20 we have is the thermal conductivity of the foam

21 materials.

22 There is three different curves for the

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1 three different blowing agents, and there is a three

2 points on any given curve, because again we ran three

3 different hot plate temperatures which thereby

4 correspond to three different mean temperatures.

5 The bars on each data point represent the

6 uncertainty associated with the measurement for the

7 NIST one-meter guarded hot plate.

8 So the first thing you'll notice -- Now

9 remember, thermal conductivity means you're losing

10 more heat which, when you're trying to insulate a

11 water heater, is a bad thing. Okay? So the lower the

12 thermal conductivity, the better the performance of

13 the foam. It's the inverse of R value. Okay?

14 The top bar is for the water/CO2 foam

15 material. The blue bar is for the currently used 141b

16 blowing agent that's used in water heaters, and then

17 the green bar is for the 245fa blowing agent.

18 Things that jump out at you, of course, is

19 the fact that the water/CO 2 has a significantly higher

20 conductivity than the 141b. The 245fa samples are

21 very close to the 141b measurements and, in fact,

22 there's overlap within the measurement uncertainty of

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1 the apparatus itself.

2 The dates correspond to the dates in which

3 the measurements were made. You can see, for any

4 given blowing agent, they are sequential in nature.

5 MR. ROSENSTOCK: Question. On our copy,

6 I just want to double check the --

7 MR. BROOKMAN: Steve Rosenstock.

8 MR. ROSENSTOCK: Steve Rosenstock, EEI.

9 The HFC-245fa -- is that the lowest line across on the

10 graph?

11 MR. FANNEY: Yes. The green line, yes.

12 MR. ROSENSTOCK: The lowest line. Then

13 the 141.

14 MR. FANNEY: Yes, the 141b is the

15 intermediate line, and the top line would be the

16 water/CO2 .

17 Okay. Another way of looking at this

18 would be the relative differences between the thermal

19 conductivities. Here what we're showing, we're

20 comparing the two alternative blowing agents to the

21 one that's currently being used, the 141b, and it's

22 simply represented as a percent difference between the

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1 alternative foaming agent and the one that's currently

2 being used.

3 So, for example -- and as you remember

4 from the previous graphs, those lines are pretty much

5 linear and parallel as a function of temperature. So

6 the percent difference in thermal conductivity between

7 the water/CO2 blowing agent and the 141b is

8 approximately 42 percent higher; whereas, for the

9 245fa blowing agent, it's within three percent.

10 The experimental uncertainty on the NIST

11 guarded hot plate is about +1.5 percent. So you can

12 see that they overlap within experimental uncertainty.

13 Okay. The next thing that we wanted to

14 look at was the overall heat-loss-area coefficient.

15 Okay? Basically, what it is is it's a measurement --

16 this is embedded within the DOE test procedure, but

17 you can also use the technique to determine the

18 overall insulating capability of a water heater.

19 Basically, the way this works is

20 probably all of you are familiar with -- is that you

21 heat the tank up. You make sure the tank has achieved

22 thermal equilibrium at that point in time.

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*^& ~ 1 The tank stands there for a given duration

2 of time. There's no hot water load on the tank. You

3 measure the energy into the tank. Knowing the average

4 temperature within the tank and the surrounding

5 ambient temperature, you can back out the overall heat

6 loss area coefficient.

7 So we thought it would be of interest to

8 look at that also independent of the measurement of

9 the energy factor itself, and this is just the

10 equations by which we can determine the UA factor of

11 the tank.

12 MR. BROOKMAN: Carl?

13 MR. HILLER: Don't run by that one so

14 quick. I see your assumed input --

15 MR. BROOKMAN: Carl Hiller.

16 MR. HILLER: Carl Hiller from EPRI.

17 I see your assumed input efficiency is 98

18 percent.

19 MR. FANNEY: Yes.

20 MR. HILLER: What is it really? The point

21 is, don't assume that number.

22 MR. FANNEY: Yes. Yes, I always have --

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1 It's always kind of -- I've always questioned that

2 myself, Carl, as to why that DOE test procedure

3 proscribes the .98.

4 MR. HILLER: I've never seen any proof of

5 that. Seems to me, since the wires are pretty much

6 inside the insulation --

7 MR. FANNEY: Yes. You're right.

8 'MR. HILLER: -- and the elements inside

9 the insulation, that even if there was some heat loss

10 due to the resistance heating in the wires, it would

11 still be inside the insulation and still end up in the

12 water.

13 MR. FANNEY: Yes. Yes.

14 MR. BROOKMAN: So rather than 98 percent,

15 you would suggest it should be more like --

16 MR. HILLER: Either use 100 percent or

17 measure it and find out what it is. Don't assume it.

18 MR. FANNEY: Right. The problem with

19 trying to measure it, Carl -- and you've probably

20 tried to do this yourself -- is even with the best

21 NIST instrument calibrated from our traceable

22 laboratories there's still some uncertainty in all of

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1 the measurements.

2 When you're looking for a one percent

3 difference, for example, it's very difficult to

4 separate out that due to measurement uncertainty and

5 that due to the actual conversion efficiency.

6 MR. HILLER: You can see the importance of

7 that, however, when you're trying to make tanks with

8 an energy factor of .97.

9 MR. FANNEY: Yes, that's right. However,

10 for this discussion it somewhat becomes irrelevant,

11 because all of the results, Carl, are calculated in

12 the same manner. So the relative ranking would not

13 alter.

14 MR. HILLER: That is one of the things one

15 needs to consider in both your modeling efforts and in

16 your trying to make better tanks.

17 MR. FANNEY: Yes.

18 MR. HILLER: If there is a built-in

19 assumed input efficiency that's incorrect and it

20 knocks you down two points, there's only so much you

21 can do.

22 MR. FANNEY: That's true.

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1 MR. BROOKMAN: That does not detract from

2 Hunter's comment about the methodology which --

3 MR. HILLER: The relative comparisons are

4 still the same.

5 MR. FANNEY: That's right. In fact, when

6 I first did this, Carl, I made that mistake and

7 perhaps did the right thing, because when I first

8 calculated it, I forgot to put that in, and then I

9 went back and altered it.

10 Yes, Frank?

11 MR. STANONIK: It's an interesting

12 discussion, but the fact is the overall purpose of

13 this is to come up with new minimum efficiency

14 requirements for the product.

15 MR. FANNEY: Yes.

16 MR. STANONIK: And those efficiency

17 requirements will be based on the current test

18 procedure. Now the current test procedure, you used

19 .98. So in some ways it would be not worthwhile to

20 get into what the real efficiency is, because when the

21 manufacturer goes to build a water heater to meet the

22 new'levels, he's going to use .98.

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1 MR. FANNEY: Yes.

2 MR. STANONIK: And whatever the benefit of

3 the insulation, that's the number he's going to use.

4 MR. FANNEY: Yes. That's correct.

5 MR. LOGEE: Terry Logee from DOE. You're

6 correct, Frank. We just revised the DOE test

7 procedure. We did not try to consider that rather

8 small difference, and perhaps we can do that next go9 round; but that's not going to be in the near future.

10 MR. STANONIK: Good.

11 MR. LOGEE: Not for these standards.

12 MR. FANNEY: Okay. The results of these

13 tests -- Now the procedure that was followed here, of

14 course, is that, as I mentioned in the scope, there

15 was four tanks produced using each of the three

16 blowing agents. So there's 12 tank specimens that are

17 available to us.

18 This is basically showing the tank number

19 and the overall heat-loss-area coefficient that we

20 measured for each of the tanks. Now there's quite a

21 bit of variation from tank to tank within a given

22 blowing agent, and that could be due to a number of

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1 things. When I show you some infrared images later,

2 I think some of those will come to mind as to why

3 there's a large variation from tank to tank.

4 Basically, the 141b came in at about an

5 average of 3.11. The 245fa is 3.15, and the water/CO 2

6 is 3.77.

7 Yes, Frank?

8 MR. STANONIK: Hunter, just a quick

9 interruption. I just want to, I guess, emphasize --

10 and these water heaters were blown by the foam

11 manufacturer?

12 MR. FANNEY: That's correct. They were --

13 MR. STANONIK: The experts.

14 MR. FANNEY: That's right. They were

15 blown by BASF, that's right.

16 MR. BROOKMAN: BASF means? Oh, that's a

17 company? Okay. Okay. Jim Lutz?

18 MR. LUTZ: Hunter, what was the thickness

19 of the insulation?

20 MR. FANNEY: In the tank?

21 MR. LUTZ: In the tank.

22 MR. FANNEY: Approximately two inches in

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1 the radial direction.

2 This is just a graphic of what I showed

3 you on the previous tabular slide.

4 Now one of the things that came to mind

5 early when DOE approached us about determining the

6 effect on energy factor of different thermal

7 conductivity foams is the fact that it's not an

8 extremely strong relationship, and you're going to

9 have to bear with me here for a minute. I'm going to

10 show you why that's the case.

11 If you look at the energy factor, if

12 everything in the test procedure is at nominal

13 conditions, and if there's no change in stored energy

14 when the test is conducted, the energy factor is

15 simply the thermal efficiency of the water heater.

16 It's the amount of energy you get out of the tank

17 compared to the amount of energy that's supplied to

18 the tank.

19 So when you look at this, the amount of

20 energy that goes into the tank is equivalent, with no

21 change in stored energy, to the hot water load plus

22 the tank losses. Now you could debate the .98, but

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1 let's just say that is the case for the point of

2 discussion here. It could be one.

3 If you move this around a little bit, you

4 get the final equation here, and you can see that the

5 energy factor is equal to .98 or .1, if we went with

6 Carl's suggest, plus 1 plus the overall heat loss

7 coefficient of the tank times the difference between

8 the average tank temperature, the ambient, the elapsed

9 time of the test divided by the hot water load.

10 So the thing to keep in mind here is that,

11 when you're changing the UA, this hot water load tends

12 to be very significant with 64.3 gallons per day

13 compared to the heat loss from the tank.

14 So if you look at this graphically, what

15 you quickly recognize is that -- All I've done here is

16 taken the previous equation and I've varied the UA.

17 I've kept everything else constant, and we're looking

18 at energy factor.

19 So if you doubled the heat loss form the

20 tank -- if you doubled the UA from the tank itself,

21 from one tank to another tank, you would affect the

22 energy factor by about 0.08. Okay? So it's not an

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1 extremely strong function. It's an important

2 function, because that's the one thing you have

3 control of. Okay?

4 You can only -- To get the energy factor

5 up, somehow you've got to better insulate this vessel.

6 But keep this in mind as we go through these charts,

7 because things will become more apparent as to why

8 there's a large difference in thermal conductivity of

9 the foam, but in fact a rather much smaller difference

10 in the energy factor that the tank produced using that

11 foam.

12 MR. HILLER: Carl Hiller from EPRI.

13 You'll probably say this later on, but I'll say it

14 here.

15 It's one thing to vary the UA, but the UA,

16 the way you're calculating it, is really a mixture of

17 the heat loss through the insulation and the heat loss

18 through the fitting.

19 MR. FANNEY: You're exactly right.

20 MR. HILLER: It's even much worse when you

21 look at how that breaks down as you add insulation.

22 MR. FANNEY: That's right. There's an

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1 eight percent dependency here if you double the UA.

2 It turns out that if you calculate what the heat loss

3 should be from the tank -- and I'm sure all the water

4 heater manufacturers have done this many times, but

5 the actual heat loss from the tank typically,

6 depending on the tank configuration, is about 1.5 to

7 two times greater than what you would calculate just

8 using a vessel with the thermal conductivity of the

9 foam materials and the thicknesses.

10 So the UA from the tank, even if you

11 insulated it twice as well, you would not -- the tank

12 would not be twice as well insulated, because the

13 piping connections, as you'll see from some infrared

14 images, are significant. Okay.

15 MR. BROOKMAN: Jim McMahon.

16 MR. McMAHON: This is Jim McMahon from

17 LBL.

18 I'm looking at the graph, and maybe I'm

19 just not reading it correctly, but the difference that

20 I see is about .06.

21 MR. FANNEY: Yes, .06 divided by -- I

22 think I took .90. It's about eight percent, but

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1 you're right. As far as actual difference, it's

2 probably .06. That's right.

3 MR. BROOKMAN: George.

4 MR. KUSTERER: George Kusterer with Bock

5 Water Heaters.

6 Is this a political conspiracy to make us

7 all go blind?

8 MR. FANNEY: Well, I hope not.

9 MR. KUSTERER: Is there any way we can get

10 full-size graphs? I mean, you know, at my age, it's

11 difficult. I squint enough. Thank you.

12 MR. FANNEY: Sure. We can -- I'm not sure

13 how DOE wants to handle that, but --

14 MR. BROOKMAN: Yes. The Department will

15 try and figure out some way to make those images

16 available. He just wanted to make a complete record

17 and still save paper, I'm certain.

18 MR. FANNEY: Hopefully, you can see the

19 visuals up here.

20 MR. KUSTERER: No, they're blurry, too.

21 MR. FANNEY: Oh, they are? Is anyone else

22 having problems seeing them?

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1 MR. KUSTERER: Certainly, on these written

2 pages.

3 MR. FANNEY: Yes, I can understand that.

4 Okay. We'll take care of that.

5 Okay. So now we're through -- Everyone is

6 on board here about the relative impact of UA on the

7 energy factor's performance, and we've discussed the

8 impact of thermal conductivity on the UA of the tank.

9 So we're all in the same boat here.

10 What we did now -- Now I'm switching gears

11 for a minute, and we'll get back in a second to the UA

12 discussion. But I'm showing you some typical results

13 for a selection of the tanks that we tested.

14 Again, we tested four tanks. I'm going to

15 show you the averages of the tanks in a minute, but

16 this is showing the energy factor simply as a function

17 of test day.

18 The first test day I would discount. The

19 tank is under a transient situation. We're heating

20 the tank up. But you can see from day two through

21 five, the results are quite repeatable, and this was

22 evident on all the tanks that we tested during the

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* 1 study.

2 The 14lb for this particular tank -- and

3 - I'm having trouble reading this myself -- is .886.

4 Okay? But I'll summarize these in a minute. This is

5 just showing kind of -- The thing to be getting from

6 these slides is the day to day variation in the

7 results. Again, discounting the first day, you can

8 see that the results are very repeatable,.and the same

9 was found for 245fa.

10 Okay. This is showing the results for the

11 12 tanks. Again, there's four tanks of each blowing

12 agent, and then it's showing the average result, which

13 I've got in another chart that's going to be easier to

14 see in a second, for each group of four tanks. But

15 the importance of this chart is to show, at least to

16 me, how repeatable the results were from tank to tank.

17 Finally, this is showing the overall

18 energy factor for the three different blowing agents,

19 which is the average for the four tanks that were

20 produced with each of the three blowing agents.

21 The 141b blowing agent turned out to be

22 .887. We believe the experimental uncertainty of

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1 these results is +.007.

2 The water/CO 2 blowing agent -- the average

3 for the four tanks that were measured was .870, and

4 for the 245fa, .884. So the HFC 245fa to 141b results

5 are within the bands of experimental uncertainty. The

6 water/CO 2 blowing agent is below that.

7 MR. BROOKMAN: David Goldstein.

8 MR. GOLDSTEIN: David Goldstein, NRDC.

9 So that raises the question, is the

10 difference between 141b and 245fa statistically

11 significant?

12 MR. FANNEY: Well, we've been talking to

13 the statistician about that. We believe it probably

14 is not, based on this limited number of results that

15 we have and the energy factor; because, again, the

16 difference between these particular tanks for these

17 particular specimens is .003 mean.

18 The experimental uncertainty within these

19 results is +.007.

20 MR. GOLDSTEIN; I guess I would ask the

21 same question with respect to the hot box samplings as

22 well where there's a very small difference.

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1 MR. FANNEY: Yes. It would be basically

2 the same response.

3 MR. BROOKMAN: Carl Hiller.

4 MR. HILLER: Carl Hiller from EPRI. Just

5 a comment, that your repeatability in the same water

6 heaters on the number of tests was better than we were

7 ever able to achieve, and we took standard water

8 heaters and had them tested repeatedly over the energy

9 factor test cycle. We didn't get that tight a repeat.

10 It's better than we're doing, or our testing lab was

11 doing.

12 MR. FANNEY: Right. Well, Carl, we did --

13 we spent an extensive amount of time, because we knew

14 the -- we anticipated the differences would be small,

15 based on the analysis that we went through a little

16 while ago, and we did -- we spent a lot of time having

17 things calibrated within our NIST calibration

18 facility.

19 So in my opinion, at least for the tests

20 that I've run over my career at NIST, this is the best

21 set of results that we've ever achieved. In fact, one

22 of the things I was interested in, as we had that

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1 sidebar a minute ago -- well, these tanks were

2 manufactured by a phone manufacturer and not a

3 commercial -- not by a manufacturer of water heaters,

4 I guess, was the point.

5 So what we did is we went to a local

6 supply house, and I bought the same tank, more or

7 less, from the distributor, independent of this study,

8 that was blown with 141b. I wanted to find out just

9 how repeatable these results could be if I ran for 15

10 or 20 days.

11 MR. HILLER: Fifteen or 20 days?

12 MR. FANNEY: Yes. I call this the street

13 tank. Okay? It's the same identical tank, same model

14 number, blown with 141b. What's interesting -- Well,

15 first you can see, it's extremely repeatable. Okay?

16 This is in a room that's environmentally controlled,

17 Carl. But we found that the average for these 26-27

18 days is .887, which was identical to -- and it's kind

19 of amazing that it is -- but it was identical to the

20 141b tank that was blown by BASF. That surprised me.

21 MR. ROSENSTOCK: Steve Rosenstock. It was

22 the same amount of insulation?

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1 MR. FANNEY: Yes, to my knowledge.

2 MR. BROOKMAN: Otto?

3 MR. VAGO: Otto Vago, State Industries.

4 You said it was -- the street water heater

5 was foamed with 141b?

6 MR. FANNEY: Yes.

7 MR. VAGO: Since you purchased that on the

8 street, so to speak, how do you confirm -- how could

9 you confirm, or did you confirm that it's foamed with

10 141b?

11 MR. FANNEY: I'm thinking back to my

12 thought process. I made an assumption. I assumed

13 that all of the tanks that were currently available --

14 and for this particular energy efficiency tank -- that

15 it was blown with 141b. I do not -- could not swear

16 on a Bible that's the case. Good point.

17 MR. TAYLOR: Mark Taylor, Bradford White

18 Corporation. I can assure my colleague that this

19 heater was blown with 141b.

20 MR. FANNEY: Thank you.

21 MR. TAYLOR: If you could supply me with

22 the serial number of the product that you bought, I

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1 could confirm that. If it was within the range of

2 over the last several years that we've been producing

3 these types of products, it would be 141b.

4 MR. FANNEY: Okay. We purchased it

5 approximately two months ago. So, thank you.

6 MR. LOGEE: Terry Logee from DOE. I was

7 going to add that Eric Lannus, their chief engineer at

8 Bradford White, worked with Mike Crouper from BASF and

9 developed both the HFC141b foaming formula and the

10 HFC245fa formula.

11 So my assumption would be that the HFC141b

12 was the same formula they use in their commercial

13 production.

14 MR. BROOKMAN: David Goldstein.

15 MR. GOLDSTEIN: David Goldstein, NRDC.

16 You know what the rated energy factor was

17 for this tank?

18 MR. FANNEY: Yes. It was .90 -- 0.90, I

19 believe.

20 MR. GOLDSTEIN: Was that available just

21 from the GAMA directory or do you have a test lab

22 report?

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1 MR. FANNEY: I determined that from using

2 the dollar label on the tank, knowing the rate that

3 was used. I know what the standard hot water load is,

4 and I backed it out. Perhaps Bradford White could

5 comment, but I'm relatively certain it's 0.90.

6 MR. TAYLOR: Mark Taylor from Bradford

7 White again. I don't have the GAMA directory in front

8 of me, but I think that's probably an accurate

9 statement.

10 MR. FANNEY: Okay. What I'd like to do

11 now is move to just show you a couple of infrared

12 images, and this -- It's pertinent in terms of a

13 number of things, but it gets back to the fact that

14 the thermal conductivity doesn't necessarily drive

15 entirely the UA of the tank, which then in fact is not

16 a strong -- the energy factor is not a strong function

17 of that.

18 This is typical of a number of tanks that

19 we've tested at NIST. This is not unique in any

20 means. We've taken infrared images as part of our

21 solar energy work for a number of years in this, and

22 basically, traditionally, what you see -- and again

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1 I'm sure the manufacturers are aware of this -- is

2 that there's a number of high heat loss areas.

3 One is around the drain valve of the tank

4 itself. One is around the bottom perimeter of the

5 tank. My thoughts on that, and the manufacturers can

6 correct me if I'm wrong, but basically you have the

7 metal jacket of the tank itself.

8 The storage vessel itself has a lip on the

9 bottom of it. You know, it's concave inward, if you

10 were under the tank looking up, and then perhaps

11 there's some insulation, some fiberglass or something,

12 that's put under the bottom of the tank. Then the

13 vessel is put within it.

14 Well, when you get this thing filled up

15 with 50 gallons of water, you've got 400-450 pounds of

16 weight pushing down on this piece of insulation. So

17 you have a thermal shunt between that lip of the

18 storage vessel itself, which is now almost -- It

19 probably is sitting on the actual metal jacket

20 exterior. So heat tends to be like people. It likes

21 the path of least resistance. So you have this

22 thermal shunting.

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1 This is very typical of tanks we've looked

2 at over the years. I'll show you another IR image

3 that shows the fittings on the top of the tank. So

4 we'll get a better look at the top.

5 Then typically, you'll see areas like this

6 around. These are the panels that are removed for

7 access to the thermostat and the heating element, and

8 you'll typically see warmer areas around those

9 accessible cover area there or thermostat and heating

10 elements.

11 This is also somewhat typical. When the

12 pipes enter and leave the tank, they come through the

13 exterior sheetmetal of the tank. I call it the

14 jacket. I guess that's what it's called, jacket.

15 People are nodding their heads. Okay, jacket.

16 What happens is that, when that top piece

17 is put over the ports, it's not necessarily the case

18 that every time you look down that the holes in the

19 jacket are lined up with the inlet and outlet port.

20 Okay? They're slightly off in most cases.

21 So when you get the pipe screwed into the

22 ports, typically what will happen is the pipe is

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* 1 hitting or very close to or brushing that jacket

2 portion. Okay? So again you have this hot port

3 that's coming out.

4 Not only do you have the heat transfer up

5 the pipe, but because the jacket is in contact or may

6 be in contact -- not in all cases, but may be in

7 contact with the entrance and outlet pipes, it's

8 heating up that upper surface of the tank itself.

9 You can see it slightly here in this

10 infrared image.

11 MR. BROOKMAN: Jim Lutz, and then David

12 Winiarski.

13 MR. LUTZ: Hunter, did that water heater

14 have heat traps on it, because the pipes look like

15 they cool off dramatically once you get above the

16 nipple.

17 MR. FANNEY: Yes. It's my recollection

18 that they do.

19 MR. BROOKMAN: David?

20 MR. WINIARSKI: David Winiarski, PNL.

21 Just looking at this, we have kind of a

22 unique situation here. We have identical tanks foamed

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1 with two different foams for which we know the

2 conductivity pretty well.

3 MR. FANNEY: Right.

4 MR. WINIARSKI: Was this a good way to

5 extrapolate the overall heat losses from the non-foam

6 components?

7 MR. FANNEY: You know, infrared imaging --

8 MR. WINIARSKI: Not so much the imaging,

9 the fact that we have the data, the numbers.

10 MR. FANNEY: Yes, and I did that, as a

11 matter of fact. I went through, because I wanted to

12 determine what's the ratio of what you would

13 calculate. I assumed two inches of foam material on

14 the top and the radial direction and one inch of

15 fiberglass in the bottom, which may or may not be the

16 case. It's some assumptions I made. I'm sure it --

17 It certainly varies. I mean, the top of the tank is

18 concave upward. So it's not uniform in thickness.

19 When I made those assumptions and I went

20 through and calculated my UA factors, the UA factors

21 tended to be approximately between 1.5 and 1.7 times

22 what you would calculate. So to me, that gives you an

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1 indication of the relative importance of the other

2 penetrations as opposed to if you had a perfectly

3 insulated cylindrical vessel.

4 MR. BROOKMAN: Carl Hiller.

5 MR. HILLER: Carl Hiller from EPRI. A

6 couple of questions and comments.

7 First, the T&P valve is that bright thing

8 on the righthand side, I assume?

9 MR. FANNEY: No. That's a UPS. That's an

10 uninterruptable power supply that's feeding over to

11 our computer.

12 MR. HILLER: Where's the T&P valve?

13 MR. FANNEY: It's not on this image. I'm

14 sorry. You can't see it from this image. Maybe we

15 can get it from the other image.

16 MR. HILLER: Where was the T&P valve on

17 this tank, on the top or on the side?

18 MR. FANNEY: Yes, and it was insulated to

19 the highest level allowable within the DOE test

20 procedure. You know, they give you a range.

21 MR. HILLER: That part sticking out was

22 insulated, because normally that wouldn't --

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1 MR. FANNEY: Any additional fittings that

2 were added were insulated to the level prescribed by

3 the DOE test procedure, not the T&P valve itself.

4 MR. HILLER: Because normally I would

5 expect to see a T&P valve show up very brightly.

6 MR. FANNEY: And you do. If I had

7 selected the right image, Carl, you would see that.

8 You're right.

9 MR. HILLER: A couple of comments. You

10 ought to give serious consideration to presenting this

11 information in a technical --

12 MR. FANNEY: We're writing an ASHRE paper

13 right now.

14 MR. HILLER: And I'd like to get copies of

15 this information for use in my training seminars.

16 MR. FANNEY: Sure. Sure. Okay. I'd like

17 to summarize -- I'm sorry. Doug, did you have

18 something else? Now I'd like to summarize what we

19 found from the study.

20 We measured the thermal conductivity, and

21 we measured the energy factor and the overall heat

22 loss coefficients for foam materials and water heaters

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1 that were produced using the three different blowing

2 agents that I previously described.

3 We found that the water/CO 2 specimens have

4 a thermal conductivity approximately 43 percent higher

5 than 141b. We found that the 245fa specimens were

6 within three percent of what we found for the 141b

7 results.

8 Then we're showing that the overall heat

9 loss area coefficient for the water/CO 2 tank is

10 significantly higher than for the other two blowing

11 agents.

12 We also showed that the energy factor is

13 not a strong function of the overall heat-loss-area

14 coefficient, but keep in-mind that it is the one thing

15 you can control. I mean, if you want a more efficient

16 tank, given the same hot water load, even though it

17 may not be a strong function, it's the only path to

18 get there. Somehow, it has to be reduced.

19 The average energy factor measurements

20 that we measured for the 12 tanks: The water/CO 2

21 energy factor is about .02 less than that for the 141b

22 and the HFC245fa.

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1 Then based on the infrared images that I

2 showed you, there are significant thermal shunts

3 around things such as the bottom of the tank, the

4 drain valve, the piping leading to and from the tank.

5 MR. BROOKMAN: Steve Rosenstock.

6 MR. ROSENSTOCK: Steve Rosenstock, EEI.

7 Just a couple of questions.

8 Are you continuing, and the next phase is

9 for fossil fuel water heaters? That's the first

10 question.

11 The second question is: Is there a way --

12 I know there's a lab procedure you have. Please let

13 me know, is there a way to do any sort of accelerated

14 lifetime testing where you would, say, try to project,

15 well, okay, five years down the line, ten years down

16 the line, this is what we project, in case there's any

17 change in the -- I'm sure there probably isn't, but

18 just in case there was any changes in UA or energy

19 factor.

20 MR. FANNEY: Yes. That's kind of an area

21 of research right now. It's interesting that you

22 would bring that up. ASTM is trying to develop

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1 techniques, not for water heaters but on the actual

2 foam samples, as to how do you predict the change in

3 thermal conductivity versus time.

4 In some of these materials, it takes

5 rather a long time before they reach kind of the

6 bottom of the exponential curve. So ASTM is looking

7 into procedures. They're called thin slicing

8 techniques.

9 It turns out that, if you slice the foam

10 thinly, you have samples. You can accelerate the

11 aging. They're trying to correlate those results with

12 long term results, but they're not to the point that

13 you can do that with confidence, I should say.

14 I'm sorry. You had two or three

15 questions.

16 MR. ROSENSTOCK: Oh, the other one was

17 about are you following up with fossil fuel water

18 heaters?

19 MR. FANNEY: At this time, we're not.

20 This was basically the scope of the study we've

21 completed.

22 One of the things that we thought would be

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* i e1 interesting to do this year would be to take a tank

2 such as this, for example, and using our infrared

3 equipment and our measurement capabilities to make

4 changes to the tank design itself to see if we could

5 eliminate some of these thermal shunts to see what

6 improvement in energy factor we could gain from that.

7 But we didn't get funded to do that. So --

8 MR. BROOKMAN: Carl Hiller.

9 MR. HILLER: Carl Hiller from EPRI. Just

10 following up on the degradation of the foam issue.

11 Just for the record here, I would comment that we've

12 had a number of field test sites around the country

13 and my own personal experience that fumigants commonly

14 used when you tent a house to treat for termites or

15 other insects are usually a fluorine or bromine based

16 fumigant, and they react very quickly with any kind of

17 moisture. That's how they kill termites, but they

18 will also dissolve almost all foam structures in your

19 building, and they will also dissolve fiberglass

20 insulation.

21 I have seen houses where a fiberglass

22 insulation in the attic was totally disintegrated

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1 because of the fumigants, and I have seen foams in my

2 own house on my water heating pipe completely

3 liquified, and that happens in a matter of less than

4 a year.

5 MR. BROOKMAN: Frank Stanonik.

6 MR. STANONIK: Hunter, two questions.

7 MR. FANNEY: Yes, sir.

8 MR. STANONIK: You mentioned that the --

9 Forgive me if I misstate it -- the accuracy of the

10 guarded hot plate is +1.5 percent?

11 MR. FANNEY: Yes.

12 MR. STANONIK: Okay. And the difference

13 between the 245 and the 141 was nominally a -3

14 percent?

15 MR. FANNEY: Yes.

16 MR. STANONIK: Okay. I thought I heard

17 you say that that was within the tolerance of the

18 guarded hot plate. So it seems to me --

19 MR. FANNEY: It's right at the edge,

20 Frank. You can make the argument either way.

21 MR. STANONIK: I don't follow, because

22 +1.5 is 1.5 above or below.

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1 MR. FANNEY: Exactly.

2 MR. STANONIK: This was clearly 3 below.

3 How is it right on the edge?

4 MR. FANNEY: Okay. Well, for example, if

5 you've got this number up here, and it can be --

6 MR. STANONIK: It just clicked. You're

7 assuming the 1.5 or the three percent could all be --

8 if you took the -- Okay.

9 MR. FANNEY: Yes. It's possible.

10 MR. STANONIK: All right. Okay. Now the

11 other question is: From the data you generated using

12 the hot plate and the other information you've learned

13 here, could you guys at NIST make a prediction as to

14 what the energy factor benefit would be of going to

15 2.5 inches of foam versus two?

16 As I understand it, Terry, the stuff

17 that's been done in engineering analysis has been

18 driven off of either of the computer programs, and I'm

19 just wondering if Hunter's data would show another way

20 to estimate what the value of this added half-inch is.

21 MR. FANNEY: I think, Frank, that the

22 techniques that -- I think the techniques that we

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1 would employ for just a calculation are probably

2 identical to what they're using. You know, the only

3 thing that -- and I'm not sure what they're using in

4 their analysis for the overall UA versus what they

5 calculate for a perfectly insulated tank.

6 You know, there, I think our information

7 could assist, but I think to get at that, because of

8 the -- As you know, because of the way these things

9 are manufactured with the top not -- you know, the

10 storage tank vessel top is not parallel to the jacket

11 top. The calculations are somewhat difficult to make.

12 The measurements are, in some way, easier to do or

13 perhaps more believable.

14 MR. STANONIK: I mean, for the -- Let me

15 just point it out here. The engineering analysis on

16 an electric heater, 50 gallon, with heat traps,

17 plastic ones -- I don't know if it makes a difference

18 -- and two inches of insulation predicts an energy

19 factor of .89; and that was with -- Is that with 245?

20 Your test result, if I remember right, was

21 one point lower. Let me see if I can find that --

22 .87? Okay, so it's the same. Okay. I looked at the

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1 wrong foam.

2 MR. BROOKMAN: Otto Vago?

3 MR. VAGO: I have a couple of questions.

4 On page 5 you indicate bulk density.

5 MR. FANNEY: Yes.

6 MR. VAGO: I assume that's the test.

7 MR. FANNEY: Yes, that's correct.

8 MR. VAGO: Have you checked the in-place

9 density of the foam; that is, you know, after you foam

1.0 the --

11 MR. FANNEY: A tank?

12 MR. VAGO: Yes.

13 MR. FANNEY: No, we did not.

14 MR. VAGO: Second question: The water

15 heater was foamed by the foam supplier?

16 MR. FANNEY: BASF.

17 MR. VAGO: Obviously, that's a laboratory

18 condition. Right?

19 MR. FANNEY: I have never been to the BASF

20 facility. So I couldn't answer that. Perhaps someone

21 that's been there could answer that. Surely, the

22 manufacturers have been there.

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1 MR. TAYLOR: Mark Taylor, Bradford White.

2 Yes, Otto, it is a facility that is a laboratory type

3 condition where the heaters were foamed under. To

4 this panel, I can tell you that that was in ideal

5 conditions pretty much.

6 When a water heater goes down a production

7 line, they're running through several a minute, and

8 it's very difficult to make sure that the foam is the

9 same conditions at all times. The in-place density,

10 as Otto brought up, is going to stratify within that

11 tank vessel. It is not packed under pressure per se,

12 because it does free-rise, unlike other fixtured type

13 components.

14 So you're going to have a lot of variation

15 in the in-place density.

16 MR. FANNEY; Yes. That's one of the

17 reasons. We have seen that before with our infrared

18 imaging equipment for a number of tanks we've tested

19 for various purposes in the past. We go around the

20 circumference of the tank. We have picked up voids

21 before, and then we would disassemble the tank. We've

22 worked with manufacturers to -- you know, we'd send it

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1 back, and they would take a look at it.

2 That's one of the reasons that I wanted to

3 buy that street tank, because that thought had crossed

4 my mind, you know, and maybe I got real fortunate by

5 that particular street tank. The guy did an excellent

6 job that day in foaming it, but I got the same result.

7 MR. NADEL: Steve Nadel. Hunter, the

8 results you presented basically showed that there's a

9 slightly better, more efficient conductivity in the

10 hot plate test, and a slightly worse energy

11 performance.

12 MR. FANNEY: Yes.

13 MR. NADEL: I'm familiar with the 2R

14 directory, not comparable, as you pointed out, and

15 also some other losses. I'm not -- In my limited

16 experience, I'm not familiar with them going in the

17 opposite direction. I was wondering if you can

18 comment on perhaps why they are going in the opposite

19 direction. Is it basically just, you know, within the

20 error tolerances?

21 MR. FANNEY: Yes.

22 MR. ROSENSTOCK: Steve Rosenstock, EEI,

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1 just for Mr. Taylor. What kind of variances are you

2 seeing in the in-place density, if you've done any

3 sort of research?

4 MR. TAYLOR: You'll have to pardon me. I

5 haven't -- We haven't looked at this in quite

6 sometime, but through past experience in this maybe

7 with other blowing agents, but I would think that it

8 would be the same, is you can get anywhere from a

9 half-pound density variation from top to bottom of the

10 unit.

11 MR. FANNEY: Well, certainly, one of the

12 tanks that I recall that we found, you know, a huge

13 hot spot in the side of, there was quite a variation

14 in density; because when we got the jacket off, it was

15 an area about like this that had no foam. So --

16 MR. BROOKMAN: Jim Vaughan.

17 MR. VAUGHAN: Hunter, I'd just like to say

18 that, as Carl pointed out, I cannot believe the

19 repeatability of your tests. That's just amazing to

20 us who -- and unlike the other water heater

21 manufacturers, we don't have our own in-house testing.

22 Every time we send a test out to ETL or

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1 whoever they are now --

2 MR. FANNEY: Right.

3 MR. VAUGHAN: -- we have absolutely no

4 idea what the test is going to be.

5 MR. FANNEY: Right.

6 MR. VAUGHAN: And I would follow up on

7 what I think Frank was getting at, is if you have the

8 repeatability there, I think we should find some way

9 to try and use it to not.guess at what these changes

10 may be, but actually try and --

11 MR. FANNEY: Okay. You know, we're in an

12 ideal situation, because once we set a tank up,

13 repeatability, nothing changed in the set-up, it's day

14 to day, back to back results. We have a well

15 controlled room as far as temperature conditioning

16 surrounding the tank.

17 You know, we're not in a commercial type

18 application. We're constantly moving equipment in and

19 out of the laboratory, for example. We have a well

20 controlled inlet temperature, and every piece of

21 instrumentation was calibrated back to the NIST

22 standards.

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1 So it was a lot of effort. I mean --

2 MR. VAUGHAN: It obviously worked.

3 MR. FANNEY: Yes. It was, for these

4 results, because one of our fears, as you're alluding

5 to, is that because the differences are going to be

6 small, that unless you're really on top of this

7 instrumentation, your uncertainties are going to swamp

8 what you're looking for.

9 MR. VAUGHAN: I mean, just for the panel,

10 I can tell you personally that we have sent tanks and

11 had them tested and then gotten the same tank back at

12 our place and insulated the bottom of it and sent it

13 back out to ETL, and come back with a worse energy

14 factor number -- substantially worse.

15 So I think repeatability is a big issue,

16 but there were two other questions I want to get at.

17 You had said that there is not a big

18 difference or variation. If you double the UA, that

19 it wouldn't make that big a difference in the energy

20 factor. Maybe I'm reading this chart incorrectly, but

21 on page 9 you have the energy factor versus overall

22 heat loss coefficient.

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1 MR. FANNEY: Yes.

2 MR. VAUGHAN: If you went from a UA of 2

3 to a UA of 4 --

4 MR. FANNEY: Right.

5 MR. VAUGHAN: -- or the other way around,

6 you went from .85 to .91.

7 MR. FANNEY: That's right. It's about

8 eight percent. On a percentage point basis, if you

9 doubled the UA, it's about a eight percent difference

10 in the energy factor.

11 MR. VAUGHAN: That's a significant

12 difference.

13 MR. FANNEY: That's right. Significant --

14 I shouldn't have said it the way I did. I agree. I

15 mean, significant -- Before I thought this through, I

16 thought that doubling the heat loss from the tank

17 perhaps would decrease the energy factor by 30 percent

18 or so, but it is significant. It's certainly eight

19 percent on the energy factor.

20 MR. VAUGHAN: Then the last question is

21 why did you choose 245fa, and were there other

22 alternatives?

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1 MR. FANNEY: Yes. NIST did make the

2 selection of the blowing agents. So I'm going to have

3 to defer to DOE.

4 MR. BROOKMAN: Terry Logee.

5 MR. LOGEE: Terry Logee from DOE.

6 We chose 245fa because the refrigerator

7 people are planning to use that. That was the basis

8 for the new refrigerator standards, and to our

9 knowledge, they still plan to use that, and we -- From

10 that assumption, Allied Signal presumably is going to

11 be able to produce enough to make it worthwhile -- you

12 know, commercial viable to produce 245fa for any other

13 use as well.

14 MR. VAUGHAN: Has anybody checked with

15 EPA?

16 MR. LOGEE: Yes. 245fa, to my knowledge,

17 has passed all of the appropriate EPA requirements.

18 MR. VAUGHAN: And so there weren't other

19 alternatives looked at or considered?

20 MR. LOGEE: The only other one that we

21 considered in this test was water/CO2 . We also talked

22 with manufacturers last fall about cyclopentane and --

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1 I can't remember all of the names of the things, but

2 there were a couple of other ones, but they were not

3 as readily available, and perhaps we weren't sure they

4 would be available even by 2003.

5 MR. BROOKMAN: Jim, maybe you can ask Jim

6 Lutz about the particulars on that in a little bit.

7 We need to be moving on with the program. There's a

8 lot of additional material for us to cover.

9 Otto Vago, did you have additional

10 questions?

11 MR. VAGO: I'll withdraw mine.

12 MR. BROOKMAN: Then, Steve Nadel, perhaps

13 a final question before we keep moving on.

14 MR. NADEL: It's not a question. I was

15 just going to add an extra bit of information for Jim

16 Vaughan and his question.

17 I do know the refrigerator industry went

18 through very extensive testing on all sorts of

19 alternatives. They did lots of testing in

20 laboratories and actual refrigerators, and eventually

21 settled on 245fa, because it had the best combination

22 of efficiency, etcetera.

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1 I understand there are some differences

2 between refrigerators and water heaters, but there is

3 an extensive body of testing to arrive at that, and I

4 know DOE has lots and lots of information from the

5 refrigerator rulemaking.

6 MR. BROOKMAN: Mark Taylor?

7 MR. TAYLOR: Just one final comment on

8 245fa. I guess my understanding is that, yes, it's a

9 desired blowing agent of the future, but right now my

10 information -- Allied Signal really doesn't have the

11 capability or the capability doesn't exist to produce

12 that material in bulk quantities at this point in

13 time, and I don't think anyone really knows when

14 that's going to be.

15 MR. BROOKMAN: Thank you. Okay. The next

16 -- Thank you, Hunter. Thanks very much.

17 MR. KUSTERER: Excuse me. I'm just

18 stymied by what I've just heard. George Kusterer with

19 Bock Water Heaters.

20 So the hour and a half or hour and 45

21 minutes we spent is just kind of a moot point, because

22 it's not going to be available.

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1 MR. BROOKMAN: Charlie Stephens.

2 MR. STEPHENS: I didn't hear that. I

3 heard that no one knows whether it wills be or not.

4 But I also -- But I have had conversations with Allied

5 Signal, and this is a two-way street.

6 I think they are also waiting for some

7 commitments by the people who might choose a blowing

8 agent about whether or not it's worth their investment

9 in how much production facility to make this stuff

10 available in what year.

11 They're watching some of this stuff as

12 much as we are, waiting to see which way they should

13 make their investments, but I think if people were to

14 make commitments to a blowing agent, they could make

15 it available.

16 MR. BROOKMAN: Charlie, what does the --

17 Given your knowledge of -- or maybe Steve or someone

18 else -- knowledge of the refrigerators and how that's

19 proceeding, how that affects Allied Signal's

20 commitments?

21 MR. STEPHENS: It's a matter of scaling up

22 production, once enough manufacturers have made

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1 commitments for enough annual volume. It's not that

2 hard to produce additional production capacity, once

3 you have enough of a commitment from industry that

4 they will buy it. So -- but barring that, I don't

5 think they're going to make the investment.

6 MR. BROOKMAN: So maybe, George, you and

7 Charlie or Steve or someone else can talk about the

8 capacity that exists there or doesn't exist there and

9 how that frames up, looking ahead.

10 MR. KUSTERER: Well, just one more point,

11 and I don't want to belabor this, but you know, I'm

12 kind of a dumb farm boy, and I don't put all my eggs

13 in one basket. If this is the scenario that we're

14 talking about right now, maybe we should be looking at

15 an alternative. The year 2003 is coming real quick.

16 MR. BROOKMAN: Steve, I'm going to let you

17 go off-line and talk about this with George. Otto, do

18 you wish to make --

19 MR. VAGO: Otto Vago. Not to contradict

20 what Mark has said, on one hand. On the other hand,

21 the information we were given, it's not consistent

22 what Mark said. 245 seems to be the likelihood of

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1 material that they will be going in, and will be

2 available.

3 MR. BROOKMAN: And, Steve, do you wish to

4 have a final word before I push us on?

5 MR. ROSENSTOCK: All I was going to say is

6 this will be resolved well before July 1, 2001,

7 because that's when the new DOE refrigerator standard

8 takes effect, and the manufacturers have said that

9 they are going to be converting blowing agents by that

10 same time.

11 I realize that is not finalized now, but

12 decisions are going to have to be made -- finalized

13 pretty soon so that the manufacturers can produce the

14 new refrigerator. That standard goes into effect well

15 before any potential water heater standard goes into

16 effect.

17 MR. BROOKMAN; Just as a footnote, we're

18 going to try and do one more thing before we go to

19 break, which ought to be probably in about a half an

20 hour. So maybe 20 minutes, if we're lucky.

21 The Department yesterday with the support

22 contractors working with the Department -- when we all

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1 went home yesterday, they stayed here and worked for

2 another several hours, trying to think through how to

3 respond to the issues that we noted as we went through

4 the day yesterday. You see them listed on the wall

5 over here to my left.

6 So Terry Logee with support from some

7 other individuals perhaps are going to talk about the

8 issues that you see listed there. So, Terry, it's all

9 yours.

10 MR. LOGEE: Thank you, Doug. We did

11 indeed spend several hours here last night. These are

12 preliminary responses to all of these issues, the key

13 issues that were raised yesterday.

14 As Michael said,-we will respond within a

15 couple of weeks, putting on the Internet a complete

16 response to all of the issues that have been raised at

17 this workshop, to the extent that we can respond that

18 quickly, but right now we wanted to go through some of

19 these key issues.

20 Issue Number 1: Revisiting the screening.

21 In the process rule, of course, we've committed to

22 eliminate problematic design options early in the

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1 process. We have screened out heat pump water heaters

2 and, based on comments and other information that

3 we've received regarding manufacturability,

4 serviceability, the infrastructure, consumer utility,

5 and-other things.

6 What we will be putting together is this

7 documentation on those to make sure that that's fully

8 available. We're going to -- We will, if we receive

9 new information, and that information has to be

10 corroborated with data or with some kind of survey

11 information or something like that other than just a

12 comment that you disagree with our position. Then we

13 will reconsider our positions on these issues.

14 The next issue --

15 MR. BROOKMAN: Steve, do you wish to --

16 I'd like to keep this moving ahead fairly quickly, but

17 Steve Rosenstock?

18 MR. ROSENSTOCK: So from the workshop of

19 several months ago where all the design options or

20 many design options were screened out and discussed

21 openly, that if some parties bring out some of those

22 previously screened out design options, then all of

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1 the engineering analysis might have to be redone again

2 and all of the life cycle cost analysis will have to

3 be redone again.

4 I mean, I thought that was the point of

5 the earlier workshop, was to say this was a workshop

6 to screen out the design options at a roundtable on a

7 consensus basis, and you're saying that the ones that

8 were basically screened out before might come back

9 again.

10 I don't see how you can -- That's going to

11 delay the process.

12 MR. LOGEE: No, we're not saying that.

13 We're saying that what was screened out is screened

14 out, and we will only reconsider if we receive new

15 information that is -- you know, would substantiate

16 someone's position. And we haven't received any of

17 that sort of information.

18 What we have been able to find is more

19 information to buttress our original contention that

20 we should screen out heat pump water heaters.

21 MR. BROOKMAN: Michael McCabe.

22 MR. McCABE: Michael McCabe. As with any

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1 issue on a rulemaking, that as DOE receives credible

2 and compelling information, we are committed to

3 changing the analysis, whether or not it deals with

4 the price of energy, lifetime or products or others.

5 But as of right now, the workshop that took place --

6 we have screened out a whole range of design options

7 and would be willing to consider any information, but

8 today we have not received information that would

9 cause us to change it.

10 Again, the rulemaking is an open process,

11 and we're committed to considering any and all

12 information on any subject as it would affect the

13 rulemaking.

14 MR. BROOKMAN: Michael, am I correct in my

15 understanding that you're essentially required by law

16 to be open until this is closed?

17 MR. McCABE: Well, I have my chemical

18 engineering law degree. That is my understanding.

19 MR. BROOKMAN: Yes, and what I also heard

20 you say there a moment -- although I'm acting like a

21 mediator here. Look out. Terry, do you wish to

22 continue then from there?

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1 MR. LOGEE: Oh, I see Steve has one

2 follow-up.

3 MR. ROSENSTOCK: I just had one follow-up.

4 I mean, I'm just concerned that -- suppose you get

5 some information in late October of 1999, and you're

6 putting out the NOPR in the next month, and none of

7 the other stakeholders might have had a chance to

8 respond to it.

9 I'm just saying, from a process

10 standpoint, it's throwing a lot of wild cards in the

11 process, and we've seen how long the reports are right

12 now, coming at 160 pages right now. So, you know, I

13 just wanted to say that I'd be worried about it.

14 MR. McCABE: What we're committed to with

15 the current process is to share information, complete

16 information, as early as possible so that there will

17 not be any surprises.

18 So that if there is information that is

19 compelling and convincing that would lead us to change

20 a significant part of the analysis, I'm sure the

21 Department wills be willing to adjust the schedule

22 accordingly. But that's one reason why we're having

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1 these series of meetings, in order to draw out that

2 information as early as possible.

3 MR. BROOKMAN: Francine, do you wish to

4 comment?

5 MS. PINTO: Francine Pinto. I think this

6 came up yesterday just on the issue of comments in

7 general. Of course, we have some flexibility, but

8 there is a timeline. There is a need to do a standard

9 and to move the process.

10 So when people have information data on

11 anything, we would request you give it to us as soon

12 as possible, so that we can actually review it and use

13 it. So I think that, while there is openness and

14 flexibility, there is a point at which decisions have

15 to be made and go forward. Otherwise, we'll never get

16 done.

17 So we ask you to give whatever you have as

18 soon as possible.

19 MR. BROOKMAN: Jim?

20 MR. RANFONE: Yes, Jim Ranfone, American

21 Gas Association.

22 Yes, we did bring out this -- our

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1 objections to screening out this design option

2 yesterday, and I would challenge the Department in its

3 bullet points as to why it did that, and I did

4 yesterday.

5 We see a Federal technology alert, cost

6 effective only in selected regions, and you're using

7 that as a basis for screening out this option as one

8 of your reasons. Yet we just spent an hour and a half

9 looking at insulation provisions, whether you're going

10 to modify an energy factor based on new foaming

11 agents, and here's a product that you are now saying,

12 because of a FMP report that says it's cost effective

13 only in selected regions.

14 Why are you using that as a basis when

15 we're -- you've got an option that you developed and

16 reviewed in 1994 with good technical information

17 showing a substantial capability -- ability for saving

18 energy, and you've taken it off the table. That's our

19 objection.

20 If you want to go through the analysis and

21 determine that this is not a cost effective option,

22 then do that. This is the only thing that we're

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1 asking.

2 The other three comments about cost,

3 noise, space, reliability, electric rate increases, no

4 sales and service infrastructure -- these are not

5 valid reasons for taking it off the table; and that's

6 the only thing we want. Take a look at it.

7 MR. LOGEE: The Department -- This is

8 Terry Logee. The Department believes that those are

9 valid reasons. Those are our reasons. We have

10 documentation to that effect, and we will be putting

11 that together.

12 MR. BROOKMAN: Do you wish to comment,

13 sir?

14 MR. MORANTE: Yes, I do. My name is Peter

15 Morante, and I'm with Northeast Utilities. We

16 probably have put in more of these heat pump water

17 heaters than most utilities in the United States.

18 I will provide in writing those comments.

19 The documentation that we have essentially

20 substantiates DOE's reasons for taking it off of

21 consideration.

22 MR. BROOKMAN: Thank you for that. Are

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* 1 there other comments before we move on to the next

2 issue? Okay.

3 MR. LOGEE: The next issue: Our question

4 in regard to that is, on what basis did DOE limit the

5 recovery efficiency to 78.5 percent on gas water

6 heaters, I suppose we should say?

7 We have those GRI Battelle reports, and I

8 think someone was able to find the source of those in

9 our engineering document. There are a couple of

10 reports there, and they identify flue loss

11 efficiencies between 80 and 83 percent as being an

12 area of concern.

13 Based on the computer simulation model

14 tank, we translated those efficiencies to the 78.5

15 percent and lower recovery efficiency. We didn't want

16 to put either the consumers who buy these tanks in

17 some jeopardy due to safety concerns with venting

18 corroding or dissolving away, nor do we want to put

19 the manufacturers at risk by requiring a higher

20 efficiency standard that would be sensible or

21 reasonable.

22 MR. BROOKMAN: Questions, comments on that

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1 issue? Steve Nadel?

2 MR. NADEL: First, I have a few questions.

3 First, I just wanted to understand this 78.5 percent.

4 That is based on the 80 percent flue loss efficiency,

5 the 83 percent flue loss efficiency or --

6 MR. LOGEE; It's based on a range between

7 80 and 83 percent. Okay, it's not really known for

8 sure just what the flue loss efficiency differences

9 are, because each model -- it's dependent on each

10 model and the local conditions.

11 We list them here: You know, the

12 geographic conditions, horizontal flue length and so

13 forth and so on.

14 MR. NADEL: You looked at a range of flue

15 loss efficiencies from 80 to 83 percent and, based on

16 that, came up with a single sort of cap of 78.5

17 percent recovery efficiency?

18 MR. LOGEE: I don't think that we -- No.

19 MR. NADEL: I'm trying to understand how

20 that 78.5 came about.

21 MR. LOGEE: It's not correct to say that

22 we looked at a range of efficiencies. We merely said

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1 that, when we got below 80 percent -- When we reduce -

2 - get -- stay within or below 83 percent flue loss

3 efficiency and with some tolerance there, because we

4 understand that, you know, conditions vary throughout

5 the United States -- that 78.5 percent was -- gave us

6 that tolerance.

7 MR. NADEL: So the 78.5 is related to the

8 83, I just heard you say? I'm just trying to

9 understand.

10 MR. LOGEE: No. You're wrong. It's not

11 related. It's merely -- There is a relationship, but

12 it's just not directly related. Okay? It has to do

13 with this range, and we're providing some tolerance

14 within that range.

15 MR. NADEL: I think I'm going to get all

16 I'm going to get other than comments on that.

17 Let me move on to the next question. If

18 I understand correctly, the far more important value

19 is the flue loss efficiency than the recovery

20 efficiency, because that's what all the GRI data

21 developed. So to the extent there is flue loss

22 efficiency data, the difference between flue loss

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1 efficiency and recovery efficiency is somewhat

2 academic. Is that correct?

3 MR. LOGEE: There isn't a good correlation

4 between the two efficiencies. So I guess it's

5 acceptable to characterize it as somewhat academic.

6 What we measure -- What we -- in our DOE

7 test procedure is recovery efficiency, and that's what

8 the standard will be based on. So for our purposes,

9 that's the important number.

10 MR. BROOKMAN: Frank Stanonik?

11 MR. STANONIK: I was just going to say,

12 Steve threw in a little -- To the extent that there's

13 flue loss efficiency data -- well, the fact is there

14 isn't a lot of flue loss efficiency data, because that

15 measurement is not made as part of the DOE test

16 procedures, efficiency test procedures for water

17 heaters.

18 There is no reason for water heater

19 manufacturers to have made that measurement, and there

20 isn't any huge database or wealth of information as to

21 flue loss efficiency on water heaters. People measure

22 recovery efficiency.

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1 MR. LOGEE: Right. But that measurement

2 is an application specific number -- the result of it.

3 You know, each application is going to have a

4 different number, and it actually will change

5 throughout the year.

6 MR. KUSTERER: And one has nothing to do

7 with the other.

8 MR. LOGEE: There's very little

9 correlation.

10 MR. BROOKMAN: Steve, did you have an

11 additional question?

12 MR. NADEL: I have one additional comment,

13 and this is in terms of how do we -- I mean, I have

14 comments I'll submit for the record, now that I'm

15 getting some understanding. But a recommendation on

16 how to proceed.

17 These values are relatively key. I agree

18 that we need a safety margin. The question is how

19 much safety margin? You could add ten percent and

20 have a safety margin. I mean, where do you draw the

21 line?

22 It's going to be fairly critical for

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1 certain measures that do or do not get included in the

2 engineering analysis.

3 MR. LOGEE: At this point, this is where

4 the Department has drawn the line.

5 MR. NADEL: Right, and I don't -- There

6 will be comments.

7 The recommendation, though -- This is all

8 based, as I understand it -- and I haven't seen the

9 reports yet on these GRI studies which, if I

10 understand correctly, are based on a combination of

11 computer analysis and some laboratory measurements.

12 MR. LOGEE: Correct.

13 MR. NADEL; Right. There --

14 MR. BROOKMAN: Darryl says correct.

15 MR. NADEL: Okay. As far as I know, there

16 has not been any systematic field studies. There's a

17 few reports, anecdotal reports in the field. It

18 strikes me that this is a very important issue. It

19 would be useful to get some field data.

20 I know I was talking to some people over

21 lunch yesterday, and what came out is that there have

22 been some utilities, particularly in the northwest,

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1 who have done a lot of rebates for high efficiency

2 units, and there should be information on what those

3 units are and, hence, by extension being able to look

4 up in the GAMA directory what the recovery efficiency

5 is.

6 It may be very useful to institute a field

7 study looking at several hundred installations across

8 a range -- you know, where is the water heater, the

9 basement, the garage, etcetera -- looking at a range

1.0 of weather conditions, if I understand these, range

11 from more mild northwestern temperature questions to

12 northern Idaho, some pretty cold conditions.

13 It may be very useful, rather than just

14 relying on computer models to actually get some field

15 data to help inform the best judgment in terms of how

16 conservative is conservative enough versus getting too

17 conservative.

18 MR. BROOKMAN: Thank you, Steve. Comment,

19 please?

20 MR. HOSLER: Daryl Hosler speaking for the

21 Z21 water heater subcommittee. Just for your thought

22 process, it has already been submitted to the Z21

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1 water heater subcommittee the GRI reports, and they're

2 looking between 80.5. and 83 percent flue loss

3 efficiencies.

4 So the debate is going on. They haven't

5 had a lot of luck in getting it finished, but it is

6 there, and it is in a public process. If people want

7 to participate, you might think of going into that

8 area. But this is already before the water heater

9 subcommittee.

10 The numbers are out, 80.5 to 83. So it's

11 not going to be ten percent. It's just a matter of

12 picking which one, based on the analysis and the data

13 that the working group comes up with.

14 MR. BROOKMAN: Thank you.

15 MR. NADEL: One clarification. You said

16 80.5 versus 83. Are those, I assume, flue loss

17 efficiencies?

18 MR. HOSLER: Yes.

19 MR. NADEL: Okay, thank you.

20 MR. BROOKMAN: Charlie Stephens. In a

21 little bit I'd like to move to the next topic, because

22 we have a lot to cover this morning. Charlie.

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1 MR. STEPHENS: I just have one comment to

2 support what Steve is saying. I think we've already -

3 - Terry has explained that there's a disconnect here

4 between what GRI and Battelle and the Z21 committee is

5 looking at, flue loss efficiencies, and what we're

6 interested in here.

7 I think it might be useful to try to

8 connect the two, if there is a connection, and if it

9 is, as George says, there is no connection between the

10 two, then I have to wonder how we got connected -- how

11 it got connected in the rulemaking process here.

12 So one or the other: You know, either

13 there is a connection or there isn't, but I'd like to

14 know what it is, if there is one.

15 MR. KUSTERER: That's called job

16 retention. That's the connection.

17 MR. LOGEE: I would like to move on now.

18 The next concern is over the energy factor, a

19 difference with electric water heaters. Our question

20 to reflect this is why are the highest efficiency

21 models in the current DOE analysis not at levels

22 represented in the GAMA directory?

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1 Our response is we will look at the models

2 that are out there, try to identify the similarities

3 and any differences that may exist between those

4 models listed in the GAMA directory and what we've

5 simulated with the computer simulation model.

6 In addition, we're requesting from GAMA

7 and from manufacturers -- and/or from manufacturers

8 the ITS test data for these high efficiency water

9 heaters. So we felt that -- and the specifications

10 for the tank. We felt that if we had that, we could

11 more adequately assess these differences.

12 MR. BROOKMAN: David Goldstein.

13 MR. GOLDSTEIN: David Goldstein, NRDC.

14 I think you're doing the right thing on

15 this, particularly requesting the data on the test

16 reports; because the issue of calibration has come up

17 a couple of times in the last two days, and we really

18 need to make sure that we're self-consistent between

19 a computer simulation model, given how detailed they

20 are, that goes into, okay, with these measures you

21 have an energy factor, you've got the three

22 significant figures.

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1 Now if someone actually produced that,

2 what would the rating be, and would that be the same

3 as the three-figure accuracy number in the computer

4 run; and if not, how do you get them to be self5 consistent?

6 So in other words, if you set a standard

7 at .90 based on a certain model being the basis of the

8 standard, then that model should be rated at .90 by a

9 manufacturer who produces it, and then you're

10 requiring what you think you're requiring.

11 There is some indication of problems, both

12 in the efforts to calibrate the EPRI model with the

13 data on what's actually out there as the base case.

14 We saw this morning another example of .887 as a

15 tested measurement and .90 as the rated measurement.

16 So I don't know if that's typical or not,

17 but we need to find out, is there some kind of

18 correction factor, and what is it?

19 MR. BROOKMAN: Additional questions or

20 comments? Michael Martin and then to Frank Stanonik.

21 MR. MARTIN: Yes. At the California

22 Energy Commission we have a lot of models listed.

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1 Most of them come to us from the manufacturers through

2 GAMA, but there are some that come to us directly from

3 manufacturers. When I go back, I will see whether any

4 of those fit into this category for this very high

5 efficiency, and make inquiries about that also.

6 MR. BROOKMAN: Frank.

7 MR. STANONIK: First thing, Terry, I mean,

8 you said it. It's not on the sheet, but we are

9 talking just about electric models. That's the

10 question. Right?

11 MR. LOGEE: That is the particular

12 question, yes.

13 MR. STANONIK: Okay. Then I guess the

14 other thing is --

15 MR. LOGEE: I mean, I -- Let me back up a

16 little bit. Gas models are also a concern.

17 MR. STANONIK: But the previous question

18 answers this question for gas models.

19 MR. LOGEE: We limit them to 78.5 percent

20 recovery efficiency, but the energy factor is still

21 based on also thermal losses, and that can be

22 modified.

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1 MR. STANONIK: Well, but some of the

2 higher efficiency gas models will have higher

3 efficiency -- I'm sorry, higher recovery efficiencies.

4 They do.

5 MR. LOGEE: Our thinking is that we would

6 not like to limit -- We would like the data for both

7 gas and electric, but we're particularly concerned

8 about the electric.

9 MR. STANONIK: In any event, the other

10 issue is that -- well, two things. There's an

11 undercurrent here that I'm hearing that there is some

12 concern that everything is overrated and that the GAMA

13 tests with the tolerance allow some kind of, for lack

14 of a better word, gaming.

15 I mean, the first thing is that in the

16 overall average of our measured values versus the

17 rated values, with the exception of a two-year period

18 which we can fully explain that goes back to when the

19 test procedures changed and people were using

20 different foams -- With the exception of those two

21 years, we are always between 99 and 100 percent, when

22 we look at all our values. All right?

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1 So I'm just a little concerned, people

2 think that everybody is putting things out there right

3 on the margin.

4 The other issue is that there is a --

5 We've never -- We haven't fully got this one figured

6 out. The test procedure itself presents some

7 difficulty, because-you can take -- Maybe in Hunter's

8 lab it will show up, but you can take a two-inch foam

9 product and run the test and get an energy factor.

10 You can add another fully inch of foam to

11 that, and this is kind of what Jim Vaughan was

12 alluding to, and the analysis might say you're

13 supposed to see some significant improvement in the

14 energy factor. It doesn't show up in the test, and

15 we're still not exactly sure why. We suspect part of

16 it is when you switch the -- convex.

17 You know, we're kind of ignoring that

18 there are -- The test procedure is a real world test.

19 It has some -- let's call them peculiarities, and I'm

20 just a little concerned about this -- concerned about

21 wanting to see the manufacturer's data because of some

22 concern that sometimes the test doesn't come out right

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1 at the rating. But we certainly, to the extent we

2 can, will give you that information.

3 MR. BROOKMAN: Several people wish to

4 speak, and Hunter, do you wish to follow on briefly to

5 Frank's comment?

6 MR. FANNEY; Yes. I would just say,

7 Frank, I'm not surprised when you add the inch of foam

8 you don't see a significant difference, because you

9 know, if you add an inch, you've increased it by a

10 third, basically.

11 I've showed you that, if you double it,

12 you're only going to see eight percentage points, and

13 also the fact that 60 or 70 percent of the overall

14 heat loss is probably due to piping penetrations,

15 which aren't affected significantly when you add that

16 other inch. So I believe you.

17 MR. BROOKMAN: Tom? Is it Tom? Then

18 Charlie.

19 MR. ECKMAN: I want to race ahead on the

20 other page. So maybe you'll deal with two questions

21 at the same times.

22 This particular --

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1 MR. BROOKMAN: Tom, say your full name.

2 MR. ECKMAN: Tom Eckman, Northwest Power

3 Planning Council. This particular issue, basically,

4 generates a comparison of the engineering model's

5 energy factors with the DOE test procedure's energy

6 factors along a continuum from current standards to

7 some level higher than that.

8 There's a question on -- The last question

9 deals with connecting the dots on the retail price for

10 these same models. I think it would be important to

11 compare what the -- the slope of the energy versus

12 cost tradeoff is in the engineering models with the

13 retail price and the energy factor as done by the test

14 procedures, so we can see whether they're parallel,

15 whether they cross or what have you.

16 Am I being clear about what I'm asking for

17 there?

18 MR. BROOKMAN: I hope that in a little bit

19 we can get to that last item, you know, if we keep

20 going quickly here. Charlie?

21 MR. STEPHENS: Charlie Stephens. I just

22 wanted to follow up on Frank's comment. I don't -- My

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1 concern was with the electric tanks, not so much with

2 the gas, because reading the report I was more

3 impressed with DOE's ability to physically

4 characterize the gas tanks and then get, you know, the

5 results they would predict and compare that favorably

6 with the test results for that same tank.

7 They didn't get that with the electric

8 tanks, and that's why I'm concerned only about that.

9 But I also want to follow up on Frank's earlier

10 comment this morning where he did say that

11 manufacturers are going to be complying with whatever

12 the new standard is, using the test procedure and the

13 results that you get when you run the test procedure.

14 I just would like to ensure that we set

15 the standard on that same basis, and right now, based

16 on the engineering models for the electric tanks, I'm

17 not convinced we're doing that.

18 So if we can get those things straightened

19 out, then I'll have confidence in the test, and I'm

20 not concerned about the test results being one point

21 off or something.

22 MR. BROOKMAN: Carl Hiller and then Steve

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1 Nadel.

2 MR. HILLER: Carl Hiller, EPRI. Just to

3 follow up on this whole issue of the accuracy of the

4 electric model versus the gas model and the three

5 percent tolerance, whatever it is:

6 First of all, the electric model is very

7 accurate. We had it independently evaluated by ETL

8 Testing Laboratory. The big issue here is, number

9 one, we're talking about a production commercial test

10 facility, not NIST.

11 We had a whole bunch of identical tanks

12 tested over and over and over again, just like they

13 did at NIST, and we see, you know, ±.02 in the result,

14 and that variability gets worse as the tank energy

15 factor goes higher, because you have less and less

16 loss involved, and it's more and more difficult to

17 measure.

18 That's the reason why you get better

19 correlation with a fossil fired tank and the fossil

20 models, because the efficiency limit is so much lower,

21 it's easier to do. It's not an inaccuracy in the

22 model. It's a variability in the test, and the result

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1 of the test, because the higher efficiency you get,

2 the smaller differences you're trying to measure.

3 That's what's going on.

4 MR. BROOKMAN: Thanks for that

5 edification. I have this sense we're doubling back on

6 ourselves, and I'd like to keep pushing on here.

7 Steve Nadel, close us out of this segment.

8 MR. NADEL: I was actually going to move

9 on to the issue that Tom Eckman raised.

10 MR. BROOKMAN: Which is the final issue on

11 the sheet, I believe.

12 MR. NADEL: Well, it relates also to this.

13 I mean, I agree that DOE should be working to try to

14 better understand why does its engineering analysis

15 not, on the face, appear to correlate to what's in the

16 market, and what are the reasons for the discrepancy,

17 so we can get the two to correlate. That's one.

18 In addition, I think I agree with Tom

19 that, instead of putting all our eggs in that basket,

20 it would also be very useful to collect information on

21 the actual price in the market of different efficiency

22 measures.

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1 We do have electric water heaters of .9,

2 .91, .92, 193, etcetera, energy factor. It would be

3 very useful to actually collect data on those.

4 I would recommend. I think trying to

5 collect retail costs gets pretty messy. I would

6 recommend concentrating on wholesale costs and then

7 working on a wholesale to retail mark-up. I believe

8 through the distributors, through the manufacturers,

9 it might be quite possible to get a lot of wholesale

10 costs, to do a parallel analysis and saying what is

11 the pricing like now for these different efficiency

12 levels.

13 That may help better understand what's

14 going on in terms of the engineering, and ultimately

15 get DOE the data it needs to make the best decision.

16 MR. BROOKMAN: Okay, thank you. It

17 strikes me, this is a very good discussion but, Terry,

18 we need to keep pressing on. So go to the next issue.

19 MR. LOGEE: Yes. Let's go to the next

20 issue, which is -- Here, it was characterized as

21 revisit the price data from the survey. Our question

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1 ups of gas and electric water heaters.

2 We perceive that there probably is an

3 apparent difference in these mark-ups, and we say

4 apparent because we don't have all of the information

5 to be able to determine where the differences might

6 have arisen.

7 We have two alternatives that we're kind

8 of proposing here. The first alternative is

9 essentially extend our current database of retail

10 prices, just like Steve just suggested. We'll do that

11 by going to the wholesale plumbing supply houses.

12 The second approach is to just apply a

13 constant mark-up across both gas and electric water

14 heaters, the manufacture and cost of those water

15 heaters. We're suggesting a 1.32. That's simply an

16 average of the two mark-ups that we already got, but

17 we're hoping to -- other values, obviously.

18 MR. BROOKMAN: Glenn Schleede.

19 MR. SCHLEEDE: Yes. I asked Doug this

20 morning for permission to make two general comments.

21 One of them fits here. So I'll put it in.

22 Now it seems to me that there's a general

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1 problem here with some of the data collection. It

2 ought to be treated as a generic problem by DOE and

3 figured out how things are handled.

4 Yesterday we had some LVNL examples of

5 data collected with calling AD people or AD

6 organizations. Seems to me, we have no real

7 discipline here in the study designs and how the data

8 is collected. So we don't know whether it's

9 representative. We don't know whether it's valid,

10 reliable and so on.

11 Seems to me, there's a generic problem

12 that DOE must face here of where it gets its data, how

13 it's collected, and is it really good data.

14 MR. BROOKMAN: If-they are going to employ

15 a survey methodology such as this. That's your point.

16 Jim McMahon, did you wish to respond?

17 MR. McMAHON: Glenn, I just wanted to

18 respond to your question yesterday. You had asked

19 about documentation of this data, and I want to refer

20 you to the engineering report. Starting on page 39

21 for electric, and on page 64 for gas water heaters,

22 there is information about how we did it, but your

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1 comment is well taken, and we will look into that.

2 MR. BROOKMAN: Thank you, Glenn. Terry?

3 Additional comments on this last point that Terry

4 made, the last issue? I see none. Keep going, Terry.

5 MR. LOGEE: The only thing that leaves us

6 in the lurch is we don't have any response here to

7 indicate which direction we should go. I guess, by

8 your silence, you're saying proceed down the path that

9 collects more data.

10 I don't understand the signal, Michael.

11 MR. BROOKMAN: Charlie?

12 MR. STEPHENS: Yes. Just one quick

13 question. On the pages that Jim mentioned, I saw the

14 data, the price data from the base case equipment. I

15 think there is equipment out there. At least there is

16 in our market that sells rather well at the other

17 levels that are sort of implied by the standard.

18 I would think it would be just as easy to

19 collect the data on that and derive a difference.

20 Ultimately, I guess we're interested in the increment,

21 the increment in price and the increment in

22 performance.

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1 MR. LOGEE: We, in fact, have some of that

2 data in our database already.

3 MR. BROOKMAN: Jim McMahon, would you like

4 to add on?

5 MR. McMAHON: Let me clarify, Charlie, for

6 everybody. The data that was gathered had information

7 on all the models currently for sale by those people

8 who responded. So we do have that database, and would

9 be happy to make that available upon request.

10 MR. BROOKMAN: Steve Nadel?

11 MR. NADEL: Just to directly answer

12 Terry's question, at least to give one opinion: I

13 would recommend, yes, try to collect some additional

14 data. There were a number of suggestions made that

15 there were certain things lacking. Look at that.

16 If you still have discrepancy, then you

17 might need to consider option B, but let's first get

18 some more data and see what that says.

19 MR. LOGEE: Thank you.

20 The next issue is the issue of the

21 constant set point. What we did was combine these two

22 issues, the mark-up issue and the price database, into

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1 the one issue -- the set point of using the curve that

2 was developed from the California data, and Charlie,

3 you suggested that you had some additional data to add

4 to that curve.

5 What we're thinking there is that we

6 maintain our approach in the methodology of using

7 ranges of water temperatures or ranges in everything,

8 essentially. We would continue to use that curve.

9 We believe the data is valid. We'll add

10 your data to it. Other data that any of you folks can

11 direct us to or provide to us, we can add to that data

12 as well. We also suspect that we should add in some

13 weighting factor for the fact that most manufacturers

14 today sell water heaters at a set point of 120 degrees

15 Fahrenheit.

16 I'm not exactly sure just how we'll

17 develop that weighting factor, but we may get hold of

18 some of the manufacturers and talk with them about

19 that.

20 MR. BROOKMAN: Joe?

21 MR. MATTINGLY: Joe Mattingly from GAMA.

22 I would just -- You ought to be careful to consider

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1 the vintage of the data. Older data may have no

2 validity to what's being installed today.

3 MR. BROOKMAN: Thanks, Joe.

4 MR. LOGEE: Well, I would submit that

5 that's a good suggestion. We had considered that, but

6 we still think there's quite a lot of variability out

7 there.

8 MR. BROOKMAN: Additional comments or

9 questions on this point? Jim Vaughan, a final

10 comment?

11 MR. VAUGHAN: I think we can get comments

12 from the manufacturers, if the question is at what

13 set-point are the manufacturers setting the water

14 heaters today?

15 MR. LOGEE: Yes. Sure.

16 MR. VAUGHAN: I think everyone is setting

17 the water heaters at 120.

18 MR. LOGEE: Well, at least you say you

19 are.

20 MR. VAUGHAN: I think -- You know, and I'm

21 not speaking for everyone, but I think you can clarify

22 that fairly quickly.

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1 MR. LOGEE: I saw a couple of other

2 manufacturers nodding their heads yes, but does that

3 mean it's set at the factory?

4 MR. VAUGHAN: Yes.

5 MR. BROOKMAN: Jim Lutz.

6 MR. LUTZ: I want to stress that what

7 we're trying to model here is what the setting is in

8 the field, and it can vary quite a bit from what it

9 comes out of the factory setting. So I believe you

10 when you say in the factory you set it to 120.

11 I can guaranty you that not all of them

12 stay at 120 in the field.

13 .MR. BROOKMAN: Wilbur?

14 MR. HAAG: At 120; I presume we're talking

15 about electric water heaters

16 MR. BROOKMAN: Yes, that's what I thought.

17 MR. HAAG: The gas models are set at

18 minimum.

19 MR. BROOKMAN: Okay. Terry, would you

20 like an additional question on that? I guess, Jim,

21 your comment was that the industry could comment on

22 that. The question then becomes how, I guess, how

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1 that gets gathered or is this sufficient for your

2 purposes, Terry?

3 MR. LOGEE: They can send it in on their

4 written comments. That will be fine. Through GAMA

5 even.

6 MR. BROOKMAN: Okay.

7 MR. ECKMAN: Tom Eckman, Northwest Power

8 Planning Council.

9 I want to make sure that we don't just

10 look at the set-point. I think what we're really

11 interested in is what the outlet temperature is.

12 MR. LOGEE: That's correct.

13 MR. ECKMAN: And to the extent that we

14 have empirical data from the field, that's probably

15 more relevant than what the manufacturers set it at,

16 given the tolerances of the thermostats.

17 MR. BROOKMAN: Thanks, Tom.

18 MR. LOGEE: Okay, the next issue involves

19 these inconsistent data comparisons in the LCC or life

20 cycle cost analysis between gas and electric. Jim

21 McMahon presented this for our edification yesterday,

22 and we just want to point that out to you and let that

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1 stand on the record.

2 If you need him to repeat that, I'm sure

3 he can do that now, but in the interest of time, I'd

4 rather not. Okay. Then we'll move on.

5 The last two -- The last issues are

6 installation costs, the first one being installation

7 costs on new homes and replacements, and should DOE or

8 -- It was recommended to DOE that we gather that

9 information and include that in our installation

10 costs.

11 Let's see. Did I get ahead of myself?

12 No. We wanted to point out that in the life cycle

13 cost analysis only the incremental installation costs

14 -- only the differences between the baseline and the

15 new designs would be relevant to calculate the

16 payback.

17 So in most cases, what we're saying is

18 that there are no differences in installation costs

19 between the existing designs and new designs. We

20 understand that there probably are different costs for

21 new construction.

22 Our difficulty -- We have two difficulties

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1 there. One is that this is a fairly low part of the

2 market, maybe ten percent, around ten percent of the

3 market. So we don't anticipate a large effect from

4 it, and we're looking sort of at a resource versus

5 benefit from it.

6 The second difficulty is in trying to

7 determine what those costs are, even when we call

8 builders. Builders get this one bill from the

9 plumbing contractor or the HVAC guy, and it may be

10 pretty difficult for them to break this out.

11 We will attempt to get some of this

12 information and, to the extent we get it, we will

13 include it in our analysis. So -- Did you have a

14 question on that, Mark?

15 MR. KREBS: Mark Krebs, Laclede Gas.

16 I don't want to steal Jim McMahon's

17 thunder for his presentation on national energy

18 savings, but there's a lot of information that appears

19 to refute what you just said about what market share

20 new construction is. It's a lot more significant than

21 ten percent.

22 MR. BROOKMAN: Let's look forward to

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1 hearing that presentation.

2 Jim McMahon, would you like to comment at

3 this point?

4 MR. McMAHON: Just since you have stolen

5 my thunder, it's 16 to 20 percent.

6 MR. BROOKMAN: And we'll look forward to

7 the details shortly here as we move from here on to

8 the break.

9 Terry, let's go to the last issue.

10 MR. LOGEE: Yes. Then we have

11 installation costs of the gas versus electric, and we

12 characterize that as -- Oh, this is the retail price

13 issue here. Right? Where did we get out of whack

14 here?

15 Okay. The retail price of currently

16 available, more efficient water heaters. As we

17 already mentioned, we have some retail prices in our

18 database, and it exists not only for more efficient

19 water heaters but also for different sizes of tanks.

20 We'll try to get more of that, and we will

21 make this available to you upon your request. You can

22 sign the back of your business card and leave it on

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1 the table there, write it out on a piece of paper, or

2 whatever, and we'll E-mail it to you.

3 MR. BROOKMAN: Questions or comments on

4 these before we go to break? Jim, yes?

5 MR. RANFONE: Jim Ranfone. I guess I want

6 to add one other issue that we will be commenting on.

7 That's the hot water usage factors. It was discussed

8 yesterday. We took the RECS data and looked at the

9 differences.

10 We were rereading that this morning, and

11 we don't believe that it's correct. So we will

12 comment. I thought we had supplied, and we had at the

13 last workshop, some detailed discussion on average hot

14 water usage, and I thought it came out to about 51

15 gallons, and I'm not sure why we got off base here and

16 started going back to RECS data, which was analyzed.

17 Anyhow, I'd like to keep that as an issue

18 for our discussion.

19 MR. BROOKMAN: Sure.

20 MR. LOGEE: As I mentioned, Jim, we will

21 respond to all the issues in a couple of weeks.

22 MR. BROOKMAN: Jim Lutz.

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1 MR. LUTZ: Jim, I want to reiterate to

2 make clear -- perhaps I wasn't quite clear yesterday -

3 - that we did not use the hot water use or the hot

4 water energy to heat water that is in the RECS

5 database. We used the RECS database to characterize

6 the household -- the number of people in the household

7 and the appliances in the household.

8 MR. RANFONE: Jim Ranfone. But I do think

9 that does impact what your average cost is going to

10. be.

11 MR. LUTZ: It does, yes.

12 MR. RANFONE: That's the issue.

13 MR. BROOKMAN: We've covered a remarkable

14 amount of ground this morning already. It's now

15 10:30, and let's take a break. We'll start at 10:45,

16 and we'll get through the rest of this agenda and,

17 hopefully, adjourn at 12:30.

18 Since we're going to work until at least

19 12:30 and perhaps a little bit longer, you might want

20 to get a snack at the snack bar.

21 (Whereupon, the foregoing matter went off

22 the record at 10:30 a.m. and went back on the record

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1 at 10:45 a.m.)

2 MR. BROOKMAN: I'm suggesting that we try

3 and be very, very targeted and proceed through the

4 agenda as it's listed here.

5 The first segment was scheduled for an

6 hour and 15 minutes. I'm going to see if we can do

7 that in 45. The next element after the break, NES,

8 was listed for 45 minutes. I'm going to see if we can

9 do that in 30. The Consumer Sub-group we should be

10 able to do in 15. Maybe we can do environmental and

11 utility impacts in 15 or 20, maybe as many as 30.

12 That gets us done just about 12:45. So

13 that's pretty darn close, if we can stick with those

14 basic numbers, that basic framework. So that's what

15 we're going to try to achieve here.

16 So I'm going to put the burden on the

17 presenters to try and be concise, and I'm going to put

18 the additional burden on all of you in the room to try

19 and keep your comments targeted and on point. Okay?

20 So that's the basic plan.

21 Our first presenter is Ed Barbour, and

22 you're going to talk about manufacturer impact

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1 analysis. Ed.

2 MR. BARBOUR: That's right. I'm going to

3 try to be brief. So if I go too fast or I skip

4 something, please feel free to ask a question during

5 the presentation.

6 Again, I'm Ed Barbour. I'm with Arthur D.

7 Little, and I'm going to be talking today about

8 manufacturer impact analysis, basically the

9 methodology on what we've done to set up right before

10 we actually start the process.

11 MR. BROOKMAN: Everybody has this in their

12 packets, I believe.

13 MR. BARBOUR: Should be what was handed

14 out yesterday at the end of the day. So everybody

15 have it? We're all set.

16 All right. Basically, I'm going to

17 discuss -- I'm going to present this in five sections,

18 and we talk about the generic analytical framework,

19 the industry profile, straw man industry cash flow,

20 sub-group impact analysis and industry cash flow.

21 The first thing we're going to talk about

22 is the generic analytical framework. To run a little

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1 background as to why we perform manufacturer impact

2 analysis, essentially the law specified that in

3 determining whether a standard is economically

4 justified, DOE is required to consider the economic

5 impact of the standard on the manufacturers and on the

6 consumers of the products subject to the standard, and

7 also -- The key words here were the impact on the

8 manufacturers.

9 Basically, impacts is defined as any

10 lessening of competition as determined in writing by

11 the Attorney General that is likely to result from the

12 imposition of the standard.

13 In July 1996 in the process rule the

14 Department committed to review of the manufacturer

15 impact analysis methodologies. In this new

16 methodology we must address the following: We must

17 provide for early stakeholder input; utilize an annual

18 cash flow approach to determine quantitative impacts,

19 including an assessment of short term costs and

20 capital requirements.

21 We must develop estimates of critical

22 variables with input from interested parties, drawing

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1 on multiple sources, both quantitative and

2 qualitative; report the distribution of impacts on the

3 manufacturers; use models that are easy to understand

4 and account for uncertainty; must consider the

5 cumulative impacts of regulation; and must consider

6 the impacts on manufacturing capacity, plant closures,

7 and the loss of capital investment.

8 This sort of shows what sort of inputs

9 that we're looking for from both the qualitative and

10 the quantitative aspects. In the past there's been a

11 lot of tendency to sort of jump headlong into trying

12 to do quantitative, very detailed calculations, then

13 measure financial variables, without having really

14 spent enough time asking ourselves what were the

15 relevant things to measure for the manufacturers.

16 What we're trying to do now with the new

17 methodology is address that. That's why we have a lot

18 of qualitative -- or a lot of opportunities for

19 qualitative inputs.

20 In order to do this, we have fully

21 documented qualitative and quantitative analytical

22 methods. The qualitative assessment will draw on

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1 multiple types of stakeholder inputs. Essentially it

2 will be manufacturer inputs will be invited through

3 voluntary interviews and facility visits.

4 Stakeholders will be consulted through interviews,

5 workshops, surveys and other means to develop

6 estimates of critical variables and identify possible

7 impacts.

8 The key to this, it is very important to

9 understand the way we model the passes different from

10 our attempt today. I think it's fair to say that

11 previously we had the models such as the GRIM was very

12 much center stage.

13 Today, what we're trying to do is put --

14 this is to be more up front and be really the center

15 stage when we do the manufacturing impact analysis, to

16 really understand the qualitative assessments before

17 we get into detailed cash flow analysis that wills be

18 conducted under GRIM.

19 Now what I would like to do is sort of go

20 step by step outline of how the analysis is going to

21 be conducted. Essentially, the industry profile

22 provides us some quantitative and qualitative

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1 boundaries and aspects order of magnitudes that we can

2 work from so that we sort of understand what the

3 current industry looks like before we actually develop

4 a straw man cash flow and visit the manufacturers for

5 the interviews.

6 For the straw man industry cash flow, what

7 we have done is we have created a spreadsheet tool

8 called the GRIM model, Government Regulatory Impact

9 Model, to forecast industry cash flows both with and

10 without standards. Later this week that should be

11 available on the DOE Web to download by the

12 manufacturers and other interested parties so that you

13 can sort of see how we set up the analysis.

14 Next we do manufacturer sub-group

15 analysis, and that's actually where we will go out and

16 visit the manufacturers to interview you, get the

17 qualitative assessments, and the manufacturers

18 themselves will be allowed to run the GRIM with their

19 own financial inputs. We'll discuss that in a little

20 more detail.

21 In Phase III we sort of roll it all up

22 into an industry cash flow analysis.

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1 Next I want to go through this real quick.

2 This should be nothing real new.

3 MR. BROOKMAN: Can I just check. Is

4 everybody staying with us so far? So far? Most of

5 you have seen this framework before. Yes? Okay.

6 MR. BARBOUR: Okay. I'm going to go

7 through this real quick. This is some of the outputs

8 from the industry profile that we've done, and it's

9 just to sort of again set an order of magnitude and

10 sort of a boundary so we understand what's going on.

11 The first one, we want to look at both

12 unit shipments and value of water heaters. They've

13 increased since 1992. That's how far we go back.

14 Essentially, in 1997 there were 9.3 million water

15 heaters shipped in the United States, and this

16 attributes to a manufacturer of about $1.3 billion.

17 Next, from Appliance Magazine, just to

18 sort of get an idea who the big players are in the

19 water heater market. There's five major players.

20 Don't get too wound up in the percentages.

21 What we want to be able to do is to

22 basically say that there are five major players, so

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1 that when we visit one of the major manufacturers and

2 they tell me that they have 60 percent market share,

3 we know that maybe that's not quite right. So this

4 provides a little bit more of, again, a boundary check

5 and a framework.

6 The other thing we want to look at is some

7 of the distribution channels. One of the issues

8 that's come up previously was about the increase in

9 the large retail outlets for the do-it-yourself

10 market. Again, these numbers are somewhat

11 illustrative.

12 What we want to try to capture is the

13 growing trend to moving form plumbing wholesalers to

14 large retail outlets and whatever impact that might

15 have on a business.

16 Next I'm going to walk through how we

17 developed the straw man industry cash flow using the

18 GRIM. The Department is currently proposing to use

19 the GRIM to conduct the industry cash flow. The GRIM

20 is basically a tool that provides a discounted cash

21 flow or produces an industry net present value for

22 both scenarios, with standards and without standards.

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1 It also offers numerical and graphical comparisons.

2 The GRIM basically has four inputs:

3 Manufacturer prices, manufacturing costs, shipments,

4 and then the financial information of the

5 manufacturer. Out of those four inputs, we can

6 produce a cash flow that ends up with a net present

7 value for the industry.

8 In order to set up a tool, the Department

9 created a straw man cash flow using industry average

10 values for manufacturer prices, manufacturing costs,

11 shipments and financial information.

12 The manufacturer costs were estimated from

13 the developed industry cost structure. The data

14 submitted by GAMA was compared to current industrial

15 reports as published by the Bureau of Census.

16 The manufacturing price data itself comes

17 from the current industrial reports, and then we have

18 manufacturer markups from the industry cost structure.

19 The financial information was obtained through

20 manufacturers' 10K statements, the census of

21 manufacturers from 1992, as well as Dun & Bradstreet

22 company datasheets.

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1 Then the shipments we will get from the

2 NES, which will be discussed next by Jim McMahon,

3 which is being developed by LBNL.

4 This slide we actually discussed

5 yesterday. So unless there's any questions about what

6 GAMA provided, that they provided the full production

7 costs, I'm going to go on to the next slide.

8 One of our first checks was to sort of

9 compare what GAMA supplied on the average side from a

10 manufacturer cost standpoint to what the average price

11 was for all electric and all gas units sold in 1997

12 and 1996.

13 Now recognize that this, both the electric

14 cost, the gas cost and the oil cost represent distinct

15 baseline models. This represents a 50-gallon electric

16 with a certain energy factor and certain physical

17 characteristics. Gas is a 40-gallon gas with certain,

18 again, physical characteristics. Same with oil, 30-

19 gallon tank with certain characteristics.

20 These numbers represent the average price

21 that manufacturers sold to the wholesalers or the

22 large retail outlets or whoever their customers were

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1 for all sizes and all efficiencies and all ranges.

2 What we were able to develop was an

3 average price in 1997 for electric of $130 for gas,

4 $156, and oil was not available from the CIR. It's

5 actually not offered. There would be disclosure

6 reasons.

7 Since we're interested in really obtaining

8 an industry value, we're proposing to use these

9 industry average prices presented in the CIR for

10 "manufacturer prices" to set up the cash flow, again.

11 MR. BROOKMAN: George, a question?

12 MR. KUSTERER: George Kusterer, Bock Water

13 Heaters. In the lefthand chart that you have here,

14 overhead costs for oil is $36 as opposed to an average

15 of $50. Can you explain that, please?

16 MR. BARBOUR: Why these two are different?

17 I'm not sure I understand.

18 MR. KUSTERER: Yes. Why is that lower?

19 MR. BARBOUR: This data comes straight out

20 of the engineering analysis, and actually, what

21 happens is is that this data is what was submitted by

22 GAMA. There was no oil data submitted by GAMA. This

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1 was provided by consultants to the Department of

2 Energy to develop this overhead cost.

3 MR. KUSTERER: Well, why is there such a

4 disparity in overhead? Overhead is basically the

5 same. I mean, what changes?

6 MR. BARBOUR: All right. One thing we

7 know is that we have a transportation aspect in both

8 the overhead cost here. I'm not sure if that was

9 included in here. Again, I wasn't involved in

10 developing this data. So I'm not sure I'm the best

11 one to answer it. There may be somebody that's

12 better, that worked with the consultants in order to

13 develop the data for the oil.

14 MR. KUSTERER: I would like the record to

15 show that I believe that that number is inaccurate.

16 MR. BROOKMAN: Thanks, George.

17 MR. BARBOUR: So working off of -- Again,

18 we're still creating a straw man. I want to sort of

19 emphasize that these numbers are just to help us set

20 up the GRIM and that, when we visit the manufacturers,

21 they will run the model themselves for their own

22 situation and their own financial inputs.

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* 1 ' So don't -- I wouldn't get too wound up

2 per se about the different costs that are being

3 represented here. They're to provide a baseline and

4 provide us something to help -- sort of inputs to help

5 us develop the spreadsheet model before we actually go

6 out and do the interviews, which I'm going to discuss

7 a little bit.

8 MR. KUSTERER: Let me just say something.

9 Nobody is getting wound up. They're just -- We're

10 just trying to point out there's some inaccuracies.

11 We're not getting wound up.

12 MR. BROOKMAN: Okay. Thank you.

13 MR. KUSTERER: I mean, if you want me to

14 get wound up --

15 MR. BROOKMAN: But as I understand it,

16 we're trying to lay out the methodology here. This is

17 the description of the methodology with some numbers

18 that are starting points.

19 MR. KUSTERER: I mean, nobody is getting

20 wound up.

21 MR. BARBOUR: Okay. What we did is we

22 looked at the Census of Manufacturers, and we looked

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1 at some public data available through 10K and Dun &

2 Bradstreet, and we're able to develop what we call an

3 industry pie which tries to allocate costs for the

4 base price of a water heater for the different end

5 uses.

6 Then from that, we can sort of come up --

7 we can back out a material, labor and overhead that we

8 need to go into the spreadsheet, and if we do that, we

9 get a full production cost, and then we get an average

10 manufacturer markup of 1.24.

11 We're proposing to use that markup to

12 estimate the post-standard manufacturer price.

13 Essentially, what that would be, we would take the

14 base case manufacturer price from the CIR, which I

15 just presented, and we would add the incremental

16 production costs which we developed from the

17 engineering analysis, times that manufacturer markup.

18 Right now we've got a base case markup of

19 1.24. There are numerous scenarios that we can run

20 when we do the analysis that can look at whether or

21 not there are certain markups that result in the

22 current industry value that we currently have, just

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1 maintains it flat.

2 We can also look at different markups that

3 reduce the industry value to zero, and we can also

4 look at price resulting from a pass-through of that

5 incremental cost, all to sort of give us an idea of

6 what sort of impact it will have on the industry.

7 As I said earlier, the shipment values in

8 the GRIM will be obtained from the NES, and that's an

9 output of the NES. We actually just incorporated it

10 in, and currently LBNL is developing that.

11 For the financial information, we used a

12 couple of different sources. We used 10K reports,

13 company annual reports, Dun & Bradstreet. From that

14 we were able to come up with sort of a straw man

15 working capital number of almost 13 percent. SG&A is

16 about 11. R&D is about 2. Depreciation is about 3,

17 and capital expenditure is about 3.7, and we have an

18 effective tax rate of 35.8 percent for the straw man.

19 Any questions so far on this, because

20 otherwise I'm going to go into the interview process.

21 Basically, the interview process happens

22 when we do the sub-group impact analysis. It includes

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1 basically five components: Manufacturer cash flow;

2 estimated competitive impacts; estimate employment

3 impacts; estimate impact of manufacturing capacity;

4 and summarize quantitative and qualitative findings.

5 Now that I've just walked you through all

6 the average industry analysis, it's actually not going

7 to be used to assess the impacts on sub-groups of

8 manufacturers. What we do in the interview or even

9 before the interview, we're going to ask the

10 manufacturers to perform a cash flow analysis using

11 the GRIM spreadsheet and their own values for

12 company-specific inputs.

13 ADL will be available to assist the

14 manufacturers in adapting the GRIM to their individual

15 situation, as well as -- The key point is to document

16 important variances from the straw man or industry

17 norms, and that will be discussed and documented

18 during the interview process.

19 Cash flow reports will be prepared, again,

20 with and without new energy efficiency standards.

21 The key point of this whole analysis is

22 really the interview. What we'd like to do is to

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1 nconduct interviews that would gather manufacturer

2 specific data and views, and really the views on the

3 important issues.

4 We will develop a questionnaire to guide

5 the interviews. Currently, we have a draft version of

6 the questionnaire over on the table over here. I'd

7 like any manufacturer or interested party to feel free

8 to pick up a current copy.

9 We would also like for you to provide

10 comments and feedback into what's currently

11 incorporated in that interview guide.

12 The purpose of the interviews is to really

13 -- is to gain that understanding and to really have a

14 good confidence into the actual results that come out

15 of the MIA.

16 Some questions in the interview guide will

17 be relevant to some -- will be irrelevant to some

18 manufacturers, while there may be some manufacturers

19 who have other issues they may wish to bring up that's

20 not included in the interview guide; and we want to be

21 able, during the interview, to allow them to provide

22 that information.

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1 Again, ADL will be assisting the

2 Department in carrying out the interviews, and we'll

3 be providing the third party confidentiality for

4 proprietary information.

5 The interview guide is going to cover a

6 range of topics, and really what we'd like to do now

7 is to really outline our needs, what we need in order

8 to do the MIA, as well as distribute the draft

9 interview guide and to encourage the manufacturers to

10 contact us with suggestions and questions about the

11 content of the interviews.

12 Basically, the interview is going to cover

13 six issues: Current organizational characteristics;

14 industry infrastructure; global competition;

15 manufacturer cash flow analysis impacts assessment;

16 employment impacts assessment; and competitive impacts

17 assessment, and cumulative burden which isn't up

18 there.

19 We're interested in understanding the

20 current organizational characteristics of each

21 manufacturer. Primarily, what we really want to focus

22 on is at the plant and profit center level. That

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1 means to look at production levels and trends, the mix

2 of products that you have between electric and gas and

3 oil, as well as the size range.

4 We want to look at your location, where

5 you're located both domestically, North America and

6 other foreign production facilities. We also want to

7 look at any sort of marketing strategy you may have

8 for efficiency and how would all these things change

9 with new standards, new energy efficiency standards.

10 The cash flow analysis is somewhat key.

11 It provides a level of consistency between each

12 manufacturer as we do the interviews. As I stated

13 earlier, each one will be given a GRIM spreadsheet and

14 a sample worked-out straw man industry cash flow that

15 I walked through earlier to sort of facilitate

16 understanding among the manufacturers about the model

17 and how it works.

18 Then each manufacturer can input its own

19 data and assumptions to develop its own expected cash

20 flow, and the cash flow output will exhibit, just by

21 the way we've set up the spreadsheet -- will exhibit,

22 basically, a format content similar to the straw man.

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* 1 It should be also noted that the

2 manufacturer cash flows will be kept confidential.

3 I think we just discussed this a little

4 bit. The cash flow analysis key procedure -- It's

5 important -- The important goal of each interview is

6 to fully discuss the results of the cash flow analysis

7 under each scenario that the manufacturer does.

8 In many cases, the cash flow analysis will

9 be prepared before the interview for discussion

10 purposes only. Problems and/or unique circumstances

11 affecting the cash flows should be discussed and tried

12 to be resolved during the interview.

13 Each manufacturer should also include an

14 informal review of the draft cash flow analysis for

15 the manufacturer. This draft can then be revised

16 after the discussion for submission to third party

17 review and inclusion in the industry roll-up.

18 The next thing we want to look at is sort

19 of employment impacts. We want to look at current

20 trends of water heater production employment as well

21 as manufacturer's use on how employment patterns might

22 be affected by new energy efficiency standards.

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1 They would also be interested in knowing

2 to what extent that workforce will need extensive

3 retraining or even replacement in the case of a new

4 energy efficiency standard. Existing data on

5 manufacturing interviews are going to be used to try

6 to estimate this employment level, differences between

7 different standard levels.

8 Interviews will be the primary method of

9 really establishing the difference in workforce skills

10 required under different levels of the energy

11 efficiency standards, and again the interviews will

12 establish likely impact of the new energy efficiency

13 standards on product mix and employment levels.

14 In order to do- the competitive impact

15 assessment, the Department of Justice. will be

16 solicited in order to provide draft questions to the

17 manufacturers for the interview questionnaire.

18 Questions are likely to pertain to the likeliness of -

19 - DOJ is really interested in what sort of reduction

20 in competition happens among the manufacturers.

21 So a lot of their questions are really

22 going to be focused on if there's asymmetrical cost

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1 increases to some manufacturers, whether there is an

2 increased proportion of fixed costs to certain

3 manufacturers that increase their business risk, as

4 well as any barriers to market entry.

5 In other words, if one manufacturer has

6 proprietary technology that would allow it to really

7 dominate the market, DOJ would be interested in that.

8 MR. LOGEE: This is Terry Logee. Let me

9 just make a note for the record. DOE and Arthur D.

10 Little contractors have already been to the Department

11 of Justice and have gotten preliminary input on what

12 should be in this questionnaire.

13 Department of Justice will be contacted

14 once more to review this and to finalize it before we

15 actually make our interviews.

16 MR. BROOKMAN: And so everybody, based on

17 Ed's earlier comment, should take a look at the

18 interview format and look and make sure they're

19 comfortable and add their comments to the Department.

20 MR. BARBOUR: The interview guide actually

21 already has questions for competitive impacts in it.

22 MR. BROOKMAN: So look at those.

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1 MR. BARBOUR: Then after the interviews,

2 we go into develop an industry task flow to sort of

3 roll up everything we've learned, and it's really a

4 bottoms up approach.

5 We've talked probably ad nauseam about the

6 GRIM, but it will be used to really have -- to

7 provide that commonality between the different

8 manufacturers in order to come up with an annual cash

9 flow analysis under current and new energy efficiency

10 standards.

11 We've already talked about the process.

12 So let's go into how we actually roll it up. We can

13 develop -- take the individual flows -- We take the

14 straw man, send out the GRIM to the manufacturers.

15 They run it with their own financial information. We

16 have the results. We roll it up together into one big

17 industry cash flow that shows the overall impact on

18 the industry.

19 Then finally, for the public record the

20 information is presented. It's only the summary sheet

21 of the industry cash flow for each scenario.

22 Proprietary information will not be disclosed. That

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1 means shipments by water heater type, prices by water

2 heater type, manufacturing costs, as well as the

3 manufacturer specific financial information.

4 That actually concludes my presentation.

5 If there's any other questions --

6 MR. LOGEE; Terry Logee again. Ed, for

7 the record why don't you just explain what the

8 confidentiality arrangement is that you intend to

9 have.

10 MR. BARBOUR: Actually, Mike is probably

11 better, since he's done this with valves before.

12 MR. RIVEST: Hi. This is Mike Rivest of

13 ADL. I've just been through the process with the

14 valves manufacturers, and I'm happy to say that things

15 went surprisingly well.

16 We were able to -- We had varying ways of

17 working with manufacturers. All of them allowed us to

18 tour their manufacturing facilities. In some cases --

19 In most cases, they had prepared GRIM cash flow

20 analyses for their particular situations and filled in

21 the questionnaires when we met them.

22 In other situations we spent a day or two

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1 with them developing the cash flow analyses for their

2 particular situations. The confidentiality agreements

3 that we signed -- We at ADL have suggested

4 confidentiality agreements.

5 I would say in most cases they came back

6 changed substantially, based on the inputs from the

7 legal counsel of the various companies, but it hasn't

8 been a roadblock up until now. All the information

9 coming from individual manufacturers is kept in

10 confidentiality at A.D. Little.

11 The Department doesn't see your individual

12 company submittals. All they see is what is in the

13 public record, which is the rolled-up industry values.

14 MR. BROOKMAN: Questions on that? That

15 was a lot of information quickly presented by Ed

16 Barbour. Questions on this packet of information?

17 Glen Schleede.

18 MR. SCHLEEDE: One question for Terry.

19 Could you sort of characterize how -- the extent to

20 which the Justice Department is really engaged in this

21 process? I mean, are they thoroughly involved? Are

22 they doing it because you're bugging them or can you

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1 give some general description of how thorough you

2 think their involvement really is.

3 MR. LOGEE: The meeting that I attended,

4 there were three or four -- several Justice Department

5 individuals, including, I believe, the Director of

6 that particular office. They had offered to review a

7 generic, if you will, document, interview type

8 document which is really what our interview guide is

9 *1 based on, and then they also will be interviewing each

10 specific -- product-specific interview guide that we

11 produce.

12 Our reason and our effort and their

13 interest in it is to reduce overlap from the two

14 agencies so that -- with the hope that in most cases

15 they will not have to go back out and ask these

16 questions all over again to all these manufacturers.

17 Now there may be some instances when they

18 decide they need additional information, but to the

19 extent that it's possible, we're trying to prevent

20 that.

21 MR. SCHLEEDE: Will they have access to

22 the raw information that is collected or are they

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1 restricted to seeing only the summary information that

2 DOE gets?

3 MR. RIVEST: I certainly -- My intent is

4 to not give them any information.

5 MR. LOGEE: The confidentiality agreement

6 is between the manufacturers and ADL. The government

7 is not involved in that. So I would expect that, if

8 they want some of that information, the Department of

9 Justice will have to execute their own confidentiality

10 agreement and go and get that information.

11 Otherwise, they will see the same

12 information that the public sees and that we see.

13 MR. BROOKMAN: Jim, you had a question?

14 MR. RANFONE: Yes. Jim Ranfone, American

15 Gas Association.

16 I guess, even though this is in the

17 section on manufacturing, back on page 2 it says, "In

18 determining a standard, whether a standard is

19 economically justified, DOE is required to

20 consider..."

21 The second bullet is the impact of

22 lessening of competition as determined in writing by

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1 the Attorney General that is likely to result from the

2 imposition of the standard.

3 I guess this is more for DOE's counsel.

4 Would that also apply to competition, for example,

5 between fuel suppliers, between energy suppliers?

6 MR. BARBOUR: No, I don't think so. I'm

7 almost positive it doesn't.

8 MS. PINTO: We don't have an answer right

9 now.

10 MR. RANFONE: Okay, but can we get an

11 answer to that, whether or not that's being

12 considered.

13 MS. PINTO: At some point, yes.

14 MR. BROOKMAN: Help me to capture it

15 again. Say it in a way that I can write it up here in

16 a few words.

17 MR. RANFONE: The legislative requirement

18 states the impact that DOE in determining a standard -

19 - whether a standard is economically justified, DOE is

20 to look at the impact of any lessening of competition

21 as determined in writing by the Attorney General that

22 is likely to result from the imposition of the

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1 standard.

2 My question is does that apply to the

3 lessening of competition between energy suppliers --

4 among energy suppliers?

5 MR. MARGOLIS: Are you asking -- Eugene

6 Margolis. Are you asking that in DOJ giving us its

7 opinion or are you asking how, after DOJ gives us its

8 opinion, how we relate to it, how DOE then relates to

9 it?

10 MR. RANFONE: No. What I'm asking is a

11 response to what's outlined here. It says the

12 standard -- In determining whether a standard is

13 economically justified, DOE is required to consider

14 the impact of any lessening of competition as

15 determined in writing by the Attorney General that is

16 likely to result from the imposition of the standard.

17 My question is does this only apply to the

18 lessening -- a possible lessening of competition

19 between manufacturers or does it also apply -- do you

20 have to do an analysis on any possible lessening of

21 competition between energy suppliers?

22 As an example, if you establish a standard

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1 for one product that would result possibly in fuel

2 switching to another product, is that being considered

3 by the Department of Energy or are you required by law

4 to do so?

5 MR. MARGOLIS: That has never been done by

6 the Department before. That doesn't mean that it

7 won't be done. It's never been raised before either.

8 MR. BROOKMAN: But, Jim, thanks for

9 clarifying -- for taking the time to clarify that.

10 Francine, I heard you comment earlier.

11 You gave a short answer.

12 MS. PINTO: No. I said we don't have an

13 answer.

14 MR. BROOKMAN: Thank you. That was a

15 short answer. I saw Mark Krebs first, and then

16 George.

17 MR. KREBS: Mark Krebs. Yes, it has been

18 looked at in the past.. It was looked at in the last

19 round of NAECA, specifically regarding the issue about

20 the heat pump water heaters, and I believe that DOJ

21 made a statement that's in the formal records to that

22 extent.

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1 MR. BROOKMAN: So additional questions and

2 comments based on -- George, did you wish -- Okay.

3 Additional questions and comments based on Ed

4 Barbour's presentation? There's a lot there. Steve

5 Nadel?

6 MR. NADEL: Yes. Two questions and, Ed,

7 I'm not sure whether it's you or Michael answers it.

8 If I understood correctly, you'll be taking all these

9 GRIM runs from individual manufacturers and then

10 aggregating them in some way to get an overall

11 industry perspective, and that latter is what comes in

12 the public record.

13 Okay. Let me just make sure I have it

14 understood.

15 MR. RIVEST: Yes.

16 MR. NADEL: Okay. The question is what

17 type of review are these individual manufacturer

18 estimates going to be getting, and what type of

19 assurances can -- I guess it's ADL, because they're

20 the only ones who have access to this, can give it to

21 us, that they believe that this is a fair

22 representation in the industry?

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1 The reason I ask this is that, clearly,

2 there are judgment calls being made in making these

3 analyses, and the manufacturers who are preparing them

4 are not disinterested parties in this proceeding. So

5 how can'those of us who do not have access to this are

6 going to get it in such highly aggregated form, it's

7 going to be very difficult to understand.

8 MR. RIVEST: The underlying assumptions,

9 Steve, are going to be verbalized through the

10 qualitative assessment. So that, if you have problems

11 with the assumptions, you'll be -- I think you'll be

12 in a position to make your own evaluation.

13 You know, if there are some assumptions

14 about shipments, for example, or about price trends or

15 things like that, they will be verbalized. So you

16 won't just get the GRIM and no explanation. You know,

17 we will be reporting back on the --

18 MR. NADEL: The key assumptions.

19 MR. RIVEST: Yes.

20 MR. BROOKMAN: That was Mike Rivest.

21 Additional questions or comments based on this

22 presentation? Okay. I don't see any. Thanks, Ed.

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1 George, I thought you -- Did you wish to

2 comment?

3 MR. KUSTERER: Not on the presentation,

4 but on my colleague, Mr. Ranfone. I share his

5 concerns with regard to the fuel switching issue, and

6 if you remember, for those of you who were here in

7 '94, this was also brought up. So it has been

8 extensively discussed. Whether the Department of

9 Energy had addressed it at that time, I thought they

10 had.

11 So I think it is a serious issue, and I

12 think it's something that can't be swept underneath

13 the table.

14 MR. BROOKMAN: Okay, thank you. Steve

15 Nadel?

16 MR. NADEL: One other question. An issue

17 that's come up, I think, since the process improvement

18 began and we started talking about GRIM was GRIM has

19 certain strengths, but that it needed certain

20 enhancement, particularly the one that comes to mind.

21 I see you have a cash flow here. There's

22 been discussion for several years now about also

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1 adding return on investment. What is the status of

2 that work? That's another way to look at the industry

3 health and one that traditionally DOE has used and

4 many of us who have been involved in this process have

5 become quite familiar with.

6 MR. RIVEST: I'm looking at Carl Adams

7 now. Carl, pay attention to what I'm going to say.

8 We have at ADL developed the metric, but

9 we have yet to have it approved by DOE, reviewed by

10 DOE and approved by DOE. Is that fair, Carl?

11 MR. ADAMS: I guess we're still looking at

12 it.

13 MR. BROOKMAN: That was Mike Rivest.

14 Carl, for the record, says DOE is still looking at it.

15 Eugene, do you wish to -- Okay.

16 So additional questions or comments on

17 this presentation? I think we're just about back on

18 track. The next presentation and discussion is on

19 NES. By all means, Francine Pinto.

20 MS. PINTO: This is Francine Pinto. This

21 is in response to Mr. Ranfone. Since I cannot

22 guaranty that we would have a legal opinion by

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1 December 11th, please submit whatever statements on

2 the whole issue you want to.

3 MR. RANFONE: Thank you.

4 MR. BROOKMAN: Thank you. Okay, Jim, are

5 you doing NES. National Energy Savings is the next.

6 We're back on track with time. So that's very

7 helpful. Thanks, Ed Barbour, for doing that

8 efficiently.

9 Let me also say, for those of you that may

10 have joined us and didn't hear the announcements this

11 morning, if you have a laptop computer and you expect

12 to walk out the door with it today, you need a

13 property pass.

14 So if you haven't obtained that yet from

15 Brenda Edwards Jones, you need to get one. Otherwise,

16 you'll be detained at the door as you try and leave.

17 MR. McMAHON: Apparently, the file did not

18 get loaded. I'm going to have to transfer it to my

19 computer.

20 MR. BROOKMAN: Everybody has a copy of

21 this. This is Jim McMahon's presentation, National

22 Energy Savings.

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1 MR. McMAHON: In the interest of time, I'm

2 going to begin from the paper copy and, if we get the

3 electronic slides up in time, we'll go to those.

4 This is the paper that I'm talking about,

5 National Energy Savings, page 2, discussion topics.

6 You'll be happy to know that topics 3, 4, and 5 were

7 discussed yesterday. So I'm not going to talk about

8 those: Consumer marginal energy rates, energy price

9 trends, and the energy conversion factors.

10 So the focus today is on water heater

11 shipments, fuel switching, and economic factors.

12 Page 3 is a graphic of historical water

13 heater shipments. This is date back to 1951. It

14 shows total residential water heater shipments

15 increasing from about 3 million up to close to 9

16 million today, and it also shows the breakout

17 according to fuel type for gas and electric water

18 heaters.

19 This is basic information that we need,

20 because the current stock of water heaters in place

21 includes some that were installed up to 20 years ago,

22 and we need to know how many of those are likely to

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1 retire as a meter driver of future shipments.

2 Next page, page 4 -- and please stop me

3 anytime you have a question. New housing construction

4 has been discussed a little bit yesterday. We have

5 looked at the historical record. There have been

6 between 1 and 2 million housing units added each year.

7 Most of those, 90 or 95 percent, have

8 residential storage water heaters of the.type that we

9 are concerned about. Then let me throw in here, there

10 are some residential housing units that have shared

11 water heaters. That is, they share a water heater

12 among multiple housing units. Those are typical not

13 of consideration here, and we are aware of that. I'll

14 account for that later.

15 So if you put that together, new housing

16 accounts for on the order of 1-2 million new

17 residential storage water heaters each year, and that

18 represents 16-20 percent of annual shipments.

19 MR. BROOKMAN: Frank Stanonik.

20 MR. STANONIK: Frank Stanonik with GAMA.

21 Jim, housing units -- you kind of alluded that doesn't

22 include to some extent units that would be provided

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1 from, let's say, a central water heater. Is there

2 anymore specific definition? Are we including

3 everything -- Let's put it this way -- including even

4 highrise or residential -- units that would be in the

5 highrise residential building?

6 MR. McMAHON: Let me explain. The

7 definition of housing units includes single family,

8 attached and detached. It includes multi-family,

9 including highrise. It also includes mobile homes.

10 However, we are going to exclude from the water heater

11 analysis those housing units that have shared water

12 heaters that are not of the type that are being

13 regulated.

14 Okay, on page 5, life expectancy. As was

15 indicated yesterday, we are using triangular

16 distributions. They are different for electric and

17 gas, and the numbers are here.

18 For electric water heaters, the range of

19 lifetimes is from four to 19 years with a 12 year

20 average, and for gas from three to 15 years with a

21 nine year average.

22 MR. HILLER: Carl Hiller from EPRI. From

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1 where do you get this data?

2 MR. McMAHON: It's from Appliance

3 Magazine, September.

4 MR. HILLER: So it's not really scientific

5 data then. It's just somebody's estimate.

6 MR. McMAHON: My understanding of how

7 they gathered that is by interview of knowledgeable

8 people. They've done it for many, many years. We

9 have in the past done research to try and derive

10 lifetimes from the shipments data, and it's difficult,

11 and you don't always get results that are credible.

12 I'd be happy to have input if you have

13 other sources of data.

14 MR. HILLER: Unfortunately, I don't have

15 other sources of data. I have considered doing the

16 scientific tests like we did for space conditioning

17 heat pumps, but it requires a much, much larger sample

18 because of the variability that affects water heater

19 life.

20 Just for the record, the opinion survey

21 generally doesn't give you real good results.

22 MR. BROOKMAN: And can -you characterize

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1 how they are not good?

2 MR. HILLER: Let me give an analogy of

3 what we did with space conditioning heat pumps.

4 Opinion surveys -- The opinion of how long something

5 lasts can only reflect your experience with those that

6 have been replaced, not those that haven't. That

7 tends to be the downside.

8 So, for example, when you consider a long

9 life tank, most of which would presumably still be out

10 there, having never failed, how do you determine the

11 lifetime by an opinion survey?

12 MR. McMAHON: We'll come back to this in

13 a moment, because I've got a comparison of how our

14 estimates of the replacement market plus the new

15 construction compare to actual shipments, and so

16 you'll be able to see what the discrepancies are.

17 Then we can discuss whether lifetime may be one source

18 of that discrepancy.

19 MR. STANONIK: Frank Stanonik again. So,

20 Carl, do you think the averages are too high or too

21 low?

22 MR. HILLER: I don't know what they are.

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1 I don't claim to know the answer. I wish I did.

2 MR. McMAHON: Here is a comparison. What

3 I've done here is combine the information on the

4 previous slides. This is the -- The dashed line is

5 total shipments from 1981 out to 1996. So that's

6 reported data. I got that from data that GAMA has

7 published. I got their statistical highlights.

8 The yellow band here is new .housing, and

9 I'm fairly confident of that, because there are good

10 surveys every year that report for new housing what

11 types of water heating they have, and we used the

12 historical statistics on how many housing units are

13 constructed each year. That's the yellow band.

14 The blue or green band here at the bottom,

15 which was the bulk of the market, is the replacement

16 market. We calculated that using the lifetimes that

17 I just showed you, coupled with the historical

18 shipments that have been reported.

19 Then so the total, the top line here, can

20 be compared with the actual shipments, and you can see

21 how well we did.

22 Go to the next page. It's the same

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1 information presented as a percent of the annual total

2 each year. So you should get 100 percent every year

3 if you've done it right.

4 Here's t he new construction. Here's the

5 replacement market. So you can see that we over6 estimated a little initially, pretty good agreement in

7 the middle in the late eighties and early nineties,

8 and we're still within ten percent in every year. I

9 think it's actually eight or nine percent -- is the

10 worst error.

11 I don't know all the reasons why it doesn't

12 agree. If you read the NES report, I've listed some

13 things that I think are possible explanations, and I'd

14 be happy to have any additional information that will

15 help us make a better estimate. But for now, in the

16 context of the open process, we're trying to give you

17 as much information on the way as we go.

18 I hope we can improve these if we get more

19 data, but for now our estimates are within ten percent

20 of actual shipments.

21 MR. BROOKMAN: Frank Stanonik.

22 MR. STANONIK: Jim, why is -- I'm

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1 confused. Why is new housing an estimate? I mean,

2 every year there is a statistic published that says

3 we've had this many new housing starts in this year.

4 MR. McMAHON: I may have misspoke. The

5 housing starts are reported. We get them from Census,

6 and there are surveys that report the percent of

7 houses that have water heaters by fuel type, and

8 that's what we've reported here.

9 MR. BROOKMAN: Charlie Stephens.

10 MR. STEPHENS: One quick question. Did

11 you aggregate this up from electric, gas and other or

12 did -- So you can separate the two and perhaps look

13 for explanations there?

14 MR. McMAHON: Yes. That's correct,

15 Charlie. I'm presenting the totals first, and now I'm

16 going to get into the fuel shares, but we did

17 calculate them, gas and electric, separately and add

18 them up.

19 MR. BRUNDAGE: Don Brundage, Southern

20 Company.

21 Do your data sources on new construction

22 break out houses that -- new houses that may have

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1 multiple water heaters or is an assumption of one

2 water heater per house?

3 MR. McMAHON: I don't believe we've looked

4 at multiple water heaters. I think we've assumed one.

5 MR. BRUNDAGE: Because you could have an

6 electric water upstairs and a gas in a house. That

7 may be a source of --

8 MR. McMAHON: I agree. Jim, could I ask

9 you to take a note on that?

10 Okay, water heater shipments. Let's move

11 to fuel shares. Again, this is from the shipments

12 data. It is the fraction of -- the percent of annual

13 shipments each year, starting in 1961 out to 1996, gas

14 at the top, electric at the bottom.

15 Oil is in here from 1969 to 1986. You

16 can't see it very well, because it's on the order of

17 one percent or less, but we do have those statistics

18 in there.

19 You can see that gas has the highest

20 share, and I want to focus on the last ten years,

21 about this period out here; because things have

22 stabilized pretty well, and I think that provides a

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1 base. I'm not sure that the information from the

2 early -- from the late fifties and early sixties is

3 relevant to this proceeding.

4 So we want to focus on the more recent

5 data. From '86 to '96 gas has had a 53-56 percent

6 share. I'm including LPG in there, and let me comment

7 that -- That's enough on that.

8 Electric is second, 44-47 percent. Oil

9 shares are very low.

10 MR. BROOKMAN: Mark Krebs, I saw you

11 first, and then to Steve Rosenstock and George.

12 MR. KREBS: Thanks. I'm Mark Krebs,

13 Laclede Gas. Jim, I was wondering if you are able to

14 break it out geographically.

15 MR. McMAHON: The shipments are not

16 reported geographically, at least to the best of my

17 knowledge.

18 MR. KREBS: Nor the fuel shares.

19 MR. McMAHON: Right.

20 MR. KREBS: I would assume that the market

21 share for natural gas may be higher in the north, and

22 electric may have a higher market share in the south.

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1 MR. McMAHON: Let me try to clarify. The

2 shipments data are not reported geographically.

3 However, there are survey data that are regional. For

4 example, AGA reports survey data for different regions

5 of the country for the fraction of households --

6 existing households that have water heaters of

7 different fuel types, and we do have that information.

8 This is shipments data, and we do not have that

9 geographically.

10 MR. KREBS: DOE is required to look at the

11 variability, such as geographical variability and

12 other factors. I'm indicating I think that this might

13 be one of those cases where we want to specifically

14 look at the geographic impact on gas and electric fuel

15 shares.

16 MR. McMAHON: Thank you. Can I ask you

17 what level of geographic detail you think is

18 appropriate?

19 MR. KREBS: Well, is it possible to get it

20 off Census data? I think Census data captures that

21 information, doesn't it?

22 MR. McMAHON: The American Housing Survey,

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1 I believe, has information on fuel type of water

2 heater. I'm not aware -- I can't think of another

3 Census survey that has that information. I'd be happy

4 to take comments from anybody who knows.

5 MR. KREBS: Well, the report that I sent

6 you from the Texas Railroad Commission -- it was based

7 on Census data. You know, that seemed to indicate a

8 far different picture than what you're illustrating

9 here.

1.0 MR. McMAHON: A far different national

11 picture?

12 MR. KREBS: A far different picture as far

13 as market share and especially if you're looking at

14 trends and projecting it out.

15 MR. McMAHON: Okay. Let me address that.

16 I agree that, when you look at regions, you see

17 different trends, and the most recent report I've seen

18 on that is from AGA. The residential market survey

19 report for 1996 shows, I believe, four Census regions,

20 and it shows for gas increasing market share in the

21 northeast, increased about three percent over the last

22 ten years, and decreasing market share of about three

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1 percent in the south, which includes the area you're

2 referring to, Texas.

3 So I agree with you that regionally it's

4 different, and I guess the question is at what level

5 of detail does this need to be analyzed.

6 Is four Census regions adequate? Should

7 we go to states, counties, ZIP Codes, neighborhoods,

8 houses?

9 MR. KREBS: Well, I don't want to get into

10 exactly what level at this point. I'm just making an

11 observation that I think it does significantly vary on

12 a geographic region and that DOE has a responsibility

13 to take those considerations into account.

14 MR. BROOKMAN: - Thank you. Steve

15 Rosenstock? Terry, do you wish to comment?

16 MR. LOGEE: Well, I can let Steve.

17 MR. ROSENSTOCK: I'm on a different topic.

18 The LPG -- is that pretty insignificant? Is that ten

19 percent of the gas? I'm just saying this in terms of

20 your statistics and your analysis. That's pretty

21 insignificant, isn't it?

22 MR. LUTZ: It's on the same order.

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1 MR. ROSENSTOCK: Okay, thanks.

2 MR. BROOKMAN: George?

3 MR. KUSTERER: Just a question. Why did

4 we stop at oil at 1986? Seems like we lost 12 years.

5 I mean, I realize there's not a significant change,

6 but why did we stop -- Why was it not tracked?

7 MR. McMAHON: George, I'm happy to answer

8 your question. The source of the data is GAMA

9 statistical highlights. They stopped tracking oil

10 after 1986. If there's another source that you can

11 recommend to us, I'd be happy to add it.

12 MR. KUSTERER: Yes, there are a number of

13 sources, and I can get you that information. Just

14 because GAMA doesn't -- I mean, that doesn't mean we

15 should drop it.

16 MR. McMAHON: Absolutely.

17 MR. KUSTERER: I think it's valuable

18 information.

19 MR. BROOKMAN: Thanks, George. Terry?

20 MR. LOGEE: This is Terry Logee from DOE.

21 I wanted to follow on Mark Krebs'

22 comments. I'm a little confused. This is a national

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1 energy savings, and I'm not -- I don't really

2 understand what a regional distribution of this

3 information would play in this particular part of the

4 analysis.

5 MR. KREBS: Well, regionality is supposed

6 to be included in NAECA. You're supposed to consider

7 those variables and their statistic significance.

8 MR. LOGEE: It's not necessarily

9 regionality. It is a sub-group kind of analysis.

10 Whether that be -- and it specifically was consumer

11 sub-groups, and it could be regional or it could be

12 income or it could be some other demographic.

13 MR. KREBS: I agree.

14 MR. LOGEE: But I don't see that it has a

15 purpose or a point in the national energy savings

16 portion of the analysis.

17 MR. McMAHON: If I can interject, the sub18 group analysis is done at the life cycle cost level,

19 and I guess Terry's question is whether that is

20 necessary for the national energy savings.

21 MR. KREBS: I think where it really comes

22 home to rest is when we get to the fuel switching,

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1 fuel substitution issue. Having stole Jim's thunder

2 once, I don't want to do it again, right now at least.

3 I'll give him -- I'll jump back in if I need to.

4 MR. BROOKMAN: Steve's got a question, and

5 then maybe we can proceed. Frank also, and then we'll

6 proceed with the rest of the slides.

7 MR. ROSENSTOCK: Steve Rosenstock again.

8 Yes, I heard some murmurs of discontent at the answer

9 to my LPG question. So I was wondering if someone from

10 Rheem or GAMA could -- if they had some numbers on the

11 LPG portion.

12 MR. STANONIK: Frank Stanonik with GAMA.

13 I was just going to answer. The LP gas -- shipments

14 of LP gas water heaters on an annual basis probably

15 bounce around 8-10 percent of the total. So they're

16 not -- They're probably a factor of -- They're not the

17 same as oil. You're looking at a difference of, just

18 rough numbers, 40,000 versus 400,000.

19 MR. BROOKMAN: Okay. Thank you for that

20 clarification.

21 MR. McMAHON: At this point we're not

22 separating LPG out, but we can do that next round. I

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1 think, Frank, you're probably right. It's probably in

2 the 8-10 percent range.

3 Okay, the next slide is regional fuel

4 shares, and this is the data that I referred to from

5 the AGA report. If you pick up our NES report, you'll

6 find this document there.

7 For the U.S., they report 52 percent share

8 in existing homes for gas water heaters from 1987 to

9 1995. So that's consistent with the shipment data.

10 In the northeast there was an increase of three

11 percent, in the south a decrease of three percent.

12 Here are some of the reasons, the regional

13 factors: Gas availability is certainly a factor. As

14 some of you may recall, in the 1970s there were

15 restrictions on gas hook-ups. Utility company

16 programs, both gas and electric, influenced the fuel

17 shares. Finally, there are conversions from one fuel

18 to another.

19 MR. BROOKMAN: George.

20 MR. KUSTERER: I apologize. Senility is

21 setting in again. With regard to page 8 -- You don't

22 have to go back; it's just a quick question -- the

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1 percentages, are foreign products included in those

2 percentages or do we know what foreign products --

3 foreign, meaning Canadian or any other?

4 MR. McMAHON: I will pass that question to

5 GAMA.

6 MR. KUSTERER: I don't mean to offend any

7 of my Canadian colleagues, but they are foreign

8 products, and they are infiltrating our market to a

9 degree where their standards are -- you know -- Well,

10 anyway, are foreign products included in those

11 numbers?

12 MR. McMAHON: I will ask GAMA if they know

13 in statistical highlights whether imports are

14 included.

15 MR. STANONIK: Frank Stanonik with GAMA.

16 In terms of the data that we provided, as George said,

17 we don't get any data on a water heater, so we can't

18 provide it. But on the other products, those are

19 intended to represent shipments of products in the

20 United States.

21 So if there is a Canadian manufacturer who

22 is selling some of his products in the United States,

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1 it should be in those numbers, and we have at least

2 one that does report.

3 MR. KUSTERER: Thank you.

4 MR. BROOKMAN: Thanks, Frank.

5 MR. McMAHON: Let's turn to fuel

6 switching. Fuel switching can happy for some of the

7 reasons that I've indicated. Changes in relative

8 energy costs may be a factor. That's why this is

9 important for the standards process.

10 Depending on the standards levels that are

11 ultimately analyzed, there may be differences between

12 the impact on gas and electric, and we want to be able

13 to incorporate the implications of that into the

14 shipments.

15 From 1986 to '96 the american Gas

16 Association reports -- and I understand this is based

17 upon inputs they get from the individual gas utilities

18 -- between 148,000 and 311,000 housing units annually

19 converted from some other fuel to natural gas house

20 heating; not water heating but house heating. They

21 didn't specifically collect on water heating.

22 If we were to assume that all of those

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1 households either sooner or later also converted to

2 gas water heating, then this would represent two to

3 four percent of total water heater shipments annually

4 or three to seven percent of gas water heater

5 shipments.

6 I'm not trying to say that they do

7 instantaneously change at the same time, but there

8 tend to be very high correlations. People who switch

9 to gas house heating are likely to switch to gas water

10 heater, either at the time or when the previous water

11 heater fails.

12 MR. BROOKMAN: Mark Krebs?

13 MR. KREBS: Thank you.' Mark Krebs. To

14 what extent, Jim, are analyses based upon that "if"

15 statement?

16 MR. McMAHON: To what extent? The

17 analysis that I will show you today does not include

18 any explicit modeling of fuel switching.

19 MR. KREBS: Thank you.

20 MR. McMAHON: The next topic is consumer

21 economic factors. Everything that I've shown you so

22 far has been pretty much accounting, new construction,

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1 market shares, but I've not gotten into economic

2 factors, and I want to remind you that we can come

3 within about ten percent of explaining what's happened

4 in the past without considering any economic factors.

5 Part of the reasons for the discrepancies

6 may be that consumers are responding to either the

7 prices of water heaters or, more likely, the prices of

8 energy in this period of time. So I want to now

9 introduce that topic.

10 Operating expenses: You've seen detailed

11 in the LCC report just rough ranges of values,

12 typically $100-$300 per year, depending upon the fuel

13 type, the local energy prices and how much hot water

14 they are using.

15 There's a typo here. The purchase

16 expenses -- It says typically about 300. We should

17 put a range on that, some several hundred dollars,

18 including the retail price plus the installation cost.

19 Just so that you know, we are consistent

20 in using the same numbers in between the national

21 energy forecast and the LCC.

22 MR. BROOKMAN: George?

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1 MR. KUSTERER: George Kusterer, Bock Water

2 Heaters.

3 Jim, isn't operating expenses typically

4 $100 to $300 -- isn't that extremely conservative in

5 northeast. Typically, electric hot water can run

6 anywhere from $800 to $1,000. Three hundred dollars

7 per year is kind of very, very conservatively low.

8 MR. McMAHON: In terms of characterizing

9 the maximum that you could see anywhere, yes, it is

10 low. I was just trying to capture the majority of

11 households here, but you're right.

12 MR. KUSTERER: Thank you.

13 MR. McMAHON: Okay. Elasticities: Let me

14 give you a definition. An elasticity is something

15 economists use. It's percent change in some quantity

16 such as shipments or market share associated with a

17 percent change in some driving factor.

18 For our purposes, the likely driving

19 factors are operating expenses or purchase prices. So

20 imagine that the price of energy went up 20 percent.

21 If the elasticity was one, it would mean you would see

22 a 20 percent drop in shipments or market share,

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1 depending upon which one you're looking at. That's

2 the concept of elasticity.

3 There has been previous research that

4 indicated that market shares by fuel types were

5 related to operating expenses. This is work done by

6 Oak Ridge in the 1970s.

7 The own-elasticities are the response of

8 one fuel type to the prices for the same fuel type.

9 So for electricity and oil, those elasticities were

10 approximately -1. So a ten percent or one percent

11 increase in price of electricity is likely to be

12 associated with a one percent decrease in market share

13 for that fuel type.

14 There are also cross-terms. The cross15 term says that the share of electric water heaters is

16 going to depend upon the price of gas, for example, or

17 the price of oil. So those numbers are given here.

18 We intend to continue looking into

19 additional sources and, if people know of other

20 research about elasticities, we'd be happy to have it.

21 MR. BROOKMAN: Steve Rosenstock.

22 MR. ROSENSTOCK: Steve Rosenstock, EEI.

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1 Did you try to go back and see if there was

2 correlation when you looked at shipments or --

3 MR. McMAHON: Correlation between?

4 MR. ROSENSTOCK: Elasticity and actual

5 shipments?

6 MR. McMAHON: Yes, we're getting there.

7 MR. ROSENSTOCK: Okay, sorry.

8 MR. McMAHON: Equipment price elasticities

9 are a problem for us. There is not, at least to my

10 knowledge, a publicly available dataset of water

11 heater prices, and we've had some discussions in the

12 last day and a half about the difficulties of getting

13 that information.

14 For our purposes to do a statistical

15 analysis, we would need a time series of perhaps 20

16 years of those prices and, if Mark is correct, we

17 would need them regionally; and I don't think that

18 data exists.

19 What we've done as a stop-gap is to use a

20 derivation of the equipment price elasticity from the

21 operating cost elasticity, again worked on at Oak

22 Ridge Lab in the 1970s. I'll be happy to give you the

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1 specific references.

2 The derivation is shown there. The point

3 is that the result depends upon what you assume for

4 the equipment price and for the discount rate. I'm

5 now going to discuss the discount rate.

6 Okay. The discount rates: First of all,

7 here we're talking about discount rates in the context

8 of the purchase of water heaters and how they weigh

9 operating costs compared to the equipment price.

10 This is a different discount rate than in

11 the context of calculating net present value, for

12 example. We've used discount rates in several places.

13 I want to be clear that you know which one this is.

14 Previous research assumed -- and I

15 emphasize the word assumed -- discount rates of 12-15

16 percent real. They had no data at that time, and they

17 derived equipment prices of .1 to .7 negative.

18 If the discount rates are higher -- Why do

19 we even consider that? We consider that, because

20 there is some evidences, particularly for water

21 heaters, that the consumers -- that purchasers of

22 water heaters are much more concerned with the first

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1 price of the water heater than they are with the

2 operating expenses. Example, builders or developers

3 who are purchasing water heaters and are not going to

4 pay the energy bill.

5 If that's the case, the discount rates --

6 effective discount rates may be much higher than 12-15

7 percent. We estimated discount rates by taking the

8 observed efficiency purchases -- that is, the

9 efficiency levels purchased each year -- compared to

10 higher efficiencies, and back out a discount rate high

11 enough to account for the fact that they weren't

12 buying higher efficiencies. Are you with me on that

13 one? Questions? We're all right? Okay.

14 I put here, this is a significant area

15 requiring further research. I understand that we're

16 making assumptions here. We are happy to get more

17 data. We're happy to do more analysis on this, but

18 this is a difficult area.

19 The interim results, because we know that

20 this is a difficult area, are using sensitivity

21 analysis with a high discount rate case and a low

22 discount rate case to bound the problem, so that we

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1 can be explicit with you about our assumptions and how

2 much difference they make, and we would be happy to

3 refine those bounds if more information is provided.

4 Let's move to results. These are interim

5 results. We expect that they will change as we update

6 the things that we've already talked about, but I

7 wanted to show you what the implications are of the

8 stuff we've talked about so far.

9 First of all, again projects are within

1.0 ten percent of historical shipments. The fuel shares,

11 we expect, will depend upon fuel availability,

12 operating expenses, installed costs, and utility

13 programs. If anyone has a forecast of all those

14 things regionally, I'd be happy to have it. No, huh?

15 Okay.

16 There are also some new factors that we

17 want to be cognizant of and include. One of them is

18 the cost for mitigation of gas vapor ignition, which

19 will impact the gas water heater price at least.

20 MR. ROSENSTOCK: Shouldn't that be level?

21 MR. McMAHON: Yes, it should. Thank you.

22 That's a mistake.

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1 Other factors: Future energy prices.

2 There's a great deal of interest in what will happen

3 to energy prices in the future, and also the new

4 efficiency standards.

5 So here are some numerical results. This

6 is electric water heater shipments, and I've overlaid

7 three lines on here. George, I apologize. My

8 eyesight is probably as bad or worse than yours, and

9 it's hard to see these lines. Hopefully, you can pick

10 them out. We can certainly make the electronic

11 copies available to you so you can put them on any

12 size you like.

13 Three lines: The blue line on the screen

14 is the historical from 1951 to 1996, the same data you

15 saw before. What I like to do is start my forecasts

16 a few years ago so that I can see if the forecast is

17 tracking or not.

18 So we started forecasting in 1981, and

19 that's the filled-in triangles in here. They match

20 the historical pretty well from '81 to '96. Then we

21 just continued that model on out to the year 2030.

22 The third line in here is a little hard to

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1 see. It's a dashed line. It says calculated without

2 elasticities, and there we took out the economic

3 factors and said, if we just do the accounting and we

4 ignore what's been happening to energy prices, how do

5 we do.

6 It turns out, that's still pretty good.

7 That's not what we intend to do in the final. We're

8 going to keep the economic factors in there, but I

9 just wanted to show you the sensitivity.

10 MR. BROOKMAN: Steve Rosenstock?

11 MR. ROSENSTOCK: Just a quick question.

12 Steve Rosenstock, EEI.

13 For the national energy saving

14 spreadsheet, I didn't get a chance to look at the

15 spreadsheet yet on the Website, but how many years is

16 it going to -- How many years of savings are you going

17 to be looking at? Is it going to be two lifetimes of

18 the water heaters or is it going to be 30 years or --

19 you know, just to get the time period, 2003 until

20 when?

21 MR. McMAHON: Yes. The time frame will be

22 2003 to 2030. Okay?

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1 I then took our projection, again just for

2 electric water heaters, and I compared it to the other

3 ones that I could find. The GAMA projection here was

4 published in 1996.

5 I understand that there's an update coming

6 out, Frank. I don't know if you can help me out with

7 whether that's available yet. It's a five-year

8 projection.

9 MR. STANONIK: Well, typically -- All

10 right, this is November. Typically, we're in the

11 middle of gathering the data. So I believe our target

12 to publish those projections is normally -- is before

13 the end of the year.

14 So I have -- I do not have a definite

15 answer, but we've got to be working on it. So it must

16 be close.

17 MR. McMAHON: Okay.

18 MR. STANONIK: Since I haven't been in my

19 office since last Tuesday, Joe reported to me that we

20 may have just done it.

21 MR. McMAHON: Thank you. In 1996 these

22 came out about the first of November. So this is the

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1 right time of year. I just wanted to check that I

2 have the latest one. So when we get the new one,

3 we'll update this.

4 In any case, the other source here, the

5 triangles that go out here, that's the Appliance

6 Magazine forecast. You can see that we're a little

7 lower than those -- So the actuals are in here also.

8 We're a little bit lower than those. I don't know

9 whether that's an important difference or not. I

10 would welcome comments, both on our forecast and on

11 the other two.

12 Okay, now let's turn to gas, a similar

13 presentation, historical, a forecast including the

14 economic factors and a forecast without the economic

15 factors.

16 Again, we match, not as well as we did for

17 electric but a pretty good match on the historical

18 shipments. You can see that the economic factors are

19 more important here. That is, we get a better fit

20 including the economic factors than excluding them.

21 So the changes in price of energy in the

22 1980s seemed to be an influence on the shares that gas

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1 got.

2 MR. KREBS: Mark Krebs. Jim, in most of

3 the times in the real world things don't go linear.

4 They go one direction or the other, and that was

5 really the message about scenario engineering that the

6 modeling subcommittee came up with, so we can look and

7 see how things can change other than, you know, the

8 linear directions you depicted here.

9 What have you tested there or what is

10 there -- At this point what kind of abilities exist to

11 test various scenarios?

12 MR. McMAHON; We have the ability to test

13 a wide variety of scenarios, and we'd be happy for you

14 to submit some. In terms of linear extrapolations,

15 there's nothing here that's linear. We're building up

16 form historical shipments using the lifetime

17 distributions to get the replacement market, and we're

18 using new construction times market shares where

19 economic factors are brought in, both for the market

20 shares of replacement and the market shares of new

21 construction. But none of it is linear.

22 MR. BROOKMAN: Steve Rosenstock.

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1 MR. ROSENSTOCK: Steve Rosenstock, EEI.

2 Maybe what he's saying is that the

3 projections are always an increasing slope. The slope

4 always increases, it seems, from year to year.

5 There's no flat years or any --

6 MR. McMAHON: Right. Since --

7 MR. ROSENSTOCK: I think that's what he

8 was referring to.

9 MR. McMAHON: Okay.

10 MR. KREBS: Correct.

11 MR. BROOKMAN: Additional questions or

12 comments?

13 MR. McMAHON: Okay. Again, a comparison.

14 Here, at least in the later years, the gas forecast --

15 Even though the shift -- the fit to the historical

16 shipments was not as good as electric, the fit to

17 other people's projections is better than it is for

18 electric. Go figure.

19 Preliminary base case results: I'm not

20 going to go through these and say very much about

21 them. I would be happy to take questions. Maybe

22 we'll just do that.

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1 If we use the model as currently written

2 with the elasticities that are in there and with AEO3 98 interview price projections, these are the results

4 that you get. I just wanted to give you an idea of

5 the type of result that we're likely to see.

6 Obviously, this will all change as we refine the

7 analysis.

8 MR. HILLER: Carl Hiller from EPRI.

9 What's the assumption built into this

10 about new installations? Is that a constant

11 percentage or is it a constant number or what is the

12 assumption?

13 MR. McMAHON: We assumed that, I believe,

14 a fixed fraction of new construction will have shared

15 water heaters that we're going to ignore. I believe

16 we said, based upon the most recent survey, nine

17 percent of houses have shared systems. So 91 percent

18 of new construction is available to purchase some fuel

19 type or other.

20 Then we use the elasticities that I've

21 shown you, coupled with the energy price projections

22 to find out what the market shares are.

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1 MR. HILLER: But still, it seems like

2 there's an assumption somewhere being made about

3 exactly how many new housing starts there are.

4 MR. McMAHON: Yes. That's coming from the

5 Annual Energy Outlook 1998.

6 MR. BROOKMAN: Additional questions?

7 MR. ROSENSTOCK: Steve Rosenstock, Edison

8 Electric Institute.

9 I see the primary -- the energy consumption

10 you're projecting for energy consumption.

11 MR. McMAHON: Yes.

12 MR. ROSENSTOCK: I didn't see -- Again,

13 you'll have to forgive me. I didn't see the

14 spreadsheet. What range of savings did you see with

15 the design option that you put into the spreadsheet

16 model, you know, off the top of your head, if you

17 remember.

18 MR. McMAHON: We have not done that yet.

19 We have not done any efficiency level improvement

20 analysis to this data.

21 MR. ROSENSTOCK: Thanks.

22 MR. BROOKMAN: Terry Logee.

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1 MR. LOGEE: Let me just clarify for the

2 record. Primarily, the reason we haven't done any

3 design improvements is we -- DOE has not picked the

4 trial standards levels yet. Jim needs those to do the

5 energy improvements analysis.

6 MR. RANFONE: Jim Ranfone, AGA.

7 On your primary energy consumption, what

8 factors did you use to determine the primary energy?

9 MR. McMAHON: Yes, the factors for

10 electricity are the average bTU per kilowatt hour

11 rates from Annual Energy Outlook 1998. So they change

12 every year, and we can provide the specific numbers,

13 if you like.

14 For gas, we take the site energy and

15 divide by .9.

16. MR. RANFONE: For electricity, it varies?

17 MR. McMAHON: Yes, it varies. It starts

18 at -- I don't remember the exact number, but on the

19 order of 10,500 bTUs per kilowatt hour, and declines

20 to under 10,000. It's in the nine-somethings,. I

21 think, at the end.

22 MR. RANFONE: Thank you.

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1 MR. BROOKMAN: Mark Krebs?

2 MR. KREBS: I might add that that number,

3 the heat rate, there's some sensitivity to what that

4 really means, specifically to the losses that occur

5 between the point of extraction and the power plant.

6 MR. McMAHON: It's not heat rate. It's

7 the conversion factor including transmission

8 distribution losses, but it does not include

9 everything like transportation of -- the energy

10 required to transport coal from the mine mouth to the

11 power plant.

12 MR. KREBS: Well, and I believe that

13 perhaps that should be looked at, because it could be

14 statistically significant.

15 MR. BROOKMAN: Thank you. Does that

16 conclude your presentation?

17 MR. McMAHON: That concludes my

18 presentation.

19 MR. BROOKMAN: Questions and comments?

20 One final, Mark Krebs.

21 MR. KREBS: We seemed to skip over slide

22 22 which is very confusing to me. Would you explain

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1 it, Jim?

2 MR. McMAHON: Sure. This is the

3 projection of water heater saturations. So it's the

4 percent of homes that have water heaters of different

5 fuel types. If you pay close attention, which Mark

6 probably is, you'll notice that these don't agree very

7 well with the saturations in RECS or other national

8 surveys.

9 Most of the explanation -- for example,

10 let's go to gas. It starts out at about 38 percent.

11 I just showed you ADA statistics that say 52 percent.

12 That seems like a big discrepancy.

13 We think that about eight percent is due

14 to shared systems. That would get us down to about

15 44. The remaining difference between the 38 percent

16 we show here and the 44 percent in their surveys is

17 unexplained, and this creates a dilemma.

18 We either have to calibrate everything to

19 the saturations in those surveys, which means we have

20 to not believe either the historical shipments or not

21 believe the lifetimes, or -- Something has to give

22 here, and I guess I would welcome comments about what

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1 you think needs to change.

2 MR. KREBS: Well, I'll comment about what

3 I'm perceiving here, that the so called fuel wars is

4 a lot closer race than some might otherwise expect

5 from your previous slides.

6 MR. McMAHON: Well, as you will recall,

7 the market shares have been very stable for the last

8 ten or 12 years. This shows both of them gaining a

9 little bit of market share, which is presumably at the

10 expense of shared systems, possibly a little bit at

11 the expense of LPG.

12 In any case, one thing that's going on

13 that surprised me here is that, because of the

14 differences in lifetimes, that even though gas water

15 heaters have outsold electric every year for the last

16 12 and going back farther, electric still maintains

17 market share. That's because the electric lifetimes

18 are longer. So that makes sense.

19 MR. BROOKMAN: Carl.

20 MR. HILLER: Carl Hiller from EPRI. I

21 want to make sure I understand your definition of

22 saturation here. Can you explain that?

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1 MR. McMAHON: Yes. It's the ratio of

2 total water heaters in place in a given year divided

3 by the total number of housing units.

4 MR. HILLER: So it's not manufactured.

5 It's actually in place in the housing stock?

6 MR. McMAHON: Correct. Not shipments.

7 MR. BROOKMAN: I'm going to cue up the

8 next presentation slides while we take a final

9 question for Jim McMahon, if there are any.

10 We're now moving on to consumer sub-group,

11 the assumptions analysis approach and preliminary

12 results of the RECS database. Thanks, Jim McMahon.

13 Our next presenter is Jim Lutz from LBNL.

14 MR. LUTZ: I don't have a microphone, but

15 I'll try to -- I stole a microphone.

16 The Consumer Sub-group analysis to look at

17 how different subsets of the population would be

18 impacted by the rules. This is very similar to life

19 cycle costs, but differs -- analysis, but differs in

20 some ways, and I'll highlight them now and show you

21 the preliminary results, and go back and clarify the

22 differences.

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1 We used a different sampling method. In

2 the life cycle cost analysis we sampled from the RECS

3 data, take 10,000 samples according to the weights

4 that EIA assigned to each household.

5 In the Consumer Sub-group we just take all

6 the houses. In the Consumer Sub-group we use our best

7 point estimate for values and do not try to account

8 for the ranges and uncertainties there. We do that in

9 the life cycle cost analysis where we sample from

10 distributions of values.

11 The inclusion of household demographics:

12 This means that we carry along all the data that's in

13 the RECS survey about that household; for example,

14 factors like income, whether they're renters or

15 owners, things like that. We don't track that in the

16 spreadsheet -- the life cycle cost spreadsheet.

17 Then the final product for the Consumer

18 Sub-group is a database where we have all the

19 households and the results presented in a database,

20 the results of the analysis.

21 The calculations at each step are the

22 same, but the input numbers are different, because it

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9 1 doesn't have the random error or uncertainty on it.

2 So it's prettier on the computer screen than it is on

3 your chart on your pages, but this is the average life

4 cycle cost per household for all fuel types.

5 MR. STANONIK: Because it doesn't come

6 across on the paper too well --

7 MR. LUTZ: Well, it comes across pretty

8 good on my page.

9 MR. STANONIK: -- there clearly is some

10 darker region. Basically, it almost says, if you live

11 close to the water, you pay more for your water

12 heating. It kind of follows the coast. Right? What

13 color is that?

14 MR. LUTZ: Down the eastern coast?

15 MR. STANONIK: Well, go down the east

16 coast, you know, around Chesapeake Bay. You go around

17 Florida. You pick it up in the Gulf Coast. Are those

18 different colors?

19 MR. LUTZ: From here to here? These

20 regions are all the same color.

21 MR. STANONIK: Well, but if you look right

22 on the very coastline going down the east coast,

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1 starting right where we live right there -- okay?

2 MR. LUTZ: You mean this dark line ?

3 MR. STANONIK: Yes.

4 MR. LUTZ: That's an artifact of the

5 geographic information system. It's a very detailed

6 map. So it shows all the little bays and coasts.

7 MR. STANONIK: Oh, so it's not part of

8 your color scheme?

9 MR. LUTZ: No, it's not.

10 MR. STANONIK: I asked the wrong question.

11 Thank you.

12 MR. LUTZ: We should use a simpler map.

13 Then the other -- The next map is just for the low

14 income households.

15 MR. McMAHON: Jim, if I can interject.

16 The original maps that were used in the GIS system

17 were actually CIA maps with 50 meter resolution. So

18 if you want to see the coastline in great detail, we

19 can provide that.

20 MR. STANONIK: It threw me, because on

21 this it comes out as dark, and I thought it was the

22 first block. CIA is doing energy now, too?

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1 MR. BROOKMAN: That was Jim McMahon.

2 MR. LUTZ: This is a chart of the results,

3 the average hot water draw volume, annual operating

4 cost and annual life cycle cost, comparing all the

5 households and the low income households. That's what

6 the Consumer Sub-group analysis is designed to, to

7 compare sub-groups of the population.

8 The final slide is just more details on

9 the differences between the life cycle cost and the

10 Consumer Sub-group.

11 MR. BROOKMAN: George?

12 MR. KUSTERER: I have a dumb question.

13 The reason Alaska was not in there is simply because

14 of population?

15 MR. LUTZ: It's hard to get data for it,

16 yes.

17 MR. KUSTERER: Okay, thank you.

18 MR. LUTZ: Any other questions?

19 Additional questions on this topic?

20 MR. LOGEE: This is Terry Logee. There

21 is, I guess, one sort of concern from the Department.

22 We have chosen this consumer sub-group of low income.

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1 It is not the only consumer sub-group that could be

2 chosen. There are any number of other sub-groups

3 that we could analyze.

4 1 So we have made the assumption that that

5 is the sub-group of interest. If there are other sub6 groups that you think should be analyzed, we would

7 like you to let us know about that.

8 MR. BROOKMAN: So now we are to -- Jim?

9 MR. McMAHON: With Terry's indulgence, I

10 don't think the Department -- This is Jim McMahon. I

11 don't think the Department wants a request of all

12 ' possible sub-groups but rather, if we could come to

13 some agreement on a reasonable number of important

14 sub-groups, that would be extremely useful.

15 MR. BROOKMAN: Would you say the

16 rationale? Somebody say the rationale for why you

17 chose low income sub-groups?

18 MR. LOGEE: That seemed to be, to our way

19 of thinking, the sub-group that showed -- might show

20 any impact with appreciating prices due to increased

21 efficiency in the design options.

22 MR. BROOKMAN: So that gives you a

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1 starting point for additional thoughts on any other

2 sub-groups that may be considered. Carl Hiller.

3 MR. HILLER: Carl Hiller from EPRI. Just

4 throwing out one sub-group that's probably worth

5 considering would be the elderly, you know, smaller

6 household sizes, perhaps even smaller consumption per

7 person as you get older.

8 That certainly impacts the cost

9 effectiveness of the devices for that segment of the

10 population, which is going to be growing

11 substantially.

12 MR. BROOKMAN: Thank you. Our next

13 presentation, and I think our last presentation, is

14 environmental and utility impacts. We're almost

15 there. You all are a pretty stout bunch for hanging

16 in here tough, covering a lot of ground here pretty

17 fast, and everybody is staying pretty tuned in. I'm

18 impressed.

19 Glenn Schleede, you wanted to make one

20 more comment for the record. You want to do that now

21 while we have this small gap?

22 MR. SCHLEEDE: Why don't we finish this?

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1 MR. BROOKMAN: Okay.

2 MR. McMAHON: I am working from

3 Methodology for Utility and Environmental Analysis.

4 I apologize. The pages are not numbered. However,

5 the next page is "Utility Analysis." The purpose is

6 to estimate the effects of reduced energy sales due to

7 new standards on utilities.

8 The method is to use a version of NEMS.

9 We're calling it NEMS-NAECA for this particular

10 application. The reason we changed the name is that

11 EIA, which is the owner of NEMS, is very sensitive

12 about us or anyone claiming to be using the official

13 Department of Energy NEMS model.

14 So whenever someone else uses it, you have

15 to rename it. It is the same model. It's a copy, but

16 we're going to call it NEMS-NAECA, which is LBL's use

17 of the official NEMS model.

18 As most of you know, the NEMS model is an

19 integrated model of U.S. energy sector, including

20 supply and demand for all energy sources. It's

21 publicly available. It produces a forecast through

22 2020.

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1 We need to go out to 2030, and we found

2 out that the EIA folks do extrapolations out to 2030

3 for FMP, and we intend to use their extrapolations.

4 In the past, we've done our own extrapolations out to

5 2030.

6 The current basis is the Annual Energy

7 Outlook for 1998. Whenever EIA updates their model --

8 for example, when they come out with Annual Energy

9 Outlook 1999 -- we will get a copy, and we will update

10 ours. So we will always have the most recent official

11 version of the model.

12 The inputs on the next page: The inputs

13 are coming from the national energy savings, and they

14 are going to be annual energy consumption by fuel type

15 and the savings for a particular standard level by

16 fuel type for residential water heaters. All the

17 other inputs are coming from EIA.

18 The output will be, since NEMS balances

19 supply and demand, any changes in energy sales and

20 price by fuel type, by region. The regional

21 definitions in NEMS vary by fuel type, but for the

22 consumer part they report things for nine Census

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1 divisions and also for, I believe, four of the largest

2 states. However, for each of the fuel types on the

3 supply side, they have different definitions of

4 regions which the folks in the field sector are

5 familiar with.

6 Also reported out will be any change in

7 the mix of electricity generation sources and in new

8 capacity construction.

9 Last -- that's it for utility analysis --

10 environmental analysis.

11 MR. BROOKMAN: If there are any questions

12 on those preceding slides? I don't know whether

13 everybody is tired or whether you've just absolutely

14 wowed them with your presentation, the depth.

15 MR. LUTZ: They're tired.

16 MR. BROOKMAN: So let's proceed with the

17 next.

18 MR. LUTZ: The environmental analysis on

19 one page. Purpose is to estimate the impacts from

20 standards on U.S. emissions of three things: Carbon,

21 oxides of nitrogen and of sulphur.

22 The method again is to use the NEMS model,

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1 which includes accounting for those emissions.

2 However, there's two holes that we've identified in

3 that model having to do with in-house emissions. They

4 do get things from power plants.

5 They don't calculate the emissions from

6 in-house; for example, oil water heaters, sulphur

7 emissions are not included, and NOx from gas water

8 heaters are not included. So we intend to implement

9 a spreadsheet supplement that will add those emissions

10 to what NEMS produces for the energy supply.

11 MR. BROOKMAN: Questions on that last

12 slide and on this entire presentation packet? I don't

13 hear any. Mark Krebs.

14 MR. KREBS: One more quick point on what's

15 not included for the record. What's not included are

16 the emissions upstream of the power plant.

17 MR. BROOKMAN: I didn't hear that, Mark.

18 Say it louder.

19 MR. KREBS: What's not included are

20 emissions upstream of the power plant.

21 MR. BROOKMAN: Upstream? Okay. Any other

22 comments on this group of slides? I think we've made

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1 it through the agenda, Terry.

2 Oh, yes, we need to specify next steps, of

3 course, and follow on from here.

4 MR. SCHLEEDE: Doug, can I make that other

5 point now? This is another sort of generic concern,

6 and that with the specific example of the MASIE

7 database that Jim referred to yesterday.

8 Clearly, the price of that is out of the

9 range that some of us participating in this process

10 can afford to put into it, and I think DOE needs to

11 focus how it makes available the data from this

12 commercial database, which sounds like it could have

13 an important role in the process -- how those of us

14 participating in this process can have access to that

15 data without coughing up the $50,000 required to get

16 the two databases.

17 What we have here, it seems -- We've moved

18 away from one black box that we've talked about for a

19 long time. We're sort of moving towards some other

20 ones here, which is a commercially available database.

21 MR. BROOKMAN: Glenn, do you have any

22 practical experience with anything like this, any

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d1 advice for the Department how they could make that

2 available?

3 MR. SCHLEEDE: No, but Mike McCabe told me

4 the other day that he got $3 million more in his

5 budget. So I'm assuming he could put more staff to

6 work and figure this out.

7 MR. BROOKMAN: I see. Okay. Jim McMahon?

8 MR. McMAHON: Thank you. We have been

9 joined by Robert Latta from EIA. There was a question

10 yesterday that I wanted to resolve before this

11 workshop concluded. It will be very quick.

12 That was a question raised about whether,

13 when we take the RECS survey and we take sub-samples

14 of that -- for example, in the life cycle costs where

15 we select only those households that have electric

16 water heaters -- whether that was a legitimate

17 statistical sample for a national analysis.

18 I asked Bob to come down and put a comment

19 on the record about whether this approach was valid or

20 not. So, Bob, if you wouldn't mind.

21 MR. BROOKMAN: Bob, did you hear

22 everything Jim said?

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1 MR. LATTA: Yes. Yes, I did. Yes, that

2 would be at the national level. When you start going

3 down at a lower level like, if you want to do just for

4 New York State, the sample size might be too small.

5 But at a national level it would be a statistically

6 valid sample.

7 MR. BROOKMAN: Thank you. Any other

8 comments or things that we should include before we

9 talk about next steps and other issues related to

10 closing out this two days of work? George, yes?

11 MR. KUSTERER: I don't want to belabor

12 this, but I'm seriously concerned about this issue,

13 and I don't think it should be swept underneath the

14 rug, as it was earlier this-morning.

15 Again, that's the foam issue, 245, with

16 regard to the availability to the water heater

17 industry. Currently, we have supposedly one

18 manufacturer. If he decides that he doesn't want to

19 make the foam, where are we?

20 I have assurance from Mr. Steve Nadel that

21 it will be available. I trust my learned colleague.

22 However, I don't quite believe him. We need some

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1 assurances that this wills be available and, if it

2 wills be available, they may not decide to sell it to

3 us. Currently, we're not customers of them.

4 They may not want to take us on as

5 customers. Again, I'm seriously concerned that we

6 have no avenue of escape. We have no alternative.

7 This should not be swept underneath the rug, as it was

8 this morning.

9 MR. BROOKMAN: Thank you for saying it

10 again. I've noted it in some of the questions and

11 other issues that have emerged, and so thanks for

12 surfacing it again.

13 Charlie Stephens?

14 MR. STEPHENS: Just for George, I'd like

15 to recommend that, based on my experience, those folks

16 at Allied Signal are reachable by telephone, and you

17 could probably give them a call, and I think they

18 would be more than happy to discuss it with you, and

19 maybe you could bring back the results of your

20 conversation, after you do.

21 MR. KUSTERER: They have -- We have done

22 that. Again, it is an avenue that is available to all

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1 of us, and they don't seem to be very interested nor

2 can they give me any firm commitment.

3 MR. BROOKMAN: Yes, please?

4 MR. BRUNDAGE: Don Brundage, Southern

5 Company. My understanding, 245fa is not a proprietary

6 product, is it? I mean, anybody can make it. It's

7 just an industrial chemical. So especially given

8 several years from time of the final rule until

9 implementation, I think somebody would be happy to

10 make it for us. I'm not an expert on these things.

11 MR. KUSTERER: Nobody seems to be stepping

12 forward.

13 MR. BRUNDAGE: Well, they haven't issued

14 a rule yet for them to make any commitments for it.

15 MR. KUSTERER: Oh, so we're going to put

16 the horse before the -- the cart before the horse

17 then. We're going to make the rule, and then see if

18 it's out there.

19 I still feel we need an alternative. I

20 mean, if you're on the Titanic, there's one life boat,

21 you're not on it. Guess who's going to sink.

22 MR. BRUNDAGE: Just in other refrigerant

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1 issues, giving reasonable implementation dates,

2 there's not been a problem with availability with

3 HCFCs and then HFCs. Thank you.

4 MR. BROOKMAN: Okay, thank you. Thanks

5 very much.

6 So are there any other issues that require

7 additional emphasis or discussion at this point? I

8 don't hear any or see any. Okay.

9 So next steps and follow-on from here.

10 Terry, you said at the outset that you expect a record

11 of this meeting would be available.

12 MR. LOGEE: Yes. The record is usually --

13 The transcript is usually available in about a week.

14 However, if you want a copy of that, you have to make

15 arrangements with the court reporter. They sell

16 those. We buy them from them, but we provide it in

17 our reading room where you can copy, you know, parts

18 of it.

19 Within about two weeks we'll have a

20 workshop issue discussion. We'll put that on the Web,

21 and then we're expecting comments on this workshop,

22 these proceedings, by December 11th with the

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1 substantiating data, with the one exception that

2 Frank Stanonik had requested an extension on -- I've

3 forgotten which the issue was yesterday.

4 I think we will probably have a revised

5 analysis sometime in January.

6 MR. BROOKMAN: Revised analysis of?

7 MR. LOGEE: Life cycle costs and

8 engineering. After that, the manufacturer interviews

9 will start perhaps in January, at least in February.

10 While I'm on the updates, we would like

11 you to check our Website. There it is. It got posted

12 over there at the end to my left, and we will notify

13 the trade associations.

14 That Website starts with a "less than"

15 sign.

16 MR. BROOKMAN: Yes. For the record, the

17 Website is a karat -- I don't know what that's called.

18 You don't need it? Okay:

19 http://www.eren.doe.gov/buildings/codes

20 standards/reports/index.htm

21 Okay. So there you have it, and I'm sure

22 if you call the Department and request what their

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1 Website address is, they can provide that to you as

2 well. It's in quite a bit of the written

3 documentation for this workshop.

4 Mark Krebs?

5 MR. KREBS: Yes. Mark Krebs. It took me

6 a while to get up when you said -- asked for comments.

7 Therefore, the delay.

8 I'd like to say that DOE has done an

9 extraordinarily good job on the modeling when it comes

10 to manufacturers, impacts analysis, and then GRIM.

11 I'm not sure we're there yet on the consumer side.

12 We've had a modeling subcommittee. We've

13 had a lot of meetings, and we're moving -- It could be

14 fairly said we're moving in-the right direction, but

15 it's clear that we're not there yet.

16 Glenn Schleede's statement about a $25,000

17 database, a commercial database -- that's just the tip

18 of the iceberg. Yes, NEMS -- The source code for NEMS

19 is publicly available. However, you have to have

20 multiple RISC machines and a staff of programmers to

21 do anything with it.

22 MR. BROOKMAN: Okay, thank you.

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1 So I've noted the next steps that Terry

2 listed, and let's see if there's any other next steps.

3 The transcript will be available in about a week, and

4 you talk to John over here or his company if you want

5 to obtain it.

6 Written comments are expected to be

7 received by December 11th, and Terry in his

8 introductory remarks yesterday talked about the form

9 and format for those comments.

10 The workshop issue discussion -- That is,

11 a brief discussion of issues that the Department would

12 like to flag and call attention to --

13 MR. LOGEE: Those are all the issues that

14 we flag from the transcript, including the key issues

15 that we listed, both today, the two that we have

16 today, and the eight yesterday will be in this

17 discussion. We'll post that on the Web in about two,

18 two and a half weeks.

19 MR. BROOKMAN: And the life cycle cost and

20 engineering analysis in the range of January, and then

21 in the January/February time frame the interviews,

22 manufacturer interviews and visits should start in

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1 that time frame.

2 I know the Department would welcome any

3 comments on any and all of this that we've covered in

4 the last day and a half.

5 Any other next steps we would note at this

6 point? Jim?

7 MR. RANFONE: Just a quick question on the

8 request that AGA has made concerning manufacturers or

9 the energy providers, lessening of competition. A

10 letter will be sent to Mr. Margolis or to --

11 MR. MARGOLIS: What are you going to say?

12 MR. BROOKMAN: You recall, he raised the

13 issue of --

14 MR. MARGOLIS: Yes, I know.

15 MS. PINTO: You're going to send some

16 comments, I assume. Right?

17 MR. RANFONE: Well, I thought the

18 resolution was that I would write you a letter and ask

19 for a legal opinion. Is that what --

20 MS. PINTO: No. We're going to work on

21 the issue.

22 MR. RANFONE: Okay.

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1 MS. PINTO: But I asked you, because I

2 can't guaranty a legal opinion by the December 11th

3 date, to include that in your other comments.

4 MR. RANFONE: Okay. Thank you.

5 MR. BROOKMAN: Thanks for that

6 clarification.

7 Any other items that should be clarified

8 or noted at this point?

9 So I'll just close out my involvement by

10 saying thanks to everybody for the cooperative spirit

11 of this exchange. I thought it was -- Was there one

12 other thing? Okay.

13 Thanks to all of you. Travel safely, and

14 thanks for the geniality of all of this in the last

15 day and a half.

16 (Whereupon, the foregoing matter went off

17 the record at 12:32 p.m.)

18

19

20

21

22

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CERTIFICATE

This is to certify that the foregoing transcript in th

matter of: Workshop on Standards for Water Heater

Before: Department of Energy

Office of Codes and Standards

Date: November 10, 1998

Place: Washington, DC

represents the full and complete proceedings of th

aforementioned matter, as reported and reduced t

typewriting.

~~~~r-~~~~~~~

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