# •**·~** DEPARTMENT OF ENERGY

# 11o~ss ************************** In the Matter of: 

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### * U.S. DEPT OF ENERGY 

### * WORKSHOP ON STANDARDS 

### * FOR CLOTHES WASHERS 

### * ************************** Tuesday, December 15, 1998 

# ORIGINAL U.S. Dept of Energy 1000 Independence Ave. SW Room lE-245 Washington, DC 20585
The above-entitledmatter came on for hearing, pursuant to notice at 9:15 a.m.
ATTENDEES:Bryan Berringer Eugene Margolis Mike Rivest Qonnie Laughlin Larry Hawkins Steve Nadel Dave Goldstein Steve Rosenstock Wayne Morris Earl Jones Michael Marsollek Glenn Schwantes Michael Martin StephenMariano Charlie Stevens Al Dietemann Chad Neal Alan Kessler Dick Best Dick Stilwell Peter Biermayer JimMcMahon Victoria Nader EXECUTIVE COURT REPORTERS, INC. (301) 565-0064ATTENDEES: 

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• (Continued) LouMontvoro Terry Thiele Glen Scheede Tommy Holmes Thomas Bee Stephen Grover Tony Gregg Dan Barzel Ted Pope Tom Eckman Jack Linard Mike Thompson Dan Reicher Mike McCabe RolandWeingartner Brian Neal Tom Neal Dave Modtland Anthony Balducci

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• AGENDA PRESENTATION: Introduction: Bryan Berringer Agenda Review Victoria Nader StephenMariano JimMcMahon Peter Biermayer JimMcMahon Stephen Grover Mike Rivest JimMcMahon

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• 4 1 M0 R NI N G S E S S I 0 N 2 (9:15 A.M.) 3 MR. BERRINGER: I am Bryan Berringer. 4 Thanks for everybody coming in close to, this 5 close to the holidays. This is an important step in 6 the rulemaking. 7 I am the team leader for the Clothes Washer 8 Workshop in the rulemaking. The following people are 9 also on our team as you were introduced, was Qonnie 10 Laughlin and Gene Margolis from of the Office of 11 General Counsel andMark Friedrichs, who is not here 12 from the Office of Policy and International Affairs. 13 On behalf of the Department of Energy I would 14 like to thank you all for being here today. This being 15 the fourth public workshop that we have done under the 16 new process since the process rule of July 15, 1996. 17 It is has to believe it has been two years, two and a 18 half years since we have started that process and this 19 being two years, working on the clothes washer rule. 20 Copies of the draft reports, the slides 21 today, if anybody needs, we have the programs that are 22 on the web site, if you haven't gotten those. See Sandy 23 at the table. Anything else, we have copies of the TSD 24 and the actual Federal Register, the publication is 25 sitting up here on the table also. If you feel
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• 5 1 inclinedtohave that material. 2 Anybody attendingtoday will be put on the 3 mailing list. One of the things we would like to is 4 probablynarrow down ourmailing list topeople that 5 are participating. So, we may, youmay see a shorter 6 mailing list. So, if you want tomaintain, everybody 7 that is here and.that was at the last workshop, will 8 maintain on themailing list. And we will start new 9 one, sort of cut it down because we have got a rather 10 large list. So, if you know anybody that is not here 11 that would like to remain on ourmailing list, either 12 have themcontact with or Brenda Edwards-Jones, as**~3** identified in the Federal Register
. 14 Comments receivedhere today and those 15 already submittedduring the written comment period 16 will assist us in developing the notice ofproposed 17 rule, which is planned inNovember of 1999publication. 18 The following procedural items, you have 19 heard thembefore, but we will go through them once 20 more. I will be presiding officer over the workshop. 21 VictoriaNader is our facilitator for the workshop, 22 will be settingthe guidelines for conducting the 23 workshop and for providing information as we go along, 24 parking lots and so forth. _And youmay remember 25 Victoria, she was involved in our first process
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• 6 1 improvement workshop. She was handling one of the 2 breakout sessions
. 3 In approximately two weeks the transcript 4 shouldbe available, in the Freedomof Information 5 room, which is down the hall in lE-190. You can also 6 make arrangements with the court reporter if you would 7 like to purchase a copy from them. 8 To provide the Department with as much 9 pertinent information that canbe viewed and reasonably 10 obtained and that everybody gets theirviews, the 11 workshop will be in accordance with these following 12 procedures: 13 Obviously, the focus of this workshop is to 14 listen to your comments on the supplemental proposed 15 rulemaking. Receive data information to help the 16 Department in their analysis, the preliminary analysis 17 and also receive comments on informationpertaining to 18 the Notice of ProposedRulemaking, the next steps. We 19 are going to go over themethodologies and so forth 20 this afternoon, which is on the agenda. 21 We will take a lunchbreak about noon, as 22 appropriate. There is a snackbar downstairs. There 23 is the cafeteria down in the West wing of the building. 24 There is also some restaurants up at L'Enfant Plaza
. 25 Lunch is your own, sowe will try, we let Victoria as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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### 1 the, as we do ourpresentations and get.through the 2 day, we will decide, we will choose a point for, a good 3 

### point for lunch. 4 We would like to reduce interruptions if 5 everybodywouldwait to speak, tobe recognizedby 6 Victoria. Pleaseremember, this is important for the 7 court reporter, to speak into themicrophone, give your 8 name andyour company for eachtime that you speak. 9 Please keep side conversations to a minimum. Ifyou 10 can, ifpossible, you cango outside if itbecomes a 11 lengthydiscussion. 12 Itmaybe necessaryto cut offtopics to 13 maintain schedule. We have a very full agenda today
. 14 And we have a number of topics thatpeoplewant to 15 discuss. So, whenwe get intothatwe want, we have 16 set a list uphere, some of the topics that we 17 received. What we would like to do is see when we get 18 intothat, toprioritizethat or ifeverybody feels 19 that all the agenda items orthe topics are necessary, 20 we can add that when we go to the agenda review. 21 This workshop is scheduledtoend at 4:00 22 p.m. today or soon ifwe get through everything. 23 Topics that have notbeen fully discussed can 24 be addressed in additional comments. The comment 

### 25 period for this workshop andthe notice is February2
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• 8 1 of 1999. So that will coincide with the supplemental 2 rulemaking comments. All comments and data submitted 3 to the Department will be used for the publicationof 4 the Notice of ProposedRulemaking. 5 Written comments anddata submittedwillbe 6 available for the public inspection at the reading 7 room. If anybodyneeds thephone number it is (202) 8 586-6020, and again, it is down the hall in lE-190. 9 Written comments shouldbe addressed to the Department 10 of Energy in the Federal Register notice that are 11 addressed inthe notice, supplemental advance Notice of 12 the ProposedRulemaking. 13 We request that 10 copies be submittedof 14 comments or data. The Department would like if 15 possible, electronic copies inWordPerfect 6.1. Please 16 no fax copies. There is somethingnew that we are 17 accepting, is we will accept electronic copies of 18 E-mails. We askthat you follow up with a signedhard 19 copy, so that we have a permanent record andwe know 20 that is your official comment. And that shouldbe 21 addressed also, there is an E-mail address. You can 22 address that tomyself, send it to the Department and 23 the addresses are given intheNotice of Proposed, of 24 the supplemental advance Notice of ProposedRulemaking
. Any person submitting information they feel
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• 9 1 is confidential, and exempt by law from public 2 disclosure, should submit one copywith the information 3 in it, and 10 copies in which the information claimed 4 confidential is deleted. In accordance with the 5 procedures in 10 CFR 1004.11, the Department shall make 6 its own determination whether the information shallbe 7 exempt frompublic disclosure. Okay. 8 And keeping with the regulations of this 9 building, there is no smoking allowed in the building, 10 in the restrooms or down the hall, either end of the 11 hall to the right or left. There are publicphones in 12 the main lobby area. 13 And again, we appreciate everybodytaking the 14 time and effort inpreparing for thismeeting and for 15 this workshop. And we will be glad, gladto receive 16 comments and opinions. And we have done, we have 17 already done introductions. And if we wouldjust go 18 right into agenda review. Victoria? 19 MS. NADER: Thank you, Bryan. 20 First letme saythank you to all of you for 21 beinghere. I reviewed the record of your last 22 meeting, and I can see that you have come a tremendous 23 distance from theplacewe all startedover two and a 24 half years ago. I am impressedby the technical 

### 25 expertise you have brought. And I am impressedby your EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 10 1 ability to work together as a team. And I am aware 2 that we have a tremendous amount of work to do today, 3 but I see that you are well organized and you know the 

### 4 routine. And I will look to you tomanage yourselves 5 to a certain extent. 6 Just to reenforce the ground rules. Because 7 we have to have a record of this proceeding, please 8 speak only one person at a time. We need to have the 9 recorder be able to hear you. And Recorder, please 10 signal if there is someone you can't hear, please let 11 us know. 12 If you need to have a side conversation with 13 someone, please go out in the hall to do that
. It is 14 the onlyway we can continue to hear one another 15 inside. Please respect yourselves as colleagues. 16 State your name and your organization each time you 17 speak. This is very important. Be concise. There is 18 a tremendous level of detail involved in some of the 19 work we are doing. We have to use words sparingly and 20 effectively in order for us to accomplish what we need 21 to accomplish today. 22 And again, speak to be heard. Make sure that 23 you are projecting your voice so that the recorder and 24 everyone in the room can hear you. 25 The agenda for today is lengthy. Does
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• 11 1 everyone have a copy of the agenda? We will spend from 2 9:30 to 11:30 going over the items that you have said 3 you want to provide information on and the areas that 4 you have indicated you have questions on. And injust 5 moment or two, I will go through the list and get an 6 indication of how manypeople are interested in which 7 topics, so that we can be as efficient as possible. 8 We will work until 11:30 on those questions 9 and answers. At 11:30 we will review the results of 10 the Reverse Engineering, Phase II. Approximately 12 11 and we will look for a convenient breakingpoint, but 12 approximately 12 to 1 will be lunch time. As Bryan 13 said, you are on your own for lunch
. 14 Then beginning at one, we will have a series 15 of presentations, coveringMarginal Energy andWater 16 Rates, National Energy Savings, approaches to determine 17 shipment and elasticity. Consumer Survey, update. We 18 will have a break roughly in the middle of our 19 afternoon time. And following the break, we will cover 20 Manufacturer Impact Analysis, Indirect Employment, 21 Environmental Assessment, Utility Impact Analysis. And 22 then at four to four-thirty, we will have a summary 23 discussion and try to cover anything that we have not 24 touched on earlier in the process. 25 Okay. Is everyone clear onwhat we are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 12 1 doing? 2 MR. BERRINGER: Is there anything that we have 3 eliminated fromthe agenda that you feel needs to be 4 addressed? Earl, you have a question? 5 MR. JONES:

-- not elimination, I want to 6 check themagain. 7 MR. BERRINGER: Please speak in the 8 microphone, and identifyyourself, please. 9 MR. JONES: Yes, Earl Jones with G.E. 10 There was, I thought a provisionmade for 11 call ins on the consumer surveypiece of the consumer 12 discussion, is that still true andhow is that working 13 on this agenda? 14 MR. BERRINGER: That is correct. I didn't put 15 that on the agenda since that was a working group 16 meeting. That is at 4:30 this afternoon and I do have 17 the call in number for the working group. 18 MR. JONES: I thought it was initially set at, 19 wasn't it set at two or not? No? 20 MR. BERRINGER: No, 4:30 this afternoon, which 21 is going to be in the roomright across the hall, which 22 is lE-250. So, as soon as we breakuphere, ifwe 23 breakup earlier, we can do that. I can give, if 24 during the day you needto call somebody, the call in 25 number is (202) 287-1380. So, we willmake that
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• 13 1 available later this afternoon. But, that is starting 2 at 4:30, following thismeeting. 3 MS. NADER: Anyone else have a question? 4 Okay. Qonnie has posted on the easel charts 5 the primarytopics that people have said theywant to 6 talk about today. What I would like for you to do, 7 please, is raise your hand ifyou are interestedin 8 these particular topics. I want to get a sense of 9 whether we will be talking about items of general 10 interest to the whole group ofpeople. And that will 11 make a determination also as to whether theremight be 12 some issues that couldbe handled one on one or 13 otherwise in a smaller setting
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### 14 Okay. How manypeople are here to talk 15 about product class? 16 MR. BERRINGER: We were talking about, the 17 issue here that we were looking at andwe can elaborate 18 that on, is the compact class. There was a comment 19 fromWhirlpool about increasing that product class. 20 So, that was the main topic that we heard as far as 21 product class. 22 Earl, did you have something else to add to 23 that? 24 MR. JONES: Oh, you are so generous, Bryan
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### 25 MS. NADER: I didn't hear that, Earl. What
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• 14 1 did you say? 2 MR. JONES: I am complimenting Bryan on his 3 generosity. Well, of course, a more basic question 4 then that is inproduct classes that have been 5 historically recognizedwhether they will continue as 6 they relate to port of access. 7 MS. NADER: Okay. Yes, sir? 8 MR. MARTIN: I am Michael Martin, California 9 Energy Commission. I am a little confusedby your 10 question. You asked whether we want to talk about it 11 or whether we are interested in it. There are a lot of 12 things I am very interested in, but I don't wish to 13 make a statement, but should I raise my hand? 14 MS. NADER: Thank you for that 15 MR. MARTIN: I certainlywouldn't want tomiss 16 a word that Earl toldme. 17 MS. NADER: The purpose of asking you to give 18 me a signal of your, it is a signal of interest, not 19 just something you want to talk about. Thank you. The 20 whole purpose here is just to make sure that we are 21 spending our time on the things that people think are 22 most important. Okay. 23 Water and sewer rates? All right. That one 24 is popular
. 25 Elasticities? Is there even one person in
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• 15 1 the roomwho wants to talkabout elasticities? Okay. 2 MR. BERRINGER: These, the topics, too, that 3 we have the asterisks, we willbepresenting some this 4 afternoon, especiallywater rates andwe will be 5 talking about elasticities, the next topic ·shipments is 6 also on the agenda for this afternoon. 7 MS. NADER: How many are interestedinthe 8 topic of shipments? Thankyou. 9 Repair andwarranty costs? Life cycle costs? 10 Okay. Thankyou. 11 Life of the appliance in life cycle costs? 12 Thank you. 13 Energy, annual energy outlook ''99 forecast 14 and analysis? Okay. 15 What else do we needto talk about today? 16 What are the items that are not yet on the list? 17 Yes, sir? 18 MR. SCHEEDE: Glen Scheede. I wouldjust like 19 to ask Bryan, you asked for comments by December 4th 20 for items that didnot appear tobe on the agenda, to 21 sendthe comments into nominate things. And I duly 22 sent you a number of themand I notice you don't even 23 botherputtingthemon the list. Is there some 24 criteriathat you have for selectingthings that you 25 will or will not consider?
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• 16 1 MR. BERRINGER: If you look at the agenda, we 2 tried to address some of those in the other comments, 3 about midway down, when we talked about the scenarios. 4 So, we sort ofput those, when we get into discussion, 5 we put save detergent, additional information. We just 6 put a handful of them on here. So, if you have 7 something you strongly feel that is missing from this 8 list. 9 MR. SCHEEDE: I can give you another copy of 10 my December 4th letter. One topic is the general issue 11 of quality of data, because we have, we are now getting 12 data from a number of sources, apparently the DOE and 13 its contractors are using with no information to show 14 the representativeness, validity or reliability of the 15 data. We merely are presented results without that 16 kind of discipline with it. I think that is a general 17 topic. 18 MS. NADER: Okay. Thank you. 19 MR. SCHEEDE: Ageneral topic that needs tobe 20 consideredby DOE. 21 I do have comments on the MAISY data, but 22 apparently that will be on the agenda. 23 MS. NADER: Say that last item, please, I 24 couldn't hear you? 25 MR. SCHEEDE: MAISY, M-A-I-S-Y. The new EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 17 1 source of commercial data that DOE proposes to use for 2 all sorts of decisions
. 3 MS. NADER: Okay. Thank you. 4 MR. SCHEEDE: That apparently is on the 5 agenda. You do seemto have, I guess the marginal 6 costs and taking out the fixed portion ofbills is, 7 will be discussed this afternoon and life of 8 appliances. So, the main one is this quality of data, 9 which seems to be missing. Thank you. 10 MS. NADER: Thank you. 11 How many people are interested the quality of 12 data issue? Okay. Thank you, that was a good 13 addition
. 14 Any other additions? Yes? 15 MR. NADEL: I am not quite sure where they fit 16 in, whether it is here or this afternoon, but three 17 other things, I wasn't clear whether they are on the 18 list. 19 One is a question of retail mark-ups. 20 MR. BERRINGER: Yeah, I thinkwe have skipped 21 this page right here. We do have alternative, this is 22 sort of what is in the agenda, alternative scenarios. 23 MR. NADEL: I just wanted raise, if you have 24 got it covered, great. 25 MS. NADER: Thank you. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 18 1 MR. BERRINGER: I think these some of your 2 savings from detergents, information. You had talked 3 about the cost 

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### 45 percent. 4 MR. NADEL: Right. 5 MR. BERRINGER: And retailmark-ups. So, we 6 did. 7 MR. NADEL: Okay. 8 MS. NADER: Thank you. 9 MR. SCHEEDE: I am sorry, Glenn Scheede again. 10 Another issue that I shouldhave mentioned is access to 11 data. This is a problemparticularlywithMAISY 12 because apparently it is high cost, anywhere from 20 to 

### 13 50,000 dollars to get at it. Andthe question of how 14 that informationwill bemade available so it canbe 15 evaluatedbypeople interested inparticipating in this 16 process. 17 MS. NADER: Good, thank you. Others? Yes, 18 sir? 

### 19 MR. GREGG: Tony Gregg, City ofAustin. Just 20 one thing for the input for themodel. I don't know if 21 it is addressed anywhere, but the reduction in cost to 22 utilities and electric, all types of utilities andnot 23 having to fund rebate programs after standards are 24 implemented. I don't know if that is already taken 

### 25 care of or not.
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• 19 1 MR. BERRINGER: No, I don't think that was 2 something that we have
. 3 MS. NADER: You said reduction of what, I 4 couldn't hear you clearly? 5 MR. GREGG: Reduction in cost for rebate 6 programs that are currently in effect, to try to 7 promote efficient technology. 8 MS. NADER: Thank you. 9 Okay. Anything else? All right. Hearing no 10 additional suggestions, let'sbegin the conversation on 11 Product Class. 12 May I ask those who have table tents, a 13 favor, if would helpme a great deal if you couldturn 14 your tents so that I can see your organizations. Thank 15 you. That is useful. 16 MR. BERRINGER: If I could, I just had one, 17 the presentations are there. We probably, in order to 18 save time, we probably didn't, but one of the things 19 that was on the agenda was the, as far as the overview 20 of the schedule. And I wouldjust to like to go 21 through that brieflybefore we start getting into the 22 topics. I justwant toput this slide, this is the 23 fourth workshop that we have had as far as the 24 analysis, so it has been over the approximately two 25 years since we had our first kickoff workshop, in the
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• 20 1 process. Just so everybodyis on the same schedule 2 here. We are, basicallytodaywe are having our 3 workshop. Oh, I am sorry, sorry. 4 MS. NADER: Excuseme, I amhaving equipment 5 trouble here. 6 (Pause.) 7 MR. BERRINGER: Publicworkshop today to 8 address the comments receivedon theANOPR.· We 9 receive, we are looking to receive comments February 10 2ndof 1999, again, pertainingto this workshop andthe 11 comments to the SupplementalAdvance Notice. 12 We are looking at, ifeverythinggoes 13 appropriatelyandMike Rivest will talk about 14 manufacturing impact laterthis afternoon, starting, 15 start some preliminarywork in Februarytime frame. 16 That will coincidewith some of the consumer survey 17 information that will be discussed also today. 18 We are looking, in November of '99, 19 publishing the Notice of ProposedRulemaking andthen 20 holding a publichearing in December of '99 andpublish 21 the final rule, we are looking at September of 2000. 22 And I have alreadyintroduced some ofthe, I 23 am teamleader, Qonnie Laughlin is also on the team, 24 Gene Margolis, we alsohave. A. D. Little is a leadon 25 engineering andmanufacturing. Reverse engineering and
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• 21 1 LB&L is lead on theLCC, andNational Benefits 2 Analysis, whichwe will be going overthis afternoon. 3 Andwe have ENRIL/Quantum, which is doing our consumer 4 research for us. 5 And as, to the slideswe have already gone 6 through, the slides we have, and address the comments 7 pertainingto the SupplementalNotice. 8 So, I thinkwe have can go and get into 9 discuss as far as the topics and I guess the first one 10 we would start offwouldbeproduct class. 11 One of the, as addressed, one ofthe comments 12 to theAdvance Notice, the SupplementalAdvance Notice 13 of ProposedRulemaking, Dan Oprahwas theproduct class 14 andchanging theproduct class to two cubic feet for 15 the compact. Is there, does anybodyhave any further 16 discussion on theproduct class on the compact, 17 pertainingto the compact? Yes? 18 MR. NEAL: All right. My name is ChadNeal 19 from Staber Industries. We have a concern about 20 raisingthe upper limit of 2.0 cubic feet. We have a 21 unique top loadandtumbler actionwasher that is 1.93 22 cubic feet. And

-- 23 MS. NADER: May I ask you to speaka little 24 louder, please? 

### 25 MR. NEAL: Yes, we hold, excuseme, we hold
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• 22 1 the same amount at least ormore than a regularwasher 2 at our tub capacitybecause of its unique top loadand 3 tumbler actiondesign. We arejust concernedabout it 4 being raised to 2.0 andputtingus into the compact 5 class, when we are actuallya standardwasher. So, it 6 isjust the issue of that upper limit of the tub 7 capacity. 8 MR. BERRINGER: Does anybodyelse have 9 comments pertainingto compact class as far as either 10 opposedor for or against changing theproduct class? 11 MR. WEINGARTNER: RolandWeingartner, Miele 12 Appliances. I just thinkthat this compact class is 13 subjective at the very least. And right now ifyou 14 change that up to two, you are going to knock outmany 15 of the Europeanwashers, because of the horizontal 16 loading, they are generally smallerdrums, although 17 they can domore laundrybecause you can fill themto 18 the top, which you cannot do in a vertical axis. So, I 19 think, ifyoumake, ifyou force itup to two, you are 20 going to force us tomarket a machine that for years 21 has beenmarketed as a standard, because of the load 22 size. Now you are going to force it to compact class 23 for differentmarketing. And alsowith the average 24 load, the average wash load_beingbetween seven and 25 eight pounds, generally, there is reallyno need to
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• 23 1 change the compact class up to two. 2 MR. BERRINGER: Alan? 3 MR. KESSLER: Bryan, we are not opposed to the 4 increase in size of the compact washers up·to two. 5 However, we think that the Department ought to also 6 look at maybe creating a super capacity or a larger 7 capacity above the standard size, starting say at 2.9 8 to 3.2 to create differentiation, because there is a 9 lot of confusion in the marketplace presently on what 10 size washers really are, when you get into the larger 11 sizes. 12 We want to alsomake sure that we maintain 13 the differentiation between what we characterize as 14 vertical axis and horizontal axis machines as opposed 15 to top loading versus front loading. There is distinct 16 technological differences between the machines 17 regardless of where they are loaded. 18 MR. BERRINGER: Okay. Thank you. 

### 19 MS. NADER: Yes? 20 MR. STEVENS: Charlie Stevens, Oregon Energy 21 Office. 22 Could I get somebody here in the room to 23 explain to everybody else, at least to me, what the 24 rationale for the change is? 25 MR. BERRINGER: We had basicallya comment, it
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• 24 1 was fromWhirlpool, it is dealingwith the capacity 2 that itmay eliminate a product class, ifmaybe, with a 3 particular, or a particular group, itmaybe a niche 4 produce or a smallproductby, with the test procedures 5 not being able to, my understanding, to reach the 6 minimumefficiency standards, when it is categorizedat 7 a low. Andmaybe DickBest fromWhirlpoolmaybe able 8 to elaborate on the issue. 9 MR. BEST: Is this on? 10 MR. BERRINGER: Yes. 11 MR. BEST: Yes, just a comment on the 12 rationalebehindthis. Traditionallythe compact class 13 in the last rulemakings was set at 1.6 cubic feet. And 14 the definition was reallybasedonwhat the industry 15 was producing during that, during thoseperiods of 16 time. And there weremultiplemanufacturers of what 17 was termedcompact washers. But, since that time, the 18 market has changedandnot allproducers remained in 19 that nichemarket. And at the same time, Whirlpool 20 became a supplier, even to some of the other industry 21 members of theseproducts, and itjust was not 22 economically feasible to continue with the style of 23 compact. At that time itwas replacedwith one that is 24 slightlylarger, the two cubic feet model. And that, 25 andwe do supplythat to othermembers inthe industry
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• 25 1 today as well. So, it is, we aremostly a sole source 2 

### on it. There are still small number ofthe 1.6cubic 3 

### feet models built, but theyarebuilt into, again, 4 uniqueproducts such as washer/dryer combinationunits. 5 And this whole totalmarket, if you threw all ofthem 6 together of these vertical axis, what isbasically 7 compacts, is about onepercent of the totalmarket. 8 But, eventoday, those two cubic foot are 9 classifiedas full sizewashingmachines, but ifthey 10 went to a higher efficiency standard,.thepracticality 11 of convertingthat smallproduct line and adding costs 12 wouldbasicallyeliminatethat out of themarket and 13 take that away from consumers. And theydo have unique 

### 14 utilityas we havepointedout inmany of our comments, 15 many ofthemare used asportables. Some come with 16 casters. They are a low inproduct for speciality 17 purposes. And that was the whole rationale. 18 The fact that there are also HAxismachines 19 that would fall in that category, I thinkwe recognize 20 that thatmightbe an issue fromthemarketing sidebut 21 there are probablyother solutions to that. The term 22 compact, as it is usedtoday, maybe that needs tobe 23 considered, ifthat is the right term. But, certainly 24 the utilityissues are there
. 25 MS. NADER: Does that answer the question?
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• 26 1 Good. 2 Yes? 3 MR. NEAL: May I make a comment? Brian 4 Neal, just a consumer. Why can't we just put them all 5 in one class and look at the efficiencies ourselves and 6 not have different classes? 7 MR. BERRINGER: That is the next step, I 8 think, that Earl brought up as far as port of access. 9 That is one of the comments that we received in the 10 notice, is to a have single class. So, maybe at this 11 point, we can, we had a number of comments talking 12 about that. 13 MR. JONES: Well, I am not sure I understood 14 what the gentleman's comment was, whether he was 15 addressing the issue of port of access as it relates to 16 standardmachines or whether he was addressing the 17 compact or the increase of the size of the compact. 18 So, maybe he can clarify that andmaybe

-- 19 MR. BERRINGER: I am sorry, could you clarify, 20 sir? Were you referringmainly to only to the compact 21 versus the standard or are you saying

-- 22 MR. NEAL: No, what I am saying is as a 23 consumer if I want to comparemachines, why should I 24 have to look at different lists, put all the machines 25 down, if I want to wash clothes, see what the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 27 1 efficiencies are, whether it is horizontal, vertical, 2 whether it is 1.6 or 2, just letme see andmake my own 3 decision. 4 MR. BERRINGER: So, you are saying one class 5 regardless of size orport of access, just one standard 6 class, just close washers generically. 7 MR. NEAL:**Y~s.** 8 MS. NADER: Yes? 9 MR. NADEL: Just gettingback to the previous 10 issues. 11 MR. BERRINGER: This is Steve Nadel? 12 MR. NADEL: Steve Nadel, ofACEEE, of the 13 compact class. I was just curious if the people from 14 Whirlpool, Staber andMiele, couldmaybe comment, is 15 there some value between 1.6 and 2.0. That might work 16 for everyone. I mean, I don't know, I heard Staber 17 there, theirs is 1.93. So, I would guess a 1.9 18 distinction would work. I don't know whether that 19 would work for Whirlpool, likewiseMiele. Is there 20 some in-between value? 21 MR. MARSOLLEK: This is Michael Marsollekwith 22 Bosch Group. 23 First, a comment on your remark there, for 24 us, 1.9 would not work. But, I also wanted to comment 25 on that it is, I think it is dangerous to just work
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• 28 1 cubic feet load sizes. Also for the comment thatMr. 2 Weingartner fromMielebefore, that the capacityof 3 horizontal axismachine interms of load size, is quite 4 different when youput that inrelationto the actual 5 cubic feet ofthe size of the drum, drum, because like 6 a 1, I just grab a number 2.0 cubic feet, horizontal 7 axis washer, canholdprobablythe same amount of 8 laundryand again, I amjust taking a numberhere, as a 9 3.2 cubic feet top loader or evenmore laundry. So, 10 from the consumer side, I think it ismuchmore 11 interestingto look at the actual loadcapacity. How 12 much laundry actuallycanbe washed, reasonablywashed 13 in thatmachine as opposedtojustmeasuring the 14 physical size of a tub, not taking into consideration 15 the actual way themachine works. Thankyou. 16 MS. NADER: Thankyou. 17 The gentleman at themike. 18 MR. WEINGARTNER: RolandWeingartner, Miele 19 Appliances. I thinkwe maybemixing a littlebit 20 apples and oranges, too. We are speaking about here 21 selling from a marketingpoint. All of ourmachines 22 eventhough they are under two, I would saymore than 23 95 percent ofthemalreadyreach or exceedthe limits 24 for standardmachines, eventhough they are compacts, 25 horizontal axis, I am speaking about.
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• 29 1 But, what I see happening andperhaps Bosch 2 and Staber is, we have somebody come in and out, since 3 we are a compact, theymarket theirmachine as themost 4 efficient standard sizemachine, when in reality our 5 compacts are more efficient than their standard 6 machines. So, we are mixing two different issues here, 7 trying tomake one answer out of them. So, you have 8 got to separate, are we talking about pure energy or 9 are we talking about marketing also? 10 MS. NADER: Thank you. Yes? 11 MR. NEAL: ChadNeal from Staber Industries. 12 I thinkthe thing that we have to consider here is 13 usable tub volume, because everybodythrows out a 

### 14 number like 3.4 cubic feet and 2.0 cubic feet, but 15 there is a difference in cubic feet of the entire tub 16 and then usable tub volume. That is the thing that 17 needs tobe considered. Maybe you take the entire tub 18 capacity and subtract out the volume of water and the 19 volume of the agitator and then you will come up with a 20 number that ismore accurate, not totally accurate, but 21 more accurate thanjust a tub volume. 22 MS. NADER: Thank you. Anyone else on this 23 topic? 24 MR. BEST: Onemore comment from the Whirlpool 25 Corporation.
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• 30 1 MS. NADER: Sayyour name, please. 2 MR. BEST: RichardBest, Whirlpool 3 Corporation. 4 MS. NADER: Thankyou. 5 MR. BEST: Our comments and all this really 6 are not intended to address themarketing issues as 7 brought up here. I thinkthe whole intent is that 8 there is a small vertical axis low endproduct line 9 that serves a specialitymarket here inNorthAmerica. 10 And that toput a high efficiency orhigh investment 11 challenge to this product, wouldbasicallyeliminate it 12 from themarket. Which as part of the rulemaking says 13 this is not the intent of the rulemaking is to 

### 14 eliminate unique utilityout of themarket. 15 I agree there are probably some issues 16 relatedto the size andwhere people fall andhow they 17 might label theirproducts. And even in the capacity 18 measurements as to how youmight measure. But, I think 19 we standon our comments that 2.0 is the request. It 20 isbasedon the product as it exists today. And the 21 same logic goes along if you are going tomake it 1.7 22 or 1.8, youhave to retool the product for a small 23 nichemarket, it is probablygoing to disappear. So, I 24 think our comments are, maybe there needs tobe some 25 further discussion outside of thismeeting as to
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• 31 1 possible solutions to this conflicting issue here. And 2 it is a mixed issue, but I think our 2.0 is the number 3 that we would support. 4 MS. NADER: Thank you. Sir, sir? 5 MR. NEAL: Tom**~eal,** with Staber 6 Industries. 7 As a user of a washingmachine, you ask a 8 housewife to use the washingmachine or even,

### ·r use 9 one, too, don't usuallythink of doing two cubic feet 10 of laundry or 12 pounds of laundry. I usually think of 11 doingmy laundry in loads. I didtwo loads today or 12 three loads. And if you look at the statistics on 13 loads, the loads are down around sevenpounds. Our 14 smallmachine at**Staber~s,** relatively smallmachine, 15 will do the full range of loads that werementioned in 16 the Burns Study. And it comfortablydoes the standard 17 loadthat the average housewife that is·doing laundry 18 uses. And I thinkmaybe we shouldbe thinking in terms 19 of loads of laundry, standard load of laundry rather 20 than the cubic feet or the pounds. 21 MS. NADER: Thank you. Anyone else? 22 Fine. And staff, do you have what you need 23 on the

-- Oh, I see onemore. 

### 24 25 MR. JONES: On what? Do you have what you need on what?
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• 32 1 MS. NADER: On the topic ofproduct class. 2 MR. JONES: No, I thought we werejust 3 exhaustingthe issue of sizeofcompact versus 4 standard. 5 MS. NADER: Size. All right. Thankyou. 6 MR. JONES: There are still other issues tobe 7 addressed. 8 MR. BERRINGER: Okay. 9 MS. NADER: Thank you. 10 MR. STEVENS: Charlie Stevens, Oregon Energy 11 Office. 12 Has the Department everconsidered in the 13 past settingthe standard for theseproducts like they 14 set it for refrigerators? With a formula that adjusts 15 themaximum allowabilityuse to, in this case the 16 volume? 17 MR. BERRINGER: I guess we have not considered 18 that. I guess thatmaybe a possibility. I am not sure 19 what the likelihoodofthat is. 20 MR. STEVENS: It is one, I mean, it seems to 21 me thatWhirlpool is not just sort of suggsetingthat a 22 second class needs tobe established at a certain 23 benchmark, but that a**s~parate** standardwould 24 ultimatelyhave to, I mean, the goal there is to set a 25 separate standard for that class. And from the sound
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• 33 1 of it, itwouldhave tobe a lower efficiency standard 2 to accommodate theproduct that ismade todaywithout 3 substantial changes. And sometimes a sliding scale can 4 work to accommodate that sort of thing. I don't know, 5 I have never triedto do it, so I don't how 6 successfullyyou couldbe. But, I might suggest that 7 the Department give that some thought ifthere is some 8 tendency toward a single class. 9 MR. BERRINGER: Okay. Thank you. 10 MS. NADER: Thank you. 11 MR. JONES: Earl Jones here, G.E. 12 Actuallythis discussion that we havejust 13 had is a very good lead into the whole, to the other 14 part of theproduct class discussion. Andthat, of 15 course, is themore basic one of whether or not the 16 Department is heading in the right direction in its 17 proposal or its suggestion, whatever you want to 18 characterize it as. To eliminate anyproduct class 19 basedon the access of rotation. And of course, we at 20 G.E. believe that that wouldbe a mistake. And this 21 continues tobe an issue that requires a great deal 22 more analysis than the Department has done up to this 23 point in time. It is a little like the cartbefore the 24 horse, focusing first on the question of consumer 

### 25 utility, we have got, you have got a workshop scheduled
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• 34 1 for latertoday, get, even though you haven'tpulled 2 that data together yet, even though the record is quite 3 conflictedon this question, you havemade quite clear 4 your intentiontoproceed. That I think is going tobe 5 a significant roadblocktoprogress in this rulemaking. 6 And I think you needto recognize that fact. And let's 7 justprepare for it. 8 The discussionwe justhad, as I said, is a 9 goodpredicate for this discussion, becauseherewe 10 are, now with the last discussion from Oregon 11 suggestingthat a lower efficiencymight be appropriate 12 for an upside compact washer. When based on the 13 comment we just heard from thepeople who buildthose 

### 14 machines, those are apparentlymore efficient than 15 othermachines. Ifthe Department ispromoting 16 efficiency, what exactly is your goal? It seems tome 17 that that thewhole question ofhow you determine these 18 product classesneeds to focus on what guidance is 19 beingprovidedto consumers. The gentleman's question 20 backthere, I thinkwas an interestingone. Because 21 there is substantialpotential for deception of 22 consumers an actual value they are receiving. And 23 performance, both interms of the energyefficiency, 24 and operating costs ifthese classes aremerged
. 

### 25 You want topromote efficiency? I saydo it
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• 35 1 in a rational way that preserves the ability of 2 consumers tomake an appropriate choice and also 3 preserves their ability to access utilities and 4 functionalilties that they have determined in the 5 market tobe critical. Not as thebasis of some 6 rulemaking, not on thebasis of some people sitting in 7 a room somewhere, you know, defining what the answer 8 shouldbe. But, basedupon what themarket has 9 commanded. It is rational, at least in this respect, 10 that people buyproducts theywant. And for this 11 process to leadto one which takes products away from 12 them, makes it is invalid. And also, opens it up to 13 challenge
. 14 So, let'sjust understand that this still, it 15 is a substantial issue. It requires a lotmore data 16 than is in the record. We look forward to working with 17 the Department on that andmeet with the rest of the 18 parties at this table. But, it is still a substantial 19 question that needs to be resolved. 20 MR. BERRINGER: Thank you. 21 MS. NADER: Thank you. Sounds like G.E. has 22 additional data to offer and I know theywill 23 appreciate it. 

### 24 25 MR. BERRINGER: Okay
.. At that, shouldwe
move onto the next topic? Does that prettymuch
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• 36 

### 1 address theproduct class? 2 PhilManthei? 3 

### MR. MANTHEI: PhilManthei, from the Lyons 4 Laundry. 5 Regarding the issue on front loading, top 6 loading, is the Department goingto go out and ask 7 consumers theirpreference? 8 MR. BERRINGER: That ispart of the 9 informationwe are looking at. The utilityissue that 10 we are lookingto get out ofthe consumer survey. And 11 that is also, again, we can discuss further inthe 12 working group, what we, we have not, we arejust in the 13 first stages, the first phases ofputtingtogetherthe 

### 14 consumer analysis, consumer focus groups and so forth. 15 

### MS. NADER: Okay. Are we readytomove on? 16 Water and sewer rates. 17 MR. BERRINGER: Again, this is goingtobe 18 presented later, sotheremaybe even further discussion 19 on the sewer andwater rates. I thinkthe topic onthe 20 agenda was talking about the, talking specificabout 21 historical trends and informationthere andmay 22 elaborate. 23 We can talkabout that laterthis afternoon 24 andget intomore detail. Does anybodyhave specific 

### 25 comments on this as far as the data thatwas collected?
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• 37 1 MR. SCHEEDE: Glenn Scheede. Just at 2 question, how are you going to get into the issues this 3 afternoon of how the data were recollected, in detail, 4 so that we can tell whether the data are 5 representative, valid and reliable. Will those data, 6 will those issues be addressed in detail this 7 afternoon? If they will, fine. 8 MR. BERRINGER: Yes, they will. 9 MS. NADER: Thank you. Other questions? 10 MR. MARTIN: Michael Martin. I would rather 11 wait until this afternoon when we have this background 12 to discuss these matters. 13 MR. BERRINGER: Okay. That will be fine. 

### 14 There was very little interest on 15 elasticities, I know. That is something else that we 16 are trying to again take out of the consumer survey 17 information. We are trying to get some elasticity 18 values. So, again that will be. Is there, does 19 anybody else have a specific comment on the 20 elasticities, cost elasticities? 21 Okay, again, we will get into that a little 22 bit this afternoon. 23 Shipments, I know there was a lot of interest 24 as far as the topic of shipments. And I know that is 25 a, you know, from the standpoint of the analysis, the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• --- ----------- - 38 1 Department is lookingto tryto get somemore 2 informationon shipments. Basically, have information 3 on the EF, with the new standards inplace, there is 4 very littleinformationonMES. So, that is something 5 that the Department has proposed. Ifthere is 6 additional data that canbe giventous on that 7 particulartopic, sowe cando a more thorough 8 analysis. Is there

-- 9 MS. NADER: I saw a number ofhands go up 10 earlier. Were those questions orcomments? Let's hear 11 from you. 12 MR. JONES: Well, Earl Jones here again, G.E. 13 When you sayyou are going to go into 14 shipments, what exactlyis encompassed in that, Bryan? 15 I mean, this afternoon, is that what, will therebe 16 somepresentationon that? 17 MR. BERRINGER: Yes, this afternoonLawrence 18 BerkeleyLaboratorywas going to talkabout shipments. 19 I think it ismore or less thehistorical trends and 20 projections, is that correct? I am looking for Jim? 21 MR. MCMAHON: That is right. 22 Earl, there is a handout inthepackage this 23 morning, ifyou would like to get a preview. 24 (Pause.) 25 MR. JONES: So, do you, Jim, in this
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• 39 1 presentation get into the issue of shipments by any 2 particular configuration, product configuration or is 3 this just gross shipments, inparticular channels? 4 MR. MCMAHON: Gross shipments. This is not by 5 configuration. 6 MR. JONES: Okay. So, Bryan, canwe have 7 some discussion then on the, I guess it wouldbe the 8 information that is set forth onpage 48 of the ARPR, 9 on the projected sales of horizontal axis washers 10 through the year 2030. Whoever is the, whoever 11 produced that data, can we have some explanation or 12 discussion of that? And I guess my question is, is 13 this a statement of aspiration or is itbased on some 

### 14 data which says that this is the trend over Xperiod of 15 time and indeedwe are projectingbased on sales or 16 what is it? 17 MR. BERRINGER: Are you talking specifically 18 about the projections of the HAxis? 19 MR. JONES: Correct, in themiddle paragraph 20 on page 48. 21 MR. BERRINGER: Yes, I thinkthe .5, is that 22 what you are looking at, at the .5 percent? 23 MR. JONES: Yes. 24 25 MR. BERRINGER: Increase per year. I think that is just a, yeah, we are looking, if you have
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• 40 1 specific comments on that, whether that is high, low. 2 MR. JONES: I have a specific question of 3 where it came from. 4 MR. BERRINGER: Okay. 5 MR. JONES: And what role is it playing in 6 this rulemaking? How is it entering into the 7 Department's analysis of this rulemaking? 8 MR. MCMAHON: This is JimMcMahon from 9 Lawrence BeckleyNational Lab. 10 Earl, that was an initial projectionbased 11 upon discussions with a number of people involved in 12 programs promoting horizontal axis machines. It was 13 put out there as a strawman for comment. We wouldbe 14 happy to have further data about the current shares as 15 well as expectations about further shares. 16 MR. JONES: So, I take it this was their 17 aspirational goal and that indeed, there is no data to 18 support this statement. 19 MR. MCMAHON: This was aspirational goal, I am 20 not sure exactlyhow you would find that. 21 MR. JONES: Well, okay, then maybe, let me put 22 it in English. I know it won't be possibly in 23 statistical terms. What I mean is this is a goal they 24 hope to achieve based onmaybe their plans, but indeed 25 that there is no data, which would say that current EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 41 

### 1 sales would yieldthis kindofprojection. 2 MR. MCMAHON: I thinkthat is accurate. I 3 

### have not yet received

-- 4 

### MR. JONES: Okay, thank you. 5 

### MR. MCMAHON: historical trenddata about 6 sales. 7 MR. JONES: So, then, Bryan, to get backto 8 the question. So, where does this, how does this 9 informationplayinto this rulemaking? Are you saying 10 that we have to challenge this orelse itenters into 11 thebodyof the rulemaking as an establishedfact? 12 MR. BERRINGER: Well, I thinkwe didhave the 13 GRIM training session. It is taking into 14 

### consideration, when you take thebase case, when you 15 are looking at, you know, what out there as far as the 16 market. So, ifyou.take that, this isbeing considered 17 inthe analysis. So, ifthere is conflictingdata or 18 ifthere is other suggestions, then

-- 19 MR. JONES:**So~** 

### how thendoes the success of 20 this product, which is, therefore, goingto reduce the 21 goal that the rulemaking, I assume, needs to achieve, 22 how is that goingto, how is that factoring into the 23 analysis, then? Yet, you arepresumablymove for 24 reduction inthe stringencyof the standards, isn't 25 

### correct?
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• 42 1 MR. BERRINGER: I am not sure what you are 2 asking as far as -- 3 MR. JONES: Well, ifmarket is taking care of 4 the problem, ismy question. 5 MR. BERRINGER: If it does, if it does, as 6 projected? 7 MR. JONES: Yes. 8 MR. BERRINGER: Then again, it wouldbe 9 considered in the base

-- I am sorry, go ahead, 10 Michael. 11 MR. RIVEST: Earl, I can -- 12 MS. NADER: Name, please. 13 MR. RIVEST: Mike Rivest, fromADL
. 

### 14 I can tell you how it is being used now. I 15 can't really answer the measurement question. The way 16 it is being used now is energy savings in the future 17 are beingbenchmarked against this market penetration 18 of HAxis. So, the higher the market, the forecasted 19 market penetration of the HAxis, the lower the energy 20 savings to the nation of a rule. So, when those energy 21 savings are weighed against other factors, such as 22 manufacturing impact, for example. The energy savings 23 been less, there is less to weigh against. So, it does 24 come into play in that sense. 25 I am not sure that fully answers your EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 43 1 question. 2 MR. JONES: Yes, it does, thanks. 3 MR. RIVEST: Okay. 

### 4 MS. NADER: Next? Yes, sir? 5 MR. GOLDSTEIN: Dave Goldestein, NRDC. 6 Afollow up question, I think for Jim. As I 7 was reading this sectionjustnow, it seemedtome that 8 HAxis wasn't beingused in a veryrigorous sense. And 9 what you reallymeant was high efficiency. And you 10 weren't reallytrying to specifywhether itwas high 11 efficiency, horizontal, vertical, diagonal or some new 12 technology. Is that correct? 13 MR. MCMAHON: JimMcMahon fromLBL. 

### 14 That is correct. What is important is what is 15 the distribution ofefficiencies that will be soldin 16 thebase case, inthe absence of standards? That is 17 what we need to know. 18 MR. GOLDSTEIN: So, thosepercentages refer to 19 high efficiencywashers with a certainMEF. 20 MR. MCMAHON: That is correct. 21 MR. GOLDSTEIN: Thankyou. 22 MS. NADER: Okay. Gentleman from Edison 23 Electric. 24 MR. ROSENSTOCK: Steve Rosenstock, Edison 25 Electric Institute.
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• 44 1 Just as another, inthe technical support 2 document inChapter 3, ittalks about first quarter '98 3 

### washer shipmentsbyaccess. 4 MS. NADER: May I askyou to speakup a 5 little, please? 6 MR. ROSENSTOCK: Steve Rosenstock, EEI. 7 Inthe technical support document dated 8 October '98, inChapter 3, Table 3.3, washer shipments 9 by access, first quarter 1998, the source of that, is 10 the reviseddraft report on consumer research for 11 clothes washers, April '98. It saidfront 12 load/horizontalhad 5.4 percentmarket share. I guess 13 that is a national figure. Oh, it says, okay, may not 14 

### include allmajor retailers and therefore has a margin 15 of error. But, that, just as at least one data, it is 16 showing that inthere, FYI. 17 MR. BIERMAYER: Peter Biermayer, LBNL. 18 That number is froma company called, a 19 marketing company calledIntellect. They surveyed, I 20 believe, a large number, I don't know the exact figure, 21 ofretailers. I believe that doesn't include Circuit 22 Cityor Sears. 23 MR. ROSENSTOCK: Steve Rosenstock. 24 As a follow-up, but was it a national as 25 

### opposedto a regional survey?
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• 45 1 MR. BIERMAYER: Yes, itwas a national survey. 2 MR. ROSENSTOCK: Okay. 3 MS. NADER: At themike? 

### 4 MR. GREGG: TonyGregg, CityofAustin. 

### 5 I have a commentmore on thebase case 6 scenario. It seems like thebase case is penalizing 7 the efforts of those inthe industrywho are, outside 8 of the industryactually, inthe utility field, who are 9 promoting the HAxismachines. It is not a given that 10 utilitieswill promote HAxismachines indefinitely. I 11 thinkmost ofus are hoping that there will be a 12 standardearlierratherthan later. So, we can invest 13 ourmoney in otherthings. So, if .5percent is the, 14 if it is a goodnumber orbadnumber, whatever that 15 number is, I thinkwe should, there shouldbe a 16 reduction inthat numberbasedon the effectiveness of 17 the rebateprograms that arebeingpromotedby 18 utilities, so that the standardis not assuming that 19 thoseprograms will continue. Because I don't think 20 theywill continue indefinitely. The cost ofthemis 21 high. And so, anyway, I thinkthe forecasting has to 22 recognize that andmake some allowance for it. Thank 23 you. 24 MS. NADER: Thank you. 

### 25 MR. SCHEEDE: Glen Scheede, again.
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• 46 1 Just a minute agowe had an example of using 2 data that comes from someplace, the organizationhas 3 an impressive name, Intellect, but it tells us nothing 4 about the qualityofthe data. I think DOE needs to 5 start getting some discipline inthis process. And if 6 data are citedfrom some source, details of themanner 7 inwhich that data were collected, whether it is really 8 representative, are needed. Just saying it is a 9 national survey, tells us absolutelynothing about the 10 quality ofthe data. And that is a general problem. 11 MS. NADER: Thank you. 12 Yes, sir? 13 MR. GOLDSTEIN: DavidGoldstein, NRDC. 14 I think this ismischaracterizingtheproblem 15 a littlebit. There are no data concerning the future. 16 There is data concerningthepresent or thepast. And 17 the future isprojections which have different 18 methodologies and different assumptions behind them. 19 I thinkthebroaderpoint that is consistent 20 withwhat Mr. Scheede saidand a number of other 21 comments, includingthe gentleman fromAustin, is that 22 we don't know what thebase case. There is uncertainty 23 inthe.base case andthat uncertaintyought tobe 24 modeledexplicitlybecause ithas different 25 consequences than any certainoutcome. In otherwords,
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• 47 1 ifmanufacturers know that thepenetration of high 2 efficiencywashers is going tobe 15 percent in the 3 Year 2005, they canmake investments based on that, and 4 be sure of getting a return. Ifthey know that it 5 might be zero and itmight be 100 or itmight be 6 anywhere in-between, there is a great possibility for 7 stranded costs, or for not being able tomeet consumer 8 demands and having impacts in the otherway. And those 9 are manufacturer impacts of the base case, and they 10 need tobe analyzed. 11 MS. NADER: Thank you. Glenn? 12 MR. SCHEEDE: Glenn Scheede, again. 13 I thought the data we are talking about 

### 14 relatedto.the first quarter of '98, and itwas, in 15 fact, historical data that LBNL was referring to. And 16 if so, I thinktheyhave a responsibility, that DOE has 17 a responsibilityto explain in detail where that data 18 came from. If, in fact, as the gentleman from NRDC 19 said, it is a forecast, then let's find out what the 20 methodology is for the forecast andprovide that in 21 detail. But, perhaps LBNL couldexplain something 22 about the specificpiece of data that was used. 23 

### 24 25 MS. NADER: Thankyou. Yes? MR. NADEL: SteveNadel, ACEEE
. I had another question, I guess isprobably
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• 48 

### 1 for LBNL. Inthemodel used, is thatmodel basically 2 set up so that itneeds kindof a straight line 3 

### projection or is it able to deal with differing 4 projections? I mean, ithas come out here that it is 5 likelyand I have heard similardata from other 6 sources, themarket share in 1998 is goingtobe 7 greaterthanthe threepercent you assumed. On the 8 otherhand, I suspect that, you know, your long figure 9 maybe reasonable. Can youdeal with other shapes of 10 the saturationcurve? 11 MR. MCMAHON: JimMcMahon fromLBNL. 12 Themodel is flexible. We can deal with any 13 projectionthat youwould like
. 14 

### And with regards toMr. Scheede's question, 15 Intellect is a firmthat doesmarket research. I 16 understandthat they sell this informationto a number 17 ofprivate entities. And inour search for whatever 18 data we could find that is usedby otherpeople and 19 viewedas credibleby other entities in the industry, 20 we use themas one source of information. We wouldbe 21 happyto give youmore information about the company 22 and about theirmethodologies. 23 MS. NADER: Thank you. 24 MR. BERRINGER: And ifyou have, anybodyhas 

### 25 anybetter information or additional information, you
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• 49 1 know, we definitelywouldwant to do that. We are 2 doing, research for thebest information that we can 3 find, that is available. 4 MS. NADER: Thank you. 

### 5 Anybody else onthis subject? 6 Okay. We are over at alternative 7 standards scenarios. 8 MR. BERRINGER: Are were ready to tackle that 9 one now? 10 Obviously, we have, this is one of themajor 11 things as far as the rulemaking is concerned, as far as 12 the scenarios. Again, these are the examples. These 13 are inno way where the Department has saidthis is 14 what we are going to do, this is a startingpoint for 15 discussion. And to give an example, there has been 16 discussions as far as a singlephase standard in a 17 short amount oftime, you know, three years. Or a two 18 phase, a stretchvertical in three years, followed by 19 five years of a higher efficiency standard levels. 20 So, some of thepreliminary analysis does, 21 when going through it, justifysome ofthis. Of 22 course, we are not finished through the analysis. We 23 stillhave, inNOPR studywe stillhave to do our 24 manufacturing impact, a number of other things. And we 

### 25 will rerun that, rerun the analysis also, basedonnew
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• 50 1 information. 2 So, at this point does anybody have any 3 concerns, recommendations or ideas as far as a 4 proposal, as far as standard levels or efficiency 5 levels for the clothes washers? I think we -- No. You 6 are going to let the Department choose. Okay. 7 MS. NADER: Yes, David. 8 MR. GOLDSTEIN: David Goldstein, NRDC. 9 It is very hard for us as a stakeholder to 10 make any recommendation on these alternatives, because 11 we can't connect them to anything in the real world. 12 That is there are number of products that currently are 13 at the types of levels that I think you are considering 14 in the ANOPR. And depending on what the actual MEFs of 15 those models are, will influence our judgement and I 16 presume the judgement of a lot of other stakeholders as 17 to whether the levels make sense. So, it seems to me 18 that a research that is extremely important, is to 19 gather MEFs of existing product on the marketplace, at 20 relatively high efficiencies and publish those, so that 21 we can see what, how the existingproducts match up 22 with potential standard levels. That allows everybody 23 to make some estimate of how hard of a job is it to 24 redesign to this level, and what would the impacts of 25 doing it be.EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 51 1 MR. BERRINGER: Yes, the Department has done 2 someMEF testing, butwe didn't divulge specifically, 3 

### it is in theTSD, the information, whatparticular 4 models ormanufacturers those represented. But, we did 5 take top sellingmachines andtest themandto get some 6 MEF data. 7 MR. GOLDSTEIN: But, we can't comment 8 intelligentlyon ituntil we share the data. I mean, 9 this is not priorityinformation. Anyone withenough 10 moneycango out andbuya model andtest it, andthey 11 have theMEF, but it is kindof a sillyandburdensome 12 way to have each stakeholderthat is interesteddo 13 that, when you couldhave one answer, so the 14 

### manufacturers could submit itthemselves. I don't 15 really, it doesn't concernme who is vouching for the 16 accuracy, as long as it is some trusted source that 17 says here is what the number is. 18 MR. BERRINGER: Terry? 

### 19 MR. THIELE: TerryThielewith Frigidaire. 20 I would like to askthe Department a 21 question, which iswhat's the Department purpose is in 22 proposing at this stage intheprocess these different 23 final rule outcome scenarios? In otherwords, what are 24 you attempting to achievebythrowing these out? Given 25 

### the fact that we don't have the analysis done to
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• 52 

### 1 justifyanyparticularcombination at themoment. 2 MR. BERRINGER: Well, we have somepreliminary 3 

### analysis, as far as the LCC andthe NES, as far as -- 4 Andbasedonwhat informationwas submitted. Again, 5 these are startingpoints for discussion. The 6 informationmay changebutwe are tryingto see ifwe 7 canreach a level that is agreeableby all.the 8 stakeholders. 9 MR. THIELE: The observation I wouldmake 10 though, is that the ultimate outcome of the rulemaking, 11 whether you have onephase ortwophases, two different 12 standards at different times, or simplya single 13 standard, will in largepartbe dictatedbyyour 

### 14 subgroup analysis. And that tomake some sort ofmacro 15 cut at thisbefore youhave undertaken that sort of 16 subgroup analysis, may tend to distort the rulemaking 17 process in a waythatmaybe you didn't intend. But, 18 

### may not, may cause us tohave to goback andredo a lot 19 ofwork, because the doubles inthe detail. And the 20 earlierconversation onproduct classes, between 21 compact and standard, I thinkis instructive inthe 22 consequences for subgroups ofmanufacturers ofthose 23 macro decisions, are goingtoultimatelydictatewhere 24 your economic feasibility comes out. 25 

### So, my thought tothe Departmentmightbe if
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• -------- -- - --- 53 1 you are looking for a strawman scenario, or a group of 2 scenarios to sort of bound your discussion, itmight be 3 more useful to take a low, middle, high approach and 4 throw out a set of scenarios that maybe less boundedby 5 your current work to date, as much as giving sort of 6 extreme examples ofwhat might happen. So, that you 7 can then differentiate among them from a philosophical 8 standpoint. And then allow your subgroup analysis to 9 fill in the detail later on. Because I amjust afraid 10 that you are almost prejudging this absence your 11 subgroup analysis. 12 MS. NADER: Thank you. Other comments? Yes? 13 MR. MARTIN: Michael Martin, California Energy 14 Commission. 15 I think I understand the situation about MEF 16 but letme statewhat I think and you can correctme. 17 This is defined in a test method which is not 18 yet being applied, but has been published and approved, 19 is that correct? 20 MR. BERRINGER: That is correct. And the test 21 procedure, looking that MEF, will not go into effect 22 until new standards take place. So, there is 23 information on themarket as far as EF, but as far as 24 MEF andparticularmodels. There is no public 25 information on that.
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• 54 1 MR. MARTIN: I see. Now, but DOE has done 2 some testing orpaid for some testing
. 3 MR. BERRINGER: We have done a limitednumber 4 of tests. 5 MR. MARTIN: On what basis are you not 6 identifyingwhat themodels that you have, that you 7 have tested? Is it a confidential thing thatmight be? 8 MR. BERRINGER: At this point it is 9 confidential thing that we didn't want to divulge the 10 manufacturers. We were doing this more for background 11 information for ourselves to sort of get what David 12 Goldsteinwants. The thing is, is we startedto look 13 at it and we tookhot sellingmodels, that are on the 14 market. When do you stop testingthemodels? Do we 15 test every singlemodel that is on themarket, is the 16 otherproblemas far as trying to
-- And there is an 17 issue far as confidentiality for information. So, 18 but that couldbe something that couldbe resolved or 19 discussed. 20 MR. MARTIN: I find it very, verydifficult to 21 understandwhy testing a model on themarket, using a 22 publishedtestmethod, could in anywaybe 23 confidential. And I kind ofwonder if I was to try 24 this on DOE, whether your attorneys wouldtellme that 25 couldn't be done.
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• 55 1 The otherquestion I would like to say, is if 2 we, at the EnergyCommission, were to have a surveyas 3 towhat is available, andwe dohave a database. It 4 has some columns inputMEF in. Andwe were to get this 5 information from you, wouldyou insist that we didn't 6 divulge itto anybody? 7 MR. BERRINGER: No, ifyou weremakingpublic 8 informationto that, I mean, at this point, we just 9 felt

-- 10 MR. MARTIN: So, you couldgive it to us and 11 we couldpublish it and get you out of this pickle 12 then? 13 MR. BERRINGER: That wouldbe something that 

### 14 we wouldhave to discuss with General Counsel, ifwe 15 would release that information. 16 MR. MARTIN: May I on the record, onbehalf of 17 the California EnergyCommission, request that 18 information fromyou in order that the databasemaybe 19 more useful to people? 20 MS. NADER: So noted. 21 MR. MARTIN: Thank you. 22 MS. NADER: Gentleman at themike. 23 MR. POPE: Hi, Ted Pope with the PacificGas 24 andElectric
. 25 Just ourposition is we are anxious to see a
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• 56 1 good aggressive standardthat is economically 2 justified, sooner than later. We have been spending 3 money on this, in this area since 1991, '92, you know, 4 and originallywe had the expectation there wouldbe a 5 standardtaking effect inprobably about this year, I 6 guess, maybe next year. And I guess our concern is 7 that things continue to look as if they are going to be 8 dragged out with these incremental steps. And so, not 9 yet havingbeen convincedthat it is, is solid 10 justification for going a two phase step, we are at 11 this time interested in seeing an aggressive step 12 taken, you know, right clean, whether it is 40 or 45 or 13 50 percent. I agree with some of the speakers here, 

### 14 that I am not real clear yet what the answer is andwe 15 look forward to gettingmore data there. 16 MS. NADER: Thank you. Yes? 17 MR. ROSENSTOCK: Another general comment, I 18 know we will getmore specific this afternoon. 19 MS. NADER: Name, please. 20 MR. ROSENSTOCK: Steve Rosenstock, Edison 21 Electric Institute. 22 Another general comment about the 23 supplementalANOPR is, as going through it and also 24 going through the technical support document, when 25 looking at, through this on the energy rates for both
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• - -------- - -------- ------------ 57 1 electricity and natural gas. It appears that the full 2 rate rather than the marginal or even fixed cost for 3 not taking it out, out of the ranges. So, as a result 4 the payback shown, as well as some of the life cycle 5 cost analyses are on the optimistic side. And I will 6 get more into that later. But, I am saying when you 7 are doing it over again, I do think that where possible 8 as approved by the industry advisory committee, that to 9 use ideally, which is the last step, to get the 10 marginal energy rates to be used, or in the interim, 11 for the interim analysis, taking out the fixed cost at 12 a minimum is really necessary to get the better ranges 13 of values. And I will talkmore about that this 14 afternoon. But, since you were looking for general 15 comments, I just wanted to throw that out there. 16 MS. NADER: Thank you. 17 MR. ROSENSTOCK: Thank you. 18 MR. BERRINGER: And as you know we are 19 pursuingmarginal energy rates. And that is part of 20 the discussion this afternoon. And also inMarch, we 21 also didpresent results for both the fixed, with or 22 without fixed cost in that March workshop. 23 MR. ROSENSTOCK: But, but

-- Steven 24 Rosenstock, but in the ANOPR, in the Federal Register, 25 you did not take out the fixed costs.
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# • 25**------------------------~·** 58 MR. BERRINGER: That is MR. ROSENSTOCK: So, that is why I wanted to raise that issue. MR. BERRINGER: Thank you. MS. NADER: Thank you. Steve? MR. NADEL: I wanted to ask DOE two questions and then I can get some opinions on this issue of general direction, or in particular exact numbers. The first question, if I am understood correctly, Bryan, that you have done some testing of MEF of some units. You don't want to identifywhat test results go with what units. Can you at least say what test results you have gotten, Unit A, Unit B, ignoring what products they are.

the TSO.

there.

mike
. MR. BERRINGER: That information shouldbe in

MR. NADEL: Okay. MS. NADER: Thank you. MR. NADEL: Okay. I will look for it in

MR. BERRINGER: It is available. MS. NADER: Yes, sir, please step to the

MR. MODTLAND: Dave Modtland, Frigidaire
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• 59 1 Home Products. 2 The informationthat ispresented inthe TSO, 3 on theMEF equations, it is difficult to tell since the 4 models are not identified, but I guess tome that data 5 looks suspect at this time. And as we have had some 6 discussions inthepast, with the facility that has 7 presentedinformation. Theyhave, themselves, 8 identifieddiscrepancies inbeing able to repeatedly 9 obtainMEF numbers for certainmodels. And so, there 10 is, I have got some questions, some of those values 11 that exist in the TSO, at least inmy mind. 12 MR. BERRINGER: Okay. If I couldjust follow 13 up on that. Just, there is some, we have seen some 14 discrepancies, that information as far as the RMC, so 15 it doesmake a difference in some of those results. 16 And that is somethingwe are furtherpursuing. So, 17 there are some possible changes inthe numbers that are 18 presented in that, in the TSO. 19 MS. NADER: Yes, sir? 20 MR. NEAL: TomNeal, Staber Industries, again. 21 I don't thinkwe wouldhave anydifficulty sharingthe 22 data on theMEFs orthe EFs, but theproblemthat we 23 see is that it ismisleading to the consumers. It 24 tells you a fictitious number, that represents how much 

### 25 energytheyexpect to save. Ourmachine will probably,
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• 60 1 if itwas truly rated, wouldbe twice as efficient as 2 the EF would indicate, simplybecause of the tub size 3 factor. I would rather see, I would rather go as a 4 consumer to an appliance store and ask themhow much 5 water or energy it uses to do a load of laundry rather 6 than get some factor, gettingharddata, and I have 7 done this,**~** have gone into several appliance stores 8 and asked them, well, how much water does thismachine 9 use in a load andtheydon't know. 10 MS. NADER: Thank you. 11 Yes, sir? 12 MR. STEVENS: Charlie Stevens, Oregon Energy 13 Office
. 14 I just, I canpoint outjust quickly that the 15 energy guide label does have the energyuse on it. So, 16 the EF is simply for standardcompliancepurposes. 17 But, what I ambeginning to get here is that 18 if some of us want data onMEF performance for various 19 machines, we might as well startmakingplans to go get 20 it, ourselves, because the data that you have needs to 21 be adjusted, redone, some of it anyway. So, even if 22 you let us know what itwas, it isn't exactlywhat we 23 wouldhope for anyway. Is that right? 24 25 MR. BERRINGER: There canbe some errors in that data, yes. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 61 1 MR. JONES: Earl Jones here, G.E. 2 Come on, Bryan, it is riddledwith error. It 3 is inaccurate. I mean, I don't think you shouldhold 4 back in this discussion to say that the data is 5 unreliable and therefore, the projections about what 6 machines even today are capable ofperforming at, 7 pardon the grammar, and therefore, canbe the base on 8 which we canbuild, the assumptions are simply wrong. 9 And the data will have tobe retested in order for it 10 to have any credibilitywith the people who make the 11 machines. I mean, is there any doubt about that? 12 MR. BERRINGER: If the manufacturers are 13 willing to provide that, we can throw out this data 14 altogether and then there won't be any question as far 15 as what was done. That is really, wouldbe the best 16 information. And then there wouldn't be any question 17 as far as a testing facility. 18 And as you stated there is a, there is 19 something that we are trying to address, as you know 20 with the RMC, tomake sure that 21 MR. JONES: Exactly. I just 22 MR. BERRINGER:

-- that is resolved. 23 MR. JONES: With the understanding that 24 somehow we can tweak it or something
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• 62 1 MR. JONES: Okay. 2 MS. NADER: Thank you. 3 Yes? 4 MR. MARTIN: Michael Martin. 5 How does the data that you got in testing 6 compare with what was given to you by the 7 manufacturers? 8 MR. BERRINGER: We do not have any information 9 from the manufacturers onMEF at all. 10 MR. MARTIN: And you don't have any from 11 anywhere else? 12 MR. BERRINGER: No. Other than what we 13 tested
. 14 MR. MARTIN: Then you have the world's best 15 data. And I challenge the manufacturers to make it 16 even better. 17 MS. NADER: Thank you. 18 Over here? 19 MR. MONTUORO: Lou Monturo withAmana. 20 I guess my question is that obviously this 21 is, the baseline data is controversial. Is there 22 plans to get, you are going to have to start with the 23 baseline data to regulate some improvement or we don't 24 have a baseline, is there plans to get more data, or is 25 that what we are discussing now? Or are youjust going
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• 63 1 to take the numbers that are admittedlyhave 2 discrepancies and use those as a baseline? 3 MR. BERRINGER: These, the data that we did as 4 far as testing has nothing to do with the baseline. We 5 were just trying to get our own idea. I mean, the 6 manufacturers submittedthe information on a baseline 7 unit. Okay, we are just trying to as David Goldstein 8 had said, try to an idea of what machines might match 9 up with those efficiency levels that are in the 10 rulemaking. So, we were doing that more for our 11 internal knowledge. And it is not part of the baseline 12 or any of the analysis. This is like a side issue. 13 MR. MONTUORO: But, isn't the proposal to
-- 14 MR. BERRINGER: We need you to use the mike so 15 we can have you recorded. 16 MR. MONTUORO: Okay. Isn't the proposal to 17 regulate the MEF number? Yes, no? 18 MR. RIVEST: Yes, but the cost data that was 19 provided, which is at the basis of the analysis, has 20 been providedbymanufacturers according to their test 21 results. Not according to the test results by this 22 independent lab. 23 24 record
. 25 MS. NADER: Say your name, please, for the

MR. RIVEST: Mike Rivest of EDL.
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• 64 1 MR. JONES: Well, Earl Jones here. And of 2 course, Mike, you are right about the cost data, but am 3 I not right andplease correctme if I am not, that the 4 assumptions which underlie the strawmanhere, inthe, 5 well, it is intheANOPR as well, about where the 6 standardmight endup. Is that not basedon some 7 notion ofwhat theMEF performance, that we have today 8 might yield? 9 MR. RIVEST: There is no reliance at all on 10 the data tested. It is allbasedon the data submittal 11 from

-- members. 12 MR. JONES: Just on the cost verus the 13 efficiency? 14 MR. RIVEST: Right. 15 MR. BERRINGER: Right. And theyhave also 16 seen results. 17 MR. RIVEST:

-- the Department was trying to 18 do with this testing is to understandwhat, where the 19 market is currentlyas opposedto incremental cost for 20 achieving these levels. 21 MS. NADER: Okay. Yes, Steve? 22 MR. NADEL: I had a secondquestion, which 23 relates to the three options you set forth as possible 24 strawmen, ifyou will. Has the Department looked into 25 at all with legal counsel, the question of iftheydo a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 65 

### 1 two tier standard, an initial tier, that takes effect 2 three year, whethertheperiodbetweenthose two 3 

### standards has tobe five years orwhether there are 4 options to, because you arepromulgatingthemat the 5 same time, theperiodcouldbe narrowed? 6 MR. BERRINGER: I will lookto GeneMargolis 7 to see if 8 MR. MARGOLIS: We have not lookedat whether 9 theperiodcanbe less than five years. 10 MR. NADEL: I would suggest that ifyoudo 11 want seriouslyconsiderthat option, that is a very 12 important issue, at least from our opinion. The waywe 13 see it, the schedule keeps slipping, the latest 

### 14 schedule youpublish isj you hope tohave a final rule 15 in September, which ismultiplemonths from what you 16 just saida few weeks ago. That, therefore, ifwe did 17 a two tier standard, effectivelythe secondtier 18 wouldn't go into effect until 2009, assuming youwere 19 meet your schedule. And that seemsmuch too late, I 20 think, basically, unless there are ways to narrow it 21 down, the schedule from ourpoint ofview. These 22 delays that DOE havebasically, inour opinion, ruled 23 out that two tieredoption. 24 MS. NADER: Thankyou. 25 

### I am concernedabout our time situation.
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• 66 1 There is a lot of work yet to be done in this area. My 2 question to you is whether we have burning issues that 3 need to be covered right now? I see a couple of 4 people, okay. Terry? 5 MR. THIELE: Well, I guess my question, Terry 6 Thiele, frigidaire, my question is what the Department 7 expects to get out of the workshop. If you want to 8 check the boxes on having covered somany topics, 9 without necessarily getting a full discussion, then we 10 canmove on ahead. But, I suspect that a lot of the 11 participants here, that these are material issues that 12 if you want to bedding of the issue, we take the time 13 to vent the issue
. 

### 14 I just want to follow up though, a question 15 to clarify. Did I understandADL correctly to say that 16 the scenarios that were being proposed here as 17 strawmen, were based, were predicated upon manufacturer 18 data? That that was the source for those numbers? 19 MS. NADER: Name, please. 20 MR. RIVEST: Mike Rivest, for ADL. 21 What you said is sort of a broad statement. 22 I am not sure I understand what you mean by scenarios, 23 so letme 24 MR. THIELE: Well, just to clarify. The three 25 scenarios that the Department of Energy has proposed as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 67 1 the final possible outcome of the rulemaking with 2 percentages for different tiers. 3 MR. RIVEST: My, that is just too general a 4 statement to say that. All I wanted to saywas that 5 the data submittal, the cost data, and the energy 6 efficiency numbers were based on the data submittedby 7 manufacturers. To generate the scenarios, there is a 8 whole slew of assumptions that have nothing to do with 9 the manufacturer data submittal. 10 MR. THIELE: Okay. That was the 11 clarification I wanted. Thank you. 12 MR. BERRINGER: Thank you. 13 MS. NADER: Thank you. I saw another hand 14 over here. 15 MR. NEAL: This is Chad Neal from Staber 16 Industries. 17 We are just looking for a simple solution to 18 an agreeable number for energy factors, so that the 19 consumer can go into a store and they want to how 20 energy efficient Washer Ais verus Washer B, at doing a 21 standard load of laundry. And we are just looking for, 22 if the standard load is seven pounds as you test, 23 simply count the gallons of water, how much energy it 24 is to heat that hot water, and how much energy to 25 washer's operatingmotor is using. And that is going
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• 68 1 tobe a number for every singlewasher. How energy 2 efficient is it at doing an average test load? And 3 that wouldbe themost agreeable number that consumers 4 could relate everything equally. 5 MS. NADER: Okay. 6 MR. JONES: Earl Jones. 7 The onlyproblemwith the request for 8 simplicity, is this is a regulatoryproceeding. And 9 that is something of an oxymoron, I guess. 10 Itmaybe worth commenting that fortunately or 11 unfortunately, the way this is, thesemachines are 12 going to valued is based on a test procedure, which has 13 alreadyhave been determined. And that is a whole 

### 14 different can ofworms. And I don't know whether or 15 not you are going to get a lot of support for going 16 back to that one. So, I justmention that factor here. 17 MS. NADER: Gentleman at themike? 18 MR. GREGG: Tony Gregg, City ofAustin. 19 I justwant tobring up the issue of the 20 water factor analysis, I guess we are going to talk 21 about thatmore later, but I think that needs tobe one 22 of the factors considered inpart of the labeling 23 requirements, because consumers aremore in tune with 24 how many gallons of water a machine uses than how many 25 kilowatts orwhatever it uses. So, that needs tobe
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• 69 1 part of the analysis. 2 Secondly, as far as the scenarios, certainly 3 we would support a more stringent standardand earlier 4 date rather thandrawing it out for eightmore years, 5 whenwe aremanyyears pass when the rule shouldhave 6 been adopted already. 7 At thirdthing is sort of, you know, 8 ifthisprocess gets draggedout indefinitely, you 9 know, there is stillpossibilities that some of the 10 statesmight consider theirown independent standards. 11 So, I think itwouldbehoove us all to get a 12 national standardand get it at an earlierdate. 13 MS. NADER: Thankyou. 14 MR. JONES: Earl Jones. Is that a sentiment 15 ofwhat Texasmight do? Well, I understandthere are 16 some impediments that, not the least of which arejust 17 plain oldpolitics, at least inTexas. 18 You know, Bryan, I willjust one observation, 19 again, I am not surewhat yourpurpose was inputting 20 these out, but it seems tome that onebenefit that 21 theymight serve is at least inproviding some, I 22 guess, worse case, best case, dependingupon yourpoint 23 ofview. 24 MR. BERRINGER: Right
. 25 MR. JONES: As theproceedinggoes on. But,
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• 70 1 it seems tome that it is going to take a lot of work 2 in this rulemaking to get to the point ofmaking, 3 providing support, if you will, for anyone of these 4 solutions and that certainly is going to be true for, I 5 guess, what is the third scenario, if I am looking at 6 that right, the so called two phase approach. 7 I did want to have a question for the follow 8 up on Steve Nadel's and that was, youmay not have 9 looked, Gene, at the question of whether they had to be 10 five years. Have you looked at whether it can be a two 11 stagedperiodwith any kind of a lagbetween the two? 12 MR. NADEL: Isn't that, to you asking as far 13 as legally
. 14 MR. JONES: Yes. 15 MR. NADEL: And I think with refrigerators as 16 an example of the phase in, that a similar situation. 17 MS. NADER: Eugene Margolis for the record. 18 MR. MARGOLIS: I think refrigerators was the 19 three years, but I don't recall. We have not discussed 20 how many years we would consider whether it be, say a 21 lenient standard first and then go three, four or five 22 years for a more stringent standard. There has been no 23 discussion. 24 MR. JONES: So, there is no, I guess, can I 25 assume that since the Department put out that as a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 71 1 possibility, that the Department has determined that 2 that approach wouldbe lawful? 3 MR.'MARGOLIS: Yes. 4 MR. JONES: Okay. 5 MS. NADER: Thank you. 6 Otherburning comments? Yes? 7 MR. BEST: Richard Best, Whirlpool. 8 Just to comment on some of the issues here 

### 9 brought up in the last few minutes and particularly 10 relating to the MEF values and the generation of 11 databases for that. Several people commented it would 12 reallybe great if the manufacturers wouldjust supply 

### 13 these numbers. 

### I would say fromWhirlpool's view 14 point, we would not be in favor of that for a variety 15 of reasons. But, one in particular is the MEF numbers 16 that DOE, themselves, have generated through, you know, 17 contractors and such, do not seemto hold a lot of 18 credibility within this group. I am not sure coming 19 from five or tenmanufacturers that the data wouldbe 20 anymore credible. Andparticularly, with a standard 21 that none of us have, have a lot of experience with 22 other than a few trials and submitting sample database 23 here or there. 24 And the other sidepf it is basically it is a 25 real question of ifwe did that, where would all this
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• 72 1 data end up and what would it ultimatelybe used for 2 once it is published, model bymodel for everybody? 3 You know, and I guess lastly is we just have 4 better ways to use our resources at this time. And I 5 would suggest if somebody really thinks they want to 6 know the answer, they can go out and spend theirmoney 7 and do it. 8 MS. NADER: Thank you. 9 Anyone else? 10 (Pause.) 11 MS. NADER: Yes. 12 MR. MARTIN: Michael Martin. 13 I would like to have a clarification of that, 14 you mean to say you haven't tested these things 15 yourself. You couldn't be saying that. 16 MR. BEST: I am saying that. In fact, we are 17 not going out andpulling ourmodels into our labs and 18 running all these tests and generating databases of 19 that nature. 20 We have some general ideas as to where our 21 products fall and such and were our competitors fall. 22 But, certainlywe are not spending a lot of time to get 23 an accurate number that wouldbe published andput out 24 for everyone to scrutinize and compare with
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• 73 

### 1 here, because I shouldn'tbe lumpingyou andG.E. 2 togetherhere. But, as I listentothis, I hear, 3 

### saying that DOE's stuffis all wrong. And you saying 4 we don't know what the answers are. If you don't know 5 what the answers are, you can't tellme that Bryan is 6 all wet. 7 MS. NADER: RichardBest for the record. 8 MR. BEST: Yes, what we are hearinghere is 9 that there are severalpeople inthe roomhere that are 10 questioningthe accuracyand you know, how great and 11 goodthis database is. 12 MR. MARTIN: Yes. And seems like 13 Whirlpool 14 

### MR. BEST: And at the same time askingus, 15 well, why don'twe supplythe data. 16 MR. MARTIN: Yes. 17 MR. BEST: The labthat testedthat is 18 probably similar inqualifications to the labs that 19 many of themanufacturers have. Why wouldwe be even 20 more crediblewhen all we give you is a sheet of 21 numbers, and you say, but I needto know exactlyhow 22 you got the numbers. We got thembythe test 23 procedure. Theygot theirs bythe test procedure. I 24 don't see the value added inus spending a lot ofour 25 

### resources to generate it. It is not reallyrelevant
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• 74 1 heremodel bymodel. 2 MS. NADER: Okay. One more question or 3 comment and then we have go tobreak. Eugene? 4 MR. MARGOLIS: Eugene Margolis, DOE. 5 This is response to the City ofAustin, which 6 saidthat theywouldthen, if DOE is still not issuing 7 standards that the City ofAustinmay in its wisdom 8 issue a standard. I wouldjust like to recall to them 9 that there is the issue ofpreexemption. And we can, 10 we in DOE considerthat the field is preexempted. 11 Congress didpreexempt this field. 12 MS. NADER: Okay. Michael? 13 MR. MARTIN: Yes, I, the similar discussions 14 arebeing going on in a lot of states, not just Texas. 15 And not talking about the city. But, our understanding 16 of theAct, is that not only is the preexemption, but 17 there is a means ofpetitioning for exemption from 18 preexemption. And that, in fact, when you have no 19 standard standards, we didpetition for exemption from 20 preexemption and so, it is tedious. We are 21 preexempted, but there is a way out also. 22 MR. MARGOLIS: You canpetition us for an 23 exemption frompreexemption. That procedure is not the 24 same procedure that was initially. And the original 25 procedure was, youmight saya straight forward
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• ---------------- ---- 75 1 procedure andnow in reading the language of Section 2 327, it ismuchmore difficult for the petitioner to 3 show enough that he couldwinhis case. 4 MR. MARTIN: We agreewiththat. 5 MR. MARGOLIS: Andthat is the reason I assume 6 no one has petitionedDOE for an exemption. 7 MS. NADER: Okay. I see two hands. Steve, 8 you go first, then you andthen

-- 

### 9 MR. BERRINGER: We have one other. 10 MS. NADER: And one other. All right, those 11 three andthenwe go tobreak. Thank you. 12 MR. ROSENSTOCK: Steve Rosenstock, EEI. 13 And I think ifMr. Margolis ismaking the 14 decision, then youmight as well save the paper right 15 now. 16 MR. MARTIN: I have beenworking withMr. 17 Margolis since themid'70s. 18 MS. NADER: Yes. 19 MR. STEVENS: Charlie Stevens from Oregon. 20 I justwantedtopoint out to Gene that as, 21 itmaybe a tough casebut as each yearpassing without 22 a standard, I think it gets a littleeasier tomake the 23 case. 24 MS. NADER: Thankyou. 

### 25 MR. MARTIN: We wouldhope then someone would
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• 76 1 petition DOE. 2 MS. NADER: Thank you. Okay, gentleman at the 3 mike. 4 MR. POPE: Ted Pope, Pacific Gas and 5 Electric. 6 Just a clarification for my benefit from DOE, 7 what was the reason that a normal proposal, one of the 8 three that I would have expected, which is a something, 9 I don't know, it is 40 or 45 percent, but the 10 economicallyjustified standard, you know, within three 11 years of promulgation, why wasn't that one of the 12 primary options? Does that make sense? 13 MR. BERRINGER: I think your question is that 14 is the first option as soon as, if the rule went into 15 effect. I thinkthat is sort of the first scenario, 16 wouldbe three years after the rule went in place, you 17 look at 2000, 2002, and then it would get in effect in 18 2005. So, I think that is sort of the first option. 19 MR. POPE: Except for you have, what tome 20 looks like a weaker than expected standard. It looks 21 like it is less than what is economicallyjustified 22 based onmy perusal of the documentation. 23 MR. JONES: Earl Jones, G.E. 24 Well, again, that raises the other question, 25 which Stevenmentioned before and again, the one we EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 77 1 will be getting to this afternoon and that is the, that 2 is the cost assumptions behind these numbers, which 3 presumablyjustifythese very stringent standards. It 4 is far from clear that these levels are justified, 5 based a real look at the cost andwhat the projected 6 savings actually are, or wouldbe. That is, I think, 7 another issue in which this rulemaking very likely 8 could fall apart. 9 MS. NADER: Thank you. 10 MR. RIVEST: I don't want to speak for my job, 11 but all the economic analysis has not been done. The 12 part which is the economic analysis onmanufacturers is 13 not in the record yet. So, it is an incomplete record
. 14 MS. NADER: Thank you. We are overdue for a 15 break. It is 10 minutes to 11, please take your break 16 and come backpromptly at five after 11. 17 (Whereupon, a short recess was taken.) 18 MS. NADER: All right. Let's begin. 19 MR. BERRINGER: We want to try and finish up 20 some of these topics. Some of the information like 21 quality of data, the MAISY and data access, we can 22 probably cover in this afternoon's presentations. Get 23 into that. 24 We do have a few odds and ends that just sort 25 of fall into the life cycle cost area, the warranty, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 78 1 repair warranty cost. I know that was one of your 2 things, comments, Glenn. At this point we do not have 3 any data showing that there is a difference between 4 warranty cost versus energy efficiency. Does anybody 5 have or know of any type of information that wouldbe 6 available. I think last workshop, I think it was 7 possibly G.E., I am not sure, if they had any 8 information on warranty cost, any type of information 9 like that. 10 MR. JONES: We will be following that with our 11 comments. 12 MR. BERRINGER: Okay. 13 MS. NADER: That was Earl Jones, G.E
. 14 Okay, yes, sir? 15 MR. SCHEEDE: Glenn Scheede again. 16 MS. NADER: Is thatmike on? 17 MR. SCHEEDE: Does that workbetter? 18 MS. NADER: Thank you. 19 MR. SCHEEDE: I didhear from, I believe it 20 was AHAM, indicated that there is a trade association 21 with plans retailers perhaps that might have 22 information on extendedwarranty and such agreements. 23 But, the otherpoint I would like tomake 24 is that the burden shouldnot be on interestedparties 25 in this proceeding, such as consumers toproduce the
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• 79 1 data. The burden shouldbe on the Department of Energy 2 to find the information. You are the ones that are 3 operatingwith our tax dollars, and it is your 4 responsibilityto compile, to come up with the data, 5 not mine. 6 MS. NADER: Thank you. 7 MR. BERRINGER: Okay. We have a couple of 8 topics in the life cycle cost. Also, the life of the 9 appliance used in the LCC. And was this another one? 10 Tomy knowledge there wasn't, I hadn't seen any 11 comments before as far a the life of the appliance. 12 MS. NADER: Glenn Scheede. 13 MR. SCHEEDE: You have

-- Glenn Scheede again
. 

### 14 You havemy comments that I believe you are 15 substantiallyoverstating the real useful life of 16 appliance to the individual, to the initial purchaser 17 of that appliance. However, I thought you were going 18 to go into that inmore detail with the life cycle 19 costs discussion this afternoon. 20 MR. BERRINGER: Well, do not have life cycle 21 costs on the agenda. I mean, it was presented at the 22 March workshop. 23 MR. SCHEEDE: Well, you havemy comments. I 24 noticed you narred them in the Federal Register notice, 

### 25 but you do have them. They are on the record, I
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• 80 1 believe, that I believe you are overstating the life of 2 the appliance and that you should be using information 3 on the time that the purchaser of that appliance is 4 likely to be using it, not what itmight be on a 5 secondarymarket. 6 MS. NADER: Thank you. 7 MR. BERRINGER: Why don't we just, we will 8 finish up this list. The AO 99 forecast analysis, I 9 think we will be using that data. I think we are 10 incorporating into it. 11 MR. MCMAHON: We can discuss that in the

-- 12 MR. BERRINGER: Okay. All right. 13 Quality data we can definitely address in 14 the, excessive data when we get into the marginal 15 energy rate, unless there are some specific, I mean, 16 any other analysis, unless there are specific comments 17 pertaining to analysis that has already been done. 18 MS. NADER: Does anyone have anything on that? 19 MR. BERRINGER: Okay. I know, Steve, this 20 was your topic, Steve Nadel, you had talked about, I 21 think relies, goes back to LCC and also, I think the 22 next couple of things here. Savings for detergent as 23 far as LCC. Do you have, again, I am sorry to ask for 24 information, we don't have, we have information stating 25 that there, you know, there is not, no change in
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• 81 1 detergents. I mean, as far as what might be for the 2 efficiency, for the high efficiency as far as offering 3 the same sort of price range as far as detergents. Do 4 you have or does anybody can suggest anything as far as 5 how we want to use the detergents or how theymight be 6 used or your concern as far as do you feel there is a 7 substantial difference in the price of detergents that 8 would warrant, to be included in the analysis, I guess 9 is my question? 10 MR. NADEL: Steve Nadel, ACEEE. 11 The point I was making was not is there a 12 substantial difference in the relative cost of the 13 detergents. The point I was making that a number of 14 surveys seemto have found that when people purchase 15 the high efficiencywashers, basically the HAxis 16 machines at this point in the surveys I have seen, some 17 of them use the same amount of detergent. But, some of 18 themuse less detergent. And I believe in the Bern 19 Study, and I believe, Charlie, correct me if I am 20 wrong, that coming out of the Northwest there is some 21 survey data indicating how, what proportion of 22 consumers use less detergent and so on. 23 Likewise, I don't know, Ed, has PG&E ever 24 done a survey? 25 MR. NADEL: Okay. So, basically I was EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 82 1 arguing that there are some objective data sources that 2 DOE shoulduse and that that is very important, you 3 know. If Proctor and Gamble, so far fromwhat I have 4 seen, theyhavemade statements that theydon't think 5 there are, iftheyhave any specificdata on actual 6 consumers, I wouldbe very interestedin seeing that as 7 well. But, DOE shouldcollect the available data. 8 They alreadyhave the Bern Study, I believe that the 9 Northwest will be submittingdata. Anybodywho has 10 data, they should submit it and DOE should look at the 11 data that is submitted, not the opinions, but the data 12 andbasedon that proceed. 13 MR. BERRINGER: Okay. Thank you. 14 MR. JONES: Earl Jones, G.E. 15 And to the extent that indeed such data is 16 made available, I would assume that the Department 17 would look at exactlywhat the data was. I mean, my 18 understanding, and those who know, I am sure will weigh 19 in, that to the extent the consumers have "used less" 20 detergent inthesemachine, it isbecause theyhaven't 21 had the detergent formulated for thosemachines. And 22 iftheyuse conventional detergents inthosemachines, 23 indeed, theyhave a disaster on theirhands. So, they 24 have learnedtouse less.- Themanufacturers ofboth 25 themachines and the detergent do not recommend any
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• 83 1 smaller cost per dose, if you will, but we are 2 recommending an equivalent dosage for thosemachines, 3 for which will have these, the same cost. There is no 4 evidence of any reduction in cost or consumer savings 5 associatedwith changing detergents for thesemachines. 6 And that is just the fact, not the

-- The anecdotal 7 information about what wrong detergent people are using 8 is simply not relevant. 9 MS. NADER: Thank you. At the mike? 10 MR. LINARD: Jack Linard, Unilever-HEP. 11 The Bern Kansas Studyhas been citedbecause 12 on average the amount of detergent usage declined from 13 Phase 1 to Phase 2. But, if you look at the data, 14 Phase 1 was an uncontrolled study in whichpeople used 15 the detergent they were normally using. And in fact, 16 dosages of up to one and a half to two cups were 17 reported. That is quite a bit higher than the 18 recommended dosage for almost any detergent these days. 19 There are products still on the market, however, which 20 have very high dosage recommendations. 21 Phase 2 is a muchmore controlled study. Most 22 of the people used one product and dosed it according 23 to package instructions. In fact, if you look at the 24 instances of under dosing from Phase 1 to Phase 2, it 25 decreased I think fairly significantly. So, in fact,
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• 84 

### 1 people were actuallydosingthe recommended amount of 2 the appropriate detergent for thatmachine. Yes, the 3 

### average came down simplybecausewe lost a lot of the 4 people dosing orreally overdosingtheproducts. 5 Earl is exactlycorrectwhen he talks about 6 you have tomake surewhat your study, your consumer 7 survey is reporting on. Ifpeople, in fact, do use 8 detergents which arehigher foaming then themachine 9 can actuallytolerate, you actuallyhave to cut the 10 dose tomake itworkright. But, what we need is 11 informationregardingwhat happens ifyou dose the 12 amount ofdetergent of a detergent that is specifically 13 formulated for thatmachine. And that is exactlywhat 14 

### the Bern Kansas Studydid. And inthat regard, if you 15 lookat it, peopledosed the right amount ofdetergent. 16 There was very little overdosing. Therewas actually 17 less under dosing. 18 

### MS. NADER: Thank you. Other input? Yes? 19 MR. NEAL: This is ChadNeal from Staber 20 Industries. 21 With our currentmachine with standard 22 detergent we are savingthe consumer on average 75 23 percent using onlya maximum of an ounce, on average. 24 And therefore, since that is a cost ofdoing laundry, 25 

### we are requestingthat be includedinthe lifecycle
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• 85 1 cost, since it is a cost ofdoing laundry. 2 MS. NADER: Thankyou. Anyone else? 3 MR. POPE: I have lost a train ofwhat topic 4 we were restricting ourselves tojust now. But, I am 5 wondering iftherehas peen some additional thought on 6 the valuingtheprolong life of clothing. You know, I 7 haven't heardmanypeople in this group argue that 8 these more efficient washers tendto cleanbetterand 9 if so, aren't there significant, in fact, most 10 significant impacts of these new washers is that the 11 clothing last longer. 12 MR. BERRINGER: Couldyou state your name, 13 please? 14 MR. POPE: Ted Pope, PacificGas and 15 Electric. 16 MR. BERRINGER: Thanks. 17 MS. NADER: Thankyou. Do you have.what you 18 needon the subject? 19 MR. BERRINGER: I thinkwe have onemore. 20 MS. NADER: Yes, sir? 21 MR. LINARD: JackLinard, again, Unilever. 22 With regard to reducing the level of a high 23 sudsing detergent, yet, we know you have to do that in 24 order to keep the suds profile down, but we have done 25 quite a number of studies which showthat your
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• 86 1 potentialperformance is considerably loweredwhen you 2 cut the level of detergentbeyondthat whichwe 3 recommend. And I think otherpeople inthepast 4 workshop inMarch have statedthe same thing, too. So, 5 yeah, ifyou do use less yourperformance is going to 6 go down. That is thebottomline. 7 MS. NADER: Thankyou. Okay. Shall we move on 8 to
-- Is there onemore? 9 MR. ECKMAN: I don't whether analytically 10 performance

-- 11 MS. NADER: Name, please. 12 MR. ECKMAN: Tom Eckman, Northwest Power 13 PlanningCouncil
. 

### 14 I don't know whether analyticallyperformance 15 goes down basedon soil chemistryin the clothes, but 16 from theperspective ofthe consumer acceptance. The 17 wash wise consumer satisfaction surveyclearly 18 indicatedthat evenwith less detergent use, the 19 consumers thought that their clothes, thought, 20 perceived, that their clothes were as clean ifnot 21 cleanerthan theyhadbefore. So, the analytics versus 22 consumer acceptance question isprobablybest dealt 23 with consumer surveys this afternoon, but I don't want 24 to leave the impressionthat consumers are unsatisfied 

### 25 with HAxismachines that arebeingpurchased.
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• 87 1 MS. NADER: Thankyou. Anyone else? 2 MR. BERRINGER: Okay. 3 MS. NADER: All right. Shall we talk about the 4 cost ofunits? 5 MR. BERRINGER: I thinkwas again, Steve, I 6 thinkyou had, I think it comesbackto you, you still 7 had a question as far as the differencebetweenthe 40 8 and 45 percent levels as far as the data was concerned. 9 MR. NADEL: Yes, we had some concerns about 10 the cost estimates that came to fromthe data for the 11 40 and 45 percent. Intheprevious workshop, we were 12 told, well, yes, we will be doing some additional 13 checkingon that andparticularlythe reverse 14 engineeringthatprovides some useful information. I 15 believe there is a presentationon that a little later 16 today. 17 MR. BERRINGER: Yes. 18 MR. NADEL: Itwouldbe fine topostpone this 19 discussion until then, hopefullythat analysis will 20 help answer these questions. 21 MR. BERRINGER: Okay. Thankyou. We will 22 make sure we address that. We will leave these on the 23 list ifwe don't, on theboard. 24 Retail markup, I think, was also yours, 25 Steve. It hadto do with, youhad a question about
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• 88 1 where, how itwas derived. Itwas alsopresentedat 2 the lastworkshop, so I thinkwe shouldprobably

-- 3 MR. NADEL: Again 4 MS. NADER: SteveNadel. 5 MR. NADEL: SteveNadel, ACEEE, again. 6 At the last workshop, there was a statement 7 on the record fromCircuit Cityregardingwhat they 8 perceivedtobe the typicalmarkups inthe industry 9 whichwere lower the values-by DOE. We note that in 10 the NOPR DOE, interpretedthose in terms of gross 11 markupversus netmarkup, but still came up with a 33 12 percentmarkupbased on the Circuit City and other 13 publicly available data, not the 40 percentmarkup that 

### 14 DOE used. So, I guess I have a question about given 15 that latest analysis, which shows a 33 percentmarkup 16 makes sense, what is the rationale for 40 percent 17 markup? But, the otherthing is, again, it is as.per 18 the, request for additional information this issue. 19 MS. NADER: Do we have any information on that 20 subject? 21 MR. RIVEST: What I can add, Steve, is the 22 data sources that were used inthatprevious analysis, 23 I believe, an additional year's data is available now. 24 And I willmake sure that that is incorporated in our 25 thinkinghere. That that includes consumer expenditure
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• 89 1 surveys, and current industrial reports, published 2 government sources. 3 MS. NADER: Thank you. 4 MR. BERRINGER: Okay. We have rebates, I 5 guess was added on to the other thing. And that maybe 6 something we can discuss this afternoon when we talk 7 about the utility analysis. 8 Is there anything else that we have missed, 9 that we feel need to discuss now? 10 Steve? 11 MR. ROSENSTOCK: Steve Rosenstock, EEI. 12 There was one thing about shipments, was that 

### 13 on the list, I am not sure which list we were working 

### 14 on. 

### 15 MR. BERRINGER: Yes, shipments will be 16 discussed later this afternoon. But, if you have 17 specific question, then we can go ahead. 18 MR. ROSENSTOCK: Oh, okay. I didn't know if 19 it was this morning or this afternoon. So, okay. Then 20 I will wait until this afternoon. 21 MR. BERRINGER: Okay. 22 MS. NADER: Okay. At themike? 23 MR. MODTLAND: Dave Modtland for Frigidaire 24 Home Products
. 25 Just a clarification on this last discussion
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• 90 1 on detergent usage. I think all the Bern studies and 2 the otherWashwise and other studies, when they are 3 talking about high efficiencies, those were all 4 relating to horizontal axis, where we were trying to 5 prevent that separation. So, I don't know if you can 6 apply some of the same things to high efficiency 7 products. 8 MS. NADER: Thank you. Anythingmore? 9 MR. BERRINGER: Any additional comments or 10 concerns? 11 Okay, well, if we have time, at the end of 12 the, near the end, we can come back and address or if 13 there is anything on the parking lot we want to come 14 back and look at this afternoon. 15 At this time, we about back on schedule here. 16 First, Steve Mariano, Arthur B. Little to talk about 17 the reverse engineering. 18 (Pause.) 19 PRESENTATION BY STEVE MARIANO: 20 MR. MARIANO: Okay. Can everybody hear okay? 21 Is that all right? 22 My name is Steve Mariano. Thank you, Bryan, 23 for introducingme. I am going to talk today about our 24 manufacturing cost analysis, specificallyour Phase 2, 

### 25 which was to look at differential cost for higher
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• 91 1 efficiencydesigns. 2 I have alreadypresented inthe past our 3 Phase 1 whichwas ourbaseline cost analysis. I am 4 going tojust touch on the objectives of what we were 5 doing in Phase 1, also recover some of our assumptions, 6 just tomake sure that we have got a goodpicture of 7 where we are with Phase 2. 8 Phase 1, primarilywe look at highvolume, 9 high sales volume, vertical axis washer, currently 10 available today. We actually looked at two units and 11 aggregatedthat data and created a baseline full 12 production costs for that technology or that currently 13 available system. And the purpose of doing that was 14 primarily so that we couldthenmake comparisons using 15 in our Phase 2 theWhirlpool prototype design that has 16 been in question as well as some commercially available 17 HAxis designs. 18 So, the Phase 1 was to key in establishing 19 themethodology andhow we were going to go about the 20 analysis as well as generating a differential cost. If 21 we were tojust to an analysis of a higher efficiency 22 designs, the Phase 2, without having that baseline, we 23 wouldn't reallybe comparing apples to apples. We 24 wouldbemaking comparisons to data thatmay have been 25 collecteddifferently, may have been generated
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• 92 

### 1 differently, andhaddifferent assumptions. So, that 2 was themain reason for doing a Phase 1 andreviewing 3 

### that first. 4 As I have statedalready, the Phase 2 5 objectivesherewere to evaluate theprototype 6 Whirlpool vertical axis, higher efficiencydesign. One 7 of the key aspects of this was tomaintain 8 confidentialityofdata. And that is why we are going 9 tobepresentinga lot ofthe results as differentials, 10 presentingranges ofdata, as well as presenting 11 percentage differences. And that is to keep that 12 confidentialityandnot topresent absolute numbers. 13 And also one of themain objectives is to 14 

### obtain comment from the stakeholders relative to this 15 analysis. 16 Actuallythis workhas been, we did a lot of 17 actual physical teardown and analysis backin late 18 spring, early summer and our analysis has been 

### 19 essentiallycomplete. We have done someminor 20 refinements, but the informationyouhave in your 21 packets today is our completedanalysis at thispoint. 22 

### We didtwo vertical axismachines. And that 23 is typicallythe descriptionwe used ofhow we would 24 characterizethose. We also looked at two HAxis 25 

### designs thatwere commercially available. We actually
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• 93 1 purchasedunits on the market. And then, finally, the 2 Whirlpool prototype design was provided to us. We had 3 access to that byWhirlpool. 4 To reiterate ourmanufacturing facility 5 assumptions, we have taken a typical practices plant. 6 We did visit and talkwith all of themanufacturers. 7 We have reviewed some of this information in Phase 1. 8 Typically, we looked at, well, one and a halfmillion 9 units a year and now there aremanufacturers that are 10 more or less. But, we use this as a ourbaseline. 11 Again, we aremaking comparisons of Phase 1 to Phase 2, 12 so we are keeping themanufacturing facility 13 assumptions the same. And that is why we did it this 14 way. 15 Again, you can see some of those are 16 Greenfield Investments, so it is complete investment to 17 manufacture these units and not a differential 18 investment. It wouldbe a differential from a complete 19 investment for vertical axis versus a complete 20 investment for some higher efficiency design. 21 Again, to reiterate some of our assumptions. 22 We are looking at full production costs in this 23 analysis. We have not considered SG&A, the cost 24 associatedwith R&D or interest payments that you might .25 be making. And there is a lot of variability in that
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• 94 

### 1 frommanufacturertomanufacturer. What we focused on 2 was justproductioncosts, whichwould include direct 3 

### labor andmaterials, as well as factory overhead. 4 Overheadassociatedwith operation ofa facility or 5 plant. 6 Again, just to show you some of the 7 assumptions we used, again, these are the same 8 assumptions we have used in Phase 1, sowe have carried 9 these forward into Phase 2, again, tomake an apples to 10 apples comparison. 11 We presentedthe datahere ina fashion that 12 allows, again, the confidentialityofdata. What we 13 have done is generateda cost range for these designs
. 14 

### The range has been generatedusing ourMonte Carlo 15 simulations as we did in Phase 1. Using those 16 parameters that I outlinedand I will show you some of 17 those againhere, justto reiteratewhat those were. 18 But, we generateda cost range. And as you can see the 19 verticalprototype iswell within the range of the 20 current HAxis units thatwe looked at. 21 These were the keyparameters that we usedin 22 theMonte Carlo simulations. Basically, what we have 23 done here ismade some variations along laborrate, 24 planoutput, the depreciation life on equipment, 25 

### investment. And so you can see thoseparameters, that
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• 95 1 is describes theprobabilitydistribution. I will show 2 you what thosemean as well as the range that we used 3 and if, for triangle distributions, themost likely 4 value. So, this was sort of the basis of our 5 simulation to**cre~te** that range. And this corresponds 6 to our Phase 1 analysis, whichwe did as well on these 7 sameparameters. 8 Just to explainwhat those distributions are. 9 Using a uniformdistribution, what we are saying there 10 is that the probability that the, in this case, the 11 labor rate is between 17 and 28 dollars is equal. That 12 it couldbe anywhere between there. We actually inthe 13 baseline used $24.00, but we are saying that it could 14 be anywhere in that range. While triangle 15 distribution, we are using a most likelyvalue, and 16 then a range around that. Andwhat that says is the 17 most likelyvalue is a highprobabilitythat that is 18 the number that ismost likely. And that that overall 19 range is possible. 20 To give you somemore information on our 21 analysis, rather thanjust give you a number, I wanted 22 to tryto explainwhat was driving some of those costs, 23 that differential costs. And I am going to give you 24 some information here, mostly on a percentage basis. 25 Again, toprotect the individualmanufacturers. We
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• 96 1 have also aggregatedthe HAxis designs as we haddone 2 before. We have costedthose individually, but thenby 3 using theMonte Carlo simulation, and taking averages, 

### 4 we have aggregatedthose together. And so, we are 5 going to showyou that here. 6 As you can see here, one of themajor 7 differentiaters orcost drivers inthehigher 8 efficiencydesigns, is the sophisticated controls they 9 use. And you can see that their cost grows as an 10 overallpercentage of the total cost to that product. 11 In some cases, nearlydouble thepercentage in the 12 vertical axis baselineunits thatwe looked at in Phase 

### 13 1 . 

### 14 We also generated investment estimates for 15 these designs. I think themajor thing to see here is 16 that they are all within the same range. Again, I 17 remind you that this is a Greenfield investment, so it 18 is not the cost to change over a factory, but it is a 19 cost tobuilda factory from scratch, basically. And 20 you can see that they fall withinthe same range for 21 those two, well, actually for the, all three of the 22 different design concepts. 23 Now to spitethose falling in the same range, 24 I am not sayingthat they are the same, and that the 

### 25 investment is the same. Our analysis is to show the
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• 97 

### 1 investment shifts intodifferent types ofmanufacturing 2 processes. FortheVaxis, there is a large of 3 

### percentage of themanufacturingwasmachine components, 4 while inthe aggregatedHaxis andVaxis prototypes, 5 that shift has changed. There is lessmachining 6 operationsbut there ismore eitherinjectionmolding 7 in one case ormore stamping andbending operations in 8 the other. So, reallyyou havejust shift in the 9 manufacturingprocesses for each of those designs. 10 And actuallythat is evidenced inthe average 11 depreciation life as well, where theyhave gone up for 12 HAxis andthe vertical axisprototype. Andthat is 13 primarilybecause the injectionmolding and stamping 14 

### equipment is of longer life. Now, our average 15 depreciation life isbasedonboththe tax life of 16 equipment as well as its useful life. We factoredboth 17 of those in. 18 Formore information on sort of a percentage 19 basis, this shows thepercentagebreakdown of 20 materials, direct labor andoverhead. It shows for 21 baselinevertical axis, we are looking at about 60 22 percent ofthe cost is inmaterials, that is 60 percent 23 of the full production cost. While inthe higher 24 efficiency, it averagesmore like 75percent. So it is 

### 25 a largerpercentage of the cost. So, it is not only
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• 98 

### 1 that theunit ismore expensive, thematerials are also 2 

### encompassing a greaterpercentage. Andmaterials 3 

### includebothrawmaterials as well as purchased 4 components. 5 With regard to overhead, we saw that the 6 average of the higher efficiencydesigns is a similar 7 overhead structure as thebaselinevertical axis 8 washers. Whichwould follow from themanufacturing 9 processes and operations andplant assumptions that we 10 havemade. It shouldn't change verymuch. 11 So, in summary, our Phase 2 results, we 12 looked at three, three units, two Haxis, commercially 13 availablemachines, as well as theWhirlpoolprototype. 14 

### We dida complete teardown ofthose and generated 15 manufacturingof full production costs, using the same 16 methodologywe did in Phase 1 and the same assumptions 17 that we have used in Phase 1 for manufacturing 18 processes, materials, etc. And then generatedthat 19 differential cost. And as I presentedin the range, if 20 you lookedat all ofthese high efficiencydesigns, 21 theyaverage from $75.00 to 190.00, using ourMonte 22 Carlo simulation. And thatwouldbe the differential 23 cost that we estimated. 24 Obviously, that cost is drivenbyproduct 25 features, andperformance andnot strictlyby
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• 99 1 efficiency. I wanted to iterate that what we have done 2 is taken actual units, actual product. We have not 3 tried to design a higher efficiencyunit. Have not 4 made any assumptions about what couldbe or can't be 5 removed from a product to defeature it. We have taken 6 exactlywhat exists today, and generated our cost 7 analysis around that, our differential cost. 8 So, if there is any questions, I will be 9 happy to answer those. 10 MR. BERRINGER: Questions? 11 MS. NADER: Yes? 12 MR. MORRIS: Wayne Morris withAHAM. 13 I would just like to go back, if I could, 14 Steve, to chart number 8 orpage 8, I think. It is the 15 bar graph of the, it is titled "Differential 16 Manufacturing Cost Estimates, the V-axis prototype 17 differential cost is well within the range of the H 18 axis designs. It looks like this one, if you are 19 looking for it. You have got it, okay, yes. 20 The title says that these are differential 21 cost, but the Vaxis prototype, is that a differential 22 cost or is that the absolute cost? 23 MR. MARIANO: No, that is a differential cost 24 over our Phase 1 baseline, aggregatedbaseline. 25 MR. MORRIS: Okay
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•----------------- ----- ----- 100 1 MS. NADER: Other questions? Yes. 2 MR. GOLDSTEIN: In doing this analysis of the 3 Whirlpool design, tell me if I am correct in assuming 4 that you had a chance to look at the product, but you 5 did not have a chance to look at the manufacturing 6 facility that Whirlpool was using to produce this? 7 MR. MARIANO: In our Phase 1 analysis, we have 8 actually visited all of the major manufacturers, five 9 to be exact. And reviewed theirmanufacturing 10 operations and discussedmanufacturingprocesses that 11 are typicallyused in theirplants. Then what we had 12 done is, for the vertical axis prototype, the Whirlpool· 13 prototype, we actually reviewed a prototype product, 

### 14 did tear down andbuilt cost estimates basedon actual, 15 on that actual product, with the assumption that it 16 wouldbe built in this Greenfield site that would use 17 similarmanufacturing processes as is currently 18 available in the industry. 

### 19 MR. 

### GOLDSTEIN: Okay. But, you had no 20 information on what manufacturingprocess or equipment 21 theymight have used to give you that prototype, is 22 that correct? 23 MR. MARIANO: Well, what we have done is we 24 have looked at manufacturingprocesses that wouldbe 25 typical and wouldbe needed tomake those components
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• 101 1 andhighvolume. And that is the assumptions we used. 2 MR. GOLDSTEIN: Okay. But, basedon your 3 judgement, notbasedonwhat theyhave done. 4 MR. MARIANO: We didnotbaseit onwhat they 5 actually, how they actuallymade thepart. No, we 6 based it onhow you would actuallymake it in 7 production. 8 MS. NADER: Other questions? 9 MR. NADEL: I have three questions. First, 10 with this graphhere. You showranges, when youdo a 11 sample of a thousandyou are going to get some real 12 extreme values. You are going to get a real tendency 13 toward themean. Does this show the full extremes or 14 is there some confidence, the 95 percent confidence, 15 and you eliminatedthe five percent. I amjust trying 16 to characterizethis distribution. 17 MR. MARIANO: Yes, no, we actuallytook, 18 typicallythe simulationswe ran, there are some 19 outliers, but theywould in the neighborhoodof less 20 than onepercent. Those were eliminated, so this does 21 represent a full range of cost that youwould see. 22 MR. NADEL: But, am I correct in assuming that 23 the values at the extreme top andbottomof each range 24 aremuch less likelythan the values toward to the 25 middle of the range?
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• 102 1 MR. MARIANO: Yes, I would, and I can show 2 you, in our Phase 1 analysis, the typical simulations 3 we ran, yes, you are getting somewhat of a bell shaped 4 curve. There isn't any sort of strange things going on 5 at the ends. I will saythat the range in the Haxis 6 is really an overlap of two simulations. And so, if 7 you were to take sort of right in themiddle of that, 8 itmaybe sort of twopeaks in that range rather than 9 one singlepeak. 10 MS. NADER: That question was from Steve 11 Nadel, for the record. Other questions? 12 MR. NADEL: I had three. 13 MS. NADER: Oh, you had three
. 

### 14 MR. NADEL: I had three questions. 15 A second and this gets to the issue that we 16 discussedbrieflyearlier, which is inpart this 17 analysis is designed tobe a check on the data that was 18 providedbyAHAM. How would you characterize these 19 models as percent savings relative to the baseline, 20 just so we can, supposedlythese are tobe used, to 21 correlate and to check them. 22 MR. MARIANO: I am not sure I understandwhat 23 you are asking. 24 MR. RIVEST: I understand the question. 25 Mike Rivest. Given the controversy and the
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• 103 1 results of testingwe have, I can't give you a definite 2 answer. And the controversyplaces itwell within the 3 range where itwouldn't bemeaningful to give you the 4 numbers. In otherwords, is this a 40 or 45? Because 5 I know that your concern is there. And I can't, we 6 reallycouldn't answer that question right now. 7 MR. GOLDSTEIN: Couldyou give us a range? 8 MR. RIVEST: I think I just did in a way. 9 MR. NADEL: Letme than ask 10 MR. RIVEST: I mean, it couldbe 35 or 45, but 11 it is, you know. 12 MR. NADEL: What are DOE andAOL's plans for 13 narrowing this down and allowingus tohave this data 14 as a comparison? What are youplanningondoing? Are 15 youjust saying, well, gee, we can't do it, and 16 therefore, there is no comparison? Orwhat are your 17 specificplans for providing

-- 18 MR. RIVEST: I just, I do want topoint out a 

### 19 differenceherebetweenthis andthe data that was 20 submittedandmake the statement that it is not, this 21 is not exactlycomparable data. Inthe data submittal 22 you hadmanufacturers whose production, annual 23 production ismuch lower**tha~** 1.4million. You also 24 hadonemanufacturer, at**~east.one** anyway, thathad 25 greater than that. So, I wouldn't anticipatedthat the
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• 104 1 range of the data submittal frommanufacturers wouldbe 2 greater than this. First caveat. 3 Also, this based on a Greenfield site. Now, 4 how one considers the interactions between existing 5 assets. How much of those are transferable, how many 6 of those are stranded, that will shift you, either one 7 way or the other. I mean, ifyou are going to·a 8 technologythat is very similar, thatmay help you. If 9 you are going to a technology that is radically 10 different, and you have recent investments and that the 11 existing technology, then your differential wouldbe 12 greater. 13 So, there isjust a caveat there. Before you 14 start preparing these as being one and the same. 

### 15 I think they are useful because, you know, 16 they are useful and not beingbenchmarked. The 17 inherent costliness ofthese designs. 18 MS. NADER: Did that answer your question? 

### 19 

### MR. NADEL: Not fully. We can have some 20 further discussions later and we can submit some 21 comments. But, I think is very important that this 22 whole process was based on collective data fromAHAM, 23 but then having some independent ways to check and 24 verify those. And I hope DOE is going to continue to 25 allow that to happen. Tojust say, well, gee, we can't
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• 105 1 reallydo that, I think is setting a verybad 2 precedent, particularly, or at least I interpret this 3 data, it tends to support the comments that we have 4 made, about the 45 percent cost are too high. We will 5 provide comments to that effect. 6 Final question. Your final conclusion talks 7 about performance and features are driving cost. And 8 you said, well, you haven't done anywork to say, what 9 features couldbe removed that do not affect 10 efficiency? I was wondering how complicatedwould it 11 be to tryto do that type of an analysis because, 12 again, gettingbackto the issue that we are trying to 13 provide a check on theAHAM data, we want to, theAHAM 14 data, as I understand it, isbased, is estimates of how 15 much it would cost tomeet certainbasic performance 16 energy levels without lots of extra bells and whistles, 17 to the extent these units have bells and whistles, that 18 inflates the cost. So, I was wondering how complicated 19 would itbe for you to estimate a cost without bells 20 and whistles? 21 MR. MARIANO: I think the issue there is, 22 thesemachines are, it is a systemdesign. And so, 23 there are constant tradeoffs that are beingmade. And 24 if you wanted to take features out, theremaybe 25 tradeoffs inperformance, maintainability, reliability,
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• 106 1 that I think are very difficult to undertake in a small 2 paper analysis. What needs to be done is actual 3 product needs to be built. It needs to be evaluated. 4 If you were to say I want to replace a component with a 5 less expensive one, that unit would have to be actually 6 built or that component wouldhave to be put into a 7 unit and actually tested to see what the impact would 8 be on performance. There wouldbe assessments of its 9 ieliability. In long term, will it last 10 or 12 or 13 10 years without failing? Or is it going to fail in two? 11 All of those issues, I thinkmake it a very complicated 12 thing to do. 13 MS. NADER: Okay
. The gentleman at the mike. 14 MR. GREGG: Tony Gregg, fromAustin. 15 MS. NADER: Say your name again, I couldn't 16 hear you. 17 MR. GREGG: Tony Gregg. 18 MS. NADER: Thank you. 19 MR. GREGG: Along the same line. I guess we 20 are not disclosingwhat machines were tested, is that 21 true? 22 MR. MARIANO: Yes. 23 MR. GREGG: Can we make a big assumption about 24 that or what? 25 MR. MARIANO: Other then the Whirlpool
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• 107 1 prototype. 2 MR. GREGG: But, on the other two, the Haxis 3 ones, we don't know which those are? 4 MR. MARIANO: Well, at this point I guess DOE 5 has decidednot to reveal that. 6 MR. GREGG: Okay. 7 MR. MARIANO: Andtheprimary reason for us 8 not doing that is to actually, we have actually torn 9 down product and evaluated its cost and generated cost 10 estimates for thatproduct. 11 MR. GREGG: Okay. 12 MR. MARIANO: The issue was isproviding that 13 to the industry. I think there is some question of 14 confidentialityof that information. It is not that 15 anybody else couldn't do it. Somebody else couldbuy a 16 machine. Manufacturers have data on their competitors, 17 have done this, but it isbeing, actuallyproviding 18 that information to everyone is an issue. 

### 19 MR. GREGG: Okay. Related to that, though, 20 were the Haxismachines and this relates to the 21 previous question, similar in feature to the vertical 22 axis machines? Because, I mean, most of the Haxis 23 machines, I assume you tested, are basically fully 24 featured models, with extra controls and stuff like 25 that for all the different cycles.
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• 108 1 MR. MARIANO: Yes. 2 MR. GREGG: Was that an impact at all in the 3 price differential? 4 MR. MARIANO: Yes. 5 MR. GREGG: Because they hadmore features 6 than the vertical axis machine. 7 MR. MARIANO: That is correct. The units that 8 we evaluatedwere either commercially available or the 9 Whirlpool prototype that hadmore product features than 10 was sort of typically what you would expect in the 11 standardwashing machine or the baseline that we looked 12 at. They definitely hadmore features than the 13 baseline. The reason we did that is we couldn't create 14 a unit. 15 MR. GREGG: Right. 16 MR. MARIANO: So, what we did was tookunits 17 that were currently available, that were higher 18 efficiency, they also had some additional features. 19 MR. GREGG: And the answer is still the same, 20 you can't determine what the difference between a unit 21 without all of those features and one with all those 22 features would be without reconstructing it or trying 23 to modify it? 24 25 MR. MARIANO: Right. In essence, if you are asking me to say can I create a defeatured version of
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• 109 1 these, there is a considerable amount of effort and it 

### 2 is complicated. I can't say that the range of data 3 that we have seen, say for the Haxis, represents 4 different features in the product. And different 5 levels of features. And so, you can't say that that 6 range canbe somewhat attributedto features. 7 MR. GREGG: Okay. And one final thing. Just 8 inmanufacturing in general, and this wasn't probably 9 part of the, your analysis, but over time, as a new 10 product such an Haxis is introduced, wouldn't there be 11 a declining cost inproducing that product as the 12 manufacturers found ways to produce a component 13 cheaper, mass producing in larger quantities. Andmay 14 also not be reflected in this analysis? 15 MR. MARIANO: There is a element of that. Our 16 approach was to look at high volume, standard 17 manufacturingprocesses that are used today and scale, 18 relatively relied scale. So, we did try to accommodate 19 for that. In otherwords we weren't costing a low 20 volume product in comparing it to a high volume 21 vertical axis baseline. We were looking at high volume 22 production of these. 23 If you are asking can a manufacturer through 24 a learning curve, in a product, reduce cost, yes, that 25 is done and it is primarilydriven though, through
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• 110 1 

### design changes, lower costdesignoptions and/or 2 product of component developments that are really 3 

### driving those things ratherthan efficiencies and 4 manufacturingprocess. I would saythat wouldhave a 5 less of an impact onthesenumbers. 

### 6 MR. GREGG: Okay. Thank you. 7 MS. NADER: Steve? 8 MR. ROSENSTOCK: Steve Rosenstock, Edison 9 Electric Institute. 10 But, it also seemsbasedon your analysis 11 that a key component is the sophisticatedcontrols, is 12 theprimary, obviously istheprimaryreason for the 13 incremental cost. So, those can'tbe defeatured 14 

### without ruiningthe equipment. That is what it seems 15 like, just kindof looking at the data that youhave 16 presented. I mean, it is the controls, and youneed 17 those controls for the higher efficiency. That is what 18 it seems like. 19 MR. MARIANO: I would, I can't really saythat 20 you needthose controls for the higher efficiency. I 21 know that youneedthose controls for thisproduct to 22 performas it does. Whether those are controls 23 specificallyfor efficiency, orwhether they 24 accommodate certainperformance features that their 25 

### customer looks for inthatproduct, it ishardto
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• 111 1 separate those. 2 MR. ROSENSTOCK: Okay
. 3 MR. MARIANO: But, these products built the 4 way they are, need those controls. 5 MR. ROSENSTOCK: Okay. Steve Rosenstock. 6 But, one of the end results of the more 7 sophisticated controls is a higher efficiency. Would 8 you accept that? 9 MR. MARIANO: Yes. That is part of it. 10 MR. ROSENSTOCK: Okay. 11 MS. NADER: Other questions. 12 MR. KESSLER: I have got a question. You did 13 such a fine job on your earlier analysis, where you 14 took the baseline vertical axis unit. 15 MS. NADER: Excuseme, give us your name. 16 MR. KESSLER: Alan Kessler, Amana. 17 Broken down labor, overhead andmaterial and 18 the assumptions, and why aren't we doing that for these 19 models that we know? 20 MR. MARIANO: Primarilythemain driverbehind 21 this is, well, one of the reasons we didn't want to, we 22 couldn't go into as much detail, is because of the 23 nature of these products. Primarily, the vertical axis 24 prototype. Being able to do that made it very 

### 25 difficult for us to say, expose a lot of that
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• 112 1 information about what components or sub assemblies 2 were driving the cost. And so, in essence, ifwe 3 couldn't do that for the vertical axis prototype, we 4 felt that ifwe did for the Haxis, you are not really 5 getting a good comparison of those. And that is the 6 reason we did the Haxis, was to compare it to, to give 7 you sort a comparison of this prototype. 8 MS. NADER: Other questions? 9 (Pause.) 10 MS. NADER: No further questions? Thank you, 11 Steve. 12 Thank you, all of you for your hardworkthis 13 morning. We will take anhourbreak. Does everyone 14 know where to find lunch? Does anyone need information 15 about where to get lunch? Okay. You are oldhands at 16 this. 17 We will breaknow andpleasebeback exactly 18 at one. We have a full agenda this afternoon as well. 19 Enjoy your lunch. 20 (Whereupon, at 11:55 a.m., themeetingwas 21 recessed, to reconvene at 1:00 p.m., this same day, 22 Tuesday, December 15, 1998.)

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• 113 1 

### A F T E R N0 0 N S E S S I 0 N 

### 2 (1:14 P.M.) 3 MS. NADER: Thank you verymuch for your hard 4 work this morning. You have all worked hard and well 5 together. We are going to go ahead and start our 6 presentations, even though there are a few people who 7 haven't come back yet. 8 Thanks verymuch to those of you who did come 9 back on time. 

### 10 The first person who is going tomake a 11 presentation is JimMcMahon. Jim, are you ready? 12 (Pause.) 13 MS. NADER: Okay. JimMcMahon, Consumer 14 Marginal Energy Rates. 15 PRESENTATION BY JIMMCMAHON: 16 MR. MCMAHON: Thank you, good afternoon. I am 17 JimMcMahon from Lawrence BerkeleyNational Laboratory. 18 I am going to give you a briefpresentation on the 19 methodology for consumermarginal energy rates. 20 The first definitions, what are average and 21 marginally rates? Average rates, average prices as 22 used in the past, are the ratio of the total annual 23 energybill, by the total annual energy use. This can 24 apply to whatever energy source, whether it is electric 

### 25 or gas, residential or commercial. Historicallythis
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• 114 1 has beenthe data reportedbyutilities, that is total 2 revenues received fromresidential customers, divided 3 

### byelectricity sales for residential customers, for 4 example: 5 Marginal prices on the otherhand, are the 6 change inthebill dividedbythe change inthe energy 7 consumption. 8 Now, down at thebottom, point number three, 9 the differencebetweenmarginal and average we are 10 defining as epsilon. Some of the folks backat LBNL 11 are using shorthandtouse this as thepercent 12 differencebetweenmarginal and averageprice. It is 13 just an easierway to think about it for those folks 14 who are usedto thinking about averageprices. 15 

### What is changing? Previouslythe consumer 16 energybill savings andwe are now talking about the 17 life cycle cost calculation, were estimatedusing 18 average energyprices. Forclothes washers, those were 19 national average value, something like eight centsper 20 kilowatt hour for electricity. 21 The new approach isto estimate consumer 22 marginal energyrates in calculatingthe energybill 23 savings. So, these are estimatedbythe household. 24 The energy savings willbe valuedat themargin, not at 

### 25 the average. And it is important to know thatwhen you
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• 115 1 go to marginal rates, these are household specific. It 2 depends upon the consumption of the household, and the 3 specific tariff or rate structure that the household is 4 facing. 5 What is themethodology? We are going to 6 obtain a database of individual customers or building, 7 in fact, we have already done that. And I will tell 8 you in a moment what the databases are. We are going 9 to design a nationally represented sample of customers. 10 I will tell you what I have said in the other workshops 11 to date, we do not plan to simulate every house in the 12 country. That would be practically impossible. But, 13 we do intend to get a sample that does represent 14 different regions, different types of household, 15 different types of consumer demographics and behaviors, 16 so that we can account for those differences. 17 We have inmind something on the order of the 18 size of the RECS sample, which is several thousand 19 households and is a nationally represented sample. 20 But, this will be a new sample. 21 Thirdbullet, we are going to collect tariff 22 information. By that I mean, we are going to gather 23 information of the specific rates schedules that 24 customers face in differept utilities around the 25 country. That is already underway
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• 116 1 We are going to develop and test the method 2 for matching the tariffs with the customers. There is 3 no existing data set that has both a population of 4 individual customers with their energy using 5 characteristics and of the tariffs that they are 6 paying. So, this is new work. 7 Finally, we will calculate the marginal rates 8 for the sample of buildings and use that sample of 9 estimates of the total population for the country. 10 Before I go on to the next slide, are there 11 questions on themethodology at this point? 12 MS. NADER: Name, please? 13 MR. SCHEEDE: Glenn Scheede
. 14 Can you tell us, do I gather from this that 15 you sort of dropped the RECS data from your new 16 procedure now? Is RECS no longer in this, the EI RECS 17 survey? 18 MR. MCMAHON: Our plan right now is to in the 19 future do less cost from a new national sample of 20 buildings, not from the RECS and the reason for that is 21 that the RECS households are not identified in fine of 22 geographic detail for us to assign them to utilities 23 and to rate schedules. It wouldbe nice if we could 24 simply assignmarginal rates to the RECS households, 25 but, there is no simple to do that.
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• 117 1 As a caveat, some ofthe RECS surveys do have 2 specificmonthbymonth utilitiesbills for the 3 households. And we are looking at those to see ifwe 4 canpull out of those somemarginal rates. And thenwe 5 wouldhave the RECS sample as another national sample 6 to look at. But, I am not sure whether that willbe 7 successful or not. 8 MR. SCHEEDE: Okay. Couldyou tell us either 9 now or whenever it is appropriate in your presentation 10 ofwhat informationyou are going tomake available to 11 interestedparties, concerning all the databases you 12 have got, includingthe commercial database that you 13 arebuying. And where do we get informationto know 

### 14 whether that, whether those data are representative, 15 valid and reliable? 16 MR. MCMAHON: Acouple of slides fromnow, I 17 am going to list the databases. I will be happyto 18 answer your questions about that. 

### 19 MR. SCHEEDE: Thank you. 20 MR. ROSENSTOCK: Steve Rosenstock, Edison 21 Electric Institute. 22 Part ofthis also is that you, since for both 23 gas and electricityon the commercial industrial side, 24 that theymight be, you know, choosing different 25 suppliers for different terms for their generation or
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• 118 1 production, depending on the fuel source for the 2 portion of thebill. You are going to be, part of 3 this effort is to get information from the customers, 4 correct? Will some of the data be from the customers 5 as well, just as a backup? 6 MR. MCMAHON: In the long term, that is 7 correct. And we have a couple of short term 8 deliverables. Betweennow and February, which is when 9 I promisedto complete this work, we expect to get 10 information from utilities. We do understand that with 11 restructuring, there are other suppliers coming into 12 the market. Right now there have small market share, 13 but they are gaining. The intent is that in the long 14 term, the Energy InformationAdministration surveys, 15 both for residential and commercial, will gatherprice 16 information or ratherbill information directly from 17 the individual customers, so that whoever their 18 supplier is, whether it is a utility or someone else, 19 we will have that information. 20 MR. ROSENSTOCK: Steve Rosenstock. I think 21 that is a good approach to use because of the fact 22 that, you know, withmultiple suppliers out there and 23 especiallydifferent terms of contracts, that will be 24 a veryuseful piece, data set to have
. 25 MS. NADER: Glenn?
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• 119 1 MR. SCHEEDE: Glenn Scheede, again. 2 Does this mean that DOE is committing to use 3 marginal energy rates in the future steps in this 4 rulemaking? I noticed in theANOPR, theyhave not used 5 marginal energyrates. Does this mean they will from 6 now on? 7 MR. MCMAHON: My understanding is that the 8 Department intends to usemarginal rates in the next 9 round of life cycle cost. 10 Bryan? 11 MR. BERRINGER: That is correct, based on the 12 AdvisoryCommittee recommendations we will be using 13 marginal energy rates. 14 MR. BALDUCCI: Anthony Balducci withNEMA. 15 Along those same lines withmarginal rates, 16 are they going tobe used across all the rulemaking 17 that is inprocess? Specifically, ballast. 18 MS. NADER: Couldyou repeat the question, 19 please? 20 MR. BALDUCCI: Formarginal energyrates, 21 people havementioned commercial as well as industrial 22 and residential. I know this is onlyresidential. Is 23 DOE planning onusingmarginal energy rates for the 24 other rulemakings, specificallythe ballast rulemaking? 

### 25 MR. MARGOLIS: This is Eugene Margolis. We
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• 120 1 are here on clothes washers. 2 MR. BALDUCCI: I understand that, Gene. 3 MR. MARGOLIS: And that is what

-- 4 MR. BALDUCCI: But, this is more 5 MR. MARGOLIS: But, the answer was yes for 6 clothes washers. When we go to another rulemaking, 7 then we will talk about the products at that time. 8 MR. BALDUCCI: Well, I amjust, this ismore 9 of a general across the boardthing. It is not product 10 specificmarginal energy rates. That is why I have 11 that concern. I think the Department shouldbe 12 consistent in their approaches with each rulemaking. 13 And that ismy only comment. 

### 14 MR. MARGOLIS: Okay. Thank you for your 15 comment. 

### 16 MR. MCMAHON: Okay. The next slide is how do 17 we extract the consumermarginal energy rates. Each 18 sample building has a baseline energy use and canbe 19 assigned a tariff. We will calculatemonthly energy 20 bills for each of these households. These are 21 baseline, without new standards. Then calculate annual 22 energy savings due to standards. Desegregate those 23 annual savings across themonth, this is going tobe 24 very important for some productsmore than others. At 

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• 121 1 seasonalityinclothes washerusage, but we intendto 2 research that
. 3 

### Calculatethemonthly energybills for the 4 sample, with standards, andhave a parathetical here. 5 We are aware that some customers havehourlytime of 6 use rates. It is a very small sample of the 7 population, but there are some. Inthose cases, we 8 will needto go to somethingmore likehourlyprofiles 9 of energyconsumption. And we areplanningto do that 10 where necessary. 11 Finally, we will use the samplemarginal 12 rates as estimates of the nationalmarginal and 13 calculatethebill savings
. 14 

### The questionhas arisen about the data 15 sources. We havepurchaseda data source, a database 16 calledMAISY, M-A-I-S-Y. You can find information on 17 the web atwwww.Maisy.com. This is not a commercial, 18 justtryingtoprovide the information. This is a data 19 set that was developedbyJackson andAssociates in 20 North Carolina. It comprises over 90,000 commercial 21 customers and 60,000 residential customers. These are 22 stratifiedby state. And itprovides energyrelated 23 customer characteristics. There are also household 24 loadprofiles in this database. 25 

### The database was builtupbyJackson
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• 122 1 Associates startingwith the EIA surveys, the RECS and 2 CBET surveys. And then bringing in city and county 3 databases as well as census information. And there is 4 some information on the web site. And we can refer you 5 to JacksonAssociates for more information. And the 6 TSO will describe how we utilized this data. 7 The second set of

-- Glenn? 8 MR. SCHEEDE: I visited the MAISY website and 9 there is relatively little information there that would 10 give one comfort in knowing how the data are really, 11 where they come from and again, their 12 representativeness, whether, the reliability andhow 13 they are put together. There is very little 14 information there. So, what you wouldbe forcing 15 interestedparties into doing is buying the database. 16 And I don't think that is an acceptable way for DOE to 17 proceed. If DOE plans on using this data, they should 18 make it available in detail, so it canbe reviewedby 19 interestedparties, particularlythose of us who don't 20 have access to taxpayer dollars, to fund our activities 21 or to, all the money that Earl Jones has. 22 MR. MCMAHON: Let me respond to that. 23 MR. JONES: Thank you. I hope, Jim, you 24 will respond on G.E., too. 25 MR. MCMAHON: I am not going to respond on
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• 123 1 behalf of Earl. I don't know howmuchmoneyhe has. 2 On behalf ofwhywe did this, inthepast we 3 have usedthe RECS data, which you are familiar with, 4 Glenn, and you have your own concerns about. Given the 5 importance of trying to get this rulemaking out without 6 undue delay, it didnot seemwise tohave the 7 Government devise a national surveythat is 10 times as 8 big as the existingone andto go out anddo that on 9 publicdollars, when there is a commercial product that 10 is available, that is usedby a very large number of 11 utilities. And I can give you a customer list, ifyou 12 would like, ofpeoplewho are using this database. 13 It seemedprudent topurchase this database 14 as a commercial product. But, since it is a commercial 15 product, I can't give the entire database to you, 16 obviously. It is a commercialproduct. So, I am sorry 17 that we can't do that, but I am happy to answer your 18 questions about the contents ofthe database. I just 19 can't give away a free commercialproduct that they 20 have for sale. 21 Earl, did you want to respond on yourbehalf? 22 MR. JONES: Well, actually, no, actually, I 23 don't. My money is all committed. 24 But, I didwantjustpursue this particular 25 question on the statement. Now, if indeed DOE is going
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• 124 1 tobe relyingupon these data, is there no obligation 2 tomake it available? 3 MR. MCMAHON: I will turn to DOE for the 4 answer to that. 5 MR. MARGOLIS: We have not investigatedthat. 6 We will and reportbackat the next committee. 7 MR. JONES: Yes. Thankyou, Gene. Because I 8 do understandJim's point about not wanting to reinvent 9 the wheel ifthere is a gooddata source out there. 10 But, bythe same token, ifthat is what you are 11 adopting, then it seems tome that you really should 12 make it available. 13 And that reallybrings backthe other 14 question I wantedto askBryan. It ismy understanding 15 that therewas a recommendation for a, well, at least 16 tome, a more simple, simplifiedapproach to this 17 issue. Whichwas proposedby theAdvisoryCommittee. 18 Which I didn't understandto involvepulling together a 19 new data source here. But, a very simpleway of taking 20 out fixed costs. And I guessmy question is what is 21 the, where does that standinthis rulemaking? What 22 are youmaking ofthat recommendation? Is this an 23 alternative that recommendation or indeedtheymake two 24 recommendations? 25 MR. BERRINGER: Basedon theAdvisory
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• 125 1 Committee, their recommendation, that came from Dan, 2 was to use the marginal energy rates, which are being 3 developed for this rulemaking. The fixed costs were 4 talked about in the letter that Dan Ranker had 5 addressed and we were not going to pursue without fixed 6 cost. We are looking at, as far as marginal energy 7 rates, some other possible alternatives for 8 information. 9 MR. MCMAHON: If I could supplement that 10 answer? If I may. My understanding of what the 11 Advisory Committee recommended was that marginal energy 12 rates be used. And that the average less fixed costs 13 be used as a temporary stock gap until the marginal 14 rates were developed. 15 MR. JONES: Okay. Then that leads tomy next 16 question, then. 17 MR. MCMAHON: So, the intention is to not 18 waste resources on the temporary stock gap, but to go 19 and solve the problem. 20 MR. JONES: Okay. I understand. What 21 process, what was then used to come up with the life 22 cycle costs here? 23 MR. BERRINGER: Full cost. 24 25 MR. JONES: Full cost. So, you went with, you didn't go with the temporary stock gap either, then,
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• 126 1 for that purpose? 2 MR. MCMAHON: In**th1~** March workshop, both the 3 average price and the average less fixed were 4 presented. In the documentation here, only the 5 average was presentedbecause in the interim the 6 Department had decided that they were not going to use 7 the average minus fixed in future. 8 MR. JONES: So, when will we have an 9 opportunity to see these numbers recasted with data, 10 better data from one source or another, or calculate 11 one way or another? 12 MR. MCMAHON: When the marginal rates are 13 developed, these will be fed into life cycle cost for 14 the next set of calculations. 15 MR. JONES: And that, and that, we have no 16 timetable for that, is what you are saying? 17 MR. MCMAHON: Bryan has a timetable. 18 MR. JONES: Oh. 19 MR. BERRINGER: Yes, we are looking at in the 20 March time frame, getting the results as far as 21 marginal energy rates, so, you know, in the, probably a 22 data will be available like sayApril, May time frame. 23 24 25 MR. JONES: Okay. Thank you. MR. BERRINGER: But, that is our next step to
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• 127 1 MR. MCMAHON: If I could address the issue of 2 the availabilityof data. One thing that we thought 3 about doing andwe have hadpreliminary conversations 4 with JacksonAssociates about this, is to develop a 5 national subset, so not his full data set of 60,000 6 households, but rather something like five to ten 7 thousandhouseholds that are a national sample, without 8 all of the detail that is inhis data set, but only the 9 relevant variables used in this rulemaking andmake 10 that available. That is, I can'tpromise yet that we 11 are going to do that, but we are innegotiations to 12 make that available. 

### 13 MS. NADER: Okay
. At themike? 14 MR. NEAL: Yes, this was the previous slide, 15 you statedabout whethei seasonhad anything to with 16 the normal load. I would think that itmay from a 17 practical standpoint being that you wear heavier 18 clothing in a coldclimate or colder season. So, that 19 maybe a factor. 

### 20 MR. MCMAHON: Okay. Are you aware of any 21 data sources on that? 

### 22 23 

### 24 25 MR. NEAL: No, I am not. MS. NADER: Couldwe have your name, please? MR. NEAL: BrianNeal. MR. ECKMAN: Tom Eckman, Northwest Power
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• 128 1 Plant Council. 

### 2 We have got regional data at the hourly 3 level. 4 MS. NADER: Thank you. Steve Rosenstock. 5 MR. ROSENSTOCK: Steve Rosenstock, EEI. 6 Since MAISY is a commercial product, I mean, 7 it doesn't, it doesn't seem, I mean, if I was selling a 8 product, I wouldn't want DOE to give it to everybody 9 else, all the stakeholders. That is kind of you are 10 hurting your sales there. Maybe some extracts might be 11 of use, you know, that JacksonAssociates would agree 12 to, just to show some of the extracts for a limited 13 sample, that they are not, you know, giving away the 14 store as it were for their database. But, you know, 15 you were saying five or ten thousand, that is, that is 16 fine, it almost sounds like overkill just, I mean, I 17 would saywork with the vendor on that, that whatever 18 they feel comfortable with inproviding, I think is a, 19 wouldbe reasonable. Or you could also say, I don't 20 know, just if DOE here would have the complete set, 21 that people if theywanted to look at it here on site, 22 they couldn't obviously take away. They couldview it 23 or look at the database here, just for their, you know, 24 againpreserve confidentiality andthat way you are 

### 25 not, you know, no one is getting a free software
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• 129 1 product, basically. 2 Also I wantedto, I am gladMr. Jones brought 3 

### itup, interms ofusingthe average cost inthe 4 technical support document. TheAdvisoryCommittee, 5 you know, said, take out the fixed cost as an interim 6 step. And what concernsme is that inthe technical 7 support document as well as the announcement inthe 8 Federal Register, that since fixed cost were not taken 9 out, it, it gives the impression, it leads to, there 10 couldbe some vastlydifferent numbers that could 11 happenwhen you get theNOPR stage. I mean, we have 12 the conclusions here, what appeartobe conclusions. 13 And I don't want to, I want tomake sure that that 14 

### people realize that these arejustpreliminarynumbers 15 from a preliminaryanalysis, that NOPR numbers, the 16 final modifiedenergy factor, might be completely 17 differentbasedonthe new data that DOE is goingto 18 get. Have I mischaracterizedthat? 19 MR. BERRINGER: No. 20 

### MR. ROSENSTOCK: Thank you. 21 MR. SCHEEDE: Glenn Scheede, again. I just 22 wantedto disagree withMr. Rosenstock onbeingvery 23 comfortablewith data that happens tobe available from 24 a commercial source. There are lots ofproducts 25 

### available from commercial sources that are verygood.
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• 130 1 There are others that aren't worth a darn. Andjust 2 having you listpeople who have brought them, and I 3 recognize that is on theMAISY website. I have worked 

### 4 for lots of different organizations, who buy lots of 5 products, data products, some you use, some you don't. 6 But, you needtobe able to evaluate them. Andjust 7 sayingthey are commercialproduct, doesn't carryany 8 weight. You needto findout how the product was 9 developed. And I amjustnot nearly as comfortable 10 with saying, fine, let's grab this as Mr. Rosenstock 11 is. 12 MS. NADER: Thank you. 13 MR. JONES: Earl Jones, G.E. here
. 

### 14 Just to comment onboth, on two things. One, 15 it seems tome that Jim isproceeding down the right 16 roadby trying to come up with a, something from these 17 people who got data, that could fit the needs here and 18 bemade available. And then itwould seemalso that 19 you wouldbe in theposition, Jim, to explain or defend 20 or at least helpus betterunderstand exactlywhat was 21 inthere whenever the timemight come that we have 22 anothermeeting. 23 And the otherpoint was that havingdone 24 these calculations with the average costs inthere, I 25 guess I wanted, it raises questions and if one were EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 131 1 concerned about, let's say the bona fides of this 2 proceeding, which I am not, you would wonder why these 3 numbers were put in there. What is the objective of 4 doing that? I mean, you either are raising false 5 expectations or you are trying to leverage people into 6 a result which they are otherwise not prepared to 7 accept. I reallywould caution you to, against doing 8 that in the future and say, if you committedto a 9 process, which says you are going to take certain costs 10 out, then produce numbers which are more realistically 11 basedupon that commitment, as opposed to putting up 12 strawmen, which can only fuel controversy in this 13 rulemaking. I just don't understandwhy that was done. 14 MS. NADER: Thank you for those comments. I 15 thinkwe should let Jim continue his presentation and 16 see if some of the questions aren't answered in his 17 presentation. 18 Go ahead, Jim. 19 MR. MCMAHON: Okay. I was describing the 20 databases. The first one is the buildings database. 21 The second is the tariffs. We are gathering 22 information from several sources. We have perusedthe 23 websites of the trade associations that are listedhere 24 for the utilities. We have looked at commercial 25 vendors of data sets of tariffs. Public utility
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• - ------- ------------------- ------- 132 1 commissions have this information. It is very 2 laborious to go and retrieve it, but it does exist in 3 thepublic, inpubliclyaccessible form. And in some 4 cases we are contacting individual utilities. 5 The thirddata set ismonthlyenduse load 6 profiles. Whichwe are getting from thepublished 7 literature. There was quite a bit ofworkdone, 8 starting inthe 1970s and continuing in someplaces 9 today. And there are still some utilities studies 10 available. And I welcome the offers of data fromthe 11 Northwest and anywhere else. 12 Okay. Now letme comebacktothis issue of 13 averageminus fixed costs. This is not inyour 14 handout. It was somethingthat I put together this 15 morning. This is representation of estimates of 16 electricityprice, using oneparticulartariff from one 17 particularutility. And I am trying to illustratewhy 18 itmade sense to drop the averageminus fixed cost in 19 this example. What you are seeinghere on the vertical 20 axis is the costper kilowatt hour. The scale goes from 21 zero to 30 cents. And on the horizontal axis kilowatt 22 hours permonth, from zero to 600 kilowatt hours. 23 There are three lines drawn here. The one that is in 24 blue, that looks like two rectangles is labeled 25 marginal price. This is actuallythe tariff schedule,
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• 133 1 12 cents a kilowatt hour in this range, up to 273 and 2 14 cents a kilowatt hour above 273 kilowatts hours
. 3 So, if you all go home and look at your utilitybills, 4 youmay see something that has a block structure, 5 something like that, with different prices. 6 The green line coming down here is the 7 average. This particularutilityhas a fixed charge. 8 And so you are going topay that charge whether you use 9 energy or not. So, your first kilowatt hour is very 10 expensive, because you arepaying $2.00 a month, 11 whether or not you use electricity. After that, as you 12 usemore electricity, it averages in and you begin to 13 approach the 12 cents a kilowatt hour, then step up to 14 14 cents and this slopes upwards. So, this is what the 15 average price wouldbe as a function of kilowatts hours 16 permonth. 17 Averageminus fixed, ifwe take off that 18 $2.00 minimumcharge, it looks like this. So, it 19 starts being very low. There is a small anomalyhere 20 because it is a complex tariff and there is a three 21 cents per kilowatt hour basic fee that shows up for 22 very low consumption. But, basically, without the 23 fixed charge, youpayvery little at the low end. You 24 come up to 12 cents and eventually startmoving
. 25 The point of this is that the average is
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• 134 1 sometimes high and sometimes low. But, it is a better 2 representation ofthemarginal, than the averageminus 3 fixed, which is always low. Now, I understandthis is 4 one tariff and you can come up with other tariffs, but 5 we have looked at a number ofthem, andwe believe that 6 the averageminus fixed isbias to low. And that is 7 why the average was a betterrepresentation for this 8 one case as a stockgap until we can get to the 9 marginalprices, themselves. 10 MS. NADER: Steve? 11 MR. ROSENSTOCK: Steve Rosenstock, Edison 12 Electric Institute. 13 EEI collecteddata as well as Oregon Energy 14 Office, that I thinkwe showed, especially, well, among 15 investment utilities, the difference was the fixed cost 16 were about sevenand a halfpercent. And among 17 municipals and coops, at least of some ofthe limited 18 data that I saw, some ofthe values were higherbecause 19 you have fewer customers for distribution linemile. 20 And since, you know, municipals and coops are about 25 21 percent of thepopulation. Since we are going to 22 marginal energy rates for the next round of the 23 analysis and I know this ispreliminary, I still, the 24 AdvisoryCommittee still saidas an interim step, that 25 we agreed that to take out as the interim step, take
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• 135 1 out the fixed costwhere we could. So, I amjust a 2 little concerned and I know you examinedthe databut I 3 

### stillthinkthat you are kindof skirtingaroundwhat 4 theAdvisoryCommittee said. That is kindofmy 5 interpretationof it. But, since it ispreliminary, 6 it, I am okaywith it right now. But, I amjust saying 7 for the future, if forwhatever reason, depending on 8 the timetable, that you don't have all themarginal 9 energyrates, I would saythat that itwouldbe a 10 betterprocedure to take out the fixed costs, 11 otherwise, again, inmy.opinionthat some ofthe 12 economics wouldbe, the economicsmight be a littlebit 13 overstated. Thank you. 14 

### MS. NADER: Glenn Scheede. 15 MR. SCHEEDE: Glenn Scheede, again. 16 Since you have alreadydone this analysis on 17 some utilities, couldyoubundle that informationup 18 andmake it available tous, sowe can seewhich 19 utilities you lookedat andwhat the results were, the 20 studythat you saidyoujust, have alreadydone to look 21 atmarginal versus average rates? 22 MR. MCMAHON: I canprovide you, not at this 23 moment, but I canprovide youwith information about 24 what utilitieswe have contactedandhowmanytariffs 25 

### we have from those utilities.
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• 136 1 In terms of showing you quantitative results 2 like this for all, that is not possible at this time, 3 because 4 MR. SCHEEDE: Just the ones that you have 5 looked at to reach the conclusion that you did. You 6 said you reached a conclusion that there were enough of 7 themwhere the marginal rates were higher than the 8 average rates. That you thought that was not the right 9 way to go. So, I say, can we just see the data, see 10 the analysis you have done, since it is already done, 11 just bundle it up and let's see it and see what 12 MR. MCMAHON: I am showing you an example, 13 Glenn. I wouldbe happy to 

### 14 MR. SCHEEDE: No, I don't mean the example. I 

### 15 mean, the whole works. The one example doesn't provide 16 the basis for you to reach a conclusion, I assume. 

### 17 Because you said you have done it on a number of 18 utilities. 19 MR. MCMAHON: I have looked at a number of 20 tariffs and similar result. It is very clear that when 21 you subtract a fixed charge from the average, you are 22 going to get a lower number. It is very clear from 23 what Edison Electric Institute did, thatmarginal rates 24 maybe higher or lower than average. They are not 25 consistently lower. And, therefore, the average minus
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• 137 1 fixed charge isbias low. To the extent that we have 2 documentationwrittenup, I am happy toprovide to you, 3 however, our resources right now are dedicatedto 4 developing themarginal rates. And I reallydon't have 5 the time orthe resources towrite another report in 6 the interim. 7 MR. SCHEEDE: I wasn't lopking for anynew 8 analysis, just the EEI provided a whole lot of data and 9 you saidyou came up with data that suggestedthat is 10 bias on the low side. What I am saying, I want to see 11 the data that you have alreadyput together, justmake 12 that availabletous, not, itdoesn't have to anything 13 fancy, just let's see the data
. 14 MR. MCMAHON: Okay. 15 MS. NADER: Okay. 16 MR. MCMAHON: It won't be fancy. 17 MS. NADER: Steve Rosenstock. 18 MR. ROSENSTOCK: Steve Rosenstock, EEI. 19 Going into the technical support document, it 20 talks about, it is Chapter 7 talking about theprices 21 and the approach, this is forboth electricityand 22 natural gas. The RECS 1993 data is used and then to 23 adjust it to 1997 dollars andplease correctme if I am 24 misstatingthis, it is the values from 1993 were 25 multipliedby the CPI, Consumer Price Index, Global
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• 138 1 U.S. Consumer Price Index tobring it, that ispart of 2 the equations, so it is those values times the '93 to 3 '97 CPI. Then it ismultiplied againbythe, I will 4 say an energyprice scale for that same time period. 5 Is that, am I statingthat correctly? 6 MR. MCMAHON: That is correct. 7 MR.**ROSEN~TOCK:** Okay. I am just kind of 8 curious, I am having, I guess I am having a little 9 trouble with that because let'sjust use, it is a 10 dollarper unit of energy in 1993 and the price didn't 11 change in 1997. So that, the energy scale, there is 12 1.0, but the price, the Consumer Price Index went up 10 13 percent. So, it wouldbe 1.0 times 1.1 for Consumer 14 Price Index, times 1.0, which wouldmean that the '93 15 price wouldbe shown as 1.1 in the graph, when really 16 you have other data that shows that was actually 1.0. 17 MR. MCMAHON: No, that is not what happened. 18 What we didwas replicate the 1997 prices. The 

### 19 adjustments are there tomake sure that in 

### 1997 we are 20 characterizingthe energyprice correctly, not using 21 1993 values. 22 MR. ROSENSTOCK: Okay. But, but, since there 23 is census data on the actual energyprices, you know, 24 whether it is electricity, itmight be electricityand 25 natural gas, and oil. I know, I am pretty sure the
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• 139 1 Commerce Department does have some energy, you know, 2 theydo food andthey alsodo energy. Theybreakout 3 oil from electricityand gas. Is that CPI component 4 reallyneeded inthere to do that adjustment? That was 5 just, I amjust kind of curious about that. 6 MR. MCMAHON: You areproposing alternative 7 methodologywhere we do one scaling. We take 1993 8 prices and '93 dollars and scale 1997 and 1997 dollars. 9 But, we didn't separate that intotwo components. But, 10 you have the same result. 11 MR. SCHEEDE: Glenn Scheede, again. 12 Electricitypricesbetween '93 and '97 did 13 not increase at the same rate as CPI. If you will look 14 inmonthlyenergyreviews, you will see EIAhas a table 15 inthere that compares the two. Electricityprices 16 didn't go up as far, as far as CPI. So, it is not a 17 correct adjustment. 18 MR. MCMAHON: I agree with you, it didnot. 19 And the scale in 1997 dollars, from '93 to '97 prices 20 accounts for that. 21 MS. NADER: Okay. I am going to askthat we 22 move on. Ifwe have additional time, at the endof the 23 afternoon, we can return to some ofthese subjects. We 24 have a number ofpresentations yet. 25 MR. MCMAHON: Okay. So, Peter, do you want
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• 140 1 to? 2 MS. NADER: Oh, you are through
. 3 MR. MCMAHON: Yeah, we are going to do that 4 water rates, next. 5 MS. NADER: Thank you. 6 Peter Biermayer, also ofLawrence Berkeley 7 Lab. 8 PRESENTATION BY PETER BIERMAYER: 9 MR. BIERMAYER: Okay. I am going to talk 10 about the analysis ofwater andwaste water rates. By 11 waste water, we mean seweragebasically. 12 Okay. We hadtwo objectives inthis task. 13 And one was to find what the distribution of current 14 rates are, so we can have a price for the current rate 15 of water. And also to see how it escalates. 16 So, to get the distribution, first of allwe 17 usedRaftelis data andthat is the latest surveydata 18 that we know of. And itwas taken in 1998. And we 

### 19 converted it to 

### 1997 dollars. And what we didwith 20 that data is we took the cost of water for a thousand 21 cubic feet and subtractedout the base charge for zero 22 consumption. And so, that is, thendivided that bythe 23 thousand cubic feet, sowe get dollars per cubic feet. 24 And that is sort of a marginal rate. It is different 25 than a marginal rate than Jimtalked about in the way EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 141 1 itwas done, but it is, that was the intent. 2 We also correctedusing all urban consumer 3 price indexto convert to 1997 dollars, since all the 4 rest of the analysis is in 1997 dollars. And this data 5 was going tobeused intwoplaces. One was intheLCC 6 spreadsheet, where we woulduse the distribution. And 7 also inthe NES spreadsheet, where we woulduse a 8 singlevalue, but itwouldbe a marginal rate, a single 9 marginal rate cost ofwater. 10 The database for the distribution or the 11 number for the current rate was based on 115 service 12 areas, and service areasprettymuch correspondto 13 cities. They represent populationof 56million. And 14 that ispeople, not households. And to give you an 15 idea of what that number is representative of, 86 16 percent ofthe country is on a water utilityand 77 17 percent have a wastewaterutility. Meaning, the rest 18 have, are connectedtoprivatewells, septictanks. 19 This chart here shows us the, it isjust a 20 graph of the database I was describing. BasicallyI 21 have, on this side isjust the weighting. We weighted 22 all these, these, this price data according to the 23 population served. So, you can see overhere, we have 24 New YorkCity, I believe this is Detroit, that is L. A . 25 And it shows you the distribution ofwater rates,
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• 142 1 marginal water rates. 2 MR. JONES: Peter, Earl Jones here
. 3 How did you select these cities? 

### 4 MR. BIERMAYER: Theywere on the database, put 5 togetherby an organization, byMr. Raftelis. 6 MR. JONES: Who is he? 

### 7 MR. BIERMAYER: He is, he is well known inthe 8 waterbusiness. He is the onlyperson I know ofthat 9 puts together a comprehensive surveyon water. And

-- 10 MR. JONES: So, it is not populationweighted 11 or -- 12 MR. BIERMAYER: This is

-- for population. 13 What he did is he askedthemwhat the number ofpeople 14 eachwater utility served, andthen these were weighted 15 by the population. That is what the wide axis shows is 16 distribution. 17 MR. JONES: Yeah, maybe I askedthe wrong 18 question. What I meant was, what percent, were the 19 selectionof 115 cities.basedin any respect on their 20 populations andwhat that representedbyway of the 21 U.S. population? Or is itjust 115 cities for whatever 22 reason? 

### 23 MR. MCMAHON: Earl, maybe I canhelp. This is 24 JimMcMahon
. 25 We contactedthe TradeAssociation, the
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• 143 1 AmericanWaterworksAssociation and askedthemwhere 2 thebest data was. Theyreferredus toMr. Raftelis, 3 who has a consultingorganization. And this is the 4 most comprehensive data set that exists. These are the 5 only 115 cities that are surveyed. So, there is no 6 selectionhere. We took all of the data that was 7 available. 8 MR. JONES: Okay. Thank you. 9 MR. MORRIS: This isWayne Morris of theAHAM. 10 Jim, when you look at this data from 11 Raftelis, didhe notbreakthis down into, I believe 12 large cities, mediumcities and small cities? Some 13 kind of a distribution inwhich he had a selection of 14 some ofthe largest cities in the U.S.A., some of the 15 medium sizes and some ofthe smaller. I thought that 16 that is what I remember. 17 MR. MCMAHON: This is the full set. There are 18 large cities, medium cities and small cities included. 19 And you can see that in thepopulationdistributionby 20 theheight ofbar. 21 MR. BIERMAYER: I can get you the exact cities 22 ifyou are interested. It isjust a list of cities and 23 we calledRaftelis andhe said itwas okayto share it 24 with whoeverwanted it
. 

### 25 MS. NADER: Glenn Scheede.
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• 144 1 MR. SCHEEDE: Two questions. Will the databe 2 made available so that we can see them? 3 MR. BIERMAYER: Yes. 4 MR. SCHEEDE: The detaileddata? 5 MR. BIERMAYER: Yes. 6 MR. SCHEEDE: Okay. Secondquestion. To 7 what extent are the data for the 115 cities and the 56 8 millionpeople representative of the nation as a whole? 9 MR. BIERMAYER: Well, 2.3 peopleper 10 household, would give you thepercentage. Letme see. 11 It is about 22 percent ofthe nationalpopulation. 12 MR. SCHEEDE: Yes, I can do that arithmetic, 13 too. But, towhat extent do know these 115 cities 14 represent, are representative ofthe nation as a whole? 15 Particularly, in rural areas where people don't relyon 16 municipal sewer andwater? 17 MR. BIERMAYER: Yeah, at this time we don't 18 have information onwhat the cost is if you have a 19 privatewell and a private septictank system. From 20 people that I have talked to in the waterbusiness, 21 theytellme that ifgiven a choice, people would, will 22 hook up to citywater and city sewerage, meaning there 23 is some benefit tohaving that rather thanhaving your 24 own well andpump. I don't have exact numbers onwhat 25 it costs, but there are costs of**course~** You know, you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 145 1 have tohave your septic tankpumpedout, you have to 2 maintainyourpumps. There are costs tohaving a 3 private system. We don't have detaileddata on that. 4 We expect it tobehigher. 5 MR. SCHEEDE: Do youexpect to get those data, 6 so that we know what the 7 MR. BIERMAYER: We intendto tryand get some 8 informationon that, yes. 9 MR. SCHEEDE: Because this seems like a bias 10 sample tometropolitan areas, and large, and I don't 11 know whether they large ornot. 12 MR. BIERMAYER: Yes, what thewater experts 13 tellme is that actuallythe waterprices are less 14 expensive in the large cities. So, ifyou are saying 15 thatmy prices are too low, you areprobably correct. 16 MR. SCHEEDE: No, I don't know whether they 17 are too low or too high. I am looking for the data so 18 I can see. 

### 19 MR. BIERMAYER: Okay. If anybodyhas data on 20 that, please send it tome. We are trying to get that. 21 MR. SCHEEDE: Well, no, no, let's not tryto 22 shift theburdenhere. Obviously

-- 23 MR. BIERMAYER: No, if it ispossibly, 24 possible to get it, we will get it. 25 MR. SCHEEDE: Okay
. But, it is DOE'S
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• 146 1 responsibility to collect andprovide the data, not 2 interestedparties to collect it
. 3 MR. BIERMAYER: I am just saying, we will 4 welcome your contributions. 5 MS. NADER: Steve Rosenstock and then over 6 there, and then I will suggest that Peter continue with 7 his presentation. 8 MR. ROSENSTOCK: Steve Rosenstock, Edison 9 Electric Institute. 10 These are just a couple of quick questions. 11 These are residential rates only, they are not small 12 commercial or anything. 13 MR. BIERMAYER: Right, residential
. 14 MR. ROSENSTOCK: Residential. 15 Number two, did any of them, just out of 16 curiosity, did any of themhave any sort ofblock 17 rates, either increasing or decreasing? 18 MR. BIERMAYER: Yes, they did. 19 MR. ROSENSTOCK: Okay. 20 MR. BIERMAYER: We have other data on that. 21 think about, I don't know the exact numbers but the 22 most popular for water is the incliningblock rate, 23 with a declining block rate being second and then a 24 flat rate. Andwith sewerage it ismostly, I think it 25 is 80 percent flat rate.
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• 147 1 MR. ROSENSTOCK: So, when, so when you created 2 these values, were you looking at a, were you looking 3 at the first block or secondblock, you know, 4 regardless of what it was? I amjust kind of 5 MR. BIERMAYER: No, we, I don't have the 6 breakdown on the blocks. It was just for one thousand 7 cubic feet, what were the costs. 8 MR. ROSENSTOCK: Which is the average -- 9 MR. BIERMAYER: Right. 10 MR. ROSENSTOCK: Permonth. 11 MR. BIERMAYER: Right. 12 MR. ROSENSTOCK: Okay. 13 MS. NADER: Okay. Question over there? 14 MR. STEVENS: Charlie Stevens from the Oregon 15 Energy Office. I wouldjust like to take issue with 16 Mr. Scheede here, momentarily. I think DOE has 17 collectedthe onlydata there is. I have been out 18 there collecting some of this datamyself. I don't 19 think it is necessarily incumbent on DOE to domore 20 than collect all the data there is. I think it is 21 incumbent upon stakeholders who find issues with it, to 22 put some concrete reasons on the table as to why this 23 data is inadequate and usually that is done byhaving 24 some other data that shows some other case. So, in the 25 absence of that I think they have done a prettygood
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• 148 1 jobofgatheringdata. 2 MS. NADER: Okay. Thankyou. 3 

### MR. SCHEEDE: Glenn Scheede, if I were 4 subsidizedbyDOE to collect data, the way some of the 5 state energyoffices are, perhaps I coulddo it. 6 MS. NADER: Thank you. 7 Peter, please continuewith your 8 presentation. 9 MR. BIERMAYER: Okay. The secondobjective 10 was to determine a price escalation for water. And 11 these were the first ofthe data we went to look for, 12 for data in for boththe cost and for the escalation. 13 We got some data fromAmericanWaterWorks 14 Association. As I saidbefore, got information from 15 Raftelis, Al Dietemann, who is here, did some work in 16 1994, givingpopulationweights to otherdata thatwas 17 collectedfromRaftelis andErnst andYoung. Andwhat 18 we did isbecause each of these surveys didn't always 19 have consistent cities, the same cities weren't 20 surveyed inevery survey, what we did is we calledup 21 cities to fill inmissing gaps. Andwhat we came up 22 with for 1986 and 1998 was 38 citieswhere we canhave 23 the same citiesboth in 1986 and 1998, sowe canmake a 24 comparison
. 

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• 149 1 asked themwhat they forecasted for the future? We 2 didn't get a whole lot of response. We got sixpeople 3 who responded, utilities that responded on that. And 4 theykind of, itwasn't veryconsistent data. 5 Also we, there was some comments to DOE, 6 which I will talkabout later, regarding the escalation 7 ofwaterprices. And thenwe alsohave opinions of 8 experts from Raftelis, Al Dietemann, AmericanWater 9 Works. 10 This is a map that shows the cities of the 11 38, of 38 cities that we used inpredicting a price, or 12 looking a historical trend for price escalationof 13 water. So, you can see they are distributedaroundthe 14 United States. 15 Okay. This chart here, shows the, it is a 16 bar chart one, color is 1998. That tends tobe the 17 higherbar chart, showing that it ismore expensive 18 than in 1986. This is also in 1997 dollars, corrected 19 using CPI, Consumer Price Index. 

### 20 Okay. This charthere shows the 38 21 individual cities andthe distribution of theirpercent 22 change inwaterprices from '86 to '98. So, you can 23 see there is a few that are negative, there are some on 24 the right. And**tbe~e** are indiyidual cities, and it 25 shows youbasicallythepopulation.
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• 150 1 Steve? 2 MR. ROSENSTOCK: Steve Rosenstock, EEI. 3 On this chart it saysmedian of 1.86percent. 4 That is over years without anyCPI adjustments, right? 5 That isjust from, you know

-- 6 MR. BIERMAYER: No, that is, everythinghas 7 been adjustedto 1997 dollars. 8 MR. ROSENSTOCK: But, the

-- 9 MR. BIERMAYER: That represents unweighted. 10 Those are unweighted figures. 11 MR. ROSENSTOCK: Okay. 12 MR. BIERMAYER: That is an unweighted average. 13 And, well, themedian isjustof those cities. It is 14 just, you know, it doesn't need tobe weighted. 15 MR. ROSENSTOCK: Right. But, what I am saying 16 is that itwas, you know, itwas like $4.00 one year 17 and then $5.00 10 years later andyou arejust the 18 annual percentage. Didyou assume -- 19 MR. BIERMAYER: Oh, right. 20 MR. ROSENSTOCK: Didyou assume a constant 21 slowbetween the two datapoints? 22 MR. BIERMAYER: No, what we did is, we used 23 the concept of a compound interestbasically. Where 24 if, we looked at the, let's see if I can explainthis 

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• 151 1 We looked at the numbers in 1986, the cost in 2 1986 in 1987 dollars, I mean, 1997 dollars, and looked 3 at the cost in 1998, and convertedthat to 1997 4 dollars. Thenwe used an equation showing that, well, 5 basicallythat, what the ratewouldbe assuming they 6 had a rate change everyyear andhow that would 7 compound. What the equivalent interest rate wouldbe, 8 yearly interest rate increasewouldbe ifthey changed 9 the rate everyyear. And a certainpercent rate, to 10 get the

-- dollars. 11 MR. ROSENSTOCK: It is derivedpercentage 12 changes. 13 MR. BIERMAYER: Yes
. 14 MR. ROSENSTOCK: And it is constant, you are 15 assuming constant change throughout the 12 years. 16 MR. BIERMAYER: Yes. 17 MR. ROSENSTOCK: But, it is still like a one 18 percent andthen onepercent, you know, it is still 19 that

-- 20 MR. BIERMAYER: It doesn't, as youmight 21 guess, itdoesn't change the samepercentage every 22 year. This is sort of an averagepercentage changeper 23 year. 24 MR. ROSENSTOCK: But, the first, for the 25 original adjustment, from '86 to '97, was again using
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• 152 1 the Global Consumer Price Index. 2 MR. BIERMAYER: It is all UrbanConsumer Price 3 index. 4 MR. ROSENSTOCK: The Urban, okay, but 5 MR. BIERMAYER: Which I think is the standard 6 CPI number. 7 MR. ROSENSTOCK: Okay. 8 MR. BIERMAYER: Okay. So, the results, we 9 got $3.20, we converted it to gallons, insteadof cubic 10 feet, $3.20 per gallon, that is for 1998, Raftelis 11 data, 1997 dollars, includes water andwastewater 12 rates, 115 cities. And as I already explained, 56 13 millionpeople. The escalationrate we got was 3.1 14 percent real. These are allmarginal rates, basedon 15 38 service territories and 27 millionpeople. 16 And how does this comparewith the 17 stakeholders. We have some comments, Whirlpool 18 mentionedthe samepeople that we got data from. And 19 made a general observationthat prices havebeen 20 increasing. 21 ACEEE referredtoOsann and Young study. 22 They also looked at future improvements in 23 infrastructure requiredbythe government andhow that 24 would affect future prices. And they also did the and 25 theygot a range of 1.1 to 2.7 percent real.
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• 153 1 Anticipating the question why we got 2 something different than Osann andYoung. Osann and 3 Young came up with the 2.6percent real. And the 4 difference in the analysis there was that we usedthe 5 years from '86 and '98. Theyused '86 to '96. So, we 6 have onemore year's worth of data. 7 We adjusted for marginal rates, and they 8 didn't. We used 38 cities, and the same cities inboth 9 years. Theyused a larger data set, Ernst and Young 10 and Raftelis data surveys, but those surveys don't 11 always have the same cities every year. So, we want to 12 make sure we are using the same cities both years. 13 And I guess that is it. Any questions? 

### 14 MS. NADER: No questions? Peter, thank you. 15 MR. BIERMAYER: Thank you. 16 MS. NADER: JimMcMahon is going to 

### 17 MR. JONES: Well, Earl Jones here. I didhave 18 one question. You said you contacteddepartments, 19 water works and to find out what theirplans were and 20 you got responses from six. So, my question 21 MR. BIERMAYER: Oh, no, the, we calledup 22 utilities and asked them andwe had six responses. 23 MR. JONES: Yes, I thought, well, okay. 24 How does that figure into this analysis? 

### 25 MR. BIERMAYER: We are not using itbecause
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• 154 1 there was notmuch response. 2 MR. JONES: Not enough data
. 3 MR. BIERMAYER: But, since how we made the 4 effort, we were asking them for it andwe didn't get 5 any response, basically. 6 MR. JONES: So, thenwhat assumption do you 7 make about what happens in the future? 8 MR. BIERMAYER: Three, point twopercent, the 

### 9 3.

-- 10 MR. JONES: How about infrastructure? 11 MR. BIERMAYER: Oh, about the infrastructure? 12 MR. JONES: Yes. And the cost of that? 13 MR. BIERMAYER: Well, basicallywe assume 14 that, you know, itwill, the cost of water will 15 increase faster than the rate of inflation. So, we 16 didn't, this analysis I didhere, was justbased on 17 historicalbasically. And we got some input from some 18 ofthe experts sayingthat basicallytheywould expect 19 theprice to increase. But, our analysis isn'tbased 20 on, isbased onjusthistorical cost. It is notbased 21 on future infrastructure costs. 22 MR. JONES: Okay. 23 MS. NADER: Gentleman at themike. 24 MR. HOLMES: Hi, I am Tommy Holmes, American 25 Waterworks.
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• 155 1 Sorry, more utilities didn't response 2 directly. But, I can assure you yourwaterbills will 3 go,up in an increasingratebecause of a varietyof 4 factors. One we have falling water tables across the 5 country. Two, we have an aging infrastructure that is 6 screaming for replacement. AndCongress recognized 7 this in creatingthe StateRevolvingLoan Fund, in the 8 Safe DrinkingWaterAct. And we havemore andmore 9 regulations coming on line. The Safe DrinkingWater 10 Act was last amended in 1996. And those amendments 11 are, the regulations stemming from those amendments are 12 justbeginningto come on line. Just last week 13 President Clinton announcedthe new regulation from 

### 14 Microbial and DisinfectionBy-products. And that is a 15 whole new layer of water treatment to lower your 16 exposure tobugs, like cryptosperida(ph), and 17 consequentlyalso lower your exposure to theby18 products from disinfectionpractices. 19 Alsowe have to admit drinkingwater 20 utilities are tremendous consumers of electricity. And 21 in our comments we sent to DOE in 1995, we had a study 22 saying itwas estimatedthat drinkingwater utilities 23 consume sevenpercent ofthe nation's electricity. I 24 would imagine that isprettyconservative nowadays, 

### 25 especiallyifyouhave utilitiesmoving toward
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• 156 1 ozoneization(ph), reverse osmosis(ph) and 2 decelerization(ph). Those aren't wide practices yet. 3 But, even our own backyard, FairfaxCountyWater is 4 moving to ozone treatment. So, I think, 3.2percent is 5 a goodbaseline, but I would sayit isprobablypretty 6 conservative. 7 MS. NADER: Thank you. Steve? 8 MR. ROSENSTOCK: Steve Rosenstock. 9 Does your organizationtrack it? What has 10 beenhappeningthe last few years, justout of 11 curiosity, interms of some of these rates? 12 MR. HOLMES: In rates?
.You know, we haven't 13 done a lot of worktrackingutilities rates. The 14 NARORC(ph} has done a lot that stuff. Our concern 15 mainlyhas been inwater qualityandwater treatment 16 andon the legislative and regulatory side. But, we 17 haven't done a lot of tracking at rates. 18 MS. NADER: Okay. Any more questions for 19 Peter? 20 MR. DIETERMANN: I have got a follow up to 21 that. My name isAl Dietermann. I amwith Seattle 22 PublicUtilities. 23 For those that don't know George Raftelis is 24 chair of Rates and Finance Committee forAmerican 25 WaterworksAssociation. The references here are tied
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• ----------- ----------

### ------ 157 1 into the Raftelis survey. He is a private rate 2 consultant. He doesn't getpaidbyAWWA to do these 3 

### surveywork. But, there is a logical tie inthere and 4 he is extremelyknowledge individual about rates across 5 the country for bothwater andwastewater. 6 

### MS. NADER: Thank you. Anyone else, for 7 Peter? Steve? 8 

### MR. NADEL: SteveNadel, ACEEE. I am very 9 gladthat DOE andLBL has gone forward and actually 10 done this analysis. The data we providedbeforewas 11 saying, was to address the fact thatbefore you assumed 12 a zeropercent escalation, istake thebestdata that 13 we could find at that point intime. But, you have 

### 14 clearlygotten a lotmore data. You have done a lot 15 more to clean itup, and I thinkit is a prettygood 16 analysis. 17 The one otherthing I wouldpoint out is as 18 younotedthe differencebetweenthe 2.6 

### and 3.1 19 percent, what the differences were, the low endofour 20 range was basedon some of the data fromOsann and 21 Young interms of future cost. That data is a couple 22 of years old. And we applycertainassumptions tothat. 23 So, that is not especiallyrigorous. We supplythat to 24 indicate that there is a great likelihoodthat that 25 

### rates would increase inthe future, to argue against
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• 158 1 thepreassumptionthat rates were going tobe flat. 2 But, I wouldn't readtoomuch in, particularlythe 3 lower

-- If someone wantedto look at infrastructure 4 cost, theywill needto do a lotmore. Theywould 5 first needtoupdate that database anddo a lotmore 6 looking into some ofthe keydriving assumptions about 7 the average life and interest rate and so on, in order 8 to do that. 9 MS. NADER: Thank you. Thank you, Peter. 10 JimMcMahon is going to talktous about 11 energy savings. 12 MR. MCMAHON: Somuch research, so little 13 time
. 

### 14 MR. JONES: Jim, beforewe leave theprior 15 discussion, onemore time, ifyou could. And I 16 probablymissedthis and I apologize. But, the 3.1 17 factor or 3.2 orwhatever itwas. Peter, is overwhat 18 period oftime? Is that annual? Is that overthe 19 MR. BIERMAYER: That is averageper year 20 increase from 1986 to 1998. 21 MR. JONES: And how is that numberbeingused 22 going forward now? 23 MR. BIERMAYER: How is itbeingused, how? 24 MR. JONES: Yes, going forward
. 25 MR. BIERMAYER: Oh, okay. That will be used
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• 159 1 in the life cycle cost spreadsheet and also the NES 2 spreadsheet
. 3 MR. JONES: Okay. 4 MR. BIERMAYER: National Energy Savings 5 spreadsheet. 6 MR. JONES: Okay. And how does that number 7 different from the other numbers which are cited in 8 your last page? The analysis by the other folks you 9 looked at. The other data that you came up with, how 10 does this number compare with others? I see that ACEEE 11 suggested a number. That is on here somewhere. 12 MR. BIERMAYER: Yes. 13 MR. JONES: Right. And I guess my question 14 was what other, what othernumbers, what other factors 15 were suggestedby·these other, by anybody else you 16 looked at? 17 MR. BIERMAYER: Those, those are themain 18 people I looked at. There are some otherpapers on 19 there that I don't have withme and I don't, I don't 20 have any of the information withme on -- 21 1 MR. JONES: So, you don't know what the Ernst 22 and Young suggested or Raftelis? 23 MR. BIERMAYER: Oh, theyjust, they are in the 24 business of collecting the surveys. They are not in 25 the business of

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• ------ --- ----- -- 160 1 MR. JONES: Makingprojections. 2 MR. BIERMAYER: Projections. 3 MR. JONES: And so, the onlyprojectionthat 4 is in your information or that you had access to, is 5 the one that Steveprovidedto you, is that what I am 6 hearing? 7 MR. MCMAHON: No, there is a misunderstanding 8 here. Maybe I canhelp, Earl. 9 MR. JONES: Okay. 10 MR. MCMAHON: Ernst andYoung was the firm 11 that did the surveys from 1986up until, 1994, is that 12 correct? And then Raftelis has done the surveys since 13 then
. 14 MR. BIERMAYER: Yes. 15 MR. MCMAHON: Okay. 16 MR. BIERMAYER: I would like to add actually 17 that Raftelis did this for Ernst and Youngbefore he 18 openedhis own consultingpractice. So, it is really 19 the sameperson. 20 MR. MCMAHON: So, we have used all ofthat 21 data that is available from Ernst andYoung and from 22 Raftelis, from 1986 to thepresent. 23 MR. JONES: Right, but they are not in the 24 business ofmakingprojections, right? You usedtheir 25 data to come up with theprojection ofwhat the annual
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• 161 1 inflation wouldbe going forward. Am I

-- 2 MR. MCMAHON: I believe that Raftelis does 3 provide, I mean, Al can_answer that question whether 4 George Raftelis provides projections. 5 MR. DIETERMANN: Well, he works for the 6 individual utilities to forecast based on their 7 specific geographic and future needs. But, not for the 8 whole nation. 9 Ernst and Young didprovide information in 10 the '94 study, which showed and tracked their work in 11 terms of rate increases over time. And that is 12 available but of course it stops at '94, when their 13 work was concluded
. 14 MR. JONES: Okay. And who is Osann? Who is 15 Osann? 16 MS. NADER: Al what is your last name? 17 MR. DIETERMANN: Al Dietermann, Seattle Public 18 Utilities. 19 Osann is a private consultant at this point. 20 He has done considerable work developing information 21 associated with the Conberg(ph) Bill, which is before 22 Congress now. 23 MR. JONES: Okay. And so thenmy question, 24 Peter, then is how did you, it says here that these 25 studies and I guess Osann and Young is another company EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 162 1 or consulting firm, is that correct? 2 MR. BIERMAYER: Okay. The reason that was 3 mentioned is becauseACEEE sent a comment to the 4 Department of Energy, they attached the Osann and Young 5 report and referred to it. That is why I am comparing 6 what we did at LBL, withwhat a comment was that Steve 7 Nadel supplied. 8 MR. JONES: Okay. So, then tell me again, 9 what was wrong with Steve's data? I want it on the 10 record. 11 MR. BIERMAYER: Steve

-- Well, I outlinedwhat 12 we did differently, you know, I don't want to saywhat 13 they didwas wrong, I amjust saying what we didwas 14 different. We used the same cities in '86 and in '98. 15 And they also, they stopped in the year 1996. We added 16 onemore year, because we used the latest data. We 17 corrected frommarginal rates. They did not correct 18 for marginal rates. That is what was different, and 19 that is why we got different numbers. 20 MR. JONES: And that would explain what seems 21 tome rather substantial difference. 22 MR. BIERMAYER: Yes. 23 MS. NADER: Okay. Onemore question in the 24 back. Did I see a hand? No. All right
. 

### 25 Carry on, Jim.
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• 163 1 PRESENTATION BY JIMMCMAHON: 2 MR. MCMAHON: Thankyou. 3 

### JimMcMahon fromLBL. I am goingto speak 4 about clothes washer shipments. 5 The approach that I have takenhere is to try 6 to give the simplest approachpossible and then add 7 more factors as itbecomes necessary. 8 Themaj?rdrivers of shipments are two, 9 replacements of existing clothes washers andnew 10 housing construction. 11 In addition, oureconomic factors, in 12 principal washerprices and operatingexpenses should 13 influence shipments as well
. 14 

### What I am goingtodo is deal withthe first 15 two, justbyaccounting for those without worrying 16 about the economic factors and then discuss the 17 economic factors later. 18 New housing constructionhas beenbetween one 19 and twomillionhousingunits a year in recent history. 20 Seventy-fourto 90 percent ofnew housingunits have 21 residential clothes washers, dependingupon the house 22 vintage, ithas increasedover time. Here referringto 23 theperiod from 1980 to 1993. 24 We estimate that new housing accounts for 

### 25 about 1 to 1.6million residential clothes washers
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• 164 1 shippedeach year. Again, it depends upon the year. 2 Ifwe compare those numbers to the total shipments, 3 that is about 19to 33 percent of annual shipments. 4 Interms of replacements, the life expectancy 5 of clothes washers, we are takingnumbers of 12 to 16 6 years. This is fromApplianceMagazine, Septemberof 7 1998, with a 14 year average. 8 Using that distribution of lifetime expressed 9 as a triangular distribution, and the record of 10 historical shipments, we can calculatethe replacements 11 andwe estimate those tohave account for 63 to 85 12 percent of total shipments, depending upon the year. 13 If I addthose two together, I can compare 14 these estimates to the total shipments reportedbythe 15 industry. And that is shown on this picture onpage 16 five. Thebottom shaded inblue is the replacement 17 market. The white section is the new housing 18 construction. And the dashed line is total shipments, 19 actual. And you can seewe get fair agreement from 20 about 1981 up to the early 1990s, andnot as good 21 agreement the last few years. 22 Expressingthat same data a different way, I 23 turned the actual shipments each year into 100percent 24 andwe express the replacement andnew as shares of 100 25 percent. Since those estimates are done independently,
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• 165 1 theydon't always addto 100percent, onlywhen we get 2 it exactlyright. And you can see that dependingupon 3 the year, it is prettyclose. Theworse error is 11 4 percent that the estimates differ from the actual. 5 So, that is fairly reasonable agreement without 6 accounting for any economic factors. 7 We recognize that there are economic factors. 8 Purchase expenses for washers are about $420.00 retail. 9 These are the same numbers that are used elsewhere in 10 the analysis. 11 The operating expenses, we estimate average 12 about $126.00 per year on a national average. Those 13 arebroken down into energyexpenses, of about $78.00 14 per year. This includes waterheating and clothes
. 15 drying, averagedoverthe different fuel types. And 16 letme be clear about the average over, we are actually 17 adding up the individual ones and then dividingbythe 18 population. So, each household has one fuel type or 19 another. And thenwe put themtogether to get the 20 national totals. 21 The water expenses, we estimate average 22 $48.00 per year and that includesboththe water and 23 the wastewater rates. 24 25 Letme just go to elasticities. In orderto bringthe economic factors into theprojection of
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• 166 1 shipments, one way to do that is to express things in 2 terms of the elasticities
. 3 An elasticityis thepercent change in a 4 quantity such as shipments ormarket share, associated 5 with a percent change in a driving factor, like the 6 washerprice. 7 Previous researchhas indicatedthat for 8 white goods, specificallyrefrigerators have elasticity 9 of about minus .2. Thatmeans that a 10percent 10 increase inpricewould cause a two percent decrease in 11 shipments. 12 Now, we don't have gooddata on elasticities 13 for clothes washers. Further analysis is needed and 

### 14 there is going tobe a discussion of the consumer 15 analysis later this afternoon andhow that is going to 16 be used to attempt to get elasticities. 17 So, the interimresults are that usingjust 18 the accounting, projections are within 11 percent of 19 historical total shipments basedupon replacements and 20 new housing construction. 21 The new factors will be to include the 22 economic factors through the elasticities. To factor 23 in future energyprices. And the effect ofnew 24 standards. 25 The graphic onpage 11 shows theprojection
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• 167 1 of clothes washer shipments. It is in the current 2 spreadsheet. You can find this on DOE's website and 3 download the shipments spreadsheet. And I put onhere, 4 to the left, thehistorical data. You will notice that 5 startedthe forecast in 1981. This was a way for us to 6 checkwhether themodel was anygood, whether itwas 7 tracking recent historyornot. And it tracked the 8 '80s prettywell. It is a littlebit off at the 9 current time. And thenwe have the future projections. 10 Conclusions: Accounting for the replacement 11 sales andnew housingprovidesprojections of future 12 shipments. And I would addthat theywithin about 10 13 percent of actuals. And economic factors will needto 14 be addressedandwe propose to do that. 15 Questions? 16 MS. NADER: At themike? 17 MR. THIELE: TerryThiele with Frigidaire. 18 Did you have anyexplanation for that 11 19 percent discrepancyinthemost recent year? 20 MR. MCMAHON: I don't. I wouldhave to 21 speculate. Clearlythere is changes in sales from year 22 to year, due to economic conditions. And we have not 23 attemptedto explicitlymodel those. 24 MR. THIELE: Have you looked explicitlyat 25 exports? 

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• 168 1 MR. MCMAHON: Exports are excluded fromthis. 2 This is domestic
. 3 MR. THIELE: All right. Well, but what I am 4 saying is when you are taking total shipments, you are 5 saying those are domestic shipments, those aren't 6 shipments that

-- 7 MR. MCMAHON: That is correct. 8 MR. THIELE: Shipments that involve Canada or 9 Mexico or 10 MR. MCMAHON: That is right. 11 MR. THIELE: Okay. 12 MS. NADER: Steve? 13 MR. ROSENSTOCK: Steve Rosenstock, Edison 14 Electric Institute. 15 In terms ofthis also, there is another, in 16 the technical support document there is also kind of 17 the range of forecast. It is a nice chart showingthe 18 different ones, page 815. On theprojection, I am 19 looking at theprojectionandthen I am also looking at 20 the National Energy Savings spreadsheets. On, it looks 21 like for bothbase case and the standardcase, interms 22 of the column callednew shipments, it is a flat 23 increasing slope in the spreadsheet versus on this 24 projection, a rise andthen a plateau or slight 25 decrease and then a riseplateau. It looks like as a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 169 1 result, in the spreadsheet by 2030, it shows 9.08 2 million units versus theprojection here of about 8.2 3 million. I hope I get·that right or 8.3 million, 4 maybe. So, there does seemtobe a littlebit of 5 discrepancy in terms of the spreadsheet versus this 6 graphic here. 7 MR. MCMAHON: Let me, I am not sure about 8 that. Let me checkthat with you. 9 MR. ROSENSTOCK: Okay. 10 MR. MCMAHON.: The intention is to eventually 11 substitute it for whatever the best shipment 12 projections are into the NES spreadsheet, once we have 13 the economic factors in. So, we will be happy to 

### 14 correct that if there is an error there. 

### 15 MR. ROSENSTOCK: Yes. Spreadsheet shows flat 16 increasing, it looks like the same, you know, steadily 17 increasing slope versus projection of high and then 18 flat or decline. 19 MR. JONES: Earl Jones here, G.E. 20 So, how will you use, well, first, do I 21 understand that you are going to get information on 22 consumerprice sensitivity in these, the consumer 23 exercise that begins this afternoon? 24 MR. MCMAHON: That is correct. 25 MR. JONES: Or at least part of theprocess. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 170 1 MR. MCMAHON: Yes. 2 MR. JONES: And then how do you bring that 3 back into, into this shipment analysis? 4 MR. MCMAHON: The intention is from that work 5 to devise the elasticities, so, the sensitivityto 6 purchaseprice and operating expenses. And then to use 7 those elasticities together with, what the expected 8 purchase price and operating costs will be in a base 9 case and a standards case. 10 MS. NADER: Any other questions? Yes? 11 MR. BEST: Richard Best, Whirlpool. 12 Jim, just some clarificationhere. You know, 13 some interesting things have been happening in the 

### 14 markets the last two or three years. And you have 15 mentioned refrigeration, that you had done a elasticity 16 study and came out with a minus .2. I think it would 17 be interesting to note that most people here would 18 probably have noticed that in themarket the real price 19 refrigerators has been dropping over the past few 20 years. Although, there has not been a great surge in 21 volume of those products from themanufacturing side. 22 And also that, there is something happening within that 23 scenario in that people may not be actuallypaying a 24 lot less, theymaybe shifting their purchases from 25 what were lower featuredmodels a few years ago, to
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• 171 1 higher featuredmodels today at the sameprice they 2 wouldhavepaid, havepaida few years ago. 3 MR. MCMAHON: Yes. 4 MR. BEST: It is a little complicatedto say 5 that you are reallycomparingprice change versus 6 selection totallyon apples to applesbasis here. And 7 I wonder ifthat hadbeen consideredwhen you did this, 8 because certainlythere is a lot of strange things have 9 happened in the last recent periodanyway. 10 MR. MCMAHON: Yes, I agree with that comment. 11 We have not done that kind of a study for clothes 12 washers as yet. And we are looking forward to seeing 13 what happens with the consumer analysis. For 

### 14 refrigerators we diddo a retrospective study. It was 15 published in 1997, lookingbackto the period from 1987 16 to '93. The first two sets ofNational Standards for 17 refrigerators. And, in fact, theprices diddecline in 18 real terms. And the quality and future of the product 19 increased. So, I agreewithwhat you are saying. And 20 those things shouldbe taken into account as best 21 possible. 22 MS. NADER: Yes. 23 MR. BEE: Are we going tobe studying or -- 24 MR. BERRINGER: Microphone, please. 25 MS. NADER: Speakup, please
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• 172 1 MR. BEE: Tom Bee, Staber Industries. 2 I don't know if you are going to, if I missed 3 something here, but are we going to go intomore detail 4 on the consumer economic factors that you have on page 5 seven of your presentation? 6 MR. MCMAHON: Not at this time. The intention 7 is to discuss that in the consumer analysis later this 8 afternoon. 9 MR. BEE: Okay. 10 MS. NADER: Okay. Thank you. 11 Anymore questions for Jim? Jim, thank you 12 verymuch. 13 MR. MCMAHON: Okay. Did we want to address 14 the issues of the energyprice, future energy prices at 15 this time? 16 MS. NADER: Bryan, what was your thinking? 17 MR. MCMAHON: Future energyprices, the energy 18 price scenarios and in the '99. In the context of 19 National Energy Savings Study. 20 MS. NADER: Okay. 21 Who had questions or comments on the National 22 23 24 

### 25 Energy Study? Is that what we are talking about now? MR. BERRINGER: Yes. MS. NADER: Yes. Okay. Anumber of people raised their hands earlier today as having interest in
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• 173 1 the subject. Where are you now? 2 MR. ROSENSTOCK: Wait, on the National Energy 3 Savings spreadsheet. Steve Rosenstock, EEI. Or what, 4 what topic are you -- 5 MS. NADER: Somebodywith a mike restate that, 6 please. 7 MR. NADEL: Bryanwas just noting that we had 8 raised some questions about AEO '98. TheAEO '99 has 9 just come out. We want to take a look at it, but we do 10 have some concerns that, at least theAEO '98 has 11 overestimatedthe decline tobe expected in the 12 residential energyprices that effectively, technically 13 the same decline in residential, commercial and 14 industrial prices whenmost observers, most we have 15 seen on electricityprices, project greater declines in 16 the commercial and industrial and smaller declines in 17 ihe residential. We have not had time to look at the 18 AEO Year '99. We just got it a couple of days ago. 19 But, I hear through the grapevine that some, it started 20 to address those problems, but theremay stillbe. We 21 will look 22 23 on that? 

### 24 25 questions at it further and comment later.
I MS. NADER: Okay. Thank you. Anything All right. Thank you. MR. MCMAHON: I am trying to address that I thinkwere raised earlier.
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• 174 1 doesAEO '99 compare toAEO '98?And the other is what 2 is the range of scenarios for future energyprices that 3 ought tobe used? And theAdvisoryCommittee suggested 4 that at least three scenarios, a high, low andmid, 5 ought tobe used. 6 What we have done is assemblydata from a 7 variety of source ofenergypricedprojections for the 8 future. These are residential electricprices. They 9 have allbeenturned into 1996 cent per kilowatt hour. 10 This starts inthe Year 2000 and goes out to 2015. And 11 let's seewhat I canpickout inhere. 12 AEO '99 isblue with a circle. They are all 13 clusteredtightlytogetherhere. It runs through here
. 14 There is the dot there, runs through themiddle and 15 ends here. AndAEO '98 is the close triangles. It is 16 very close. The values are very similar, all the way 17 through. 18 So, AEO '99 is not significantlydifferent 19 fromAEO '98. It is a littlebit higherbut very 20 small. And obviously, these numbers are available. We 21 can give themto you. 22 The rest ofthe forecast fromAEO high and 23 low, economic growth, AGA forecast and GRI's forecast 24 all fairly tightlyclusteredhere together. Notmuch 25 difference.
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• 175 1 The two that are very different are from 2 different parts of the Department of Energy. This is a 3 policyoffice analysis of a high competition case for 4 restructuring. And the other one is EIA, at the 5 request of a committee of Congress, was asked to look 6 at a carbon tax scenario, veryhigh carbontax. And 7 that imposed a very highprices on the consumers. So, 8 this is the set of projections that I think are 9 currently on the table for consideration to select 10 scenarios for the future. The Department has not come 11 to any decision about what to do. And I don't know if 12 you want to say anythingmore about that. I guess at 13 this point it is open to comment. 

### 14 MS. NADER: Glenn Scheede. 15 MR. SCHEEDE: I may have misunderstood, Mr. 16 Nadel's comment, but I did want to point out that EIA 17 for once on residential prices has beenpretty accurate 18 as far as their 1998 forecast on residential prices. 

### 19 Residential prices have come down in 

### '98 for the first 20 eightmonths by an excessive threepercent comparedto 21 the comparable period, previous year. Residential 22 prices are coming down even faster than commercial and 23 industrial, so far in 1998. 24 So, for once, EIA and residential is about 25 right, for '98.
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• 176 1 MR. MCMAHON: Could you repeat that, Glenn. 2 You saidthat for once EIAis correct? 3 MR. SCHEEDE: On residential. However, they 4 managedto overestimate or excuseme, underestimate the 5 rate of decline in commercial and industrial rates. 6 Again, theyhave, theybasicallyexpect a one percent 7 per year decline inthe rates over a longperiodof 8 time. However, theydid correctly forecast that the 9 rates for residential woulddrop sharply in '98 10 comparedto '97, because they looked at what is 11 happening in California andthe Northeast. 12 MS. NADER: Okay. Steve? 13 MR. ROSENSTOCK: Steve Rosenstock, Edison 14 Electric Institute. 15 I can't count from here, it looks there is 16 about eight or nine differentpricing scenarios on 17 that. 18 MR. MCMAHON: There are nine. 19 MR. ROSENSTOCK: There are nine, okay. 20 Thanks. 21 Am I to assume that you are going to try to 22 include all nine on the future, on the future life 23 cycle cost spreadsheets? Because right now they are 24 four, AEO, GRI, I forget the othertwo, high growth, 25 low growth, you know, right now there is like four
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• 177 1 default ones on the, as I recall on the spreadsheets. 2 Are you going to tryto include all nine on future 3 ones? 4 MR. MCMAHON: Steve, I amjust the contractor. 5 It is up to the Department to decide which scenarios 6 are going to go on there. 7 MR. ROSENSTOCK: Okay. Question to the 8 Department ofEnergy, I guess, it goes for as well as 9 gas and oilprices, too, are you going to tryto 10 include for electricity, gas, and oil, like nine 11 different defaults scenarios? I willjust call that 12 for lackofbetter, nine different defaultsprojections 13 for each fuel source? 14 MR. BERRINGER: No, we have no intentions of 15 running all the scenarios, just choosing one ofthe 16 best, best ones to run. They are representative. 17 MR. ROSENSTOCK: Andwhen we will hear about 18 which ones are "thebest onesu. Steve Rosenstock, EEI. 19 MR. BERRINGER: And also as -- stated, the 20 high and low, so you have a range. 21 MR. ROSENSTOCK: So, Steven Rosenstock. Am I 22 to assume that what EIA has shown is going tobe the 23 high end of the range for electricity, gas and oil 24 assuming the carbontaxes overthe next, you know, 20 25 years or so?
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• 178 1 MR. BERRINGER: There is no decision, no 2 decision has beenmade at this time, but that is, I 3 mean, itwouldbe, I guess how likelythat carbon tax 4 wouldbe, if consider an all likelihood. 5 MR. ROSENSTOCK: Okay. Thank you. 6 MS. NADER: Thankyou. 7 Anythingmore before we let Jim sit down? 8 Thank you, thankyou, Jim. 9 Our next presenter is Steve Grover, who is 10 with QuantumConsulting. He is going to talkto us 11 about the Consumer Surveyhe is undertaking. I have 12 suggestedto himthat he go through his entire 13 presentation and any questions that come upbeyondjust 

### 14 a few, we shouldprobablydefer to later this· 15 afternoon, between 4:30 and 6:30. Steve willbe 16 available andwill have time to go through, go into 17 muchmore detail. 18 PRESENTATION BY STEPHEN GROVER: 

### 19 MR. GROVER: All right. Thank you. 20 All right. Well, this is the first time I 21 have been in front of this workshop discussingwhat we 22 are planning ondoing for the long awaited consumer 23 analysis portion of the study. 24 In the objectives of the consumerportion of 25 the analysis are to, the first is that we want to
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• 179 ' 1 determine which attributes are viewedby consumers as 2 beingthemost important in selecting a clothes washer
. 3 Once we determinewhich attributes aremost important, 4 thenwe canmove on to the next phase, which is 5 examininghow will changes in these attributes affect 6 the decision tomake a clothes washerpurchase. Or how 7 will changes inthese attributes shiftpurchases from 8 standardefficiencytohigh efficiency. 9 Alongwith this objective then, is an effort 10 to focus also on those attributes that aremost likely 11 tobe affectedby the standardand also we are 12 designing this, looking forward tobeing able to 13 calculate elasticitieswhich will thenbe useddown the 

### 14 road in some of the workthat LBL is doing. 

### 15 What we have then isbasicallya two prong or 16 a twomethod approach here for gathering data. All 17 right. So, againwith the objective of looking at 18 customers anddetermining their attributes, what we 19 want then is a nation wide sample of customers, 20 ordinarycustomers andwhat we want to do is first look 21 at focus groups to elicit from themwhat are the 22 attributes that aremost important. What are they 23 really look at when they aremaking a decision tomake 24 a purchase. Once we whittle this down to themost 25 important, we are looking at six to eight features,
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• 180 1 perhaps. Those attributes will be fed into the 2 ConjointAnalysis. And the ConjointAnalysis will be 3 used ultimately for a statistical analysis to determine 4 the elasticities and some of the marginal effects of 5 changes of attributes. So, I am going to go through 6 bothwhat is going on with the Focus Groups, as well as 7 describe inmore detail what goes on with the Conjoint 8 Analysis, which I am guessingnot as manypeople are 9 familiar with Conjoint as they are with Focus Groups. 10 But, to start offwith the Focus Groups, we 11 are looking at holding focus groups in five distinct 12 geographic areas. We want to focus on a national 13 representative sample of different regions in the 

### 14 country. And focus groups involved recruitingpeople, 15 having themcome together. There is a moderator. What 16 thismoderator will do is lead a discussion on what is 17 important inpicking out a clothes washer. All right. 18 So, the group will start with themoderator guiding the 19 discussion, trying to get unsolicited opinions on what 20 is important to clothes washers. So, basicallythe 21 first part of the sessionwill be groups are allowed to 22 decide what is important. 23 At the end of that time, once it appears that 24 most of the unsolicited characteristics have come, have 25 beenpresented, themoderator will suggest other
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• 181 1 characteristicsthat haven't come up. You know, for 2 example, ifwe go for anhour andnobodybrings up the 3 issue of top loadingversus front loading, for example. 4 Themoderator will throw that out and give, let the 5 group gauge their opinion. 6 At the endof this time, we will have each 7 personwithinthe focus group list out of all the 8 characteristics that have come up, rankthe list, sowe 9 can get an order, rank order ofwhat is important. 10 The way that we have designedthis, then, is 11 we are looking at 10 different groups, with somewhere 12 betweeneight and 12 participants. We are looking at 13 doing 10 sessions, two in each city selected in the 14 country. We have chosen five cities here, Washington, 15 these are our initial cities, anyway, Washington, 16 Madison, orMilwaukee area, Wisconsin, Dallas, San 17 Francisco andMiami. To get a nice spread across the 18 regions. 19 We willbe looking at collectinga diverse 20 group of samples, diverse group of respondents tobe in 21 the sample, all right. So, we want to get a broad 22 range of demographics, things like age, income, and 23 participants will alsobepaid $50.00 a piece. All 24 right. So, this willbe takingplace in January. Once 25 we determine then from this, by looking at the
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• 182 1 sessions, we will have a total of 100 people, more or 2 less for the focus groups used to feed into the 3 ConjointAnalysis. Okay. Andwhat Conjoint Analysis 4 is, it is somewhat similar to focus groups, in that 5 people are recruited and they come to a session, and 6 they are given a deck of cards to sort through. And I 7 have a set here. I have a set withme, anyway, I 8 should say. But, the deck of cards is each card 9 represents a different washingmachine. And on each 10 card the characteristics are listedthat are determined 11 from the focus groups. All right. So, what respondents 12 do is take these cards and rank them in the order of 13 theirpreference. They are told that they should sort 14 through the cards as if they are definitely going to 15 purchase a washingmachine and now they are sorting 16 through their available options at the store. All 17 right. So, themost preferredone goes on the top, the 18 least preferredgoes on the bottom. And so, again, 19 each washer is describedby washer characteristics 20 determinedby the focus groups. So, for example, if 21 the focus group's determination was that a price 22 savings, horizontal versus vertical axis orientation 23 and clothes washing temperatures are, you know, saythe 24 foremost important, each of those characteristics would 25 be on each cardwith varying levels os price, savings,
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• 183 1 axis orientation listed. And what people would do 2 then, is rank. And what this forces people to do then 3 is to evaluate which characteristics are important. 4 That as they would when they go to the store, 5 and they look at issues where, you know, I need this 6 higher capacity, I would like to save money onmy 7 electricity andmy water bills, but this is going to 8 cost me more. All right, so what is my cutoff point? 9 What is my tradeoff point? 10 Well, in the meantime, I foundmy cards. 11 These will be available for people to look 12 at. This is mock up of just some attributes. These 13 ranges are justmeant for an example. So, please, if 

### 14 you look at these, do not think by anymeans that this 15 what the study is going to look like, but it will give 16 you an example of what people have to do to sort 17 through the cards. 18 Okay. So, there is a variety of 19 characteristics listed on the card. People, the value 20 of Conjoint is that people have to trade off against 21 different equipment characteristics. 22 Once they have ranked the cards, then we ask 23 the question, given your situation today, given the 24 situation in your home, which of these options would 25 you actuallypurchase. And then they are given an
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• 184 1 additional cardthat we callpurchase card, where 2 peoplemake a cutoff at the rankedcards, to showwhich 3 ones given their situationtoday, theywould actually 4 purchase a washingmachine. So, for example, if you 5 justpurchasedone the daybefore you went to the 6 Conjoint session, youprobablywon't purchase any of 7 the other ones today. If you are thinking about 8 purchasingone in your future, some of tpese options 9 wouldbe attractive. 10 And this gives an idea of some ofthe 11 potential demand, whichbecomes important lateron. 12 As with the focus groups, we are looking for 13 a national sample here. We are going tobe recruiting 14 400 people across four different cities. We would like 15 the cities to coincidewith the ones that arebeing 16 done in the focus group, minus one city. But, this 17 helps, you know, preserves the regional nature ofthe 18 data. So, we are looking for 100participants across 19 four cities, Washington, Madison, San Francisco, and 20 Dallas. 21 We will be recruitingpeoplebyphone. 22 Peoplemaybe familiar with kindofmall incept 23 Conjoint. We willbe doing itbyphone. It allows us 24 to control a bitmore ofthe sample. It ensures a 25 random sample. One thing I do want tomake clear is
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• 185 1 that we are not looking for representative sample of 2 thepopulation. But, we are having a random sample 3 that will be stratifiedperhaps depending onwhat comes 4 out of the focus groups, but we are going tobe looking 5 at getting a goodrepresentative sample among some key 6 demographics. Perhaps, income, age, getting a good 7 male, female mix for the sample. And this will allow 8 us alongwith the regional data, to try anddo some 9 analysis across key demographic groups, to see ifthere 10 is anyvariationthere. 11 Also includedinthe sample willbe at least 12 a portion ofthepeople that recentlypurchaseda 13 clothes washer. And what this, what this will do is 14 get input frompeople that have recentlygone through 15 the spotprocess. And this will be fresh intheirmind 16 and theywill understand, you know, well, I just did 17 this, what was important tome when I was at the store. 18 We can't have an entire sample of this, because in one 19 sensewe are using this data to at least get a sense of 20 the likelihoodofmaking a purchase. So, we can't have 21 an entire sample ofpeoplewho havejustmade a 22 purchase. 23 With the, as with the focus groups, Conjoint 24 participants will bepaid a $50.00 incentive to 25 participate as well. And these are anticipatedtobe
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• 186 1 conducted in February. 2 Now, a littlebit about the Conjoint and I 3 apologize if I race through, what exactlygoes on in a 4 Conjoint session, but I willbemore than happyto 5 discuss it later. There are several different 6 advantages of Conjoint thatmakes it a very attractive 7 for this situation. 8 The first is that Conjoint is the one state 9 preference technique that really lays out different 10 equipment characteristics at the same time. And this 11 mirrors as closelyas possible the type of decision 12 process thatpeople go through inthe store. All 13 right. And this is contrast tomore of your, more 14 familiar surveyquestions where thephrasedquestion 15 is, you know, would yoube willing tobe pay $800.00 16 for a clothes washer that savedyou, you know, $50.00 a 17 year on your electricityandwaterbills? Orwould you 18 be willingtopayan extra $100.00 ifyou knew that 19 this washer would save you $20.00 a year in your 20 electricityandwaterbills? Those are kind of a take 21 it or leave approach and they are somewhat removed from 22 realitywhen they are done overthephone. In this 23 context whenpeople do Conjoint, when they are given 24 the time to really sit down and think about it, as if 25 theywere actuallypurchasing a washer. Andmy
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• 187 1 experience hasbeenthat this has helpedprovide 2 accurate results when we have usedthe results to try 3 andpredicatepurchases of appliances, especially 4 comparedwith actualmarket data. 5 Another good advantage of Conjoint is that it 6 allows a wide range of statistical techniques tobe 7 usedon the data later on. Ingeneral what is done is 8 that in the statisticalmodel, the rankings of the 9 cards are regressed against the cardcharacteristics. 10 So, ifwe hadthe same characteristics, price, savings, 11 axis orientation, and water temperature, as your four 12 characteristics, we canmodel how changes in those 13 characteristics change the rankings of the cards on the 14 individual level. 15 And what this allows us to do then later is 16 touse this, these estimates of the effect ofthese 17 attributes, canbe used in a varietyofways. We can 18 look at what is the likelihoodthat somebody is going 19 topurchase a clothes washer? We can estimate the 20 probabilityof giventhat, theydecided topurchase a 21 clothes washer, what is the likelihoodthat theywill 22 choose a standardefficiencyversus high efficiency 23 option. We candevelop a choice set of all different 24 types of clotheswashers, different capacities, 25 different axis orientation, different prices, different
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• 188 1 savings estimates. Whatever, whatever the 2 characteristics that were used in the Conjoint, could 3 be used to develop choice set. And we can look and 4 estimate purchases or estimate the likelihood ofmaking 5 a purchase of all these different characteristics. 6 So it really does provide a wide range of 7 opportunities. 8 And finally, once we estimate a purchase 9 probabilities, these can be calibratedto some of the 10 actual market data. So, what we can look at is we can 11 take the statedpreference nature of the data, andjoin 12 it with some of the actual observedmarket behavior. 13 And so, what we are taking, in essence what this is, is 14 that we are not asking the statedpreference data to do 15 toomuch. That we are taking away the tradeoff nature 16 that we learned, from the controls experiment and we 17 are grounding in real market data, and real purchase 18 estimates. So, we can get a sense of where we are 19 starting in themarket. So, we have a baseline 20 startingpoint that is ground in real market data. And 21 then we move forward from there. 22 Ultimately, as I alluded to, the Conjoint 23 Analysis will be used to estimate 24 25 Have I not changed this in the last three? I
am sorry, I apologize.
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• 189 1 We are on the last slide, bythe way. Off 2 inmy own worlduphere. 3 The Conjoint data will be used to estimate 4 purchaseprobabilities. As I mentioned, boththe 5 likelihoodofmaking any clothes washerpurchase as 6 well as we can look at high versus standardefficiency 7 orwe can take any one clothes washer configuration, 8 based on the characteristics inthe Conjoint, and 9 estimate theprobabilitythat that washerwill be 10 chosen. 11 Once theseprobabilities are estimated, then 12 we can look at how the likelihoodofpurchases will 13 change in a variety of differentmethods. And, again, 14 there is a lot of flexibility here. 15 One is we willbe looking at calculating 16 elasticities to feed in some of the workthat LBL is 17 doing. The other isjust looking at the estimated 18 probabilities and asking the question, well, ifthere 19 are two ways tomeet the standard, one is an axis 20 orientation, versus one is some combination of capacity 21 or water temperature, let's look at two comparable 22 equipment configurations that bothmeet the standard, 23 andwhat are, is there any difference and effect on 24 purchases, or estimatedlikelihoodofpurchase. All 25 right. So, we can address those types of questions.
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• -**----------------~---** 190 1 We can also look atjust individual 2 attributes. You know, howmuch do changes and axis 3 orientationeffectpurchases. How much does estimated 4 savings alone changepurchases? How much does dropping 5 the hot water option changepurchases? These things 6 will be evaluated individually. 7 Ultimately, we can also look at holdingprice 8 constant. That in a scenariowhere ifthere 9 presumably, how tophrase this. Ifprice increases off 10 theboard, across theboard for all options, thenwhat 11 we might want to do is holdprice constant ordrop 12 price from the equation andjust look at how do changes 13 inprobability, how do changes in other attributes 

### 14 affect thisprobability. All right, so we will look at 15 it two ways. One an absolute change, when we take into 16 account a change inprice. And second, holdingprice 17 constant across choices, andjust looking at how 18 changes in the other attributes that need tobe changed 19 tomeet the efficiency standard. How will those 20 changes affect the likelihoodofmaking a purchase? 21 And which are themore sensitive issues? So, all these 22 things canbe taken out from the Conjoint data. 

### 23 Okay. So, that is a briefoverview. There 24 ismore of a detaileddescriptionincludedinthere for 

### 25 the technical approach, that I wouldencourage you to
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• 191 1 read.· And then later on, I will be available to answer 2 things as well
. 3 MS. NADER: Thank you, Steve. 

### 4 Stevewill be available inthe roomacross 5 the hall from 4:30 to 6:30. And so, I askthat any 6 questions you have or comments you save until then. 7 We are running a littlebitbehind schedule. 8 MR. BERRINGER: Address any comments inthis, 9 that isjust a working group. Everybody is

-- 10 MS. NADER: Oh, all right. 11 MR. BERRINGER: For the record, I think they 12 shouldhave their questions addressednow. 13 MS. NADER: Okay. Briefly, then, please. 14 MR. SCHEEDE: I was going to ask a procedural 15 question. Will therebe official recordof that 16 meeting or ifthere will be, then I will savemy 17 question until then, ifnot, I would like to get two on 18 the recordnow. 19 MR. BERRINGER: We were not planningto have a 20 court reporter or anything at that meeting. So, this is 21 the opportunityifyou want toput it on the record. 22 MR. SCHEEDE: Okay. Two questions. 23 First one, how will the stagebe set, what 24 kind of data will youbeproviding in terms of telling 

### 25 thepeople inthe focus groups, and inthe Conjoint
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• 192 1 Analysis, what theirexpectations shouldbe as far as 2 energy cost savings orwater cost savings. How do you 3 set the stage for that, andwhat kind of data will you 4 be using to set the stage for that? How much of, how 5 are you going topredict savings? 6 MR. GROVER: Right. It is an interesting 7 questionbecause on one handyouneedto inform 8 consumers, especiallyifyou are trying to recreate 9 what is going on inthemarket. And on the otherhand, 10 you don't want to guide the discussion toomuch. We 11 will beprovidingbothwith, if cost and savings are 12 used as attributes, we will have probablythree, maybe 13 four different levels of savings levels andprice 14 levels. Basically, these levels are chosen to run the 15 range of standardefficiencytohigh efficiency. So, 16 what we want to do isprovide a price range, and a 17 savings range thatbound all the realistic options with 18 a littlebit of an overlap, just to be safe. So, you 19 know, savings wouldbe, themaximum, the zero savings 20 wouldbe for standard·efficiencyand themaximum 21 savings wouldbe, you know, whatever the highest 22 estimated savings you couldanticipate under any 23 situation for a clothes washer. 24 MR. SCHEEDE: Well, you will do something for 25 those ofus who are worried about the average cost, you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 193 1 are not reflectingmarginal costs, thinking that is too 2 high. Are you going to have some low end of the range 3 in terms of what the savings shouldbe expected? 4 MR. GROVER: The low end of the range of 5 savings wouldbe zero. It is going to be savings 6 relative to purchasing a standard efficiency. So, we 7 need to include standard efficiency characteristics in 8 the Conjoint as well as high efficiency 9 characteristics, because that still wouldbe an option. 10 And we need, what we want to do ultimately is gauge 11 what is the effect of the standard? So, the study has 12 to be set up to include both standard efficiency and 13 high efficiency equipment designs
. 14 MR. SCHEEDE: Okay. I will save the rest of 15 that one for later. 16 The other question, what kind of data do you 17 have available to show that the findings from this kind 18 of an analysis reflects the real world? And closely 19 related to that, is this the kind of analysis that 20 appliancemanufacturers and retailers actually use to 21 do market analysis? Could you comment just on those 22 two things? 23 MR. GROVER: Yes, this is something, there 24 is a broad range of literature available on this. Also 25 I have done some work with the utility evaluating
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• 194 1 appliances, specificallyairconditioners, using the 2 same thing, has predictedverywell. But, this is 3 something, another advantage of Conjoint is that when. 4 you do these cards, you can include features and 5 characteristics that do not exist. That, for example, 6 assume that there is, therewas there horizontal axis 7 machines available, we couldput that into the Conjoint 8 and still gaugepeople's opinion about these things and 9 figure out the trade off. And so, for that reason, it 10 is verypopular for companies to test products that 11 haven't existed, that don't exist yet, that they are 12 thinking about introducing. 13 MS. NADER: Okay
. At themike? 14 MR. GREGG: Yes, TonyGregg, CityofAustin. 15 I am not reallythat familiar with this 16 analysis, so I justhad a couple ofquestions. 17 One, the five areas you have picked, appear 18 tobe areas, at least frommy knowledge, that don't 19 have any aggressivemarketing efforts byutilities. I 20 might be wrong on onemaybe. But, at least four of 21 themdon't appear to. So, my sense is ifyoupickeda 22 population from those cities, will yoube getting, the 23 people will not have hadthebenefit ofmaybe some of 24 the otherreasons tobuyHaxismachines, ifthat is· 25 the intent ofthis survey. And I amwondering, you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 195 1 know, shouldyoube going to someplace like Seattle, as 2 a separate experience to see what the difference there 3 between Seattle and say somewhere, where there is no 4 programor severalplaces. 5 MR. GROVER: Well, two things. First, is 6 that we will bepresenting informationtopeople, 7 especiallyat the Conjoint, givingthem somebackground 8 on, you know, thepros andcons ofthe high efficiency 9 designs. So, theywill have some information available 10 addressing that. 11 As far as the cities go, theyhavebeen 12 pickedprimarilytomake sure that we have a good 13 spread across five different regions. And theyhave 14 alsobeenpickedtohelpmaximize our resources since 15 we have familiarity inthese areas. Andwe have people 16 working those areas. 17 My understanding alsowas that it is desired, 18 that there was some workdone inthe Northwest already 19 andwe wantedtomove towardsmore of a national 20 sample. Relativemerits of one cityversus another. 21 You know, we are not weddedto theseparticularcities. 22 But, we want tomake sure that it is a national sample, 23 though. 

### 24 MR. GREGG: I guess, I mean, relatedto that 25 is why do peoplebuyHaxismachines and I guess I am a
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• 196 1 little concernedthat thatmight_not come out just if 2 you look at features and costs. Yeah, that is the 3 primary sellingpoint, but you know wash wise in the 4 Northwest, you know, it is, I forget what one of the 5 slogans is but it is good for the environment, a better 6 world. Clearly, peoplebuy andtheMaytag is an 7 excellentmachine, but they are not buying itprobably 8 for the cost savings orpeople who buy Frigidairemight 9 be. So, I mean, there are other, I am not trying to 10 put
-- I amjust sayingtheprice is lower. 11 

### MR. GROVER: One thing that we want to 12 emphasize inthe Conjoint, is that brandnames will not 13 be used. Theywill be drivenjustbythe physical 

### 14 characteristics of the washingmachine. And we are 15 going to relyon the focus groups. And one thing about 16 this, is, you know, itwouldbe relatively easy for us 17 to, I believe come up with six or eight attributes that 18 we think shouldbe important, but, you know, assuming 19 that people go andhave some degree of awareness and we 20 informthemon, you know, environmental, the 21 environmental benefits ofthis, the savings. You know, 22 we don't want to dictateto themthat they shouldbe 23 purchasingthis because it is friendly to the 24 environment, ifthey, you know, eithertheywill know 

### 25 that from looking at the savings ortheywon't. But,
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• 197 1 we have tobe careful not to, you know, kind of skew 2 the results
. 3 MR. GREGG: Well, you know, I am not trying, 4 yeah, I amjust saying that the outside influencemay 5 not be therejust depending onwhat, itmaybe 6 different if you get something·from your cityor if you 7 believe in the energy starprogramor something like, 8 somemarketing effort that is going on. It is 9 different iftheyhave alreadygotten that from an 10 outsideparty, thenmaybe theyhear for the first time, 11 you know, what are some of the environmentalbenefits. 12 I amjust sayingmaybe there wouldbe a way to do a 13 littlebit inbothmarkets
. 14 MR. GROVER: Right. Okay. We will 15 definitely. 16 MS. NADER: Thank you. Bryan? 17 MR. BERRINGER: I wouldjust like to follow up 18 on what you are stating. What came out of the last 19 workshop, we have done a lot of research. It has 20 alreadybeen done. Obviously, there is Thelma, Bern, 21 andWashwise. So, we havebeen given those results. 22 What was commented at the last workshop is specifically 23 those are areas that have received rebates or theyhave 24 given themachines free. So, we are looking to do a 25 more national sample of an average consumer. And we are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 198 1 not looking in particular rebate being one. But, 2 obviously the focus groups, you know, we are not trying 3 to bias the focus groups at all. We want them to tell 4 us what is important to them. 5 MS. NADER: Thank you. 6 Steve and then the gentleman at the mike. 7 MR. BERRINGER: He was first. 8 MS. NADER: Oh, thank you. Correct, my 9 apology. 10 MR. BARZEL: Dan Barzel, Circuit City. 11 Bryan, I support your premise that it is 12 better to have an objective sample and to spite your 13 argument, Gentleman from Austin, you are not going to 14 get a true picture if you sample people who have been 15 marketed on a particularproduct. So, you are better 16 off, I think, with a more objective sample that hasn't 17 beenmarketed in a city that hasn't had a program 18 going, because it is going to give you a better 19 indicator. 20 One of the questions Glenn asked was do 21 retailers andmanufacturers use Conjoint Analysis. I 22 have seenmanufacturers use Conjoint Analysis to 23 develop what people will pay for particular features 24 and the trade offs among features. And generally 25 speaking, I would say, it is better to approach the
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• 199 1 problemofwhat people will payandwhether theywill 2 paymoney for a feature, through an objective study 3 like trade off, than it is not tohave any data orto 4 use conjecture or touse bias sorts of samples, where 5 you ask Themost difficult thing to determine when 6 you are in the situationis when theperson is standing 7 at the cash register, readytobuy, will they actually 8 take themoney out of theirwallet? And because you 9 can't reallymeasure that unless you are in the 10 positionthat we are in, which is actuallymaking the 11 sale. You have touse the nextbest thing, and I would 12 saythat this isprobably, if it is doneproperly, and 13 objectively, anduse a bigenough sample, and you are 14 doing it across enough tjifferent areas, this is 15 probablythe nextbest thing. 16 And whether, the question of whether 17 retailers use it ornot, probablynot. Becausepeople 18 who buythisproduct andwatch sales rates, canplay 19 with the elasticityeveryday. We can dropprices on 20 products and raiseprices onproducts independentlyand 21 seewhat happens to the elasticityor the volume. So, 22 we don't do any and I doubt that a lot of retailers do, 23 maybe one ortwo do it. But, it is a fairly expensive 24 thing to do when you can get it virtually for free by 

### 25 playing retail pricing across markets or across the
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• 200 1 country. 2 But, I think done properly, your approach 3 seems to be appropriate. 

### 4 MR. BERRINGER: Thank you. 5 MS. NADER: Thank you. Steve? 6 MR. ROSENSTOCK: Steve Rosenstock, Edison 7 Electric Institute. 8 Just to comment on the cities that I would 9 have to say, just kind of frommy recollections, 10 Madison, Wisconsin, well, I know that San Francisco, 11 California, Pacific Gas and Electric, please correctme 12 if I am wrong, I am pretty sure they are currently 13 issuing rebates for high efficiencywashingmachines
. 14 Ted, is that correct? 15 MR. GREGG: Yeah, in San Francisco. 16 MR. ROSENSTOCK: In San Francisco. 17 MR. GREGG: Plus 18 MR. ROSENSTOCK: Include San Francisco. 19 MR. BERRINGER: Excuseme, could youmake your 20 comments to themike, please? 21 MR. ROSENSTOCK: Sorry. 22 MR. GREGG: Yes, PGE does provide rebates for 23 purchasing an efficient clothes washers. And 24 additionally, some of the water utilities within our 25 service territory alsoprovide additional funding, as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 201 1 well as outreach inmarketing. 2 MR. ROSENSTOCK: So, in that case, it is kind 3 of a double whammy of both energy utilities as well as 4 the water utilitymarketing and promoting certain 5 product. I am just talking in terms of potential 6 consumer knowledge or bias in the focus groups. 7 I don't, itmight be inWisconsin. I don't 8 know if the utilities there. T know the, in the past 9 the utility inWisconsin had a pretty aggressive, 10 again, man type managerprograms, whether they included 11 washingmachines, I am not exactly sure. But, I 12 wouldn't be surprised inWisconsin that if they did. 13 In Washington, D.C., they did not. They had 

### 14 aggressive programs, Pepco did, but they did not 15 include washingmachines. 16 I just wanted to address that in terms of, 17 you know, in terms of city selection that, two out of 18 the five cities had or have aggressive programs 19 addressing

-- Definitely one possibly, probably two had 20 aggressive programs for this product. 21 MS. NADER: Thank you. At the mike? 22 MR. ECKMAN: Tom Eckman, Northwest Power 23 Plant Council. 24 25 Two comments. Coming from the Northwest, maybe this is going to sound a littleparochial, but I
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• 202 1 think it wouldbe at least interesting andprobably and 2 ofmerit to test the differences between an area that 3 has advocated these types ofmachines for some period 4 of time, and areas where theyhaven't, to see whether 5 there are differences in the values associated with 6 various characteristics of themachines. 7 And secondly, I think Dan Barzel's suggestion 8 that they do price elasticitytests weekly, in every 9 Sunday ad, wouldbe a really good way to get this 10 information with the empirical data, because I think 11 that is probably the right place to test it. So, maybe 12 something can be worked out with some of the retailers 13 to get that information
. 14 MR. GROVER: One comment about the cities. 15 I mean, in one sense when we get to the Conjoint 16 session, there will be informationprovided that in 17 essence will level the playing field as far as people 18 that have, came to the meeting aware, unaware of the 19 benefits ofhigh efficiency. 20 And the second is that given the amount of 21 promotion that has been going on nationally, that 22 awareness is not going to go away. And itmaybe useful 23 to look at, you know, if that is a substantial part of 24 the population, then you know, itmaybe useful to look 25 at them in the Conjoint session as well.
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• 203 1 But, that is definitely somethingwe will 2 take into consideration
. 3 MS. NADER: Okay. I saw a hand overhere. 4 Yes, Richard? 5 MR. BEST: Richard Best, Whirlpool 6 Corporation. 7 Since this is the onlychance we have to, you 8 know, publiclycomment on this and I hope, you know, 9 following your session later, we will stillbe able to 10 input to DOE on this. But, I hope we are not losing 11 focus of the whole intentbehindthis. And the intent 12 ofthis whole price elasticityissue is to determine 13 whether that price effect is on shipment volumes and 14 other attributes of this rule, when the rule takes 15 effect. And that is going tobe in the absence of 16 incentiveprograms. So, I think some of the comments 17 here were well in linewith that issue. Maybe itwould 18 be nice to know, but when we have a rule, it is going 19 tobebased on a non incentivemarket, the rule itself 20 andthose effects. 21 And the secondis I have a concern, our 22 companydoes a lot of these type of studies and 23 analysis andwe know verywell thebenefits as well as 24 thepitfalls ofconductingthese types of studies and 25 surveys. And one of thebiggestpitfalls is not
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• 204 1 looking correctly at the right attributes. And in this 2 case, the attributes are important, are those that 3 affect this rulemaking, not themanufacturers' design 4 decision on how tomeet those rules. And so, if you 5 are asking consumers do theywant to paymore, $50.00 6 more or $100.00 more for the door in the front or the 7 top, or what size knob theyhave or whether it should 8 be 22 inches wide or 28 inches wide, I think you are 9 missing the boat. The attributes will bemet by 10 manufacturers in different ways. And what we do in our 11 studies as to what, what the consumer really is willing 12 to pay for from the feature side. So, I wouldjust 13 like tomake that comment. 14 I think it is very important that this next 15 hour or two in your session that themanufacturers and 16 others convey their intent here and also convey to you 17 what those attributes are. 18 MR. GROVER: Yeah, one comment about that is 19 with the Conjoint, our experience has been that the 20 best tradeoff information, themost accurate tradeoff 21 information is, as you said, you need to include the 22 attributes that are important to the consumer, in 23 making the decision. And if, I would anticipate that 24 those would generallybe in line with the attributes 

### 25 that are likely to be affectedby the standard. But,
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• 205 1 in the sense that they diverge, if one of the 2 attributes that is being changed, such as perhaps knob 3 size, or, you know, whatever. Say, if that was meant, 4 you know, something that people don't care about, but 5 has a price effect, ifwe have to, if we include that 6 in the study and drop something that is important, more 7 important to the consumer, we are going to get suspect 8 tradeoff information. And it is going tomake it less 9 accurate. 10 MS. NADER: Richard? 11 MR. BEST: Just to reply to that. I think 12 early on in this rulemaking we moved away from the 13 design option approach to writing the rule. And all of 14 the data that was input for the analysis was put in, in 15 a form with aggregated data, but not with design 16 options. And a lot of this attribute study seems to be 17 moving back towards the design pption approach. No 18 one, there is no intent that I know of in this rule to 19 dictate tomanufacturers how they wouldmeet a rule. 20 MS. NADER: Thank you. Bryan? 21 MR. BERRINGER: Just to follow up, Dick, two 22 things. There will still be an opportunity to comment 23 up to February 2nd. 24 Second is we are not, we are looking at the 25 utility issues from that standpoint, too. And since
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• 206 1 that is a major thing, andtheprice. So, I mean, it 2 is really, it is not to get to the design option. That 3 is not our intent. And our intent is to answer the 4 questions that havebeenbrought up as far as the 5 utility issuemore or less. And also as far as the 6 price elasticity. 7 MS. NADER: Okay. At themike? 8 MR. POPE: Yes, Ted Pope with PG&E. 9 Afew years backwhen we had the Thelma 10 Research Project, we did sort of a quasi Conjoint 11 analysis as well as focus groups. And that data is 12 available. 13 But, I guess, Bryan is sort of confirmingmy 

### 14 question, the results ofthis will be usednot onlyto 15 understandpurchase intentbut also to try and 16 characterize consumerutilities, is that correct? 17 MR. BERRINGER: Yes. 18 MR. POPE: Okay. Just, one little nitty 19 thing that couldbe a bigger issue and that is we found 20 that in the focus groups andwe had a demonstration 21 where people came in onebyone andwere able touse 22 certain front loadingmachines for an hour. That their 23 perception of convenience, i.e. bending over, changed 24 radicallyin a very shortperiodoftime. And wasmore 25 negative when theyhadno idea ofwhat a horizontal
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• 207 1 axis front loadingmachine looked like. And when they 2 had a littlebit experience, in the case, a real owner 3 who is determining his utilityover time, that opinion 4 changedprettydramatically. And so, I am hoping there 5 is some waythat factor couldbe accounted for, if in 6 fact, during the focus groups, you know, front loading, 7 horizontal axis comes up as, you know, key attribute. 8 So, that is a real time sensitive factor there. 9 MS. NADER: Okay. David? 

### 10 MR. GOLDSTEIN: David Goldstein, NRDC. 11 Anotherpossible issue with the Conjoint 12 Analysis. You coulduse it for a lot of things in this 13 rulemaking. One of the things you coulduse it for is 

### 14 to analyze what**consume~s** would do after a standard is 15 inplace. And it is important that the consumers come 16 inwithpollutedperspective in the sense ofbeing 17 exposed to options that aren't going tobe there after 18 the standard reallyexists. In otherwords, it is one 19 thing to askwhat would you do if you had a choice 20 between a low efficiency and a high efficiencymodel, 21 and that clues you that there is a low efficiency, 22 cheapermodel that exists. And someone after a 23 standard and is going to walk into the showroom, they 24 probablyhaven't looked at a washer since the last time 

### 25 theybrought one 15 years ago, theywon't know what the
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• 208 1 price of the lowefficiencymodel was, andtheywon't 2 know what it looked like. And you canprobablyhandle 3 this through the studydesign, but it is important that 4 phantomchoices notbe available. Because choices 5 aren't transient. You canhave weird situations where 6 ifthe choice isbetweenAandB, a consumer choosesA 7 but ifyou expandthe choice to includeA, BandC, the 8 consumerprefers B. 9 

### MR. GROVER: One comment about that is that 10 the Conjoint is designed so we can estimate a tradeoff 11 of sayprice versus other attributes. And what we do 12 is provide a range ofprices that are likelyto 13 correspondwhat theywill see after the standard. So, 

### 14 ifwe haveA, BandC, you know, Ais the low, andCis 15 the highprice, as long as theprices that we use in 16 ourmodel arebetweenAandC, thenwe have already, 17 through the analysis, have already covered, you know, 18 how people react toprices within this range. And then 19 when we go to construct a choice set later on, you 20 know, that has in sense alreadybeen taken care of 21 through theprocess. Where we get introuble, is ifwe 22 plan for a range ofAto Cand then have D, which is 23 higher, you know, outside this range. And thenwe get 24 intomore shakyground trying to estimate outside of 25 what the studywas designed for.
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• 209 1 MS. NADER: At themike? 2 MR. LINARD: JackLinard. 3 I find it amazing that you have given this 4 whole presentationandnot oncementioned the 5 performance ofthemachine. The idea is to clean 6 clothes andcare for clothes. Nowhere do you indicate 7 whether any of these design options actuallywill 8 change thatperformance. I can tell you right now, 9 some ofthemyouhave alreadymentioned, will, in fact, 10 change the performancebut for better orworse. As an 11 example, we have known for years ifeliminatehot water 12 inlets in the washingmachines) you get great energy 13 figures, but your cleaningperformance is really 

### 14 horrible inmany cases. So, I wasjustwondering what 15 you are going to do to give an indicationofwhat the 16 tradeoffwouldbe in terms ofperformance. 17 MR. GROVER: That is a tricky issue that we 18 have discussed about how to approach this in the focus 19 groups. I mean, certainlythat is not going tobe 20 brought up during the unsolicitedpart ofthe focus 21 group. But, itwill be coveredduring the discussion. 22 And inone sense, that customers have a 23 certainpresumed.idea that I am going to go to the 24 store andthese will probably all cleanmy clothes, you 

### 25 know, andhold that as a constant. And then look at
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• 210 1 the other attributes. 2 To the extent that we can look at adding an 3 attribute inthe Conjoint that has somemeasure of 4 cleanliness, my concernwouldbe that that wouldjust 5 be a real hot button, thatmight bias things more than 6 if itwas left out. But, that ismy initial. 7 MS. NADER: Okay. Steve? 8 MR. NADEL: SteveNadel, ACEEE. 9 I had a couple of questions and a couple of 10 comments. I think you startedgetting to the first 11 one, which is towhat extent will this Conjoint 12 Analysis give you such things as abilityto clean 13 clothes, wear andtear on clothes. Those are some key 14 attributes for some of the high efficiencymachines. 15 And ifyou ignore them, you know, you are significantly 16 I thinkbias inyour results in one way. 17 MR. GROVER: The Conjoint is going tobe 18 restrictedto themost important attributes. And as we 19 add attributes and levels of attributes, then the 20 number of cards thatpeoplehave to sort though, 21 quicklybecomes overwhelming. So, we like to limit it 22 to probablyabout, you know, four to six 23 characteristics with 16 cards. And thenwe can also 24 add a separate trade, linking the trades together. 

### 25 There are techniques for that, where we can incorporate
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• 211 1 additional attributes. 2 But, again, the intention of this is to, you 3 know, once, once customers aremade aware of during the 4 focus groups, we don't want to dictate, you know, we 5 don't want to dictate what attributes they view as 6 important. And if they are aware that, you know, the 7 high efficiency design willmake clothes last longer, 8 once they are given that information, if they rank that 9 20th, then we, you know, that is the point of the focus 10 group, that, okay, they acknowledged that it is 11 important, but it is not nearly as important as other 12 things, then it won't make it to the Conjoint. 13 

### MR. NADEL: So, if 

### I understand you, you said 14 you are open to the consumers if they say cleanliness, 15 or wear on clothes, that will include it. 16 

### MR. GROVER: Yes. Definitely, that is the 17 whole reason for the focus group. 18 

### MR. NADEL: Right and likewise, there is going 19 to be a whole list of factors that you are going to 20 mention at the end, to see whether they are important? 21 

### MR. GROVER: Just, anything that is left 22 out, we will have like, a universal choice set, and you 23 know, I think it is conceivable that we might get 24 through a focus group where people don't consider top, 25 you know, horizontal versus vertical. And that is
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• 212 1 obviously key. And it needs tobebrought out. 2 MR. NADEL: Okay. Asecond question, is have 3 you readthe Thelma Studyresults and as Tedpointed 4 out, the impacts of consumer familiaritywith the high 5 efficiencymachines on their, their acceptance of 6 different designs. Andhow do youplanto address 7 those things? Do you think a basic explanationwill be 8 adequate to address that factor or is somethingmore 9 going tobe needed? 10 MR. GROVER: As far as familiarity with the 11 designs, we want to have photographs of the different 12 designs as well as, ideally itwouldbe nice to have, 13 you know, the actual machines so they could look at. 14 But, given the five areas that is, I believe, going to 15 beprohibitivelyexpensive. But, a close secondto 16 that w9uldbe havingphotographs available as well as 17 pointing out some of themore obvious advantages and 18 disadvantages, for example, ofhorizontal axis, you are 19 not ieallyable to soak your clothes, that type of 20 thing or add clothes inthemiddle. 21 MS. NADER: Okay. We are running seriously 22 short of time. And so, I want to ask if any ofthe 23 questions and comments that you still hold, are things 24 that we could cover in the sessionwith Steve, that 25 begins at 4:30?
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• 213 1 Yes. Bryan, you have been standing there for 2 awhile
. 3 MR. THOMPSON: Just a definition. 4 In some of thepublic information I see 5 horizontal axis and front loadingbeingthe same thing 6 and I thinkthere is at least one, maybemoremachines 7 that do top load and are horizontal axis. So, I think 8 definition there needs cleanedup a littlebit in some 9 of the public information. 10 MS. NADER: Thank you. Anything elseburning 11 that can't wait until 4:30? 12 Okay, great, thank you. Oh, I was almost 13 there
. 14 MR. THOMPSON: This isjust a question 15 regarding, you are going tobe doing, this is Mike 16 Thompson, Whirlpool. 17 You are going to doing two analysis, it 18 sounds like. You are a focus group and you doing a 19 Conjoint, is that correct? 20 MR. GROVER: The focus group is thepre cursor 21 to the Conjoint. So, there is two, two analysis, but 22 really the focus group is onlybeing done to feed the 23 ConjointAnalysis. 24 25 MR. THOMPSON: So, is onlybeing done to what? MR. GROVER: To feed into the Conjoint
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• 214 1 Analysis, to help dictate which attributes are going to 2 be used
. 3 MR. THOMPSON: What I was leading up to, is 4 then, so one supplements the other. It is not a 5 waitingprocess, I am going to givemore weight to one 6 side of this analysis as far as the focus group over a 7 Conjoint analysis? 8 MR. GROVER: No, it is, the focus groups are 9 just designed to trimdown that list, without, you 10 know, letting the average customer decide what is 11 important. So, we are not really guiding the analysis 12 forward that way. 13 MR. THOMPSON: So, what you going to be left 14 with is a list of attributes after the focus groups 15 have finished. 16 MR. GROVER: Right. 17 MR. THOMPSON: Okay. That answer the 18 question. 19 I had one other comment, and I agree with the 20 gentleman in the back of the room, from Unilever, that 21 attributes ultimately are performance. There is stain 22 removal, there is soil removal, there are lint removal, 23 they are gentleness on clothes. I am going to presume 24 that that is going to come out somehow in this focus 25 group. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 215 1 MR. GROVER: Yeah, to the extent that we can 2 categorize the differences ofperforman6e, we will 3 definitelybebringing that out. We want, again, what 4 we want to do is, you know, have as much of a hands off 5 approach as possible for these focus groups. And the 6 only role of themoderator is going to bemake sure at 7 the end of the focus group, that nothing has been left 8 out. 9 MS. NADER: Okay. So

-- This really can't 10 wait until 4:30. 11 MR. ROSENSTOCK: Just a process question. 12 Will stakeholders be allowed to view them, to be in 13 the, behindthe one waymirror? 14 MR. GROVER: Yes, one of the reasons why we 15 choose Washington was to have an opportunity for people 16 to at least, you know, OCS, and what not, to observe. 17 And to the extent that people are located in any of 18 the, want to travel to the other cities, you aremore 

### 19 than welcome for both Conjoint and focus groups. 20 MS. NADER: Okay. Great. Thank you. 21 MR. GROVER: All right. 22 MS. NADER: What an interesting topic. 23 We are going to take a break. I am going to 24 ask that if it canbe a briefbreak. We are running 25 behind. And we have several other topics to cover in
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• ---**---------------~---------------** 216 1 the last hour or so of ourprogram. 2 Traditionally it is a 15minutebreak, canwe 3 get awaywith a 10minutebreakhere? 4 (Whereupon, a short recess was taken.) 5 MS. NADER: We have a great deal yet to do. 6 Mike Rivest ofArthur D. Little is going to talkto us 7 about manufacturer impact analysis. 8 PRESENTATION BY MIKE RIVEST: 9 MR. RIVEST: Thankyou. I apologize to those 10 of you who were here yesterdayandhave toheardme 11 again. Yesterday afternoon I coveredthe GRIM 12 spreadsheet in great detail. And what I plan ondoing 13 this afternoon ismore talking about some of the 14 objectives of themanufacturing impact analysis and 15 also some of themethodologies and the overallprocess. 16 And I will not be focusing somuch on the GRIM 17 spreadsheet. 18 My presentationhas five sections. Quickly 19 an overview of the framework. Talking a littlebit 20 about the industryprofile, the industrycash flow, a 21 subgroup impact analysis, which is includedas part of 22 the analysis. And I will be concludingwith some next 23 steps interms of what it is we will be doing in the 24 upcomingmonths
. 25 To be able to save time I would askthat you
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• - -------------------- 217 1 .keep your questions to the end of each ofthese 2 sections
. 3 Just a reminder, theManufacturers Impact 4 Analysis has its eye on twomajor elements. First of 5 all, we are interestedin looking at the impacts ofthe 6 rule on themanufacturers oftheproducts. Also, we are 7 interestedinworking closelywith the Department of 8 Justice and relatingto themany informationthat we 9 gather during our analysis with regards to the 10 competitive impacts ofthe rule. 11 TheManufacturer ImpactAnalysis is reallya 12 three stepprocess, ifyouwill. And it isvery 13 closely interlinkedwith every sectionof the analysis
. 14 We havebeenworking on the industryprofile for quite 15 some time now. We have, yesterday I presentedwith the 16 GRIM Spreadsheet some preliminaryindustrycash flows. 17 Andwe willbe working through an interviewprocess on 18 a subgroup analysis anddoing somemore subgroup level 19 analysis. 20 The industryprofile is not per se discreet 21 tasks. It is a matter of gatheringdata that is 22 relevant to the rulemaking, as the sections and as the 23 information is needed into the analysis. There is some 24 information on the industrythat ispresented in 25 Chapter 3 ofthe TSO. But, also the industryprofile
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• 218 1 was arrived at, at determining suchthings as the 2 industrycost structure, whichwe used in setting some 3 of the costparameters inside the GRIM model. Some of 4 the shipments data, historical shipments, that Jimwill 5 be using as a startingpoint for forecasting future 6 shipments. We have also done, used the industry 7 profile to arrive atbaselinemanufacturer and retail 8 prices andmark-ups. And some product characteristics 9 andmarket shares, which are discussed inChapter 3. 10 The industrycash flow isbased on the GRIM 11 model. The GRIM model is a very conventional 12 evaluationtool that isused for evaluatingwhole 13 companies, or capital investment decisions. And the 

### 14 conclusions of the cash flow analysis arepresenting a 15 before standards and after standards industryvalue in 16 terms of a net present value. 17 I like to thinkof the GRIM as simply a 18 sophisticatedcalculatorthat takes a series of 19 manufacturing costs, shipments, prices and financial 20 information, to compute cash flows. And this is done 21 both for a base case and for standards cases, for each 22 standard level under consideration. So, for the 23 present time, since all efficiency levels are under 24 consideration, the GRIM that we have preparedhas all 25 efficiency levels.
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• 219 1 In our preliminarybase case industry value, 2 if you will, that I used to set up the GRIM, we 3 obtained information on the existingmanufacture price 4 of clothes washers from the AHAM fact book and the 5 current industrial reports. Manufacturing costs were 6 reverse calculated from the prices, using industry cost 7 structures that we were able to do, using Census and 8 manufacturer and lO(k)s. 9 Similarly, we developed financial information 10 representative of the overall industry from financial 11 information that is publicly available. 12 Very important consideration is the shipments 13 forecast. For the present time we have shipments 14 forecast which is basically a slow growth of 2.3 15 percent. Eventually, our purpose here is to make sure 16 that the same shipment assumptions that are used in the 17 National Energy spreadsheet, are also used in the GRIM 18 model. 19 As I mentionedbefore, we were able to obtain 20 manufacturer prices from both the AHAM Fact Book and 21 the Census, the current industrial reports. We see 22 that the prices are very flat for many years. And 23 these are nominal dollars. So in real dollars they 24 wouldbe going down. 25 We have the industry cost structure from the
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• 220 1 prices. We allocatedthe cost inthebase case, based 2 on our analysis ofthe industry
. 3 Our financial informationwas also obtained 4 from the study of financial information. And these are 5 the values that arebeingusedcurrently inthe GRIM 6 model for thebase case. And I reviewed these 7 yesterdaywith thepeoplepresent. 8 Formy preliminarybase case, if you will, I 9 just createda scenariowith a small increase of 2.3 10 percent, just a straight regression over thepast. I 11 wanted to create a scenario and start running some 12 parametric evaluations on it, just to see what kind of 13 numbers we are coming at. 

### 14 Eventuallythe intent is that the GRIM 15 spreadsheet willbe linkeddirectlyto the NES. So, 16 the assumptions we make about shipments, before and 17 after standards, any assumptions we would like tomake 18 about, for example, thepercentage ofhigh efficiency 19 clothes washers andthebaseline would translated 20 directly from the NES to the GRIM spreadsheet. 21 Order ofmagnitude number, well, betterthan 22 order ofmagnitude, a good first cut in industryvalue 23 we obtainedis that the industry is currentlyvalued at 24 about $885million. I thinkthis is significant in 

### 25 that when we look later at the investments we are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 221 1 talking about, to reach some ofthehigh, higher 2 efficiency levels, we will see the comparative to the 3 industryvalue. The investment required are as large. 4 So, we are talkinghere about investing asmuch as the 5 business is alreadyworth. 6 To adapt the GRIM for this clothes washer 7 rulemaking, we havemade somemodifications and some 8 enhancements, ifyou will. Andmost of those were done 9 primarilyto account for change in shipments, to 10 account for growth, finally. 11 And some of the assumptions that were changed 12 from the original GRIM are that the SG&A now is a 13 function of revenues. It is not fixed. Depreciation 

### 14 and ordinarycapital expenditures to thebase case are 15 also allowed to fluctuate with revenues. 16 And also the data gathering exercise that was 17 done, that done onperunit costs. And we have tomake 18 sure that when our actual investments aremade, that 19 theprecise shipment numbers are used in the given year 20 that the investments aremade. So, ifthe rule is 21 implemented in 2003, then the number of shipments, it 22 will no longerbe sevenmillion. So, the investment of 23 800million, for example, is scaledto the number, to 24 the actual shipments inthat year. 25 For the standards case, we created
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• 222 1 incremental costs using theAHAM data submittal. 2 Manufacturerprices, after standardsmanufacturer 3 prices are obtainedbyputtinga mark-up on full 4 production costs. And we ran scenarios at various 5 markups and I will show some ofthepreliminary 6 results. 7 Financial information, the industry 8 statistics for standards case are the same as thebase 9 case. 10 And also veryimportant to note, in all the 11 results I will showyou, we are assuming that there 12 will be no decrease in shipments iftheprice of, if 13 there is an increaseprice ofhigher equipment, higher 14 efficiencyequipment. Now, we know that is wrong. So, 15 when we have results of the elasticityvalues from the 16 consumer survey, the new shipments values will reflect 17 these elasticityvalues. And we know that canbe quite 18 significant. I was looking at the analysis that was 

### 19 prepared for the earlierrulemaking andfor an increase 20 inprice of about $200.00 shipment fell, shipments fell 21 byabout 10percent. So, that is quite considerable. 22 These arejust showing theportion ofthe 23 GRIM spreadsheet that contains theAHAM data submittal. 24 Four ourbaselinemodel, we calculated 25 currentlythe industry applies andmark-up of 1.35 over
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• 223 1 the full production cost. For the after the standard 2 scenario on the incremental cost ofmeeting the 3 standard, we have applied a number of different 4 scenarios. Anumber of different mark-ups. Some of 5 them, want to point out that a mark-up of 1.18 was 6 used to calculate the life cycle costs and I ran this 7 preliminarymodel at 1.18 to see what would be the 8 situation for the industry, if that was, in fact, the 9 mark-up that was obtained. 10 Currently, as I mentioned earlier, some of, 11 one of the assumptions that we change is, that SG&A 12 will now be allowed to track the growth in the 13 business, if you will, the growth in revenues. 14 Another assumption that is very critical and 15 very sensitive to the timing or the delay in 16 introducing a standard, is how the capital assets are, 17 howmany is expended for the new capital assets. And 18 there is a table in the GRIM which shows for any given 19 number of years, between the actual announcement of the 20 standard, and the year that the standardbecomes into 21 effect, how themoney, the capital expenditures are 22 spent. And I wouldjust like to point out that this is 23 the table from the original GRIM. And I would like to 24 have comments on how I can, if change the schedule of 25 cash out lays. Just from looking at it, and I don't
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• 224 1 want to go in great detail right now, it seems that a 2 manufacturer who has eight years to buildup his 3 capacity, to meet the standard, wouldprobably not 4 spend 16 percent of that capital, one, two, three, 5 four, five, six years, before the standard is in 6 effect. So, I am just questioning some of the original 7 assumptions in the GRIM and trying to see ifwe can 8 improve on them. 9 That is also true of R&D expense. 10 I ran the current version of the GRIM to see 11 what sort ofmark-ups we needed on the incremental 12 manufacturing costs in order to accomplish certain 13 outcomes. And here I wanted to see what wouldbe the 14 mark-up I would need at the different efficiency 15 levels, to recuperate, tomaintain the exact same 16 industry value of 880 million. And what I noticed in 17 running these scenarios is that the mark-up needed is 18 very sensitive to the proportion of fixed costs 19 relative to the total costs. So, that is reallywhat 20 we are seeing here. And I graphed the ratio of fixed 21 to variable cost to the change, to the requiredmark-up 22 tomaintain the industryvalue. 23 I also tried to see if we couldput abound, a 24 bound on the manufacturermark-up, back calculating 25 from some potential outcomes. One of those outcomes
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• 225 1 beingwhat sort ofmark-upwouldwe need tomaintain 2 ourNPV, ifyou will. Thatmightbe ourhigherbound
. 3 There wouldbe absolutelynomanufacturing impact from 4 a higher standard. And the lowerbound, whichwould 5 represent themark-upwe wouldneed, just, themark-up 6 that would result in the industry, losing all of the 7 capital expenditures tomeet this rule. 8 And what I want to showhere, this is the 9 magnitude ofthe investments tomeet the efficiency 10 levels. So, for example, it costs about 800million 11 dollars tomeet efficiency, in fixed cost, tomeet 12 efficiencylevels eight andnine. And themark-up you 13 wouldneed on your incrementalproduction cost is in 14 the area of 1.25. 15 I ampointingthis out becausewe ran the 16 life cycle costs at 1.18. And what this is saying is 17 at 1.25, we lose all of our investments. And ran the 18 model at differentmark-up assumptions, 1.18, 1.27 and 19 1.35. 

### So, 1.35 represents what we are currently 20 observing as themark-up over full production costs. 21 And we see that the reduction inthe industryvalue is 22 reallyproportionally, is reallytrackingthe 23 proportion of fixed to variable costs. And then I ran 24 themodel at 1.18, and lookedat the industryvalue. 25 And as you can see, as you getmore stringent, the
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• 226 1 industryvalue drops dramatically, to an unsustainable, 2 you know, muchbelow zero industryvalue. 3 We have createda secondvenison ofthe GRIM, 4 which is able to analyze themanufacturing effects of a 5 two tier standard. One of the caveats there is that 6 the assumption is that the costs ofmeeting those 7 standards wouldbe additive. So, when you do an 8 analysis with the two step, the two step GRIM, we have 9 limitedyour choices as a first choice in the zero to 10 25 range, and a second choice inthe 35 to 50 range. 11 And the GRIM assumes that the investments done tomeet 12 the 20 percent efficiency standards will be depreciated 13 overthe length of time that that first phase is in 14 effect. And that all new investments will have tobe 15 made to recover, all new investments will have tobe 16 made to have that second standardbemet. 17 It is our intentionthat we will use the full 18 range of data that was submitted formanufacturing 19 .costs. We willbepreparing a revisedversion of the 20 GRIM, that insteadofhaving onlythe shipment weighted 21 averages, we will have all thepercentile values. That 22 will allow us to do scenario analysis, comparing the 23 impacts of 25 percentile costs fixed or variable, with 24 shipment weightedor 75 percentile. So, we will get an 25 idea of thepotential distribution ofthose impacts.
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• 227 1 Also we would like to workwithAHAM tobe 2 able to run full Monte Carlo analysis on the actual 3 data submittal andpresent the results. But, we would 4 be doing that onlyonce we have the shipments from Jim, 5 that will be used, the final shipments from the NES 6 model, just to cut down on the burden. 7 And this figure just shows how we wouldbe 8 using the cost and shipments which are residing at 9 AHAM, calculatingthemanufacturing impact separately 10 for eachmanufacturer and aggregating those into an 11 industry cash flow, which wouldthenbe part of the 12 public record. 13 Are there any questions on the last series of 

### 14 slides or observations or is it toomuch, did I rush 15 through it too quickly? 16 I will push on. 

### 17 Now, the secondphase, ifyou will, of this 18 analysis is to take the industry cash flow that we have 19 producedandto visit eachmanufacturer individually 20 and get a sense of how representative that industry 21 cash flow is to each oftheirparticular situations. 22 And tobe able to do that we will be equipped 23 with two tools. We will have the industry cash flow 24 andwe will also have an interviewquestionnaire. And 

### 25 we have provideda draft ofthe interview
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• 228 1 questionnaire, with the materials to this workshop. 2 And what we are hoping to do within this comment 3 period, and in the subsequent weeks, is to refine the 4 questionnaire. What we are trying to do is capture 5 all, as many of the potential issues as possible in the 6 questionnaire. So, then when I am conducting the 7 interviews, we cover all potential and important 8 issues. 9 MS. NADER: Mike, I am sorry to interrupt, but 10 we have an opportunityhere. Dan Reicher is with us 11 and has a very short period of time that he can spend 12 with us. So, may I ask your indulgence and take a 13 break from your presentation for just a few minutes? 14 MR. REICHER: Yes, I apologize to break in 15 right now, but wanted to 16 MR. BERRINGER: Could you step at the podium, 17 please, themicrophone. 18 MR. REICHER: Yes. I am Dan Reicher, 19 Department of Energy. 20 I apologize for breaking into themeeting. I 21 am theAssistant Secretary for Efficiency and Renewals 22 and I, first of all, wanted to thank you for coming 23 today. I know it has been a long, but I hear it has 24 been quite a fruitful meeting. And I wanted to 

### 25 emphasize to you howmuch we appreciate this input
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• 229 1 because as you all know, we are in themidst of 2 reinventing this process and this is one of the early 3 rulemakings out of that reinventionbox. And we want 4 tomake sure that we take the right steps that will 5 lead to what we are very committed to, which is putting 6 out this rule by September of 2000. We are verymuch 7 committed to that, committedto that schedule. And we 8 will do all we can to get there. We are working on 9 both the policy side andthe budget side tomake that 10 happen. And it ismeetings like.this where we can 11 ventilate issues early, we can get them resolved and we 12 canmove forward. That I think is extremely important. 13 I think that the role of theAdvisory 14 Committee on appliance efficiency standards, which some 15 of you aremembers of andmany of you have attend the 16 meetings, also has helpedus move this forward and help 17 shape some of what is being discussed today. I know 18 there are some issues that come out of that Advisory 19 Committee that you are taking up today, and I know 20 there are some differences of opinion, but from what I 21 am told, we are making some progress. Andpeople, 22 increasingly, are comfortable with the process that we 23 have put inplace to try tomove this standard setting 24 forward, along with the other threemajor ones that we 25 are working on. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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----- ---- 230 1 So, I am, again, thank you for beinghere. 2 Thank you for your commitment to this. Our commitment 3 to you is to run a very fair and very open process, to 4 take all points of views, to do as much analysis as we 5 can realisticallydo to get answers to things, and to 6 be timely in how we conduct ourselves and stickto our 7 schedule, so that we can put out a standard that has 8 got as much support as itpossibly get by September of 9 the Year 2000. 10 So, thank you. 11 MS. NADER: Thank you. 12 MR. REICHER: And happy holidays to you all. 13 MR. THOMPSON: I will just quickly review 14 some of themain topics of the interview questionnaire. 15 We will be interested in having a better understanding 16 of the current organizational characteristics of the 17 various firms, understanding the industry 18 infrastructure, buyers, suppliers. And in any way in 19 which these might be influenced or impactedby the 20 rule. 21 We will be conducting or comparing the 22 manufacturing cash flow analysis performed for the 23 industry, with any differences or significant variances 24 withparticular situations, existing at different 

### 25 manufacturers.
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• ---- - ----------------- 231 1 We will, we are interestedinunderstanding 2 any competitive impacts that the rulemayhave on 3 various firms. 4 Thebig issue inthe ballast, I am not so 5 sure here, the employment impact assessment, how would 6 the decision to go to a more stringent standard impact 7 manufacturing incertain facilities, potentially 8 closing some or opening others. 9 Also looking at the impacts ofthe rule on 10 any of your current assets. Would some of your current 11 assets be somehow stranded as a result of this rule? 12 And this couldapply also to ofyourmajor suppliers. 13 The next few slides onlydetail a littlebit, 14 each of the topics that I justbrought up for the 15 survey. And I invite you readthemat your leisure. 16 But, most of all, to comment back onhow I can improve 17 that questionnaire. 18 One very important distinction, orvery 19 important element of the subgroup analysis is tobe 20 able to reportbackhow somemanufacturersmaybe 21 impactedmore or less orjust differently from other 22 manufacturers. And in so doing, I hope tobe working 23 withthe various groups ofmanufacturers tobe able to 24 report those impacts in a way thatpreserves 25 confidentiality, but shows a clear signal to DOE's
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•**--------~---------** 232 1 decisionmakers, as to how that average manufacturer, 2 how that average industry impact may, in fact, fall 3 more heavily on some groups rather than others. 4 MR. JONES: Yes, Michael, Earl Jones here, 

### 5 G.E. 6 Do I understand that in this section or this 7 section of yourpresentation, focuses on sort of 8 qualitative issues? 9 MR. THOMPSON: That is correct. 10 MR. JONES: That this results in some kind of 11 a narrative. 12 MR. THOMPSON: Absolutely. 13 MR. JONES: With supplements, what comes out 14 of the first piece. 15 MR. THOMPSON: Right. The first piece is 16 strictlyby the numbers. And we are looking at overall 17 industry aggregate impacts in terms of number of total 18 investments in dollars. And the potential impacts on 19 dollars for the overall industry. 20 The secondphase we move into one on one 21 interviews, and then we explore how those impacts may 22 be different, the quantitative impacts maybe different 23 for them. But, more than that, we would like to get 24 intomore qualitative impacts or assessments. Such as 25 decisions to invest or not to invest in new product
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• 233 1 lines, you know, leave thebusiness entirely, things 

### 2 like that. And the result willbe, the reported impacts 3 wouldbe the industrycash flow analysis. Ifwe can do 4 itwithout confidentialityissues, we couldreport a 5 cash flow analysis for a subgroup ofmanufacturers, 6 whichwouldbe impacteddifferently. And then there 7 wouldbe a narrative whichwould follow the outline of 8 the questionnaire. And that is why I urge you to spend 9 considerable timemaking sure that the questionnaire 10 covers all the issues. 11 David? 12 MR. GOLDSTEIN: Yes, DavidGoldstein, NRVC. 13 Hopefullyyour discussions withmanufacturers 14 can help to reconcile quantitatively a disconnect that 15 seems tobe comingup from thepreliminarywork that 16 you have presented, which is that yourpreliminary 17 analysis suggests that the industry is worse offby 18 producing lots ofproducts at a high efficiency level. 19 Yet, companies that areproducingmoderate amounts, the 20 sameproducts, at the same efficiencylevels, are 21 reporting toWall Street that they aremaking lots of 22 money on that. 23 MR. THOMPSON: Letme give youmy two second 24 explanation for that
. 25 Themanufacturers will invest where there is
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• 234 1 a competitive advantage tobe gained. And thatmaybe 2 very short lived competitive advantage. But, to invest 3 in onlymeeting the bareminimum, I think it is 4 different. So, I don't thinkthere is a disconnect 5 ihere. I think there isjust a different phenomena. Do 6 you understand? I mean, there are -- 7 MR. GOLDSTEIN: I don't think that is a 8 sufficient explanation. I thinkthat if anything it 9 should cut the otherway, because ifyou have a 10 standard, a manufacturer can count on hismarket share 11 being relativelypredictable, relativelythe same 12 levels, and so that you know that if youmake an 13 investment, you canpredictproduction levels and you 14 will get it right. Whereas, in this market place, you 15 make an investment, you are taking a wild guess at 16 production levels. You couldbe way off, andbeingway 17 offby over optimistichurts you. 18 So, the additional certainty in standards 19 wouldmake that actuallymore profitable. So, there 20 are factors that cut both ways. It is not the same 21 situation, but I thinkthe interviewsmight be able to 22 help you look at the quantitative analysis. That is 23 you ought to be able to start off with the industry 24 quantitative analysis, and turn a couple of levers and 25 knobs to be able topredict what has alreadyhappened
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• 235 1 out of themodels. And then

-- 

### 2 MR. THOMPSON: I agree with your general 3 statement that there is a lot of value in the interview 4 process, which will help to understand a lot of the 5 quantitative phenomenon. In terms of the exact 6 example, I guess we couldgot a great length. 7 MR. GOLDSTEIN: Yes, the example was 8 MR. THOMPSON: Okay. 9 MR. GOLDSTEIN: I wasn't trying to get too 10 specific. 11 MR. THOMPSON:. Right. 12 MR. GOLDSTEIN: The other issue concerns, you 13 have analyzedthe impacts of the standard as if it were 

### 14 real simple. You set a standard in a given date, 15 everyone gears up right before it, theymeet the 16 standard that is all that happens. This product isn't 17 going to work that way. Because a couple of companies 18 have alreadymade investments that at least, partially, 19 I would claim, are in anticipation of theirbeing a 20 standard. 21 MR. THOMPSON: Have you been talking to 22 Charlie Stevens? 23 MR. GOLDSTEIN: No, sometimes ideas arejust 24 so obviouslyright, that people

-- 25 MR. THOMPSON: No, we -- David, we will

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• 236 1 MR. GOLDSTEIN: There are issues of 2 uncertainty about investment and stranded investments 3 that arebigger, unquestionablybigger inthebase 4 case, that need tobe analyzedhere. If you have a 5 company that ismaking an investment basedon a project 6 of growth inhigh efficiencyproducts, and the 7 utilities drop out of the game in five years, which 8 theymay ormay not do, and the voluntaryprograms like 9 Energy Start, don't work or aren't funded, which isn't 10 a surety, but it is a possibility. That is an impact 11 of the base case. And in ordertobe even handed, you 12 need to look at that inthe distribution functions, 13 just as you are looking at the impacts of standards
. 14 And I thinkyou also needto look at the 15 question ofwhat ifmanufacturers find that it ismore 16 to theirbenefit to gearup slowly, piecebypiece for 17 a standardand tryto workwith the voluntaryprograms 18 to sellthoseproducts on a non regulatedbasis inthe 19 first, inthe third year, the fourth year, before the 20 standardgoes into effect. 21 MR. THOMPSON: There are some element of 22 what you saidthat definitelywill be captured in that 23 we will have, we will be tracking the shipments and the 24 growth in shipments ofhigher efficiencyproducts, you 25 know, linkingwith the NES.
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• 237 1 So, those investments will bemade and 2 tracked. So, that willmoderate, if youwill, the size 3 ofthe step function. But, I am not sure that we can 4 capture all of what you said. That is why the 5 qualitative discussions, I thinkwill be important. 6 MR. GOLDSTEIN: The point I ammaking is that 7 giventhe size ofthis investment, your analysis is 8 alreadypointingout this is an unusually large 9 investment for appliance efficiency standard. It seems 10 tome thatmanymanufacturers will choose not tomake 11 that in a lumpy fashion. But, will rather trytomake 12 it earlyandmake some profit on theproduct before it 13 is required, perhaps bymarking itupmore and 14 differentiatingthemselves as currentmanufacturers are 15 doing. That is somethingthat needs tobe in there, in 16 the standards case. 17 And in addition, or separatelyfrom that, the 18 base case has to incorporate the realitythat you 19 cannot predict saturationofhigh efficiencymachines 20 relative to low efficiencyones. And that uncertainty 21 is a business risk and it is not cost free. 22 MR. THOMPSON: But, itmaybe symmetrical in 23 that higher riskhas higherpotentialpayoffs. 24 But, we are reallygetting into analytical 25 details, I think, that I will behappyto talkto you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 238 1 about. 2 As I have mentioned, we have already, DOE and 3 myself, met with the Department of Justice on two 4 occasions, concerning this and other rules. And they 5 plan on playing a very active role in helping us, for 6 example, develop the interview questionnaire, and they 7 will be monitoring, if you will, the analysis and 8 making sure that their data needs aremet to the extent 9 possible, to facilitate their own tasks when they have 10 to do their DOJ review. 11 Just tomove on to the next steps. This, as 12 I mentioned, this analysis is reallyvery closely 13 linkedwith all other sections, all over sections of 

### 14 the analysis. And the current sequence is that the 15 consumer analysis will give us some idea of the 16 customers willingness to pay, if you will, or the 17 elasticity. Those elasticityvalues will be usedby 18 Jim to develop shipment forecasts. And the shipment 19 forecast developed for the NES spreadsheet, will then 20 be used in the GRIM. 21 So, the sequence of events, I plan on 22 initiating dialogue withmanufacturers on the one to 23 one basis, during the winter. And to begin, first of 24 all, making sure that we have the best possible 25 instrument that we can, begin getting a grasp on some EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 239 1 of themajor issues. 2 Once we obtain the shipments from NES, that 3 is when we will finalize our scenarios for the industry 4 cash flow. And visit themanufacturers with that, those 5 cash flow scenarios andwith our interview guide and 6 report back, we will be beginning the interviews in the 7 Spring. 8 Any questions on the schedule, the time line 9 as it

-- 10 MR. HAWKINS: This is LarryHawkins, G.E. 11 Your handout package, Michael, has a 12 different first bullet date, Februarythe 2ndversus 13 January 15th
. 14 MR. THOMPSON: I am sorry, what happened 15 there is that I hadtaken 30 days as a comment period 16 for this workshop, andwe just heardthat the workshop 17 will bemade to coincide with theANOPR comment period. 18 So, the February 2nd is the correct date. 

### 19 That completes this presentation. I willbe 20 standing around after themeeting and I will be happy 21 to talkto any of you about this inmore detail. 22 MS. NADER: Thank you verymuch. 23 MR. MONTUORO: I have a comment. I am Lou 24 Monturo withAmana Appliances. Andwe presenteddata 25 earlier that, on a cost tear down analysis of two H
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• 240 1 axis machines in another high energy, efficiency 2 machine
. 3 MR. THOMPSON: Yes. 4 MR. MONTUORO: Will that data be, will that be 5 additional data to be incorporated into GRIM or is 6 there going to be some type of reconciliation done with 7 that data, with what AHAM initiallyhas supplied? 8 MR. THOMPSON: No, that data was, I am not 9 sure what data you got, so -- The data that we will be 10 using is data that was supplied toAHAM. Youmay have 11 supplied data directly to Steve for the purpose of the 12 reverse engineering. I don't have that data. 13 MR. MONTUORO: No, I justmean we analyzed, we 14 did a tear down of the two Haxis machines and the 15 Whirlpool prototype. Is that financial information 16 that was generated to be incorporated into this model? 17 MR. THOMPSON: Not as such. I mean, one way 18 that we can, for example, model the impacts no lower 19 volume manufacturers wouldbe to take the production 20 model that Steve prepared, and run themodel at lower 21 volumes in slightlydifferent production configuration 22 and get an idea of what sort of costs are involved in, 23 differential costs between high and low production 24 manufacturers. So, that is one way we could use the 25 model. But, the informationper se is not part of the
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• 241 1 GRIM. 2 MS. NADER: Thank you, Mike
. 3 I know there may be other questions and 4 comments and I regret that we simply don't have any 5 more time for that now. And would encourage you to 6 talk to Mike in the next few minutes when, since he has 7 said he will continue to be available. 8 MR. BERRINGER: Or an opportunity to submit 9 written comments also. 10 MS. NADER: Yes. Thank you. 11 JimMcMahon, patient soul that he is, now has 12 three additional areas he is going to cover. Indirect 13 employment, environmental assessment, and utility 14 impact analysis. And Jim, I am sorry the time is so 15 constrained. 16 PRESENTATION BY JIMMCMAHON: 17 MR. MCMAHON: Okay. The first topic is 18 indirect employment impacts. 19 Okay. Indirect employment impacts. 20 Standards could effect consumer spending in two ways. 21 We expect that standards will increase the purchase 22 price of regulatedproducts and decrease consumer 23 energy and water expenditures. 24 The direct employment impacts have just been 25 described by Mike Rivest and those will be analyzed in
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• 242 1 the manufacturer impact analysis. 2 There are'also indirect employment impacts by 3 which we mean net jobs, createdor eliminated in the 4 U.S. population at large, as a consequence of new 5 energy efficiency standards. 6 Currentlyresidential energy consumption, 7 energy expenditures, this is for 1995, were 129billion 8 dollars. Possible energyefficiency standards are 9 expected to reduce those expenditures. And as the life 10 cycle cost demonstrates, usuallythe projected increase 11 in equipment prices is overcome by decreases in energy 12 expenditures over time. 13 Theproposal is to use an input, outputmodel 14 to estimate the effects on other sectors of the economy 15 from the changes in consumer spending. 16 In this case, themodel is a model called 17 Inbuilt. This is basedupon a commercial product 18 called Inplan, which is available for purchase. 19 However, you will be happy to hear that in this case, 20 the Department of Energyhas taken the commercial 21 product, developed a spreadsheet version of it that is 22 simpler, and is able to give away the spreadsheet 23 version of it. So it is fully available and 24 documented. 25 This was done by Pacific Northwest
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• 243 1 Laboratory. I believe there are two volumes of 2 documentation and we will be happy to have those put on 3 the record. 

### 4 The U.S. Economy is characterized as 5 interconnection among 35 sectors. The 35 are those 6 that are important to building energy consumption. The 7 other sectors are the economy that are not expected to 8 be affected, have been aggregated. 9 The input into the model are shifts in 10 expenditures due to standards. There are two of those. 11 The equipment expenditures and the interview 12 expenditures. These will come from the National Energy 13 Savings spreadsheet
. 14 And then the output will be the change in 15 employment by sector as a consequence of the new 16 standards. 17 What do we expect to find? We expect there 18 will be reduced spending for energy and water. That 19 may cause reductions in employment in the energy and 20 water supply sectors. There will also be a shift of 21 spending away from energy toward other sectors, and 22 that couldpotentiallycreate jobs in those other 23 sectors. So, the net result will be the net job 24 creation or eliminationby sector will be estimated
. 25 Are there questions on this?
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• 244 1 MS. NADER: Richard? 2 MR. BEST: Yes, Richard Best, Whirlpool. 3 Are you going onto another topic from here? 4 MR. MCMAHON: Yes. 5 MR. BEST: Okay. Because I do have a comment 6 here and I think it is relevant to going in the record 7 here.· 8 When you are looking at indirect employment 9 impacts, it seems as though themodel isbasicallyone 10 of, within the contents ofthe United States. Andmy 11 comments are relatedto this. You know, the U.S. 12 appliance industry is unique. And one thing unique 13 about it, is over the past generationmost ofus 14 watched as theAmerican auto industrywas basically 15 dismantled. We watched our consumer electronic 16 industriesmove overseas. But, through it all the 17 appliance industryremained intact and fairly healthy. 18 And we did it through invocation, cost, and 19 productivityandpassingthose things onto the 20 consumer. Theprices of appliances today arebasically 21 at the same price theywere a generation ago, even 22 without inflation. 23 I thinkthe issue here is one that this rule 24 will force a lot of investment on themanufacturers and 25 significant changes to the products we are going to
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• 245 1 produce. The question is how much investment, how soon 2 andhow significant will the changes be? Andmy 3 comments are that from a globalperspective, we have 4 another employmentpotential impact here, that needs to 5 be considered inthe rulemaking. First of all, the 6 appliance industry, global competitiveposture is going 7 tobe threatenedjustby the diversion ofmajor 8 technical and financial resources during this rule 9 makingperiod. 10 The second is that this, the playing field in 11 the U.S. willbe level for all competitors on a global 12 basis if it is a major change to ourmarkets. Andmost 13 of the productivitygains made overthe years byU.S
. 14 companies, couldbe wiped outby these change overs to 15 new products andprocesses ifthere is not sufficient 16 time to allow the transition in a smoothmanner. And 17 for us to reestablish our global competitive leadership 18 that we have worked on for the last several decades. 

### 19 And the lastpoint is that global pricing, or 20 competitivepricingon theseproducts coulddouble or 21 triple as pointedoutmanytimes inthese arguments, 22 and that just rises the probabilityof an importmarket 23 takingplace. Thank you. 24 25 MS. NADER: Thank you. MR. MCMAHON: Thankyou, Dick
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• 246 1 (Pause.) 2 MR. MCMAHON: Okay. Moving to the next topic 3 on the agenda. You have a handout calledMethodology 4 for Utility and Environmental Analysis. These are 5 combined into the one handout. 6 MR. JONES: Oh, excuseme, Jim. Earl Jones 7 here. I was just trying to digest some of the previous 8 comments. You know, I don't understand what this 9 employment impact, what it will do? Did I miss that? 10 Or how does this thing work? Are you tellingme that 11 you are going to do something, but you don't know what, 12 how it will be done? Is that what I understood? 13 MR. MCMAHON: No, that is not what I said. 

### 14 MR. JONES: Okay. So, what then, what did 15 you say? 16 MR. MCMAHON: Let me try and restate it. 17 The methodology here is an input, output 18 model. That divides the U.S. economy into sectors, and 19 specifies the flow between one sector and another. And 20 what we are saying is that the standards will 21 presumably affect consumer expenditures in two ways. 22 They will 23 MR. JONES: Well, I understand that. I 24 understand everything you have on this paper, because I 

### 25 think it is fairly good English. But, I still don't
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• 247 1 what the hell itmeans at the endof the day. In other 2 words, what, what will, what is this analysis going to 3 provide? It is going to somehow determine, and I guess 4 I can't understand fromwhat is here, how it is going 5 to determine that, what is going tobe the net addition 6 or gain?And how, what informationwill go into 7 decidingwhat, whether it is up or down? 8 MR. MCMAHON: In simplest terms, ifthere are 9 increasedexpenditures into a sector, if**consumers~** for 10 example, hypothetically, were topurchase some other 11 product**~ith** themoney that they saved in energy, then**~** 12 presumably that sectorwould respondby selling that 13 product to the consumer. And that increase in sales 14 might leadto increasedemployment inthat sector. 15 MR. JONES: Yes. 16 MR. MCMAHON: So, what themodel is doing, is 17 taking a snapshot of the current economy, and what the 18 current flows are, and thenwe are imposing upon that a 19 probationwhere we say, instead of this moneybeing 20 spent on energy, it is now spent on other things. 21 MR. JONES: Right. And how will you, what are 22 the assumptions which saythat those are additional 23 dollars represent Xor Yjobs? 24 MR. MCMAHON: Associatedwithproduction in 25 each sector are workers. And the idea is that if
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• 248 1 production increases there will need to bemore 2 workers
. 3 MR. JONES: And there is some formula based on 4 the particular industry which says that in the, in the 5 entertainment industry or the travel industry or the 6 construction industry, if people spendmore or less in 7 those areas, there is a differential number ofjobs 8 added or lost? Or is there just a number that applies 9 across the economy? 10 MR. MCMAHON: The former. 11 MR. JONES: The former. So, then, so and the 12 information which says what the impact is by particular 13 sector, is something which you all are developing or is 14 available otherwise? 15 MR. MCMAHON: We have not developed it. It 16 has been developed. There are good accounts of the 17 National Economy already developed. This is using a 18 model that already exists. 19 MR. JONES: Okay. So, then, totally aside 20 from the question of energy and the impact of 21 standards, you are saying that there exist a model 22 somewhere which says, that if expenditures increase in 23 a particular segment, or sector of the economy, that 24 equals Xor Yjobs? 25 MR. MCMAHON: Yes. That is correct.
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• 249 1 MR. JONES: Okay. And you are going to 2 piggyback on thatby saying ifwe divert the expenses, 3 the expenditures previouslyused for energy andwater, 4 andmove themoverhere, then it will have the same 5 impact? 6 MR. MCMAHON: That is correct. 7 MR. JONES: Okay. Thank you. 8 MS. NADER: Carryon. 9 MR. MCMAHON: The next topic is utility 10 analysis. Thepurpose ofthe utility analysis andwe 11 have used the utility in a couple of different places. 12 In this case we aremeaning energy supply sector, the 13 utilities that supplyelectricityand gas. 14 The purpose is to estimate the effects on 15 those utilities from reducedenergy sales due to the 16 new standards. Themethod is to use the NEMS model, 17 the Department ofEnergy, Energy Information 18 Administration, National EnergyModeling System. We 19 are calling itNEMS-NAECA, because EIA is very 20 proprietaryabout theirmodel. If anyone else uses it, 21 we have to rename it, so that it is not confusedwith 22 the official DOE model. So, we are calling itNEMS23 NAECA. It is an exact copyof the official DOE model. 24 25 It is an integratedmodel of the U.S. Energy sector. It includes all supply anddemand. It is
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• 250 1 publiclyavailable. And it contains a forecast through 2 the Year 2020. There are also extrapolations done out 3 to 2030 for FEMP. And we intendto use the Department's 4 extrapolations rather than our own. 5 The currentbasis to date has been the annual 6 energyoutlook 1998, within the lastmonth, the annual 7 energy outlook for 1999has beenmade public, over the 8 Thanksgivingweekend. One of our staff came to the 9 Department and captureda copy of the 1999model and 10 brought that backto LBL. So, we will be using that 11 one in the future. 12 The inputs to the analysis are annual energy 13 consumption and savingsby fuel type from the National 14 Energy Savings spreadsheet. All the other inputs will 15 be consistent with those usedby the Department of 16 Energy. 17 The output, themodel as I have said, balance 18 all supply and demand. So, it will be given the 19 savings from the standards andthen it will conduct its 20 balance. That balance will potentially affectprice as 21 well as the supplyof energy. And we will reportback 22 then the change in energy sales andprice by fuel type 23 andby region. We can also reportbackthe change in 24 themix of electricitygeneration, if any. And the 25 change in new capacityconstruction, if any.
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• 251 1 MR. ROSENSTOCK: Could I comment? 2 MR. MCMAHON: Yes
. 3 MR. ROSENSTOCK: Steve Rosenstock, Edison 4 Electric Institute. 5 Maybe more of a nomen clature than anything 6 else. This kind ofmodel is still kind of working on 7 the assumption of, at least as far as I see, vertically 8 integrated entities, whether it is gas or electric. 9 And since we are projecting forward in the future, when 10 you are doing this type of an analysis, when you are 11 get right down to it, how is it going to affect the 12 electric generation companies, the natural gas 13 suppliers, production companies, the electric 14 distribution companies, and the natural gas 15 distribution companies? I will leave oil out as a 16 separate kind of entity, since it has been deregulated. 17 I wouldpropose those kind of four categories, because 18 basic, or these distribution companies, because there 19 are going to be different viewpoints, depending on 20 what part of the sector youmight be in. And I think 21 that, as just a generation supplier versus a 22 distribution company, theremight be different 23 attitudes in terms of, or different impacts on, from 24 new standards. 25 So, part of is that. And I guess the other
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• 252 1 thing I wantedto statewas, the other itemwas, the 2 fact that with a lot of the new technologies, withthe 3 newmerchant plans goingon line, especiallyinNew 4 England, and California and actually in severalparts 5 of the country, the impact ofmerchant plans andthe 6 wild card especiallyof distributedgeneration. Well, 7 increase emphasis on combinedheat andpower systems, 8 and distributedgeneration, which is really, letme get 9 right down to it, you know, on site generation systems 10 and the fact that several large companies are investing 11 capital to, you know, sell and service the systems 12 throughout the United States. I think there is going 13 tobe a lotmore, I will saywild·cards, for lackof a 14 betterword, in terms of this type of analysis that I 15 am not, you know, again, I am not, I am partially 16 familiar with it, I am not totally familiar with it, 17 but I thinkthey are going to have a significant 18 impact. And theywill have an impact in terms of, you 19 know, what, you know, customer self generation, I 20 guess is the otherword to say it. All of these 21 factors are going to, you know, play intoNEMS**a~d** 22 ideallytheywill be accounted for, becausetheywill 23 have an impact when you get down to heat rate 24 conversions as well, you know, onsite electrical or 25 natural gas type ofusage. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 253 1 I mean, well, especiallyon the commercial 2 side. Even residential, for example, ifyou are 3 generating electricityon site, some of the, I will 4 call it the waste heat, might be used for thermal 5 applications, base heating orwater heating. Well, if 6 you reduce your, ifyou are having, ifyou are 7 producing it on site andyou are reducing the usage of 8 the water heater or clothes washer, are you, what 9 exactly are you saving, if it isjustbasically, I will 10 say "waste heat." I don't want, you know, it is not 11 necessarilywaste heat, but 

### r·will just say it, it is a 12 generationprocess. It couldbe consideredextract 13 heat
. 14 So, I mean, this isjust some of the issues 15 that ideallycouldbe, needtobe addressed in this 16 type of analysis. Because it will, it will have an 17 impact on your final numbers when you get to the 18 National Energy Savings. Thank you. 19 MS. NADER: Thank you. At themike? 20 MR. ECKMAN: Tom Eckman, Northwest Power 21 Plant Council. 22 Jim, does the NEMS model take into account 23 the reduced energy consumptiondue to the water 24 savings, at the treatment facility? 

### 25 MR. MCMAHON: I don't know the answer to that.
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• 254 1 I have not checked. We will check that. 2 MS. NADER: Yes. 3 MR. MORRIS: Wayne Morris withAHAM. 4 I have a question, Jim, interms of the 5 utility impact situation. 6 In theANOPR, it states that you are looking 7 at an utility analysis in terms for a baselineversus a 8 standards case kind of scenario, I believe. Does the 9 baseline assume the impact of themost recent 10 refrigerator rule andthe room air conditioner rule in 11 terms of this, since theywillbe also taken into 12 account when you do or at least the Department willbe 13 taking theminto account when you do themultiple 14 scenarios of standards cases onmanufacturers. 15 MR. MCMAHON: Are you talking about the rules 16 that have alreadybeen finalized? 17 MR. MORRIS: Yes. 18 MR. MCMAHON: Yes, it does. 

### 19 MR. MORRIS: Thank you. 20 MS. NADER: Thank you. Glenn? 21 MR. SCHEEDE: Glenn Scheede. I just think 22 that ifpeople are not familiar with the NEMS model, 23 andhow this thing is developed, you ought to get 24 familiar with it, and you ought to recognize that it is 25 fundamentallybehindwhat is happening inthe industry.
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• 255 1 It is always a couple of years behind, because the 2 industry is changing a lot and the NEMS model is 3 heavilybased on historic data and historic 4 relationships andhistoric algorithms. 5 So, if you are assuming that this is a good 6 predictormodel, it is, theytry, they tryhard to do 7 it, but it is inherentlybehind. And if you are 8 concerned about some of the things that Steve**ta~.ked** 9 about, you ought to get familiar with the assumptions 10 that drive that model, because they are not necessarily 11 up to date. 12 MS. NADER: Thank you. 13 MR. JONES: Earl Jones, here. Again, I have 14 a question. I just want to know, again, Jim, with 15 respect to both these analysis ormodels, that you just 16 presented. How much of the data is available to the 17 people who are in this room? 18 MR. MCMAHON: All of the data. 19 MR. JONES: All of it is. 20 So, if you wanted to find the information 21 that supports this indirect employment impact, where 22 would you find that? Where is that? Is that in

-- 23 MR. MCMAHON: There are two reports from the 24 Pacific Northwest Laboratory. 25 MR. JONES: I am sorry?
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• 256 1 MR. MCMAHON: There are two reports from the 2 Pacific Northwest National Laboratory, that are 3 available. 4 MR. JONES: They are not in any documents 5 provided so far, are they? 6 MR. MCMAHON: I don't believe so. 7 MR. JONES: Okay. And I am just curious, 8 Bryan, is it the Department's intention to somehow put 9 those in the record or are we suppose to go get them 10 from the lab? 11 MR. BERRINGER: If they are publicly 12 available, we will get copies of them. We will make 13 sure, you know, anybody that requests them, we will get 

### 14 a copy to you. 15 MR. JONES: So, is this a request or do you 16 want me do to something other thanmake it now? 17 MR. BERRINGER: No. 18 MR. JONES: Okay. Thank you. 19 And then what about the second one, the NEMS, f 20 that is a DOE developed, if I understood, model. 21 MR. MCMAHON: That is correct. 22 MR. JONES: Which is available where? 23 MR. MCMAHON: Fromthe Energy Information 24 Administration in this building. 25 MR. JONES: Okay
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• 257 1 MS. NADER: Thankyou. Other questions? 2 Additional comments? 3 MR. MONTUORO: LouMontuoro, Amana Appliances. 4 I needto go on the recordwith a couple of 5 comments. 6 Number 1, Amana would like to officially 7 request an extension to the February 2nd comment 8 period, for twomonths, to go from Groundhog Day to 9 April Fools Day. As our friends inWhirlpool so 10 elegantlyput, this is an important issue. We are 11 doing the best we can to understand themodel, how it 12 affects our company. And we willbe able to give you 13 better quality of feedback back
. 14 I think this was, it was, it happened, you 15 know, theANOPR came out right before Thanksgiving. It 16 comes during corporate holiday time. I think it was 17 probably delayedbecause of the complexity of the 18 situation. 19 So, we are officiallyrequesting that. 20 And the second item, there was some cost 21 information, I wasn't sure if it was sensitive or not, 22 on tear down analysis of the Haxismachines, not the 23 prototype. And we would like to obtainthe data from 24 that, ifthat is publicly available. Al and I think 25 that is public data andwe shouldbe able to get that.
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• 258 1 MR. BERRINGER: And the reason you sayyou 2 needtwomonths for the extension of the comment period 3 were reasons of holiday, is that an absolute necessity? 4 MR. MONTUORO: Well, the question is how much 5 time we have to analyze the impact on our company and 6 give you a response with data. And right now we are 7 looking at a February 2nd date. And it is very 8 important to our company and we are working on it, but 9 obviouslywe willbe able give youbetter information, 10 better feedbacks if givenmore time. The question is 11 what is reasonable? So, we think it is reasonable 12 to ask for a twomonth extension. 13 MR. BERRINGER: Okay. And does anybodyhave 14 a calendar as far as when that wouldbe? 15 MR. MONTUORO: April 1st. Two months. That 16 wouldbe a Thursday, April 1st. 17 MR. BERRINGER: Were you finished? 18 MR. MONTUORO: Yes. 

### 19 MR. BERRINGER: Okay. 20 MS. NADER: Yes, Mike? 21 MR. MCCABE: This isMichael McCabe with the 22 Department ofEnergy. 23 The follow up question, Lou, with respect to 24 additional time, if you couldbemore specific as to 25 what parts of the analysis that you would need
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• 259 1 additional time, because for example, with what Mike 2 Rivest ofAOL hadpresentedon themanufacturer impact 3 analysis, there are going tobe a series of one on one 4 meetings that willbe takingplace. And ifyou need 5 additional time toprovide input on themanufacturer 6 impact analysis, there willbe that exchange during the 7 February andMarch time frame. If it is additional 8 time to comment on the NES analysis or life cycle cost 9 analysis, we would appreciate some of those specifics. 10 The request will be consideredbythe Department as Dan 11 Reicher indicated, he is committedto issuing a final 12 ruleby September of 2000. And that any request for an 13 extension ofthe comment period, you know, that he will 14 evaluate as to what impact that will have on the 15 schedule and wouldbe interested in others, inwhat 16 theywouldhave to say as far as what the additional 17 time wouldbe of value to them. But, particularwith 18 your request, you know, ifyou couldprovide somemore 

### 19· specificsastotheareasofthe analysisthatyou 20 neededthe additional time. 21 MR. MONTUORO: Sure. Right now, of course, 22 what is important to us is do our financial models 23 represent our smallmanufacturer. We are doing the 24 best we can to understandthat. We understand there 25 was aggregate dataprovidedbyAHAM. So, we would
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• 260 1 understand that along with our options. The ANOPR, I 2 think delineates, I think it is about 11 items, for 3 comment on, including some of the things we have 4 covered, the product class size, the detail on retail 5 mark-up assumptions, information the elasticities. I 6 thought the ANOPR was asking for responses to those 7 items. And to give, to give response to those items 8 and the work on those, those are the basic items that 9 we talked about before this meeting. Since coming 10 yesterday, I found out that there is going to be some 11 additional interviewing processes with our company, 12 which is good. But, nonetheless, to respond to the 13 ANOPR and all the items that are listed in the ANOPR, 14 all the complexities that we are talking about here, we 15 are asking for an extension from February 2nd. 16 MS. NADER: Mike, do you have anything else? 17 MR. MCCABE: I will stay here because I 18 suspect that there will be some more. 19 MS. NADER: Okay. Thank you. Yes? 20 MR. MORRIS: Wayne Morris with AHAM. 21 We polled our members and a majority, not a 22 unanimous position but the majority of the members did 23 ask for an extension of time to respond to the items 24 25 that are in the ANOPR. It is a particularly difficult time period with the holidays. A number of trade shows
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• 261 1 that do come about in January and February of this 2 year, with the International Housewares show in Colgna
. 3 As Lou pointed out, there are quite a lengthyperiod 4 of, amount ofmaterials.in the ANOPR that are asked for 5 responses to. Ourmembers did feel that additional 6 time is necessary. 7 The amount of time seems to vary between 90 8 days and 60 days, 45 days. But, I think Lou's proposal 9 of 60 days is probably in the ballpark of where the 10 majority of companies that wish an extension to be. As 11 I said, this is not an unanimous opinionby anymeans, 12 but it was a majority of the companies that we polled. 13 MS. NADER: Thank you. Steve Nadel? 14 MR. NADEL: Thank you. I guess we have 15 substantial problems, as no one wouldbe surprised, 16 with a request for extension. When the process 17 improvement rule came out, rules were suppose to be 18 completedwithin three years. This rule is suppose to 19 be an accelerated rule because it already started. We 20 are now more than three years into it, at least two 21 years to go. Now, we want to extend it further? I 22 think a iradeoff was made during the process 23 improvement, that basically said, we are going to have 24 more frequent reviews, but we are going to have shorter 25 reviews. If we are going to have more frequent reviews
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### ----------------- 262 1 than longer reviews, itjust doesn't work. So, I think 2 people have tomake a basicdecision, do theywant a 3 few long reviews ormore short reviews? 4 I would askthe gentleman fromAmana, you 5 know, on top of DOE's request, what particularthings 6 theydo, ifhe sees some particular areas subsequently 7 in this schedule, where, gee, ifyou take twomonths 8 here, we can cut a month here and a month here. That 9 is reasonable, I think. Itwouldbe veryhelpful to 10 have those suggestions. 11 I had also observedthat, at least frommy 12 reading of theANOPR, most of the issues that are here 13 arejust a restatement ofthings that we came up with 

### 14 during the last workshop. I don't see verymuch new 15 material. The only real significant newmaterial is 16 the reverse engineering on a fewmoremodels. But, I 17 mean, when I reviewed it, my thingwas, gee, maybe we 18 shouldn't have hadthat lastworkshop and comment 19 period. We arejust repeating that. I would think the 20 time wouldbebetter spent elsewhere. But, ifpeople 21 wantmore comments now andthenwe will just go 22 straight toANOPR, short periodandthen straight to 23 final rule, we can. But, I don't think this is the 24 place where the time isbest spent. 25 MS. NADER: Thank you. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 263 1 MR. THOMPSON: Mike Thompson, Whirlpool 2 Corporation. 3 We are one of the companies that did object 4 to an extension of the comment period. We all know 5 that DOE is years behind on promulgation of a final 6 rule on clothes washers. We all know that DOE 7 continuallyhas allowed the rulemaking to slip time 8 line wise. The last thing that I knew it was going to 9 be a July extension. This morning I walked in, 10 surprised to see another twomonths slipby. So, at 11 this point in time, we vehemently oppose any further 12 extensions. 13 MS. NADER: Thank you. Steve? 14 MR. ROSENSTOCK: Just a quick question. Steve 15 Rosenstock, EEI. 16 It says publishANOPR in November of '99 and 17 then final rule in September 2000. I guess that is 18 about a nine month in-between. What is the reason? 19 Was that increased or decreased or I amjust kind of 20 curious, it sounds like some people think that it would 21 maybe increase for some reason, andmaybe that is a 22 periodwhere you could shrink it. You know, add a 23 littleperiod here for the comments and then shrink it 24 back at that final end. Is that, because OMB or 25 Justice Department reviews are going to take longer or EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 264 1 what? 2 MS. NADER: Yes, sir. 3 MR. ROSENSTOCK: That was for DOE, bythe way. 4 That was a question for DOE. 5 MR. MCCABE: Yes, Michael McCabe, DOE. 6 The changes in the schedule that are there 7 reflect some additional analysis that upon review could 8 not be done inparallelbut are done in sequence and 9 series. Particularly, the work that is, discussions 10 going on or about to start, on the consumer survey, 11 because that is going to be feeding into the energy 12 savings analysis, which it had not been fully captured 13 in some of the earlier schedules. Also, the, some of 14 the time periods for some of the steps in the analysis 15 or in the process, hadbeen unrealistically short. The 16 SecretaryandOMB reviewed concurrent and lessen time 17 than what has been done in the past. So, that this is 18 a schedule that I feel is now, has all the bugs ironed 19 out and is reasonable and obtainable. 20 In looking at the request, one of the things 21 which I will be looking at inmakingmy recommendations 22 to Dan Reicher, you know, is again, how will it affect 23 the overall schedule. We have some analysis that is 24 underway. Any delays of 90 days, for example, would 25 affect that analysis. Adelay, a shorter delaymay not
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• 265 1 affect it, but I am not sure how short of an extension 2 we have to get towhere itwill not affect it. So, be 3 looking at that. And that is one of the reasons why I 4 am asking for specifics in order tobe able to try to 5 breakup the comments and some differentparts to get 6 some in earlier. And some of the other, later, which 7 may not be on the criticalpath. 8 MS. NADER: Thank you. Yes? 9 MR. MARTIN: MichaelMartin, CaliforniaEnergy 10 Commission. 11 We at the EnergyCommissionhave supported in 12 good faith NECA, the Energy PolicyAct, this changing 13 of procedures andwe desperatelywant to keep out of 14 getting intothispreexemption andpetitioning and all 15 the rest of it. Andmy commissioners wouldbe very 16 upset if I was to come back and saythat this has 17 slippedyet another couple ofmonths, you know. We 18 have acted in good faith on this, this, these various 19 different steps. And we needto stickwith this, with 20 what we have, the schedule we have here. 21 MR. JONES: Earl Jones, here. G.E. 22 I think everybody, I hope has acted in good 23 faith, and I thinkcertainlythemanufacturers have. 24 These requests for extensions, are not for the purpose 25 of delaying this rulemaking ifyou had to collect the
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• 266 1 data and do the analysis, you wouldunderstandthe 2 complexityofwhat you are asking us to go through. We 3 have lost a month in that process through the holidays. 4 That isjust gone. Arequest for the additional time 5 is not unwarranted. There is no delay in this process 6 that you can lay at our doorsteps. Ifyou want tomake 7 adjustments in the schedule internally, I mean, I don't 8 see anyproblemwith that. And DOE, you know, have 9 added, whatever yourbest guess on that is. But, I 10 don't think, nobody should for anymoment suggest that 11 anypart of the delay in this schedule, the slippage is 12 causedby themanufacturers. Ithas not been. It is 13 principallybeen causedbythe Department's own 14 internal deliberations. And do not put that on our 15 doorstep. If there is a problemhere, look inside the 16 Department to fix it. 17 Certainly, this request is reasonable and 18 there is no reasonwhy anybody should deny it or cast 19 dispersions on the people who are requesting it, for 20 making it. 21 I do want tomake other comments about the 22 rulemaking generally, when you get into the point, but 23 I suppose ifyou are still on the question of the time 24 table, I will defer those. 25 MS. NADER: Thankyou. Other comments on the
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• 267 1 time period? 2 MR. ROSENSTOCK: Not on the time period. Jim, 3 are you going to talk about the environmental analysis 4 now? That was the last step. 5 MS. NADER: Let me just check with Bryan, who 6 is our leader here. I am concerned about the time. We 7 were suppose to finish at 4:30 and it is almost 10 to 8 five now. 9 MR. BERRINGER: Yeah, we have the people on 10 hold over, that we are going to call in on the consumer 11 groups. To let them know that we are running behind. 12 And as Michael said, we will evaluate the comment 13 period time. And obviously, we will have to a Federal 14 Register notice to extend, do an extension. So, we 15 will consider that and get back with everybody on that. 16 MR. MORRIS: Wayne Morris. Bryan, just, not 17 to belabor this, but is itpossible to get an answer to 18 that before the holidays? 19 MR. BERRINGER: We will try to get you an 20 answer before the holidays. 21 MR. MCCABE: Michael McCabe. We have got a 22 meeting 23 will get 24 least at 25 with Dan early next week, so that hopefully his call by then and get it out informally that time.

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• 268 1 MR. MCMAHON: The last presentation is the 2 environmental analysis. It is on the last slide of 3 that handout. The purpose is to estimate the impacts 4 from the standards on U.S. emissions of oxides of 5 carbon, nitrogen and sulphur. Themethodology is to 6 get the powerplant emissions fromNEMS, when we do the 7 utility analysis, the emissions will also come out of 8 the samemodel. There are two things that NEMS does 9 not coverthat we will addwith spreadsheet estimates. 10 One of those is sulphur oxide emissions from oil fired 11 water heaters and the other is noxide emissions from 12 gas fired water heaters in the home. 13 Are there any questions? 

### 14 MS. NADER: Steve? 15 MR. ROSENSTOCK: Steve Rosenstock, Edison 16 Electric Institute. 17 Looking at the technical support document, at 18 Table 12.1, MT/A, what does that refer to? I wasn't 19 sure what that, was that metric

-- 20 MR. MCMAHON: I believe that ismilliontons 21 per year. 22 MR. ROSENSTOCK: Is thatmillion

-- 23 MR. MCMAHON: Per anna. 24 MR. ROSENSTOCK: For anna, millionmetric 25 tons?
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• 269 1 MR. MCMAHON: Yes. 2 MR. ROSENSTOCK: Okay. Okay, it says,.well, 3 again, I still get, I have some problems with this just 4 because, whether it is really, you know, it is an 5 energy impact, not an environmental because a lot of 6 the issues that I saidbefore, about the changing, 7 especiallythe changing electric industry, spills over 8 into this, because as residential customers have 9 choices of suppliers, and the fact that theymight be 10 able to change suppliers.on a yearly ormonthly basis, 11 some of these numbers get very, very interesting. I 12 mean, it is, you know, with choice there couldbe some 13 quite dramatic changes over the 30 years, is what I am 14 saying. So, that the C02, NOX and S02 numbers could 15 vary widely from household to household. It is not 16 just the regional model anymore. That is number one. 17 Especially with on site generation and distributed 18 generation. And those impacts could also play quite the 19 role. 20 Also, as a criticism, if you are doing this, 21 you are neglecting carbonmonoxide. And particularly 22 organic compounds in the in house combustion. Which do 23 have impacts, which are emissions orpollutants, 24 whatever the word you want to use. 25 The other thing I was going to say is in
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• 270 1 terms ofboth the natural gas and oil, it seems that, 2 you know, the boundaryofthe systemis a household and 3 that is it. Whereas, for electricity, you take it from 4 outside the house·tothe powerplant or generation 5 source. I don't want to get in

-- versus source. You 6 know, I don't want the arrows thrown atme, but if it 7 is going tobe consistent, then youhave to take into 8 account transmissionproduction losses for natural gas, 9 as well as fuel oil. I mean, that is, you know, if, if 10 you want to do that and ifyou want to, you know, 11 because there are transmission losses for natural gas. 12 There are losses for oil as well as production in 13 transmission
. 14 So, I justwantedtoput those out there and 15 especiallythat, you know, again, assuming, you know, I 16 thinkthere are going tobe a lot of changes inthe 17 power sector, especiallywhenpeople choose theirpower 18 plants. And it going to have quite a dramatic impact 19 when you look outside the house for some of the actual, 20 what is the environmental impact of the future Energy 21 Standards. 22 So, those aremy comments. I am glad I made 23 themlate inthe day, when some people are tirednot to 24 killme. Thankyou. 25 MS. NADER: Thank you. Yes, sir?
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• 271 1 MR. GREGG: Tony Gregg, City ofAustin. 2 I think this is similar to the other issue of 3 where they wouldbe emissions savings also from the 4 electric savings at water utilityplants. So, I would 5 like to see ifwe could, if they are not factored, if 6 they could also be factored. Thank you. 7 MS. NADER: Thank you. 8 (Pause.) 9 MS. NADER: Earl, do you say that you had some 10 comments? 11 MR. JONES: Yes. Just a minute, please. 12 MS. NADER: I would ask that they be very 13 brief
. 14 MR. JONES: They will be. 15 Well, I just wanted to sort of leavemy 16 comments on the workshop. I still continue to be very 17 ·impressedby the progress that DOE has made in the 18 process improvements. And I reallymean that. That is 19 the positive introduction. And I mean that the 20 But, seriously, Bryan, I mean, a lot of 21 effort has beenput into this and I can see the work 22 and a lot of it is muchmore understandable. Which is 23 very important for me, at least. But, I am, when I 24 come to the workshops, and this one is similar in that 25**~espect,** I have this sense of progress two steps
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• 272 1 forward andone stepback. Because at the same time we 2 aremaking these great strides towards understanding 3 andtransparency, at least, speaking in English, etc. 4 There is a whole anotherhalf of this rulemakingwhich 5 is still verymuch in theblackbox. And that I am 6 afraid is these analysis and thesemodels, whichwe 7 don't, I do not understandhow it is going to finally 8 impact this rulemaking. But, I have this awful feeling 9 that to spite all thepositive things that are 10 ·happening, there is this thingwaiting out there and it 11 is going tobounce. 12 So, there is a real credibilityproblemwith 13 the rulemaking. And I justwant to stress the 14 importancebetweennow**~nd** the next phase, getting 15 through the**NOP~** to tryto close that gap to increase 16 the abilityof theparticipants to understandwhere 17 the, how the data isbeingused, how it is going to 18 impact, how it is going to, how the secondhalf, ifyou 19 will, is goingto now comeback into thepicture. And 20 affect the, what I consider a verygood analysis having 21 been done to date. This is a very serious question. 22 There is a real issue ofbeing able tomake this 23 process work. Let's understand that we understand, 24 that we know that everybody is not going tobepleased 25 the way this thingworks out. That is the way the
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• 273 1 process works and that isjust the way it falls. 2 But, in the process of doing that, people 3 should have clear understanding of how they are going 4 to be impacted. And there shouldbe few surprises. 5 And I am concerned that there will bemore surprises in 6 the wings. And I think I would like to try to avoid 7 them as much as possible. Thank you. 8 MS. NADER: Thank you. Anything else, 9 anyone must saybefore we call it a day? Okay. Thank 10 you. You all have worked veryhard. I appreciate your 11 active engagement. 12 Bryan, would you like to say the last few 13 words? 14 MR. BERRINGER: I wouldjust like to thank 15 everybody for sticking around. We will probably, take 16 a couple ofminutes and then we will go over to
-- The 17 people that want to stay for the consumer working group 18 it is right across the hall. We have the phone hooked 19 up, so people, everybody is welcome to that, come to 20 that meeting. It is open. Ifpeople want to stayhere 21 and they will have some time if they want discuss other 22 things. 23 Again, thank you verymuch. 24 (Whereupon, at 5:10 p.m., themeetingwas 25 concluded.)
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### REPORTER'S CERTIFICATE This is tocertifythat theattached proceedingsbefore: U.S. DOE



### In the Matterof: WASHERWORKSHOP



### wereheld as hereinappears andthat this is the original transcriptthereof for the file of the Depart!llent, Commission, AdministrativeLaw Judge
or theAgency.

Dated: 12t15-98

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