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UNITED STATES DEPARTMENT OF ENERGY

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Conservation and Solar Energy

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PUBLIC MEETING

MORNING SESSION

Energy Conservation Program for Consumer Products

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NOTICE OF PROPOSED RULEMAKING

REGARDING ENERGY EFFICIENCY STANDARDS FOR

REFRIGERATORS AND REFRIGERATOR/FREEZERS, FREEZERS,

CLOTHES DRYERS, WATER HEATERS, ROOM AIR CONDITIONERS,

FURNACES, KITCHEN RANGES AND OVENS, AND

CENTRAL AIR CONDITIONERS

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Room 3000A, Federal Building

12th Street and Pennsylvania Avenue, Northwest

Washington, D. C.

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9:00 A. M.

Wednesday, July 16, 1980

BEFORE:

John Millhone, Presiding Official

Director, Office of Buildings and

Community Systems

Conservation and Solar Energy

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PANEL MEMBERS:

James A. Smith

Chief, Consumer Products Efficiency Branch

Office of Buildings and Community Systems

Conservation and Solar Energy

Loren D. Raap

Engineer, Consumer Products Efficiency Branch

Office of Buildings and Community Systems

Conservation and Solar Energy

Richard R. Furlong

Senior Engineer,

Consumer Products Efficiency Branch

Office of Buildings and Community Systems

Conservation and Solar Energy

George E. Pomeroy

Economist, Systems Analysis Branch

Office of Buildings and Community Systems

Conservation and Solar Energy

Victor P. Petrolati

Engineer, Consumer Products Efficiency Branch

Office of Buildings and Community Systems

Conservation and Solar Energy

John D. Wilman

Economist, Office of Conservation, Policy and

Evaluation; Policy and Evaluation

Eugene Margolis, Esq.

Counsel for Consumer Products Efficiency Branch

Office of General Counsel

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C O N T E N T S

1. Opening Remarks . . . . . . . . . . . . . . . . . 4

2. Questions and Answers - General . . . . . . . . . 13

3. Questions and Answers - Economic . . . . . . . . 44

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P R O C E E D I N G S

MR. MILLHONE: Good morning. I want to call

this public meeting together at this time.

The meeting was carefully planned to show the

importance of internal air conditioning and the government's commitment to the emergency building temperature

restriction program.

Good morning and welcome. I am John Mi_llhone,

the Presiding Official of this meeting and the Director

of the Office of Buildings and Community Systems.

I want to extend to you, on behalf of the

Department of Energy, our thanks to you for taking part

in this public meeting. Your presence here today is

evidence of your interest in this program, and is in

keeping with President Carter's desire for public participation in the Federal Government's decision-making

process.

As you know, the Energy Policy and Conservation

Act, as amended by the National Energy Conservation Policy

Act, requires that the Department of Energy prescribe

energy efficiency standards for refrigerators,

refrigerator-freezers, freezers, clothes dryers, water

heaters, room air conditioners, home heating equipment not

including furnaces, kitchen ranges and ovens, central air

conditioners,, and furnaces by December of 1980.

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On June 30, 1980, a Notice of Proposed Rulemaking was published in the Federal Register regarding

these upcoming energy efficiency standards. In that

notice, pursuant to Section 336 of the Act, it was

announced that a public meeting would be held on today,

July 16th, to address questions relevant to this notice.

To further clarify the purpose of today's

meeting, let me cite the legislation pertaining to

administrative procedures and judicial review for the

Energy Conservation Program for Consumer Products Other

than Automobiles. There are several citations that are

in my prepared statement. I will submit the whole

statement into the record. However, I am not going to

read through this list of numbers.

The rules that are set forth in that Act

require that interested persons shall be afforded an

opportunity to present written and oral data, views, and

arguments with respect to any proposed rule.

In the case of a rule under Section 325(a) --

that is, these proceedings -- the Administrator shall, by

means of conferences or other informal procedures, afford

any interested person an opportunity to question any

other interested persons who have made oral presentations,

and employees of the U. S. who have made written or oral

presentations with, respect to disputed issues of material

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fact.

Such opportunity shall be afforded to the

extent the Administrator determines that questioning

pursuant to such procedures is likely to result in a more

timely and effective resolution of such issues.

Let me just say informally that that is the

purpose of this session. It is to give those of you who

are interested in the rule a chance to question those of

us at DOE who have worked on the rule, so that you will

have a better understanding of the basis for our

recommended proposed rule, and so that in the upcoming

public hearings you will be able to design your comments

so that they will be as direct and clear and relevant and

pertinent as possible, so that the information that you

give us will help us develop the best possible final rule,

and so that we will be able to consider fully your

concerns and interests and positions in making that final,

rule development.

A transcript shall be held of all oral presentations made during this session.

It has been determined that this meeting today

and the upcoming related hearings satisfy the legislative

requirement I mentioned above,

As of July 8 of this year, DOE had received

over 300 questions. Of those questions, we have selected

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those which we believe are the most pertinent or which

will provide clarification to the various interests

concerned.

In order to respond to as many of those

questions that were submitted in advance as possible, we

will try to limit new questions here to the extent that

they go into areas that haven't been touched with to some

extent by one of the written questions that we have

received.

However, I think in explanation, the questions

that we have received have been so broad in. scope and

have covered so many issues, that most of the questions

which you have relevant to the final rule would seem to

me to be appropriate.

All comments made here today are being recorded

by a court reporter and will be available for inspection

at the Freedom of Information Office. You may want to get

this number down. That is in Room 5B180 of the Forrestal

Building at 1000 Independence Avenue, Southwest.

Anyone wishing to purchase a copy of the

transcript can make arrangements with the court reporter.

Because of the transcript being made, when we

get to the portion of the meeting where questions are

received, I will insist that you identify yourself so

that we have that as part of the record.

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Now, we will not be able to, in the limited

amount of time available today, fully answer all of the

questions that we have received. We have tried to go

through them in part and identify those that are most

important and bring together those that deal with the

same issue.

For those questions that are not addressed here

today, the department will provide a written response. A

complete set of all questions and answers will be made

available to the Freedom of Information Office for your

inspection. That is, the written response will be

returned to the lberson who has submitted that question,

and then a copy of all the questions and answers will be

available in the FOI information room.

The questions that we have received have been

placed into four different general categories. These are

questions that are general in nature, or administrative

or legal in nature -- that is one category; the second

category is questions that are economic in nature; the

third category are questions that are product specific;

and the fourth category are questions that deal with

certification and enforcement.

After the questions and answers are dealt with

by one of DOE's staff people in each of these categories,

then we will provide an opportunity for questions from the

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floor relevant to that category. For example, the first

category will be the general questions in nature. I would

anticipate our taking something in the range of 45 minutes

or 30 to an hour, I think, depending upon the category

of questions, summarizing the questions that we have

received and giving the answers. And then after that,

there will be questions from the floor in that particular

category.

So, if you have a question, say, on certification and enforcement, I would like for you to wait and

ask that questions after we have had the questions and

answers on that particular category.

With four categories, our intent is to cover

the general category in terms of the formal questions and

answers, and questions from the floor; and then take a

mid-morning break; and after that, cover the economic

questions before taking a noon break. Then after we get

back after lunch, covering the product specific questions,

taking a mid-afternoon break, and then covering the

certification and enforcement questions.

I would like to ask you to please not to stray

from the subject at hand, and to be as brief as possible

in your asking of the questions. Your cooperation will

enable us to address the maximum number of questions

possible.

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I would like to stress again the difference

between this public meeting, which is for the purpose of

clarifying the reasons why DOE has made the proposed rule

that it has made and the public hearings that will come

later on , which are designed for people who are interested

in the hearing to state your positions on the rule, on.

the proposed rules.

I would like to ask you or invite you to pick

up an information package on our program at the registration desk at the morning break , if you have not already

done so. Contained in that package you will find the

notice of proposed rulemaking , program legislation, and a

fact sheet.

I would also like to suggest that yo.u place

yourself on our mailing list by completing the blue

postcard which you will find inside. the information

package . We have tried over the past , year to develop a

system that will ensure the prompt receipt of useful

information by you and which will stimulate interest and

generate participation at the pub^lic.meetings and hearings

Your filling out of that postcard will help us keep this

information list current.:

The public hearings relating to this notice of

proposed rulemaking will be= held the last three weeks of

August . The dates , times, and locations are in the

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information folder. I won't repeat them now.

I certainly encourage you to attend and

participate in these hearings, as well as to submit

written comments. Let me emphasize that, because in

dealing with this hearing, this rulemaking process, one

of the areas that is of most importance in terms of

developing the final standards is the various impacts,

and to the extent that you have information on the

impacts of the proposed rule and can put that information

into the hearing record, that will provide that additional

information that will enable DOE to put together the

final rule.

So, the final rules will be importantly affected

by the information that comes in in the hearing process,

and your active participation can help us end up with a

better final rule.

The end of the public comment period is

August 29, 1980. We intend to stick with that date for

the end of the public comment period. We feel as if that

is necessary for us to meet the statutory deadline for

the final standards in December of this year.

Fifteen copies of a speaker's prepared

testimony -- that is, if you want to be a speaker at a

public hearing -- 15 copies must be received in our

Office of Hearings and Dockets at the address listed in

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the notice of proposed rulemaking no later than August 4,

1980 for the Washington hearing, and August 18, 1980 for

the Chicago hearing.

Now, if you intend to submit written, rather

than oral, comments, we also ask that 15 copies be

submitted to the Office of Hearings and Dockets at the

same address. We would greatly appreciate your efforts

in providing these copies of comments and statements. And

to the extent that you can get them in ahead of those

dates, they will help us in analyzing them and getting a

head start on some of the issues that are involved.

I would now like to introduce the members of

the panel. I will go from your right to your left.

At the far end is Loren Raap, a former member of

my staff who was instrumental in developing the NOPR. To

his right is Richard Furlong, a senior engineer with the

Consumer Products Standards. On my immediate left is

James A. Smith, the chief of the Consumer Products

Efficiency Standards Program. On my immediate right is

George Pomeroy, our staff economist. On his right is

Vic Petrolati, an engineer for the certification and

enforcement program. On his right is John Wilman of the

DOE Policy Office. And on the far right is Gene Margolis,

the counsel for the program.

I will now turn the meeting over to Jim Smith,

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who will present the first category of questions and

answers, those that were general in nature.

Jim.

MR. SMITH: Thank you, John.

I will be addressing 19 questions which we kind

of categorized as general in nature. I will read the

questions verbatim as received. I will not identify the

person or manufacturer who submitted the question.

The first question is: Referencing the

engineering analysis report, Technical Support Document 4,

page C-11, how was the formula derived to arrive at the

1.7 mark-up factor? What were the elements considered in

the term "overhead"?

The answer to that question is: The estimate

was based on interviews with various manufacturers and

distributors. The multiplier of 1.7 times ex factory

cost, which is the cost to distributor, to arrive at the

price to the consumer results from using a distributor

margin of 15 percent, which is equivalent to a multiplier

of 1.18, plus the retail margin of 30 percent is the

multiplier of 1.43.

In addition, factory costs, including burden of

labor, were marked up by a margin of 26 percent, a

multiplier of 1.35, to get the ex factory cost.

This results in a total multiplier of 1.7 times

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1.35, which equals 2.3 to be applied to factory cost to

arrive at the consumer cost.

If any of you have concerns on how these figures

were derived, we would appreciate receiving your

additional input and comments.

The second question: Will interested parties

have an opportunity to review and respond to the final

staff recommendation of the rules prior to their publication in December of 1980? This was done by the FTC

staff as part of the energy labeling program.

The answer: The Department of Energy Organizational Act, Section 501, and the Procedures for the

Development and Analysis of Regulations, DOE Order No.

2030.1, do not provide for parties to review and respond

to final staff recommendations of the rules prior to their

issuance and publication.

Question No. 3: DOE has stated that "Product

designs in prototype from January, 1980 represent the

maximum technologically feasible product..." Pages 4

through 6. Are these prototypes available for inspection

or are there reports available that accurately describe

the design options used and their individual impact on

product energy efficiency improvements for each of the

standards proposed?

The answer: Maximum, technologically feasible

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levels are based on combinations of design options known

to be currently under development by various manufacturers

The design options are described in the Engineering

Analysis Document, Technical Support Document No. 5.

For example, design options for maximum

technologically feasible levels for refrigerators and

refrigerator-freezers are described on pages Dl through

15 and Dl through 16 -- those are tables -- of the

Technical Support Document No. 5.

The values of performance parameters used to

determine the energy factor for each class are given in

Tables 1.1 through 1.7. The resulting energy factors of

each class, ranging from 8,9 to 22.2 for the particular

unit analyzed, are given in the tables and the resulting

volume-efficiency relationships are summarized on page

D1-17-

The next question: If the hearings are

scheduled by product type, how will DOE Handle comments

from multi-product manufacturers that address generic

issues as well as product specific issues?

Answer: Multi-product manufacturers can

address generic issues as part of the comments for the

first product specific testimony presented, and reference

this fact during subsequent product specific testimony.

DOE, during its analysis of product specific issues will

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refer back to the generic issues as appropriate.

Next question: In the case of comfort heating

and cooling equipment, the test procedures determine the

efficiency of the equipment and this efficiency is

reported as AFUE, SEER or EER. The test procedures then

give a method for calculating consumption based on a known

structure heat loss, heat gain or hours of operation,

because the energy consumption of these products varies

considerably with their use and the building in which they

are installed.

In view of this, why does DOE then define a

basic model furnace as units having electrical, physical

or functional characteristics that do not affect energy

consumption rather than as having electrical, physical or

functional characteristics that do not affect energy

efficiency? Would this not be more in keeping with energy

efficiency standards?

Answer: This is essentially done, since the

only measure of energy consumption that is included in

the standards is energy efficiency.

Next question: Please define all of the element

used in establishing the factory cost for each product

type.

Answer, and this is a short answer: All product

cost elements were included as given in the engineering

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analysis, Technical Support Document No. 5.

Next question: What action is or will be taken

by DOE in regard to notifying states that all, or part of,

some state regulations will be superseded upon promulgation of the final rule in December?

Answer: In the final rule, DOE will state the

effect the federal standards have on state regulations or

other state requirements with respect to energy efficiency

or energy use. DOE will mail the final rule to each of

the 50 States.

Next question: How does DOE plan to evaluate

the burden on interstate commerce which could result from

differing state efficiency regulations?

Answer: Each petition whether by a state for a

rule not to supersede or by a manufacturer for a rule to

supersede will be judged separately based on the information supplied by all parties to the proceeding.

Question: The DOE definition of small business

as a gross revenue of less than 8 million per year for

all operations including both covered and non-covered

products is considerably different than most other

government used definitions of small business. What is th

reason for this difference?

Answer: Congress established the criteria for

an exemption for any manufacturer from all or part of the

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requirements of any rule prescribing an energy efficiency

standard for any period which does not extend beyond the

date which. is 24 months after the date such rule is

prescribed.

The 8 million refers. to the annual gross

revenues to such manufacturers for the preceding 12 month

period from all its operations, including the manufacture

and sale of covered products.

In making such a finding, the annual gross

revenues of any other person who controls, is controlled

by, or is under control with such manufacturer shall be

taken into account.

Question: Section 430,52(b) requires the

applicant to identify all other manufacturers of the same

or similar product types and all other persons who may be

aggrieved.

Will not all of this information be in DOE's

files as a result of the certification and enforcement

requirements and might not the analysis performed by a

small business be expected to be less complete than one

performed by DOE?

Answer: DOE will make known the names of other

manufacturers of the same or similar product types that it

has obtained as a result of the certification and

enforcement requirements to a small business upon request.

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Question: What justification was used in

ignoring time delays caused by certification laboratories

as noted under the heading "Design Option Lead Times" on

page 4 of the engineering analysis?

Answer: DOE does not have information indicatin

that these delays would pace the development of more

efficient models. Manufacturers are.invited to submit

written data on this subject during the comment period.

Question: The six month period between the

publication and effective date of the final rule does not

provide adequate time to certify our ovens -- page 1-16,

appliance efficiency standards of the NOPR.' There is a

large volume of initial testing required.

For example, we will have 24 to 32 basic oven/

door configurations to test.

Would DOE consider extending the effective date

from July 15, 1981 to an alternative later date?

Answer: DOE would consider extending the

effective date if such an extension is justified.

Interested parties are invited to submit comments

regarding this subject, providing information on the

reasons an extension is needed.

Question: DOE believes that consumer utility

f the consumer product efficiency standards appliances

should improve or, at worst, remain unchanged -- page 3-31

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environmental assessment. In view of the fact that some

insulated wall thicknesses could be increased, thereby

reducing thermal cavities of some major appliances, how

would consumer utility improve or maintain the same

level?

Answer: DOE states on page 3-31 of the

environmental assessment document that implementation of

energy efficiency standards could result in some loss of

utility to consumers. However, based on the design

options anticipated for use in meeting the standards,

loss of internal volume is expected in very few cases.

Question: The preamble, 1.3.1, states that

standards apply only to units manufactured after the

effective date. What happens to inventories? Can units

in inventory on the effective date be distributed in

commerce after such effective date if such units do not

meet the applicable standards? See 430.61.

Answer: Units in inventory manufactured before

the effective date may be distributed in commerce after

such effective date even if such units do not meet the

applicable standards. Documentation must exist to prove

that the units in inventory were manufactured before the

effective date,

Question: What rules or guidelines will DOE

follow during the proposed rulemaking phase respecting

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ex parte communications, written or oral?

Answer: It is DOE policy that ex parte

communications will not take place once a proposed rule

has been issued for public comment. Requests for written

information or materials will be handled through formal

channels with the information or materials being made

available to the public or interested parties in the

public reading room of the Freedom of Information Office,

Arrangement will be made by individual requesters to

purchase copies of desired materials.

Question: What will constitute the rulemaking

record?

Answer: The following materials consitute the

rulemaking record:

One, the notice of proposed rulemaking and any

documents referred to therein;

Two, comments and other documents submitted by

interested persons;

Three, any transcripts of oral-presentations

made in the course of the rulemaking;

Four, factual information not included in the

foregoing that was considered by the authority responsible

for promulgation of the rule or that is proffered by the

agency as pertinent to the rule;

Five, reports of any advisory committees;

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And six, the agency's concise general statement

or final order and any documents referred to therein.

The rulemaking record above-mentioned will be

available in the Office of Hearings and Dockets, and

accessible to the public in the public reading room of the

Freedom of Information Office. A transcript of the public

meeting and all public hearings will be retained by DOE

and made available for inspection at the DOE Freedom of

Information Office.

Question: How does DOE plan to implement

Section 336(a)(2)(A) and 336(a)(2)(B) of NECPA? Does DOE

contend that the July 16, 1980 public meeting satisfies

the requirements of subsection (A), as Section 11.4 of the

preamble would indicate?

The answer: Section 336(a)(2)(A) of NECPA will

be implemented during the opportunity for rebuttal

statements portion of the public hearing proceedings. At

that time interested persons will be given an opportunity

to question other interested persons who have made oral

presentations at the hearing.

Section 336(a)(2)(B) of NECPA is considered

satisfied by this public meeting whereby interested person

were given the opportunity to question employees of the

U. S. who have made written or oral presentations with

respect to disputed issues of material fact.

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Question: Dealing with waiver rule versus

energy efficiency certification, on March 4, 1980, the

DOE published the proposed rulemaking for the waiving of

consumer product test procedures. This proposed rule

provides protection for manufacturers from premature

disclosure of a special energy saving feature or product

not covered in the existing test procedure by providing

exemption from the testing of such feature or product

until it was on the market and a test procedure developed.

Clarify the interrelationship between the

proposed waiver rule and the energy efficiency standards.

If a manufacturer designed an energy saving

feature or product that could not be tested for energy

consumption or energy efficiency by the existing test

procedure and accordingly filed for a waiver of the test

procedure, would the waiver take precedence over the

certification aspects of the energy efficiency rule?

Answer: If a test procedure is waived without

conditions-for a basic model, that basic model is not

subject to the DOE energy efficiency standards since

there are no test procedures as required by Section

325(b) of the Act. However, if the waiver is granted

subject to conditions, the waiver will address whether or

not the basic model is covered by the energy efficiency

standards.

(202) 234-4433

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The last question is: What provisions, if any,

has DOE made for coordination with the Secretary of the

Treasury of certification and enforcement procedures for

imported covered products?

Answer: DOE is working with the Department of

the Treasury to establish certification and enforcement

procedures for imported covered products.

MR. MILLHONE: Thank you, Jim.

That covers the questions and answers of a

written nature in the general category. I will now open

up the meeting for questions from the floor.

If there are any attendees who would like to

ask a question in this area, I would request that they

come forward at this time and ask the question at the

microphone as the front of the room.

Are there any question.s? Come ahead.

MR. LANGMEAD: Jack Langmead, LAMA.

On question 5, where the question was asked,

why is the term for comfort heating and cooling equipment

defined as a capacity rather than an energy efficiency,

the answer was, it is in. fact done that way because that

is the measure of efficiency that is specified in the

rule.

Can somebody respond to the effect of that

definition as it relates.to how :you define a basic model?

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MR. MILLHONE: Mr. Langmead, let me check with

my staff and see if we feel we can answer that question

at this point. In this instance and in the future when

there are questions that are asked, if I feel that we need

some additional time in order to get the accurate answer,

what we will do is make certain that we have the question

and get the answer back to you and put a copy of the

question and answer in the Freedom of Information library.

MR. LANGMEAD: The importance of the answer is

that it makes it extremely difficult to comment on the

certification and enforcement portion of the rule without

knowing that interrelationship.

MR. MILLHONE: If you will just wait for a

minute, I will confer with my staff and see if we feel

we can answer that question at this time.

MR. LANGMEAD: Fine. Thank you.

MR. MILLHONE: Why don't you stay here, you may

have some follow-up questions.

MR. LANGMEAD: All right.

MR. MILLHONE: The panel, when they comment,

should also identify themselves so that we will have a

complete record.

Mr. Furlong is going to respond to your

question. I believe he is seeking some clarification.

MR. FURLONG: I am not certain what the specific

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problem is, Jack. Can you clarify, please, the specific

issue you are talking about in terms of a basic model

definition? I am not clear what the problem is that you

have.

MR. LANGMEAD: The basic model definition of a

furnace, central air conditioners, room air conditioners -

the definition of a furnace used in the test procedure

now, the question comes around as, there are units built

in a series where they are added incrementally. If you

have to have a different basic model for each different

input or each different output capacity, the number of

basic models, when you are talking about capacity rather

than efficiency in the definition, expands by a multiple

of 50 to 60 or 100. And the issue is, is a line of

furnaces with input rates from 20 or.40,000 to 120,000

built in incremental designs that can be proved to have

the same energy efficiency, a basic model or a different

basic model for each input? And you have revised the

definition of a basic model furnace in this rule.

MR. MILLHONE: Hold on for just a minute. Jack,

if you could stay for just a minute, I would like to

huddle with a couple of people on my staff.

(Caucus.)

MR. MILLHONE: Mr. Langmead, that was a good

question. Thank you. I believe we understand the question

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now, and that we need to reserve time to answer it after

some additional consideration.

We expect to be able to get written answers on

all of those questions that are reserved, such as this

one, by the end of next week. And at that time we will

make those answers also available in the Freedom of

Information library room.

MR. LANGMEAD: Fine, thank you. A similar

problem exists with the definition of water heaters, and

I think you will find it through several products, where

the test procedure determines a rate of consumption rather

than a total capacity. It is a little bit like rating a

faucet in regard to the tub that it is going to fill; if

it is going to fill a one gallon tub, it is a one gallon

faucet; if it is going to fill a ten gallon tub it is a

ten gallon faucet. Actually, you rate a faucet in how

many gallons per minute it delivers.

MR. MILLHONE: As I understand it, and I will

be corrected by my staff if I am not, that within a basic

model we are concerned about energy efficiency, not

energy consumption. The question that you raise is what

happens when you sort of elide from one basic model into

something that may or may not be a different basic model,

and I think that raises some questions that we are going

to have to give some additional attention to.

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MR. LANGMEAD: I have one additional question,

and that is: When the FTC was going through its rulemaking procedure on labeling, it provided some funding to

small business and consumers to participate in that rulemaking procedure. I understand DOE recognizes the impact

of this rule on small business. Is DOE planning to

provide any funding for participation in the rulemaking

process to either small business or consumers?

MR. MILLHONE: Mr. Langmead, we have investigated that possibility and have found that there are no

DOE funds available to provide for that participation

either by small manufacturers or by consumers.

MR. LANGMEAD: Thank you.

MR. MILLHONE: Are there further questions of a

general nature? Yes? Would you please identify yourself?

MR. BURGER: My name is Steve Burger. I am

from the California Energy Commission.

I would like clarification on the question and

answer with respect to the administrative record that will

be developed for the final rule.

If I understood Mr. Smith correctly, the

administrative record will include the notice of proposed

rulemaking, the comments received, the transcripts made of

the proceedings, and I am not sure I got the next one

down correctly, but that was facts considered and not

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included in other materials that were available. Is that

correct?

MR. MILLHONE: Mr. Smith, would you like to

reread that item four of that answer?

MR. SMITH: Yes. Item four that I read is

"factual information not included in the foregoing that

was considered by the authority responsible for promulgation of the rule or that is proffered by the agency as

pertinent to the rule."

MR. BURGER: Okay. And the next one was

reports by other agencies that are relevant to the rulemaking, is that correct?

MR. SMITH: Reports by any advisory committees.

And last, the agency's concise general statement or final

order and any documents referred to therein.

MR. BURGER: Okay. Then if I am interpreting

this correctly, you intend to include in the administrative

record facts and reports which may support action but

which were not necessarily subject to rebuttal or comment

by those affected by the rule. Is that correct?

MR. MILLHONE: Mr. Smith, I would like to,

since this gets into some questions of a legal nature

dealing with the completeness of the record, for purposes

of soliciting public comment, ask Mr. Margolis if he has

any answer that he can provide.

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MR. MARGOLIS: With regard to number four,

factual information not included in the foregoing that

was considered by the agency, this would be if -- excuse

me --- we are not saying that there will be any such

type of information. We are saying, if there is other

information that was considered by the agency, it would

become part of the rulemaking record.

In other words, anything that was considered by

the agency in promulgating the rule will be part of the

record. We are trying to, in response to the question of

what will constitute the rulemaking record, to try to

state all various possibilities of documents that will be

included.

This does not mean that we will include

documents that we have not given the public a chance to

comment on. If such a situation does come in to play, we

would include such a document in the record.

MR. BURGER: Thank you. I take it that that

may nevertheless include material that is not now

available and will not be identified until perhaps the

final rule is published, at which time there is no

further comment allowed. Is that correct?

MR. MARGOLIS: No. I know of no -- as of this

time I know of no document that would be covered by that

No. 4 provision. I am just making a statement to the

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effect that if such a document was considered and would

not come under the first three categories, we would

include it in the rulemaking record.

MR. BURGER: Thank you very much. I have one

additional question. I am hoping you can give me some

information prior to the time of the final rule with

respect to the effect of the DOE program.

You addressed a question with respect to the

effect of the DOE program on state standards, Mr. Smith,

and I am wondering if you could elaborate on when

supercession would occur.

Would it be at the time the final rule is

promulgated, or at the time the final rule becomes

effective? And if the supercession takes place at the tim

the rule is promulgated, what are manufacturers to do

during the interim period when a state may engage in a

petition process with DOE to allow exemption from the

preemption?

MR. MILLHONE: I am going to ask that

Mr. Margolis respond to that question, since it is a

matter of legal interpretation.

Would you excuse us for just a minute?

(Caucus.)

MR. MILLHONE: We would like to respond to that

question in writing. I want to make certain that I have

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your name and your address, as well. Do we have that from

the court reporter?

MR. BURGER: I will give her my address. Thank

you very much.

MR. MILLHONE: If you can take a minute and

give your address to the court reporter and to

Mr. Margolis, we can get an answer to you right away.

Are there other questions of a general nature?

Yes?

MR. DEAN: My name is Richard Dean, from

Whirlpool.

My question is: Will DOE provide for inspection

of all contractor computer simulation models and that

data input that was used for our inspection? That would

be both for the economic models and the engineering

models.

MR. MILLHONE: Will you give us a moment to

ponder that one also, Mr. Dean?

(Caucus.)

MR. MILLHONE: Mr. Dean, the answer to your

question is that information in that area, in terms of

the models, is recognized by DOE as information that it

needs to make available. The question is, how can we --

it requires some detail, because some of the information

is more rapidly available than other:

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So, what I would like to do is get an answer

back to you within a reasonably quick period of time that

provides some further details in terms of the availability

of different parts of that information.

MR. DEAN: I would just like to emphasize that

it would be very difficult to comment on both the design

alternatives and many of the economic conclusions without

that information, and I hope it can be expediently

provided.

MR. MILLHONE: Mr. Furlong would like to add

something to that.

MR. FURLONG: I realize this information is

important to people such as Whirlpool, and I am sure

other people in the audience that are representing other

manufacturers. But on the other side of the coin, there

is the case where the analysis has been set forth in both

the notice of proposed rulemaking and the technical

support documents.

If any manufacturer has reason to believe that

the results of the analysis are not correct, it is also

the responsibility of you people to provide information

that refutes what has been put forth in the notice of

proposed rulemaking. So, that is why we have public

hearings. And you may find something wrong with one of

the models, but that may end up being, you know, somewhat

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immaterial. If you can prove that what came out of the

model is not correct, that is the purpose of why we are

holding the hearings, and you have to provide the

information to us.

So, it is really kind of a two-way street is

what I am trying to say. We, we think, have done our

homework correctly. If you think that we have not done

it, it is up to you to tell us where we went wrong. And

part of it may be in the modeling, but part of it is also

the end result. If you know the answer is not correct,

you tell us why the answer isn't correct. The model

might not have done the job right, but you should be

telling us what is incorrect about the final answer is

what I am saying.

MR. MILLHONE: Mr. Dean, did you have a further

question?

MR. DEAN: Yes, just one further followup to

that. The key thing that we are interested in is the

date input, as opposed to the specific models themselves.

MR. MILLHONE: Your question dealt with the

economic models as well as the engineering models.

MR. DEAN: That is correct.

MR. MILLHONE: Mr. Furlong was dealing primarily

with the engineering models. Mr. Pomeroy is more familiar

with the status of the economic models, so I will ask him

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to respond to your question as well. Mr. Pomeroy.

MR. POMEROY: Mr. Dean, in regard to the economi

modeling, we have provided in our technical support

documents the major parameters and assumptions underlying

those models. However, I believe you want to get actual

control of the model so that you can simulate them, so

that you can take a look at the data. Is that correct?

MR. DEAN: That is correct. Let me cite you an

example. To project, for example, energy savings from a

given standard, there is no information in the TSD as to

the specific input that was used to derive those numbers.

That is an example of what I am talking about in terms of

input.

MR. POMEROY: Well, we will consider further

how we can give you access to those models. But in

general, I believe most of the significant, salient

characteristics of those models has been presented, and

we might be just splitting hairs to actually look at

every line item in those models, every equation, because

in many instances their solution is not intuitive. And

as I have said, we have provided the prime parameters in

our technical support documents.

MR. MILLHONE: Am I correct, Mr. Dean, in

understanding that your question was not so much

concerned with the model itself, but the data input into

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the model?

MR. DEAN: My question addresses both the model

and the input used to derive, for example, the design

options, energy savings of the program, several different

topics. But if I had to put a priority on which one I am

interested in, probably the data input would be the most

important. Certainly, the TSDs cover the basic

parameters of the models and how they were designed. But

we would like to know how those decisions were arrived at

and it would certainly facilitate our comment process.

MR. MILLHONE: The answer to you is that we will

get a written letter that provides further details on this

subject. Meanwhile, we see the participants who are

familiar with this area and who have their own design

procedures and their own models used in their own

operations as having a responsibility to give us the best

information they can based upon their efforts to deal

with these same issues.

MR. DEAN: Thank you.

MR. SCHROEDER: name is Stanley Schroeder.

I am with the Gas Appliance Manufacturers Association.

My question deals with the procedure of the

hearing that we can anticipate. Will the hearings be

conducted according to any particular rules of the

Administrative Procedure Act, such as Section 553 and 557?

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Will there be an opportunity for cross-examination of

commentators? Will there be a hearing officer, and how

will motions during the hearings be treated?

MR. MILLHONE: Mr. Schroeder, I would like to

ask Mr. Margolis to respond to your question.

MR. MARGOLIS: The public hearings that are to

take place in Washington and Chicago will have at the

head table a panel of government personnel, one of which

will be designated as the chairman.

The people in the audience who have indicated

that they wish to present an oral statement at the hearing

will be called on to make that statement. The panel can

then ask questions of the person making the statement.

When he or she concludes their statement, then the

remainder of the people who have indicated a desire to

make oral comments will be called, and the same procedures

will be followed.

At the conclusion of all oral comments, then

the chairman will then call back the participants in the

same order that they made their original statements to

make any additional comments that they wish. At this time

they could then ask, as has been the practice in the other

public hearings conducted in this program, to ask other

persons who made statements questions. Then when that

party's turn comes, that party then would answer the

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question.

Those would be the procedures that would be

followed in the public hearings.

MR. SCHROEDER: I take it you are saying that

there is no formal hearing officer that will be presiding

at those hearings?

MR. MARGOLIS: There will be a chairman from

one of the members of the panel who will, as today the

chairman is Mr. John Millhone, I do not know who the

chairman is who will be designated for each of the days

of the hearings in Washington and Chicago.

MR. SCHROEDER: Do you think it would be possibl

to allow questions to be addressed to people who are makin

presentations after the staff has had an opportunity to

present them via a vehicle, perhaps, such as submitting

questions to the staff for presentation at the time the

person is making his presentation, rather than six hours

later when the whole thing is done?

MR. MARGOLIS: One of the procedures is for

members in the audience who do wish to submit questions

to present them in writing to the chairman, who will then

decide to ask the question, yes.

MR. SCHROEDER: At the time the presentation is

made?

25 11 MR. MARGOLIS: Yes.

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MR. MILLHONE: Thank you, Mr. Schroeder.

Next question?

MR. BAILY: Good morning. My name is Ted Baily,

with Carrier Corporation. I have two questions.

One is on further amplification of Mr. Smith's

answer to the imported products question. Will the

products of Canadian manufacturers be treated the same as

domestic products, or will they come under the rules to

be developed by the Treasury? And if the latter, what

sort of a timetable do you have for the development of

those rules? Will they coincide with the promulgation of

the final rule as of the end of this year?

MR. MILLHONE: Give us just a minute, please.

(Caucus.)

MR. MILLHONE: The Canadian manufactured product

would be treated as other products that are manufactured

in a foreign country. DOE.-is currently discussing withTreasury the schedule for the development of those rules,

and that schedule hasn't been completed now.

MR. BAILY: Thank you, Mr. Millhone. The other

question that I would like to ask concerns Mr. Burger's

question on preemption, on promulgation or effectivity.

I am interested in the answer to that question, and wonder

if it is necessary to haunt the Freedom of Information

office to get it, or is there a simpler way of finding

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out what that answer will be?

MR. MILLHONE: Mr. Baily, we would be happy to

give you the answer to the same question, and if there are

others in attendance at this meeting who would like to get

answers to that question or to any other question that is

given, if they could give a note to -- I think I might

ask Rebecca Dyer, who is in a blue dress at the back of

the hall, to receive those requests.

Let me recap what I just said. Mr. Baily has

indicated that he would also like to get an answer to the

question asked by Mr. Burger on the preemption with

regard to the California standard question without

haunting the Freedom of Information library.

If there are others who would like to get an

answer to a specific question such as that, if they could

give their name and the question that they want answered

to Ms. Dyer, then we will see that they get those answers

at the same time they are sent out to the person who

asked the question.

MR. BAILY: Thank you, Mr. Millhone.

MS. BUTLER: Karen Butler, from Sears-Roebuck.

I understand that a number of companies have

requested that DOE extend the deadline for comments on

the proposed rule. We are among those people, and I was

wondering if DOE is in a position to give us an answer?

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MR. MILLHONE: The question is on the extension

of the comment period. To my knowledge, thus far we have

received two such requests, three such requests. As I

indicated at my opening comments, it is our current

intention to not extend the hearing comment period.

However, if there are others who feel as if the comment

period is severely limiting their ability to participate

in the hearing process, I would like to know so, and that

decision hasn't been made in absolute finality.

We are concerned, however, that any extension

of the comment period would make it impossible for us to

meet the statutory deadline of December, 1980 final

standard, and feel as if meeting that.statutory deadline

is extremely important in terms of the energy savings

that the program will accomplish, and also in terms of

the determination of what these standards would be in

terms of guiding the affected industry and in certain

areas where preemption is a concern.

MS. BUTLER: I trust that in making your

decision you will keep in mind that the TSDs weren't

available on July 30th, and that a number of commenters

have to address all of the standards, and not just some

of them.

MR. MILLHONE: The comment was that in making

the decision on an extension, Ms. Butler would hope that

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we would recognize that in her experience there was some

delay in getting the TSDs, in their availability. I had

thought that they were available at the time or within

days of the time through the principal associations.

So, if that information that I have been told

is not correct, and if there was a severe delay in your

getting that information, I would like to have that as

part of a request.

Are there other questions of a general nature?

(No response.)

I am told that the coffee has arrived, so that

we will now take a short break and then get back.

(Recess.)

MR. MILLHONE: Let's get back in session.

There have been a number of people who have asked if they

couldn't get copies of all the questions and answers. We

are looking at some way that that might'be done, either

by publishing the questions and answers in the Federal

Register or by making copies available and distributing

them to the people who attend the hearing.

If we make it available to those who have

attended this meeting, we would use the names and

addresses that you should have put down as you came into

the meeting. So, if you haven't done that, be certain to

do so. We will give this some further attention, and I

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will have an announcement this afternoon at the start of

that session in terms of how we will make that information

available.

My impression from the people who I talked to

during the coffee break was that there was a great deal of

interest in having answers to these questions.

In addition, the transcript of this meeting

will also be available, and at the front table on the

suitcase there are some forms that can be filled out by

anyone who wants to get a copy of the transcript of the

hearing from the reporter. There would be a charge for

this, of course.

The break also led to a number of expressions

from people who felt that there was a need for additional

time during which the hearing should be open, in order to

provide them an adequate opportunity to prepare their

comments. That sentiment appears to me to be more

widespread than I had anticipated it as being.

This question, then, will be considered by DOE

within the next several days, and if there are any of

you who have feelings for and against such a change, I

would ask that you let me or a member of my staff know or

send me a note. You could send it to the people who are

identified, the addresses on the notice of proposed rulemaking, or directly to me.

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I believe that takes care of the opening

comments at the start of the second part of this meeting.

The second general category of questions dealt

with economic matters, and we will now have the questions

and answers in areas that were received in that particular

area.

Mr. Pomeroy will handle that category.

MR. POMEROY: Good morning. My name is George

Pomeroy. There are approximately 39 answers to questions

which have been submitted on the economic aspects of the

rulemaking.

In certain cases I have taken the liberty of

paraphrasing the questions for clarity.

The first question states: How does DOE justify

the exorbitant expenditures of time and money, by the

government and industry, in setting standards when they

result in great sacrifice of future industry development

and progress?

The answer to that question is: The proposed

standards were evaluated for economic justification. For

some product classes no standard was set and for others

the level of standard was reduced to lessen impacts on

manufacturers.

DOE has determined that the proposed level of

standards provides a large net benefit to consumers and

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the nation overall, both in dollars and in energy saved.

Furthermore, analysis shows the industry to

remain competitive and profitable after standards. The

justification procedure is described in detail in TSD No.

4, "Economic Analysis."

The second question: Is the 750 hour usage time

for room air conditioners as used in the economic

analysis consistent with the DOE statement that "no region

of the nation is impacted more severely than another"

when the actual range between regions is 250 to 2,000

hours? Reference, TSD No. 1, the draft of regulatory

analysis.

The answer to this is: The only way to ensure

that there are minimal differences in regional life cycle

cost impacts is to impose regional rather than national

standards.

DOE has determined, however, that regional

standards are not justified due to large appliance price

increases resulting from expected increases in the number

of product models offered.

The statement on page 5-6 of the draft regulator

analysis was incorrect. Regional differences in life

cycle cost impacts for HVAC equipment were calculated and

presented on page 3.32 of TSD No. 4.

DOE finds these regional differences acceptable.

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In nearly all cases standards will reduce the life cycle

costs even in regions with very low product usage.

Next question: What has DOE done to evaluate

the negative economic impact on the U. S. appliance

industry associated with foreign competitors who will

avoid the cost of developing standards, thus enabling them

to introduce lower priced products?

Answer: DOE has not made a detailed evaluation

of the economic impact of foreign competitors on consumer

product manufacturers. However, based on available data,

foreign manufacturers of the eight product types currently

represent an insignificant share of the U. S. market.

In order to fully analyze their impact, DOE

would need detailed information on the market shares and

manufacturing costs of foreign competitors to U. S. firms.

DOE would appreciate receiving any available information

from the appliance industry.

Question: Did DOE receive data from manufacture:

indicating that some products would be commercially

available in 1986 at or above the proposed standard

level?

Answer: information obtained from the industrywide survey, Form CS 179, indicated that some products

projected to be commercially available in 1986 would meet

or surpass the proposed 1986 standards. In fact, some

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products sold in 1978 meet or surpass the proposed 1986

standards.

Question: Have any studies or market surveys

been made to determine consumer reaction to models that

will be available at the 1986 standard levels and the

prices they will have to pay? Will they postpone

purchases and defeat the program?

Answer: Both analytical studies and market

surveys were conducted to determine consumer reactions to

more energy efficient products. Consumer demand for

efficient appliances was formally investigated in the

Oak Ridge National Laboratory residential energy use model

The model simulated changes in consumer

purchasing patterns based upon changes in fuel prices,

appliance prices and income. This model was updated to

reflect the best current survey data available on

consumer pruchase and use of appliances.

Question: Why was the payback period calculated

on straight energy savings without discounting as was done

with life cycle costs?

Answer: Consumers will pay higher purchase

prices but lower energy bills on more efficient products.

There are several ways of viewing this impact. DOE

believes that discounted life cycle cost changes reflect

the true cost benefit tradeoff to consumers.

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However, consumers often make purchase decisions

based on simple payback criterion. Therefore, simple

payback was provided for each product class to provide

additional insight into consumer impacts.

Question: Considering the current economic

crisis related to American industrial productivity, what

is the basis for DOE's rationale concerning the employment

of 30,000 additional people in this industry to achieve

the same production level as was achieved prior to the

rule? Isn't this inflation?

The answer is: The 30,000 increase in employment refers to the total increase in employment throughout

the economy, not the appliance industry per se.

With standards at the proposed levels consumers

will receive the same product service at lower cost,

thereby having more money to spend on other goods and

services. This increase in disposable income will

induce the employment of approximately 30,000 additional

workers in 1986, and 220,000 additional workers by the

year 2000.

Question: Given the current economic slump and

especially the rise in price of home heating oil, why was

the production volume for each product class, especially

oil heating equipment, assumed to remain constant at

1978 levels?

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Answer: In spreading fixed production costs for

more energy efficient appliance, market shares and

production volumes in 1978 were used as described in the

engineering analysis, TSD No. 5. This is because no

defensible market share projections exist for specific

product classes.

For the economic analysis, however, only fuel

specific product type shipment forecasts were needed.

The economic analysis does assume that product market

shares change over the forecast period. Appliance

shipment forecasts are displayed in TSD No. 4, economic

analysis.

Question: Like gas horizontal non-weatherproof

furnaces, the number and size of current oil fired forced

air furnace manufacturers are believed to have been

misstated. In both cases, the number and size of

manufacturers will affect DOE estimates of the economic

impact to companies and consumers alike. How was the

information. obtained? Were those companies who brand name

products segregated out and the original equipment

manufacturer identified?

Answer: Estimates of the number of classspecific manufacturers were obtained from trade associations and conversations with industry representatives.

See engineering analysis, TSD No. 5, page D4-25. Where

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appropriate, product labelers and the original equipment

manufacturers were identified,

Question: The draft regulatory analysis on

page 2-2 refers to a DOE cost book. What is contained in

this book? Is this book available? If so, where?

Answer: The DOE cost book refers to the

engineering analysis, TSD No. 5. The engineering analysis

contains estimates of the production costs of achieving

various levels of energy efficiency. This document is

available from DOE, as are the other technical support

documents.

Question: How were the figures for energy use,

energy savings and net present value for fuel and equipment

derived in Table 2-2 and page 2-4 of the draft regulatory

analysis?

Answer: Section 2.1 of the draft regulatory

analysis describes the inputs to the Oak Ridge National

Laboratory energy use model used to compute energy use,

energy savings and net present value for fuel and equipment

Further description of the model and how it computes

these outputs is contained in Appendix E of TSD No. 4,

economic analysis.

Question: How did DOE derive a 0.79 to 1.59

quadrillion BTU annual energy savings depicted on pages

3-13 of the draft regulatory analysis and what are the

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figures for each appliance type?

Answer: These energy savings were calculated

using the Oak Ridge model previously described. The

model projects annual energy savings over the period

1982 to 2005 for each individual product type. A more

extensive discussion of this model may be found in the

economic analysis document.

Cumulative energy savings by product type are

presented in Table 4-2 of the draft regulatory analysis

and in figure 5.5.1 of the economic analysis.

Question: In discussing the methodology for

analyzing economic impacts of the proposed standards on

the nation, page 4-1, draft regulatory analysis, DOE

lists "reasonable energy savings to the nation." What

quantitative data did DOE use in determining a reasonable

energy savings for each covered product?

The answer is: "Reasonable energy savings to

the nation" refers to the requirement by Congress that

standards result in significant energy conservation.

For product types, this has been determined to

be 2.867 trillion BTUs per year. For product classes,

significant energy savings is 102,390 BTUs per year for

each unit. A rationale for this determination can be

found in Section 6.3 of TSD No. 4, economic analysis.

Question: DOE assumes that there will be little

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impact on socio-economic factors from the consumer product

efficiency standards program. Life cycle costs may

decrease under the program, but can lower income families

afford the higher initial purchase price and increased

financial cost?

Answer: TSD No. 4, economic analysis, addresses

whether or not the poor are severely affected by purchase

price increases associated with increasing appliance

efficiency. When all products are combined, the aggregate

purchase cost increase experienced by the poor is less

than 0.2 percent of their median disposable income.

Therefore, on average the impacts are extremely small.

Refer to Section 5.6 of the economic analysis.

Question: Is DOE's initial purchase price

premium of seven percent to nine percent on CPES units or

units subject to standard in 1986 realistic?

Answer: The methodology for estimating purchase

price increases for appliances at alternative levels of

regulation is described in TSD No. 4. The average price

increase from the baseline 1986 appliance is computed to

be 8.4 percent. Purchase price increases expected to

result from standards are in the range of $10 to $30 per

unit for most products.

Question: DOE estimates that appliance life

expectancy may improve as a result of the standards

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program, page 3-32 of the environmental assessment. What

studies support this claim?

Answer: Since 1972 there has been a gradual

increase in energy efficiency for many of the covered

products. At the same time, the reliability of these

appliances has generally been improving.

Although higher efficiencies do not necessarily

create improved reliability, higher efficiencies have not

been shown to impair product life expectancies. The

economic analysis assumes that standards will have no

effect on the service lifetimes of appliances.

Question: DOE admits that medium-size and small

size manufacturers will suffer most from the proposed

standards. Does DOE foresee the elimination of some of

these smaller firms, thereby paving the way for potential

antitrust action against the larger surviving appliance

manufacturers?

Answer: The potential for anti-competitive

effects resulting from appliance standards is presently

being reviewed by the Department of Justice.

However, the appliance market currently is

extremely concentrated with the largest firms holding more

than 90 percent of the market share of nearly all types of

products.

25 11 The elimination of some small firms, as presentey

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in TSD No. 4, economic analysis, will not appreciably

increase the market share of large firms either singly

or taken as a group.

Therefore, DOE does not foresee any deterioration in the competitive nature of the market or the

potential for future antitrust action.

Question: The proposed rule indicates that 58

firms comprise the central air conditioning industry. Can

a list of these firms be obtained? Where did DOE obtain

lthis list?

Answer: Section 4.0 of the proposed rule

indicates that 58 individual firms and major plants

comprise the central air conditioning manufacturing

industry. This list was developed from ARI and published

sources and verified by consultation with the identified

manufacturers. This list is available from DOE on

request. Any comments or revisions to this list are

encouraged.

Question: In performing the economic impact

analysis on individual manufacturers, did DOE consider the

overall impact on individual manufacturers making more

than one of the covered products? Was the aggregate

economic impact on such firms analyzed?

There were two questions with regard to this

subject.

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Answer: In performing the economic analysis of

the impact on firms making appliances, DOE developed

rlepresentative firms such that each representative firm

makes one and only one appliance. There was insufficient

information to allow an evaluation of the interactions

which take place between product divisions.

In order to fully evaluate this issue, DOE would

need a large set of data covering assets, production

facilities and funds flow at the line of business level.

This information has been requested from the industry, but

was not received in sufficient detail for a defensible

analysis.

Additional information on line of business

activities and product division interactions for multiproduct firms is requested.

The analysis of divisional interactions within

multi-product firms, however, was implicitly addressed by

allowing manufacturers to obtain financing funds from any

source, including other divisions, as long as the funds

could be repaid with estimated future profits. This is

described in Appendix A of TSD No. 4, economic analysis.

Question: Section 5.5.1 of the notice indicates

that the inflationary impact of the proposal is negligible.

What level of inflationary impact would DOE consider to

be more than negligible, from an individual consumer

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standpoint and from an individual company standpoint?

Answer: The impact of inflation on consumers

is commonly expressed in terms of the erosion of overall

purchasing power of the dollar. The Gross National

Product price deflator is a standard measure of purchasing

power and was chosen for this analysis because of its

comprehensiveness and familiar properties. Macro-economic

simulation of the EXPOR-MULTITRADE model, which is our

macro-economic simulation model, indicates that this

measure does not show a statistically significant change.

Aggregate appliance purchase price increases,

the value of fuel savings and indirect effects on overall

economic activity were considered together in computing

inflationary impacts. You can get more detail on this

from TSD No. 4, economic analysis.

Question: How did DOE calculate that there are

some 1,500 basic models of central air conditioners? Is

this an estimate of the number now being sold, or the

number which will comply with the proposed interim

minimum standard?

Answer: The Air Conditioning and Refrigeration

Institute, ARI, estimates that as many as 20,000 basic

models of central air conditioners could be identified if

basic models were narrowly defined. Based on additional

ARI and DOE analysis, this large number reduces to 1,500

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basic models which must be tested since each condenser

unit needs to be tested only with the evaporator coil

having the largest sales volume.

Question: What procedure or method was used by

DOE in projecting the model mix within each product class

with regard to shipments, changes in energy consumption,

efficiency, et cetera?

Answer: The Oak Ridge National Laboratory

residential energy use model projects estimates of

appliance demand and energy consumption with and without

standards. This model assumes that fuel switching can

occur for product types, but that the market shares of

classes within fuel specific product types remain constant

over time. For a description of this model, see

Appendix E of TSD No. 4.

The data necessary to forecast product class

shipments is not available to DOE. Any data submissions

regarding the projection of shifting market shares for

product classes will be used in subsequent economic

analysis.

Question: The discussion of the analysis of

the financial impact on manufacturers, pages 4-7 and

4-8 in the NOPR, states that financial data from publicly

available sources was used with a certain amount of

estimating and/or projecting of data being done; that

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firms were classified according to three size groupings,

small, medium and large; and that representative firms

were selected within each of these classifications. Pleas

provide by example or illustration how the generalized

financial data was developed to the product type level and

what criteria were used to classify firms as representative?

The answer is: The procedure for estimating the

financial impacts on manufacturers resulting from applianc

standards is described in detail in Appendix A and Section

5.7 of TSD No. 4.

Question: The NOPR includes extensive material

on the certification and enforcement aspects of the

minimum standards program. However, the discussion of

the cost/efficiency relationships in Sections 4 and 5

does not indicate that the cost of testing and recordkeeping that would result from the proposed certification

and enforcment program have been included in the

increased cost of the product. Were these costs

included?

Answer: These costs were not included directly

in the economic analysis. The additional impact of testin

costs is treated in TSD No. 3, certification and

enforcement analysis.

DOE recognizes that sample sizes required for

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certification may be larger than those projected in

TSD No. 3.

Initial estimates of test costs show them to be

generally less than one dollar per unit and less than one

half of one percent of purchase price. Their inclusion

in the analysis would not significantly change any of the

economic impact results. These costs, however, will be

included in all subsequent economic analyses using the

most currently available certification cost data.

DOE solicits information from manufacturers on

product variability, test variability, and test costs

which will assist in further quantifying certification

costs.

Question: The shipment-weighted energy factor

that is discussed in the NOPR was calculated by weighting

the energy factor by the unit shipments of each model.

Previously, shipment-weighted energy factors were

calculated by shipment-weighting the functional output and

the nergy input of each model and using those values as

the numerator and denominator in calculating the shipmentweighted energy factor. Why did DOE change the procedure

for calculating the shipment-weighted energy factor?

Answer: There are many ways of computing

shipment-weighted means of data. The procedure chosen

by DOE for purposes of analysis of the potential impacts

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of the appliance standards yields a shipment-weighted

mean of the quantity on which DOE will establish a

standard, specifically the test procedure energy

efficiency factor of an appliance. Other procedures, such.

as the one described in the question, may be used for

other purposes.

Question: The NOPR explains that a series of

alternative efficiency levels were evaluated for each

product class for the July, 1981 and the January, 1986

standards. In some instances proposed levels are not the

same as the alternative levels that DOE evaluated. Why?

In such instances how were the proposed levels evaluated?

Answer: DOE evaluated alternatives within a

range of values which appeared suitable candidates for

loose or tight standards. The proposed levels fall

within the ranges evaluated. In some cases, interpolation

between alternative levels was used to tighten or loosen

the standard slightly.

Question: The NOPR indicates that a base line

unit which had an efficiency level, energy input,

functional output and size approximately equal to that of

the most commonly produced unit in 1978 was used to

determine the specific design options that could be used

on the product to improve its energy efficiency. How did

DOE identify the design and/or operating characteristics

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already utilized in the 1978 base line unit and therefore

not available for future use in improving product

efficiency?

Answer: The base line unit, as described in

the question, was used as the starting point to which

design options were added. Its characteristics and

available design options were developed from discussions

with manufacturers and examination of units in the

marketplace.

Question: Was each potential design option

analyzed individually for consumer payback?

Answer: The methodology chosen for evaluating

the benefits of design options involves adding these

options to a baseline unit in order of cost effectiveness,

and then computing the efficiency and cost of the

appliance. Each design option was not evaluated directly

for consumer payback, although the analysis considers

minimum manufacturing costs which imply minimum consumer

purchase cost. For more detail, see TSD No. 5, engineerin

analysis.

Question: The regulatory analysis section of

the NOPR indicates that one of the options considered as

an alternative to the proposed approach is no regulation

in cases where none of the four alternative regulatory

levels for 1981 and 1986 or regional standards were

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economically feasible. Did DOE consider or evaluate the

flow of more efficient products and the consequent energy

savings to be realized through normal market forces and

compare the aggregate energy savings, the costs and the

benefits to those resulting from standards?

Answer: The "no regulation" alternative did

assume that forces other than the appliance standards woul

result in energy savings compared with present consumption

levels. The factors considered in the no regulation"

alternative were deregulation of energy prices, state

energy efficiency standards, the FTC labeling program, the

DOE public information program, and the building energy

performance standards.

Standards at the proposed levels were shown to

result in large benefits beyond those realized through

normal market forces. For more detail, see Chapter 5.9

of TSD No. 4, economic analysis.

Question: Appliance manufacturers provided

DOE, through their respective trade associations, extensiV

data on product energy consumption, efficiency levels and

unit shipments for 1972 and projected data for 1980 and

1986. DOE appears to have given little consideration to

those data. Were they used by DOE?

Now, there were two questions on this.

Answer: Industry data obtained through DOE

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Survey Form CS 179 was used throughout the engineering

and economic analyses. For example, proposed standards

for 1981 were based on the sales weighted average

efficiency levels calculated from this data.

Furthermore, the submitted industry data

provided the core for financial impact analysis of

appliance manufacturers. Industry data, often submitted

in aggregated and coded form, were extensively analyzed

and developed to provide a detailed data base. A great

deal of the manufacturer impact analysis would have been

impossible without this data base.

Question: How did DOE treat exports by U. S.

manufacturers in the economic analysis of the proposed

standards? Did DOE consider the impact of the proposed

standards on the competitive position of U. S. products

in world markets?

Answer: From discussions with industry sources

DOE determined that export of appliances has not been a

major source of revenue for domestic appliance manufacturers

and that those foreign markets are intensely competitive.

Nevertheless, nothing in the regulations

prohibits manufacturers from shipping units not meeting

the domestic standard to foreign countries with lower or

non-existent standards. It is not expected that foreign

operations of domestic producers will provide an

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increasing source of future revenue to appliance

manufacturers. DOE welcomes any comments to the contrary.

Question: Page 4-58 of the economic analysis,

TSD No. 4, includes a table containing industry shipments

by product type for the years 1978, 1981 and 1985. These

are identified on the preceding page as projections of

industry shipments developed from the data collected from

manufacturers and submitted to DOE through their

respective trade associations. There is no explanation

as to how these projections were developed or the rationalE

for these projections. Can you explain how these projections were developed?

Answer: The methodology of projection is

discussed in detail in Appendix A of TSD No. 4, page A-26.

Briefly, shipments for 1978 reflect historical data.

Estimates for 1981 and 1985 were estimated using the

Oak Ridge residential energy use model.

Question: Page 4-45 of the economic analysis,

TSD No. 4, contains a discussion of inventory levels. The

following page includes a table containing historical

data on inventory levels, and their relationship to the

value of the shipments. There is no explanation as to what

these inventory levels represent. Are they year-end

inventories, averages for the year, or what?

Answer: The inventories reported on page 4-46

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of TSD No. 4, economic analysis, are end-of-year

inventories calculated by the U. S. Department of

Commerce, Bureau of the Census.

Question: Page 4-48 of the economic analysis

includes a discussion of firm entries and exits. This is

supported by statistics on page 4-49 which display the

number of establishments by industry classification at

various points in time. What is the difference in

"establishments" as used by the Department of Commerce in

the census of manufacturers, which is identified as the

source of these data, and "firms", as used by DOE in the

economic analysis? What is the relationship between

these?

Answer: Data collected and published by the

census of manufacturers is specific to small industrial

subsectors. The industrial establishments of each

subsector are designated by the SIC code.

Four digit SIC data, while encompassing more

than the manufacturers of the eight covered product types,

was helpful in characterizing the structure and conduct

of the consumer appliance industry.

"Firms", as designated in DOE actual calculations of baseline scenario and regulatory impacts, refer

only to manufacturers of the covered products.

I have a list of the SIC codes, but I am not

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going to read them into the record.

Question: Page 4-42 of the economic analysis,

TSD No. 4, displays a series of consumer product price

elasticities of demand which are identified as DOE

estimates. What information or data was used by DOE as

the basis for these estimates?

Answer: The Data Resources, Incorporated data

base was used to estimate the demand elasticities

reported on page 4-42 of TSD No. 4. That data base

contains published information from trade associations

on quantities of appliances shipped, Department of Labor

wholesale appliance price indices, Bureau of the Census

estimates of income levels, and other factors related to

appliance demand.

Similar estimates of price elasticity of demand

can. be obtained from the Oak Ridge National Laboratory

residential. energy use forecasting model, used in much of

the economic justification of appliance standards.

Question: The material presently available

from DOE makes no mention of an evaluation of the impact

of the proposed levels on wholesalers and retailers. Did

DOE consider these impacts? If not, why not?

Answer: DOE was not able to evaluate quantitatively the impact of proposed standards on wholesalers and

retailers. Insufficient information was available on

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67

those parts of the appliance industry. However, wholesale

and retail operations appear to be sufficiently diversified that reductions in volume of any one product can be

offset by switching to other products. Investment tends

to be in the form of inventory space and handling

facilities which are adaptable to a wide range of

products. Therefore, DOE anticipates the impact on

wholesalers and retailers to be small.

If you have comments to the contrary, let us

know.

Question: The material available from DOE

concerning life cycle cost analysis and consumer payback

does not specify the level of product usage used in the

calculations, so we assume that these are based on

average usage factors. Is this assumption correct? Has

DOE made similar analyses of life cycle cost and

consumer payback for varying degrees of product usage,

such. as light users, average users and heavy users?

Answer: National average usage rates were

employed in all life cycle cost and payback analyses of

consumer products not related to heating or cooling.

Since the usage rates of room air conditioners, central

air conditioners and furnaces varies as a function of

the area of the country where the consumer lives, average

regional usage rates as well as national average usage

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rates were calculated for these products. Thus, for

heating and cooling appliances two sets of life cycle

costs and payback were estimated. See Appendices H

through K of TSD No. 4, economic analysis.

Question: The discussion of income inequality

on page 3-17 of TSD No. 4 states that DOE has determined

that an unacceptable level of impact is reflected by a

positive change in the Gini coefficient of at least plus

0.005. What was the basis for this determination by DOE?

Additionally, should not this measure be applied to

specific product types?

Answer: A description of the method used to

determine the threshold level for unacceptable impact on

income inequality is presented on page 5-64 of TSD No. 4,

economic analysis.

The income inequality measure, as applied to all

product types combined, showed appliance standards to have

insignificant impacts. To estimate distributional income

impacts for each product type individually would show even

smaller impacts, which by inference would also be

insignificant.

Last question: Have the various contractors

that provided the forecasts and/or projections to DOE for

the minimum standards program also supplied DOE with

confidence intervals or measures of probability concerning

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their forecasts and projections?

Answer: All analyses of impacts performed by

DOE or its contractors were investigated for sensitivity

to key assumptions. The subchapters entitled "Sensitivity

Analysis" in TSD No. 4, economic analysis, contain

discussions on the results of those analyses. All

national impact estimates such as energy savings and net

present value are presented as ranges representing DOE's

judgment about potential high and low values of those

impacts.

MR. MILLHONE: Thank you, Mr. Pomeroy.

I will now open up the meeting for questions

from the floor in the economic area. Are there any

questions in this area?

As indicated earlier, please state your name.

MR. REARDON: John Reardon with ARI.

I would like to follow up on the question

regarding the 1,500 basic models. That question was

raised by ARI and we are not sure how it was arrived at

by DOE.

To begin with, a definition of a basic model for

a central air conditioner in the proposed rule does not

speak to the fact that a condensing unit matched with the

highest retail sales volume coil constitutes the product

that has to be tested to meet the proposed rule provisions.

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The basic model is interpreted by us to mean every

combination of condensing unit and evaporator or blower

coil.

So, we have asked that that also be -- that was

also submitted as a question.

The other matter regarding the 1,500 basic

models that is not clear to us is: Are you considering

only those products that are above the proposed minimum

efficiency values in the proposed rule, or are you

considering all basic models that are now within the DOE

covered program?

MR. POMEROY: In regard to your first question

on the 1,500 basic models, a basic model for that

definition is just the condensing unit with the sales

volume coil associated with it. That is what the 1,500

referred to. And what you are saying is that that is

not the basic model as described by our certification

procedures. Is that true?

MR. REARDON: That is correct. That is not

worded that way in the proposed rule.

MR. POMEROY: Vic Petrolati is going to answer

this question.

MR. PETROLATI: Mr. Reardon, you are correct

that the proposed rule as currently written does not allow

the condenser-coil combination. The intent was to allow

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it as it was allowed on units to be tested under

section, I believe, 323 of the test procedure. The

intent, again, was to allow that type of combination.

So, the 1,500 was derived using the condenser

and coil combination as the unit to be tested.

MR. REARDON: Okay.

MR. PETROLATI: Now, the second part of your

question about the 1,500 basic models, that 1,500 was

derived at from all models that currently are in

existence, not those just above the standard.

MR. MILLHONE: Mr. Reardon, do you have a

follow-up question?

MR. REARDON: No. I will pick it up under the

certification and enforcement.

MR. MILLHONE: Okay. Do you have a few

questions there?

MR. REARDON: That was the two questions. One

was the definition of the basic models to clarify that,

and the other one was, were you including all basic models

or just those that are currently above the proposed

value.

MR. MILLHONE: Fine. Thank you. I believe we

have dealt with those.

Are there other questions on the economics? Yes

MR. WEIZEDRICK: My name is Jack Weizedrick. I

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am with ARAM. I would like to return briefly to the

shipment-weighted energy factor again.

I believe I heard the statement that the

shipment weighted average energy level was used for

computing the data base. The shipment weighted energy

factor which was submitted in the aggregate data was

computed on one method. Was the data base which you used,

did you recompute that using the formula used in the

NOPR?

MR. POMEROY: The answer is yes. We simply took

the efficiency factors as submitted by the industry

through Form CS 179 and made a shipment weighted average

of that factor as submitted. So, it didn't have an

enumerator and a denominator input-output.

MR. MILLHONE: Any further questions,

Mr. Weizedrick?

MR. WEIZEDRICK: Just a follow-up question.

Would you have any idea of the effect of the different

methods of calculation on the final values?

MR. MILLHONE: I guess it is not clear to me

what you mean by different methods of calculation.

MR. WEIZEDRICK: Okay. The way it was computed

originally, I guess, developed by the Department of

Commerce, was that the enumerator was summed and a

denominator was summed independently, and then divided in

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order to come up with shipment weighted energy factors,

The methodology in the NOPR uses an energy

factor which is a division in itself, and sums the energy

factors in enumerator and merely sums the shipments in

the denominator.

MR. POMEROY: I can't say that we have done any

studies, to my knowledge, of the difference between the

two methods of deriving shipment weights. I am also not

familiar with where in our rulemaking proceedings we have

used that particular method you are mentioning.

MR. MILLHONE: I am going-to ask Mr. Raap to alsc

deal with that question. Mr. Raap.

MR. RAAP: Yes. The point being that there may

be an error in the NOPR on how we calculated our shipment

weighted energy factor. Mr. Weizedrick pointed out that

a past method that has been used by the Department of

Commerce does exactly what he says, sums the numerator

and sums the denominator, where we just summed the

resulting energy efficiency, that you do not get the same

answer. There is an inconsistency.

If our shipment weighted energy factor calculation is incorrect, all the proposed levels would essential

be incorrect also and would be adjusted to the right

numbers.

25 11 I don't know presently which method is correct,

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but there is an inconsistency in how AHAM determines

shipment weighted effect and how we did it in the NOPR.

If there is an error, the numbers will have to

be adjusted. All shipment weighted -- the proposed

levels, to be consistent with the analysis, would have to

be adjusted. And we are currently looking at it. That is

all I can say.

MR. WEIZEDRICK: Thank you..

MR. MILLRONE: Mr. Weizedrick, I appreciate

your comment on that question. One of the values of a

public meeting like this is that some of these issues that

more often are frequently associated following the public

hearing process get surfaced early so we can have a

chance to take a look at them.

Mr. Langmead.

MR. LANGMEAD: Thank you. I have got one

question, I think, that falls here and not in the product

specific area.

That is, there are some products that use gas

for their source of energy and require no electricity. In

several cases the design options discussed in the rule

would require bringing electricity to the site of the

gas appliance.

What was the cost of bringing electricity to the

location of the gas appliance assumed to be in homes that

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are existing today?

MR. MILLHONE: Mr. Langmead, as I understand it,

what you are saying is that there may be electric service

hook-up costs that would be associated with certain

products. Could you provide some specific examples?

MR. LANGMEAD: Two examples are gas ranges that

have no electrical supply cord, and the other example is

gas water heaters where the report and discussion talks

about the use of flue dampers, not, vent dampers -- flue

dampters, which is a considerable difference, and

intermittent ignition devices. Neither one of those

products -- not all ranges have electrical supply cords,

not all gas ranges, and no water heaters have electrical

supply cords at the present time.

MR. POMEROY: Mr.-Langmead, in the economic

analysis we try to estimate the,,-'penetration and the shift

in the penetrations of prodiAtts and .the shifts in demand

over time in the future. We. donpt encourage consumers to

purchase gas or electric p:roducts'.

Assuming a consuum^er purchases a product, we are

trying to create the.condition whereby that product will

be more efficient than it would be without standards.

So, assuming that. the consumer was going to

purchase the product, we are just interested in the

energy savings that you will realize with a product subjec

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to standard as opposed to the energy consumption of a

product with no standard.

MR. LANGMEAD: Mr. Pomeroy, let me try to

explain my question, because obviously you don't understand it.

MR. POMEROY: All right.

MR. LANGMEAD: The product is in place. There

is a range in a kitchen. There is no electrical supply

in the vicinity of the range. If a range is bought with

an intermittent ignition device, it must have to be wired

in, in according with the National Electric Code, an

electrical outlet within about four feet of that range

location. It cost somewhere in the neighborhood of

$100 to

spot.

150 to bring that electrical supply to that

I am saying, by requiring electric ignition on

ranges that is going to be a requirement of installing a

gas range in an existing home.

MR. MILLHONE: I think we understand the question

now. You are saying that where an ID Is required in order

to meet the standard, has the cost of providing the

electricity to the vicinity of the product been considered

as part of the product cost.

MR. LANGMEAD: That is correct.

MR. MILLHONE: Mr. Raap is going to address

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that question.

MR. RAAP: You are correct that in the gas

ovens the intermittent ignition device with electric

power, the cost to provide electricity to that gas stove

was not included in the design option analysis. On the

other hand, the water heaters, if you look at the design

options for 1986 levels, intermittent ignition or any

electric power is not required. It is only insulation,

heat traps and improved heat transfer. No intermittent

ignition, or no requirement for a flue gas damper. That

is not an option.

MR. LANGMEAD: That appears to be a little

inconsistent with what is in the preamble of the rule,

though.

MR. RAAP: Well, you had better read the

technical support document.

MR. LANGMEAD: I have, thank you.

MR. MILLHONE: I guess I have a question here.

It would seem to me just as a practical matter, in many

instances where a range would be located there would be

a switch that would be nearby, so that this wouldn't be

something that would necessarily be a cost that would be

attributed to each application of the new appliance. Do

you have any information on how frequently additional

electrical hookups would be needed?

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MR. LANGMEAD: I am trying to determine the

specific information. I would request that DOE check with

the Department of Housing and Urban Development and their

federally financed homes, because I have received numerous

calls about where am I going to get ranges to go into

these locations that don't have electricity supply in

existing buildings. The predominant area, New York City,

Chicago, high apartment areas,

MR. MILLHONE: We will look for that information. If you can come across any information that would

be helpful, I would hope you would do so also.

MR. LANGMEAD: I will provide you a man's name

over there.

I have another question, and that is, on page

4-3995 of the proposed rule DOE states that there are some

firms not able to successfully finance compliance with

the standards by means of funds from earnings or loans,

and may be able to use other methods such as the sales of

stock bonds, transfers of funds from other operating

divisions, et cetera.

My question is: How does that conclusion, that

they may be able to get funds from other sources, really

address and answer the economic burden on small manufacturers? I am trying to relate those, and can somebody

shed some light on that issue?

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MR. POMEROY: We are interested in determining

whether or not firms producing products now can, after

standards, remain in business producing products. Now,

if they are going to have to change their production

processes, they are going to have to pour some additional

money into tooling and investment and various other

costs to produce more efficient products. There will be

some increment over their present investment plans in many

cases.

What we tried to do is for different size

manufacturers estimate what these increased costs were,

using largely the TSD No. 5 technical support document

information, and then determine whether or not a

representative firm, a representative small firm, as was

defined in Appendix A of TSD No. 4, economic analysis,

can repay that additional investment or retooling cost.

Now, the reason we wanted to know or we made

the assumption that they could get the funds from

wherever, from other divisions or from loans, is we were

just interested in determining, are they going to have

enough money over the next or through the 1988 period to

pay back whatever that increased cost is, That was

basically the strategy taken in the analysis.

MR. MILLHONE: I might add to that a bit,

because that was one of the areas that we were most

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concerned about in developing the proposed standards.

At least as I understand it, Mr. Langmead, what

happens with the regulation is that the effect of the

regulation is to change some of the operating conditions

within a given industrial market operation, and that any

time you have a change and it is a highly competitive

area there are some firms who benefit from that change

and some firms who don't.

What we tried to do in that area of the NOPR is

describe what some of the effects of the regulation might

be.

Now, if you look at it in a sort of sterile

computer printout fashion you get certain results, but the

real world has greater variability than that. So, what we

wanted to do in the language that you quoted was just talk

about some of the other adjustments that could take

place with a firm that was adjusting to the existence of

regulations. And some of the things that we describe

there, such as obtaining funds from some other source or

some other division, or some kind of managerial ingenius

reaction that the computer model wouldn't pick up, what

we wanted to indicate was that there are these kinds of

things that would take place, we would anticipate would

take place, and that these would affect the ability of

a firm to adjust to the changed circumstances.

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I would also say that there may be some firms

that would benefit and therefore be able to stay in

business more effectively as a result of the regulations,

say, a firm that is already manufacturing a more efficient

product, so that it is placed in a relatively competitive

advantageous position as a result of the regulations.

So, I think that the effect will be that there

will be some firms that will benefit and some firms that

will have more difficulty as a result of the regulations,

and this language that you refer to deals with that

particular problem.

The larger analysis indicates that the nation

as a whole and consumers benefit as a result of the

proposed regulations, so that the net benefit is

advantageous.

MR. LANGMEAD: Do I understand your answer,

then, basically being, if I can shorten it and see if I

have got it in the right words, that the statement in

the notice was not intended to be justification or

support for the fact there would be no adverse effect on

small business, but it was an explanation that there may

be some other way to solve their problems?

MR. MILLHONE: That is right.

MR. LANGMEAD: One other statement, rather than

a question. In the response to a question that indicated

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the number of horizontal furnace manufacturers and oil

furnace manufacturers, the response indicated that that

information came from discussions with trade associations.

Being with GAMA and representing the trade association of

those products, I don't ever remember being asked that

question specifically on product type.

The information you have in the notice of

proposed rule on the number of companies is incorrect. I

will furnish you with more accurate information, to the

best of my knowledge.

MR. MILLHONE: I remember that question. Let

me see if I can find it.

MR. LANGMEAD: It was near the beginning.

MR. POMEROY: You are just making a general

statement that you believe the number to be incorrect and

you have better information?

MR. LANGMEAD: I believe so.

MR. POMEROY: Really, we are interested in any

information on the market shares of these various classes.

Now, to the best of our abilities we tried to identify

what those market shares were, and the results of that are

presented in TSD No. 5, the market shares for the

different products in 1978.

If you can provide us with updated or corrected

information, we would be happy to include it in any

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additional analysis for the final rules.

MR. LANGMEAD: It was question No. 9, and I

wasn't talking about market share. I was talking about

number of manufacturers participating in making that

product class.

MR. MILLHONE: I have found the question now,

and I understand your question with regard to it.

And although it was not dealing specifically with market

shares, the answer that Mr. Pomeroy gave was correct in

the sense that if you have better information in this

area we would certainly hope that you would give it to

us. If there is information that is available

immediately in this area, I would urge that GAMA provide

information at this time or as quickly as possible, and

not feel that it has to wait until its presentation of

all of its comments on the rules before it provides

information on an area like this.

MR. LANGMEAD: On the other hand, Mr. Millrone,

I would like to request that DOE provide me with where

it got the information to get that answer, and who made

that assumption, and on what basis.

MR. FURLONG: Just give us the right answer.

MR. LANGMEAD: I will do both.

MR. MILLRONE: As I believe you are aware, we

have relied on information that we have obtained from the

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84

trade associations, as well as information from many other

sources, as well. If the information in this area, you

feel, is inartfully attributed to the trade associations,

we would like to know any information on this subject that

you can help us with. Meanwhile, we will look at other

sources as well and try to find better information in

this area and identify it as an area that needs to be

checked.

MR. LANGMEAD: I just want to isolate the

differences between what you think the industry make-up

is and what we do.

MR. MILLRONE: I appreciate that.

MR. LANGMEAD: There may be a difference.

MR. PITSCH: My name is Peter Pitsch, and I am

with Montgomery Ward.

DOE's draft regulatory analysis determines that

the present value of the net benefit to consumers

exceeds the benefit that would accrue from taking no

action.

My question goes to the clarification of how

that analysis figures in the economic analysis. For

example, if the reverse was true -- that is, the present

value of the net benefit from taking no action exceeded

that of the proposed standards, would DOE conclude that

the proposed standards were not economically justifiable?

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MR. POMEROY: Yes.

MR. PITSCH: Okay. One further question. Does

DOE see its burden under the statutes, the authorizing

statutes, and President Carter's Proclamation 12044, does

DOE see those directives requiring it to demonstrate that

the benefit from the proposed standard will exceed the

benefits from taking no action?

MR. MILLRONE: Let me answer that question. As

I understand the question, that is one of the requirements

and that is an issue that is dealt with in the regulatory

analysis particularly.

MR. PITSCH: Fine. I just want to make clear

that DOE sees the regulatory analysis, particularly of

the no action alternative, as being encompassed in a

definition of the statutory requirements, that the

standards be economically justifiable.

MR. MILLRONE: I understand the question, and

I think we have answered it. If there is something that

you are driving at that is not apparent -- it sounds like

you are trying to establish the basis for a later

challenge.

MR. PITSCH: Well, a good cross-examination

technique, I am told, is to establish various points

early on and then sum them up later on.

MR. MILLRONE: Yes?

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MR. BAILY: I am Ted Baily, with Carrier.

I am encouraged by Mr. Pomeroy's comments that

DOE does not consider regional standards to be justified.

Can we rely on your comment to mean that regional

standards will not be included in the final rule for

1981 and 1986, and just devote our limited time and

energies to commenting on things other than regional?

MR. MILLRONE: I can answer that question. We

have given a good deal of attention to the issue of

regional standards, and DOE's position at the present

time, as stated by Mr. Pomeroy, is that regional standards

would not be desirable in '81 or in '85-86 period. We

do identify that as one of the issues on which we would

solicit comments in the hearing process, so I wouldn't

want to, without having had the benefit of any comments

that might come in on that issue, say that DOE categorical

will not in the final standard consider regional

standards. But the strong leaning from DOE at the present

time is that regional standards would not be desirable inthe '85-86 period, and I would recommend that Carrier

spend its time dealing with other aspects of the proposed

rule.

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MR. BAILY: Thank you very much.

MR. MILLRONE: Yes, Mr. Reardon.

MR. REARDON: John Reardon again. I would like

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to pick up on a question that has been answered that we

had asked, and that is the question of 58 central air

conditioning manufacturers.

In picking up on your comment just a few

minutes ago, Mr. Millhone, to Jack Langmead from GAMA

relative to the gas manufacturers, you indicated that

you would like him to respond to you rather quickly on

that and not wait for the written comments. Is that

correct?

MR. MILLHONE: My answer was, and it will be

the same for you, as well, that if there are comments that

you can give us right away that you think would help us

in our ongoing work, give those to us now and do not wait.

MR. REARDON: Well, we can plan on trying to

give it to you before the hearing. But what I would like

to request is that you provide us with the names of the

58 companies as soon as possible, and also give us an

indication as to how many of those companies the

contractor actually determined to be a manufacturer, as

opposed to being a private labeler.

We are not only concerned about it in that

respect, but we are concerned about it in responding with

our counter-proposal relative to industry certification

programs whereby we have indicated to DOE that for air

conditioners we are presently including over 98 percent

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of the sales volume in the country. But the question

raised by the general counsel's office to DOE is that we

are not covering all manufacturers. We have had a

difficult time arriving at a true list of central air

conditioning manufacturers, and if we could use your

58 companies as the authoritative list, then we will be

able to respond to that question as far as participation

in the voluntary industry program.

So, I am requesting that you provide us with

that list and as much background as to how it was compiled

as quickly as possible, so that we can respond to you

prior to the hearing and our written comments.

MR. MILLRONE: That would be regarded as a

question that is relevant to the questions that we have

already been talking about, that you are asking at this

time.

MR. REARDON: Correct.

MR. MILLRONE: I see that as a little bit

different from the discussion I had with Mr. Langmead in

terms of information that GAMA might provide, but I think

that it is appropriate for you to ask that question. I am

concerned that we have a record in this matter that puts

all of the information that is relevant in terms of anyone's comments into the public arena so that they will

know what is there. So, if something like this were done,

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89

I think what we would do in, particularly, areas that are

critical like this is publish it in the Federal Register

in some way so that it would be part of the public

record.

MR. REARDON: Well, regardless, we would still

turn around and include it in our statement as part of

the public record.

MR. MILLRONE: Does general counsel have any

comment on this procedure?

MR. MARGOLIS: No.

MR. MILLRONE: Fine. Are there any other

questions that deal with the economic aspect of the

proposed rule?

MR. BRANCHEAU: Hello. I am Harry Brancheau

from Belding Products. I have two questions as kind of a

follow-up to Mr. Weizedrick's comments regarding the

apparent discrepancy in calculating the weighted energy

efficiencies used to determine the minimums.

The first is, basically, what time frame do you

expect to make the decision as to which methodology is

correct?

Number two is, when can industry expect,

assuming the AHAM methodology is correct, the revised

minimums, because this will impact any possible future

correspondence and comments regarding minimums and their

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economic impacts?

MR. MILLRONE: What I would like to do is just

ask Mr. Raap how large a matter is this and how quickly

do you feel it could be dealt with? We will get an

answer to you right away, but we need to have a brief

huddle.

(Caucus.)

MR. MILLRONE: Are there further questions

after this question?

(No response.)

Okay. I think that after we deal with this

matter, then we will take the lunch break. It will

probably be 12:20 or something like that by the time we

break. Why don't we plan on getting back here at 1:30.

We will plan on starting again at 1:30, and those of you

who are in suspense regarding the answer to this

question, I will have the envelope in just a minute.

(Caucus.)

MR. MILLRONE: I will ask Mr. Raap to rap with

you on that question.

MR. RAAP: I am now the expert on shipment

weighted energy factors.

Granted, there are two ways of calculating it,

each is correct for its own purpose and as described to

me by our economic expert, who derived this, that the

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way we calculated for our purposes is correct and is

valid, and will not be changed, due to the requirement

for us to measure the impact on the manufacturers'

shipment weighted line and not a target approach or a

weighted BTUs. We are going to maintain that our

procedure is correct for our purposes, and that AHAM's

procedure is correct, but for a different purpose.

So, the levels will stand as is.

MR. MILLRONE: Loren, can you give us any .idea

of what the difference in the result applying the two

approaches would be?

MR. RAAP: The difference will usually be on

the order of five percent or less, but it is dependent

on the number of shipments associated with each particular

class. So, it is not a straight three percent all the way

through. It will depend definitely on the weighting. But

in general it will always be a lower number, AHAM's

approach. But we maintain that our procedure is correct

for our purposes. It is not intended to measure an

efficiency of a product line. It is intended to measure

the impact on manufacturers. So, it stands as is.

MR. MILLRONE: Thank you. We will now take a

lunch break and be back at 1:30.

(Whereupon, at 12:20 p. m., the meeting was

recessed, to reconvene at 1:30 p. m., this same day.)

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92

C£ h l iy .. C A T E

This is to certify that the attached proceedings

in the aforecaptioned matter were held on July 16, 1980

and that this is a true and accurate record thereof and

that this is the origi nal transcript thereof .

N L R. GRO S

(2021 .234-4433

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