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• U.S.. DEPARTMENT OF ENERGY CLOTHES WASHERS WORKSHOP 

### U.S. Department ofEnergy 1000 IndependenceAvenue, S. W. Washington, D.C. Wednesday, March 11, 1998 9:00 a.m. Attendees MR. THOMAS BEE TransformationTechnologies, Inc. 5608'ClermontDrive Alexandria, VA 22310-1310 MR. PETER J. BIERMAYER LawrenceBerkeleyLaboratory MS-90-4000 1 CyclotronRoad Berkeley, CA 94720 MS. LAUREN CASENTINI PacificGas 

### &Electric Mail Code H28L P.O. Box 770000 SanFrancisco, CA 94177 MS. CHRISTINE EGAN ProductManager Consortium for Energy Efficiency 1 State Street, Suite 1400 Boston, MA 02109-3507 MR. EUGENE C. FOLEY, JR. TheAlliance to SaveEnergy 1200 18Th Street, N.W., Suite 900 Washington, DC 20036 MR. DAVID B. GOLDSTEIN Natural Resources Defense Council 71 Stevenson Street SanFrancisco, CA 94105 

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• ATTENDEES: (Continued) MR. C. EDWARD BARBOUR Arthur D. Little, Inc. 966 L'Enfant Plaza, S.W., Suite 8600 Washington, DC 20024-2119 MR. L. DAN BARZEL Senior National Buyer Circuit City Stores, Inc. 9950 Maryland Drive Richmond, VA 23233-1464 MR. DICK BEST Director, Environmental Programs Whirlpool Corporation 701 Main StreetMD 9015 st. Joseph, MI 49085 MR. DOUGLAS R. BROOKMAN (Facilitator) Brookman-King Collaborative Solutions 5 Ingleside Avenue Baltimore, MD 21228 MR. TOM ECKMAN Northwest Power Planning Council Suite 1100 851 SW SixthAvenue Portland, OR 97204-1348 MR. BRADFORD W. FLORA Whirlpool Corporation 2000 M-63 NORTH BENTON HARBOR, MI 49022 MR. CHARLES R. FOSTER Manager, Marketing Codes 

### &Standards Edison Electric Institute 701 PennsylvaniaAvenue, N.W. Washington, DC 20004-2696 MR. LARRY HAWKINS General Electric Company Appliance Park, AP1-2NC-68 Louisville, KY 40225

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• ATTENDEES: (Continued) DOUGLAS C. HORSTMAN Maytag 1310 GStreet, N.W. Suite 720 Washington, DC 20005 MR. EARL F. JONES, Senior Counsel Government 

### &Industry Relations General Electric Company Appliance Park, AP1-310, Bldg. 2, Rm 225 Louisville, KY 40225 MR. ALAN F. KESSLER Vice President-Engineering

### &Quality Amana Appliances 2800 220th Trail P.O. Box 8901 Amana, IA 52204-0001 MR. PHILIP J. MANTHEI SeniorMgr., Washer Engineering Raytheon Commercial Laundry Shepard Street, P.O. Box 990 Ripon, WI 54971-0990 MR. STEVE MARIANO Arthur D. Little, Inc. Acorn Park Cambridge, MA 02140-2390 MR. WAYNE E. MORRIS Association of Home Appliance Manufacturers 701 Pennsylvania Ave., N.W., Suite 900 Washington, DC 20004 MR. CURT RIECHMAN Whirlpool Corporation St. Joseph Technology Ctr., 303 Upton Drive St. Joseph, MI 49085-1175 MR. STEVE ROSENSTOCK Edison Electric Institute 701 PennsylvaniaAve., N.W., 5th Floor Washington, DC 20004-2696

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• ATTENDEES: (Continued) MR. JACK LINARD Unilever-HEP-USA Research

### &Development Center 45 River Road Edgewater, NJ 07020 MR. R. MICHAEL MARTIN CaliforniaEnergy Commission 1516 Ninth Street Sacramento, CA 95814 MR. JAMES E. McMAHON Lawrence Berkeley Laboratory Bldg
..90, Room 4000 University of California Berkeley, CA 94720 MR. DAVE MODTLAND Frigidaire Company 400 Des Moines Street Webster City, IA 50595-1499 MR. STEVEN M. NADEL Deputy Director ACEEE 1001 Connecticut Ave., N.W. Washington, DC 20036 MR. MICHAEL C. RIVEST Arthur D. Little, Inc. 955 L'Enfant Plaza, S. W., Suite 4200 Washington, DC 20024-2119 MR. CHARLES A. SAMUELS Government Relations Counsel Association of Home Appliance Manufacturers 701 Pennsylvania Ave., N.W., Suite 900 Washington, DC 20004 MR. GLENN R. SCHLEEDE President Energy Market

### &Policy Analysis, Inc. P.O. Box 3875 Reston, VA 20195-1875

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• ATTENDEES: (Continued) MR. CHARLES STEPHENS Oregon Department of Energy Policy

### &Planning Division 625 Marion St., NE Salem, OR 97310 MR. ALAN TARRANT Frigidaire Company 400 Des Moines Street Webster City, IA 50595-1499 MS. VALARIE WHELAN Natural Resources Canada 580 Rue Booth 18 Stage Ottawa, Ontario K1A DE4 MR. RICHARD E. STILWELL Maytag Appliances 403 West Fourth Street North Newton, IA 50208 MR. TERRY THIELE Associate General Counsel White Consolidated Industries, Inc. 11770 Berea Road Cleveland, OH 44111 MR. MICHAEL WASSON Standards 

### &Quality Assurance Manager Asko, Inc. 1161 Executive Drive West Richardson, TX 75081 MS. LINDA W. GREINER White Consolidated Industries 1317 F Street, N.W., Suite 510 Washington, DC 20004 MR. ED C. KLECZKO Miele Appliances, Inc. 22D Worlds Fair drive Somerset, NJ 08873 MR. ERIC J. ESSMA The Chlorox Corporation Frederick, MD 21702
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• ATTENDEES: (Continued) MR. STEVE MEJEUR Whirlpool Corporation St. Joseph Technology Center 303 Upton Drive, Mail Drop 0207 St. Joseph, MI 49085-1175 MR. MOHAMED IBRAHIM NOSSEIR Global Marketing Consultancy 20 Mahmoud Hassan Street 4th Quarter Heliopolis Cairo, EGYPT MS. AIMEE N. REIVER Kaiser Associates 1595 Springhill Road Suite 700 Vienna, VA 22182 MR. DOUG RINGGER Maytag Corporation 40E West Fourth Street North Newton, IA 50206 MR. RICHARD E. SUBLER Maytag Corporation 1310 GStreet, N.W., Suite 702 Washington, DC 20005 MR. LEON B. TYNES, II Energetics 7164 Columbia Gateway Drive Columbia, MD 21046 MR. ROLAND G. WEINGARTNER Miele Appliances, Inc. 22D Worlds FairDrive Somerset, NJ 08873 MR. CONSTANTIN VON WENTZEL Arthur D. Little Acorn Park Cambridge, MA 02140-2390 MR. LAWRENCE R. WETHJE Air-Conditioning

### &Refrigeration Institute 4301 North Fairfax Drive, Suite 425 Arlington, VA 22203
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• AGENDA 

### AGENDA ITEM: Introduction/ReviewAgenda OpeningRemarks Overviewof the PreliminaryClothes Washers Rulemaking Schedule and Analytical Framework Discussionof PreliminaryResults and AnalyticalMethods andTools Used in theAnalysis EngineeringAnalysis/DataCollection Life-Cycle-Cost (LCC) National Energy SavingsForecasts ReverseEngineering Consumer Issues Adjournment

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• 8 1 P R 0 C E E D I N G S 2 9:10 a.m. 3 MR. BROOKMAN: Good morning, everybody, and 4 welcome. This is the CloseWasherWorkshop, and thank 5 you for beinghere on time and allowing us to start 6 just about on time. 7 As is our custom, let's start offby having 8 everybody introduce themselves. If I could starthere 9 onmy left. 10 MR. MARGOLIS: Eugene Margolis, Counsel for 11 the Program. 12 MR. BROOKMAN: And Gene, thanking for saying 13 who you're affiliatedwith, what your organizational 14 affiliation is. 15 MR. ADAMS: Carl Adams, with the Office of 16 Codes and Standards. 17 Mr. McMAHON: JimMcMahon, Lawrence Berkeley 18 National Lab. 19 MR. BIERMAYER: Peter Biermayer, Lawrence 20 Berkeley National Lab. 21 22 MR. SAMUELS: Chuck Samuels, AHAM
. MR. MORRIS: Wayne Morris, AHAM. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 9 1 MR. MANTHEI: BillManthei, Raytheon 2 Commercial Laundry. 3 MR. KESSLER: Alan Kessler, Amana Appliances. 4 MR. MODTLAND: Dave Modtland, Frigidaire Home 5 Products. 6 MR. RIVEST: Mike Rivest, Arthur D. Little. 7 MR. HAWKINS: Larry Hawkins, General 8 Electric. 9 MR. JONES: Earl Jones, GE. 10 MS. GREINER: Linda Greiner, Frigidaire. 1 1 MR. STILWELL: Dick Stilwell, Maytag. 12 MR. MARTIN: Michael Martin, California 13 Energy Commission. 14 MR. BEST: Dick Best, Whirlpool Corporation. 15 MR. MORROW: Randy Morrow, Whirlpool 16 Corporation. 17 MR. WASSEN: Michael Wasson, Asko, 18 Incorporated. 19 20 Office. 21 22 Energy. MR. STEVENS: Charlie Stevens, Oregon Energy

MR. McCABE: Michael McCabe, Department of

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• 10 1 MR. BERRINGER: Bryan Berringer, Department 2 of Energy. 3 MS. LAUGHLIN: Qonnie Laughlin, Office of 4 Codes and Standards. 5 MR. FOLEY: Gene Foley, the Alliance to Save 6 Energy. 7 MR. NADEL: Steve Nadel, American Council for 8 an Energy Efficient Economy. 9 MR. GOLDSTEIN: David Goldstein, NRDC. 10 MR. ROSENSTOCK: SteveRosenstock, Edison 1 1 Electric Institute. 12 MR. BROOKMAN: Thank you, very much. And I'd 13 like to have everybody else introduce themselves. 14 We have a limited amount of space in this 15 room and that's why you see somany of you that can't 16 make it around the table here today. 17 So let's start with you, sir. Could you 18 stand and say your name and who you represent? And I'm 19 going to go right around the room like this. 20 21 22 MR. LINARD: Jack Linard, Unilever HPC-USA. MR. BROOKMAN: Thank you. (Other audience introductions off mike.)
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• 1 1 1 MR. BROOKMAN: Did everybody get a chance to 2 introduce themselves? 3 (No response.) 

### 4 I think so. 5 Once again, thank you all for beinghere and 6 allowing us to start on time. 7 Brian is going to start off by justgiving 8 some general information about the workshop today. 9 Then I'mgoing to review the agenda and then we're 10 going to launch right into it. 1 1 MR. BERRINGER: Good morning. If you're not 12 here for the ClothesWasherWorkshop, you're in the 13 wrong place. So if anybody needs to leave right now, 14 go ahead. 15 (Laughter.) 16 Good morning, everybody. I appreciate 17 everybody showingup today. I'm the team leader for 18 the ClothesWashers Team. Also on that team is Carl 19 Adams, Qonnie Laughlin and Barry Berlin from the Office 20 of Codes and Standards. 21 22 We have Gene Margolis from General Counsel andMark Fredricks from Office of Policy and EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 12 1 InternationalAffairs, which I don't seehere at this 2 time. 3 On behalf of the Department, again I'd like 4 to thank you all for taking the time toparticipate in 5 this thirdworkshopunder the newprocess improvement 6 effort that was done onJuly 15th, 1996, the Process 7 Rule. 8 If you haven't got copies of the reports or 9 the slides, you can see Brendaor Sandy over at the 10 table. 11 Anybody attending today's workshop, if you 12 haven'tbeen added onto the list, you will be after 13 this mailinghere

-- onto themailing list for future 14 responses. 15 Also, any comments received today and those 16 already submittedduring the written comment period 17 will assist the Department inpreparing the 18 Supplemental Advanced ProposedRulemakingplanned for 19 publication inMay of 1998. 20 The following are procedural items which you 21 22 are aware of. I'llbe presidingover the workshop. Doug Brookmanwill be facilitating and setting the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 13 1 guidelines of conduct as far as theworkshop and 2 providing other information. 3 In approximately two weeks, the transcript 4 shouldbe available in the Freedomof Information 5 ReadingRoom, which is down the hall in 1E-90. So 6 anybody wishing to see those or if you want to purchase 7 those from the Court Reporter, please seehim at the 8 break. 9 To provide the Department with as much 10 pertinent information and as many views as reasonable, 1 1 we want all people to express theirviews, and the 12 workshopwill be conductedwith the following 13 procedures. 14 Again, the focus of this workshop is to 15 listen to your comments pertaining to the assumptions 16 utilized in the life cycle cost analysis, with 17 preliminary results; also, shipments and inputs to the 18 National Energy Savings Forecast and the approach being 19 utilized for the ReverseEngineeringAnalysis; and also 20 the report on the consumer survey research andpossible 21 future approaches
. 22 We've already done introductions. We'll then EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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### 14 1 

### go into, after this, the agendareview, whichDoug 2 Brookmanwill goover. 3 DOE topics will remainon the agenda as the 4 leadpresentations in theirrespective areas. 5 We will take a lunchbreak aboutnoon today, 6 which is on your own. There's a snackbarbelowus one 7 floor. There's also a cafeteriaover in theWest 8 Buildingon the second floor, and there's also 9 restaurants up at L'Enfant Plaza. 10 Itwill reduce interruptions ifeverybody 11 thatwants to speakbe recognizedby Doug, please. 12 Remember to speak into themicrophone, stateyourname 13 and your company, please, for the Court Reporter. 14 We ask that all side conversationsbekept to 15 a minimum. If youneed to -- we'repretty crammed in 16 here. If you 

### eithergo to the corneroroutside the 17 roomwhile themeeting is goingon, we'd appreciate it. 18 Itmay be necessary to cut some of the debate 19 off toremain on schedule. We have a full schedule 20 today, a lotofmaterial togoover. I know some of it 21 

### 22 isnew. Some of itwas on theWeb site, sohopefully
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• 15 1 of what's beingpresented today. 2 I encourage all persons toparticipate as 3 much as possible so the Departmentmay get a full 

### 4 spectrumof opinions on all topics. And as you all may 

### 5 know, opinions are like armpits. Everybody has one and 6 most of them stink, so 7 (Laughter.) 8 So we do ask you to give your full opinions 9 on that and we do accept those. 10 This workshop is scheduled to go to 4:00 11 today and we'll also startup again at 9:00 a.m. 12 tomorrow and go until noon. Ifwe finish early we 13 may finish early tomorrow, but it looks likewe do have 14 a full agenda and discussions. Ifwe do progress, 15 obviously we'll go to the next agenda items. 16 Again, the topics that have not been 17 completely discussed canbe addressed in additional 18 written comments. Deadline for written comments and 19 data submission following this workshop will be 20 determined basedon responses today. So ifwe feel 21 that 30 days or 45 days is necessary, we can seehow we 22 progress within the workshop as far as the information EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 16 1 

### presented. 2 All comments will be consideredbefore the 3 Departmentpublishes the SupplementalAdvanced 4 Rulemaking. All writtencomments and data submitted 5 will be available for public inspection, again, in the 6 DOE Freedomof InformationRoom. 7 The phone number, if anybody is interested, 8 is 202-586-6020. If youneed that, Sandy cangive that 9 to you. 10 Written comments shouldbe addressed to the 11 

### Department ofEnergy, as addressed in the Federal 12 Register notice of today's workshop, whichwould go to 13 our office, attentionBrendaEdwardJones. 14 As far as data submittal, we request 10 15 copies of comments and data. In addition, if you could 16 put itelectronically onWordPerfect, itwouldbe 17 

### appreciated. We can alsohandleWord andmost any 18 other software, but itwould helpus inourprocess if 19 comments were submittedon disk. And we do not accept 20 fax comments. 21 Any person submitting information that they 22 believe is confidential and exemptby publicdisclosure EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 17 1 should submit one complete copy and 10 copies with the 2 informationdeleted that they feel is confidential. 3 In accordance withprocedures established in 4 10 C.F.R. 1004.11, the Department ofEnergy shallmake 5 is own determination as towhether information shallbe 6 exempt from public disclosure. 7 Inkeeping with the regulations of this 8 building, it'snon-smokingbuilding. The restrooms are 9 down the hall to the left and the right. Phones are 10 also located in the main lobby area. 1 1 And again, we appreciate the time and effort 12 that everybody has takenhere to come to this workshop 13 and preparing for it, andwe're pleased toreceive your 14 comments and opinions. 15 At this time, I'd like to turn itbackover 16 toDoug Brookman todo the agenda review. 17 Thank you. 18 MR. BROOKMAN: I think all of youhave an 19 agendabefore you, andBryanhas already covered the 20 purpose of the workshop. And the outcome of the 21 22 workshopwouldbe simply to receive comments from all of you in as much depth as possible that fits within EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 18 1 the time constraintswe have here today. 2 So in the first substantive segment of the 3 morning, Michael McCabe and others are going tohave 4 openingremarks. That will be followed at 9:45 with an 5 overviewof the rulemaking schedule and the analytic 6 framework. 7 we'll take a break around about 10:15. After 8 the break, we're going tohave discussion of the 9 preliminary results and analyticmethods and tools used 10 in the analysis. 11 Following that, we'll have discussion

-- a 12 presentation followed by discussion and comment on 13 engineering analysis and data collection. 14 The next substantive topic in thatblock 15 prior to lunch will be life cycle costs, and 16 particularly the revised life cycle cost spreadsheet 17 model. And that spreadsheet will include data from the 18 engineering analysis that's beenperformed to date. 19 And justprior to lunch there'll be a 20 discussion about price, the assumptions related to 21 22 price andhow the price figures that you see there got rolled together. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 19 1 

### We're going to letyou go offon yourown for 2 lunch. Try tobebackby 1:00 so thatwe can commence 3 on time. 4 After lunch at 1:00, we'll continue the life 5 cycle cost discussion. In the 2:00 to 3:00 time frame, 6 talk about the National Energy Savings Forecasts and 7 review that spreadsheet, and then talk about shipment 8 forecasts. 9 We'll take a breakmid afternoon and then 10 after thebreakwe'll continue the discussionof 11 National Energy Savings Forecasts. 12 Tomorrowwe'll start again at 9:00 and then 13 talk first and foremost about the reverse engineering 14 approach. In the reverse engineering approach they'll 15 be talking about themethodology used to I 

### guess 16 reconstructV-axis machines and thebasis of costing. 17 After the midmorning break, we'llmove into 18 consumer issues and the Departmentwill present a 19 report on the existingconsumer survey research. 20 We will end tomorrowround about noon. Ifwe 21 require a littlemore time to get done, we'll use it; 22 take it. But thatwouldbe ourhope and expectation. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 20 1 

### And we'll end the sessionwith a discussion about next 2 steps and any other items thpt need tobe takenup. 3 Are there questions orcomments about the 4 agenda, as written? 5 (No response.) 6 Is there anythingmajor that we've missed? 7 (No response.) 8 I don't see anybody that's got anything 9 additional or significant at this point. 10 Ifwe uncover something that'smissing, we'll 1 1 

### take itup and try to staywithin the time frame 12 allotted. 13 When we first starteddoingworkshops like 14 this, we startedoffwithgroundrules. And over time, 15 they've generally gravitated towards norms. And I'm 

### 16 happy to say that these norms have worked, generally 17 speaking, over the spanof this time, especially 18 recently. So I'mgoing to ask today that everybody 19 adhere to the following norms. 20 

### Speak one at a time. Please say yourname 21 for the record. And when youmake your comments, it's 22 especiallyhelpful to the Department ifyou includehow 

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• 21 1 

### to improve these draft products. Your comments about 2 what's wrongwith them, that's useful. It's especially 3 useful if you'd sayhow itcouldbe fixed. So ifyou 4 coulddirect your comment that way, that will make it 5 easier for them to interpret ordo the fix that you 6 might suggest. 7 So I'm suggesting those simply as norms. 8 Is there anything else to say at this point 9 before I turn itover toMichael McCabe for opening 10 remarks? 1 1 

### (No response.) 12 Thanks again for beinghere, all of you, and 13 for allowing us toget off to a good fast start this 14 morning. 15 Michael. 

### 16 MR. McCABE: Good morning. If I don't 17 recognize most of the faces, justcontinue the 18 introduction. 19 I'mMichaelMcCabe, Directorof the 20 Department's Office ofCodes and Standards. I'd like 21 towelcome everybodyhere. I'mnot sure if I can follow 22 up on Bryan's one-liner. I'vebeengoing for hears EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 22 1 

### withmy standard line that

-- talking about the 2 

### legislation that establishes the program. The short 3 titleof the legislation is the Russ Sassnet and 4 Michael McCabe GuaranteedEmployment Act. People kind 5 ofhave a nervous chuckle and say, "Well, I knowMike 6 who MikeMcCabe is. Who's this Russ Sassnet?" 7 Russ is somebody who hadworked in the 8 program years ago andhas sinceretired, so it'snot a 9 guaranteedemployment act. 10 We in fact wouldhave liked tomentionour 11 accomplishments. In fact, this last yearwe have had 12 some significant accomplishments with final rules 13 issued for refrigerators and room air-conditioners. We 14 have a comment period that's openwherewe have 15 released analysis for kitchen ranges andovens. We've 16 indicated the expectedoutcome for that and have asked 17 for comments. The comment period is about to close and 18 we expect to issue that final rule very shortly. 19 And we are embarkingnow on a number of 20 priorityrulemakings ofwhich theproposedwasher 21 

### rulemaking is one. The Department is committed to 22 conducting this rulemaking ina timely fashion andwe EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 23 1 appreciate your input into this process. We are 2 looking at final rules tobe completed the target is 3 to complete itby Octoberof 1999. 4 And this is proving tobe a very challenging 5 and exciting rulemakingbecausepart ofwhat we 6 committed to inourprocess improvement, whichBryan 7 alluded to, is to customize the rulemakings for those 8 particularproducts. That's one of the reasons why 9 alsoARI is here, spec representatives from Gamma 10 later, is that no longer can you expect that the 11 rulemakings are going tobe a cookie cutter approach; 12 that there are going tobe some differences. 13 So that, for example, for this rulemaking, 14 with the engineering analysis insteadof taking the 15 design approach which we've done in years past, we've 16 taken itusing the efficiency level approach; collected 17 data from the industry for the engineering analysis. 18 It's a very different approach and it's led to some 19 head scratchingon our part as far as how to interpret 20 the information. 21 22 Bryanwill be talking about that because we have learned some things by looking at those data, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 24 1 whichwere surprises becausewe thought we knewmore 2 thanwe did at the beginning. Bryanwill be sharing 3 some of that. 4 We've alsowith this process, we're sharing 5 information earlier. I'd like tomake a point thatwe 6 are sharingdraft information. You're sharing 7 information that ourmanagement is aware ofbut they've 8 not had a detailedbriefing. So thatwhat we are 9 presenting is I would call staff information. Ithas 10 notbeenreviewed, concurredonby seniormanagement, 11 nor have they developedpositions. So that you may 12 look at the information and try to second guesswhat 13 management would decide withrespect to this, but 14 management has notmade any decisions yet. 15 Management is waiting until we get the 16 complete analysis before we will present -- make any 17 recommendations to them. We will raise issues to them 18 with respect to the analysis but not the result. 19 I'mvery excited about what will be presented 20 later today, particularlywith respect to life cycle 21 22 costs and the National Energy Savings spreadsheet models that have come a longway from the average EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 25 1 

### calculationswhichwe've done in thepast. 2 The crystalball approachwhich has beenused 3 on the life cycle cost analysis andwill bepresented 4 here, attempts to capture the range of variables in 5 usage, electricityprices and other inputs to life 6 cycle costs. There isn't an average consumer anywhere. 7 There in fact are lots of consumers withdifferent 8 usagerates, different energyprices that they're 9 experiencing. And we're trying to capture that and 10 present this information. 1 1 

### So that one of thebenefits of presenting 12 this information today is that we have

-- I'll look at 13 JimMcMahon now -- I think 36 slides of distribution 14 for life cyclecosts. That's a hell of a lotof 15 information. We're trying to come up with a simple way 

### 16 ofpresenting it, something that captures the 17 robustness of this analysis. 18 So that if thepresentations seem todrone on 19 becausewe're on the 33rd slideof 36, by allmeans 20 jump in andmake some suggestions as towhat is 21 meaningful. Becausewe're trying tobothpresent the 22 information thatwe have as itexists right now, but 

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• 26 1 also, this is a learning experience for us inhow to 2 present the information to you and itwill alsobe to 3 ourmanagement on the results of this analysis so that 4 there canbe a betterdecisionmade with this. 5 We do not want to swamp themwith 6 information. We don't want to swamp you, but rather 7 provide you with the breadthof informationwe have and 8 make this rulemaking a more productive viable 9 rulemaking. 10 We're committed tohaving frequent 1 1 stakeholder involvement in this process and this is one 12 example. 13 Bryanhad apologized to everybody about how 14 crowded it is, and we're experimentingwith formats. 15 The 

### "U" table is something that two years agowe would 16 never have had. We had an approach whichwas more of a 17 talkinghead. TheDOE staffwouldbe sitting at a 18 front table and we'd ask individual speakers to come 19 up, read form prepared statements, and thenDOE would 20 have some questions. 21 22 Sometimes those questions seemed tobe pretty inane and I'd say that some of themprobably were 

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• 1 becausewe were looking to ask questions, we would 2 misunderstandwhat was being said, and our questions 3 comingbackwould reflect that. We want to try to come 4 up with an approach thatwill facilitate an open 5 dialogue. So even though Doug had presented the rules, 6 we don't want those rules to stifle the discussion. So 7 that if information is beingpresentedon 8 recommendations of a way to improve the life cycle cost 9 analysis and somebody has an alternative or can expound 10 on a point that's made, by allmeans, please do. 1 1 Because the purpose of thisrulemaking is to get the 12 informationout and tohelp us improve themethodology 13 for what is going tobe the proposed rule and, in turn, 14 the final rule is going to rest on. 15 Again, the life cycle costs, National Energy 16 Savings spreadsheetmodels that are beingpresented are 17 drafts. We have done much more in this life cycle cost 18 analysis. What I thought we wouldhave done

-- if you 19 had askedme July of '96 what is going tobe the life 20 cycle cost analysis thatwould accompany anANOPR, at 21 that time I had envisions what I will call a more 22 simplified life cycle cost analysis, something that EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 28 1 wouldbemore along the lines of the average, and that 2 at this time we wouldbe talking about the different 3 sort of inputswe coulduse for the more robust life 4 cycle cost analysis. 5 So in fact, we're doingmore earlier. I 6 think all that it can do is benefit the rulemaking. 7 Again, to talk about the commitment. The 8 Department is committed to issuing the rule in a timely 9 fashion. And part of that

-- I thinkmost everybody 10 has heard this. The Secretary andAssistant Secretary 11 Reikerhave entered into a performance agreement where 12 EERE, Energy Efficiency Renewal Energy, is committed to 13 performing this rulemaking on the schedule that has 14 been laid out, the resources that you see around the 15 table and in the back. 16 As far as the DOE staff, contractor staff, 17 are here inorder tohear what you say, in order to 18 turn that around and include it, incorporate it into 19 the analysis, so that we can get the proposed rule out 20 timely. 21 In terms of the final rule, the final rule

-- 22 again, to repeat what I've saidbefore, the Department EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 29 1 is looking for the highest energy and water savings 2 that is economically feasible and technologically 3 justified. We are, however, recognizing that there 4 could be tradeoffs. That you can accelerate the 5 rulemaking and possibly lower the standard level or 6 delay it, delay the effective date, with a more 7 stringent standard. And the way that we are 8 structuring the analysis, we will be able to capture 9 that. 10 We would encourage any thoughts that youmay 11 have as towhat those factors couldbe, how the 12 standards couldbe structured. 13 Also, there's been an issue that's often 14 raised as far as voluntary programs and the 15 Department's commitment to them. You've seen an awful 16 lothappening in the last year or sowith respect to 17 new, more efficientproducts entering into the 18 marketplace. In the years past or inprevious 19 rulemakings, ourbaseline efficiency for analysis was 20 typically something that was near what is the existing 21 22 standards. With the energy starprogram that's in place, with manufacturers' actions, the average EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 30 1 efficiency today is higher than what ithas beenwith 2 out products in other rulemakings. 

### 3 Our base case analysis for energy savings 4 calculations will capture that. We will include it, so 5 that information that exists on not only what is the 

### 6 average efficiency of products sold today but what is 7 the average of what likely will be sold in the future. 8 It's information that will be captured and we look to 9 have as much as we can to include in our energy savings 10 estimates. 11 Much of what is being presentedwith respect 12 to the analysis, specifically the life cycle cost 13 analysis and some of the energy savings forecast 14 spreadsheets, have been presented before. This is the 15 next step, how this involved. So some of it's going to 16 be repetitive but I wish that you'd bear with us 17 because it's the details now that we're getting caught 18 up in. For some, it's very important, but for others 19 itmay not be quite as important. 20 We've had over the last year and a half four 21 significant exchanges with representatives of a variety 22 of organizations in order to get where we are today and EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 31 1 we will havemany more in the future, for this 2 rulemaking and for others. And I appreciate your 3 patience and your inputbecause all itcando is help 4 us improve the quality of the rulemaking. 5 Thank you. 6 MR. BERRINGER: As far as the agenda, you may 7 have noticed

-- youmay have not we had originally, 8 the first agenda that went out, was scheduled for 9 another room tomorrow. We will be in this room, 1E10 245, tomorrow. So same place. 9:00 a.m. Just to let 11 youknow. 12 The other thing. If you're following along 13 as far as the slides, we're in the package here with 14 this cover sheet. Michael justpresented the 15 information in slides two and three, and I will be 16 talking a littlebit about stakeholder involvement and 17 just sort of a littlebackground as far as where we've 18 been. 19 Can everybody see that? Follow along. It's 20 slidenumber 4 in your package. 21 22 As I said, this is basically the third workshopwe've had since we've started the new process EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 32 1 

### improvement. One of the first workshops was back in 2 November 15thof '96, and that's wherewe identified 3 how new datawouldbe collected andused throughout the 4 process. 5 In response to that, everybodykept on 6 saying, "Well, how is the datagoing tobeused and 7 when is itgoing tobeused?" Soone of the outcomes 8 of that was the development of the framework document. 9 And then therewas anotherworkshop that covered all 10 the appliances, whichwas theManufacturing Impact 11 Workshop thatwas heldMarch 11thand 12thof '97, 12 about this time last year. 13 And basically, stakeholders felt that the 14 rulemaking shouldbe customized, that we should look at 15

-- different appliances are treated differently, so we 

### 16 should sort of customize it to that. And really, the 17 ClothesWasherhas been the first rulemaking togo 18 through all this process. Sowe arebreakingnew 19 ground and tryingnew things. 20 Thenwe had the ClothesWasherWorkshop in 21 22 July 23rdof last year. We presentedmore as far as the framework document. We also introduced the life EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 33 1 cycle cost spreadsheets and shipments and National 2 Savings Forecasts. 3 And basically today we're going tobe going 4 over that. There's revised data. The spreadsheets 5 have been updated, more user friendly. And I'd like to 6 thankLBL for theirwork as far as doing that. And we 7 alsohave the data thatwas collected. And I'd also 8 like to thankAHAM for theirparticipation in that, as 9 far as -- and themanufacturers

-- for collecting that 10 data and getting that information tous. 11 And basically, again, the objectiveof the 12 workshop is to discuss the revised analytical tools, 13 the spreadsheets and so forth, and the assumptions that 14 we're using for the life cycle cost analysis, with 15 preliminary results. Also, discuss shipments as the 16 input into the National Energy Savings Forecasts. The 17 other thing is the approach being utilized for the 18 reverse engineering analysis which will bediscussed. 19 And also, the report on consumer survey research and 20 possible future approaches, ifnecessary. 21 22 Today's workshopwill focus on the analytical tools needed for the publication for Supplemental EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 34 1 

### AdvancedNoticeof ProposedRulemaking. Again, where 2 we're at today is looking at the frame. This is in the 3 framework document. It shouldbe inyourpackage. 4 

### Basically, what we're going through is we're 5 stepping through the process. As you can see, there's 6 a break in the line. The upperportion, the upperhalf 7 of this graphor this roadmap, as we like torefer to 8 it, we're looking at, first of all, the engineering 9 analysis where it's sortof step 3, which is feeding 10 intothe life cycle costs. And oneof the inputs to the 1 1 

### life cycle cost is the price. 12 There's a paper thatwe're going todiscuss 13 as far as theprice as an input to life cyclecost. And 14 then the other thing iswe saidwe wouldhave 15 preliminary results for the national benefit as part of 

### 16 an input of shipments. So a lotof today's discussion 17 is going to focus on the shipments. 18 So that's where we're at, as far as up to the 19 breakpoint. And this, again, will be a Supplemental 20 ANOPR, since there's been a previous one done. But 21 22 obviously a lotof thatwork isbeing supersededwith the new data and what we're doing today. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 35 1 Just a summary ofwhat we're doing for '98 2 and '99. 3 One of the first things is

-- today we're 4 discussing some of the preliminary results. Or later 5 today, we'll be discussing that

-- informationprior to 6 the SupplementalANOPR. Also, we plan to publish the 7 SupplementalANOPR inMay of this year. And then right 8 now tentativelywe scheduled you have a detailed 9 schedule in yourpackage. Alsowe're looking at doing 10 a workshop inJuly. And thatwould alsobe to receive 11 additional comments to theANOPR and also to start to 12 begindata collection as far as manufacturing impacting 13 the analysis, introducing the approaches for the next 14 phase of the analysis. 15 Again, if you refer to your roadmap, you can 16 see what's next as far as analysis and the process for 17 the NOPR stage. 18 The other thing is, starting in theAugust 19 time frame, alsoon your detailed schedule, we'd start 20 looking at doing information as far as manufacturing 21 impact, collecting that data, and alsodo a follow-up 22 maybe inDecember-November time frame, look at another EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 36 1 

### workshop to see the secondphase, seewhat the results 2 are looking at as far as the secondphase of the 3 analysis. So we'll work around that time. 4 Basically, in 1999 we'replanning

-- January, 5 start the yearout right, we'll try tohave published 6 the notice ofproposed rulemaking in theJanuary time 7 frame. Shortly inMarch, hold a publichearing, and 8 thenplan to finalize the final rule inOctober. 9 Again, as Michael discussed, theremight be 10 times

-- typically, it's three years afterpublication 1 1 

### of a date. Obviously, through discussions and talks, 12 negotiations, we can talk about the date and the impact 13 onmanufacturers, especially impacts such as the 14 refrigeratorrule coming intoeffect. So that's what 15 our time frame looks like. 16 Again in yourpackage you can see the 17 detailed schedulehas a littlebitmore breakdown. 18 It's a littlebitbusy toput on a slide. So youhave 19 it. So you can address it. And ifyou have comments 20 orquestions about this schedule, I guess that wouldbe 21 appropriate at this time
. 22 Is there any questions aboutwhat

-- what do
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• 37 1 you feel as far as the time frame. 2 (No response.) 3 Seeingnone, obviously it's somethingwe can 4 bringup later. We are on a very aggressive time 5 schedule. There's a lotof information in there tobe 6 analyzed and a lot of work tobe done. 7 MR. NADEL: Bryan, Steve Nadel. Just a quick 8 readingbecause I just received this latest versionof 9 the schedule. 10 My general sense is it's pretty compacted at 1 1 the end. And I would encourage you to see if you could 12 look to save a month or two, basically, betweennow and 13 the NOPR in order to allow a littlebitmore time at 14 the end. 15 Possibleways that come tomy mind is this 16 one. We have the three workshops that are already in 17 place, but I think we have at least four other 18 workshops. You may be able to shorten the official 19 comment periodbecause by the time we get to these 20 various ANOPRs and NOPRs, it's going tobe stuff that 21 people have seen three or four times
. 22 But I'd encourage you to look that way, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 38 1 basically, to bring the NOPR into '98 and allow a 2 littlebitmore time betweenNOPR and final rule. 3 MR. SAMUELS: Chuck Samuels, AHAM. It's 4 certainlyup to you folks todecide how touse the 5 schedule. My only comment wouldbe that I would think 6 we wouldbe opposed to any shortening of comment 7 periods. It'svery important for both individual 8 manufacturers to try to develop comments collectively, 9 sohowever you organize yourself, please don't cutout 10 the public's ability to comment. 11 MR. BERRINGER: Thank you. 12 Do we have any other comments on the 13 schedule? 14 (No response.) 15 Okay. Thank you. 16 Next I justwanted to discuss

-- as far as we 17 have, I introduced the OCS team earlier. On topof 18 that, as part of the commitment, we've also talked 19 about broadeningour team focus and we alsohave a 20 number of contractors that are here today that are on 21 22 the team andwe're functioning as a team. I, being the lead again on that as far as coordinating it. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 39 1 We have A.D. Little, Lawrence Berkeley 2 Laboratory, NREL, Energetics, and other experts that 3 are helpingus out as far as peerreview and so forth. 4 A.D. Little is performing the lead as far as 5 the engineering andmanufacturing impact analysis. 6 They're also the lead as far as doing the work for the 7 reverse engineering, whichwe'll discuss tomorrow. 8 LBNL is obviously they're the leaddoing 9 the workwith the LCC and the national benefits 10 analysis and the work with the spreadsheets. 1 1 We also are looking as far as havingpeer 12 review, more stakeholder review, trying to get that out 13 there so everybody can have itprior to workshops and 14 meetings. Sowe're being as open as we can in this new 15 process to give you that data and share that data as we 16 get it. 17 MR. SAMUELS: Bryan? 18 MR. BERRINGER: Yes, Chuck. 19 MR. SAMUELS: Chuck Samuels. 20 Could you describe the role of NREL and 21 Energetics? 22 MR. BERRINGER: Energetics, we're just EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 40 1 looking at a system for the comments right now, comment 2 summary. We're developing a database sowe canput the 3 forms

-- electronically summarize them. So it's an 4 easy -- it's sort of a new system, so they're helping 5 us with that. 6 NREL is

-- we've been asking them for support 7 as far as consumer and justgeneral rulemaking support 8 overall, as far as implementationof the process 9 improvement, sort of helpingus withpapers and so 10 forth to staff. So they've sort of done genericrole, 11 but they alsohelpedus with supportwithA.D. Little 12 also. 13 MR. SAMUELS: Comment summary. Is that 14 something that you couldput on the publicrecord oron 15 the Web afterward orwould that purely be for internal 16 purposes? 17 MR. BERRINGER: Typically, it's only been 18 internal purposes. Obviously all the comments are on 19 the public record for review. Now, in the past -- 20 again, this is a new system. I mean, that may be

-- 21 22 MR. SAMUELS: Thatmay be an interesting thing, Michael, toput up on theWeb. I assume it's EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 41 1 just an objective summary of comments that they do. If 2 it isn't a bigproblem or it isn't some legal problem

- 3 - I can't imagine what itmight be. Itmight be 4 something thatmight be interesting to the public. 5 MR. McCABE: Michael McCabe. We'll look into 6 that. This effortwould lead into the discussion of 7 comment section that appear in the proposed rule and in 8 turn also the final rule. So it's a strictreporting 9 of what's beendone inorder tohelp facilitate the 10 various documents as well as for management's review. 1 1 We'll look atmaking that information available on the 12 Web, as well. 13 MR. BERRINGER: Okay. Are there any other 14 questions then as far as the schedule or the framework 15 as far as the roadmap and so forth? At this point, it 16 looks like we're a little ahead of schedule, sowe can 17 eitherpress on -- 18 VOICE: Get out a little early. 19 MR. BERRINGER: One of the things we've 20 prepared as far as tools for this workshop that I 21 22 brought withme, too, it's a -- I broughtmy Bible and my flack jacket. So I'mgoing tohave toput my flack EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 42 1 jacketon now since we're getting into the meat of the 2 discussion. 3 Just the first part we're going to talk about 4 is the data collection. And as part of the data 5 collecting, the engineering analysis. And again, I'd 6 like to thank AHAM for their role in that and the 7 manufacturers, and alsoA.D. Little for assisting as 8 far as the data collection for the engineering 9 analysis. 10 Basically, we received the databack in 1 1 December, early December from AHAM as far as from the 12 manufacturer data that was obtained. Basically, that 13 was LBNL. And they incorporated that data into the 14 spreadsheets which you'll see later today. So that has 15 been incorporated in there. So that's something new 16 since the last workshop. 17 One of the things that is newhere

-- and I'm 18 suremost of the manufacturers and AHAM, who was just 19 talk about it this morning, more or less

-- was based 20 on preliminary result which we're going to discuss 21 22 today, the Department would like to request additional information for V-axis machines at the 30, 35 and 40 EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 43 1 

### percent level. 2 Basically, we're seeing favorable good 3 results at that level, or above 25 percent. 4 Unfortunately, we don'thave any data to say that 30 5 percent is good. It's sortof like a no-man's land 6 thatwe don'thave information. 7 One of the reasonswe don't orwe didn't 8 request itoriginally isbasedonprevious analysis 9 where itonly looked like themost possible levelwas 10 at 20 percent. So, we're

-- basedonknowledge. 1 1 

### As far as the other thing, testprocedures 12 weren't finalized. We just finalized the test 13 procedures ofAugust last year, sowe're now just 14 getting some sortof indicationofwhat theMEF levels 15 are on machines out there today. 

### 16 So there's new information andwe didn'tknow 17 how the test procedurewould impact that. Sowe are 18 seeingnumbers thatmanagement would come up, or ifwe 19 tried topresent something toDan Reicher to say, okay, 20 25 percent looks really goodbuthe asks us what about 21 22 30 percent, we wouldn'thave an answer. So that's one of the reasons we'd look for additional data. And EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 44 1 obviously, somemanufacturers may not be able to 2 achieve

-- maybe 35 and 40. Butwe'd like to at least 3 get an ideaof what that wouldbe, as far as the impact 4 on themanufacturers. 5 Also, justget a feel for what information is 6 out there and the cost for that. 7 I know this is something new, something 8 that's justbeenbroughtup today. I know youhave to 9 think about it. 10 The other thing is we'd like to also, if it's 1 1 agreedup todo that, we'd like tohave AHAM assist and 12 do the data collection as we didpreviouslywith the 13 original data. 14 Is there any questions on thatparticular 15 portion? I know that is new. It's something that we're 16 looking for. 17 (No response.) 18 Okay. Seeingno discussion, I'mgoing to 19 turn itover toMike Rivest right now toget intoa 20 littlebitmore detail as far as the actual data 21 22 collection and engineering analysis. Mike. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 45 1 MR. RIVEST: Good morning. What I'd like to 2 do, and I apologize for my throat. What I'd like todo 3 is go over the process that was used for gatheringdata 4 for the engineering analysis. And I'll look toWayne 5 Morris to correctme if I make any mistakes along the 6 way. We worked closely together in combining the data 7 that was suppliedby themanufacturers. 8 MR. MORRIS: I appreciate the compliment, 9 Michael, but you're so far aboveme on this thing that 10 I'mgoing tobe strugglingjust to keepup. 11 MR. RIVEST: I'm always cautionedwhen I hear 12 someone downplaying their role. 13 I'd like to talk a littlebit about the data 14 collectionmethodology. Because this is an entirely 15 new way ofdoing things, I thought itmight be 16 worthwhile to spend a fewminutes goingover the 17 concepts. Itwill helpus understand, I think, the 18 results a littlebetter. 19 I'll try to, in some cases, come upwith 20 simplifiedexamples sopeople canbecome comfortable. 21 We'll talk a little about uncertainty and variability, 22 which really was thewhole purpose. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 46 1 At the workshop that was held in November 

### 2 '96, I believe, one of the as Mike McCabe mentioned, 3 one of the key commitments to the newprocess was to 4 reflect the wide range in various inputs. And one of 5 the critical inputs is the range inmanufacturing cost. 6 Sowe tried to come up with a methodology that 7 incorporated all that richness without going into 8 problems in terms of divulging very sensitive 9 information. 10 The data that's been presented to DOE is 1 1 representative of the entire industry cost 12 distribution. We'll look at that. The output canbe 13 seen in a summary form on the cost efficiency graph. 14 And finally, I'd like to justquickly show you the 15 results of the AHAM data collection. I won't go 16 through it in any detail. I justwant to explain the 17 format of the tables. 18 The first stepwe had to deal withwas the 19 establishment of a baseline. We know that the test 20 procedure changed and the change in description toEF 21 toMEF. And that's not a simple change. There's no 

### 22 direct way of computingMEF from EF. There are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 47 1 

### additional variables that need tobe considered. And 2 sincepeopleweren't designing around this new 3 descriptor, there's also a wide range around the new 4 MEF. So threemachines with the sameEF couldhave 5 very differentMEF values. 6 And the process thatwas used to establisha 7 baselinewas to ask allmanufacturers, allmajor 8 manufacturers, to test some of theirmachines at the 9 lower endof theEF value and give

-- basically, give 10 theMEF that was resulting from those tests. And AHAM 11 

### created a mathematical average of those five data 12 submittals. So there was noweighing. Itwas a strict 13 mathematical averagingof those models. 14 DOE, alongwithAHAM, had several 15 conversations andmeetings, making sure that we had a 16 common understandingofwhat the definitions of the 17 various cost components were. 18 We then proceeded incollectingthedata from 19 manufacturers. And the data, whatwas new was instead 20 of asking for a single estimateof their cost, we asked 21 them tocome upwith an estimateof cost within a 22 range. And we tried todescribe that range to capture EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 48 1 the richness without going into toomuch detail. And 2 the way we proposedwas to come upwith three values: a 3 minimum value, a most likely value and a maximum value. 4 While the datawas being collected, I worked 5 on creating a spreadsheet which could aggregate those 6 various data submittals into an industry distribution, 7 and I'lldescribe that a littlemore. 8 Sowe're going to look at a rawdata 9 submittal from threemanufacturers for a particular 10 efficiency level. This is the type of data submittal 1 1 youmight see; a triangulardistributionwith a minimum 12 point, a maximum point and a most likely. And 13 depending on the expectations, itwasn't necessary that 14 themid pointbe themost likely. So you could 15 represent, if you will, the risk in those cost 16 estimates by changing the shape. Sohere wouldbe, for 17 the same level, threemanufacturer submittals. 18 The next stepwas to try and aggregate that 19 into an industry distribution for that given level. And 20 the process that was used was to first scale these 21 22 triangles according tomarket share, and then sample themrepeatedly tocreate a full distribution.
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• 49 1 

### Finally, oncewe created that full 2 distribution, we wanted toreport itback. In some 3 situations, ifwe wouldhave reportedback the 4 distribution as aggregated, because therewas no 5 overlap in some situations, you could get into serious 6 confidentiality issues. So, the interim solutionwe 7 came upwithwas togive percentile values for the 8 given data sowe can describe roughlywhat the 9 distributionof the costswere. And the datapoint 10 percentilevalues we came upwithwere zero, 10, 25, 11 50, 75, 90 and 100percent. 12 We also added an additional valuewhichwas 13 the weighted average of themost likely. If youwill, 14 the tops of the triangles. And I'd like to talk for a 15 minute about that a little later, what's the 16 significanceof that value and how itmight beused and 17 what's the value tohaving collected it. 18 To translate the output of our data 19 aggregation to the input of the life cycle cost 20 spreadsheet, I created this very simple example. This 21 22 wouldbe the aggregationof data submittalsor the industry distribution. If therewere twomanufacturers 

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• 50 1 

### with 50 percentmarket share each, this iswhatwould 2 have come out of our aggregation. 3 And ifyouwere to create an input 4 distribution for the life cycle cost curve trough 5 percentile values, what theprogramdoes is it scans 6 from left toright. When ithits zeropercent, ithits 7 its first value, itkeeps scanninguntil ithits 10 8 percent of the surface area, and then it fills in that 9 slot evenly for that interim. 10 So, this area represents 10 percent of the 1 1 

### total areahere. But itjustgives you a shape of 12 how

-- a sense ofhow even in an extreme case itdoes 13 somewhatmask the distribution of costs. 14 One convenientway of displaying all the 15 information on a single graph consists in displaying 

### 16 the percentilevalues on an incremental costversus 17 efficiency level graph. And the next slide, you'll 18 see, ifyouwill, a snapshot summary of the entiredata 19 collectionexercise, being these cost efficiency 20 distributions. 21 So, for instance, you'll see that there's 22 relatively little cost in achieving five and 10percent
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• 51 1 

### efficiency improvements. As you increase the 2 efficiency improvement you're increasing, if youwill, 3 the uncertaintyorjust thevariability in the 4 differentmanufacturers' costs of attaining these 5 different levels. And by looking at theproximity of 6 the datapoints, you'dget a sense ofwhere theremight 7 be some clusteringof costs. But thewhole ideahere 8 is to carry the full range of costs throughout the 9 analysis and never get ridof it. 10 Itwas mentioned earlier, the concept of the 1 1 

### average, theweighted average of themost likelies. 12 And this is the first time we were doing this. We were 13 comparingour 50thpercentile to that value. And we 14 didn't expect toget the same number but I triedhere 15 to explain what the value is of having both those 

### 16 concepts. 17 For example, the crystalballwould, for this 18 distribution of costs, come up with a 50 percentile 19 value of $4.00. Itjust scans until itreaches 50 20 percent and then itwrites down $4.00 as the 50 21 percentile. If youwere todo the averageof themost 22 likelies, youwouldbe averagingout the tops of these,
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• 52 1 and youwould obtain a different answer. You'd obtain 2 $5.00. 3 So the conclusionhere is that if youwere to 4 use a single value to represent the average, you can 5 onlyuse the weighted average of themost likely 6 because it's the only one that samples each of these. 7 Sousing the 50 percentilevalue as representative of 8 the industry is really an overstatement. Sousing the 9 full distribution is best. That's what captures the 10 full richness. And just

-- that you shouldn't use the 1 1 otherpercentilevalues as beingreflective of the 12 industry. Only as a whole. 13 MR. ROSENSTOCK: Can I ask a quickquestion? 14 SteveRosenstock, EdisonElectric Institute. 15 As you were going through this, justout of 16 curiosity, did you look at shipment weighted average 17 versus shipmentweightedmedian, just as kindof a 18 statistical

-- just to see if there was any big 19 discrepantbigdifferent on that end? 20 21 mean? 22 MR. RIVEST: Shipmentweightedmedian would

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• 53 1 the same, but 2 MR. RIVEST: If therewas skewness in the 3 triangles? No. We didn't look at that. 4 MR. ROSENSTOCK: Okay. 5 MR. RIVEST: I'vebeen focusing strictly on 6 cost, but alsowas collected, at eachof the efficiency 7 levels for eachof these MEF values, was collected 8 disaggregate energy consumption. 9 It's significantbecause theMEF value 10 doesn't give you the full picture. The MEF is a 11 combinationofwater use, energy for waterhearing, for 12 motor, et cetera. So it's important todo our life 13 cycle cost, thenwe have a disaggregation of the 14 various components of energy use. Also see some 15 product characteristics. 16 The costs were collected separately for 17 variable and fixed costs. And finally, the graph you 18 sawearlierwith the different percentilevalues is 19 shownhere tabulatedwith the exact values. 20 Are there any questions on the data 21 collection? 22 Pleaseuse themicrophone. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 54 1 MR. WETHJE: LarryWethje withARI. 2 Just for the record, Mike, couldyou tell us 3 exactlywho has access to the data that's submittedby 4 themanufacturers? 5 MR. MORRIS: This isWayne Morris fromAHAM. 6 Yes. The data

-- in fact, I was going tobring thisup 7 a littlebit laterbecause itwas a question thatwas 8 raised at a previous workshop about transparency in 9 data collection and so forth. 10 We made an arrangement withArthurD. Little 1 1 thatbothMichael Rivest and I wouldhave access to the 12 rawdata in all forms. Michael was able to see it. He 13 was able towork through all of the calculationswith 14 me so that therewas a double checkingof all 15 aggregation and calculations thatwere doing 16 calculating the shipment weighted averaging and all of 17 the information. 18 I was the onlyperson that retained access of 19 the proprietarymanufacturers' data, butMichael worked 20 withme on all of the calculations. He setup the 21 22 aggregated spreadsheetbut it appeared onlywithme. And I ran all the calculations under his review. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 55 1 So therewas a double check through the 2 entireprocess but the final results of the aggregated 3 crystalball spreadsheetwe thenpresented toDOE. 

### 4 MR. WETHJE: Sodoes Mike know exactlywhich 5 manufacturer isA, B, CandD? Nobody onDOE staffhas 6 access to that either? 7 MR. MORRIS: No. 

### 8 MR. WETHJE: Thanks. 9 MR. RIVEST: I saw the rawdata and I was 10 able to cross-reference, make suremy spreadsheet 1 1 worked, basically. And thedatahas always stayed at 12 AHAM. I never had it inmy possession. 13 MR. HAWKINS: Mike, could you give an 14 interpretationof the percentiles again? 15 My name is Larry Hawkins. I'mwith General 16 Electric. 17 Could you give a clarifying interpretationof 18 the percentiles? And if the shipment weighted average 19 is a betternumber than the 50thpercentile, how would 20 you infer that relative to the 75thor the 25th as 21 opposed to the 100th? 22 MR. RIVEST: I just think that

-- I just EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 56 1 cautionusing any of the percentilevalues as singular 2 values. I think they only have valuewhen used with 3 all the others. So I'mnot -- the 75thpercentile 4 value justmeans that of all the data submittals, of 5 all those triangle, 75 percent of that total 6 probability area ended at that pointbut itdoesn't 7 tell you that therewas someone -- someonemay have 8 been very far down before you'd reach 100, so that 9 person, his data, may not have been even considered. 10 That's the point I was trying tomake. 11 If you're going touse a singlenumber, that 12 number has tohave

-- youknow, all manufacturers 13 shouldhave contributed to that number. That's the 14 point I was trying tomake. 15 MR. HAWKINS: Not to put words in yourmouth, 16 but are you saying then if you used a singlenumber it 17 shouldbe the 100thpercentile? 18 MR. RIVEST: No. I'm saying you shouldn't 19 use any of the percentile numbers as singlenumbers. 20 You should use the shipment weight ofmost likely, if 21 youwere. And I think the whole here was tonot reduce 22 the datagathering to a singlenumber. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 57 1 MR. HAWKINS: Okay. Thank you. 2 MR. BROOKMAN: Do youhave a follow-up 3 question? He looked likehe wasn't

-- 4 MR. HAWKINS: No. 5 MR. BROOKMAN: Are you satisfiedwith the 6 answer? 7 MR. HAWKINS: Yes. 8 MR. BERRINGER: Okay. 9 Steve? 10 MR. NADEL: Yes. SteveNadel, ACEEE. I have 11 a coupleof questions. 12 As we discussedbefore in these workshops, 13 with this type of data collectionwe're getting 14 information from, in this case, five major 15 manufacturers, all ofwhom have a strong interest in 16 the outcome of the result, and all ofwhom recognize 17 that the information that the information that they 18 give couldhave a very significant impact on, 19 effectively, what the final rulewillbe. 20 Towhat extent did you review the individual 21 assumptions for reasonableness? Do you feel 22 comfortable that these values are reasonable estimates EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 58 1 themanufacturers have given or did you justrecord 2 them, and to the extent manufacturers gamed the 3 numbers, that justplayed through? 4 MR. RIVEST: Steve, I did not reviewwith 5 that intent inmind and my general feeling is that the 6 datamade sense. And in fact, it'smy understanding 7 that the outlyers were outlyers youmight have 8 expected. I was not surprised in any way. But that 9 wasn'tmy role. 10 MR. NADEL: Okay. I'll ask the second 1 1 questionbut it's

-- 12 MR. MORRIS: This isWayne Morris. Can I 13 just interjecthere to Steve's point? 14 MR. NADEL: Yes. 15 MR. MORRIS: One of the things that I did in 16 terms ofAHAM was to, as I've done inpast data 17 collections, is to look at eachdata submittal and try 18 and look at itwith respect toboth the previous data 19 submittal thatwas done two years ago andwhat changes, 20 if any, may have beenmade in that situation. And also 21 22 to look at it in light of otherdata submittal. In some cases, I did contactmanufacturers EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 59 1 and ask them to review their data submittal to see if 2 therewas a mathematical error that might have been 3 made, orhow this may have related to a previous data 4 submittal; what changed orwhat did not. 5 I wouldn't exactly call it a reasonableness 6 testbut I tried to use every available piece of 7 information inorder to try and double check tomake 8 sure therewere not errors being submitted and captured 9 in this data submittal. 10 I won't comment whether ornot any 11 manufacturers changed their submittal. I think that's 12 private. But we did try and work on this as closely as 13 possible to eliminate any errors that couldhave been 14 made. 15 MR. NADEL: I guess my second question

-- I'm 16 not surewho couldrespond, whether it's one or you or 17 maybe itultimately goes back to the Department. When 18 I look at the data, I see -- ifwe take

-- tomention 19 one number just to illustrate the issue, look at the 20 50thpercentile. There's quite a jumpbetween the 40 21 22 percent and 50 percent. MR. BROOKMAN: Are you referring to the last EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 60 1 page, a matrix likepage? 2 MR. NADEL: I'mreferring topage 8 at the 3 moment. 4 MR. RIVEST: It is the graph or -- 5 MR. NADEL: The graph. It's also on one of 6 the charts that you showed. There appears on the 50th 7 percentile to be quite a jump in the incremental 8 manufacture costs between the 40 percent and 50 percent 9 number, a jump at at least

-- there are products right 10 in that range now. I don't see that there's a 11 technical difference between products at the 40 percent 12 or 45 percent. I'mwondering

-- 13 MR. RIVEST: The one thing I can say, Steve, 14 is that itwas apparent from the datawhen different 15 manufacturer hit walls; tooling

-- you know. You could 16 get a sense ofwhere their technology positionswere, 17 where their investments were currently, although a 18 slight difference can have a huge change in cost just 19 because of the assets they have and the assets they 20 need. 21 22 MR. MORRIS: This is Wayne Morris
. Pleasekeep inmind, Steve, this was a cost EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 61 1 to convert 100percent production to these values. 2 This was not a cost to do one particularmodel. 3 MR. NADEL: Okay. I guess the point I'dmake 4 is that

-- and this may well be for the Department. 5 There may be a need to further look into this issue. 6 Thatbigjump I think couldhave a very telling effect 7 onwhat level. I think the Department needs to satisfy 8 themselves that that jump is in fact reasonable versus 9 itmay be somethingrelated to thedata collection 10 process. 1 1 And I know we'll be talking about reverse 12 engineering later. That will give us another take on 13 these costs. But that did strikeme as a bitof an 14 anomaly in this data set. 15 MR. RIVEST: I mean, you notice things do 16 happen indiscrete steps. There's no difference, for 17 example, between 35 and 40. So I think youhit 18 technology walls and 19 MR. NADEL: Butwhen I look at the products, 20 I don't see that. Which iswhy I'mjust saying it 21 22 requires further looking into. I'mnot concluding something. I'mjust sayingwe shouldn't accept it at EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 62 1 face value. 2 MR. BROOKMAN: Additional questions on the 3 data? 4 Steve. 5 MR. ROSENSTOCK: Yes. SteveRosenstock, 6 EdisonElectric Institute. 7 On the first of the last three pages, the 8 first page, product characteristics and energy use 9 data. That page. The first one of the three charts. 10 TheAHAM Appendices. 1 1 MR. BROOKMAN: Yes. 12 MR. ROSENSTOCK: Just out of curiosity. 13 That's the one. Just out of curiosity, under the 14 energy use -- and again, I'mnot totally familiar with 15 theMEF calculation and test procedure. I'll say that 16 right up front. 17 Under energy use, underhot water it shows 18 kilowatt hours per cycle. Do you have similar 19 information for gas or oilwater heaters? There may be 20 differences in terms of

-- you know, because there's 21 22 different energy factors for different types ofwater heaters. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 63 1 MR. RIVEST: I thinkmaybe Peter

-- Peter? 2 MR. BIERMAYER: Yes. That column is just the 3 energy contained in the water. So that, for example, 4 wouldbe equivalent say if youhad an electricwater 5 heater and itwas 100percent efficient, that's the 6 energy you would use. 7 Now the testprocedure

-- that's the number 8 that goes into the testprocedures. If there's a gas 9 waterheater, it's assumed tobe 75 percent efficient. 10 You divideby 75 and itwouldbe thatmuch more energy 11 efficient. 12 MR. ROSENSTOCK: So you're using the recovery 13 efficiencywhen you're doing it for different types of 14 water heaters? 15 MR. BIERMAYER: Right. Right. 16 MR. ROSENSTOCK: Okay. I just

-- youknow

-- 17 was concerned. 18 MR. BIERMAYER: That's just the energy to 19 heatjust a certain amount ofwater. 20 21 22 MR. ROSENSTOCK: You're justcoveringBTUs to kilowatthours and then you're using a recovery MR. BIERMAYER: Right. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 64 1 MR. ROSENSTOCK: Okay. I justwanted toknow 2 how youwere -- okay. 3 MR. BROOKMAN: David? 4 MR. GOLDSTEIN: Yes. I had a question. This 5 is a methodological question concerning the 6 distribution function of costs. 7 I'm emphasizing I don't see any problemwith 8 the data that you're getting from the method on this 9 product. But the question is suppose one of the 10 manufacturers was submitting false data inorder to 1 1 influence the result. They took some item that you 12 wouldknow as an engineering consultant ought tocost 13 $25.00 and they're saying itcosts $150.00. 14 What way is there for DOE or for a commenter 15 from the outside topoint out thatkind of a 16 discrepancy? 17 MR. RIVEST: I think youhave to appreciate 18 the complexity here because what we're asking the 19 manufacturers is not to take one of theirmodels and 20 tweak thatmodel. We're asking them to switch over 21 22 theirwhole production. Sounless youworked there, I don't think you'dneed todo that. To say that they're EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 65 1 giving false informationwouldbe very presumptuous, I 2 think. 3 MR. GOLDSTEIN: No, I'mnot. That's why I 4 said this is a methodological question. I'mnot 5 assuming that anyone is doing that. I'm asking the 6 question ifhypothetically they were to do it, what 7 ways are there within the process to discover that 8 error and to correct it. 9 MR. RIVEST: First of all, I'd say that 10 having

-- the results should not be surprising anyone. 11 I don't think that they are within

-- they're not out 12 of the range of previous data submittals. They're not 13 out of the range of observation either. 14 MR. GOLDSTEIN: Yes, but you're 15 misunderstandingmy question. I'mnot saying 16 MR. RIVEST: Well, I can't answer your 17 question. 18 MR. GOLDSTEIN:

-- something's wrongwith the 19 data. I'm askingbecause this is a method that's going 20 tobe used not only in this rulemakingbut in other 21 ones. I'vehad time to review these. From the 22 preliminary review, I don't see anything wrongwith EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 66 1 these numbers either. But suppose there was something 2 wrong with these orwith the next one orwith the next 3 one. 4 Using the oldmethodology I could look at 5 compressor efficiency

-- they don't have compressors in 6 this product

-- going from 90 percent to 93 percent. 7 And I could say, all right, how much should that cost? 8 I could look in a catalogue. I couldget a reality 9 check. 10 MR. RIVEST: I think that

-- not tobelabor 11 this point, butdifferent rules will have to have 12 different safeguards. 13 MR. McCABE: Letme interject. This is 14 MichaelMcCabe. 15 The engineeringmanufacturingof any of these 16 products is rather complicated and itcomplicates the 17 rulemaking, and it'sone of the reasons why we're 18 sharing the information as we are, as we do now, in 19 order so that everybody has the benefit of the 20 information that is going to be used for the 21 rulemaking
. 22 We're spending time visitingwith EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 67 1 manufacturers, getting an understanding of what their 2 products are, inorder tobe able to appreciate these 3 data. We'll alsobe talking about the reverse 4 engineering analysis. We're trying to get a breadthof 5 information tobe able tounderstandwhat's happening 6 within the industry and, withmanufacturer impact 7 analysis, within individualmanufacturers. Because 8 when you go out into themarketplace, you'll see a 9 range of costs, a range ofprices. And there are a 10 variety of factors that are causing that tohappen. 11 Inmany cases you need tounderstand the 12 specifics for that individual model or that individual 13 manufacturers in cases tounderstand those prices. But 14 we're trying to share this with everybody inorder to 15 be able to sortout some of this. 16 I'd also ask if anybody has any suggestions 17 as toways that we can ferret out any issues such as 18 that, they identify them. 19 20 21 22 MR. BROOKMAN: Glenn? MR. SCHLEEDE: Glenn Schleede. I heard

-- I thought I heardMichael say earlier that this marketwas changing fast. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 68 1 MR. BROOKMAN: Is thatmike on? Can you hear 2 him? I canhardly hear you. Please see if it's on. 3 (Pause.) 4 Okay. Go ahead. 5 MR. SAMUELS: I thought I understoodMichael 6 to say that themarket is changing considerably. 7 Question. Do these data change over time? And if so, 8 are there provisions toupdate between now and the time 9 of the rulemaking, which is a year and a half off, or 10 the effective date, which is three or four years off? 11 Or do these data tend toremain stable andhave no 12 impact on the analysis as themarket changes? 13 MR. RIVEST: I'll try to answer that. The 14 data thatwas collectedwas collectedwith the 15 understanding that therewas a certain time schedule. 16 Sowithin the data collection and the costs that were 17 provided, they understood that therewas a presumed 18 final rule in '99 andpresumed effective rule in 2003. 19 So I don't thinkwe can gobeyond that and 20 get into this endless scenario. If there was reason to 21 22 believe that those dates areway off, then that may be warranted. But at this time, it's factored in. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 69 1 MR. BROOKMAN: What I heard you say there I 2 thinkwas that the time frame that was specified to the 3 data submitters should account for this, at least in 4 part. It's a part of their submittals. Okay. 5 Charlie? 6 MR. STEPHENS: Charlie Stephens, Oregon 7 Energy Office. 8 Mike, what's the source of the shipment 9 weights and do they change? I mean, given the impact 10 that prices and costs assumed can affect shipment 11 weights? Are they static? 12 MR. RIVEST: My understanding is they are 13 static. And they were based on the data submittals. 14 MR. BROOKMAN: I seeWayne sitting there 15 nodding his head in agreement. 16 MR. MORRIS: Wayne Morris. 17 Yes. The data is static on shipment 18 weighted. 19 MR. SAMUELS: At what date? I mean, when do 20 the shipment weights

-- 21 22 MR. MORRIS: It's based on -- I believe it
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• 70 1 shipments date, as reported toAHAM
. 2 MR. BROOKMAN: Michael McCabe. 3 MR. McCABE: Wayne, I think itmight be 4 useful to go into some of that to explain the weighting 5 because the weightingwas looking atmanufacturers, 6 when they were developing the data. Itwas what their 7 shipments were for that periodof time. Inother 8 words, themanufacturerswere estimatingwhat their 9 costs wouldbe to take that volume of shipments 10 engineered to those efficiency levels. 11 So it'snot trying to represent the shareof 12 a particularmodel that exists in themarketplace today 13 whichmay meet any one of those levels, but rather 14 taking a manufacturer's shipments as they exist at a 15 period of time and what itwould cost for that 16 manufacturer to go to the different efficiency levels. 17 MR. MORRIS: Yes. That's correct. 18 This isWayne. That is correct. And it also 19 anticipates that they wouldbe changing all of their 20 production to thatminimum value, whatever that 21 particular energy level was above the baseline
. 22 MR. BROOKMAN: Additional questions, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 71 1 

### comments, on the data thatMike has reviewed? 2 (No response.) 3 I don't see any. 4 We're at a natural breakpoint, aren'twe? 5 I'd like to suggestwe take a break. 6 

### It'snow 10:30. Thank you. We've got a real 7 good start. Let's resume at 10:45. We'll start at 8 

### 10:45. 9 Thank you. 10 (Whereupon, a recess was taken.) 11 MR. BROOKMAN: Thank you again for allowing 12 us to stayon schedule, allowingus to starton time. 13 The next segment is to talk about life cycle 14 costdata. 15 Bryan, are you ready? 

### 16 MR. BERRINGER: Okay. The next pointon 17 the

-- can everybody hearme okay? I know some of the 18 speakers are turneddown and I'll try to speakmore 19 into themike here. 20 The next is the lifecycle cost analysis that 21 22 we're going tobegin to talk about. This gets into
some of the assumptions thatwe'remaking as far as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 72 1 input into the analysis. And JimMcMahon will be 2 getting intomore detail as far as running the LCC and 3 all that. 4 I justwanted topoint out some of the 5 assumptions thatwe're usinghere. And these 6 assumptions are consideringusing the crystal ball 7 simulations. Sobasicallywe have the start year at 8 2003, the purchase expense baseline retail price of 9 $4.21 with tax. 10 Mike Rivest is going to talk a littlebit 1 1 more about that as far as where those numbers came 12 from, where itwas derived. 13 Lifetime. We're using a distribution for 14 cycles per year. Also, a distributionoff data. So 15 we're trying to get away from using the average values 16 in some cases. 17 The energy price trend. We're looking atAEO 18 '98 reference case. The energy fixed chart is

-- we've 19 done the analysis bothwith and without fixed cost and 20 it shows a comparison. 21 22 The water prices was a distribution. And at this point, the water price escalator, we've just EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 73 1 assumed it tobe flat at zero, sowe have not added any 2 escalation into this analysis. 3 And also, the discount rates as a 4 distribution. 5 MR. NADEL: Bryan? 6 MR. BERRINGER: Yes. 7 MR. NADEL: Steve Nadel. Since you quickly 8 moved that chart off, I assume that those specific 9 assumptions we'll discuss laterwhen Jimgives us the 10 presentation? 11 MR. BERRINGER: Yes. 12 MR. NADEL: Fine. 13 MR. BERRINGER: Jimwill get intomore detail 14 on the spreadsheet and stuff. 15 MR. NADEL: I justwanted toknowwhere to 16 comment later. 17 MR. BERRINGER: That's just to let you know 18 where it's starting at and what assumptions were used 19 in this analysis. 20 Again, I don't really want to get into any 21 22 detailwith this. I'll give you an ideaof what the preliminary results are. There's a number of graphs, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 74 1 but this table sort of summarizes it, the findings with 2 the runs, what it looks like. So again, this is some 3 of the preliminary information. 4 Again, we'll get intomore detail with that 5 when Jim is there and we'll have more discussion on 6 these items. Just to give you an idea ofwhat it's 7 looking at, what the information is looking like to 8 date. 9 Yes, Steve? 10 MR. ROSENSTOCK: Hi. Steve Rosenstock, 11 EdisonElectric Institute. 12 Is that table inone of these handouts? 13 MR. BERRINGER: Yes. It's way down. 14 MR. ROSENSTOCK: Okay. Sorry about that. 15 MR. BERRINGER: It's probably about the last 16 package. It should be there. 17 MR. ROSENSTOCK: Okay. 18 MR. BERRINGER: But ithas a littlebitmore 19 detail as far as slides and stuff. 20 21 22 MR. ROSENSTOCK: Okay. I see. MR. BERRINGER: At this point I'mgoing to letMike Rivest

-- one of the inputs is price into the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 75 1 

### LCC. Sowe'll haveMike talk about that and thenwe'll 2 haveJimMcMahon present and get into further 3 discussion as far as theLCC analysis and so forth. 4 Thank you. 5 

### MR. RIVEST: You shouldhave this inyour 6 package, maybe afterJim's slides. Just thought I 7 would immediately talk about how we go from the data 8 submittals for cost and try to come upwith an input 9 for the life cycle cost for price. And I thought I 10 woulddo thatbeforeJim starts into the life cycle 11 

### cost. 12 This is the last slide. I justwant tomake 13 a quick intro. 14 The costs thatwe'vebeenobtaining from 15 manufacturers areproduction costs. They deal with 16 directmaterial, labor and overheadcomponents. There 17 are additional costswhich are not capturedwithin the 18 datacollection that deal with sales, general and 19 administrative costs. And what we're trying todo for 20 the life cycle cost is come upwith an enduserprice. 21 In comingup with this end userprice todo 22 the life cycle tradeoffbetween increases inprice and EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 76 1 reductions inoperating costs, we have to go from the 2 data submittals into a net consumerprice. And to sort 3 ofwrite thatdown intomanageable parts, we'vebroken 4 itdown into three separatemark-ups. 5 The first mark-up takes those production 6 costs and adds a multiplieron itbasedon sales, 7 general and administrative costs and you obtain 8 manufacturerprice. And we'll see. We have a couple 9 of data sources for manufacturer pricebased on 10 industry shipments, both in terms of units and in terms 1 1 ofdollarvalue. 12 We go from themanufacturer price which is 13 reported andwe obtain a retail price. And there's 14 this categoryhere I've calledretail mark-up, which 15 essentially incorporates the difference inprice 16 between themanufacturerprice reported and the price 17 sold to the consumer. Theremay be some elements in 18 there that are not strictlyretail mark-up thatmay 19 have todo with costs associatedwith shipping, with 20 buying andwith some logistical costs. But I've 21 22 characterized that under the retail mark-up category. And finally, an increase inpricewill also 

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• 77 1 have an increase inpricewhich will impact the 2 consumer. 3 What I'lldo is I'mgoing tohave a brief 4 discussion first on the retail mark-up, then on the 5 manufacturermark-up. And here itwon't bemuch of a 6 discussion. Just to say thatwhat we've done is we've 7 taken the industry shipmentby state and we've applied 8 the state tax rate and obtained an average, a shipment 9 weighted average, sales tax rate of 5.2 percent. 10 In obtaining that first element ofmark-up, 1 1 which is the pricebetween the retail price and the 12 reported shipment value, we have a few data sources 13 that canhelpus try andput a bound on that mark-up. 14 Forretail prices, we have information from the 15 government, which is the Consumer Expenditure Surveys, 16 andwe have data'for the years '96 to '94. That's an 17 annual survey, a rolling survey of 5,000 families where 18 they are reporting all theirpurchases within that 19 year. And one of the discrete items is clothes washer. 20 21 22 Asecond survey, we have data for the years '98 to '95 from DealerscopeMerchandising annual survey. The surveymethodology is different. It'snot 

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• 78 1 

### based on talkingdirectly to consumer. Instead, it's 2 basedon talking to industryparticipants and asking 3 them to estimatenot their own shipmentsbut the 4 shipments of their competitors, a totally different 5 approach. 6 And finally, we have a third surveywhich is 7 theELCAP survey data. And we have fairly update 8 informationonpricingwhich is obtained from a survey 9 orparticipatingretailers which are asked togive a 10 detail ofwhat clothes washers they sold and atwhat 1 1 

### price. 12 Now, the sample size here is significantbut 13 itdoes not include two of themajor retailers, which 14 are Sears and Circuit City. 15 So all of those data sources come with some 

### 16 caveats. 17 We have two sources of data for manufacturer 18 prices. We have Current Industrial Reports andwe also 19 have theAHAM FactBook. 20 Alittle trend analysis on some of theprices 21 22 we can observe. In terms of the retail price, we definitely see a clustering around the $400.00 point. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 79 1 It's relatively flat as far as the consumer expenditure 2 survey. Probably a slight downward decline. Amore 3 noticeable downward decline with the Dealerscope 4 merchandising survey. And we have ELCAP data for the 5 last couple of years. 6 You see a definite clustering around the 7 $400.00 mark. So this is not, quote, the baseline, 8 necessarily. This is just the average sales price of 9 all clothes washers surveyed. 10 Manufacturer prices. We see a trend line 1 1 here. Once again, I thinkwe can observe a slight 12 increase up to a certain time frame, then a flattening, 13 maybe a reduction, depending on the data source. 14 So the idea here is to obtain a mark-up from 15 one price to the other. And the process we're going to 16 use is quite simply to divide one by the other. 17 Wayne? 18 MR. MORRIS: Wayne Morris. Just a question 19 for you, Michael. It states inhere that you're using 20 information from the AHAM Fact Book. Could you explain 21 22 how you did that in terms of

-- is that a mathematically defined kind of thing?
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• 80 1 MR. RIVEST: Yes. It is a mathematically 2 derived number looking for each year at the total value 3 of shipments and the number of units shipped. 

### 4 MR. MORRIS: Okay. For purposes of the 5 record, I'd like itmade very clear thatAHAM did not 6 provide any pricing data to 7 MR. RIVEST: No. 8 MR. MORRIS:

-- eitherArthur D. Little or to 9 DOE. We're not in the business of doing that. But I 10 justdidn't want anybody to think, looking at this 1 1 graph and the next one, thatAHAM has now provided 12 pricing data. 13 MR. TRICKET: Another question. Dave 14 Tricket, NREL. 15 Are these current dollars? What are these 16 actually? In constant dollars? What year? 17 MR. RIVEST: They're in the dollars of the 18 time the survey was taken. 19 20 21 22 MR. TRICKET: Okay. MR. RIVEST: It's a very good point. MR. ROSENSTOCK: StevenRosenstock, Edison Electric Institute. Not adjusted at all for inflation EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 81 1 or anything else? 2 MR. RIVEST: There are no adjustments. And 3 sincewe're really getting at a ratio in a given year, 4 I think that's self-correcting. 5 Delvingmore into this than there is, just 6 looked at all the combinations of dividing the retail 7 priceby the various

-- the two sources of retail 8 price, and looking at how thatmark-up ratio varies. 9 You can see definitely that therewas a significant 10 downward trend in the years 186 perhaps to the 11 beginningof the '90s; a more blurredpicture in the 12 more recent years. Part of that has todowith the 13 fact that ourdata, we have less richness ofdata. 14 Ourmost solidyear was the year 1994where 15 we had the most data sources. We were calculating the 16 mark-up of 1.39 on average here. 17 Now, one thing I do want topoint out is each 18 of these has pros -- eachof these data sets has pros 19 and cons and very differentmethodologies. The one 20 data source which is, if you will, all government, is 21 the Consumer Expenditure Survey and the Current 22 Industrial Reports. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 82 1 So analyzing this and not necessarily drawing 2 to any single number, the Department proposes using a 3 mark-up of 1.4. And I emphasize the 1.4. The zero 4 there

-- I think to go into a second significant digit 5 is probably overemphasizing the accuracy thatwe can 6 have here, butwe feel that 1.4 is a reasonable retail 7 mark-up which considers 8 Dan Barzel. 9 MR. BARZEL: I'mdreaming about this number. 10 (Laughter.) 1 1 Does itmatter -- I don't want to argue for 12 the sake of argument. Is it important that the number 13 be accurate in terms of the final result? Because I've 14 got an idea ofwhat our company andmy competitors are 15 realizing in terms of what they report. I don't know 16 what they actually realize. I know what they report. 17 And there isn't

-- there really isn't a 18 retailerout there, if you convert that to gross margin 19 percentage as a percent of sales, I don't think there's 20 a retailerout there who's realizing over 30 percent. 21 22 And 1.4would be in excess of 30 percent. MR. RIVEST: That's why I tried a littlebit EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 83 1 topreface it. We looked at the 10-Ks of several 2 retailers andwe realize that a good gross margin is 3 probably 25. I think I sawmaybe 26. And that 4 translates to a multiplierof 1.33, 1.35. 5 But I'mnot sure that since I'mdividing the 6 retail priceby this shipment number, I think there are 7 other costs that arebeing encapsulated in this mark-up 8 that are not -- 9 MR. BARZEL: Service, distribution, returns, 10 defective product

-- 1 1 MR. RIVEST: Correct. Soprobably the retail 12 mark-up is a misnomer but we weren't

-- when we looked 13 at the 10-Ks, at leastwe were satisfied thatwe -- and 14 there were footnotes in some of the 10-Ks that some of 15 the purchase

-- in the calculation of the gross margin 16 there were some purchasing costs and inventory costs 17 that weren't captured. 18 MR. BARZEL: I would any -- the net price 19 that the retailer ultimately pays is a valid

-- to the 20 sellingprice

-- is a validmeasure of gross margin and 21 shouldbe included in your number. Because those are 22 costs that retailers have to spend to selling the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 84 1 product. They have sellingexpense. And theyhave 2 these other expenses, whether theybe service or 3 distributionorwhatever. 4 I justdon't know

-- I don't know how 5 important it is to your calculation if the actual 6 number is 25 percent or 23 percent gross margin. And 7 that's 1.32 and you're using 1.4. Does thathave a 8 significant effect on your outcome? 9 MR. RIVEST: It'sprobably within the range. 10 Certainly less than the range ofuncertainty of a lot 1 1 of the other inputs. I wouldn't say it'sunimportant. 12 Terry? 13 MR. THIELE: Terry Thiele ofWhite 14 Consolidated. 15 As youmentioned earlier, your one setof 16 datadonot include Sears. 17 MR. RIVEST: Yes. 18 MR. BARZEL: Does Sears showup? Because 19 they are such a very largeplayer in this product line. 20 Do they showup in any of this dataon any of those? 21 22 MR. RIVEST: Yes. They would showup onmost of this data. They wouldn't showup on -- they would EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 85 1 showup certainly on the Consumer Expenditure Survey 2 because you're calling in consumers who've just 3 purchased a washer. Sobecause of theirmarket share, 4 they would be in there. 5 The Dealerscope? I believe

-- I'mnot sure 6 about the exact participation in the Dealerscope survey 7 and I know for a fact they'renot in the ELCAP. And 8 the significance of that is does Searshave such a 9 large volume inpurchasing that for any givenprice, 10 market price, they canget a higher return. But that's 1 1 speculating. I don't know for a fact. 12 MR. BARZEL: Well,

-- or that they can afford 13 to livewith a lower return. 14 MR. RIVEST: I think as I understand it, they 15 would base their pricingon their competitors and then 16 they would make theirprofit on theirmarket share. 17 But I haven't talked to Sear. 18 MR. THIELE: Yes. I mean, we're talking 19 theory. I'm trying to ascertainwhetherwe've got the 20 fact. 21 MR. RIVEST: I don't have any detailed 22 information on retail mark-ups at Sears. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 86 1 Yes, sir? 2 MR. FLORA: Brad FlorawithWhirlpool. 3 I guess the only question that I've got, 4 Mike, is I'm sure ELCAP data earlier than '94 is 5 available. Is there a reasonwhy we didn't try to get 6 a littlemore data from ELCAP to get our average? 7 MR. RIVEST:

-- Ponday, who works withme, is 8 shakinghis head no. 9 You calledELCAP and they told you that they 10 didn't have that data. And I think the reason was 1 1 because the survey had been sold to another firm called 12 Intellect. Theremay havebeen anELCAP survey butwe 13 can't get the data. 14 MR. FLORA: Okay. How about CES data for 15 after '94? 16 MR. RIVEST: We have a request in right now 17 to get that. 18 MR. FLORA: Okay. I just think that wouldbe 19 helpful to get a betterunderstanding. 20 MR. RIVEST: Basedon the data sources, we 21 cameupwith an average retail costprice

-- an average 22 retailprice before tax of approximately $400.00. And EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 87 1 adding the sales tax of 5.2 percent, we were obtaining 2 a retail cost in the $420.00 range. 3 I do want to say that as far as life cycle 4 cost analysis is concerned, we're really only 5 interested in incremental costs and incremental price. 6 Sowhere you fix that initialprice is not going to 7 impact the results in terms ofpaybackor lifecycle 8 cost of the analysis thatJimwill show. However,

-- 

### 9 Wayne? 10 MR. MORRIS: Wayne Morris. Just a question 1 1 about

-- I think at the lastworkshop we had raised a 12 question of whether ornot we were capturing the cost 13 of installation. And for thosemanufacturers that 14 eitherdo include installation in theirretail priceor 15 for those that charge a separate fee, I think there's 16 some way of capturing that andknowing whether that is 17 in this series or not. 18 MR. RIVEST: The Consumer Expenditure Survey 19 does that. It asks if therewere installationcosts. 20 On average, it ends upbeing a small numberbecause I 21 guess not everyonepays that installationcost. But 22 it'snot somethingwe capturedhere. And I think in EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 88 1 the back of our head for theLCC, the questionwould be 2 would the technology change that installationcost. 3 Would itmake itmore complex ormore costly. And that 4 wouldbe a validquestion to ask. 5 MR. FOLEY: Just back on installation, unless 6 somebody convinces me that it costs more money -- Gene 7 Foley. I'm sorry. From the Alliance to Save 8 Energy. costs more money to install a high 9 efficiency washingmachine compared to a low efficiency 10 washing machine, wouldn't that number actually just 1 1 wash out in the analysis? 12 MR. RIVEST: Or shouldn't it? 13 MR. FOLEY: Or shouldn't it. Shouldn't it 14 endup becoming sort of a non-figure in the analysis? 15 MR. BROOKMAN: Wash out? As if you just 16 chose a metaphor. 17 (Laughter.) 18 MR. FOLEY: Just choosing a metaphor. Right. 19 Exactly. 20 MR. RIVEST: I think you're right. I don't 21 have information that it costs more presently tohave a 22 more efficientmodel. I'dbe interested if there EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 89 1 information. 2 MR. BROOKMAN: Let me make a statement. 3 Several people approachedme at the break and they said 4 that we're making good progress. And they also said 5 that they were struckby the quality of what's being 6 presented and asking if we can conclude this today. 7 I thought I'draise that with you at some 8 point, not now. But we're going to continue topress 9 on and I'mgoing to ask people to try andmake their 10 points concisely and on point and we're going to really 1 1 see how much we can get done today and we'll take this 12 up a little lateron today. 13 Okay, Mike. Press on. 14 MR. RIVEST: Looking at the second component 15 of mark-up, which is primarily the SG&A mark-up the 16 manufacturerhas to take on their production costs to 17 be able to recover all their costs, we had as 18 information sources three primary things. We had a 19 report that was prepared in 1991 for AHAM. We had from 20 the Bureau of Census, the Census ofManufacturers, 21 22 whichwas dated I think '94. And we alsohad available 10-Ks from publicly tradedmanufacturers of clothes EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 90 1 washers. 2 Once again, none of those data sources is 3 absolutely reflective of the cost structure of clothes 4 washer manufacturing because I don't think the data is 5 collected at that level. But based on our understanding 6 of costs, we think that we have a fairly good 7 understanding of what the sales, general and 

### 8 administrative costs would be within the total sales 9 price of a manufacturer. 10 We derived a manufacturer mark-up currently

- 11
- not a profit, a total mark-up on those elementary 12 material and labor costs, of 1.35, derived from a 13 breakdown of the different cost components. 14 So summarizing the current mark-up situation 15 as we understand it on those basic manufacturing costs, 16 we would have a mark-up of 1.35 for sales, general and 17 administrative, and we're working back here from our 18 price, retail price of $400.00, factoring in a retail 19 mark-up of 1.4, a manufacturer price of $285.00, which 20 is in good accordance to the data that we have, and a 21 22 manufacturing mark-up of 1.35. We would work our way back to a manufacturing cost of approximately $211.00.
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•**-----------------------~-** - ---- -----
91 1 Now, what does thatmean for our analysis? 2 We've captured the incrementalmanufacturer costs that 3 were submitted andwe have to forecast a price. And one 4 of the ways so far we've thought about doing this is 5 there's always some uncertainty as tohow much of those 6 costs you'll be able topass on to the consumer. There 7 may be a squeeze onpricing. 8 Sowe've tried tobound that uncertainty by 9 having a lower endmark-up of 1, whichmeans that 10 you're not recouping any of your additional sales, 11 general and administrative costs, and anupperbound of 12 1.35, whichmeans you're doing as well after the 13 standardpercentagewise as you were before the 14 standard. And we're justproposing an equilateral 15 triangle as a distribution at this time. 16 Questions? 17 (No response.) 18 That completes that. 19 Jimwill continue on and look at all the 20 other inputs that gowithin the spreadsheet. 21 22 MR. MORRIS: Somethingjust struckme. It's Wayne Morris. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 92 1 On page 7, you show a calculationwhich 2 arrives, through all of this, at an -- if youwill 3 an average. And especially in thepages evenbefore 4 that, a very laborious process of getting to this 1.35 5 number. 6 And then it seems thatby looking atpage 9, 7 suddenly 1.35 didn'tbecome the average. Itbecame the 8 upperbound. Did I miss something? 9 MR. RIVEST: Yes. What happens, ifwe were 10 to assume in the life cycle cost analysis or throughout 11 the analysis, that youwouldbe able tomark-up

-- you 12 wouldbe able topass through and mark-up to the same 13 extent your additional costs as you are currently. But 14 the final analysis, the manufacturer impact analysis 15 would say that themore youpush the standard level the 16 more money you're going tomake. 17 So,

-- and it'sbeen the concern that as you 18 increase those costs that you'll be able to appropriate 19 less and less of those costs. Sowe tried to bound 20 that problem. And as we move on in the analysis, and 21 22 we do startmaking the trade between themanufacturing impact and the consumer life cycle, we have tomaintain EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 93 1 a constant assumption about prices. 2 MR. BROOKMAN: Additional questions onMike's 3 presentationbeforewe move on toJimMcMahon? 4 (No response.) 5 Okay, Jim. Jim is going tobe referring to 6 this packet, Life Cycle CostAnalysis: ClothesWashers. 7 And it's got the heavy black line that then leads to 8 the schematic, the Berkeley National Laboratory. 

### 9 MR. McMAHON: No. It's now the advanced 10 light source. 1 1 (Laughter.) 12 The ALS. If you're ever inBerkeley, you'll 13 see this building up on the hill. It's kind of a 14 trademark thing. They gutted the entire interior. But 15 since it's such a famous structurewithhistorical 16 significance for the physics community, they kept the 17 exterior and they put a brand new x-ray machine on the 18 inside. So it's the Advanced Light Source. It's 19 national resource. Anyone here canuse it. Just got 20 to signup as a user. 21 22 (Laughter.) MR. BROOKMAN: And if you want to signup as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 94 1 a user, how long do you need towait in line? 2 MR. McMAHON: I don't have the answer to that 3 question. 4 Okay. I'mgoing tobe referring to this 5 handout and one other, which is the one on the inputs, 6 and it's called "Quantities and CurrentAssumptions for 7 CalculatingLife Cycle Costs of ClothesWashers." I'd 8 be happy to take questions at any time. 9 The major discussion topics are these: What's 10 changed since the workshop of July last year; the major 11 input assumptions; how we are handlinguncertainty and 12 variability; some sample outputs; and what are the 13 sensitivity of these preliminary results to the major 14 inputs. 15 On recent developments, I'm going to start 16 the talk in July of 1997. We gave a demonstration at 17 that time of the first draft life cycle cost 18 spreadsheet. There have since thenbeen informal 19 demonstrations of revisions and a pilot training for a 20 handful of people at that time of two spreadsheets, one 21 22 ofwhichwas the simple life cycle cost calculation and the secondwas the populationdistribution that uses EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 95 1 

### the crystal ball add on toEXCEL
. 2 What we have done since then ismerge those 3 two spreadsheets intoone so that there's no confusion 4 aboutwhatwe are using. If you wanted a simple life 5 cyclecost, you cando iton that spreadsheet. If you 6 have crystal ball attached toEXCEL, you cango into 7 theprobabilitydistributions. 8 And thatbringsus to today. 9 Themajor changes in the calculation itself 10 areprimarily data inputs. The engineering analysis 1 1 

### has justbeendescribed. We've taken the numbers as 12 givenbyArthurD. Little. The energy prices I'll 13 discuss in detail. Water and sewage costs are inhere 14 inmuch greater detail thanpreviously, andwe have a 15 significant treatment ofuncertainty and variability. 16 The engineering analysis contrasting the old, 17 defined as July last year, with the new today. The old 18 analysis useddesignoptions. We're now using 19 efficiency levels as has justbeendescribed. And 20 wherewe used touse a singlevalue for average 21 manufacturing cost, there isnow a distribution
. 22 Normally, we use the distribution, the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 96 1 shipmentweighted average, with the full distribution 2 as suppliedby the industry. However, you have the 3 opportunity in the spreadsheet to select one of the 4 percentiles. 5 I will repeat thatMike Rivest recommends 6 that's not a good idea, butwe're providing tools with 7 capabilities in case you want touse them. 8 Now, this is a rehash of things you've just 

### 9 seen fromMike, so I will not spend a lotof time on 10 it. 1 1 The engineering analysis provides 12 manufacturing cost for nine efficiency levels as 13 incrementals compared to the baseline, and this is that 14 same data. 15 The purchase price is calculated as Mike has 16 just indicated. The baseline price is $400.00 plus tax 17 and the incremental price includes the mark-ups that 18 have justbeen described and the sales tax. 19 We haven't quite settledon our terminology 20 here, sowhat I'm calling the purchase price is what 21 Mike just called the consumer price. It's the same 22 thing. So it's retail price plus tax. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 97 1 The graph shows you the variability. As you 2 go out tohigherMEF you get a wider range because of 3 thevariability in themanufacturingcost submittals 4 and the range of mark-ups that arebeing assumed. 5 MR. SCHLEEDE: Glenn Schleede. I'll ask 6 three questions and you can cover themwhenever it's 7 appropriate in your presentation. 8 Do maintenance and repair costs enter into 9 your lifecycle costs at any point? 10 Second, does anyone have dataon the extent 11 towhich consumers purchasemaintenance contracts? Are 12 they a significant factor or not? 13 And third, are the costs of the maintenance 14 contracts taken into account any place in the life 15 cycle cost? 16 So it'sjustwhenever it's appropriate, if 17 youwould. 18 MR. McMAHON: The answers are no; I don't 19 know; and no. 20 21 

### 22 MR. SCHLEEDE: Does thatmean that they're not -- the assumption is that none of those costs are important? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 98 1 MR. McMAHON: At this time we have not 2 attempted to account for maintenance costs. I have no 3 data on that right now. 4 MR. SCHLEEDE: Does that reflect a conclusion 5 that it's not significant or just not doable or -- 6 MR. McMAHON: So far, no one has offered 7 evidence that the maintenance costs will change as a 8 function of efficiency. 9 MR. SCHLEEDE: Is there any evidence on that? 10 Any data on that? 11 MR. McMAHON: I have not seen any data on 12 that at all. No. 13 MR. SCHLEEDE: Okay. I must be buying the 14 wrong appliances because my repair costs keep going up. 15 MR. BROOKMAN: So, Glenn, if you had data 16 like that, I'm sure the Department would like to see 17 

### it. 18 MR. RIVEST: Jim, Mike Rivest. I justwanted 19

-- you mentioned my name and I didn't hear what you 20 said. What is it you just said about what I said? 21 22 I justwant to reiterate the question about using singularpercentile values to be conducting
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• 99 1 analyses. What I said is that if you're going tousing 2 a singularpoint, you should use the shipment weighted 3 average. 

### 4 MR. McMAHON: Right. 5 MR. RIVEST: But what we really were trying 6 to do here is to not pick any point and use the full 7 distribution. 8 MR. McMAHON: Right. Let me clarify. 9 MR. RIVEST: I'm

-- be sure I'm clear about 10 that. 1 1 MR. McMAHON: Letme clarify. 12 In the spreadsheet the userhas the option of 13 selectingone of the percentiles. I didn't want to 14 lose any of the information. Sowe present in this 15 spreadsheet the informationjust as you presented it 16 with the different percentiles. The default value in 17 this spreadsheet is to use the shipment weighted 18 average in the simple calculation and to use the full 19 distributionwhen you do the crystal ball calculation. 20 That's the default. But it is possible for the user to 21 22 select one of the percentiles and use that
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• 100 1 model is all the information is in there, such as you 2 presented it, so it's fully disclosed. You know what's 3 there. You have the optionofpicking a percentile. 

### 4 I support your recommendation that you don't 5 do that. The best representationof the data is touse 6 the shipmentweighted average, and that is the default 7 unless you change it. 8 MR. RIVEST: My recommendation is use that if 9 the single value is used. My recommendation is touse 10 the full distribution. 1 1 MR. McMAHON: Right. 12 MR. BROOKMAN: Thanks for the clarification. 13 Yes, Bryan? 14 MR. BERRINGER: BryanBerringer. 15 Just to interrupt a second. We had a 16 questionby Glenn Schleede. Do manufacturers have any 17 informationor are there any other sources that anybody 18 knows ofwhere we can obtain any maintenance contract 19 information ormaintenance costs and what does it 20 range? Would itrange due to efficiency costs and 21 pricing achieved? 22 MR. JONES: Earl Jones here from GE. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 101 1 Yes. We believe that data is available and 2 we will make it available to you. 3 MR. BERRINGER: Thank you. 4 MR. BROOKMAN: Dan, did you have an 5 additional comment? 6 MR. HAWKINS: I have one follow-up comment to 7 the discussion between Michael and Jim. 8 MR. BROOKMAN: Just a second, because this 9 follows on, Dan, an additional on maintenance. 10 MR. HAWKINS: Sorry. 11 MR. BARZEL: The maintenance contract is 12 really a separate issue, I think. It's basically an 13 insurance policy. So I'mnot sure it's fair to include 14 it in the cost of operating the product. I think the 15 cost of the product and the cost to fix the product are 16 fair costs. But since the maintenance contract is 17 almost like an insurance policy, it's an optional 18 thing. You don't have to have it to own the product. 19 I think if you limit your look at what it 20 actually costs to fix it, that's the issue. 21 22 MR. BROOKMAN: Larry? MR. HAWKINS: Yes. I justwanted to clarify.
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• 102 1 I'm stilljust a littlebit confused. Is the 2 recommendation that we should not be using a singular 3 value, be it the shipmentweighted average or any 4 percentile? But is the recommendation that we should 5 be using the 100thpercentile, the whole distribution, 6 in the analysis? 7 MR. McMAHON: The recommendation is that you 8 use the full distribution. You use crystal ball and do 9 the full distribution. 10 MR. HAWKINS: Thank you. 1 1 MR. BROOKMAN: Yes, Terry? 12 MR. THIELE: Terry, WCI. 13 I think we may be getting confusedwhenwe're 14 talking about maintenance contracts. And perhaps the 15 issue that's being raised, whichmay be valid, is 16 warranty costs. 17 Purchasing a maintenance contract is a 18 discretionary act of the consumers, but that's separate 19 and apart from the issue ofproductwarranty. Most 20 products are underwarranty for some prescribedperiod 21 22 of time and theremay be some relationship not between energy efficiency necessarily and warranty costs but EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 103 1 product complexity andwarranty cost. And themore 2 complex your product is, or if ithas new features or 3 design options that have not been time tested, you are 4 likely to see in the introductionof that product an 5 increase in yourwarranty costs. Becauseyou have to 6 then go out and fix themistakes that you didn't catch 7 in the product design ormanufacture. 8 MR. BROOKMAN: Thank you. 9 MR. JONES: Just a further comment on that. 10 Thatwouldbe certainly a true observation. And of 1 1 course, as applied in the context of this rulemaking, 12 then, one could correlate those increased costs to 13 changes made to comply with the standard. 14 MR. BROOKMAN: Thatwas Earl Jones. 15 David Goldstein? 16 MR. GOLDSTEIN: Well, there are some 17 maintenance costs associatedwith the use of washing 18 machines, the biggest ofwhich is the detergent that 19 goes into it. We've consistently recommended that 20 since you canuse less detergent in the higherMEF 21 22 closewashers that the cost reductions to the consumer from using less detergent shouldbe included in the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 104 1 

### analysis. 2 I would also assume that if a more efficient 3 washer results in less use of yourwaterheater and 4 less use of your clothes dryer that yourmaintenance 5 costs for those two appliances would godo or the 6 lifetimes go up. It'sprobably not a big effectbut 7 it's there. 8 

### MR. JONES: Earl Jones here again. I just 9 can't

-- and I'veheard this comment ondetergents so 10 frequently it'sjustgot tobe responded to. 1 1 

### I think the Department is taking theright 12 position at this point innot assuming any reduction 13 because of the allegedreduction in soap costs. 14 Indeed, nomanufacturer suggests that less soapbe 15 used. And indeed, the latest consumerreport says that 16 the costs of those detergents aremore expensive. 17 Sowe want to talk about therecord, let's 18 look at the full record. Let's not talk about 19 assertions. Let's talk aboutwhat the facts show. And 20 that iswhat the facts show. 21 22 MR. BROOKMAN: Let's confine ourcomments to the issuehere athand. I'd like topress on. I think EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 105 1 that's relevant but we're not here to discuss 2 detergents at this moment, I don't think. 3 MR. NADEL: Will we get to that later, or is 4 this the time to -- 5 MR. McMAHON: At this time, detergents are 6 not included inoperating costs. I'm about to discuss 7 operating costs. 8 MR. NADEL: We had a workshop, small 9 workshop. I believeone of the decisions at that 10 workshop is we were going to add the capability to add 11 detergent cost savings so that those who believe that a 12 change indetergent cost is zero can include that. 13 People could input their assumptions. What is the 14 status of that? 15 MR. McMAHON: LBL stated that itwas capable 16 of putting that capability in. 17 (Laughter.) 18 We haven't been instructed to do so. And 19 there are comments on the record from the soap 20 manufacturers stating that the costs will not decline. 21 22 Independent ofwhether the formulation or the quantity of detergent changes as more efficientproducts come on EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 106 1 the market, they're on the record as saying that the 2 costs will not decline. And as recently as last week I 3 checked with one of those manufacturers and they still 4 standby that statement. 5 Sowe have not yet been told by the 6 Department that his is a factor that we need to 7 include. 8 MR. NADEL: So, I'll turn to the Department. 9 MR. BERRINGER: I think there's a 10 representative from Chlorox here or some of the other 1 1 detergent manufacturers. If they have any -- did he 12 leave the room? 13 MR. NADEL: Excuse me. We've had the 14 discussionbefore about will there or will there not. 15 I'm not trying to repeat that discussion. We have 16 differingpoints of view. The question is whether the 17 analysis module permits different assumptions tobe 18 entered rather than just to assume that one point of 19 viewprevails. 20 MR. BERRINGER: Right. As you said, we 21 discussed that. To try and do that for LBL, with the 22 time constraints trying to get ready for the workshop EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 107 1 and the many revisions that they did to revise this, 2 there was a time factor. So it is appropriate to 3 discuss if that's an option that shouldbe added to the 4 spreadsheet. 5 MR. JONES: What does that mean, Michael? 6 Earl Jones. 7 MR. BROOKMAN: Well, the one question I have 8 is whether now is the appropriate time to discuss this, 9 because I'm not clearmyself. 10 MR. LINARD: Jack Linard, Unilever HPC-USA. 1 1 I've given many presentations over the years 12 on the effect of detergents on performance, certainly 13 with higher efficiencymachines. One of the comments - 14

- first of all, when we give a dose of detergent, it's 15 purely a recommended dose which we provide for optimum 16 cleaning results. With today's detergents, we don't 17 tell you you have to use a certain amount and then come 18 out and check tomake sure you're doing that. We don't 19 have detergent police running around. 20 If we today cut the dose inhalf today or 21 22 double it, we are recommending an optimum level. And that's exactly what we do for high efficiencymachines.
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• 108 1 We recommend an optimum level for the best performance. 

### 2 If the consumerwants to cut it inhalf, 3 they're going to suffer inperformance. That's up to 4 them. We will just give what we consider the 5 recommended. 6 In terms of costs of detergents, yes, they 7 aremore expensive. We sell a productnow which is 8 twice as expensive as a normal product per use. Half 9 of that, I think, is due to shipment. We sell itby 10 mail. The otherone that is on retail is about 20 11 percentmark-up roughly. 12 So I don't think that the cost of the 13 detergent is necessarily more expensive. Itmay be 14 just the fact that the volume of sales is so low at the 15 moment that it's hard to recoup the cost of actually 16 selling it. Certainly the intention is to sell it for 17 basically the same price as any otherdetergent per 18 use. 19 MR. BROOKMAN: Bryan, what I interpreted from 20 some of the earlierquestions was about the process 21 

### 22 that DOE's pursuing at this point. What Jim represented a moment ago, I believe

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• 109 1 I'mwrong, Jim was that LBL had the capability of 2 including this in their analysis and he also said the 3 Department had not yet instructed them to include that 4 capability inwhat they're doing. 5 Is that a fair characterization? 

### 6 MR. BERRINGER: Yes. That's correct. 7 MR. BROOKMAN: So then I guess the question 8 would thenbe, basedon the earlierquestions, the 9 thrust ofwhat I heard was maybe it should be included. 10 MR. JONES: The thrust from whom did you hear 1 1 that? 12 MR. BROOKMAN: Maybe I heard itwrong. 13 (Laughter.) 14 MR. JONES: I guess I'dput the question this 15 way. If the Department is going to give instructions 16 about designing a model baseduponwhat people feel, 17 then I think we have a lot more feelings we couldput 18 on the table and put into the model. 19 Itwould seem tome that at minimum you have 20 tohave some evidence in the recordwhichwould support 21 22 that change in the model. At this point in time there is no such information in the record. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 110 1 To change themodel for that purpose would 2 reallyundermine the credibilityof the model and this 3 whole rulemaking inmy opinion. But if youwant todo 4 that, then I think you ought tohave anotherworkshop 5 inwhich we invite the public and anybody else inwith 6 any ideas, crackpot orotherwise, who mightwant to 7 suggest a change in themodel. 8 I'm sureJim is quite capable, as he said, of 9 putting them all in. 10 MR. BROOKMAN: I knowwe have oneother 1 1 personwho wishes to comment and thenmaybe we're ready 12 tomove back to the presentation. 13 MS. LAUGHLIN: I justhave a questionon the 14 issue. It seems like there are varyingviews around 15 the table onwhether ornot the detergent costs will go 16 up ordown, and I wonder if anyone has any data in 17 terms ofwhat people are actually doingwith these 18 detergents and the higher efficiencymachines. And if 19 that's something that's been thought about looking at 20 in terms ofmaking a decisionone way or the other to 21 22 include itor not in the life cycle costs analysis. MR. BROOKMAN: So the question is, is there EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 111 1 any data 2 MS. LAUGHLIN: Do we know what consumers are 3 doing? 4 MR. BROOKMAN: Gene, you have

-- 5 MR. FOLEY: May question is

-- I realize this 6 gets a lot further into the presentation, but did the 7 Bernmodel and the research thatwas done wherever it 8 was in theMidwest look at detergent use? 9 MR. BROOKMAN: Let's answer the first 10 question first. 1 1 Does anybody have any data? And then Gene 12 asked a second question about Bern. 13 MR. FOLEY: Well, Bern is data. 14 MR. BROOKMAN: I know it. I know. 15 MR. JONES: But it seems tome, again, that 16 the question is does anybody have dataonconsumers' 17 use of detergents period. As the representative from 18 Level said, consumers are always free todisregard, 19 whetherup ordown, or follow a manufacturer's 20 recommendation. 21 22 MR. FOLEY: Well,

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• 112 1 MR. FOLEY: I asked my question and you 2 interrupted itbefore itwas answered, so 3 (Crosstalk.) 4 MR. JONES: And I just simply amended your 5 question to say is there dataperiod. 6 MR. BROOKMAN: So these questions are 7 consonant. 8 Does anybody have an answer to the question? 9 Yes. Steve Rosenstock, it seems, perhaps 10 may. 11 MR. ROSENSTOCK: Well, just for the second 12 question. Oak Ridge National Labs was doing the study 13 onBern, Kansas. If anyone would have data, itwould 14 be Oak Ridge National Labs. 15 MR. BROOKMAN: Peter, did you have something 16 to contribute? 17 Peterhas suggested there may be data. 18 Do you have data? And would you introduce 19 yourself, please? 20 21 22 MS. CASENTINI: Laurie Casentini with Pacific Gas and Electric Company. I have a copy of the Bern study here and I can look through it and report back a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 113 1 littlebit lateron in the day. It looks like there is 2 something inhere. 

### 3 MR. BROOKMAN: I'llmake a note. Your name 4 is Laurie? 5 MS. CASENTINI: Lauren Casentini, Pacific Gas 6 and Electric. 

### 7 MR. BROOKMAN: Thank you. We'll call you 8 lateron. 

### 9 MR. FOLEY: So for my purposes, there seems 10 tobe some sort of data available which would then 1 1 indicate that we probably ought toput it in the model. 12 MR. BROOKMAN: Steve? 13 MR. NADEL: Since a lot of the people were 14 not in the smallerworkshop, one of the questions that 15 came up is how do we get into changes in cleaning 16 ability. Many independent studies have found that the 17 higher efficiencywashers have high cleaning ability. 18 And one of the place holders we came up with that's 19 useful as part of the sensitivity analysis is to say if 20 a high efficiency washer with the same amount of 21 22 detergent gets clothes cleaner that provides higher utility, if you will, that one way to get at the value EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 114 1 of that utility is to assume to estimatehow much 2 less detergent youwould use toget the same cleaning 3 ability as you have for the current washer. 4 It's not saying that this is the only factor 5 thatwill be usedbut itwas discussedhow this would 6 be an important input. And hence, that's why we 7 discussed including this value. And to attempt to say, 8 no, we do not evenwant anybody to look at that I think 9 ismaking itvery difficult to let this rulemaking 10 proceeding consider all the useful facts. 11 MR. BROOKMAN: I think it's fair to say that 12 there's enoughdifference of opinion in the room at the 13 moment about it. I don't thinkwe're going to leapto 14 any conclusions today. So, let's then proceedwith 15 what we have andwe'll call on Lauren later togive us 16 a brief interpretationof what's in the data. 17 MR. JONES: How about the facts. 18 MR. BROOKMAN: What's in the data. Yes. 19 Thank you. 20 MR. McMAHON: Returning to the simple 21 economic analysis

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• 115 1 

### What is currently in themodel for operating 2 costs includes energy and water usage. This graph 3 shows on the left axis at the redbars, energy 4 consumption, total hours percycle. This is assuming 5 an electricwaterheater and an electricdryer. The 6 model does go through thepopulation and adjust 7 according to the fuel types for waterheaters and 8 dryers for different combinations. And thewater 9 consumption, gallons percycle, is on the right axis 10 here. It's total water, includinghot and cold, 11 

### expressedhere as gallons per cycle. 12 The next input, energyprices. Previouslywe 13 used the U.S. average price, including fixed cost. It 14 has gottenmuch more complex. To account for the 15 variability inenergyprices, the fact that not 16 everyone in the U.S. faces the sameprice, we have gone 17 to a sample from the 1993 residential energy 18 consumption survey and I have theprophere. 19 For those of youwho are interested in the 20 report, this is a DOE Energy InformationAdministration 21 report that's available in this building
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• 116 1 

### is the most recent available. Footnote: There is a 2 1996 survey but the data tape from that is not expected 3 tobe available until earlynext year, sowe'reusing 4 themost currently available. 5 We took 4,350 households from this survey. 6 This is all the households thathave clothes washers 7 and clothes dryers. They have different fuel types of 8 waterheaters. There are three fuel types ofwater 9 heaters: electric, gas and oil. There are two fuel 10 types ofclothes dryers: electric and gas. 1 1 

### The energyprices are reported for each of 12 thehouseholds. The energy prices are for a typical 13 consumption for the utility inwhich this house 14 resides. So they are not trulyhousehold specific. 15 They are specific toutility companies. 16 There are 201 electriccompanies and I don't 17 remember the number, but several hundredgas companies 18 included. So that's the range of prices thatwe 19 include. 20 Finally, eachhouseholdreports the number of 21 personsperhousehold andwe use that informationto 22 determinehow many cycles peryearof laundry is going 

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• 117 1 tobewashed for that house. 2 MR. BROOKMAN: Terry, and then Steve. 3 MR. THIELE: Terry Thiele, WCI. 4 Is that '93 data or is that the year the data 5 surveywas published? 6 MR. McMAHON: The survey was done in 1993. 7 It's data for the year 1993. 8 MR. THIELE: But it's '93 data, not '90 data 9 done in '93. 10 MR. McMAHON: It's 1993 data. That is 1 1 correct. 12 MR. BROOKMAN: Steve? 13 MR. ROSENSTOCK: Hi. SteveRosenstock, 14 EdisonElectric Institute. 15 In our subcommittees and everything, we 16 talked about

-- we've been discussing this at length 17 for the IndustryAdvisory Committee. Of the 201 18 electric companies, did it seem like the distribution 19 was pretty close to the national, like 75 percent 20 investorowned versus 25 percent? 21 22 MR. McMAHON: I actually have not looked at that. But what we did look

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• 118 1 "Quantities and CurrentAssumptions" page numbers 2 pages 6 through 8, page 7 has the range of residential 3 electric prices. 

### 4 And what we didhere is take the distribution 5 in 1993 from the survey and then scale the 1993 average 6 up to 1997. 7 Moving into the next page of this, which is 8 how do you account for the prime trend, you see a range 9 from 2 cents to 17 cents a kilowatt hour, which is 10 consistentwith what we've seen in the full treatment 11 of utilities in the country. I haven't actually 12 compared the shape of this curve to another one, but we 13 could do that. At first glance it appears tobe 14 representative and it certainly captures variability. 15 MR. BROOKMAN: That detail, again, Jim, it's 16 in "Quantities and CurrentAssumptions." It's in your 17 packet. And you're referring topage -- 18 19 20 21 22 MR. McMAHON: Page 7. MR. BROOKMAN: Thank you. MR. McMAHON: Figure 3. Okay. So the point of this, summarizing in a sentence, is previously we used something like 8 cents EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 119 1 perkilowatt hour for the electric price for the U.S., 2 just an averagenumber. Now we are using this 3 distribution, which ranges from 2 to 17 centsper 4 kilowatt hour. And there's a number that is tied to 5 eachhouse. 6 Similarly, we've done that for gas prices and 7 for oil prices. 8 The next issue in energy prices is fixed 9 charges. Previously, the price included revenues 10 receivedby the utility from residential customers 1 1 dividedby the kilowatt hour of sales to residential 12 customers, so there were fixed charges in there. When 13 the energy efficiency improves for whatever reason, the 14 savings that appear on the bill are not those but 15 rather they dependupon the rate that the consumer is 16 paying. 17 The RECS Survey thatwe're using now uses the 18 rate, the cost of a thousandkilowatt hours, but it 19 also includes the fixed charges. Sowe don't have 20 specific information in that survey about what the 21 22 fixed charge is that's paidby eachof those houses. So what we did was take the national average fixed EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 120 1 charge, 7.5 percent for electric, 12 percent for gas 2 and subtract that for every household. So this is an 3 approximationbut it does serve as the first 4 approximation to removing the fixed charge. 5 The numbers, the 7.5 percent, came from a 6 survey of utilities done by EdisonElectric Institute. 7 The 12 percent came from a survey done by the American 8 Gas Association. 9 MR. BROOKMAN: Steve? 10 MR. ROSENSTOCK: SteveRosenstock, Edison 11 Electric Institute. 12 Just as a clarifyingpoint, for the electric 13 ones, prettymuch they were basedon like '95 or '96 14 data. I was trying tomatch the data that I hadbased 15 on the actual rates, some rate information that I was 16 able to gather from utilities. 17 The second thing I'd like to discuss

-- and 18 not to throw a wrench into the process, but this kind 19 of gets involved with the IndustryAdvisory Committee 20 and the Economic Analysis Subcommittee, which there are 21 several people here on those
. 22 InDecember there were four recommendations EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 121 1 to the DepartmentofEnergy thatwere voted onby the 2 IndustryAdvisory Committee, and two of themreally 3 dealt directly with energy prices. 4 Aletterwas supposed to go out. Itdid not 5 go out. That's another issue that I'drathernot 6 discuss for timepurposes. Butbasically, the Industry 7 Advisory Committee voted literallyprettymuch by 8 consensus on issues dealingwith energy prices. And I 9 was justwondering, I guess, from the Department of 10 Energy

-- obviouslyJimMcMahon has incorporated some 1 1 of these recommendations from the committeebut we 12 haven't necessarily received anything. The Industry 13 Advisory Committee hasn't received anything formal from 14 DOE to say, yes, we are going todo this from now on. 15 So I justwanted tokind of know. I'm in 16 favor of this. Obviously, I was looking especially 17 more in the future for marginal energy prices. But I'm 18 just saying, because itwill come up in national energy 19 savings as well, is the Departmentbasically giving its 20 blessing to the recommendations thatwere providedby 21 the Industry Advisory Committee. Because I think it's 22 kind of a key point right here. It's all related to EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 122 1 the analysis. 2 MR. McCABE: This is Michael McCAbe. The 3 staff is recommending that we go ahead with those 4 recommendations. And in order to fully appreciate what 5 is the effect of those is one reason why we gave Jim 6 the direction to look at bothwith the fixed charges 7 included and, as we've done in the past, everything 8 removed, so that we could get a sense as to what the 9 differences, what the effectwas going to be. 10 MR. ROSENSTOCK: Okay. 1 1 MR. BROOKMAN: Additional questions before 12 Jim

-- yes, Steve? 13 MR. NADEL: I had a question regarding the 14 EIAprice forecast. 15 Jim, perhaps you can answer or maybe someone 16 else can. I had occasion to look at this recently in 17 depth for the first time. And the way itwas explained 18 tome by one person is that EIA is not really trying 19 to forecast prices but they looked at cost to 20 generators and then assumed, based on the reduction in 21 cost, assumed that those cost savings as a result of 22 restructuringwould be spread evenly across all the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 123 1 customer classes. So they assumed effectively the 2 exact same pricereductions on a percentage basis for 3 the residential sector as say for the industrial 4 sector. 5 First, can you comment on -- is that your 6 understanding onhow the EIA forecast is raised? 7 MR. McMAHON: The answer is I don't know if 8 that's true, but I have the report here. We could 9 figure itout. 10 MR. NADEL: I did do themath and within a 11 percentagepoint itdoes work out that way. 12 MR. McMAHON: Okay. 13 MR. NADEL: The question is is that an 14 appropriate set ofprices to use? At least all the 15 stuff that I've seen indicates that most predictions 16 are that the industrial customers will seemore 17 significant discounts. 18 MR. BROOKMAN: Would you suggest a different 19 approach or a different data source? 20 21 22 MR. NADEL: I haven't fully looked into all of the different forecasts out there. I was asking Jim, ormaybe there's someone else. Butbasedon what EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 124 1 

### I've seen, I would saymaybe for residential theEIA 2 highgrowth forecast, even though we're not talking 3 about high growth. But I think thatmay bettermimic

- 4 - what I'mhearing is likely tobe the reductions in 5 the residential sector as opposed to the industrial 6 sector. 

### 7 MR. McMAHON: If you'll go ahead two slides, 8 you'll see the forecast that Steve is referring to. 9 The top left is the electricityprice. Now, I've 10 subtractedout the fixed costs here. 1 1 

### MR. NADEL: For all of them? 12 MR. McMAHON: Right. So this is 7.5 percent 13 lower thanwhat you will see in theAEO report. But 14 you can see the time trends there. 15 And the top, the green line, is the AEO high 

### 16 growth scenario. This is the lowgrowth scenario. The 17 reddots are their reference case. And the additional 18 line inhere is a GRI 1998baselineprojection. 19 So allof those are available in the current 20 spreadsheet. You can run on any one of those. But I 21 22 understand you'remaking a recommendation that the higherone ismore appropriate? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 125 1 MR. NADEL: I'mmaking the recommendation, 2 first, that someone should look into this issue 3 further. I'mnot claiming tobe an expert on these. 4 But I'm saying, when Doug pushedme, ifbased onwhat I 5 know now what would I say, I'd sayprobably the high. 6 But again, itneeds further investigation. 7 MR. BROOKMAN: You note a limitationon the 8 data. 9 Otherquestions, comments? 10 Earl? 11 MR. JONES: Yes. 12 Jim, if you could, please

-- Jim, I can't see 13 the colors there. Can you tell us in terms of the 14 positionon herewhich one is which? 15 VOICE: We've gotblack, black, black and 16 black. 17 MR. JONES: Right. 18 MR. McMAHON: The order in the legend is 19 correct. So highgrowth is the top line, AEO

-- well, 20 it'shard. The second line at year 2030 is the GRI 21 1998
. 22 MR. JONES: That's the lighterdotted line? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 126 1 MR. McMAHON: Yes. The second line down
. 2 And the third line down is the AEO reference case. The 3 bottom case is theAEO lowgrowth case. 4 I apologize. The black and white did not 5 come out. 6 MR. JONES: Could you do the same thing on 7 the others? 8 MR. McMAHON: On gas, high growth, this one 9 is the GRI. 10 MR. JONES: The middle one? 1 1 MR. McMAHON: If you goback to the year 12 2000, the top one is GRI, the solid line. The one with 13 the dots on it is the AEO reference case and the bottom 14 curve is theAEO lowgrowth. 15 And for oil prices, the top line is the high 16 growth, the second line is theAEO reference case, AEO 17 '98. The third line in the year 2010 is the lowgrowth 18 AEO and the bottom line, very flat, is the GRI case. 19 MR. JONES: Thanks. 20 MR. McMAHON: All of these figures are 21 available onDOE's Web site and you can catch them in 22 color there.EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 127 1 MR. BROOKMAN: Glenn? 2 MR. SCHLEEDE: Glenn Schleede. I justwanted 3 to comment briefly on the point thatMr. Nadel raised. 4 EIAdoes distinguish between residential, commercial 5 and industrial rates in their forecasts and they do 6 have them coming down at different rates. Residential 7 coming down .9 percent per year; commercial is 1 8 percent a year; and industrial 1.1 percent per year. 9 However, more significant than that, if you 10 look at what's actually happening compared to what EIA 11 forecast only twomonths ago, you will find that rates 12 are -- even for residential, are coming down twice as 13 fast as EIAjust forecast in December. Commercial are 14 coming down about three times as fast and industrial 15 about four times as fast. 16 So Steve is correct that there's a difference 17 in the rates. But the underlying point is they're all 18 coming down faster thanwhat EIA forecast. 19 20 21 22 MR. BROOKMAN: Thank you, Glenn. Bryan? MR. BERRINGER: I'm sorry. Most of the slides have beenput on theWeb page, so they're EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 128 1 

### downloadable andwe'llmake sure they're accessible
. 2 And these are all inPower Point. 3 

### MR. BROOKMAN: Yes, Bill? 

### 4 AUDIENCE QUESTION: Just a quick

-- Bill 5 Bandy from NREL. Aquick follow-up question about 6 prices going down faster than EIA projected. 7 Is that in the stateswhere deregulation is 8 occurringornationally? 9 MR. SCHLEEDE: The numbers I used are 10 national average numbers. I have not yet looked at the 1 1 

### stateby statenumbers. 12 MR. BROOKMAN: Okay. Thank you. 13 MR. McMAHON: Okay. I'mgoing tobackup one 14 page. We skipped ahead to the time trend, so letme 15 rehash. 16 To deal with energy prices, we dealt with 17 three separable issues. The first was variability, 18 whichwe dealt withby taking a sample ofhouseholds. 19 the secondwas fixed costs. We subtracted the national 20 average fixed costs for electricity and gas. And the 21 third iswhat dowe do about the future
. 22 For the time trend, the currentmodel has EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 129 1 

### four scenarios that you can select from. They are the 2 four that I showedon thegraph and they're also shown 3 on this page. Three cases fromAEO, a high, reference 4 and lowcase and one case from GRI. 5 At the current time the default assumption 6 that the Department is using the AEO reference case. 7 The next inputhas todowithwater andwaste 8 wateror sewage costs. Previously 9 

### MR. MORRIS: Jim, this isWayne Morris. Can 10 I ask a question first? 1 1 

### MR. McMAHON: Certainly. 12 MR. MORRIS: This just shows my ignorance in 13 not understanding this, but letme ask it. In terms of 14 reaching this beginningpointon the energyprices at 15 1995, which is roughly 8 cents per kilowatt hour, that 

### 16 data

-- I mean, all of the lines coincide at that point 17 orbegin at thatpoint in terms of divergence. That 18 data is from what? Is that a combinationof all of 19 theirdata agree that thatwas thebeginningpoint? 20 

### 21 22 MR. McMAHON: That's right. MR. MORRIS: Okay. And where does that dovetail thenwith the RECS dataof surveys of EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 130 1 households? That is exactly the same? 2 MR. McMAHON: The most recent RECS data that 3 is public is 1993. 4 MR. MORRIS: Right. 5 MR. McMAHON: So I can't answer that. The 6 '96 datawill become available early next year and then 7 we can -- 8 MR. MORRIS: Was the model then updated to 9 this beginning point of the 8 cents even though you 10 were using the RECS data for survey? 11 MR. McMAHON: Yes. Letme explain how we 12 deal with the time. 13 The initial data set from RECS is 1993. It 14 gives us a distribution of prices. We take that 15 distribution. And as we move on to the future, we 16 scale all of those by the percent change that's 17 reflected in these forecasts. 18 So if, for example, AEO says that over some 19 time periodprices go down 10 percent, we will take all 20 the households andmove theirprice down 10 percent for 21 22 that year. And we do that every year in the forecast
. So as you do the life cycle cost, the prices are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 131 1 constantly adjusting. 2 So the point of these slides is to give you 3 the trend inrelativeprice and that trend is applied 4 to the full set ofhouseholds. 5 MR. MORRIS: That's what I thought but I just 6 wanted tomake sure. 7 Thanks. 8 MR. McMAHON: Okay. Water costs. 9 As with energy, water costs previouslywere 10 assumed to be a single value at a U.S. average, based 11 upon a 1994 survey. We have not been able to get a 12 more recent surveybutwe have used the full 13 distribution of costs thatwere available from the 1994 14 survey. 15 I should also note -- I didn't put it on the 16 slide

-- that the numbers thatwe are using are rates. 17 That is, the fixed charges have been taken out. The 18 fixed charges are very large for water. Anumerical 19 example for 1994. The U.S. average, including fixed 20 charges, wouldbe about $4.00 for a thousand gallons. 21 Taking the fixed charge out you get $2.84. So it's a 22 very large change. We're using the $2.84 number. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 132 1 

### The default escalationrate. The current 2 assumption iswaterprices andwastewaterprices will 3 never change. This is an area, I think, of some 4 controversy, andwe arehoping for additional input 5 about this. I've listed this as more researchneeded 6 Rather thanmake an arbitrary assumption about an 7 escalationrate, we chose zeropercent for today's 8 preliminaryresults andwe hope to get further input 9 aboutwhat that escalationrate ought tobe. 10 MR. BROOKMAN: Steve? 11 MR. ROSENSTOCK: Hi. SteveRosenstock, 12 EdisonElectric Institute. 13 Thewater charges, per your distribution in 14 your "Quantities" handout onpage 14, this 15 distribution is based on the

-- it wasn't like RECS. 

### 16 Itwas more of a -- the trade association you got it 17 from andjust the actual rates rather than a 18 population. 19 

### MR. McMAHON: Yes. There is a national 20 survey done byErnst

### &Young. Thatwas inprocess by 21 22 someone at SeattlePower, I believe. I can lookup the specificreference. I imagine thatmemo canbemade EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 133 1 available. 2 What he didwas apply populationweights and 3 take out the fixed charges and turn this into a much 4 more representative national sample than the raw survey 5 data. 6 MR. JONES: Yes. I was going topoint out, 7 in terms of themore researchneeded, that the Ernst

### & 8 Young survey has continuedon a regular basis. I 9 understandErnst

### &Young did it for a number of years, 10 and then one of the partners there, a fellow named 1 1 Raftelis startedhis own firm. Has continued that. 12 I justgave Jim some data that goes through 13 '96. I hear the '97 survey shouldbe out shortly. And 14 you canuse that to -- at least the report I gave Jim 15 shows 10 years of data. You canuse that to showwhat 16 thehistoric escalationrates have beenover the past 17 decade. 18 The other thing I'dpoint out is in that same 19 report, not from the Ernst

### &Young but from EPA 20 sources, it indicates what the likely and investment 21 22 needs are for water and waste water systemover the next 20 years. The figures are pretty staggering. I EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 134 1 

### know. I'vedone a littlebitof analysis putting those 2 into a spreadsheet and sayingwhat does thatmean for 3 future costs. 4 And at leastmy preliminary analysis 5 indicates that the historic rate of increasemay be a 6 little low. And conceivably, therateof increase 7 couldbe slightlyhigher in the future. 8 But, Jim, I gave you all of that information. 9 

### MR. McMAHON: I presume you'll submit those 10 to the record for the Department? 1 1 

### MR. NADEL: Yes, I will. 12 

### MR. BROOKMAN: Earl? 13 MR. McMAHON: Yes. Just curious. What was 14 thereference that Stevejustmade that you submitted? 15 Whatwas the data? 16 MR. NADEL: The data I've submitted isboth a 17 time series in terms of theErnst

### &Young andRaftelis 18 data, and alsodata I think from the Environmental 19 ProtectionAgency ondrinkingwater and cleanwater 20 infrastructureneeds. 21 

### 22 Raftelis?MR. BROOKMAN: Steve, will you spell

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• 135 1 MR. NADEL: R-A-F-T-E-L-I-S
. 2 MR. BROOKMAN: Thank you. 3 MR. MORRIS: Aquestion, Jim. To what extend 

### 4 did this data capture households that are not on 5 municipal water system? 6 MR. McMAHON: It does not. 7 MR. MORRIS: Is there any way to estimate the 8 percentage of population and what the costs would be 9 for those populations for water? I mean, there is some 10 cost even if you have a well. But is there a way to 1 1 get at that situation? 12 MR. McMAHON: I'll take that as a suggestion 13 that we look into it. I don't have the answer to that 14 right now. 15 MR. BROOKMAN: David? 16 MR. GOLDSTEIN: David Goldstein. Just to 17 comment on that, it'smy impression from talking with 18 some people who have looked at this that when there is 19 citywater and sewage available, people use it. So a 20 good assumption is that the cost of septic systems and 21 wells is higher than the correspondingpublic system. 22 Otherwise you'd see much more competitionbetween them. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 136 1 

### MR. McMAHON: Okay. The next issue is fuel 2 types. Previouslywe had sixcombinations. The fuel 3 on the left in these is thewaterheater fuel and on 4 the right is the clothes dryer fuel. So there are 5 threewaterheater fuels, electric, gas and oil; two 6 dryer fuels, electric and gas. And we do all of those 7 combinations. 8 Currently the model allows you topickeach 9 of those individually, and themodel will pickonly 10 those households thathave that combination, or you can 1 1 

### selectU.S. mix and itwill sample from the entire 12 population. Obviously the U.S. mix is the full sample 13 of the country. 14 Okay. Now, this is an example of 15 intermediateoutput, the annual operatingexpense in 16 dollars, one year, assume the year 2003, as a function 17 ofwhat those fuel types are. So thebaron the left 18 is electricwaterheater/electricdryer. The yellow 19 line, thebottompart of the bar, is thepricepaid for 20 electricity. And the top, the green, is thewater 21 22 expense. So approximately $80.00 for electricity and another $40.00 for water. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 137 1 

### Now, the difference across these depends not 2 only on the fuels but on the difference among the 3 characteristics of the households. The households that 4 havegas/gas as opposed to those thathave 5 electric/electricmay have differentnumbers ofpeople 6 inthem. That's all accounted for by samplingonly 7 those households. So these numbers reflect those 8 differences betweenhouseholds. 9 The other advantage ofusing the survey data 10 is that correlations, for example, between those homes 1 1 

### thathave an electricwaterheaterbut a gas dryer, 12 they may face different gas prices than those people 13 thathave gas waterheaters. And that's also accounted 14 for because we're directly sampling the correct setof 15 households. 16 The result of that in terms of annual 17 operatingexpensehypothetically for the different 18 efficiency levels are done here. There are twobars. 19 The electricwaterheaterplus electric clothes dryer 20 is the leftbar, yellowon the screen. Therightbar 21 22 is gas waterheater and gas dryer
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• 138 1 

### backup one second to the slideonpage 15? I'mjust 2 curious. The expenditureportion accorded towater is 3 different in the differentbars orelse I'vegot an 4 optical illusion. Is there a reason? 5 

### MR. McMAHON: No, it'snot. But the cycles

- 6 - let's see. Annual operatingexpense includes the 7 cycles per year. And since the family sizes are 8 different, they douse a differentnumber of cycles per 9 year. So it'snot thewater expense that's changing. 10 It'show many cycles they run. 1 1 

### Okay. Now the next few slides

-- for those 12 of you who are familiar with life cycle costing, these 13 will be repetitive and unnecessary, but letme run 14 throughvery quickly, just so that youunderstandwhat 15 the calculation involves. 

### 16 I'mgoing to first talk about cumulative cash 17 flow insteadof life cycle cost. Cumulative cash flow 18 is very simple. You start in year zerowith the 19 purchaseprice, which is the retail priceplus tax. In 20 thebaselineunit it's about $400.00, $421.00with tax. 21 22 And then you goover the lifeof thewasherone year in time. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 139 1 The horizontal axis here is years since 2 purchase going out from 1 to 14. And the slopeof each 3 of these lines is the annual operating cost for one 4 year tacked ontowhatever you've spent so far. So you 5 initiallyhave a purchase price. Then you have one 6 year operating cost in year one. The second year of 7 operating cost in year two. So the line goes on into 8 the future. 9 There are four lineshere representing four 10 different efficiency levels; baseline unit, 20 percent, 1 1 35 percent and 50 percent improvement. 12 MR. ROSENSTOCK: Aquick question. The 13 operating expense and the cumulative cash flow are 14 based

-- when you goback to the annual operating 15 expense -- based on those houses in that subgroup that 16 you're talking about there, that particularnumber of 17 cycles, that particular energy. Well, especially I'll 18 say cycles per yearbasedon the

-- sowhen you go down 19 to the cumulative cash flow, let's saywhether 20 electric/electricversus electric and gas orwhatever, 21 22 that onemight 400 cycles per year and the otherone might have 300 cycles per year. But it'sbasedon the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 140 1 statistical

-- the number that youwere able to gather 2 from the study. 3 MR. McMAHON: That's correct. 

### 4 MR. ROSENSTOCK: Okay. Good. That obviously 5 couldbe a key parameter for

-- since it's the number 6 of cycles, thatmight alsohave a big

-- obviously has 7 a big impact. 

### 8 MR. McMAHON: That's right. 9 MR. ROSENSTOCK: Okay. Thank you. 10 MR. McMAHON: All right. Sowe account for 1 1 the difference between the households about what their 12 consumption is. 13 Moving on to the next one. Here is how we 14 get from cumulative cash flow to life cycle cost. The 15 only difference is

-- 16 Question? 17 MR. JONES: Yes. Jim, what were the discount 18 rate assumptions in that first graph? 19 MR. McMAHON: In the first graph, the beauty 20 of it, Earl, is that there is no discount rate 21 assumption. This is straight cash flow. The next 22 thing you bring in is the discount rate, and that gets EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 141 1 

### you to life cycle cost. 2 MR. JONES: Okay. So, seque to the next 3 slide. Here's cumulative cash flow on the top line; 4 life cycle cost with a 6 percent discount rate is the 5 lower line. And what 

### you see is you're discounting 6 values into the future. The farther into the future 7 

### you go, the bigger the discount is. 8 So the life cycle cost in the year -- for a 9 14 year lifeof a clothes washer is the last point of 10 the lower line. Here, approximately $1600.00. 1 1 Now, ifwe go through and do the simple life 12 cycle cost justusing the average value for all these 13 distributions, assuming an electricwater heater and an 14 electric dryer, that population, and doing it for each 15 of the efficiency levels

-- 16 MR. MORRIS: Excuseme, Jim. At what 17 standard level was this number 18? 18 MR. McMAHON: Each of those bars represents 19 an efficiency level. The first baron the left, .82 20 MEF, is the baseline. 21 22 one slide.MR. MORRIS: I'mgoingback topage 18. Back

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• 142 1 

### MR. McMAHON: Oh, I'm sorry. Page 18? 2 That's a baseline. There's no efficiency levels in 3 there. 4 

### MR. MORRIS: That's baselineonly. Okay. 5 

### MR. McMAHON: That's justbaseline. Okay. 6 Somoving from thebaseline, which is the 7 first baron the lefthere, the .82MEF, eachof the 8 bars across is the next efficiency level. So the .86 9 corresponds to a 5 percent energy reduction. The .91 10 is a 10percent energy reduction, and soon through the 1 1 

### list. 12 The one at the far right is a 50 percent 13 energy reduction. Thebottombarhere is thepurchase 14 price and the topbar is the operating costover the 15 lifetime, discounted at 6 percent. 

### 16 So in some sense this corresponds to the 17 information that we used toprovide in life cycle cost 18 curves, andwe're doing only average values for 19 everything. 20 And this is the same calculationbutwe've 21 22 moved from electricwaterheater and electricdryer to
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• 143 1 and gas dryers. It's on the same scale, so you can see 2 that these have lower costs. The life cycle cost for 3 the baselineunit is on the order of $1100.00. In the 4 previous slide itwas nearly $1600.00. 5 MR. ROSENSTOCK: Sorry. StevenRosenstock, 6 EdisonElectric Institute. 7 But there couldbe fewer cycles in this one, 8 as well? 9 MR. McMAHON: There could. Yes. 10 MR. ROSENSTOCK: Based on the graphbefore? 11 MR. McMAHON: That's correct. 12 MR. ROSENSTOCK: Okay. 13 MR. McMAHON: Sohow havewe dealtwith the 14 issues ofuncertainty and variability? Firstof all, 15 we've identified the key uncertainties and 16 variabilities. I want to step aside togive youmy 17 definitions for these two terms so they're not 18 confused. 19 I distinguishbetweenuncertainty, meaning 20 incomplete information, and variability, meaning a 21 22 range of values. So an example of uncertainty wouldbe
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• 144 1 be in the future. We have this range that's provided 2 by the submittals, sowe use that range. 3 An example of variability is eachhousehold 4 paying a different energy price. It's not thatwe 5 don't knowwhat that price is. It's just that they are 6 different from house tohouse. 7 Is there a question? 8 MR. JONES: Yes. I justdecided itwas too 9 big to ask. 10 (Laughter.) 11 MR. BROOKMAN: Sincewe're moving on towards 12 lunch, we appreciate any intermission. 13 (Laughter.) 14 We'll pick itup later. 15 MR. McMAHON: Okay. To deal with uncertainty 16 and variability we now provide ranges rather thanpoint 17 values. We conduct the scenarios, what if analysis. 18 If you use a different energy price trend, and so 19 forth. 20 21 22 We do a simulationover inputranges. And simulationjustmeans you step through a whole bunch of different households and addup the results. I'll show EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 145 1 you in a moment. We express the result as ranges, one 2 examplebeingwhat percent of consumers have lower life 3 cycle costs in this scenario. 4 And I'mjustgoing togo through to -- Doug, 5 if it's okay

-- the next couple of slides just to get 6 to the sample output, and then thatmight be a good 7 time to take a break. 8 So summarizing it all on one page, if you had 9 topull one page out of this whole presentationabout 10 how this is done, I would take this one, comparing the 1 1 oldwith the new, and distinguishbetween scenarios and 12 simulations. 13 Scenario is youmake a pick. So, for 14 example, what's the startdate for the standard. It's 15 either 2003 or it's 2004. You don't simulate some 16 range of startdates. You pick a start date. Same 17 thing for a standard level. You pick a standard level. 18 So these are scenarios that you select and then you do 19 your calculations based upon that scenario. It's a 20 what if calculation. 21 22 The simulations are those things where the distribution is embedded in the calculation. The range EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 146 1 

### ofmark-ups isgiven in the calculationand the 2 computermodel is going to sample across that range and 3 take care of that. 4 If you agree with the range that's beenput 5 in, youno longerhave todo anything. It's taken care 6 of internally. So, that's the distinctionhere. 7 

### So thebig changes here are that scenarios 8 that were not therebefore are there now. They are the 9 energy fixed charges and thewaterprice trend. And 10 simulations, discount ratehas beenmoved from a 1 1 

### scenariowhere you'll pick a singlevalue to a 12 distribution. And I expect thatwe'll have that 13 discussion this afternoon about that distribution. 14 Manufacturing cost is now a distribution. 15 The setofhouseholds is now this sample of 4,000 16 households insteadof an average house. And the energy 17 andwaterprices are the distributions that I've shown 18 you. 19 I'mgoing togo ahead, because I'vejust 20 explained that. 21 22 Here's how the model works. When you do a simulation, when you run crystalball, themodel 

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• 147 1 selects one household from the sample of 4,350 that are 2 in there. Now, these are eachweighted so they 3 represent the right number ofhouseholds in the 4 country, sothey addup to the U.S. population. You are 5 selectingproportional to those weights. 6 For thathouse, you lookup what fuel type do 7 they have for theirwaterheater, what fuel type do 8 they have for clothes dryers, what is theirprice of 9 energy for eachof those fuels, and how many people are 10 there in the house. We convert that into cycles per 1 1 year. 12 Next we need to adjust the price of energy 13 twoways. First, we need to subtract the fixed charges 14 togetback to the rate. That's done for all the 15 households. And next you apply a time trend. Ifwe're 16 talking about a future year, we go to the time trends 17 that I hosed you. In this case, AEO '98 reference case 18 for the year 2003, find out the relative change in 19 price for eachof the fuels and apply that towhat the 20 prices used tobe sowe get a future price. 21 22 Now you go intoeachof those variables for whichwe have a range and, using a random sample, you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 148 1 pick a value. Sowe don't know what the manufacturing 2 cost is going tobe. It's somewhere in that 3 distribution. You pick a value. Same thing for mark4 up, water and sewage rates, lifetime discount rate. 5 You pick from the distribution. 6 Typically now we are running 10,000 samples, 7 so it's 10,000 households. And when you do 10,000, you 8 capture the full range of variability in all of these 9 variables. And you can runmore or less. Once you run 10 a largenumber, it converges and you're not getting any 11 more information by doing any more. That is, doing a 12 million will not teach youmuch more than doing 10,000. 13 Here's a sample output. This is the LCC 14 difference, the change in life cycle cost in going from 15 a baseline unit to, in this case, a 20 percent energy 16 reduction. We've done 10,000 samples. And sowhat you 

### 17 get is a different answer for each of the 

### 10,000. And 18 these are summarizedhere. 19 Instead of a number, what's the change in 20 life cycle cost, we get a different number for each 21 22 house. And this is summarizing that information from that population of houses. The things you can see on EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 149 1 this graph, not very clearlyon the screenbut they are 2 given there in text. Themean impact is $57.00 saving, 3 a reduction in life cycle cost of $57.00. 4 The range is at the extreme. There's one 5 point that you can't seebecause it'sonly one house 6 outhere at $358.00 savings. That's probably someone 7 thathad a lot of cycles peryear and very expensive 8 energy. And there's someone overhere that actually 9 has an increase in cost in life cycle terms of $125.00. 10 They probablywere in the opposite situationwith a low 1 1 number of cycles and a lowcost of energy or they paid 12 a very high price for theirwasher. Inbetween is the 13 whole group. 14 Now, the shading you can see in colorpretty 15 well. You can't see in the black and white. The zero 16 point iswhere this little triangle is. So even in the 17 black and white, if you look for this marker, this 18 tells you the zeropoint. So anyone on the left is 19 saving less on costs. They've reduced loss on costby 20 reducing their energy consumption 20 percent. Anyone 21 22 on the right has an increase in life cycle cost. They have no recovered the increased cost. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 150 1 The percentages are 86 percent on the left 2 and 14percent on the right in this example. 3 Now are there any questions about that 4 representationbecause it's a new representationof the 5 data. 6 MR. ROSENSTOCK: SteveRosenstock, Edison 7 Electric Institute. Some peoplemight

-- youknow, you 8 cando themedian as well just as easily; right? That 9 software? 10 MR. McMAHON: Yes. 1 1 MR. ROSENSTOCK: The second thing also I 12 think one of the powerful things is that ifyouwanted 13 to, with this tool

-- again, I'mreally not that 14 familiar

-- you couldjustdo itjust for one of the 15 inputvariables and freeze everything else. Just, for 16 example, youwanted to seewhat wouldbe the impact of 17 justonly doing the range ofmanufacturing costs and 18 then freeze energyprices, discount rates, everything, 19 all the other 20 21 22 MR. McMAHON: That's correct. MR. ROSENSTOCK: Just to see what would happen. Just ifyouhad just the one variable impact EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 151 1 versus multi-variable impact. You could do that to if 2 you wanted? 3 MR. McMAHON: Yes. 4 MR. ROSENSTOCK: Okay. 5 MR. McMAHON: This software is available. 

### 6 MR. ROSENSTOCK: Yes. I know. I haven't had 7 a chance to play around with it, unfortunately. I'm 8 just saying that if for particularpeople you justwant 9 to see just the impact of one variable in particular 10 and run all the trials, you can do that, too, and try 1 1 to freeze everything else
. 12 MR. SCHLEEDE: Glenn Schleede again. A 13 question. I thought I understood but I want to 14 clarify. 15 When you pick an energy price like for 2003, 16 is that price frozen for the rest of the life of the 17 appliance? 18 MR. McMAHON: No. 19 MR. SCHLEEDE: You take whatever trend you're 20 on and apply that trend? 21 22 MR. McMAHON: Ituses the trend and applies it every year through the life. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 152 1 

### MR. SCHLEEDE: Thank you. 2 

### MR. BROOKMAN: Additional questions? 3 

### Bryan? 

### 4 MR. BERRINGER: I justwant toclarify. This 5 iswithout fixed costs. Is that correct? This 6 scenario? 7 

### MR. McMAHON: This iswithout fixed costs. 8 Yes. That's correct. And I want topoint out that you 9 have anotherpackagehere calledpreliminaryresults of 10 life cycle costs that has a lotmore information. 1 1 

### You'll find the numbers in there are slightlydifferent 12 than these. The numbers inhere are the current set. 13 This is justan illustrativeexample. It's closebut 14 it'snot exactly the samenumber. 15 And letme explain thebottomgraph and then 16 that will concludemy presentation. 17 Thebottomgraph is the same information 18 presented a differentway. It's the cumulative 19 probabilitydistribution. What you do is just start at 20 the leftand stack thesebars on topof each other 21 until you get up to 100percent. It's the same 22 

### information. It's anotherway of looking at it. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 153 1 MR. BROOKMAN: I thinkwe have one or two 2 more questions. But letme ask. 3 Lauren, if you were give a presentationon 4 the data, how longwould it take you? 5 MS. CASENTINI: Why don'twe do itright 6 after lunch. And probably, a fewminutes. 7 MR. BROOKMAN: Okay. We'll wait until after 8 lunch. 9 Dave, youhad a question? 10 MR. MODTLAND: Yes. DaveModtland. 11 I justhave this question. What's the 12 relationshipbetween the households and the number of 13 cycles? You'd indicated that the cycles per yearwere 14 basedon 15 MR. McMAHON: Yes. That's explained in the 16 "Quantities" handout. We had information from Proctor 17 and Gambel that related the number of cycles to the 18 number ofpersons in the house. It'spage 4 of the 19 "Quantities and CurrentAssumptions." For one person, 20 RECS says 200 cycles per year. We've scaled these up 21 22 slightlybecause there was a littledifferencebetween this and the testprocedures. Sowe're using 210 EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 154 1 cycles per year for a one-personhousehold. For a two2 personhousehold, 321; three or four people it's 469 3 cycles per year; and five ormore people is 645 cycles 4 per year. 5 MR. MODTLAND: So this isbasedon P&G's 6 survey data? 7 MR. McMAHON: That's correct. 8 MR. BROOKMAN: Yes, sir? 

### 9 MR. FLORA: BradFlora fromWhirlpool. 10 Jim, how did you handle inflation for the 1 1 energy and the water costs that are projected out in 12 the future? 13 MR. McMAHON: There's no inflation. These 14 are all real prices. 15 MR. FLORA: So those are real expectedprices 16 in those years? 17 MR. McMAHON: That's correct. No assumption 18 about inflation. 19 MR. BROOKMAN: Additional questions about 20 Jim's presentation and all these methodologies? 21 22 Yes. Larry? MR. HAWKINS: If I followed you, you said you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 155 1 

### used the P&G data, then scale itbasedon the number of 2 people and cycles. Did you compareback tohow that 3 compared to the RECS data? Didn't youhave family size 4 and cycles per year? 5 MR. McMAHON: Well, the RECS data 6 actually, you're right. The RECS datadoes have their 7 own question about how many cycles peryearbut it it's 8 indifferent blocks. So they askdid you use one to 9 five loads a week or six to 10 orwhatever. 10 We have compared them. The RECS number comes 11 

### out slightly lower on average. Letme see if I can 12 recall the numbers. 13 The testprocedurenumber is 392 cycles per 14 year. The RECS done this way using Proctor and Gambel 15 datagives you 379 cycles per year. That's pretty 16 close. 17 Letme explainwhere those numbers actually 18 come from. When the question is asked of consumers, he 19 question is: How many loads of laundry do you do in a 20 week. And that number ismultiplied times 52 toget 21 the cycles per year. So the differencebetween 7.3 and 22 7 loads a week is not significant. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 156 1 The RECS number itselfusing.theirnumbers, 2 ifwe used the midpoint of the ranges that they asked 3 the question, is slightly lower. It's

-- I don't think 4 I can tell you the exactnumber but it'sbelow 379. 5 MR. HAWKINS: Okay. Thank you. 6 MR. McMAHON: I can look thatup for you, 7 Larry. 8 MR. BROOKMAN: Additional questions for Jim 9 on the presentation? 10 (No response.) 11 Let me ask you collectively about the time 12 frame for the day. I think we're slightly ahead of 13 schedule. There are several important issues yet tobe 14 discussed in the afternoon. Several peoplehave asked 15 if itwouldbepossible towork hard and get through 16 what was originally scheduled for tomorrow today and I 17 want to ask your sense of it. 18 I asked if itwas possible for the Court 19 Reporter and others, a few others, tohang arounduntil 20 5:00, work today until 5:00 if that gets us done. That 21 strikesme as being one alternative. I raise that as 22 an issue. I see some of you nodding yourheads up and EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 157 1 down, yes. 2 Does that work for most of you? Does that 3 cause a significantproblem for anybody? 4 (No response.) 5 I don't see that it cause a significant 6 problem for anybody. I'mnot saying we'll succeedbut 

### 7 ifwe can strive to get done today by 5:00 and even 8 before, if we're very efficient. 9 Is that okay with everybody? That's the 10 currentplan. 1 1 It's now**12:25~** 12 Gene? 13 MR. FOLEY: Canwe do a working lunch? 14 MR. BROOKMAN: I find that that usually 15 doesn't work, unfortunately. And sometimes people wish 16 to confer over lunch. 17 It's now 12:25. Can we start at 1:15? 1:15 18 we'll start. 19 Letme acquaint you, for those that aren't 20 familiar with this building, againwhere you can eat. 21 There is a snackbar that has coldcuts and soups and 22 things directly one floor belowon the opposite sideof EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 158 1 the corridor. If you go down one floor to the ground 2 floor and walk across the hallway there's a cafeteria 3 two flights up the escalator. Arather large cafeteria 

### 4 that has most everything that you couldwant. And I 5 understand there's a new cafeteria vendor. Is that 6 correct? 7 MR. BERRINGER: New management. 8 MR. BROOKMAN: New management in the 9 cafeteria. I'mnot sure what thatmeans. 10 We're going to start -- we will start at 1 1 1:15. And thanks to all the presenters for a good job 12 this morning. 13 (Whereupon, the luncheon recess was taken at 14 12:25 p.m.) 15 16 17 18 19 20 21 22
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• 160 1 AFTERNOON SESSION 2 1:25 p.m. 3 MR. BROOKMAN: Okay. Let's begin. 4 Thank you for making it through lunchquickly 5 and allowing us tobegin almost on time. I greatly 6 appreciate it. We're almost there. 7 Lauren. 8 MS. CASENTINI: Fromwhat readhere over 9 lunch, I thinkJohnTomlinson is going tobe here 10 tomorrow ifwe need tomorrow, sohe'dbe available to 11 answermore questions. And I'dbe glad topass this 12 around if anyone would like to take a look at it. 13 But the bottom line is

-- now, the 14 participantswere given switchingdetergent orusing 15 the specialtydetergent. And the specially formulated 16 detergentwas given to them at no cost. They didhave 17 tocontinue touse theirown detergent. 18 Seventy-sevenpercent of them chose to take 19 the free re-formulateddetergent, so 23 percent chose 20 to continueusing theirregulardetergent. 21 And the change inuse was about a third less 22 detergent. That is in cups perpound, about a third EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 161 1 less. Itwent from .06-.08 cups down to .04 to .06
. 2 That'skind of the bottom line. 3 And again, I'dbe happy to let anyone take a 4 look at this if they'd like to see it. 

### 5 MR. BROOKMAN: And maybe there are other 6 sources of dataon this. 7 [Microphonemalfunction.] 8 If youknow of anybody who's not herewho 9 intends to attend tomorrow, we need to figure out 10 something todo about that. Some plan. 1 1 One simpleway to address that wouldbe to 12 give those name to Sandy and Brenda andmaybe we could 13 call them or find some way todo that. And that 14 presumingwe do get done. There's a lot yet tocover 15 today. 16 So, let's go right back into it, then. 17 Anything else tobe saidbefore we return to 18 JimMcMahon for questions onhis earlierpresentation, 19 and then following onwith the agenda as listed. 20 Nothing else tobe said at this point? 21 (No response.) 22 Okay. So, Bryan, would youwish to -- EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 162 1 MR. BERRINGER: Why don't we continue then 2 with

-- if there's any further questions on theLCC 3 presentation? I know we sort of cut itoff at lunch. 4 I want tomake sure that ifyouhave opinions

-- I know 5 this is a lotofmaterial that we'rekind of throwing 6 at you and goingover and I hope we'rehaving a good 7 discussion as far as what's goingon. Butwe want to 8 make sure thatpeople agree. 9 Let us know if you agree ordisagree, oneway 10 or the other. If you concur, please letus know also. 1 1 That's been a concern in the pastwhere we go along and 12 we don't have any comments. 13 MR. BROOKMAN: Jim, maybe you couldjust say, 14 sopeople can locate it in theirpackets. You gave 15 kind of a slimpresentation, compared all thedata and 16 material that's here. 17 MR. McMAHON: Yes. The presentation that I 18 gave followed this handout, the life cycle costs, and 19 also for clothes washers. You have two otherpackages 20 that arerelevant. One, I've referred to: "Quantities 21 and CurrentAssumptions." It containedmore 22 information about each of the inputs. And then there's EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 163 1 "Preliminary Results." That's the first draft of what 2 some of the outputs look like that you can get out of 3 crystal ball. 4 MR. ROSENSTOCK: Steve Rosenstock. Just one 5 quick one. Maybe a lunchtime inspiration. I don't 

### 6 know. 7 In terms of the analysis, again, hopefully 8 there's data on it. There might be some from the Bern, 9 Kansas study of percentage of cycles per year versus 10 warm versus hot. Again, I have no idea what the trends 11 are or what most people are washing. You know, the 12 warm settingon a washing machine versus a hot versus 13 the cold. Obviously that's going tomake a difference, 14 if there's data out there, what percentage of people 15 always wash in cold water. When you extrapolate that, 16 if there's data out there, I think hopefully that could 17 be used as one of the inputs for this, when you refine 18 your analysis a littlebit. 19 MR. McMAHON: My understanding is that that 20 informationhas beenused in the test procedure. 21 22 MR. ROSENSTOCK: Oh, okay. Okay
. MR. JONES: I did have one otherquestions. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 164 1 

### Earl Jones here. 2 I actuallywas rather struckby the fact that 3 I thought that the analysis was actually pretty 4 thorough. It looks like it'sheaded in theright 5 direction. But I didhave one questiononone of the 6 assumptions andwanted toknowwhat the source of it 7 was. And thatwas the applicationof the same 14 year 8 life cycle to these twohorizontal axis products. 9 What's thebasis of the assumption that is true for 10 theseproducts? 1 1 

### MR. McMAHON: I have no information that 12 distinguishes between the vertical andhorizontal axis. 13 I'dbehappy toreceive that information if it's 14 available. 15 MR. JONES: Okay. So then it's simply 

### 16 becausewashers which have currentlybeen inproduction 17 for

-- I guess the dominant producthas been in 18 production for 50 or so years. And since it's average 19 life these days is 14 years, the assumptionhas been 20 that there's no distinctionbetween thatproduct and 21 22 this one as itrelates toproduct life
. MR. McMAHON: Letme expandonmy answer. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 165 1 The lifetimes thatwe're using are basedupon an 2 analysis ofhistorical shipments and sales of all 3 washers. Since that dominatedby vertical axis 4 machines that's where the lifetime is coming from. 5 We don't have any independent information 6 about horizontal axis. We'reworking on a statistical 7 basis. 8 MR. JONES: I'mnot sure ifdominatewould be 9 quite the accurate term there though, Jim, since it's 10 about 99 percentage to 1. But I get your point. The 1 1 answer is there's no data to support that assumption. 12 MR. McMAHON: Hard torefute it. 13 MR. JONES: I'm sorry? 14 MR. McMAHON: Hard torefute it at this 15 point. 16 MR. JONES: Well,

-- 17 (Laughter.) 18 MR. BROOKMAN: And beforewe go to Gene, I 19 guess now wouldbe the appropriate time to entertain 20 any questions, not only toJim's presentationbut from 21 his supportingmaterials, as well
. 22 Gene? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 166 1 

### MR. FOLEY: This questiongoes toEarl's 2 point, just in terms of a random source for data. 3 Whereas, you lastedhis 99 to 1. Inothercountries, 4 including inEurope, that ratiowould notbe the same. 5 

### MR. McMAHON: Right. 6 

### MR. FOLEY: Maybe itwouldbe the otherway 7 around. In looking for dataon life cycles itmight be 8 worth looking atEuropeanmodels and what their 9 

### expected life the life expectanciesof those 10 productsmight in fact be. 11 

### MR. JONES: Yes. That was inpartmy 12 question, whetherornotJimor the DOE has that 13 information. And then the secondquestionwouldbe 14 what is the impact of the Americanizationof such 15 products as we now see in terms of capacity, size, 

### 16 weight, growweight, physics, et cetera. Butwe'll get 17 more into that later, I suspect. 18 

### MR. BROOKMAN: Okay. Thank you. 19 Additional questions for Jimon all the 20 materials that are in your packet? 21 22 Yes. Wayne? MR. MORRIS: Wayne Morris. Just to -- maybe EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 167 1 

### an observationorwhatever. And Jimknows. We've 2 talkedprivately about it. But I think for other 3 people the differencebetween the RECS survey and the 4 shipments of areas such as gas versus electric, water 5 heaters and gas versus electric clothes dryers, there 6 is a difference between those twopieces of 7 information. I won't saywhether it's significantor 8 what itdoes to the analysis, but the RECS survey 9 

### does makes assumptions about the differences and the 10 overallpopulation of the surveyedhomes of electric 1 1 

### versus gas waterheaters. 12 It seems tobe different from the 13 extrapolated informationof say the last 10 or 15 years 14 of shippingdataonwaterheaters and ondryers. I 15 don'tknow which one's right, which one'swrong. I 

### 16 don'tknow that we could

### everget to that. But 

### it is 17 different. 18 I wonder if there's a way toresolve that, to 19 get closer towhatever the U.S. population is. I mean, 20 onewould assume, I guess, that the shipment data is in 21 22 fact representativeof the entireU.S., whereas RECS is
a function ofjust those households. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 168 1 Itdoes begin to ask the questionofwhether 2 ornot the RECS is representative of the entireU.S. 3 households. Maybe it'smore representative. I don't 4 know. But it's a question and an observation that I 5 seem to seewhen I look at this. 6 MR. McMAHON: Letme respond. JimMcMahon. 7 We're aware of this difference. The 8 difference thatWayne is referring to is that the share 9 of electricwaterheaters in shipments is higher than 10 it is in stocks and that's been true for some time. 1 1 And we don'treally understandwhy that is. 12 We're speculating that there maybe 13 speculation theremay be somethingdifferent about the 14 conditions under which thesewater heaters operate. 15 For example, if the electricwaterheaters are inareas 16 whichharderwater, lowerwater quality, thatmay be an 17 explanation for this difference. And we're looking 18 into that. I appreciate the question. 19 20 21 22 MR. BROOKMAN: Did youhave a follow-up? MR. NADEL: I have a follow-up to that. I was also curious about this issue so I looked in the January 1998 "ApplianceMagazine," where EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 169 1 they give recent shipments and theirown projections of 2 shipments basedon a variety of data they have 3 available. 4 And from that I projectedoutwhat the stocks 5 would likelybe in 2010, given the DOE estimates of

-- 6 you're shaking yourhead like**mayb~** you've done this, 7 too. 8 What I found is it's veryminor changes 9 compared to the RECS. What itmeans is youhave a 10 couple of percent increase in the gas waterheater 1 1 share, but also a percentage increase in the electric 12 dryer share. At leastmy analysis shows the 13 differences are likely tobe just in the noise. 14 MR. BROOKMAN: Glenn? 15 MR. SCHLEEDE: Aquestion for JimMcMahon. 16 In the refrigerator analysis youhad assumed 17 that the electricityused for refrigerators costs 6 18 percentmore than electricity

-- than the average price 19 of electricity. If youused that samemethodology in 20 the case ofwashers, I remember back some of the 21 22 papers, youwould adjust itdownward. You'd discount itrather than inflate the price. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 170 1 Have you dropped that concept totally from 2 this analysis now? 3 MR. McMAHON: Yes, we have. 

### 4 MR. SCHLEEDE: Well, itwas okay to inflate 5 prices when you did the cost on refrigerators. It's no 6 longer appropriate tomake these

-- 7 MR. McMAHON: It's an entirely different 8 methodology. The reason for doing that before was 9 becausewe were trying to account for regional 10 differences and rate structure differences for 1 1 different enduses. 12 So, for example, electric space heating and 13 water heating tends to occur inregions with lower 14 electricityprices, and therefore the average price for 15 those enduses is lower. Whereas, the other 16 appliances, since they are the residual, are higher. 17 And now we're using a full distributionof 18 prices for the different households sowe're already 19 accounting for the regional rate structure differences 20 sowe don't need to use that simple approximation. 21 22 MR. BROOKMAN: Additional questions for Jim beforewe proceedwith the otherpresentations? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 171 1 I heardBryan ask a moment ago, and aside 2 from hearing from Earl, I didn'thear from anybody else 3 how yougenerally view the analysis in these 4 presentations, whether the fit withwhat youwould 5 expect and othercomments onwhat's being

-- the 6 methodology and I guess the results as well. 7 Comments onwhat you seehere? 8 

### MR. ROSENSTOCK: SteveRosenstock, EI. I 9 think it's a very good first step. I was able to 10 download the spreadsheets. I'm stillhavinga little 11 bitofproblems with it. It'sjustmore of a software 12 issue. Kind ofpersonally speaking, it's that if the 13 Department is going todo spreadsheets for downloading, 14 right now it'sonly inEXCEL and there are some ofus 15 holdouts out there who have LOTUS orQUATRO PRO. 16 Itmightbe nice. If itcosts tomuch money, 17 slapme down. But itmightbe nice if you did it for 18 multiple softwares. 19 Unfortunately, one of theproblems we're 20 having is likeEXCEL 97 doesn't seem torecognize INTEL 21 7 when you're doingone of the spreadsheets. I don't 22 knowwhy. Maybe the mightybeings in Seattlecould EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 172 1 tell us why. But just a thought. I think it's a 2 really good first step. 3 MR. BROOKMAN: Bryan? 4 MR. BERRINGER: Just a point of information. 5 We do have some disks that we've copiedwith the LCC 6 and the NES. It's on the Web page. But the most 7 current version, we do have some disks if you'rehaving 8 trouble with downloading it from the Web. If youwant 9 to see Sandy orBrenda, you can get a copy of those. 10 MR. BROOKMAN: Any additional comments pro or 11 cononwhat's beendone so far here? 12 (No response.) 13 I see not. Okay. 14 So then, Jim, are you the one who proceeds 15 with the next segment? 16 MR. McMAHON: We're on energy savings and 17 shipments? Yes. 18 MR. BROOKMAN: Yes. Jim, if you couldgo 19 ahead and proceed. 20 21 22 MR. McMAHON: I'llbe speaking from this handout, Base Case Future Shipments: Clothes Washers, DiscussionTopics: The issue is how dowe EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 173 1 project in the base case clothes washer shipments out 2 to the year 2030. Some of the important topics are 3 what fraction ofhomes will have clothes washers; how 4 many houses will there be; what's the lifeof clothes 5 washers. I'll comment on the difference between 6 wringer and automaticwashers because that influences 7 some of the statistics. Severalmodels of future 8 shipments and a brief comment at the end of that, the 9 impact of standards. 10 Current surveys. This is RECS survey. 11 Seventy-sevenpercent of U.S. households have clothes 12 washers. It differs according to the house type. 13 Those of youwho attended the workshop lastJuly will 14 recall that we presented a preliminary spreadsheet at 15 that time and there was some controversy about the 16 saturations inmulti-familyhomes which seemed tohave 17 increased all of a sudden from 30 or 40 percent to 70 18 percent. They went back and looked and therewas an 19 error in one of the surveys, and the number is closer 20 to 40 percent. 21 22 So thesenumbers are -- thenumbers you see
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• 174 1 increase thatwe had shown inJuly wasn't there. 2 Didn't really happen. 3 So single family homes, existinghomes, have 4 about

-- 93 percent of them have clothes washers. New 5 construction, approximately 95 percenthave clothes 6 washers. The existing fraction was 86 percent in 1981. 7 That's just to give you an ideaof the growth in 8 saturations over time. 9 Formobile homes they're a littlebit lower. 10 Eighty-four percent now. About the same in newhomes. 11 Somaybe those have stabilized at that level. The 12 existing saturationwas 66 percent in 1981. 13 Multi-family existinghomes, currently 31 14 percent. New homes, 39. Somaybe there's some more 15 growth there. Existing homes was 28 percent in 1981. 16 Now without speculating about how those 17 saturations will change in the future, let's just 18 assume for the moment that the saturations stay the 19 same. And we have the growth in households projects by 20 DRI andby the Annual Energy Outlook in 1998. And this 21 22 graph shows youwhat will happen
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• 175 1 will be 30-35 millionmore washers in place than there 2 are now by the year 2030. So our shipments forecasts 3 need to account for where those are going to come from. 4 The top line here is the number of households 5 and I sayAHAM, and I shouldbe fully disclosing and 6 say that's derived from the AHAM Fact Bookby taking 7 the number of washers reported inplace dividedby the 8 saturation. Page 21 of the 1997 AHAM Fact Book. 9 The dashed line shows the number of 10 households according to the Annual Energy Outlook 1998. 11 The number of washers is from the AHAM Fact Book and 12 the 1990 number I think is high. We had a conversation 13 privately, Wayne and I, about this. 14 The survey number that was reported there 15 appears to be a single family percentage, not all 16 households, so I think they overestimated the number of 17 washers in place. So I'musing the lower number 18 corresponding to 77 percent of all households having 19 washers where the number in the Fact Book is about 95 20 percent. That's a single family number. 21 22 Okay. So the major reason for expecting that shipments will increase is because there will be more EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 176 1 

### houses andwe expect people will have at least the same 2 percentageofwashers as they do today. 3 Lookingback on 1980 to 1986, the annual rate 4 of growth indomestic shipments, excludingexports, 5 average about 2.3 percent. Ifwe simplymaintain 6 current saturations therewill be an annual growth in 7 shipments of approximately .9 percent, justunder 1 8 percent. 9 In context, therewere 6.2milliondomestic 10 shipments in 1996, so this wouldbe an increaseon the 1 1 

### orderof 50,000 or 60,000 additional shipments each 12 yearon top of that. If you take that out to the year 13 2030, that's a projectionof 8.5 million shippedper 14 year. 15 Anumber of factors could alter this. If 

### 16 those houses are notbuiltobviously the number will be 17 different. If the percent ofhouseholds havingwashers 18 changes, itwill change. The washer lifetimes could 19 change. Washerprices and operating expensesmay have 20 some bearingonhow many people own them. And there 21 22 couldbe differences inconsumerdecisions torepair rather than replace in the future.
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• 177 1 

### Graphically reinforcing thepoint about 2 increases in sales, this figure shows at the top 3 clothes washer sales historically, includingexports. 4 And below that, the lower line, domestic clotheswasher 5 sales. We don'tworry about the exports at this point. 6 And the two lines that say "Appliance 7 Magazine," are a projection inJanuary this year in 8 "ApplianceMagazine" of what theprojectedclothes 9 washer saleswill be for the next five years. They 10 seem to follow the trendprettynicely. 11 Thewiggly line that goes onout to the year 12 2030 is a projectionbasedupon a spreadsheet assuming 13 frozen saturations, a 14-yearclotheswasher lifetime. 14 And this has the 1997 housing stock forecast. We will 15 update that to 1998 but it's not very different. 

### 16 Thewaves in thathave todowithreplacement 17 cycles and I'lldiscuss that a littlebitmore ina 18 moment. 19 Now, sinceJulywe've looked at five 20 different statisticalmodels to check this very simple, 21 22 almost linearextrapolation from the simple saturation
. The five model types are listedhere, and I'llgo into 

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• 178 1 each of them a little bit. I'll tell you the pros and 2 cons of each of the models. I want to tell that each 3 of the models builds on the previous one. 

### 4 The next page is a table showing some of the 5 factors that are accounted for by the models. And 6 start from the top on the left, the ARIMA model. 7 In July we presented a simple linear fit of 8 historical shipments, and there was a comment that we 

### 9 should use the ARIMA. The ARIMA is a moving average so 10 ituses the historical data but uses the moving average 1 1 to go on off into the future. So the only information 12 that's used in the ARIMA model is washer sales. 13 The Multivariate time series, simply put, 14 brings in the number of households. So it's not just 15 the historical time series of washers that tells us how 16 many will be built in the future, but also the number 17 of households. 18 Saturation/life 1 brings in information about 19 what percent of households will own washers and the 20 washer lifetime. Saturation/2 is a variant of that. 21 22 I'll explain the difference. And theAccountingmodel takes into account all of those effects and potentially
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• 179 1 can take account of economics; that is, the effect of 2 price and operating expenses on the sales. 3 Now there are two pages on eachof the 4 models, and those of you who have the hard copies, you 5 canopen them this way and see the two pages together 6 and show you a text slide and a graphic slide. On the 7 screen, I'mjust showing you one at a time. 8 TheARIMA model. The good news is itonly 9 requires time series data. It's very simple. The bad 10 news ishistorical trends may not be a good guide to 1 1 the future. 12 Wringer washers are an importantpart of the 13 early story of clothes washers. We have databack to 14 1957 that we're using. And obviouslywe don't want to 15 extrapolatebased upon wringer washers, so that's a 16 concern. 17 If you exclude the wringerwashers you 18 shorten your time series, which means you have less 19 years from which to forecast. Itmakes the statistics 20 very bad. 21 The equation shown at the bottomof the page 22 and the note here is that themodel cannot account for EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 180 1 changes in the number of households. They're just 2 extrapolating from past trend. What percent of houses 3 will own the washers, the prices or operating expenses. 4 The graph shows you the fit from the ARIMA 5 model. It doesn't show you the uncertainty, and I 6 should tell you what that looks like. 7 Letme express it in terms of the change in 8 shipments from year to year. The "ApplianceMagazine" 9 forecast, consistent with recent history, says that 10 shipments will increase about 100,000 each year. So 11 from 6.2 million in 1996, add 100,000 each year. 12 If you do the statistical uncertainty on this 13 you find a lowbound that says they could decline by 14 20,000 a year, so it couldbe going down, oron the 15 otherhand they could be increasingby 200,000 a year. 16 So it'sbasicallyplus orminus 100 percent on the 17 increase. 18 Sobecause we have only somany datapoints 19 and because it'sonly doing a moving average and 20 doesn't have any other information about the future, 21 likehow many houses here will be, there's nothing to 22 hold this forecast down and make it stabilize at any EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 181 1 particularvalue. So this looks really cleanbut 2 you've got a huge amount ofuncertainty in that. 3 Going to the next one, theMulti-Variant. 4 The advantages are two time series data. We've taken a 5 time series onwasher shipments and adding in a time 6 series ofhow many households. And then it'sjust 7 forecasting baseduponhow those have changedover 8 time. 9 Basically, the same set of criticisms here. 10 I'll showyou the picture. 1 1 

### Itgives you a better fit of the historical 12 data, which tells us that in fact the number ofhouses 13 does matter. That's goods news. But there's no 14 explicit accounting for replacement sales, house 15 saturations change or the economic factors. 16 The thirdmodel is a SaturationLifetime 17 model. This is the first time thatwe'rebringing the 18 washer lifetime into account. The othermodels just 19 assume that youhave a historical trend and itwill go 20 on into the future. 21 22 We bring in a retirement function. We still base the housing and saturation stocks on time series EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 182 1 

### data. The thirdnote under "Pros" is youcouldcreate 2 a model ofdifferent assumptions about future housing 3 and saturation. Letme restate that. 4 Because you are looking athousing and 5 saturationofwashers as independent time series, you 6 canuse those toget a very good fit of the historical 7 data. However, in the future, you're dependent upon 8 the assumptions about lifetimes and you still can't 9 account for any of the economic factors as they affect 10 the stocks. 1 1 

### Is that clear? 12 Now, the fits look a littlebit scary. The 13 historical time series

-- there are times when these 14 models don't fit the historical datavery well. They 15 tend tobe very sensitive to the assumptions and so 16 they skip around a littlebit. 17 The problemhere is that the saturations are 18 a measure ofwhat percent of households own washers. 19 Fromyear to year that doesn't change very much. It's 20 got a lot of inertia. There's not all of a sudden 10 21 millionpeople who suddenly today decide togoout and 22 buy a washer nor thatmany that suddenlydump them. On EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 183 1 

### the otherhand, the actual sales from year to year are 2 very dependent upon short-termbusiness cycles; 3 people's incomes, how the jobmarket is goingand so 4 forth. And so the model, in attempting to fit those 5 swings has a littlebitof a hard time. 6 But these are the two Sat/Life 1 and Sat/Life 7 2, the twomodels. 8 The otherdifferencebetween these two is the 9 line at the topwith thebigwaves on ithas a fairly 10 narrowbandof lifetimes and so your replacement cycles 11 

### tend torepeat off into the future. This large swing 12 in sales thathappened in the last 1980s tend to lead 13 to a replacement, and then those get replaced, and you 14 get thesebumps. 15 The other way to do it is to say the 

### 16 lifetimes are very broad, a range of 7 years to 30 17 years insteadof 12 to 17. Inwhich caseyou smooth 18 those out and you get a much straighterline. 19 The lastmodel is theAccountingmodel. It's 20 relatively simple. It accounts for washers separately 21 22 

### innew homes and replacements. I think those are very differentmarkets and I think it's important to treat
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• 184 1 those separately. 2 The price and operating cost dependencies can 3 be incorporated. We haven't done ityet. That's the 4 next step. But that's important ifwe're going to look 5 at a standard scenario. You want to be able to see the 6 effect ofprice and operating cost. 7 The "con" side. Any model you deal with is 8 going tohave to involve some assumptions about the 9 future. You're going tohave to forecast the 10 saturations. I think that's good news andbadnews. 11 We want to forecast the saturations so that we have the 12 responsiveness toprice, but thatmeans you have todo 13 it. 14 The housing startsmust be forecasted. 15 That's true for all of the models. And the removals 16 are based upon; your assumption about lifetimes. And 17 we'vehad a question earlier about whether the 18 lifetimes will hold up over time. That gives you this 19 forecast. 20 21 22 I'll comment about the fit here. You'll notice it fits pretty well up until 1990, early '90s, and then the actual sales have beenbetter than this
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• 185 1 model says. I think there are a couple of things going 2 on there. 3 The economy has been better than expected. 

### 4 The model is not very sensitive to short-termbusiness 5 cycles. It tends to do long-term. And I think that 6 reality is going tomeet up with the model again fairly 7 shortly. 8 So the fact that there's some discrepancy in 

### 9 recent years, although is a concern, I don't think is 10 something that kills this approach. 1 1 Now we put them all together. Those of you 12 who are interested in uncertainty, you can take this as 13 your band or at least part of the band of the 14 uncertainty about the future. In the worst case, sales 15 couldbe lower or flat for the foreseeable 10 years and 16 then going on out. In the best case, they'll be 17 increasing at a much higher rate. 18 But all the models show that in the long19 term, if you start lookingout 30 years, you have to 20 account for increases in shipments. 21 My suggestions for how to use this are in the 22 simple spreadsheet that you already have from last EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 186 1 July. You could take anything in this band and plug it 2 in to reflect yourbest judgment about what the future 3 will be like. 4 All themodels forecast an increase in 5 shipments eitherbecause of the time trend. 6 Historically they've been increasing; because the 7 saturations are increasing; orbecause there's more 8 households in the world. 9 Of the five models, only the last one, the 10 Accountingmodel, couldbe adapted to account for 11 economic factors, and therefore, I think that's the one 12 to focus on as we move intonot just a base case 13 forecast but also a standards based forecast. 14 Thank you. 1 5 MR. BROOKMAN: Quite a lot ofmaterial there. 16 Questions or comments? 17 Steve? 18 MR. ROSENSTOCK: Steve Rosenstock, EI. 19 Just a quick one. Just looking atkind of 20 all five, kind of there, itjust struckme that it 21 seemed likenone of themodels showed

-- well, onlyone 22 really shows a drop in sales at some point. The EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 187 1 humpiest one. I'll say that one. 2 (Laughter.) 3 That's the only one that shows like a real 4 drop. And itdoes look like, like youwere saying, 5 withbusiness cycles it does seem to be a significant 6 drop at some point in the future. It'smore of a 7 it's a very hilly route and smooth curve. That's my 8 best guess that the hill part is probably the better 9 one, might be the most kind of

-- when you look at it, 10 that might be the most -- it's just linearupwards it 1 1 seems like. 12 MR. McMAHON: You think the replacement 13 cycles have some merit? 14 MR. ROSENSTOCK: Yes. 15 MR. BROOKMAN: Would you comment on theband 16 width? 17 MR. ROSENSTOCK: No. 18 (Laughter.) 19 MR. BROOKMAN: Other questions or comments on 20 all these models? 21 22 MR. ROSENSTOCK: Well, is that the only part of this national energy savings spreadsheet you were EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 188 1 going to discuss or is the future counted

-- just an 2 overall

-- what kind of numbers you got? 3 MR. McMAHON: That's the basicpresentation. 4 I could showyou a look at theNES spreadsheet. 5 Well, are there any otherquestions on this 6 beforewe go to that? 7 MR. BROOKMAN: Dave, do youhave a question? 8 MR. MODTLAND: Yes. Dave Modtland. Just a 9 comment, I guess. 10 From the information that was shown earlier, 1 1 it indicated that the pricewas fairly constant 12 throughout that period and really this model doesn't 13 take into account what retail price does onvolume. I 14 don't have any suggestions for how todo that, but just 15 a comment. 16 MR. McMAHON: You're right. That's a problem 17 because the historical prices have been stable. And 18 from an analysis point of view, that doesn't give us 19 situations to analyze where the price suddenlywent up. 20 If that's what's going tohappenwith 21 22 standards, that standards are going to drive pricesup,
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• 189 1 to look at and saywhat's the response going tobe. So 2 that is a problemand I agreewith you. 3 MR. BROOKMAN: Do youhave any additional? 4 (No response.) 5 MR. McMAHON: Okay. Letme turn to the 6 NationalEnergy Savings Spreadsheet. This iswhat it 7 looks like. You can download this spreadsheet from the 8 DOE Web site. Itwill alsobe up on the LBL Web site 9 shortly. 10 There's nohandout on this. If you're looking 1 1 for a handout, there is nohandout on this. We can 12 make copies of this available. 13 This is basically the summary results page 14 sheet of the spreadsheet and it shows a table ofenergy 15 savings for the different fuels from the time period 16 startof standards to 2010, 2020 and 2030. It shows 17 electric, gas and oil and the total, and also shows 18 water savings. 19 The chart shows billions of dollars change 20 going from the base case to the standards case. We 21 22 took a 20 percent improvement, 20 percent energy reduction, for this example. The lines below the zero EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 190 1 

### areprice changes, soyouhave a price increasewhich 2 isprintedhere as a negative value. and energy and 3 water savings, which are positives. And thered line 4 shows the net effectof that. 5 So in this scenario, after about three years, 6 the countrybreaks even, and after that it'smaking 7 money. 8 Overhere, discounted at 7 percent, is the 9 netpresentvalue of the energy and water savings, $4.8 10 billion. Equipment cost, $1.5 [billion]. So a net of 11 $3 billion. Abenefit costratioof 3. 12 

### To operate this you simply go to list inputs 13 and youwill get a screen that looks like that. Main 14 menu. Because of the resolution of this projector it's 15 hard to see, sowe'll have tomake hard copies 16 available. But it lists the usermenus that you have 17 available. 18 Energy price, the year to start the standard, 19 the discount rate and the year towhich you're going to 20 discount, the standards case you want torun, the 21 manufacturer costs. We're using the shipmentweighted 22 average. And thewater cost escalation. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 191 1 Up in the top left you can change the fixed 2 charge if you want to deal with the fixed charge issue 3 on the energy crisis. 4 MR. BROOKMAN: And again, Jim, where is this 5 available? 6 MR. McMAHON: DOE Web site. 7 MR. BROOKMAN: And this is called 8 MR. McMAHON: NESCW. 9 MR. BERRINGER: Sandy has the disk. It's a 10 separate disk that she has here available. 11 MR. NADEL: That's the life cycle cost 12 spreadsheet? 13 MR. BERRINGER: No. The National Energy 14 Savings Spreadsheet. 15 MR. McMAHON: NES. National Energy Savings. 16 MR. ROSENSTOCK: Aquick one. Steve 17 Rosenstock, EI. 18 When I downloaded itoff the Web site, the 19 DOE Web site, with the announcement about the workshop, 20 I triedprintingup some pages. I don't remember 21 seeing

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• 192 1 MR. NADEL: I downloaded it

-- well, two 2 weeks ago. I'm sorry. 3 MR. McMAHON: Two weeks ago. The 4 calculations and the user interfacehas beenmade much 5 friendlier, comparable to the life cycle cost 6 spreadsheet. 

### 7 MR. NADEL: I wish I'dknown that. Okay. 8 MR. McMAHON: I'm sorry. 9 MR. BROOKMAN: Is that now available on 10 the

-- 1 1 MR. McMAHON: That's what you get for being 12 ahead of the curve, Steve. 13 MR. NADEL: Sorry. 14 MR. McMAHON: Yes. It's now available on the 15 Web site. 16 MR. BROOKMAN: On the DOE Web site. Under 17 the announcement? 18 MR. BERRINGER: We'll make sure that 19 everything is updated to include all the slides and so 20 forth for the data. We had a lot of that on there. 21 22 This is a newer version than what you had downloaded, Steve. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 193 1 MR. BROOKMAN: Wayne? 2 MR. MORRIS: This one's got the correction? 3 MR. McMAHON: You can change the inputs and 4 itwill recalculate, we hope. Yes. 5 Those of youwho have been involved inpre6 tests of all these things, I apologize for the 7 technical difficulties. We've learned thatMicrosoft 8 versions of EXCEL are not upwardly compatible and 9 things thatwe created inEXCEL 7 for WINDOW 95 don't 10 work inEXCEL for WINDOWS 97 and so forth. Sowe've 1 1 had to goback several times and as different systems 12 pickup the spreadsheet and try and use itand fail, 13 we've had to goback and reprogram tomake itwork for 14 different applications. 15 So I apologize for the problems. Itworks 16 fine on ours. And if you use EXCEL version 7 for 17 WINDOWS 95, I expect itwill work just fine. If you 18 use something else, try itout and tell us if it 19 doesn't work and we'll figure out what the problem is. 20 We've talked toMicrosoft and they have 21 22 admitted that there are difficulties and they're working on a patch. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 194 1 (Laughter.) 2 MR. ROSENSTOCK: On the inputs, there's a 3 conversion factor in there? 4 MR. McMAHON: Yes. 5 MR. ROSENSTOCK: BTU's perkilowatt, heat 6 rate conversionon the 7 MR. McMAHON: Yes. The current conversion 8 for heat rate is taken from AEO 98. That's the most 9 current thing that we have. And in terms of numbers, 10 it starts at about 10,700BTUs perkilowatt hour and 1 1 goes down to somewhere in the 9,000's by the year 2020. 12 The specificnumbers are in the spreadsheet. 13 If you go to the tab that says "elect conversion." 14 MR. ROSENSTOCK: The latestversion though. 15 MR. McMAHON: Yes. 16 MR. ROSENSTOCK: Okay. I don't need to see 17 it. 18 MR. McMAHON: Okay. So the operationof the 19 spreadsheet is you go through to each of thesemenu 20 items. You pick your scenario and hit the button that 21 22 says calculatedown at the bottom and itwill showyou that results screen that I just showed you. And we're EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 195 1 

### happy to take comments about any otherdevelopments 2 that you would like to see. 3 That's all I have on that. 

### 4 MR. BROOKMAN: Additional questions or 5 comments? 6 Yes, Steven? 7 

### MR. GOLDSTEIN: Question. Thismay be 8 farther than you've gotten. National Energy Savings 9 are compared to some base case and what are the 10 assumptions concerning the saturationof efficient 1 1 

### products in the base case. 12 MR. McMAHON: You're right. It's a little 13 farther thanwe've gotten. There is a spreadsheet

-- 14 there is one of the sheets. I don't know ifyou can 15 see these tabs down here. This one saysbase case. 16 And ifyou go there, itwill showyou the time series 17 of energy consumptionperunit, consumptionpercycle, 18 which is taken out of the engineeringdata. 19 Sowhatwe have inhere is the setof 20 efficiency levels that are were described earlier from 21 the AHAM data. We have a base case forecast thathas 22 an assumption aboutwhat fraction of thosewillbe EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 196 1 horizontal axis and that's all. Sowe're not 2 forecasting a full distributionof efficiencies at this 3 point. 4 The standards case is then compared against 5 whatever thatbase trend is. But you can find all of 6 the details in the sheet. 7 MR. BROOKMAN: Additional questions? Are we 8 ready tomove on? 9 (No response.) 10 I think we are. Okay. 11 MR. BERRINGER: If you goback to your 12 package, your original package, we're starting at slide 13 15 right now on reverse engineering. The packetwe 14 startedwith this morning. Clothes Washers Standards 15 Workshop, today's date. The one that begins withthis 16 slide, slide 15 of this package here. 17 (Pause.) 18 I told you one of the tools I needed today 19 was my Bible, so I broughtmy Bible for this session 20 here. 21 One of the stars as part of this rulemaking 22 has beenWhirlpool, as far as theirprototypedesign. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 197 1 And one of the reasons we're doing reverse engineering 2 is to derive a thirdparty estimate of the cost of the 3 prototype in comparison with the V- and H-axis machines 4 in the data supplied by the manufacturers and to 5 evaluate whether or not it falls within the range of 6 existing data. 7 So the approachwas basically to do

-- we 8 actually do the baselineV-axis models, two top selling 9 V-axis models. Also, we're looking at two commercially 10 available H-axis models and the Whirlpool prototype. 11 And I'd like to thank Whirlpool for

-- 12 they've been very cooperative in their assistance 13 throughout this whole process as far as allowing Arthur 14 D. Little and myself to come out there and witness 15 testing of the machine and really open up theirbooks 16 and letArthur D. Little evaluate the prototype. 17 Status to date. Arthur D. Littlehas

-- and 18 Steve Mariano will get into a little bit more detail as 19 far as what they've done. They've torn down two of the 20 V-axis machines. Also in your package is a preliminary 21 22 report dated February 24th of '98. And to date, they've also begun tear-down of the prototype. So EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 198 1 they've beenout toWhirlpool to look at themachine. 2 One of the things we want todo, and the 3 purpose of this is tomake sure that the approaches 4 thatArthurD. Littlehas done to date with the 5 baselineunits is acceptable, some of the assumptions 6 they'veused, and come upwith

-- obviously it'snot 7 going to represent any one particularmanufacturer, but 8 what we're going todo is present their approach for 9 their tear-down. 10 Basicallywe're looking for your input as far 1 1 as if these assumptions make sense. And again, we 12 weren't trying to focus on one particularmanufacturer 13 but a greenfield type study. And after that, we still 14 have toproceed

-- they stillhave toproceed and 15 they're going to teardown two H-axis machines 16 basically to seewhere that falls, if it falls within 17 the range of existingdata. 18 Sowe're trying a -- Steve Nadel, you'd asked 19 about some of the verification, so some of the work in 20 doing this

-- this is somethingnewwe haven't done 21 22 before. So this gives us an idea, too, as far as whethernumbers are realistic or even sort of

-- we're 

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• 199 1 

### doing a bottoms up and a topdown sortof analysis 2 here, sowe're trying tobe as thorough as possible. 3 There's been a number ofquestions inpast 4 workshops questioning theWhirlpool prototype, whether 5 itcleans clothes ornot. And Whirlpool was gracious 6 enough tohave us come out there andwitness the 7 testing. 8 I personallywitnessed the testing, saw the 9 results. We basicallyran -- they ran a top selling

### V10 axis machine and top sellingH-axis machine and the 11 prototype. They actually ran the test twice. 12 Basically, we looked at soil and stain 13 removal. Again, they ran the test twice for each 14 machine. They usedbasically anASTM-D4265 standard as 15 

### far as evaluating the stain and soil removal. So they 16 usednine different stain swatches, six samples of it. 17 We ran the test twice. 18 We alsoused the material, the clothcalled 19 out in theAHAM testmethod. Alsovarious other 20 cloths. Stainedclothwereused, but a total ofnine. 21 22 Also therewas a gentleness testperformedon there and also a rinsing test. And basically, all the 

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• 200 1 

### results thatwe saw fell within the range. I could 2 visually see the difference in all the materials. We 3 laidout the vertical axis, the H-axis and the 4 prototype, and all the results fell within the range. 5 Acceptabilitybetween those threemodels. 6 The prototype fell inbetween that as far s results. 7 So that's sortof the question that's come up in the 8 past as far as the performance issue. 9 Does anybody have any questions as far as 10 that's concerned? 1 1 

### Larry? 12 MR. HAWKINS: I'm sorry if I missed itbut 13 what load sizedid you say was tested? 14 MR. BERRINGER: Basically, what's calledout 15 intheAHAM testprocedure usedvarious shirts, sheets, 16 towels. 17 

### MR. HAWKINS: Yes. TheAHAM testprocedure 18 has articles for different loadweight sizes. My 19 questionwas what load sizeweightwas tested. 20 MR. BERRINGER: Off the top ofmy head, I 21 don't recall what load sizewas used
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• 201 1 Thank you, Curt. 2 MR. HAWKINS: Thanks. 3 MR. BERRINGER: Are there any otherquestions 4 about any of this testing? 5 (No response.) 6 Okay. Seeingnone, I'llgo into a littlebit 7 ofbackground on the reverse engineering. 8 I thought I had some slides on that. This 9 time I'll let SteveMariano come and present from 10 Arthur D. Little. 1 1 MR. MARIANO: Thanks, Bryan. 12 Good afternoon. As Bryanhas said, as part 13 of a reverse engineering

-- I'mgoing to use that term 14 a little loosely. In the classic sense, reverse 15 engineering is sort of the build a bettermousetrap. 16 Tear somebody else's product apart and make itbetter. 17 That's not really what we're doinghere. Our 18 approachhere is to assess the costs. Primarily itwas 19 to assess the cost of the prototype, the Whirlpool 20 prototype. But to stepback from that, we saidwhat's 21 important is thatwe convey the methodology to the 22 stakeholders so that everybody understands how we EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 202 1 

### arrived at that cost, because obviously revealing 2 specificdata about the cost of that productwouldbe 3 beyond the realmof confidentiality. 4 So, that initiatedthis programan that's 5 what we're callingourPhase I. Phase I was really to 6 do a vertical access machine, current state-of-the-art, 7 and demonstrate themethodology, showyou theresults, 8 and thenmove forward ontoPhase II, whichwouldbe the 9 prototype. 10 And as partof Phase II we were alsogoing to 1 1 

### do the H-axis, which is again a higher efficiency 12 concept. 13 One of the important things that I want to 14 point out, one of our objectiveshere andwhat I'd like 15 to see from the stakeholders as input as toour 16 methodology. That's a major objectiveof Phase I is to 17 get input. Sobesidesme gettingout ofhere alive, 18 I'dlike some feedback onwhat you guys thinkof our 19 methodology and the analysis andwhether you think 20 there are certain issues likevariability and 21 22 uncertainty in the analysis we should focus our attention. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 203 1 Bryanhas already told you a bit about our 2 status, where we are today. Just to give you a bit of 3 a chart to show you sort of what we've been doing. 4 We're nearly complete with our Phase I 5 analysis. We've been refining that. 6 You've really got two documents. The report 7 that you received on February 24 was preliminary. We 8 have actually updated some of that analysis. And in 9 the handout package that you have, that incorporates 10 some more information, primarily through more visits 11 and discussions with the manufacturers of clothes 12 washers, as well as material, component and equipment 13 suppliers. We've been having discussions with them as 14 well. We're feeding that information into our 15 analysis. 16 We've also actually already begun, thanks to 17 Whirlpool, analysis on the prototype. We've actually 18 had a visit with them and are collecting the data and 19 have now begun our analysis on the prototype, as well. 20 21 22 MR. NADEL: Given this schedule, am I correct in assuming that this analysis will be completed around the same time as the NOPR so the data won't be in the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 204 1 ANOPR butmay be available around the same schedule? 2 MR. MARIANO: I thinkBryanmade a case of 3 thatbetter. That's our intention. I think 4 information is available as we proceed, butmaybe we 5 won't be finalizing ituntil sooner than theMay time 6 frame. 7 MR. BERRINGER: It is around the same time 8 frame. Ifwe can accelerate it, we will have the 9 information available, butwe stillhave time after the 10 ANOPR todiscuss it and ifwe have a workshop inJuly, 1 1 to further

-- 12 MR. NADEL: That makes sense. And I'd 13 encourage you not toholdup theANOPR for this. 14 MR. BERRINGER: No. We do not planon 15 holding up the ANOPR. 16 MR. MARIANO: I'd like to talk a littlebit 17 aboutmethodology. What we refer to as technical cost 18 modeling is really buildingup costs butusing a 19 spreadsheet tomodel those costs. Itprovides us a 20 great deal of flexibility in the analysis. Changing 21 input parameters to themodel to look at the effectsof 22 various equipment, process, cycle time and et ceteraon EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 205 1 

### the cost. And sowe can readily adapt it if 2. 

### informationbecomes available thatwould leadus to 3 believe that our initial assumptions weremaybe 4 incorrect. 5 Really, what we have here is separate 6 databases in the spreadsheet. One is drivenby product 7 specifications. And this actually applies to a lotof 8 products that we work on. But obviously here, the 9 clotheswasher and the information. And I'll go 10 through the assumptions we've usedonourbaseline 11 

### vertical axis machine there. 12 Material and component databases which 13 primarily gives you pricingofmaterials and the 14 components, major components, purchased components in 15 the machine. 

### 16 The process database is focused on 17 manufacturingprocesses. Just togive you some 18 examples here, pricing, injectionmolding, et cetera. 19 In thatkind of a database, information on equipment, 20 typical process cycle times for various sizes of 21 equipment. And that's all drawn into themanufacturing 22 cost estimate, as well, from that database. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 206 1 And then finally, obviously, sort of the 2 financial exogenous factors associatedwith the plant 3 size, output, capacity, machine up time, et cetera. 4 Those are all sort of factory information that's 5 important in the analysis. 6 These are all fed in. This information is 7 all fed into the costingpartof it, which is what I've 8 shown you. It's components. And it'sby a component 9 basis. And the componentwould draw offof the 10 appropriatemanufacturing processes ormaterials that 1 1 are associatedwith that to calculate the cost. 12 And we've basically summarized this data 13 according towhat you've already seen. On full 14 production costs, we've broken it intomaterials, 15 direct labor and overhead, as in factory overhead. 16 Just to give you a littleglimpse of sortof 17 what that looks like

-- and some of you may be familiar 18 with sort of this kind of a -- it's really a structured 19 bill ofmaterials for a product listingparts. We 20 identify themby number. We actually have the 21 22 description of the part and all pertinent information,
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• 207 1 projected area of a plastic component to size, 2 injectionmolding equipment. That type of thing. And 3 this will drive our actual material cost. 4 Also this is structured according to assembly 5 so that what we're doing is here is actually layingout 6 how the thing, this product, might go together and how 7 the clothes washer goes together, so the steps that are 8 taken in that. And that will generate our assembly 9 times as well and associated labor. 10 To generate equipment costs and equipment 1 1 utilization, in otherwords, how many presses orhow 12 large a paint facility wouldbe necessary to do these 13 productions, we've attached to this bill ofmaterials a 14 process sheet. And what that does is identify cycle 15 times per part for specificmanufacturing processes. 16 So, inotherwords, if a particularcomponent 17 needs injectionmolding, there wouldbe a cycle time in 18 that cell according to that particularcomponent size. 19 That would obviously generate, basedon the number of 20 components that needed tobemade in a year, how much 21 22 equipment wouldbe necessary given certain financial assumptions such as up time and die change. And we EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 208 1 have that incorporated inhere, as well. 2 Now all of this has been summarized and 3 placed into cells that tell you the total amount of 4 time that this equipmentwouldbe necessary. And then, 5 given certainequipment availability, itwould tell you 6 how much equipment I'mgoing toneed. Do I need 10 7 injectionmolders? Do I need 2? Itwould generate 8 that type of information. 9 So from that kind of informationwe can 10 generate a total equipment investment associatedwith 1 1 building these particularunits at a given volume. 12 If there's any questions on themethodology, 13 I'dbe certainlywelcome to answer those now. But I'll 14 go into some of the assumptions thatwe've assumed in 15 our Phase I analysis for the clothes washer. 16 First of all, as Bryanhas mentioned, we took 17 two vertical axis currently available on the market 18 machines. Purchased those. This is a general 19 description ofwhat thosemachines looked like. They 20 were high volume, relatively common models thatwere 21 22 out there. And basedon certain information about whichmodels wouldbe representative ofbaseline from 

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• 209 1 the standpoint of the wash and rinse temperature 2 settings, whether ithad a heated rinse or not, an 3 unheatedrinse in this case, washer spins speeds. 4 These are twomodels that we chose to 5 actually dow a tear down of. 6 Those of you who might not be familiar with a 7 teardown, basicallywhat we've done is take the 8 machine apart to the very screws andwashers and nuts 9 andbolts that are there. And that's how we 10 characterized that. And that's what made up in the 1 1 bill ofmaterials, the actual components and pieces 12 that actually go into this machine. So it's a very 13 detailed teardown analysis. 14 We've alsomade some assumptions about the 15 manufacturing facility. We haven't tried tomodel the 16 particularmanufacturer's plant tomake this particular 17 machine. What we've tried to do is take and aggregate 18 the two designs to get a general overall aggregated 19 cost and also createdwhat we're calling a typical 20 practices plant. 21 22 I don'twant touse the bestpractices becausewe don't want tomake any judgment about whose
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• 210 1 

### plant isbetter than the next guy. Our assessment is 2 to saywhatwouldbe typical of the industry, what's 3 currentlydone out there from the standpointof 4 manufacturing. And we've actually talked to 5 manufacturers toconfirmour assumptions aboutwhether 6 these things were processes thatwere typical orcommon 7 in theirplants. 8 Oftendecisions about what processmight be 9 used isn't all that difficult. Obviously certain 10 plastic components are injectionmolded. There isn't a 1 1 

### lotofothermethods that are commonly used in the 12 industry. But again, we have talked to the 13 manufacturers tomake sure thatwe're representing a 14 plant that would be representative of the industry. 15 And some of the assumptions thatwe'vemade 16 at this time. One, we've assumed 1.5millionunits a 17 year as a baseline capacity. And really what that is 18 going todo is drive our investment; how much equipment 19 are we going to need toproduce thatmany machines. 20 Also, we've looked at we've considered 100 21 percent capacity. Inotherwords, the plant is 22 building 1.5 millionunits, not somewhat less than EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 211 1 designed for. Also, we have assumed thatnone of the 2 equipment is dedicated. Now, thatmay notbe typically 3 the case, but that wouldbe verymuch related toa 4 specificmanufacturer. And again, we didn't want to 5 get into that realmofwho does this represent; which 6 manufacturermight havemore or less dedicated 7 equipment. Sowe've taken sortof a theoretical 8 viewpoint in this sense and said that rightnow none of 9 our fabrication processes is dedicated to any 10 particularcomponents. 1 1 

### And what that says is that for say a 12 particularpiece of stamping equipment tomake a 13 certain component in themachine, may only have 20 14 ·percentutilization. Well, thatmeans that thatpiece 15 

### of equipment is available for 80 

### percent of the time 16 and itcanmake otherparts. And that's what our 17 assumptionhas been at this stage. 18 We've also assumed a greenfield investment. 19 Inotherwords, a brandnew plant. There's no 20 refittingor retrofittingor changing of a current 21 

### 22 facility. We haven't said that a certainmanufacturer would recuperate some of this investment because they EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 212 1 already had equipment or that they would potentially 2 lose investment in the assets that they already had 3 that were no longeruseful. We've assumed that this 4 plant is greenfield and start from fresh. 5 So inotherwords, as we sometimes jokingly 6 said, ArthurD. Little is going into the clothes washer 7 business. 8 And again, some of the assumptions we've made 9 about automation. Typically in the industry there is a 10 lot of automation and supporting fabrication processes 1 1 but that assembled operations are primarily manual. 12 And what I mean by that is there are some powered 13 handheld tools but they are prettymuch drivenby a 14 line assembly withworkers on the line. There isn't a 15 lot of robotics doing assembly. And that's typical of 16 the industry. 17 And again, for equipment costs, cycle times, 18 we've assumed what's both typical for the industrybut 19 also typical for equipment suppliers and the equipment 20 that's available in the industry today. 21 22 You've already seen this charthere in the presentations earlier today but I justwanted to 

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• 213 1 emphasize again thatwhat we're doing isbuildingup a 2 full production cost, directmaterials and again direct 3 labor, and thenwhat's considered factory overhead, 4 which is

-- we've included in that the indirect labor 5 and indirectmaterials, maintenance costs associated 6 with equipment, utility costs. Also in thatwouldbe 7 taxes, insurance and depreciationof the equipment. We 8 have not included any cost of capital associatedwith 9 an equipment investment. That would fall under the 10 nonproduction costs, at least in this analysis. 11 In your packetwe have some baseline 12 assumptions thatwe made and certain financial factors. 13 I won't go through all these indetail but certainly 14 can answer any questions. 15 We've again taken information that we feel is 16 typical of the industrybut often this was an area 17 where we see variability and uncertainties and that's 18 where we focus a lot of our attention in the analysis, 19 which I'll showyou in a few minutes. 20 This is ourmost recent analysis thatwe've 21 22 completed as ofMonday. These numbers don't quite agree with our earlyFebruary numbers, or I should say EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 214 1 lateFebruary numbers. And that's basedprimarilyon 2 more information that we've collected since that time. 3 What we've done is tried tobreakdown costs 4 permajor subassembly. And the reason we've done that 5 is toprimarily give you an ability toevaluate the 6 analysis without actually spellingout specificdetails 7 oncomponents. We've tried toreserve some 8 confidentiality inour analysis but this gives you at 9 least a littlebit of an indication of componentwise 10 or subassemblywisewhat the costs are. And that would 1 1 allowyou to evaluatewhether you felt this analysis 12 was representativeof the industry. 13 Just to summarize the numbers here, we've 14 calculateda total material cost in this aggregated 15 vertical axis machine is $126.00. Direct labor, 16 $31.00. The overhead, factory overhead at $45.00 for a 17 total of $203.00. 18 MR. KESSLER: Do you want us tobreak inhere 19 with some comments where it's appropriate? 20 21 22 MR. MARIANO: Any time. MR. KESSLER: Alan Kessler, fromAmana
. Because I'd like togoback and comment on a couple of EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 215 1 

### things, startingonpage 9. One hundredpresent 2 capacityutilization is an admirable goal but I don't 3 know of any manufacturers that are able to achieve 4 that. 5 We've got cyclical seasonal business thatwe 6 have tomove up anddown, so I would say thatwhile 7 we'd like tobe therepartof the year, we may average 8 more like 90 percent or in the high 80s. 9 Thework shiftdays, I thinkmost of them 10 probably running 230 to 235 rather than 240. You look 11 at your down timewhere your vacations, yourholidays 12 and that sortof thing. Most of our operations I would 13 say areprobably not runningmore than two shifts in 14 assembly. 15 MR. MARIANO: 

### What we tried todo iswe 16 looked at fabrication, whichwouldbemore runningon 17 three shifts and assembly on two. And we tried to 18 create some sort of an average. But certainly any 19 indications that youmight have as an industry of 20 what's more typical, you can certainly adjust the 21 analysis torepresent that
. 22 MR. KESSLER: Right. Equipment depreciation. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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216 1 If I thought I couldget 14 years, that wouldbe a hell 2 of a deal. 3 MR. BROOKMAN: You'd be drooling likeMr. 4 Barzel. 5 MR. KESSLER: Yes. That's probablymore like 6 five to seven for most ofus. 7 MR. MARIANO: Okay. I appreciate those 8 comments. Actually, one of the things thatwe've done 9 is

-- lateron I'll showyou some of the sensitivity. 10 We tried to look at, well, what ifone of those 11 theories we realize that capacity utilization 100 12 percent is a dream, not realistic. What would be the 13 impact on those utilizations. 14 I think the inputs that you give are very 15 useful inhelping us to find what is the actual 16 baseline andwe can run variations on that rather than 17 using this as baseline. 18 We've alsoprovidedyouwith a breakdownof 19 ouroverhead cost categories since some of these issues 20 might be of interest to you in that where is indirect 21 22 labor, indirectmaterials. Certainly depreciation is a question youmight want to consider. And these are all EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 217 1 

### perunit basis, so this wouldbe the dollars perunit. 2 Taxes and insurance aremore driven from, as 3 Mike showed earlier, an industry structure analysis. 4 Obviously that's going to vary and it's pretty hard to 5 assign that to a particularproduct. Butwe have tried 6 toput some numbers in there that are representative of 7 the overall industry average and to try to assess that 8 andmake sure that that's included in the cost as well. 9 These vary considerably from our initial 10 assessment. These are our estimates on a greenfield 11 siteequipment investment. We've broken that down into 12 equipment, tooling and incorporated some estimate for 13 installationof that equipment, and then alsoput in an 14 estimate for thebuilding itself and conveyors 15 associatedwith that. we tried to incorporate that as 16 well to come up with a total investment. 17 I'm sure this isprobably a number that there 18 willbe a lotof discussionover as towhere this 19 eventually leads. And that's another thing that we've 20 done some sensitivity analysis on. 21 22 Again, I canreiterate that our analysis has beenbasedon a particular component andprocesses, 

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• 218 1 

### someprocesses associatedwith that component, and what 2 wouldbe estimated as necessary tomanufacture that 3 component. And so that's how we builtup our costs. 4 Theremay be equipmentparticulartoa 5 manufacturer that in a sense we've said they're all 6 non-dedicated that they are dedicated, and thatwould 7 increase this number, I believe, but to the extent that 8 we haven't tried todelve intohow much that wouldbe 9 yet. But this is our estimates ofbaseline, $10.5 10 million a year facility tobuild an aggregatedor 11 typical v-axis machine. 12 I might alsonote thatwe have not 13 incorporated the fact that there are multipleproducts 14 built in a facility. This is just tobuild this one 15 particular machine in at a million and a half a year. 

### 16 MR. BROOKMAN: Ifwe couldjustpause for a 17 moment here. It seems likely one comment -- the 18 Departmentwould like tohear comment onboth 19 methodology and the results as listedhere. 20 Please stateyourname for the record. 21 22 MR. ESSMA: EricEssma, ChloroxCompany
. I have a question. Backon your charton EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 219 1 page 5, you're accounting for parts down topennies and 2 you account for a bleach tool. And the twomost common 3 accessories on a machine are fabric softener dispenser 4 and a bleachdispenser. And the reservoir for the 5 fabric dispenser is, as you noted, on the upper 6 agitator assembly usually, but the bleachdispenser 7 reservoir is on the tub inside the extra lidof the 8 machine. 9 And there's an expense involved in cutting 10 thatwhole andputting that reservoir in there and 1 1 attaching the tube to it and I don't see that accounted 12 for inhere anywhere. And unless you have itback in 13 here in the cabinet costs or something like that, there 14 is nobleachdispenser on this machine. And I'mjust 15 wonderingwhere. 16 MR. MARIANO: What I've shown you inonly 17 really a snapshot of that full buildmaterials. 18 There's about 350 parts in themachine, so that's a 19 spreadsheet that's 350 rows long. All of the 20 components, including thatbleachdispenser and the 21 22 bleach tube are in there. It'sjustwhere they get attached, where the whole is cut on the lid. If it's EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 220 1 in the lid, itwould go into typically the wood 2 assembly area, and that's how we've accounted for it. 3 MR. ESSMA: So it's justnot broken out. 4 MR. MARIANO: Right. If you haven't seen on 5 here doesn't necessarily mean we don't have it. 6 MR. ESSMA: Thank you. 7 MR. MARIANO: The other thing is there are 8 probably features in these particularmodels that 9 aren't present -- I'm sorry. There may be features in 10 othermodels that are not present in these models. We 1 1 have not costed those and incorporated those into the 12 analysis. 13 If there's no further questions, I'll go on 14 to some of our analysis. 15 As you've seen already today in the 16 sensitivity analysis as well as some simulations using 17 something like crystal ball have beenprevalent and I 18 thinkwe also are doing that in this analysis and we 19 feel it's very important for us to understand the 20 impact of certain variables on the cost of the unit. 21 Just to show you an example of those, and by 22 no means complete but certainly to give you an idea of EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 221 1 what things we are doingwith themodel and which 2 variables we are at least currently looking at and 3 we'd like tohear your input onwhich ones 

### you think 4 are relevant orothers that

### you think we should 5 consider. 6 We're doingboth single sensitivity analysis 7 on each individual variablebut also looking at using 8 theMonte Carlo simulation, such as crystal ball. We 9 are giving

### you just a representationof the numbers 10 thatwe're looking at. 1 1 As 

### you can see in the plant output, I've 12 already said that the capacity is 100 percent, 1.5 13 million units. We are looking at lower volumes down to 14 900,000, says about 60 percent capacity. Things like 15 laborrates. I thinkJimmade a good point about 16 variability and uncertainty. Labor rates most likely 17 fall into that variability term that laborrates will 18 differ for differentmanufacturers, different parts of 19 the country. So there's analysis thatwe've look at, 20 what if the laborrates were different from our 21 baseline assumption of $24.00
. 22 Uncertainty is a parameter that you can see EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 222 1 

### present in something like plantoutput. You really 2 justdon'tknow what is theplantoutput going tobe. 3 Are we going toreallybuild and sell 1.5millionor 4 maybe we're only going to sell 1.1 million, 1.2 5 million. So that is an area thatwe can look at from 6 the standpointofuncertainty and evaluate its impact 7 on cost. 8 What I'm also showing is some of the 9 probability distributions we've used. There's a 10 variety of distributions that canbe used. Whether 1 1 

### they're uniformornot means that the laborrate can 12 vary from $17.00 to $28.00 andnonumber ismore likely 13 than another. Where with theplantoutputwe might use 14 a triangular distributionwhich has a most likelyvalue 15 to it, we feel that 1.5 million units is most likely 

### 16 but itcould vary from that. And that wouldjusthave 17 an affect on the ultimate distributionof the final 18 cost estimate. 19 I won't go through all of the sensitivities 20 because there are several here. And I'll certainly 21 22 answer any questions about any specificones youmight have.
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• 223 1 

### Butjust to show

### you an exampleof the 2 analysis thatwe cando with themodel

-- and this we 3 cando on a perunitbaseline. We have twomachines, 4 one atbaseline 1 and baseline 2. We cando iton the 5 aggregatednumber as well. Butwhat this allows us to 6 do is comparewhat is the cost of thewasher and what 7 is the impact of a variation in the cost of labor. 8 You can seehere ifwe vary from $17 to $28 9 for thebaseline, $24, the impacts areplus orminus 5 10 percenton the final cost of $203. So itjustgives 11 

### you some indicationofwhich variables aremore 12 which variables the cost ismore sensitive to. 13 I'mjustgoing to skip to theMonte Carlo 14 simulationwe ranjust togive

### you a senseofwhat 15 

### we're doingwith that. 16 Basically this analysis would take those 17 MonteCarlo simulation inputs that we have for labor, 18 plantcapacity, investment, et cetera, and use 19 generate randomnumbers in that probability 20 distribution according to the distribution andcome up 21 22 with a range ofultimately themanufacturing full productioncost. You can see here that just togive
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• 224 1 

### you an example, we ran a quick analysis with 1,000 2 trials. And within about 95 percent certainty the cost 3 runs from $197 to $232. 4 Actually, we'vebeenrunning somemore recent 5 ones based on some more recent analysis and that 6 information is leadingus to a littlebit tighter 7 spread. So as we refine ourdata I thinkwe're getting 8 more andmore closer to a good estimateof that range 9 ofmanufacturing costs. 10 And inconclusion, our assessment provides 1 1 

### somewhat of a clear transparent analysis that canbe 12 reviewed for future cost analysis of the highe+ 13 efficiencydesigns. Again, the reasonwe did the 14 vertical axis baselinemachinewas todemonstrate to 15 you thatwe cando this on a product and generate 16 costs, as well as provide the ability todo some 17 sensitivity analysis on those costs so thatwe cango 18 forward with the prototypes. 19 We are alsogoing tobe doing the H-axis. 20 Thosewill bephysical teardowns as well. 21 22 The other things that I thinkwe've given you is a number for a typical baseline clotheswasher,
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• 225 1 which I think agrees fairly well withwhat the results 2 have been to date from various other sources. 3 We are also able to aggregate a cost given 4 multiplemodels. We can look atmore than one model 5 and aggregate those cost numbers based on having a 

### 6 model allowing us to quickly do that. 7 I can answer any questions. 8 MR. BROOKMAN: Questions on either the 9 methodology or the results that's listedhere. 10 Particularly, what about some of the results that are 1 1 shown there at the end of Phase I on the lastpage, on 12 page 24. Is he within the range? 13 I see one or two heads nodding up and down, 14 yes. That's all I see. 15 MR. STILWELL: Well, even if it isn't, you 16 still get relative ideas of where the other products 17 lay relative to this, even if this is not an accurate 18 model. If it's off $10 or $15 one way or the other, 19 you canuse the same method and you'd be able toget 20 the relative costs. 21 22 MR. MARIANO: That's correct. That's another
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• 226 1 given certainprocessing assumptions about certain 2 components. Granted there are different components but 3 some of the components are similar, use similar 4 manufacturingprocesses. Carrying those forward we're 5 going tobe againgenerating a differential number 6 based on this vertical axis analysis. 7 MR. BROOKMAN: Additional questions and 8 comments? 9 Yes, David. 10 MR. GOLDSTEIN: David Goldstein. 1 1 Acomment. This seems tobe a real thorough 12 methodology and I think it addresses a lot of the 13 issues I brought up this morning about the blackbox 14 nature of the cost estimationmethodology. IfDOE 15 plans onrunning something like this inparallel, then 16 itprovides a prettygood sanity checkonwhether the 17 unreviewable numbers that it's getting from 18 manufacturers make sense because you have something 19 here that is reviewable. 20 I guess the question is

-- I'm assuming that 21 thisbill of materials, the 350 lines, is something 22 that is going tobe available to the public, at least EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 227 1 for the vertical axis machine? 2 MR. BERRINGER: David, our plans were not 3 to -- we didn'twant to try to identify any one 4 particularmanufacturer, sowe specifically scaled it 5 back so you couldn't say this is so-and-so's model. So 6 our intentionwas not to release any additional 7 information. 8 MR. GOLDSTEIN: Okay. Well, then, I think 9 the issue

-- maybe you can use this as a dry run to 10 figure out how much of the information you couldmake 11 available so that people could review the incremental 12 cost estimate for efficiency improvements and see 13 whether theymade sense on a comparativebasis. And 14 obviously youwouldn't need toknowmost of those 350 15 lines but there would be certainpieces of it that 16 couldbe relevant that you would want toknow so that 17 you can say this piece costs $10 in the study and 18 improves the efficiency 10 percent, so you'd expect to 19 see -- and nothing else changes. So you'd expect to 20 see that the othermethodology gives you about a $10 21 cost increment as well
. 22 MR. NADEL: Yes. This is Steve Nadel. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 228 1 I mean, ultimately some of this dataneeds to 2 be subject topublic reviewrather thanjustbe a whole 3 bunchof blackboxes that everyone is being told trust 

### 4 us. 5 MR. BROOKMAN: Which data causes the 6 question? What levels of aggregationwould yoube 7 hoping to see? We talked about what's listedhereon 8 page 5, for example. I mean, do youunderstand? I 9 presume youunderstandBryan's concern about the 10 proprietary nature of individual products. 11 MR. NADEL: Of course. I think it's a little 12 premature to come up with a specific examplebecause 13 what we've seen is a methodology for costingout the 14 base casedevice and then, in comparison, there's 15 another type of device, in this case, the H-axis, that 16 they say they're going to do andhaven't done yet. And 17 there are certaincomponents, in this case quite a few, 18 that changebetween the se case and the higher 19 efficiency case. And the cost of those changes would 20 be the things that you'dwant toreview. 21 22 MR. BROOKMAN: As opposed to the system, the appliance as a whole? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 229 1 MR. GOLDSTEIN: Yes. The common elements we 2 wouldn't need toknowmuch or anything about. And some 3 of the changes

-- you know, if this used a different 4 size fastener and the cost impact was 15 cents out of 5 $40, youprobablywouldn't need toknow that. 6 MR. BROOKMAN: Dave, you're in the que, but 7 I'mgoing to let this continue on to its conclusion. 8 Okay? 9 Wayne? 10 MR. MORRIS: Wayne Morris. I have a problem 11 with that, David, onlybecausewe're not looking at 12 this approach from the standpoint of design options. 13 We haven't since the beginningof the data collection 14 phase. We've been looking at it in terms of efficiency 15 increases which couldbe very different from one 16 manufacturer to another. Sohaving available 17 individual information about how onemanufacturerwent 18 about getting to an efficiency level and trying to 19 extrapolate that back to now looking at costs per 20 design option seems tome to be an erroneous 21 assumption
. 22 MR. GOLDSTEIN: Well, Wayne, I think

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• 230 1 draw a picture here. If you have a distribution of 2 costs to get to a certain efficiency level, which is 3 what they've got, and they do an analysis of this sort 4 and they come up with a single cost which looks like 5 this, you can say, well, yes, that's with the 6 distribution. It's probably okay. 7 But if it comes up way across there where 8 Carl's sitting, you can say, there's a problemhere. 9 That's what I'm trying tobe able to do. 10 There's a reason why this might not be in the 1 1 middle and it's just the reasons you gave, but at least 12 somebody shouldhave used the same technology. And so 13 somewhere in the distribution function is one ormore 14 companies that equal this tear down kind of number. 15 That's what I'm looking to see. 16 MR. NADEL: Steve Nadel. Acouple of 17 comments. 18 First, most recently, Wayne, as youmay 19 recall when we first discussedwhether to use this. 20 You know, manufacturers submit their 5, 10, 15 percent 21 costs. There was a lot of concern among the non22 manufacturer parties that there's going tobe a black EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 231 1 

### box. That they couldbe influence andbiased. And as 2 I recall, the resolutionwas that DOE was going tohave 3 available**multi~le** 

### differentmethodologies and that 4 some of thoseweregoing tobe outsidereviewable so 5 thatwe could all feel comfortable that the best cost 6 estimateswere beingused. 7 And so this is all partof that. 8 Speaking to the question about what dataon 9 this canbe released, it strikesme that to the extent 10 the data is on a model ormodels that are already in 11 thepublicdomain, it'snot like there's any trade 12 secrets involved. It'sjustDOE has paid todo 13 something and anybody elsewith enoughmoney couldhave 14 paid todo the same thing. So I don't seewhat the 15 problemwould be. I 

### understand thatwe have toget 16 more creativewhen itcomes to a proprietarydesign 17 that's not on themarket, but at least in terms of the 18 otherproducts, I would think that in some way itcan 19 be released. And I'm fine to aggregate things and 20 really concentrate. 21 One of thekey questions iswhat are the 22 drivers as opposed tohow much does a nutorbolt cost. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 232 1 

### MR. McCABE: I'm interested ineverybody's 2 comments on that request. We will certainly consider 3 itand raise it and getback to everybody afterwe've 4 had a chance to consider all the comments. 5 Again, we had focused on a greenfield 6 approachwhich is getting intomore of a product 7 specific approach, model specific. And we're trying to 8 develop a wide range of data. None of them are 9 directly comparable. Thedatahere cannotdirectly 10 compare to the datawas submittedbyAHAM because 11 

### that'smanufacturerdatadealingwith the circumstances 12 that areunique to eachmanufacturer. 13 I appreciate the desire touse all these data 14 in order todetermine the reasonableness of any piece. 15 We'll look to see how we can provide that data so that 

### 16 everybody can feel comfortable with the analysis that's 17 beingperformed. 18 

### MR. BROOKMAN: So letme justecho, Michael. 19 What I heard you saywas you'd like toreceive comment 20 on this. And I've listedonmy sheetofpaperhere at 21 22 least four pieces of this whichwould be way to aggregate these structuredbillmaterials. And then EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 233 1 the request for how you would show individual features 2 with the corresponding efficiency benefits. 3 And then seems tome if you're going to talk 4 about that, you need to talk about kind of the unique 5 design features as well, and that doesn't speak to 6 imbedded capital, plant, all those kinds of issues. So 7 it's a pretty complicatedpicture. 8 Terry? 9 MR. THIELE: Terry Thiele, WCI. 10 If I understand itcorrectly, we are 1 1 currently in the process of tearingdown existing 12 productwhich is a baseline exercise, if I understand 13 correctly, for twopurposes. One, togive a comparative 14 baseline against future product of the same design of a 15 higherdeficiencywhere youhave component 16 substitution. And two, togive a comparativebaseline 17 againstwhich togauge differentplatforms altogether. 18 So, if I understood itcorrectly, the 19 principal purpose of this exercisewas to come upwith 20 a relative measure, a comparativemeasure, not an 21 22 absolute method. Isn't that the general thrust of it? So the delta is the issue, not the startingpoint. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 234 1 MR. MARIANO: That's correct. Our analysis, 2 the vertical axis baseline thatwe didwas tohave a 3 sort of stake in the ground; where do we start from, 4 where dowe make our comparison to. 5 At this point in the analysis, we're going to 6 be doing theWhirlpool prototype, and therewill be a 7 differential numberbetween our stake in the ground. 8 And then there'll be H-axis designs, and we're looking 9 at two H-axis, commercially available H-axis designs, 10 and there'll be a comparativenumber as well there. 1 1 And that's all thatwas provided is that comparative 12 number. 13 MR. THIELE: As far as these tear downs on 14 these currentmodels which are currently inproduction 15 and currently for sale, I mean, we have absolutely no 16 objection if the data is disclosed, as long as it'snot 17 ourproduct thatwas torndown. 18 (Laughter.) 19 MR. BROOKMAN: Larry, did youhave a follow 20 on to this? 21 22 MR. HAWKINS: Yes, I do. And to follow on what Terry says in response to Steve's comment, I EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 235 1 believe that this study goes beyond what couldbe just 2 done by someone purchasing those products, taking them 3 into a warehouse and tearing themdown because I 4 believe they'dneed inputs and have achieved data that 5 may not be readily availablewithout the consent and 6 agreement of themanufacturers concerned. 7 That data andknowledge canbe considered to 8 be proprietary. 9 MR. BROOKMAN: Would a representative from 10 Arthur D. Little comment on that? 1 1 MR. MARIANO: We have visitedwith 12 manufacturers. The primary reason for thatwas to 13 confirmour analysis and to discuss manufacturing 14 processes associatedwith plants typical processes that 15 they woulduse, so thatwe would represent the 16 industry. So I thinkLarry's comment that that type of 17 informationwould certainlyhave tobe held out of 18 information thatwas revealed. 19 MR. RIVEST: Steve, it'snot just the listof 20 materials. This isMike Rivest. It's the actual 21 22 processes used to generate. And I think you touch on itperfect. I mean, there is information there that EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 236 1 might be valuable for a competitor. 2 MR. THIELE: We're not talking about a 3 product tobe built in 2003. We're talking about 4 product that's coming off the assembly lineright now. 5 MR. BROOKMAN: Okay. Michael McCabe has 6 requested comment, further comment on this subject. 7 And this ensuing discussionhere I think was useful. 8 Dave, you had an earlierquestion. 9 MR. MODTLAND: Yes. I guess it's kind of 10 getting intowhere Larry was. It's a question about 1 1 from the preliminary report that was publishedon 12 February 24th, there have been some significant changes 13 in some areas, one being the fixed cost sidewhich 14 almost was cut inhalf. 15 MR. MARIANO: That's right. 16 MR. MODTLAND: And I guess the question that 17 I'mkind of alluding to is what was the involvement 18 with the manufacturers orhow did that influence that 19 process of refining those numbers. Because inorder to 20 assess the accuracy of the methodology and the results 21 22 that it achieves, it's a littlebit different depending upon if you have the answer, so to speak. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 237 1 MR. MARIANO: Yes. That was definitely one 2 of the major differences between ourmost recent 3 analysis. And what was driving that sort of change is 

### 4 discussions withmanufacturers about processes that 5 were used, and also interviews with equipment 6 suppliers, et cetera. So, collecting the additional 7 data on costs of equipment, capacities, potential 

### 8 capacities of equipment. 9 Obviously if ithas a higher capacity, 10 quicker die change, there's less investment because it 1 1 canjustprocess more equipment. You'd need one rather 12 than four or something. So definitely there was 13 interaction there I thinkwith the manufacturers at 14 that stage to guide us that we'd definitelyhave to 15 as Mike has said, there's more than just the listof 16 parts here. There is process. And what we've 17 generated internally at ADL through supplier interviews 18 or throughmanufacturer interviews is certainly 19 information that shouldn't really be readily produced 20 for public consumption. 21 22 MR. BROOKMAN: Gene? MR. FOLEY: I justwant tomake sort of a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 238 1 

### generalpoint. Gene Foley from theAlliance to Save 2 Energy. 3 

### Goingback, way backtoprocess improvement 4 

### and thewhole pointofprocess improvement, it seemed 5 

### oneofourmaingoals was toeliminate theblackbox, 6 

### tomake theprocess theway we determine a rulemaking 7 

### transparent sothat anybody couldcome in, look at the 8 

### process anddeterminewhatwas happening. 9 

### It sounds tome likewhat insteadwe'vedone 10 

### iswe've tradedoneblackbox thatwas somewhat 1 1 

### confusing for one thatnot only is a blackboxbutone 12 

### that youpromise youwillneveropenup. 13 MR. RIVEST: I'mnot surehow useful itwould 14 be for you. 15 

### MR. FOLEY: You're tellingus it'sa black 16 box and you're tellingus it'snotuseful. 17 

### MR. RIVEST: Foryou. 18 

### MR. FOLEY: But that'snot thewholepointof 19 process improvement. 20 21 22 

### MR. BROOKMAN: As anotherparticipantin process improvement, I'llgooutona limband say one thing. That is, process improvement and the ability EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 239 1 for people to come forward with things like data 2 depends on their ability to feel comforts surrounding 3 the boundaries of the use of that data. That's kind of 4 the underpinning of things like trust. And that's 5 even though trust is not ubiquitous in this world, 6 that's what allows the exchange to continue that can 7 make something like a regulatory process beproductive. 8 So, I think definition, further definition 9 needs tobe put inplace before things are generally 10 and specifically characterized as blackboxes. And it 1 1 seemed like in the earlierdiscussion there were 12 opportunities towork this issue. So let's work the 13 issue and see what we come up with. 14 MR. NADEL: Yes. We understand that there's 15 data that needs to be collected in confidence and that 16 there's five major companies here and we have tobe 17 concerned about what one company sees about the other's 18 product. We're not trying tobreach those bounds. 19 We're trying to have some data that we can review and 20 get comfortable with tohelp give us support for the 21 overall data that's generated
. 22 If we get two bits of data that say the same EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 240 1 thingbut neither of those canwe necessarily get 2 comfortablewith, it leaves us the same place as 3 before. So, ifDOE orADL can think about what they 4 canmake available, thatwould be useful tohelpus get 5 comfortablewith what appears tous to be largelyblack 6 boxes. Thatwouldbe helpful. 7 Basedon these twomethods

-- the other thing 8 that was discussed a while ago, and I can't remember 9 what happened, is we talked thatwe'd also continue to 10 move forward the old engineering analysis. We were 11 going to take the results of that last engineering 12 analysis, recast it in terms ofMEF terms, give 13 manufacturers

-- and they did in this lastperiod

-- a 14 chance to say that they wanted to revise some of those 15 estimates. But that's another way that we can have an 16 analysis that hopefully will be internally consistent 17 thatwe can review, but something so that this overall 18 package is something that we can say, yes, we're 19 comfortablewith that. 20 21 22 MR. BROOKMAN: Additional comments on this presentation and on reverse engineeringgenerally? MR. McCABE: I'd like to ask a question as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 241 1 far as Gene, Steve and David. Has there been anything 2 that you have seen that has made you uncomfortable as 3 far s the data that has beenreported? Not to say that 4 thatmeans that you are comfortable. 5 MR. GOLDSTEIN: This isDavid. My reaction 6 is I think you're startingoff down the right path. 7 The somewhat troubling piece of informationwas simply 8 finding that the detailed results of that won't be 9 available for my review or for reviewof consultants 10 that I'dwant toworkwith. 11 And I understand there are good reasons why 12 the whole thing isn't. What I'mhopeful that DOE can 13 dowith its contractors is construct a subset of the 14 information that doesn't violate confidentialitybut 15 that does giveme something that I can use as benchmark 16 to reviewwhether themanufacturer efficiency curve 17 cost estimates are in the ballpark. 18 And I'll offerkind of a couple ofmetaphors 19 here. One is I couldhire somebody todo the exact 20 same thing that ADL is doing and they would get less 21 22 cooperation from manufacturers, but you could figure outwith themhow much of the information they wouldn't EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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•• 242 1 have gottenwithout thatkind of cooperation. And 2 certainly that stuff I could get anyway. And that 3 ought tobe available. 

### 4 MR. BROOKMAN: Steve, would you like to 5 respond? 6 MR. NADEL: Yes. The one area I mentioned 7 where I dohave some discomfort from what I've seen so 8 far is the jump in themanufacturer cost estimates 9 between a 40 percent and a 45 percent energy savings. 10 It's like a $50 increase. And that didnot strikeme 1 1 as reasonable from what I know about the products out 12 there. So I'mvery interested in the reverse 13 engineering andpotentially looking again at the 14 engineering analysis toget greatercomfortwith that. 15 MR. BROOKMAN: Charlie, youwere next in the 16 que, and thenTerry. 17 MR. STEPHENS: Yes. Charlie Stevens, Oregon 18 Energy Office. 19 I justwanted togoback about 18months here 20 if I can. I think the original intentherewas to 21 22 include the dataon theWhirlpool prototype in all the dots on this graphofMEFs versus costs. Am I right EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 243 1 

### about that? 2 We wanted tomake sure that that datawas in 3 there, alongwith everything else; that itwas 4 considered alongwith all the otherestimates. 5 

### MR. BROOKMAN: Can you refer to thepage, 6 Charlie? 7 

### MR. STEPHENS: It's page 8 from Mike Rivest's 8 presentation thismorningon clotheswasher 9 manufacturing costs. 10 MR. BROOKMAN: Bryan? 1 1 

### MR. BERRINGER: BryanBerringer. Just to 12 respond, Charlie, one of the things about that iswe 13 have two different types of data. Again, the 14 manufacturingdataversus this greenfielddata. So 15 whatwe were going todo is do an independencewhere 16 youhave again a vertical axis, a prototype and the H17 axis, a separate sortof

-- keep it separateLCC type 18 ofrun and see if it falls in the same range, again, as 19 a sanity check againstwhatwas submitted. 20 But to say that those are dots into that 21 22 graphwouldbe a bitapples andoranges. So thatwas not our intent toput that in there, to insert that as EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 244 1 a datapoint. 

### 2 MR. STEPHENS: Okay. Then I am confused. 3 MR. BERRINGER: What we're looking at is to 4 see if thatprototype falls within the data thatwe 5 received, that itwouldn't be an issue as far as the 6 analysis is concerned. 7 MR. STEPHENS: I think that's what I'm 8 saying. If you endupwith

-- I mean, you cando a 9 greenfield. You cando an adaptationof anotherplant. 10 You cando almost anything youwant andbasically 1 1 you'll endupwithmore dots for this curve. 12 Whether you actually represent themornot, 13 you're looking to see if they fall in the range of dots 14 that you already have. 15 MR. MARIANO: That is correct. 16 MR. RIVEST: But what we're not doing is 17 taking that dot, reaggregating itwith the otherdata 18 and creating a new distributionor something like that. 19 MR. BROOKMAN: Mike Rivest, would youplease 20 repeatwhat you said? We couldn'thear it. 21 MR. RIVEST: No. 22 (Laughter.) EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 245 1 I said certainly the intentionwas not to 2 take that data, introduce it in the raw data, 3 regenerate a distribution and run a life cycle cost. 4 That's why the whole issue about a separate analysis 5 with different stakes, relative stakes. 6 MR. BROOKMAN: Additional questions on this 7 subject? 8 Yes, Wayne? 9 MR. MORRIS: Just for clarification, I don't 10 know exactlywhat youwere referring to, Steve, but I 11 don't know of any agreement by the manufacturers to go 12 back and take the data from two or three years ago and 13 agree to update that on the basis of today's 14 information. 15 Now if the Departmentwanted to do that, we 16 have no say about it, but I don't know that the 17 manufacturers ever agreed to do that. I jutwanted to 18 make sure that was clear. 19 MR. NADEL: What I was referring to was a 20 workshop in this very room at which we discussedusing 21 the manufacturer cost data and at whichwe saidwe 22 couldgo alongwith that provided this datawas EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 246 1 available and that we'd look to the Department to 2 revise that data and thatwe'dmake available to the 3 manufacturers, if they thought any revisions were 4 needed to that data, they should submit it at the same 5 time as they did the otherdata. 6 I'dhave to check the exactminutes for the 7 exact words, but my clear recollectionwas that we were 8 saying that that was a third potential data option 9 because therewas back then, just as you'rehearing 10 now, concern about what appears tous tobe a black 11 box. 12 MR. MORRIS: As long as it'sunderstood that 13 thatwas a comment that was made. I didn'tknow that 14 we hadmade it. 15 MR. NADEL: I believe the Department may have 16 responded to something. As I said, I'llhave to check 17 the notes. 18 MR. McCABE: Michael McCabe. We are looking 19 togather as much information from as many different 20 sources with respect to the price of equipment inorder 21 tobe able tounderstand and appreciatewhat it is that 22 we have. And the closer all of them come to agreement EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 247 1 the greater comfortwe will have with all the data. 2 And whilewe have not gone back to take a look at -- 3 I'mnot aware that we've gonebackrecently to take a 4 look at comparing the earlierengineering analysis with 5 these data. We are open to doing that. 6 Right now, I have a fairly high comfort level 7 with what I'm seeingreported, the variety sources that 8 we have. We've taken both the actual sales data and 9 price and we've taken the industry information that was 10 provided from AHAM onmanufacturer costs and looking at 1 1 the reverse engineering are remarkably consistent inmy 12 view. They're not exact. I wouldn't expect it to be. 13 But they're a lot closer than what I wouldhave feared 14 theymay have been. 15 MR. BROOKMAN: Go ahead, David. 16 MR. GOLDSTEIN: I think this well, Mike's 17 comment raises the key reason that I'mdwellingon 18 this. This is perhaps the last rulemaking for which a 19 comparison similar to whatMr. McCabe just spoke about 20 canbemade. Therewas a previous measure base cost 21 22 curve. And sowe can look at the numbers thatAHAM has submitted and my personal reaction, and I've only seen EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 248 1 them today, is these look in the ballpark. They look 2 in theballpark compared to a measurebase curve that 3 said you do this so this component; here's how much it 4 costs and here are the components of it. And I'd say, 5 yes, that's about in the same ballpark. It looks 6 reasonably good. 7 And what I'mworried about is that when you 8 don't have that reviewable stake in the ground out 9 there in future rulemakings, how will you knowwhether 10 these 10 percentmore efficient, Xmore dollars kinds 1 1 of curves that we're getting are correct. And how do 12 we know that the manufacturers in those future 13 rulemaking will be motivated to try real hard to 14 minimize costs inmeeting those efficiency levels. 15 I don't manufacture stuff for money but I do 16 sometimes write reports for money. And if I'mgiving an 17 estimate on a consulting study that I don't 18 particularlywant todo and I say it's going to cost 19 $100,000, trustme. Thatmaybe a good number. But if 20 I know that there's going tobe a competitivebid out 21 22 there and someone else is going tobid $55,000 and I'm going to lookpretty silly for having bid $100,000, I
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• 249 1 may sharpenmy pencil a littlebit. 2 And that's the process that I want to see 3 going on in future rulemakings. 4 MR. NADEL: Gettingback to this specific 5 rulemaking rather than future one, Mike, I agree with 6 you that the reverse engineering and the base lifeof 7 themanufacturer are very consistent. I'dbe very 8 concerned if they weren'tbecause that's the easiest 9 case. 10 I look forward to seeing the reverse 11 engineeringof some of the advanced products, and that 12 will bemuch more important. And to the extentwe can 13 be comfortable with that reverse engineering, to the 14 extentwe could have a revised engineering analysis to 15 improve our comfort, that wouldbe helpful still. 16 MR. BROOKMAN: Additional comments or 17 questions on reverse engineering? 18 (No response.) 19 I thinkwe'reon track to finish by the end 20 of the day. I'mgoing to suggest we take a break. But 21 before anybody moves, this weekwe really need any 22 if youknow of any single personwho might showup EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 250 1 tomorrow, we need theirnames and we need tohave you 2 give them toBrenda and Sandy so that they don't show 3 up tomorrow and expect that a lot ofpeople are going 4 tobe here, only tomake a trip that's unnecessary. 5 So, please, if youknow of someone, take the 6 time togive the name and perhaps the telephone number 7 to Sandy and toBrendaoverhere at the table. 8 Bryan? 9 MR. BERRINGER: I justwant tomake a 10 comment. There is a revised attendance list that they 1 1 have and the people

-- basically the people that 12 responded that said they were coming, they were checked 13 ofhere, so everybody's here. JohnTomlinsonwas the 14 only one that was in question and we calledhis office 15 and he didn't have travel arrangements to come here. 16 So to ourknowledge, everybody who said they 17 were coming is here andwe do have a revised list. 18 MR. ROSENSTOCK: He's the one that did the 19 Bern, Kansas study; right? Wasn'the going topass 20 themout or something? I'm SteveRosenstock. 21 22 MS. LAUGHLIN: He was going tocome. He said he might come. We called and he didn't have any EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 251 1 tickets. 2 MR. BERRINGER: I'llmake a comment when I 3 talk about the studies. I have his number. The 4 reports are being published. They're color reports so 5 they're not readily available. I have one and I guess 6 Lauren has one. And I can give people, if they're 7 interested, John's number to give him a call. 8 MR. ROSENSTOCK: I already gave him the 9 number. 10 MR. BROOKMAN: So when we return from break, 11 and we'll start at 3:30, we'll take up consumer issues 12 and we'll play that out until it's finished this 13 afternoon. 14 Thank you. 15 (Whereupon, a recess was taken.) 16 MR. BROOKMAN: As a way of starting this 17 session, Jack

-- Jack, what is your last name? 18 MR. LINARD: Linard. 19 MR. BROOKMAN: Jack Linard from Chlorox had a 20 chance to briefly scan through

-- 21 22 MR. LINARD: Unilever
. MR. BROOKMAN: Pardonme. Pardonme. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 252 1 Unilever, has a comment or two. 2 MR. LINARD: I'mgoing to try tomake this 3 fast. Firstof all, having a look at the report, I 4 cautionyou please look at the datarather thanjust 5 some general conclusion. 6 Firstof all, there are a number of detergent 7 products on themarketnow whichhave recommended 8 dosages of a half cup toone cup still. Not every 9 detergent has a four-tenths orhalf cupdose. So ifa 10 significant number of peoplewere using those inPhase 11 I and then you offer them a detergentwhichhas a four12 tenths to a half cupdose andmost people take it, your 13 total detergent should actually declineper dose. So, 14 please look at that. 15 The other thing is if you look at the number 16 ofpeopleunder-dosing, you'll find as people change to 17 the H-axis machine, with their standardwashing 18 machine, 34percentused a quarter cup. After they got 19 the new H-axis, only 25 percent used a quarter cup. 20 Thatwouldbe tous anunder-dosing situation. So the 21 22 number of peopleunder-dosingdeclined significantly
. The number ofpeopleusing, quote, the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 253 1 correct dosage actually increased from 43 percent to 58 2 percent. This couldbe a reflectionof the fact that 3 people are dosingproperly. 4 The only major decline is people using three5 quarters of a cup. This couldmerely justreflect the 6 fact that peoplehad a one-cupdetergent or two-thirds 7 cup detergent andhad replaced for the recommended 8 dosage of a half a cup. 9 So, please look at the data. Itmay justbe 10 a gross over-exaggeration to say that on average the 1 1 dosage declined. You have to look at the recommended 12 dosages of the products usedprior to the changeover in 13 machines. 14 Thank you. 15 MR. BROOKMAN: Thanks, Jack. 16 Okay. BryanBerringer is ready to talk about 17 consumer issues. 18 MR. BERRINGER: Thank you. 19 Consumer issues. This has been something 20 that's come up as far as theAdvisory Committee. One 21 22 of the first steps they asked us to look at was basically to look at research that's already out there. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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254 1 So that's what our first stepwas. 2 In the draft report, there's a number of 3 items in there. It's in your package. It shouldbe 4 about the last thing in your package. It's compiles a 5 lot of the research that's already been done. 6 If there's anythingwhen you're looking 7 through that that seems like it'smissing or you know 8 of other studies, please letus know. Number one does 9 encompass research studies, utility rebates, consumer 10 surveys andmagazine articles, like "Consumer Report." 1 1 One of the things going through this, some of 12 the reports, the major studies, Thelma and even some of 13 the stuff as far as I was just talking about withTom. 14 It didn't incorporate some of the new Maytag Neptune 15 unit, but he did indicate there are some updates to 16 that. They're going to go out and do some more survey. 17 But basically, based on the current 18 information, there's a lot of positive response in 19 there as far as the H-axis is concerned, so we've seen 20 a lot. Basedon the current information, it indicates 21 that the H-axis machines are acceptable to consumers. 22 We haven't seen anything contradicting that to date. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 255 1 MR. JONES: Aquestion, Bryan, with all due 2 respect. 3 What do youmean it's acceptable? I mean, 4 was that ever a question? 5 (Laughter.) 6 MR. BERRINGER: Maybe we misinterpreted your 7 questions from the last three workshops. 8 (Laughter.) 9 MR. JONES: I've always taken the position 10 that consumers ought tohave the right tobuy whatever 1 1 it is they want to buy. And obviously, there are 12 consumers who've been buying this product. 13 So I guess my point is if the conclusion that 14 one is expected todraw from this is that consumers see 15 no difference between the products then you certainly 16 have no shown that. I want tomake sure that's not 17 what you're saying, or is it? 18 MR. BERRINGER: Could you repeat the 19 question? I couldbarelyhear you. 20 MR. JONES: My questionwas are you saying 21 that consumers seeno difference between theseproducts 22 or are you saying that consumers find them, quote, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 256 1 acceptable? 2 MR. BERRINGER: Consumers find them 3 acceptable as far as the use and as far as other issues 4 that come up as far as -- you say bending over or 5 washing, cleaning. 6 MR. JONES: Well, is it the Department's 7 position then that these data support the proposition 8 that the utility issue is nonexistent, it's off the 9 table, that it'sbeen resolved by consumerbuy habits 10 orwhat. 1 1 MR. BERRINGER: Based on these studies, it's 12 up for question. As far as what we were puttingout 13 there, yes, it seems that the majority

-- we have not 14 seen -- maybe there are some issues that haven't been 15 addressed in these studies but it addresses a large 16 portionof those issues. 17 MR. JONES: Well, see, I'd like tounderstand 18 exactlyhow these studies do that because from what I 19 understand, what they appear to stand for is that 20 consumers who choose tobuy these products like them, 21 which is not to say that consumers generally do
. 22 MR. BERRINGER: Well, there's also EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 257 1 MR. JONES: I mean, that's just as truism. 2 That if you presume people who migrate to a product and 3 decide that they want to buy, which isn't to say that 4 they're representative of all consumers.. 5 And I guess my question is is that the level 6 of rigor of the Department's analysis of which they're 7 going to proceed in this rulemaking. 8 MR. BERRINGER: Based on what we've read 9 before, it's talking about performance and utility 10 issues. These reports address some of those. I'mnot 1 1 saying it addresses all of them. That's up for 12 discussion and debate. But there's a lot of other 13 things, as far as results from Consumer Report. We've 14 heard do these products

-- you know, is it clean, is it 15 going to be acceptable to the public. 16 Well, to the extent we've seen that based on 17 these reports that it is acceptable. It's a product 18 that people are going to buy. 19 MR. JONES: Well, that's not what the 20 Consumer Report study says, Bryan. I don't want to take 21 22 up the time here to debate that question. I guess the real question I'm asking is are EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 258 1 you saying that the record as the Department sees it is 2 that these studieshave removed any concernon consumer 3 utility issues and that it is up topeoplewho feel 4 otherwise toput itback in the record or to contest 5 that, or are you saying that you're still looking to 6 establishwhether that is true or not. 7 MR. BERRINGER: If there are issues that are 8 not addressedby these reports 9 MR. JONES: That doesn't answer the question. 10 What is the Department's position at this point in time 1 1 on this issue? 12 MR. BERRINGER: On this issue, it's very 13 vague as far as what

-- we'd like to know specifically 14 what

-- 15 MR. JONES: The record is not established 16 then. You're not going inone way or another. 17 MR. McCABE: Letme jump in. This isMichael 18 McCabe. 19 Again, what we are presenting is staff 20 information, sowe're not going to speak to this isnow 21 22 theDepartment'sposition. We're looking at the information thatwe have at present, which includes the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 259 1 survey information as well as the preliminary 2 evaluationof engineeringdata for the prototype, the 3 patented information for theWhirlpool design and 4 others, that the consumerutility issuewith respect to 5 classes does no seem tobe an issue, and that there 6 appear tobemultiple approaches without regard to 7 access inorder toget to relatively the same level of 8 efficiency. And that that, the performance of those 9 different designs, seems tobe all within the same 10 region that consumers find tobe acceptable. 1 1 MR. JONES: As a choice. And I guess my 12 question is does that mean then that they are prepared 13 todowithout other choices? 14 MR. McCABE: I'mnot following that. 15 MR. JONES: Well, it's one thing to say that 16 a personwill buy something. It's another thing to say 17 that they'll be happy with all they can buy. 18 MR. McCABE: And what I'm saying is given 19 what we see right now, we see a number of approaches 20 that canbe

-- designs that canreach the same, 21 22 relatively same level of efficiency without limitations with respect to the port of access. So that consumers EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 260 1 wouldhave the choice if the choicewas focused onport 2 of access, front loador top load. But they will have 3 both choices available to them. They will alsohave 4 access, both vertical and horizontal, toget to the 5 same level ofperformance. 6 If you're limiting the choice to those two 7 issues, itwould appear that choice stillremains. 8 Will exist, I should say. 9 MR. JONES: And I gather then that the last 10 point you justmade is based on informationwhich is 1 1 available only to the Department andpresumably cannot 12 be sharedwith the general public and cannotbe 13 otherwise commentedonbecause it involves proprietary 14 information. 15 MR. McCABE: Some of that information is on 16 the public record. As far as the patent, there's 17 informationwhichwe have shared today which is not a 18 matter ofpublic record as far as the testingofunits. 19 We'veprovided some summary information. So it is 20 certainly limited information. It ismore information 21 thatwhat we've had available in some earlier 22 rulemakings on some advanced design refrigerators. But EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 261 1 we are striving toput as much informationon the 2 record as possible. 3 MR. JONES: Okay. 

### 4 MR. BERRINGER: Okay. Moving forward. 5 Thank you, Earl. Thank you, Michael. 6 There's been threemajor studies andmaybe 7 some of these points are taken care of as far as the 8 consumer. Earl feels that there's no question as far as 9 the acceptability of thesemachines but there is some 10 otherdata that canbe derived from these studies. The 1 1 threemajorones were the Thelma, the Bern, Kansas 12 study and the washWise. 13 Basically, the Thelmahad a consortiumof 28 14 utilities. Itwas done by EPRI. The study entailed 15 focus groups with consumers, laboratory testingof 16 washing effectiveness and energy/water efficiency use 17 and in-home testing. 18 The Bern, Kansas study is themost recent one 19 using obviously theMaytagNeptune. JohnTomlinson 20 isn't there andLauren

-- letme borrowherreport. I 21 caneverybodyJohn's

-- youknow, for people's 22 information, this is a colorreport. When I talked to EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 262 1 John, they are in publication. They are printing this 2 now. But I'll give

-- if people want to indicate, take 3 John Tomlinson's number down, canprobably get copies 4 of this report. It's area code 423-574-0291. And I'll 5 leave that number alsowith Sandy if you can get that. 6 But this has justbeen released inMarch 1998 so it's 7 beingpublished. 8 Basically, part of DOE andMaytagwere 9 sponsoring this. They monitoredwashingmachines in 10 105 homes, measured energy andwateruse for existing 11 vertical axis washers, and he maytag Neptune H-axis. So 12 itwas a comparison type thing and ithas impacts on 13 consumer laundryhabits. 14 Tom Eckman is now sitting at the table. He 15 justgave me a report, the final report that they have 16 done on the WashWise program, and he also has a Web 17 site onhere. We'll make this available. He said it's 18 be there on the Web page in about two weeks. Get into 19 a littlebitmore detail. Is a more recent study. 20 21 22 He also indicated tome earlier that they are going to go out and do some more surveys, a questionnaire that have participated in the program. So EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 263 1 thismightbe an opportunity if there's questions that 2 arenot answered orhave not been answered, itmay be 3 an opportunity to add those questions to their survey. 4 So I appreciate that, Tom. 5 I'llmake it available, but it's 6 WWW.NWALLIANCE.ORG. And the number, the telephone 7 number is 503-827-8416. And I have

-- this is from 8 Northwest Energy EfficiencyAlliance, and it'sReport 9 Number E98-003. 10 Yes, Tom? 1 1 MR. ECKMAN: If you want togiveme your 12 business card, I canmake sure that they'll send you 13 one ifyou don't have Web access yet or don'twant to 14 download it. 15 AUDIENCE PARTICIPANT: Could you repeat the 16 Web address? 17 MR. ECKMAN: The Web site isWWW.NWALLIANCE. 18 ORG. You can reachme at extension 234 at thatphone 19 number or e-mailme atTECKMAN at the same e-mail 20 address. TECKMAN@NWALLIANCE.ORG. 21 22 for Tom. MR. BROOKMAN: We have a question, I think

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• 264 1 MR. ROSENSTOCK: Just a quickone. Steve 2 Rosenstock, EI. 3 Is that report going tobe PDF format? 4 MR. ECKMAN: Yes. 5 MR. BERRINGER: Okay. Again, the sponsor of 6 that was Northwest Energy Efficiency Alliance, 7 comprisedmainly primarily of electricutilities in the 8 Northwest. It included a survey of rebate program 9 participants, intercept surveys of consumers in 10 shopping centers or shopping for washers, and a survey 1 1 ofretailers and manufacturer surveys. So, obviously, 12 Tom's here if anybody has any specific questions on 13 that, oronce you receive the report, he couldhelp you 14 out on that. 15 MR. JONES: Are the actual survey questions 16 in this report? 17 MR. ECKMAN: Yes, they are. Both the 18 retailer and the customer. 19 20 21 22 MR. HAWKINS: [Offmike.] MR. ECKMAN: The samplewas drawn from the first 1900 purchasers in our program and roughly 420 respondents in a telephone survey after they've had

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• 265 1 about 60 percent of themhad sixweeks ormore use of 2 the product. 3 MR. BERRINGER: Also, John Tomlinson is a 4 contact if you have questions

-- you know, Thelma 5 reports and so forth. Some of that information is 6 datedbut the washWise information and also the Bern, 7 Kansas is fairly recent information. 8 There's also incorporated into the report 9 there's utility survey rebate educationprograms. 10 Again, Northeast Energy PartnershipConsortium for 1 1 Energy Efficiency and individual utility surveys and 12 rebate programs. There's also

-- EPRI was also 13 involved in some of that and also the Thelma report. 14 Government projects. Obviously, Energy's 15 StarProgram, DOE/EPA program, the labelling, label 16 efficiency, Web sites. So there's also a Web site, 17 Energy StarWeb site. Utility participants, retail 18 participants, and also demonstration programs. 19 MR. JONES: Excuseme. Earl Jones here 20 again. 21 Bryan, what is this supposed tobe? I know 22 what the paper says butwhat is it supposed to stand EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 266 1 for? 2 MR. BERRINGER: Well, this is basically

-- in 3 the report that was inyour package, it sort of talked 4 about the background and gets into a littlebitmore 5 detail about what all has been done out there. 6 MR. JONES: Are there any conclusions that 7 the Department is relying upon for any proposition in 8 this rulemaking comingout of the Energy Star Program? 

### 9 MR. BERRINGER: No. At this point it'sjust 10 tobring itup as far as what programs are out there 1 1 andwhat type of information is available on clothes 12 washers. There is a large amount of informationout 13 there on that. 14 MR. NADEL: SteveNadel. 15 I mean, I took a look at this draft report 16 which, as you said, basicallydescribes the information 17 that is out there. That they did a survey. But it 18 doesn't describe the results at all. I think itwould 19 be very useful, andmaybe you're planningondoing 20 this, to take it the next step andhave your contractor 21 22 summarize the results andbring it all together inone place. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 267 1 Because one of your questions, I assume, is 2 dowe have enough consumer information. And I'm 3 familiar withprobably two-thirds of these studies, not 4 with all of them. I think itwouldbe helpful to 5 everybody to seewhat the results were and seehow 6 consistent they were and exactly what questions were 7 asked rather thanjust

-- gee, they conducted a survey. 8 Assuming youwant us all to give you feedback on 9 whether this is sufficient orwhat more is needed. 10 MR. BERRINGER: Again, this is justother 11 places where informationwas available. Consumer 12 Reports had test rests again of acceptability and 13 cleanliness type of information that's reported. 14 There's also some otherpublications that are listed in 15 the report. 16 MR. MORRIS: Bryan, Wayne Morris. Just a 17 question is for you. 18 One of the assumptions I know that's been 19 looked at and I thinkwas alluded to even earlier today 20 was the issue of removing any type of a heated rinse 21 22 from washing machines to achieve some level of efficiency. Were there any studies thatwere in this EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 268 1 paper that looked at that issue of consumer acceptance 

### 2 of no or of cold rinse only on their machines? 3 MR. BERRINGER: I don't recall that being an 4 issue that any of themhave addressed. And that's a 5 perfect example, Wayne. If there are other issues that 6 need tobe addressed that haven't been, then we'd like 

### 7 toknow. We have issues. We're on the same wave. 8 There's a lot of consumer issues. It couldbe a 9 shopping list of any -- as Earl said, you couldhave 10 all kind of nuts and bolts and every kind of people 1 1 coming up with every scenario and the Department 12 doesn't want to go down that shopping list to say that 13 there's an endless or infinite number of issues that 14 need tobe addressed. 15 So ifwe could refine that list of consumer 16 issues that need tobe addressed, that would, 17 especiallywhat you hadmarked

-- what you had indicted 18 there, Wayne, would be one of the places. 19 Steve? 20 21 22 MR. NADEL: Just to comment on that lastone. That was a significant issue in the last clothes washer rulemaking, as you may recall. And as I recall, that
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• 269 1 was a design option approach. One of the design 2 options that was included in selecting the standard 3 level was eliminationof the rinse. I think there was 4 quite a bit of informationpresentedby Proctor and 5 Gambel and some of the manufacturers on that issue. 6 I haven't looked at the data latelybutmy 7 impression is the vast majority of washers now on the 8 market do not have the warm rise any more. 9 MR. JONES: Well, I'm not sure about that. 10 And I think the people up inMinnesota inDecember and 11 January, particularly those that have arthritis, would 12 have real problems with that as a solution to the 13 problem. 14 And you're going to see as well, Bryan, that 15 it seems tome that the Department's data at this point 16 on consumers consists of two categories of folks; those 17 who got the product for free and those who paid $1,000 18 for it and were therefore quite happy with it. But 19 there seems tobe very littledata on anybody else, 20 like other type consumers. 21 I guess my question is are you going toget 22 to the point of sayinghow do you get that data? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 270 1 MR. BERRINGER: What data are you looking 2 for? 3 MR. JONES: I'mnot the decisionmaker here, 4 fortunately. 5 MR. BERRINGER: Well, you asked a question. 6 You said are you going to get that data. 7 MR. JONES: Yes. I'm asking the Department 8 whether or not they're looking for

-- they have a way 9 or they have plans to seek information from consumers 10 who are not in either of those two categories. 1 1 MR. BERRINGER: Either free or paid $1,000 12 and are happy with it? 13 MR. JONES: Yes. Well, no. They may be 14 happy with it, but I suspect that if you paid $1,000 15 for it you would tend to be happy with it. 16 MR. BERRINGER: Yes. I agree it's self17 fulfilling information. 18 19 20 21 22 Charlie. MR. JONES: Right. MR. BERRINGER: But how do you get at that? MR. JONES: Maybe you have some ideas. MR. BROOKMAN: I sawMike and then I saw

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• 271 1 MR. MARTIN: Michael Martin, California 2 Energy Commission. 3 I'd like toreword what I think Earl is 4 saying. He wants the opinionof thosewho don't use 5 washingmachines, thosewho've never used washing 6 machines, thosewho have washingmachines andhave 7 neverbought a new one in the last 10 years -- thatme. 8 And he wants opinions of the vastmajority of the 9 public who are totallyuninformed about this. 10 Isn't that what you're saying? 1 1 MR. JONES: Oh, I didn't think I said that. 12 (Laughter.) 13 I alsowasn't as misinformed inphrasing the 14 question. My question is the average sellingprice of 15 a washer in the United States is about $349. And I 16 don'tknow when you bought yours last, but I suspect it 17 was probably the same price. 18 The question is is the Departmentgoing tobe 19 getting information on consumers who spend average 20 prices, who pay the average price for a washer, who 21 22 don't get it for free, who don't pay $1,000, but who spend about $349. Thatwas my question. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 272 1 MR. BROOKMAN: Charlie. 2 MR. STEPHENS: Charlie Stephens, Oregon 3 Energy Office. 4 I guess I should say, Earl, most of the 5 people out in our area aren't paying even half of that 6 all net for their clothes washers. The vast majority 7 of the people who buy the washers in ourprograms pay 8 less than $600. 9 MR. JONES: Okay. 10 MR. STEPHENS: How much less do you want them 1 1 to pay? 12 MR. JONES: $349. Again, I'mnot going to 13 argue, Charlie, on the point because it really isn't 14 worth arguing about. I had a very simple question. 15 Does the Department have any plans to get information 16 from consumers who buy washers at a more -- shallwe 17 say standard price. That's all. It's not a debating 18 point. 19 20 21 22 AUDIENCE PARTICIPANT: [Off mike.] MR. JONES: Well, that isn't a question which is, I think, relevant to this proceeding. The question is when is the record going to be complete enough for
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• 273 1 the Department tomake a decision that's appropriate, 2 not when am I going tobe satisfied, or for that 3 matter, when will yoube satisfied. 

### 4 MR. BROOKMAN: It seems as though, Dan, you 5 have a comment. And then Steve is next. 

### 6 MR. BARZEL: I thinkwhat Earl is asking is a 7 good question, which is what is the price elasticity 8 of a washer. What will peoplepay for additional 9 energy efficiency, what's the price they'll pay. And 10 if you give them $100 a year, will they pay you $300 1 1 more for the washer. And if they save $200 a year, 12 will they pay $400 more, and soon. 13 And then it's really a very -- theAdvisory 14 Board, the ConsumerAdvisory Board to the DOE, is 15 struggling with that. How do yo measure that issue. 16 Because there really

-- the truthbe known, there's 17 only oneway tomeasure it and that's with real product 18 and real dollars and real purchases. Because asking 19 peoplewhat they'll do

-- and it's a terribly difficult 20 problem, because askingpeoplewhat they'll do when 21 22 theymake a purchase andwhat they actually do are different things. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 274 1 And so you can go ask 100 people will you pay 2 $300 more for a washer that saves you $100 a year and 3 90 percent of themmight tell you yes. And when it's 4 time tobuy, it's only 50 percent that buy. 5 I think to Charlie's benefit, they captured a 6 terrific share of market with fairly high priced 

### 7 washingmachines up in the Northwest. Are the results 8 public on that? 

### 9 MR. STEPHENS: Yes. 10 MR. MARTIN: And is it 20 percent? Is that 1 1 the right number? 12 MR. STEPHENS: We're currently about 10 13 percent and doing 15 percent. 14 MR. MARTIN: I thought I sawnumbers as high 15 as 18. 16 MR. STEPHENS: Eighteen. In one month we 17 were 18 percent of the market. 18 MR. MARTIN: But if a product is capturing 18 19 percent of a market

-- now given that there are pretty 20 significant economic incentives to it. I guess the 21 22 argument -- I'mmaking it for Charlie, but the argument that Charlie is making is if 20 percent of the people
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• 275 1 arebuying it, that's pretty convincing evidence
. 2 That's a pretty significantportionof themarket 3 that's accepting the technology. 4 And is that the be all/end all? No. And how 5 will you everprove that 80 percent of themarket will 6 accept a technology? Well, the answer is, I think, 7 only when you're selling 80 percent of themarket that 8 technology will you know that. Asking peoplewhether 9 they'll do itor not is really a very difficult way to 10 get it. 1 1 And the truth is that all the measurements 12 that you're suggestingwould be necessary and that 13 anybody would suggestwould be necessary, would only 14 measure opinions about what's available orwhat's not 15 available orhow much peoplewouldpay for it. So I 16 think it's a terribly difficult issue, iswhat I'm 17 saying. I think it's a goodquestion. I justdon't 18 know an easyway to answer it. I think it's expensive 19 to answer it. 20 MR. JONES: But, Dan, just to follow upon 21 thispoint, there are some places you might look. It's 22 clear that the choices made by people in areas like the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 276 1 Northwest where water costs are, I gather, quite 2 different and otherkinds of issues drive consumer 3 choices than it is to say that itmight be in a place 4 like

-- any otherAmerican city, some major cities in 5 the American South. 6 You have no data that I'vebeen able to see 7 that when no one's attended these meetings. You 8 have no data respecting any of those places. It 9 exists. 10 MR. BARZEL: What exists? 1 1 MR. JONES: Data about sales of these 12 products. 13 MR. BARZEL: The market shares don't approach 14 18 percent. 15 MR. JONES: Dan, you said if 20 percent of 16 the people are going tobuy this product, then that 17 says a lot. And my question is is it clear that 20 18 percent of the people are going tobuy this product in 19 New Orleans or Philadelphia? 20 21 22 MR. BARZEL: If they're given the same economic incentives that they're givingup in the Northwest? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 277 1 MR. JONES: Well, no. You'll never prove the 2 point until you see 80 percent of the product. All I 3 want to say iswhat is the record showing. What does 4 the data show? 5 MR. BARZEL: The data will never showmarket 6 acceptance of a product at a level that's 7 MR. JONES: Than I suspect that the record is 8 going tobe inadequate. 9 MR. BROOKMAN: Excuseme. The Court Reporter 10 is having a hard time capturing this conversation and 1 1 thatwe don'twant tomiss. 12 MR. JONES: The question iswhether the 13 Department is going to take any action. Does ithave 14 any plan, does ithave any informationor any ideas on 15 how togo about gettingconsumer information from 16 places other than the Northwest. 17 MR. BROOKMAN: Stevehas beenpatienthere. 18 Let's givehim a chance to respond. 19 MR. NADEL: Okay. Let me try to address a 20 couple of the issues that have come up in the last 21 coupleofminutes
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• 278 1 

### anybody who's been surveyedwho hasn't gotten a machine 2 for free or for $1,000. My understanding

-- and 3 Charlie and Tom, correctme if I'mwrong -- is that 4 there are people today in the Northwestwho arepaying 5 as little as $300 net for theirmachines. So there is 6 [sic] consumers available. 7 And, if I understoodTom correctly, they are 8 going tobe doing another survey lateron this Spring 9 ofmore than a thousand of these purchasers with a full 10 range ofpurchaseprices. And Tom is offering to the 1 1 

### Department and I suspect toEarl or anybody else if 12 they have some particularquestions like administered 13 in that type ofquestionnaire that this wouldbe a good 14 opportunity. 15 That addresses the range ofprices and canwe 16 get additional information. 17 

### MR. JONES: Excuse me. If someone is going 18 togiveme a Mercedes for thepriceof a Saturn, that 19 somehow that's going to changemy willingness topay 20 for a Mercedes? I don't think so. 21 22 

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• 279 1 MR. JONES: Take things the way youwill, but 2 in terms of

-- 3 (Laughter.) 4 That's a fair conclusionbecausewe're 5 talking about a product which for many people sits in 6 the basement and shouldbe

-- [inaudible]. 7 MR. BROOKMAN: Let's let Steve respond. 8 MR. NADEL: That is a definite offerwe have, 9 it looks like, from the Northwest. I know that there's 10 utilities in California thathave beendoing a lot of 1 1 work. I seeLauren Casentini there. They periodically 12 do surveys andmaybe they could. Also you talked about 13 otherregions. 14 I see ChristineEgan over there from the 15 Consortium for Energy Efficiencywho isworking with 16 utilities all over the country. I know there are 17 utilities in Iowa, Wisconsin, New England. Itmay be 18 possible touse this network of peoplewho are 19 purchasing thesemachines by the thousands. 20 21 22 MR. JONES: [Off mike.] MR. NADEL: I'm suggesting it as a potential opportunity andmaybe one that the Department should EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 280 1 

### take advantage of. 2 

### MR. BERRINGER: Yes. We're open to 3 recommendations. The one thing thatDan didn'tbring 4 up was sales data. There is some information that 5 ArthurD. Littlehas collected as far asELCAP and 6 stuff like that and through Intellectual Services, 7 wherewe canget some sales data and sales information, 8 if that's a reasonable response to answer your 9 question, Earl. 10 Christine, do you wish to comment? 1 1 

### MS. EGAN: Yes. I justwant to say we do 12 havemembers across the nationwho arepromoting these 13 programs. None inNew Orleans, unfortunately. Butwe 14 dohave datapotentially form California, the 15 Northeast, the Northwest. Thebigger theprogram, the 16 more surveying and themore extensive the consumer 17 search. 18 If there are specific questions the 19 Department orothers around the tablewould like tobe 20 asking consumers, letme know. I'mglad topass on to 21 ourmembership that those questions shouldbe included
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• 281 1 otherswould do it as well
. 2 We would certainly like tobe able to answer 3 the question clearly that consumers do or do not value 4 and accept these machines. 5 MR. BROOKMAN: Thank you. 6 Steve Rosenstock. 

### 7 MR. ROSENSTOCK: Steve Rosenstock, EI. I'm 8 going to divert the subject. 9 Under Thelma there were focus groups. I 10 don't know how detailed they were but there was under 1 1 Thelma. It's in this rough document, talking about '95 12 focus groups. But one thing I wanted to also say is 13 that it's a nice combination of information that's out 14 there and all the programs that are out there right 15 now, all the voluntary and national and regional and 16 local efforts that are going on that are promoting 17 especially the horizontal access washingmachines. 18 I thinkwhat would be useful for a lot of the 19 number crunching is to -- well, obviously get kind of 20 current either '96-'97 data on actual sales, number 21 22 one. And then also, really, I would like to -- again, tohelp the process, just see some of the projections. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 282 1 What are the projections in terms ofwhat they think
. 2 How long theirprograms are going to go on, number one. 3 And number two, what kind of impact they think they're 4 going tohave. Because obviously it's going tomake a 5 difference in I'll say the baseline reference case. 6 I mean, if all these things are going on 7 right now, obviously it's going tohave an impactby 8 the year 2003. 9 MR. JONES: Earl here again. 10 Actually, Bryan, I was anticipatingwhat I 11 thought was one of the items on the agenda on consumer 12 issues. And it says that the Department is seeking a 13 subgroup of stakeholders in order to assist the 14 Department in further developing a strategy for 15 addressing consumer issues. 16 And actually, I assume that you put that 17 question there that you hadplanned todo that. 18 MR. BERRINGER: Well, at this point the 19 Department is not wedded to any one path to go. And 20 that's why we're looking for input, number one, if 21 22 there are. There's costs, but if somebody's willing to pay, how much are they willing topay for this higher EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 283 1 efficiencyproduct. That isnot addressed in the 2 studies. So, I mean, thatwould 3 MR. ECKMAN: The questionwas asked if the 4 sales staff that's trying tomove this product and the 5 retailers, how much they thought the consumerwouldpay 6 incrementally andhow much market share they'dgetby 7 whether itwas $100 or $200. So that information is 8 available in the survey, theWashWise survey. We did 9 ask that. 10 MR. BROOKMAN: Did everybody hear that? 1 1 AUDIENCE PARTICIPANT: Repeat it. 12 MR. BERRINGER: Yes. 13 MR. ECKMAN: We asked the sales thatwas 14 trying tomove this product in the retail 15 establishments how much they thought they could move at 16 various incremental costs, being $100, $200 overa 17 standardof the day, what they would normally sell. 18 And they gave estimates. The results of that question 19 is in the report that is available. And we will repeat 20 that question in the Spring toget some idea. 21 22 The sales staffhas a prettygood senseof price elasticity. They make theirmoney onmoving EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 284 1 product. 2 MR. BROOKMAN: Additional questions, comments 3 at this point? 4 MR. JONES: Is there going tobe a subgroup? 5 MR. GOLDSTEIN: To discuss what 6 recommendation? 7 MR. BROOKMAN: Michael, do you have a 8 comment? 9 MR. JONES: What it says on the agenda. 10 MR. McCABE: This isMichael McCabe. 1 1 This is one area that we're

-- I'mnot real 12 comfortable thatwe have all the answers. As Dan 13 rather eloquently put it, it's a very complicated 14 issue, the elasticity. The information that Tom has 15 justreferred to is particularly useful but I would 16 like to get some we're open to a subgroup. We're 17 open to recommendations as towhat the issues are tobe 18 examined. 19 When we look at the information that is 20 available as far as the utility of the product and the 21 performance, there appear tobe a number of paths to 22 get to the higher efficiency levels that consumer EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 285 1 

### utility does not seem tobe the issue that it.mayhave 2 been earlier. The price elasticity is certainly a 3 significant issue. I'd like toget at that. I'mnot 4 certainhow to accurately characterize it. 5 As towhetherornot theremay be other 6 issues, I'd like to get input on those, and 7 recommendations as towhether ornot tohave a group 8 get together and develop this andmake some specific 9 recommendations as tohow to capture consumer impact 10 issues. 1 1 

### I'mopen to it and I'm also open to 12 recommendations that would be submitted inresponse to 13 this discussion, this information. And thenwe'd try 14 to advance theball. But ithas proved tobe rather 15 

### difficult toget a handle on it and resolve all of 16 those issues. 17 

### MR. BROOKMAN: Steve? 18 

### MR. NADEL: As a recommendation onhow to 19 move forward, what I'dmaybe suggest is that first, as 20 quickly as possible, the Department take this current 21 draft report and flesh out and summarizewhatwe do 22 

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• 286 1 maybe

-- I don't know. You can form a group, if you 2 will. I thinkwe can do it rather conference calls 3 rather than a formal meeting. But set up a conference 4 call of these people tomaybe discuss what you have and 5 what the key questions are. Then the Department can 6 prepare a draft plan and have a follow-up conference 7 call. 8 Itmight be an efficientway to do this. I'd 9 also recommend doing it fairly quickly if we're going 10 tobe able to take full advantage of the offer from the 1 1 Northwest in terms of their survey, which is

-- when is 12 it going out, Tom? 13 MR. ECKMAN: Probably lateMay or early June. 14 MR. NADEL: But I throw that out there for 15 people to react to as a way to move forward. 16 MR. McCABE: Well, again, my reaction to that 17 is that I assume the Department put this on here 18 because they were trying to follow up on the commitment 19 they made on the interpretive rule to seek consumer 20 information. And I can't judge, of course, whether or 21 22 not the information which you all describe here is relevant to that purpose. I assume it says something.
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• 287 1 But whether it answers all the questions, I wouldn't 2 know. 3 What concerns me, Michael, was that your 4 statements seemed to indicate a prejudgment on the 5 Department's part, even though the record is stillby 6 nomeans complete on the question of consumer utility. 7 And it seems tome that the question I really want the 8 Department which I assume the Department is actually 9 addressing in this sentenceherewas some way of 10 getting information about that question. What do 1 1 consumers value in terms of utility of theseproducts 12 and inwhat respect. Do they seeno distinction in 13 terms of the port of access. 14 And if that was what you're looking for, as I 15 hoped youwere, then I would like to have some input in 16 such a subgroup. If you're tellingme the Department 17 hasmade up itsmind on that subject and that the only 18 question is whatpricepeople areprepared topay for a 19 productwhich otherwise is justnoproblem for them, 20 then that's a different question. 21 22 I'mreally trying tohear from you exactly what is the scope of the question you're interested in 

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• 288 1 

### getting information on, and then, of course, we can 2 decide at least on thatwhat's the appropriateway we 3 canparticipate, if at all. 4 The Departmenthas not reached a conclusion 5 on any of these issues. As I stated inmy opening 6 remarks, what I'moffering is a staffposition. In 7 particular, how I would look atwhat informationhas 8 been inputbeforeme and thatmany of the questions as 9 far as what consumers value, theymay very well value 10 port of access. Theymay very well value axis. But 1 1 

### looking at the products that are in the market orbased 12 onpatent and other informationwill be coming into the 13 marketplace, it appears that therewill be a range of 14 choices so that consumers will stillhave those choices 15 available to them. 16 

### MR. JONES: So you're saying

-- you're 17 telling the rest of us that sinceone of our 18 competitors has a product, proprietary technology, 19 whichwould solve all theseproblems, thatwe shouldbe 20 happy about that? I mean, I'mnot surewhat we're 21 22 supposedtodo about that
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• 289 1 shouldbe happy about it
. 2 MR. JONES: Well, then, what are we supposed 3 to do with that information? What is the relevance of 4 that on this rulemaking and what are we supposed to do 5 with that? How do we comment on that except to say 6 well, a couple of things. 7 (Laughter.) 8 MR. BROOKMAN: David, you have a comment? 9 Are you finished, Michael? For themoment, 10 perhaps. 1 1 MR. GOLDSTEIN: David Goldstein. 12 It seems tome that before you can answer a 13 question you have to frame the question. And the way I 14 would propose to deal with framing the question is to 15 ask what does NACA require in terms of demonstrations 16 to set a standard at a particular level. And what it 17 requires with respect to consumer utility is a very 18 small section that says that standards can't

-- I don't 19 remember the words

-- significantly reduce consumer 20 utility. 21 And so if the Department is going to study a 22 standard at an MEF of whatever, they have tobe able to EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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### frame the question and answer itwhether they see any 2 evidence in the record that such a standardwill 3 significantly compromise consumer utility. 4 And so it seems tome thatwhatMike is 5 saying, what I would agree with, whetherornot he's 6 saying it 7 (Laughter.) 8 some evidence in the record on this 9 question and that that evidence does not suggest that a 10 standard at any of the levels under studyhere would 11 

### compromise consumer utility at all. 12 MR. JONES: But it seems tome, David, that 13 youhave toknown first of allwhat are utilities that 14 consumers value. That's the first question I think you 15 have to askorhave asked. And it seems tome that the 16 record is devoid in this rulemakingon informationon 17 that subject. 18 Now we canmake assumptions basedupon what a 19 certainportionof the consumingpublichas done in 20 buyingparticularproducts. We know that some people 21 have no issue. What we don'tknow is what does that 22 mean for a great number of consumers anddo you care EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 291 1 about the opinions of those otherpeople and is there a 2 way that this rulemaking can access that information. 3 MR. GOLDSTEIN: If you or any stakeholder 4 wants to suggest what those questions are andhow they 5 couldbe answered, thatwouldbe a non-sandbagging 6 response to the question. If youwant to simply ask 7 questions and say I'mnot convinced that the record is 8 adequate but I'mnot going to tell you how tomake it 9 adequate until the lawsuit afterward, I don't think 10 that's going tobe lookedon very favorably. 11 MR. JONES: My point is that I am sure that 12 working together in this subgroupwhich I assume that 13 Bryanwas going tobe proposing here today, we would 14 come upwith exactly the questions to get to that 15 point. And that together we would resolve this 16 question once and for all. 17 MR. GOLDSTEIN: It seems tome that nobody in 18 this grouphas any rigorously defined answer to the 19 questions because I haven't heard you suggesting any 20 and I haven't heardDOE suggesting any. And ifno one 21 can suggest any, no one can answer them and the record 22 is not deficient for such absence of answers. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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292 1 (Laughter.) 2 MR. JONES: The question is certainly there. 3 MR. GOLDSTEIN: One question is certainly 4 there, Earl. 5 MR. JONES: I'm saying I'mnot a marketing 6 expert. I know what questions consumers are often 7 askedwhen it comes tomaking a judgment on this issue. 8 I assume it canbe pulled together. 9 MR. BROOKMAN: Terry has benwaiting and then 10 we'll move back toBryanor to Steve. 1 1 MR. THIELE: Terry Thiele, WCI. 12 We need to recognize in the debate that a 13 discussion of consumer utility is inextricably linked 14 to the question of economic justification insofar as 15 the consumermay have in the final analysis access to a 16 wide range of product designs that offer different 17 features, whatever they may be, so that the consumer 18 can walk onto the selling floor and however you define 19 utility it is represented there. 20 But from the manufacturer's standpoint, the 21 22 utility features that sell may not necessarilybe available to all manufacturers. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 293 1 

### So the point I'mmaking is thatutility and 2 the features that represent that utility and 3 manufacturing capacityorcapability are not one and 4 the same. And simplybecause the consumer canhave 5 access to itdoesn'tmean themanufacturerhas access 6 to it, whatever it is theproviderof_this utility. 7 And so in this discussion, the Department 8 needs torecognize that there is an economic side from 9 a manufacturerperspective to the debate on consumer 10 utility. And ifyou're drawing the conclusion from the 1 1 

### available evidence that all aspects ofutility, however 12 it is defined, are satisfied from the consumer 13 standpoint, you nonetheless have to complete the 14 analysis and flip itover and seewhether all 15 manufacturers are going to, from an equal economic 16 footing, be able to serve the consumerby providing 17 thatutility. 18 Because ifAcme canbuild itbutAjax cannot, 19 the consumer gets itbutAjax is economically 20 disadvantagedbecause of the rulemaking. 21 MR. McCABE: You're absolutely correct, 22 Terry. And that is, as we've discussed in the past, EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 294 1 one of the features thatwe are going tobe examining 2 in the manufacturer impact analysis. Because a standard 3 thatmay be, quote, acceptable, unquote, to consumers 

### 4 may be not economically justified from the Department's 5 perspective. 6 MR. THIELE: The only point I wanted tomake 7 was as long as the Department recognized and kept that 8 nexus. 9 MR. McCABE: Absolutely. 10 MR. BROOKMAN: Additional comments or 1 1 questions at this point? 12 (No response.) 13 Bryan, did you have further materials to 14 present? 15 MR. BERRINGER: No, no. That was it. I 16 guess one of the things we talked about was a 17 discussion of comments, comments or data submittal. We 18 put something out new to the group as far as requesting 19 additional information from the manufacturers for the 20 v-axis at 30, 35 and 40 percent. And what sort of time 21 22 frame we should look for comments. Obviously there's a lot of discussion. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 295 1 

### There's some unanswered questions orrecommendations to 2 be set forward andwe'd like to establisha date for 3 that. I think inone of the notices we putApril 15th. 4 Ifwe need togo further, ifwe need 35 or 45 days to 5 do that, I'd like to see if**~nybody** 

### has any 6 recommendations on the comment period. 7 

### MR. BROOKMAN: Steve? 8 

### MR. NADEL: Yes. I mean, yes, everybody can 9 and should get comments inbyApril 15th. I was 10 wonderingwhethermaybe the Department can get answers 1 1 

### to a couple ofquestions evennow. One, would itbe 12 possible for the Department to summarize the available 13 research in terms of the results as opposed to, gee, 14 they asked questions. That's one question. 15 Two, it sounded like youwere suggesting 16 settingup some group todeal with these issues. 17 NorthwestEfficiencyAlliance said they can include 18 questions if they know about thembyMay. 19 Do youwant towait until we get comments in 20 mid-lateApril and then address itordo you want to 21 get volunteers toparticipate settingup a conference 22 call around about April 15th. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 296 1 MR. BERRINGER: I think ifwe can see the 2 interest as far as peoplewanting toparticipate in 3 that group and settingup a conference call, I think 4 thatwouldbe a good opportunity. 5 Do we have any volunteers? 6 MR. JONES: Yes. 7 AUDIENCE PARTICIPANT: What did you volunteer 8 for? 9 MR. JONES: I'mvolunteering somebody. 10 MR. BROOKMAN: Steve, when you listedbefore 11 possiblenext steps, you also said summarize the 12 information on consumer issues. 13 MR. NADEL: Yes. I think itwouldbe very 14 useful to take this report. You've already got the

-- 15 this is themethodology for eachof the studies. But 16 then write about a page or soonwhat thekey findings 17 of those studieswere. You know, themajorones or two 18 or three. Not a bigpass but something that a 19 researcher shouldbe able topull together if they're 20 working full-time in less than a week. 21 MR. MORRIS: If the Departmentbelieves in 22 the conclusions. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 297 1 MR. NADEL: Or at this point, all it is would 2 be drafting. It could be one researcher's opinion of 3 those conclusions. Then I'm sure ifpeople don't agree 4 with those conclusions, they'll let the Department know 5 that. 6 MR. BROOKMAN: Bryan, and the Department at 7 large, is itpossible to do this? Steve's making a 8 request and it seems tobe linked to the effectiveness 9 of this conference call on consumer issues. 10 MR. BERRINGER: Yes. I think that canbe 1 1 accomplished. 12 MR. NADEL: In a week? 13 MR. BERRINGER: Within a week. Yes. 14 MR. ROSENSTOCK: Aquick comment. Steve 15 Rosenstock, EI. 16 As part of the Industry Advisory Committee 17 there is a consumer issues working group. I'll call it 18 that. Kathy Utney is kind of in charge of it. So 19 they're proceeding forward with it. 20 So, they might be doing some activities 21 22 already. I mean, if you can not reinvent the wheel

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• 298 1 MS. LAUGHLIN: I believe that the Advisory 2 Committee and their subcommittees aremore generic at 3 least. And this is specific to the clothes washer 4 rulemaking. 5 MR. MORRIS: Yes. I think any questions out 6 of this need tobe really directed to this rulemaking. 7 MR. ROSENSTOCK: Okay. I was just saying in 8 terms ofmore people for the group. Theremight be 9 some interest in some of those people, just for

-- if 10 you're recruiting. 1 1 MR. BROOKMAN: Is there a contact person for 12 the

-- who's going to shepherd the conference call on 13 consumer issues at this activity? 14 Bryan is. 15 Sowe have two next steps so far. One is to 16 setup a conference call on consumer issues. Bryan is 17 the contacton that. So anybody that wishes to 18 participate should contactBryan, eithere-mail, 19 telephone, eitherone. 20 MR. BERRINGER: Yes. 21 MR. BROOKMAN: And then someone will be 22 tasked for the summary on the consumer issues studies EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 299 1 results. Is there a name we put next to that or is 2 that yet tobe determined? 3 MR. BERRINGER: Also I'llbe the contact for 4 that as team lead. 5 MR. BROOKMAN: Are there any othernext steps 6 or action items we should establish at this point? 7 MR. McCABE: Well, another next stepthat 8 Bryanwill be the contactperson is, as Tom had 9 offered, and it is certainly appropriate that we 10 contact the range ofutilities and owners who are doing 1 1 some studies and likely be surveying to see if there's 12 some information that we canpiggybackonto invery 13 short order. That's one thing thatwe should starton 14 immediately and not try toget things come out ofwhat 15 may be a protracteddiscussion. And we may look at the 16 same time to see if comingout of any comments or the 17 discussion today ifwe can identify some other items. 18 But as I saidbefore, as Dan pointedout, 19 this is a month that's been extremely difficult for 20 Frank. 21 22 name also.MR. BROOKMAN: Okay. I have put down Bryan's

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• 300 1 MR. MORRIS: Doug, just a suggestion. You 2 may want tojust take that sheet over there, before 3 people leave, those people thatwant tobe included in 4 the conference call, have them sign their name and put 5 their telephone number on there. Bryan can take it 6 withhim andhe'll have the listof people thatwant to 7 be included. 8 MR. NADEL: Tell youwhat. I'll send around 9 a pieceofpaper. 10 MR. BROOKMAN: Okay. That sounds good. 1 1 Any other action items ornext steps we 12 should list at this point? 13 MR. MORRIS: Just a comment. It'sWayne 14 again. 15 In terms of the comment period for the 16 workshop and all of the activities thatwe've heard 17 today, some of the informationwas really available the 18 first time here today whenwe saw a lot of this. Jim 19 has beengracious enough toput a lot of the 20 informationup on theWeb throughDOE, whichwe think 21 is an excellent way of distributing information. But I 22 think a lot of this, as a result of theworkshop, it's EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 301 1 going to take a little time to digest. 2 You suggested 45 days for a comment period. 3 I think that that wouldbe probably a minimum that I 4 would like to ask for. So, I thinkwe're looking 5 really at the end of April of a comment periodor 6 something close to that. You can work on that, but I'd 7 have a littleheartache with trying to do that by the 8 15thofApril, especially ifwe're going to include in 

### 9 our comments the summary of the consumer issues paper 10 that's going tobe out in a week or so and to try and 11 also keep things moving as much as possible and have 12 one comment periodrather than multiple comment 13 periods. 14 MR. BROOKMAN: What aboutWayne's comment? 15 How does that sit? Does it compromise the Department's 16 time schedule, the calendar? 17 MR. BERRINGER: I thinkwe still

-- yes. 18 MR. BROOKMAN: Yes? 19 MR. McCABE: Again, the analyses thatwe have 20 presented, they are those which will be included along 21 with the advanced notice of proposed rulemaking. 22 Following the supplemental ANOPR, we will have a EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 302 1 workshopwhichwe're going to go into, which I was 2 expecting to go into some of the detail that we've gone 3 in today but relatively more subjects ofmanufacturer 4 impact analysis. 5 Sowe're dealing with preliminary lifecycle 6 cost analysis, preliminary energy forecasting, and in 7 fact, the first ofwhat wouldbe considered two

### LCC 8 analyses. And energy forecasting wouldbe that which 9 wouldbe used for the proposed rule. 10 And listening to the comments that have been 1 1 received today that there are some areas where there've 12 been substantial comment, consumer impact analysis 13 beingone, but when you look at the life cycle cost 14 analysis that Jimhad presented, some of the work that 15 Mike Rivest hadpresented, I didn't hearmuch exception 16 or supplemental informationbeing presented. And I'm 17 not certainwhat there is out there, what there likely 18 will be. 19 And my first concern is with respect to the 20 direction which these analyses are taking. Are they 21 22 headed in a useful direction. And from the comments that I'veheard, I think almost to a person the answer 

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• 303 1 is yes. They're not going off on a tangent. They're 2 going toproduce meaningful results. 3 And again, those results that are really 4 meaningful would be those that would be presented for 5 the NOPR so that the information that will then be 6 presented to the decisionmakers here in the Department 7 will be on target. 8 The NOPR is scheduled for

-- 9 MR. BERRINGER: The schedule for the ANOPR is 10 for the end of May. 1 1 MR. McCABE: And the NOPR? 12 MR. BERRINGER: It's January '99. 13 In the July workshop following the ANOPR 14 there's going to be more detailed information exchanged 15 that will guide the completing of the life cycle costs, 16 the manufacturer impact analysis and the other 17 analyses. Going to the first order question, are we on 18 target? Are some of those things questions that can be 19 answered in the 30-day period? Many of the others are 20 going to take more than 30 days and they'll be picked 21 22 up in the NOPR. MR. BROOKMAN: I guess one thing as I've EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 304 1 listened to this conversation that I was unclear about 2 is how much refinement you need on these consumer 3 issues now. It seems like there's special issues tobe 4 addressed. I didn'tknowwhether itwas possible to, 5 as you suggest, use a 30-day comment period to address 6 what's been presentedhere andmaybe extend it a little 7 bit, if that's what required, to get comment on the 8 consumer issues. 9 MR. McCABE: We have alsomade the request 10 for additional engineeringdata. I don't expect that 1 1 those data are going tobe collectedwithin 45 days. 12 We're going tohave to sitdown with themanufacturers 13 and talk about it in some detail so there is 14 information that's going tobe received well after

-- 15 30 days after that 45 day period. 16 I'm looking to what is important now inorder 17 to aid the preparationof theANOPR, whichwe're 18 looking at in theMay time frame. 19 MR. BROOKMAN: Mike, you're saying let's 20 stickto 30 days to the extent you can? 21 22 MR. McCABE: I would. Yes. MR. BROOKMAN: Steve Nadel? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 305 1 MR. NADEL: I was justgoing to comment and 2 agree that for the information thatwas presentedhere, 3 I think 30 days shouldbemore than sufficient, 4 particularly since a lot of this was discussed in the 5 preliminary workshop inFebruary for those who chose to 6 sendpeople. 7 To the extent there is additional information 8 on consumer issues coming out in a week or two, then 9 for that particulardocument maybe a longer comment 10 period, but let's not delay comment on everything 1 1 because of that one document
. 12 MR. BROOKMAN: Would 30 days comment be 13 sufficient once that consumer paper is out, the 14 consumer issues summary? Would thatbe sufficient at 15 that point? 16 MR. McCABE: Adifferent response period? 17 MR. BROOKMAN: Yes. I mean, I guess I'mking 18 of splitting the question beforewe try to roll it 19 together. 20 MR. THIELE: I thought I heardMike say that 21 there are really two dates here. The one is whenwe 22 need tocomment on inpreparation for or in expectation EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 306 1 of influencing theANOPR, and then once theANOPR is 2 out, you can comment yourbrains out. 3 MR. BERRINGER: I'djust like tomake the 4 point that the consumerportion that we'rebringingup 5 here is not critical to the ANOPR. It's really the 6 nextphase. Sowe're justbeginning that. 7 So the consumer issue, thatwould have no 8 impact on theANOPR. 9 MR. BROOKMAN: MichaelMcCabe makes the 10 request, I believe, thatwe try and do comments -- you 1 1 collectively try and do comments within 30 days. Is 12 that going towork? I see several people nodding yes. 13 The rest of you I think are tired. 14 Thirty days iswhat's being suggested. If 15 it'sgoing tobe a real heartburn for you, you should 16 say sonow. Notingwe're not talking about consumer 17 issues in this case. 18 And then, as a way of dealingwith consumer 19 issues, is itreally possible to get a report written 20 in the spanof a week? 21 22 MR. BERRINGER: I thinkwe can. MR. BROOKMAN: Pretty close to it? That EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 307 1 would mean the due date or the distributiondate out of 2 DOE by say the 18thor couldwe give it the 20th, to 3 the 20th, March 20th? March 18th is seven days. 4 MR. BERRINGER: What's that on the calendar. 5 We're not working on Sunday. 6 MR. BROOKMAN: Let's be realistic about this. 7 MR. NADEL: I said a personworking full-time 8 couldprobably do it in a week. I know it'sprobably 9 going to take a couple of days to figure out who's 10 going to do it. I wasn't trying to set a rigid one-week 1 1 time frame. I was just saying itwas a relatively 12 quick turnaround. That's the point. 13 MR. BROOKMAN: Do you have somebody inmind 14 who cando this and get it turned around in 7-10 days? 15 MR. McCABE: I have somebody inmind. 16 (Laughter.) 17 MR. BROOKMAN: If we said twoweeks would 18 that be reasonable, two weeks? And then the comment 19 period follows

-- is 30 days after that twoweeks? 20 21 22 MR. KESSLER: I'd like to ask for somewhere between 45 and 60 days. I don't have the resources thatEarl has. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 308 1 (Laughter.) 2 MR. BROOKMAN: To review the consumer issues 3 document or -- 4 MR. KESSLER: To comment no this. 5 MR. BROOKMAN: On today's? 6 MR. KESSLER: Yes. 7 MR. BROOKMAN: I see. So I don't know what 8 to do with this. 9 Michael? 10 AUDIENCE PARTICIPANT: Doug, you're the 1 1 facilitator. You can't pass the buck
. 12 MR. BROOKMAN: Some people were saying that 13 there's a lothere to review before they feel like they 14 can comment. You can't squeeze it up into 30 days? 15 MR. KESSLER: I'd like tohave more time. 16 MR. BROOKMAN: Could we split ithalf between 17 45 and 30? That would get us 

### 38. 18 [Crosstalk.} 19 MR. NADEL: I thinkpeople shouldbear in 20 mind this is not the final last chance to comment. 21 We've got about five more comment periods in the 22 schedule. I mean, I guess the two choices are we do EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 309 1 them quick orwe cut out comment periods and givemore 2 people a longer time before each setof comments. I 3 cango either. Butwe can't extend

-- have five 4 extensive comment periods. 5 MR. MORRIS: To follow that, Steve, maybe 6 what we need todo is figure outwhat parts of all of 7 the stuff that we saw today influenced theANOPR and 8 have our comments only deal with those specific parts. 9 MR. BROOKMAN: That's your suggestion, as 10 well? And are those clearly identifiable, do you 11 think? 12 MR. KESSLER: They're not tome. 13 MR. McCABE: Well, let's justdiscuss the 14 ANOPR. TheANOPR that we publish is going tobe unlike 15 anything that the Department has publishedbefore. 16 PreviousANOPRs were nothingmore, as I've 17 characterized them, as running the flag up the 18 flagpole, then say the Department is going tobe 19 conducting a rulemakingon these products. The 20 Departmentwill beperforming an engineeringanalysis. 21 Here are thedesign options that are going tobe 22 considered. Here are the tools that are going tobe EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 310 1 used. 2 Therewere no results presented. Itwas just 3 a very broad framework. This ANOPR whichwe've had 4 some preliminary

-- very preliminarydiscussions as to 5 the format, is going to be different in that, one, it's 6 going to have a technical document that's going to 7 accompany it. 8 Ideally, we will release these technical 9 documents that accompany anANOPR or a NOPR or a final 10 rule in advance of the publicationof those Federal 1 1 Register notices. 12 In this case, it's going to have what I have 13 called a preliminary life cycle cost analysis, 14 preliminary engineering analysis and preliminary energy 15 forecasting analysis with results of those. 16 I stress preliminarybecause the workshop 17 following the publicationof theANOPR as we've 18 described in the process rule is for the purpose of 19 defining the inputs, the variables that will be used in 20 the complete analysis so thatwhat I would find tobe 21 22 most valuable and the purpose of all these workshops and meetings thatwe've had is tohone in and narrow EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 311 1 the definitionof the life cycle cost analysis. And 2 we've put a fair amount of definition as towhat is 3 going tobe the form and substance of the life cycle 4 cost analysis. 5 The comment I'd like to see on the ANOPR with 6 respect to the life cycle cost analysis is is that 7 analysis reasonable? Does itcapture therange of 8 impacts on consumer life cycle costs? And ifwe had 9 justpublished andwere justrelyingon an average life 10 cycle cost analysis, I would expect the comments that, 1 1 no, it'snot adequate because itneeds to look at the 12 whole range of variables that consumers experience. Up 13 in the PacificNorthwest, the cost of electricity is 14 very different than it is in New York State, and that 15 you need tohave a more robust analysis. 16 When it comes towhether ornot the priceof 17 electricity, the range of electricityprices is from 2 18 cents to 18 or if it's from 1.5 to 19, that's in the 19 noise and that's something that personally I see that 20 canbe resolved, addressed, between now and the initial 21 part of thatworkshop following the publication of the 22 ANOPR. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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312 1 But if the structure that Jimhas presented 2 on the life cycle cost analysis, the approach thatMike 3 has presented on taking and developing some mark-ups, 4 if you all think that we're way off base on that, 5 that's what I'm interested in the comment on the ANOPR. 6 But if it's going to be fine tuning it, that's between 7 now and when we start to do the analysis for the 8 proposed rule. Butmore importantly, the time to get 9 all that fine tuning done is by July when we have the 10 workshop following the publication of the ANOPR. 1 1 MR. BROOKMAN: I guess then, Alan, I'ddirect 12 the question to you. Do you think based onwhat 13 Michael said you can get your comments in on that scope 14 of comment by in the next 30 days? 15 MR. KESSLER: Yes. Fine. 16 MR. BROOKMAN: Okay. So no one's got a 17 problemwith 30 days, I'mhearing. Now let's turn to 18 the consumer issues. 19 Thanks for that clarification, Michael. 20 21 22 Consumer issues. Hopefully we'll have a report in the span of two weeks and it's out the door; right? And then after two weeks, what's a reasonable
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• 313 1 comment period for the consumer issues? 

### 2 MR. MARTIN: Thirty days. 3 MR. BROOKMAN: Thirtymore days? 4 MR. MARTIN: Yes. All you're really looking 5 at is to say I've got a copy of that report and you've 6 got itwrong. It's a summary of what's available and 7 the comments would be inaccuracies in the summary. 8 MR. BROOKMAN: I should think also that we 9 also listed that a conference call might occur or 10 should occur. That based on that report, people would 1 1 come forward and say you asked the wrong question, 12 based on the preceding point

-- discussion. That you 13 missed this question. This is a fundamental question, 14 as Earl and others have pointed to that shouldbe 15 answered, that shouldbe part of the record before the 16 Department goes forward. 17 So I would hope there'd be more than you're 18 right orwrong. 19 20 21 

### 22 Thirty days. Is that sufficient? (No response.) Thirty days is sufficient. Okay. Good. Any other additional items, next steps or EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 314 1 action items we should address at this point? I note 2 you put the framework up there. Did you wish tomake a 3 comment on that at this point? 4 MR. BERRINGER: No. It's justone way of 5 discussing as far as what is the most critical thing 6 that is needed sowe canproceedwith theANOPR. 7 Obviously, comments on the engineering analysis, life 8 cycle cost, shipments, and those, and the less critical 9 are the consumer and the reverse engineering. Although 10 toproceed forward with the reverse engineering, Steve 11 Mariano would need comments tomake sure he's on the 12 right track inorder tomove forward. 13 So, that's the only thing I wanted to say 14 about that. 15 MR. ROSENSTOCK: Steve Rosenstock, EI. 16 Just for this consumer issue, this revised 17 report, if itgets done in two weeks, are you going to 18 only send itoutby e-mail and fax so that you known 19 people get it, so that they have 30 days? Again, just 20 for this part of it, justbecause 30 days canbe less 21 thanmaybe 25 days if you send itout viamail, regular 22 mail. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 315 1 MR. BROOKMAN: Based on the people that want 2 to participate

-- or, I guess we can send itout to 3 everybody. We can send it out. We can also post iton 

### 4 theWeb page. 5 AUDIENCE PARTICIPANT: Let me ask. Should 6 the consumer issues paper that's going to go out in two 7 weeks, should that be sent to everybody in this room or 8 everybody on the distribution list? How should thatbe 9 handled? 10 MR. JONES: I don't think itmatters whether 1 1 itgoes out or whether you post it, but we justhave to 12 know that it's available. 13 MR. BROOKMAN: Can everybody access it via 14 theWeb site? Does anybody have a problem accessing it 15 via the Web site? Speak now. 16 (No response.) 17 No one has a problem. Okay. So the need to 18 know it's available. 19 Qonnie? 20 MS. LAUGHLIN: I have a question. I want to 21 knowwhat kind of summary. I mean, some of these are 22 fairly huge reports. What kind of summary are you EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 316 1 looking for? I mean, we can't possibly put like all 2 the questions to be asked, which is kind of what we 3 would like to know. So, I mean, itmight be difficult 4 for us to determine what kind of summary you want. 5 Do you want itby issues? Do you want itby 6 just generally what the general conclusions are? Do 7 you want**~** description of who they surveyed? 8 I mean, you know, there's all kind of 

### 9 summaries. 10 MR. JONES: I think you got them all, or at 1 1 least that was a start. 12 MR. JONES: No. I mean, seriously, I don't 13 think you can simply go right to the point of saying 14 this is what the conclusionwas because I think we'd 15 like to be in a position to know exactly what the 16 approach was in settingup the survey. 17 Did they talk with people who spent $1,000 18 and who didn't want to seem like they were idiots for 19 having done so. Things like that. 20 You want to be in a position to judge whether 21 or not there was some objectivity in the approach that 22 was used by the surveyors as opposed tohaving to guess EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 317 1 

### at that. 2 MR. NADEL: This is SteveNadel. I had in 3 mindnothing too longbut a paragraphor soon the 4 methodology and thekey things. You know, gee, itwas 5 a survey of appliances, consumers inmajor appliance 6 stores orwhatever itwas. You know, the key 7 methodology andwhat the key findings were. 8 The idea is not tomake

-- tohave todo a 9 doctoral dissertationbut to let everybody understand 10 aboutwhere things are. If they wantmore information, 1 1 

### they can follow up with the original citation. But to 12 give a picture about what is the stateof knowledge 13 withregard to consumer acceptance of these new high 14 efficiency technologies. 15 

### MR. BROOKMAN: Noting that there are 10 

### or 15 

### 16 sources that are listed in the document here today. So 17 if it's even one pageper source, thatwouldbe a 18 significantreport. 19 

### MR. JONES: Just looking at -- I thinkJim 20 did this. It doesn't say, but it's from LBNL. And on 21 page 11 of that draft, if you look at that

-- I mean, 22 pick any one. There's a descriptionof some of the EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 318 1 studies. Page 12, for example. And then there's a 2 summary. 3 Now, I guess I was looking for something 4 other than this. And I guess, Steve, I'd ask you if 5 you could look at that. Is thatwhat you thinkwould 6 be an adequate synopsis? 7 MR. NADEL: Yes. I found thatbasically the 8 summary said that they did these surveys. itdidn't 9 say anything about what the findings were. It doesn't 10 say that

-- youknow, what are the key questions. And 1 1 gee, if a questionwas consumer satisfactionwith the 12 technology. You know, 88 percent said yes, they were 13 very satisfied. What are some of the key results 14 rather than

-- this basically says, yes, we got some 15 results. 16 MR. MORRIS: This isWayne. I thoughtwhat I 17 had understood what peoplewere asking for was, ifyou 18 will, a summary of the conclusions. What is it that 19 the Department is taking away from these studies. What 20 is it that the Department believes is the result and 21 conclusionof this study that is going to then 22 influence the rulemaking. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 319 1 So it's not just the summary ofhow the study 2 was conducted. It's a summary of the conclusions. 3 MR. THIELE: This isTerry Thiele. And I'd 4 just simply throwout as an editorial comment that it 5 wouldbemore useful if

-- working off ofwhat's 6 already there, obviouslybut if this summary review 7 could attempt to follow more or less the same format on 8 eachof the studies, so that youwere comparing an 9 apple and an apple and an apple, and then add on the 10 conclusions
. 1 1 MR. BROOKMAN: Steve? 12 MR. NADEL: The other thing I'dpoint out is, 13 I think as Bryanpointedout, there are like three 14 major studies that goes two or three pages. The 15 WashWise, Bern and one of the other ones, you canget 16 bymuch more briefly. 17 MR. BROOKMAN: Now, I would note, I've also 18 noted as next steps that Bryan is alsoon thehook to 19 contact the utilities and others about surveys and 20 other things that are prospective that are happening 21 soon. Tom and Christie and others had othervehicles 22 toobtain this information. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 320 1 MR. JONES: Earl here. And I assume thatwe 2 wouldknow that in the conference call, that utilityX 3 or Yis gettingready to, on this kind of a schedule, 4 to conduct a study and would you want to try to affect 5 that in some way; right? 6 MR. BROOKMAN: And the sheetwas circulated. 7 Where did itendup? 8 AUDIENCE PARTICIPANT: I have ithere. 9 MR. BROOKMAN: Okay. So it's stillbeing 10 circulated for anybody thatwouldwish to sign it
. 11 MR. NADEL: Itnevermade itdown this side 12 of the table. 13 MR. BROOKMAN: So let's send itbackup here. 14 Yes. Thank you. 15 Any additional action items or next steps 16 before I hand itback to Bryan andMichael McCabe? 17 MR. BERRINGER: I guess therewould be one 18 other thing, too. Ifwe're planning tokeep on 19 schedule, we're looking at a workshop inJuly. And 20 obviously the 4th ofJuly wouldn't be a goodweek, but 21 are there any conflictingdates we want tolook at as 22 far as next steps. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 321 1 When would be a good time? Is there any 2 major conflicts inJuly that are occurring? Any 3 proposed dates from anybody? 4 MR. NADEL: The question isbasically are 5 there any days in July that are not good? 6 MR. BERRINGER: That is correct. 7 MR. BROOKMAN: Can we discuss by earlyJuly? 8 You know, a week time frame in there? 9 MR. McCABE: This is going tobe

-- there are 10 a number of issues. This is going tobe following the 1 1 publication of the ANOPR. That's the focus. Another 12 part of the question which has not been asked ishow 13 much time after the ANOPR is published are people going 14 toneed to review it. I would assume that it's going 15 tobe in about 30 days after in order to look at the 16 information that's included in there. 17 So if we were successful inpublishing it in 18 mid-lateMay, you're talking about the first ofJune 19 for all practical purposes and you're talking about the 20 first of July would be the 30 days. The first week of 21 22 July, I suspect, would be out. MR. HAWKINS: I would like to see itpushed EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 322 1 beyond the second week ofJuly, myself. 2 MR. BROOKMAN: Someone on this side of the 3 room said the fourth week. SteveNadel, did you have a 4 comment? 5 MR. NADEL: I was trying to clarify, Mike. 6 Is this workshop primarily todeal with likenew 7 issues, likemanufacturing impact and not somuch to 8 repeat issues we've discussednow or is it a 9 combinationof goingover these issues again and 10 getting to the new issues? 1 1 MR. McCABE: Itwill cover everything so that 12 on these issues, we're going toget down tomany of the 13 points thatAlan has; preciselywhat is the right 14 value, the correctvalue that shouldbe used in the 15 reverse engineering analysis that Stevehas described. 16 We may be goingbeyondwhat has been 17 submitted in the interim. It's going tobe looking at 18 the life cycle cost analysis saying that these 36 runs 19 are reasonable, but there shouldbe these additional 20 scenarios besides the EIA, the threeEIA cases, and the 21 one GRI. There shouldbe three others andhere are 22 what they are. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 323 1 So it's going tobe going through that level 2 of detail for those. It's going to get into the 3 manufacture impact analysis and that will be new 4 information there as far as presentingmethodology. 5 So it is not going tobe one thatwe're going 6 to take a day and a half and do in a day. If anything, 7 it's going tobe taking a day and a half and do it in 8 three days. 9 MR. BROOKMAN: I'veheard only two things 10 about the date so far. One person said I'm free todo 1 1 it after the secondweek and another person saidhow 12 about the fourth. That's what's on the table so far. 13 So we're talking the third and fourth, basedon all 14 that's been said, which is very little. 15 MR. NADEL: Not the 23rd. 16 MR. BROOKMAN: Not the 23rd. So it seems as 17 though everybody is okay ifwe go the third or fourth 18 week. And the dates are out there. We'll leave it to 19 the Department to establish them. 20 MR. NADEL: Could they get back tous fairly 21 quickly because what we're sayingnow applies now, but 22 itmay not apply in two weeks. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 324 1 MR. BROOKMAN: Shouldwe establish the fourth 2 week now? 3 MR. McCABE: No. We cannot establishwhen 4 it's going tobe because it's going tobe dependent 5 upon when the ANOPR is published. But what Steve was 6 getting to is appropriate, and that is, we will be 7 talking to all parties beforewe publish theANOPR. 8 The publicationof the ANOPR is not going tobe a 

### 9 surprise. And when we publish that, we will have a 10 need for a hearing, for a workshop. And that date will 1 1 have been something that will have been discussed prior 12 topublication so that people will have had a say and 13 we will have gotten input as towhen that date should 14 be. 15 We have a sense as to the lasthalf of July 16 right now. And ifwe are on schedule with publishing 17 it lateMay, I think that's what I would recommend. 18 But before we publish it, Bryan, who's got his name for 19 everything else, will contact AHAM, will contact some 20 of the states, will contact some of the efficiency 21 advocates andmany of those who arehere toget a sense 22 as towhat falls within your calendar. EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 325 1 We're not going to satisfy everybody. There 2 are some who will go off on vacationduring the July3 August time frame. Can't change that. There are some 4 who are going tohave

-- theirbosses are going tohave 5 demands on them. Can't change. But I'd like to try to 6 satisfy themajority ofpeople because it'snotgoing 7 tobe worthwhile if only have a few people there. 8 MR. NADEL: I guess, Mike, I mightwant to 9 suggest a slightly alternativeway todo it. First, I 10 think frommy experience trying to setup large group 11 meetings inAugust, it'svery difficult. If you don't 12 makeJuly, you're going tohave thin attendance. 13 I think if youwait until you have a firm 14 date on the ANOPR, sometime inMay, you're going to 15 lose a significantnumber ofpeoplebecause youhaven't 16 set it. 17 I would encourage you to set a date now and 18 thenmake sure that the schedule fits it inorder to 19 get the vastmajority of peoplewho need attend it. 20 People's schedules do fill up. I'mprettyopennow but 21 22 just to speakpersonally, my April andMay are getting pretty crowded. I'mmainly working on schedulingJune EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 326 1 now. Sodon't delay it too long. 2 MR. MARGOLIS: Ifwe are delayed for some 3 reason and we set the date, then are you saying? That 4 we shouldget out the ANOPR anyway ifwe're delayed and 5 cut out certain things? That cannot be. 6 MR. NADEL: The option is to cancel the 7 meeting in a worse case. But you do everything 8 possible to -- from this conversation, I'd say let's do 9 it the lastweek inJuly. Let's set a date now. And 10 DOE does everythingpossible tomake that work. And if 1 1 itdoesn't, thenwe have to cancel it. But recognize 12 that itprobably won't rescheduled againuntil 13 September. 14 AUDIENCE PARTICIPANT: Am I on the record as 15 saying I agreewith Steve? 16 (Laughter.) 17 MR. BROOKMAN: Typicallyworkshops are held 18 in themiddle of theweek, likeWednesdays and 19 thursdays. Is that a good time? Orwould you rather 20 do earlier in theweek, themiddle of theweek? 21 And I think this all depends on whatMichael 22 saidearlier. Perhaps a two-daymeeting, Mike? EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 327 1 MR. McCABE: I think at least two days. 2 MR. BROOKMAN: At least two days. 3 So the lastweek inJuly is what I'veheard. 4 Does anybody have a calendar? 5 Wednesday the 29th andThursday the 30th, at 6 a minimum. Can you pencil in those dates? 7 AUDIENCE PARTICIPANT: Maybe itought itbe 8 Tuesday-Wednesday, because then if itneeds to go a 9 thirdday, then you have theThursday. 10 MR. BROOKMAN: Does thatmake it the 28th? 1 1 Pencil in the 28th, the 29th and maybe the 30th. 12 AUDIENCE PARTICIPANT: No. Leave it two 13 days. People will burnoutby then. 14 MR. McCABE: You were decidingwhich one of 15 the three

-- which two of the three youwould take but 16 not the three days. 17 MR. BROOKMAN: Well, let'spick two now. 18 Tuesday is the day to start. Okay. That's the day the 19 start. That's the 28thofJuly. 20 21 22 MR. NADEL: The 28th, 29th. MR. BROOKMAN: Okay. So is there any other business that we should take upbeforewe close out EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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• 328 1 

### thismeeting? 2 Any othernext steps or action items we 3 should establish? 4 (No response.) 5 Then I'lljust turn itback toBryan, and 6 thankyou all for a veryproductivemeeting frommy 7 perspective. 8 Thank you. 9 

### MR. BERRINGER: I'djust like to thank 10 everybody. I'm amazed and shocked that we made it 11 

### through thismeeting inone day. Appreciate your 12 openness and your comments on that. 13 Michael, do youhave any other closing 14 remarks? 15 Again, I'd like to thank everybody for 16 attending. 17 

### MR. BROOKMAN: I'vegot one thing I want to 18 say. Steve asked if theEconomicAnalysisWorking 19 Group Subcommittee couldhang on immediately after the 20 meeting todecide where you're going tomeet tomorrow. 21 22 

### So everybodyjusthangonright here. Stayrighthere. And please hand your evaluation forms to EXECUTIVE COURT REPORTERS, INC. (301) 565-0064---------..,....-- 

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• 329 1 Brenda and to Sandy as youwalk out the door. 2 (Whereupon, the proceedings were concluded at 3 5:15 p.m.) 4 5 6 7 8 9 10 11 12

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064

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# .- 13 14 15 16 17 18 19 20 21 22 23 24 

# ·- 25 REPORTER'S CERTIFICATE This is to certify that the attached

- proceedings before: DEPT. OF ENERGY

In the Matter of: CLOTHES WASHER WORKSHOP

were held as herein appears and that this is the original transcript thereof for the file of the Department, Commission, Administrative Law Judge
or the_**~g~ncy.** DAVID McCoy Official Reporter Dated:MARH 11, 1998

EXECUTIVE COURT REPORTERS (301) 565-0064