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 U.S. DEPARTMENT OF ENERGY 

PUBLIC MEETING ON ENERGY CONSERVATION STANDARDS 

 FOR REFRIGERATED BOTTLED OR CANNED BEVERAGE 

VENDING MACHINES 

U.S. Department of Energy 

 Room 1E-245 

1000 Independence Avenue, SW 

Washington, D.C. 20585 

 9:00 a.m. 

Thursday, June 26, 2008 

Attendees

 DOUG BROOKMAN, Facilitator 

 VICTOR PETROLATI, Department of Energy 

 CHARLES LLENZA, Department of Energy 

 ERIC STAS, Department of Energy 

 MICHAEL KIDO, Department of Energy 

 RACHEL SCHMELTZ, Environmental Protection 

 Agency 

 BOB McGARRAH, USA Tech 

 TRENT ROTH, Dixie Narco 

 NINA TARLEY, PepsiCo 

 MATT MILLARD, Navigant 

 ARIS MARANTAN, Navigant 

 MIKE RIVEST, Navigant 

 STEVEN ROSENSTOCK, EEI 

 GARY FERNSTROM, Pacific Gas & Electric 

 HARVEY SACHS, American Council for 

 An Energy Efficiency Economy 

 SRIRAM SOMASUNDARAM, Pacific Northwest 

 National Laboratory 

 MIKE SCOTT, Pacific Northwest 

 National Laboratory 

 STEVEN COUSINS, Coca-Cola 

 TOM ECKMAN, Northwest Power 

 GLENN SELFRIDGE, Royal Vendors 

 TOM McMAHON, National Automated 

 Merchandising Association (NAMA) 

 LANE BURTON, NRDC 

 REBECCA DUFF, ICF Consulting 

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A G E N D A 

ITEM: PAGE: 

Welcome 3 

Opening Remarks, Introductions and Agenda 

Review 4 

 Doug Brookman 

Rulemaking Overview 8 

 Charles Llenza 

Comments from Participants 10 

 Doug Brookman 

Engineering Analysis 21 

 Aris Marantan and Matt Millard 

Life-Cycle Cost Analysis 34 

 Sriram Somasundaram and Mike Scott 

Afternoon Session

National Impact Analysis 134 

 Sriram Somasundaram and Mike Scott 

NOPR Analyses 189 

 Aris Marantan, Sriram Somasundaram 

 and Mike Scott 

Discussion of Other Issues 206 

 Doug Brookman 

Next Steps and Closing Remarks 212 

 Charles Llenza 

Adjourn 

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

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3 Welcome

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 MR. BROOKMAN: So I believe we should reward 

those of you who were here on time. I appreciate that. 

Thanks very much. 

 Good morning, everybody. Welcome. My name’s 

Doug Brookman from Public Solutions in Baltimore. 

 This is the U.S. Department of Energy’s 

Public Meeting on Energy Conservation Standards for 

Refrigerated Bottled or Canned Beverage Vending 

Machines. 

 Welcoming Remarks by Victor Petrolati. 

 MR. PETROLATI: Good morning. My name is Vic 

Petrolati. I’m the Acting Supervisor this week for the 

Appliance Standards Program, sitting in for Ron Lewis, 

who is the Supervisor for the Appliance Standards 

Program. 

 First of all, I want to welcome you to 

Washington, D.C., today. You caught us on one of our 

typical summer days, warm, humid, most likely rain this 

afternoon. 

 So we’re very pleased that you could attend 

today. We’re looking forward to a very productive 

meeting this afternoon, today and this morning. We’re 

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certainly hopeful that we can gather all of the 

information we need to our rulemaking process. I 

understand this is an industry that has a significant 

participation with the EnergyStar Program. So you’ve 

already made in many cases a lot of technology 

improvements to improve energy efficiency. 

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 Again, I want to thank you for attending 

today and I appreciate the assistance that you’re 

providing us in this rulemaking process. 

 Thank you. 

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 MR. BROOKMAN: Let me do Introductions. 

Okay. And then I’ll give the Overview. Okay. 

 So it’s our custom to provide an opportunity 

for each person to introduce him or herself. Please 

say your name and organizational affiliation and then 

we’ll do a brief Agenda Review and then we’ll have an 

Overview. Your name and organizational affiliation. 

We’ll move around the room. 

 MR. McGARRAH: Bob McGarrah, USA 

Technologies. 

 MR. COUSINS: I’m Steve Cousins with CocaCola Company. 

 MR. ROSENSTOCK: Steve Rosenstock, Edison 

Electric Institute. 

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 MR. SACHS: Harvey Sachs, American Council 

for an Energy Efficient Economy. 

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 MR. FERNSTROM: Gary Fernstrom, recently 

retired from and representing the Pacific Gas and 

Electric Company. 

 MR. ECKMAN: Tom Eckman, Northwest Power and 

Conservation Council. 

 MR. BERG: William Berg, Natural Resources 

Defense Council. 

 MS. TARLEY: Nina Tarley, PepsiCo. 

 MR. SELFRIDGE: Glenn Selfridge, Royal 

Vendors. 

 MR. ROTH: Trent Roth, Dixie Narco. 

 MR. MATHIS: Tim Mathis, Dixie Narco. 

 MR. HARACH: Rick Harach, Dixie Narco. 

 MR. STAS: Eric Stas, DOE General Counsel. 

 MR. LLENZA: Charles Llenza, Project Engineer 

for Department of Energy. 

 MR. BROOKMAN: Vic introduced himself. 

Please. 

 MR. MILLARD: Matt Millard from Navigant. 

 MR. MARANTAN: Aris Marantan, Navigant. 

 MR. SOMASUNDARAM: Sriram Somasundaram, 

Pacific Northwest National Laboratory. 

 MR. SCOTT: Mike Scott, Pacific Northwest 

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 MR. PARKER: Graham Parker, Pacific Northwest 

National Laboratory. 

 MR. McMAHON: Tom McMahon, NAMA. 

 (Introductions Off Microphone.) 

 MR. BROOKMAN: Thank you. I think all of you 

received a packet of information when you came in the 

door and I think all of you, each of you, registered as 

well. That’s helpful for the department to know who’s 

here. 

 In your packet, there’s a copy of the Agenda. 

I’m going to take a quick review of that right now. 

This is the plan for the day. 

 Following this Agenda Review, we’re going to 

have a Rulemaking Overview by Charles Llenza. 

Following the Overview segment, there’s an opportunity 

for any individual that wishes to do so to make brief 

summary comments. You can see that in the 9:30 to 10 

o’clock slot, Comments from Participants. 

 Following that, we’ll have an Overview of 

Engineering Analysis. We’ll take a break midmorning, 

round about 11:15 or so. Following the midmorning 

break, we’ll have a detailed description of the LifeCycle Cost Analysis. Following that, we’ll take a 

break for lunch. 

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 As I understand it, the major cafeteria has 

now shut down. That’s what the AV guy told me. So 

we’re going to have to make some other arrangements for 

lunch or something. There will be food somewhere. We 

do know that but it may not be as simple as it 

typically is. 

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 Following lunch, we’ll have a Description of 

National Impact Analysis and the segment on your agenda 

that says Discussion of Other Issues, we’re going to 

move that to the end of the day. We’ll take a break 

midafternoon around about 3:30. Then we’ll do a 

Description of the NOPR Analyses and then following 

that, there’s another opportunity for any of you to 

make comments, summary comments, raise other issues 

that haven’t been raised so far, and then we’ll after a 

Description of Next Steps and Closing Remarks, and 

we’ll adjourn today no later than 5 o’clock. We may 

make it out of here earlier than that. It’s a 

possibility. 

 Questions and comments about the agenda? 

 (No response.) 

 MR. BROOKMAN: In particular, anything that 

you think -- anything that you would like to accomplish 

that won’t fit in the framework provided here? 

 (No response.) 

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 MR. BROOKMAN: Okay. I see no additional 

comments on that. 

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 I’d ask for your consideration. What has 

emerged over many years at these public meetings is 

what I think is common courtesy. I’d ask simply that 

you speak one at a time. Please say your name for the 

record. I’m going to be queuing you as best I can by 

name. You don’t need to repeat your company name every 

single time. Just your name for the record. 

 Please keep the focus here. Put your cell 

phones on silent mode, if you would, please, at this 

time. If you need to have a sidebar conversation with 

someone for more than about 30 seconds, we’ll 

understand you taking it out of the room, and as I 

said, I’m going to be queuing people by name as best I 

can and also I wish to encourage follow-on comments, 

but please do for the completeness of the record, 

there’s a court reporter present, there will be a 

complete record of this meeting, please say your name 

every time you speak. That will make it easier for 

everybody. 

 I think that’s all I have. So then an 

Overview by Charles Llenza. 

24 Rulemaking Overview

25 MR. LLENZA: Welcome to the Department of 

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Energy and in case somebody doesn’t know where they’re 

at, we are at the Beverage Vending Machines Advance 

Notice of Proposed Rulemaking Public Meeting here at 

the Department. 

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 The basic purpose of our meeting today is to 

present the Department’s methodologies and to 

characterize the results, to discuss the specifics on 

the analysis, to seek your input, to describe our 

downstream process, and the next steps. 

 This is our agenda for today and as you can 

see it’s a full agenda. 

 The Energy Policy and Conservation Act 

directs the department to consider seven factors when 

setting energy conservation standards. These seven 

factors provide us with the related steps for our 

analysis. 

 This is the flow diagram of the Advance 

Notice of Proposed Rulemaking process and we will be 

discussing several of these segments here today. 

Basically, they are: the Engineering Analysis, the 

Life-Cycle Cost Analysis, the NIA. Our primary goal 

here is to achieve our issuance date of August 2009 for 

the Energy Conservation Standard to be published. 

 We’re seeking issues for public comment here 

on these eight different categories. We’re seeking 

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information on equipment classes, operating hours for 

the compressors and the lighting, the refurbishment 

cycles, the life-cycle cost baseline, the base case and 

standard case forecasts, impacts of future shipments, 

candidate standard levels, and characterization of 

energy conservation standards. 

 The participants are more than welcome to 

provide your summary comments in your statements and 

are invited to raise additional issues in the 

discussions today. There will be several points in the 

agenda where that will be allowed. 

 Also, I wanted to make everybody aware that 

our comment period is through July 16th of this year. 

 That’s all I’ve got. 

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 MR. BROOKMAN: The department likes to 

provide an opportunity for anybody that wishes to do so 

here at the outset to make a brief summary comment 

about issues that you would like to raise for the 

record and presumably many of these issues will be 

taken up and dealt with in more detail as the day goes 

on, and one or two individuals have requested the 

opportunity to speak and then anybody else that wishes 

to do so is encouraged also to do so. 

 So Bob McGarrah from USA Technologies has 

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requested the opportunity to speak. These comments, 

please, if you would, two, three, no more than five 

minutes. 

 MR. McGARRAH: Bob McGarrah, USA 

Technologies. 

 We met here in 2006 in this exact room. The 

average cost of gasoline was 2.95 a gallon. The 

average commercial energy cost was 8.8 cents per 

kilowatt hour. Two short years later, you can tell how 

long ago I wrote this, the average cost of gasoline is 

$3.82. We know that’s over $4 in just two weeks 

between the time I wrote this and the meeting. The 

average commercial electrical cost is 1.5 cents per 

kilowatt hour. 

 Global energy crisis is a serious and growing 

concern. There’s no way we’re going to back to the way 

it was. The demand for energy is rising, supply is 

dwindling and forcing record prices. 

 Fundamental changes are necessary. We’re 

beginning to take those actions. We should have taken 

the actions a little sooner but we are making some 

progress. 

 The Department of Energy has been working 

hard on this problem for quite awhile. The actions 

that we take today will benefit us tomorrow which 

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brings me to why I’m here. I’m a senior energy 

consultant for USA Technologies, a company that 

develops energy management technology for refrigerated 

vending machines, coolers and other commercial 

appliances and equipment. 

 The company’s Energy Miser technology has the 

capability of reducing vending machine energy 

consumption by as much as 46 percent. Now we know that 

there’s an estimated 4.2 million refrigerated vending 

machines in the U.S. and over 10 million coolers. 

 Our studies have shown that if all of these 

4.2 million refrigerated vending machines were equipped 

with Energy Miser products calculated at 40 percent 

savings, the approximate annual impact would be $500 

million a year. That’s $4.2 million a day. That’s 

what it costs us today to operate our vending machines, 

about a dollar a day per machine. 

 It eliminates three million tons of coal and 

it’s more than enough energy to operate a half a 

million homes and that’s based on only 4.2 vending 

machines, not on coolers. 

 I know this conference is focused on 

improving the efficiency of vending machines only. 

We’re not focused on other similar energy consumers, 

such as refrigerated glass-front coolers, but let’s 

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make it very clear. The energy savings from the Energy 

Miser technology and other technologies, it’s applied 

to vending machines and can be applied directly to 

coolers. This is obviously a subject for a different 

time, but it’s something that we need to keep in mind 

and we should prepare for it. 

 This conference is also focused on regulating 

only new vending machines and not the 4.2 million 

vending machines already installed nationwide. 

 USA Technologies Energy Miser line is allembracing, delivering energy savings in all forms for 

vending machines, from technology installed on new 

machines to technology installed on remanufactured 

machines and machines already on location in the field. 

 Each installed vending machine can cost 

upwards of $400 a year to operate. We call it a dollar 

a day. Our Energy Miser technology can cut that cost 

by nearly half and certainly by 30 percent. It will 

also lower energy consumed in new EnergyStar machines 

by approximately 10 percent. 

 Now to the credit of the folks that make 

these vending machines, they’re already meeting for the 

large part Tier 2 EnergyStar standard and we can take 

10 percent reduction on that. So we are working on it, 

the industry is working on it. 

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 USA Technologies has approximately 200,000 of 

our products in the field, some of them for more than 

10 years. It’s a proven product with an excellent 

record of accomplishment. EnergyStar has tested the 

Energy Miser products. USA also had a test at Foster 

Miller. Some of you are familiar with Foster Miller, 

but they’re the same organization that developed the 

Bradley Tank Armor during Desert Storm 10 years ago, 

and they’re currently making a bomb robot device for 

the U.S. Government to address some of the bombing 

issues in Iraq. They also conduct testing for Pepsi, 

Frito-Lay and other major corporations. 

 So the Energy Miser is a proven product and 

it also extends the life of machines, reducing wear and 

tear, cost of maintenance and results in fewer machines 

ending up in landfills prematurely. 

 Energy utilities nationwide are also 

validating the Energy Miser product line. Forty-four 

major utilities offer rebates on the Energy Miser line. 

Another four utilities offer turnkey service. They 

purchase the products directly from us and install them 

free to their customers’ equipment. This helps the 

customer lower their energy consumption, obviously 

lowers the customers’ cost of energy, and it also 

lowers the demand on the national grid and that’s the 

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key thing that the energy companies are looking for: 

get requirements off the grid so we don’t have to build 

another power plant. 

 One of our larger and more successful and 

most innovative companies is a company many of the 

folks in the Energy Department know, Austin Energy. 

Austin Energy bought over 5,000 of our products and 

they immediately saw the advantage of implementing the 

energy control technology, both for vending machines 

and they’re also installing it on coolers. 

 They have a Smart Vendor Program. They’re 

saving over a quarter of a million dollars, starting to 

approach a half a million dollars, annually. That’s 

7,380,000 kilowatt hours of energy annually, and it’s 

4,775,000 tons of CO2 that doesn’t go into the 

atmosphere. 

 Energy conservation companies, such as USA 

Technologies, are designing and providing unique 

beneficial energy management and conservation 

technology for the United States and the world. We’re 

selling products in Australia and overseas, also. 

 These companies, such as USA Technologies, 

often do not have the resources to promote their 

products. Conferences such as this help promote those 

vital small businesses. Those businesses are working 

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to help lower America’s energy use for future 

generations, lessen the drain on the national power 

grid and lower our dependence on foreign oil, and I 

think that’s kind of hitting us between the eyes today 

with $4 gas. 

 This is a huge national opportunity not only 

for vendors but also for coolers. You know what the 

costs are doing since we met the last time. We’re up 

quite a bit and I wouldn’t even render a guess at what 

it will be by the time these standards are implemented. 

 Two years ago, companies conserving energy 

were largely those who wanted to do the right thing and 

impact the environment. Today, many companies are 

installing products for bottom line savings, for 

business survival. 

 We all know that other energy conservation 

technologies are available today and I think some of 

the folks from the manufacturers will talk about that. 

 What product has a return on investment of 

less than a year, a life expectancy of up to 15 or more 

years, and returns up to 46 percent energy savings year 

after year? I can’t think of any. We’re all feeling 

the pain of the energy crisis but we’re headed in the 

right direction. 

 We need to address the vending machines. We 

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need higher energy efficiency from our vending machines 

and we also must consider the installed base of 4.2 

million machines that are costing us $4 million a day 

to operate. 

 With that, we should look at the coolers, and 

I know I’m running over time. 

 MR. BROOKMAN: So finish it up. 

 MR. McGARRAH: Thank you very much for your 

attention. Thank you for allowing us to participate in 

this conference. 

 MR. BROOKMAN: Thank you. So others that 

wish to make brief summary remarks at this point? Yes, 

please. Trent and then Nina. 

 MR. ROTH: Trent Roth. 

 MR. BROOKMAN: And thanks to all of you for 

sticking your face right close to these mikes. That’s 

a requirement to get this all on the record. Thanks. 

 MR. ROTH: I’ll make it very brief and short. 

I just want to thank everybody for the opportunity to 

be here today. 

 One thing that needs to be understood really 

in our industry, this industry has made great strides 

since 2004. Actually, when you look at some of our 

products from 2003 to today, which is five short years, 

in both stacks and closed-front machines, as you call 

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them, and glass fronts, we’ve made strides in both 

platforms of saving energy of over 50 percent. I think 

that’s very renowned in this industry. We’ve done that 

through technology and looking at various technologies. 

 That’s been in partnership with our bottlers 

who are very supportive of driving energy savings and 

this has really been an industrywide piece. I mean, we 

want to say that we’re behind this and we’re very 

supportive of moving forward. 

 As relates to this legislation here, we have 

-- we’re very supportive of it. We understand that 

some of the rulings just came out recently, so we’ve 

analyzed some of the methods in the last days, as well 

as some of the standards in which it references to such 

as 32.1 of ASHRAE are yet to be defined but are getting 

very close to being defined. So there will be some 

topics on there as well. 

 In regards to some comments that Bob has 

made, we understand that there’s opportunities of 

sometimes looking at older products for using a 

technology, such as a Ven Miser, or some type of 

technology, but as we look to new technologies, we need 

to be very careful because it can conflict with energy 

savings considerably as we look at technologies. 

 A vending machine is a very smart piece of 

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equipment. It has a control board in it. We have the 

ability to do all sorts of things with it, regulating, 

and when we do that, when an outside piece is added to 

it, it can conflict, it actually can drive higher costs 

of energy rather than what the machine is put towards. 

So we want to be careful in that implementation. 

 The other statement I would make is by 2012, 

when this comes out, when we look at the life 

expectancy of a vending machine to be about 10 or 12 

years, it will mean the vast majority of the vending 

machines that are still out in the marketplace at that 

time will meet EnergyStar. They will meet the -- they 

will already have been EnergyStar since 2004 and the 

majority of what we sell today is EnergyStar and will 

continue to move towards that and drive towards that. 

 So we just want to really make it clear that, 

you know, we’ve come a long ways as an industry and we 

can apply a lot of the same technologies we’ve done 

with software today and other elements into our vending 

machines as they’re refurbished. A lot of vending 

machines tend to be refurbed one or two times during 

their lifetime and life expectancy and we have been 

working with kits, we have applied to EPA for these 

kits, of applying really less expensive technology that 

drives a lot of energy savings as these machines run 

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through. 

 So I just want to make that as a quick 

statement and I’m sure we’ll have a lot of debate 

later. 

 MR. BROOKMAN: Thank you. Nina? 

 MS. TARLEY: Nina Tarley, PepsiCo. 

 MR. BROOKMAN: Thank you. 

 MS. TARLEY: I wanted to refer to the 

documents that was sent to all of us prior, a couple of 

weeks before the meeting. It’s the Federal Register. 

Specifically, I’m referring to the Page 34,111. 

 MR. BROOKMAN: You want to state that number 

again. 

 MS. TARLEY: Yes. Specifically, I want to 

refer to the paragraph under the Section B, Energy 

Consumption Model, where reference is made to the 

ASHRAE Standard 32.1. 

 I don’t know if that’s on the agenda to be 

discussed, but I merely want to point out there is an 

addition to the standard that the lights for the 

machine during the energy testing have to be on for 24 

hours and I would like to make sure that this will be 

discussed during the meeting today because it’s very 

important. 

 The methodologies that we use to test the 

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equipment, we have to be totally aware that, as my 

esteemed colleague just said, all companies are making 

so many strides towards energy consumption and usage of 

energy, that the methodology is very critical. It has 

to reflect reality of what’s out there and has to 

reflect the fact that everything is done, including 

controlling the lights, energy consumption, all kind of 

energy management devices, should be part of the 

methodology. 

 MR. BROOKMAN: Thank you. So you make sure 

to raise it in the event it doesn’t get raised in 

another place. Okay? We’ll discuss it in detail. 

 Okay. So then other brief summary comments 

here at the outset? 

 (No response.) 

 MR. BROOKMAN: Okay. I see no additional 

comments at this time. 

 Then let’s proceed with a description of the 

Engineering Analysis. Aris, are you starting this off? 

Matt is. Okay. 

21 Engineering Analysis

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 MR. MILLARD: Thank you for your comments. 

Good morning. My name is Matt Millard, and I will be 

discussing the Engineering Analysis steps and our 

analyses. 

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 As Charlie showed earlier, the beginning 

steps of our analyses are the market and technology 

assessment, the screening analysis, and those lead into 

the Engineering Analysis. 

 The market and technology assessment is where 

we characterize the market, and look at the 

efficiencies of equipment that’s currently out there 

and existing regulations. The screening analysis is 

where we look at various design options that are 

available for the equipment, and we use four basic 

criteria that DOE has laid out to evaluate all those 

design options, and then from there, we go into the 

Engineering Analysis which is where we develop some 

cost efficiency relationships, evaluate these design 

options, and perform various sensitivity analyses. 

 From the market and technology assessment, we 

were able to determine that 75 percent of the market is 

dominated by three manufacturers, those being Dixie 

Narco Crane, Sandi Vendo and Royal Vendors. We 

estimated an installed base of approximately 3.7 

million. This is from 2006. As Bob said earlier, it’s 

4.2 currently. Then we estimated that about 340,000 

units are shipped annually. 

 In our screening analysis, as I said before, 

we evaluate design options by four various criteria 

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laid out by the Department of Energy and those are: 

technological feasibility - we will only evaluate 

technologies in our Engineering Analysis that have gone 

into the prototype stage that are currently used in the 

industry; the practicability to manufacture, install 

and service; the adverse effects on product utility or 

product availability - if it’s going to limit the 

availability of the equipment in the industry, then we 

will screen those design options out; and adverse 

impacts on health and safety. 

 Here are shown the technologies that have 

made it through the screening process and have met 

these four requirements. These are all laid out in the 

ANOPR and described in the TSD. 

 From here, I will let Aris Marantan talk you 

through the Engineering Analysis. 

 MR. BROOKMAN: Matt, since it’s -- why don’t 

you just read them so they’re in the record? Okay? 

 MR. MILLARD: The design options? 

 MR. BROOKMAN: Yes. 

 MR. MILLARD: Higher efficiency lighting and 

ballasts, higher efficiency evaporator fan motors, 

evaporator fan motor controllers, improved evaporator 

design, insulation improvements or thickness increases, 

improved glass pack (this is only for Class A machines 

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only, and we’ll get into what Class A is in the next -- 

with Aris’s presentation), higher efficiency condenser 

fan motors, improved condenser design, and higher 

efficiency compressors. 

 MR. BROOKMAN: Thank you. Yes, Steve 

Rosenstock? 

 MR. ROSENSTOCK: Steven Rosenstock, EEI. 

Under higher efficiency lighting and ballasts, does 

that category include lighting controls? 

 MR. BROOKMAN: I think Aris is going to 

answer that question. 

 MR. MARANTAN: Yes, Aris Marantan. That 

category does not include lighting controls. It’s only 

specifically addressing the lighting technology itself. 

 MR. ROSENSTOCK: Thank you. 

 MR. BROOKMAN: Yes, please, Gary. 

 MR. FERNSTROM: Gary Fernstrom. Does 

lighting include light emitting diodes as a technology? 

 MR. MARANTAN: Yes, it does. 

 MR. FERNSTROM: Thank you. 

 MR. BROOKMAN: Thank you. 

 MR. MARANTAN: Okay. Continuing on with the 

Engineering Analysis Section of this presentation, we 

get into the development of the cost efficiency 

relationship. 

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 The purpose of the Engineering Analysis is to 

characterize the relationship between manufacturer cost 

and higher levels of efficiency. So as you can see 

from this graph, this is a representation of this 

relationship. 

 As equipment tends to increase in efficiency, 

of course, manufacturing costs will increase as well. 

This relationship for cost and efficiency is used for 

downstream analyses. It’s the basis for the cost and 

benefit analysis the Department uses to establish their 

energy conservation standards. 

 Some of these downstream analyses include the 

Life-Cycle Cost and Payback Period Analysis as well as 

the National Impacts Analysis that we’ll be summarizing 

today. 

 MR. BROOKMAN: Yes, Harvey Sachs? 

 MR. SACHS: Harvey Sachs, ACEEE. I just want 

to note for the record that the graph to the left on 

Slide 7, Cost Efficiency Relationship, is a simplified 

mental model which in the real world has many 

exceptions under many conditions. 

 For example, if we had a high efficiency 

standard and that was the major product being 

delivered, we would expect to special order the low 

efficiency unit to actually cost more than the mass 

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manufacture high efficiency unit. 

 So this is introduced so frequently as a 

metaphor in the department’s rulemakings that we think 

it’s important to introduce the fact that this is a 

metaphor only. It ignores the time dimension of 

improvements to manufacturing processes and technology 

innovation, special order situations, and a lot of 

other things, and frankly it’s not always clear that 

it’s a terribly helpful metaphor. 

 Thank you. 

 MR. BROOKMAN: It’s meant to be illustrative. 

 Mike Rivest? 

 MR. RIVEST: Mike Rivest, Navigant 

Consulting. To expand on what you said, it’s not a 

metaphor. It’s actually a construct, an analytical 

construct whereby we assume that a market is entirely 

moved from one efficiency level to the next and where 

the production volumes are kept constant. 

 So for example, it’s quite possible that a 

more energy inefficient product is more expensive today 

if it’s at low volumes. So I agree with you on that, 

but the construct here is an assumption that if a 

million products are built today at efficiency X, then 

at efficiency X+1, if that’s the standard level, all 

one million units go to that level. So actually, the 

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construct is consistent to the objectives of the rule. 

 MR. SACHS: Thank you very much. I really 

don’t want to belabor this. It’s something that Mr. 

Rivest and I have chatted about as well as many others, 

but certainly the record of DOE rulemakings on other 

products is quite clear, that in many cases, changes in 

efficiency have led to declining prices in the market 

as paid by consumers and in the manufacturing cost as 

well. 

 MR. BROOKMAN: Thanks for raising it. Other 

comments here before we proceed? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. MARANTAN: Okay. This slide is meant to 

describe the equipment classes that are analyzed, 

starting with the Engineering Analysis and continuing 

to all of the downstream analyses as well. 

 For this rulemaking for vending machines, we 

have equipment classes broken down into Class A 

machines which are fully cooled machines and Class B 

machines which are any machines not considered to be 

Class A. 

 The analysis itself is broken down into three 

representative sizes for each equipment class, so we 

have a small, a medium and a large vending machine that 

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we’ve analyzed for each of the classes, Class A and 

Class B. 

 The Engineering Analysis is conducted in a 

design options approach and the definition we’re using 

for the design options approach is that it uses 

individual or combinations of design options to 

identify increases in efficiency. 

 So under this approach, estimates are based 

on manufacturer or component supplier data or through 

the use of engineering computer simulations. So 

therefore individual design options or combinations of 

design options are added to the baseline model in 

ascending order of cost effectiveness. 

 Okay. This slide describes in a little more 

detail each step of the Engineering Analysis design 

option approach. We start with the baseline 

specifications for each equipment and class. 

Basically, we analyze the market to identify what the 

baseline equipment features and characteristics are for 

each equipment class and we took the most typical 

characteristics and used that as a description of the 

baseline equipment. 

 From there, we use a model of production 

costs and energy consumption which are two independent 

models to describe both dimensions on our cost 

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efficiency curve. For manufacturer production costs, 

we developed a cost model which is based on a tear-down 

of a commercial refrigerator type of machine which has 

similar features to vending and all of the design 

options and baseline characteristics of vending 

machines, and we also use an energy consumption model 

which is based on the test procedure used for 

calculating the energy consumption of vending machines. 

 From there, we implemented the design options 

one by one in order of increasing effectiveness and in 

this case, we’re using from shortest payback to longest 

payback, that’s simple payback, to order the design 

options, and then from there, the incremental costs of 

each design option is added and then we recalculate the 

calculated daily energy consumption, the CDEC, and 

finally we include a mark-up of the manufacturer 

production costs. This gives us the manufacturer’s 

selling price for our curve. 

 Okay. This slide describes the energy 

consumption model in a little more detail. Basically, 

there are two major parts to the energy consumption 

model: the compressor energy consumption which takes 

into account the total heat load of the machine, and 

then the component energy consumption which is all of 

the electrical-consuming components of the machine. 

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 Just going through this, the total heat load 

includes component loads and non-electric loads. I’ll 

just read these off. These include the fan motor heat 

load, the lighting heat load, the radiation load 

conduction and infiltration loads as well, and for the 

component energy consumption, that includes the fan 

motor energy consumption and the lighting energy 

consumption. 

 So all of these components are included in 

the energy consumption model to calculate the CDEC, the 

calculated daily energy consumption. 

 Okay. Now the other model we use is the cost 

model. This is a cost model adapted from DOE’s 

rulemaking on commercial refrigeration equipment due to 

the similarities in manufacturing process between 

self-contained commercial refrigeration equipment and 

vending machines. 

 So here we have the full production cost 

estimated from the cost model. Added to this is the 

manufacturer mark-ups or non-production costs and that 

gives us the selling price of the equipment. 

 Now please keep in mind that these 

manufacturing mark-ups are separate from the 

distribution channel mark-ups which are explained in 

the next section. When we include the distribution 

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channel mark-ups, that is then the purchase price of 

the machine. 

 Okay. The next two slides give you an idea 

of the types of curves that we can generate using each 

of these models for the Engineering Analysis. This one 

happens to represent the Class A machines results. 

There are three lines here representing a small, a 

medium and a large size machine for Class A, and the 

next slide are similar results for the Class B machines 

for small, medium and large. 

 Before I continue, the full results of these 

are in the Technical Support Document, so you can look 

those up if you like. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 

the navy blue is small, the red is medium, and then the 

yellow is large? Is that -- 

 MR. MARANTAN: Yes, I do believe that’s 

correct. 

 MR. ROSENSTOCK: No labels. It makes it 

easier. 

 MR. MARANTAN: Yes, so I’ll reiterate. The 

blue is for small, the pink, the middle line there, is 

medium, and the yellow, the top line, is for large. 

 Thank you. 

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 MR. BROOKMAN: Charles Llenza. 

 MR. LLENZA: We’ll make corrections when we 

put the slides on the website. 

 MR. BROOKMAN: Just that addition. 

 MR. LLENZA: Right. 

 MR. BROOKMAN: Okay. Thank you. 

 MR. LLENZA: Thank you for that question. 

 MR. BROOKMAN: Yes, Sriram? 

 MR. SOMASUNDARAM: Sriram Somasundaram, PNNL. 

 Just another clarification in terms of the sizes that 

Aris is talking about. The details of the sizes, the 

capacity of the refrigerated volume of the three sizes 

and the two classes of the machines are on Page 34 and 

35 of the Federal Register. 

 MR. BROOKMAN: Thank you. I think it also 

would be a nice addition to the posted version. Okay. 

 Yes, please. Your name for the record. 

 MR. COUSINS: Steve Cousins, Coca-Cola. I 

don’t think it will make any difference with regard to 

results of the Engineering Analysis. 

 I’m looking at the energy consumption model. 

I see it does not include the moisture load, at least I 

don’t think moisture load is included in the 

calculation. It can account for up to 12 percent of 

the energy consumption in a machine, but even if it 

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wasn’t included in the analysis, I don’t think it 

changes any of the results that you’ve done. 

 MR. BROOKMAN: So what are you advocating? 

 MR. COUSINS: What I’m advocating is that, 

depending on the size of the machine, the impact of the 

moisture removal that has to take place, the energy 

that has to be consumed in the moisture removal, may 

shift some of these curves closer or further apart. 

 MR. BROOKMAN: Okay. Additional comments on 

this set of slides? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. MARANTAN: Okay. Thank you. 

 MR. ECKMAN: Doug? 

 MR. BROOKMAN: Yes, Tom Eckman. 

 MR. ECKMAN: Just a clarification. My 

reading was that there was humidity data in the energy 

consumption model. So is that -- 

 MR. BROOKMAN: Sriram? 

 MR. ECKMAN: -- accounted for or not? 

 MR. SOMASUNDARAM: This is Sriram. The issue 

that Steve Cousins is referring to is the maintenance 

of a certain humidity level inside the machine. 

 MR. ECKMAN: In the equipment itself, not 

just the -- 

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 MR. SOMASUNDARAM: In the equipment, not just 

the -- 

 MR. ECKMAN: -- compressor. 

 MR. SOMASUNDARAM: But we do account for the 

outdoor conditions, where the machines are installed 

outdoors, in varying temperatures and relative 

humidity, whereas the indoor machines are presumed to 

be exposed to constant conditions, 75 F, 45 percent 

relative humidity, according to the test conditions of 

32.1. 

 So I believe you’re referring to how you 

bring the air temperature and humidity down to the 

inside conditions. 

 MR. BROOKMAN: That’s Steve commenting, yes. 

 MR. SOMASUNDARAM: Yeah. There’s an 

additional energy consumption because of that, that was 

very difficult to account for it in our energy model. 

 MR. BROOKMAN: Okay. Any additional comments 

on this section on Engineering Analysis? 

 (No response.) 

 MR. BROOKMAN: Okay. 

22 Life-Cycle Cost Analysis

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 MR. SOMASUNDARAM: Good morning. My name is 

Sriram Somasundaram, as I’ve already introduced myself, 

from the Pacific Northwest National Laboratory. 

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 As part of the Life-Cycle Cost Analysis, I 

will introduce the Energy Analysis, Energy Use or 

Energy Consumption Analysis first, and then also talk 

about the mark-ups that Aris referred to, and then my 

colleague Mike Scott will talk about the Economic 

Analysis itself and further on that. 

 So the three elements or the three steps in 

the Life-Cycle Cost Analysis are the mark-ups, the 

energy use characterization, and then those provide 

inputs to the Life-Cycle Cost and Payback Period 

Analysis which comes next. 

 The purpose of the mark-ups is to basically 

translate or convert the manufacturer’s selling price 

of the equipment to the customer price or the final 

price that the customer pays, and the way we account 

for the mark-ups is through two elements. 

 One we call the baseline mark-up which is the 

mark-up that is applied to the baseline efficiency 

equipment, and then we calculate also an incremental 

mark-up that’s applied on top of that, on top of the 

baseline mark-up for higher efficiency equipment. 

 In other words, so that we can account for 

what is the mark-up to the price, customer price of a 

baseline efficiency equipment and then incremental 

mark-up to the higher efficiency equipment. 

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 The Energy Use Characterization Analysis in 

this case basically develops the electrical energy 

consumed by each machine over a 24-hour period which is 

the test metric and the test procedure ASHRAE Standard 

32.1, the daily energy consumption, and for the 

purposes of doing the Energy Use Analysis here, we 

basically translated the Engineering Analysis model 

that Aris described earlier to be able to vary the 

ambient temperature. 

 Because the engineering model was originally 

developed only to be operated at the two rating 

conditions, 75 and 90 degrees F, we had to make some 

modifications to the model to be able to run at varying 

ambient conditions, both temperatures and relative 

humidity, and I’ll describe the details later. 

 The final step in this section is the LifeCycle Cost and Payback Period Analysis where we 

basically, with all the inputs of the energy 

consumption and hence the energy cost by multiplying by 

the electricity price, we calculate the life-cycle cost 

to the customer of operating this equipment over a year 

and also over the lifetime of the equipment and we 

also, for the purposes of payback period analysis, we 

also calculate a simple payback of what it takes, how 

long it takes for the investment of procuring a higher 

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efficiency equipment, how long it takes to pay off that 

investment. 

 MR. BROOKMAN: Yes, Bob? 

 MR. McGARRAH: Bob McGarrah. One comment on 

paying back the investment. Seventy-five percent of 

the machines that are purchased from the manufacturers 

are owned by Coke, Pepsi and the other large bottlers. 

They don’t pay the energy costs, so they never get a 

payback. 

 MR. COUSINS: Steve Cousins here. That’s 

only partially true. We may not pay the energy costs 

directly, but the energy costs may be rolled into the 

cost of the product that we sell our account customers. 

So it may not be direct compensation. There’s 

compensation, but it may not be directly to the power 

companies. 

 MR. BROOKMAN: Thank you. 

 MR. COUSINS: It’s very difficult to 

calculate exactly what that percentage is, however. 

 MR. SOMASUNDARAM: Should I continue? 

 MR. BROOKMAN: Yes, please do, Sriram. 

 MR. SOMASUNDARAM: So the details on the 

mark-ups is -- the purpose again -- to reiterate, the 

purpose of the mark-ups determination is simply to 

determine the customer price on both a standard 

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scenario based on the manufacturer selling price and 

also to determine the incremental customer price that 

they would pay for a higher efficiency equipment. 

 The way we do this is by characterizing a 

distribution channel for how the machines might be sold 

and also determine what the percentage of shipments are 

through each of the channels and the inputs to the 

mark-up itself are basically the firm balance sheets 

and we use the Census Bureau financial data for 

determining the wholesale mark-up. 

 The output again of this analysis is the 

baseline and incremental mark-up. 

 This slide basically just lays out the three 

distribution channels that we assumed these machines 

are sold through and the percentages at the bottom of 

each column are the estimated fraction of equipment 

shipments through each of those channels and so we 

presume that channel 1, which is a direct sale to the 

bottler or distributor, is about 68 percent of the 

total shipments. 

 The second channel, which we assume that the 

manufacturer sells to an equipment wholesaler or a 

distributor and then to a vending machine operator or a 

vendor, constitutes about 27 percent of the shipments. 

 The last channel is a very small market where 

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the site owner where the machines are installed 

themselves own the machine and stock the machine which 

is only about five percent of the market. 

 MR. BROOKMAN: Yes. So I’d like to obtain 

comments on this slide, particularly confirming or 

changing the assumptions that are in play on this 

slide. 

 Yes, please, Glenn. 

 MR. SELFRIDGE: Glenn Selfridge, Royal 

Vendors. I believe that the channel 1 is significantly 

higher. The channel 2, at least for the ones that I 

work with for now, the percentages skew very much in 

the direction of channel 1. 

 MR. BROOKMAN: So what would you -- 

 MR. SELFRIDGE: Along that same line, 350,000 

machines for 2 is way too high, way too high. 

 MR. BROOKMAN: So what would you say the 

numbers would likely be for channel 1, channel 2, 

channel 3? 

 MR. SELFRIDGE: For channel 1, that’s going 

to be around 85 to 90 percent, and channel 3, we don’t 

allow. I guess it could be sold from us to a 

wholesaler. 

 MR. BROOKMAN: That’s through your company, 

though? 

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 MR. SELFRIDGE: Yeah. 

 MR. BROOKMAN: Okay. So how about some of 

the other companies in the room? Comments on both the 

channel and also the figures that are here? Go ahead, 

Trent. 

 MR. ROTH: This is Trent Roth. I would 

concur. We’re probably more around 80 to 85 percent 

for channel 1 today. The industry’s changed a little 

bit in the last few years. 

 We do -- probably if you did that, you’re 

probably 13 percent would have channel 2. We do some 

channel 3 occasionally. So, I mean, there is, 

especially with the advent of some outlying products 

out there today, there is some opportunities to do 

that. 

 So, I mean, probably today, I’d say 85, 12 

and 3. 

 MR. BROOKMAN: Okay. Thank you. That’s very 

helpful for the Department. Bob? 

 MR. McGARRAH: Bob McGarrah. While we have 

the two major manufacturers in the room, without giving 

away trade secrets, you wanted to change the number 

downward from the 373-380,000 machines produced a year. 

You guys want to caucus and come back with a reasonable 

number that would make sense for the two of you? 

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 MR. BROOKMAN: Or you could submit -- 

 MR. McGARRAH: No? 

 MR. BROOKMAN: -- in your written comments, 

either one. Steve, go ahead. 

 MR. SELFRIDGE: This is Glenn Selfridge. EPA 

has our shipping data. 

 MR. BROOKMAN: Okay. 

 MR. COUSINS: Steve Cousins. I was going to 

point out that NAMA also has that shipping data. I 

know we’ve shared it in the past with the intent or 

with the expectation that NAMA would share that 

information. 

 MR. BROOKMAN: So they simply abrogate it or 

something? 

 MR. COUSINS: Yeah. 

 MR. BROOKMAN: Okay. Great. Yeah. Aris? 

 MR. MARANTAN: Aris Marantan. I just want to 

be clear. I may have heard, Glenn, you say something 

about this equipment class and then your response to 

the distribution channels. 

 Is it for a specific equipment class or for 

both? 

 MR. SELFRIDGE: It’s for both. 

 MR. MARANTAN: Okay. Thank you. 

 MR. BROOKMAN: Thank you for that 

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clarification. Okay. Steve? 

 MR. COUSINS: Steve Cousins. A challenge, 

and I don’t have a number to put out there, 

unfortunately, around vending machine population. 

 It’s my impression that overall, the vending 

machine population in North America has been shrinking 

and not growing. I guess I can only speaking for the 

Coke system. I know the Coke system has removed 

something like 200 to 250,000 vending machines from the 

marketplace over the past -- since we had this meeting 

here last time. 

 So the assumption that the numbers are going 

up is not the case. 

 MR. BROOKMAN: Charlie Llenza. 

 MR. LLENZA: What kind of percentage of the 

market are the amount of machines taken out? 

 MR. COUSINS: What percentage of the 

marketplace does Coca-Cola represent? 

 MR. LLENZA: No. What percentage of the 

machines are you -- is that 25 percent? 

 MR. COUSINS: I’m not going to tell you that 

in this forum. But the number is going down. 

 MR. STAS: Eric Stas, DOE. Is this a longterm trend or is this something cyclical in which you 

expect the numbers to fluctuate back up? 

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 MR. COUSINS: It’s hard to tell what the 

future -- the reason why the machines are being removed 

from the marketplace is because the profitability model 

is changing and it’s based in large measure on consumer 

expectations, what they expect to pay for a product. 

There’s also a so-called artificial price barrier, a 

ceiling that we’re running into. 

 Consumers are hard-pressed -- they don’t like 

to spend more than a dollar for a product coming from a 

vending machine. What that does is that forces you to 

-- it forces us to look for ways to manage, to keep our 

operating costs down. That’s not always the case, but 

what happens is the profitable throughput for a machine 

has been shrinking year by year. So the number of 

cases of product that we have to pass through a vending 

machine to realize some profit is actually going up and 

we’re not -- and actually, we’re seeing lowered 

purchases or sales from vending machines. 

 So it’s kind of forcing us to take machines 

out of the marketplace to keep full service vending a 

good proposition for us. 

 MR. BROOKMAN: Thank you for that. Nina? 

 MS. TARLEY: Nina Tarley. I just for the 

record want to say that I totally concur with what 

Steve just said. Yes, the total number is going down. 

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 Probably the only thing I would add to the 

questions, the reasons, one of them is vandalism, very 

high cost of vandalism. 

 MR. BROOKMAN: Could you, responding to 

Eric’s question, could you say whether it’s cyclical or 

it’s a one-time phenomenon or it’s just a trend line or 

what? 

 MS. TARLEY: From my opinion, it’s not 

cyclical. It’s happening and I don’t see it reversing. 

 MR. BROOKMAN: Yeah. Okay. Thank you. Bob? 

 MR. McGARRAH: Bob McGarrah. Doing the quick 

math, if Coke pulled 250,000 out of the system and 

we’re buying 350,000, it sounds like Pepsi pulled out a 

100,000. 

 MS. TARLEY: No comment. 

 MR. BROOKMAN: We’ll let Trent follow on, 

then I’m coming to Glenn. 

 MR. ROTH: Trent Roth. I would probably 

estimate right now about three million machines out in 

the existing market is what our numbers have. Maybe 3 

to 3.2 million, not 4.2 million, but we have seen that 

decline by both manufacturers, a significant decrease 

in machines being pulled out -- an increase in machines 

being pulled out of the marketplace. 

 The machines definitely are very old machines 

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that were high energy-using machines that are being 

removed. So it’s significant and doesn’t seem -- it 

seems to be a trend, based really upon drinking habits 

and consumer choices right now. 

 MR. BROOKMAN: I’m certain the Department 

would really appreciate if there was some way for you 

to describe the array of machines and what’s being 

pulled out based on what kind of energy characteristics 

they had, that that information was available to you in 

your written comments, boy, that’d be very helpful to 

them in their analysis. 

 Glenn, you’re next in the queue. 

 MR. SELFRIDGE: Yeah. I had actually two 

comments. One, we did some analysis and we come up 

with duplication in counting of machines of the 

bottlers, loaned machines to one of these big vending 

companies, and NAMA’s counting them twice. We could 

not come up with more than about 2.3 million. 

 MR. BROOKMAN: Can you describe that thing 

about NAMA counting them twice? 

 MR. SELFRIDGE: NAMA -- the way NAMA collects 

information on vending sales isn’t just the 

manufacturers. It’s from all the vending operators. 

The vending operators are getting a lot of the machines 

for free, most of them for free. So it’s a double 

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count. 

 MR. BROOKMAN: I see. 

 MR. SELFRIDGE: Secondly, I believe there’s a 

structural change. Many of the prime vending sites or 

manufacturing locations in this country have been 

shipping those overseas now very strongly for years. 

So that there’s deep structural changes in the vending 

market itself, too. 

 MR. BROOKMAN: So what’s being shipped 

overseas? 

 MR. SELFRIDGE: Jobs. 

 MR. BROOKMAN: Jobs. 

 MR. SELFRIDGE: Manufacturing jobs. 

 MR. BROOKMAN: Okay. Thank you. Not the 

machines. 

 MR. SELFRIDGE: No, manufacturing jobs. 

 MR. BROOKMAN: Okay. Thank you. Steve, go 

ahead. 

 MR. COUSINS: I was just going to echo 

confirmation of what Glenn just said. What happens is 

the Coca-Cola bottlers or the Coca-Cola system will 

purchase machines and then they will turn them over to 

full-line operators who will manage them. So there 

could be -- when they -- when NAMA does polling on 

vending machine population, they ask Coca-Cola and they 

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ask the full-line operators, there is that likelihood 

that the machines are being double counted. 

 MR. BROOKMAN: Thank you. Aris? 

 MR. MARANTAN: Yes, Aris Marantan. I think I 

heard earlier someone mentioned that EPA and NAMA have 

information on shipments data and I’d like to just see 

if it’s possible that that information could be shared. 

 MR. SOMASUNDARAM: This is Sriram. I believe 

we will be talking about that in the shipments analysis 

portion of the presentation. 

 We did get some data from NAMA, at least 

trend data, in the last five years, and what you saw in 

terms of the stock and also the annual shipments in the 

earlier slide was -- my understanding is that those 

were 2001 data, I think when the shipments sort of hit 

a peak around 2000 and 2001, and my understanding 

again, based on data we have seen and both in the State 

of the Vending Industry Report as well as the NAMA 

numbers, is that it’s been on the way down since then 

to about -- I don’t recall, but it’s -- the total stock 

is down in the 3.7 million range, but the annual 

shipments are in the 120 to 100,000 per year range. 

 MR. BROOKMAN: Did you introduce yourself as 

being from EPA? 

 MS. SCHMELTZ: Yes, I did. 

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 MR. BROOKMAN: I thought you did. Please say 

your name for the record. 

 MS. SCHMELTZ: Rachel Schmeltz with EPA. We 

do collect unit shipment data from all of our 

EnergyStar partners. We have been doing so for vending 

machines for, I believe, the past three years. We can 

share the aggregated data with you. We collect it 

specifically for EnergyStar-qualified units shipped but 

then also request information as well on the total 

units shipped. So we can certainly share that with 

you. 

 MR. BROOKMAN: How complete is your data? 

 MS. SCHMELTZ: How complete? 

 MR. BROOKMAN: How complete, yes. 

 MS. SCHMELTZ: It covers the major 

manufacturers that were listed in the slides. 

 MR. BROOKMAN: Okay. Thank you. I thought I 

saw somebody over here. Yes, your name, please. 

 MR. McMAHON: Tom McMahon, NAMA. I just 

wanted to point out that NAMA does very little 

gathering of industry data. It’s mainly done by trade 

journals, Automatic Merchandiser Vending Times. I 

think people attribute those net data to NAMA. That is 

done by Vending Times and the other trade journals. 

 The other thing is, the other point I would 

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make is we have seen a decline in vending machine sales 

in general over the last five to six years. A lot of 

it is connected to the obesity issue. The rate of 

obesity among the American people is rising. A lot of 

the critics, a lot of the media, Centers for Disease 

Control, politicians, school officials, they seem to 

link vending machines sales, especially in schools, to 

that issue, and I think there have been some school 

districts who have pulled vending machines from schools 

in connection with that issue. 

 Our industry is doing everything we can to 

offer a wide variety of foods and beverages and I know 

Coke and Pepsi and others are certainly offering lowcalorie items and bottled water and so forth. 

 Nevertheless, it’s an industry that was 

devoted to a certain product mix over decades and it’s 

taking us awhile to make those changes. I guess it’s a 

long way of saying I agree with the comments made 

earlier that the vending industry, at least in terms of 

unit sales, has been in a state of decline over the 

past three to four years. 

 MR. BROOKMAN: Okay. So that was a lot of 

good comment there. Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock. Yeah. I 

kind of heard about that there’s a trend for the 

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manufacturing to be -- is going overseas and possible 

job impacts, and I was wondering, I guess over the last 

five years, what -- has that trend accelerated and, you 

know, the rules -- how much of an impact is that having 

on, I’ll say, the manufacturing side of the equation in 

terms of were machines 100 percent manufactured 10 

years ago in the United States versus, you know, 75 

now? Again, I’m just kind of curious because that 

obviously -- the Department has to check on the 

manufacturer impact. 

 MR. BROOKMAN: We’re going to cover that 

later in the analysis. 

 MR. ROSENSTOCK: Okay. Thank you. 

 MR. BROOKMAN: Yeah. Okay. So final 

comments. This was very helpful, this discussion on 

distribution channels. Any final comments on those 

before we move on? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. SOMASUNDARAM: Okay. So the way that we 

calculated the mark-ups is based on the -- I indicated 

earlier that it was based on the industry balance 

sheets or the wholesaler balance sheets and also 

related to the cost of goods sold and the baseline 

mark-up, like I indicated before, supplied to the 

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baseline efficiency equipment includes the direct labor 

costs, such as salaries, payroll, rental and occupancy 

of the company, whereas the incremental mark-ups, which 

are applied to the higher efficiency equipment, do not 

include the costs that are constant; that is, the 

direct labor costs, whereas we only include what the -- 

how the costs vary with increased efficiency. 

 Then to give you some details about what the 

specific numbers are or how we calculated the specific 

numbers, the wholesaler mark-up we estimated again from 

Census financial data. 

 The manufacturer direct sales to beverage 

bottlers, we assumed that there was a zero mark-up 

before application of the sales tax, and the sales tax 

is applied based on each specific state’s tax data. 

 The national average estimates for sales tax 

then is also including the estimates of relative 

shipments of the beverage vending machines by each 

state. So we do that on the basis of population rates 

within each state and that’s because we don’t know the 

exact number of relative shipments at the state level. 

We use the Census data for population as a proxy. 

 These next two slides show the table with the 

actual values that we used for the mark-ups. The first 

column is the manufacturer direct sales, the channel 1, 

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and the second is the wholesaler or distributor mark-up 

which is all of channel 2 and 3 because we assume that, 

if you remember, the manufacturer sells to a 

distributor before the distributor sells it either to a 

vendor operator or a site owner, and as you have 

indicated, the site owner is a pretty small market, so 

it’s mostly to channel 2. And overall weighted 

average, again this is the baseline mark-up, shows the 

overall mark-up of 1.226 for the entire mark-up. 

 The next slide shows the incremental mark-up 

applied to the higher efficiency equipment and that 

number is 1.137, based on the numbers here. 

 MR. BROOKMAN: Tom Eckman. 

 MR. SOMASUNDARAM: Let me pause -- 

 MR. BROOKMAN: Yes. 

 MR. SOMASUNDARAM: -- for any questions. 

 MR. ECKMAN: Tom Eckman. Those are based on 

the rates that you showed in the other table? 

 MR. SOMASUNDARAM: That’s correct. 

 MR. ECKMAN: So these would be lower? 

 MR. SOMASUNDARAM: These will be lower if you 

change them to 80 or 85, yes. 

 MR. BROOKMAN: Okay. Thank you. Other 

comments on these expenses and mark-ups? 

 (No response.) 

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 MR. BROOKMAN: Okay. I see no additional 

comments on those. 

 MR. SOMASUNDARAM: Okay. So the next step in 

our analysis is the energy use characterization, and as 

Aris indicated earlier, we basically divided the entire 

market into two classes of equipment. Class A which 

are predominantly the glass front or also called the 

shelf-style and also called the fully cooled machines, 

and because these are glass front, we assume that all 

of these machines were typically installed indoors and 

the indoor condition happened to be coincident with one 

of the test conditions that is listed in Standard 32.1 

of 75 degrees F and 45 percent relative humidity. 

 So to calculate the energy use of those 

machines, of Class A machines, was not a problem in the 

sense we could just calculate the daily energy 

consumption of these machines, add them up for a year, 

and we had average number over the annual basis. 

 It was the Class B machines which are the 

closed front or solid front, zone cooled and stackstyle equipment that were sometimes installed outdoors 

and some of them were installed indoors, and we had no 

data on what percentages were installed outdoors and 

what percentages were installed indoors. 

 So we made a few calls to a few distributors 

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in our local area and we also talked to Bob McGarrah 

and rule of thumb was emerging of 75 percent of these 

machines were typically installed indoors and 25 

percent would be installed outdoors and so that was our 

assumption. 

 As the second bullet under Class B machines 

indicates here, for the 25 percent of the Class B 

machines located outdoors, we modified the Engineering 

Analysis model, as I indicated earlier, to be able to 

account for varying ambient conditions, all the way 

from about a 130 degrees F to about minus 40 degrees F 

or something, because the weather data, the TMY-2 data 

that we used for all the 237 cities in the U.S., varied 

by that much. 

 We also binned the relative humidity data in 

five percent increments and finally, the annual energy 

use for Class B machines was calculated as 0.25 times 

the energy consumption of the machines installed 

outdoors, plus 0.75 times the energy consumption of the 

machines installed indoors. 

 MR. BROOKMAN: Gary? 

 MR. FERNSTROM: Gary Fernstrom. 

 MR. SOMASUNDARAM: Yes? 

 MR. FERNSTROM: Where these machines are 

assumed to be used indoors, is the load they place on 

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the building cooling systems considered in this 

analysis or not? 

 MR. SOMASUNDARAM: Yes, we got a comment 

about that at the Framework Meeting, and we assessed 

the load on the -- it was typically considered to be a 

plug load, a constant plug load, and when we calculated 

the annual energy consumption based on eight kilowatt 

hours per day over 365 days a year, it turned out to be 

about three percent of the lighting load for typical 

commercial buildings and it was small enough, 

therefore, the Department decided that it not be 

included in the impact on the building air conditioning 

load and we state that in the ANOPR document. 

 MR. FERNSTROM: So you assessed it but then 

decided not to include it? 

 MR. SOMASUNDARAM: That’s correct. 

 MR. BROOKMAN: Lane? 

 MR. BURTON: Lane Burton, NRDC. Later in the 

Federal Register document, it says that 30 percent of 

all beverage machines are assumed to be in 

manufacturing and warehouses. 

 Are those considered indoors or outdoors? 

 MR. SOMASUNDARAM: If they’re in the 

manufacturing facilities, they are considered indoors. 

 MR. BURTON: Okay. And does anyone look at 

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the percentage of manufacturing and warehouse 

facilities that have air conditioning? 

 MR. SOMASUNDARAM: Well, okay. The -- I 

should clarify. The business type installations 

breakdown that was done later to assess the life-cycle 

costs was done on business type percentages. That 

breakdown depends on -- so for example, one quarter of 

the 30 percent installations could be outdoors because 

the overall division was at the total shipment level, 

total market level, and then we break it down, both 

Class A and Class B machines. 

 So there could be -- the 30 percent of the 

market that goes into manufacturing facilities could 

consist of both Class A and Class B machines and all of 

the Class B machines, perhaps one-quarter, up to a 

quarter of those machines, could be installed outdoors. 

 MR. BURTON: Okay. 

 MR. SOMASUNDARAM: So that’s the division. 

 MR. BURTON: Okay. 

 MR. SOMASUNDARAM: So. 

 MR. BROOKMAN: So other questions or 

comments? Tom Eckman? 

 MR. ECKMAN: Just following up on that, it 

probably would be useful to look at the CBECS data to 

see how much unheated warehouse space there is to see 

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just to see whether that tracks with the 25 percent 

because if you’ve got so many going into warehouse 

facilities and some number, like 25 percent or less, 

than you’re probably okay because so many are going to 

go outside some other place, but if it’s a number that 

exceeds that, then the number may be too small for 

outside units. 

 MR. BROOKMAN: Gary? 

 MR. FERNSTROM: Gary Fernstrom again. So I’m 

not sure I understand this issue of the load the 

equipment places on the building. 

 If we save some energy with the vending 

machine or, for that matter, any other product that 

generates heat that’s inside a building, at least 

during the time the building air conditioning is 

operating, about a third of that heat energy is 

consumed by the air conditioning equipment removing 

that heat from the building. 

 So it would seem to me if you consider all of 

the energy saving potential associated with reducing 

loads inside buildings, you would get about a third 

more energy reflected in reduction in air conditioning 

load. 

 Is that deemed to be insignificant or is 

there something wrong with my reasoning here? 

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 MR. SOMASUNDARAM: No, there’s nothing wrong 

with your reasoning, except that the air conditioning 

or the cooling of the building is only over four to six 

months of the year. You also have to remember that for 

the remaining six months of the year, the machine adds 

heat to the space when it isn’t the heating season. 

 MR. FERNSTROM: Yeah. Well, I don’t -- 

 MR. SOMASUNDARAM: And so when we -- we did 

look at two-thirds of the commercial building stock 

from CBECS data where these machines are typically 

installed and if they are installed in conditioned 

space, we looked at what would be the energy 

consumption on an annual basis of a number of these 

machines and came up with the fact that it was three 

percent of the entire lighting load in the building 

which is, as you know, a predominant energy consumption 

in a commercial building, and so if the remaining -- I 

mean, if the lighting is also adding heat to the space, 

to the cooled space. 

 So we heard the comment. We assessed the 

impact and three percent of the lighting load in a 

building was deemed to be relatively insignificant 

impact on the air-conditioning load, remembering that 

for half the year, it in fact adds heat to the 

building. 

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 MR. FERNSTROM: Well, I don’t know that our 

experience lines up with yours with regard to the way 

air conditioning works in buildings, at least out in 

California. Most commercial buildings are dominated by 

internal loads and have more air conditioning than they 

do hours in the year when heating is actually required. 

 But thank you. I understand what you did and 

we’ll address this in the comments. 

 MR. BROOKMAN: Let me go to Trent for a 

follow-on comment, then I’m coming back to you, Steve. 

Go ahead 

 MR. ROTH: This kind of goes back to what we 

debated a year ago when we really looked at heat loads 

and all that. We could not find one city in the entire 

United States that had a temperature, average 

temperature above 75 degrees. There isn’t a place in 

Miami that was at 72 degrees when we looked at it from 

the national -- we couldn’t find -- there are always 

exceptions, but you go to a place like Minnesota, you 

want -- it’s not going to -- when we start looking at 

the average temperature, we’re going to use 

considerably less energy to run a machine there than we 

are in Miami, for example. 

 But I think when we look at a standard for 

the U.S., I know air conditioning is running in 

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California, let’s say, for four months, five months, 

out of the year in certain buildings, but on average in 

the United States, it’s not running that often and 

there’s an exception out here today, but it goes back 

to these average temperatures. They were extremes. 

Ninety degrees isn’t real life. It happens 

occasionally, happens today, but it doesn’t happen 365 

days a year. Snow happens sometimes, too. 

 MR. FERNSTROM: Okay. So I don’t disagree 

with you about the average temperatures. I’m just 

suggesting that commercial building air conditioning 

use is dominated by internal heat loads. So it’s a 

little less important what the outdoor temperature is 

than the fact that these buildings have significant 

plugged lighting and other load that’s generating heat 

inside the building all the time that needs to be 

removed. 

 MR. BROOKMAN: Thank you, Gary. Steve 

Rosenstock and then to Harvey. 

 MR. ROSENSTOCK: Again this is one of those 

issues where it really depends on the climate zone 

you’re in because obviously in the more northern zones, 

commercial buildings do heat and there’s a benefit from 

the heat that’s rejected from the machines, so it 

reduces the heating loads. Then you’ve got to get 

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into, okay, well, what are the energy savings in the 

winter time versus the energy penalty in the summer 

time? 

 Yes, you know, on an annualized basis, it 

might in many buildings, there’s probably more in the 

cooling side than the heating side, but in the more 

northern zones, it probably cancels out, I would guess, 

on an annualized basis just in terms of, you know, 

heating penalty -- I mean heating addition, heating 

benefit versus cooling penalty. So again, it’s, you 

know, there but again it could be, you know, in the 

less than five percent range. 

 MR. BROOKMAN: Harvey Sachs. 

 MR. SACHS: Harvey Sachs. I want to agree 

with everybody but draw a different conclusion. That 

may not surprise anybody. 

 One of the points -- 

 MR. BROOKMAN: Thanks for the heads up. 

 MR. SACHS: One of the points that I’d like 

to make is that I appreciate this relative evaluation 

that it looks like the heat rejection is three percent 

of the lighting load. It calibrates it. I fully agree 

that this is a small number, given the overall 

uncertainty of the analysis. 

 What would concern me is that we at least 

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track this sort of thing to make sure that we’re not 

stacking a number in ways that are -- a number of these 

uncertainties in ways that might align all on the same 

side and no longer give us an unbiased estimate. 

 So I’m comfortable with leaving it out now as 

long as we keep track of which direction we’re going 

in. 

 MR. BROOKMAN: Gary? 

 MR. SACHS: Let me finish one other point, if 

I might, and that point is the question of the outdoor 

versus indoor. This is right now, I believe, a bit of 

a proxy and the point that I want to bear in mind is 

that for equipment operated at high temperatures for 

pretty basic reasons, it takes more kilowatt hours per 

unit of cooling delivered to the interior of that case 

than it does at a lower ambient temperature, so that 

there’s a disproportionate importance to high 

temperature operation. 

 How that gets included in this -- that value 

gets included here is quite open, but I don’t want to 

forget that when we deal with average costs. 

 MR. BROOKMAN: Gary? 

 MR. FERNSTROM: Okay. So just one more quick 

comment. No offense to Steve Rosenstock, but at least 

for PG&E, most of the heating is gas and the cooling is 

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 MR. ROSENSTOCK: So it should be analyzed 

both ways. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. But 

if you’re going to do that analysis, again if there’s a 

cooling penalty where you need more air conditioning, 

then there’s a heating benefit where you might need 

less gas or electricity. I’m just saying in terms of 

analytics. That’s all I was referring to. 

 MR. FERNSTROM: I agree. 

 MR. BROOKMAN: Okay. So that was a useful 

bit of comment there. That’s helpful. 

 MR. SOMASUNDARAM: I think we covered this 

slide, I think. Basically, I was trying to explain how 

we did the outdoor installations, how we developed the 

weather data and then calculated the annual energy 

consumption figures. 

 Oh, the final bullet, I do want to emphasize 

that. You heard the discussion about the engineering 

model, coming up with the design options and efficiency 

levels, and for Class A and Class B machines, DOE had 

11 and 13 efficiency levels that were priced, costed, 

and developed in the curves. 

 We then down-selected nine efficiency levels, 

including a Level 0 which was considered a market 

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baseline, which is the present market baseline, while 

the analytical baseline that we compared all the lifecycle costs to is, in fact, referred to as Level 1 

which is the Tier 1 of EnergyStar, which went into 

effect in 2004, and so we considered that as the 

analytic baseline and then seven levels, additional 

levels to max tech which is Level 8. 

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of the analysis downstream, including the life-cycle 

cost and the national impact analyses, and so from now 

on, you will see references to 8 and 9 efficiency 

levels and these are the levels that we are referring 

to. Of course, we also looked at three sizes, or 

capacities of the machines. 

 MR. BROOKMAN: Tom Eckman. 

 MR. ECKMAN: I just want to follow up on a 

comment that Steve made about the humidity question I 

raised earlier, whether it’s incorporated or not. 

 I think you said it was the 12 percent higher 

consumption that was incorporated, is that what I 

understood? 

 MR. COUSINS: Up to 12 percent is possible. 

 MR. ECKMAN: This is mindful of Harvey’s 

keeping score. 

 MR. COUSINS: Well, what we do, and I know 

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this doesn’t apply to the standard because Coke testing 

is in large measure not based on ASHRAE criteria. We 

have a tropical condition that we mandate some 

equipment to comply with which is a 75 percent humidity 

and between 75 and 25 percent humidity, you may see up 

to 12 percent additional energy consumption just 

involved in condensing the moisture out of the air 

inside the cabinet in a reload situation. 

 MR. ECKMAN: So this is just for -- it’s a 

peak period time when you’re taking the humidity down 

when you reload the unit? 

 MR. COUSINS: Right. 

 MR. ECKMAN: So it’s intermittent, it’s not a 

constant? 

 MR. COUSINS: It’s not a steady state, no. 

 MR. BROOKMAN: When you reload the unit. 

 MR. SOMASUNDARAM: It’s a pull down 

condition. 

 MR. BROOKMAN: When you reload an outdoor 

machine in tropical conditions, you’ve got to get the 

moisture out of the air. 

 MR. BROOKMAN: Okay. Gotcha. Okay. 

 MR. SOMASUNDARAM: The next three slides are 

actually listing the details of three questions in the 

ANOPR document. The first is the definition of the 

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equipment classes and as I’ve indicated before, the 

first two bullets basically list out the assumptions 

that DOE made and the blue text at the bottom of the 

slide asks specific questions or comments from you all 

on the use of the two equipment classes as defined 

above and also the -- I think we talked about most of 

these already, and the split of 75 percent and 25 

percent indoor versus outdoor installations. 

 MR. BROOKMAN: So I think we covered that 

pretty adequately. Any additional comments on those 

queries on the bottom of Page 12? Please. 

 MS. SCHMELTZ: This is Rachel Schmeltz from 

EPA. I had one question and that was, what are your 

assumptions about the percentage in the market of Class 

A versus Class B in your analysis? 

 MR. SOMASUNDARAM: I believe Class A machines 

are 90 percent and Class B are 10 percent. The other 

way? I’m sorry. Yes, the other way. 

 MS. SCHMELTZ: Okay. Thank you. 

 MR. SOMASUNDARAM: Yes. Class A is 10 and 

Class B is 90 percent. Sorry. 

 MR. BROOKMAN: Okay. Yes, Harvey Sachs. 

 MR. SACHS: Clarification. That seems to 

apply to the standing stock out there today. Is this 

also true for the present shipment ratio? 

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 MR. BROOKMAN: Do you wish to comment, Mike? 

So Mike Scott says that’s what they’ve used for their 

analysis. Trent? 

 MR. ROTH: This is Trent. I just have one 

question, I guess, for understanding. Class A machines 

are going to be indoor, are considered indoor only, 

glass front type machines. Class B machines are 

indoor/outdoor type machines, not necessarily zone 

cooled but they could be a glass type machine versus 

for an outdoor use? 

 MR. SOMASUNDARAM: No, that’s not correct. 

It’s fully cooled are Class A and all the rest are 

Class B. 

 MR. ROTH: Okay. Thank you. 

 MR. BROOKMAN: Okay. So no additional 

comments on that -- those distinctions. Okay. So 

we’re moving on. 

 MR. SOMASUNDARAM: The second question we had 

goes to Nina’s earlier comment about -- or maybe not 

Nina’s. Somebody else asked about the lighting 

control. Perhaps Nina. 

 We assumed in our analysis that, as you saw 

in the ANOPR document, that the lights, for example, 

are on 24 hours a day because we had no data to 

indicate otherwise. 

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 Now that’s also what the test procedure calls 

for and so we assumed that there were no controls that 

limit the display lighting or the compressor operation 

during the day of operating the machine and we also 

assumed that the lighting will not be affected by any 

occupancy controls or occupancy patterns in the 

building. 

 DOE understands that such controllers exist 

as has been stated before at this meeting and can 

either be added on or enabled in certain beverage 

vending machines, but again we had no data on how many 

of the machines would have them and how often would 

they be turned on or off and maintained and controlled. 

 So we would like comments on any such 

information that might be available out there. 

 MR. BROOKMAN: Glenn? 

 MR. SELFRIDGE: For the purposes of this 

analysis, -- 

 MR. BROOKMAN: Hey, Glenn, get closer to the 

mike, please. 

 MR. SELFRIDGE: Okay. 

 MR. BROOKMAN: Thank you. 

 MR. SELFRIDGE: For the purpose of this 

analysis, this methodology is reasonable and 

consistent, apples to apples, but bear in mind the 

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future’s going to bring completely automated controls 

of the refrigeration and the lighting, real time. 

Okay? 

 MR. BROOKMAN: Yes. 

 MR. SELFRIDGE: So we shouldn’t be specifying 

in the standard that you measure always with the 

lighting and whatever on and the temperatures at a 

certain point. 

 MR. BROOKMAN: And would you speculate about 

the time scale there for that integration? 

 MR. SELFRIDGE: It’s happening already. 

 MR. BROOKMAN: I’m going to follow on with 

the manufacturing side here. Trent, and then we’re 

going to Nina. 

 MR. ROTH: This is Trent. Today, we 

incorporate turning the lights off, what we call sleep 

mode, today in our glass front machines, similar to 

what you’d use with -- you’d see in your computer 

screen. When it’s not being used, it goes to sleep and 

what we do now, we’ve incorporated this in all of our 

glass fronts significantly and that’s how we achieve 

our energy reductions because what we’re able to do is 

turn two of the three lights off in the vending machine 

and essentially we call it putting it to sleep and it’s 

essential for us to be able to do that to achieve Tier 

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2 status. 

 When you look at a vending machine, we really 

have three areas which we can focus on and that’s the 

evaporator, the condenser, evaporator area that you 

have the fans, and you have lighting, and as we try to 

do that, we try to look at innovative ways to drive 

that down. 

 So we think it really needs to be included 

in. I know that’s part of ASHRAE 32.1 right now. As 

long as it cannot be disabled, I mean that is a key, it 

can be adjusted and when we say adjusted, it can’t be 

adjusted higher than what the manufacturer say. It can 

be adjusted down so that it actually makes it more 

energy efficient. 

 The challenge why we want to do this is, and 

we’ve worked with the bottlers on this because it’s 

very important, understand that vending machine outlets 

out there is branding. I mean, the idea of it is that 

it’s all lit up. It’s a statement of their brand and 

both the glass front and with the piece. 

 So what we’ve really -- I mean, it’s taken a 

lot of work, work with the manufacturers, to say now 

how do we reduce this during an occupancy but still 

feel that the consumer will walk up to that machine and 

purchase something, even though it’s in sleep mode, so 

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it’s not like the machine’s out of order, and that’s 

why it’s very important that we incorporate lighting as 

a big part of this to develop it. 

 I mean, it needs to be part of the standard. 

It’s how we achieve Tier 2 today in some models because 

we’re able to do it and there’s a lot of benefits being 

derived from it. So we’d like to see it incorporated 

into the standard. I think the key is, is that, it can 

still be adjusted but it cannot be disabled and its not 

being disabled is the key to achieve the energy 

efficiency. 

 MR. BROOKMAN: Hang on. Matt, did you have a 

-- 

 MR. MILLARD: I’ll come back. 

 MR. BROOKMAN: Okay. Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

Earlier today, I asked specifically about lighting 

controls and the answer I received from DOE, that they 

were not being considered for further consideration 

under this proceeding. So now manufacturers are saying 

that they are doing some sort of lighting control in 

their machines. 

 Also, there was something in the ANOPR about 

EEI and ACEEE agreeing about advanced ballasts possibly 

being used in the machines, to be considered as one of 

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the technology options. 

 So as part of the NOPR, would DOE consider 

lighting controls as a technology to consider as part 

of the standards analysis? 

 MR. BROOKMAN: So Aris, is this to you? DOE 

consultant will respond now. Aris. 

 MR. MARANTAN: Aris Marantan. Let me just 

try and clarify my statement earlier about the reason 

why the lighting controls aren’t captured right now. 

 One thing is that the DOE test procedure 

that’s being used in the analysis and for the standards 

purposes is the ASHRAE 32.1 and currently, our 

understanding is that the 2004 version of ASHRAE 32.1 

doesn’t allow you to include lighting controls unless 

it is built into the system and can’t be disabled by 

the operator. I believe that’s the current 

interpretation by ASHRAE of that standard and so if the 

controls happen to pass that criteria, then it’s okay 

and can be captured for lighting controls. 

 I know that right now, ASHRAE is taking on an 

update to Standard 32.1-2004 and this is one of the key 

topics being discussed currently and, you know, once 

ASHRAE passes the update to 32.1, DOE can update their 

method of test for rating vending machines for 

standards purposes. So that could be coming up in the 

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future, but as of currently, the 2004 version is the 

one that we’re using. 

 MR. BROOKMAN: Thank you. Bob, do you want 

to chime in? 

 MR. McGARRAH: Bob McGarrah. Several of us 

in the room were part of the standards writing of 32.1 

and that point was very, very hotly discussed on how we 

can make a machine very energy efficient that the 

customer can’t disable, and I think Trent talked 

exactly to that point. 

 It’s adjustable but the lowest or the highest 

setting, depending on what side you want to look at, 

can only go so far and the worst case setting is what 

it’s tested at and that’s exactly how certain companies 

are able to meet Tier 2 for EnergyStar by having that 

setting. Worst setting, they still get the performance 

that the purchasers, the Coke and Pepsi, need in terms 

of lighting and that type thing. So that’s why it’s in 

that standard. 

 There’s going to be an update, don’t know 

what that’s going to say yet, but it will be better. 

 MR. BROOKMAN: Nina? 

 MS. TARLEY: Well, actually, I don’t have 

much to add to what Trent said. I agree with him, but 

I have to say the future is now. 

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 In terms of what Steve was asking before, the 

energy management devices usually incorporate the 

light, so that’s usually not a separate system in 

itself, but it’s part of the overall energy management 

device. 

 MR. BROOKMAN: Thank you. 

 MS. TARLEY: Also, the last thing I want to 

say is I think it’s our mandate now to look at, you 

know, the energy -- the lights on is not something that 

should be the -- we have to make sure that we encourage 

the reduction of the energy by reducing the time the 

lights are on. So I think it’s very critical to change 

that particular one. 

 MR. BROOKMAN: And you were commenting 

earlier on operating hours. Lighting would be one 

aspect of that. Do you want to say more about 

operating hours at this time or do you want to save 

that for later? 

 MS. TARLEY: Well, the hours vary, depending 

on the locations. There are some locations where, you 

know, 24-hour establishment where the machine is on all 

the time and there are some installations actually are 

in the office buildings and so on where machines only 

function during the day and then at 5 o’clock, 

everything shuts down. So it’s difficult to really 

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tell you the average, but I think it’s very critical to 

encourage to turn the lights off. 

 MR. BROOKMAN: I’m wondering if there’s some 

way to characterize this for the Department. Trent? 

 MR. ROTH: Well, the question is not to 

characterize it as setting a timer. If you start to 

set a timer, what you’re giving the operator the 

ability to do is make a whole bunch of adjustments in 

there and it’s not a factory setting. 

 So coming in and saying it’s going to be -- 

why would an operator say, well, it needs to shut off 

at 5 o’clock and it comes back on at 7 o’clock gives 

too much ambiguity. Again, it can be disabled or 

changed. It needs to be a factory setting. 

 The changes in that vary. I mean, schools, 

if nobody’s using the machine, a lot of times the 

software in the machine has the capability to do a 

variety of things. We can tell you when somebody’s 

vended from the machine last, we can tell you a whole 

bunch of different things. So it varies on how the 

manufacturer may set that, but it generally has to do 

with the machine not being used, it will go to sleep, 

just like if your computer screen is not used, it will 

go to sleep. It’s probably the best way to 

characterize it. 

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 We use that term loosely because we didn’t 

know what else to call it in the industry except sleep 

mode and it goes into sleep and still will revive back 

up when somebody needs to use it. 

 MR. BROOKMAN: I just want to finish this 

stream out, Harvey. Mike Rivest. 

 MR. RIVEST: Just to be clear, there are two 

aspects where lighting might come into play in the 

analysis. There’s in the actual rating of the 

equipment, the descriptors. So when we derive the cost 

efficiency curve, the efficiency is as measured by the 

test procedure. So it’s important that we understand 

how a technology can reduce the descriptors and I’m not 

sure I understand the state of that. It sounds like 

the analysis assumes that it’s lights on, steady state, 

and that’s what’s being measured in the descriptor 

currently. 

 MR. BROOKMAN: Mike, get close to that 

microphone. 

 MR. RIVEST: So that’s the one aspect, and 

what I’m hearing is that a revision to ASHRAE may 

actually allow testing under lower lighting conditions 

than assuming lights are full on. 

 MR. BROOKMAN: Trent? 

 MR. ROTH: It does today. 

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 MR. RIVEST: It does today. 

 MR. ROTH: Right. There was some changes 

made on the update that wanted the lights to be on 24 

hours. We said today, ASHRAE does allow that standard 

to take place because it is a state -- it’s written 

into there and so does the EPA underneath the current 

EnergyStar guidelines also allow that to happen. 

 MR. RIVEST: So that’s one element that has 

to be cleared up. 

 The second one is actually trying to quantify 

the energy savings and that, we require an 

understanding of how many hours the lights are on and, 

you know, they’re off. So those are the two separate 

issues that are intertwined. 

 MR. BROOKMAN: So that’s why I was asking if 

there was some way to simply characterize this and 

you’re shaking your head, it’s not possible to do that, 

Trent? 

 MR. ROTH: I’ll let Steve. Steve might have 

-- 

 MR. BROOKMAN: Thank you. Steve. I wanted 

to give him a shot first. Steve, go ahead. 

 MR. COUSINS: Yeah. Steve Cousins. I’m 

disappointed that we’re getting caught up in the hours 

with the lighting. In Coca-Cola, we’re looking at a 

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certain percentage of our machines not even having 

lights and with that percentage growing in the future 

to maybe to a point not too distant where there will no 

longer be lighting on the machines, we’ll be looking at 

reflective technologies and other things that will 

present our trademarks and our branding in a way that 

is recognized by consumers. 

 So to get caught up in lighting and how long 

the lights are on, I think, is really -- it’s no sense 

in doing that. 

 MR. BROOKMAN: So that’s a very interesting 

trend line you just laid out there. Additional 

comments on those before I go to our next commenter? 

Yes, Tom, is this on this stream here? 

 MR. ECKMAN: Yes. 

 MR. BROOKMAN: Tom Eckman. 

 MR. ECKMAN: Yeah. I guess the issue that 

Mike Rivest raised, which is, you know, if we’re going 

to figure out somehow to modify the on-time schedule 

from 8760 hours a year to some other schedule for those 

places where the occupancy or the time of day drives 

the lighting levels down, then it’s not clear to me how 

that gets done, given current levels of information 

about what that might look like. 

 You know, there are occupancy schedules for 

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office buildings and schools that are sort of templates 

for doing simulation analysis, but it’s not clear to me 

that those are necessarily applicable to the vending 

machine industry. There are whole building schedules, 

not just the lighting -- or there are lighting 

schedules for particular building type and that would 

be the only thing that I know of, unless industry has 

some sort of schedule in mind for this because 

otherwise it’s an 8760 hour operation and I don’t know 

how we take advantage of the technology. 

 I think we should, but I don’t know how to 

take advantage of it, given the current level of 

information that we have about how often these lights 

are dimmed and not on. 

 MR. BROOKMAN: Well, one question I had was 

are these machines quite similar and then they get 

programmed differently or are they -- that’s 

principally the way it works? Nina, you’re shaking 

your head. 

 I was wondering if there’s a distribution of 

these technologies you could supply to the Department 

that would be illustrative in that respect. Nina? 

 MS. TARLEY: I think that Trent already 

outlined that there is a technology available currently 

and it’s been available for several years where we can 

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program the machine to sense the sales that are 

happening, the temperatures that are happening. It’s a 

very sophisticated energy management device that can 

certainly, based on the real sales, rather than being, 

you know, some average national number, could really 

eliminate the need for lights most of the days and as 

you heard Steve saying, that maybe eliminate lights 

period. 

 So rather than mandating the 24-hour lights 

on, we should encourage the lights to be off and that 

should be part of the protocol. 

 MR. BROOKMAN: Okay. I’m certain the 

Department would really welcome in your written 

comments any way you can describe this more fully. 

Harvey Sachs. 

 MR. SACHS: Harvey Sachs. I’m normally a 

gentle soul, but I want to point out that the 

Department has dug itself into a pretty deep hole and I 

point particularly to Page 34,100, Column C, in the 

Federal Register, the paragraph that begins, oh, a 

little above the center of the page, “In response.” 

 This goes back to the furnaces and boilers 

rulemaking of a couple of years ago in which the 

Department explicitly rejected the consensus agreement 

recommendation among the environmental advocates and 

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the manufacturers that would have included both an AFUE 

and prescription of a certain level or type of control 

strategies to be included. 

 In rejecting that, in carrying that same 

language forward to the paragraph I’ve cited, I believe 

DOE may have set itself up for this standard-making to 

become pretty irrelevant since our friends doing 

EnergyStar are not under these constraints, these selfimposed constraints, and we may find that regardless of 

the standards set here, the industry is able to move 

forward with EnergyStar to achieve savings across a 

broad range of equipment that simply will be -- will 

serve to make this proceeding almost irrelevant. 

 So I’m criticizing the effects of the 

Department’s approach to standards and it’s carried 

forward to this case in a situation where we have 

rapidly evolving technologies that in part are based on 

controls and software. 

 Thank you. 

 MR. BROOKMAN: Thank you. So I’m certain you 

will include those in your written comments. 

 MR. SACHS: Yes, I will, and I would like to 

add a specific example that’s not brought up and that’s 

the advanced features referred to by Nina would 

certainly include the ability to interact with the 

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utility for load control at peak times and this is a 

matter which shows up as small amounts of energy but 

very large economic value to the grid in general. 

 MR. BROOKMAN: Thank you. So then we covered 

a lot of ground. Mike, did you have a clarifying 

question? Mike Rivest. 

 MR. RIVEST: Mike Rivest, Navigant. Those 

are sweeping comments and I don’t exactly understand 

the specifics of them, but -- 

 MR. BROOKMAN: You’re referring to his citing 

of the Federal Register Notice? 

 MR. RIVEST: Right. 

 MR. BROOKMAN: Right. Okay. 

 MR. RIVEST: But, you know, to be clear, DOE 

regulates on the basis of the test procedure and the 

test method incorporates certain features of a product 

and I believe what I’m hearing here is that there may 

be some features that generate energy savings that are 

not captured by the test procedure and, you know, 

there’s nothing more deceitful than that. 

 MR. BROOKMAN: Tom Eckman. 

 MR. SACHS: Precisely. 

 MR. BROOKMAN: That was Harvey Sachs. Now 

Tom Eckman. 

 MR. ECKMAN: And this is a question for the 

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Department. Under EISA, there’s the ability to 

regulate more than one characteristic of equipment, and 

I guess the question is whether or not you can regulate 

both on the basis of a performance standard tested by 

ASHRAE Standard 32.1 and also a prescriptive 

requirement that would encourage the manufacturers to 

place such controls in that device, knowing that it 

would -- not to define what that device is but to have 

the ability to control based on use of the machine. 

 It’s an open question. I don’t expect we’ll 

want a response right now, but under EISA, you were 

allowed to regulate more than on one parameter. 

 MR. BROOKMAN: Thanks for bringing that up. 

So that was -- that conversation was very useful. 

Final comments on this spectrum of issues? Yes, 

please, Trent. 

 MR. ROTH: Just one last comment. 32.1 isn’t 

finalized yet. I mean, we’re all being very 

speculative here about what it’s going to end up and 

you were at the meeting last Sunday. I think that’s 

important, that if it’s not included, it’s written so 

that if these features cannot be included, there needs 

to be an exception made to the test procedure. 

 We’re trying to decide on something right now 

that hasn’t been decided yet because we don’t know what 

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that test procedure is. I don’t think that’s going to 

take place for another 30 to 45 days. 

 MR. BROOKMAN: Okay. Aris? 

 MR. MARANTAN: Yeah. I can comment on that a 

little bit. One thing is the test procedure that DOE’s 

mandated to use right now is currently ASHRAE Standard 

32.1-2004 and, you know, that’s what we have as a 

legislative requirement. 

 But also in the statute, DOE can update the 

test procedure once ASHRAE updates its test procedure. 

So yes, we are certainly looking forward to 32.1 being 

updated. I don’t know the current timeline for that, 

but that would certainly take care of a lot of these 

concerns. 

 MR. BROOKMAN: Okay. Thank you. So we’re 

going to move on now, folks. Yes, Matt, please. 

 MR. MILLARD: Matt Millard. I just had a 

quick point of clarification about the equipment 

classes, just so that nobody was confused. 

 Class A, the only requirement is that it’s 

fully cooled. The indoor installation is an assumption 

about Class A. 

 MR. BROOKMAN: Thanks for that clarification. 

Okay. Now to Sriram. 

 MR. SOMASUNDARAM: Okay. The next slide, 

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Number 14 in this set, asks for -- raises Issue Number 

3 which has to do with refurbishment cycles. 

 Now, part of this question pertains to this 

Energy Use Analysis and the second part of this 

question relates to the Life-Cycle Cost Analysis where 

we developed the installation costs. But I was going 

to put this question up here, ask the question related 

to the energy use now and then if you want to bring up 

other comments related to the installation costs and 

the maintenance costs, related to the refurbishment 

cycles and the cost of refurbishment, then you’re 

welcome to do that after Mike Scott presents that 

section. 

 But the basic issue here is in our assumption 

of the Life-Cycle Cost Analysis, we’ve assumed an 

average lifetime of this equipment to be 14 years and 

each unit to undergo, typically undergo two 

refurbishment cycles during the life of the equipment, 

and we also assumed those to occur about three or four 

years into the life or into the operation of the 

equipment. 

 So given those assumptions, as elements of 

the machine get refurbished, the energy consumption of 

the machine may or may not change, depending on what is 

done to the machine, and so basically what we are 

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asking here at this point is are those assumptions 

related to the frequency, typical frequency of 

refurbishment cycles correct, and if that assumption is 

correct, then we are asking further whether 

refurbishing a machine affects its energy use and how 

it might affect its energy use. 

 MR. COUSINS: Steve Cousins here. There are 

two things that happen within our system. 

Remanufacture or refurbishment, as you described it, is 

one. Generally speaking, the lifetime of a vending 

machine in our system, it was at one point 13 years, 

it’s actually gone down. 

 Generally speaking, we scrap machines. It’s 

been reduced to about 10 years in our system, the 

lifetime of a typical machine. On that machine, we’re 

going through one refurbishment cycle. I’m only 

speaking about present conditions. Things may change 

in the future. 

 When it undergoes remanufacture, we have a 

financial model that we follow, but we only replace or 

upgrade components or subsystems that need to be 

changed. If the subsystem or component is in good 

condition and it still has a lot of life in it, we 

won’t replace it. 

 So the assumption that the energy profile may 

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or may not change is a correct one. There’s no 

guarantee that the energy profile will change. 

 MR. BROOKMAN: Other comments on these series 

of questions related to refurbishment? No additional 

comments? Bob? 

 MR. McGARRAH: Bob McGarrah. The EPA, in 

their EnergyStar Program, has worked out a program for 

the machine owners to upgrade to various levels of 

EnergyStar and EnergyStar 1, EnergyStar 2, by doing 

certain things within the machine to the extreme of 

replacing the refrigeration system to adding equipment 

that will improve the efficiency of the refrigeration 

system, change the lighting and things like that. 

 So the EnergyStar does have a formula or a 

method or a process to let machines be upgraded energy 

consumption-wise. How much that’s done, I really can’t 

say. 

 MR. BROOKMAN: Okay. I’d like to call your 

attention, though, to this slide. There are three 

specific bullets there and if anybody has any other 

comments to address any or all of those three. Gary? 

 MR. FERNSTROM: Gary Fernstrom. I’m 

interested in last two comments which seem to be 

opposing one another. EnergyStar apparently has some 

recognition of efficiency improvement in refurbishment 

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and Coke is saying that only those components requiring 

maintenance with respect to durability are usually 

addressed in remanufacture. 

 So I’m wanting to understand better what the 

energy efficiency improvement opportunity is in 

remanufacture or refurbishment. 

 MR. BROOKMAN: Steve Cousins. 

 MR. COUSINS: Actually, the comments that Bob 

and I have made are not conflicting. They’re two 

different scenarios or situations. We have a process 

in which we do remanufacture machines. So the Legacy 

machines may have an extended life in the marketplace. 

 We do also do energy upgrades but the two are 

mutually exclusive. Energy upgrades are done based on 

account needs and account demands. It’s not a part of 

the routine remanufacturing process that we have. So 

energy upgrades take place. They’re just not done 

across the board on every single machine that goes 

through a remanufacturing cycle. 

 MR. BROOKMAN: Gary? 

 MR. FERNSTROM: Can you give us some sort of 

sense of the extent to which these two things are done? 

I’m, you know, wanting to get at what the volume is, if 

you can answer that question, so we can assess what the 

opportunity might be to address remanufacture for 

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efficiency improvement based on the needs of the 

clients, I guess. 

 MR. COUSINS: I can’t do that at this time. 

I just don’t know what that volume is, so I couldn’t 

tell you. If you say, well, how many machines have 

undergone an energy upgrade over the past year or 

what’s planned or how many, I don’t have that 

information available right now. 

 MR. BROOKMAN: Would you say the proportion 

is stable? 

 MR. COUSINS: No, it’s a growing percentage. 

It’s something that will -- 

 MR. BROOKMAN: The scrapping of them? 

 MR. COUSINS: Well, no. I was actually 

referring to energy improvements. The energy 

improvements, the energy upgrades, the percentage of 

machines in the system that will undergo that, the 

number that will undergo that will be increasing in the 

future. 

 MR. BROOKMAN: I see. 

 MR. FERNSTROM: So I’m not looking toward 

standards to address this opportunity, but at the last 

meeting we had on this subject, PG&E anyway was looking 

at some sort of, you know, rebate or incentive program 

to address that opportunity and I’m still interested in 

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understanding what the opportunity is there. 

 MR. BROOKMAN: Okay. Thank you. Trent. 

 MR. ROTH: Just a comment on that. I don’t 

have any numbers to tell you what percentage is being 

done today, but EnergyStar addressed the refurbishment 

piece. When it moved to Tier 2 in July of last year, 

it needed machines in order to receive the EnergyStar 

label and to achieve Tier 2 and that included 

refurbished machines. 

 We currently have kits listed on the EPA 

website and are very close to getting new kits that 

will take both non-EnergyStar, that means pre-Tier 1, 

units as well as Tier 1 EnergyStar units to achieve 

Tier 2 status. 

 We’re currently working on that right now and 

we already have some kits that are already posted on 

the website. We are working to address the models that 

were pre-EnergyStar in the marketplace and we’re very 

close. 

 MR. FERNSTROM: So who actually uses those 

kits and does the refurbishment? 

 MR. ROTH: We would open them up as a 

supplier to both bottler refurbishment agencies. We 

also have our own refurbishment center in which 

bottlers send equipment to. So it would be open to 

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that. It’s a kit that’s made available to everybody 

and it’s posted on the EPA website. It’s just takes us 

longer to look at that older technology and say, okay, 

how do we achieve that status, and again we’re 

achieving that status by changing the evaporator fans. 

We’re doing that by regulating the software and the 

controls to where the condenser, the fans run in 

operation. 

 We’re also using lighting and going back and 

saying how do we use this sleep mode to achieve what 

were non-EnergyStar pieces that we didn’t think we 

could get there and we’re really testing the ways of 

how do we take that established base that’s out there 

and cost effectively be able to upgrade it. 

 The key is cost effectively. If you’re 

taking a piece that’s out there that’s seven or eight 

years old, it’s depreciating an asset, how much money 

do you really want to put into this machine knowing 

it’s only going to last you three to five more years? 

That becomes a cost equation, but those kits are 

becoming available. In fact, we’ll have more available 

very shortly. 

 So we are addressing that installed base and 

we are very open to looking at how rebates will be able 

to help cover some of the costs of that because I think 

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we can, unlike the appliances back when they replaced 

refrigerators with EnergyStar and people took and put 

them in their garage, you know, these are getting 

scrapped or they’re getting upgraded to meet the new 

energy pieces and that’s something our industry can do. 

 MR. BROOKMAN: Okay. Thanks very much. 

Useful. Bob. I’m going to suggest we take a break 

very shortly, so hang in there, folks. Go ahead. 

 MR. McGARRAH: Bob McGarrah. Worst place to 

be, between you folks and a break. 

 Just a comment on that. The EnergyStar 

Refurb Program, I don’t want to sound like a commercial 

but USA Technologies had the first units available to 

upgrade units from Tier 1 to Tier 2 and from nonEnergyStar to Tier 1. That’s on the EPA website. 

 The industry again, as Trent had noted, we’re 

making tremendous effort to address both the new and 

the existing base, but in the absence of any real 

incentive, whether it’s a rebate program or something 

else, it is very difficult to get the dollars to invest 

that, in our case $82, to just address the energy 

issue. They’ll spend the money on something else that 

makes it fancier, new sign faces, something like that, 

and if rebate programs are available for the refurb, 

that would be a huge help in addressing that install 

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base and that’s where the big opportunity is, not in 

300,000 machines that we’re buying every year. 

 MR. BROOKMAN: Okay. Thanks. Okay. I’m 

going to suggest we take a break. It’s 5 minutes after 

11 by that clock up there. I was going to suggest we 

should try and do it in 10 minutes. It will probably 

take 15, but we’ll try and resume at 20 minutes after 

11. At that point, we’re going to keep going for 

awhile. Please wear your badges inside the building. 

This room, there will be people in here. It will be 

secure. You can leave your stuff here. 

 Steve Rosenstock before we go. 

 MR. ROSENSTOCK: Oh, information about the 

cafeteria. 

 MR. BROOKMAN: I will tell you when we 

return. 

 (Recess.) 

 MR. BROOKMAN: As we get towards the lunch 

break and we’ll see what the natural break point is as 

we’re moving along here, we do have some trajectory and 

then let’s proceed with the slides. Mike is up and we 

are on Life-Cycle Cost Analysis. 

 MR. SCOTT: Slide 15. I’m Mike Scott from 

Pacific Northwest National Lab. I will be taking you 

through the Life-Cycle Cost Analysis which depends on 

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the analyses that have been described so far. 

 We do the economic evaluation in Life-Cycle 

Cost Analysis as an analysis from the customer 

perspective. The Life-Cycle Cost, as you may know, 

equals the customer price plus the sum of annual 

operating cost discounted to particular base year and 

that year is assumed to be 2012 which is the first year 

of the effect of the new rule. 

 The results are expressed as a life-cycle 

cost difference between the baseline and the standard 

level and Level 1 that’s described in that baseline is 

actually EnergyStar Tier 1 and so the implicit 

assumption behind that is that by 2012, everyone will 

basically be at Tier 1. 

 The simple payback period in years is also 

calculated and reported in the analysis. 

 We began with up to 13 efficiency levels for 

the equipment in the Engineering Analysis, combining 

various technologies, and all of this is described in 

the TSD. Ultimately, nine efficiency levels were 

selected for the LCC Analysis and we can go into 

greater detail on that a little later in the 

presentation. I didn’t plan on covering it right here 

in this portion, though. 

 Level 0 represents the current level of BVMs. 

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 As I mentioned, Level 1 represented the EnergyStar 

Tier 1 level and is the baseline efficiency level from 

which all the remaining proposed standard Levels 2 

through 8 are compared. 

 Level 2 through 8 are the proposed standard 

levels analyzed for LCC and Payback Analysis and again 

compared to Level 1. 

 This Slide 17 or Page 17 is the life-cycle 

calculation flow chart and describes how the analysis 

is done in outline form. Going up on the left-hand 

side from Engineering Analysis, we take the baseline 

manufacturer’s price and the standard level of 

manufacturer’s price for each of the overall nine 

levels and we take those from the Engineering Analysis. 

 Those actually wind up being the 

manufacturer’s sales price that we use which includes 

the manufacturer’s mark-up but not the wholesale markup. The wholesale mark-up or the retail mark-up is the 

next block and that comes from the mark-up analysis 

that was described already this morning. It includes 

any distributor mark-up, any manufacturer direct markup, if there is any at retail on direct sales, and 

sales tax. 

 Those two things together equal the equipment 

price or the consumer price. So that is added and 

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installation cost that I’ll describe in a moment, and 

those two things together are the initial price to the 

consumer of whatever type and that is the total 

installed cost. 

 The lower part of the table talks about the 

annual operating costs. From the Energy Use 

Characterization Analysis which is covered in the TSD, 

we have energy use as a function of efficiency. So we 

have energy consumption associated with each of the 

nine levels. We have electricity prices that vary both 

by location, i.e. state, and by business type. They 

also vary over time. 

 There is an annual energy expense at the 

beginning of the forecast period, the 2012 period, that 

is essentially the electricity price in -- well, for 

the ANOPR, it’s 2006, then escalated to 2012. For the 

ANOPR and the final rule, it will be the appropriate 

price for those years. 

 To the annual energy expense, we add a repair 

cost, and maintenance cost, and the repair cost varies 

by the efficiency level. For the moment, maintenance 

cost does not. Together, that gives us an annual 

operating expense. 

 We apply that over the lifetime of the 

equipment using a discount rate appropriate to the type 

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of customer and electricity price trend from the Energy 

Information Administration which gives us a lifetime 

operating expense. Total installed cost plus lifetime 

operating expense give us life-cycle cost. Annual 

operating expense first year divided into the total 

installed cost is the payback period. So we’re doing a 

simple payback period. 

 So the first issue that we want to talk about 

here this morning is that the selection of EnergyStar 

Tier 1 as the baseline efficiency level for the LCC and 

Payback Period Analysis. DOE invites comments on the 

use of the single level, Level 1, rather than, say, a 

distribution of efficiencies, and we also, if people 

feel like Level 1 is not appropriate or a single level, 

in particular, is not appropriate, we would also seek 

data that could be used to populate a distribution of 

efficiency levels for the baseline. 

 MR. BROOKMAN: So there you have the 

questions that DOE’s particularly interested in that 

Mike just said. Glenn. 

 MR. SELFRIDGE: I have a comment. 

 MR. BROOKMAN: Glenn, get close to the 

microphone, Glenn. Thank you. Sorry about that. 

These mikes are real antiquated. 

 MR. SELFRIDGE: That’s okay. I was going to 

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bring this up later, but I’ll bring it up now because 

it seems appropriate. 

 I ran your Table 3 data against the formula 

for industry group machines that were tested at 75/45 

and were 100 percent EnergyStar-rated, had been at Tier 

1, and I find, at least on the Type B machines, that 

your line derived from Table 3 for EnergyStar Tier 1 

characterizes the actual machines out there on average, 

but because it characterizes the machines on average, 

the line rejects about 50 percent of them. 

 So your line is not at EnergyStar Tier 2. It 

characterizes machines that have been included in 

EnergyStar for Tier 1. But in fact, if that were used 

as the cap, you would be considerably more efficient 

with your Level 1 than EnergyStar Tier 1. I could 

repeat that, possibly. 

 Basically, if you match your line against -- 

I’ve got like 20 or 22 different models for three 

manufacturers. It is a best fit center line of the 

data. Okay? The machines obviously all equal to or 

better than EnergyStar Tier 1. So what you’ve done is 

you’ve moved the line down where you would reject many 

machines that were in EnergyStar Tier 1. 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: I think Navigant could help us 

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with that. 

 MR. BROOKMAN: Matt, please. 

 MR. MILLARD: Matt Millard. I was wondering 

which table are you referring to? 

 MR. SELFRIDGE: I believe it was Table -- let 

me get my briefcase. 

 MR. BROOKMAN: Matt, stay up there. 

 MR. SELFRIDGE: It’s Table 3, 3.2. Table 

3.2. 

 MR. BROOKMAN: And what page is that? TSD? 

What is it in? 

 MR. SELFRIDGE: ANOPR. It’s in the ANOPR. 

 MR. SOMASUNDARAM: It’s in the revised ANOPR. 

We will get to it in the afternoon. 

 MR. BROOKMAN: Okay. 

 MR. SELFRIDGE: It’s actually the first slide 

in your back-up sheet. 

 MR. SOMASUNDARAM: Can we wait till the 

afternoon? 

 MR. SELFRIDGE: Yeah. It can wait till the 

afternoon. 

 MR. BROOKMAN: Okay. So thanks for raising 

that and we’ll get to that in more detail. Trent? 

 MR. ROTH: We’ll get to it in more detail. 

This is Trent. More detail later. I just want to 

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concur with him that it’s showing using this formula 

that the baseline is more -- looks like Tier 2 than it 

does Tier 1. Most of our Tier 1 machines would not 

fall into that. 

 MR. BROOKMAN: The implication being the 

baseline should be lower? 

 MR. ROTH: I didn’t say that. 

 MR. BROOKMAN: That’s why I’m trying to press 

you. 

 MR. ROTH: I mean, by 2012, I mean, we’ll 

probably be beyond, I mean, where we are today. I hope 

so anyway. 

 But what I am saying is that the baseline is 

more equivalent to what we are producing today that 

meets Tier 2 standards. Our Tier 1 machines that we 

made a year and a half ago would be more or less thrown 

out here. 

 I just wanted to state that it’s more 

equivalent to Tier 2 as a baseline today. 

 MR. BROOKMAN: Right. Okay. 

 MR. ROTH: I’m not saying you need to change 

it. 

 MR. BROOKMAN: And be careful not to throw 

out too many conclusions from it. 

 MR. ROTH: I don’t think there’s a need to 

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change it. It’s a 2012 standard. We’re only 

introducing Tier 2 today. 

 MR. BROOKMAN: Okay. 

 MR. ROTH: I’m just saying that referring it 

to Tier 1 and saying you need to go higher, there is 

some risk factors because we haven’t figured those 

technologies out today. It’s more equivalent to Tier 

2, at least from our -- 

 MR. BROOKMAN: That’s a helpful comment. 

Additional comments in this vein? I see one or two. 

Nina, you’re shaking your head yes. 

 MS. TARLEY: Nina Tarley. No, I think it’s 

very important to recognize what it is. I agree 

totally. We can discuss should it be lower or higher, 

but it’s important to recognize it’s Tier 2. 

 MR. BROOKMAN: Okay. Thank you. Bob? 

 MR. McGARRAH: Bob McGarrah. I think what 

we’re hearing is the industry already is meeting the 

standard that you’re setting by being at EnergyStar 

Tier 2. The industry has worked very hard behind the 

scenes, if you will, to get energy efficiency without a 

mandate with the EnergyStar Program and that type 

thing. 

 So they’re already at Tier 2. They’re only 

selling probably 80-90 percent of their machines are 

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already Tier 2 and that’s why Trent is saying Tier 2 is 

fine but let’s identify it as a Tier 2 so that we don’t 

go way beyond that and get into areas that we just 

can’t perform. 

 MR. BROOKMAN: Okay. 

 MR. McGARRAH: Thank you. 

 MR. BROOKMAN: So other comments on this, on 

the baseline level here on 18 before we move on? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: Okay. Moving on. Electricity 

prices, as I mentioned before, are an input to this 

analysis. We based it on state by state average 

electricity prices paid by seven business types that 

use BVM equipment. We had six of them were also 

basically building types and the seventh was 

bottler/distributors. 

 The electricity prices by business type were 

developed using a ratio of the average price in 2003 

CBECS, Commercial Building Energy Consumption Survey, 

by business type to their average compared to the 

commercial average price for four of the business types 

and what appeared to be more appropriate was an 

industrial average price for manufacturing and military 

which have similar kinds of energy consumption, very 

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large commercial-type establishments. 

 Bottler/distributors are assumed to 

experience the market share-weighted mix of prices 

experienced by the other six business types; that is, 

if there’s one percent of them sold in a particular 

business type, then bottler/distributors are also 

assumed to have one percent of their sales to that type 

of building. 

 These ratios are then applied on a state by 

state average electricity prices, either commercial or 

industrial, for year 2012 and then the outyears out to 

the end of the equipment life by EIA price projections. 

The price projections used for this particular 

analysis, I believe, were the AEO 2007 reference 

forecast. 2008 is out now and, of course, would be 

used for the NOPR analysis and then, as appropriate, 

2008 or 2009 for the final rule. 

 We also did sensitivity analysis that’s 

included in the Technical Support Document concerning 

high- and low-growth cases that were run in 

sensitivities. 

 MR. BROOKMAN: Yes, Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

Question about the last slide. 

 Again, so you have -- in the Technical 

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percentage of machines in manufacturing, -- 

 MR. SCOTT: Right. 

 MR. ROSENSTOCK: -- military versus the other 

commercial spaces. 

 MR. SCOTT: Right. 

 MR. ROSENSTOCK: And did you use some of the 

MECS data for some of this analysis? 

 MR. SCOTT: No, we were using CBECS for this. 

 MR. ROSENSTOCK: Manufacturing Energy 

Consumption. Okay. 

 MR. BROOKMAN: Those categories you list 

there, they’re all there inside CBECS. 

 MR. ROSENSTOCK: Well, manufacturing is -- 

Steve Rosenstock, EEI. Manufacturing is MECS, 

Manufacturing Energy Consumption Survey. 

 MR. SCOTT: Correct, correct. The building 

types that we looked at, a certain portion of those are 

-- a portion of those buildings in CBECS that are 

described as manufacturing is the percentage that we 

used that went to manufacturing as opposed to something 

else. 

 MR. ROSENSTOCK: I see. Okay. 

 MR. BROOKMAN: Harvey Sachs. 

 MR. SCOTT: We used the industrial prices, 

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however, for that. 

 MR. ROSENSTOCK: Gotcha. 

 MR. BROOKMAN: Keep going, Steve. 

 MR. ROSENSTOCK: Again, this is a big lifecycle. So this is primarily with outdoor machines, I 

would say, especially in southern regions. There is a 

seasonal variation in electricity prices. Summer’s 

higher than winter. The outdoor machines, I don’t have 

data. There might be -- I think I saw something last 

time from PG&E or California. 

 It is likely that for the outdoor machines, 

especially in the more southern areas, that the summer 

energy consumption might be higher than the winter 

energy consumption, compared to indoor machines where 

it’s probably flat, you know, every month is pretty 

flat. 

 So in terms of Life-Cycle Analysis, in terms 

of some of the economics of the -- for the outdoor 

machines, if there’s a way -- if what I said is true, 

that the summer usage is higher than the winter usage, 

then if there’s a way to adjust the economic analysis 

to adjust for the fact that if they’re using more in 

the summertime, then, you know, the cost per kilowatt 

hour on an annualized basis will be higher just because 

of that seasonal variation. 

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 MR. SCOTT: Both the commercial energy prices 

are what they are in those states, so we do have that 

variation in place. Also, the analysis takes into 

account the difference in weather on an annual basis 

between -- 8760 basis, basically, and in each of those 

states, based on the TMY2 analysis. 

 So you do have considerable variation in the 

cost of a given type of machine in different locations. 

 MR. ROSENSTOCK: Again, Steve Rosenstock. 

Thank you. This might be -- again, I don’t want to -- 

well, there could be an extra step, like you have state 

annual average for -- let’s say it’s eight cents for 

commercial. In the summer months, it could be 10 cents 

versus winter time it’s six cents. Again, it might be 

interesting to see how the numbers kind of play out for 

those outdoor machines. 

 Again, I don’t know, but that’s easy to 

replicate, but again just as an analytical thought. 

 MR. SCOTT: Okay. I understand the comment. 

Thank you. 

 MR. BROOKMAN: Lane, and then to Harvey. 

 MR. BURTON: Lane Burton, NRDC. The 

electricity price forecast assumed no regulatory 

changes, but there’s almost certain likelihood that 

there will be a regulatory change in the form of 

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climate legislation. So we’re not advocating that the 

Department use a forecast that doesn’t exist, that 

includes these changes, but we are advocating that they 

monetize the value of carbon dioxide and take that into 

account in the Life-Cycle Cost Analysis and the 

document to take that price from would be the EIA’s 

Analysis of the Lieberman-Warner. 

 MR. BROOKMAN: Thank you. Okay. Thank you. 

Harvey Sachs. 

 MR. SACHS: Harvey Sachs. Along the same 

lines, I believe the Department owes its stakeholders 

some review of the applicability of the EIA AEO 

electricity price projections, particularly a 

calibration against other forecasts. 

 We all know that all forecasts are wrong all 

the time. It’s just a matter of how much. But there 

certainly is a sense that for whatever reasons, the EIA 

Annual Energy Outlook has not tracked the volatility 

and increasing prices of the actual as-revealed market 

as accurately as some of the private sector forecasts 

and it is time for the Department to perhaps pay 

attention to additional sources of information. 

 MR. BROOKMAN: Thank you. 

 MR. SCOTT: Harvey, this is Mike Scott. Do 

you have any, in particular, in mind? 

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 MR. SACHS: We can provide a list, Mike. 

 MR. SCOTT: Thank you. 

 MR. BROOKMAN: Okay. Additional comments on 

electricity prices before we move on? Gary? No. 

Okay. 

 MR. SCOTT: Moving on. Okay. Installation 

costs are a component of the first costs of the 

equipment, and for the ANOPR, DOE assumed a $72 

installation cost per machine. Those costs were based 

on an article by Foster Miller in 2002, adjusted to 

2007 dollars. 

 Installation costs were assumed not to vary 

with the equipment price or efficiency level but do 

vary by location, primarily for differences in labor 

prices. 

 The discount rates that were used were 

derived from estimates of the cost of capital for 

companies that would purchase beverage vending machines 

by business type. I alluded earlier to the various 

classes of equipment. The cost of capital is 

calculated as a weighted average cost of capital that 

combines the ratios by company of equity and debt 

financing. 

 All of this comes from an analysis of 

something like 8,000 U.S. companies that are 

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categorized according to the business type and we 

picked representative companies from those types. 

 The weighted average value adjusted for 

inflation, and these numbers are, I believe, January 

2007 numbers, that’s going to have changed a bit, is 

4.49 percent for bottler/distributor, 6.19 percent for 

manufacturers, 5.42 for office/healthcare, 5.77 for 

retail, 1.81 for schools, 2.83 for military 

installations, and 5.15 for other which are primarily 

warehouses. 

 Equipment lifetime. In the ANOPR analysis, 

and we’ve had some comment on this already this 

morning, we used an average age of 14 years, dependent 

on a literature survey and some industry input. We 

assumed that the equipment would be refurbished every 

three to five years, again we’ve had some comment on 

that this morning, and would undergo two refurbishment 

life cycles in a typical lifetime. 

 I should say about the equipment lifetime 

that that actually winds up being a distribution of 

potential lifetimes, reaching from three years out to 

20 years, and it follows what’s called a Weibull 

distribution which is commonly used for equipment 

failure analysis. 

 The repair costs were also based on the 

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Foster Miller article and averaged $115 per year per 

unit of equipment. Repair costs were assumed to 

increase proportionately with equipment price. 

Maintenance costs basically had two components: a 

routine maintenance cost of $33 a year that includes 

things like simply cleaning regularly and that sort of 

thing, and then a preventive maintenance -- I’m sorry 

and two refurbishment cycles once every four years at 

$930 each. Again that was input from that Foster 

Miller article, I believe. 

 MR. BROOKMAN: Let’s pause there. Bob? 

 MR. McGARRAH: Bob McGarrah. I just wanted 

to comment on the cost of capital analysis. 

 MR. SCOTT: Sure. 

 MR. McGARRAH: If we go back to Page 5 of 

this presentation, we got some very good information 

this morning about what percentage of equipment was 

owned. So I think it’s pretty clear that close to 90 

percent of the equipment is owned by two companies. So 

we could probably just use their discount rate and get 

a lot more credibility into the analysis. 

 MR. BROOKMAN: They supply that discount rate 

in their reporting to NAMA or to EPA or somebody? 

 MR. McGARRAH: I don’t know. 

 MR. BROOKMAN: Okay. Gary? 

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 MR. FERNSTROM: Well, the discount rate is 

used in figuring the economics and it seems to me that 

the energy savings here results in a reduction in the 

customer’s bill who’s not part of that equation 

directly. As was pointed out earlier, they may be 

indirectly. 

 So I’m not sure whose discount rate we ought 

to be using here. 

 MR. BROOKMAN: And particularly the 

Department would really appreciate your comments on the 

discount rate and what it should be and to whom it 

might benefit or why. So as you look at these two 

slides, 20 plus 21, there’s all kinds of -- we’ve 

already had some good discussion on equipment lifetime. 

We’ve already had some good discussion on repair costs. 

We’ve already had also some discussion on maintenance 

costs. 

 So further comment on those would be helpful. 

I’ll start with Bob. 

 MR. McGARRAH: I just want to comment on the 

discount rates again. It says, “Cost of capital of 

companies that purchase beverage vending machines.” 

That’s basically two companies. So I think we could 

very quickly get a really solid number around that just 

by going to what a large beverage company pays for 

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capital. 

 MR. BROOKMAN: Okay, okay. 

 MR. McGARRAH: It’s going to change your 

analysis. 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: So just to be clear, you’re 

suggesting that that small portion of the market that 

is actually site-owned machines, schools, military, 

others, be omitted from the analysis? 

 MR. McGARRAH: We heard this morning that 

it’s five percent, so that’s your call. 

 MR. BROOKMAN: Steve? 

 MR. COUSINS: As far as I know, the military 

doesn’t own any machines and neither do any of the 

schools. 

 MR. SCOTT: Okay. 

 MR. LLENZA: So it becomes even smaller. 

 MR. BROOKMAN: So that’s Charlie’s comment on 

it. So Nina, thank you, please. 

 MS. TARLEY: Actually, it’s not totally 

correct. It’s not just two companies. Vending 

machines are owned by bottlers. PepsiCo has several 

bottlers. As far as I know, Coca-Cola has several 

bottlers and they’re the ones who owns equipment. So 

it’s more than just two. We’re talking at least half a 

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dozen, maybe more, large entities that own 90 percent 

of vending equipment. 

 MR. BROOKMAN: So, Mike, the third bullet 

where you reference the weighted average discount rate, 

the values, this is some representation of what these 

different groupings, cost of capital and all that, 

interest rates they pay and -- 

 MR. SCOTT: Yes, that’s correct. 

 MR. BROOKMAN: Okay. So comments on those 

figures, in addition to what we’ve heard already? Bob? 

 MR. McGARRAH: Very much to Nina’s point. 

Their list is right here. Bottlers and distributors, 

and that’s probably the number that we should be using. 

 MR. BROOKMAN: Okay. You like the break-out 

categories? It’s sensible to you? 

 MR. McGARRAH: Based on Slide Number 4, 

that’s 90 percent. 

 MR. BROOKMAN: Okay. 

 MR. McGARRAH: So it would be reasonable for 

analysis purposes. 

 MR. BROOKMAN: Okay. How about equipment 

lifetime repair costs and maintenance costs? Steve? 

 MR. COUSINS: Without giving specific 

numbers, generally speaking, maintenance costs are 

really on the order of $90 a year. Our remanufacturing 

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costs are significantly less than what’s assumed or 

stated here. Generally speaking, a remanufacturing 

cycle is somewhere around $5 to $600. 

 MR. SCOTT: In case -- Steve, in case it 

comes up, is there a difference in -- between a 

remanufacturing cost and a -- I think you called it an 

energy upgrade or one of these kit changes? 

 MR. COUSINS: Yeah. There is a difference 

there. I could not comment on the cost of an energy 

upgrade. 

 MR. SCOTT: Okay. 

 MR. COUSINS: That’s just not information I 

have at the tip of my tongue right now. 

 MR. SCOTT: Is it something you could put in 

the written comments? 

 MR. COUSINS: Yeah. I could provide some 

general numbers around that. 

 MR. SCOTT: Okay. Can others also do that? 

 MS. TARLEY: Nina Tarley. Yes. 

 MR. SCOTT: Okay. Thank you. 

 MR. BROOKMAN: So we heard earlier comments 

on equipment lifetime. Other comments on lifetime 

repair costs and maintenance costs? Bob? 

 MR. McGARRAH: Bob McGarrah. I believe the 

EPA EnergyStar Program has some costs on what an energy 

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upgrade would cost, so you could probably draw that 

right from the EnergyStar Program and again get a real 

accurate, real world number as opposed to, you know, 

trying to calculate it backwards from some other 

source. 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: Would EPA care to comment on 

that? Do you have such information? 

 MR. BROOKMAN: Rachel? 

 MS. SCHMELTZ: This is Rachel Schmeltz. I 

don’t think we have that information on cost to share. 

 MR. BROOKMAN: Bob? 

 MR. McGARRAH: Rachel, do we have the -- Bob 

McGarrah. Rachel, do we have the numbers on the kit 

costs? I thought that was part of the information that 

we had to provide. You just provide the kit numbers 

and then they have to order from the manufacturer. 

 MS. SCHMELTZ: Right. We just provide what 

the kit is. 

 MR. McGARRAH: So the manufacturer can 

provide that. 

 MS. SCHMELTZ: Yes. 

 MR. BROOKMAN: Thank you. I see Trent. 

Please. 

 MR. ROTH: This is Trent. We could provide 

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an estimated kit cost, but the kit costs are going to 

vary depending on the age of the equipment and what 

we’re trying to achieve. The piece that we don’t have 

is -- I couldn’t estimate. We do estimate length of 

time. We do provide to how long we think an 

installation may take and it will also vary by piece of 

equipment, but the true cost of it, I’d have to go back 

to Nina and Steve later on for them to say, okay, what 

are the installation costs, field installation costs? 

You’re going to have field installation costs and 

refurbishment installation costs. They are going to 

vary, whether you’re going out to that machine or 

whether it’s coming through a regular process. 

 So I don’t know if we have that today. We’re 

working on all these kits. We can give some estimates 

probably and report back. 

 MR. BROOKMAN: That would be very helpful. 

 MR. ROTH: It would be ballpark. It would 

definitely be. Just a comment on that piece. I think 

it’s already been made. It’s about one refurbishment 

cycle today and I think if it’s about $500, chances are 

it’s going to get scrapped. So it’s typically lower 

than that. 

 MR. BROOKMAN: That’s useful. Thank you. 

Harvey Sachs. 

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 MR. SACHS: Harvey Sachs. Just a request for 

a bit of clarification on Slide 21. I’m not quite 

reading under Bullet 3 exactly how the preventive 

maintenance costs derives at a $165 from the bullet 

below and it may be that it’s just a matter that you 

want to put out a revised version with the updated 

costs we’ve gotten from the manufacturers. 

 MR. SCOTT: I think the answer to your 

question is, yeah, we do something revised obviously. 

But to the point of the 165, it’s 33 every year 

basically, plus an annualized equivalent of 930 twice, 

once at four years and once at eight years. 

 MR. SACHS: Okay. Thank you very much. 

 MR. BROOKMAN: Okay. Let’s move on. 

 MR. SCOTT: Okay. Couple of examples of the 

kind of analysis that we’ve done with all of this data 

and the kind of output we provide. 

 The slide you see on the screen right now, 

Slide 22, shows a cumulative life-cycle savings and 

this would be for a particular piece of equipment, say 

a large indoor or outdoor Type B machine, under various 

circumstances in the U.S. We do a thousand runs of the 

model in uncertainty analysis using Crystal Ball®

which is an add-on to the Excel programs and what we 

get here in this particular case for the set of 

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assumptions was that we have a mean value but we also 

show the scatter and it’s considerable, largely because 

of differences in energy prices but also because of 

differences in energy costs or energy use, differences 

in installation costs and so on. So you do get the 

sense of how variable that is across the country. 

 The next slide, Slide 23, shows an average 

for several levels and we have the -- beginning with 

Level 1, the EnergyStar, as we’ve described it, as Tier 

1. Level 2, Level 3, 4, 5, 6, and 7, and on out to 8 

which is our max tech in every case, and as you can 

see, the life-cycle costs for this particular piece of 

equipment, this particular equipment class, tend to 

fall for awhile, levels out, and then max tech for some 

reason having to do with the first cost, I expect, 

increases considerably, but this is a weighted average 

across the country. So what it does is it takes all 

that variability into account and then this is the 

averages for each of the levels. 

 Payback Analysis. We have a similar type of 

analysis with a cumulative probability distribution 

that again takes into account the variability across 

the country. For the particular piece or the 

particular equipment class shown here, the payback 

period average across the country is 1.7 years, goes 

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from as little as, it looks like, about 0.6 to as much 

as about 3.5 years. 

 MR. BROOKMAN: We have a couple of questions 

here. 

 MR. SCOTT: Yeah. 

 MR. BROOKMAN: Actually Harvey’s first, 

Steve. 

 MR. SACHS: Harvey Sachs. Moving back to 

Figure 23, U.S. National Average LCC Analysis Results. 

 MR. SCOTT: Yes. 

 MR. SACHS: We see a very broad trough from, 

say, Level 3 with an imputed life-cycle cost of $60.36, 

up to through Level 7 at $60.31. I don’t think those 

two numbers are analytically different from each other. 

 MR. SCOTT: The changes are really typically 

small between them. Yeah. 

 MR. SACHS: And one of the things we haven’t 

been hearing from the Department in the context of the 

requirements of the law for the maximum level that’s 

economically -- technologically feasible and 

economically justified is, I’m not even sure that the 

max tech at $72.28 is a meaningfully different number 

from the $60.31 at Level 7 and as we have in earlier 

proceedings, we would certainly want the benefit of the 

Department’s wisdom on whether, for example, the least 

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cost at $59.75 for Level 4 is really a different number 

from the Level 7 at $60.31 or the $60.36 for Level 3. 

I mean, it doesn’t seem to reflect any kind of reality 

given the uncertainties in the underlying information 

that went into the analysis. 

 MR. BROOKMAN: Okay. Thank you. Steve? 

 MR. COUSINS: I’m sorry, Harvey. I guess I 

didn’t completely understand the discussion or the 

argument that you were presenting there. 

 My thought was this. I know that there’s a 

in our full-service vending operation, the margins are 

pretty thin and the difference between a profitable 

machine and an unprofitable machine is very small. Our 

maintenance costs are somewhere around $90 a year now. 

If it were a $110, we would be pulling more machines 

out of the marketplace. 

 So what I didn’t understand when you said 

there’s not a substantially -- any substantial 

difference between the 6,000 and the 7,000 number, I 

didn’t follow exactly the basis for what you were 

saying. 

 MR. SACHS: Thank you, Steve. This is Harvey 

Sachs again, and let’s just leave out the Level 8 max 

tech and look at the various numbers between Level 3 

EnergyStar Tier 2 and Level 7 and I’m suggesting that 

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there’s a $5 estimate of the life-cycle cost difference 

which includes a fair amount of uncertainty about 

exactly how long these things are going to last and 

what the energy costs really will be in the outyears. 

 At a given point in time, as your maintenance 

costs are revealed to you, you can make decisions and 

I’m just not at all sure that these numbers have any 

kind of meaningful difference among them when the 

difference is $5 over 15 years. $5 is less than a 

tenth of a percent of the life-cycle cost. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Just to go back to Slide 24, 

I just wanted to say as a long-time stakeholder now 

that in -- I’m sure the Technical Support Document, 

that for awhile, it was -- the Department was just 

showing the mean data, the mean value in these 

cumulative probability charts and you’re showing the 

median now. I appreciate that from a stakeholder 

viewpoint. I think it really gives -- because there 

can be so much scatter data with a lot of this 

information, that gives you kind of a clearer picture 

of what’s going on, and I really appreciate the 

Department doing this. Thanks. 

 MR. BROOKMAN: Thank you. Bob? 

 MR. McGARRAH: Bob McGarrah. Steve gave us a 

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number of $90 a year versus a $165 and a refurb cost of 

$500-600 versus $930. It would seem to me that just on 

a percentage basis that would drive that model 

significantly. 

 To the earlier gentleman’s point of $5, this 

looks like it could drive it maybe $35. So that could 

have a significant difference, you know, as we readjust 

these. 

 MR. SCOTT: That’s why it’s important to get 

the best data we can. 

 MR. SACHS: Exactly. 

 MR. SCOTT: Because we’re kind of on a knife 

edge here. 

 MR. SACHS: Exactly. Thank you. 

 MR. BROOKMAN: Okay. So any other comments 

on these slides? We’re now on 25, I believe. 

 MR. SCOTT: Okay. And similar slide to the 

one you saw earlier, this one just happens to be for 

Payback and I assume most of the same comments would 

apply to it as to the previous slide. 

 Questions? No? Okay. We also show, besides 

in chart form, we will be showing the analysis in terms 

of set-ups where we’ve got all of the equipment 

compared to each other as well as by efficiency level 

and also both life-cycle costs and life-cycle cost 

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savings. 

 We also will show the -- this is of interest 

to some parties, at least, the percentage of units 

owned that would show a positive life-cycle cost 

savings. Similarly, for payback period, the percent of 

units with a payback period of less than three years. 

That may not be the period that you would all prefer 

but that’s the one we’re using at the moment, so maybe 

we should have some comment on that. 

 Finally, we’ve done a couple of life-cycle 

cost sensitivity analyses. We performed an LCC, and 

this is somewhat addressing Harvey’s point earlier. We 

did use the high-growth and low-growth fuel escalation 

rate scenarios, at least, in the ANOPR. The choice of 

fuel escalation rate did impact the life-cycle cost of 

all of the equipment classes and it did have some -- 

make some marginal changes in what the minimum lifecycle cost efficiency level was -- sorry -- did not. 

 There was a small change on the payback 

period when we used a different price level. 

 Finally, we did take a look at the question 

of split incentives. We were talking about that 

earlier this morning where the bottler/vendor may or 

may not pay some of the energy costs, depending on 

whether -- what kind of agreement they had with the 

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customer at the site where the BVM is located and who 

do pay the electricity prices. 

 We have assumed for purposes of the ANOPR 

that the energy cost savings are transferred to the 

owner/operator through the coin box revenue allocation 

agreement and in effect the operator of the machine or 

the owner of the machine sees the effect of the energy 

savings, if any, back through the cash box revenue and 

so it’s as if the owner of the machine actually also 

paid the electricity cost. 

 We felt that that was in the spirit of what 

was trying to be accomplished with the proposed 

regulation. 

 We did do a sensitivity analysis of the 

energy cost savings. Rather than having it all accrue 

to the owner of the machine, we also did a 50/50 split 

and no surprise, the life-cycle cost savings to the 

owner/operator go way down. They drop in this 

particular case on the screen, on Page 30, from a mean 

of $382 life-cycle cost savings to a mean of $133 lifecycle cost savings. So it is -- that split incentive 

is quite important. 

 The problem is that we don’t know exactly how 

the savings actually are allocated and so it’s very 

difficult to address what the actual impacts are out in 

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the real world. 

 MR. BROOKMAN: Bob? 

 MR. McGARRAH: Bob McGarrah. With deference 

to my good friend Steve Cousins, I don’t believe that 

the bottler or the operator or the owner of the 

equipment is going to see any real measurable benefit 

from the cost savings that are generated by more 

efficient equipment. It becomes caught up in the 

negotiations for the commissions and getting the site 

and that type thing. 

 I would find that to be a real challenge to 

even put a thought around that in talking to an awful 

lot of customers. 

 MR. BROOKMAN: How that might be structured? 

 MR. McGARRAH: Yeah. There’s a high 

complexity to that and I’m sure that a very sharp 

operator could negotiate that into his contract and his 

commission rate, but in general, I think it’s 

presumptuous to assume that the savings in energy is 

going to come back to the owner/operator in any 

significant form. 

 MR. BROOKMAN: Okay. Steve? 

 MR. COUSINS: No, I was just agreeing with 

Bob. He’s right on both cases and for two reasons. 

 One is the energy subsidy is prenegotiated 

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and -- 

 MR. BROOKMAN: And energy level, the 

expectation of an energy consumption level? 

 MR. COUSINS: It -- that doesn’t even factor 

into it. 

 MR. BROOKMAN: Really? 

 MR. COUSINS: There are other variables that 

do factor in. The volume of the account, how much 

product, how large the -- how much volume we actually 

put through that account customer is a variable in 

there as well because what they pay for product is 

based on that volume throughput. So consequently, how 

much we would subsidize energy is going to be factored 

into that as well, and contracts vary in length. 

 There could be a three-year contract with a 

large accountant customer, not unusual and yet we 

really don’t know what the cost of energy is going to 

be going forward. So there are assumptions that are 

made. 

 It’s difficult to complicate it, to try to 

put a number around what that split is. I agree with 

Bob. We really couldn’t begin to try to do that. 

 MR. BROOKMAN: So for taxicabs here in D.C., 

energy prices, gas prices are real high. You pay an 

energy surcharge, a gas supplement surcharge. You all 

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don’t have an arrangement like that? 

 MR. COUSINS: No. 

 MR. BROOKMAN: Nothing like that? That 

negotiated three-year agreement stays pretty fixed? 

 MR. COUSINS: Mm-hmm. 

 MR. BROOKMAN: Bob? 

 MR. McGARRAH: Bob McGarrah. Not to jump 

right away to a solution, but if there was a way that 

the energy companies who currently subsidize products 

like the USA products could put a subsidy out there to 

the bottler that would put out more efficient machines 

so that if you put a high efficiency machine out, that 

utility would provide some kind of an incentive to the 

bottler to (a) buy the machines and (2) place them, 

same concept with remanufacturing machines that are 

currently on location. 

 If the bottler sees a revenue coming in for 

installing an energy-saving product on an existing 

piece of equipment, they’d be much more inclined to do 

that. Current law says that the utility can only pay 

it to the subscriber to the utility or the person that 

pays the electric bill. That cuts the bottler out of 

any direct opportunity and the indirect opportunity, as 

Steve and I are violently agreeing on, is very 

nebulous. 

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 MR. BROOKMAN: Trent? 

 MR. ROTH: This is Trent. I would agree with 

Bob’s comments about when there needs to be incentives. 

The incentives out there are from energy suppliers that 

could help offset the costs of new innovation, it would 

be greatly appreciated and we would be willing to work 

with people to try to do that. I mean, from the 

manufacturing side, we’ve got a lot of ideas, it’s just 

adding the cost. 

 One thing I would question is the payback 

period. Being that we’ve kind of established that 

through our interpretation of the formulas that really 

we’re looking at the baseline being more Tier 2 than 

Tier 1, I challenge the ability for us to get to the 

higher levels and actually it’s going to cost us more 

than what it probably did in the analysis here to go 

from a Tier 1 level to a Tier 2. That’s why we’re 

already at Tier 2 today. 

 So I would say the payback period may be much 

longer and actually the cost may be greater because we 

are looking at to get to the next levels, you’re 

looking at variable capacity compressors, you’re 

looking at more highly cost items than just ballasts 

and light switches because we’ve already pretty much 

played a lot of those out. 

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 So I think your payback period may be much 

longer, not a 100 percent in the first year, just 

because of where the formula fell into. 

 MR. BROOKMAN: So in your written comments to 

talk about how those -- if those technology 

improvements would impact costs and payback period, to 

be as specific as you can, that would be helpful to the 

Department. Lane? 

 MR. BURTON: When the split incentive exists 

-- 

 MR. BROOKMAN: Louder, Lane. 

 MR. BURTON: Sorry. When the split incentive 

exists and the person paying the energy bill doesn’t 

select the machine, it’s important for the Department 

to put a number on that and how -- when they analyze 

winners and losers, such as they do in the Manufacturer 

Impact Analysis, they should also look at those 

customers who don’t get to make that decision, what 

proportion of the market they are and we’ve talked 

about how in this one they’re a large portion of the 

market, and how they will be affected by a higher or 

lower standard. 

 MR. BROOKMAN: Okay. Thank you. Steve 

Rosenstock. 

 MR. ROSENSTOCK: There was an issue of 

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incentives to bottlers. Yeah. By the way, there are 

many lists. There are national lists of what kind of 

incentives are out there, like desireusa.org is a very 

nice database, I have to say. 

 Yeah. It’s just really -- I don’t know where 

all the bottlers are located, but for -- it’s just not 

-- from a regulatory basis, regulatory commissions 

aren’t going to allow energy companies to provide 

incentives to entities that are out of their service 

territory. It just is not going to happen. 

 MR. BROOKMAN: Thank you. Okay. Yes, Tom 

Eckman. 

 MR. ECKMAN: Oh, yes, they will. It depends 

on where the benefits flow back to the utility. 

 MR. ROSENSTOCK: I’m sorry? 

 MR. ECKMAN: Oh, yes, they will. If the 

benefits flow back to the utility, they will allow it. 

It’s just whether the benefits flow back to the 

utility. 

 MR. ROSENSTOCK: I’m not aware -- Steve 

Rosenstock, EEI. 

 MR. ECKMAN: How do we do the golden carrot? 

 MR. BROOKMAN: It’s another form of -- 

 MR. ROSENSTOCK: Hold on a second, hold on a 

second. Steve Rosenstock, EEI. That is a different 

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type of thing all together. That was a research and 

development type of cooperation where utilities 

voluntarily, again that was voluntarily that they 

joined together with other entities to create a new 

product. 

 I’m talking about a utility incentive program 

which is -- 

 MR. BROOKMAN: You would expect they would 

derive the benefit? 

 MR. ROSENSTOCK: Right. 

 MR. BROOKMAN: That utility. Harvey, go 

ahead. 

 MR. SACHS: This may be the first time in 30 

minutes or so I’ve disagreed with Mr. Rosenstock, but 

in point of fact, as Gary and others here were 

involved, I was involved with the Golden Carrot. That 

was a per refrigerator incentive paid for products 

delivered. It was paid to Whirlpool in Michigan by 

utilities distributed as far as California and New 

England. It was a direct incentive for a piece of 

equipment paid to an entity outside of the service 

territory. 

 MR. BROOKMAN: Go ahead, Gary. 

 MR. FERNSTROM: I’d like to agree with Steve 

Rosenstock. The state utility commissions are really 

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only wanting utilities to pay for the benefits that 

accrue to customers those utilities serve. If it turns 

out that, you know, you can do something that has a 

national impact, that’s wonderful and that’s not 

prohibited. However, the evaluation credits the 

utility with the benefits that accrue to its customers. 

 MR. BROOKMAN: Steve’s talking about a rule 

of thumb, so to speak. 

 MR. FERNSTROM: Yes. 

 MR. BROOKMAN: Yes. Okay. Great. So then 

we’ve gone through several slides and lots of data. 

Maybe there’s some additional comments on split 

incentives. I think we’ve covered that somewhat, and 

this whole section, Life-Cycle Cost and Payback Period 

Analyses, final comments on those, on all of this 

information. 

 (No response.) 

 MR. BROOKMAN: Okay. So I’m going to suggest 

we take lunch now and before we go to lunch, I want to 

thank you all. This was a very, very constructive 

comment period here. We got a lot of good information 

for the Department. 

 As I said, the DOE cafeteria has closed for 

renovation. There is a small cafeteria one floor below 

us where some of you went for coffee in the morning 

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coffee break. That, I suspect, will be very crowded. 

 (Whereupon, at 12:17 p.m., the meeting was 

recessed for lunch, to reconvene this same day at 1:30 

p.m.) 

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A F T E R N O O N S E S S I O N 

 (1:30 p.m.) 

 MR. BROOKMAN: Okay. Let’s do begin, folks. 

 Okay. So we are picking up where we left off just 

prior to lunch, and let me note again that at the end 

of the day today, there’s an opportunity for any of you 

to raise any additional issues or comments that you 

wish to do, wish to say for the record, and that’s 

especially helpful for the Department, if there are, 

for example, issues that you’ve flagged for their 

consideration. 

 So then Mike Scott is still up. Mike, to 

you. 

15 National Impact Analysis

16 

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 MR. SCOTT: I’m back. All right. We’re 

going to be talking about the National Impact Analysis 

and Shipments Analysis, and this is really -- really 

has a couple of purposes. 

 The Shipments Analysis is to estimate the 

refrigerated beverage machine vending equipment 

shipments over time and that’s for the purpose of 

estimating the national energy savings from BVM 

equipment at different efficiency levels and to 

estimate the national economic impact on the nation, 

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net present value of the adoption of that equipment 

standard. 

 The National Impact Analysis process has a 

couple of stages. The first of those is to do an 

analysis of potential shipments. That’s fed by a lifecycle cost analysis results and some other inputs that 

I’ll go into and the shipments model. 

 The Shipments Analysis model -- I’m sorry for 

the busyness of this slide. It really is quite a bit 

of looping that occurs one year to the next, so that’s 

why we have all the circularity in the slides. I’ll 

try to start here on the left-hand side. 

 For the purpose of doing the Shipments 

Analysis in the ANOPR, what we did was we took some 

industry estimates of the shipments, primarily from 

2002 through 2005, which provided us some start-up 

numbers. In those start-up numbers, we did notice the 

decline in shipments that was alluded to this morning 

and we’ll be talking about that in a minute, and then 

we had to allocate those as shipments to new locations 

and shipments that are essentially replacements. 

 For the new shipments going -- shipments to 

new locations going forward, we used the population 

forecast for the U.S. and allowed shipments at new 

locations to grow at the same rate as the population, 

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assuming that what would happen is even if you were 

taking equipment out of the inventory in some places, 

you’d be putting it in, in other places. 

 We also had an initial BVM stock that in 2007 

we thought was 3.7 million units. We heard some 

information today to suggest it’s somewhat smaller and 

we’ll be looking at that information as it comes in. 

 We then had an estimated lifetime of the 

stock that we talked about this morning. What we did 

was we took the initial stock, aged it, allowed some of 

it to fail in each year, kept track of it by vintage, 

that is by individual year classes, going forward, and 

replaced that stock as it went out of the inventory, so 

that you had a more or less continuous stock going 

forward. 

 In addition to that, we had to have some 

allocation of all those shipments by equipment classes 

and we looked at the distribution between the years 

2002 and 2005 to get a sense of what the total 

shipments were by equipment class and size and then 

took -- allocated that going forward as well. 

 So there are a number of inputs to that 

model. The first of those was the distribution of 

sales by equipment class and purchaser based on State 

of the Vending Industry Report of 2006, a couple of 

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industry contacts and a couple of assumptions for 

capacities, and we did talk about that this morning, 

and there will be a point in here where we’ll stop 

talking and we can talk about it any further that you 

want. 

 The initial stock, we know, declined from 

between 2000 and 2006. Again, we, for purposes of the 

ANOPR, we thought it fell from 4.2 million to 

approximately 3.7 million, may be lower than that. 

Sales of new equipment, we assumed -- now when we say 

new equipment, we mean equipment to basically new 

locations, and we didn’t see any of those, based on the 

historical record between 2000 and 2006, at least we 

couldn’t find room for that equipment, but we thought 

that there probably would be some going forward. 

 So we assumed a number of about 50,000 units 

for 2007 and then we grew that at two percent per year 

thereafter, based on population growth. 

 For replacement equipment, we assumed that 

all sales between 2001 and 2006 were essentially for 

replacement and to account for the loss of stock from 

4.2 million to 3.7 million, that translated into a 

replacement number of shipments from about 150,000 

units in 2001 to about 67,000 units in 2006. 

 Our future replacements were based on the 

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existing stock and then on again a viable distribution 

of stock survival with a 14-year average life and a 

replacement of the earliest units at a rate of five 

percent per year. 

 And out of all of that came a set of 

projections, all of which will obviously change now for 

the Notice of Proposed Rulemaking and for the final 

rule, but going forward, we had, for each of the six 

equipment classes, that is Class A units, large, 

medium, small in indoor locations, we allocated the 10 

percent of the market that was believed to be those 

equipment 

that kind of equipment going forward, as you see in the 

slide on Page 7, and then the indoor/outdoor equipment, 

again large, medium and small, representing 90 percent 

of the market going forward. 

 We didn’t have a good breakdown for small, 

medium and large for each of those equipment classes, 

so we simply assumed one-third, one-third, one-third, 

which is why you get that very parallel-looking 

outcome. 

 Okay. I probably ought to stop right there 

and see if there are comments on the Shipments Analysis 

or any additional data that people want to bring to the 

table. 

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 MR. BROOKMAN: Right. And particularly maybe 

you could go back to 6. 

 MR. SCOTT: Sure. 

 MR. BROOKMAN: I want to make sure we hit 

these four classes, Distribution of Sales by Equipment 

Class Purchaser, Initial Stocks, Sales of New 

Equipment, and Sales of Replacement Equipment, and 

while I think we’ve covered some of this in part, other 

comments on what’s here in this slide? 

 Yes, please, Glenn. 

 MR. SELFRIDGE: I don’t know whether this is 

permanent or not, but there has been a major shift in 

the small sales towards the Type A machine. So your 

statement of 90/10 for the existing population is 

correct. Going forward, it may not be. 

 MR. SCOTT: Okay. Any ideas about what the 

trend in that might be from the manufacturers would be 

helpful. 

 MR. SELFRIDGE: All I can tell you is what it 

is now and it’s around 60/40, 50/50, in that range. 

 MR. SCOTT: Okay. 

 MR. COUSINS: And I think right now -- Steve 

Cousins. I think right now, the majority of purchases 

are Type A and I think for the short-term future, they 

will continue to be Type A. The majority, that is. 

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 The comment I was going to make on this slide 

is I think it’s a mistake to expect that there’s going 

to be annual growth in the population of vending 

machines of any -- at any level. So I don’t think 

there’s going to be a two percent a year growth in new. 

 MR. BROOKMAN: You think it’s going to be 

flat? 

 MR. COUSINS: I think it’s going to be flat. 

I think essentially it will be replacement machines but 

no additions beyond replacements. 

 MR. BROOKMAN: I noted that Mike was saying 

that they didn’t -- they had a hard time accounting for 

new locations. So that goes to your point. 

 MR. COUSINS: Yeah. 

 MR. BROOKMAN: Bob? 

 MR. McGARRAH: Bob McGarrah. I agree with 

Steve again. The net new business, which is the total 

number of machines on location increasing, is probably 

going to stay flat and the new machines will be going 

to be replacing machines that are being taken out of 

service and basically junked. 

 And I’d like to get the other folks’ thoughts 

on this one-third, one-third, one-third. If we in fact 

are going to 50/50, toward the Type A machines, they’re 

generally a larger machine. So that would kind of say 

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that the one-third, one-third rule doesn’t apply 

certainly not going forward, and I just wondered if you 

guys could comment on that. 

 MR. BROOKMAN: Glenn? 

 MR. SELFRIDGE: Yeah. I’ll give it a shot 

from my point of view. The small machines were never 

popular, 10 percent. The very large machines, up to 

about 2000, -- 

 MR. BROOKMAN: Glenn, I’m sorry, you’ve got 

to get close. 

 MR. SELFRIDGE: The very large machines, up 

through about 2000, were extremely popular, but the 

last five years, it’s been medium, probably 80 percent. 

 MR. COUSINS: Steve Cousins. Yes, that has 

been the case, Glenn, and that will continue to be the 

trend, that the extremes of small machines and the 

small machines, you just can’t -- the finances just 

don’t work with the small machine. 

 We have difficulty placing the large machines 

and that’s why, you know, predominantly the purchases 

have been about 80 percent medium. 

 MR. BROOKMAN: Thank you. Trent? 

 MR. ROTH: This is Trent. For glass fronts, 

it’s primarily glass fronts, I mean it’s large. I 

mean, we fit the large category. Probably 90 percent 

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or greater of our sales are in the large category in 

glass fronts. That’s primarily where the marketplace 

is today. 

 Moving to the new volume capacity, I mean 

that’s what this is based upon, so it’s primarily 

large, medium, very few small today. So the one-third, 

one-third is not accurate. 

 MR. BROOKMAN: New volume capacity, that is 

the machines are being reconfigured so that -- 

 MR. ROTH: We’re using volume as a 

measurement of capacity rather than can capacity which 

has been the total. The machines are much larger 

refrigerated volume. Underneath that would be very -- 

we’re very high end. I mean, when you look back at the 

old stack versions, I mean yeah, even one-third, onethird, one-third wasn’t correct then. 

 Moving to glass fronts, we’re 90/10 on the 

large side. 

 MR. BROOKMAN: 90/10. Okay. Glenn, close to 

the mike. 

 MR. SELFRIDGE: Just one more industry input. 

He builds the big one and the medium, we build only a 

medium and it’s 100 percent of our business right now. 

 MR. BROOKMAN: Okay. 

 MR. SELFRIDGE: Only Type A machines. 

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 MR. BROOKMAN: Only Type A. 

 MR. SELFRIDGE: Between the two of us, it’s 

probably 50/50. 

 MR. BROOKMAN: That’s interesting. Okay. 

Yes, Bob? 

 MR. McGARRAH: Bob McGarrah again. With 

regard to small, medium and large, that doesn’t reflect 

in any way the energy consumption. I think we need to 

address glass fronts energy consumption versus a large 

machine of the conventional solid door design. That 

becomes a factor as you build in these models, as you 

know. 

 MR. BROOKMAN: Okay. Okay. I assume we 

account for that. 

 MR. SCOTT: One other thing. When we had the 

sales of new equipment, 50,000 a year, for sort of new 

locations, is that a reasonable number? Should it be 

higher? Should it be lower? Since it isn’t going to 

change, I want to get it right. 

 MR. ROTH: This is Trent. You’re saying 

annual sales of 50,000 or growth? 

 MR. SCOTT: Annual sales of new machines -- 

of new equipment to new locations as opposed to 

replacements. 

 MR. ROTH: No, I would disagree. 

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 MR. BROOKMAN: I thought it was zero. 

 MR. SCOTT: Zero is what you say. Okay. 

 MR. BROOKMAN: I’m looking at Steve. 

 MR. COUSINS: New locations, we’re at 

saturation. 

 MR. SCOTT: All right. 

 MR. COUSINS: It’s not going to be new 

locations. 

 MR. BROOKMAN: Okay. And so that 50,000 

number is also zero. 

 MR. COUSINS: If you’re talking new 

locations, it would be zero. 

 MR. BROOKMAN: Okay. Go ahead, Trent. 

 MR. ROTH: This is Trent. One thing to 

comment on. Using populations is probably not a great 

way to -- it’s manufacturing locations, school 

locations. It’s location placements rather than 

population that drives this. 

 So as we lose manufacturing to outside 

companies, it’s a big placement of vending machines 

today. So that’s where those go back into the pool and 

they get redistributed into new locations, but really 

the manufacturing, the downfall of that in schools and 

other places that don’t allow vending machines is 

what’s impacted the placements. It’s not population. 

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 MR. BROOKMAN: Okay. Thank you. 

 MR. SCOTT: That’s very helpful. 

 MR. BROOKMAN: Did you want to -- let’s take 

a peak at 7 and just look at the shipment model results 

and see if people would like to comment on what these 

projections. 

 MR. SCOTT: I think I can tell you, as you’re 

looking at those, that that’s going to -- that’s -- 

those numbers are all going to be much smaller based on 

what I’ve heard here. 

 MR. BROOKMAN: Right. Okay. Okay. So we’ll 

leave that for the next round then of populations. 

 MR. SCOTT: Okay. Now we move on to the 

National Impact Analysis and unfortunately that’s even 

a little bit more complicated, at least as far as the 

slide is concerned. So again, I’ll talk you through 

it. 

 The left-hand side, we’re basically dealing 

with inputs from the LCC model and much of the purpose 

of using that information is for the purpose of taking 

the individual equipment classes, the three sizes of As 

and Bs, and trying to allocate them across efficiency 

levels in a base case that isn’t affected by the 

regulation. 

 So if we have real data on that, that’s what 

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we’d prefer to use. In the absence of real data, which 

is our current situation, what we do is we use an 

economic model to in effect replicate what we think the 

market would ask for, and the way we do that is to say 

you have classes of customers who have different 

sensitivities to first costs and different 

sensitivities to longer-term costs and the annualized 

costs that they see, based on the LCC analysis, is what 

would guide their choice of a more efficient machine 

versus a less efficient machine. So it is an economic 

calculation. 

 It’s pretty complex. It comes from the NEMS 

model, the National Energy Modeling System model, and 

it has six classes of consumers with different levels 

of risk, and it has them allocated across the 

marketplace. 

 What you find in that model, if you look at 

it, is that many of the customer classes are actually 

fairly sensitive to first costs and it’s intended to 

represent the entire marketplace for energy equipment 

in the NEMS model, so it might be that we’d have a 

somewhat different set of risks, particularly for large 

commercial buyers. So that may be worth a couple of 

thoughts. 

 Once we get that initial distribution by 

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efficiency class, then that gets played in with the 

Shipments Analysis, the total number shipped, and each 

of the classes of equipment going forward gets 

allocated to efficiency levels. Okay? So you have 

10,000 units shipped in some particular year, some 

percentage of those are going to be one efficiency 

class, another efficiency class, another efficiency 

class, and so on. 

 Those classes, however, because we didn’t 

have information on how that might change over time, 

are fixed, and I’ll show you that in a minute and we’ll 

have -- I’ll have a question about that. 

 Oh, the other thing is that the existing 

stock of units also gets allocated by efficiency level 

and as the old stock goes out of the system at its 

efficiencies, it’s replaced by new stock at its 

efficiencies, and the new equipment is much more 

efficient than the old equipment, so that happens, and 

it’s kept track of again by vintage. So equipment that 

goes out of the stock in, say, 2015 is replaced in 2015 

by more efficient equipment which in turn is replaced 

over the years by equipment in 2021 or 2027. 

 Clear as mud? Keep in mind that what we’re 

doing basically is taking a stock of equipment that 

exists, trying to figure out what its efficiency mix is 

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and then replacing it over time, in addition to 

possibly adding to it. 

 MR. BROOKMAN: Steve? 

 MR. COUSINS: Steve Cousins. I expect that 

the reality is that any machine shipments in any year 

will all be the same efficiency class. Unlike the 

domestic marketplace where the consumer decides, you 

know, what he’s going to purchase and you’ve got a wide 

range of consumer preferences, that’s not really the 

case here. 

 So for example, the Coca-Cola system, the 

machines that we buy will all essentially be the same 

efficiency class. 

 MR. BROOKMAN: You’ll make a determination 

about the optimal point between price and performance 

-- 

 MR. COUSINS: Right. 

 MR. BROOKMAN: -- and essentially buy all of 

them? 

 MR. COUSINS: Correct. 

 MR. BROOKMAN: All of them, and that will not 

vary -- I’m not going to say -- 

 MR. COUSINS: Well, yeah, you understand what 

I’m saying? 

 MR. BROOKMAN: I do. Okay. Nina? 

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 MS. TARLEY: PepsiCo right now mandates that 

every single machine, vending machine that’s approved 

by us is Tier 2 EnergyStar. So every single machine is 

Tier 2. 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: And is it Tier 2 exactly or Tier 

2 or better? 

 MS. TARLEY: Tier 2 is mandatory. Above and 

beyond depends on the rebates. 

 MR. BROOKMAN: So I want to make sure you get 

a chance to make that point one more time today. Okay. 

So thanks for that comment, Steve and Nina, both. 

 MR. SCOTT: One more follow-up question, if I 

might, from up here. Is there any reason to believe 

that there will be variation across the various classes 

of folks who own machines? 

 I realize the bottlers are a huge part of 

that, but what about distributors? Would they have 

maybe a different price point than you guys would? 

 MS. TARLEY: Is that a question? 

 MR. SCOTT: That is a question. 

 MS. TARLEY: Well, I can only speak for 

PepsiCo obviously, but nobody, none of our bottlers are 

allowed to buy anything that currently does not appear 

in our approved equipment list. 

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 MR. SCOTT: Okay. 

 MS. TARLEY: And everything on the list is 

Tier 2. 

 MR. SCOTT: Okay. Thank you. 

 MR. BROOKMAN: Okay. Yeah. Go ahead, Trent. 

 MR. ROTH: This is Trent. Distributors today 

don’t mandate Tier 2 or EnergyStar. Only if they’ve 

had some state agency or customer demand it, that’s 

when they put it in the marketplace. 

 They’re a small percentage of business but 

generally what follows suit is if we’re building a 

machine for the bottlers who are asking us to meet 

certain energy standards, chances are that machine’s 

going to be what they want because they’re going to 

drive efficiencies to our plant but it’s not always the 

case. 

 So, I mean, today there is pressure to keep 

some of our models out there that we’d like to 

discontinue and we’ll actually probably use this 

legislation to discontinue models. 

 MR. BROOKMAN: You’d like to see everybody 

swept by the same wave. 

 MR. ROTH: Absolutely. Both that and the 

states to align because we’ve got a lot of energy 

pressures from states. We’re looking at this to help 

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us that way. But, I mean, yeah, I think you’re going 

to see -- will some of them be better than others? Do 

we have some machines that go farther beyond Tier 2 

than others? Yes, but they will meet a minimum 

standard of what the bottlers are demanding and that 

tends to be Tier 2. 

 MR. BROOKMAN: Okay. Thank you. That’s 

helpful comments. 

 MR. SCOTT: Very helpful. Let’s see. I 

think I’ll just move on here. 

 MR. BROOKMAN: Yeah. 

 MR. SCOTT: Okay. We’ve actually talked 

about some of these things. We have the shipments, 

annual units shipped. We have total installed costs. 

I think we talked about that. Repair and maintenance, 

we’ve talked about. Annual energy use, we’ve talked 

about. Market shares by efficiency level I just tried 

to talk about. We talked about it enough, I think, to 

get a sense of what’s actually going on. 

 One last thing is the standards, the last 

bullet on the slide, and that is how we treat the 

standards. The standard, what it does is it takes a 

roll-up approach; that is, you take whatever base 

market share is, say it’s Tier 2, and the standard is 

established above that. It rolls everything from below 

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the new standard up to the standard but it doesn’t 

affect anything that’s better than the standard. 

 MR. BROOKMAN: Yes, Nina? 

 MS. TARLEY: I’m sorry. Minor point but I 

want to build on what Trent was saying. We have some 

independent bottlers who buy whatever they want to buy 

rather than what we approve, and distributors, as Trent 

mentioned, and I suspect the majority of them might not 

buy the Tier 2 equipment just because it’s more 

expensive. So I just wanted to make that point. 

 MR. BROOKMAN: Okay. 

 MS. TARLEY: Nina Tarley. 

 MR. BROOKMAN: A small number, though? 

 MS. TARLEY: Yes. 

 MR. BROOKMAN: Yes. 

 MS. TARLEY: A small number. 

 MR. BROOKMAN: A small number. 

 MR. SCOTT: Okay. The next point is the 

efficiency trends, and the point I was making kind of 

at the top of this was that the mix of efficiencies, 

whatever it starts at, in the absence of the rule, the 

way we’ve done this in the ANOPR is to hold the mix of 

efficiency going forward at constant. 

 I’ve heard some discussion this morning that 

some of the equipment might become more efficient over 

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time in the absence of a rule and if there is any 

information out there that can be brought to bear on 

how that efficiency mix might change over time in the 

absence of a rule, we’d like to see that because it 

would help with the analysis. 

 The energy price escalations, we talked about 

that this morning. It’s annual energy -- 

 MR. BROOKMAN: Let’s pause for a moment. 

 MR. SCOTT: Sorry. 

 MR. BROOKMAN: Yeah. Go ahead. 

 MR. ROTH: This is Trent. 

 MR. BROOKMAN: Trent. 

 MR. ROTH: When we’re looking at this rule, I 

may need clarification. When this rule is put into 

place, do we see this rule changing every few years to 

increase to a new level? Maybe I’m wrong. 

 If we establish it today at baseline, what I 

see is the EPA has the EnergyStar Program. EnergyStar 

is a voluntary program which today in our industry it’s 

a mandatory thing we do. I mean, it’s something that 

is standard, unlike a consumer product where it’s 

voluntary, it’s really not voluntary in our industry. 

 So I see a baseline coming out here for DOE 

having minimum standards, can’t make anything that uses 

this much energy or more, but then I expect the EPA is 

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going to come in behind and say, okay, for those 

machines higher than that, to achieve -- correct me if 

I’m wrong, but they’re going to have another threshold 

that’s going to be above the threshold that you 

currently have today, hopefully not too high because it 

is again something that we almost mandate like 

legislation. 

 We see that driving us to the next standard 

or driving us higher and testing our ability to try to 

get to more energy efficiency. I don’t think the DOE 

in this legislation is going to be that driver. I 

think it’s going to be really EnergyStar pushing us to 

that next level, and I’m not going to say that this 

rule is not going to come out and in five years you’re 

going to say we need to be Level 1 or three years from 

now you need to be Level 2 and there’s a long plan. 

That’s okay and then that will drive it as well, but 

that wasn’t my understanding of how this ruling was. 

 MR. BROOKMAN: I’m not the only one that -- I 

may be the only one that doesn’t know this, but why is 

it that the industry has taken this voluntary program 

and accepted it de facto as being all mandatory or 

almost mandatory? Maybe we’ll hear from Trent first 

and then I’ll come back to you since he started this. 

 MR. ROTH: It’s the major bottlers. I mean, 

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they’re very concerned publicly about being energy 

efficient. 

 I mean, there isn’t many products out there 

today where you’ve got billboards on there with such 

large companies as Coke and Pepsi. I mean, it is very 

important to them and they’ve taken corporate stances 

outside of vending that they’re going to be very good, 

you know, stewards of the industry. 

 So, I mean, that’s why when you get a program 

that’s EnergyStar, you need to mean it. I mean that’s 

-- they’re going to help drive that. 

 MR. BROOKMAN: Okay. Steve, pardon me, 

you’re next. 

 MR. COUSINS: Yeah. I was just going to say 

that because of the very nature of our business, 

placing vending machines in very public places and 

government buildings and schools and so forth that are 

very sensitive to the Federal Energy Management Program 

and some of the Executive Orders and they very much 

want to have EnergyStar commodities, energy-consuming 

commodities in their locations, they drive us to place 

only EnergyStar machines and then when you have very 

sensitive customers, like Walmart and McDonald’s and 

others, who are stating publicly that they are going to 

only want the most energy efficient commodities in 

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their locations and stores and so forth, we’re in a 

situation where our customer base is forcing us to only 

place EnergyStar equipment. 

 So in essence, it’s not really so much 

voluntary as really if we intend to stay in the vending 

business, then EnergyStar becomes a mandatory pillar. 

 MR. BROOKMAN: It’s part of your customers’ 

expectations. 

 MR. COUSINS: Right. 

 MR. BROOKMAN: Okay. And it’s one of your 

selling principles. Gary? 

 MR. SELFRIDGE: So Doug, this is Gary. I’d 

just like to make the observation that what we’re 

talking about here is so commendable, I wish it could 

occur across a lot more products and industries. 

 MR. BROOKMAN: We just need to push for these 

companies to get more market share, right? I just 

thought I’d offer that as one of the ways -- go ahead, 

Steve. 

 MR. FERNSTROM: You would be drinking a 

Pepsi. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Just to let you know, once 

DOE sets a standard, by federal law, they’re supposed 

to re-examine the standard once every five years to see 

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if it should be updated or improved. That’s just -- 

once any product has a standard, DOE is supposed to reexamine every five years or so. 

 MR. BROOKMAN: Okay. So thanks for those 

comments. Charlie? 

 MR. LLENZA: And it doesn’t stop at another 

EnergyStar tier increase. 

 MR. BROOKMAN: Yeah. Steve? 

 MR. COUSINS: I know this is not the forum to 

make this statement. Steve Cousins here. If we aren’t 

collectively careful about how we go about doing 

things, particularly with EnergyStar, we may kill the 

vending business. I mean, if -- we’re already at a 

point, in my opinion, where we’ve pushed efficiencies 

for vending machines to the extent where if we push it 

further, it no longer becomes cost effective to 

purchase and place a vending machine. 

 So if -- we’re in a situation, just as Pepsi 

is, where we have to buy and place EnergyStar 

equipment. If the equipment -- if we cannot find costeffective ways of becoming more efficient, then 

essentially we kill off the vending business. 

 MR. BROOKMAN: Thank you. Please. Your name 

and organizational affiliation. 

 MS. DUFF: Rebecca Duff with ICF. I work on 

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the EnergyStar Program, so I figured this is probably a 

good time for me to -- 

 MR. BROOKMAN: On behalf of EPA? 

 MS. DUFF: On behalf of EPA, yes. 

 MR. BROOKMAN: Thank you. 

 MS. DUFF: I wanted to say one thing, clarify 

one thing, is that, you know, just because the -- if 

the minimum standards were to go to a Tier 2 level or 

higher, that doesn’t necessarily mean that EPA will 

have an EnergyStar Program at that point. 

 You know, we go through the same process of 

talking to folks in industry and determining if it’s 

cost effective or not and there have been actual 

product categories where we’ve left the marketplace. 

For example, traffic signals and transformers, we 

actually decided to sunset the program because we see 

that the market is transformed. 

 So actually, -- so to speak. So actually, 

you know, I just want to put that out there, that I 

don’t want people to be afraid that, you know, if we 

push the limit a little bit on the regulatory side, 

that we’ll actually come in and automatically introduce 

a more stringent EnergyStar standard. 

 I think it depends on the marketplace and the 

products and the available technology. 

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 MR. BROOKMAN: Thanks for that input. That’s 

helpful. Okay. So -- yes, did you have an additional 

comment, Nina? 

 MS. TARLEY: I just wanted to say -- Nina 

Tarley -- that I definitely agree with my friend, the 

competition, that we have to be careful about that. We 

already picked all the low-hanging fruit and the 

further we go, it’s more difficult to get, to make it 

both energy efficient and cost effective, 

 MR. BROOKMAN: Okay. Good. 

 MR. SCOTT: Okay. We’re up to Page 10 in the 

National Impact Analysis now, continuing the inputs. 

I’ll just power through most of this. 

 We’ve looked at the future trends and average 

equipment efficiency improvement, not forecast. We’re 

not talking about forecast but we’ve talked about that 

a little bit here. 

 The energy price escalations, again we used 

the 2007 Annual Energy Outlook. The electricity 

website. One thing we do need to do to show the annual 

energy savings is show the energy savings on a Btu 

basis at the national level and there’s a conversion 

and distribution process of energy from sort of the 

burner tip at the coal plant or the nuclear reactor or 

the solar panel going out to the ultimate consumer and 

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so when we have energy savings at the consumer level, 

there’s actually a multiplier on that for national 

energy savings, the energy you didn’t have to consume 

in order to make that electricity, and the site to 

source conversion factor takes care of that. That 

comes from also the Annual Energy Outlook. 

 Then finally, we’re obligated by terms of 

OMB’s Regulatory Analysis Guideline A-4 to use as our 

discount rate for National Impact Analysis seven 

percent and three percent real, that is adjusted for 

inflation, going forward. 

 Future expenses are all discounted in the 

ANOPR to 2007. The National Present Value Analysis 

accounts for all equipment that has been shipped by the 

end of the regulatory period from 2012 to 2042 and then 

we have to account for any savings that occur after 

that, so it takes awhile for the old equipment to go 

out of the inventory and we account for that. 

 MR. BROOKMAN: So these inputs amount to 

really a series of explanations and assumptions that 

are in place. 

 MR. SCOTT: Correct. 

 MR. BROOKMAN: So that any comments on these 

would be helpful. 

 (No response.) 

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 MR. BROOKMAN: Okay. Moving forward. 

 MR. SCOTT: Okay. We did talk about the base 

case and standards shipments forecasts here, Doug. I 

don’t think there’s anything new on this slide. We’ve 

already had the discussion of how things would be 

shipped in the absence of -- 

 MR. BROOKMAN: You can see the specific 

invitation for comment on the basis of our forecasted 

shipments at the bottom of the page there, the bottom 

of the slide. 

 Any additional comments on that? Harvey 

Sachs. 

 MR. SACHS: With respect to the -- Harvey 

Sachs. With respect to the present slide, Number 11, I 

am hearing that this can be simplified by not worrying 

about market shares by efficiency level for annual 

shipments, at least the cohort will all be, for 

example, at EnergyStar Tier 2, from now through 2012. 

There might be a few better and a few worse, but it’s 

basically a shipment model that’s tightly constrained 

to what both buyers are asking for. 

 MR. SCOTT: I was hearing comments something 

to that effect. 

 MR. SACHS: Thank you. 

 MR. BROOKMAN: Other comments on base case 

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standards case shipments forecasts? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. SCOTT: Okay. Going on to the next slide 

then, the next issue is Issue 6, Differential Impact of 

New Standards on Future Shipments by Equipment Classes, 

and there are two points here. 

 The Shipments Model presumes that the 

relative market shares between equipment classes stays 

constant over time, we’ve talked about that, and then 

DOE is concerned that higher standards set for specific 

classes of equipment, if any, could shift the market to 

use other equipment that may have greater energy 

consumption. 

 So DOE invites comments on the potential for 

a standards-driven market shifts between equipment 

classes, say from indoor/outdoor machines to indooronly machines or from one size to another size, if 

there were different costs associated with different 

kinds of machines. 

 MR. BROOKMAN: So do you anticipate that 

there might be standards-driven market shifts between 

equipment classes? Glenn? Close to the microphone, 

please. 

 MR. SELFRIDGE: As we discussed a little bit 

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earlier, that has already occurred. 

 MR. BROOKMAN: Yeah. 

 MR. SELFRIDGE: Major shift from Class B to 

Class A. 

 MR. BROOKMAN: Yeah. Thank you. Please, 

yes. Trent. 

 MR. ROTH: I agree the shifts occurred and 

it’s been drastic. I do think, though, there’s new 

equipment coming out in a few years that will be 

questionable where it ends up and in which class 

because we are -- what’s driving change in our industry 

today is package, packages, and typically your closed 

front machines, what we call stack machines, vent 20-

ounce bottles and 12-ounce cans. They’re not very good 

at vending anything else. 

 Well, packages have changed a lot in the last 

few years. Just walk in anywhere and packages have 

become the branding. So as this looks at it, we’re 

going to have to look at ways to replace those machines 

that are traditional stack machines with probably 

products similar to what we have today in glass fronts, 

uses multiple shelves rather than serpentine or stacktype, stack a bunch of cans, you have a variety of 

products in there. So that will change and then we’ll 

start to blend and confuse those categories a little 

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bit. 

 I think the capacity is going to be very 

large, large or to the medium, as the competitors have 

as well, but I think the class may all shift to that 

type of scenario rather than the closed fronts, but 

they’re going to be indoor/outdoor machines and today 

you build an indoor/outdoor machine, it’s possibly just 

going to -- it’s classified as that. 

 Well, if you start to think of everything 

behind the door as being very similar in design, those 

machines could go from indoor to outdoor locations 

easily, more easily and that could blur this. 

 I’m giving you a complicated answer, but I do 

see technology changing in the way package design and 

vending machines are changing. 

 MR. BROOKMAN: So can you speculate how that 

will -- will that impact placement? 

 MR. ROTH: I don’t think it will impact 

placement. I mean, I think the placements are again 

driven by manufacturing locations and school locations. 

It’s going to be the type of machine that’s built that 

could go into a more varied -- today, you can’t take a 

glass front, for example, and stick it in a park 

because it will get vandalized, but that glass front, 

the same type of design, could be put anywhere if it 

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was an indoor/outdoor-type machine that had other 

security features. 

 So I’m saying as a class could change the way 

you have applicable places to put them. It’s not 

necessarily that the placements are going to change. 

 MR. BROOKMAN: Glenn, did you want to follow 

on? Close to the microphone. 

 MR. SELFRIDGE: DOE’s approach to this thing 

has been to define the Class A and Class B based on 

fully cooled or not fully cooled and the scenario he’s 

talking about is still a Class A machine but it’s 

driving industry more away from the Class B. 

 MR. BROOKMAN: Thank you for that 

clarification. Bob, and then I’ll come back to you, 

Harvey. 

 MR. McGARRAH: Bob McGarrah. I’d just like 

to make a point. We see the industry morphing as these 

two gentlemen said. They’re the manufacturers. 

They’re morphing around the package size. Remember 

earlier that Tina said that -- Nina, I’m sorry. 

 Nina said one of the reasons the machine 

population is shrinking is because of vandalism and as 

that becomes the tipping point for pulling machines off 

location, they’ll go back to the manufacturers and have 

them make a machine with tempered glass, with a cage or 

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some new innovation. 

 So there’s this constant morphing to address 

marketplace conditions that are limiting the placement 

of machines today. So it’s a very moving target and, 

you know, we’ve been addressing that, some of us, for 

30 or 40 years now. 

 MR. BROOKMAN: Okay. 

 MR. McGARRAH: So we have to factor that in 

and I think the manufacturers are trying to keep the 

rules from being so restrictive that that morphing 

can’t take place. It has to take place, as we’re 

hearing from the Cokes and Pepsis, to make the 

marketplace workable for whatever’s coming down the 

road. 

 MR. BROOKMAN: Okay. Thank you. Harvey 

Sachs. 

 MR. SACHS: Harvey Sachs. I want to thank 

the manufacturers for helping me understand that the 

market shares are dynamic and can continue to shift. 

That’s the squared bullet Number 1, the top one. 

 No one that I have heard has suggested that 

anything in this standards process would contribute to 

that shift, that the shift is being driven by market 

factors, by packaging changes, by vandalism, by a 

number of other things, but relative to those large 

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factors, the differential effect of first cost changes 

due to differences in the energy standard has not been 

mentioned. 

 So I just want to stress that whether Bullet 

1 is correct or not is not informed by Bullet 2. 

 MR. BROOKMAN: Okay. 

 MR. SACHS: Thank you. Perhaps my separation 

is wrong and the manufacturers can help me understand 

that better or their customers. 

 MR. BROOKMAN: Bullet 1 being that the 

relative market shares between equipment classes 

remains constant over time, that as being one of DOE’s 

operating assumptions. 

 MR. SACHS: And that’s been challenged 

broadly. 

 MR. SCOTT: I think we’ll probably change 

that in the next go-around. 

 MR. BROOKMAN: Okay. And the second point 

being the standards-driven market shifts between 

equipment classes are not as likely to happen as 

market-driven or -- wait. It’s clearly subordinated by 

market-driven factors. Okay. Okay. 

 So do you agree with that interpretation? 

Several heads nodding up and down, yes. Okay. Okay. 

Very good. Then let’s move on. 

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 MR. SCOTT: Okay. I’ll just wrap up here 

with a few just quick examples of what the output looks 

like. 

 On Page 13, what we have is the cumulative 

source energy savings, that’s multiplied up energy 

savings, measured on the left-hand axis, and not 

surprisingly, since this is an energy standard, that 

the amount of energy savings increases with each level 

of the standard. 

 On the right-hand side, you see the National 

Present Value of the discounted value of those savings 

compared with the discounted value of the costs of the 

additional equipment and that increases for awhile and 

then it bends over and in this case falls off fairly 

sharply in that last level. 

 So you will get analyses that look something 

like that. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock. Yeah. 

This is over the 30-year period, 2012 to 2042, correct? 

 MR. SCOTT: Yeah. The energy savings shown 

are 2012 through 2042 and the net present values I 

alluded to before because of the carry-over of the last 

equipment is through 2062. 

 MR. ROSENSTOCK: Now, the other question I 

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had was that was kind of two lifetimes basically when 

you say the typical lifetime was 14 years. 

 MR. SCOTT: Right. 

 MR. ROSENSTOCK: If the lifetime should go 

down based on manufacturer/bottler data, will you keep 

that same analytical period because it could be three 

lifetimes in that case? 

 MR. SCOTT: We would have to go through 2042 

because we have to do the 30 years. That last piece 

might shorten up some. 

 MR. BROOKMAN: I think it would be useful to 

add this time frame to this slide before you post it. 

Okay, okay. 

 MR. SCOTT: All right. This is an example of 

net present value results for a single level for a 

single piece of equipment and what you’re seeing there 

-- and this won’t look the same in the future because 

of the assumptions we will now be making about 

increases in the size of the market. 

 What you see there is some net savings on the 

top and below the zero line, you see the costs of the 

equipment necessary to achieve that, and then the 

difference between them goes up for awhile and then 

when you get out past 2042, then you start seeing the 

equipment going out of the inventory and then the 

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savings drop off. So that’s how to read that slide. 

 And then finally, just to tell you what we 

found in the ANOPR analysis, we find that the National 

Energy Savings for the period 2012 through 2042 range 

from .05 quads at Level 2 which is the lowest level 

beyond our baseline to .39 quads at Level 8 which is 

the maximum efficiency level when all the equipment 

classes are summed together. 

 The range of net present value savings over 

the period, actually it’s 2012 through 2062, the seven 

percent discount rate, is anywhere from a loss of 2.1 

billion at Level 8, you recall that that fell over 

pretty sharply toward the end, to 313 million plus at 

Level 5 which is sort of the maximum level. 

 The range of net present value savings at 

three percent is roughly twice that simply because of 

the discounting factor and that is it for Results. 

Let’s see if we’re open for any other issues. 

 MR. BROOKMAN: Comments on the Results page, 

especially Tom Eckman. 

 MR. ECKMAN: Given the change in the market 

share between A and B and the differential mix between 

medium, large and small, I think these are probably 

illustrative but not anywhere close to the numbers 

we’re going to see in the end. 

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 MR. SCOTT: No, absolutely correct. The 

final numbers will probably be quite a bit different. 

 MR. ECKMAN: Yeah. 

 MR. BROOKMAN: Thank you. Harvey Sachs. 

 MR. SACHS: Harvey Sachs. With reference to 

Slide 13 and given the comments about being 

illustrative, do you happen to remember if that was a 

three percent or -- 

 MR. SCOTT: This was a seven percent, I 

believe. 

 MR. SACHS: Thank you. 

 MR. BROOKMAN: So then final comments on 

National Impact Analysis Results before we move on. 

 (No response.) 

 MR. BROOKMAN: Thank you, Mike. Sriram? 

 MR. SOMASUNDARAM: Okay. Now for the real 

story. At the end of all these analyses, at this 

point, I’m going to talk about what we will do after 

this meeting in terms of the Notice of Proposed 

Rulemaking Analyses, revisions to the present ANOPR 

Analyses and so on, but I wanted to take some time to 

present the candidate standard levels that we will 

analyze further in that ANOPR stage and wanted to open 

that up for comments and discussion because that’s the 

crux of the whole analysis here, the results of these 

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analyses. 

 So we’ll get hack to the steps that we will 

be taking in the ANOPR Analyses in subsequent slides, 

but I want to -- so like I said, the revisions to the 

ANOPR Analyses will include changes or updates to all 

the steps that we’ve talked about this morning and this 

afternoon, starting with the Engineering Analysis, the 

Life-Cycle Cost and Payback Period Analyses, as well as 

the National Impact Analyses, following comments from 

you all, and revising any data or updating any of the 

inputs to address those comments. 

 So this Slide Number 4 has the first question 

to the stakeholders in terms of what do you think of 

the candidate standard levels that DOE has selected at 

the end of the ANOPR Analyses? 

 Like we said before, the baseline level is 

the Level 1 that all the impacts, costs and savings, 

are compared to, and there are seven additional 

proposed efficiency levels, Levels 2 through 8, from 

which DOE will select a set of candidate standard 

levels, and they will make that selection for both 

equipment classes, Class A and Class B, on the basis of 

the criteria listed here under the third bullet. 

 Some of the criteria that we have used in the 

past and will use in the present analysis are maximum 

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energy savings, maximum life-cycle cost savings, 

maximum efficiency level that still has positive lifecycle cost savings, and the last one is also referred 

to as the rebuttable presumption payback according to 

the legislation, EPACT, where we look at the highest 

efficiency level with a simple payback period of less 

than three years. 

 So taking into consideration all those 

criteria that I just talked about, this is what we 

found as a result of the ANOPR Analyses, and again as 

you can see on this slide, the maximum efficiency level 

was the max tech level, the Level 8 that we have 

considered. 

 The maximum efficiency level with positive 

life-cycle cost savings are also coincident for both 

equipment classes. They’re both at Level 7. The 

efficiency level with minimum life-cycle cost, as you 

probably noticed from one of the slides that Mike Scott 

presented, was a Level 5 for Class A equipment and 

Level 4 for Class B equipment, and then, finally, the 

highest efficiency level with payback of less than 

three years is Level 6 for Class A and Level 4 for 

Class B. 

 It just so happens that for Class B, the 

efficiency level is the same for both those criteria 

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there, but because our baseline was Level 1 and all 

these are 4 and above, we wanted to fill the gap to 

draw the curve with the selection of additional 

standard levels to get a smooth curve, and those are 

Levels 3 and 5 for Class B and Levels 3 and 4 for Class 

A. 

 I might mention here that, as we have stated 

before, Level 1 is the Tier 1 EnergyStar and Level 3 

for both classes of equipment are Tier 2 EnergyStar. 

So what we’re talking about in terms of 4, 5, 6, 7 and 

8 are all beyond Tier 2 EnergyStar. 

 So that’s Table 3.1 in the ANOPR Notice and 

we now present the corrected or amended Table 3.2. 

What we did here was -- and the two slides that follow 

this are the two curves that were handed out as a 

supplementary hand-out. So we’ll get to that after 

this slide. 

 This one basically shows what DOE has done in 

terms of a preliminary selection of candidate standard 

levels that we will analyze further in the NOPR stage 

and we wanted to present both the intercept and the 

slope of each of these levels and the the X axis in 

this case is the refrigerated volume and the Y axis is 

the daily energy consumption of kilowatt hours per day. 

 And so as you can see, the baseline is Level 

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1 in both cases, both of the equipment classes. So 

what I have in each column is the intercept and the 

slope and within parentheses tells you what level that 

corresponds to. So that’s Tier 1, is the baseline. 

 Candidate Standard Level 1 is Level 3 which 

is Tier 2 in both cases, EnergyStar, and CSL 2 

corresponds to Level 4 in both cases, both equipment 

classes. CSL 3 is Level 5 and so on. So you can see 

the rest of them. 

 So then they were plotted. What we should 

have added on these two graphs is the baseline curve 

and let me add that. 

 MR. BROOKMAN: Those plots are there as an 

attachment to the packets, I believe. If you look at 

the back of the packet, -- 

 MR. SOMASUNDARAM: The back of the packet has 

three slides and that contains the graphs. 

 MR. BROOKMAN: The plots are attached. 

 MR. SOMASUNDARAM: That’s right. 

 MR. BROOKMAN: But the matrix, Slide 6, the 

figures are the same. 

 MR. SOMASUNDARAM: Yeah. The numbers are the 

same. 

 MR. BROOKMAN: Yes. 

 MR. SOMASUNDARAM: We just show that 

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graphically. 

 MR. BROOKMAN: Charlie? 

 MR. LLENZA: Well, I just wanted to make a 

comment. We published in the Federal Register with the 

wrong numbers in the table. So this is the correction 

to that table. 

 MR. SOMASUNDARAM: Table III.2 in the ANOPR 

document. 

 MR. LLENZA: Right. And then we came up with 

additional -- the additional ones. 

 MR. SOMASUNDARAM: Presentation. 

 MR. LLENZA: Right. 

 MR. SOMASUNDARAM: Okay. 

 MR. LLENZA: You have the complete story and 

it will be corrected on the website, also. 

 MR. BROOKMAN: Thank you. 

 MR. FERNSTROM: So Gary Fernstrom. Just to 

be clear about this, the numbers that we have in the 

table on Page 6 of the large docket are correct and the 

ones in the attachment are correct? 

 MR. LLENZA: No, no, no, no. The ones 

published in the Federal Register Notice are incorrect 

and we just -- we had an additional two slides that we 

wanted to present and so what I did is I copied the 

corrected table and just added the slides in case the 

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slides got misplaced. 

 MR. FERNSTROM: Thank you. 

 MR. LLENZA: So the two tables are the same. 

 MR. BROOKMAN: Tom Eckman. 

 MR. ECKMAN: Just going back to the 

characterization of the four categories that you laid 

out in the -- five categories on Page 5 -- 

 MR. BROOKMAN: The candidate standard levels. 

 MR. ECKMAN: The candidate standard levels, 

minimum efficiency level, maximum, blah-blah-blah. 

 MR. SOMASUNDARAM: No, those are criteria for 

selecting. 

 MR. ECKMAN: Yeah. It seems to me that those 

criteria might be satisfied by different levels, given 

some of the changes that we may talk about today, like 

the mark-ups and the share of who buys what. 

 MR. SOMASUNDARAM: That’s right. 

 MR. ECKMAN: So are these the illustrative 

candidate standard levels given that? 

 MR. SOMASUNDARAM: These are the levels that 

are -- 

 MR. ECKMAN: Because these -- 

 MR. SOMASUNDARAM: -- present. 

 MR. ECKMAN: Some may be stable, some may 

not, given -- 

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 MR. SOMASUNDARAM: That’s right. 

 MR. ECKMAN: -- the different economic 

analysis. 

 MR. BROOKMAN: Charlie Llenza. 

 MR. LLENZA: Just want to remind everybody 

that this is the Advance Notice of Proposed Rulemaking 

and what we’re providing is methodology. So the 

numbers, while important, are not final numbers and if 

we have to shift a little bit in terms of candidate 

standard levels when the final numbers start coming in, 

based on all the changes we made today, then that will 

be reflected in the next stage, at the NOPR stage. 

 MR. ECKMAN: Yeah. I was just trying to 

verify that the metric category, minimum life-cycle 

cost, is the overriding. It’s the determination of 

what you pick as opposed to a particular performance 

level. You’re looking for a minimum life-cycle cost 

candidate standard level. 

 MR. LLENZA: Right. 

 MR. ECKMAN: And so it will be some level, 

whatever that is. 

 MR. LLENZA: Right. 

 MR. BROOKMAN: Okay. Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock. But, of 

course, as we’ve seen, that could be different from the 

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minimum life-cycle cost in the trial standard level 

which comes out with the NOPR, just for everybody. So 

these numbers are current for now but they could easily 

change when you see the NOPR. 

 MR. BROOKMAN: As Sriram said, he’s looking 

ahead. Steve? 

 MR. COUSINS: I probably should have made 

this statement in the last segment of discussions that 

we had. Come 2012, the Coca-Cola Company is hoping and 

expecting that what we’ll have in cold drink equipment 

will be different from what is currently commercially 

available because we have a goal and an aspiration that 

we’ve publicly stated several times that we want to 

have completely green equipment in every aspect of 

operation. 

 So we are in the process now of phasing out 

of HFCs and come 2012, we don’t expect to have any 

refrigeration equipment operating based on HFCs as a 

refrigerant. 

 Unfortunately, there’s nothing commercially 

available now that allows us to be able to do that, but 

we’re hoping that by 2012, that will be the case. How 

that factors in, in terms of efficiencies and these 

candidate standard levels, we just don’t know. I’m 

only saying because if we select Level 5 or a Level 7, 

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the technologies that we want to use come 2012 may not 

allow us to be able to hit those kinds of targets. 

 MR. BROOKMAN: So your detailed comments to 

the Department on what you think would be appropriate, 

that’d be helpful. 

 MR. SOMASUNDARAM: I was going to ask you, 

Steve. So are you looking at alternate refrigerants, 

such as carbon dioxide? 

 MR. COUSINS: At this time, we are actively 

focused on CO2 or R-744. 

 MR. BROOKMAN: Okay. That’s helpful. Thank 

you. So other comments? 

 MR. SOMASUNDARAM: Sorry. I was just going 

to say that the two graphs are shown here, 7 and 8. As 

you can see -- for Class A machines, the lines 

basically line up in order. The baseline would be 

above the top-most line there and these are just the 

candidate standard levels shown. So the baseline is 

not shown, but for Class B on Page 8, you see that the 

CSL 2, the green line, actually crosses over several of 

the other lines and that was primarily because of the 

way the design options were ordered for small, medium 

and large machines for the closed front design. 

 So they just -- they can swap around a little 

bit. So between -- so what we actually found was that 

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Level 5 and Level 6, which is very close to Level 5, 

had a different order of the design options. That’s 

why the little cross-over there, but otherwise these 

lines are what are shown in the table as slopes and 

intercepts. 

 MR. FERNSTROM: So Doug, this is Gary. It’s 

a little off the subject, but I’d like to go back and 

ask a question of Coke in terms of their efforts to get 

environmentally friendly refrigerant gases by 2012. 

 That would be if there is a negative energy 

efficiency performance consequence associated with 

those more desirable refrigerant gases, my question 

would be, are you looking at the air quality impact of 

the energy saving loss, so to speak, that would result 

or are you just, you know, looking at your product 

without regard to the air quality impacts if the energy 

that supplies it? 

 MR. BROOKMAN: Steve? 

 MR. COUSINS: Neither to both questions. 

It’s -- we have no intention of putting out sales and 

marketing equipment that’s going to be detrimental or 

deleterious to the environment. That’s why what we’ve 

publicly stated is that we have a goal for energy 

reduction as well as environmental friendliness with 

regard to refrigerant gases. So we’re looking to hit 

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targets in both areas. 

 One thing we recognize right now with CO2, 

which is the best candidate that we’ve identified, is 

that you don’t have efficient -- if you look at the 

Rankine cycle, if you look at vapor compression, 

transcritical cycle for CO2, it is not as efficient 

when you have larger delta Ts. 

 So if you have outdoor machines, for example, 

CO2 at present is less efficient. That’s not to say we 

won’t be able to hit targets. We do expect to hit Tier 

2, but, you know, with regard to higher levels of 

efficiency, it’s just too early to say right now. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

guess that does lead to the question of -- I know it’s 

not shown in the DOE, but just the impact of 

alternative refrigerants on some of these levels. I 

mean, if the market is moving that way, again I don’t 

know what the timing is, but that -- you know, if 

there’s no impact, great, it’s no problem for your 

CSLs, but if there’s impact up or down, I guess there 

is a timing issue since this rule comes out in 2009 and 

takes effect in 2012, as I recall the schedule. 

 So if there’s data out there, I think that 

might be very helpful. 

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 MR. BROOKMAN: Gary, keep going. 

 MR. FERNSTROM: So this is Gary again. I’ve 

got to commend everybody in this industry’s effort to 

address efficiency and climate change. That’s 

wonderful. 

 I just encourage you in terms of looking at 

these two different goals you have, one for efficiency 

and one for greenhouse gas mitigation, that you 

consider the emissions of the power production in your 

thinking. 

 MR. BROOKMAN: Steve? 

 MR. COUSINS: There won’t be a disregard for 

that. What, in all likelihood, will happen is if we 

settle in our R-744 as a direction across the board for 

cold drink equipment and we can’t hit these targets, 

then we’ll just get out of the vending business. 

 MR. BROOKMAN: Bob? 

 MR. McGARRAH: Bob McGarrah. I think, and I 

may be presumptive to assume this, but I think the 

large companies in any industry are looking at the 

carbon footprint and I think the carbon footprint 

really takes into account those issues that we’re 

talking about, the carbon emissions, and it sounds like 

it’s going to become a trade-off. 

 So, you know, while I’m doing this here, I’m 

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doing that there, and p.s., my carbon footprint looks 

extremely good and it becomes a balancing act, and 

again to my earlier point, if we start to get 

restrictive on what we can do to just be better, then 

we’re starting to drive in a certain direction. It may 

not be, you know, the right way to go for the bigger 

picture. 

 MR. BROOKMAN: If you get pinched by too high 

an efficiency target, it might limit your options to 

meet some of the larger -- the other goals. 

 MR. McGARRAH: That’s what I was trying to 

say. Thank you. 

 MR. COUSINS: What we’re looking at doing is 

that we’ve already trimmed back in large measure where 

we are with regard to the cold drink business because 

we can’t hit targets. 

 Now I’m not saying we’re going to be 

irresponsible, but we’re going to be business savvy at 

the same time. For example, open front air curtain 

coolers. We’ve gotten out of that because we can’t hit 

our energy targets, you know, with current technology 

and that’s the direction that we’ll go in, in the 

future. 

 We have environmental goals, but we also want 

to be, you know, business savvy. So if -- we’re not 

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going to, as a business and we’ve made this very clear, 

we’re not going to go out and do things that are going 

to be detrimental to the environment just so that we 

can grow our profit margin. 

 MR. BROOKMAN: Lane, did you have a comment? 

 No. Tom, and then back to Gary. 

 MR. ECKMAN: This is jumping ahead a bit, but 

-- 

 MR. BROOKMAN: Well, then don’t. 

 MR. ECKMAN: Well, it’s on this topic, I 

think. 

 MR. BROOKMAN: It is? Okay. Go ahead. 

 MR. ECKMAN: In the environmental assessment, 

DOE does calculate what CO2 emissions of each of the 

standards levels is going to be. So the trade-off 

ought to be apparent when we get to that point. 

 MR. BROOKMAN: Okay. Thank you. Thank you. 

 Gary, you didn’t look like you were finished. 

 MR. FERNSTROM: Well, thanks. That was very 

clear. 

 MR. BROOKMAN: Okay. Yes, please, Nina. 

 MS. TARLEY: Nina Tarley. A couple of 

numbers. The total carbon footprint of a vending 

machine, 95 percent comes from indirect emission of 

greenhouse gases and five percent from the direct 

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emissions. By direct emissions, I mean the HFCs that 

we have could be in the insulation or in the 

refrigerant. 

 PepsiCo already mandated that all of our new 

vending machines insulation has to be HFC-free, so 

we’re reducing already that part of the footprint. So 

energy consumption is 95 or larger percent of our 

footprint. So obviously a lot of our efforts are 

towards reducing energy consumption because that’s part 

of the larger piece of the pie. 

 MR. BROOKMAN: Thank you for that 

clarification. Thank you. Okay. Other comments on 

this subject? 

 (No response.) 

 MR. BROOKMAN: That was a helpful discussion 

there. Where are we now, Sriram? 

 MR. SOMASUNDARAM: The eighth and the last 

question on the ANOPR Notice is -- actually, it’s 

related to the discussion we just had about selection 

of candidate standard levels as well as what DOE might 

do in its next steps to characterize the final 

standard. 

 It goes back to the correlation that we 

presented before, the Slope B times the refrigerated 

volume plus the intercept K and DOE invites comments on 

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this proposed approach of setting the standard as a 

maximum daily energy consumption metric and as a 

function of the refrigerated volume and what numbers, 

what the coefficient B and K should be for the two 

equipment classes. That’s the question. 

 MR. BROOKMAN: So you can see how the 

department intends to characterize energy consumption. 

Comments on that? Yes, Glenn. Close, please. 

 MR. SELFRIDGE: One only. There has been 

some work, serious work done with CSA on this subject, 

and I believe there’s a member here from Navigant who’s 

been in that process and we ought to at least try to 

align with this proposal before CSA for these numbers, 

at least for 1 and 2. 

 MR. BROOKMAN: And just for the record, CSA 

stands for? 

 MR. SELFRIDGE: Canadian Standards 

Association. 

 MR. BROOKMAN: Thank you. Okay. Thank you. 

So presumably that will get to Navigant in some form. 

Yes? 

 MR. SOMASUNDARAM: Yeah. They’ve been 

attending the meetings. 

 MR. BROOKMAN: Okay. Great. Okay. 

 MR. SOMASUNDARAM: Okay. 

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 MR. BROOKMAN: Wait. We have -- let’s go to 

Trent first. 

 MR. ROTH: We just want to state. I think 

we’re good with the standards. We do need to do a 

little bit more math here because it came up recently, 

especially on the zoned cooling ones, to really 

understand the levels in which we’re proposing, but 

overall, I mean, it seems like it’s the right standard 

that’s there. We just need to do a little bit more 

work. 

 I just want to -- it’s hard for us to come 

here today because really the K factors are recently 

new and all of our equipment, at least for zoned 

cooling, in the past has been tested at 90 degrees and 

knowing the new temperatures here at 75, we haven’t 

done all that testing to understand what that impact is 

because it really didn’t matter to us because we didn’t 

need to test at lower temperatures. We need to drive 

the higher. 

 So we’ve got some work to do a little bit, 

but we’ll respond back in writing. 

 MR. BROOKMAN: Okay. 

 MR. ROTH: But it looks good on the glass 

fronts, Type A. 

 MR. BROOKMAN: Okay. Thank you. I thought I 

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saw some -- Steve Rosenstock, did you -- you’re all 

set? 

 MR. ROSENSTOCK: I’m set now. 

 MR. BROOKMAN: Okay. Thank you for that 

comment. 

6 NOPR Analysis

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 MR. SOMASUNDARAM: Okay. So continuing with 

what I said before about NOPR Analysis, we will be in 

the process of doing the NOPR Analysis. We’ll select 

trial standard levels from which the impacts as well -- 

I mean which includes benefits and burdens are made and 

the proposed standard level is selected. 

 Each trial standard level consists of a set 

of distinct potential minimum efficiency levels 

covering all equipment classes and which may be 

different for different equipment classes, and the NOPR 

Analyses assess the impacts of these trial standard 

levels on the customer, and again, like I said before, 

the trial standard levels will be culled out of the set 

of candidate standard levels that I presented earlier 

and will look at more details of the impacts and some 

of the criteria that will be used for trial standard 

levels are -- we could look at -- DOE could look at 

combinations of candidate standard levels for each 

equipment class and propose a single standard and also 

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the trial standard levels could be based around a 

consistent theme, such as the efficiency level that has 

the lowest life-cycle cost or the simple payback period 

of three years or less. 

 So DOE invites comments on these criteria 

that are used for selecting trial standard levels. 

 If there aren’t any other comments at this 

point, I would ask Aris to mention -- to talk about the 

Manufacturer Impact Analysis which is an integral step 

of the NOPR Analysis. 

 MR. BROOKMAN: Harvey Sachs before we move 

on. 

 MR. SACHS: Harvey Sachs here. I’m still not 

completely clear if there’s an explicit mapping from 

the candidate standard levels to the trial standard 

levels and Steve threw me a hook a few minutes ago and 

got me confused about that. Steve Rosenstock. 

 MR. SOMASUNDARAM: I believe -- 

 MR. BROOKMAN: Will you restate the question, 

please, Harvey? 

 MR. SACHS: We have identified in the 

discussions today a set of candidate standard levels. 

 MR. BROOKMAN: Right. 

 MR. SACHS: These evolve or do these evolve 

to trial standard levels or are trial standard levels 

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totally different? What’s the conceptual relationship, 

if any? Thank you. 

 MR. SOMASUNDARAM: My understanding, and 

having gone through some of these processes in the 

recent past, -- 

 MR. BROOKMAN: From the ANOPR stage to the 

NOPR. 

 MR. SOMASUNDARAM: Yeah. 

 MR. BROOKMAN: Correct. 

 MR. SOMASUNDARAM: I presented six possible 

candidate standard levels, baseline and five additional 

candidate standard levels, on the earlier slide. These 

six levels would lead to a set of trial standard 

levels. They could be two or three or four in number 

and they could be exactly the same as the candidate 

standard levels or slightly different based on the 

revised ANOPR Analyses, as Tom Eckman referred to 

earlier, and we would then look at impacts. We would 

look at all these impact assessments that are listed 

here in terms of the next step of NOPR Analyses as 

those three or four trial standard levels are impacted. 

 MR. SACHS: Thank you. 

 MR. BROOKMAN: Thank you. 

 MR. SOMASUNDARAM: The baseline could be the 

same. 

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 MR. BROOKMAN: Okay. Aris? 

 MR. MARANTAN: Okay. This section is the 

Manufacturer Impact Analysis. I’m going to briefly 

describe what this analysis entails. 

 Basically, the purpose of this analysis is to 

assess the impacts of standards on beverage vending 

machine manufacturers. This analysis identifies also 

subgroups of manufacturers or groups that are out there 

in the industry that may be affected differently. 

 It also examines the impact of cumulative 

regulatory burden and I’ll just explain that real 

briefly. Cumulative regulatory burden is the impacts 

on a manufacturer that take into account overlapping 

regulations. So as an example, if there is a 

manufacturer out there that makes vending machines but 

also makes other products that are regulated at the 

federal level, you know, there’s a larger cumulative 

effect of those impacts and so we want to try and 

capture that, if that does exist. 

 The method that we used to conduct the 

Manufacturer Impact Analysis is basically -- we have 

two different tools available to us. The first one is 

the Government Regulatory Impact Model or the GRIM. 

This is a comprehensive spreadsheet that analyzes the 

cash flow of the industry as a whole, so all the 

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manufacturers that represent this industry. 

 We analyze on an industry level the cash flow 

of several years before the standard, the standard 

itself and then what happens after the standard in 

terms of industry cash flow. 

 Basically that gives you an idea of how much 

of an impact this proposed standard would have on a 

manufacturer’s ability to exist. 

 The second item that we use is the 

Manufacturer Impact Analysis Interviews. We go out as a 

consultant to the Department of Energy to visit each of 

the manufacturers who are willing to participate and 

conduct an interview about their manufacturing process, 

their engineering technologies that they use, and also 

get into how they run the business in terms of what 

decisions are made. 

 One thing that I’d like to point out is that 

these interviews are conducted under a non-disclosure 

agreement, so we set up a non-disclosure agreement. 

The results are aggregated afterwards and nothing that 

can reveal proprietary information is revealed in our 

public documents later on. 

 So in terms of schedule, this is going to be 

happening after the comment period. So one thing is 

that you should be aware of is that we’ll be sending 

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out an invitation to participate in these Manufacturer 

Impact Analysis Interviews pretty shortly. If you wish 

to participate, it will happen after the comment period 

for this ANOPR is completed which is July 16th. 

 I mentioned the outputs. It’s an industry 

net present value, one of the key outputs of this 

analysis. We also track impacts to subgroups and we 

also report on other impacts. 

 One thing that I would like to mention here 

is that, you know, this is the Manufacturer Impact 

Analysis. We go out and interview manufacturers, but 

as we understand in this industry, this industry is 

quite unique in that, you know, we have Coke and Pepsi 

and other purchasers who are very influential in this 

industry and so we’d like to also extend the invitation 

to participate in the Manufacturer Impact Analysis to 

the purchasers as well. 

 This just shows a diagram of the MIA process. 

Phase 1 is when we prepare the industry profile. We 

have a look at the information that’s publicly 

available for manufacturers. We develop an initial 

Government Regulatory Impact Model. That will inform 

the questions that we include in the interview guide 

which we take to the interviews with us. 

 By the way, we send that out ahead of time so 

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manufacturers will have an opportunity to review the 

questions before we actually meet, and then we conduct 

the interview and we do another round of running the 

numbers after the interview is conducted to come up 

with a final MIA NOPR results. 

 So are there any questions about the MIA 

process? 

 (No response.) 

 MR. MARANTAN: Okay. Thank you. 

 MR. SOMASUNDARAM: Okay. The last four steps 

of the ANOPR Analysis are listed here and I’ll just 

briefly explain to you what those entail. 

 First is the Utility Impact Analysis which is 

primarily an impact assessment of the reduction in 

electricity consumption because of the standards 

rulemaking on the utility industry as a whole. In 

other words, -- and looking forward. 

 In other words, this analysis will look at or 

will use the National Energy Modeling System, the NEMS 

model that Mike mentioned earlier, and will do a -- 

perform an assessment of what would -- what might be 

the changes to the utility sector because of the 

reduced consumption foreseen by the promulgation of 

this energy conservation standard. 

 So in terms of the output, these are changes 

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to the electricity sales and price by region of the 

country, changes to the mix of electricity generation 

again in the future and changes to the new capacity 

construction in the utility industry. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

made comments at the earlier stage. 

 You also -- there’s a thing in here about -- 

under the Purpose about reduced peak load demand. 

Well, for indoor machines, I’m sure it can be 

calculated because of the steady state conditions, but 

in terms of outdoor machines with the current test 

procedure, with the test procedure the way it is, I 

mean, I know there’s utility data that might be able to 

help out, but right now under the current test 

procedure, there is really no way to determine the 

impact on peak demand due to the machines and due to 

standards, in my opinion. 

 Thank you. 

 MR. BROOKMAN: Thank you. Tom Eckman. 

 MR. ECKMAN: Will the Utility Impact Analysis 

compute the national cost, the change in new capacity 

from each standard level. 

 MR. SOMASUNDARAM: I don’t believe so. I 

think it only looks at the capacity, the energy 

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capacity of the future plants. 

 MR. ECKMAN: It’s certainly an impact on 

utilities. 

 MR. SOMASUNDARAM: That’s right. 

 MR. ECKMAN: That is, the cost of building 

that capacity or not building that capacity. 

 MR. BROOKMAN: Gary. 

 MR. SOMASUNDARAM: That’s right. But NEMS 

doesn’t provide that. 

 MR. ECKMAN: I would argue that’s still an 

impact, whether NEMS calculates it or not. It seems to 

me it’s a valuable piece of information as to how much 

money. If you’re going to be able to compute the 

change in price, you must have some estimate of what 

the cost is because you can’t compute the change in 

price unless you know how much goes into the rates to 

recover the cost of that new capacity. So somewhere in 

the model there’s some understanding of what that 

capacity has to cost. 

 MR. FERNSTROM: So this is Gary. I’d just 

like to follow up on the previous two comments by 

saying I agree. If we really want to look at the peak 

load impacts here, the test procedure doesn’t really 

give us a very good handle on the peak load energy 

efficiency performance and we’re really not addressing 

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peak load costs adequately either. 

 MR. SOMASUNDARAM: Yeah. I should mention 

that this particular equipment, because it’s -- the 

test metric is energy consumption and is essentially 

considered as a base load in a building, so that 

particular aspect of the bullet doesn’t apply to this 

product. 

 The first bullet is -- 

 MR. ECKMAN: Based on which we build the 

peak. Anything that changes the base changes the peak. 

It’s additive. 

 MR. BROOKMAN: Tom, you’ve got to speak into 

the microphone. Say it again. 

 MR. ECKMAN: Sorry. Base load and peak load 

are additive. There’s a base out there and if it’s not 

out there, the peak is lowered by the amount that the 

base isn’t there. So this contributes to peak if it’s 

running during peak periods of time at all. 

 MR. BROOKMAN: Gary? 

 MR. FERNSTROM: It contributes to peak 

particularly for equipment that’s located out of doors, 

we all know that, but indirectly, it contributes to 

peak for equipment that’s located indoors, even though 

the environment the vending machine is operating in may 

not change, The environment, the building air 

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conditioning system is operating in, has certainly 

changed. 

 So there’s, you know, an indirect impact on 

peak even for equipment located indoors. 

 MR. BROOKMAN: Harvey Sachs. 

 MR. SACHS: I return again to the paragraph 

cited earlier -- Harvey Sachs -- on 34,100, and as a 

rough order, a commercial customer will face almost as 

much cost for demand as for energy, and I think that’s 

pretty fair for a lot of utilities today, Steven. 

Okay. But if it’s the same or half, it is a 

significant number in terms of the economics of 

ownership in terms of the effective energy price. 

 The reason I return to the cited paragraph is 

that a prescriptive element that gave credit in these 

calculations for the ability for a utility to control, 

for example, 10 minute per hour cut-out which is common 

for commercial and residential equipment under utility 

demand management programs, would have value to the 

country in terms of utility impact and by taking the 

narrow perspective of either energy units or 

prescriptive requirements, the Department does not 

allow itself to harvest benefits that are readily 

available at very low cost. 

 MR. BROOKMAN: Thank you. Steve Rosenstock, 

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follow on. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

don’t want to get into a utility rates 101. For 

commercial customers, demand charges from the data that 

I’ve seen and the information I’ve received, 30 to 40 

percent of the bill can be demand charges. However, in 

the summer time, they’re usually higher because there 

are many utilities that have summer peak demand charges 

that are higher, much higher than winter peak demand 

charges, if they have any winter peak demand charges. 

 So there can be that, but again that would 

have to be changed for some of your economic analysis 

as well because of peak demand charges, if you separate 

them out, then you have a lower kilowatt hour charge 

when you join the actual economic analysis. 

 Thank you. 

 MR. BROOKMAN: Okay. Final comments in this 

stream? 

 (No response.) 

 MR. SOMASUNDARAM: Okay. The next step is 

the Employment Impact Analysis. The changes to the -- 

the direct employment impacts are actually developed in 

the Manufacturer Impact Analysis that Aris described 

earlier, but in this step, we will be using a tool 

called ImSET for Impact of Sector Energy Technologies 

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which will assess the indirect employment impacts 

because of -- as a consequence of new energy 

conservation standards, there could be a national 

impact on changes in employment structure in other 

sectors of the industry. 

 So this particular step assesses what those 

indirect impacts might be on employment, and the final 

step of the ANOPR Analysis is the environmental 

assessment that was alluded to earlier by several 

individuals where DOE is required to report on the 

estimate of national emission reductions of sulfur 

dioxide, oxides of nitrogen, carbon dioxide as well as 

mercury due to the implementation of these new 

conservation standards. 

 And this is directly done as a result of 

reductions in power plant emissions because of the 

reduced electricity consumption. So it goes back to 

the Utility Impact Analysis and assesses how the power 

plant emissions might be affected because of the new 

standards. 

 MR. BROOKMAN: Harvey Sachs. 

 MR. SACHS: Harvey Sachs. With respect to 

Employment Impact Analysis and the Environmental 

Assessment, and recognizing that this could come back 

to bite me, this is a relatively small energy consumer 

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and at some point, it’s, I think, a value to this 

process to give an estimate of whether or not the 

Employment Impact Analysis of indirect job effects and 

things like that is actually considered to be 

significant. It may be calculatable but not 

measurable, and this will also be true in some of the 

other areas. 

 MR. BROOKMAN: Okay. Other comments related 

to Environmental Assessment? 

 (No response.) 

 MR. BROOKMAN: We heard other comments 

earlier today, of course. Okay. 

 MR. SOMASUNDARAM: Finally, Regulatory Impact 

Analysis looks at what some of the -- what some nonregulatory alternatives to this regulation might have. 

That is, what is the impact of non-regulatory 

alternatives to this regulatory rulemaking on the 

market? 

 Some of the non-regulatory alternatives we’ve 

looked at in the past and we would look at for this 

particular product as well are customer tax credits, 

manufacturer tax credits and utility rebates as was 

mentioned earlier or customer rebates towards the 

purchase of this equipment, and as well as bulk 

government procurement. 

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 As you all know, there is already a nonregulatory alternative out there for this particular 

product in terms of the EnergyStar Program and we would 

also look at how that might be impacted because of 

setting this new standard for beverage vending 

machines, and we would report on all this in the Notice 

of Proposed Rulemaking as well as a Technical Support 

Document that will accompany the Notice. 

 MR. BROOKMAN: Additional comments? 

 (No response.) 

 MR. BROOKMAN: Okay. 

 MR. SOMASUNDARAM: Finally, I have been asked 

to go over this slide by Charlie on behalf of DOE, that 

we would like to state here that we encourage 

development of consensus proposals among the 

stakeholders, either as part of the comment process 

during this ANOPR comment period or subsequent to that, 

and as long as any recommendation that comes to DOE 

must satisfy the seven statutory criteria that are 

listed in the next slide that are provided by EPCA for 

DOE to meet and those primarily address the bottom line 

question of whether the energy conservation standard 

that is proposed by the consensus recommendation is 

technologically feasible and economically justified as 

well as results in significant energy savings. 

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 Therefore, any consensus recommendation that 

comes as part of comments, public comments, should also 

include information that DOE can use to assess these 

seven criteria and determine that the benefits of the 

standard will exceed its burdens to the greatest extent 

practicable and the seven criteria are listed on this 

slide and I think you’ve seen those before. 

 They were also in the first part of the slide 

presentation and they are as follows. The factors are 

the economic impact on consumers and manufacturers, the 

lifetime operating cost savings, the total projected 

energy savings, impact on utility or performance of the 

equipment, impact of any lessening of competition, and, 

finally, need for national energy conservation and 

other factors that the Secretary of Energy might 

consider relevant for this rulemaking. 

 MR. BROOKMAN: Steve Rosenstock. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

may sense that from the last Framework document that 

such a consensus might be possible based on some of the 

information I heard from the last -- the Framework 

Workshop. 

 I had a question about the impact of the 

Energy Independence and Security Act of 2007. There’s 

a section in there that said that DOE definitely did 

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have the legislative authority to accept consensus 

recommendations, I believe it’s after the ANOPR now. 

But it also said in there that such a joint 

recommendation, it was in parenthesis from energy 

efficiency advocates, manufacturers and states were the 

three parties listed in the EISA, as I recall. 

 So my question to DOE is, if there’s other 

parties that are a part of such a recommendation but 

let’s say the states just -- we -- any sort of group 

just couldn’t get states to sign on, could DOE still 

accept that sort of consensus? Again, it was just that 

paragraph, those parenthesis that kind of confused me a 

little bit in the EISA 2007. 

 MR. SACHS: Are you asking if EEI is an 

environmental advocate? 

 MR. ROSENSTOCK: No, no. I’m just saying is 

that right now, there are three groups listed, and I’m 

just saying if, for whatever reason, one of those 

groups is not listed, does that mean that DOE can 

pretty much just say sorry, you didn’t meet the EISA 

2007, we cannot accept your recommendation? 

 MR. BROOKMAN: Michael Kido. 

 MR. KIDO: Michael Kido, Office of General 

Counsel. If you could just raise that particular issue 

in your written comments and I’m sure we’ll address it 

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in the future notice. 

 MR. BROOKMAN: Thanks very much. Thank you. 

 Additional comments on this slide with respect to 

consensus recommendations? 

 (No response.) 

 MR. BROOKMAN: Okay. I think that’s -- 

 MR. SOMASUNDARAM: I’ll hand it back to 

Charlie. 

9 Discussion of Other Issues

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 MR. BROOKMAN: Before we hand it back to 

Charlie, this is the opportunity we wanted to provide 

to anybody in the room as we promised earlier for final 

comments and any -- to raise any issues that you feel 

you’d like to raise now that haven’t been raised 

already or to emphasize a point or two and make your 

closing remarks briefly now. 

 Yes, Glenn first and then Trent. 

 MR. SELFRIDGE: Yeah. I have -- 

 MR. BROOKMAN: Close to the microphone. 

Thank you. 

 MR. SELFRIDGE: It’s a clarification. 

 MR. BROOKMAN: Yeah. Please. 

 MR. SACHS: I did discuss that and the 

equation and the constant question, efficiently 

characterized the existing Class B machines, okay, as 

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Tier 1. My objection was based on thinking that they 

might be using that for a cap. It’s not appropriate 

for a cap formula. 

 MR. BROOKMAN: Okay. Thanks very much. 

Trent? 

 MR. ROTH: This is Trent. We’ll be making -- 

when we make our written recommendations, we will be 

making them for ASHRAE rules on 32.1. We just want 

everybody to be aware of that. We’re going to have to 

try to anticipate what that ruling might be because 

that will impact us. We’ll put that in the written 

comments. 

 MR. BROOKMAN: And did you say you 

anticipated that was four to six weeks at least? 

 MR. ROTH: I don’t know. 

 MR. SELFRIDGE: If we don’t have -- if ASHRAE 

does not -- the committee does not have a proposal 

ready for submittal for comment by like the third week 

in July, it’s not going to happen this year, so 

pressure to get it done. 

 MR. ROTH: Which brings up an issue. We’ll 

refer back to the 2004 standard. That’s a question. I 

guess, if ASHRAE doesn’t finalize 32.1, it will go 

back. 

 MR. BROOKMAN: Okay. So that was Glenn 

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followed by Trent. So thanks very much for those 

comments. Harvey Sachs. Final comments here, folks. 

 MR. SACHS: I have a question which we’ll 

have to raise, I’m afraid. If the parties involved 

wish to work on a consensus, are they constrained to do 

that in the framework of whichever version of 32 is 

available? 

 MR. BROOKMAN: Michael Kido? I see Aris is 

also there. You want to start and then we’ll turn it 

back to the attorney for the final word? 

 MR. MARANTAN: Aris Marantan. I just want to 

point out that again the test procedure that DOE’s 

mandated to use currently is 32.1-2004 and even if 

ASHRAE updates their test procedure, let’s say even 

within the next year, and goes final with that revised 

32.1 test procedure, DOE is still obligated to use 

32.1-2004 until DOE issues a final rule to update its 

test procedure. 

 MR. BROOKMAN: Michael Kido. 

 MR. KIDO: Nothing to add. 

 MR. BROOKMAN: Does that mean, though, that 

did you answer Harvey’s question? 

 MR. SACHS: Yes. 

 MR. BROOKMAN: Okay. Thank you. Steve. 

 MR. ROSENSTOCK: Steve Rosenstock, EEI. Just 

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as a quick follow-on, I know that, you know, central 

air conditioning and heat pumps is starting and DOE 

finalized their rule a couple of years ago, but at that 

workshop, DOE said that they would be interested in 

amending their test procedure. 

 Now again, it’s an earlier but they said 

before the ANOPR is -- and again, please, this might be 

procedure, is DOE allowed to amend their test procedure 

between an ANOPR and NOPR? 

 MR. LLENZA: It’s called an SNOPR. 

 MR. ROSENSTOCK: Excuse me. SNOPR. Sorry. 

 MR. LLENZA: No. I’m saying it would be 

through an SNOPR of some kind of intermediate document 

and at the point that we are now in the ruling, that 

may delay the final rule. 

 MR. ROSENSTOCK: Okay. I just wanted to -- 

but whether that was part of a consensus recommendation 

may be on the test procedure as well. 

 MR. LLENZA: I don’t know because we haven’t 

done one of these yet. 

 MR. BROOKMAN: Sriram, you want to just 

comment briefly? 

 MR. SOMASUNDARAM: This is Sriram. What we 

said on the central AC is a procedural thing of any 

amendment to the test procedure has to be published as 

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a final rule before publishing the NOPR of a standard 

rulemaking. So that’s the process. 

 MR. BROOKMAN: The sequence. 

 MR. SOMASUNDARAM: That’s the sequence. 

 MR. BROOKMAN: Yes. Okay. 

 MR. SOMASUNDARAM: So if you were to apply 

that to this rulemaking before we publish a NOPR which 

is due early next year for BVMs, you would have to 

publish a final rule of a test procedure which is 

highly unlikely given the timing and like Aris said, 

ASHRAE is still considering revisions to 32.1 and by 

the time they go out for public comment, which they 

expect after the Chicago meeting, which is January 

2009, then they publish it. If they don’t get any 

significant comments, it will be at least Summer of ’09 

before they publish a new test procedure and then DOE 

will have to take it up subsequent to that. 

 So my understanding -- my present 

understanding of this is we will still be held to the 

existing DOE test procedure which is based on 32.1-

2004. 

 MR. BROOKMAN: Harvey. 

 MR. SACHS: Harvey Sachs, ACEEE. Without 

polling, I believe I reflect the community of 

environmental advocates and to some extent California 

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utilities at least in first thanking the Department and 

its contractors for the analyses and, second, stating 

that we will be quite open to the process of 

development of consensus agreement with other 

stakeholders and would look forward to working with all 

of them. 

 MR. BROOKMAN: Thank you. Thank you. Gary? 

 MR. FERNSTROM: Gary representing PG&E. I 

second that. 

 MR. BROOKMAN: I see several heads nodding 

yes around the table for the record. Okay. So then 

additional and perhaps final comments here at the end 

of the day, other issues that individuals would like to 

raise? Steve Rosenstock. 

 MR. ROSENSTOCK: Just to let you know we are 

involved with -- on distribution transformers, working 

on a consensus agreement, and again if you are going 

down the path at least the way it seemed to work for 

our members for -- we were consumers of the product, 

not the manufacturers. This is for liquid-filled 

distribution transformers, is that we were able to get 

agreement among widely different members on a two-stage 

efficiency process which has also been done by DOE and 

for products such as clothes washers. 

 So again, if such a negotiations start, there 

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is that option, too. 

 MR. BROOKMAN: Thanks very much. Okay. So 

then we’ll turn it back to Charlie. 

4 Next Steps and Closing Remarks

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 MR. LLENZA: I’m here to do the closing 

remarks now and I appreciate the attendance here by all 

the parties for this meeting. You’re more than welcome 

to provide your comments and on this last slide, it’s 

in your package, too, it’s just the methodology on how 

you could provide your comments. 

 Please remember that the cut-off date is July 

16th and also that we will be posting the transcript on 

the website, so people will have the available 

information, and the slides will be posted also on the 

website, the corrected slides, and again thank you for 

attending the BVM ANOPR Meeting. 

 MR. BROOKMAN: In your packet, at the back of 

your packet is an evaluation form and a meeting 

evaluation form, take you 30 seconds to fill it out. 

Please do so. The Department reads them carefully. 

 Thanks to all of you. Safe travels. 

 (Whereupon, at 3:20 p.m., the meeting was 

concluded.) 

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1 REPORTER'S CERTIFICATE

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 This is to certify that the attached proceedings 

before: 

UNITED STATES DEPARTMENT OF ENERGY 

In the Matter of: 

 FOR REFRIGERATED BOTTLED OR CANNED BEVERAGE 

PUBLIC MEETING ON ENERGY CONSERVATION STANDARDS 

VENDING MACHINES 

 Were held as herein appears and that this is the 

original transcript thereof for the file of the 

Department, Commission, Board, Administrative Law Judge 

or the Agency. 

 Further, I am neither counsel for or related to any 

party to the above proceedings. 

 

19 Debbie Derr 20 

21 

 Official Reporter 

Dated: July 18, 2008 

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