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# -:r. UNITED STATES
+ + + + + DEPARTMENT OF ENERGY
+ + + + + CLOTHES WASHER STANDARDS
+ + + + + Thursday, 22 July 1999
+ + + + + The workshop met in Room BE-089, 1000 Independence Avenue, S.W. at 9:00 a.m. Douglas Brookman, facilitator, presiding. PRESENT: DOUGLAS BROOKMAN, Facilitator PHIL MANTHEI, Alliance Laundry Systems ALAN KESSLER, Amana Appliances GENTLE HALLOR, Amana DENNIS DONOVAN, Amana RICHARD STILWELL, Maytag Appliances DOUG HORSTMAN, Maytag Appliances STEVE SOUSEK, Maytag Appliances EARL JONES, General Electric Company CHARLES SAMUELS, AHAM EUGENE FOLEY, AHAM WAYNE MORRIS, AHAM DICK BEST, Whirlpool Corporation BRAD FLORA, Whirlpool CURT REICHMAN, Whirlpool MARK DAHMER, Whirlpool BARRY ROGERS, Fisher 

### &Paykel Limited DAVID MODTLAND, Frigidaire Company GLENN SCHWANTES, Fridgaire Company ALAN TARRANT, Frigidaire Company CHARLES STEPHENS, Oregon Dept. of Energy STEVEN ROSENSTOCK, Edison Electric Institute BILL PRINDLE, The Alliance to Save Energy BRYAN BERRINGER, DOE MICHAEL MCCABE, DOENEAL

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• PRESENT: (CONT. ) DANIEL REICHER, Assistant Secretary for Energy Efficiency and Renewable Energy DEBORAH MILLER, DOE MARK MAZUR, DOE MARK SCHWARTZ, DOE EUGENE MARGOLIS, DOE BARBARA TWIGG, DOE STEVEN NADEL, ACEEE RICHARD TOPPING, ADL MIKE RIVEST, ADL STEVE GROVER, Quantum 2

PETER BIERMAYOR, Lawrence BerkleyNational Laboratory JIM MCMAHON, LBNL ROBERT HENBUSTER, LBNL STEVE WIEL, LBNL LAURA VANDEE, LBNL MARK RIVEST, Arthur D. Little DICK TOPPING, Arthur D. Little ARNIE FONDE, Arthur D. Little NELSON MACKEN, Arthur D. Little BILL BRADLEY, National Handyman ANDY PERSILY, NIST NATASHA CASTRO, NIST TOM BEE, Staber Industries TOM ECKMAN, Northwest Power Planning Council LUTHER MYERS, Textile Innovators ANN WILKINS, National Resources in Canada GLENDA TAYLOR, National Resources in Canada JACK LINARD, Unilever Home and Personal Care IAN FLANAGAN LAUREN CASENTINI, Pacific Gas and Electric Company GLEN SCHLEEDE, Energy Market and Policy Analysis ERIC ESSMAN, Clorox DAN BARZEL, Circuit City Stores DON BRUNDAGE, Southern Company

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••• 3 A-G-E-N-D-A Agenda Item Opening Remarks . 4 Overview of Clothes Washer Rulemaking Status Bryan Berringer 18 Test Procedure Issue, Bryan Berringer Plan of Action, Dick Topping, ADL Consumer Analysis, Steve Grover, Quantum Shipments Analysis, Jim McMahon, LBNL Review of Tools, GRIM Spreadsheet Mike Rivest, ADL Next Steps
- Schedule Next Workshop Closing Remarks
- Adjournment .

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• 4 1 P-R-0-C-E-E-D-I-N-G-S 2 (9:16 a.m.) 3 MR. BROOKMAN: Thanks to all of you for 4 being**her~** on time sowe canget startedhere ontime. 5 We have a full agenda for this morning and we intend 6 to run until about 1:00 today. 7 My name is Doug Brookman. I will be 8 facilitating today's meeting. Let me now introduce 9 the Assistant Secretary, Dan Reicher. 10 ASSISTANT SECRETARY REICHER: Good 11 morning, everyone. Again, I'm sorry for being late. 12 I was ata congressional-orientedmeetingacrosstown. 13 I got caught in a bad traffic jam, which seems to be 14 an increasingproblem in this city. It took about 30 15 minutes to go three miles. But I am here. 16 I want tothankyou all for coming to this 17 important meeting. This is a workshop to look at the 18 clothes washer standard. It is a narrower workshop, 19 as you all know, than we originally intended. But 20 with the issue that has arisen regarding the test 21 procedure, we have narrowed down the focus. 22 We want to do two things this morning. 23 That is, to discuss the test procedure issue, discuss 24 a plan of action that is underway to quickly and 25 appropriately resolve this test procedure issue, and

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• 5 1 then also take a good amount of time to discuss the 2 consumer and shipment analysis. We have some 3 important analytical work that's now available. We 4 think it's veryuseful to discuss that as part of the 5 process rule, a more open communication about all the 6 things that provide the basis for a potential 7 standard. 8 The outcomes of the workshop are, as I 9 said, todiscusstheplanof action, betterunderstand 10 the analyses done to date, and there are several of 11 them, and I thinkit'sworthyof some gooddiscussion, 12 and to talk about a schedule for the actual broader, 13 more formal workshop that we intended to have today, 14 butbecauseofthe testprocedure issuethat's arisen, 15 we have not scheduled for today. 16 What we are committed to are the 17 following: is resolving the test procedure issue 18 quickly. It is an issue that we still don't 19 completely understand the scope of, but with some 2

### o testingthat'sunderway, we expect tohave the kindof 21 information we need in the next few weeks, to better 22 understandthe scope of this issue. We intendtokeep 23 the rulemakingon schedule interms of the issuance of 24 the notice of proposed rulemaking, in terms of the 25 final standards. Obviously the test procedure issue

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# • 6 1 is important to that. 2 We intend to share new information as we 3 have been doing, as it becomes available. We have 4 been trying to do all we can to make sure that as we 5 get analytical information, as we get information 6 about for example, the testprocedure issue, we get it 7 to you in a quick fashion, and there is good dialogue 8 on it. 9 As we indicate in the fourth bullet, 10 communicating early and often. There was some 11 sentiment that we should cancel today's meeting. I 12 felt strongly that the more that we can talk to each 13 other, even if it isn't on the full range of issues 14 regarding the clothes washer rule, the better. 15 What we need from you is your support of 16 the action plan that's put into place to resolve the 17 test procedure issue quickly. We really need to get 18 through this. I don't think it is to anybody's 19 advantage to have this hang and be a source of 20 confusion with respect to the standard. 21 Dependingupon the outcome, to retest the 22 products, to verify the recommended test procedure 23 changes, if that becomes necessary. We needyou togo 24 back and depending upon the outcome of the look we're 25 taking at the test procedure to go back and test, if

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• 7 1 that becomes necessary. 2 Provideupdatedcost data as that becomes 3 warranted. Again, based onwhat we may find from the 4 reanalysis. And obviously, to continue the open 5 communicationsthatwe haveverymuchappreciatedfrom 6 you. This has been a good process going forward. 7 There has been a lot of interchange. We feel like we 8 are out of the old black box mentality that I think 9 usedto toooftenpervade thesekinds of rulemakings. 10 So I am lookingforwardtothisdiscussion 11 over the next several hours. I think it's an 12 important one. I think when we finish it, we will 13 have a good sense of where we are andwhere we need to 14 get to, so that ultimatelywe canmove forwardwith an 15 appropriate rulemaking, one that really does look to 16 all the key issues and resolve them in a reasonable 17 andopen fashion. I thankyou, all of you for coming. 18 MR. BROOKMAN: It iscustomaryforus, all 19 of us, to have a chance to introduce ourselves. So I 20 would like to ask that everybody introduce yourself 21 and sayyour affiliation. I'll start here andworkmy 22 way around. 23 MR. MANTHEI: Phil Manthei from Alliance 24 Laundry Systems. 25

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• 8 1 Appliances. 2 MR. STILWELL: Dick Stilwell, Maytag. 3 MR. SAMUELS: Chuck Samuels, AHAM. 4 MR. BEST: Dick Best, Whirlpool 5 Corporation. 6 MR. ROGERS: Barry Rogers, Fisher & 7 Paykel. 8 MR. MODTLAND: Dave Modtland, Frigidaire 9 Home Products. 10 MR. STEPHENS: Charlie Stephens, Oregon 11 Office of Energy. 12 MR. ROSENSTOCK: Steve Rosenstock, Edison 13 Electric Institute. 14 MR. BERRINGER: Bryan Berringer, 15 Department of Energy. 16 MR. McCABE: MichaelMcCabe, Departmentof 17 Energy. 18 ASSISTANTSECRETARYREICHER: DanReicher, 19 Department of Energy. 20 MS. MILLER: DeborahMiller, Departmentof 21 Energy. 22 MR. MARGOLIS: Eugene Margolis, Office of 23 General Counsel, Department of Energy. 24 25 MR. BIERMAYER: PeterBiermayer, Lawrence Berkeley National Laboratory.

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• ------------ 9 1 MR: McMAHON: Jim McMahon, Lawrence 2 Berkeley National Lab. 3 MR. HENBUSTER: Robert Henbuster 4 (phonetic), Lawrence Berkeley National Lab. 5 MR. RIVEST: Mike Rivest, Arthur D. 6 Little. 7 MR. GROVER: Steve Grover, Quantum 8 Consulting. 9 MR. BRADLEY: Bill Bradley, National 10 Handyman. 11 MR. TOPPING: Dick Topping, Arthur D. 12 Little. 13 MR. PERSILY: Andy Persily, National 14 Institute of Standards and Technology. 15 MS. CASTRO: Natascha Castro, National 16 Institute of Standards and Technology. 17 MS. TWIGG: Barbara Twigg, Department of 18 Energy. 19 MR. BEE: Tom Bee, Staber Industries. 20 MR. ECKMAN: Tom Eckman, Northwest Power 21 Planning Council. 22 23 Corporation. 24 25 Corporation.

(202) 234-4433 MR. FLORA: Brad Flora, Whirlpool
MR. RIECHMAN: Curt Riechman, Whirlpool
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# • 10 1 MR: DAHMER: Mark Dahmer, Whirlpool 2 Corporation. 3 MR. FOLEY: Eugene Foley, AHAM. 4 MR. MYERS: Luther Myers, Textile 5 Innovators. 6 MS. WILKINS: Ann Wilkins, National 7 Resources in Canada. 8 MS. TAYLOR: Glenda Taylor, National 9 Resources of Canada. 10 MR. LINARD: Jack Linard, Unilever Home 11 and Personal Care. 12 MR. WIEL: Steve Wiel, Lawrence Berkeley 13 National Lab. 14 MS. VANDEE: Laura Vandee (phonetic), 15 Lawrence Berkeley National Lab. 16 MR. SCHWANTES: Glenn Schwantes, 17 Frigidaire Home Products. 18 MR. TARRANT: Alan Tarrant, Frigidaire 19 Home Products. 20 MR. MORRIS: Wayne Morris, the new AHAM. 21 (Laughter.) 22 MR. FONDE: ArnieFonde (phonetic), Arthur 23 D. Little. 24 25 Little.

(202) 234-4433 MR. MACKEN: Nelson Macken, Arthur D.
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• 11 1 MR. SOUSEK: Steve Sousek, Maytag. 2 MR. HALLOR: Gentle Hallor (phonetic), 3 Amana Appliances. 4 MR. DONOVAN: Dennis Donovan, Amana 5 Appliances. 6 MR. FLANAGAN: Ian Flanagan (inaudible). 7 MS. CASENTINI: LaurenCasentini, Pacific 8 Gas and Electric Company. 9 MR. SCHLEEDE: Glenn Schleede, Energy 10 Market and PolicyAnalysis. 11 MR. ESSMA: Eric Essma, Clorox Company. 12 MR. BARZEL: Dan Barzel, Circuit City 13 Stores. 14 MR. HORSTMAN: Doug Horstman, Maytag. 15 MR. BRUNDAGE: Don Brundage, Southern 16 Company. 17 MR. BROOKMAN: For those of you in the 18 back of the room, those are you that are at this end 19 of the room -- I just turned my mike on. Is that 20 better? The acoustics in here are pretty bad, so we 21 are going to have to try and speak up. I am going to 22 ask everybody to use the mikes. 23 Jonathan, when they use the mikes around 24 the table, you can pick them up okay? Okay. 25

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# • 12 1 who aren't here but who are going to join us, and I 2 just want to emphasize the importance that theybring 3 to this, is Mark Mazur, who is the head of ourpolicy 4 office here at DOE, andhas beenvery instrumental in 5 the work you have been doing on standards. And then 6 MarkSchwartz, who hasbeenthedeputygeneral counsel 7 inthe energy area here at DOE. He has alsobeenvery 8 involved. The three offices are very working very, 9 very closely together on these standards. They will 10 be joining us later. 11 MR. BROOKMAN: So theAssistant Secretary 12 referenced and talked about the purpose of this 13 workshop. I am going to just run through this agenda 14 briefly. Thenwe are going to proceedwith the day's 15 work. 16 The first substantive section of the day 17 is to do an overview of clothes washer rule making 18 status. Bryan is going to talk about that, and talk 19 about revisions tothe analysis. Inthe 9:45 to 10:15 20 timeframe, talking about the test procedure issue. I 21 guess Dick Topping, you are going to talk about a 22 prospective plan of action. 23 ·10:15to 10:45, consumeranalysisbySteve 24 Grover. We'll take a breakmid-morning this morning. 25 After the mid-morning break, about 11:00, we'll talk

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• 13 1 about the shipments analysis issue. JimMcMahon will 2 be talking about that. 3 We will proceed from there to our review 4 of the tools and specifically the GRIM spreadsheet. 5 Mike Rivest will be talking about that. We'll close 6 out the daybyaddressinganyremainingissues andany 7 other next steps, and maybe talk about the schedule 8 for work going ahead. We intend to end today around 9 about 1:00. That is the general plan. 10 Therearea fewhousekeepingiterns, letme 11 say briefly and quickly, I hope. Draft reports, 12 slides, and other materials are available at the 13 table. If you haven't received them already, Sandy 14 and Brenda are out there at the check-in table. 15 Anyone attending today's workshop or anyone who 16 submitted comments will be added to the mailing list 17 for future mailings. 18 Thecommentsreceivedheretodayandthose 19 already submitted during the written comment period 20 will assisttheDepartment indevelopingtheNoticeof 21 Proposed Rulemaking. The comment period, looking 22 ahead, ends around about August 3. Is that correct? 23 I think for this workshop, comments in by August 3. 24 25 My name is Doug Brookman. I will be facilitating this workshop. In approximately two

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..-,.;,;....·-. 14 1 weeks, a complete copyof the transcript, plus all the 2 commentsreceivedwillbeavailablefor inspectionand 3 copying in the Department of Energy's Freedom of 4 Information Reading Room, which is located on the 5 first floor, and specifically that is lE-190. 6 Those that wish to purchase a copyof the 7 transcript can do so from Jonathan and his company. 8 So you should get his business card before you leave 9 here today. 10 Also, wepostedupthewebsite address for 11 those of you that don't already have it. It's long. 12 It's complicated, but it's there. So please 13 virtually all of this information is available on the 14 website. Many of you have access. I encourage that 15 as an efficient way to get to information. 16 We are going to take a breakmid-morning. 17 The Department has graciously provided coffee and 18 snacks. They will be available here. So you don't 19 need to go anywhere else. The restrooms are located 20 down the hall as you exit, all the way to the left. 21 I suspect all the way at the other end of the hall on 22 the right there are restrooms, both male and female, 23 down there as well. 24 All writtencomments anddata submissions 25 will be available for public inspection at the same

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• 15 1 reading room I referenced earlier. Ten copies of 2 comments or data are requested for submittal to the 3 Department. The Department would also appreciate an 4 electronic copyof comments or data. WordPerfect 6.1 5 is the format that they like touse. In fact, I think 6 it is the only format that they use. 7 No faxed comments will be accepted. 8 There's a newaspect to the submittingcomments. That 9 is, e-mail comments will be accepted, provided that a 10 signed hard copy is also sent to the Department. So 11 I thinkthat is a newwayof doing, receivingcomment, 12 I believe. 13 Those e-mails and hard copies should be 14 sent and addressed to the Department, care of Bryan 15 Berringer in the Federal Register notice for the 16 supplemental ANOPR. 17 Thosepersons that are submittingdata or 18 information they deem to be confidential, should 19 follow the same basic procedures, one complete copy 20 and 10 copies. The Department will then make a 21 determination about whether that information indeed 22 should be classified as confidential. Right? Yes. 23 No smoking is allowed in this room or in 24 this areahere. There is smokingavailable downstairs 25 outside.

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.":' '!"t;. ..:r. ·••**~** 16 1 before, someone will help you find it. .I said where 2 the restrooms are. That's basically the housekeeping 3 items. 4 For those of you who haven't already 5 signed in or handed your business card to Sandy or 6 Brenda at the front desk, at the break, please do so. 7 Questionsbeforewe proceed? Afewpeople 8 did not get a chance to introduce themselves at the 9 outset. Steve, would you introduce yourself? 10 MR. NADEL: SteveNadel, American Council 11 for an Energy Efficient Economy. 12 MR. BROOKMAN: Didanyonenot get a chance 13 to introduce themselves? 14 MR. HAWKINS: I didn't. Larry Hawkins, 15 General Electric Appliances. 16 MR. BROOKMAN: Thank you. Thanks for 17 joining us. Thanks to all of you for being here on 18 time. You are lookingprettybright this morning all 19 together, beinghow it's a rainy, muggy day, and it's 20 a good start. 21 Over the span of process improvement and 22 processed reinvention, norms have emerged for these 23 meetings. I would like to ask for your consideration 24 25 for them to be followed today. We have a lot to cover. We are going to try and stay very focused on

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• 17 1 it. 2 I am going to·ask that everyone speak one 3 at a time. Please use the microphones. Say your 4 name. I will be queuing people to speak. It is 5 important that everybody share the air time and be 6 concise. Sometimes that may require you to take a 7 note. Just kind of zero in on what you are trying to 8 say. 9 As for the conduct of the meeting itself, 10 the actual mechanics of it, I do a complicated system 11 relatively speaking, as facilitators go. That is, I 12 queue people to speak, but I also try and allow for 13 the exchange, for the follow-on. Because what we are 14 trying to create here is the kind of exchange that 15 creates a lot more light than heat, just to use a 16 metaphor. 17 Sopleasebearwithme. If for anyreason 18 I queue youup to speak and then I dropyou out, don't 19 let me get away with it. That occasionally happens. 20 So that is the general game plan. Are 21 there questions and comments or concerns at the 22 outset? I see none. 23 Letme askyouone final question. On the 24 agenda, are there any additional topics that need to 25 be taken up today that do not fit in the framework of

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• 18 1 this age'nda? That are necessaryto take up todaythat 2 do not fit in the framework of this agenda. Okay. I 3 see no comment on that. 4 Then let's proceed. Bryan, you are up 5 first. Take it away. 6 MR. BERRINGER: Can everybody hear me in 7 the back? Okay, for those who don't know me, I am 8 Bryan Berringer, the Project Manager for the Clothes 9 Washer Standards Rulemaking. Basically I would just 10 like to overview what we have done to date as far as 11 sincethe lastworkshop, sincethe supplementalANOPR. 12 So I'll just sort of highlight that. 13 Basically what's new? We haven't
-- all 14 the information was put on the website, the 15 information, the analysis that's available for today. 16 It's also in the back there. I apologize, I did have 1 7 some slides I wanted to make up as far as the 18 analysis, but I'll tellyouwhatpages ifyouhave the 19 handouts that are available. 20 Basically, the first thing that's since 21 the supplementalANOPR and for the ANOPR analysis, we 22 basicallydid not make any changes to the engineering 23 24 25 analysis. The big changes were the life cycle cost analysis. We included the marginal energy rates, whichwas a recommendationby the Advisory Committee,

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• 19 1 which substitutes where before we were using average 2 prices. 3 In addition, we have also included the 4 water rates as one of the major ones, major changes 5 that's been incorporated in here. We have also 6 included information as far as the LPG and the A099, 7 as far as the electric, gas, and oil. Manufacturers' 8 markups have been changed from a triangular 9 distribution from a rectangular triangle 10 distribution with different standards to a 11 rectangular, if I said that correctly. 12 MS. MILLER: Now explain it. 13 MR. BERRINGER: Itisexplainedthoroughly 14 in the report. How about that? 15 (Laughter.) 16 MR. BERRINGER: Basically you can see 17 these changes in the LCC report. If you don't have 18 it, it is available in the back. There's limited 19 copies. There is some information. You can see 20 basically on page eight, the one graph sort of shows 21 that they are using the marginal energy rates, and 22 correct me if I'mwrong, there was very little change 23 24 25 between the analysis that resulted from the ANOPR to the NOPR analysis. So that can be seen sort of on page eight of the LCC report.

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• 20 1 You can also see on page five, actual 2 results as far asusingtheAO reference case, onpage 3 five. 4 MR. BROOKMAN: Do they have the LCC 5 report? 6 MR. BERRINGER: They should have. This 7 information was available on the web, and is also 8 available in the back. 9 MR. BROOKMAN: You are creating a 10 referencepoint for themasyouwalkthroughthebasic 11 major changes you have made, the major revisions that 12 you have considered in the LCC report. 13 Steve Rosenstock? 14 MR. ROSENSTOCK: SteveRosenstock, Edison 15 Electric Institute. This is the June 1999 version. 16 There hasn't been any others that have been 17 MR. BERRINGER: No. This is what we are 18 referring to, what was put on the web. We have not 19 made any changes. 20 The second, we talkedwas the NES results 21 that's also
-- there's a report available that was on 22 the web. That's basically been re-run. We put the 23 new shipments analysis in there. That is going tobe 24 further discussed by Jim McMahon later today, as far 25 as what was done with the shipments. Also, we have

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# • 21 1 Steve Grover from Quantum to talk about the consumer 2 analysis, the focus groups and conjoint analysis that 3 fit into the shipments report, alongwith calibrating 4 with the historical shipments. 5 Additionalchangeswerethe fuel flight to 6 sourceconversion, froma constantconservationfactor 7 to a time series projected conservation series 8 changing from year to year. We also changed the H 9 axis base case escalation rate. Before in the ANOPR, 10 it was three percent. For the 1998 shipments, we are 11 expected to increase by .5 percent per year. In the 12 NOPR, we have changed that to 6.25 percent of 13 shipments in 1998. We basicallyusedthree scenarios, 14 a .25, a .5, and .75 scenario. So that is also in the 15 reports. 16 The water escalation prices before 17 previous in ANOPR, we had a zero percent. We have 18 changed that to a 3.04 percent per year for the NOPR. 19 Also, there was a change in the 20 manufacturing markups in this analysis. Before, the 21 ANOPR used the shipment weighted average. One value 22 was used for each standard. The NOPR used the range 23 of markups to calculate for each standard level. 24 25 So if you look at the NES report, onpage eight, you can see some of the results. Again, that

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• 22 1 is dated June 1999, available on the web, and in the 2 back. Page eight is pretty much a summary. There's 3 a number of scenarios. Upper and lower bounds were 4 used. So on page eight, there it talks about the 5 energysavings, thewater savings, andthenetpresent 6 value results. So that pretty much summarizes the 7 results for the NES. 8 was there anyquestions pertaining to the 9 NES report or results? 10 MR. SCHLEEDE: Glenn Schleede. Question 11 on the water and sewer prices that fed into the 12 analysis. Are theymarginalprices oraverageprices? 13 MR. BERRINGER: I woulddeferthat toLBNL 14 If you could come to the mike here. We briefly 15 discussed this at the last workshop, and went into 16 prettymuch detail onthe waterrates. But if you can 17 just sit right there and introduce yourself. We've 18 got Peter Biermayer from LBNL. 19 MR. BIERMAYER: Peter Biermayer, LBNL. 20 Those are marginal prices. Basically what we did is 21 we subtracted out the sixth rate. Then it's based on 22 a certain amount of water usage. It was sort of the 23 average of 1,000 gallons of water per month. 24 25 MR. SCHLEEDE: The fixed portions of consumer bills are excluded, correct?

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• 23 1 MR. BIERMAYER: Yes. They are subtracted 2 out. 3 MR. SCHLEEDE: May I askanotherquestion, 4 on life cycle costs or do you want to hold that until 5 later? 6 MR. BROOKMAN: Does it fit here? 7 MR. SCHLEEDE: I don't know if it does or 8 not. I just don't want to miss it. 9 MR. BERRINGER: This would be an 10 opportunity. I just talked about that, so go ahead, 11 if you could raise the question. 12 MR. SCHLEEDE: Question. I didn't see 13 anything in here on maintenance repair costs or 14 maintenance andextendedwarranty agreements. First, 15 did I miss it? Or is it still excluded? And second, 16 if it is excluded, is it the Department's position 17 that such costs are not a part of life cycle costs? 18 MR. BERRINGER: Bryan Berringer. 19 Basically, we haveno informationat allpertainingto 20 that. At this point, unless we have sufficient data 21 or analysis that would show the usefulness, and that 22 this point we do not intendbecause we do not have any 23 basis to do that. 24 25 MR. SCHLEEDE: Is it the Department's position that those costs are not a part of life cycle

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• 24 1 costs as used in the statute? 2 MR. MCCABE: Michael McCabe. They are 3 certainlya part of the consumers' costs. Inthe life 4 cycle cost analysis, we are trying to capture, among 5 other things, the difference in life cycle cost from 6 one efficiency level to the other. The information 7 that has beenprovided to DOE to date with respect to 8 themaintenancecosts, warrantycosts, there'snothing 9 to indicate that there would be any difference in 10 thoseprices aswouldrelate toenergyefficiency. So 11 it's assumed for the timebeingthat theyare the same 12 across all range of efficiency. Therefore, it can be 13 netted out. 14 MR. SCHLEEDE: Where is that information 15 available that you are relying-on? 16 MR. MCCABE: We havenot receivedanything 17 on the life cycle cost difference. I said that was 18 pretty much from the body of all the rulemakings. 19 That's been one area where we have not gottenmuch in 20 the way of data. 21 MR. SCHLEEDE: I misunderstood what you 22 just said. Earlier I thought you said that based on 23 the information you have, there is no difference, no 24 significant difference. 25

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-**.~'''!'°~ ~~**  -- • 25 1 that would show that there is any difference. 2 MR. SCHLEEDE: So you basically haven't 3 looked at. You have not collected data that would 4 show whether there's a difference or not? 5 MR. MCCABE: We havenot receivedanydata 6 that would show there's a difference. 7 MR. SCHLEEDE: Andyou stillconclude that 8 you don't have to consider it as a part of life cycle 9 cost? That is the Department's position? 10 MR. MCCABE: It is assumed that for the 11 purposes of this analysis, that those costs are the 12 same across the full range of efficiencies. So we're 13 trying to capture changes in the life cycle costs, 14 they wouldn't matter. 15 MR. SCHLEEDE: Thank you. 16 MR. ROSENSTOCK: SteveRosenstock, Edison 17 Electrical Institute. Since this workshop is a 18 different focus, I have made a lot of comments about 19 the economic analysis outside of the shipments and 20 consumer analysis. I don't know when the next -- is 21 the next go-round of the life cycle cost natural 22 energy savings going to be dependent on the test 23 procedure? I gather that if there is a revision, it 24 might change some of these numbers again. Itmight be 25 done. There might be another revision?

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• 26 1 MR. BERRINGER: Yes. Bryan Berringer. 2 Right now we don't know if it's necessary to go back. 3 That is sort of what Dan talked about in the 4 beginning. If the test procedure shows that the 5 cloth, once we specify the cloth, we may have to go 6 back and have manufacturers re-test during what we 7 call a spec. cloth with a certified cloth that 8 everybody would feel comfortable.· So yes, all the 9 analysis may have to go back and be redone, including 10 the LCC and NES. 11 MR. ROSENSTOCK: Alotofmy comments were 12 really not based on the test procedure, more on the 13 analytic side of the workshop. 14 MR. BERRINGER: Correct. 15 MR. ROSENSTOCK: So I'm not going to 16 really
-- 17 MR. BERRINGER: Thank you, Steve. We do 18 have your written comments. If you have additional 19 ones. We don't anticipate anyof the methodologies of 20 course changing. It would just be changing the 21 numbers as far as input. 22 MR. BROOKMAN: Additional questions? 23 Steve Nadel? 24 25 MR. NADEL: Yes. I'm not exactly sure whether this is theplace for it, but I had a question

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# • 27 1 specifically about the costs that are used in the 2 is this the appropriate place for that? 3 MR. BERRINGER: This would be the 4 appropriate place, yes. 5 MR. NADEL: As I understand it, the 6 analysis, even with the revisions, relies totally on 7 the information submitted by AHAM a number of years 8 ago. My question is what, if anything, have you done 9 to modify or incorporate the results of the reversed 10 engineering in this economic analysis? 11 MR. BERRINGER: We have not incorporated 12 any of that information. We feel that's sort of an 13 apples to oranges. It is there for a basis for us to 14 make decisions, but itwas a Greenfield studythat was 15 usedwhere also the analysis that was sent toAHAM was 16 actually shipment weighted. So there is a factor 17 there. Where we looked for the reverse engineering, 18 we useda Greenfieldstudy, and lookedat thenumbers. 19 Sowe don't feel that there is a correlation, a direct 20 correlation where we can feed those numbers into the 21 engineering analysis directly. 22 MR. NADEL: Okay. I guess to then move 23 into a comment. I would say that the two have a cost 24 difference of roughly a factor of two at the higher 25 efficiency levels. In some waymaybe it's a separate

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# • 28 1 analysis, but you need to look at an analysis that 2 looks at what are the impacts assuming that the 3 reversed engineering costs apply and not the 4 manufacture estimates, particularly given that the 5 manufacturersarenota totallydisinterestedpartyin 6 this proceeding. 7 MR. BERRINGER: Yes. Just to further on 8 that. As you remember, in the reverse engineering we 9 did take the H axis levels. We took two machines and 1O we averagedthosenumbers. So again, whenyou average 11 that and also the baseline
-- we took two units and 12 averaged, you are looking at an H axis machine that 13 might not necessarily exist. But we did that for the 14 purpose of comparing that to the Whirlpool prototype. 15 That was the mainpurpose of the reverse engineering. 16 MR. NADEL: I guess I would submit that 17 when we first discussed collecting data from 18 manufacturers, there was a lot of concern among the 19 non-manufacturer parties that that data needed to be 20 corroborated by independent sources. It was at that 21 time discussed that the reversed engineeringwouldbe 22 that corroboration. 23 So I think you need to either use the 24 reverse engineering in a separate analysis and then 25 the decisionmakers can decide which one to emphasize,

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# • 29 1 or come up with some other corroboration. 2 Corroboration, from ourpoint of view, is 3 the primary purpose of the reverse engineering. If 4 you change that purpose, then you need to find 5 something else to corroborate, or figure out a way to 6 use that tocorroborateordo analternative analysis, 7 because they don't seem to corroborate very closely. 8 MR. BROOKMAN: Thankyou. Other comments 9 before we proceed? Questions? 10 Okay. The next basicallynew information 11 is the consumer survey information. We again did the 12 focus groups to see what attributes that they felt 13 were important. We also followed that up with a 14 conjoint analysis, which was one of the majors. We 15 had a little working group that that was the route 16 that was felt was the most logical way, was to do the 17 conjoint. Steve Grover from Quantum is going to go 18 into that in a little bit more detail later on, so I 19 won't say any more about that. You can ask questions 20 at that time on the consumer analysis. 21 Also, new information as far as the 22 shipment analysis, which will be presented by LBNL, 23 Jim McMahon, later today, which is new. The clothes 24 washer shipment estimates are the necessary inputs 25 into the manufacturer impact analysis and the NES

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# • 30 1 calculations. So that feeds into those two analyses. 2 A new spreadsheet was developed by LBNL, which 3 incorporates the information from the DOE consumer 4 analysis, and also again, using the calibrating to 5 historical purchases. 6 Again, we'll talk about that a littlebit 7 later, so that would be an appropriate time to speak 8 more about the shipments analysis. You should also 9 have the report, in the back or also available on the 10 webpage. 11 The manufacturing impact analysis, 12 basically Arthur D. Little, Mike Rivest will talk 13 about theGRIM spreadsheets that theydeveloped. They 14 are in the process. They have done the interviews. 15 They are going back to the manufacturers and sort of 16 getting verification that the sections they have are 1 7 appropriate, thatnoconfidentialinformationisbeing 18 divulged. So that's sort of in the review process. 19 Again, all that information, if we find 20 with the test procedure which we feel is critical, 21 that analysis couldchange along with shipments, NES, 22 LCC. So it's really dependent on what we find out 23 with the test procedure. But that is in the process. 24 We hope to at least get a draft report in the near 25 future.

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• 31 1 Then also the net national employment 2 results, that's new information. Basically in that 3 report, short report, also dated June 1999, you can 4 actually see on the graph, it's figure one, what the 5 results are. Basicallywe didthenine clotheswasher 6 scenarios withefficiencies ranging from zero to five 7 percent. You can also for a givenyear, the change in 8 number of jobs. The economy is relative to the case 9 of no new standards. So that's sort of the key 10 results there. 11 Does anybodyhave anyquestions about the 12 net national employment results? 13 MR. BEST: DickBestwithWhirlpool. This 14 particularstudyI guesswe probablyhave some comment 15 on, but we need some time to digest it. I think the 16 first response is that it's a nice theoretical study, 17 but itdoesn'tgive anyindicationnecessarilyofwhat 18 type ofjobs arebeingreplacedwithwhat. I mean the 19 fact that there's jobs changing in itself may not be 20 that significant. 21 MS. MILLER: DeborahMiller. Dick, doyou 22 have anything that you would suggest insteador after 23 you have a chance to digest it, might you have some 24 recommendations on how we might do it better? 25

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• 32 1 thinkabout thisone, becauseyouknow, quite frankly, 2 here andwe see ithappening inmanycities across the 3 country, where you replace manufacturing jobs, they 4 don't necessarilyget equivalentjobs. Theyendup in 5 service industries at much lesser employment levels, 6 and those type issues. 7 MR. BROOKMAN: David Modtland? 8 MR. MODTLAND: DaveModtland, Frigidaire. 9 Just a comment onone of the assumptions that's in the 10 back of the report. It says 11 MR. BROOKMAN: I would like to ask that 12 everybody try to speak up. 13 MR. MODTLAND: Acommentontheassumption 14 in the back. It says we assume that there's neither 15 an increase or a decrease in water utility related 16 employment. I guess sincethehigherefficiencytends 17 to be to conserve water as well, it seems that that 18 may not be a valid assumption. I am wondering if the 19 utility people had any comment on that. 20 MR. BROOKMAN: JimMcMahon isgoingtotry 21 and address that. 22 23 24 25 MR. MCMAHON: JimMcMahon from LBNL. The model that we were using did not have a breakout of water utilities. We have since done supplemental calculations based upon information about the number

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# • 33 1 of jobs per revenue in what utilities. We have a 2 revised estimate that we'll be making available. So 3 we will take care of that in the next round. 4 MR. BROOKMAN: Glenn Schleede? 5 MR. SCHLEEDE: It's a different subject 6 than this, so do you want to continue on employment? 7 MR. BROOKMAN: Thank you. Let's continue 8 on with this. Thanks for that inhibition. 9 MR. BERRINGER: Was there any more 10 comments on the employment results? Again, we have 11 some opportunities for written comments after the 12 workshop. I know that this is new information. You 13 need time to look at that and give us further, your 14 input. Written comments are greatly appreciated. 15 MR. BERRINGER: Glenn, what was your 16 question pertaining to? 17 MR. SCHLEEDE: Sorry. I need to go back 18 on one on the water prices. Where can the data be 19 seen that actually lies behind the conclusions 20 reflected in here? The only thing referenced I found 21 to it in the documentation is that it will be 22 available in the TSD. But I see no real detailed 23 explanation or none of the raw data. Where can I get 24 all of that? 25

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# • 34 1 available. We plan onputting that in the TSD, which 2 would be the next step. We will put those results on 3 the web page. 4 MR. SCHLEEDE: Is thereanypossibilityof 5 getting it earlier? 6 MR. BERRINGER: Jim McMahon, do you wish 7 to respond? 8 MR. MCMAHON: It's the Department's call. 9 We can make it available. 10 MR. BERRINGER: Is there any proprietary 11 information that is contained in that? 12 MR. MCMAHON: No. 13 MR. BERRINGER: We canmake that available 14 shortly after the workshop then. 15 MR. SCHLEEDE: Thank you. 16 MR. ROSENSTOCK: Steve Rosenstock. Just 17 a quick comment. As I recall at a previous workshop, 18 there was some data presented, 1986 data versus 1996 19 data for water rates. I guess that's been 20 supplementednow. I am just curious if the data sets 21 have been expanded now. I just remember there was 22 that one basic data set that was presented at the 23 24 25 previous workshop. I don't know if that's been expandedfor this analysis ornot, but I justremember that was presented at that point. I don't know if

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# • 35 1 it's been expanded or not. 2 MR. MCMAHON: JimMcMahon atLBNL. Yes, it 3 has been expanded. We'll make it all available. 4 MR. BROOKMAN: Dave Modtland? 5 MR. MODTLAND: Dave Modtland. A comment 6 again on the national net employment results. Figure 7 six seems to be a little counter-intuitive. That's 8 dealing with the projected U.S. consumer savings in 9 energyandwaterbillsversus energyefficient leveJ,.s. 10 It is showing that at 35 to 40 percent, you will save 11 more money than a 45 percent efficient standard. 12 MR. BROOKMAN: Please say thepage number 13 again. 14 MR. MODTLAND: Page eight, figure six. 15 MR. BROOKMAN: Thank you. 16 MR. MCMAHON: Are you comparing the 45 17 percent to the 35? 18 MR. MODTLAND: Correct. 19 MR. MCMAHON: Jim McMahon. I don't have 20 a specific answer for you. We can get back to you. 21 MR. ECKMAN: I have looked at that. It is 22 because the water savings are larger at the 35 23 percent. 24 MR. BROOKMAN: Excuse me, Tom. Couldyou 25 come to the mike and introduce yourself for the court

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• ------------ 36 1 reporter? There is a standingmike right there inthe 2 corner. 3 MR. ECKMAN: If you look at the 4 engineering analysis
-- Tom Eckman, Northwest Power 5 Planning Council. If you look at the engineering 6 analysis, the water savings are larger at the 40 and 7 35 percent level than they are at the 45 percent 8 level, and that is what is going to generate those 9 differences. 10 MR. BROOKMAN: Can you say why? 11 MR. ECKMAN: I don't know, because I don't 12 knowwhat the technologyis that getsyou to 45 versus 13 40 and 35. All we know is performance levels. 14 MR. BROOKMAN: Thank you. 15 MR. BEST: Dick Best, Whirlpool. One 16 additional comment on the net employment impact. I 1 7 believe this excludes one factor that needs to be 18 added to the study. That is the employment impact on 19 the clothes dryer industry. The reason is that a 20 sizeable percentage of clothes dryers are sold as 21 pairs with clothes washers. So any change in volume 22 shipments in clothes washers will also have an effect 23 on the shipment of clothes dryers, which will also 24 25 impact the dryer industry. So I ask that that be considered for inclusion in this.

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# • 37 1 MR. BERRINGER: Okay, thank you. That is 2 one of the things I guess we found reasonably during 3 Mike Rivest's going through manufacturing impact 4 interviews. That is why he had developed a separate 5 spreadsheet for the dryer industry. So we will look 6 at that. Thank you. 7 Anyothe:r:questionsonthese subjects? We 8 have got one more left. The last subject was the 9 environmental assessment, new results. It is a one10 page results. It's also available on the web. 11 Basically what I would like to note is what happened 12 is the analysis that they get basically from EIA, the 13 NEMs, only goes to 20-20. So table one are the 14 results that go 20-20, and what was done then was an 15 extrapolation to 20-30, so as far as the results. 16 Obviouslyasyougethigherefficiencies, yougetmore 17
-- you have better savings as far as the emissions. 18 Are there any questions as far as the 19 emissions results or what was done there? 20 MR. ROSENSTOCK: SteveRosenstock, Edison 21 Electric Institute. I made somewrittencomments, but 22 I don't know how far you are going to go on the 23 emissions area. Are you going to include other 24 emissions that are out there as well? Are you going 25 to look at the production side as well? Because this

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..-·.. 38 1 analysis, if you are going to do emissions, right now 2 it's incomplete. It also doesn't take into effect 3 that by 2003, more than 70 percent of the population 4 will choose their electric supplier of choice. That 5 couldhave a dramatic impact onjustthe electric side 6 of the equation. 7 MR. BROOKMAN: Steve, can you say what 8 else shouldbe includedthat'snot intherepresently? 9 MR. ROSENSTOCK: I put it in my written 10 comments. I just wanted to make a summary comment. 11 It's in my written comments. 12 MR. BERRINGER: Okay, thank you. 13 Basically the emissions that we are looking at are, 14 what we have typically done in the analysis and I 15 think are mandated as far as looking at. So we will 16 address those comments. 17 Was there any other questions as far as 18 the analysis? We have some test procedure, getting 19 into that aspect. Again, there's a comment period as 20 far as any of this information. The material is on 21 the website. That is our main website page, just as 22 23 24 25 a note. When you go into that, if you go into "Stakeholder Information" then "Product-specific Information" linked to that. Then you can go into "Clothes Washers." That is basically where all this

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• 39 1 information is, as far as downloaded. 2 There's alsQ the Excel spreadsheets are 3 available onthewebpage also. That's somethingthat 4 wasn'tprovided. But ifyouhavetroubledownloading, 5 please let us know and we'll try to get you copies of 6 the spreadsheets. 7 All right. Withthat said, I thinkwe can 8 move onto one of the next issues, is the test 9 procedure. 10 MR. MODTLAND: Dave Modtland. I guess I 11 was expected in the status to have some type of 12 overviewof the schedule. Is that going tobe covered 13 sometime today or at the end? 14 MR. BERRINGER: I think Arthur D. Little 15 is going to touch on that in their presentation, a 16 little bit. I can tell you basically jumping ahead 17 would be we're looking at hopefully trying to find a 18 specificationora processbythe endof September, is 19 what the timeframe we're looking at. That would be 20 obviously specking out the cloth, coming up with a 21 process, so we have a certified cloth and something 22 that's a repeatable type of testing. 23 Then at the end of September, we would 24 look back to the manufacturers if we have some 25 conclusive results, is ask
-- get that cloth out to

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# • 40 1 the manufacturers and have it retested so we can have 2 an idea if the analysis that was submitted by the 3 manufacturers is still good. If there needs to be 4 revisions, corrections done to that. 5 MR. MODTLAND: I guess my question was 6 more directed at the standards overall in general. 7 MR. BERRINGER: The schedule as far as the 8 standard rulemaking? 9 MR. MODTLAND: Yes. 10 MR. BERRINGER: We expect that we will 11 have some delays. Right now, we will probably push 12 the NOPR out. Again, we're looking at some unknowns 13 with the test procedure. So I can't give a 14 definitive. We're trying, again, the commitment is to 15 work as quickly as possible. I anticipate that the 16 NOPR publication, which is now inDecember, may slip. 17 But our goal was still to make up some time andgo for 18 a final rule at the July 2000 timeframe. So we are 19 still pushing for that. 20 MR. BROOKMAN: Additional questions, 21 comments before we proceed? Okay. 22 MR. BERRINGER: Test procedure. I know a 23 lot of you, this is something that's really come up 24 recently. It's basicallytalking about it affects 25 it is the major factor as far as the modified energy

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# • 41 1 factor. It takes into account the dry energy which 2 would reflect in the remaining moisture content. 3 Basically we released in the last TSD, 4 some testing that we had done by an independent 5 laboratory. Those results were sort of questioned. 6 We wentbacktothe indivictualmanufacturers andasked 7 them if these results looked correct. Basicallythey 8 saidtherewerediscrepancies, mainlyintheremaining 9 moisture content. We sort of focused on that. InMay 10 of this year, we actually met with ITS and had some 11 follow-up testing. That iswherewe reallyfound that 12 there was discrepancies in the test cloth. 13 But the key factor is that we feel now is 14 the test cloth that we're focusing on. There may be 15 some other issues. We hope to capture those also. 16 Basically the overall effect is if the 17 data that was submitted for the engineering analysis 18 by the manufacturer, that those MEFs or those values 19 for thebaseline are off, thenourwhole resultswould 20 have to be redone and reanalyzed. So our first step 21 is to find a cloth that is appropriate, and make sure 22 we get in the future, have repeatable results as far 23 as a cloth that meets a certain tolerance or 24 specification. 25 So that was something that we recently

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• 42 1 discovered. I guess actually at the end of May is 2 when we really definitively found out that there was 3 a discrepancy in the cloth. 4 We have basically
- - we formed a team. We 5 have been working on it pretty diligently since May. 6 As a matter of fact, we had a number of conference 7 calls before our meeting at ITS. We have had a 8 number, three or four conference calls after. 9 Everybody has been working together. We have had 10 NIST, AHAM, LBNL, A.D. Little. ITS has been very 11 helpful as far as doing the test. Also, I would like 12 to -- Textile Innovators, Luther Myers, has beenvery 13 involved and very cooperative from the textile 14 industries. We're trying to work we also have the 15 Department, and Dick Topping will talk about this 16 more, what the plan of action is. We also have the 17 Department of Agriculture doing some various 18 characteristic testing forus. I will let him further 19 go into that. 20 Initial steps, is we examined the 21 potential causes of the RMC variations. We reviewed 22 those test methods at ITS. We basically found that we 23 hadtwo different cloths. Theywere actually from two 24 25 different suppliers in this case. But we found a variation that showed an MEF, if we're looking at an

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• 43 1 improvement, it showeda machine thatmayhavebeen 30 2 percent. It could also be 20 percent. So there was 3 almost a 10 percent variation in those MEF numbers. 4 If there's that much variation, it's hard 5 to set a standards level at anylevel, especiallywhen 6 you see the step increases at five percent, where the 7 significant changes are. So if you are talking about 8 a 10 percent difference, that is very significant in 9 this rulemaking. 10 I kind of touched on that, the two 11 different results of the test cloth, resulted in 12 different RMCs. Again, we had the RMC is a factor in 13 the denominator. It isused inthe calculationof the 14 MEF. So it's a very critical factor. 15 Again, we have been looking at the 16 trying to further investigate the characteristics of 1 7 these two cloths that we found discrepancies in. 18 Obviously there's going to be some other ones. We 19 have got cloth being analyzed by Textile Innovators 20 and also another supplier, Cotton Goods, it will be 21 looked at. So that we can make sure, inspect the 22 cloth out as the first step. We just feel that we're 23 going to continue and try and set up a more detailed 24 plan of action to make sure we can nail down this 25 issue quickly.

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• 44 1 So that's sort of the next slide, is the 2 next step, istoactuallytrytoresolve thisquickly, 3 spec out a cloth. Come up with something we can 4 certify this cloth, that when we do it in the future, 5 ifwe buy it five years down the road, that it'sgoing 6 to have the same characteristics and give us the same 7 sort of results within a tolerance and acceptable 8 tolerance. 9 So a task force has been created, as we 10 discussed, with various manufacturers, laboratories, 11 textile manufacturers. We are going to try and 12 further coordinate
-- A.D. Little is going to. Dick 13 Toppingis headingup the groupas far as coordinating 14 the planning action. 15 Soifthere isnodetailedquestion, we do 16 have Dick**~opping** that's going to go further into it. 17 Ifyouhave anygeneral comments forme, byallmeans, 18 at this time. 19 MR. BROOKMAN: Chuck Samuels? 20 MR. SAMUELS: I just wanted to give an 21 overall industry perspective on this test procedure 22 issue. Just as everyone knows, there's pretty wide 23 diversity among the manufacturers in terms of their 24 positiononthe standards andthe level, the effective 25 date. There is not a consensus on what the level of

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• 45 1 significance is on this test procedure issue, what 2 needs to be done about it, and what impact it 3 ultimately will have on the rulemaking. 4 But there are three points that all the 5 manufacturers do agree on. I think that's important. 6 The first thing is that this is a matter that must be 7 dealt with before the proposed rule is issued. It 8 would not make sense, either from an analytical point 9 of view or legal or policy point of view to proceed 10 untilwe understandthe significanceof this, what the 11 fix is, what implications it has for the data that's 12 in the system, and then we do something about it. 13 We don't think that people would be able 14 tomakeverymeaningful commentsonvirtuallyanypart 15 of thisrulemakingthat'sofanyimportanceuntil this 16 is dealt with. 17 The second thing is, we don't see this as 18 a government problem alone. We were an integral part 19 of the development of the test procedure. We have a 20 responsibility to be an integral part of trying to 21 resolve this as quickly, but effectivelyas possible. 22 So we stand ready to cooperate in any reasonable way. 23 I appreciateBryan'scommentsabout ourcooperationso 24 far. I think you are going to see it continue. 25

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• 46 1 who is interested in this rulemaking should want to 2 see this fixed, and fixed effectively. It's not just 3 the manufacturers that have an arcane interest in 4 uniform or repeatable results. The government has a 5 huge interest in it, and anyone who doesn't want to 6 see us moving forward not only with a shaky 7 rulemaking, but even beyond that with a standards or 8 testproceduresthatmighthavepotential loopholes.in 9 it, ought to want to see this get fixed and get fixed 10 now. 11 So we appreciate the way that DOE has 12 organized itself and through ADL to deal with this. 13 We will be there to work with you to resolve it as 14 soon as we can. 15 MR. BERRINGER: Thank you. Are there any 16 other questions as far as the test procedure? 17 I will turn it over to A.D. Little to go 18 into a little bit more detail as far as the plan of 19 action. 20 MR. TOPPING: Goodmorning. For those of 21 you that asked, yes, I am glad to be back. It is, 22 it's actually good to be here, see some familiar 23 faces, touch base with some friends. 24 Bryan introduced the issue. I use that 25 word deliberately. I think this is an issue. I don't

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• 47 1 think it's a problem yet. We'll see if it's a 2 problem. But I guess the best way to describe it is 3 to show you the data. 4 About a monthor a littlebit longer than 5 a month ago, some test data was developed that showed 6 a fairly significant difference inremainingmoisture 7 content testing, when identical tests were done using 8 two washing machines and two different test loads of 9 test cloths. As you can see there, there was about a 10 10 point difference in average RMC, both using two 11 different washers, identical RMC tests, but two 12 different test loads of clothing. One which resided 13 at the test lab, and one which was supplied by the 14 Amana or Alliance Laundry group. 15 So also interestingly enough, those two 16 test loads had been procured from two different 17 companies. If you're not aware, these two companies, 18 Cotton Goods and Textile Innovators, actually take 19 cloth from mills, and it can come from different 20 mills. Then they process the cloth, cut it, and hem 21 it, and thenprovide it as test cloth topeople doing 22 testing. 23 So, so what? I mean in terms of that 10 24 points of difference. Well, you do a couple of back25 of-the-envelope calculations. This is part of the so

.(202) 234-4433 NEALR.GROSS COURTREPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com48 1 what. You take a high efficiency horizontal axis 

# • 2 3 machine, and basically assume that the RMC would increase 10 points. Thenplug those numbers into the 4 modified energy factor equation. You get a 5 significant difference. The MEF drops by 13 percent. 6 Now if you take a machine that's a little 7 less efficient, a vertical axis washer, where more of 8 the energy consumed is to heat water and to actually 9 run the washer so that the RMC component is not as 10 large, and you add again hypothetically, a 10-point 11 increase to RMC, you get about a sixpercent decrease 12 in MEF. So that kind of bounds the range of 13 differences inMEF that that sort of change inRMC can 

# • 14 get you. 15 So that is significant. It obviously 16 impacts verymuch the test procedure and the results. 17 Another implication, and I think Chuck 18 mentioned this, is that the manufacturers have 19 developed cost efficiencydata for washers and design

••_ ...... '·,!'"
...**~:::** ••••• 20 options in terms of how much it would cost to get to 21 high levels of efficiency. 22 Nowhypothetically, ifthosemanufacturers 23 used different test cloths and the results varied, 24 such as we see here, then the results that were 

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.... 49 1 inaccurate, or certainly there could be a band of 2 uncertainty around them. 3 But a caveat is, and we have done some 4 discussionwiththemanufacturers, thatthishasnever 5 been identifiedas a problembefore. People havebeen 6 doing RMC testing for years and years and years. 7 Though maybe it hasn't been looked at in the depth 8 that we have been looking at it over the past few 9 weeks, it just has never been an issue. It has never 10 beenidentifiedasboy, there'sa bigdifferencebased 11 on what cloth you use, what results you get. 12 So that is why we need to really start to 13 look in a detailedway at the two specific test cloth 14 loads that were at issue here, but also more 15 generally, to the test cloth that's specified in the 16 procedure, see what's going on here. I added here on 17 the slidewhat exactlythe testprocedure calls for in 18 terms of a specification. 19 One of the problems with that spec., if 20 you just think about it for a minute, there's no 21 tolerances on it. So, for example, it says 50-50 22 cotton polyester. Does that mean 49-51 is okay, 45- 23 55? So threads per inches, 65? What if it' s 6 3? 24 What's the tolerance around the weight? 25

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• 50 1 done at any rate, I think, is to put some tolerances 2 around the specification so when people procure test 3 cloth, you know that it fits into a certain range. 4 Basedonwhat we find out, which I am going to go into 5 in a minute, there may need to be some additional 6 specifications to this test cloth to relate to its 7 ability to be used for RMC testing. 8 So there has been a test plan developed. 9 It's just underway, so I really have no results to 10 report, unfortunately. But we do have a test plan 11 that we have worked with with several members of the 12 task force and DOE. It seems to make some sense. 13 This is the first public rollout, so we'll be looking 14 for comments. 15 But it's a three-part action plan. The 16 first one, as you might expect, is just a 17 comprehensive testing program to try to understand 18 what's going on with these various loads of test 19 cloth. There's a number of tests that are underway 20 and about to begin. 21 One is just how well that clothmeets the 22 specification that I just showed you, in terms of 23 cotton/polyesterratio, threadsperinch, weight, that 24 25 sort of thing. 

### We are going to do much more comprehensivetestingaswell, usingtheDepartment of

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• 51 1 Agriculture, to look actually at the composition of 2 some of these test cloth loads, and to do some fairly 3 sophisticatedtestingof the fabrics andofthe fibers 4 to see if there's a difference. 5 we are also going to be doing more RMC 6 testing. We will be doing more conventional RMC 7 testing, using ITS. And then also, at Arthur D. 8 Little, we plan to do some more comprehensive
-- more 9 in a research mode, some looking at RMC. 10 This is a very busy slide, and probably 11 the best approachhere is to review it andget back to 12 us ifyou have comments. But just to give you an idea 13 that we're taking this seriously and doing an awful 14 lot of testing, this is the test matrix that has been 15 developed. We'll be using four laboratories. We'll 16 be using four test cloth loads. The two loads that 17 were the basis for the issue identification, but also 18 two new loads of kind of virgin material coming from 19 the two suppliers. 20 we will be looking at the sort of data 21 that's outlinedinthe spec, as well as somemuchmore 22 detailedinformationthat isdonebytheDepartmentof 23 Agriculture down in their research center in New 24 Orleans. 25

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• 52 1 measurements, somewhat equivalent to what they did in 2 May, but with different loads of material. What 3 ArthurD. Little isplanningondoingis simulatingor 4 doing some of the work that's similar to what we did 5 years ago. This is some data from a project we did 6 for EPRI a few years ago, where we actuallyused nine 7 different washing machines, as well as an extractor. 8 That is an interesting curve because it shows how RMC 9 can vary the G load or spin speed for different 10 machines. We expect to develop some families of 11 curves similar to that for different materials and 12 different test loads. 13 The idea would be to determine whether 14 there needs tobe some sort of anRMC spec tobe added 15 to the test cloth to ensure repeatability and 16 consistency in the future. 17 So given that data and digesting all that 18 data, part two of the action plan would be to 19 determine what changes might be necessary to the 20 current test spec. I'm not exactly sure what that 21 entailed right now. As I mentioned before, we 22 certainlyneedtoput some tolerances inthere tomake 23 it a more viable spec. We also may have to add some 24 data to ensure that test cloth complies with kind of 25 standard expectations for RMC measurements.

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# • 53 1 Dependingonwhathappensthere, theremay 2 need to be some level of amendment to the test 3 procedure, Appendix J-1. I just don't know how 4 stringent that is going to be. But that wouldbe the 5 logical conclusion to all the test work that's going 6 to be underway over the next couple of months. 7 Then the third part is once there are 8 consistent test samples and the issue is resolved, as 9 Chuck mentioned, there is then issue of how does that 10 change what has already been developed. The point 11 here then would be once we have a consistent - - a 12 spec. and a consistent type of test clock, to 13 basically have the manufacturers go back and analyze 14 the differences that might exist or how the data that 15 was supplied to AHAM may have to be modified based on 16 a consistent set of test conditions. 17 The schedule, we're hoping to complete 18 parts one and two by the end of September, about two 19 months away. The time required for that last part is 20 basicallyup to AHAM and DOE to determine in terms of 21 going back and seeing what sort of impact and what 22 sort of changes might need to be made to the data 23 that'sbeendeveloped. Thenbasedonagainthe extent 24 of the changes of that data, that will impact the 25 analyses that havebeendone. I guess ultimatelythat

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•• 54 1 will tell you where you are in your overall schedule. 2 So that's theplan. As I say, we have had 3 a lot of input from experts in the field, so we feel 4 prettygood about it. But this is obviouslya time to 5 ask questions or make suggestions as well. 6 Yes, sir? 7 MR. STEPHENS: Charlie Stephens, Oregon 8 Energy Office. Do you know the test procedure well 9 enoughto tellme whetherthe temperature of the rinse 10 water that's being spun out of these clothes is held 11 tightly, as to the tolerance? 12 MR. TOPPING: Is someone from ITS here? 13 MR. BROOKMAN: Please come to the 14 microphone. Did you hear the question back there? 15 MR. MORGAN: Yes. I did. 16 MR. BROOKMAN: Thankyou. Please identify 17 yourself for the record. 18 MR. MORGAN: Ken Morgan, from ITS. 19 The water temperature is held within 20 we're tryingtoholdwithinplus orminus onedegrees, 21 but in general, it's two degrees. So if we're trying 22 to do 100 degrees, then 98 to 102 is acceptable. 23 24 25 MR. STEPHENS: For rinse water? MR. MORGAN: For the water temperature, supply water temperature, the supply itself..

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• 55 1 MR. STEPHENS: Okay. I am trying to get 2 at the temperature that the clothing or the water in 3 the cloths will be at when you are spinning them dry 4 for remaining moisture measurements. 5 MR. MORGAN: Right. We have no data to 6 showwhat the temperature is at that time. Depending 7 on what the cycle duration is and
-- 8 MR. STEPHENS: Soyou just fill the rinse 9 cycle with whatever cold water comes in, and there's 10 no tolerance onthe coldwatertemperature as itcomes 11 into the rinse cycle? 12 MR. MORGAN: Yes. 13 MR. STEPHENS: It's just cold? 14 MR. MORGAN: Oh yes, there is a spec. of 15 plus orminus two degrees. But if it's rinsing for 16 if it's spinning and agitating for a period of five 1 7 minutes ortenminutes, obviouslythe temperaturewill 18 go up if the room temperature was higher than the 60 19 degrees or go down if it's 20 MR. STEPHENS: Yes. I ask because the 21 most knowledgeable people I have come across lately 22 about this issue are in Denver testing some different 23 kinds of machines. My conversations with them led me 24 to believe that they believe that temperature is a 25 very big variable in remaining moisture performance.

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• 56 1 If the temperature varies significantly at all, so 2 will the remaining moisture. I don't
-- 3 MR. TOPPING: We'll look into that. 4 Ken, correct me if I'mwrong, but the RMC 5 test is at the end of a washing test. Is that 6 correct? 7 MR. MORGAN: That'sright. The endof the 8 whole cycle. 9 MR. TOPPING: You basicallyrun the whole 10 cycle. The inlet water temperatures are controlled. 11 What you are saying is you don't know how the 12 temperature might vary over time through the spin 13 cycle. But the inlet temperature to the rinse cycle 14 is controlled. 15 MR. STEPHENS: Yes. Well these folks at 16 Levandry in Denver found that there was a huge 1 7 variation in remaining moisture depending on the 18 temperature of the water and the cloths in the water 19 in the cloths as they were spinning them. The hotter 20 it was, the lower the remaining moisture they got. 21 MR. BROOKMAN: I see Larry wishes to 22 comment. Can we let Bryan respond first? 23 24 25 MR. BERRINGER: Bryan Berringer, DOE. Larry is probably going to say the same thing. 

### We have done testing with both J and J-1 at different

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• 57 1 temperatures. We are aware that there is a 2 difference, the RMC will vary at different 3 temperatures. That is correct. The problem is is 4 that we're doing the same machine, the same cloth, I 5 mean the clothwiththe sameparameters. We are still 6 getting a variation. We're not changing the 7 temperature or the machine or anything. 8 MR. TOPPING: Same day. 9 MR. BERRINGER: So I don't think that's a 10
-- yes, same time period. 11 MR. BROOKMAN: Same day, so same water 12 temperaturepresumedfor the rinse cycle. That'syour 13 point. 14 Larry? 15 MR. HAWKINS: Yes. I just wanted to add 16 that the testproceduredoes specificallytiedown the 17 water temperature. Actually, it ties down the source 18 ofwatertemperatures 140 or 135, dependingonwhether 19 you are looking at the current test procedure or the 20 J, J-1 test procedure. For code 60, it's plus or 21 minus five degrees temperature control. 22 To runtheRMC test, if it'sa coldrinse, 23 you run a cold wash so that you are conditioning the 24 washer with the wash water, the same temperature as 25 the rinsewater. Forwarm rinse, youwould run a warm

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• 58 1 wash. That is one area that couldchange depending on 2 the manufacturer's design, because the warm 3 temperatures do varyby design. But on a cold level, 4 it should be close as is maintainable within the 5 limits, and it is specifiedinthe test procedurevery 6 accurately. 7 MR. STEPHENS: Did you say that it was 8 plus or minus five? 9 MR. HAWKINS: Yes. 10 MR. STEPHENS: By percent or degree? 11 MR. HAWKINS: Degrees F. That'son source 12 water. 13 MR. STEPHENS: Yes, that's enough to make 14 a difference. 15 MR. HAWKINS: In practice, it could be 16 tighterthan that, but intheprocedures it is allowed 17 to be plus or minus five. 18 MR. STEPHENS: Okay. Thank you. 19 MR. TOPPING: Perhaps if you have data or 20 access to additional data, you can let the Department 21 know. 22 MR. STEPHENS: I'll refer you to the guy 23 you can talk to if you want to have a conversation 24 with him. 25

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•• 59 1 into whether it makes
-- there's a reason to try and 2 tighten the tolerance on the order of plus or minus 3 two degrees from five. 4 MR. BROOKMAN: That was Steve Nadel. 5 Additional questions or comments on this 6 subject? Steve? Excuse me. Dick Best. 7 MR. BEST: Dick Best, Whirlpool. Dick, I 8 have a comment here regarding the numbers shown onone 9 ofyour slideswhereyou show likepercent decease and 10 MEF. Just for clarification, maybe for many people 11 here, we're basing the rule on percent improvements 12 not percent change in MEF. For consistency, maybe if 13 we could correlate somehow in the future those 14 numbers, with what it really means in the efficiency 15 level changes, becausetheyarenotnecessarilylinear 16 tracking. 17 MR. TOPPING: That was not an attempt to 18 say anything about the rulemaking. It was just take 19 the equations and the test procedure and get an idea 20 of what sort of a change in RMC leads to what sort of 21 a change in MEF, just so you can bound the problem. 22 Those are just illustrative. 23 24 25 MR. BEST: I understand that. MR. TOPPING: 

### They weren't made to be anything else.

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# • 60 1 MR. BEST: Buttheyaredifferentnumbers. 2 Sometimes they get confusing. 3 MR. BROOKMAN: Bryan Berringer? 4 MR. BERRINGER: Bryan Berringer. I just 5 wanted to respond to that. I kind of mentioned 6 earlier in the presentation that we solved for a 7 vertical axis machine as much as a ten percent 8 difference in improvement. So a machine that was 9 showing in ourTSD at 30 percent improvement, dropped 10 down to a 20 percent improvement. So that's the 11 variation there. 12 I have seen with the horizontal, I think 13 aneightpercent difference inMEF, anda sixpercent. 14 So it didvarybetweenmachines from the limited data 15 we know. Between three machines, I saw a tenpercent 16 difference, and eight percent difference, and six 17 percent difference in the MEF values. In percentage 18 improvement. 19 MR. BEST: Just asking that to keep the 2

### o numbers straight so we know which ones you are 21 referring to. 22 MR. BROOKMAN: Additional questions or 23 comments on test procedures, and particularly, Dick 24 endedtalkingabout theplanof action. I knowthat's 25 of interest to several of you.

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# • 61 1 Steve Rosenstock? 2 MR. ROSENSTOCK: Steve Rosenstock, Edison 3 Electric Institute. If the NOPR was scheduled to be 4 sent out in December of 1999 on the current schedule, 5 October, November, it seems like with the timetable, 6 October, November, that's going to be two months. Is 7 it going to be enough for part III? 8 ASSISTANT SECRETARY REICHER: That 9 depends. I mean it really depends on what the first 10 two steps of the actionplandetermine. That's really 11 what we'll know somewhat more in a few weeks when we 12 get some data back. Then we'll know obviously in a 13 very clear fashion when we get through those steps. 14 MR. BROOKMAN: That was Dan Reicher. 15 Additional questions, comments? Yes, 16 Alan. 17 MR. KESSLER: Alan Kessler from Amana. 18 Dick, I know you've got USDA getting into 19 it. I am sure that they will have comments on the 20 cotton specifications, long staple, diameter, 21 similarly on the polyester, the diameter. There's a 22 whole lot of opportunity to work this. We haven't 23 talked about it. 24 25

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# • 62 1 this issue, my understanding is that some 2 manufacturers are tending to use one hepa cloth and 3 get a certain set of results, some manufacturers are 4 using another cloth and getting other results. I was 5 curious, without mentioning companies' names, is it 6 basically four manufacturers versus one, or three and 7 two? How big
-- how uneven a split is there between 8 the different cloths among the manufacturer tests? 9 MR. TOPPING: I wouldn't evengo as far as 10 what your first statement. What we doknow is that in 11 one particular set of tests, there were significant 12 differences. How wide ranging that is, and in fact, 13 whether that can be traced to different samples of 14 different suppliers inthe long-term, we'llknowa lot 15 better in a few weeks. 16 MR. BROOKMAN: Additional questions, 17 comments? Other questions? Assistant Secretary 18 Reicher? 19 ASSISTANT SECRETARY REICHER: I just 20 wantedtobe sure -- we're at sort of a criticalpoint 21 with this action plan being outlined. I think it is 22 important that if there are other issues or problems 23 people have with it, this is really an important time 24 because we reallywant to agree that this is the right 25 way to be proceeding. I was very impressedwith what

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• 63 1 Dick laid out, but if there are other wrinkles in 2 this, no pun intended. I'll reserve my otherpun for 3 later. 4 MR. BROOKMAN: We reallyneedtoknowwhat 5 those are now or in the next few days, as people 6 submit their comments. Because what I would really 7 very much like to avoid is a month or six weeks from 8 now, people taking issue with the action plan that 9 we've laid out, because there's some great detail to 10 it, and a lot of players. I think we have been very 11 open about how we're going forward. Let's hear those 12 now or very quickly. 13 ASSISTANT SECRETARY REICHER: I would 14 refer everybody to the last two slides that Dick put 15 up there on pages seven and eight in your handout, 16 where they lay out the action plan elements and also 17 the schedule. 18 MR. STEPHENS: CharlieStephens. It looks 19 like a comprehensive plan. I think you are going to 20 find out more than most of us want to know about. 21 MR. TOPPING: True. Alreadywe knowmore 22 than we thought there was to be known. 23 MR. STEPHENS: I don't see any inherent 24 flaws in it from the outset. So it's comprehensive. 25

(202) 234-4433 MR. BROOKMAN: What about the schedule NEAL

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• 64 1 itself? Let'saskthat questionbroadlyanddirectly. 2 MR. STEPHENS: It'spretty fast from what 3 I can see. I don't know that you can do it any 4 faster, quite frankly, from my perspective, knowing 5 about this process. 6 MR. BROOKMAN: Comments from the 7 manufacturers about the schedule? Dick Stilwell? 8 MR. STILWELL: Dick Stilwell, Maytag. I 9 think the schedule is pretty aggressive, but I think 10 it needs to be aggressive. I think we really need to 11 get after this. 12 I wouldliketocomment that nowthat this 13 question of confidence about the test cloth has been 14 raised, I think ultimately we are going to need some 15 kind of a certification of the test cloth as to its 16 RMC range. I mean we are going to need to put some 17 kind of a specification on the RMC of the test cloth. 18 I think that's something that ultimatelywe are going 19 to have to have. We may as well get started on that 20 part of it as soon as possible. 21 MR. BROOKMAN: Let me ask, Dick, do you 22 see it going in that direction or is that anticipated 23 as part of the action plan? 24 25 MR. TOPPING: Yes. There needs to be I think two things. One is the current specification

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• ·---·--- 65 1 needs to be cleaned up because it's just too loose 2 now. Then the second is given that this happened even 3 once, there's something that cangowrong. Soyou are 4 absolutelyright. That needs tobe somehowrecognized 5 through some sort of test. 6 Obviouslywhat we don't want to do is come 7 up with million dollar test cloth requirements. So 8 really, I mean the idea is to try to keep the spec. as 9 loose as reasonable. At the same time, making sure we 10 cover all these issues and eventualities. So that's 11 kind of the balancing act. 12 I'll just say in closing, this is a great 13 opportunity for stakeholder participation and 14 cooperation. Great opportunity for people to work 15 together because we are looking for data, we're 16 looking for help in all sorts of different ways. So 1 7 hopefullywe canwork together on this andget it done 18 really quickly. 19 MR. BROOKMAN: Gene Foley? Pleaseuse the 20 mike, Gene. That was a shoot, for the record. 21 MR. FOLEY: Gene Foley, AHAM. Are you 22 comfortable that the variability at this point is 23 strictly a test cloth problem? 24 25

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### MR. TOPPING: 

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• 66 1 comments, before we move on? 2 MR. KESSLER: Dick, I have a question 3 here. Ifwe assume we've got a test clothvariability 4 problem and we utilize a current test cloth as 5 currently manufactured, how long do you think it's 6 going to take, and I guess Luther is the guyto ask to 7 get more test cloths made that are consistent so that· 8 we canassure reproducability. I mean is this a quick 9 turnaround kind of a deal? 10 MR. TOPPING: We are going to start with 11 what we have. You know, virginmaterial, unused from 12 both suppliers, and see where we are. 13 MR. BROOKMAN: Did that answer your 14 question? 15 MR. KESSLER: Not really. We don't know 16 what the answer is. 17 MR. TOPPING: Yes. Absolutely. 18 MR. KESSLER: Okay. 19 MR. BROOKMAN: Finalquestionsorcomments 20 before we move on? Let me reaffirm what I heard the 21 Assistant Secretary say, which is that the Department 22 is seeking not only your participation, but your 23 ongoing thoughts about this quickly. That is, upon 24 reflection, if there are other things that occur to 25 you, other snags, other concerns, other missed

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# • 67 1 opportunities in the analysis or the plan as 2 presented, I hear the Department seeking that you 3 quickly get back to them and help them and all the 4 otherplayers inthisto confirmthe analysis andmove 5 forward. 6 Dick, they know how to find you, yes? 7 MR. TOPPING: I think so. I cangive them 8 a phone number if you're interested. Do you have a 9 roster? Is it in the roster? 10 MR. BROOKMAN: Yes, the participant list 11 from this meetingwill include Dick's name, telephone 12 number, and other contact information. 13 So then let's move onto the next segment 14 of the agenda, which is consumer analysis. Steve 15 Grover from Quantum. 16 After this segment, for those of you that 17 are interested, we will be takinga break. So hang in 18 there. 19 MR. GROVER: Can people hear me in back? 20 Again, I am Steve Grover from Quantum Consulting. We 21 were hiredby the Department and working withNREL to 22 do the consumer analysis for this overall clothes 23 24 25 washer rulemaking process. What I intend to do is talk a little bit, review the objectives, walk through the methodology

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• 68 1 that we used. Those ofyou that have seenthe report, 2 know that it's fairly detailed. I am going to talk a 3 little bit about some very general results. 4 So first of all, the objectives that we 5 had for the consumer analysis were two-fold. One was 6 to determine which features on a clothes washer were 7 most important to consumers, and to set up a 8 systematicprocesstodetermine that. Oncewe figured 9 out which features were most important, we wanted to 10 use those in a separate part of the analysis to see 11 that if these features were changed due to a proposed 12 efficiency standard, how was this going to affect 13 consumer utility, andultimatelyhow is this going to 14 affect the decision to purchase a clothes washer. 15 So to address these issues, we had a two16 phased research approach. We utilized both focus 17 groups and conjoint analysis. The focus groups were 18 used to determine the list of the most important 19 features. Once we determined an overall list of what 20 was important to consumers, we took the top few. We 21 took six. We used that in the second phase, in the 22 conjoint analysis. 23 The conjoint analysis was a tradeoff 24 analysis tool that we used. Ultimately this was used 25 to determine the utility of these features. We went

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# • 69 1 through some purchase scenarios and estimated 2 elasticity to go through some market simulations to 3 see how utility would change. 4 MR. BROOKMAN: Steve, I would like you to 5 say a little more about what conjoint analysis is for 6 most of us who don't know what that means. 7 MR. GROVER: I'm sorry. Yes. I was going 8 to lead into this. I am going to discuss next both 9 focus groups and conjoint. 10 MR. BROOKMAN: Okay. Thank you. 11 MR. GROVER: And now the results. Okay. 12 Let me first talk about the focus groups. We designed 13 the focus groups to let consumers tell us what was 14 important to them. What we did was we had focus 15 groups, we had a national sample. We had two focus 16 groups in five different cities for a total of ten 17 sessions all together. We did them in the D.C. area, 18 Madison, Wisconsin, Dallas, Miami, and San Francisco 19 Bay area. We had 8 to 12 participants for each 20 session, depending on the weather. We ended up with 21 90 participants total across these sessions. 22 The way that we did these focus groups is 23 we startedoff having the participantsjust volunteer 24 the features that were important to them. We had the 25 moderator be as non-intrusive as possible and just

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• 70 1 have the ·discussion be free-form, have respondents 2 suggest what features were most important. 3 Once that discussion kind of ran its 4 course, the moderator had a master list of features 5 that we wanted to discuss. This is the list that the 6 manufacturers actuallyprovidedDOE some time ago. At 7 thispoint, themoderatorwouldsuggestotherfeatures 8 that hadn't been covered in the focus group to that 9 point. So what this didwas it allowed the groups to 10 be structured so that the customers, the respondents 11 were providing the· information, but by referring to 12 this master list, it also ensured that each focus 13 group covered the same list of characteristics across 14 all 10 groups. 15 At the end of these sessions, the 16 participants were asked to list their top 10 features 17 that were most important in making the decision. So 18 fromthis list, the entire listwas about 75 features. 19 That's given in one of the appendices of the report. 20 I have here a list of the top 12. 21 So the first column isjust the features, 22 price, capacity, energy/water costs. The middle 23 column is howmanytimes out of 90 was thisparticular 24 25 item mentioned. 

### Then the far column is just the percentage out of the total possible, the percentage

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# • 71 1 out of 90. 2 MR. BROOKMAN: Is 90 your total N? 3 MR. GROVER: Ninetyis the totalNfor the 4 focus groups. 5 MR. BROOKMAN: Thank you. 6 MR. GROVER: So you can see here that 7 price was the top feature, was mentioned 75 out of 90 8 times, or 83 percent of the time. So the top 9 features, price, capacity, energy and water costs, 10 load size options, meaning can you adjust the water 11 level up and down, durability, water temperature 12 options, and door placement were the top seven. 13 What we wanted to do was take the most 14 important features to include in the next phase, the 15 conjoint. We wanted to use six features. We felt 16 that six features would allow for a manageable number 17 of things to be evaluated in the conjoint. Any more 18 than that, you start adding cards, it becomes much 19 more complicated. 20 So we used, we included doorplacement in 21 place of durability for a couple of reasons. One, 22 door placement is very important for proposed 23 efficiencystandard. This is somethingthat is likely 24 25 to be impacted. So we wanted to make sure it was included.

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• 72 1 Durability, while important, is not so 2 much a feature. We considered it more of like a 3 performancebenefitofanoverallproduct design. It's 4 less likely than door placement to be affected by an 5 efficiency standard. So we opted to use door 6 placement. So we have six of the top seven important 7 features from the focus groups that are used in the 8 conjoint. 9 All right. So this is the first phase. 10 Determining from the consumers what are the important 11 features. The next phase was the conjoint analysis. 12 What the conjoint did, a conjoint is a stated 13 preference data collection technique. What we did in 14 these conjoint sessions is that we had these six 15 features printed on cards with different levels for 16 each feature. Each respondent in the conjoint 17 sessions thenwere givena set of 16 cards, where each 18 card reflected a different clothes washer. Each card 19 had those six features on the card with different 20 levels. 21 They were asked
-- 22 ASSISTANT SECRETARY REICHER: Excuse me. 23 Levels of what? 24 25 MR. GROVER: Levels of the
-- maybe this will be a little easier to --·the next slide was the

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# • 73 1 levels of the six. So the six most important 2 features. Let me talk about this first. That might 3 clear things up. 4 The features that we used, these are the 5 same top important features that came from the focus 6 group. We used price, retail price of the clothes 7 washer. What we did also was we used different price 8 pointstoroughlycoincidewithefficiencylevels. We 9 had a standard efficiency level, what we called a 10 medium efficiency level, which corresponded to a 20 11 percent improvement in efficiency, and we had a high 12 efficiency level, which corresponded to a 40 percent 13 increase in efficiency. 14 Sohere, pricewas the retailpriceof the 15 clothes washer. We used three price points, $400, 16 $450, and $650, corresponding to a standard 17 efficiency, medium efficiency, and a high efficiency. 18 Savings, which was annual water and energy savings, 19 again, we had three points, zero for current standard 20 efficiency, $10 a year, $50 a year. 21 Capacity, we had two choices, either 22 standard capacity or extra large capacity. The 23 standard capacityis the normal residential size home 24 25 unit. Extra large capacity would be 20 percent greater than that.

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• 74 1 Door placement, there was two choices, 2 either front loading or top loading. I want to 3 emphasize one thing about door placement, is that we 4 made the point in both the focus groups and the 5 conjoint to make sure that people understood that it 6 is possible to have an H-axis machine that is a top 7 loader. We wanted them to try and focus on the 8 convenience of the door, and focus just on the door 9 placement. 10 MR. BROOKMAN: Please identify yourself. 11 MR. ESSMA: Eric Essma, Clorox Company. 12 Could I just ask how you qualified the participants 13 for the focus groups? 14 MR. GROVER: How we qualified? 15 MR. ESSMA: Were they head of households, 16 most likely to do laundry, or are theyjust people on 17 the street? How did you 18 MR. GROVER: They had to be the person 19 that did the laundry in the household. That was the 20 case with the conjoint as well. We wanted to make 21 sure that the people were the people that actually 22 were familiar with doing the laundry. So they could 23 both contribute intelligently or informed for both 24 stages. 25

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• 75 1 options. Eitheryouhadhotwater available, socold, 2 warm, and hot, or else hot water is not available. 3 Either cold or warm. 4 Then finally, load sizes, either 5 adjustable or non-adjustable. 6 MR. BEST: Dick Best, Whirlpool. While 7 we're on this conjoint analysis, the one issue I see 8 here is on door placement. If you're not aware, the 9 Energy Star program has both top and front-loader 10 products listed as high efficiency program. In this 11 study, you used door placement as mutually exclusive 12 with energy savings. We think that's totally 13 incorrect. In fact, it's not mutually exclusive. So 14 that part of it I think needs further examination. 15 MR. GROVER: The conjoint analysis is 16 designed to present these six characteristics 17 simultaneously to the customers. Each card, it has 18 these sixcharacteristicswithsomelevel. Everything 19 is mutually exclusive from the other. What this does 20 is itmakes the respondent look at the cardanddecide 21 what's important, and then rank the cards. 22 MR. BEST: We understand. What we're 23 saying is choosingbetween energyefficiency and door 24 placement is not a choice a consumer necessarily has 25 to make.

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# • 76 1 the setting. 2 MR. BROOKMAN: I saw Assistant Secretary 3 Reicher. I also saw Bryan Berringer. 4 ASSISTANT SECRETARY REICHER: This is Dan 5 Reicher. I think you are saying something similar. 6 You're saying that these are analyzed, you put them 7 all together, and you give people the options to 8 choose how they like them linked. 9 MR. BROOKMAN: Bryan? 10 MR. BERRINGER: Yes. BryanBerringer. In 11 the report, we have laid out in Appendix D, the 12 various cards. There are 16 cards that theyused. So 13 whatyou're saying, Dick, andthesewere alsoordered. 14 There were like four sets of cards, different color 15 codes that put -- so you didn't put prices on the top 16 all the time. But it was looking
-- what Steve is 17 trying to say is that these are not necessarily
-- a 18 $450 machinemay havebeen a front loader. So the six 19 variables are lookedat independentlywhentheydo the 20 conjoint. But there is a sample of the 16 cards that 21 were used in there, so there was no weighted 22 preference to any one. 23 MR. BROOKMAN: Steve, are you in a 24 position to answer Dick's? 25

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# • 77 1 additional point. Is that if we link say like high 2 price to more efficient machine, greater savings, or 3 if you link door placement to savings, during the 4 process of ranking the cards, we can't tell then what 5 the person was focusing on when we do the analysis. 6 If front loaders were always associated with the $50 7 savings, and someonerankedtheircardsbasedonthat, 8 when we go back we can't tell if they were looking at 9 the door and were looking at convenience for some 10 reason, or if they were looking at the savings. 11 So that's why when you look at the cards, 12 a $400 machine might be a front loader with $50 13 savings, because we wanted to require the respondent 14 in the process to look at these things and make a 15 decision about what's important. I think that comes 16 out later on. 17 MR. BEST: I believe part of the issue 18 here is earlier in this rulemaking, I thought we 19 passed the point where the utility issues were pretty 20 muchunderstoodbetweentop and front loading, andthe 21 fact that it was not a utility lost to the consumer on 22 energy efficiency because of door placement, because 23 all options were available. 24 In this case, we're going back and we're 25 doing this study for this energy standard rule. But

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• 78 1 door placement back into the equation is not a choice 2 the consumer has to make in this energy or machine 3 attributes. 4 MR. BROOKMAN: Okay. Thanks for making 5 that point again. Thank you. 6 What I heard you say there, Steve, was 7 thatusingthese cards, theones thatBryanreferenced 8 in the document Bryan, hold up that document, 9 please. What's it called? 10 MR. BERRINGER: It's the draft. "Draft 11 Clothes Washer Consumer Analysis," April 1999. It's 12 Appendix D. 13 MR. BROOKMAN: So following on from the 14 focus groups, where the focus groups specified what 15 the six characteristics were that were most important 16 to them. Then using these cards, they make choices 17 which are kind of mutually exclusive. Right? 18 MR. GROVER: They look at the cards and 19 they rank the cards. 20 MR. MCMAHON: JimMcMahon at ADL. I don't 21 think the word "mutually exclusive" is right. They 22 are independent. 23 24 25 MR. BROOKMAN: Okay. Thank you. MR. MCMAHON: So every possible combination is in there. In Appendix D, card 10, is

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• 79 1 a $400 clothes washer, with $50 energy and water 2 savings. So that is a high efficiency machine, and 3 it's a top loader. So every possible combination is 4 possible. 5 MR. BROOKMAN: Thank you. That is a 6 better way of saying it. Thanks for the correction. 7 Additional? Yes, Earl Jones? 8 MR. JONES: Earl Jones, GE. Just to 9 comment further. I thought the purpose of the 10 analysis which you were just reporting on was to get 11 from consumers what their issues were, and to the 12 extent that door placement surfaced in their 13 preferences, then obviously it's legitimately in the 14 study, not somethingwhich the Department or somebody 15 else could sort of exclude because of their own 16 interests. 17 MR. BROOKMAN: Thank you. Alan? 18 MR. KESSLER: Yes. I think what you are 19 saying is these are imaginary machines that don't 20 exist and in some cases couldn't exist. The objective 21 is to find out if consumers would like to have that, 22 and how important it is to them. 23 24 25 MR. GROVER: How they would fall in, and so yes. That's exactly right. 

### In the 

### ranking process, there are some that like the example thatwas

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• 80 1 justgiven, youwouldnot see inthe marketplace. But 2 it's useful to see where these things are placed. 3 MR. BROOKMAN: And they are making a 4 choice among all possible choices, and then those get 5 ranked? 6 MR. GROVER: Not all possible 7 combinations, but each one of these price points and 8 savingspoints showsup enoughwhere the ranges the 9 way they show up it's independent of the other 10 variables. 11 MR. BROOKMAN: I'mgetting the point that 12 we've even clarified this sufficiently for me. 13 (Laughter.) 14 Please say your name. 15 MR. FLORA: My name is Brad Flora. I'm 16 withWhirlpool. Just a quick question. I notice you 17 left durability off of these factors and it's ranked 18 equally high with some of these. 19 MR. GROVER: Right. The reason we did 20 that is we wanted to -- we knew that door placement 21 would be an issue in the proposed efficiency rule. 22 That is one waythatpeople canhave a frontloadingH23 axis machine. We knew that was an issue. We wanted 24 25 to include it in the conjoint. We decided that durability for the proposed rule would be less of an

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• 81 1 issue because it'snot reallya feature per se. It is 2 more of an overall benefit. It's also less likely 3 than door placement to be an issue with the rule. So 4 we made the decision to go with door placement and 5 leave off durability. 6 MR. BROOKMAN: Dick Best? 7 MR. BEST: Just to follow up on your 8 comments and Mr. Jones. I think, Earl, you put it 9 adequately, that the consumer input was important 10 here. Consumers ranked durability ahead of door 11 placement. Why did you choose to override the 12 consumer input? 13 MR. GROVER: Again, we felt that door 14 placement would be more of an issue. We wanted to 15 make sure that that was included in the secondphase, 16 althoughwe realizedthatwe wantedtohave the system 1 7 set up so that the consumers gave us their most 18 important ones. We still included six of the most 19 seven important issues. 20 

### MR. BABICH: I am Bill Babich with 

### NREL, 21 who was involved in this effort. The more important 22 was the fact that durability, like cleanliness, are 23 performance characteristics that you can't quantify 24 like, for example, water level on machines. It's not 25 a feature.

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• 82 1 characteristic. 2 This was an effort to determine what 3 features were most valuedby consumers. It's assumed 4 that high durability is valued, but how do you 5 quantify durability? How do you determine if it's on 6 a machine or not? So this was an effort to quantify 7 features. That was the most important reason that 8 durability was not chosen to be included in the 9 conjoint. It was also, like Steve noted, of high 10 interest to look at door placement. So it worked out 11 well that it was high enough up there to be included 12 once durability was taken off. But it was the 13 performance characteristic issue which was most 14 important. 15 MR. BEST: For the purpose of expediting 16 this meeting, I'll pass on further comment. But I 17 will say that we don't agree with the methodology of 18 this. 19 MR. BROOKMAN: I knowtheDepartmentwould 20 welcome your comments expanded in writing. But I 21 think it has been useful to raise questions about the 22 methodology, which causes me to ask are there other 23 questions about the methodology as explained? 24 25

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# • 83 1 have got a question in terms of one of the features 2 from the focus group was water temperature options. 3 When we got to the conjoint analysis, that became 4 whether theywantedhot waterornot. There are other 5 temperature options other than just eliminating hot 6 which affect the energy rating of the machine by the 7 temperature utilization factors. I wondered how we 8 made that transition or shift. 9 MR. GROVER: That definition was 10 consistent from the focus groups to the conjoint. 11 When we talked about water temperature options, what 12 came out in the focus groups was theywantedhot water 13 available. 14 MR. MODTLAND: Did we ask them about 15 whether they wanted a warm rinse? 16 MR. GROVER: Thatwasn'tbrought upbythe 17 respondents in the focus group. 18 MR. BROOKMAN: Yourmethodologywasdriven 19 by what they stated as preferences and it didn't come 20 up, is what you are telling us? 21 MR. GROVER: Yes. 22 MR. BROOKMAN: Bryan Berringer? 23 MR. BERRINGER: Just toanswer. Therewas 24 on the cards, it does state in Appendix D, we have 25 wash/rinse temperature. So we had cold/warm. So we

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### ------------------ 84 1 did address. One of the options would be a cold wash 2 rinse. Sowe were looking at rinse inthere, in those 3 options. Again, if you look at the cards, it's in 4 Appendix D of the report. So that we did specify 5 wash/rinse temperatures when they were sorting the 6 cards. So if they want hot/warm or cold. But we 7 didn't specifically ask them if they wanted
-- they 8 more or less wanted to have features to select that. 9 I don't know that any -- again, what Stevehadraised, 10 I don't think anybody specified they had to have warm 11 rinse. 12 MR. MODTLAND: Howmuchtime didtheyhave 13 to make this determination or sorting the 16 cards? 14 MR. GROVER: We allowed two hours. There 15 was never a situation where people required 16 actually no. It was more like an hour-and-a-half. 17 But we let them stay as long as they needed. 18 Generally there was never a problem of asking people 19 to leave. So basically they had as long as they 20 needed to do it. 21 MR. BROOKMAN: Didyouhelp thembypiping 22 in new age music or any enhancement? 23 (Laughter.) 24 25

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• 85 1 get done early? 2 MR. BROOKMAN: ·Are there any additional 3 questions that relate to the methodology? I think 4 this has been useful. 5 MR. GROVER: Therewere cookies there. So 6 they had an incentive to stay longer. 7 (Laughter.) 8 MR. BROOKMAN: Bryan Berringer. 9 MR. BERRINGER: I sat in on a number of 10 them, some of the conjoints. But yes, the focus group 11 just went, as Steve said, the focus groups went as 12 long as they basically ran out of ideas. The first 13 groupwent about three hours. Theyjustkept ongoing 14 and going. Some of the other ones we had, they went 15 as far as they could. Then the master list was 16 brought out, as Steve said. 17 In the conjoint, yes, they were given, I 18 remember it was in Washington, we had a little old 19 lady that came in late. She was just given the time 20 until she was done. When she was done, she was done. 21 There was no pressure to -- 22 MR. GROVER: Even if it goes into the next 23 group, we let them stay and work it out. 24 25 

### MR. MODTLAND: 

### But they were 

### given some financial or some gift?

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• 86 1 MR. GROVER: Yes. Both focus groups and 2 conjoint people were paid $50 to attend. 3 MR. MODTLAND: Sothequickertheydidit, 4 the better their rate. 5 (Laughter.) 6 MR. BROOKMAN: Okay. Additional comments 7 orquestions about themethodology? You are not quite 8 through with your slides. So keep going. 9 MR. GROVER: Are people clear with the 10 rank? Let me just say a couple other things. They 11 ranked the cards. Then once the cards are ranked, we 12 ask them also which of these would theybe willing to 13 purchase. So not only do we get an idea of the 14 ranking, but we also are goingtoget some information 15 about how the six features that are laid out there 16 will also drive the decision to purchase. This 17 becomes important in some of the results I am goingto 18 show. 19 Acouple other things. We have a sample, 20 again. We have a national sample split across four 21 regions. We did conjoint sessions in four different 22 cities, Washington, Madison, San Francisco Bay area, 23 and Dallas, split almost evenly across the four. 24 We also had a survey at the end, which 1s 25 also included in the Appendix C, I believe, in the

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• 87 1 report, that asks demographic information as well as 2 goingthroughsome typesof repairpurchase scenarios, 3 wherepeople are askedquestions like "Ifyourclothes 4 washer breaks and it's a choice between repairing it 5 for $150 or purchasing a new one at $450, what would 6 you do?" 7 We also asked have they tried an H-axis 8 machine, would they be willing to consider it. Have 9 you purchased a clothes washer in the recent past? 10 This surveywas used to help break up the 11 sample and the demographic groups. It also provided 12 some consistency checks, to see that people when they 13 state their preferences in the survey, do they rank 14 the cards in a consistent manner. For the most part, 15 the survey did support what we found in the conjoint. 16 MR. BROOKMAN: Bill Prindle. 17 MR. PRINDLE: Yes. Bill Prindle. Inyour 18 geographic selection test site, did you take into 19 account areas that have had promotion on incentive 20 programs for high efficiency equipment? Did you 21 specifically include or excluded areas? 22 MR. GROVER: We were most concerned with 23 making sure, and we know that California has had a 24 program like that. I know that Florida has not. So 25 we wanted to make sure at least there was a mix to

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• 88 1 some degree, but we didn't find strong regional 2 differences on things like price. 3 MR. BROOKMAN: Did not or did? 4 MR. GROVER: Did not. 5 MR. PRINDLE: Were there any questions 6 specifically that asked whether people had 7 participated in or heard about promotional programs? 8 MR. GROVER: There were not questions 9 specific to that. 10 MR. BROOKMAN: What I thought I heardyou 11 say there was that you didn't try to introduce any 12 specific controls for that feature. 13 MR. GROVER: That's correct. 14 MR. BROOKMAN: Bryan Berringer. 15 .MR. BERRINGER: Just to add, we did have 16 a separate, after the.conjoint, we did come up with a 17 and it's also in the report inAppendixC, a number 18 of questions that maybe useful to you, Bill, that we 19 sort of asked if they got a rebate and how they were 20 financing, various questions that we thought were 21 important that we alsowantedto tryto capture inthe 22 study that were followed after the conjoint. 23 TheotherthingI wouldjust liketooffer 24 toDaveModtland, iswe have a numberof videotapes if 25 he has a couple of days. They're riveting.

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# • 89 1 MR. BROOKMAN: Other questions or 2 comments? Why don't you proceed with your slides. 3 MR. GROVER: Okay. When you look at the 4 report, you'll see that it is very detailed. I just 5 want to touch on a couple of analyses that we did. 6 The first was looking at how each of these six 7 features influenced the rankings. We have a chart 8 here. Each row reflects a different feature. Each 9 column represents the sample group that was examined. 10 In the body of the table, this shows the portion 11 attributable to that feature that affects total 12 utility. 13 So for this first column here, for the 14 full sample, each of these columns always sums up to 15 100percent. Sowhat this is saying is in the ranking 16 procedure, whichofthese features iscontributingthe 17 most to this decision. 18 So we can go back in. We ran a Logent 19 model regressing the ranks against the features, the 20 six features and the values of the features. So the 21 higherthevalue inthe table, themore influence that 22 feature is having in the procedure. We have this 23 broken out for different sample groups. 24 25 I just wanted to point out a couple general things to look at. You can see in the first

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..-,.-r:-...·.· 90 1 row that price is consistently either the number one 2 driver or close to it. That's consistent across the 3 groups. Forthe full sample, it's 26 percent of total 4 utility, is drivenbyprice. Low income, you can see 5 that it's higher, it's a greater consideration. 6 Eighteen to 24 year olds, it's also high. 7 One thing I want tomake clearabout these 8 sub-sample categories, is that these are not mutually 9 exclusive groups. There might be some low income 10 people that are also in the 18 to 24 category. 11 While price is important, it's not heads 12 and shoulders more important than everything else in 13 the rankingprocedure. You can see the last row, load 14 size. Being able to adjust the water level to match 15 the loadwas also very important, almost as important 16 as price, equally important with some, and actually 1 7 more important than price slightly for those that 18 would not consider an H-axis machine. 19 So while price is important, at least in 20 this instance, I mean while it's the most important, 21 it's not the only important factor. You can see the 22 savings is also important. 23 Anotherimportantthingtolookat isdoor 24 placement does not come up as.important as theseother 25 features.

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• 91 1 the exception being those that indicated they would 2 not purchase an H-axis machine. This is where the 3 survey again is consistent with the conjoint. The 4 survey said they would not, that 30 percent of the 5 people would not consider purchasing an H-axis 6 machine. For them, door placement becomes much more 7 of an issue. 8 Okay. So this gives a general idea of
-- 9 you know, we know that all six of these features are 10 important. The conjoint allows us to see when push 11 comes to shove and people have to make tradeoffs, 12 what's really important across these six 13 characteristics. 14 MR. FLORA: Question. Brad Flora from 15 Whirlpool. In terms of load size, based on the focus 16 groups, did you get any feel for what was the logic 17 behind? I mean why load size was so important to 18 these consumers? 19 MR. GROVER: It was the idea of wasting 20 water, the idea of having a full tub of water to wash 21 a few things. 22 23 24 25 MR. BROOKMAN: How did you reveal that? MR. GROVER: We just allowed them to -- MR. BROOKMAN: They offered that in their comments in the focus group itself?

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• 92 1 MR. GROVER: Yes. When theybrought that 2 up, the moderator would probe a little bit about what 3 the issue was. That was what came up consistently. 4 MR. BROOKMAN: You were careful to say, as 5 someone who has run focus groups, you were careful to 6 say at the outset, however the moderator did not lead 7 them. 8 MR. GROVER: Yes. That'sdefinitelytrue. 9 MR. BROOKMAN: Bill Babuch? 10 MR. BABUCH: Just to clarify a point 11 further. Afterthe list of attributes was providedby 12 therespondents inthe focus group, themoderator then 13 asked, identified various people who provided those 14 and said would you explain to us why you think that's 15 important. So all theydidwas ask that. People then 16 talked about it and a little dialogue would occur. 1 7 It's amazinghowmuchpeople arewillingto talk about 18 this stuff. 19 (Laughter.) 20 MR. GROVER: The moderators were always 21 more to shut people up than to get people to talk. 22 MR. FLORA: Just to make sure I 23 understand. It was the water savings, but it didn't 24 have anything to do with performance or .somehow how 25 the clothes were being washed?

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• 93 1 MR. GROVER: No, not from the focus 2 groups. 3 MR. BROOKMAN: Bryan Berringer. 4 MR. BERRINGER: Just to add, there were 5 some respondents who looked at capacity as they could 6 put more in essentially. It's the younger 7 demographics that you couldputmore inandwashmore, 8 so you spent less time washing. So they like that. 9 Then they also at that, they thought the levels were 10 importantbecause theydidn't want towastewater. So 11 if they just had a medium or small load, they wanted 12 that option to be able to adjust. 13 MR. FLORA: There is some connection 14 between the capacity and the load size. 15 MR. BERRINGER: Yes. They felt that it 16 was important that capacity, larger capacity meant 17 less time washing clothes. 18 MR. BROOKMAN: Dave Modtland? 19 MR. MODTLAND: I guess I have a question. 20 Are you fairly confident they are not confusing load 21 size and capacity? 22 MR. GROVER: Yes. We spent a lot of time 23 talking about
-- because when that came up, I mean 24 25 it's like well how many clothes can we do. They phrased it a lot of different ways.

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# • 94 1 moderator's job to have the person elaborate to 2 clarify what they're talking about. So I do feel 3 confident. 4 MR. MODTLAND: You feel very confident 5 that load size is relating to the ability to adjust 6 water level to the amount of clothes being 7 MR. GROVER: Yes. Because we talked 8 whenever the issue of the amount of clothes you could 9 wash, themoderatormade the decisiontorefertothat 10 as capacity. So that was the term that was used in 11 the rest of the focus group. 12 MR. MODTLAND: How was capacity defined? 13 In terms of clothes you couldwash or in terms of tub 14 volume? 15 MR. GROVER: Tubvolume, especiallyinthe 16 conjoint. We actually had the cubic feet size. 17 MR. MODTLAND: They are not necessarily 18 the same. 19 MR. GROVER: Right. 20 MR. MODTLAND: Not necessarily a direct 21 relationship, dependent upon washing technology. 22 MR. GROVER: Yes. 23 MR. MODTLAND: The people in the survey 24 understand that? 25

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# ·~···. 95 1 MR. ECKMAN: Tom Eckman, Northwest Power 2 Planning Council. In reviewing this and the full 3 report, maybe this is going to sound a little bit 4 parochial, but the Northwest has had some experience 5 with real consumers buying these machines. We have 6 also had some experience both doing the survey work 7 with consumers before and after they have had 8 experience with machines. I don't see anything in 9 this or in the report that describes whether or not 10 experience with the machines changes the way people 11 rank and feel about certain features, and that ought 12 to be added. 13 MR. GROVER: We do have some purchase 14 scenarios. We have a separate sub-group of people 15 thathave at least
-- well, we have recentpurchasers, 16 andwe have people that have triedH-axis. There are 17 slight variations for those people. 18 For instance, for the people that have 19 triedhorizontalaxisandwouldconsiderpurchasingan 20 H-axis, which is not the same as people who purchase 21 them, but at least they have tried them, door 22 placement is even less of an issue for them, which is 23 consistent with other findings, where people as they 24 have used H-axis, I think, become more accustomed to 25 them.

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# • 96 1 MR. BROOKMAN: I wouldlikeyoutoproceed 2 with the slides and keep going. 3 MR. GROVER: Okay. Let me just talk 4 briefly about purchase scenarios, why I think I can 5 breeze through this one without questions, I'm not 6 sure, but nevertheless. 7 The purchase scenarios, we asked people 8 once they ranked the cards, which of these options 9 would you purchase. This was done so we could get a 10 measure of how these six features influence the 11 decision to buy a clothes washer. 12 What we have done then is use a separate 13 Logent model to estimate the likelihood of making a 14 purchase. What that allows us to do is simulate 15 different market conditions, change each of these six 16 features, and see how is this probability going to 17 change. 18 So we start off, again, we had the 19 different sample subgroups in the rows. We have the 20 differentmarket scenarios incolumns. We can look at 21 the standardefficiencycase asreallyjusta starting 22 point. We want to see how does this probability 23 change from the starting point. 24 When we move -- so if we just take the 25 full sample case, it's at .59 is the starting point.

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# •• 97 1 Standardefficiency involvedplugging invalues. For 2 price, it was $400. Savings was zero. It was a top3 loading, standard capacity machine, with hot water, 4 load size adjustable. 5 Medium-efficiency, the only two things 6 that changed, we moved price from $400 to $450. 7 Annual savings goes from zero to $10. You can see 8 with that move, there's relatively or virtually no 9 change in the probability. A very slight decrease, 10 but not anything really that could be considered 11 significant. 12 We went to the high efficiency case, and 13 we looked at two cases where you could get to high 14 efficiency, eitherwithhavinga front-loadingmachine 15 or having a top loading machine that removes hot 16 water. So in these simulations, price went from $400 17 to $650. Savings, annual savings went from zero to 18 $50. Inthe first column, you can see front-loading
- 19
- the machine became a front loader. 20 The net affect of these three changes is 21 pretty substantial. That here this is going to have 22 a significant impact in the decision to purchase a 23 machine. If you get to high efficiency by removing 24 hot water, the effect is more dramatic. 25

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• 98 1 reflecting the change, the net change of changing 2 three things, price, savings, and let's say door 3 placement. 4 The last column looks at holding price 5 constant. We knewgoing intothis, we suspectedprice 6 would be influential. We knew that from the 7 importance statistics. What we did was to holdprice 8 constant to see what the effect of the other features 9 .is. You can see that if we keep price at $400 and 10 justchange savings and locationof the door, that the 11 likelihood of purchase is going to actually increase. 12 What this is saying is that if price is 13 removed from this scenario, that the increase in 14 savings is offsetting the disutility for most people 15 of having a front-loading machine. The exception to 16 this, again, is thosepeople that statedin the survey 17 independentlythat theywouldnot considerpurchasing 18 an H-axis machine. 19 So what this does, going through these 20 probabilityscenarios, again, iswe knowthat features 21 are important. But here we can do market simulations 22 andchange different things, andlookat what's really 23 going to drive this purchase decision. From this, we 24 can draw some general conclusions here. 25

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# • 99 1 can sayis that there are four features inparticular: 2 hot water, being able to adjust the load size, the 3 price, and savings, are all important. This came out 4 in the focus groups. These were in the top five 5 things that were considered. In the conjoint, these 6 were also driving both the purchase decision and the 7 importance intheutilityanalysis. These four things 8 comprised over 80 percent of the utility for each of 9 the sample groups. 10 So of these, price was the most important 11 consideration. Again, this is the number one feature 12 that came out of the focus groups and had the highest 13 importance. When we looked at importance statistics 14 at the conjoint and in the purchase scenarios, it 15 appearedtobe that was what was drivingmore than the 16 other features, the purchase decision. 17 Similarly, door placement was not as 18 important as these otherfeatures. Now again, all six 19 of these features are important, and the conjoint 20 allows us to look and forces the respondent to rank 21 them. Door placement made the cut, but when it came 22 time in the conjoint analysis, when people had to 23 evaluate doorplacement alongwithprice and savings, 24 the focus was more on price and savings and 25 temperature options.

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• 100 1 Then finally, this is something that is 2 includedmore inthe report andcame out inthe survey 3 and some of the analysis that we did with the 4 conjoint, is thatwe lookedat lookingat elasticities 5 for clothes washer purchasers. Those people that 6 currentlyown clotheswashers hadmore of an inelastic 7 demand. This came out of primarily the survey, but 8 also analysis of the conjoint data. That people, when 9 we went through scenarios where they were given a 10 choice between repairing or purchasing, these people 11 were much more likely to purchase and repair as 12 opposed to do without a clothes washer entirely. 13 MR. BROOKMAN: Questions, comments? 14 Charlie Stephens, Steve Rosenstock, and then Gene. 15 MR. STEPHENS: Charlie Stephens. 16 MR. BROOKMAN: Let's try and keep these 17 brief. 18 MR. STEPHENS: Remembering my written 19 comments here, and I hope I get it right. But as I 2

### o recall, pricewasnot themost importantconsideration 21 in a couple of cities. In fact, it fell down the pack 22 quite a ways. Were you ever able to explain why that 23 was? 24 MR. GROVER: Off the top of my head, no. 25 The price was always included as one of the more

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• 101 1 important ones. Areyoureferringtothe focus groups 2 or in the conjoint? 3 MR. STEPHENS: The focus groups that 4 ranked the various things. You had a ranking of what 5 the important features were for each city, city by 6 city in the report. Price in a couple of cities, I 7 was surprised. I think Texas was one of the places, 8 it fell down in the middle of the pack there. It was 9 so far below where every other city seemed to place 10 it, I wondered what the big difference was between 11 that city and the others. I thought it was a fairly 12 significant difference. 13 MR. GROVER: Yes. I'm not sure what 14 happened inDallas in that particular
-- I didn't run 15 thatparticular focus group. One reasonwhywe looked 16 at the incidents of how many times these appeared in 17 the top 10 rather than like an average ranking, is to 18 address that issue. Where sometimes in the focus 19 groups, someone will get off and get on a soapbox 20 about this, that, the other thing. This is a way to 21 kind of control for that. Get somebody to kind of 22 brow beat everyone into not thinking about price. At 23 least it's still considered here. 24 25 soapboxes?

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• 102 1 (Laughter.) 2 MR. GROVER: We covered everything. 3 MR. BROOKMAN: Steve Rosenstock. 4 MR. ROSENSTOCK: Steve Rosenstock, Edison 5 Electric Institute. Just a couple quick comments. In 6 the report on conjoint analysis surveys, one thing 7 that surprisedme was that at page 4-4, 57 percent of 8 those surveyed had used horizontal axis clothes 9 washers in the past. That just seems really high to 10 me. 11 MR. GROVER: No. It was primarily from 12 laundromats. 13 MR. ROSENSTOCK: Okay. 14 MR. GROVER: Although it was surprising 15 that
-- 16 MR. ROSENSTOCK: It still seemed high. 17 Seventy two percent did their laundry at home. 18 MR. GROVER: We took care, in each of the 19 focus groups. 20 MR. ROSENSTOCK: I'm just saying that 21 seemed high to me. 22 MR. BROOKMAN: Bill Babuch? 23 MR. BABUCH: A lot of people go there, 24 from the focus groups it became evident that a lot of 25 peoplego to laundromats towash sheetsorbedspreads,

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• 103 1 big things like that where they need a big capacity 2 washer, biggerthan foryourhome. That's the reason. 3 MR. ROSENSTOCK: It was just very 4 interesting to me. 5 MR. BROOKMAN: Bill Prindle? 6 MR. PRINDLE: Sort of an overall comment. 7 I thinkthis analysis has beenveryhelpful, andlooks 8 like it's methodologically robust. However, I would 9 hope the Department would not use it in a wholly 10 predictive manner as far as market behavior is 11 concerned. For example, in Appendix C, there is a 12 table about willingness to paybyprice category. It 13 says no one will be willing to pay more than $1,000 14 for a washer. Yet we know that all the major 15 retailers have $1,100 machines on their floors and 16 some of them are selling. 1 7 So I would encourage the Department to 18 look at actual sales data for actual equipment today 19 basedonactualmarketbehavior, andnot relyentirely 20 on a piece of consumer research which admittedly has 21 some predictive inaccuracy built into it, with the 22 best of methods. 23 24 25 MR. BROOKMAN: Earl Jones MR. JONES: I for one, want to commendthe Department for the first time actually talking to and

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# • 104 1 listening to real consumers as opposed to taking 2 peoplewhomaythinktheyrepresentconsumerinterests 3 at their word when they make claims about what it is 4 people want or don't want. 5 Then I wanted to just make one final 6 comment on your conclusions. There seems to be a 7 fistful which is missing, whichhas to do withpeople 8 who are not currentlywasher owners, people who might 9 be future purchasers. As I recall, there was some 10 report, some part of the report which said that as to 11 that group, it was indeed quite elastic. 12 MR. GROVER: Yes. I mean as you know, 13 there's a lot more in the report. I was just trying 14 to highlight them. But that's true. We did a similar 15 elasticity calculations for people who did not 16 currentlyown a machine. Theirelasticitydid seemto 17 be much more sensitive. 18 MR. BROOKMAN: Steve. Gene, go to the 19 microphone. You are next after Steve. Steve 20 Rosenstock. 21 MR. ROSENSTOCK: Just two quick ones. 22 Again, in terms of elasticity, how would you suggest 23 the results in terms of elasticity be used in the 24 overall either energy savings or life cycle cost 25 analysis?

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• 105 1 MR. GROVER: One thing, andthiswill come 2 out more at the LBL, but one thing that came out of 3 this that I was going to make the point earlier with 4 thepurchase scenarios,· isthat thesecalculations are 5 all done based on the six attributes that were 6 included in the conjoint. So for looking at how 7 important those six attributes are, the conjoint is 8 extremely useful. 9 When we tried to do the elasticity, 10 obviously the other demographic factors come into 11 play. So we can get a measure comparing different 12 subgroups, which is more elastic or more inelastic. 13 But again, there are demographic issues that aren't 14 taken into account in those calculations. 15 MR. ROSENSTOCK: I found, just two quick 16 ones. I found the questions onrepairorreplacevery 17 interesting inAppendixC, about various price levels 18 versus the repair, an $150 repair versus incremental 19 increases in the cost. Very interesting results. 20 The last thing was the survey question 21 showed about how did people finance it. Over 62 22 percent of people in the survey, credit cards, store 23 financing, credit card financing, or bank loan for a 24 new clothes washer. So that might have an impact on 25 both the life cycle cost and possibly the discount

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# • 106 1 rates. 2 MR. BROOKMAN: Thank you, Steve. Gene 3 Foley. 4 MR. FOLEY: This is Gene Foley, AHAM. 5 Following up on Steve's comment on elasticities. In 6 the draft exhibit 4.7, and in the subsequent ones on 7 elasticities, I'mtryingtoremembermyoldeconomics. 8 It looks as though that graph would say it was 9 actually quite elastic as opposed to inelastic, 10 especially based on repair costs. Can you sort of 11 explain how you chose to focus on the inelasticity 12 aspects of this? 13 MR. GROVER: 4.7 means that the survey 14 results where people
-- 15 MR. FOLEY: Choice sensitivity to price 16 change of respondents, which means the definition of 17 elasticity. 18 MR. GROVER: Right. Theactualelasticity 19 calculations were done using the conjoint rather than 20 the survey. 21 22 23 24 25 MR. FOLEY: Rather than these analyses? MR. GROVER: Right. MR. FOLEY: So there is somewhat of a disparity between the two as opposed to one saying it's elastic and the other one saying it's inelastic.

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• 107 1 MR. GROVER: Right. The reason why they 2 arenot directlycomparable isthe surveyresultshave 3 a repair as an option, where the conjoint, we weren't 4 able to look at that. Sothe surveyresults, I think, 5 are a little bit more anecdotal as far as elasticity 6 is concerned. 7 MR. FOLEY: At theveryleast, we ought to 8 point out that there is some discrepancybetween that 9 bullet and the survey results. 10 MR. BROOKMAN: I think in defense of 11 Steve, or I guessmaybe it'snot defense, I think it's 12 the obvious. He has gleaned several important 13 conclusionsandotherconclusionsarenot fullylisted 14 here for the purposes of brief presentation. 15 Charlie Stephens. 16 MR. STEPHENS: Yes, I hada littleconcern 17 about the repair issues these folks were presenting. 18 How did you come upon a 10-year mark and $150 as the 19 only repair option these folks were facing in their 20 purchase choices? 21 MR. GROVER: We wanted to look at how 22 changes in price affected this decision. If we also 23 started varying repair time, we wanted to hold that 24 constant and look at how changes inprice affect that 25 decision.

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•**·~•** 108 1 timeframe, make them make the judgement of a 10-year 2 machine, how long that would last. This is the 3 repair. Otherwise, we have got two different 4 variables. We have got price of the machine and the 5 price of repair, and if you want to change the age of 6 the machine, we would have to end up asking 15 7 questions to kind of cover, run the gamut. 8 MR. STEPHENS: That is though how you get 9 at cross elasticities, isn't it? 10 MR. GROVER: It is a way, yes. What we 11 wanted to do was to support some of the stuff in the 12 conjoint. 13 MR. BROOKMAN: I thought Charlie's 14 questionwas goingat howyou arrivedat those levels. 15 MR. STEPHENS: Yes. I mean it actually is 16 a very long string. I'm not going to go into the 17 whole thing right now, but you know, you are not 18 talking to people as though they
-- I mean you are 19 talking to one subgroup that later came out in the 2

### o analysis. You are talking about peoplewho aremaking 21 a decision to early replace their machine. I mean if 22 you are asking about a probability of buying or price 23 elasticityor a newmachine and somebodyhas got a 10- 24 year old machine, that is a very small subgroup. 25

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• 109 1 14-year old machine, who are facing a $250 repair 2 bill? I mean I guess I am trying to, unless you have 3 answered some of those questions, I am not sure you 4 can really do very much with what you did ask. 5 MR. BROOKMAN: Bryan Berringer first. 6 MR. BERRINGER: Yes. Just to respond to 7 you, Charlie. We tried to limit it. So obviously we 8 tried to pick·a realistic one. Obviously we were 9 looking at a life of a clothes washer being 14 years. 10 We wanted totake somethingthat was, youknow, three11 quarters of the way of their life, and make sort of 12 the best type of repair, to look at the repairs. So 13 we didn't look at a whole range, except we tried to 14 take the best sort of realistic question we thought 15 would be 16 MR. BROOKMAN: Does someof thisget taken 17 up in shipments analysis? 18 MR. STEPHENS: Yes. We will carry on the 19 rest of that conversation. 20 MR. BROOKMAN: I am wanting forus tokeep 21 moving on so we can conclude this session, this 22 segment, and then take a break. 23 Dick Stilwell? 24 MR. STILWELL: Dick Stilwell, Maytag. I 25 just wanted to make a quick comment.

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• 110 1 study is about as good as you can do without having 2 actual machines therefor people to look at and feel, 3 but when you do have actual machines there, either 4 prototypesormock-ups, yousometimesgetdramatically 5 different results. That has been our experience. 6 MR. BROOKMAN: Interesting. That's a 7 useful bit of information. I'm sure the Department 8 welcomes that. 9 Final questions, comments? I am very 10 eager for us to go to break. Bryan? 11 MR. BERRINGER: I just wanted to add one 12 more, to respond to Bill Prindle's question as far as 13 dowe look at themarket numbers orthe salesnumbers. 14 That is somethingthat we do look at, to the available 15 data that we have. So we are looking at that. 16 MR. BROOKMAN: Thanks, Steve, for that 17 good presentation. Thanks to the others that have 18 presented already this morning, Dick and others. 19 It is now 11:25. Let's take a break. We 20 will start. Did you hear the word, start, 11:40. 21 22 23 24 25 (Whereupon, the foregoingmatterwent off the record at 11:30 a.m. andwent back on the record at 11:45 a.m.) 

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• 111 1 you intend to walk out without having the security 2 folks try and take it away from you, you need to get 3 a property pass. Did everybody hear me? They will 4 try to take it away from you unless you have a 5 propertypass. SandyandBrendahavepropertypasses. 6 You need to fill that out and show it as you are 7 trying to walk out of this secured building. 8 Okay. So, Michael McCabe. Let's start 9 then. The next item on the agenda, and we're running 10 a littlebehind schedule, but I thinkwe'llmake itup 11 as we go here. Is shipments analysis. Jim McMahon 12 from LBNL will be our presenter. 13 MR. MCMAHON: Goodmorning. I am goingto 14 speak about the shipments analysis. I think the 15 ·questions leading into this have been a very good 16 segway. I hope that I will be able to answer all 17 those questions. 18 This is not in your package, but I put 19 this together at the lastminutejustto summarize the 20 big changes that have gone on. The most important I 21 thinkis the clotheswasherconsumeranalysis that has 22 just been described to you. As Earl Jones just 23 commented, this is the first time the Department has 24 attempted to quantify the impact of features of an 25 applianceonthedecisionprobabilities. Inthepast,

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• 112 1 we have lookedatprice andoperatingcost, but nowwe 2 also have the features that consumers have told the 3 Department are important. 4 The most important ones for this 5 rulemaking are top or front loading, the door 6 placement, and the hot water feature. 7 Other changes that have gone on are we 8 have updated the economic factors, the washerprices, 9 and the energy and water costs. There is now a more 10 detailed treatment of market segments. I'll step 11 through the specifics of that in a moment. Finally, 12 there was a comment I think Bill Prindle made about 13 relying upon the stated preferences of consumers and 14 thatperhaps theDepartment ought toconsiderwhat the 15 historical behavior has been, and we have done that. 16 I will describe to you how we have done that. 17 Thismaybea littledifficulttoreadfrom 18 the back of the room, but it's in the handout. The 19 process for developing the model started with the 20 conjoint analysis. So inputs from real consumers. 21 That led to the development of a probability of 22 purchase model using standard economics. When we 23 initiallyassessed the model just using the data from 24 the consumers, we found that it didnot matchwhat has 25 happenedhistorically. I will illustrate that foryou

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# • 113 1 momentarily. 2 So there was additional work done to look 3 at the tradeoff s that people are currentlymaking and 4 have made in recent years between purchase price and 5 operating costs. Specifically, the consumers in the 6 conjoint studyoverstatedhow sensitivetheyare, both 7 to price and to operating costs. If you took them at 8 their word, thenyou would expect that manymore high 9 efficiency models would be sold these days than are 10 actuallybeing sold. Soyouhave to correct for that. 11 Finally, there'samodelcalibrationusing 12 historical shipments data from the industry to make 13 sure that our model is based on reality. 14 The principal economic factors that 15 consumers face are the purchase expenses for baseline 16 unit, including tax, $420 per washer. The operating 17 expenses on average, $122 per year, of which $76 are 18 energy costs. That includes heating the water and 19 drying the clothes. The water expenses average about 20 $46 per year, combining water and waste water rates. 21 Moving into the different types of 22 purchasers, we have four major segments that we are 23 concernedabout. The largest segment iswasherowners 24 and existing housing. There's also a fair number of 25 sales of washers of people moving into new housing

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• 114 1 each year. There are non-owners, who may decide to 2 buy a washer and get out of the laundromat. A new 3 feature is we have allowed for consumers to have the 4 option of repairing washers and extending their life 5 rather than buying new ones. 6 The specific consumer decisions that they 7 make are whether to replace a working washer. It may 8 surprise you to know that 26 or 27 percent of working 9 washers are replaced early, while they are still 10 working. Most oftenthis iswhenpeople do remodeling 11 and theyupgrade theirproduct. This is information
- 12
- I guess I want to at this point thank AHAM. AHAM 13 did a couple of surveys with NFO. This is the 1996 14 survey. There's also a 1990 survey. We got a lot of 15 our input data from those surveys. They were useful. 16 MR. NADEL: One question. Is there any 17 information in those surveys or from other sources on 18 what happens to those 27 percent of functioning 19 washers? 20 MR. MCMAHON: We presume that theygo into 21 the used washer market, and that they are still 22 operating. But they have moved from one place to 23 another. That is accounted for in our model. 24 25 MR. 

### FOLEY: While I don't have the statistics at my fingertips, that may not be an

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# • 115 1 accurate assumption, given that 80 percent of washers 2 that are removed from people's homes are actually 3 recycled. So I would be careful making that 4 assumption. 5 MR. MCMAHON: Thereisa specificquestion 6 on this topic inAHAM's survey about how products are 7 disposedof. Let's see, reasons fordisposition. You 8 have to separate these things out. For clothes 9 washers, this isAHAM's final report, "Home Appliance 10 Saturation and Length of First Ownership Study", May 11 of 1996, page 32. 12 Among owners who obtain an appliance new, 13 those who get rid of them, 53 percent are because the 14 washerdiedorhadcostlyrepairs. Keep inmind, this 15 is across all of them. So we're not saying anything 16 about the age yet. Thirty one percent, because they 17 moved. Fifteen percent, new or updated model. One 18 percent, remodeled. One percent, remodeled. Three 19 percent, other. Okay? So people who moved, 20 presumably the washer is still in use and so on. So 21 we segment these and deal with them in the specifics 22 of the model. 23 Okay. The seconddecisionisif something 24 happens to the washer, it's not functioningproperly, 25 you either replace it or repair it. The third is if

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# • 116 1 youmove into a new home, you may decide to buy a new 2 washer. I guess I want to say one thing here that I 3 am not sure is clear inthe report. The effect is the 4 same whether the personmoving into the new home buys 5 a new washer or if they move their washer with them, 6 but the house that they left behind, the new resident 7 buys a new washer. As far as we are concerned, the 8 new house creates a purchase. Okay? 9 Becoming a washer owner, so someone who 10 was not an owner before buys a washer. In each of 11 these decisions, consumers have the choice of 12 purchasing a new or a used washer. That was not 13 modeled previously. 14 In the handout, this may be easier to 15 read. I this text is probably small for the back of 16 the room. This is half of a two-page flow chart that 17 shows how the model works. 18 We startwitha start of a year. We go to 19 the end of a year. The model does this each year for 20 the 30-year forecast. Starting with houses that 21 already own washers, the first question is, are they 22 having a problemwiththe washerornot. If not, they 23 candecide toreplace itearlyanyway, for the reasons 24 that I have just stated, or not. If they do nothing, then they just stay in the population of houses with

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• 117 1 washers. 2 If. they are having a problem with the 3 washer
-- I'm sorry, I skippeda step. If theydecide 4 to early replace, then theybuy a new washer. That's 5 one contribution to purchase. 6 If they are having problems, they decide 7 whether to repair it or replace it. If they replace 8 it, they choose new or used, so you get a stream of 9 new purchases here or purchases of used. If they 10 decide to repair it, we have a choice here of a 11 regular repair which is normally going on now, or an 12 extra repair, which it'sput inhere specifically for 13 the standards analysis. 14 Ifthere isa situationwherethe standard 15 changes the dynamics of themarket andthenewwashers 16 aremore expensive, itmay shiftpeople intorepairing 17 longer. This has been raised in comments for a long 18 time. We're now addressing it quantitatively. 19 So if they do a regular repair, they 2O remain a housewitha washer that's beenrepaired. If 21 theydo an extrarepair, we put them in a new category 22 with a house with an extended lifetime washer. So we 23 actually adjust the lifetime to allow these things to 24 go on a bit longer. You can't do that forever.. The 25 washers do eventually die.

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• 118 1 The rest of the market is composed of 2 houses that already had extended lifetime washers. 3 When those break, there comes a point where you canno 4 longer keep themgoing. So if itbreaks down
-- if it 5 doesn't break down, you're fine. If it does break 6 down, you have to replace it or buy a used one. So 7 the life extension is only for some period of time. 8 Fornewhouses, decisiontopurchase a new 9 washer, yes or no. If you do not purchase a new 10 washer, you are a house without a washer. That's this 11 group down here. Those folks who don't own a washer 12 at the beginning of the year and decide to purchase a 13 purchase, they can buy new or used. So this is just 14 all the accounting that goes on. 15 Let me turn to the inputs. I wanted to 16 first thank AHAM for their data. Just a couple of 17 numbers that we have used from this report. Eighty 18 two percent of washer purchases in a given year are 19 obtainednew. Eighteenpercent are used. This is the 20 first time we have characterized the used market at 21 all. As I said before, 2 6 percent of washers are 22 replaced before they break down. 23 We also got annual shipments data from 24 them. I will come back to that. 25

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# • 119 1 information about repair rates in their surveys that 2 they do of consumers. They ask them how many people 3 have had repairs in the first five years of life of 4 the washers. It averages out to about five percent 5 per year. So we're using that as the source of 6 information about how often repairs occur. 7 We arealsousingthe consumeranalysis in 8 terms of the relative importance of features to the 9 economic factors, the price and the operating cost. 10 MR. BROOKMAN: Steve Nadel? 11 MR. NADEL: I am just trying to 12 understand, going back one. There's 26 percent of 13 washers are replaced before breakdown. Does that 14 include any overlap with this new home sales or is 15 that in addition to? 16 MR. MCMAHON: No. That is in addition to 17 new homes. Let me clarify that. I will show you a 18 graph in a moment. This is a cumulative number. It 19 is a small number each year. It is a couple of 20 percent, but accumulated over the 14-year life of an 21 appliance. About 26 percent of them are replaced 22 before they break down. 23 The conjoint analysis provided a great 24 25 deal of information. One of the things that was interesting was how many people were willing to

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• 120 1 abandon the washer if it broke down, and go to the 2 laundromat. The answer was small. We used to think 3 nobody would do it, but two percent of people are 4 willing to say the heck with it, I'll just go to the 5 laundromat. So that's fine. 6 We also found, I guess I should say that 7 Steve Grover and the folks at Quantum found that 8 different income groups have similar purchase 9 preferences. That is, the relative ranking of the 10 features and the price and operating costs were very 11 similar from one income group to another. There are 12 smalldifferences thathe indicated, butbyandlarge, 13 price is important to everybody, and you go on down 14 the list. That simplifies our modeling because we 15 don't have to deal with a lot of different income 16 segments to complicate the model. 17 The functional form of the model is the 18 likelihood of purchased model. I'm sure you don't 19 want an economics lecture, so we'll just say that. 20 There is a preference for top-loading washers by the 21 majority of consumers in this study. We are going to 22 account for that. 23 Soifwe wereto summarizeeverythinginto 24 one picture, this is our attempt to do that. I want 25 to thankRobert VanBuskirkonour staff for comingup

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• 121 1 with this. 2 This is washer age over time. This is a 3 probability, zero to 100 percent. What dopeople do. 4 So when you first buy a washer, you keep it, is what 5 the blue area is. As it ages, there is a certain 6 likelihood that it will require repair. That 7 likelihood increases over time. 8 Once itreaches a certainage, outhere in 9 10 or 11 years, it becomes very likely that you are 10 going to start seeing people replacing them. 11 Eventually at 17 years, they all get replaced. 12 The other small line in here is the 13 replaced early. Even though this is a small fraction 14 of people everyyear, if you accumulate this over the 15 entirepopulation, you get the 26 percent number that 16 I used on a previous slide. 17 MR. BROOKMAN: That's a great graphic. 18 MR. MCMAHON: Thank you. So this is one 19 way to look at what the dynamics are. You start with 20 purchasers ina givenyear, intheyear 2003. You say 21 what's going to happen over time. Most of them are 22 goingtokeepthem. Some fractionwill earlyreplace. 23 There will be repairs. Eventually there will be 24 replacements. 25

(202)234-4433 The only addition to this is an extra NEAL

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• 122 1 repaircyclewhichbuyspeople a littlebitmore time, 2 for a price, before they replace them. 3 Okay. If we now go to the output of the 4 model, and the spreadsheet model is on the DOE web 5 page, as is a detailed documentation of the model. 6 The output of the model looks like this. This is 7 annual shipments inmillions. We're starting in 1980 8 because I like to have a track record to see how we 9 compare to what actually happened in the real world. 10 So it's a back-cast, if you will. The forecast 11 actually starts in about 1997 or 1998. 12 Breaking down into the four categories 13 that we talked about, new housing account for the 14 shaded blue area in the bottom, roughly a million 15 unitsa year. Earlyreplacements, anothermillionand 16 increasing. Regular retirements, so as the products· 17 age, theyget replaced, is the bulk. There is a small 18 number, since 80 percent of households already own 19 washers, of the 20 percent who don't, some small 20 number of those buy washers each year. So non-owner 21 conversions are the top. Our forecast on the future 22 in the base case with no new standard, looks like 23 this. 24 Now let me come back to the issue of 25 calibrating the model to the start is there a

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....**·!.~-::;** -. 123 1 question? 2 MS. CASENTINI: Yes. Lauren Casentini, 3 Pacific Gas and Electric Company. Does the model 4 include common area washers? 5 MR. MCMAHON: Common area washers? It 6 does not. 7 MS. CASENTINI: It doesnot. Okay, great. 8 MR. MCMAHON: There are several things on 9 this slide, so let me explain it. We have again, 10 annual shipments in millions from 1980 to the year 11 2000. So it's the historical record with just a 12 couple of future years. 13 The first one I want to call your 14 attention to is this blue line, called stated 15 preference coefficients. If we were to take what the 16 conjoint analysis told us, and apply it to the 17 historical record of what has happened to price and 18 efficiency and futures of washers, then we can do a 19 forecast and say people said this is how they valued 20 thesethings, sotheymust havebought the appropriate 21 number of machines. You get this blue line. 22 What I would like to call your attention 23 to is the spikewhichhappened in 1994. What happened 24 in 1994? The previous clothes washer standard. Okay. 25 There was a significant change in efficiency. Not

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• 124 1 much change in price, but the product became cheaper 2 to operate. If we took the consumers at their word, 3 that would say that theywouldhave bought roughly 15 4 million washers that year because the operating cost 5 savings are so attractive. It didn't happen. The red 6 squares are what actuallyhappened in the market. So 7 this is why we don't use the conjoint directly. 8 It's not to be critical of the conjoint. 9 It is just to say that people's statements need to be 10 calibrated to how they actuallybehave. The conjoint 11 was absolutely critical for us being able to weigh 12 these factors relative to each other and relative 13 features. 14 So the next part is we revised the 15 probabilityof purchase model to the green line here, 16 to kind of damp down what people said to closer to 17 what we believedthe tradeoff is. Let me saythat one 18 more way. We have had many discussions about payback 19 periods and discount rates and how people weigh the 20 first price versus the operating cost. The results 21 from the conjoint said that the relative value of a 22 dollarofoperatingcost savingswas about $5 compared 23 to $1 of increased price of the washer. 24 25 time?

(202)234-4433 MR. JONES: Couldyourepeat thatonemore
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• ----------------- 125 1 MR. MCMAHON: Yes. The relative value of 2 a dollar of operating cost savings is about a factor 3 of five larger than the value of a dollar of price 4 savings. Okay? That is not consistent with 5 experiencethat sayspeopleaccept five-yearpaybacks. 6 Theydon't. Most of the evidence says consumers go to 7 one or two-year paybacks, and we have direct studies 8 of that in some areas of the country. 9 So we have to damp down what was said in 10 the conjoint. We still take the relative value. The 11 price is still really important. Operating cost is 12 below that. But we adjust them for that factor. 13 So that gets us to the green line. That 14 is a partial adjustment. Then we calibrate all the 15 coefficients of the model to the 1980 to 1996 16 shipments. You get this black line, which runs 17 through here. 18 So you see the model is within about 19 200,000 typically, of the correct value in any year, 20 where the correct values are between 4 million and 21 over 6 million shipments a year. So it's a reasonable 22 23 MR. STEPHENS: Charlie Stephens. Can I 24 ask you a fundamental question? 25

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# • 126 1 MR. STEPHENS: What led you to believe 2 that historical shipments of clothes washers were 3 affected at all by price and efficiency? That they 4 were even factors that had any influence at all on 5 shipment? 6 MR. MCMAHON: The consumers saythatprice 7 and operating cost are very important to them. 8 MR. STEPHENS: Yes, and then you created 9 the curve based onwhat they said. I am losingyou in 10 the leap to okay, here's what we predictbasedonwhat 11 the consumers said. I am not sure I am following how 12 you can just assume. 13 I mean my assumption from that would be 14 that what they said really isn't relevant to 15 historical shipments. You may find some other 16 variables thathave a biggerimpact on shipments, like 17 income, disposable income, economic, you know, the 18 economic status in the country, housing starts, 19 relative housing starts of multi-familyversus single 20 family. It seems to me there is an awful lot of 21 variables that are an awful lot more important in 22 predicting, if you want to, or backcasting shipments 23 than price and efficiency. 24 25 MR. MCMAHON: Let me refresh your memory of a previous workshop about shipments models. We

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• 127 1 found that you could account for most -- you could 2 explain most of the shipments by housing starts and 3 replacement, without any consideration of economics 4 whatsoever. Okay? So I agree with that. We have 5 accounted for that here. 6 However, ontop of that, these variations 7 from year to year, you want to be able to account for 8 price and operating cost. First of all, because when 9 there's a newstandard, presumablypriceandoperating 10 cost will change. You want tobe able to see how much 11 of a kick that is going to give to the sales. That is 12 a motivation for doing it. 13 Now the question is, how well do we do in 14 matching things up to the past. What is correct is 15 there may be other factors that caused people to buy 16 more or less washers that we have not accounted for. 1 7 You mentioned income. Alimitationof the conjoint is 18 it's a slice in time. We don't have these going back 19 20 years, to say how much income influenced the 20 purchases. So I just don't have an answer to that. 21 It could be that that is a factor. 22 MR. STEPHENS: Well, I have watched this 23 before. We went through an exercise like this 24 watchingsomebodytryingtobackcasthistoricalenergy 25 use insomebuildingsbydevelopingsimilarequations.

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• 128 1 When they were finished, what they didn't pay any 2 attention to was the fact that we had actually 3 measured what they were trying to estimate. They 4 ended up with garbage because they just ignored what 5 the real factors were. 6 They assumedthat what was in this total, 7 which is shipments in this case, was affected by 8 certainthings, andtherefore, that theyknew. Sothey 9 took what they knew. What they ignored was what they 10 didn't know. They left it out of the model 11 completely. Well, as it turns out, those factors 12 actually had a big influence on what that total was. 13 They were a big piece of the total, but they weren't 14 even in the model. 15 Whattheyendedupdoingwasmisestimating 16 what they didhave in the model, because part of what 17 was in there was actually very much attributable to 18 something else. 19 I am afraidwhat you may be doing here is 20 in our desire to try to find the impact of price and 21 efficiency on shipments, you are backcasting into a 22 realm where it didn't have any impact of note on 23 shipments. If you go back far enough into 1980, how 24 many models of efficient clothes washers were there, 25 that were more efficient in any significant way than

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• 129 1 other clothes washers or more expensive than other 2 clothes washers in any significant way? 3 MR. MCMAHON: Let me ask you what factors 4 you thinkwe have left out. I can tell you whetherwe 5 have left them out or not. 6 MR. STEPHENS: I mentioned them earlier. 7 I think that the bigger factors have much more to do 8 with economic factors going on in the economy than 9 they do about the relative price and efficiency of 10 clothes washers. You are backcasting and calibrating 11 yourpredictionmodel against a scenariothat hadnone 12 of the elements in it that we are trying to 13 MR. BROOKMAN: Like disposable income, is 14 one you raised? 15 MR. STEPHENS: Yes. Disposable income. 16 But I mean we didn't have $1,000 clothes washers on 17 the market in 1984. 18 MR. MCMAHON: I agree with that. 19 Disposable income is not in the model. However, the 20 other factors you mentioned are. So housing is in 21 there. 22 MR. STEPHENS: I know you have looked at 23 housing starts and you have explained most of that 24 25 stuff. But what I am saying is it is a big leap to assume that price and efficiency, relative price and

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• 130 1 efficiencyarenow the ones that aremissing. I don't 2 knowthat theyare the ones that aremissing. So far, 3 I haven't seen a**c~se** that they are. 4 MR. MCMAHON: Okay. Let me address that 5 specifically. Actually with your indulgence, I will 6 go to a different slide. I want to show you the 7 historical data. This is the relative change based 8 upon 1995 as the base for three things. Shipments are 9 in red. So this is how shipments have changed. This 10 is a percent axis. So this is shipments were 30 11 percent lower in 1980 than they were in 1985. They 12 were 30 percent higher in 1995 thantheywere in 1985. 13 That is the red line. 14 The triangles are the average washer 15 price. They were 15 percent higher
-- they have been 16 going down over time
-- in 1978, than they were in 17 1985. They have continued to go down. They are now 18 25 percent lower than they were in 1985. 19 Thelastone isoperatingcost. Operating 20 costs increased about 10 percent. So this accounts 21 for efficiency and energy prices and water prices. 22 Okay? There have been significant changes in those 23 factors. Operating costs have come down over time. 24 You see this big step-down is the 1994 standard on 25 clothes washers. It made a big difference. I read

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• 131 1 that as about a 15percentdecrease inoperatingcost. 2 So we rolled these in because we think 3 these changes from 1985, onthe orderof 25 percent in 4 purchase price and more than 40 percent in operating 5 cost, are big enough that they ought to be worried 6 about. 7 MR. STEPHENS: Yes, but I mean the notion 8 that those things are correlated doesn't mean that 9 they actually impact one another. I mean I see the 10 correlationyoupointto, but I don'tnecessarilydraw 11 the conclusion that because they correlated an 12 intuitively logical way, that one of them has an 13 impact on the other. 14 MR. MCMAHON: It is difficult for me to 15 say anything other thanwithout otherdata that shows 16 that there is a correlation between income or some 1 7 other variable, you know, I can't disprove that 18 without some evidence. 19 MR. BROOKMAN: Charlie, would you offer 20 any additional data or any additional variable for 21 consideration by LBNL? 22 MR. STEPHENS: Well, I thinkwe're trying 2 3 to do some things here based on an awful lot of 24 assumptions. What concerns me is the process called 25 abstraction from reality. You start out, I think we

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'·-·**·!"~**-""];**~.** 132 1 have all agreed, that what consumers say is kind of 2 abstracted from the reality of what they do. 3 The further you play with your 4 coefficients to try to make your curve matchhistory, 5 that really isn't very much like the future at all, 6 based on the standard, I mean if the manufacturers' 7 comments are tobebelieved, that we are goingtohave 8 a whole different marketplace here after the new 9 standard. 10 MR. MCMAHON: It is even worse than 11 calibratingthehistorybecausewe arenow speculating 12 about the future. 13 MR. STEPHENS: Yes. Well, I mean that's 14 the next step. But what concerns me is that the 15 farther you get removed from what you know, the more 16 abstractedfrom realityyou are. I amnot sureyou've 17 got variables that even are related to each other 18 here. I haven't seenanythingthatyou said, youknow 19 anything here, that says we should
-- it's a huge 20 assumption I think to assume that price and operating 21 cost affect total shipments, historically. 22 MR. MCMAHON: So you are alleging that 23 price and operating costs should not be drivers of 24 shipments? 25 shipments.

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• 133 1 is, it's not going to change the shipments. 2 MR. STEPHENS: Not by themselves. I mean 3 if the price crept up over time, you would expect 4 shipments to creep down? 5 MR. MCMAHON: Yes. 6 MR. STEPHENS: And if price crept 7 downward, then shipments should creep upward. What 8 about price relative to income? What if disposable 9 income is creeping down at the same rate price is, or 10 creeping up at the same rate price is? What is they 11 are disparate? One is creepingdown andthe otherone 12 is going up? What kind of a relative impact are you 13 likelyto see there? How do you explain the dip after 14 you get that operating cost decline in 1994. I see 15 that. Then I see a decline in shipments subsequent. 16 MR. MCMAHON: So if we accept your model, 17 that the shipments are unaffected except for income. 18 We have accounted for the other things. 19 MR. STEPHENS: No. My problemis not like 20 yours. You are trying to find what is impacting a 21 model. You are trying to make a model. 22 MR. MCMAHON: Yes. 23 MR. STEPHENS: Andyou are trying to pull 24 in the right variables to use in the model. 25

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... ' 134 1 coefficients. 2 MR. STEPHENS: To explainreality. I mean 3 backcasting anyway. I don't think you can use the 4 variables youhave chosen. I don't know that you have 5 made a case that I can believe that the variables you 6 picked are the ones that you need to calibrate to go 7 to backcasting. 8 MR. BROOKMAN: Steve Nadel is next, and 9 then Earl Jones. 10 This is getting pretty esoteric, folks. 11 I think it is fairly fundamental, but I would like to 12 keep this as concrete as possible. So to the extent 13 possible, if you can suggest what the variables, the 14 pertinent points of analysis, how it benefits this 15 analysis and how it works in the context of 16 rulemaking, I think it would be very useful. 17 Steve Nadel. 18 MR. NADEL: Okay. I have a couple of 19 comments and questions that to some extent relate to 20 what Charlie said, and in some sense go beyond them. 21 It strikes me in looking at the information you have 22 there, that maybe before we get into a detailed 23 conjoint analysis, we should do some much more basic 24 regressions to look at a whole range of possible 25 factors. Operatingcosts, pricebeingone, disposable

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• 135 1 income. Another one that I'mnot sure is or is not in 2 your model is number of households. There has been, 3 over the same period, there has been significant 4**growt~** in the number
-- 5 MR. MCMAHON: That is accounted for. 6 MR. NADEL: So that one is in. But to 7 look at 

### a variety of factors. I agree with Charlie 8 that disposable income I would expect wouldbe a much 9 bigger variable than those two. 10 To figure out how much, how important 11 those two factors are versus some other things. If 12 our hypothesis that disposable income is very 13 important, than all of these other things need to be 14 put down to allowfor the fact. Disposable income has 15 been up at the same time that price is down. 16 MR. MCMAHON: I understand. 17 MR. BROOKMAN: Willyou sayit again? Say 18 why you are making this attempt at backcasting? 19 MR. MCMAHON: Sure we are trying to 20 explainwhat hashappenedhistoricallyfor thepurpose 21 of developing a model we canuse for the future to see 22 what the impact of new standards will be. 23 I guess I would be uncomfortable making 24 the assumption that purchase price will have no 25 impact, whateverthepurchaseprice iswillnot impact

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• 136 1 shipments. It may be true that the historical record 2 with this set of prices was not the only thing 3 responsible for the increase in shipments. We know 4 that I think about 60 percent of this increase is the 5 change inthe housing stock. Okay? But there remains 6 the other4

### opercent toexplainwhymorepeoplebought 7 washers. It maybe that the features changed. It may 8 be that consumer thinking changed. That is the 9 challenge, is to come up with that model. 10 MR. BROOKMAN: Okay. Earl Jones. 11 MR. JONES: I just wanted to bring up a 12 couple of things. One, I suppose what the question 13 that's being raised fundamentally goes to is the 14 ability to regulate this industry at all, to the 15 extent that on the ability to discern from what's 16 happening in the real world, then go andpredict what 17 is going to happen in the future. So we may be 18 actually in agreement on that point, Charlie. 19 (Laughter.) 20 MR. BROOKMAN: Let me note for the record 21 that we have an agreement here, folks. 22 MR. JONES: We'll pass over that one very 23 quickly since I don't' think we can get very far with 24 this. Because there is additional data which I think 25 we have seen today. That is, we .can just listen to

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• 137 1 what real consumers tell us. We can go on the basis 2 of that. 3 I thought what the purpose here was, was 4 to say, well let's just use all the data we can, 5 whether it's historical, whether it is known factors 6 versus what people tell us. But let's come up with 7 something which at least gives us information from 8 which we can hopefully make an intelligent choice. 9 Now I havebeenverymuchobjectingtothe 10 use of models by the Department over the years. I 11 find that ironic that people who previously supported 12 those, thismodelingprocess, arenow opposingitonly 13 when it seems topredict somethingwhich is different 14 from what it used topredict, which didn't make sense 15 then and was definitely wrong, but is at least now 16 tested to be more accurate. 17 So I mean let'sjust leave it at that, and 18 agree to disagree. I suggest that we go on. 19 MR. BROOKMAN: We have a suggestiononthe 20 table that we move on. 21 I saw additional questions. I do want to 22 make sure we finish with Jim's slides. Jim. 23 24 25 MR. ECKMAN: Tom Eckman, Northwest Power Planning Council. Two things. In the specification of the model, Charlie has pointed out and so has

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• 138 1 Steve, that there may be missing variables, 2 discretionary income, there may be others. 3 In dialing in on the coefficients to get 4 the backcast that you've got, are the regressions 5 there to support the coefficients? Do you have T 6 statistics andthings like that on those coefficients 7 to say that they are significant? 8 MR. MCMAHON: We haven't done the T 9 statistics, but we can. Yes. 10 MR. ECKMAN: So forthevariablesthat are 11 in the model today, we can see the stats. to see 12 whether they are significant? 13 MR. MCMAHON: Sure. 14 MR. ECKMAN: Interms of explanatory. And 15 additionalvariablestobe added, like incomeorother 16 that ought to be tested. There shouldbe a list that 17 we can probably come up with. I think income is an 18 important one. But there may be other things, 19 relative price, to usedmarket or something, needs to 20 be inthere. Andmaybe housingtype splits soyou get 21 thecommon laundryversusthe individualhome laundry. 22 23 laundry. 24 laundry. 25

(202)234-4433 MR. MCMAHON: We have excluded common We are just looking at the individual

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# .... 139 1 and then Alan, I believe. Yes. Thank you. I wasn't 2 sure you were in line or not. 3 MS. CASENTINI: Thanks, Steve. Lauren 4 Casentini, Pacific Gas and Electric Company. 5 Justa questionaboutthehistoricaldata. 6 I wonder if you could help me understand this. 7 Lookingback at 1980, the ratio of annual 8 shipments topopulationwas 5.8 percent. Then 1996 it 9 shows it was 6.2 percent. And then based on the 35 10 percent level, the forecast for 2003 is 5.17 percent. 11 Yet, whenyou look back at 1980 the price 12 of washers, it was $608 and annual operating costs 13 were $129 higher than the 35 percent level. So it's 14 sort of counterintuitive, one would think that the 15 ratio of annual shipments would be more along the 16 lines withwhat theywere in 1980 at the 5.8 percent. 17 I wonder if you could help me understand that. 18 MR. McMAHON: I think one thing that has 19 happened is you're reaching saturation. There were 20 fewer people who owned washers, so there's a growth 21 period, but once you reach that duration, thenyou're 22 basically in a replacement cycle. So I don't think 23 that the percent of population is a good metric
-- 24 25 MR. BROOKMAN: Which coincides withpostwar growth, baby boomers, all of that.

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# • 140 1 Charlie Stephens? 2 MS. CASTENINI: Thank you. 3 MR. STEPHENS: For the record, I am not 4 against modeling. 5 (Laughter) 6 I think modeling can be done well and it 7 actually can produce interesting and useful results. 8 But people seemto think
-- I don't think
-- I want to 9 offer you one variable that you don't have in your 10 model that I think probably can explain an awful lot 11 of what you see in shipments as they keep going up in 12 spite of everything else going down and that is the 13 availability of credit. 14 I think if you go back and start looking 15 at thehistoric availabilityof credit at everyincome 16 level and you start figuring out how easy it has 17 become tobuy large things, I mean your data suggests 18 that SUVs shouldnot sell. I mean the prices of those 19 things relative to every other car is going off the 20 charts and yet, they're 49 percent of sales I think 21 now, over 50 now. 22 So you know, there are some other things 23 associated with that and I think you'11 find that 24 availability of credit is a huge influence on why 25 shipments might keep climbing as other things
--

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# • 141 1 MR. BROOKMAN: · I know for a fact that the 2 Department welcomes your ideas about how to 3 characterize additional variables, so thank you. 4 Steve Rosenstock? 5 MR. ROSENSTOCK: I want togetback to the 6 future onthis, this output ofwasher shipments andgo 7 back to this original slide presentation. 8 Just as a quick comment, under the 9 standards, that was the last slide you had, between 10 2020 and 2030, it seems to flatten out. Is that 11 because, as I've seena numberof reports, that'spast 12 the NEMS deadline you just other parts of the 13 report, other reports, it seems like you've kind of 14 said no real improvements between 2020 and 2030 on a 15 varietyof issues, soyou kindof left it flat just as 16 a placemark? 17 MR. McMAHON: These, no. You can see the 18 replacements continue to grow. I think that the 19 projections for new construction are declining. 20 MR. ROSENSTOCK: Okay. 21 MR. McMAHON: Andthat'swhat'sflattening 22 things out. 23 24 overall cap. 25

(202) 234-4433 MR. ROSENSTOCK: I just thought it was an
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• 142 1 MR. KESSLER: Jim, I think it might be 2 helpful togo throughthe listof the factors that you 3 are including in the forecast because some of the 4 things that Charliecomments onare inherentlyin some 5 of those other numbers. 6 MR. BROOKMAN: You might see them as 7 embedded. 8 MR. KESSLER: Embedded, yes. And what 9 you've tried to do with these last, I believe, is add 10 those things that are germane to this particular 11 subject. 12 MR. BROOKMAN: Did you also have a 13 comment? Okay. I want to make sure you get through 14 your slides, so I'd like you to proceedwithwhat you 15 haven't covered so far. 16 Steve Nadel, go first. 1 7 MR. NADEL: Actually, as a transitioninto 18 this, can we go to the next slide because I had a 19 question about that. 20 MR. BROOKMAN: I like this progress. 21 MR. McMAHON: This one? 22 MR. NADEL: Yes. I was trying to 23 understand the difference between the green line and 24 the black line. 25

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• 143 1 MR. NADEL: What didyoudoto reviseyour 2 model to go from one to the other? 3 MR. McMAHON: We looked at the current 4 distribution of sales by efficiency of washers and 5 compared to the engineering data that we have from 6 AHAM that indicates what the relationship is between 7 price and operating costs and that gave us a better 8 read on how people trade off, price versus operating 9 costs because they're buying close to the baseline 10 model, not at the high efficiency end of that 11 distribution. 12 Socurrentmarketbehaviordefinedbywhat 13 people are currently buying gave us a ratio between 14 how valuable a dollar or savings is to a dollar of 15 purchase price that is different than we got from the 16 conjoint analysis. And that's what we did here. 17 MR. NADEL: So if I understandthe blue is 18 the conjoint
-- 19 MR. McMAHON: Yes
-- 20 MR. NADEL: The green was your attempt to 21 tamp down the conjoint? 22 MR. McMAHON: Yes. 23 MR. NADEL: And the black represents, 24 based on your models, the correlation of market which 25 effectively is a further significant tamping down on

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• 144 1 the
-- some of the factors in the contract. 2 MR. McMAHON: That's correct. Thanks for 3 that summary. 4 (Laughter.) 5 MR. BROOKMAN: Proceed with the rest of 6 your slides. 7 MR. McMAHON: Okay, so moving along into 8 the future, speculation about how consumers might 9 react to new standards, higher equipment prices, if 10 all of this data is correct, will mean that there will 11 be fewer earlier replacements, the people have less 12 incentive to buy a new product early. There will be 13 more repairs and fewer replacements in general and 14 more purchases of used washers. 15 Lower operating expenses that would go 16 withnew standards wouldmitigate these reactions, so 17 they'd go in the opposite direction. At the higher 18 standard levels if that implies an increase in the 19 fraction of washers that are front loaders, people's 20 preferencefortoploadingwillamplifytheresistance 21 to the new products and it would therefore be similar 22 to what's happening with the higher prices. 23 Now all of these things are accounted for 24 in the models, but I just wanted to be explicit about 25 what the factors are.

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• 145 1 MR. BROOKMAN: Bill Prindle? 2 MR. PRINDLE: Jim, could you explain a 3 little bit how you derived assumptions about future 4 prices, particularly in light of your earlier slide 5 from your otherpresentationwhich showed essentially 6 no price impact from the 1994 standard? How do you 7 translate manufacturing costs and prices? 8 MR. McMAHON: It's all inthe spreadsheet. 9 We used the manufacturing cost information from AHAM 10 as a function of the efficiency levels. There are 11 markups applied for the manufacturing markup, the 12 retailer markup and a sales tax. So basically, the 13 retail prices are proportional to the manufacturer 14 costs. That's how the prices are derived. 15 MR. PRINDLE: Did you do any sensitivity 16 analysisondifferentassumptionsaboutdifferentkind 17 of pricing behavior or just assume sort of a -- 18 MR. McMAHON: We have not -- 19 MR. PRINDLE: A pass through of costs? 20 MR. McMAHON: Let me go ahead to here. 21 Let's go into sensitiyity analysis which is the next 22 slide. I've skipped over the results with different 23 standard levels, but we can come back to that. 24 25 assumptions

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• 146 1 particularlysincewe're speculatingaboutthefuture. 2 So the next threepages list those things that we have 3 thought about that could give you different answers 4 and we haven't done
-- we've done a few sensitivities 5 so far, but not a lot andwe wouldwelcome suggestions 6 about what sensitivities to do, especially 7 . specifically quantitative suggestions about what to 8 change here. 9 If consumers in the future value energy 10 and water savings more than they do now, then they 11 willbe lessresistant topurchasingproducts that are 12 more efficient. So when I say standards of level, 13 that's the effeet of the top of this, I mean the 14 change in shipments will be less if consumers are 15 happywithreducingtheirenergyandwatercosts, more 16 happy than they are now. 1 7 Ifmanufacturersacttomitigatethe sales 18 decrease somehow, somaybe theyare able to adjust the 19 pricing, I don't know, maybe there is a way to reduce 20 costs beyond what their current estimates are. This 21 is speculation. 22 If there were some adjustment on the 23 supply side of the washers, then that would also 24 mitigate the change in sales. 25

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# • 147 1 models, there's a distribution of prices here and 2 we've just said that this distribution moves on out 3 into the future and applies to the new standard. But 4 if, in fact, consumers are -- get too high up on the 5 price curve andtheychange theirmix, I hope that the 6 manufacturerswill forgiveme, buttheremightbe some 7 brand shifting that went on in that scenario. That 8 might change the effects. 9 If there were early replacement programs 10 by governments or utilities and that those were 11 effective, that couldinducepeopletocontinuetobuy 12 more washers in spite of new standards going on. 13 If high efficiency washers continue to 14 capture market share more than we're projecting, we 15 have an increase in our baseline, but if it's faster 16 than that, then that would mitigate the effeet of 17 standards. 18 An issue that I think it was Dick who 19 raised it this morning about the washer-dryer 20 combinations, we didnot consider that factor whenwe 21 didthis forecast and infact, it'sgoingto damp down 22 the effect of standards here. Let me explain. 23 About half of washers are sold as a 24 washer-dryer combination, not as just a washer alone. 25 That means that if there's a standard on the washers

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# • 148 1 and it doesn't affect the price of dryers, that the 2 relative change in price for the combo, for the 3 washer-dryer combo is a smallerpercentage than if it 4 was just compared to the washer alone. We have an 5 accounter for that. 6 Our elasticities are based upon just a 7 washer price alone. I know the manufacturer impact 8 analysis did do an analysis that includes the 9 combination washer-dryers. That was a new issuejust 10 came up, so that's going to be a small adjustment 11 that's going to happen here. 12 Another factor, we've assumedthat enough 13 used washers are going to be available. We haven't 14 worried about supply of used washers and then maybe 15 there's other factors as Charlie says that are 16 responsible for whypeople decide tobuywashers that 17 we haven't accounted for. 18 On the othersideof the ledger, if inthe 19 future consumers value energy and water savings less 20 than they do now for whatever reason, then the 21 standardimpactswillbegreaterthanwe'veestimated. 22 If consumers don't adjust to front loaders, if their 23 resistance to front loaders increased for whatever 24 reason, then standardswouldhave a biggerimpact. Or 25 if high efficiency washers fall off and they don't

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• 149 1 continue to capture the market shares that we're 2 project, then the standards will have more effect. 3 So bottom line, backing up a couple of 4 pages. This is the output from the current model. 5 Historical data again is the red axis. Just for 6 reference, the blue line is the baseline case, no new 7 standard and the interestingperiod is from 2003, the 8 start date of a new standard on into the future. 9 I have not shown all of the efficiency 10 levels because the lower efficiency levels show up 11 very close to the baseline in the 5, 10, 15 percents, 12 a very small change in shipment. At 20 percent, you 13 begin to see a change, at least visually it's enough 14 to see. At 25 percent, a bigger change; 35 percent 15 and then 45 and 50 percent are out here and they're 16 very close together. 17 So we're seeing initial drop of about 1.5 18 million in shipments in 2003. It's mitigated 19 somewhat. Part of what's going on here is you have 20 people who do an extra repair. Theybuy a little bit 21 more life andtheydefertheirdecision, but thenover 22 some number of years that washer dies eventually and 23 they have to buy a new one, so the gap closes 24 somewhat, as you go out in time. 25

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# ..• 150 1 MR. NADEL: Could you back up one more 2 because inresponse toa previousquestionon that one 3 you jumped ahead. 4 MR. McMAHON: Sure. 5 MR. NADEL: Acouple of questions. Ifyou 6 could tell me what are the sources of the data you 7 used on the assumed impacts on fewer early 8 replacements, more repairs, more purchasers needed 9 washers. Also likewise, what specific data did you 10 use for your last bullet? 11 MR. McMAHON: Okay, I summarized the data 12 sources earlier iri. inputs, but I'11 go over them 13 again. The faction of people who are likely to do 14 earlyreplacement isbasedupon theAHAMNFO surveyof 15 1996. 16 I guess I want to restate your question. 17 We didn't assumethe answers. We assumedcoefficients 18 for the decisionmodel that I showedyou earlier. So 19 what fraction of people faced with these earlier 20 decisions here. 21 MR. NADEL: Right. 22 MR. McMAHON: What is the likelihood of 23 problems? That's from Consumer Reports. It tells us 24 the probability of repair. 25

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# • 151 1 MR. McMAHON: And then we extrapolated 2 that out. The probability of early replacement is 3 from AHAM NFO survey 1996. 4 MR. NADEL: Current price is what I'm
-- 5 on what basis or did you just assume that that same 6 probability continues under all the scenarios or is 7 there somehow is that affectedbytheprice andthat's 8 what I wanted to know. 9 MR. McMAHON: Yes. These are. 10 MR. NADEL: How is that adjustment 11 determined by? 12 MR. McMAHON: These are all affected by 13 the price and by the operating cost, by whether it's 14 a front loader. 15 MR. NADEL: Yes. 16 MR. McMAHON: And those coefficients are 17 primarily from the conjoint adjusted to agree with 18 historical shipments. So it's a Logit equation with 19 these multiple terms in it. 20 MR. NADEL: Okay. 21 MR. McMAHON: So it's a response to those 22 quantitative things that are in there. And we're 23 calibrating it to 1996 data, in this case of early 24 replacement where we know what the percentage was at 25 that time. That helps us determine the coefficients

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# ,. 152 1 now and then as the drivers, the energy price and 2 operating costs and number of households change over 3 time, the model adjusts. 4 MR. BROOKMAN: Question or comment? 5 MR. BRUNDAGE: Question. Don Brundage, 6 SouthernCompanyElectricUtility. Couldyouputback 7 up your washer shipment slide? 8 MR. McMAHON: The historical shipments? 9 MR. BRUNDAGE: No, the output with new 10 standards. 11 MR. McMAHON: Sure. That one? 12 MR. BRUNDAGE: No. 13 MR. McMAHON: Not the base case, the 14 standards case? 15 MR. BRUNDAGE: The standards case. 16 MR. McMAHON: Yes. 17 MR. BRUNDAGE: ThequestionI have iswhen 18 you have these high efficiency levels which you're 19 assuming are going to result in additional repairs, 20 one thought that had occurred to me also is that 21 you're going to have a couple of year period before 22 implementation of the new standard where knowledge 23 that the standard is coming in, it's going to be 24 25 public knowledge. Are you assuming any early replacements of washing machines to get the cheaper

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• 153 1 models before the new standards? 2 MR. McMAHON: No, we have not. 3 MR. BRUNDAGE: Okay. 4 MR. BROOKMAN: Dick Best, you've been 5 patient. Thank you. 6 MR. BEST: Thank you. Jim, would you 7 repeat your comment on the washer-dryer combinations? 8 I'm not sure I understood the point. 9 MR. McMAHON: Okay, sure. The models are 10 set up in terms of the change in price of the washers 11 and right now if we have a $420 washer including tax, 12 thenthere's a certaindollarincrease inthat, that's 13 goingto influencethepercent ofpeoplewho decide to 14 purchase a new washer. 15 However, if thecorrectbase isnot a $400 16 washer, but a $400 washer and a couple hundred dollar 17 dryer, then let's say a $50 increase in price is a 18 smallerpercentage change for the combination than it 19 is just for the washer alone. 20 So for half of the market that buywasher 21 and dryer combinations, the expectation is they will 22 be less sensitive the change in price than the folks 23 who just have a washer alone. 24 25 MR. BROOKMAN: Michael McCabe first. Pardon me, Dick wants to follow on. Dick, followm.

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• 154 1 MR. BEST: I thinkthatneeds some further 2 evaluationbecause it'susually
- - dryers arenormally 3 sold almost as an accessory to the washer as an 4 additional sale, although they're sold together and 5 the fact that theprice of the washergoes up and they 6 decide not to buy the washer, that's the first 7 decision. The dryer sale goes right along with the 8 washer. 9 On the second portion of it, increasing 10 thewasherprice, youbuilt it inmaking anadditional 11 purchase of the dryer also declines the probability, 12 so I think you have a different effect than the 13 viewpoint that you presented. 14 MR. BROOKMAN: Michael, are you okay? 15 DavidModtland, Bill Prindle and then Earl Jones. If 16 we could be brief. I'd like to get him towards his 17 conclusion. 18 MR. McMAHON: If I may before I take one 19 more question I want to respondtoDick. I thinkwhat 20 I hearyou're saying is you're supporting the current 21 model which says everything is based upon the washer 22 and I was proposingthat we make an adjustment for the 23 combinationpurchases and you're sayingwe shouldnot 24 make that adjustment. 25

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• 155 1 that you presented I don't believe is correct on the 2 adjustment method. 3 MR. McMAHON: Okay. 4 MR. BROOKMAN: David. 5 MR. MODTLAND: Could you explain the dip 6 in the higher efficiency around the 2018-2019 time 7 frame? 8 MR. McMAHON: This is a function of, I 9 think what's going on with - - I really need the 10 breakout of that, but I think it's a combinationof 11 what's going on here. If you go out roughly 14 to 20 12 years later, you should see a dip. There's less 13 replacements because you had less sales here. That's 14 what's going on. 15 MR. MODTLAND: Don't you have to make 16 those up some time? 17 MR. McMAHON: Not necessarily. These are 18 people who have decided not to have washers. 19 MR. MODTLAND: I think the effect 20 stretches out the replacement. 21 MR. STEPHENS: It does stretch the 22 lifetime out abut a year. 23 24 25

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# • 156 1 think earlier, Jim, you referred to the 1994 standard 2 in its energysavings impact. Didyou look at all the 3 historical databasedonwhat happened inresponse to 4 the 1994 standard or is the predictive part of that 5 graph solely based on the adjusted conjoint? 6 MR. McMAHON: The former. We used all of 7 the shipments data from 1980 to 1996 in order to 8 calibrate the coefficients of the model. It's not 9 based just on the contract. 10 MR. BROOKMAN: Earl? 11 MR. JONES: Just again, Jim, I'm stillnot 12 sure I follow your point on the impact on dryers. I 13 want to make a point that decreases in washer sales 14 would necessarilyhave a negative impact on the dryer 15 sales andyourmodel does or does not recognize that? 16 MR. McMAHON: Ourmodel has no connection 17 between
- - we didn't look at dryer sales at all. 18 We're looking strictly at washers. 19 MR. JONES: Okay, and so therefore 20 anythingliketheemployment analysiswhichfollows as 21 well which I gather you all did? 22 MR. McMAHON: Yes. 23 MR. JONES: Does not take that into 24 account either? 25

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• 157 1 MR. JONES: That may be somethingwhich I 2 think would be appropriate if you're looking to make 3 some adjustmentstotake intoaccount therelationship 4 between washer and dryer sales. As Dick says, to 5 accept their accessories and the washer sale is in 6 place because of the negative impact on dryers you 7 need to acknowledge that in your analysis. 8 MR. BROOKMAN: I would like
-- I sawboth 9 Steve and Charlie. Will you let himdohis conclusion 10 so we can roll the conclusions into the following 11 comments andthen I knowwe'll all strive tobebrief. 12 Please, Jim, press on with your conclusions. 13 MR. McMAHON: Conclusions. Subject to 14 comment. The current clothes washer shipments model 15 provide a very detailed picture of potential 16 standards-induced impacts. Assuming no mitigating 1 7 actionsbygovernment orindustry, the impactsthatwe 18 forecast are less than 10 percent change in shipments 19 for standard levels of 25 percent or below and 20 to 20 30 percent reductions in shipments in 2003 for the 21 higher standard levels. 22 Then these are the factors that you might 23 want to consider to do sensitivity studies. 

### If 24 consumers become increasinglyaware of savings and it 25 becomes more important to themortheymove to lowend

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• 158 1 models, if used washers are not available, if early 2 replacement and marketing programs increase, that 3 could mitigate the drop in shipments. 4 On the other hand,· if consumers value 5 energy and water savings less, or have an adverse 6 reaction to front-loaders, that could aggravate the 7 drop in shipments. 8 That's my conclusion. 9 MR. BROOKMAN: Excuse me, I'm sorry. I'm 10 calibrating for the rest of the day. I saw Steve and 11 Charlie both, briefly, if you can. 12 MR. NADEL: Okay, I had some comments on 13 a number of the slides. 14 MR. BROOKMAN: It strikesme we'regetting 15 towards the level of detail in this analysis that 16 almost, you know, some of this information has been 1 7 presentedbefore andithasbeenrecalibratedfor this 18 purpose and this kind of detailed analysis is very 19 useful to the Department. I'm wondering how much of 20 it can be put in writing and can also be included 21 after the kind of exchange between individuals that 22 illuminates. 23 MR. NADEL: Some of it is I'm trying to 24 understand his thing. 25

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# • 159 1 MR. NADEL: So if we could go back to the 2 graph showing shipments with standards. 3 Now if I understood you correctly, you 4 said that in the case with standards that the average 5 life is basically increases about one yearbecause of 6 more repairs. 7 I also heardyou say that at most maybe 2 8 percent of the people who now have washers go to the 9 laundromat. But here, if you look at your 45 percent 10 level, it's a 20 to 30percent decline in sales. What 11 happens to the rest? If 2 percent go to the 12 laundromat and the average life increases one year, 13 there's still a large quantity of people
-- 14 MR. McMAHON: This is sales of new 15 washers. 16 MR. NADEL: Right. 17 MR. McMAHON: So there are a number of 18 people who either repair the washer and extend the 19 life or buy a used washer. 20 MR. NADEL: Okay, but if you buy a used 21 washer, that's another way of saying you've extended 22 the average life. 23 MR. McMAHON: Well, the biggest affect 24 here, if you're doing it in percentage terms is that 25 the used washermarket takes off. There's a lot more

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# • 160 1 used washers bought. It's one of the reasons why in 2 our caveats we said if there aren't enough used 3 washers that could be a problem. 4 MR. NADEL: Okay, and that would be my 5 next question. Where would these used washers come 6 from if - - I understood theprevious discussion itwas 7 usedwashers comeprimarilyfromearlyreplacement and 8 if early replacement is down, that implies that the 9 used washer market is smaller, so where do all these 10 used washers come from? Mexico? I don't know. 11 (Laughter.) 12 MR. BROOKMAN: I would like to float a 13 suggestion. In the service of sticking with the 14 agenda, and ingettingdone nearlyontime today, Jim, 15 what time is your plane? 16 Canyouhangaround for a littlebit after 17 this workshop today to go through these in sufficient 18 detail to answer all these very detailed and I think 19 very appropriate questions. 20 MR. McMAHON: I'd be happy to. 21 MR. BROOKMAN: So could we move off this 22 level of depth and get to maybe comments on the 23 conclusions and then move on with the other elements 

### 24 of the agenda. Would that work for you, 

### Steve? 25

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• 161 1 you may consider in detail effectively drive the 2 results and I wanted to get them
-- 3 MR. BROOKMAN: I don't wish to deny you 4 the answer though. 5 MR. NADEL: Other people can have their 6 input too. Maybe I should just raise a few more of 7 the issues and comment on some of them. 8 MR. BROOKMAN: Briefly. 9 MR. NADEL: Right, I waswonderingtowhat 10 extent doesyour analysis look at all at the fact that 11 many of these higher efficiency washers have 12 additional factors that affect consumerutility, such 13 as better cleaning ability, larger ability to 14 accommodate clothes. Are those factored into your 15 analysis in any way? 16 MR. McMAHON: Those were not considered 1 7 and in fact, if those features are sufficient to 18 offset the factors that we have considered, then that 19 would change the forecast. 20 21 22 23 24 25 MR. JONES: I just hadto stopright there
MR. BROOKMAN: Earl Jones. MR. JONES: You have to have the data to support the question or the conclusion which is implicit in the question which I don't think you've

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• 162 1 got either. That is to say either that there's more 2 capacity or that there's more cleanliness. 3 MR. NADEL: I'.d be happy at some point to 4 debate you on this. 5 MR. JONES: Well, we candebate it, but if 6 there's no data then that's all it is, a debate. 7 MR. BROOKMAN: Do you have an additional 8 question? 9 MR. NADEL: Let Charliego. I'11 have one 10 more. 11 MR. BROOKMAN: Can either of you hang 12 around and go through this in detail with Jim at the 13 end of the workshop today? 14 MR. STEPHENS: Yeah, there will be about 15 15 pages of comments on it, too, later. 16 MR. BROOKMAN: I think that's very useful 17 and that provides also the level of detail in your 18 comments that the Department really benefits from, I 19 believe. 20 MR. BROOKMAN: Other questions or 21 comments? Dan Reicher. 22 MR. REICHER: I justwantedto saythis is 23 a very, very important discussion because this is a 24 very important piece of analysis, sowe reallydo need 25 people's fullest andbest views of this so that we can

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# • 163 1 go back and really assess what we ended up because 2 this is very much key to final decision making about 3 what was established. 4 MR. BROOKMAN: Steve Rosenstock and then 5 Chuck Samuels. 6 MR. ROSENSTOCK: Steve Rosenstock. Yes, 7 just to follow up, it might be interesting as you're 8 looking at it justto go back to other standards like 9 ballast. I remember when the ballast standards were 10 createdin 1990 therewere stories about how theywere 11 going into overtime making the last of the old 12 magneticballastsjusttorushtheproductionandthen 13 also with the 40 watt, 4 foot fluorescent lamps. I'm 14 just saying there might be a bump up. It might be 15 interesting, that one or two year period beforehand. 16 There might be a bump up. I might make it interesting 17 on the forefront of the forecast. 18 (Laughter.) 19 MR. BROOKMAN: As if we need other 20 exogenous variables here. Chuck? 21 MR. SAMUELS: Yes, I just wanted topoint 22 out that it's important to reflect that if it hadn't 23 been for some of the turmoil in the program that, of 24 course, eventually moved over to the congressional 25 front and then as a consequence we had the difficult

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# • 164 1 butextremelyproductiveprocess improvement, wewould 2 not be givingCharlie and Steve the opportunityto ask 3 these very cogent and insightful questions because we 4 would have been where we were five or six years ago 5 where we'dbe looking at outputs formodels andnobody 6 would even know where to begin to ask the questions. 7 Everyone is to be commended for the fact that we now 8 have an approach that allows people to ask these good 9 questions. 1O Soeven thoughtherewas a lot ofpainand 11 people were extremelyunhappywith some of the things 12 that were done outside of the program in terms of the 13 appropriationsmoratorium, we shouldrecognizethatwe 14 wouldn't be here, able to have this rich of a 15 discussion without it. 16 MR. BROOKMAN: Thank you, thank you. 17 Additional comments that relate, I would hope more 18 particularly to the conclusions and not these 19 methodologies, noting that we will provide time to 20 those that with to delve into this in greater depth. 21 Steve Nadel? 22 MR. NADEL: 

### i guess I have one otherpoint 23 that I wanted to put on the table and I'm not sure it 24 25 relates to the conclusion or the methodology. It's kind of

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• 165 1 MR. BROOKMAN: So that was a good cover. 2 I appreciate that. He's a real politics guy. 3 (Laughter.) 4 MR. NADEL: Right, but Jim, as an 5 economist, I was wonderingifyou couldcomment onhow 6 useful is it to have a model from a past periodbased 7 ondecliningprices andapplyto a future periodbased 8 on rising prices. Is there
-- is it a nice, smooth 9 transition or is there enough of a mismatch that one 10 needs to proceed with caution? 11 MR. McMAHON: For the record, I am not an 12 economist. 13 (Laughter.) 14 However, I will attempt to answer the 15 question. It's a valid question. The historical 16 record is a record of declining prices and you are 1 7 observing correctly that we're assuming that the 18 response, the elasticityto increasingprices will be 19 the same as it was to decreasing prices. And that's 2

### o an assumption because we do not have a historical 21 record of increasing prices. 22 The only other choice that I would have 23 would be to make some assumption absent any data on 24 what would happen in a period of increasing prices. 25 We have chosen to use the historical record as a

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# • ------- ------------------ 166 1 guide. 2 MR. BROOKMAN: Final questions. I see 3 none. Thanks, Jim, thanks very much. 4 Letme sayas a recoveringeconomist, that 5 if you were an economist your job might be easier. 6 (Laughter.) 7 Who's next in the agenda? Mike Rivest. 8 Mike Rivest is going to review the tools and 9 particularly the GRIM spreadsheet. 10 MR. RIVEST: I will not be reviewing the 11 GRIM. What I will be doing is
-- I have three things 12 I'd like to cover. I'd like to give a status report 13 on where we are in performing the manufacture impact 14 analysis. I quickly would like to make you aware of 15 some changes I've done on the clothes washer GRIM 16 analysis. 17 Andthirdly, I'dlike tomakeyouaware of 18 a new tool which is a GRIM analysis for the clothes 19 washer business which really came out of our 20 interviews as something important that we needed to 21 consider. 22 So my objective here is to make you aware 23 there's no analysisper se. That will come at a later 24 date when I have a little more certainty on the test 25 procedure issue.

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# • 167 1 As I want to make you -- first of all, I 2 have completed interviews with practically all 3 manufacturers, I believe, and have gotten their 4 feedback on the GRIM models and the shipment models 5 and the various parts of the analysis that would 6 directly impact their business. 7 And I'm currentlyin the stage of sitting 8 down with them, reviewing the results of the analysis 9 and mostly trying to identify any aggregation and 10 confidentiality issues that result from insufficient 11 aggregation, if you will. So I'm very -- since I 12 signed my life away on those confidentiality 13 agreements, I want to make sure I don't get sued. 14 (Laughter.) 15 We have developed cash flows for the 16 industry. We'vedevelopedemployment impacts. As you 17 can see from the spreadsheets, we are modeling the 18 dryer business, also considering the dryer business 19 and the employment impacts. 20 We've also developed a small manufacture 21 cash flow analysis, if you will, which is applying 22 sensitivities to the main industry cash flow through 23 the knowledge we gained of the differences between 24 small and large manufacturers. 25

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--------- - 168 1 as the magnitude of the test procedure issue becomes 2 more clear, then I'11 be able to come back to the 3 manufacturers and get some feedback with them as to 4 whether or not the conclusions we drew together are 5 still valid. 6 Youmayrecall thatwiththeANOPR, we had 7 a versionof the GRIM that hadbeenpreparedandthere 8 were somepartsmissingto it. The mainpart that was 9 missing is the shipments forecast and obviously the 10 shipments forecast is a dryer of the manufacturer 11 impact analysis, one we're anticipating drops of 25 12 percent, the order of 25 percent in shipments to have 13 serious consideration of the cash flows and on the 14 competitiveness of the industry as they try to 15 recuperate those volumes. 16 So what we've done, we've made sure that 17 we hada similar shipment forecast as isbeingused in 18 theNationalEnergySavings spreadsheetwhichinvolved 19 separating out the horizontal and the vertical or the 20 highefficiencyandbaselineefficiencymarkets inthe 21 base case. 22 We've also gotten additional information 23 from manufacturers breaking out the fixed costs 24 between actual tooling and equipment, costs that are 25 not expensed in the current year, but are depreciated

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• 169 1 over time, but have to be replenished and marketing 2 and design costs which are expensed in current year 3 and do not have to be at least in terms of meeting 4 standards, do not have to -- are not reoccurring. 5 Justforinformation, saythosebreakdowns 6 havebeenincorporatedintheGRIM spreadsheet andare 7 now being considered in the cash flow. 8 The shipments currently incorporated in 9 theGRIM arethe shipments, exactlythe shipments that 10 Jimmodeledearlier. Now if these needtobe revised, 11 then they'll also have to be revised in the GRIM. If 12 any sensitivity analyses need to be performed, they 13 will also have to performed in the GRIM. 14 MR. BROOKMAN: Leave it up there for a 15 second. 16 MR. RIVEST: Sure. 17 MR. BROOKMAN: Say what you just said 18 again. 19 MR. RIVEST: I said that the shipments 20 that were developed for the National Energy Savings 21 spreadsheet are also being used in the GRIM to model 22 the future cash flows for manufacturers. So any 23 revisions to the shipment forecasts will also have to 24 be incorporated in the GRIM spreadsheet. 25

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• 170 1 MR. RIVEST: We'll see a littlelaterthat 2 this also drives the shipments forecast for dryers 3 because of the 40 to 60 percent influence of clothes 4 washers sales on dryers. 5 MR. BROOKMAN: Thank you. Charlie 6 Stephens? 7 MR. STEPHENS: Does that not also drive 8 the forecast for parts? 9 MR. RIVEST: I haven't looked at that. 10 MR. STEPHENS: Why? Why not? It seems 11 like it's going to be a big issue if you start 12 extending the life of a product based on repair. 13 MR. RIVEST: I was goingto take next week 14 off, but now I think
-- 15 (Laughter.) 16 Thank you. So Charlie, in your comments 17 I think that would be useful to -- 18 MR. STEPHENS: I can reiterate them. I 19 also made that comment in December. 20 MR. BROOKMAN: Okay, thank you. Dan 21 Reicher? 22 MR. REICHER: Dan Reicher. When you say 23 parts, then do you also have to look at increased 24 employmentamongthe servicebusinesses, theplumbers, 25 the
- - the repair guys, the guys that make $65 an

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..· !:.-"J; ,,.. ·• 171 1 hour. Is that in the analysis? 2 MR. RIVEST: It's not currently, no. 3 MR. JONES: What assumptions
- - EarlJones 4 in the GRIM for the production of the parts? 5 MR. RIVEST: For the production of the 6 parts? 7 MR. JONES: The manufactured parts. 8 MR. RIVEST: Actually, the employment 9 impacts is that what you mean? The employment 10 impacts are evaluated a number of ways. One of them 11 is to look at incremental labor costs, for example, 12 that were part of the date of submittal. Others is to 13 look at the potential impacts of closing plants and 14 moving them. So there's not a quote direct 15 relationship between the spreadsheet and the 16 employment impacts. The employment impacts are 17 actually have
-- 18 MR. JONES: What about the impact on 19 manufacturers? Was there anyprovisionmade for some 20 increase in production of spare parts? 21 MR. RIVEST: Well, I don't want to get 22 into the analysis now, but there are -- it's not all 23 rosy in the production of parts. The manufacturers 24 who have to keep supplying replacement parts have to, 25 in fact, maintain production facilities for those

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# • 172 1 parts and there's a presumption inyour question that 2 that will be a lucrative, profitable business which 3 I've gotten comments that it might not be. So I 4 didn't ignore the issue, but it's more complicated 5 than I can get into today. 6 MR. STEPHENS: I've done quite a bit of 7 research onthe retail endof it, so I knowwhere some 8 of the parts are produced. I knowwhat the markup is 9 on a lot of the parts and it's not insubstantial. 10 MR. BROOKMAN: You are suggestinganafter 11 market emerging here for those parts? 12 MR. STEPHENS: Well, it is not just an 13 after market. It's also there are major 14 manufacturers sellingthepartsmanufacturedinMexico 15 witha markupandothermanufacturers sellingthe same 16 kind of part manufactured somewhere else at a 17 different markup and the markups are quite different, 18 actually, from one manufacturer to the next and the 19 impacts will be quite different, I presume, on the 20 bottomline fromonemanufacturer tothenext basedon 21 what I've learned. 22 MR. BROOKMAN: So Michael, in summary, 23 you're saying that it's not presently in your 24 analysis, althoughyou might see it embedded in other 25 features?

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• 173 1 MR. RIVEST: There are elements of it. I 2 do not specifically do an analysis of the 3 profitability or the cash flow impacts of changes in 4 the repair business. 5 I'll speak to DOE and see if that's 6 something they would like us to look at. 7 MR. BROOKMAN: Additional questions on 8 this point? 9 MR. RIVEST: Oneveryimportantthingthat 10 has tobe kept inmind is that what Jimis forecasting 11 in terms of shipments are -- he's primarilydoing for 12 the purpose of evaluating the energy savings in the 13 U.S. But manufacturers, actually, produce for the 14 U.S., for othercountries, andthere are also imports. 15 So in terms of what is being produced and the 16 shipments that they have to retool for, it may be 17 different and what I've done here is made the 18 assumption that theywill completely
-- any -- if the 19 standard requires an efficiency level, they would 20 retool their whole production for that efficiency 21 level and that has a significant impact in that 22 there's about a 12 if you see the industry 23 shipments for 1996, there's 7 million, but they also 24 25 export .8 million. So I'm trying to incorporate in theindustrycashflowtheiractualproductionvolumes.

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.•·!**·::~**-;c: .•••. 174 1 Out of a necessity to take into account 2 the growing or the assumed growing market of h axis 3 clothes washers, I've separated the business, if you 4 will, in a v axis and an h axis business, where a 5 baseline efficiency and a higher efficiency business 6 and I've created separate cash flows for both those 7 businesses. That would also, Charlie, allow me to 8 model some of your recommended scenarios for the base 9 case. And that's actually work under way. 10 An important note, I had to make some 11 assumptions about the relative profitability of the v 12 axis business versus the h axis business in the 13 baseline. I currentlyhave a slightlymoreprofitable 14 h axis business modeled, but obviously we'll need to 15 do some sensitivity on that. 16 MR. BROOKMAN: Steve Nadel? 17 MR. NADEL: Mike, what are you doing in 18 the analysis orwhat do youplan to do in the analysis 19 regarding if there's a standardat the h axis level
-- 20 MR. RIVEST: At what? 21 MR. NADEL: If there is a standard at the 22 h axis level. 23 24 25 MR. RIVEST: Right. MR. 

### NADEL: What type of markup assumptions are being made and on what basis?

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# • 175 1 MR. RIVEST: That's what I don't want to 2 get into today because that will not happen in the 3 next few minutes. That's actually what we've been 4 working on with manufacturers looking at the 5 distributionof costs, lookingatthe currentproducts 6 in the·market and their ability to increase price. 7 MR. BROOKMAN: You are suggesting that's 8 a work in progress? 9 MR. RIVEST: That's the analysis. 10 MR. BROOKMAN: You're not ready to talk 11 about it? 12 MR. RIVEST: Correct. 13 MR. NADEL: When is that open to 14 discussion? 15 MR. RIVEST: That will be open to 16 discussion once I have some certainty that the costs 1 7 that have been provided are reliable and that the 18 conclusions we drew from those costs are reliable. 19 MR. REICHER: Dan Reicher. That, Steve, 20 wouldclearlybe anappropriate subjectwhenwe get to 21 the next workshop. 22 MR. RIVEST: Right. 23 MR. REICHER: With the document going out 24 presumably ahead of time. 25

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•••• 176 1 that, my hope would be to the extent we can get into 2 those issues a lot sooner, because tothe extent there 3 is debate about those and a need for additional 4 sensitivity, it would be nice to have those 5 sensitivities at the workshop. 6 I think that's going to be another hot 7 issue. And you don't want to go to the workshop and 8 say we need to do an analysis. We have a lot of time 9 now because of the test procedure issue. How can we 10 advance the manufacturing impact analysis so that we 11 can address these uncertainties in parallel with the 12 uncertainties on the other issues. 13 MR. RIVEST: Right, I think we'll know 14 within a few weeks how much progress we'll be able to 15 make in terms of releasing the analysis. 16 MR. REICHER: This isDanReicher. Let me ·17 say obviously the sooner we can release an analysis 18 that we're comfortable with, we will strive to do 19 that. 20 MR. RIVEST: I mean 2 5 or 3Opercent or 15 21 or 20 percent makes the world of difference for some 22 manufacturers. Therearetechnologythresholds and
- - 23 MR. NADEL: Right, if we could find some 24 way to get that a lot sooner, that would be very 25 helpful.

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• 177 1 MR. BROOKMAN: Dave? 2 MR. MODTLAND: Dave Modtland. We just 3 have to be a little careful of how we use horizontal 4 axis and v axis and high efficiency and then use h 5 axis and high efficiency interchangeably and someone 6 else's isn't tied that way and
-- 7 MR. RIVEST: I think the more generic way 8 to think about it is stating the efficiency level. 9 MR. MODTLAND: Efficiency level, yes. 10 MR. BROOKMAN: Thanks for that caution. 11 Other additional comments on this slide before Mike 12 moves to the next one? 13 MR. RIVEST: Based on the changed 14 shipmentsforecast, basedonsome corrections, or some 15 suggestions I had on the ANOPR analysis, the current 16 spreadsheet that you have models a base case industry 1 7 value which, as I mentioned here, there will be 18 additional scenarios developed to look at what that 19 base case industry value is and that is the value 20 against which the standards case industry value will 21 be compared and the change in industry value will be 22 benchmarked. 23 So you have the tool and the intent of 24 makingthe tool available istohaveyouknowledgeable 25 about what data exists, what are the distribution of

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• 178 1 costs at the various levels, what assumptions you 2 would make so that when we do have that conversation 3 you would have had plenty of opportunity to look at 4 the impacts of some of those suggestions that you're 5 making. 6 I wanted to make some progress in trying 7 to get a handle on what might be the impact on the 8 dryerbusiness andbecause it'

### :3 not somethingthathad 9 come up earlier, I didn't have a lot of data. What I 10 did is I created a spreadsheet GRIM, with very much 11 the same top down approach of looking at industry 12 costs, industry prices from census and from retail 13 surveys, and create an industry
-- base case industry 14 cash flow for the dryer business. And then looked at 15 what would be the implication of the drop in 16 shipments. 17 So what I have here, if you will, is a -- 18 what I would consider a shell inwhich I would invite 19 additional comment. I have there my simple 20 assumption is that the only impact of the decline in 21 dryer shipments is the loss margin. That's 6 or 7 22 percent that we're no longer making. I'm not taking 23 intoaccount anypricingcompetitionthatmayoccuras 24 a result of the drop in shipments or any investments 25 that may be needed in the actual dryer business to be

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• 179 1 able to match the cabinets of a more stringent, of a 2 higher efficiency washer, for example. So as such, 3 with these conservative assumptions, I still come up 4 with considerably large impacts on the dryerbusiness 5 strictly looking at the lost profit. 6 And there again, the point I want to make 7 is we'll make everyeffort to incorporate the dryers' 8 impact into the analysis and I understand they'll be 9
-- we'll be having conversations as to what you're 10 planning on doing and I invite data on conversion 11 costs includingR

### &D, designmarketingat thevarious 12 levels. 13 MR. BROOKMAN: BillPrindleandthenSteve 14 Rosenstock. 15 MR. PRINDLE: On page 11, your third 16 bullet, you have a "could" changes tb a "would". 17 MR. RIVEST: .I'm sorry, where is that? 18 MR. PRINDLE: Thirdbullet onpage 11 you 19 say that "changes in washer platforms could indicate 20 a change to dryer platforms. And as a result, there 21 would necessarily have to be some" is this just 22 people's speculation or is this based on -- 23 MR. RIVEST: Have you looked in a dryer 24 cabinet onmy Frigidaire
-- I have a pairedFrigidaire 25 washer-dryer. I don't think that dryerwas something

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• 180 1
-- it seemed to me like an entirely new production 2 line was put in place for that. I may be wrong. I 3 wouldmake that case for an efficiency improvement of 4 10 percent for example. So the would or could has a 5 lot to do with what efficiency improvement we're 6 looking at. 7 I would change could to would at 40 8 percent. 9 MR. PRINDLE: Okay, itjust seems a little 10 vague as to whether
-- 11 MR. RIVEST: Maybe 12 MR. PRINDLE: there's some causal 13 relationship here. It just sounds a little 14 speculative. 15 MR. RIVEST: It is speculative because 16 that's something that
-- 17 MR. BROOKMAN: It seems as though he's 18 trying to make the statement that encompasses that 19 range, right? Charlie? 20 MR. STEPHENS: Charles Stephens. 21 MR. BROOKMAN: Steve, I'msorry, you'11go 22 next. 23 MR. STEPHENS: Your 2 to 10 percent comes 24 from the shipments forecast that you're currently 25 using and that's the direct impact of that.

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• 181 1 MR. RIVEST: Right. 2 MR. STEPHENS: The loss of the same dryer 3 sales? 4 MR. RIVEST: Correct. 5 MR. BROOKMAN: Steve? 6 MR. ROSENSTOCK: Steve Rosenstock. Yes, 7 on the last page with the chart of results. Standard 8 gauge versus change
- - that's in million dollars, 9 dollars per annum? 10 MR. RIVEST: Yes. 11 MR. ROSENSTOCK: Okay. 12 MR. BROOKMAN: Additional questions on 13 these sheets andparticularlythe final slides. Dick 14 Stilwell. 15 MR. STILWELL: Dick Stilwell, Maytag. I 16 have a comment I'd like to make regarding the impact 17 of washer design on the dryer design. Obviously, if 18 you do anything other than square box for a washer 19 design, then you've got to modify the dryer to match 20 it. 21 MR. BROOKMAN: You want them to appear as 22 matched, as a matched pair? 23 MR. STILWELL: Yes, absolutely. So more 24 than likely, any newmajor redesigns of washers would 25 also involve a redesign for dryers.

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• r**~ ,~-;;;**  • 182 1 MR. BROOKMAN: Glenn Schleede. 2 MR. SCHLEEDE: It just occurs to me as a 3 result of this conversation about matched dryer and 4 washer that there's an opportunity here to save 5 consumers a lot of money on buying new dryers. DOE 6 wouldjust issue specifications for the appearance of 7 the washer and dryer
-- 8 (Laughter.) 9 MR. BROOKMAN: Thankyouforthat comment, 10 Glenn. ll Dick Best. 12 MR. BEST: Maybe I missed a point. You 13 had inyourpackagehere the fact that you've included 14 import/export impacts in the analysis. 15 MR. RIVEST: Yes. 16 MR. BEST: The only comment I have is if 17 those were entered with the same degree of impact, 18 that needs to be reevaluated. I think the point is 19 that significant price increase on a U.S. produced 20 washer, by the time it's exported and normally taxed 21 at thevalue of the import at the receivingpoint, has 2 2 a much larger impact than it.would be just on the 23 price injust a year in the U.S. And also the growth 24 of imports needs to be recognized as the
-- not only 25 the technology becomes close, but the price becomes

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# • 183 1 close between imports and both of these products' 2 placement ofU.S. productsbyimports. That numberis 3 going to change as well. So I think there's some 4 further analysis on import-export thatprobablyneeds 5 to be considered, both from the percentage of impact. 6 MR. BROOKMAN: Thank you. Additional 7 comments or questions? Yes, Dave Modtland. 8 MR. MODTLAND: I justhada questionabout 9 the import and export is relatively new into the 10 analysis, right? 11 MR. BROOKMAN: Could you say the page, 12 Dave? 13 MR. MODTLAND: I'm talking about the same 14 page, page 7 and it's in the material that was on the 15 16 MR. BROOKMAN: Sorry. 17 MR. MODTLAND: I wasjustwonderingis the 18 Department as interested in the energy saved in 19 foreign countries or are they mainly concerned with 20 what the savings is domestically? 21 MR. RIVEST: There are a couple of people 22 from Canada back there. 23 24 25 MR. MODTLAND: No response required. MR. REICHER: I think there's probably a definition based on the answer based on the

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• 184 1 statute. I don't know what that answer is. I would 2 presume the statute tells us to look at U.S. energy 3 savings. It does not tell us to look at foreign 4 energy savings. 5 MR. BROOKMAN: Michael McCabe. 6 MR. McCABE: Michael McCabe. This is the 7 manufacturingimpactanalysisthat'stryingtocapture 8 what was happening as far as the manufacturers both 9 with respect to the importing and exporting of 10 products an dhow imports may affect domestic 11 manufacturers, how the impact on regulation may be 12 modified or minimized because of a growing export 13 market. 14 This is not feeding into the national 15 energy savings analysis. That analysis was looking 16 strictly at the use domestically of these products. 17 MR. BROOKMAN: Steve Nadel? 18 MR. NADEL: Yes. A question on the base 19 case. In the base case, are there assumptions about 20 the investments that manufacturers will need to make 21 and new plants because I know a number of 22 manufacturers have been holding off on investments 23 until they know what the new standard is going to be. 24 So I assume there's going to be some pretty hefty 25 investments even if there was no new standard. Is

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# • 185 1 that factored into the analysis? 2 MR. RIVEST: Yes, the investment levels 3 for higher efficiency are the exact same numbers that 4 are beingused for the standards case. So as you have 5 a more aggressivebase casewhere there'smoremarket6 driven changes towards h axis, the same types of 7 investments are occurring, but they're occurringover 8 time. And then the impact, the impact of standards is 9 diminishedwhenyouhave fewer lowerefficiencymodels 10 to convert in the standards case. So there is a -- 11 MR. NADEL: Right, you are answering a 12 question about keymarket driven improvements to high 13 efficiency. I was saying to what extent does even in 14 thebase case, assumingnochange inefficiencylevels 15 does that factor into some likely significant 16 increases to modernize plants in years following 17 effective date of the standard because a lot of 18 manufacturers have been postponing some of those 19 decisions because why retool now whenyou knowyou're 20 going to have to quite possibly retool. 21 MR. RIVEST: I'm not entirely sure I 22 understand, but to the extent the market is demanding 23 theproducts, theassumptionisthatmanufacturers are 24 25 satisfying that demand by investing in 

### h axis technology?

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• 186 1 MR. NADEL: No, forget h axis. 2 MR. RIVEST: Okay. 3 MR. NADEL: The question is in looking at 4 investments in a base case, under no change in new 5 standards, does that take account of the fact that 6 these investments in a base case are likely to be 7 significantlyhigherinthe future thantheyhavebeen 8 in the recent past because people have been waiting 9 for a decision on standardsbefore making investments 10 in modern production facilities? 11 MR. RIVEST: I'm still not sure how I 12 would answer that. 13 MR. McCABE: Let me try to add a little 14 bit to this. Mike McCabe. 15 Is your assumption is that certain 16 manufacturers meet or are planning to make an 17 investment for reasons other than standards for 18 modernization, toremove costs, improveproductivity, 19 whatever the issue is, that they are waiting to make 20 that decision to making that investment and they're 21 waiting for it because they don't want to make two 22 investments. They know they're expecting to have to 23 make onebecause of standards. Theywant tomake them 24 together at one time. 25

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# ••• 187 1 MR. McCABE: So that there is some 2 investment that you're arguing is going to be made 3 whether or not standards happen or not and is that 4 taken into account in the analysis. 5 MR. NADEL: Right. 6 MR. RIVEST: Definitely no. I mean no. 7 There are things that even they won't tell and they 8 won't tell me. 9 (Laughter.) 10 I saw a few press releases. 11 MR. BROOKMAN: Additional questions or 12 comments? 13 Okay, thanks, Mike. I'mhopingthatBryan 14 or Michael or somebody can describe the time line, 15 looking ahead, injust a moment. But let me affirm a 16 few things, notes that I've taken as we've gone 17 through the workshop today. 18 When didwe saycommentswere due? August 19 3rd. August 3rd for comments, specific comments 20 related to these workshops. 21 I'vemade somenotesabout specificaction 22 itemsthatwe detailedaswe went along, particularly, 23 the test procedures plan of action that Arthur B. 24 25 Little is helping to coordinate. That's proceeding rapidly.

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• 188 1 comments soon on that as they intend to get that 2 shapedandmovingahead shortly. Right, Dick? In the 3 span of the next couple of weeks at the outside. 4 Also, I know that Jim McMahon from LDNL 5 would appreciate your comments on other variables to 6 considerthat might fit intohismodelingefforts. So 7 for those of you that are inclined in that 8 quantitative direction, please sendthose comments to 9 him. 10 MR. McMAHON: To the Department. 11 MR. BROOKMAN: To the Department. Thank 12 you. In care of Bryan. All of these comments get 13 directed to Bryan. Bryan is the designated federal 14 official onthis one. That may not be correct. He is 15 the head guy on this particular rule making. 16 (Laughter.) 17 And the GRIM spreadsheet values that Mike 18 Rivest just talked about now, I know that there's 19 going to be some additional work to confirm and 20 scrutinize those and Steve Nadel made the question or 21 request about when that
-- releasing those as soon as 22 possible so that any additional sensitivities work 23 that needs to be done, surrounding those values that 24 25 that get in motion. Kind of on a parallel track, while test procedures are proceeding.

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• 189 1 So Bryan, can you or Michael talk 2 generallyabout the time frame for this going aheador 3 perhaps the Assistant Secretary. 4 MR. REICHER: I have to go and I'll let my 5 colleagues talk about the time frame. Obviously, what 6 we very much want to do is keep to the schedule, but 7 do it in an appropriate fashion, making sure we have 8 all the data we need to make a decision. 9 I just want to thank everyone for what I 10 think has been a very, very good session. As Chuck 11 said, I think a level of discussion, the analysis we 12 have to talk about, even, I think, the degree to which 13 we are addressing the problem that we face with the 14 test procedure is we're doing it at a very -- in a 15 very helpful and constructive way and I appreciate 16 everybody wanting to put their shoulders to the wheel 17 here and move forward. I think when all is said and 18 done, the better the data we have and the more we can 19 address these problems, ultimately the better the 20 decision will be and while it may not be a decision 21 that everybody loves, I think it will be a well
-- it 22 will be a thoughtful decision, a well-informed 23 decision and one that over time will show itself tobe 24 25 defensible, so I really appreciate people's cooperation, their willingness to talk, to listen to

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# • 190 1 each other, to provide data so that people can get 2 back to us in quick time frames and to keep this very 3 good discussion going so we can come to a conclusion 4 that the largest number of people can support. So 5 thank you very much. 6 MR. BROOKMAN: Thankyou. Sothentalking 7 about the timetable, looking ahead. 8 MR. BERRINGER: One of the suggestions, 9 obviously, the test procedure, one of the steps is 10 looking at the end of September. We also have, 11 obviously, the manufacturing impact report will be 12 released as soon as possible, as soon as we can get 13 that certainty on that. So we could
-- I would say 14 probably the October, November time frame would be a 15 possible likelihood for a second workshop. I'd just 16 like to open up for discussion when people
-- what 1 7 theircalendars look like, whenwouldbe thebest time 18 to, the most logical time to have the next workshop. 19 MR. BROOKMAN: Deborah, do you wish to -- 20 MS. MILLER: Yes, I just wanted to say 21 that I agree with Bryan that it has to be at the end 22 of September or October, although they all know that 23 I am not happy about that. 24 (Laughter.) 25 Be that as it may, this test procedure

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• 191 1 issue is critical. Having saidthat, I justwanted to 2 stress andwe will, obviously, take ourleadfromwhat 3 Dick Topping tells us on the state of things, but I 4 just wanted to stress again because Dan whispered in 5 my earand that is simplythat we reallywould like to 6 get the workshop done as soon as possible. So 7 although November is an option, we all know it's 8 Thanksgiving. We start going into Christmas, blah, 9 blah, blah. Look at Octobermore seriouslyandwe may 10 have to end up in November, but we would really like 11 to look at October. 12 MR. BROOKMAN: Okay, thank you. Steve 13 Rosenstock and then Michael McCabe. 14 MR. ROSENSTOCK: The only thing I would 15 suggest is in terms of timing is that once the test 16 procedure is resolvedinSeptember, as longas all the 17 other analyses that have to be revised canbe revised 18 and in that time frame revised, posted on the 19 website and then give us a little time to digest that 20 and that would be the main thing that I know that I 21 would ask for. 22 MR. BROOKMAN: Howmuchtimewouldthatbe 23 to digest? 24 MR. ROSENSTOCK: At least a few weeks. I 25 mean, you know
--

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• 192 1 MR. BROOKMAN: So at a minimum, you're 2 looking at a couple of weeks, after it gets up. 3 Michael? 4 MR. McCABE: Michael McCabe. After Dan 5 whispered into Deborah's ear -- 6 MS. MILLER: Did he tell you something 7 different? 8 MR. BROOKMAN: He's persistent. He's a 9 persistent guy. 10 MR. McCABE: He whispered in my ear what 11 he would like todo, to see everybodywould consent to 12 two dates, one that would be an earlier date and 13 things go well; another would be a little later date 14 if it takes us a while longer and understanding that 15 the decision is goingtobe dependent upon the workof 16 Mr. Topping and others. The October time frame would 17 be the earlierdate. He's not looking for a sixmonth 18 window, but something a lot smaller than that. 19 MR. BROOKMAN: Do you wish to try to 20 establisha date right now? Those two dates right now 21 soeverybodycanget itpenciledinon theircalendar? 22 MS. MILLER: The second or third week of 23 October. 24 MR. BROOKMAN: So let's try to do that if 25 you can get your calendars.

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• 193 1 So the second or third week of October, 2 the second week commences with the 11th which is 3 Columbus Day. Is it good for most of you to continue 4 to meet in the middle of the week like this? 5 Brenda? 6 MS. JONES: There are two tentative 7 workshops in October. 8 MR. BROOKMAN: I see. So I guess we're 9 looking at the second and third week of October is 10 what's been suggested. 11 Bryan? 12 MR. BERRINGER: Let me just throw 13 something out to get us a good time frame from the 14 manufacturing side. If we come up with something by 15 the end of September fromADL, what time frame are we 16 looking to run some tests? Is that two weeks, three 17 weeks, four weeks? If we say we got the certified 18 cloth out there, we said this is the standard cloth, 19 this is the one we want to rerun some tests to make 20 sure the analysis that was submitted was valid. What 21 type of turn around are we talking about? 22 MR. SAMUELS: Beforewe answerthat, which 23 these folks cananswerindividually, I justthought 24 I'm glad you brought that up because it does sort of 25 hamper reality checks, which is there's been a couple

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• --- -- ----**----------~---** 194 1 of comments about when we get this resolved in 2 September. Well, maybe we're not going to get it 3 resolved in September. Maybe in September, Mr. 4 Toppingwillhave some suggestionsthatwill thenneed 5 tobe the subject of some testingbythemanufacturers 6 and thenmaybe we'll have to analyze what the results 7 of the manufacturers' testing is and then we'll have 8 to figure out what to do with the existing data base. 9 So you can set the dates that you want to 10 set, it's fine with me and people can give you their 11 comments on how long it's going to take them to do 12 testing, the sooner they're going to understand what 13 testing is that you're talking about, but let's 14 recognize all the steps that we're talking about. 15 Then we get to Steve's comment, well, so then we have 16 possibly some revised analysis, right? Which is then 17 put up on the web and then we get to Steve's point of 18 having some time to look at it before the workshop. 19 So that'swhy
-- I mean I don't want to -- 20 when you said October, I was wondering what year you 21 were in. 22 (Laughter.) 23 MS. MILLER: Excuse me, Chuck. This is 24 DeborahMilleragain. This is theproblemand I think 25 this wouldbe helpful if DickorBryan layout for the

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..· !'..,..;;·., 195 1 decision makers, policy makers here what steps. 2 Again, we're the uninformed. You know, what steps 3 need to take place and what a reasonable schedule 4 would be because when we just looked at this we say 5 okay, we want this as soon as possible, but we don't 6 know what the steps are. So Bryan and Dick, maybe 7 that wouldbe helpful for us andmaybe we can set some 8 dates and we'11 be in constant contact with you, 9 understanding that we need to get a better sense of 10 what needs to happen and what those time frames are. 11 MR. BERRINGER: Well, just looking at the 12 time frames say 13 MS. MILLER: I thinkwhat we need to know 14 is are there anymajor conferencesgoingon for anyone 15 inOctober andNovember. I don't think itmakes sense 16 to worry about an actual date yet before we know what 17 are those elements. 18 MR. BROOKMAN: And Bryan, I thought the 19 request was are there big chunks of this that need to 20 get done that you want to identify now that would 21 influence the date we schedule? 22 MR. BERRINGER: The big chunks would be, 23 if everything worked fine, at the end of September, 24 this is talking about best case, we send the material 25 out for the manufacturers to retest.

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• 196 1 that, that's going to be October
-- 2 MR. BROOKMAN: And that takes a certain 3 amount of time to do the retesting. 4 MR. BERRINGER: Yeah, they're going to 5 have to have some time to do that. And if we're going 6 to do reanalysis that adds another month to the time 7 frame andthat's assumingeverythingisgoing smoothly 8 and when you figure you have to have that in advance 9 of the workshop, typically, by a month, realistically 10 we'repushing it into
-- tome, into the December time 11 frame. We can shoot for November, December
-- 12 MS. MILLER: No. Let me just state 13 something again. I'm not looking for this detail 14 right now. What I'm looking for is a time line laid 15 out with these elements so that we can inform the key 16 decision maker in this, i.e., Dan Reicher, what the 17 reasonable dates are that we can consider. Because 18 right now the orders that we have from him being 19 uninformed about really what needs to happen is he 20 wants something in October, at the latest, November. 21 So frankly, Bryan, I think what we need to do 22 internally is just lay out the elements, the time 23 frames for those elements because you know that he's 24 going to push the envelope of this stuff and we're 25 goingto ask themanufacturers topushthe envelope on

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# • 197 1 this stuff as well. 2 We all, aswe'vetalkedabout earlier, the 3 optimum situation is to get this done as soon as 4 possible. We're all in this together. We're all 5 putting additional resources on it. So if you could 6 just
-- we can do this and share this withpeople, you 7 know. Bryan will share it, I'm sure, and ask whether 8 this is correct. Lay out the different elements that 9 need to happen, what the time frames are, we believe, 10 and see how we canpossibly compress, push, whatever, 11 to shorten those elements. 12 That's what I guess I'm driving at. And 13 it may be November or December, but at this point our 14 instructions are October and November, without this 15 sort of information. 16 MR. BROOKMAN: Earl Jones. 17 MR. JONES: Earl Jones. The facts will 18 speak for themselves, I assume and either there will 19 or there won't be a problem. So rather than 20 prejudging that why don't we just
-- how about the 21 week of the 18th of October and then the 15th of 22 November? 23 MR. BROOKMAN: Wouldyou like topencil in 24 a specific date? 25

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••• 198 1 MR. BROOKMAN: No, you wouldn't. Well, I 2 guess you're asking people to just kind of try and 3 pencil in that whole week or -- try to -- 4 MS. MILLER: If it's TuesdayorWednesday. 5 We have to check the availabilities of rooms. 6 MR. BROOKMAN: Right. 7 MS. MILLER: We can have maximum 8 flexibility. 9 MR. BROOKMAN: So Earl, I thank you for 10 suggesting that and you said October 18th and 

### -- 11 MS. MILLER: Week of November 15th. 12 MR. BROOKMAN: Thank you. 13 MR. BERRINGER: Bryan Berringer. At this 14 point, if there's anymajorconflicts thatpeople know 15 about that are going on, please let us know. 16 MS. MILLER: Conferences. 17 MR. NADEL: On that, early in the week of 18 the 15th is not good. It would be better toward the 19 end of the week. 20 MS. MILLER: Okay. 21 MR. BROOKMAN: And I know that the 22 Department would like to hear from those of you that, 23 as your conflicts start to occur on those dates, so 24 they can really zero in. 25

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• 199 1 still, rather than a Monday, rather than a Friday. 2 We're talking Tuesday, Wednesday, Thursday. I think 3 that's as specific as we wishtoget right now, right? 4 Steve Nadel? 5 .MR. NADEL: The one thing I would 6 encourage the Department is to try to resolve this in 7 thenext couple ofweeks. Those calendars are quickly 8 going to fill. 9 MR. BROOKMAN: Isthere anyotherbusiness 10 that we need to cover at this point? I think we've 11 coveredthe elements of the agenda sobefore I turn it 12 back to the Department for their closing remarks, I 13 thank all of you for the spirit of cooperation and 14 good humor that came here today. We covered a lot of 15 ground and we covered it rapidly and thanks for 16 observing the norms that have emerged in these 17 meetings and travel safely. 18 MR. BERRINGER: I would like to thank 19 everybody for coming today. It was very useful and 20 important. I thinkwe got a littlebit further as far 21 as the at least the methodologies used in the 22 analysis, so I do appreciate that and the comments. 23 That said, meeting adjourned. Thank you. 24 25 concluded.)

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• 200 CERTIFICATE
This is to certify that the foregoing transcript in the matter of: WORKSHOP ON CLOTHES WASHER STANDARDS
Before: U.S. DEPARTMENT OF ENERGY
Date: JULY 22, 1999
Place: WASHINGTON, D.C. represents the full and complete proceedings of the aforementioned typewriting.

(202)234-4433 matter, as reported

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