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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### U.S. DEPARTMENT OF ENERGY **+ + + + + CENTRAL AIR CONDITIONER REGIONAL STANDARDS**  **ENFORCEMENT WORKING GROUP**

**+ + + + + PUBLIC MEETING** 

**+ + + + + TUESDAY**  **AUGUST 26, 2014 + + + + +** 

**The Public Meeting met in Room 8E-089, 1000 Independence Avenue, S.W., Washington,**  **D.C., at 9:00 a.m., Neil Eisner, Meeting Facilitator, presiding.** 

**PRESENT NEIL EISNER, Meeting Facilitator**  **TIMOTHY BALLO, Earthjustice GARY CLARK, Goodman Global**  **JORDAN DORIA, Ingersoll Rand RAY ELLIS, Lincoln Electric Cooperative**  **GARY FERNSTROM, California Investor Owned Utilities**  **JOHN GIBBONS, Carrier Corporation MATTHEW LATTANZI, NORDYNE Inc.**  **CHARLES McCRUDDEN, Air Conditioning Contractors of America**  **JON MELCHI, HARDI KAREN MEYERS, Rheem Manufacturing Company**  **ELIZABETH NOLL, Natural Resources Defense Council**  **DOUG RAWALD, DOE Office of General Counsel**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### BRYAN ROCKY, Johnson Controls **HARVEY SACHS, American Council for an Energy-Efficient Economy**  **AMY SHEPHERD, Air-Conditioning, Heating and Refrigeration Institute**  **CHARLES WHITE, Plumbing-Heating-Cooling Contractors - National Association**  **DAVID WINNINGHAM, Allied Air Enterprises**

**ALSO PRESENT**

**KARIM AMRANE, Air-Conditioning, Heating, and Refrigeration Institute**  **LAURA DEGITZ, Navigant Consulting JEREMIAH FREEMAN, U.S. Department of Energy**  **DAVID HUNGERFORD, California Energy Commission** * **JOHN HURST, Lennox International EMILY MARCHETTI, U.S. Department of Energy**  **DON SURRENA, National Association of Home Builders**  **ERIC STAS, DOE Office of General Counsel**

***via teleconference**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **CONTENTS Call to Order and Opening Remarks. . . . . . . 4**  **Neil Eisner Meeting Facilitator**  **Update on DOE Guidance Re: Issues. . . . . . . 7 Raised by Members**  **Doug Rawald Department of Energy**  **Questions and Comments About the . . . . . . .17 Guidance**  **Basic Definitions. . . . . . . . . . . . . . .64 Doug Rawald**  **Department of Energy Discuss Knowing Sales to Routine . . . .151, 320**  **Violator Doug Rawald**  **Department of Energy FTC Label. . . . . . . . . . . . . . . . . . 286**  **Hampton Newsome Division of Enforcement**  **Federal Trade Commission Questions and Comments . . . . . . . . . . . 293** 

**What Is an "Effective" Enforcement . . . . . 237 Plan?** 

**Wrap-Up. . . . . . . . . . . . . . . . . . . 375**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 P-R-O-C-E-E-D-I-N-G-S**  **2 9:04 a.m.**  **3 MR. EISNER: Why don't we get**  **4 started? It seems some seats are still empty.**  **5 Hopefully, they will get here shortly.**  **6 Did everybody get a copy of the**  **7 agenda? There are extra copies if anybody**  **8 needs one.**  **9 Is everybody set?**  **10 Okay. For those who are not aware**  **11 of it -- and I know there is a little bit of**  **12 confusion with some of you when you checked in**  **13 this morning -- tomorrow's meeting is not**  **14 going to be here. And then, Thursday we will**  **15 be here again. Tomorrow's meeting is going to**  **16 be at Harvey's headquarters, the National**  **17 Press Building, at 529 14th Street. It is at**  **18 529 14th Street, Northwest. For those of you**  **19 from out of town, just remember that**  **20 "Northwest," Suite 600. And Harvey is going**  **21 to send out some directions on that.**  **22 Harvey, do you want to mention** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 anything else?**  **2 MEMBER SACHS: This is Harvey.**  **3 ACEEE is two blocks from Metro**  **4 Center. We certainly never advise anyone to**  **5 try parking anywhere in that quadrant. We are**  **6 two blocks from the White House, and it is the**  **7 old National Press Building.**  **8 The easiest way to get there is by**  **9 Metro to Metro Center Station, which is red**  **10 line, blue, orange, silver. And I will send**  **11 you directions.**  **12 The only other note of interest is**  **13 the coffee situation is analogous to that**  **14 here. There are lots of places for lunch**  **15 within the block, including the food court on**  **16 our second floor. But come with your own**  **17 coffee.**  **18 I am sorry we have never been able**  **19 to arrange for intensive security precautions**  **20 that characterize this building. If you need,**  **21 I can try to get someone to stand at the door**  **22 and emulate a scanner, but we don't know how** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to do that stuff. End of rant.**  **2 (Laughter.)**  **3 MR. EISNER: And we have one**  **4 change in membership that Doug wants to**  **5 mention.**  **6 MR. RAWALD: Right. So, this is**  **7 Doug Rawald.**  **8 For those people keeping track of**  **9 who is part of the group, we received an email**  **10 late last night that Charlie Harak from the**  **11 National Consumer Law Center is withdrawing**  **12 membership from the group. Those of you who**  **13 are here, we didn't meet him because he didn't**  **14 come to the last meeting because he was on**  **15 vacation. But he will not be taking part in**  **16 the group.**  **17 I have not talked to the program**  **18 head about replacing him, to know if we have**  **19 that option or not. But I will circle back**  **20 with folks and let them know. But he has**  **21 withdrawn his membership.**  **22 MR. EISNER: Okay. Any questions?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 (No response.)**  **2 Everybody has got the agenda.**  **3 Well, let's get started.**  **4 And the first thing is going to be**  **5 an update on DOE Guidance. Doug is going to**  **6 go into that.**  **7 MR. RAWALD: Right. So, this is**  **8 Doug again.**  **9 So, hopefully, everyone checked**  **10 their email during the last two weeks and saw**  **11 the email from Jeremiah which linked folks to**  **12 the Draft Guidance we issued.**  **13 To give an explanation, as a**  **14 typical matter, DOE, when we issue guidance,**  **15 we issue it first in a draft form, so folks**  **16 can provide comment to that Guidance. We do**  **17 that just because we want to hear from people**  **18 about what they think of the Guidance before**  **19 go final with it or make changes based upon**  **20 what we hear from people.**  **21 So, the Guidance is directly**  **22 related to the questions we had discussed here** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 two weeks ago and, hopefully, answers in large**  **2 part those questions, though I know there are**  **3 still lingering questions that still need to**  **4 be answered. Hopefully, the Guidance gives**  **5 some clarity that can take away the**  **6 obstructions that we had regarding proceeding**  **7 with the enforcement questions that we had**  **8 here.**  **9 But I definitely want to hear from**  **10 folks today, if there are still questions that**  **11 need to be answered, before we can really**  **12 engage fruitfully in enforcement, developing**  **13 an enforcement program.**  **14 Folks should feel free to respond**  **15 to the Guidance with their thoughts by**  **16 replying to the email address on the Guidance.**  **17 So, if you have an opinion of the Guidance --**  **18 and I know some folks expressed opinions in**  **19 response when Ashley laid out some of the**  **20 Guidance last meeting on the record.**  **21 Please put them in the docket for**  **22 the Guidance, so everyone can read them. So,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 they are easier to respond to, so we can have**  **2 them all in one place. It just makes it a lot**  **3 simpler and it makes it a lot more effective**  **4 for public participation in the Guidance if**  **5 you respond to the docket as we have asked you**  **6 to.**  **7 But, once again, if you have any**  **8 questions or concerns about it, we can answer**  **9 them here. Ashley is out this week. So, I**  **10 will give you the best answer I can non**  **11 technically-speaking about the Guidance, if**  **12 you have any questions about it. But,**  **13 hopefully, it speaks for itself, and I think**  **14 it is pretty comprehensive in answering a lot**  **15 of the questions that we had come up.**  **16 MR. EISNER: Anybody have any**  **17 questions? Comments?**  **18 (No response.)**  **19 Okay.**  **20 MR. RAWALD: This is Doug again.**  **21 So, do I take it that there is no**  **22 one who has any concerns with our ability to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 proceed at least with our fruitful discussion**  **2 over the next three days because of questions**  **3 that are still lingering from the Guidance?**  **4 And we can engage in a positive discourse for**  **5 the next couple of days.**  **6 MEMBER ROCKY: This is Bryan Rocky**  **7 with Johnson Controls.**  **8 So, in general, I think the**  **9 Guidance answered the basic questions that**  **10 were talked about, and I think we can move**  **11 forward.**  **12 There are a couple of things of**  **13 concern that we will be commenting on. In**  **14 particular, the addition of the text that says**  **15 "an individual condensing unit or coil must**  **16 meet the current federal requirements." The**  **17 discussion on coil leads to some potential**  **18 issues, both in the U.S., but also in**  **19 discussions with Canada.**  **20 And again, it doesn't prevent us**  **21 from moving forward today, Doug, but there are**  **22 some things and some verbiage that I think** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 still need to be, could be clearer and a**  **2 little more concise, but nothing that would**  **3 prevent us from moving forward.**  **4 MR. RAWALD: Okay, and I**  **5 appreciate that. And so, Bryan, you are**  **6 saying you guys are going to submit some**  **7 comments explaining that further?**  **8 MEMBER ROCKY: Yes, absolutely.**  **9 MR. RAWALD: Okay.**  **10 MR. EISNER: Okay. Other**  **11 questions? Comments?**  **12 MR. AMRANE: Karim. I am with**  **13 AHRI.**  **14 Of course, the Guidance also has**  **15 an impact on the label, the FTC label. Are we**  **16 expecting it to be part of the discussion**  **17 during these three days?**  **18 MR. RAWALD: Right, Karim. So,**  **19 this is Doug.**  **20 I talked with Hampton Newsome at**  **21 the FTC, as I said I would last meeting. I**  **22 explained to him what happened, what we** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 discussed last meeting. We don't have a**  **2 transcript, so he wasn't able to read the**  **3 various commentary we had, which I think is**  **4 unfortunate, because I think it would have**  **5 helped him prepare for today.**  **6 He did agree to come today to**  **7 speak briefly with folks. So, he will be here**  **8 at least in the afternoon. Obviously, he has**  **9 a different schedule. He has different**  **10 concerns. He is not part of the group. So,**  **11 he can't be here for three days. But he does**  **12 want to be informed of what is going on, and**  **13 he will lay out some more information, I**  **14 think, that will help folks this afternoon.**  **15 So, please feel free to ask him**  **16 questions then, and he will do his best to**  **17 answer them, as prepared as he can be.**  **18 Obviously, if he can't answer your question,**  **19 he will go back and try to answer them later**  **20 on. But I want him to come here and at least**  **21 be able to help people be informed on where**  **22 they are and what they are thinking. Okay?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER MELCHI: This is Jon Melchi**  **2 with HARDI.**  **3 On June 20th, we submitted a**  **4 Request for Guidance from DOE on the question**  **5 of dry-shipped condensing units, which I think**  **6 would be extremely helpful as we are moving**  **7 forward in this. Is there any update on when**  **8 we may expect an answer from DOE on that**  **9 question?**  **10 MR. RAWALD: So, Jon, I am not**  **11 particularly familiar with the document you**  **12 submitted. I haven't read it recently, if I**  **13 have read it at all.**  **14 But what I understand is a lot of**  **15 this guidance answers, at least from a larger**  **16 picture level, the R22 dry-shipped issue. The**  **17 question really that seems to be remaining for**  **18 R22, as I understand it, is how would you rate**  **19 an R22 system, or would we even allow you to**  **20 do that at all? Or would we rely upon what**  **21 has already been rated in the past and**  **22 certified?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, there is some more discussion**  **2 to be had there, more guidance to be given, or**  **3 a possible rulemaking to be taken. But I will**  **4 go back and take a look at the guidance or the**  **5 question you submitted and see what else I can**  **6 ferret out from that.**  **7 MR. EISNER: Anything else?**  **8 (No response.)**  **9 Does anybody feel that this**  **10 afternoon, when the FTC comes, if there are**  **11 too many unanswered questions, it is going to**  **12 be difficult to go further? Or are there**  **13 certain things we have to have this afternoon?**  **14 Or are you all comfortable seeing how that**  **15 meeting goes and, then, talking about it**  **16 afterwards?**  **17 MEMBER MEYERS: This is Karen with**  **18 Rheem.**  **19 Are we going to -- I mean, look at**  **20 those Guidance that the stuff was sent in --**  **21 are we going to go over it at all in this**  **22 meeting or just --** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. EISNER: the two documents**  **2 that just came down?**  **3 MEMBER MEYERS: The two documents,**  **4 are we going to review them in this meeting?**  **5 MR. RAWALD: Right. So, I am**  **6 prepared to talk about them, if you would**  **7 like. Just tell me what you want to do.**  **8 So, we have this half-an-hour**  **9 block set aside to talk about it, and I am**  **10 prepared to discuss it now. I told you the**  **11 unfortunate reality is that Ashley is not**  **12 here, and she is the technical person who**  **13 everyone wants to hear from on these things.**  **14 So, I will answer them all from a lawyer or**  **15 from my point of view. But, if I can't answer**  **16 the question, I can't answer the question.**  **17 But, as to the questions, please,**  **18 let's hear them. I don't know exactly what**  **19 you want to hear. I mean, the Guidance lays**  **20 out what it says in whole part. I don't want**  **21 to paraphrase it and I don't want to read it**  **22 because it is lengthy. But I want to be able** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to talk about it if you want to talk about it.**  **2 So, if there is a specific area you want to**  **3 discuss, then we can go into that.**  **4 MR. EISNER: And I forgot -- you**  **5 told me -- but is she on vacation or just on**  **6 other business?**  **7 MR. RAWALD: No, Ashley is on**  **8 vacation.**  **9 MR. EISNER: So, she is on**  **10 vacation, so is not reachable.**  **11 Would you like to go further into**  **12 the --**  **13 MEMBER MEYERS: Yes. This is**  **14 Karen with Rheem.**  **15 Can we pull it up, so that we are**  **16 all kind of on the screen? Is that possible?**  **17 MR. RAWALD: Yes. Let me talk to**  **18 Jeremiah about that.**  **19 And, Karen, just to be clear, do**  **20 you mean the longer Guidance or the short**  **21 Blower Coil Testing Guidance?**  **22 MEMBER MEYERS: The long document.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: Okay, the longer one?**  **2 MEMBER WINNINGHAM: This is Dave**  **3 with Allied.**  **4 There is one question, also, on**  **5 this shorter one.**  **6 MR. RAWALD: Okay. So, we will**  **7 field Karen's question first and, then, we**  **8 will turn to yours, Dave.**  **9 And for those of you following**  **10 along on the phone or that are listening,**  **11 reading the transcript, we are now looking at**  **12 the four-page Guidance that DOE issues in a**  **13 draft form on August 20th regarding various**  **14 questions regarding rating and testing of**  **15 central air conditioner systems.**  **16 So, a particular page you want us**  **17 to turn to? I have one right here for you, if**  **18 you want to look at it. Well, that is not**  **19 going to help you then.**  **20 So, Jeremiah, if you can go to**  **21 page 3 of the PDF? So, we are looking at the**  **22 statement that says, "Individual coils or** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 condensing units sold as replacements...." Is**  **2 that what you are talking about, Bryan?**  **3 MEMBER ROCKY: Yes, that is**  **4 correct.**  **5 MR. RAWALD: Okay.**  **6 MEMBER ROCKY: So, the addition of**  **7 the word "coil" changes a lot of the focus of**  **8 this. Up until this point, with dry-ship**  **9 units, we understand and acknowledge the**  **10 discussion on condensing units, which was**  **11 originally the discussion on dry-ship and now**  **12 has expanded to cover any replacement**  **13 condensing unit would make sense. But the**  **14 inclusion of the word "coil" in this case**  **15 changes the situation in the field**  **16 tremendously.**  **17 Particular in retrofit, a lot of**  **18 applications where a condensing unit can be**  **19 changed as an individual part, there are not**  **20 restrictions on the size of the unit. And**  **21 especially, we are going from an older unit**  **22 that had less SEER to a current unit that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 meets the 13 or 14 or future ratings is one**  **2 thing.**  **3 A coil, on the other hand -- I**  **4 almost hate to do this, to channel Terry Small**  **5 for a moment -- for manufactured housing, very**  **6 restrictive on the size of the location where**  **7 the coil can be installed, does also apply to**  **8 a lot of replacement situations for**  **9 residential furnaces where a coil is going in.**  **10 Or, in this case, if you were to**  **11 replace a coil as part of a blower coil, you**  **12 may not be able to do that legally now. You**  **13 would have to replace the air handler.**  **14 So, I know we had a lot of**  **15 discussion on condensing unit, but the**  **16 addition of the word "or coil" throws this**  **17 into a lot more uncertainty, and I think**  **18 definitely needs some discussion.**  **19 MR. RAWALD: Okay. So, Bryan, I**  **20 will make sure I step back and say what we are**  **21 trying to accomplish here, as I understand it,**  **22 is. And this is Doug from DOE.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 The requirements are that, if a**  **2 manufacturer makes a condensing unit or a coil**  **3 today, it has to comply with the standard when**  **4 tested. So, you can't make a coil that**  **5 wouldn't be able to comply with a standard as**  **6 a manufacturer. So, a manufacturer couldn't**  **7 make a coil that wouldn't be able to reach**  **8 what we currently have as a 13 SEER level when**  **9 paired with a condensing unit that would work**  **10 with it appropriately. So, that is the**  **11 situation.**  **12 So, what we are saying is, if you**  **13 are going into a region which requires a 14**  **14 SEER, that coil has to be able to accomplish**  **15 that when paired, when testing with one. Now**  **16 we understand that, when installed, it is**  **17 going to be installed with an old condensing**  **18 unit. So, it is not going to necessarily**  **19 achieve that as far as the unit goes, the**  **20 system.**  **21 But the coil itself, to be**  **22 manufactured and sold in the region, has to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 comply with the standard.**  **2 MEMBER ROCKY: So, this is Bryan**  **3 from Johnson Controls.**  **4 So, having said that, Doug,**  **5 basically, in a replacement situation, we**  **6 cannot provide, as a manufacturer, a**  **7 replacement service coil that matched what was**  **8 previously installed. We have to match using**  **9 a coil that we are selling today.**  **10 So, as you get into a coil for a**  **11 14 SEER air conditioner in Georgia, where it**  **12 was a 10 SEER unit before that had a coil**  **13 replacement required, I -- us, as an industry**  **14 -- may not be physically able to put the new**  **15 coil in that retrofit as a coil only.**  **16 MR. RAWALD: Well, I want to be**  **17 clear with the word "put" and put it into**  **18 perspective.**  **19 MEMBER ROCKY: Installed.**  **20 MR. RAWALD: Right. No, and I**  **21 know what you mean. I want to make sure what**  **22 we are saying.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, manufacturers today,**  **2 regardless, cannot manufacture, say, a SEER 10**  **3 coil. You couldn't make a new one. You could**  **4 have an old one in stock that you use as a**  **5 replacement part. But, because the current**  **6 standard is 13, you couldn't make a new 13, a**  **7 new 10 SEER coil, a coil that would not be**  **8 able to operate a 13 SEER. That would be**  **9 manufacturing a product that doesn't comply**  **10 with the standard.**  **11 MEMBER ROCKY: I'm sorry. So,**  **12 there is no such thing as a 13 or 10 SEER**  **13 coil, okay? Right?**  **14 MR. RAWALD: Uh-hum.**  **15 MEMBER ROCKY: There's three**  **16 components to this system. We have been**  **17 talking about the replacement of condenser**  **18 units for the last several years as the dry**  **19 charge.**  **20 MR. RAWALD: Uh-hum.**  **21 MEMBER ROCKY: So, we are now**  **22 expanding this to be coils as a replacement** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 component and now must meet requirements of**  **2 current applications. So, is the line set the**  **3 next part? Because that is the third part of**  **4 the system that influences the performance of**  **5 the unit.**  **6 In a loose coil rating, and that**  **7 is where it gets back to, for central air**  **8 conditioners, single-speed, 13/14. So, we are**  **9 now, as a service replacement unit, you are**  **10 saying I cannot sell a service coil that was**  **11 part of a legitimate rated system as a 13 SEER**  **12 product in Georgia because it is now a 14 SEER**  **13 for that unit, even though at the time of**  **14 installation it was a valid, rated,**  **15 appropriate system?**  **16 MR. RAWALD: So, I think you are**  **17 raising an interesting question. And so, I**  **18 want to go back to a couple of different**  **19 things we have said.**  **20 So, first of all, we have the 18-**  **21 month sell-through. That allows folks for 18**  **22 months to sell through. So, if you have a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 coil that was part of a valid 13 system that**  **2 you manufactured before January 1st, you could**  **3 sell it in the region by July 1st of 2016.**  **4 The question that you seem to be**  **5 driving at is, okay, if I have a coil that**  **6 would work that was manufactured on January**  **7 2nd, could I sell it in the region or could I**  **8 sell it, if it was manufactured today, after**  **9 July 1st, 2016? That seems to be the main**  **10 question.**  **11 And I don't have an answer for you**  **12 beyond what we have said here. So, if there**  **13 is a concern, I want to hear it in your**  **14 comments, and it seems to be there will be**  **15 one. And then, we will consider it further.**  **16 But, right now, what the**  **17 Department is saying is that anything**  **18 manufactured has to comply with the standard.**  **19 So, as you discussed, the coil operates with**  **20 the condensing unit, which has a SEER value,**  **21 but the coil must be capable of operating with**  **22 the condenser at a certain SEER value. And if** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 it can't, then it wouldn't comply. And**  **2 therefore, it should not be sold or installed**  **3 in that region if it can't be complying with**  **4 that standard.**  **5 But I understand what you are**  **6 saying. It is certainly complicated, and I**  **7 don't mean to throw confusion into this. We**  **8 are trying to add clarity through this**  **9 Guidance. And I do understand where you are**  **10 coming from.**  **11 It sounds like this isn't an issue**  **12 that can stop us from talking about things**  **13 today, which is good, but it is something that**  **14 I will take back to folks and I will look**  **15 forward to reading in your written comments**  **16 about more implications of that and how we can**  **17 work it out.**  **18 I see a couple of hands up about**  **19 that.**  **20 MR. EISNER: If it were**  **21 manufactured solely for the purpose of**  **22 repairing a SEER 13 unit in Georgia, was it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the intent of the Department to prohibit that?**  **2 MR. RAWALD: Right. So, this is**  **3 Doug.**  **4 So, the question becomes one of,**  **5 if we are talking about a 13 SEER and it is**  **6 manufactured, because it could be**  **7 manufactured, legally manufactured, that is a**  **8 slightly different question than if it is**  **9 being manufactured and didn't meet the**  **10 national standard at all.**  **11 So, the intent, as I read it, was**  **12 to say, hey, the coil could not be sold in the**  **13 region unless it could actually be capable of**  **14 meeting the 14 SEER level when combined and**  **15 tested with the condensing unit that was going**  **16 to be in a 14 SEER. That is how I understand**  **17 it.**  **18 Now this is a very non-technical**  **19 discussion that I am offering because I am not**  **20 a technical person. So, I am trying to do my**  **21 best to give you a good answer.**  **22 And I see a lot of hands. So, I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 definitely think I want to hear from people**  **2 here.**  **3 So, Harvey and, then, Don Surrena,**  **4 both are interested.**  **5 MEMBER SACHS: Doug, this is**  **6 Harvey Sachs.**  **7 And I may be slightly less**  **8 untechnical than you.**  **9 (Laughter.)**  **10 But let me just offer an**  **11 observation that amplifies your term that this**  **12 is very complicated. First of all, we have to**  **13 separate out the R22 issue from the**  **14 replacement of coils that were R410a to begin**  **15 with.**  **16 Secondly, contractors routinely**  **17 change the coil size they install with a**  **18 particular condensing unit to meet particular**  **19 site-specific needs. For example, if I am**  **20 installing a 3-ton condensing unit and space**  **21 is really tight, I might put in a smaller coil**  **22 that might or might not still be rated, but it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is going to happen just because the contractor**  **2 is trying to make a living and satisfy his**  **3 customer.**  **4 But the implications of this to**  **5 me -- and I am trying to figure out myself**  **6 what to do, and I haven't studied this closely**  **7 -- are an irony. Let's assume that we do hold**  **8 this guy to installing a 14 SEER, or a coil**  **9 that will yield 14 SEER with that 13 SEER**  **10 condensing unit that was originally there.**  **11 That will be a physically larger coil I think**  **12 in almost all cases. It will have much more**  **13 evaporating surface for the refrigerant.**  **14 And unless I start reducing the**  **15 fan speed, the net result, which is reasonably**  **16 sophisticated for many of the non-ACCA**  **17 contractors and non-PHCC contractors, unless**  **18 I do that, I am going to start giving, I**  **19 believe, less good humidity control for having**  **20 installed that larger evaporator.**  **21 I grew up in Atlanta and I lived**  **22 in Houston. If there is one thing I don't** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 want in my air conditioner, it is less**  **2 humidity control.**  **3 So, without knowing an answer, I**  **4 think it is very important that we think this**  **5 one through to avoid some pretty negative**  **6 potential implications.**  **7 MR. RAWALD: No, I hear that,**  **8 Harvey. Thank you.**  **9 So, Don Surrena first and, then,**  **10 Gary Fernstrom.**  **11 MR. SURRENA: Don Surrena, NAHB.**  **12 What I am hearing -- and this is**  **13 why I am standing, to make sure I am hearing**  **14 what I am hearing -- is we have an existing**  **15 condition that was installed and met the Code**  **16 in 2010, and their coil goes bad and they have**  **17 to replace the coil. That's all. The rest of**  **18 the components are good.**  **19 They have to, then, take the**  **20 existing components and install a coil, if**  **21 they can, to bring it up to current standards**  **22 for whatever the SEER rating might be. And if** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 they can't match a coil to it, then they have**  **2 to replace all of their unit?**  **3 MR. RAWALD: No. Don, I want to**  **4 cut you off there because that is not what we**  **5 are saying.**  **6 MR. SURRENA: I'm glad.**  **7 MR. RAWALD: So, what we are**  **8 saying is the coil itself that is used, the**  **9 replacement part, when tested with a**  **10 condensing unit, has to be able to achieve the**  **11 14 SEER. What the actual system that is**  **12 installed is going to do is not going to be 14**  **13 SEER, we get that, because the condensing unit**  **14 is going to be an old condensing unit.**  **15 But the coil can't be manufactured**  **16 and sold unless it is independently able to**  **17 achieve the 14 SEER level.**  **18 MR. SURRENA: In a new condition.**  **19 MR. RAWALD: Yes. Or a new**  **20 testing.**  **21 MR. SURRENA: So that, if the coil**  **22 requirements to do that, then, make the coils** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 larger or different to the point where they**  **2 can't match with an existing system -- and I**  **3 am not technical enough to know whether that**  **4 happens or not. I am an old building**  **5 inspector for 20-some years. We didn't care**  **6 in those days. We wanted to know the SEER of**  **7 the unit and we were done.**  **8 This has changed the whole ball**  **9 game for Code enforcement, but will you be**  **10 able to make a coil that will fit existing**  **11 conditions without requiring a homeowner to**  **12 change their entire system to meet current**  **13 standards?**  **14 MR. RAWALD: And, Don, this is**  **15 Doug.**  **16 So, that sounds like a great**  **17 question for the manufacturers to give**  **18 opinions on in their response to the Draft**  **19 Guidance because that is something that the**  **20 implication of it needs to be understood. So,**  **21 that is the exact kind of question that would**  **22 need to be answered for us.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. SURRENA: Great. I will wait**  **2 for it.**  **3 MR. RAWALD: Okay.**  **4 MR. SURRENA: Thank you.**  **5 MR. RAWALD: Gary has his hand up.**  **6 Yes?**  **7 MEMBER FERNSTROM: So, this is**  **8 Gary Fernstrom, representing the California**  **9 IOUs. Sorry I was late. I got held up**  **10 checking my computer in.**  **11 I would like to support Harvey's**  **12 point. When we first started discussing**  **13 regional air-conditioning standards a couple**  **14 of years ago, Don Brundage from the Southern**  **15 Company was very concerned that standards**  **16 might inhibit humidity control in the**  **17 Southeast part of the country. So, from the**  **18 electric utility point of view, we want to**  **19 make sure that that issue is adequately**  **20 covered.**  **21 And I have a second point that was**  **22 called to my attention from my friends at the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 California Energy Commission. And they were**  **2 addressing the situation where a dry**  **3 condensing unit is installed as a replacement**  **4 for one that has failed, but the contractor**  **5 has chosen not to install the same size**  **6 condensing unit. So, maybe the old one wasn't**  **7 performing adequately, rather than a 2-ton, 3-**  **8 ton condensing unit is installed.**  **9 And I know you previously told us**  **10 that replacing the condensing unit is a**  **11 component or considered a component of the**  **12 system. My question is, is it still a**  **13 component of the system if it is of a**  **14 significantly different size than the**  **15 component that is replaced?**  **16 MR. RAWALD: Right. So, this is**  **17 Doug.**  **18 And so, I have studiously avoided**  **19 using the word "component". I think that has**  **20 thrown some confusion into it from the EPA.**  **21 And so, I am trying to avoid using that**  **22 particular word for that reason.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 But what I will tell you is that**  **2 our current feeling is there is a restriction**  **3 on manufacturers being able to manufacture new**  **4 things, right? That's clear. And so, the**  **5 question, then, becomes, what can be installed**  **6 if a manufacturer can make it nationally, but**  **7 can't be sold regionally?**  **8 And so, from our point of view, if**  **9 a manufacturer can legally still manufacture**  **10 a condensing unit because it is going to be**  **11 compliant with the national standard, and it**  **12 would be sold in the North, that condensing**  **13 unit, if it is able to be operated -- or**  **14 excuse me -- if it is able to be used or rated**  **15 at a level of 14 SEER or above, when**  **16 effectively done in accordance with test**  **17 procedures or when tested with a component,**  **18 then it can be sold in the South as a**  **19 replacement part of a system that is otherwise**  **20 in place.**  **21 If it is a new system, the new**  **22 system that is put in place has to meet the 14** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 SEER level. That is the basic, very much a**  **2 paraphrase of what the Guidance says, which I**  **3 don't like doing because it causes some**  **4 uncertainty when we paraphrase things. But**  **5 that is kind of what I am breaking down here**  **6 to explain to you, I think, Gary.**  **7 MEMBER FERNSTROM: Okay. So, let**  **8 me just respond to that, to make sure I**  **9 understand your answer.**  **10 And that would be, if the**  **11 replacement condensing unit meets the standard**  **12 or is capable of meeting the standard for that**  **13 area with the coil that it is tested with,**  **14 then it is okay to be sold irrespective of how**  **15 big or small it may be relative to the coil**  **16 that it is actually being connected to?**  **17 MR. RAWALD: That would be my**  **18 answer, not understanding the technical**  **19 implication of that and what that would mean.**  **20 But that is currently the Department's**  **21 position as articulated.**  **22 MEMBER FERNSTROM: Okay. Well,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 just to respond, the technical implication is,**  **2 if you put a larger condenser on an existing**  **3 smaller coil, you get a lower overall**  **4 performance in the replacement.**  **5 MR. RAWALD: Again, this is Doug.**  **6 So, it is your position that the**  **7 replacement of the larger condensing unit that**  **8 is at a higher SEER value, when tested with**  **9 the component, in the system would actually**  **10 result in a lower SEER value than previously**  **11 was there because of the coil size?**  **12 MEMBER FERNSTROM: Yes. If the**  **13 replacement condensing unit is of a larger**  **14 size than what was originally there.**  **15 MR. RAWALD: Do the manufacturers**  **16 have a technical point of view to respond to**  **17 that? I just don't know the answer to that.**  **18 MEMBER WHITE: Well, this is Chuck**  **19 White, PHCC.**  **20 I am not a manufacturer, but I**  **21 would say my favorite answer is it depends.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And it is a laboratory test. So,**  **2 a blanket statement that any unit is going to**  **3 be worse, if I took out a 1962 unit that was**  **4 a SEER 5, and I put something in, it could**  **5 very well be better. If you are significantly**  **6 larger on capacity, it is probably not going**  **7 to work because you have got way more suction**  **8 capacity than you have coil to evaporate. You**  **9 are going to change the equilibrium point.**  **10 You are probably looking at freezing issues.**  **11 But every one of those cases is going to be an**  **12 individual issue.**  **13 If you go up a half a ton, is it**  **14 probably going to work? Yes, you can get away**  **15 with it. But if you go from a 3-ton to a 5-**  **16 ton, the system is probably not going to work**  **17 without some other changes.**  **18 Circling back to the coil**  **19 question, which we started with, the**  **20 contractor, if you come to a job where you**  **21 have a failed coil, the No. 1 question is,**  **22 what are the dimensions? I know I need this** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 tonnage, but what are the dimensions? Because**  **2 I have got to find something that is going to**  **3 fit in this spot.**  **4 So, if I have a coil that is**  **5 matched somewhere in the database to SEER 14,**  **6 it sounds like that makes it an okay unit.**  **7 Now my question is, capacity-wise, can I make**  **8 it work? And that for some contractors is**  **9 pretty easy exploration; for other contractors**  **10 that is more of a challenge.**  **11 So, again, there is no across-the**  **12 board blanket answer to that question, but I**  **13 think if the position is, as long as the coil**  **14 is listed and matched as a SEER 14 to**  **15 something, and I can take that as an**  **16 individual item, not as a system, not matched**  **17 to something, and replace a failed device,**  **18 then I think you are in pretty decent**  **19 condition. Again, giving ground on what the**  **20 rated system efficiency is going to be, if you**  **21 are doing it as a repair to an existing**  **22 system, I think you are going to make it work.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER FERNSTROM: So, this is**  **2 Gary again.**  **3 That was a much better technical**  **4 answer than I gave. Replacing with a larger**  **5 unit is probably going to be better than what**  **6 was there originally, but not as good as it**  **7 probably should be if the unit were of the**  **8 proper size.**  **9 But I want to go back to the point**  **10 that the CEC raised. And they said that it is**  **11 not uncommon for contractors to come in and**  **12 put in a slightly-larger condensing unit than**  **13 was previously there with the existing coil.**  **14 And I was asking that question to**  **15 see whether or not that changed DOE's opinion**  **16 about the acceptability of these replacements**  **17 in general. And it sounds like it does not.**  **18 MR. RAWALD: And so, Gary, I am**  **19 only speaking from the Guidance as written,**  **20 and it is silent on that very question. So,**  **21 I will tell you that it doesn't, as currently**  **22 written, it doesn't affect that. But I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 certainly will take the issue back. We will**  **2 certainly discuss it and see if it affects the**  **3 opinion, because it is something that I have**  **4 not discussed with them before.**  **5 MEMBER FERNSTROM: Thank you.**  **6 MEMBER CLARK: This is Gary Clark**  **7 with Goodman.**  **8 You mentioned that the CEC**  **9 believes that contractors typically or it is**  **10 not unusual for them the condensing unit in a**  **11 replacement situation. Do you have any data**  **12 that would support that?**  **13 MEMBER FERNSTROM: No, just the**  **14 comment of Tav Commins from the CEC's new**  **15 Buildings Group. It is a market observation.**  **16 I wouldn't suggest that it is typical in any**  **17 way, but it does happen and it is a concern.**  **18 MR. RAWALD: This is Doug.**  **19 We have talked quite a bit now**  **20 about the point that Bryan and Karen raised**  **21 about the coil. Both Karen and David had a**  **22 question on the blower coil testing document.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, we will turn to that one.**  **2 Matt, do you have a question on**  **3 this document?**  **4 MEMBER LATTANZI: Just some**  **5 additional comment on I, too, have a concern**  **6 with the addition of coil being added in this**  **7 paragraph. And in addition to what I have**  **8 already heard, particularly Harvey's comments**  **9 on humidity, I absolutely agree with that.**  **10 But there is a practical field**  **11 problem here that we sort of touched around,**  **12 and that is some of these applications are**  **13 space constraint. So, the indoor appliance is**  **14 in an alcove of a fixed dimension. And if**  **15 that 14-SEER-capable coil is taller, for**  **16 example, there is a chance, a likely chance,**  **17 you would need to completely change out the**  **18 entire indoor appliance. And I think we**  **19 mentioned that.**  **20 But in many cases that coil is not**  **21 only going to be taller, it is going to be**  **22 wider to get the proper airflow. And the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 result there is we are asking this contractor**  **2 to widen the space that is fixed and has been**  **3 that same dimension for many, many decades.**  **4 And they are just not going to knock down**  **5 walls and tear up drywall to make that coil**  **6 replacement, particularly if that original**  **7 size coil is still available and sold into the**  **8 north.**  **9 I think, again, I just want to**  **10 make mention of what I see as a problem from**  **11 a practical application standpoint.**  **12 Thank you.**  **13 MR. EISNER: If you took the word**  **14 "or coil" out, would you have to say something**  **15 else in another sentence about coils to be**  **16 clear or would that make everybody happy who**  **17 has got a problem with coils?**  **18 MEMBER LATTANZI: Well, I mean, I**  **19 guess my thought is that the word "coil"**  **20 should be omitted there.**  **21 MR. EISNER: And you don't need to**  **22 clarify anything about coils, add any other** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 sentence? Okay.**  **2 MEMBER FERNSTROM: This is Gary**  **3 again.**  **4 We could take the word "coil" out**  **5 and eliminate the problem or alleviate the**  **6 problem. However, we would be compromising**  **7 efficiency by so doing. So, that is the**  **8 tradeoff I think that we are making.**  **9 MR. RAWALD: And this is Doug.**  **10 So, I want to be clear that this**  **11 is how the Department interprets what has**  **12 already been promulgated. So, we want to be**  **13 very careful because we have already looked at**  **14 the numbers. We have reached the standard for**  **15 a particular reason.**  **16 So, I want the folks back at the**  **17 program to go back and look at this comment.**  **18 You know, we will read your comments when they**  **19 are submitted within the next 30 days and we**  **20 will think about the issue and come back with**  **21 a good answer.**  **22 And this has all been very helpful** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to me to understand better what we are talking**  **2 about here.**  **3 Bryan?**  **4 MEMBER ROCKY: Yes, Bryan from**  **5 JCI.**  **6 So, just to summarize, and then, I**  **7 promise I won't say anything more on this**  **8 issue. For new system applications, there is**  **9 absolutely no disagreement. For replacement**  **10 of a condenser unit, the verbiage that we have**  **11 discussed that is in the Guidance I think is**  **12 very understandable and has not changed in**  **13 substance.**  **14 The addition of the coil changes**  **15 the substance of the comment and the**  **16 direction. So, as I understand this Guidance,**  **17 if I have a compressor in a condenser unit go**  **18 out and I replace the compressor, there is no**  **19 issue to the Department. If I replace the**  **20 unit, the condensing unit, we meet the**  **21 regional requirements for that unit. The unit**  **22 has to meet the SEER for the region in it is,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 rated for the SEER it is involved in.**  **2 With this addition of coil, if I**  **3 replace the coil only as a service part, like**  **4 the compressor, there is no issue. But if I**  **5 have a contract that puts a new coil in, it is**  **6 like replacing a condenser unit. It has to be**  **7 part of a system.**  **8 MR. RAWALD: Could you go back one**  **9 step there? You said that, if you have it**  **10 replaced as a service part -- so, there are**  **11 two distinctions you offer on the coil. Can**  **12 you explain that a little further?**  **13 MEMBER ROCKY: So, an evaporator**  **14 coil generally has got a sheet metal case, and**  **15 it is an evaporator coil and your refrigerant,**  **16 connections, and everything else. In doing**  **17 that, you can replace, repair or replace the**  **18 component of the coil like you can replace a**  **19 compressor. You do not have to put in a whole**  **20 new set of sheet metal.**  **21 And Matt was talking about space**  **22 constraint. I think what this is going to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 drive to is the fact that many contractors,**  **2 because of the impact of cost and time to**  **3 replace it, will take out a failed coil and**  **4 put in a whole new box. This is going to**  **5 restrict that and I think drive them to where**  **6 we have to replace the component of a failed**  **7 coil with a new slab coil assembly. Like**  **8 replacing a compressor versus the condenser,**  **9 we are going to talk about replacing the coil**  **10 versus the coil assembly.**  **11 MR. RAWALD: No, I think it is a**  **12 very interesting point and not one I thought**  **13 of. So, I mean, I would really appreciate it**  **14 if in the written comments if the folks from**  **15 ACCA and, Chuck, if your folks could go ahead**  **16 and comment on how that would drive your**  **17 market, this kind of factor. Just in the**  **18 written comments. We don't need to talk about**  **19 it further here. I got a sense of what it is,**  **20 but for us to look at further.**  **21 And, Harvey, do you have one last**  **22 point on this? Because I think we pretty much** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 understand where we are now.**  **2 MEMBER SACHS: I do. This is**  **3 Harvey from ACEEE.**  **4 I think it is pretty clear that**  **5 some of the people in the room, important**  **6 stakeholders, have less experience with field**  **7 operations and installations than others. I**  **8 am certainly quite happy to arrange a field**  **9 trip to one typical installation. It happens**  **10 to be mine. So that we can have a**  **11 conversation about what the issues are when**  **12 one is replacing equipment in an older house.**  **13 That is a standing offer. I**  **14 suspect that our friends at ACCA who are also**  **15 local would be happy to be represented on that**  **16 field trip.**  **17 But, Doug, it might be a way to**  **18 advance the conversation, and I am happy to**  **19 undertake that.**  **20 I don't charge for my advice, and**  **21 it is worth at least as much.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: And with that said,**  **2 Jeremiah is going to pull up the other**  **3 Guidance, the Blower Coil Testing Guidance, so**  **4 we can talk to Dave and Karen about their**  **5 concerns here.**  **6 And, Dave, you can turn on your**  **7 microphone.**  **8 MEMBER WINNINGHAM: This is Dave**  **9 Winningham with Allied Air.**  **10 In the answer to the question**  **11 directly, it states there is no provision for**  **12 permitting use of a blower coil for testing**  **13 and rating in a split system. Can you**  **14 elaborate on what DOE means by that statement?**  **15 MR. RAWALD: So, this Guidance is**  **16 brief in that it is supposed to just simply be**  **17 saying, hey, we have said this already. And**  **18 so, what we are talking about here is the fact**  **19 that we have two tests, right? We have the**  **20 blower coil test and we had the coil-only**  **21 test.**  **22 And the only time you would use** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the boiler coil test is when you sell that**  **2 product as a blower coil. But, if it is sold**  **3 as a coil-only, then these are tested as a**  **4 coil-only. So, that is what we are getting at**  **5 here. So, if it is sold as both a blower coil**  **6 and a coil-only, it needs to be tested as a**  **7 coil-only. So, that is what we are saying.**  **8 There is no provision allowing for**  **9 you to test the blower coil and, then, market**  **10 that as a coil-only and get a higher SEER**  **11 value from it because that would be not what**  **12 it actually is doing. It is being used as a**  **13 coil-only in that marketing and sales.**  **14 MEMBER WINNINGHAM: Just to**  **15 elaborate on that, and it goes to the testing**  **16 and rating. And we understand that for a**  **17 single-speed, and we would agree, that we**  **18 would prefer the coil-only be used as the**  **19 basis for that grading. But there are many,**  **20 many combinations where you use that same coil**  **21 in a blower section to develop a rating.**  **22 MR. RAWALD: So, I am hearing what** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 you are saying. So, are those products that**  **2 are sold with a blower or not with a blower?**  **3 MEMBER WINNINGHAM: They are sold**  **4 as a system. We sell them as a coil-only. We**  **5 sell them as a coil-only with a furnace and an**  **6 air handler. And all of those are valid**  **7 ratings today.**  **8 MEMBER LATTANZI: Doug, this is**  **9 Matt.**  **10 I think what we are saying here is**  **11 if you don't have an ARM, am I correct?**  **12 MR. RAWALD: No. This is not only**  **13 just an ARM. The ARM is supposed to meet our**  **14 testing. So, it is supposed to take that into**  **15 consideration. And Dave is nodding his head.**  **16 So, I think they understand that.**  **17 MEMBER WINNINGHAM: Yes, that is**  **18 typically how the blower coil rating is**  **19 developed, is through an ARM.**  **20 MR. RAWALD: Right.**  **21 MEMBER WINNINGHAM: We test the**  **22 basic combination of coil-only and, then, we** 

### Page 51

202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 generate all of our other ratings through the**  **2 use of an ARM -- or typically.**  **3 MR. RAWALD: Uh-hum. And when you**  **4 test it, you are testing it with a coil-only,**  **5 and then, you are using the ARM to estimate**  **6 how it performs as a blower coil?**  **7 MEMBER WINNINGHAM: Right.**  **8 MR. RAWALD: Right.**  **9 MEMBER WINNINGHAM: This says**  **10 there is no provision for testing and rating.**  **11 MR. RAWALD: Uh-hum. Right. So,**  **12 I understand your question; I do.**  **13 Unfortunately, I am not the right person to**  **14 answer probably.**  **15 MEMBER WINNINGHAM: Right.**  **16 MR. RAWALD: So, let me go back**  **17 and see if I can get something more for you**  **18 folks today about this.**  **19 MEMBER WINNINGHAM: Just to**  **20 elaborate, there are hundreds of thousands of**  **21 ratings that are based upon blower coil**  **22 combinations.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: Right. And this**  **2 Guidance is meant to dispel what we think is**  **3 some confusion in the industry. And so, we**  **4 want to make sure it does that.**  **5 MEMBER WINNINGHAM: Yes.**  **6 MR. RAWALD: So, I want to make**  **7 sure we answer that now.**  **8 MEMBER LATTANZI: Right. For the**  **9 record, this is very common, that blower coil**  **10 rating.**  **11 MR. RAWALD: To use an ARM to give**  **12 a blower coil rating --**  **13 MEMBER LATTANZI: We all do that.**  **14 MR. RAWALD: -- for something that**  **15 is not sold as a blower coil?**  **16 MEMBER LATTANZI: No.**  **17 MR. RAWALD: Okay.**  **18 MEMBER LATTANZI: It is sold as a**  **19 blower coil.**  **20 MR. RAWALD: Uh-hum.**  **21 MEMBER LATTANZI: There is the**  **22 coil-only rating and, then, we use an ARM to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 generate other ratings.**  **2 MR. RAWALD: Your microphone is**  **3 off, Matt.**  **4 MEMBER LATTANZI: I'm sorry. This**  **5 is Matt Lattanzi. I'm sorry I had the**  **6 microphone off.**  **7 Yes, there is a coil-only rating**  **8 and, then, we use the ARM -- that has been**  **9 standard practice for many, many years -- to**  **10 generate additional ratings with other indoor**  **11 appliances where we have the blower coil.**  **12 MR. RAWALD: Right. So, just from**  **13 a theoretical point of view, what I see the**  **14 issue would be is, if you are using the blower**  **15 coil -- because using the blower coil test you**  **16 can get a higher SEER value, right? Am I**  **17 correct on that technically?**  **18 Dave, you're nodding your head.**  **19 So, I guess I am correct here.**  **20 MEMBER WINNINGHAM: Yes.**  **21 MR. RAWALD: And using that to,**  **22 then, sell a coil-only at a higher SEER value,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that is what we want to avoid, that people**  **2 would use the blower coil rating to, then, be**  **3 able to sell something that would in**  **4 application be used as a coil-only at a higher**  **5 rating, and therefore, actually be non**  **6 compliant.**  **7 MEMBER WINNINGHAM: Yes. When we**  **8 do that, it is certified as a system --**  **9 MR. RAWALD: Uh-hum.**  **10 MEMBER WINNINGHAM: -- listing all**  **11 the components that make up that system.**  **12 MR. RAWALD: Okay.**  **13 MEMBER LATTANZI: Right. This is**  **14 Matt.**  **15 By definition, that is exactly**  **16 what the ratings do, what you described.**  **17 MR. RAWALD: Right. And so, that**  **18 would be a different basic model. So, let's**  **19 go back to the first idea, which is basic**  **20 model, right?**  **21 So, from our point of view -- and**  **22 I want to be clear because folks have** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 different ideas of basic model and base model;**  **2 these terms are complicated -- so, from the**  **3 Department's point of view, what we try to**  **4 make clear in the first Guidance is that basic**  **5 model is what you deem it, but the basic model**  **6 is what you rate the thing at. So, you put**  **7 the components together and you say, hey,**  **8 these components together make the basic**  **9 model, and they are going to all share the**  **10 same rating.**  **11 And so, if you are rating your**  **12 blower coil unit differently than your coil**  **13 only unit, then it is a different basic model**  **14 from the Department's perspective.**  **15 MEMBER WINNINGHAM: I understand**  **16 from the Department's perspective on basic**  **17 model and the Guidance that it provides. I am**  **18 not sure that that is something we are going**  **19 necessarily solve here. Maybe we do need to**  **20 work towards that. But that is not the way**  **21 the current AHRI Directory or the data that is**  **22 in the CCMS is structured.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: Okay. That is**  **2 something more complicated to work out then.**  **3 Okay. Understood.**  **4 Any other comments on this?**  **5 (No response.)**  **6 Karen, was that your question?**  **7 MEMBER MEYERS: Yes.**  **8 MR. RAWALD: Okay. You are**  **9 elected. I want to make sure you have your**  **10 chance to air your thoughts.**  **11 MEMBER MEYERS: Okay. So, I am**  **12 going to ask this question. If I have a 3-ton**  **13 unit, and you look at the first document and**  **14 it talks about your highest sales volume**  **15 combination, and then, you look at this**  **16 definition on how you rate coil-only versus a**  **17 blower coil -- so I am still trying to make**  **18 sure I understand what I can sell in the**  **19 South.**  **20 So, for this Rheem 3-ton**  **21 condensing unit that may have 100 different**  **22 ratings, maybe 200 different ratings because** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 I can rate it as a coil-only, I can rate it**  **2 with various air handlers, other different**  **3 coils, various furnaces, hydronic air handlers**  **4 -- I can have tons of ratings for this very**  **5 same 3-ton unit -- so does the minimum rating**  **6 for this 3-ton unit that I am going to sell in**  **7 the South, out of all of these 200 other**  **8 ratings I have, paired with this same 3-ton**  **9 unit, does the minimum rating on that, this**  **10 unit that is getting sold in the South, have**  **11 to be a 14 or is it just the highest sales**  **12 volume combination?**  **13 MR. RAWALD: Right. And your**  **14 question is a very good one that gets right to**  **15 the heart of the matter. I think we talked**  **16 about it two weeks ago. And I will say that**  **17 the Department has not said that. We have not**  **18 said that.**  **19 So, there are a couple of**  **20 different talking points on that that I could**  **21 go on, but I want to make sure I talk to folks**  **22 to make sure we are all on the same page about** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 what exactly we would say to that. We have**  **2 not responded to that exact question.**  **3 MEMBER MEYERS: Thank you.**  **4 MEMBER CLARK: This is Gary.**  **5 But doesn't the Guidance at this**  **6 point say that, in Karen's example, without**  **7 going through that again, that the tested**  **8 combination for that unit must be at least 14**  **9 SEER for the coil-only?**  **10 MR. RAWALD: So, there are two**  **11 layers to the Guidance. And this is what led**  **12 to part of my confusing statements last time**  **13 we spoke, which is, in speaking about parts**  **14 that are sold individually versus those**  **15 systems that are sold together.**  **16 So, when you are putting it into a**  **17 part or a piece of an existing system, that**  **18 piece you are putting into that system must be**  **19 tested as part of a combination compliant,**  **20 even though we understand that when installed**  **21 into an existing application, it won't be**  **22 installed with what it was tested with. We** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 understand that. We get that.**  **2 But, when sold as a system, when**  **3 it is a new installation, the question that**  **4 Karen is getting at is, hey, do both parts**  **5 together, is that what drives what the minimum**  **6 is or is it the fact that it has to always be**  **7 able to reach at least 14 SEER and it can't be**  **8 below 14 SEER? That is what I hear her**  **9 question to be.**  **10 So, what I will tell you from what**  **11 seems to be the basis, the system as installed**  **12 needs to be able to achieve 14 SEER. So, the**  **13 open question is, well, can that be a**  **14 condensing unit that also goes to 13.6 SEER**  **15 with a different coil? Is that okay? Right?**  **16 That is your question?**  **17 MEMBER MEYERS: That is my**  **18 question.**  **19 MR. RAWALD: Right. And I want to**  **20 make sure we get you a very good, very clear**  **21 answer because you want to be able to control**  **22 how your products are distributed, and I get** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that. Okay?**  **2 Harvey, you have a point on that?**  **3 MEMBER SACHS: I do, and this is**  **4 Harvey Sachs.**  **5 Doug, I think it would help all of**  **6 us to visualize what Karen has said. I would**  **7 like to make a request of Karen or another**  **8 manufacturer or my good friend Karim, that**  **9 actually have distribution data, that I have**  **10 got this SEER 14 condensing unit or a SEER 13**  **11 condensing unit, and for this whole cloud of**  **12 100 or 200 matched coils that that could be**  **13 sold with and different fan combinations, and**  **14 so on, what is the statistical distribution of**  **15 the SEER ratings? And that might help us**  **16 inform this question of where we want to set**  **17 that target for compliance.**  **18 Because this really is to me the**  **19 heart of the question, that there are so many**  **20 different combinations that are legally in**  **21 commerce, some of which will meet, some of**  **22 which will not. And I think it is absolutely** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 critical that we all have an understanding and**  **2 a way that is easily enforceable.**  **3 Is that an unfair request?**  **4 MR. RAWALD: This is Doug.**  **5 So, I am not sure we need to go**  **6 into that level of detail because I think that**  **7 the question is, you have a condensing unit**  **8 that is capable of operating at 13.2 with one**  **9 coil, 13.4 with another coil, 14.2 with a**  **10 different coil, 14.4 with a coil.**  **11 Karen wants to know, can I sell**  **12 that condensing unit in the South with the**  **13 14.2 coil, knowing that it can be at other**  **14 points 13.2 or 13.6?**  **15 MEMBER SACHS: Doug, this is**  **16 Harvey.**  **17 I think the question is that your**  **18 mental model is a pretty tight cluster. My**  **19 mental model is a much wider distribution. I**  **20 can well imagine, for example, a match**  **21 designed to give extremely good humidity**  **22 control with a single-stage unit, with a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 simple motor that would downsize that**  **2 evaporator, and on the test be rated well**  **3 below 13. That would not be a unit that one**  **4 would want to sell. But, if we are rating on**  **5 most commonly-sold combination, I don't know**  **6 if I could sell that or not. I am sure all**  **7 the manufacturers do.**  **8 But I just have a mental model of**  **9 a much broader distribution of SEERS than you**  **10 seem to have for the same condensing unit.**  **11 MR. RAWALD: Right. So, as a**  **12 baseline, a company would not be able to**  **13 certify or manufacture, a condensing unit pair**  **14 that would be below the national standard.**  **15 So, that is a baseline issue.**  **16 But what I think you are saying**  **17 is, hey, there is a condensing unit that will**  **18 operate, compliant with the national standard,**  **19 but with a different coil that will operate**  **20 well below the national standard. And so, I**  **21 understand that.**  **22 That must be true, right? Like if** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 you put it with a really, really inappropriate**  **2 coil, the SEER value of the condenser will go**  **3 somewhere. There has to be a bottom somewhere**  **4 for that SEER value. I just don't know from**  **5 a technical point of view what that is.**  **6 MEMBER SACHS: Doug, this is**  **7 Harvey again.**  **8 There is a loaded term.**  **9 MR. RAWALD: Uh-hum.**  **10 MEMBER SACHS: What you call an**  **11 inappropriate coil may be appropriate for a**  **12 specific customer application.**  **13 MR. RAWALD: So, I think I have a**  **14 sense of Karen's question. Anything else on**  **15 this Guidance?**  **16 Karim has a point.**  **17 MR. AMRANE: Karim.**  **18 Just to follow up on that**  **19 question, Doug, why don't you get us an answer**  **20 because I think it is a critical question and**  **21 we need an answer from you before we can move**  **22 forward with it.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: No, I understand. I**  **2 understand, and I will do my best, and I think**  **3 I have proven so far that I have been a good**  **4 agent here, trying to deliver mail. So, I**  **5 will do my best to try to keep delivering**  **6 mail.**  **7 MR. EISNER: Any other questions?**  **8 (No response.)**  **9 Okay, then, let's get on to basic**  **10 definitions.**  **11 Do you have a handout? Everybody**  **12 should have a copy.**  **13 MR. RAWALD: So, this is really a**  **14 brainstorming activity because we have terms**  **15 that are defined in the statute, both in 6295,**  **16 which is the enforcement provision, as well as**  **17 the prohibited acts section, and those are not**  **18 defined anywhere currently in our regulations**  **19 or in the statute.**  **20 And so, I think it is incumbent**  **21 upon us here to at least offer some**  **22 definitions for those terms. What I would** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 turn to is the second slide here, which points**  **2 out in 6295 and it makes reference to folks in**  **3 the market who include dealers, contractors,**  **4 and installers without any defining terms.**  **5 So, what I would like to do is**  **6 throw it open to the room to define these**  **7 terms because I wouldn't know where to begin**  **8 since I am not the person that sits in these**  **9 roles. So, I thought it would be helpful if**  **10 folks could offer up some ideas on how to**  **11 define them.**  **12 MR. EISNER: Do we want to start**  **13 off with a suggestion?**  **14 MEMBER MEYERS: Yes. This is**  **15 Karen with Rheem.**  **16 To me, those are all**  **17 interchangeable terms. We personally don't**  **18 like the word "dealer". We use "contractor".**  **19 As the former ACCA Chair used to say, "A**  **20 dealer deals drugs and a contractor installs**  **21 HVAC equipment." So, to me, those are all the**  **22 same thing.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 But, at least in my company, we**  **2 use the word "contractor". It is the person**  **3 that sells the unit to the homeowner, and**  **4 either him or his team installs the unit.**  **5 MR. EISNER: So, we could start**  **6 off by defining "dealer" under the statute as**  **7 not someone who sells drugs?**  **8 (Laughter.)**  **9 MEMBER MEYERS: I don't know that**  **10 many people use the word "dealer" anymore. I**  **11 don't know.**  **12 MEMBER WHITE: This is Chuck White**  **13 with PHCC.**  **14 I think we tend to think of**  **15 "dealer" as someone with a contractual**  **16 agreement with a manufacturer. So, I am an**  **17 XYZ dealer or an ABC dealer.**  **18 MR. EISNER: So, is that the first**  **19 phrase we want to put up here, "contractual**  **20 relationship with the manufacturer"?**  **21 MEMBER WHITE: I don't know if**  **22 that is the exact words you want to use. I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 don't have one of those lawyers' sheepskins,**  **2 but --**  **3 MR. EISNER: Well, let's just put**  **4 that up there now and we can start playing**  **5 with the words.**  **6 MEMBER WHITE: Sure. As opposed**  **7 to most contractors these days, some do have**  **8 this arrangement. But, even with that**  **9 arrangement, they still have the ability to**  **10 use other equipment, should the need arise or**  **11 specific requirement.**  **12 MR. EISNER: Is that a key element**  **13 that should be in the definition, that they**  **14 can sell other products?**  **15 MEMBER GIBBONS: This is John from**  **16 Carrier.**  **17 All dealers are contractors, but**  **18 not all contractors are dealers. We use the**  **19 term "dealer". It is kind of the more loyal**  **20 contractors are dealers, so more brand loyal,**  **21 I guess.**  **22 MR. EISNER: Is there any** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 legislative history on that?**  **2 MR. RAWALD: I will defer that**  **3 question to our lawyers to look at in the next**  **4 break.**  **5 MR. EISNER: Okay.**  **6 MEMBER McCRUDDEN: This is Charlie**  **7 with ACCA.**  **8 I think that these were sort of**  **9 catch-all terms thrown into the Energy**  **10 Independence and Security Act when they were**  **11 trying to figure out how are we going to deal**  **12 with enforcement or how are we going to deal**  **13 with regional standards and, then,**  **14 enforcement.**  **15 I don't want to go too far. I**  **16 don't even know if we need to define "dealer"**  **17 unless we think it is a term that will be out**  **18 there. I mean, if we rely on "contractor" or**  **19 "installer," we may just be able to avoid**  **20 trying to define a term of art within the**  **21 industry.**  **22 But, to complicate it, I might** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 throw in the word "technician," depending on**  **2 how you define "contractor". And I say that**  **3 because "contractor" can be a company, and I**  **4 think there are times when we refer to**  **5 "contractors" as "the company". And**  **6 "contractor" can be the individual. So, it**  **7 may be more important to make that**  **8 distinction.**  **9 And before we move on, maybe we**  **10 figure out, are we talking about the company**  **11 in terms of the defined terms for enforcement**  **12 or are we going to be talking about the**  **13 individuals? And sometimes, in the same way**  **14 you stated that this is maybe one and the**  **15 other, some contractors are installers, but**  **16 not all installers are contractors.**  **17 MR. RAWALD: And so, Charlie, from**  **18 an enforcement point of view -- this is**  **19 Doug --**  **20 MR. EISNER: Before we go further,**  **21 can we put that up there as a distinction?**  **22 MS. DEGITZ: Sure.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: So, when we bring**  **2 actions against manufacturers, we do it**  **3 against the corporate enterprise. I mean,**  **4 that is what we do. And I would say that that**  **5 the preferred course of action from my point**  **6 of view right now would be to continue against**  **7 companies rather than individuals.**  **8 MEMBER McCRUDDEN: So, maybe the**  **9 first thing you write on the definition of**  **10 "contractor" is "the company or entity," to**  **11 make that clear.**  **12 MEMBER CLARK: This is Gary from**  **13 Goodman.**  **14 Just to follow up on what Charlie**  **15 is saying, and really Karen's comments also,**  **16 I mean, if we dropped the term "dealer"**  **17 completely, would anybody be opposed to that?**  **18 MR. EISNER: If we dropped it, is**  **19 that what you said?**  **20 MEMBER CLARK: Yes. Replace**  **21 "dealer" with "contractor". So, we don't even**  **22 have to worry about defining what a "dealer"** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is.**  **2 MR. RAWALD: This is Doug.**  **3 So, unfortunately, I operate at**  **4 the behest of Congress. And so, they have**  **5 given me a statute which contains the words;**  **6 they have to have meaning. And so, I have to**  **7 at least have some sort of meaning ascribed to**  **8 those words. If it is as simple as a "dealer"**  **9 equals a "contractor," that is fine, but I**  **10 need to have some sort of meaning.**  **11 My lawyers have let me know that**  **12 there is no legislative history regarding**  **13 these terms. So, we are really operating in**  **14 absence of information. I am sure Charlie has**  **15 better information since he has been involved**  **16 with this for a while.**  **17 But what is important, the reason**  **18 why these terms are important is because they**  **19 are not only here in 6295, but they are also**  **20 in that prohibited act that we discussed and**  **21 that we are going to discuss in the next**  **22 section.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, what it talks about is**  **2 "knowing sales to a distributor, contractor,**  **3 or dealer". So, those terms are defined in**  **4 the "prohibited acts". So, from the**  **5 manufacturers' point of view, I think they**  **6 want to know who these guys are because they**  **7 are going to be on the hook because they sell**  **8 to these people. So, I think we really have**  **9 a reason to want to know who these people are.**  **10 Yes, John Hurst from Lennox.**  **11 MR. HURST: John Hurst with**  **12 Lennox.**  **13 Can we agree that a "dealer" is a**  **14 "contractor"? Would we agree with that?**  **15 Okay.**  **16 So, I would change the first to**  **17 say "an entity". It doesn't necessarily need**  **18 to be someone -- a "dealer," I'm under; I'm**  **19 sorry -- "an entity with a contractual**  **20 relationship with a manufacturer or**  **21 manufacturers," because I understand some**  **22 dealers can have contractual relationships** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 with more than one manufacturer.**  **2 I look at, kind of along I think**  **3 what Charlie was saying, an installer and a**  **4 technician can work for a contractor. And**  **5 those are the physical individuals that**  **6 install or service equipment.**  **7 MEMBER MEYERS: This is Karen with**  **8 Rheem.**  **9 I guess I have trouble with the**  **10 word "contractual".**  **11 MR. HURST: "Relationship"?**  **12 MEMBER MEYERS: Sure.**  **13 MR. HURST: Just "relationship".**  **14 MEMBER MEYERS: Yes. I think it**  **15 is just too strong, yes.**  **16 MEMBER CLARK: This is Gary from**  **17 Goodman again.**  **18 When we say "manufacturers," in**  **19 fact, is it the manufacturer or the**  **20 distributor that the contractor has the**  **21 relationship with?**  **22 MR. HURST: It depends.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER CLARK: Yes, it depends,**  **2 right?**  **3 MR. HURST: Yes. Well, I mean**  **4 some of us own our own distribution and some**  **5 of us have company-owned distribution.**  **6 MEMBER CLARK: So, do we. Yes,**  **7 "or distributor". There you go.**  **8 MR. RAWALD: Don Surrena has his**  **9 hand up in the back.**  **10 MR. SURRENA: Thank you. Don**  **11 Surrena.**  **12 I am a little uncomfortable with**  **13 "contractor". The builder is a contractor.**  **14 He hires a subcontractor who installs the**  **15 equipment through his technicians. At what**  **16 level does the responsibility go to the**  **17 contractor? Does it stop with the installing**  **18 company or is the builder himself, then,**  **19 liable to make sure that what is installed**  **20 meets the code? You know, where does the buck**  **21 stop?**  **22 MR. RAWALD: Right, and that is a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 good question, and it has to accurately**  **2 reflect what the market does, right? So, who**  **3 is the person making those decisions with the**  **4 air-conditioning manufacturer or distributor?**  **5 Who is the person that is making that call on**  **6 what air conditioner will be installed into**  **7 those homes that are being built?**  **8 MR. EISNER: But, for the purposes**  **9 of a definition, would it suffice to say "a**  **10 contractor or any subcontractor"?**  **11 MR. RAWALD: But what I hear Don**  **12 saying -- this is Doug -- is that he wants to**  **13 avoid liability for contractors who may**  **14 possibly be having subcontractors make the**  **15 decisions for them. They don't want to have**  **16 those guys be liable. That is what I think he**  **17 is saying.**  **18 MR. SURRENA: The builder at some**  **19 point doesn't want to have to know all the**  **20 requirements for plumbing, air conditioning,**  **21 heating, electrical. Somewhere your**  **22 subcontractor takes that responsibility. And** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 I don't want to see the builder end up in the**  **2 definition because it is just not their**  **3 purview. That is not their warehouse. That**  **4 is not where they put their expertise. It is**  **5 to the subcontractors whom they hire who are**  **6 either distributor for a manufacturer -- or**  **7 that is where my concern starts to pop up.**  **8 MR. EISNER: Well, again, do you**  **9 want to have something like "the contractor or**  **10 subcontractor who is responsible for**  **11 installation"? You know, again, you usually**  **12 don't handle substance in it like that in a**  **13 definition.**  **14 MR. SURRENA: I understand.**  **15 MR. EISNER: Someplace else you**  **16 would say the person responsible would be the**  **17 one who made the decision.**  **18 MEMBER WHITE: This is Chuck White**  **19 with PHCC.**  **20 The contractor is going to offer**  **21 to perform services, installation services,**  **22 maintenance services. So, the company or** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 entity that offers to perform services in**  **2 HVAC, or however you want to word that. And,**  **3 Mr. General Contractor, you have a contract,**  **4 so you work that out in your contract.**  **5 And I understand where you are**  **6 coming from.**  **7 MR. SURRENA: Thank you. I have**  **8 raised the issue, and I will go back to my**  **9 corner.**  **10 MEMBER SACHS: This is Harvey**  **11 Sachs from ACEEE.**  **12 With all due respect to the**  **13 gentleman from NAHB, I believe that the**  **14 general contractor or developer, whatever you**  **15 want to call that person, must own the**  **16 responsibility. That person writes a contract**  **17 for the installation according to code. If he**  **18 doesn't, he's "duh."**  **19 We have had too many problems. My**  **20 colleague Gary well understands from**  **21 California, where the investigations have been**  **22 done, that low bid has led to severely** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 underperforming systems in every aspect. The**  **2 plumbing doesn't leak, but that is about the**  **3 only good thing you can say about the quality**  **4 of the mechanical systems in typical**  **5 production housing.**  **6 For that reason, the history of**  **7 housing in America, to me, it is important**  **8 that the term "contractor" include the person**  **9 who is responsible for offering the completed,**  **10 integrated system, the house, for sale to the**  **11 public.**  **12 MR. EISNER: John, did you have a**  **13 question?**  **14 MR. HURST: Just a comment. Maybe**  **15 backing a little bit what Harvey said, as a**  **16 manufacturer, oftentimes, we have direct**  **17 relationships with large builders. And so, it**  **18 would be, I think, problematic to go to the**  **19 subcontractor when our relationship is**  **20 directly with the large builder. Just a**  **21 consideration.**  **22 MR. EISNER: I will take one more,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 and then, I have got a written question. Go**  **2 ahead.**  **3 MR. SURRENA: This has thrown a**  **4 whole new light on the approach. If a general**  **5 contractor -- and I would look at that as a**  **6 large tract builder -- has a relationship with**  **7 the manufacturer, I don't disagree with it.**  **8 But, if a general contractor, a small stick**  **9 built builder, has hired a HVAC company to do**  **10 this, and he has put in his contract "the**  **11 house will be built to code," at what point**  **12 does he have to learn the HVAC industry or the**  **13 electrical industry when he relies on the**  **14 people that he has hired to do that?**  **15 He can write a clause in there**  **16 that would indemnify him from that, but if the**  **17 statute is going to back up to the builder, it**  **18 should also back up to the homeowner. They**  **19 are the ultimate people with the contract.**  **20 MR. RAWALD: So, Don, I hear what**  **21 you are saying. And I am going to offer a**  **22 corollary example from what we do today in the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Department with our enforcement effort that**  **2 may at least give you an idea of where we come**  **3 from.**  **4 So, folks that have been familiar**  **5 with the stuff know that we consider importers**  **6 to be manufacturers. So, someone would**  **7 probably not argue that an importer oftentimes**  **8 knows nothing about the product they are**  **9 importing. They don't know the efficiency of**  **10 the external power supply or the motor they**  **11 are importing. They are simply importing.**  **12 But, from the Department's point**  **13 of view, the person who imports is the person**  **14 that we bring an action against. So, even if**  **15 that person never performed any testing, they**  **16 are relying upon the Chinese or Korean or**  **17 Japanese manufacturer to do the testing and to**  **18 make sure the product is compliant. The**  **19 importer is the one we hold responsible**  **20 legally. Now they can enter a contractual**  **21 agreement with that supplier from a foreign**  **22 country to indemnify them, if we hold them** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 responsible for having a non-compliant**  **2 product, or they could break the contract and**  **3 say, "We're never buying from you again**  **4 because you've gotten us in trouble with the**  **5 Department of Energy."**  **6 But I am going to bring the action**  **7 against the importer, regardless of the fact**  **8 that they may not know anything about that**  **9 product, because they should know about it,**  **10 because that is what our requirements are,**  **11 that they should know about it.**  **12 And so, that may be a corollary**  **13 that brings you an example here of what we**  **14 think about general contractors. That is just**  **15 an example. I have not made a decision. I am**  **16 offering to use this thought for some guidance**  **17 on where we come from.**  **18 MR. EISNER: Is there any benefit,**  **19 before I get into the question from Craig, is**  **20 there any benefit to writing the rules so that**  **21 the Department has the flexibility of deciding**  **22 in this case it doesn't pay to penalize the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 builder; we should be penalizing the person**  **2 who installed it, especially if that**  **3 subcontractor has a history of doing this, for**  **4 example?**  **5 And I don't know. I would throw**  **6 that out there. Maybe, again, you don't have**  **7 to handle it in the definition. You give the**  **8 Department in the rule the discretion to**  **9 decide which one to penalize.**  **10 Craig Messmer had a comment or a**  **11 question.**  **12 "A contractor is one who is hired**  **13 by the building owner to install a product.**  **14 The contractor may install it or hire an**  **15 installer."**  **16 These are, apparently, suggested**  **17 definitions.**  **18 "A dealer is a contractor with a**  **19 relationship with the product manufacturer.**  **20 The relationship can be formal with a**  **21 contractor or informal in that they specialize**  **22 in that product from a specific manufacturer."** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Any comments on that? Do we want**  **2 to use any of that in what we been talking**  **3 about?**  **4 MR. RAWALD: This is Doug.**  **5 I will go hand it to Laura, so she**  **6 can add that to what we have.**  **7 MR. EISNER: Okay. And then,**  **8 Bruce Helft is online. And you have a**  **9 comment, Bruce?**  **10 (No response.)**  **11 He can't talk? Okay. We will get**  **12 back to him then.**  **13 Do you have -- no, behind you, do**  **14 you have a question?**  **15 MR. RAWALD: Don.**  **16 MR. EISNER: Don?**  **17 MR. SURRENA: Well, I have a**  **18 partial copy of the statute. Section 6302,**  **19 "Prohibited Acts," which is enforced through**  **20 Section 6303, only has prohibitions against**  **21 manufacturers or persons employed by**  **22 manufacturers. The only reference to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 distributors or contractors or installers is**  **2 a provision that manufacturers could be**  **3 penalized for knowingly selling a product to**  **4 a distributor, contractor, or dealer with**  **5 knowledge that the entity violates any**  **6 regional standard, application, applicable**  **7 product.**  **8 MR. RAWALD: No, Don, I understand**  **9 your point, which is that there is currently**  **10 no prohibited act in the statute in naming**  **11 dealers or installers or contractors as**  **12 someone that would be in an action. And we**  **13 discussed that earlier, which is that the**  **14 Department's opinion at the moment is that we**  **15 have legal authorities broad enough to do what**  **16 we need to do to make an effective enforcement**  **17 program. So, we could discuss more about**  **18 whether or not we need to have another**  **19 prohibited act or not.**  **20 But what is important is that that**  **21 last prohibited act's meaning, which is that**  **22 manufacturers can be held liable, certainly** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 under the statute, for selling to contractors**  **2 they know knowingly do this. So, who are**  **3 those people? They need to know who those**  **4 people are, so they can make sure they avoid**  **5 them.**  **6 And so, we have to define them, so**  **7 they are on a good (unintelligible), so they**  **8 know what they are going to be held**  **9 responsible for. And I think that is only**  **10 fair to them, that we give them some guidance**  **11 on that. So, I think that is what we are**  **12 aiming at here.**  **13 And if we are telling them the**  **14 contractor is going to be the air-conditioning**  **15 guy who you never met, that is going to be**  **16 hard for them to really stop from happening,**  **17 sales to that person, because they are not**  **18 going to out and tell a general contractor,**  **19 "Make sure you don't use" Person XYZ; "only**  **20 use Acme because I know that he is okay."**  **21 They are going to be talking to the general**  **22 contractor is what I am hearing here. And so,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 they want to be able to have the general**  **2 contractor be held responsible possibly. So,**  **3 that seems to be the question from the**  **4 manufacturer point of view that I hear right**  **5 now, as articulated by John Hurst earlier.**  **6 MR. SURRENA: Then, by that**  **7 explanation, wouldn't the contractor be the**  **8 person who has the direct relationship with**  **9 the manufacturer?**  **10 MR. RAWALD: And I will throw it**  **11 open to the room because I don't know.**  **12 MEMBER WHITE: Now this is Chuck**  **13 White with PHCC.**  **14 I think if you boil this down,**  **15 what we are talking about is a project that**  **16 everything went south on, that we have**  **17 problems. If everything goes well, this is a**  **18 non-event. All the good jobs we did, nobody**  **19 pats you on the back. But one thing goes**  **20 wrong, and now who is responsible?**  **21 And it is a chain reaction. I**  **22 don't want to debate the merits of the general** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 contractor, subcontractor, all that. The fact**  **2 is the general hired the sub. If the sub is**  **3 bankrupt, if the sub has no insurance, if the**  **4 sub can't perform, it swims upstream.**  **5 And there should have been some**  **6 due diligence ahead of all the agony that got**  **7 started. There are times -- the favorite word**  **8 out there is we are going to "value-engineer"**  **9 this. Because whatever it was we decided we**  **10 wanted to do is too expensive, so you tell me**  **11 what to leave out, so we can make it**  **12 affordable.**  **13 And then, in any of these**  **14 situations it is a specific set of**  **15 circumstances and chain of events, and who did**  **16 what depends on what happened that day. But,**  **17 ultimately, I think -- and again, I am not a**  **18 lawyer -- whoever is in this chain of**  **19 contractual relationship is on the hook. And**  **20 however you sort that out, it gets sorted out.**  **21 But nobody wants to be at fault, but you all**  **22 sign the agreement.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: And this is Doug.**  **2 I know this question of who is**  **3 liable is certainly important for figuring out**  **4 how we define these terms in some people's**  **5 minds. But, from a Department point of view,**  **6 when we typically define terms, we define them**  **7 pretty broadly because we want to make sure**  **8 that they encompass everything we want them to**  **9 encompass, and we don't want people to have**  **10 arguments, saying, "I don't fit in there,"**  **11 when they really meant to be, but because of**  **12 the way we wrote it, they didn't fit in there.**  **13 And so, we want to make sure that**  **14 it is broad enough that it encompasses**  **15 everything everyone wants without being overly**  **16 broad, that it doesn't include those we don't**  **17 want, but also that it provides significant or**  **18 sufficient clarity to the folks that are**  **19 looking at these things, so they can do the**  **20 right thing.**  **21 And so, the folks I think that**  **22 should be most concerned about this term would** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 be the folks that would be held responsible**  **2 for dealing with these people. And so, I**  **3 think I do want to hear more from the**  **4 manufacturers because you are the people who**  **5 can't sell with these people if they are**  **6 breaking the rules. What makes the most sense**  **7 from you in knowing who these people are?**  **8 MR. EISNER: Any other comments?**  **9 Do we want to go back to the language on the**  **10 board?**  **11 MEMBER MEYERS: Well, this is**  **12 Karen with Rheem.**  **13 Are we going to define**  **14 "distributor" because, for my company, we only**  **15 sell to a distributor.**  **16 MR. RAWALD: Right. So,**  **17 distributor -- this is Doug -- is already**  **18 defined in the statute.**  **19 MEMBER MEYERS: Okay.**  **20 MR. RAWALD: And so, we went over**  **21 last week or two weeks ago what that term is.**  **22 And so, we are not going to rehash terms that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 are defined by the statute.**  **2 MR. EISNER: There may be a term,**  **3 I assume, within distributor that you could**  **4 make an argument should be defined, if you**  **5 think there is some confusion in the statutory**  **6 definition. I mean, I assume DOE wouldn't**  **7 have a problem with that.**  **8 MR. RAWALD: Neil, I can't say. I**  **9 don't know exactly what you are asking. We**  **10 have a term defined by the statute. So, we**  **11 are going to stick with that.**  **12 MR. EISNER: No, I am saying terms**  **13 used within the definition in the statute that**  **14 may need clarification.**  **15 MR. RAWALD: Okay. I haven't**  **16 heard that yet, but I understand.**  **17 MR. EISNER: John?**  **18 MR. HURST: John Hurst from**  **19 Lennox.**  **20 I think Craig has a good**  **21 suggestion here. Under contractor, I am a**  **22 little disturbed by the building owner, not by** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the building owner, but the term "by the**  **2 building owner". It could be a warranty**  **3 management company. It could be a facility**  **4 manager. I think we need to say a contractor**  **5 is one who is hired to install. I don't think**  **6 it matters who they are hired by because it**  **7 could be one of the warranty companies as**  **8 well.**  **9 And then, I think where it says,**  **10 "A contractor may install it or hire an**  **11 installer," you could say something to the**  **12 effect of "A contractor may employ installers**  **13 or subcontract to an installer."**  **14 MR. RAWALD: This is Doug.**  **15 Is that second sentence even**  **16 really necessary? Because we do simply define**  **17 installer and not even worry about defining**  **18 "within contractor," the fact that they may**  **19 install or not.**  **20 MEMBER SHEPHERD: This is Amy**  **21 Shepherd.**  **22 I guess to back up just a little** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 bit, the section that you cited where you had**  **2 the three terms, that was actually the section**  **3 that the Department has to consider the impact**  **4 of the regional standards on those entities in**  **5 promulgating the rule.**  **6 The enforcement provision deals**  **7 with distributors, contractors, and dealers.**  **8 So, it may be necessary to determine like how**  **9 installer fits within contractor for purposes**  **10 of a manufacturer knowing that, but those, to**  **11 me, seem to be the three key terms. So, I am**  **12 not quite sure why there is a need to have a**  **13 separate definition for "installer".**  **14 MR. RAWALD: There's not, Amy.**  **15 You are absolutely correct. So, you are**  **16 pointing exactly to the statute that I am**  **17 looking at.**  **18 And so, the word "installer" only**  **19 appears that one time. The question is**  **20 whether there is any need in this group at**  **21 all, because that term exists, to define it,**  **22 and whether we think that could have** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 independent legal significance. And I don't**  **2 know that.**  **3 So, I am putting it out to the**  **4 group because I don't know. And so, I am**  **5 hoping folks here can help me understand.**  **6 What it seems like to me is, from**  **7 a practical point of view, the installer is a**  **8 person who puts the thing in, right? And the**  **9 contractor is the person who is either doing**  **10 that work or they are the boss or the hirer of**  **11 that person doing that work, from a very**  **12 simplistic, non-intelligent point of view.**  **13 But that is my understanding. So,**  **14 I want to make sure, do folks think we need**  **15 clarity on this or are we comfortable with the**  **16 fact that that term will be defined, and it**  **17 doesn't really matter? The contractor and the**  **18 dealer are the terms that really matter for**  **19 the prohibited act. And so, we should define**  **20 those here. And I am comfortable with that.**  **21 I just want to make sure we discuss the terms.**  **22 MEMBER CLARK: This is Gary from** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Goodman.**  **2 Back to the term "contractor,"**  **3 should we consider that, the contractor, to be**  **4 a business or a person? And so, personally,**  **5 I think it is a business. And so, I think we**  **6 should be explicit as far as that goes. But**  **7 others may have different opinions.**  **8 MEMBER SACHS: This is Harvey.**  **9 And I would love for that to be**  **10 the case, but I think I am sensitive to this**  **11 question of the tech who is buying off the**  **12 internet and installing in his after-hours**  **13 using his employer's stuff. So, that is why**  **14 I am a little bit concerned about defining it**  **15 as a business, even though that is where I**  **16 would like us to be.**  **17 MEMBER McCRUDDEN: This is Charlie**  **18 with ACCA.**  **19 I think we have in this definition**  **20 here on the board where it says, "the company**  **21 or entity that offers to perform the services**  **22 in HVAC," I think there will be companies that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 are violating or causing prohibited acts. I**  **2 think there will be individuals, to Harvey's**  **3 point, that will be out there doing this, too.**  **4 The upstanding contractors want**  **5 the protection from those. So, the upstanding**  **6 contractor wants the protection from the**  **7 company that is out there, but also this**  **8 individual. And I don't know if there is a**  **9 way to define "contractor". I don't know if**  **10 "company" or "entity," and if "entity"**  **11 captures individuals or not. And so, I will**  **12 look to you for that.**  **13 MR. RAWALD: This is Doug.**  **14 From a practical point of view, I**  **15 would view the term "entity" to be**  **16 encompassing of companies and individuals.**  **17 MEMBER BALLO: This is Tim Ballo.**  **18 There is in the DOE regs currently**  **19 a definition of "person," which includes "any**  **20 individual, corporation, company, association,**  **21 firm, partnership, society, trust, joint**  **22 venture, or a joint stock company," and it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 goes on from there. So, I think "person," if**  **2 we just use that, would cover us here.**  **3 MR. RAWALD: That is a good find.**  **4 Thank you, Tim.**  **5 MEMBER DORIA: This is Jordan**  **6 Doria with Ingersoll Rand.**  **7 I think it is, just going back to**  **8 the question of do we need to define**  **9 "installer," I think it is important that we**  **10 do because, ultimately, we have compliance**  **11 that is triggered by installation. So, I**  **12 think to have that which is a requirement and**  **13 not have a definition of "installer," I think**  **14 it would create some asymmetry between the**  **15 definitions that we are working with here.**  **16 MEMBER WHITE: This is Chuck White**  **17 at PHCC.**  **18 And that is true, but, typically,**  **19 the contractor is responsible for his**  **20 installer's actions. That is why he has the**  **21 contractor's license. In some states, actual**  **22 technicians are licensed, but in many they are** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 not.**  **2 MEMBER DORIA: I think that is a**  **3 fair point. I guess the bottom line is we**  **4 don't want to get into a situation where, if**  **5 we have a definition of "contractor" and,**  **6 then, people are pointing to each other saying**  **7 that they are ultimately not an installer, and**  **8 therefore, not guilty of doing an installation**  **9 improperly, we need to avoid that outcome.**  **10 MEMBER SACHS: This is Harvey, and**  **11 I have a problem with the second bullet under**  **12 "contractor" where it says, "one who is hired**  **13 to install a product". That leaves out**  **14 completely who has decided what product to**  **15 install. And to me, the contractor is the one**  **16 who is doing systems specification, which**  **17 might be approved by the building owner, is**  **18 doing sizing and is doing installation, and is**  **19 responsible for the right piece of gear going**  **20 in the right place.**  **21 MEMBER CLARK: So, would it be**  **22 appropriate to say "hired to specify and** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 install"? **2 MEMBER SACHS: This is Harvey. 3 Gary, I am much more comfortable**  **4 with that. I am not sure it meets everyone's 5 needs, but it may be close enough for Doug's**  **6 interest in broad definitions. 7 MEMBER WHITE: This is Chuck**  **8 White. 9 That is probably true in the**  **10 residential market, but commercial and larger 11 is going to be a specifying engineer.**  **12 MR. RAWALD: Right. But this is 13 Doug.**  **14 So, let's keep this only to the 15 regional standards. So, these definitions**  **16 will not have broad implications for DOE. 17 These definitions, as I see them, will be**  **18 geared toward the regional standards, which 19 are related only to residential central air**  **20 conditioning split systems and single-package 21 systems that will be covered by the regional**  **22 standards.**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER WHITE: But I could have a**  **2 50-story condominium building in New York City**  **3 that is designed by a consulting engineer. It**  **4 is not specified by the contractor. There are**  **5 residential applications where he is not the**  **6 only one doing that.**  **7 Dallas is fine.**  **8 MR. EISNER: Are we getting close**  **9 on "contractor"?**  **10 MEMBER DORIA: This is Jordan**  **11 Doria with Ingersoll Rand.**  **12 I am not sure that I am**  **13 comfortable with the idea of adding in this**  **14 specified terminology. Basically, we are**  **15 saying now it is anybody who consults is now**  **16 somehow involved in this. I just, quite**  **17 frankly, don't see the need for that.**  **18 I think we keep it limited to the**  **19 person who actually performs the act. I mean,**  **20 that is the person who bears the requirement.**  **21 Because they specify "and they install". So**  **22 now, you need to be doing both of those things** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 potentially to meet that definition. And**  **2 then, if you are only doing one, then somehow**  **3 you are not liable? I don't think that is**  **4 what we want.**  **5 MR. HUNGERFORD: Hi. This is**  **6 David Hungerford. If I could jump in for a**  **7 second?**  **8 MR. EISNER: Yes.**  **9 MR. HUNGERFORD: Neil, can you**  **10 guys hear me?**  **11 MR. EISNER: Yes, we can.**  **12 MR. HUNGERFORD: I think we are**  **13 confusing here the idea of a role versus an**  **14 entity. And it seems like what we are trying**  **15 to define for legal purposes is the idea of a**  **16 role.**  **17 And so, in a simple sense, a**  **18 dealer is the entity that purchases the**  **19 equipment from the manufacturer or the**  **20 manufacturer's representative. The contractor**  **21 is the entity that the customer employs to**  **22 purchase the equipment for their premises or** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 for their building. And the installer is the**  **2 entity that actually does the work through**  **3 their technician.**  **4 And so, any entity could fulfil**  **5 all of those roles or just a subset of those**  **6 roles. But it seems like it is the role that**  **7 is important rather than getting mixed up with**  **8 different configuration of entities that**  **9 fulfill multiple roles, is the comment.**  **10 MR. EISNER: Do you want to go**  **11 back and look at those three sentences and see**  **12 what you think of that?**  **13 MS. DEGITZ: Yes, yes.**  **14 MR. EISNER: And again, we could**  **15 use "person" instead of "entity".**  **16 Any comments on those? Does that**  **17 satisfy a lot of the concerns?**  **18 MEMBER SHEPHERD: What's**  **19 "contractor" now?**  **20 MR. EISNER: The contractor would**  **21 be the person the customer employs to install**  **22 the equipment, I think.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER SHEPHERD: So, what is the**  **2 difference between an "installer" and a**  **3 "contractor"?**  **4 MR. EISNER: I'm sorry, it is a**  **5 little harder to point out where it is also --**  **6 maybe if I try to speak a little louder.**  **7 This would have to be something a**  **8 little different. The entity is the person**  **9 that the customer employs to -- somebody? It**  **10 can be the one installs it. Let's put it this**  **11 way: is everybody happy with this, "the**  **12 person who purchases the equipment"?**  **13 MEMBER SHEPHERD: I think that is**  **14 way too vague.**  **15 MEMBER SACHS: Wait a minute. Two**  **16 years ago, I purchased equipment through a**  **17 dealer to be installed in my house. I was the**  **18 purchaser. It was specified --**  **19 MR. EISNER: So, does this have to**  **20 be "that purchases the equipment from the**  **21 manufacturer"?**  **22 MEMBER DORIA: I would recommend** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 we omit the "from whom". That is less**  **2 important. And just say "for the purpose of**  **3 reselling to an ultimate end-user," or**  **4 something along those lines, "ultimate**  **5 consumer," you know, something like that. And**  **6 just leave out where they get it from.**  **7 MR. EISNER: Thank you.**  **8 MEMBER FERNSTROM: So, this is**  **9 Gary for the California IOUs.**  **10 It seems like we are spinning all**  **11 of these things around the notion of**  **12 purchasing. And looking back at the CEC,**  **13 their appliance standards applied to those**  **14 selling the equipment, not those purchasing.**  **15 And I think it makes it a lot easier because**  **16 those selling, then, are responsible for**  **17 complying with the regulations.**  **18 MEMBER DORIA: This is Jordan with**  **19 Ingersoll Rand.**  **20 I think that the problem with that**  **21 is that basically means, if you have a date of**  **22 manufacture, it is very easy to apply it to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the seller. But, when you have something that**  **2 is not around date of manufacture, but the**  **3 date of install, an installation, it seems**  **4 that that necessarily starts consideration of**  **5 purchaser obligations and requirements.**  **6 MEMBER FERNSTROM: Yes. However,**  **7 somebody on down the line is always selling**  **8 it. So, the contractor sells it to the**  **9 customer, whoever that is. That may be the**  **10 homeowner. It may be a builder. It may be a**  **11 general contractor. But somebody is always**  **12 selling the equipment.**  **13 MR. SURRENA: Don Surrena, NAHB.**  **14 This may have used to have been**  **15 simple when you just had to have a certain**  **16 SEER rating for a certain single component.**  **17 But now you have to design this system, and it**  **18 can have three different components that make**  **19 it comply or not have it comply under the**  **20 different circumstances for humidity or**  **21 whatever the reason.**  **22 And somebody has to design it.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 They just can't go buy it and put it in. It**  **2 is the design that makes it compliant. It is**  **3 the knowledgeable installation of those**  **4 components that put the responsibility in**  **5 design and installation of a knowledgeable**  **6 person. You could have an installer that was**  **7 given three things to put in. He installs**  **8 them. He can install them whether they comply**  **9 or don't comply. He may know it; he may not**  **10 know it.**  **11 Where do you want the ultimate**  **12 responsibility to fall, on the person who**  **13 designed it and understood what was being put**  **14 into make it compliant? The pieces themselves**  **15 have no eyes. They don't know where they are**  **16 going. Someone does know what they are doing.**  **17 If it is the builder who designed**  **18 it and ordered its installation, or if it was**  **19 the HVAC contractor who designed and ordered**  **20 its installation, somewhere you have got to**  **21 differentiate that this is just not one piece**  **22 of a product that was brought into place and** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 put there. It is three different components.**  **2 It could be variations in multiple scenarios.**  **3 We have to disseminate how it came**  **4 to that proposed compliance level and who put**  **5 it in, whether they were knowing or whether**  **6 they ordered it installed. But to just have**  **7 these vague definitions doesn't give guidance**  **8 to define how the Department is going to**  **9 enforce it. It is the knowledge of what was**  **10 designed and ordered to be installed.**  **11 MEMBER WHITE: This is Chuck White**  **12 at PHCC.**  **13 And that I guess is true, but**  **14 correct me if I am wrong, Doug, the standard**  **15 or what we are here about is regional**  **16 efficiencies, not system design and size and**  **17 criteria and load calculations. All you have**  **18 to go on is the air conditioner that got put**  **19 in has to comply with SEER 14, which means the**  **20 condensing unit and the coil were matched and**  **21 they are listed on Karim's database, and we**  **22 can verify that.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And from your point of view, Doug,**  **2 you don't care if it is 2-ton or 5-ton or 100-**  **3 ton. As long as it meets SEER 14, we satisfy**  **4 your requirements. Is that correct?**  **5 MR. RAWALD: That is correct,**  **6 Chuck.**  **7 MEMBER MEYERS: This is Karen with**  **8 Rheem.**  **9 I think I would repeat the**  **10 definition that you have for "dealer" for**  **11 "contractor," for the purpose of selling. And**  **12 I would probably put "and/or installing to the**  **13 consumer". And I think those definitions**  **14 should be the same.**  **15 And then, I think I would add a**  **16 line that says, "For purposes of enforcement,**  **17 these could be different or the same."**  **18 MS. DEGITZ: Could you repeat**  **19 that, Karen, the last part?**  **20 MR. EISNER: Well, don't you cover**  **21 what you just did by saying that about all?**  **22 One person can perform all three functions?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER MEYERS: I think that needs**  **2 to be included.**  **3 MR. EISNER: So "entity," this**  **4 could be the person that purchases the**  **5 equipment for the purpose of selling to the**  **6 consumer. Maybe the "contractor" could be**  **7 something like the person that oversees the**  **8 installation, and the "installer" can be the**  **9 entity that installs the equipment.**  **10 Start out with something simple.**  **11 Go on to some other elements. But the**  **12 enforcement program, you may want to come back**  **13 and add to the simple definitions as you see**  **14 problems. Or you may decide you don't need**  **15 the definitions, that they are too simple.**  **16 But start off with something simple like that.**  **17 And then, as I said, add a**  **18 sentence that would be an introductory or at**  **19 the end, that one person could perform one or**  **20 more functions, one or more of these**  **21 functions. It can be the same person.**  **22 MR. RAWALD: So, this is Doug.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And I want to throw another**  **2 question into this, which is, we are doing**  **3 this now somewhat like the distributor**  **4 definition. And so, it is a question of how**  **5 do we make them separate and apart from**  **6 distributor. And I know Tim has the statute**  **7 in front of him. So, possibly he could turn**  **8 to 6291 and read the distributor definition**  **9 for us.**  **10 MEMBER BALLO: This is Tim.**  **11 "The term `distributor' means a**  **12 person (other than a manufacturer or retailer)**  **13 to whom a consumer product is delivered or**  **14 sold for purposes of distribution in**  **15 commerce."**  **16 So, looking at this, it seems the**  **17 distinction here is that the "dealer"**  **18 definition is for the purpose of selling to**  **19 the consumer, not just for distribution in**  **20 commerce.**  **21 MEMBER ROCKY: So, this is Bryan**  **22 Rocky.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 With that statement, I see no**  **2 difference in the terms "dealer" or**  **3 "contractor".**  **4 MR. EISNER: With what?**  **5 MEMBER ROCKY: Following on from**  **6 what Tim just read, if distribution means**  **7 moving product from manufacturers through a**  **8 distribution channel in commerce, the idea of**  **9 a dealer/contractor is selling to the end**  **10 user, and they are the same term and they can**  **11 be used interchangeably. An "installer" or**  **12 "technician" becomes the person that actually**  **13 installs the equipment or services or replaces**  **14 the equipment.**  **15 We have gone round and round. I**  **16 see no difference between "dealer" and**  **17 "contractor" as far as what we are trying to**  **18 approach here.**  **19 MEMBER WHITE: This is Chuck**  **20 White.**  **21 I think I could agree with that.**  **22 For the purposes of what we are after, I think** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that is probably correct.**  **2 MR. SURRENA: I am still absorbing**  **3 it. Don Surrena, NAHB.**  **4 The distributor gets the product**  **5 directly from the manufacturer or is the**  **6 manufacturer who distributes in different**  **7 areas. A person who sets themselves up as a**  **8 dealer sets themselves up through a**  **9 distributor or through the manufacturer to**  **10 sell that particular type of a product.**  **11 Normally, to be a dealer, when I**  **12 was in construction, to sell certain windows**  **13 I had to have a certain quantity I had bought**  **14 in a period of time. A contractor was the guy**  **15 who came in to either the distributor or**  **16 worked through a dealer and bought one unit**  **17 and went out and did it. He may buy different**  **18 brands at different times. But a dealer**  **19 normally worked with one specific**  **20 manufacturer. I think there is a**  **21 differentiation between dealer and contractor.**  **22 MEMBER ROCKY: I'm sorry -- this** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is Bryan -- I disagree with that. A**  **2 contractor or dealer can buy one; they can buy**  **3 a thousand systems. They are buying product**  **4 from a manufacturer or an independent**  **5 distribution to sell it to a**  **6 consumer/homeowner. That's it. And there is**  **7 nothing related to that. We are talking about**  **8 HVAC contractors. We are not talking general**  **9 contractors or anything else.**  **10 We are making this much more**  **11 complicated than it needs to be for this**  **12 rulemaking. This is someone who buys**  **13 residential air conditioners from someplace to**  **14 sell it to a homeowner. That is all this is,**  **15 and those first two terms are the same under**  **16 that definition, under that scope.**  **17 MR. EISNER: Harvey?**  **18 MEMBER SACHS: It seems to me --**  **19 this is Harvey Sachs -- trying to absorb what**  **20 I have heard this morning, that the first**  **21 point, distributor is what would generally be**  **22 known in business as a wholesaler. The dealer** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 and contractor I see as being substantially**  **2 equivalent, if not entirely, and they would**  **3 both be subsumed as retailer.**  **4 And I think if we identify these**  **5 with those sort of standard business practice**  **6 terms, it is more helpful than it is harmful,**  **7 and it preserves Doug's generalizability.**  **8 So, I just make a suggestion that**  **9 we define "distributor" as the person who**  **10 serves the wholesale function, and "dealer" or**  **11 "contractor" is the person who serves the**  **12 retail function.**  **13 MR. RAWALD: Right. And so, to be**  **14 clear, though, we are not open to redefining**  **15 "distributor" because it is defined in the**  **16 statute. So, we are going to stick with the**  **17 definition we have.**  **18 MEMBER SACHS: Mea culpa.**  **19 (Laughter.)**  **20 MR. RAWALD: Right. But we can,**  **21 of course, use that advice. Now the word**  **22 "retailer" used is a loaded term because it is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 also defined in the statute, which Tim could**  **2 tell us what it means. But, generally, we**  **3 would view it to mean "big box stores" like**  **4 Best Buy and those kinds of things. But there**  **5 is a term defining "retailer," and it may help**  **6 us or it may hurt us to know what that means.**  **7 MR. EISNER: Amy?**  **8 MEMBER SHEPHERD: So, what if we,**  **9 instead of having -- is there a need to have**  **10 these discrete definitions for each of these**  **11 terms? What if, instead, we had sort of the**  **12 bucket of conduct? Because it sounds like it**  **13 depends. Sometimes people are one and**  **14 sometimes people are another.**  **15 So, what if we said something**  **16 like, "A dealer or contractor is an entity**  **17 who...."? We define the conduct that is at**  **18 issue here, that will need to be identified by**  **19 manufacturers.**  **20 So, they don't need to know is**  **21 this person a dealer, is this person a**  **22 contractor. They need to know, is this person** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 doing the thing that I can be in trouble for?**  **2 Are they installing it? And if we did that,**  **3 would that avoid some of these knots we seem**  **4 to be twisting ourselves into to come up with**  **5 these discrete definitions that aren't**  **6 necessarily going to be discrete?**  **7 MR. RAWALD: Right. So, this is**  **8 Doug.**  **9 From an enforcement point of view,**  **10 that would work, unless we define some sort of**  **11 different responsibilities for those people**  **12 down the road. And so, I think we could**  **13 certainly go in the opening position right now**  **14 of defining them the same. But if we decide**  **15 later on that we want to have these guys doing**  **16 different things or have different**  **17 responsibilities, then that may have to reopen**  **18 the definition. That is only reason why I**  **19 could see that being an issue.**  **20 MEMBER GIBBONS: This is John from**  **21 Carrier.**  **22 I agree with Amy, and I took a pen** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to it and wrote out, just to be consistent**  **2 with the definition of "distributor," I wrote**  **3 out, "The terms dealer/contractor means an**  **4 entity other than the manufacturer or**  **5 distributor to whom a consumer product is**  **6 delivered and eventually sold to an end-user."**  **7 And you can take my piece of paper**  **8 here.**  **9 MEMBER WHITE: This is Charlie**  **10 with ACCA.**  **11 While she is typing that up, could**  **12 we hear what the definition of "retailer" is?**  **13 MR. RAWALD: Tim, are you willing**  **14 to read it?**  **15 MEMBER BALLO: No.**  **16 (Laughter.)**  **17 The term "retailer" means "a**  **18 person to whom a consumer product is delivered**  **19 or sold, if such delivery or sale is for**  **20 purposes of sale or distribution in commerce**  **21 to purchasers who buy such product for**  **22 purposes other than resell."** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, purchasers who buy such**  **2 product for purposes other than resell would**  **3 generally be known as consumers.**  **4 (Laughter.)**  **5 MR. RAWALD: That was written by**  **6 Congress. So, don't look at me.**  **7 (Laughter.)**  **8 So, the question is, is the**  **9 "retailer" definition, is that much akin to**  **10 what we are defining in "dealer" or a**  **11 "contractor" at the moment?**  **12 MR. EISNER: Do you want to focus**  **13 on this?**  **14 MEMBER CLARK: The only question I**  **15 have is "entity" -- or should it be "person,"**  **16 based on --**  **17 MEMBER SACHS: Gary, I could go**  **18 with "person".**  **19 MEMBER NOLL: This is Elizabeth at**  **20 NRDC.**  **21 Also, the delivered or sold versus**  **22 the selling or installing, are we missing a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 component? The "delivered" and "installed" to**  **2 me sounds a lot like the distributor and**  **3 retailer, and we have completely missed the**  **4 installation aspect.**  **5 MEMBER GIBBONS: John from**  **6 Carrier.**  **7 Are you suggesting change**  **8 "delivered" to "installed"?**  **9 MEMBER NOLL: I am only suggesting**  **10 that I feel like that is a component that is**  **11 still missing in what we are trying to design.**  **12 MR. EISNER: You are saying, what**  **13 is the difference between this and this?**  **14 MEMBER NOLL: It got changed. So,**  **15 when John defined "dealer" and "contractor,"**  **16 it said "delivered" and "sold". And I said**  **17 that was strikingly similar to "retailer" and**  **18 "distributor".**  **19 And in Karen's definition, we had**  **20 for the purpose of selling and/or installing.**  **21 And I thought that more accurately captured**  **22 what we are trying to define.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 But, then, also, remembering what**  **2 Jordan's comment was on is it "and/or," is it**  **3 both --**  **4 MR. RAWALD: Yes, Laura, if you**  **5 could keep both options there rather than**  **6 deleting that one, that would be helpful I**  **7 think for me.**  **8 I mean, is this an effective time**  **9 to break and think about this? Are people**  **10 pretty much tapped out from ideas? Can we**  **11 come back, clean this up a little bit, and**  **12 then, we could put some ideas on the screen,**  **13 and people could look at them again? Is that**  **14 a good idea? I see a lot of people nodding**  **15 their heads that a break would be appropriate.**  **16 MEMBER MEYERS: Yes. Do we still**  **17 need to come up with a definition for**  **18 "installer"? Is that the third piece of this**  **19 or not?**  **20 MR. RAWALD: Well, Amy is positive**  **21 that we don't need a definition for**  **22 "installer". Jordan has said that possibly** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 one would be helpful. So, we have some ideas**  **2 put forward for one.**  **3 MEMBER SHEPHERD: I am just saying**  **4 I don't think it is required.**  **5 MR. RAWALD: It's not, right,**  **6 exactly.**  **7 MEMBER SHEPHERD: Right. It might**  **8 be a good idea, but --**  **9 MR. RAWALD: Not to put words in**  **10 your mouth.**  **11 MEMBER SHEPHERD: Yes, too late.**  **12 MR. RAWALD: I'm sorry. I**  **13 apologize.**  **14 MR. EISNER: Why don't we take a**  **15 15-minute break? Be back at 11:00 and see if**  **16 we can finish this.**  **17 (Whereupon, the foregoing matter**  **18 went off the record at 10:48 a.m. and went**  **19 back on the record at 11:07 a.m.)**  **20 MS. DEGITZ: Okay. Can everyone**  **21 read the screen or should I make it bigger?**  **22 How is that? Okay.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, the top is the current**  **2 definitions. Below are the proposed**  **3 definitions that we discussed today.**  **4 The first two are the combined**  **5 definitions for "dealer" or "contractor". And**  **6 then, below that, a table of all the different**  **7 discussions and definitions we have that were**  **8 applicable only to one term. So, it would be,**  **9 if we are going to define "dealer," I put that**  **10 in that "dealer" column versus "contractor" or**  **11 "installer".**  **12 MR. EISNER: Can we blow that up**  **13 just a little bit?**  **14 MS. DEGITZ: Sure.**  **15 So, these are just the proposed**  **16 definitions? If you want to see DOE's**  **17 definition of "distributor" or "retailer," let**  **18 me know and I can scroll back up.**  **19 MR. EISNER: Any thoughts on where**  **20 we start it off or the proposal that everybody**  **21 agreed to?**  **22 MEMBER MEYERS: So, this is Karen** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 with Rheem.**  **2 I will start it off. I think I**  **3 like the proposed definitions as written, and**  **4 I would add a bullet that also has the**  **5 "installer" defined. And then, a caveat at**  **6 either the beginning or the end that a person**  **7 could do one or all of these activities.**  **8 MS. DEGITZ: So, the first two**  **9 definitions are very similar. The only**  **10 difference is one has product is delivered and**  **11 sold and the second is product is sold and/or**  **12 installed. So, is there one you like more**  **13 than the other?**  **14 MEMBER MEYERS: I like the second**  **15 one better, just personally.**  **16 MS. DEGITZ: Okay. So, this was**  **17 your proposal, and what would you like to add?**  **18 MEMBER MEYERS: I would add**  **19 another bullet that has the "installer"**  **20 definition, just as it is written in the box.**  **21 I would say it is a "person" to keep it**  **22 consistent.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MS. DEGITZ: You said, "may**  **2 perform any of these functions"?**  **3 MEMBER BALLO: So, this is Tim**  **4 Ballo.**  **5 First, a minor point on the**  **6 "installer" bullet. We have been referring to**  **7 "consumer product," not "equipment". So, "a**  **8 person that installs a consumer product". And**  **9 "a consumer product," not "the consumer**  **10 product".**  **11 The main point that I had, though,**  **12 is I am not sure the dealer or contractor**  **13 portion of the definition is grammatically**  **14 correct. I don't understand where the end**  **15 user comes in there.**  **16 MR. RAWALD: And, Tim, you are**  **17 referring to the fact that it says "install to**  **18 an end-user"? Right?**  **19 MEMBER BALLO: Yes.**  **20 MR. RAWALD: How about "for"?**  **21 "Sold to or installed for...."**  **22 And so, this is Doug again.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 I do want to keep these **2 definitions limited to central air 3 conditioning, not to consumer products at**  **4 large. So, if we could narrow the scope? 5 MR. EISNER: You stick an extra**  **6 "to" in here or you want to say "for sale to 7 consumer". But you have got "to whom a**  **8 consumer product is sold to". 9 MR. RAWALD: Right, "is sold to**  **10 and/or installed for an end-user". Yes, 11 right, I see what you are saying. Uh-hum.**  **12 MS. DEGITZ: Oh, I see it. 13 MEMBER WHITE: This is Chuck**  **14 White. 15 Wouldn't be better to say "sells** **16 or installs a consumer product to an end 17 user"? Because the way it is put there, it**  **18 kind of sounds like the -- 19 MEMBER MEYERS: This is Karen.**  **20 Do we want to change "consumer 21 product" to "a residential air conditioner"?**  **22 MS. DEGITZ: Yes, I will get**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 there.**  **2 MR. RAWALD: She is going to do**  **3 that.**  **4 I do appreciate Laura's patience.**  **5 I am sure it is very difficult to do this with**  **6 all of us staring at her.**  **7 MS. DEGITZ: Does "central air**  **8 conditioner" cover heat pump? It does? Okay.**  **9 MR. RAWALD: Right. So, her**  **10 question is, do we want to make the term a**  **11 little more narrow or is everyone comfortable**  **12 with the term "central air conditioner,"**  **13 knowing that it won't really matter?**  **14 MS. DEGITZ: "Who sells or**  **15 installs a residential" -- you wanted to**  **16 specify "a product covered by regional**  **17 standards" instead of "residential central air**  **18 conditioner"?**  **19 MEMBER BALLO: No, residential**  **20 central air conditioner is covered.**  **21 MR. RAWALD: Right. And if I hear**  **22 Charlie correctly, we don't want to bind** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 ourselves to leave out future regional**  **2 standards or the definitions for those**  **3 regional standards.**  **4 MS. DEGITZ: Okay. "A dealer or**  **5 contractor is a person who sells or installs**  **6 a residential central air conditioner covered**  **7 by regional standards for an end-user."**  **8 MR. EISNER: Would it be clearer**  **9 if you moved -- instead of "to," "installs for**  **10 and end-user"?**  **11 MS. DEGITZ: Like this?**  **12 MR. EISNER: Is that clearer that**  **13 way?**  **14 MEMBER LATTANZI: This is Matt.**  **15 Should it be "who sells to and/or**  **16 installs"?**  **17 MR. EISNER: Is everybody happy**  **18 with that?**  **19 MR. RAWALD: Okay. So, grammar**  **20 always is difficult in this kind of forum.**  **21 So, perhaps we all have a general sense now of**  **22 an idea that we all are coalescing around.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Maybe we can give Laura a break**  **2 and we can at lunchtime put together a**  **3 grammatically-correct definition that will**  **4 work for everyone, and then, we can come back.**  **5 I think it is very difficult to like parse**  **6 grammar in this particular forum this way, if**  **7 folks are okay with that.**  **8 MR. EISNER: And so, those are the**  **9 three bullets we want to keep. Again, I would**  **10 stress, I think as we go through the**  **11 enforcement program itself, we may want to**  **12 come back and say, all right, we're going to**  **13 have to add something or subtract something**  **14 from the definition. But to start off with**  **15 that, we have got a good set of bullets.**  **16 MEMBER McCRUDDEN: This is Charlie**  **17 with ACCA.**  **18 So, I may be getting ahead of**  **19 myself here. But I know that you can't go**  **20 after homeowners. But suppose you have a**  **21 situation where there is a homeowner who is**  **22 coordinating with someone. They are the end-** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 user, but they could also, under this**  **2 definition, be the contractor, correct?**  **3 MR. RAWALD: Right. So, it is**  **4 possible, I guess if you were to parse it out,**  **5 that that person could fit within the legal**  **6 definition. And so, I think from the point of**  **7 view of this negotiation, we should discuss**  **8 how we feel about that.**  **9 MEMBER McCRUDDEN: Yes. Right. I**  **10 would support capturing homeowners who are**  **11 trying to skirt the system in a way, so that**  **12 homeowners themselves, they may not be the**  **13 traditional sense of an HVAC contractor, but**  **14 they could be, I think, deemed a**  **15 dealer/contractor in this situation.**  **16 MR. RAWALD: Okay. And this is**  **17 Doug.**  **18 And my preference, once again, is**  **19 the broad definitions, and then, we can**  **20 characterize our exclusions or things that**  **21 make sense as we go over it. But I think that**  **22 if there is a reason to want to capture these** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 people because they feel they may be skirting**  **2 the rules and getting by, then let's make sure**  **3 the definition is broad enough to include**  **4 that.**  **5 MR. EISNER: Are there comments,**  **6 questions?**  **7 MEMBER BALLO: This is Tim.**  **8 I think we need to make a parallel**  **9 change to the "installer" definition, "person**  **10 that installs a residential central air**  **11 conditioner covered by regional standards".**  **12 MR. RAWALD: So, is everyone okay**  **13 with the approach of we will go ahead and fix**  **14 this grammatical or do a little wordsmithing**  **15 with it, and then, bring it back after lunch**  **16 and make sure it looks good for everyone? But**  **17 this is kind of where we are?**  **18 MEMBER DORIA: This is Jordan**  **19 Doria with Ingersoll Rand.**  **20 One comment I want to make, I**  **21 think this does a good job of really capturing**  **22 sort of where we are or where the current** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 state of the industry is. I think it is just**  **2 always important to think about how that could**  **3 change and what that might mean for the**  **4 definitions.**  **5 As I am looking at it, we say a**  **6 dealer or a contractor is a person other than**  **7 a manufacturer or distributor. I think that**  **8 is accurate in terms of the state of play**  **9 today, but that is not a fundamental point.**  **10 That could, in fact, be different, right? And**  **11 it is sort of up to manufacturers, were that**  **12 to be different, right?**  **13 So, just sort of putting it out**  **14 there, does this capture other permutations of**  **15 how the industry and the channel could operate**  **16 appropriately?**  **17 I guess, to put it in more stark**  **18 terms, an installer is a person. In theory,**  **19 that means a manufacturer, right? If we, as**  **20 manufacturers, started actually putting in the**  **21 product, I think that would capture**  **22 manufacturers.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. EISNER: Well, do you want to**  **2 just simply add something here? "May perform**  **3 any of the functions defined above or those of**  **4 a manufacturer"?**  **5 Anybody have a reaction?**  **6 MEMBER SACHS: This is Harvey.**  **7 I think Jordan's point is almost**  **8 captured as instructions to Laura to make sure**  **9 that we are not closing off, through**  **10 definitions that we didn't intend, future**  **11 business models.**  **12 MEMBER ROCKY: This is Bryan**  **13 Rocky.**  **14 But by that discussion, Jordan and**  **15 Harvey both, if a manufacturer is going to act**  **16 today as a distributor, then we are covered**  **17 under definitions of a distributor. If a**  **18 manufacturer is going to act as a contractor,**  **19 then you are actually separating internally**  **20 the functions of a manufacturer and the**  **21 functions of a contractor. And you have to**  **22 meet the requirements, as defined for a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 contractor/dealer/installer.**  **2 MEMBER SACHS: To me, as long as**  **3 we don't exclude the possibility that a**  **4 manufacturer might want to, particularly a**  **5 dish manufacturer might want to integrate all**  **6 three levels within one single entity. I just**  **7 see no reason to forbid that through**  **8 regulation.**  **9 MEMBER DORIA: This is Jordan,**  **10 Ingersoll Rand, again.**  **11 I think that the issue, to Bryan's**  **12 point, is one of manufacturer/distributor as**  **13 we think of it in industry or**  **14 manufacturer/distributor as defined by the**  **15 Department, right?**  **16 And I think what we need to be**  **17 saying here is that a manufacturer/distributor**  **18 could choose to undertake certain activities**  **19 that would, then, mean, in addition to being**  **20 a manufacturer and potentially a distributor,**  **21 they now meet the definition of a dealer or**  **22 contractor. And they now have the obligations** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that come with that essentially treatment from**  **2 the Department.**  **3 MR. RAWALD: Right. And this is**  **4 Doug.**  **5 So, currently, under the statute,**  **6 as Amy pointed out earlier, the only issue of**  **7 concern for these folks is the requirement**  **8 that the manufacturer not sell to them. So,**  **9 if a manufacturer is wearing both hats, they**  **10 couldn't sell to themselves, if they knew they**  **11 were breaking the rules, right?**  **12 So, if we, as we go through the**  **13 negotiation, we develop more responsibilities,**  **14 we may want to revisit the definition to see**  **15 if that is an appropriate responsibility to**  **16 put on someone who could be a**  **17 manufacturer/installer.**  **18 So, I think at the moment with**  **19 what we have got, I am comfortable with this**  **20 as is. And then, we can kind of discuss those**  **21 possibilities as they evolve over the course**  **22 of the negotiation.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 MEMBER WHITE: This is Chuck **2 White. 3 At the risk of being dragged out**  **4 of the room, thinking along the lines of what 5 Charlie talked about, instead of saying "who**  **6 sells to," I think I would prefer "who 7 furnishes and/or installs". Because if a**  **8 consumer has it sitting in their garage, they 9 are still in the clear because they didn't**  **10 sell it; they bought it. So, if they furnish 11 it to someone to install, would it be better**  **12 to say "furnish and/or install a residential 13 central air conditioner," instead of "sell"?**  **14 MEMBER FERNSTROM: So, where did 15 the consumer buy it from?**  **16 MEMBER WHITE: I don't know. But 17 if they got a contractor out there to put it**  **18 in, if they have someone to put it in, they 19 have furnished it for being put in, to be put**  **20 in. 21 MR. SURRENA: And if they drag**  **22 Charlie out of the room, I agree with him.**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 From NAHB's perspective, I think that hones it**  **2 in a little better.**  **3 MEMBER WHITE: Because the person**  **4 that sold it is the person who, if you sold it**  **5 to the end-user, you are the person. So, if**  **6 they bought it from somebody online 10 states**  **7 away, you would have to somehow track them**  **8 down. That means the homeowner is innocent of**  **9 doing this because somebody else sold it to**  **10 them. But, if they furnish it, I bought it**  **11 from someone and now I furnish it to someone**  **12 to install it, you have put them in the chain**  **13 of liability. They are skirting the rules,**  **14 and they are the ones.**  **15 MR. HURST: Is that not implied,**  **16 though?**  **17 This is John Hurst from Lennox.**  **18 Is it not implied when you say**  **19 "and/or installs"? Do you think there needs**  **20 to be further clarification?**  **21 MEMBER WHITE: Chuck White.**  **22 Only if they are the ones that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 install it.**  **2 MR. RAWALD: Right. John, this is**  **3 Doug.**  **4 So, he is not talking about the**  **5 contractor. He is talking about the guy who**  **6 has it in his garage. He wants him to be**  **7 liable.**  **8 MR. HURST: Oh, okay.**  **9 MR. RAWALD: So, as a person who**  **10 has it --**  **11 MR. HURST: Got it.**  **12 MR. RAWALD: So, he is saying he**  **13 is furnishing it.**  **14 So, it is interesting because in**  **15 the statute we always use the word "distribute**  **16 in commerce," as opposed to the word "sell,"**  **17 which is much more narrow. So, perhaps the**  **18 word "distribute" might be consistent with the**  **19 statute or something like that, something akin**  **20 to that. So, they might work a little better**  **21 for folks.**  **22 MEMBER WHITE: Well, it is Chuck** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 White again.**  **2 If you view "distribute in**  **3 commerce," the fact that it is sitting in my**  **4 garage.**  **5 MR. RAWALD: Right, that's is a**  **6 fair point. That is a fair point.**  **7 MEMBER WHITE: I would think it**  **8 was distributed in commerce when it arrived at**  **9 my garage, but not when it leaves my garage**  **10 and gets put in on my patio.**  **11 MR. RAWALD: Right. And Tim could**  **12 tell you there is a definition of**  **13 "distribution in commerce" in the statute, and**  **14 it probably wouldn't go that far. So, yes.**  **15 MEMBER MEYERS: So, Chuck, help me**  **16 understand. So, your issue is there is a unit**  **17 in a garage. How did that unit get to the**  **18 garage?**  **19 MEMBER WHITE: Somebody carried**  **20 it.**  **21 MEMBER MEYERS: So, the homeowner**  **22 is installing it himself? Is that your --** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER WHITE: It could be the**  **2 homeowner is installing it themselves. It**  **3 could be they have got some friend who knows**  **4 how to do this. It could be somebody working**  **5 on the side after hours.**  **6 MR. RAWALD: They bought it on**  **7 eBay.**  **8 MEMBER WHITE: Yes, a homeowner**  **9 buys one from an outside source and has it**  **10 shipped to their place. There is nothing --**  **11 nobody is going to search in the truck lines**  **12 to be sure a SEER 13 is not going to Florida.**  **13 MEMBER MEYERS: But would the**  **14 prohibited act be against the person who sold**  **15 it on eBay? Shouldn't that be the appropriate**  **16 prohibited act, not the homeowner who bought**  **17 it?**  **18 MR. RAWALD: And this is Doug.**  **19 I don't want to jump too far ahead**  **20 into prohibitions. I think what Charlie and**  **21 Chuck are hitting on is they are concerned of**  **22 trying to make the definitions broad enough to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 encompass anyone who might be handing the**  **2 installer this item to install. And so, if**  **3 that person is the homeowner and says, "Hey,**  **4 Installer, you come to my house and put this**  **5 in," that person should be defined as the**  **6 contractor or dealer because they are, in**  **7 fact, being the ones that are giving it to the**  **8 installer. That is what I hear Chuck and**  **9 Charlie saying.**  **10 MR. EISNER: Let's give a chance,**  **11 because it may be on this issue -- David**  **12 Hungerford online wants to say something.**  **13 David? David Hungerford?**  **14 MR. HUNGERFORD: Yes, I am here.**  **15 Okay.**  **16 Yes, I was trying to break in a**  **17 couple of seconds ago. I think we want to**  **18 make sure to exclude the UPS guy.**  **19 (Laughter.)**  **20 Yes, somebody has an open**  **21 microphone.**  **22 Okay. We want to exclude the UPS** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 guy. And is there no way to think about the**  **2 seller to the end-user as the entity that we**  **3 want to pay attention to and require**  **4 compliance, even in online commerce? Or are**  **5 we excluding that as an option?**  **6 MEMBER WHITE: This is Chuck**  **7 White, PHCC.**  **8 I agree. I think we would like to**  **9 be able to catch up with those, but are they**  **10 a distributor, and what level of**  **11 responsibility do the distributors share in**  **12 the agreed-upon settlement?**  **13 MEMBER SHEPHERD: This is Amy**  **14 Shepherd.**  **15 I think, also, inevitably dragged**  **16 into the other conversation here, which is to**  **17 determine what is an effective enforcement**  **18 plan, how broad do we need this liability to**  **19 go. So, I think when we have that discussion**  **20 about what will really make this effective, if**  **21 we can come up with something based just sort**  **22 of on what we have in the statute, whatever it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 might be, more limited things that make it**  **2 ineffective, then you don't need to go as**  **3 broadly.**  **4 Like if you are going to prohibit**  **5 the installation and the installer is going to**  **6 be liable for this, do you also need to have**  **7 the homeowner who furnishes it to him also**  **8 have liability for the same act? So, I think**  **9 a little bit that we are kind of in the next**  **10 section. I don't know how much we really want**  **11 to get into that discussion, just in terms of**  **12 definitions, because, as you said, as Doug**  **13 said, we can always come back. And if we**  **14 decide we need to change these to make it work**  **15 for what we have determined to be an effective**  **16 plan, we can do that.**  **17 MR. EISNER: Don?**  **18 MR. SURRENA: Thank you. Don**  **19 Surrena, NAHB.**  **20 To change "sells" to "furnish"**  **21 continues to cover all of the things we had**  **22 talked about, and it makes the inadvertent per** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 se cheat also liable. Say they get the unit**  **2 from Canada, shipped in UPS, or from Mexico,**  **3 shipped in UPS. Are we going to go after some**  **4 entity in Mexico or Canada or are we going to**  **5 get the end-person who ordered it, had it put**  **6 in his garage, furnished it to an installer?**  **7 The installer has some liability to know he**  **8 can't do it, but so does the person who made**  **9 the direct purchase, knowing or even not**  **10 knowing that they shouldn't have done it. I**  **11 think "furnish" is an easy compromise for**  **12 everything.**  **13 MR. EISNER: The statute defines**  **14 that, doesn't it? Is the definition broader**  **15 --**  **16 MR. HUNGERFORD: Well, this is**  **17 David. Can I jump in again?**  **18 MR. EISNER: Yes, David, go ahead.**  **19 MR. HUNGERFORD: Okay. I am**  **20 getting that feedback again. Okay.**  **21 There is a principle I have tried**  **22 to follow in thinking about regulations that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 there is always an optimum level of draft,**  **2 that there is going to be some cheating or**  **3 there is going to be somebody skirting the**  **4 rule. And trying to design a regulation to**  **5 cover all essential cases as opposed to one**  **6 that works effectively to get the vast**  **7 majority of cases often gets a better outcome,**  **8 especially if compliance is more**  **9 straightforward.**  **10 And so, when we talk about the**  **11 self-installed central air conditioner, I**  **12 think we are talking about a fairly small**  **13 margin of the market. The manufacturers could**  **14 probably help me with that. But I think that**  **15 it is a relatively-tiny portion of the market.**  **16 And I think trying to design the**  **17 regulation to catch that sort of an activity**  **18 may lead us to regulations and enforcement**  **19 procedures that are far too complex to be**  **20 effectively implemented.**  **21 MEMBER SACHS: This is Harvey.**  **22 And I just want to follow up on** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 David's remark by suggesting that at his seat**  **2 at the California Energy Commission he has had**  **3 a fair amount of experience in trying to**  **4 devise effective enforcement mechanisms. And**  **5 there are some words in what he said that I**  **6 think resonate with all of us about means of**  **7 effectively assuring maximum compliance**  **8 without going after every last gnat on the**  **9 elephant's tail.**  **10 Thank you.**  **11 MR. STAS: Isn't the ultimate**  **12 solution to that for this individual homeowner**  **13 trying to do the wrong thing that the**  **14 installer who is brought in to put it in**  **15 declines the job? The unit doesn't go in.**  **16 Then, the homeowner is left to try to get**  **17 their money back from the eBay seller or**  **18 wherever they got this nefarious equipment.**  **19 THE COURT REPORTER: I'm sorry,**  **20 who was speaking?**  **21 MR. RAWALD: Eric Stas.**  **22 MR. STAS: Eric Stas.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER SACHS: This is Harvey, and**  **2 I would like to ask a question that might be**  **3 informative here.**  **4 We have, in parallel with the**  **5 enforcement regime we are trying to do, a set**  **6 of EPA regulations on refrigerant handling.**  **7 The bulk of the installs will be replacements,**  **8 unless we suddenly have an amazing change in**  **9 the housing industry in this interval.**  **10 And it may be that one of the**  **11 manufacturers or Chuck or Charlie can help me**  **12 understand how many violations there are when**  **13 a homeowner decides to do his own install,**  **14 hook up the line set and condensing unit and**  **15 the evaporator himself.**  **16 MEMBER McCRUDDEN: So, when you**  **17 say, how many violations, are we talking DOE**  **18 rules and EPA rules or?**  **19 MEMBER SACHS: The majesty of the**  **20 federal government.**  **21 MEMBER McCRUDDEN: Yes. So, we**  **22 know that 608 enforcement is pretty lackluster** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 from EPA. And it is something I can talk**  **2 about when we get to prohibited acts and**  **3 things like that.**  **4 We, as an organization, are**  **5 frustrated with the lack of enforcement on**  **6 608. There is a fair bit of compliance that**  **7 goes with it. You have to be trained,**  **8 certified. You have to carry the card. You**  **9 are restricted on purchasing HCFCs. You have**  **10 to carry the equipment, and it takes time to**  **11 properly handle the refrigerant when servicing**  **12 or repairing.**  **13 It is our hope that this doesn't**  **14 end up the same way. But when we get to that,**  **15 I can elaborate on that more.**  **16 MEMBER SACHS: Sure. No, I**  **17 appreciate that, Charlie. And just as**  **18 background, reading between the lines, I am**  **19 hearing a possible suggestion that a non**  **20 compliance bounty or a rat-out mechanism might**  **21 just be an interesting approach, just**  **22 foreshadowing a bit.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER McCRUDDEN: You are**  **2 foreshadowing a bit, yes. Yes.**  **3 MR. EISNER: Other comments?**  **4 (No response.)**  **5 How do we want to leave this? Do**  **6 we want to leave "sell" in there for now? Do**  **7 we want to change it?**  **8 MR. HURST: I was just going to**  **9 ask if we could go back up to "retailer" once**  **10 we finish with this piece.**  **11 I would just like to make a**  **12 comment. In the "big box" programs with HVAC**  **13 manufacturers and dealers/contractors, they**  **14 don't take possession of the consumer product.**  **15 It is a pass-through. So, it is never**  **16 technically delivered or sold to the retailer.**  **17 I don't know if that matters in this**  **18 definition. But this isn't currently the way**  **19 it happens.**  **20 MR. RAWALD: Right. So, John,**  **21 this is Doug.**  **22 So, I am hearing you saying that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 this 1975 definition of "retailer" doesn't**  **2 reflect what currently happens in the air**  **3 conditioning market.**  **4 MR. HURST: That's correct.**  **5 MR. RAWALD: Yes. So, that is**  **6 something that we could talk more about with**  **7 them. We need a more appropriate definition**  **8 for that. As we go on, if we decide that**  **9 retailers need to hold some sort of**  **10 responsibility in this process, we can think**  **11 of a way of making sure it is more clear for**  **12 those particular folks in this instance in**  **13 that particular industry.**  **14 MR. HURST: Yes, Doug, and instead**  **15 of bogging down the conversation, I will work**  **16 on some language that I think more accurately**  **17 reflects the current situation.**  **18 MR. RAWALD: Okay. Well, it seems**  **19 to me like we have really come to a consensus**  **20 on a general definition with some possible**  **21 nuances and possibly some grammatical changes.**  **22 So, perhaps we could table the rest of this** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 and move on to the next topic, with the**  **2 general idea of what we mean by these topics**  **3 at this point. Is everyone comfortable doing**  **4 that?**  **5 MEMBER MEYERS: This is Karen with**  **6 Rheem. Just one comment.**  **7 Do we want to change the word**  **8 "sells" to "distributes"? A couple of you**  **9 have made that comment.**  **10 MR. EISNER: Or do we want to use**  **11 this up here all the time, "delivers"?**  **12 MR. RAWALD: Right. So, the**  **13 suggestion from Chuck was "furnish," as Don**  **14 Surrena seconded. The word "furnish" is not**  **15 defined. So, there are some interesting**  **16 concerns about that.**  **17 "Sells," is the term we currently**  **18 have; "distributes" is defined in the statute**  **19 and might not be able to be stretching as far**  **20 as Charlie and Chuck would want.**  **21 So, there are some things to think**  **22 about. I think that I really need to go talk** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to the folks that I work with to make sure how**  **2 comfortable they would be with the different**  **3 variations, to come back to you guys with an**  **4 idea.**  **5 But I think we all have a general**  **6 sense of what these terms mean to us at this**  **7 point for discussing where we are with these**  **8 guys and who they are. So, I think that we**  **9 can hammer out some firmer language to vote on**  **10 as we go along, but I think we are good enough**  **11 to move on in my opinion, if everyone else is.**  **12 MR. EISNER: Does anybody**  **13 disagree?**  **14 MEMBER SACHS: This is Harvey.**  **15 Just one other question. I don't**  **16 think it is terribly important, but I would**  **17 have almost imagined that a retailer not**  **18 infrequently swaps inventory with other**  **19 retailers when somebody has got an emergency**  **20 and needs a widget or whatever. Is this**  **21 actually not happening? Or can we just leave**  **22 this definition knowing that it includes these** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 occasional variations?**  **2 MR. RAWALD: You are talking about**  **3 the retail definition, Harvey? Is that what**  **4 you're --**  **5 MEMBER SACHS: Right.**  **6 MR. RAWALD: Right. So, the**  **7 retail definition, as I mentioned, it comes**  **8 from the statute. So, we have that piece of**  **9 it.**  **10 John Hurst is working on some**  **11 possible variations targeted towards the**  **12 regional enforcement that reflects the market**  **13 better. So, if there are some ideas for that,**  **14 maybe you can give him some thoughts on that.**  **15 That would be helpful.**  **16 MEMBER SACHS: Thank you.**  **17 MR. EISNER: All right. If no one**  **18 objects then, let's go on to "Knowing Sales to**  **19 Routine Violator".**  **20 Can you hear me? Is it okay now?**  **21 MR. RAWALD: So, as Amy and I have**  **22 mentioned back and forth across the table** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 several times, the significance of the**  **2 definitions is important for the prohibited**  **3 act that we know we have.**  **4 And so, we know that Congress put**  **5 into the Energy Independence and Security Act**  **6 and, therefore, added to EPCA, this prohibited**  **7 act that says -- in the next slide, please,**  **8 Laura -- "It shall be unlawful for any**  **9 manufacturer or private labeler to knowingly**  **10 sell a product to a distributor, contractor,**  **11 or a dealer" -- two of those terms we were**  **12 just dealing with -- "with knowledge that the**  **13 entity routinely violates any regional**  **14 standard applicable to that product."**  **15 If you go to the next slide, you**  **16 can see that we have a definition from**  **17 Congress on "knowingly" as well. And Dave**  **18 Calabrese mentioned last time that we were**  **19 meeting that the "knowingly" definition is**  **20 important because it is not just actual**  **21 knowledge; it is also a constructive**  **22 knowledge, as we call it in the law. So, what** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 you should know. And so, manufacturers, what**  **2 they should know they are responsible for**  **3 oftentimes.**  **4 So, we know that that term is**  **5 defined. So, we really have some other areas,**  **6 however, in that previous definition that are**  **7 undefined.**  **8 If you can go back one slide?**  **9 So, an area I thought that I would**  **10 put out there for us to start discussing**  **11 really is what is "routinely" and what is**  **12 "violates" because that seems to be an area**  **13 for us to discuss, at least at some length.**  **14 What do we really mean by that? And provide**  **15 some clarity for folks, so they know what they**  **16 are facing, a possible prohibited act for**  **17 committing, if we know what these routine**  **18 violations are.**  **19 But that was just my suggestion.**  **20 If anyone has any other area they want to**  **21 start off with in discussing this, please**  **22 let's do. I just put that out there as kind** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 of a talking point for us to begin with.**  **2 MR. EISNER: Does anybody want to**  **3 jump in with some comments?**  **4 (No response.)**  **5 Can we start off with "routinely"?**  **6 MEMBER FERNSTROM: This is Gary.**  **7 Rather than try to judge at this**  **8 point in terms of what constitutes a**  **9 violation, whether it happens routinely or**  **10 only once, maybe the extent of the occurrence**  **11 of violation ought to be taken up in the**  **12 determination of the penalty rather than**  **13 determining whether there was actually**  **14 violation or not.**  **15 So, I would suggest "routinely" is**  **16 irrelevant. If someone violates the**  **17 regulation, they violate the regulation.**  **18 MR. RAWALD: And this is Doug.**  **19 So, Gary, there is a question of**  **20 the person who installs it or causes the thing**  **21 to be put there or sold that way, whether they**  **22 should face some sort of penalty for it being** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 there.**  **2 But this violation goes to, "Hey,**  **3 Manufacturer X, you can know if you sell to**  **4 Distributor Y, knowing that Distributor Y**  **5 always makes sure they go to the wrong place,**  **6 you're going to face a penalty, Manufacturer**  **7 X."**  **8 So, it is supposed to be stopping**  **9 Manufacturer X from selling to Distributor Y.**  **10 So, the question is, how does Manufacturer X**  **11 know that Distributor Y is routinely**  **12 violating? Is it a one-time thing? Is it a**  **13 multiple-time thing? Is there a certain**  **14 number? Do we want to keep it ambiguous? I**  **15 mean, what do folks feel like they really need**  **16 to have sufficient clarity for them, but also**  **17 sufficient ability for the Department to**  **18 enforce, knowing that not one size fits all?**  **19 MEMBER FERNSTROM: Well, this is**  **20 Gary again.**  **21 In my opinion, the manufacturer is**  **22 far enough removed from what distributors may** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 or may not be that they should not be held to**  **2 a very high standard of compliance. I**  **3 understand now why the term "routinely" is in**  **4 there, all right, but I find it hard to**  **5 understand how manufacturers should be**  **6 policing the purchasers of their products to**  **7 try and understand what they may or may not be**  **8 doing with them.**  **9 MR. EISNER: Does anybody have any**  **10 insight as to why Congress would write it this**  **11 way?**  **12 MEMBER McCRUDDEN: I don't think I**  **13 was in the room on this one. I was on some of**  **14 the other ones, but not this one.**  **15 MEMBER SACHS: This is Harvey, and**  **16 I will venture into say something, for I am**  **17 innocent of being either manufacturer or an**  **18 attorney or DOE.**  **19 My very specific question is**  **20 whether the manufacturers are comfortable with**  **21 this language. Because it seems to me that,**  **22 as close to a guarantee that DOE could go** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 after them as could possibly have been written**  **2 into the law looking like a threat, barriers**  **3 to action against a manufacturer with these**  **4 two words "routinely" and "violates" just**  **5 really seem to be the manufacturers'**  **6 indemnification clause.**  **7 Am I reading it wrong? Is this**  **8 not the way you guys read it?**  **9 MEMBER DORIA: Harvey, this is**  **10 Jordan with Ingersoll Rand.**  **11 I mean, I don't know that I would**  **12 characterize it that way. I mean, imagine a**  **13 state where a distributor in Florida was**  **14 simply getting a bunch of 13 SEER product and**  **15 we were selling it to them. I mean, in that**  **16 particular instance, it would seem that that**  **17 would potentially be both routine and**  **18 certainly knowledge. So, I don't know that I**  **19 view it as that level of indemnification.**  **20 MEMBER SACHS: Okay, but that**  **21 still would be unlikely to be a borderline**  **22 case. That would be something where somehow** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the Department had learned of something that**  **2 was industrial-scale flagrant, which I am**  **3 certain no AHRI member would ever do.**  **4 MEMBER GIBBONS: This is John from**  **5 Carrier.**  **6 I think this more relates to like,**  **7 I'll pick Louisville, Kentucky, where Kentucky**  **8 is a 14 SEER state. Indiana, right across the**  **9 river, is 13 SEER. And we know the mix of**  **10 business is generally going to be 50 percent**  **11 Indiana, 50 percent Kentucky. And all of a**  **12 sudden, it goes to 80 percent 13 SEER. So, we**  **13 kind of smell a rat there, right?**  **14 MEMBER SACHS: Now that is very**  **15 helpful, John. And it sort of tells to me**  **16 that, suggests to me that avoidance to**  **17 tracking is pretty straightforward, if we get**  **18 this coil business taken care of. So, it**  **19 looks like something that would be hard to use**  **20 as a "gotcha," for DOE to use as a "gotcha".**  **21 MEMBER GIBBONS: And John again.**  **22 It goes back to the coil as well** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 as the range that we talked about earlier, I**  **2 think referred to now as "the Karen comment".**  **3 (Laughter.)**  **4 So, once we wrap those up a little**  **5 tighter, then I think it makes it clearer for**  **6 everybody.**  **7 MEMBER SHEPHERD: This is Amy**  **8 Shepherd.**  **9 I mean, not to jump to the other**  **10 topic, but is there anything other than the**  **11 installation of equipment that is below the**  **12 regional standard that would be a violation?**  **13 Because, to me, that seems like a much more**  **14 narrow discussion about what a violation is.**  **15 It seems like, based on the statute, it is the**  **16 installation of a product that doesn't meet**  **17 the regional standard.**  **18 MR. RAWALD: I mean, from a purely**  **19 thinking-about-it-right-now point of view, I**  **20 think that is correct.**  **21 MEMBER NOLL: This is Elizabeth,**  **22 NRDC.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Have we not been discussing,**  **2 though, if a manufacturer knowingly sells,**  **3 that that would be a violation?**  **4 MR. RAWALD: Right. So, I think**  **5 Amy is trying to define the term "violates,"**  **6 what else a violation would be.**  **7 MEMBER SHEPHERD: Right. Because**  **8 they have to have knowledge of a routine**  **9 something.**  **10 MR. RAWALD: Right. So, what is**  **11 the violation? The violation is installation**  **12 of a non-compliant unit.**  **13 MEMBER McCRUDDEN: You could also**  **14 have a violation on the labeling rules and the**  **15 information disclosure rules. That is FTC,**  **16 but that is regional standards. I mean, I**  **17 don't know how that dovetails, but that is a**  **18 violation.**  **19 MEMBER SHEPHERD: Well, it says**  **20 violation of -- "violates any regional**  **21 standard applicable to the product". So, I**  **22 mean, I guess that is up for discussion as to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 whether or not that is broad enough to**  **2 encompass the labeling requirements as well.**  **3 MEMBER BALLO: So, this is Tim.**  **4 It is in a different provision of**  **5 this section, but it is "unlawful for a**  **6 manufacturer or private labeler to distribute**  **7 in commerce a newcomer product to which a**  **8 labeling rule applies unless such product is**  **9 labeled in accordance with the labeling rule."**  **10 So, if you are not labeled correctly, it is a**  **11 totally separate thing.**  **12 MEMBER ROCKY: So, this is Bryan**  **13 Rocky with Johnson Controls.**  **14 The issue gets to be, from a**  **15 manufacturer's standpoint, the vast majority**  **16 of the information we have for sales of our**  **17 product are not related to systems. We sell**  **18 air conditioners. We sell coils. We sell air**  **19 handlers. We sell heat pumps. We sell**  **20 furnaces.**  **21 Now through warranty databases and**  **22 other things which we are going to talk about** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 later on, there is some data that most**  **2 manufacturers have today relative to how**  **3 systems are installed with warranties that are**  **4 actually registered. But when we sell a**  **5 product, the vast majority of the situations,**  **6 nobody that is a manufacturer is going to be**  **7 able to tell you how that unit was sold or**  **8 installed as a system, especially with the**  **9 impact of the independent coil manufacturers**  **10 for air handlers and evap coils.**  **11 MR. RAWALD: And this is Doug.**  **12 So, I think what this prohibited**  **13 act acknowledges is that you know who you sell**  **14 to. And so, what it is saying is, if you sell**  **15 to Person X and you know Person X is breaking**  **16 the law, then you will be held responsible.**  **17 So, we can discuss the mechanism**  **18 by which manufacturers can be advised that**  **19 Person X they are selling to is a violator,**  **20 because I think that is up for grabs. We can**  **21 talk about different ways we could do that.**  **22 I think that is a very fruitful discussion.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 But the question is, how do we**  **2 decide that Person X is someone that should**  **3 not be sold to? Like what malfeasance rises**  **4 to the level of being a routine violation?**  **5 And do we want to say, from a**  **6 manufacturer's point of view, I feel more**  **7 comfortable if this guy does it once, I want**  **8 him to be on a list, so that I don't sell to**  **9 him again, because I want to minimize my**  **10 liability, or I want to maximize my ability to**  **11 sell and it needs to be a hundred times he**  **12 breaks the law because I want to keep selling**  **13 to him as many times as possible before I am**  **14 finally held responsible? Those are the kinds**  **15 of extremes, as I see it, and there is**  **16 certainly a middle ground, a vast middle**  **17 ground.**  **18 But I kind of want to understand**  **19 from folks what works the best from all the**  **20 stakeholders' point of view on making an**  **21 effective ability to have manufacturers say,**  **22 "I don't want to sell to this person anymore** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 because they are someone who routinely**  **2 violates the law."**  **3 MEMBER MEYERS: This is Karen with**  **4 Rheem.**  **5 So, back to Amy's question, by**  **6 "violating the law," you mean install the non**  **7 compliant product?**  **8 MR. RAWALD: Right. So, that is**  **9 open for discussion. From my point of view,**  **10 I take that very simplistic view. I think**  **11 that makes the most sense.**  **12 A distributor has a role in this,**  **13 however. So, if a distributor is giving it to**  **14 somebody who is installing in a region because**  **15 distributors are typically located somewhere**  **16 closer to the region than manufacturers, then**  **17 they have to have some sort of role, too. But**  **18 the actual violation has to be installation.**  **19 So, if a distributor distributes**  **20 to an installer who, then, installs in a bad**  **21 place, how we would show that I don't know.**  **22 That is a more complicated question. But the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 distributor has to have some sort of role in**  **2 it. So, the violation can't simply be**  **3 installation, because distributors are not**  **4 installing, right?**  **5 MEMBER MELCHI: This is Jon Melchi**  **6 with HARDI.**  **7 Well, in John's scenario, if I**  **8 have a distributor located in Louisville,**  **9 Kentucky, and a contractor comes and picks up**  **10 a handful, that distributor does not know**  **11 where that product is being installed. So, it**  **12 is difficult for me to see how you would pin**  **13 some sort of blame upon a distributor when,**  **14 once it leaves the store, it could be going to**  **15 south Texas or the Bahamas or somewhere else,**  **16 and we would have no idea.**  **17 So, exactly what were you**  **18 imagining, how were you imaging that they**  **19 would have some sort of knowledge of this?**  **20 MR. RAWALD: Now let me tell you**  **21 my imagination is blank.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, I am going to you folks**  **2 entirely for ideas because I think the statute**  **3 gives us words, and we want to make sure the**  **4 words make sense, and that is an effective**  **5 method of following it.**  **6 So, we have this fact that we are**  **7 saying the manufacturers who sell to**  **8 distributors, dealers, or contractors that**  **9 routinely violate the law, that that is a**  **10 violation to do that.**  **11 And so, the question is, okay,**  **12 distributors aren't really installing**  **13 anything. So, if the violation is only the**  **14 installation, is it actually in the prohibited**  **15 act there at all if you sell it to a**  **16 distributor or is there some sort of way to**  **17 make sure that, if there are distributors who**  **18 do know where the part ends up, you know,**  **19 there is a distributor who knows, yes, I'm**  **20 here on the border, but I'm merely dispensing**  **21 this out into the Southern Region, that that**  **22 person can somehow be blacklisted, or however,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 so that the manufacturer won't sell to them, **2 that is a kind of term I want to use with 3 some --**  **4 MEMBER MELCHI: Well, I would say 5 that -- this is Jon with HARDI -- that**  **6 distributors have agreements with their 7 manufacturers. I suspect that if a**  **8 manufacturer suspected that a distributor, a 9 non-HARDI member, of course, was routinely**  **10 violating the law in this aspect, their 11 agreement with that manufacturer would likely**  **12 be cancelled, and they would not be able to 13 sell equipment. And that is not necessarily**  **14 anything that the DOE would need to govern. 15 And typically, the way the**  **16 industry works, it would not be long before 17 every manufacturer at this table would be**  **18 aware of those distributors who were doing so 19 and had their contract cancelled.**  **20 And that is, I think, an example 21 of industry being able to police itself and**  **22 making sure that the industry is compliant**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 without stretching kind of the bounds of what**  **2 DOE is capable of doing.**  **3 MEMBER McCRUDDEN: So, this is**  **4 Charlie with ACCA.**  **5 You said "blacklist," and I think**  **6 I heard you previously also use the word "a**  **7 list". So, we know the violations are going**  **8 to occur at the installation level. What**  **9 would DOE do or how do you now track or keep**  **10 aware of violations that are occurring under**  **11 your jurisdiction now?**  **12 MR. RAWALD: Right. So, if you**  **13 think back to my presentation two weeks ago,**  **14 we issue right now what are called Notices of**  **15 Noncompliance Determination. So, if we find**  **16 that a manufacturer has manufactured a product**  **17 that is noncompliant, we issue a notice. And**  **18 it is publicly put out there, and it is on our**  **19 website where we keep the information on that.**  **20 So, we know that Model XYZ and**  **21 Manufacturer ABC is noncompliant. So, that**  **22 information is put out that way. And then, we** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 do keep track of that information, that we**  **2 have that.**  **3 And then, if we see that model**  **4 still out there, then, we, of course, would**  **5 follow up because it would be another**  **6 prohibited act that the company would be**  **7 committing. So, that is kind of that piece of**  **8 it.**  **9 Then, it was also an obligation to**  **10 inform Customs and Border Protection of those**  **11 findings because they can, then, stop those**  **12 things from being imported. So, we had that**  **13 piece of it as well.**  **14 So, that is a very simplistic**  **15 tool. Is there some translatability of that**  **16 tool under this process? Could we have a**  **17 finding of noncompliance of installers or**  **18 contractors or dealers, distributors, that DOE**  **19 then issues, and then, that becomes a list?**  **20 And then, manufacturers are put on notice,**  **21 "Hey, listen, DOE found Distributor ABC to be**  **22 noncompliant with the regional standards, so** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 you shouldn't sell to them."? That is a**  **2 possibility. I am just thinking off the cuff**  **3 here, but that is a possible translatable item**  **4 that we could bring from our current**  **5 enforcement scheme into the regional context.**  **6 MEMBER McCRUDDEN: And then, to**  **7 follow up, you mentioned a situation where you**  **8 found a model number. What if there were**  **9 multiple numbers? Does that trigger something**  **10 beyond the notice that you send out? Or, I**  **11 mean, how does that work when you have got,**  **12 say, multiple violations or a history?**  **13 MR. RAWALD: Right. So, we have**  **14 the Notice of Noncompliance Determination,**  **15 which is the method by which the Department**  **16 announces there is something they found**  **17 noncompliant. Then, we have the Notice of**  **18 Proposed Civil Penalty, which is the process**  **19 by which the Department charges money for**  **20 violations.**  **21 And so, we would find the various**  **22 models noncompliant. And then, we would,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 after finding out how many of the units of the**  **2 model were imported or sold within the United**  **3 States, we would, then, follow up with a**  **4 Notice of Proposed Civil Penalty possibly and**  **5 charge money for that.**  **6 And, of course, how many models**  **7 there are, there's a number of factors that**  **8 will go into how much money we would charge.**  **9 And so, that all boils into what the penalty**  **10 should be.**  **11 But there is a finding of**  **12 noncompliance first, which it is possible, as**  **13 I said before, that that idea could translate**  **14 here into finding certain distributors,**  **15 dealers, or contractors noncompliant with the**  **16 regional standards, and therefore, kind of**  **17 putting people on notice, "Hey, that is**  **18 someone who we found to routinely violate."**  **19 That is something that, thinking here as I am**  **20 talking to you guys, we could possibly use as**  **21 a base model for what we are doing.**  **22 MEMBER McCRUDDEN: And so, if** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 there are multiple notices that go out from**  **2 the same manufacturers, do you just**  **3 essentially overlook those and each is a case**  **4 by-case or does that sort of build a body that**  **5 is taken into account for the next action?**  **6 MR. RAWALD: Right. So, each**  **7 Notice of Noncompliance Determination is on**  **8 its own, right? Because just because you**  **9 found it was noncompliant before doesn't mean**  **10 it is more likely something else is**  **11 noncompliant. But, as far as assessing civil**  **12 penalties, the Department will consider the**  **13 past actions of a company. So, if a**  **14 manufacturer has a history of failing to meet**  **15 standards and they keep making things that**  **16 don't meet standards, it is likely the**  **17 Department will charge more money. Now it is**  **18 not the only factor we consider, but it is**  **19 certainly a factor we do consider.**  **20 Everybody is looking very quiet**  **21 suddenly.**  **22 So, I guess, to me, the question** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 really, the baseline question really was, what**  **2 do we define as routine? Do we need a**  **3 definition for that? Or are people**  **4 comfortable with kind of the ambiguous term**  **5 that I can, then, apply at my leisure?**  **6 And I am comfortable with either.**  **7 I think I am a good person, but I won't always**  **8 be at the Department.**  **9 (Laughter.)**  **10 So, who may be in my next shoes**  **11 filling this role?**  **12 So, I think folks need to really**  **13 think about, okay, what are we comfortable**  **14 with in this assessing? And I think really**  **15 goes into more what Jon and Charlie would be**  **16 because it is their people who are going to be**  **17 the ones assessed as routine violators.**  **18 From a manufacturer's point of**  **19 view, I think you probably just want to know**  **20 how do I assess it, so I know who the person**  **21 is, so I can avoid them.**  **22 MEMBER NOLL: So, this is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Elizabeth at NRDC.**  **2 I would throw out there, too, in**  **3 this enforcement scheme that we are**  **4 developing, are we going to consider review of**  **5 this?**  **6 MR. RAWALD: You mean, like an**  **7 ability to challenge a determination?**  **8 MEMBER NOLL: No, no.**  **9 MR. RAWALD: Okay.**  **10 MEMBER NOLL: I meant more of, are**  **11 we on track? Kind if, how is it going? I**  **12 don't know the word that I mean to use. But**  **13 would that routine, then, be at some**  **14 prescribed interval?**  **15 MR. EISNER: You are talking about**  **16 in terms of whether the rule is effective?**  **17 MEMBER NOLL: The effectiveness of**  **18 a look-back, maybe that is where Charlie was**  **19 going; I don't know.**  **20 MEMBER McCRUDDEN: I know what you**  **21 are saying. You are sort of saying like,**  **22 after a year, let's assess how we are doing** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 with this enforcement policy. I mean, I think**  **2 sometimes you will see that in like**  **3 legislation, that the agency will review how**  **4 effective have they been. That is not what I**  **5 was talking about, though.**  **6 MEMBER NOLL: Okay.**  **7 MEMBER McCRUDDEN: I was talking**  **8 about --**  **9 MEMBER NOLL: But I also think**  **10 that that might play into -- that may not play**  **11 into this definition of "routine". I mean,**  **12 because this is clearly "routinely violates,"**  **13 but that is where my mind goes.**  **14 MR. EISNER: That is why I also**  **15 asked in the beginning, is there a problem?**  **16 There is a purpose for making it a statute.**  **17 And if so, you have got something that is,**  **18 quote, "measurable" in terms of whether the**  **19 enforcement plan will deal with --**  **20 MR. RAWALD: You have to use the**  **21 microphone, Neil. It is still not working.**  **22 MEMBER NOLL: This is Elizabeth.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Maybe we just table this for**  **2 later, as we are walking through the**  **3 enforcement, and this is not the time for how**  **4 we define "routinely violates".**  **5 MEMBER WHITE: Well, this is Chuck**  **6 White.**  **7 I did the difficult thing and I**  **8 Googled it. "A customary or regular course of**  **9 procedure."**  **10 MEMBER MEYERS: You could be a**  **11 judge.**  **12 (Laughter.)**  **13 MEMBER WHITE: I mean, it is an**  **14 everyday word. I don't know, are we looking**  **15 to somehow make it mean something different?**  **16 MEMBER CLARK: Looking at Tim, of**  **17 course, is "routinely" not defined anywhere or**  **18 in any other regulation that we might look to?**  **19 MEMBER BALLO: I am not aware of**  **20 it having any definition in the statute or in**  **21 DOE regs. I am wondering, though, in the**  **22 instance where DOE has actually gone after,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 say, an installer, the only realistic way that**  **2 is going to happen is if the installer is**  **3 routinely violating the statute, because the**  **4 Department doesn't have the resources to go**  **5 after someone who does one job bad, and that**  **6 is sort of ridiculous.**  **7 So, to the extent the Department**  **8 has already found someone in violation, I**  **9 mean, it would sort of have to be routine at**  **10 that at that point. So, at that point, if you**  **11 have the list of people we have gone after,**  **12 that should be very clear, that you can't deal**  **13 with those people, at least for some period of**  **14 time. I don't know if that ends at some**  **15 point. But I guess that doesn't answer the**  **16 situation, though, of they haven't been caught**  **17 yet.**  **18 MR. RAWALD: And this is Doug.**  **19 So, I guess from a departmental**  **20 resources perspective, what you are saying**  **21 makes some sense, but I don't want to say it**  **22 is a hard-and-fast rule, right? Because say** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Mrs. Smith calls up and says, "Hey, these**  **2 contractors have installed this unit in my**  **3 house, and it's not okay. It is definitely a**  **4 12 SEER. I've got the documents right here,**  **5 that it may be wrong."**  **6 And I go out and say, "Okay, Mrs.**  **7 Smith, I understand." And she calls me 12**  **8 times. I finally go out there and make sure**  **9 we check it out.**  **10 It is actually noncompliant. I am**  **11 going to say, "Okay, we know that ACME HVAC**  **12 Company installed this noncompliant unit."**  **13 Is that enough for a routine**  **14 violation? I mean, why we follow up with**  **15 certain cases can be from a variety of**  **16 factors. And there is a lot that goes into**  **17 it. And I don't want to commit to saying that**  **18 we will only bring actions against routine**  **19 violators because there could be onsies and**  **20 twosies that happen, and the Department is**  **21 going to reserve the right to do that.**  **22 So, the question to me is, are** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 folks comfortable with the dictionary**  **2 definition of "routine"? I am; I am**  **3 comfortable because I know what I am going to**  **4 do. But I want to make sure the people who**  **5 are stakeholders in this are comfortable with**  **6 the fact that we will use routine and that we**  **7 will, then, define it.**  **8 And so, when I decide that**  **9 Distributor ABC is a routine violator and I**  **10 bring this action, and I post notice up there,**  **11 that everyone says, "Okay, DOE, we left it in**  **12 your purview to define `routine'. So, it is**  **13 okay. We are okay with that." So, I kind of**  **14 want to make sure everyone is comfortable with**  **15 that.**  **16 MEMBER MELCHI: This is Jon from**  **17 HARDI.**  **18 In that example Distributor ABC is**  **19 a routine violator, you would say, then, that**  **20 Distributor ABC knowingly sold to a contractor**  **21 who was going to perform the illegal act and**  **22 did so with knowledge that that was going to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 happen?**  **2 MR. RAWALD: So, I don't have a**  **3 term in mind. I like your language in some**  **4 way, but I have to think about it some more.**  **5 If you could write it down and give it to me,**  **6 I could certainly think about it some more for**  **7 sure, because I think it is helpful to know**  **8 where we are coming from.**  **9 The distributor piece is harder, I**  **10 think, than the dealer and the contractor**  **11 piece, right, because of where they are in**  **12 this. But I think it needs to be defined, at**  **13 least in some way, for our satisfaction, the**  **14 group here, what we are saying. So,**  **15 manufacturers know what they are getting into**  **16 in dealing with distributors, and distributors**  **17 know what the beginning and end of their**  **18 concern would be.**  **19 MR. HURST: John Hurst with**  **20 Lennox.**  **21 The only thing I would change to**  **22 that is you can't ascribe a motive to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 somebody. So, it wouldn't be knowing that**  **2 they are going to; it is having knowledge that**  **3 they have done. That is the only caveat I**  **4 would put to that, because I don't know what**  **5 people are going to do.**  **6 MEMBER McCRUDDEN: So, this is**  **7 Charlie with ACCA.**  **8 I guess, as a stakeholder, I**  **9 honestly overlooked this section because I**  **10 thought this was a manufacturers' issue. But,**  **11 now that I think about it, it is my issue**  **12 because, for contractors, you are talking**  **13 about a blacklist. And so, for routine**  **14 violations to occur, you have to have a past**  **15 history of contractors.**  **16 So, I think the word "routinely"**  **17 here doesn't describe the manufacturer. It is**  **18 describing the actions of the entities beyond**  **19 the manufacturer.**  **20 MR. RAWALD: I absolutely agree.**  **21 That is what "routine" means for us.**  **22 MEMBER McCRUDDEN: So, I guess I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 would prefer "routinely" defined in some way.**  **2 I guess that is what I was trying to sort of**  **3 get out of you in terms of what are your**  **4 thresholds now for multiple violations or for**  **5 triggers, increases in penalties that are**  **6 assessed. I mean, do you have something now**  **7 that defines what the escalation is because**  **8 contractors -- and if you have done any**  **9 federal contracting work, you know that**  **10 blacklists are critical to your company's**  **11 reputation and, obviously, just operating.**  **12 So, I would like to know more**  **13 about what you are thinking or where you may**  **14 be going. And I would prefer to see it**  **15 defined, something defined for "routinely"**  **16 versus just the casual definition.**  **17 MR. RAWALD: Uh-hum.**  **18 MEMBER WHITE: And this is Chuck**  **19 White.**  **20 I would like to kind of throw this**  **21 in with that, discussions of they found a unit**  **22 with a serial number and it is wrong. It is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 kind of the reverse of the story from that**  **2 very old book. I found one unit; does that**  **3 make me "routine"? Well, it doesn't sound**  **4 routine unless it was my first day in**  **5 business. If I found two units, does that**  **6 make me routine? "Excuse me, Mr. DOE, if you**  **7 find five units, does that make me routine?"**  **8 "Routine" is everyday occurrence.**  **9 So, if I am doing it as an everyday**  **10 occurrence, I don't think finding I goofed**  **11 once makes me a routine violator. That makes**  **12 me a one-off.**  **13 So, we know what "routine" means,**  **14 but what level of numbers? Does one mean**  **15 routine to you?**  **16 MEMBER CLARK: I think the big**  **17 question that we are kind of -- this is Gary**  **18 from Goodman -- that we are kind of circling**  **19 around is how proportionate is the enforcement**  **20 activity to the number of violations? You**  **21 know, there is no question, even if you**  **22 install one that is below the minimum** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 efficiency standard, that you broke the law,**  **2 right, to Doug's earlier point? But the level**  **3 of enforcement activity for one versus**  **4 somebody who has done a thousand should**  **5 probably be proportionate in some way, right?**  **6 And so, that is, I think, what is kind of**  **7 clouding a little bit of thoughts around what**  **8 "routine" is and what it is not.**  **9 MR. RAWALD: Right, and I guess**  **10 also what is important is, what do you deem to**  **11 be an "install"? So, say you have one of Don**  **12 Surrena's housing complexes, and all 100 of**  **13 the units that are being installed are**  **14 noncompliant. Is that a routine violation?**  **15 Because it is one time, but it is 100 units.**  **16 I mean, that seems pretty routine to me.**  **17 So, just sitting here thinking**  **18 about it, not taking a position of the**  **19 Department -- I am being very careful here**  **20 (laughter) -- but, just sitting here**  **21 spitballing ideas --**  **22 MEMBER MELCHI: This is Jon from** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 HARDI.**  **2 That would be 100 different**  **3 installations, correct?**  **4 MR. RAWALD: Well, it would be,**  **5 exactly. So, that is how I would view it,**  **6 from a point of view of that. But it is one**  **7 kind of event. So, if he has 100 other units**  **8 or 100 other projects that he is doing and he**  **9 is not violating on those projects, you know,**  **10 where do we go here?**  **11 And Don Surrena would have to be**  **12 concerned with, well, who is the person that**  **13 is going to be on the, quote/unquote, "list,"**  **14 if there was such a list, the general**  **15 contractor that is building that housing or**  **16 the subcontractor that brought those units on**  **17 the premises?**  **18 So, that is the thorniness of**  **19 this. I think it does involve Jon, Charlie,**  **20 and Chuck's folks a lot more than you guys may**  **21 have thought about. And so, maybe you want to**  **22 caucus a little bit over lunch about this a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 little bit because it is really complex.**  **2 And the manufacturers will think**  **3 about, well, how far do we want to wing this**  **4 or how much are we willing to accept from a**  **5 person until we don't want to deal with them**  **6 anymore?**  **7 You know, if DOE has knowledge**  **8 that somebody has broken the law two or three**  **9 times, we want them to say it to us, so we can**  **10 stop playing with them, because we don't want**  **11 to be in the sandbox with someone that is**  **12 doing that. We want to be careful.**  **13 So, I guess you folks need to**  **14 think about that a little bit when you caucus.**  **15 MR. EISNER: And an effort to**  **16 define this doesn't have to be limited to one**  **17 violation every three days or one violation**  **18 per every 15 units sold. You could write a**  **19 rule that said DOE will consider the following**  **20 factors: the frequency in terms of timing,**  **21 the amount compared to the total sales.**  **22 Nothing limits their judgment. But they have** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to balance a whole bunch of factors in**  **2 considering what it is.**  **3 I mean, I think you have pointed**  **4 out some important distinctions when you say**  **5 100 a day at one's jobsite, is that routine if**  **6 they have never done it before and there is no**  **7 evidence they have done it since? But 100 a**  **8 day? Or, if you sell thousands of units a**  **9 year to this company and they violated it 15**  **10 times in a year, is that routine?**  **11 So, these are factors you could**  **12 come up with that DOE should consider.**  **13 Yes?**  **14 MEMBER MELCHI: Jon from HARDI.**  **15 A challenge for me to wrap my head**  **16 around this is a manufacturer, when they**  **17 comply currently, you know, there is a**  **18 violation. It could be a transposition error**  **19 or something along those lines. But there is**  **20 an act, I guess you would say, either the act**  **21 of a product not meeting efficiency level or**  **22 data not being submitted properly.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 As we discuss this, if a**  **2 contractor did an illegal installation, that**  **3 is an act. For a distributor, it is difficult**  **4 for me to see exactly what the act would be**  **5 under, again, John's Louisville scenario,**  **6 where a product leaves -- my members aren't**  **7 mindreaders. So, you know, for them to know**  **8 in advance that somebody is going to violate**  **9 the law is very challenging.**  **10 MR. EISNER: But, if they do know,**  **11 if they got an email order to install them,**  **12 "We need these to install in...," and you**  **13 write back and say they can't be installed in**  **14 that state. They are paying us extra money to**  **15 ship them this product. And you say okay.**  **16 You got an email. Don't you want**  **17 him to be able to take enforcement action?**  **18 MR. RAWALD: And, Jon, I guess my**  **19 point of view is you represent a lot of**  **20 distributors. They must want a level playing**  **21 field. They don't want people cheating them.**  **22 So, the question is, what is a violation by** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the distributor and what would folks be**  **2 comfortable with saying, "Hey, this makes it**  **3 more level, so that I know that Company X**  **4 isn't cheating and distributing what I can't**  **5 do."?**  **6 And I don't have a sense of the**  **7 business model. I mean, I am really relying**  **8 upon you guys to tell me here what works.**  **9 But it seems to me the Congress**  **10 gave us words here, that they are knowingly**  **11 selling to a distributor who routinely**  **12 violates any regional standard. So, how can**  **13 a distributor do that? There must be some**  **14 sort of meaning to that.**  **15 MEMBER MELCHI: Far be it from me**  **16 to interpret exactly what Congress means at**  **17 all times.**  **18 (Laughter.)**  **19 But, again, in that scenario, that**  **20 language up there, the distributor is still**  **21 removed from the violation.**  **22 MR. EISNER: It shouldn't be a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 problem if the distributor had no way of**  **2 knowing. If the distributor knows, and they,**  **3 in fact, were installed illegally, you know,**  **4 I think there may be a problem here that the**  **5 statute requires be addressed by the**  **6 Department of Energy.**  **7 MR. HURST: This is John Hurst**  **8 from Lennox.**  **9 I would suggest there's a couple**  **10 of issues that I think the manufacturers want**  **11 to talk about, and it is close to lunchtime.**  **12 And I would make a suggestion that we have the**  **13 opportunity to caucus during lunch and do it**  **14 now.**  **15 MR. EISNER: Do you want to do a**  **16 longer lunch than normal or is an hour --**  **17 MR. HURST: Yes, go to what, 1:30?**  **18 MR. EISNER: 1:30?**  **19 MR. HURST: 1:30.**  **20 MR. EISNER: And I hereby legally**  **21 authorize you to caucus.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 MR. HURST: Thank you, Neil. **2 MR. EISNER: See you at 1:30. 3 (Whereupon, the foregoing matter**  **4 went off the record for lunch at 12:13 p.m. 5 and went back on the record at 1:19 p.m.)**  **6 7**  **8 9**  **10 11**  **12 13**  **14 15**  **16 17**  **18 19**  **20 21**  **22**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 **2 A-F-T-E-R-N-O-O-N 3 S-E-S-S-I-O-N**  **4 1:33 p.m. 5 MR. EISNER: All right, let's get**  **6 started. 7 Does anybody have some good news**  **8 to report as a result of the caucuses? Did 9 anything come out that anybody wants to open**  **10 discussion with? 11 MEMBER FERNSTROM: This is Gary**  **12 for the California IOUs. 13 At lunchtime some of us were on**  **14 the phone with David Hungerford from the CEC. 15 He is listening. And he didn't say this, but**  **16 it has been my experience, when I have tried 17 to participate in these kinds of activities**  **18 from afar through the webinar, it is hard to 19 be heard.**  **20 So, as a matter of process, I am 21 wondering if there isn't some way we can give**  **22 David better access to the discussion, so his**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 point of view can appear on the record and be**  **2 part of our thinking.**  **3 MR. EISNER: That is something we**  **4 always want to do. I always ask if people**  **5 have more questions, but I am open to other**  **6 suggestions. I do get some stuff coming in.**  **7 I guess it is coming over email or is it**  **8 through some other part of your --**  **9 MS. MARCHETTI: His line has been**  **10 unmuted this whole time.**  **11 MEMBER FERNSTROM: Okay. So, his**  **12 line is unmuted. And when he chooses to**  **13 speak, he can just unmute his own personal**  **14 phone and speak?**  **15 Okay. Thank you. That should**  **16 take care of it.**  **17 MR. EISNER: And if he is having**  **18 problems --**  **19 MS. MARCHETTI: Let us know.**  **20 MR. EISNER: -- let them know and,**  **21 then, they pass me a note.**  **22 But I think, again, people online,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 if you are listening when I say, "Does anybody**  **2 else have a comment, a suggestion?", jump in.**  **3 We are ready for you to participate. And let**  **4 us know if it is not working well.**  **5 MEMBER FERNSTROM: Okay. It**  **6 sounds like that issue is resolved. Thank**  **7 you.**  **8 MR. EISNER: Okay. All right.**  **9 Anybody have something they want to open with**  **10 as a result of the opportunity to caucus over**  **11 lunch? Any better language?**  **12 All in favor of Jordan?**  **13 (Laughter.)**  **14 MEMBER DORIA: So, I think just**  **15 what we were really talking about was what**  **16 role could different forms of notification**  **17 specifically from industry participants across**  **18 the value chain have in providing some sort of**  **19 indication that a violation has occurred or is**  **20 likely to have occurred.**  **21 And we didn't necessarily get to a**  **22 firm resolution, which was part of the reason** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 it got passed around like a hot potato. But**  **2 I think what we were coming out on is that**  **3 there is agreement that, if a party in the**  **4 value chain were to in some manner come across**  **5 or have access to information that would**  **6 indicate a violation has, in fact, occurred,**  **7 there should be some mechanism for providing**  **8 notification of that to other parties, just to**  **9 make them aware.**  **10 And so, I think we didn't**  **11 necessarily coalesce around a specific**  **12 vehicle, but that was sort of what we had**  **13 talked through. If anyone wants to add to**  **14 that point?**  **15 MR. HURST: Yes, this is John**  **16 Hurst with Lennox.**  **17 I think we theoretically had an**  **18 issue with "routinely violates" in defining a**  **19 number. And we looked at other types of**  **20 crimes, if you will. You don't have a hall**  **21 pass when you routinely violate the drunk**  **22 driving law or speeding or murder or -- I know** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 I am not saying that this is the same thing.**  **2 But we were concerned that if you pick a**  **3 number that says 10, do you give a violating**  **4 contractor or a dealer, installer, nine**  **5 chances to violate the law with no penalty or**  **6 would they calculate that into some equation**  **7 that says I can get away with nine times**  **8 before any activity or action happens?**  **9 And I think, theoretically, we**  **10 don't like the idea of giving number ranges of**  **11 violations before somebody has to report. And**  **12 I think we wanted to take more of a proactive**  **13 approach to it and report violations, period,**  **14 not after a certain amount of numbers.**  **15 MR. EISNER: Is anybody**  **16 questioning whether the Department has the**  **17 authority to take action, at least under this**  **18 particular provision, if there has only been**  **19 one violation?**  **20 MR. HURST: Well, we were also**  **21 talking about what a manufacturer would do,**  **22 meaning if a manufacturer sees 10 violations,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 then we have an obligation to report versus a**  **2 violation is a violation and you report a**  **3 violation.**  **4 MR. EISNER: Other comments?**  **5 In the back of the room, Don?**  **6 MR. SURRENA: Don Surrena.**  **7 This sounds like a whistleblower**  **8 program, and the Department has broad**  **9 discretion, as it has already indicated. The**  **10 Department already polices this in some form**  **11 or manner. To have this turn into something**  **12 that, if one installer gets mad at another**  **13 installer and they start to turn people in, or**  **14 the neighbors start to peek in their blinds**  **15 and see equipment -- well, you can make a face**  **16 about it, but this stuff happens.**  **17 I was a code enforcement officer**  **18 for years. I know what people do. I know**  **19 their tendencies.**  **20 It is going down a slippery slope**  **21 when you start something like that.**  **22 MEMBER MELCHI: This is Jon Melchi** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 with HARDI.**  **2 Along that same line,**  **3 hypothetically, there is a 1-800 number**  **4 somebody can turn somebody in or a**  **5 manufacturer reports that there is an illegal**  **6 installation. Does the DOE have the authority**  **7 to come to my house and check my air**  **8 conditioner to make sure that it is compliant?**  **9 MR. RAWALD: Are you asking me for**  **10 a response? Are you asking a question**  **11 hypothetically?**  **12 So, what your question that I**  **13 understand would be, does the Department of**  **14 Energy have the authority to go into an**  **15 individual consumer's house who did not report**  **16 any concern to investigate a concern possibly?**  **17 And I don't have the answer to that question.**  **18 I will have to talk to the lawyers about that.**  **19 I don't know what the extent of our authority**  **20 would be.**  **21 MEMBER FERNSTROM: So, this is**  **22 Gary for the California IOUs.** 

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### 1 I would like to express a **2 fundamental opposition to the idea that 3 enforcement or compliance can be achieved by**  **4 some reporting system of this nature where 5 violators would be reported by others in the**  **6 industry or perhaps be reported for a bounty. 7 And to support that position, I**  **8 would like to cite my experience with the 9 California Energy Commission regulations**  **10 governing portable electric spas or hot tubs. 11 The Department of Energy does not have any**  **12 energy regulations for these products, but 13 California does.**  **14 And it is well-known within the 15 industry, consisting of a few dozen makers of**  **16 these products, that some are, for some 17 unknown reason, reporting to the California**  **18 Energy Commission database energy efficiency 19 figures for these products that don't seem to**  **20 be realistic. 21 And none of the other**  **22 manufacturers in the industry have reported**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 suspect of erroneous data being reported to**  **2 the California Energy Commission. This is**  **3 because most manufacturers don't consider it**  **4 appropriate to snitch on others.**  **5 So, I don't think that is a very**  **6 good approach. I think the approach that**  **7 needs to work or that would work would be some**  **8 sort of an audit or sampling approach where we**  **9 or DOE would look to see what is being**  **10 installed and, as a consequence of that,**  **11 identify improper installations if there are**  **12 any.**  **13 And that goes to the question of**  **14 whether DOE has the authority to go to**  **15 someone's house and look, which would**  **16 basically be the way you would conduct a**  **17 quality assurance program or one of the ways**  **18 that you would.**  **19 Another would be to look at the**  **20 type of equipment that is being shipped to a**  **21 distributor, say, centrally located in a state**  **22 that requires a higher standard, such as** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 California.**  **2 MR. HURST: John Hurst with**  **3 Lennox.**  **4 I have two questions regarding**  **5 your idea. Audit what information? What**  **6 information are we talking about?**  **7 And then, what was the second part**  **8 of your statement? I will hold my thoughts**  **9 until I hear the answer to the question.**  **10 MEMBER FERNSTROM: This is Gary**  **11 again.**  **12 I'm sorry, could you repeat the**  **13 question, so I can respond?**  **14 MR. HURST: Sure, Gary. You**  **15 mentioned auditing information. What**  **16 information would you be auditing? And where**  **17 would the information come from?**  **18 MEMBER FERNSTROM: Well, that is a**  **19 key question. In order to conduct an audit or**  **20 a field inspection to determine compliance,**  **21 the Department I believe would need to have**  **22 addresses of sites where replacements had been** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 done or where this equipment had been**  **2 installed.**  **3 Lacking that, some sort of**  **4 telephone survey might be done of consumers in**  **5 general to identify ones that have had this**  **6 type of work done. And they, then, could be**  **7 audited. But that type of survey would be**  **8 expensive, given the fact that most customers**  **9 have not had their condensing units changed**  **10 recently. So, you would have to survey a lot**  **11 of consumers to find ones that would be**  **12 candidates for an inspection.**  **13 MR. RAWALD: And this is Doug**  **14 Rawald.**  **15 I just want to approach Gary's**  **16 comment with kind of an appreciation for what**  **17 we do currently. So, in enforcing national**  **18 standards, we at the Department of Energy**  **19 respond both to complaints from consumers and**  **20 members of the industry and those kinds of**  **21 things, as well as we do audits. So, we kind**  **22 of use all of the tools at our disposal to do** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 things.**  **2 Now an auditing process, just by**  **3 and large, is not necessarily a good use of**  **4 taxpayer funds unless it is somewhat targeted.**  **5 So, there is some sort of art to targeting to**  **6 figuring out, okay, you should be judicious in**  **7 figuring out where you are targeting your**  **8 audits, right?**  **9 Like the IRS uses very strategic**  **10 methods of deciding, okay, who are we going to**  **11 audit per se. So, it is not as effective just**  **12 randomly to select people that you are going**  **13 to go audit because you are likely to waste a**  **14 lot of money finding nothing wrong. And so,**  **15 the point is to try to narrow down your**  **16 efforts to finding out and weeding out things**  **17 that are mistaken.**  **18 So, any auditing process needs to**  **19 have some sort of ability to be based on an**  **20 assessment of where are we likely going to**  **21 find areas of concern. And so, that is**  **22 something to keep in mind when developing kind** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 of an auditing scheme: how do we assess what**  **2 would be the appropriate people to audit? Or**  **3 what would be the reasons to have an audit?**  **4 Mixed in with some randomness possibly,**  **5 because you do want to make sure that you are**  **6 keeping a cross-section that makes sense, but**  **7 being concerned with preservation of resources**  **8 and spending the taxpayer dollars**  **9 appropriately and trying to come up with a**  **10 good enforcement scheme, I think.**  **11 So, those are kind of the**  **12 different things that you think about, I**  **13 think, when you are looking at an audit. From**  **14 my point of view, I think that it would nice**  **15 from an enforcement point of view to have as**  **16 many tools as I can at my disposal to**  **17 investigate and to enforce things, but I also**  **18 want to be reasonable and hear from you folks**  **19 what you think makes the most sense.**  **20 MEMBER FERNSTROM: So, this is**  **21 Gary.**  **22 To follow up on how you might** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 target an audit program to bring about greater**  **2 economy, in California, anyway, you might**  **3 target residential housing developments that**  **4 were built 10 to 20 years ago, figuring that**  **5 in that length of time probably condensing**  **6 units would have failed and there would be**  **7 replacements.**  **8 Or, moving forward, there is no**  **9 sense looking at replacements that were done**  **10 before the standard goes into effect. So, we**  **11 would propose some sort of program looking at**  **12 replacements that we suspect would be done**  **13 after the standard went into effect.**  **14 So, it could be made more**  **15 efficient by targeting for sure. In my mind,**  **16 the ideal solution is to simply know where**  **17 this equipment is being installed and sample**  **18 a very small part of it.**  **19 MEMBER DORIA: This is Jordan**  **20 Doria with Ingersoll Rand.**  **21 To sort of go back to Gary's**  **22 comment on what role sort of policing those in** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the chain can have, I mean, I can't really**  **2 speak to the example you provided. But I**  **3 think it is important to keep in mind here**  **4 that, only speaking on the OEM side, we all**  **5 want this to work. We want there to be a 14**  **6 SEER, or just using that as the example in the**  **7 South.**  **8 So, we all have a vested,**  **9 essentially, a competitive interest, business**  **10 interest, in making sure that it has worked.**  **11 So, I don't know how the example in California**  **12 may or may not be similar to that, but we want**  **13 it to work. Therefore, it would be in our**  **14 interest to actually do that kind of reporting**  **15 that we are talking about. And we think that**  **16 would similarly be true to some extent for**  **17 ACCA/PHCC members that might be disadvantaged**  **18 by those who would seek to skirt the law.**  **19 So, we think there are real market**  **20 forces that would compel people to actually**  **21 provide this information to make the system**  **22 work. And furthermore, that could actually** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 help to some extent the Department in the**  **2 thing that Doug just outlined, that they need**  **3 some better way to target any kind of further**  **4 audit or whether it is audit or just further**  **5 investigation; that, at a minimum, getting**  **6 some kind of on-the-ground feedback from**  **7 people who are most knowledgeable could**  **8 certainly help with that.**  **9 MEMBER FERNSTROM: This is Gary**  **10 again.**  **11 Or to spin off the conversation I**  **12 had with David Hungerford right after lunch,**  **13 some sort of audit or sample could be done at**  **14 distributors' locations in contrast to maybe**  **15 customers' locations, because we would not**  **16 expect a large number of non-compliant pieces**  **17 of equipment to be shipped in to distributors**  **18 in the middle of states that have these higher**  **19 requirements.**  **20 And to go one step further to**  **21 these discussions we have been having about**  **22 the manufacturers' responsibility, the terms** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 "routinely" and "violates," again, I think it**  **2 would be extremely difficult for the**  **3 manufacturer to find themselves responsible**  **4 for identifying noncompliance and being**  **5 obligated to report that.**  **6 MEMBER DORIA: Certainly. This is**  **7 Jordan.**  **8 If I could just clarify, I didn't**  **9 say that manufacturers will be obligated to go**  **10 out and find instances of noncompliance, but,**  **11 rather, that if it became a manufacturer were**  **12 essentially provided access or actually just**  **13 simply given information that either indicated**  **14 a violation had, in fact, occurred or was**  **15 significantly likely to have occurred, that**  **16 there would be some kind of, I will call it**  **17 reporting obligations. That is different than**  **18 going out and actually investigating.**  **19 MEMBER FERNSTROM: I understand.**  **20 MR. SURRENA: Don Surrena.**  **21 The Department has access to**  **22 information through the ARRA legislation which** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 requires states to show how they are complying**  **2 with the Energy Code, and that gives them**  **3 access to building permit information that**  **4 would show here this activity had taken place.**  **5 Not all communities require a permit for some**  **6 replacement or repair, but the majority of**  **7 them do.**  **8 So, the Department has information**  **9 and data that will be being supplied to them**  **10 by the states to show their compliance with**  **11 ARRA to find their own way of serving the data**  **12 to see where the best locations or where the**  **13 most activity was occurring for the**  **14 installation of new equipment.**  **15 MR. EISNER: Do you have any**  **16 program with states to get information about**  **17 permits, if even automatically?**  **18 MR. RAWALD: Right. So, from the**  **19 Enforcement Office point of view at the**  **20 Department of Energy, we don't have such a**  **21 program that we do that. But we can certainly**  **22 look into that. I mean, I think that part of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the statute is telling us to look at these**  **2 building codes and these state practices for**  **3 more information, but we don't do that**  **4 currently. We don't have a current practice**  **5 of that.**  **6 But it is not necessary because we**  **7 enforce at the manufacturer level. That is**  **8 the problem, right? So, what Don is talking**  **9 about is from a different point of view, which**  **10 is new and unique about the regional**  **11 standards.**  **12 MEMBER FERNSTROM: So, this is**  **13 Gary.**  **14 To speak to the building permits,**  **15 measurement and evaluation we have done, that**  **16 would be the California utilities, and their**  **17 measurement and evaluation consultants have**  **18 found that compliance is actually pretty high**  **19 with the building code. And where permits are**  **20 taken out, generally, we don't need to worry**  **21 about that too much.**  **22 The problem is where building** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 permits are not taken out and equipment is**  **2 installed without permit and may not meet**  **3 requirements in several ways, not just**  **4 efficiency.**  **5 MR. EISNER: Do you have any data**  **6 on the success of permits or just in general**  **7 what percentage of jobs that would be covered**  **8 by the requirement to get a permit are not**  **9 getting permits?**  **10 MEMBER FERNSTROM: I am not aware**  **11 of what percentage of work is done without**  **12 permit, where normally it would be required.**  **13 But I wouldn't be surprised if some**  **14 information along those lines exists, and I**  **15 will look for it.**  **16 I also promised at the last**  **17 meeting to get for this group some information**  **18 on appliance standard compliance that the CEC**  **19 has developed through evaluation it has done**  **20 over the last several years. So, to the**  **21 extent that I can provide that, I will.**  **22 MR. EISNER: Thank you.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 John?**  **2 MR. HURST: So, two points.**  **3 MR. HUNGERFORD: This is David**  **4 Hungerford. If you could mute those**  **5 microphones?**  **6 MR. EISNER: Go ahead, David.**  **7 MR. HUNGERFORD: We have done some**  **8 studies on that, on the subject of**  **9 installation permits and what percentage are**  **10 getting pulled for changeouts. And**  **11 unfortunately, in California it is fairly low.**  **12 And off the top of my head, I am not looking**  **13 at the studies, but the estimates I remember**  **14 are that more than half, maybe significantly**  **15 more than half, are being installed, the**  **16 replacements are being done without permits in**  **17 California.**  **18 And I don't know if that applies**  **19 to other states. Our permit costs are fairly**  **20 high around the state. And we also have**  **21 additional test procedures that are required**  **22 with a changeout, including pressure testing,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 duct blast, that sort of thing.**  **2 And a lot of people just don't**  **3 pull the permits, is what is going on. And we**  **4 are urging them, trying to work on compliance**  **5 with that particular standard for changeouts**  **6 now.**  **7 And so, if that helps think about**  **8 this discussion, what the problems might be --**  **9 that's all.**  **10 MR. EISNER: There are lots of**  **11 reasons not to get a permit. Do you have any**  **12 data that indicates whether people who do not**  **13 get a permit are more likely to be in**  **14 violation of the code than those who do get a**  **15 permit?**  **16 MR. HUNGERFORD: I would have to**  **17 look back at that study. It has been a couple**  **18 of years.**  **19 My general impression is, yes,**  **20 that the installations are of a lower quality.**  **21 On what details, I am not certain. But,**  **22 certainly, they are not testing the ducts.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, we have additional leakage and that sort**  **2 of thing, which reduces the efficiency**  **3 substantially.**  **4 Whether they are putting in non**  **5 compliant equipment or whether they are**  **6 charging it properly and measuring air**  **7 properly, I can't say, not without checking**  **8 it, checking it out.**  **9 MR. EISNER: John?**  **10 MR. HURST: David beat me to the**  **11 punch. This is John Hurst with Lennox.**  **12 In other discussions regarding the**  **13 State of California, the permit percentage is**  **14 well south of 20 percent. And I would agree**  **15 with David that he who pulls a permit has a**  **16 higher chance of complying with the law than**  **17 those that don't.**  **18 I also wanted to address the**  **19 distributor shipments because we have regional**  **20 warehouses that we supply equipment to**  **21 branches for sale to dealers or contractors.**  **22 And it really doesn't matter what we ship to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that because we ship north and south out of**  **2 some of those distribution centers, those that**  **3 are particularly close to the border.**  **4 In addition, we have branches that**  **5 would ship to both sides of the river, if you**  **6 are close; for example, I think Cincinnati and**  **7 Louisville were mentioned earlier. So, we**  **8 would have branches where dealers would come**  **9 to and take the equipment right across the**  **10 river. So, I don't think auditing at the**  **11 distributor level or even at the branch level**  **12 can ensure compliance.**  **13 Now, granted, if you went to**  **14 Miami, Florida -- or maybe a bad example --**  **15 Chicago, Illinois, and you saw a lot of**  **16 equipment going south of the border, that may**  **17 be a different story.**  **18 But we also have distributors**  **19 where we ship equipment, hypothetically, say**  **20 to Maryland. And that goes to everywhere else**  **21 in the country.**  **22 So, the violation occurs at the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 point of installation, not at the point of**  **2 distribution. You can look for trends, but**  **3 just because product goes north of the border**  **4 or south of the border doesn't mean it is**  **5 going to be illegally installed.**  **6 MEMBER FERNSTROM: This is Gary.**  **7 In the examples you gave, that is**  **8 absolutely true. But one of you all has a**  **9 distributor in south San Francisco, and since**  **10 California and Nevada are both subject to this**  **11 regional standard, I would doubt that the**  **12 distributor in south San Francisco would be**  **13 distributing to Wyoming or selling equipment**  **14 to Wyoming.**  **15 So, for the states that don't have**  **16 significant border issues, looking at the**  **17 distributor might be helpful, but it certainly**  **18 wouldn't be a cure-all for those distributors**  **19 that are in areas where some areas are subject**  **20 to the higher standard and some are not.**  **21 MEMBER MELCHI: Jon Melchi with**  **22 HARDI.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And just I guess for clarification**  **2 purposes, even if that distributor in the San**  **3 Francisco Bay Area were to have a 13 SEER air**  **4 conditioner, that is not illegal. So, it**  **5 would be auditing for what purpose? I guess**  **6 I just remain a little unclear.**  **7 And to echo, I think, John's point**  **8 earlier, there are lots of distributors with**  **9 distribution centers. In fact, one of our**  **10 members opened up a distribution center in**  **11 Chicago that services a lot of the new south**  **12 border area. So, you know, I think it would**  **13 be an inexact science at worst or at best.**  **14 MEMBER FERNSTROM: So, the case**  **15 where the 13 SEER air conditioner would be**  **16 okay would be if this residential-type air**  **17 conditioner were installed on a small**  **18 commercial premise. Is that what you are**  **19 talking about? No?**  **20 MEMBER MELCHI: No. My point was,**  **21 auditing a distributor's records and it shows**  **22 that maybe they took possession of a 13 SEER** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 air conditioner doesn't show any sort of**  **2 violation because there is no violation for a**  **3 distributor holding that equipment.**  **4 MR. RAWALD: Right. If I hear**  **5 what Jon is saying -- this is Doug Rawald --**  **6 it is the mere warehousing of equipment is not**  **7 a violation. It is the fact that it is**  **8 installed. And so, the distributors holding**  **9 it in their warehouse, no matter where it is,**  **10 wouldn't be a violation, though it might be in**  **11 some way indicative of where it is going to be**  **12 installed, is what I think Gary's point is.**  **13 MEMBER MELCHI: And so, Gary, I**  **14 was thinking of one of my California members**  **15 when you were saying that, and I know that**  **16 they run up along the Pacific Coast. So,**  **17 there is a very good likelihood that in**  **18 Northern California somebody is holding 13**  **19 SEER equipment for the purposes of shipping it**  **20 to Washington State or Oregon. And that would**  **21 be completely legitimate and within --**  **22 MEMBER FERNSTROM: Well,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 absolutely, in the northern part of the State;**  **2 that is why I cited south San Francisco.**  **3 So, to give you an example of**  **4 where I think looking at the distributor might**  **5 be helpful, it comes from my experience with**  **6 swimming pool pumps. So, California requires**  **7 that two multi- or variable-speed swimming**  **8 pool pumps be utilized and installed in**  **9 residential filtration applications over 1**  **10 total horsepower.**  **11 So, if I were to go to a swimming**  **12 pool pump wholesaler, I would expect to see,**  **13 based on the number of commercial pools,**  **14 85,000, versus residential pools, 1.5 million,**  **15 I would expect to see substantially more two**  **16 multi- and variable-speed pumps than I would**  **17 single-speed pumps.**  **18 In fact, quite the reverse is**  **19 true. You will see three-four pallets of**  **20 single-speed pumps and maybe one pallet of**  **21 variable-speed pumps. So, that indicates from**  **22 looking at the distributor's location that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 something is wrong because a lot more single**  **2 speed pumps seem to be moving through market**  **3 channels than the variable-speed, multi-speed,**  **4 two-speed ones that the regulations require.**  **5 MEMBER NOLL: So, can I ask a**  **6 question? One question for John. I think we**  **7 are talking about this under the current state**  **8 of play. So, I fully recognize that people**  **9 are distributing wherever they want to. Do**  **10 you not think that distributors would adapt to**  **11 the market and start to shift to the**  **12 appropriate regions?**  **13 And then, a followup, a little bit**  **14 of pushback on Jon, another Jon, if you were**  **15 to go to a distributor in Chicago and say,**  **16 "Why are you sending a bunch of 13 SEERs to**  **17 Florida?", you know exactly where they are**  **18 going. I don't understand how that is not**  **19 a -- that wouldn't help the Department isolate**  **20 and target inappropriate activity. Am I**  **21 missing a piece --**  **22 MEMBER MELCHI: This is John** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Melchi with HARDI.**  **2 When we are talking about**  **3 distribution centers, they would be shipping**  **4 to another distribution location and not**  **5 directly to a contractor, dealer, or**  **6 installer, typically.**  **7 MEMBER NOLL: You still end up**  **8 knowing at some point where it is going and**  **9 if --**  **10 MEMBER MELCHI: And as we have**  **11 discussed, there is no sort of illegal act for**  **12 a distributor to hold inventory. And if they**  **13 ship that inventory from Chicago to**  **14 Jacksonville, Florida, that is that company's**  **15 prerogative on how they want to handle and**  **16 manage their inventory. That does not**  **17 constitute an illegal act.**  **18 MEMBER FERNSTROM: So, this is**  **19 Gary.**  **20 No solution is perfect. But it**  **21 seems to me that the challenge facing us is**  **22 fairly simple. We have got an obligation to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 assure compliance. So, where are we going to**  **2 look?**  **3 Okay, well, we can look at the**  **4 manufacturer's shipping records. That is**  **5 going to tell us virtually nothing. Maybe we**  **6 might see a large number of shipments into an**  **7 area requiring a higher efficiency of lower**  **8 efficiency equipment. You know, that would be**  **9 an indication, but it certainly wouldn't be**  **10 anything conclusive.**  **11 We can go look at the distributor.**  **12 And as has been pointed out by folks in the**  **13 room, that is not perfect, either, because**  **14 distributors trade between themselves and ship**  **15 into both higher-efficiency and lower**  **16 efficiency areas.**  **17 We can go to the site of**  **18 installation. That is perfect. You know,**  **19 that tells us where it was installed and**  **20 whether it is compliant or not. But, you**  **21 know, by golly, the recordkeeping and the**  **22 contractors and distributors, in particular,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 are not very excited about the prospect of**  **2 having to turn over that information.**  **3 So, that is the bottom line of the**  **4 problem that is facing us. We can do some**  **5 combination of all of them, which would**  **6 probably be good. Maybe this group is going**  **7 to find that some of those places we can look**  **8 are, for one reason or another, unacceptable.**  **9 And then, we will have to rely on data we can**  **10 get that we have less confidence in, higher up**  **11 the distribution chain.**  **12 MR. EISNER: John?**  **13 MR. HURST: John Hurst with**  **14 Lennox.**  **15 Elizabeth, I want to address one**  **16 of your questions. Yes, we would adjust our**  **17 shipments based on where we think it should**  **18 go.**  **19 But, for example, you will see 13**  **20 SEER product going to Miami, Florida for**  **21 export. And so, somebody can come in and**  **22 audit and say, "This doesn't smell right," to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 use the pallets and the pumps example, but it**  **2 is not staying in Florida for installation.**  **3 No crime or no violation has been committed.**  **4 So, yes, you can audit the**  **5 distributors, and you might see anomalies that**  **6 require further explanation, but we will want**  **7 to do the right thing. We will ship product**  **8 to where we think it should be consumed and**  **9 installed, but that doesn't preclude, again,**  **10 somebody picking up a truckload of it and**  **11 driving across the border, selling it online.**  **12 That happens to our equipment. That is still**  **13 going to happen.**  **14 What we would like to do is maybe**  **15 put a little bit more teeth in it and say,**  **16 when we see somebody violating, if we get that**  **17 information back, we will report it. And the**  **18 idea of looking at this database, by the way,**  **19 which we don't have, and if we put teeth**  **20 against it, less people are going to even**  **21 provide information.**  **22 So, look at the permitting in** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 California. Are all the bad actors out there**  **2 pulling permits? No, they are not. So, the**  **3 second you put teeth into this thing, for a**  **4 database that I currently don't have, you are**  **5 going to have less dealers reporting that**  **6 information. So, be careful what you ask for;**  **7 you might get it.**  **8 MEMBER FERNSTROM: Well, this is**  **9 Gary again.**  **10 With respect to less dealers**  **11 reporting information, in the extreme**  **12 compliance case I am envisioning a tag on**  **13 every air conditioner box that leaves the**  **14 factory. And the manufacturer writes on the**  **15 tag which distributor it went to and sends it**  **16 in.**  **17 And then, the distributor writes**  **18 which contractor bought it and sends it in.**  **19 And then, the contractor writes where he**  **20 installed it and sends it in. Now, if**  **21 somebody doesn't tear it off and send it in,**  **22 the next person up the chain that reports it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 knows that there was an incomplete record on**  **2 this product.**  **3 Now I am not suggesting that is**  **4 the solution because that is the most onerous,**  **5 the most costly, the most tedious, but it is**  **6 also absolutely the most certain way to do it.**  **7 Anything less than that is going to have**  **8 pluses and minuses associated with it.**  **9 MR. EISNER: Charlie?**  **10 MEMBER McCRUDDEN: On the pallet**  **11 issue, you know, I would sort of suggest that**  **12 that is only a snapshot. You saw on one day**  **13 three pallets full of one product and one**  **14 pallet full of another. And what you may not**  **15 see is that small pallet, that one pallet, is**  **16 just churned through every day and there are**  **17 three pallets sitting there every day for a**  **18 year. So, I know it was just an example you**  **19 put out there.**  **20 But my question to Doug or to**  **21 whoever is, audit authority, now we are**  **22 talking about going into and sort of auditing.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Now is audit authority different than**  **2 Information Collection Request authority?**  **3 Under the authority you have now, could you go**  **4 to a contractor and ask or see certain**  **5 installation records based on potentially a**  **6 whistleblower call that says, "We think this**  **7 contractor is doing this."?**  **8 MR. RAWALD: So, Charlie, I**  **9 haven't asked the question or thought about**  **10 it. So, I am just thinking as we talk about**  **11 this.**  **12 So, audits are only good as far as**  **13 what records are retained. And so, the record**  **14 retention would really be what was pertinent**  **15 to the PRA, right? So, if we were to have**  **16 some sort of requirement that people retain**  **17 records that, therefore, we produced upon**  **18 auditing, that would require some authority**  **19 from the Paperwork Reduction Act in order for**  **20 us to require that.**  **21 So, that is what I see as the**  **22 issue. I think that currently the Department** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 has wide ability to subpoena and ask for**  **2 things. The question is, we don't have any**  **3 sort of recourse for not getting things**  **4 because records aren't kept. That is the**  **5 problem there, as I see it. And the problem,**  **6 as Gary laid out, is the fact that records**  **7 aren't kept very well.**  **8 And it might be that the new**  **9 regulations could be a disincentive to people**  **10 keeping good records and actually cause people**  **11 to keep worse records because they don't want**  **12 to be caught.**  **13 So, these are the kind of thorny**  **14 problems I see with these questions.**  **15 MEMBER McCRUDDEN: How does your**  **16 current sort of whistleblower -- I mean, I**  **17 realize it is probably just manufacturers, but**  **18 how does that work?**  **19 MR. RAWALD: Right. So, we get**  **20 complaints from a lot of different sources.**  **21 And what I want to make clear is that**  **22 oftentimes they are pretty effective. We have** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 a number of cases that we have developed of**  **2 pretty sizable magnitude based upon consumer**  **3 or manufacturer complaints or just the parties**  **4 who have an interest for some reason or**  **5 another.**  **6 And what we do is we have a**  **7 website that advertises all of our**  **8 information. And then, we have an email. And**  **9 so, we encourage people to email us with any**  **10 sort of complaints. And so, we receive the**  **11 emails and we go through the emails in the**  **12 office. We have people that go through them.**  **13 And then, we decide how to follow up on them.**  **14 And so, we, then, look at our**  **15 various investigative tools, our subpoenas,**  **16 our ability to ask for data, our ability to**  **17 look for information. And we use those tools**  **18 as appropriate to investigate that complaint.**  **19 So, you know, we get a lot of**  **20 complaints. We have limited resources, you**  **21 know, and we try to figure out what the most**  **22 judicious way to spend those resources would** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 be.**  **2 So, I would view any sort of**  **3 whistleblower activity -- and this would be in**  **4 that same context; it would be a complaint to**  **5 us, and then, we would follow up on it.**  **6 I do want to say that**  **7 whistleblower complaints -- and I use the term**  **8 "whistleblower," but it is anyone, any sort of**  **9 complaint of this type -- are good and they**  **10 are well-received. And I think the Department**  **11 is happy with that.**  **12 We do not offer any rewards.**  **13 People don't get any sort of cut of anything.**  **14 There is no actual incentive to whistle-blow**  **15 and, then, if you are a competitor, you are**  **16 trying to rat your competitor.**  **17 On occasion, we do get the**  **18 completely frivolous complaint. But what I**  **19 will say is we don't take actions against**  **20 people that are frivolous.**  **21 What might happen, which is**  **22 burdensome to some folks, is that because of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 a complaint from another industry member, we**  **2 may ask for records from a company. And that**  **3 record-production process can be onerous for**  **4 some folks, both researching the records and,**  **5 then, producing them. And so, that is some**  **6 grief put on the individual based upon a**  **7 whistleblower complaint that may turn out to**  **8 be unsubstantiated.**  **9 But I also think there is some**  **10 value in the activity, the audit activity, in**  **11 that it encourages people to actually be doing**  **12 what they should be doing anyway. So, there**  **13 is some burden there, but there is also some**  **14 possible value in the long-term from that**  **15 process. But there are a lot of elements to**  **16 it.**  **17 Jon?**  **18 MEMBER MELCHI: Jon Melchi, HARDI.**  **19 Doug, just out of curiosity, is**  **20 this the first time the Department has had to**  **21 enforce an energy conservation standard at the**  **22 installation level? And, you know, it is the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 first one, to my knowledge, that you are not**  **2 enforcing directly upon the manufacturer at**  **3 the factory level, correct?**  **4 MR. RAWALD: Then, that is the**  **5 issue, right. So, our enforcement scheme has**  **6 developed and been predicated on enforcement**  **7 at the manufacturer level.**  **8 MEMBER MELCHI: Okay. So, just**  **9 taking it from, I guess, not the top-down, but**  **10 maybe the bottom-up -- and I know this is why**  **11 we are here -- but how would you envision, and**  **12 who would have the authority to enforce this**  **13 at that level? I.E., I understand that, you**  **14 know, I have heard building code folks**  **15 mentioned from time to time, but not every**  **16 community has those.**  **17 So, how would the Department, who**  **18 has the authority to do this, or could any**  **19 contractor call you up? And then, how would**  **20 the Department somehow proceed with something**  **21 at this level as opposed to just subpoenaing**  **22 homeowner records -- or I'm sorry --** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 manufacturer records?**  **2 And I know I asked this earlier,**  **3 but would you, then, contact the homeowner and**  **4 proceed to go to the installation site and run**  **5 a field test to make sure that it is exactly**  **6 what was installed? I am just curious.**  **7 MR. RAWALD: Right. So, the**  **8 practicalities are certainly something I**  **9 haven't thought through to that extent. So,**  **10 the question is open as to how we would**  **11 approach going to a consumer's house, going**  **12 into their attic or the closet or their**  **13 basement to see what the air handler says, and**  **14 then, looking outside in the backyard or going**  **15 up on the roof and looking at the condensing**  **16 unit. There's a lot of layers to that, and I**  **17 don't have an answer for you.**  **18 You know, is it as simple as**  **19 simply asking them to produce the Energy Guide**  **20 Label, to give you the model number, or more**  **21 complicated?**  **22 I mean, what I will add is there** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is the added dimension of there could be a**  **2 product that is labeled as a 14 SEER that is**  **3 sold to them, but, actually, in practice that**  **4 model only functions as a 13 SEER. And so, it**  **5 was at the manufacturer level maybe not**  **6 compliant with the standard and was**  **7 mislabeled, and it shouldn't have been there**  **8 at all.**  **9 So, is there some kind of**  **10 requirement to actually test the physical unit**  **11 in the house to see what its actual SEER value**  **12 is, as opposed to relying on the pallet, what**  **13 the model numbers say those would be? There's**  **14 a lot of layers of complexity to that. And on**  **15 this score, I think it is helping me ferret it**  **16 out.**  **17 There are a lot of hands up over**  **18 here. So, Chuck and, then, Harvey.**  **19 MEMBER WHITE: Given the -- Chuck**  **20 White with PHCC -- freight train that is**  **21 bearing down upon us, after January 1, it will**  **22 be legal to install a SEER 14 unit anywhere in** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 these United States. Anywhere in the Northern**  **2 Region, it will be legal to install the SEER**  **3 13. Why would any contractor of mine have to**  **4 fill out paperwork on any equipment in any of**  **5 those regions that is compliant? Why do we**  **6 want to create a database of every piece of**  **7 equipment in this nation?**  **8 MR. RAWALD: Right. And, Chuck, I**  **9 think that comment was made by a couple of**  **10 folks after the framework back in 2011. I**  **11 think AHRI actually spoke about, hey, we**  **12 should focus our efforts on only those things**  **13 that would be non-compliant in the region.**  **14 So, basically, 13 SEER items being sold in the**  **15 South.**  **16 MEMBER WHITE: And the other thing**  **17 I want to add to that is, 18 months after**  **18 implementation, the buy-through is done, the**  **19 sell-through is done. But, in short order**  **20 after that date, probably even before that**  **21 date, but in short order after that date,**  **22 inventories are going to become adjusted. And** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the easiest thing for the contractor to do is**  **2 going to be go to his wholesale house, and the**  **3 wholesale house is going to have SEER 14**  **4 equipment. It is going to take its natural**  **5 course.**  **6 Are there going to be some**  **7 skaters? Yes. Are there going to be a lot of**  **8 them? I doubt it. Most contractors, it is**  **9 too much work; it is too much effort. There**  **10 is not enough benefit to going spending extra**  **11 time driving out of state, getting that piece**  **12 of equipment. It doesn't save you enough**  **13 money.**  **14 It is far easier to comply, and**  **15 contractors are into doing what is the easiest**  **16 thing. So, I guess that is my soapbox.**  **17 MEMBER SACHS: This is Harvey.**  **18 And I would like to make explicit**  **19 some parallel thinking that builds on what**  **20 Chuck has said. My goals, of course, are**  **21 maximum, avoiding as much as possible the**  **22 national energy losses associated with** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 noncompliant equipment. But that requires**  **2 balance.**  **3 And there are two things that I**  **4 think can be used to help us by coming as**  **5 close as possible to making win/win for the**  **6 professional participants in the market,**  **7 manufacturers, distributors, and reputable**  **8 contractors.**  **9 One of those, an approach that**  **10 does heavily emphasize bottom-up**  **11 whistleblowing, I think that can be very**  **12 helpful, is getting us the feedback that, with**  **13 our data capabilities today, can be aggregated**  **14 pretty easily. You don't go after a**  **15 homeowner; you go after a pattern of**  **16 apparently noncompliant installations.**  **17 That requires some data. It**  **18 requires some information to be maintained by**  **19 the reputable contractors who already know**  **20 where they have installed equipment, so they**  **21 can sell the service contracts. It will**  **22 require some recordkeeping by the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 distributors, the leading ones of whom already**  **2 know which contractors are most susceptible to**  **3 the special offers, and some recordkeeping**  **4 that is basically, I hope, a small extension**  **5 by the manufacturers.**  **6 The hope is to use the old**  **7 business principle of fear, uncertainty, and**  **8 doubt, "FUD," to make this as self-executing,**  **9 self-enforcing as possible with the minimum**  **10 burden on each party. I think that is the**  **11 synthesis we are trying to get at here. What**  **12 is the least amount of data that each party**  **13 can hold that allows DOE to look like it can**  **14 enforce this?**  **15 End of rant.**  **16 MR. EISNER: Anything else?**  **17 MEMBER ELLIS: Yes, if I might**  **18 just for a moment. I have got a couple of**  **19 things that I want to ask of the group.**  **20 One, I will start off by kind of**  **21 an identifier that I am going to expose myself**  **22 about how little I actually know of most of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 what is going on. I sit back here and my head**  **2 is just kind of swimming trying to understand**  **3 why we are where we are at to some extent.**  **4 And, No. 1, Charles over lunch**  **5 tried to explain to me why the demarcation**  **6 line is where it is and why we have SEER 13**  **7 and SEER 14 differences throughout the**  **8 country.**  **9 And I guess my question of the**  **10 experts in the room would be, No. 1, what is**  **11 the cost difference between a SEER 13 and a**  **12 SEER 14 unit on average?**  **13 MEMBER McCRUDDEN: They can't talk**  **14 about that.**  **15 MEMBER MEYERS: Under advice of my**  **16 counsel, I can't answer that.**  **17 MEMBER ELLIS: Well, let me tell**  **18 you, just for instance here, I mean, you know,**  **19 my part at my utility -- I am the General**  **20 Manager there, and I look at our policies and**  **21 I see what we do from day-to-day. And even if**  **22 I don't know exactly what the engineer and his** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 department is trying to accomplish, if I look**  **2 at something and it is costing us a great deal**  **3 of money for really no good reason, then I**  **4 look at that and I say, "We've got to throw**  **5 this out. We have got to start all over, and**  **6 we are going to try to rework this, so that it**  **7 actually does what we want accomplished."**  **8 And it seems like this whole thing**  **9 here --**  **10 MEMBER SACHS: Could I answer**  **11 that?**  **12 MEMBER ELLIS: Yes, in a second.**  **13 MEMBER SACHS: Okay.**  **14 MEMBER ELLIS: The whole thing is**  **15 that we are extremely worried about selling a**  **16 SEER 13 unit south of the Mason-Dixon line.**  **17 And we can say we can sell the 14s to the**  **18 north. Is it because there is not enough**  **19 savings in the north, that it doesn't justify**  **20 the additional cost to install those units**  **21 north of that line? Is that one of the**  **22 reasons why we don't do that?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Because it sounds to me as though**  **2 the Department of Energy is going to have to**  **3 really bulk-up here to be able to audit and**  **4 enforce this thing on every contract. You**  **5 know, doing it at the manufacturer level,**  **6 there are only so many. But, if you start**  **7 looking at contractors across the country,**  **8 there is going to be, if not thousands,**  **9 hundreds of thousands that are going to be**  **10 doing this, and you are going have to really**  **11 bulk-up.**  **12 And it is true, you know, in our**  **13 neck of the woods, literally, we don't even**  **14 have to have building permits for somebody to**  **15 build a home. So, there is no way to check it**  **16 there.**  **17 But, again -- and maybe I am**  **18 stupid for saying this out loud again -- you**  **19 know, we still have people install the right**  **20 units because we incentivize them through our**  **21 utility to do the right thing. They get money**  **22 back for installing the right one. And we** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 inspect those. My utility inspects those, and**  **2 it has to meet the standards that are**  **3 developed by our wholesale supplier through**  **4 NEEA and the rest of the organization in the**  **5 Northwest.**  **6 And it seems like we are spending**  **7 an awful lot of time worrying about this**  **8 demarcation line on if somebody sells it**  **9 across the river and it is the wrong one. I**  **10 mean, literally, there is no climate change or**  **11 climate difference between one side of the**  **12 Ohio River and south of the Ohio River to me,**  **13 anyway.**  **14 And besides, have you got any idea**  **15 what it might cost the DOE to set up a**  **16 regulatory or enforcement wing, you know, of**  **17 DOE to get something like this done?**  **18 MR. RAWALD: Ray, I can answer**  **19 your question that I don't --**  **20 MEMBER ELLIS: Yes.**  **21 MR. RAWALD: -- but I am hoping to**  **22 see from the group what it would require. I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 know that Harvey wanted to answer part of your**  **2 question.**  **3 MEMBER SACHS: A couple of things.**  **4 One of them is, for better or for worse, we**  **5 are stuck with having to do regional**  **6 enforcement now. We can't duck that. That is**  **7 why we were called together.**  **8 But, in response to your heartfelt**  **9 question of the difference in cost between a**  **10 13 and a 14, it is a pretty complicated**  **11 problem, and the manufacturers cannot respond.**  **12 Their interpretation of the antitrust law is**  **13 that, wheresoever two of them are assembled,**  **14 they can't talk about prices.**  **15 But I'm not a manufacturer and I**  **16 would suggest now that the cost, as opposed to**  **17 the price, the premium for a SEER 14 over a**  **18 SEER 13, FOB manufacturer's shipping dock, is**  **19 in the tens of dollars, maybe in the low three**  **20 figures, my guess.**  **21 There may be in a significant**  **22 number of installations a significant** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 difference in the price and a more significant**  **2 difference in the installation cost because of**  **3 the number of components for which custom**  **4 fitting might be required, particularly the**  **5 coil.**  **6 So, the economics have to be**  **7 treated with a lot of granularity and a lot of**  **8 care.**  **9 MR. RAWALD: Uh-hum, right.**  **10 MEMBER SACHS: Is that helpful?**  **11 MR. RAWALD: Harvey, the**  **12 manufacturers are going to have a really hard**  **13 time talking cogently about this because of**  **14 the restrictions. But the Department of**  **15 Energy in the course of promulgating the**  **16 standard, obviously, put together some**  **17 economics on this. So, we could possibly have**  **18 our Navigant folks pull something that we have**  **19 said publicly and point Ray to that, to give**  **20 him some better, more granular numbers.**  **21 MEMBER SACHS: Right. And this is**  **22 Harvey again.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 It is all in something called the**  **2 Technical Support Document. And one thing**  **3 that we and the manufacturers will heartily**  **4 agree on is that it is wrong.**  **5 The Technical Support Document,**  **6 which carries all these very detailed economic**  **7 and manufacturing cost analyses, we will all**  **8 agree turns out to be wrong every time.**  **9 (Laughter.)**  **10 MR. RAWALD: And, Harvey, this is**  **11 Doug.**  **12 And I was talking to Laura from**  **13 our contractor here. She reminds me that this**  **14 is a Direct Final Rule. So, we may not have**  **15 as robust a Technical Support Document as you**  **16 might find in other cases.**  **17 So, I don't know what we have, but**  **18 we will see if we have anything that we can**  **19 give you that will give you some more --**  **20 MEMBER MELCHI: This is Jon from**  **21 HARDI.**  **22 And I don't believe that Technical** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Support Document included the cost of stranded**  **2 inventory --**  **3 MR. RAWALD: Right.**  **4 MEMBER MELCHI: -- or enforcement.**  **5 MEMBER NOLL: Doug, does it**  **6 include at any level the cost of shipment or**  **7 is that --**  **8 MR. RAWALD: Right. So, a typical**  **9 support document would. I don't know if this**  **10 one includes it because I wasn't here for the**  **11 rulemaking and I haven't ever looked at it.**  **12 And I don't even know if we have such a**  **13 document as we usually have.**  **14 So, Laura and I will go back and**  **15 we will find an answer for folks.**  **16 MEMBER NOLL: Is that information**  **17 -- this is Elizabeth at NRDC -- is that**  **18 information generally restricted to talk**  **19 about? I mean, I think that might be a more**  **20 interesting question: at what percent or**  **21 portion of the appliance is the shipment cost?**  **22 And if it is a significant cost, then does** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that restrict behavior?**  **2 MR. RAWALD: In other words, if it**  **3 costs so much to ship, would it be shipped not**  **4 very far?**  **5 MEMBER NOLL: It is cost**  **6 prohibitive, that you are not going to be**  **7 shipping it all over the country a thousand**  **8 times. Or, if it is just five cents, then**  **9 you're right; then, we have to go out -- you**  **10 know, I think that might be a more interesting**  **11 question than the 13/14 SEER question.**  **12 MR. RAWALD: Right. Well, Laura**  **13 can go back and look at that, see what numbers**  **14 we have, and we can answer.**  **15 MR. HURST: This is John Hurst**  **16 with Lennox.**  **17 I was going to say, regardless of**  **18 the percentages and the cost and the things**  **19 that we can't talk about, I think it is fair**  **20 to assume that a contractor in the South**  **21 installing 13 SEER equipment is going to be at**  **22 a cost-advantage to a contractor that is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 following the law and installing as 14 SEER**  **2 unit.**  **3 And so, we can argue about, you**  **4 know, 80 percent, 20 percent, $15, $200, but**  **5 the fact remains that a dealer that has access**  **6 to 13 SEER equipment in the South will be at**  **7 a cost-advantage for a cost-conscious**  **8 consumer, and that is the majority of**  **9 consumers.**  **10 MEMBER ELLIS: So, this is Ray**  **11 from LEC.**  **12 Just to follow up, ask a question**  **13 on that, so, then, putting a 14 SEER unit in**  **14 the North, the same must be true?**  **15 MR. HURST: Sure, but consumers,**  **16 some consumers want more features on their**  **17 equipment. We sell sometimes very high SEER**  **18 equipment in Minneapolis, for example. Some**  **19 consumers want the best of the best regardless**  **20 of the price. And it just depends. It is**  **21 much like automobiles. Some are value-driven;**  **22 some are style-driven; some are feature-** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 driven. And I think the same applies in the**  **2 HVAC space as well.**  **3 MEMBER ELLIS: Okay, but, then,**  **4 kind of what Chuck had mentioned earlier is**  **5 that, why on earth would a contractor, if you**  **6 have gone to this point where you are going to**  **7 enforce it and have the possibility of heavy**  **8 fines or jail time, trying to sit around with**  **9 your jail buddies and describe why you're in**  **10 jail, that you installed the wrong HVAC or air**  **11 conditioner, but why would they take the**  **12 chance, then, of installing a 13 SEER unit in**  **13 the South?**  **14 MR. HURST: I think two reasons.**  **15 Great question. The reasons are if they feel**  **16 the penalty is --**  **17 MEMBER ELLIS: Doesn't equal the**  **18 crime?**  **19 MR. HURST: -- doesn't equal the**  **20 crime, and, then, the chance of being caught.**  **21 So, if I think the penalty is low and the**  **22 chance of being caught is low -- so, for** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 example, just round numbers, if it is a $200**  **2 civil penalty and I get caught one every**  **3 hundred times, it is a $2 cost-add to every**  **4 job that I have done. And if I get caught**  **5 once in a thousand times and it is a $200**  **6 penalty, it is -- what? -- a 20-cent cost-add.**  **7 So, you know, I have got teenaged**  **8 boys. They sometimes calculate risk and the**  **9 chance of being caught with the penalty, and**  **10 they roll the dice, and they don't comply.**  **11 And I think the same could be true in this**  **12 example where people are going to assess the**  **13 risk versus the penalty and take their**  **14 chances.**  **15 MR. RAWALD: Right. And this is**  **16 Doug.**  **17 I did want to echo something John**  **18 said, so just to make it clear to Ray. So, we**  **19 don't have any criminal ability at all. So,**  **20 there are no criminal sanctions at all for**  **21 this.**  **22 There are criminal liabilities for** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 false statements to the government that are**  **2 separate and apart from this. But, for these**  **3 purposes, if we were to decide a penalty for**  **4 violations, there would be no criminal**  **5 liability. It is a civil penalty. And the**  **6 maximum civil penalty we can assess is $200**  **7 per violation, however we decide what a**  **8 violation would be.**  **9 So, that is the kind of context we**  **10 are in. It is not a very high penalty, and**  **11 all things considered, if folks want to pass**  **12 along that cost, as John described. So, there**  **13 is always that concern.**  **14 We have kind of wandered far**  **15 afield from what we started after lunch. But**  **16 I think it has been very valuable to kind of**  **17 air all these thoughts out there.**  **18 But I want to take it back to the**  **19 idea of the routine violations. And it seems**  **20 like we talked a lot about how to detect a**  **21 violation, but I do still want to get a sense**  **22 of where people are with the idea of deciding** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is somebody is a routine violator.**  **2 We have, and Chuck put forward**  **3 before lunch, the idea of the dictionary**  **4 definition, and he, at least at the moment,**  **5 was comfortable with that being part of the**  **6 baseline. I want to kind of hear, how do**  **7 people feel about that as far as deciding if**  **8 someone is a routine violator and where people**  **9 are at with that thought of a routine**  **10 violator?**  **11 MEMBER McCRUDDEN: So, this is**  **12 Charlie with ACCA.**  **13 And again, I am looking at**  **14 "routine" and "violator" in this sentence up**  **15 on the display here, looking at the**  **16 "contractor" or the "distributor". I will**  **17 just speak to the contractor, actually.**  **18 You know, I think I would like at**  **19 least to see some type of safe harbor. There**  **20 is going to be an accidental installation, and**  **21 it could be -- I mean, I am just thinking in**  **22 my head -- you have got a contractor. His** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 service area is both sides of a border. He**  **2 doesn't even think twice. He gets in the**  **3 basement and he puts something in there and**  **4 comes out. And then, slightly later, it turns**  **5 out, whoops, you've got the wrong product.**  **6 So, there is going to be mistakes**  **7 that are going to happen. And I think they**  **8 are going to be innocent mistakes. So, either**  **9 there is a safe harbor or an off ramp or some**  **10 type of way to account for that.**  **11 MR. RAWALD: And, Charlie, I guess**  **12 I would like to hear you -- and Chuck spoke on**  **13 this -- but in some way, to me, the risk of**  **14 being, quote/unquote, "blacklisted," because**  **15 that is the term we use it for, for being a**  **16 routine violator is actually more concerning**  **17 to a contractor than a $200 penalty from me**  **18 possibly?**  **19 MEMBER McCRUDDEN: So, I mean,**  **20 this is Charlie.**  **21 I will respond in the sense that I**  **22 think you are probably right. I think,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 because if you find yourself blacklisted, you**  **2 are going to find that your partner, or your**  **3 dealer/partner, or whatever we want to call**  **4 it, your manufacturer may choose not to work**  **5 with you anymore because they, themselves,**  **6 face an obligation here, which is the top part**  **7 of this. So, I think that is going to drive**  **8 concern.**  **9 The other thing I would sort of**  **10 suggest we think about is you are a**  **11 contractor. You have made mistakes. You have**  **12 realized the error of your ways. And now, you**  **13 want to get back. So, is there a way to**  **14 become unlisted from this directory?**  **15 MR. RAWALD: Right. So, you are**  **16 routinely violating it, but you are no longer**  **17 routinely violating it.**  **18 MEMBER McCRUDDEN: Right.**  **19 MR. RAWALD: So, could you be**  **20 now --**  **21 MEMBER McCRUDDEN: Or you find**  **22 yourself on this list. And now, is there a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 way to get yourself off of it?**  **2 MR. RAWALD: Right. And I guess**  **3 there is another permutation of this. This**  **4 goes back to definitions earlier. So, if you**  **5 are a contractor and you have been**  **6 blacklisted, and so, you go claim bankruptcy**  **7 and you hire yourself out to another**  **8 contractor. And now, you are an installer for**  **9 him. Are you still carrying that mark or is**  **10 his company that has hired you able to be**  **11 devoid of that? Or you reincorporate with a**  **12 different name.**  **13 MEMBER McCRUDDEN: And we may need**  **14 to go back to the definitions and address that**  **15 situation.**  **16 MR. RAWALD: Uh-hum. Just**  **17 something to think about, as we think about**  **18 these routine violators.**  **19 MR. EISNER: Yes, let me point out**  **20 a couple of points because I am hearing**  **21 different terms here that confuse me a little**  **22 bit. For example, "safe harbor," my** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 understanding of safe harbor is you give an**  **2 interpretation of a statute or a regulation**  **3 and say, as long as you do it this way, we**  **4 won't take enforcement action against you.**  **5 You are talking about a situation**  **6 where the person violated the rule, as**  **7 everybody understands it. That is oftentimes**  **8 a situation in my experience where an agency**  **9 will use enforcement discretion, say this was**  **10 an innocent mistake; you shouldn't have done**  **11 it. That could mean a lower penalty or it**  **12 could mean no penalty. You have got limited**  **13 resources.**  **14 We are now also talking, another**  **15 problem is we are talking about things that we**  **16 haven't even agreed are necessary for an**  **17 enforcement program. Nobody has talked about**  **18 setting up a blacklist or anything like that.**  **19 The fact is, if they take**  **20 enforcement action, it is public information.**  **21 There is nothing they can do about it. So,**  **22 how does somebody fix that? Just the way** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 other things happen. It is in the**  **2 marketplace. They can't hide it. They are**  **3 not putting it out on a list and saying,**  **4 "Don't do business with this person." I think**  **5 you have to understand you may not need to**  **6 even get into that issue.**  **7 Now one other meaning, we talk**  **8 about cost of rules. One of the differences**  **9 between the first rule and the rule we are**  **10 talking about now is, oftentimes, an agency**  **11 assumes there are no costs of an enforcement**  **12 program because, as long as you comply, you**  **13 are not going to pay a penalty.**  **14 And if you assume that you are**  **15 going to bear the cost of compliance and get**  **16 charged every once in a while a penalty, that**  **17 is something you have to live with.**  **18 MEMBER McCRUDDEN: Well, to that**  **19 point, I would argue that the cost of**  **20 compliance can be meeting the obligations that**  **21 are necessary, whether it be a recordkeeping**  **22 requirement, or let's say it was a piece of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 equipment that you needed to have to carry out**  **2 a compliant job. Okay? So, you would have to**  **3 buy that equipment. So, there are costs that**  **4 are sort of baked into the regulation that may**  **5 not be part of compliance, may not be part of**  **6 an enforcement action, but that are part of**  **7 compliance.**  **8 MR. EISNER: But that is a**  **9 separate --**  **10 MEMBER McCRUDDEN: Right.**  **11 MR. EISNER: That is a separate**  **12 rule. And in this case, remember, although**  **13 the agency does have a responsibility for**  **14 analyzing the cost and the benefits of the**  **15 rule, it is a statutory mandate.**  **16 MEMBER McCRUDDEN: Right. To your**  **17 point about safe harbor, you are right. I am**  **18 probably throwing out a term I don't use as a**  **19 term of art correctly. So, I think I was**  **20 describing a situation where there would be**  **21 enforcement discretion.**  **22 But, again, that is something I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 think would be helpful and, then, again, a way**  **2 to become delisted, if necessary.**  **3 MR. EISNER: Yes?**  **4 MR. SURRENA: Don Surrena.**  **5 It sounds like we are putting**  **6 forth the idea that there is a large number of**  **7 installers, contractors that will do whatever**  **8 they can to skirt the law. I don't think that**  **9 is true. So, I believe we are looking at a**  **10 very small number, and we have focused-in on**  **11 the minutia rather than looking at what the**  **12 law says. The law for DOE is to have it be**  **13 unlawful for a manufacturer to knowingly do**  **14 this to his dealers, subcontractors, and so**  **15 forth.**  **16 So, the manufacturers police this**  **17 themselves. They do it through their dealers**  **18 or through public complaints or complaints**  **19 they get into their companies. And they put**  **20 these people on notice and stop selling to**  **21 them, so that they don't become in violation**  **22 of what the DOE regulation requires.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 To put this total enforcement low**  **2 end burden down to the Department of Energy,**  **3 they will never have the resources to do it.**  **4 They just won't. They can't do that. If they**  **5 hired every building official that was in the**  **6 country, they still wouldn't have enough**  **7 because the people who do this, I don't want**  **8 to say they are few and far between, but they**  **9 are not the majority of the installers.**  **10 So, we are looking to have**  **11 something corrected for a very small number of**  **12 disreputable contractors or unknowing**  **13 contractors. It is the unknowing ones we are**  **14 trying to figure out a way that they get some**  **15 form of dispensation. You get one or two**  **16 marks and, then, you get a "Get Out of Jail**  **17 Card Free," whatever it is.**  **18 But to this enforcement bottom-end**  **19 onto the Department of Energy is not the place**  **20 where it should go to. It will become totally**  **21 ineffective.**  **22 MEMBER MELCHI: This is Jon with** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 HARDI.**  **2 And I know we are supposed to talk**  **3 about, I believe I saw it on here on Thursday,**  **4 but I think, again, this goes to the point of**  **5 DOE's responsibility as far as public**  **6 outreach, especially to the contractor**  **7 community and to the homeowner community.**  **8 You know, as we have discussed,**  **9 there's thousands and thousands of**  **10 contractors, and DOE is going to have a major**  **11 responsibility to help with outreach to those**  **12 entities to make sure compliance is met.**  **13 MEMBER FERNSTROM: Yes, this is**  **14 Gary.**  **15 Let me talk again to the**  **16 California example. Ray earlier asked a**  **17 question about what the cost was, and, of**  **18 course, nobody in the room could answer it.**  **19 But you all asked earlier what the**  **20 extent to which building permits are pulled**  **21 for air-conditioning work in California. And**  **22 I think David Hungerford or somebody over here** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 said it was less than half, maybe as low as 20**  **2 percent of the work that is done.**  **3 The major barrier to pulling a**  **4 permit in California is, No. 1, the cost of**  **5 the permit, which can be a couple of hundred**  **6 dollars, and, No. 2, the fact that you have to**  **7 test and seal your ductwork, which is probably**  **8 $600.**  **9 So, a contractor goes out and says**  **10 to the customer, "I need to replace your air**  **11 conditioner condensing unit. It is going to**  **12 cost $3,000-4500, whatever. I can do it with**  **13 or without a permit. If I get the permit, it**  **14 is probably going to be $600 to $800 more**  **15 costly." And that amount of money is what**  **16 drives the permit acquisition down from 100**  **17 percent to less than half.**  **18 So, the notion that all**  **19 contractors are good may be true to the extent**  **20 that, maybe if they don't pull a permit,**  **21 everything is going to be just fine. But I**  **22 don't think we can count on, given market** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 pressure, a contractor's good, honest nature**  **2 to make sure everything turns out correctly.**  **3 MR. EISNER: Let me ask a**  **4 question, too, here because I am hearing**  **5 different perspectives on who has got the**  **6 burden here. I have been hearing concerns**  **7 about, is this something we want to put on**  **8 DOE's shoulder? From the perspective of the**  **9 manufacturers, the distributors, et cetera, in**  **10 the room, is this a problem for you in the**  **11 sense that you may all of a sudden be charged**  **12 with the person who is constantly violating**  **13 the law or you are the person who is dealing**  **14 with someone who constantly or more than**  **15 routinely violates the law? And therefore,**  **16 you may be penalized by DOE for something you**  **17 didn't realize you had to do.**  **18 For example, let's assume that in**  **19 California you can learn something by looking**  **20 at permit records. And so, whether you are**  **21 selling to someone who is installing the one**  **22 unit in a dwelling in California, isn't the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 burden now back on you? If that can be**  **2 obtained easily and you are not getting it,**  **3 and you should get it if you want to do the**  **4 job right, is the burden on you, not on DOE?**  **5 And again, I ask this because I**  **6 don't have as good a feel as you do for how**  **7 the industry works. I am sure it is so much**  **8 a problem for them, though, from when I look**  **9 at it. Because if it comes to their attention**  **10 that information was reasonably available to**  **11 you and you just didn't get it, and you kept**  **12 selling to this person because you didn't want**  **13 to know more, their burden is not that**  **14 difficult. They get the records together and**  **15 they bring the enforcement action.**  **16 Using the example of you are**  **17 sending -- somebody calls you up and says, "I**  **18 want 100 SEER units delivered to a worksite in**  **19 a new residential community in Southern**  **20 California. I want them all to be 13s."**  **21 And you say, "Okay, I'll deliver**  **22 there." I don't know what you are going to do** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 with them.**  **2 Well, it is a homesite, and they**  **3 want 100 delivered every month because they**  **4 are building 1,000 homes there. Does that put**  **5 you in a position of violating this provision**  **6 as a manufacturer? And does it put you if you**  **7 are a distributor in a position of being,**  **8 quote, "blacklisted" because of what you are**  **9 doing?**  **10 You make their job actually quite**  **11 simple. They were delivered right to a**  **12 homesite. What did you think they were going**  **13 to do with them?**  **14 Response?**  **15 MEMBER MEYERS: Yes. So, this is**  **16 Karen with Rheem.**  **17 I mean, I do agree with you. I**  **18 think before we can define "routinely**  **19 violates," we need to go back to what that**  **20 "knowingly" definition is in the context of**  **21 regional standards.**  **22 So, to me, I think that you have** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to, if you have knowledge that an illegal**  **2 installation has occurred, whether you are a**  **3 contractor or a distributor, and you had that**  **4 knowledge, that you should be required to do**  **5 something with that knowledge because you have**  **6 knowledge of an illegal act.**  **7 So, I think we need to understand**  **8 what that means. Because, when I read this**  **9 definition, you know, it says that, with**  **10 regional standards coming into effect, you**  **11 should, then, be more aware of what is going**  **12 on.**  **13 So, to your point, if you are**  **14 delivering 100 13 SEER units to Southern**  **15 California, it is pretty evident that an**  **16 illegal installation is going to take place.**  **17 MR. EISNER: Especially if you**  **18 deliver them to a homesite.**  **19 MEMBER MEYERS: So, are you not**  **20 required to do anything with that, as somebody**  **21 that is in this whole selling chain?**  **22 So, I think if we can understand** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 what "knowingly" means and how that affects**  **2 everything, I mean, I think whether it is a**  **3 fellow contractors knows that another**  **4 contractor is doing wrong, whether a**  **5 distributor finds out that a contractor that**  **6 he has sold a unit to installed it illegally,**  **7 whether it is an OEM who has information that**  **8 they have a bad serial number or a serial**  **9 number in the wrong part of the country, then**  **10 we have some obligation to make that**  **11 information known.**  **12 And I think if we understand what**  **13 that is, then you can start to define**  **14 "routinely violates". But, right now, no one**  **15 knows what they are supposed to do. What does**  **16 "knowingly" actually mean in the context of**  **17 regional standards?**  **18 And I know that is probably not**  **19 something that we want -- you know, this is**  **20 huge, and I know it is not an easy thing for**  **21 us to discuss. But I think, going forward,**  **22 January 1st, 2015, it is going to be a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 different ball game, and we can't pretend that**  **2 it is not.**  **3 MEMBER McCRUDDEN: So, just to**  **4 understand -- this is Charlie from ACCA -- are**  **5 you suggesting that, if you are aware of a**  **6 violation, you are obligated to report it?**  **7 MEMBER MEYERS: I think that, if I**  **8 were aware of it, I should be required to take**  **9 some step. Whether that is contacting the**  **10 person that I have sold the unit to and having**  **11 them do additional followup -- I don't know**  **12 that I am saying you put it all in this**  **13 database, but I am saying I should be required**  **14 to do something with this information. The**  **15 database thing is not really my first choice**  **16 at all.**  **17 But I do think that, if you have a**  **18 contractor and his buddy is a good friend of**  **19 his, and he is putting in an illegal unit, and**  **20 he is down on his luck, he needs the job, he**  **21 needs the money, does that make it okay for**  **22 him not to report that or to not make** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 knowledge available? I don't know.**  **2 MR. EISNER: Another scenario, if**  **3 I could for a second expand on what you are**  **4 saying, another scenario might be you are the**  **5 manufacturer. You get the call, "Can you**  **6 deliver them right to the jobsite?"**  **7 You say, "No, I can't deliver**  **8 them. You are not going to install in**  **9 California. It is a violation of law."**  **10 "Okay, thank you."**  **11 That you might want to report, as**  **12 a good business, to the DOE that they might**  **13 want to check out this distributor who was**  **14 trying to buy a thousand units, obviously, to**  **15 install in homes in California. I don't**  **16 suspect you would want to take the business**  **17 and, then, report it to them.**  **18 MR. RAWALD: This is Doug.**  **19 What I hear Karen saying is that**  **20 she wants some sort of affirmative requirement**  **21 for reporting, as opposed to a simple, you**  **22 know, moral obligation. That is what I am** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 wondering about.**  **2 MEMBER MEYERS: Yes, and I don't**  **3 know that it is reporting, but it is a**  **4 requirement that -- and maybe Amy can jump in**  **5 here because I think she knows what I am**  **6 trying to say, because we kind of discussed**  **7 this in our caucus a little bit.**  **8 MEMBER SHEPHERD: Yes. I think**  **9 that, as opposed to requirement, I think as we**  **10 do talk about a safe harbor, I mean, I think**  **11 we are talking, also, about an incentive.**  **12 Like if you can give an incentive to people**  **13 who have this information, that they will get**  **14 some sort of protection, especially when you**  **15 have something like routine, which can be**  **16 inherently vague; it is subject to enforcement**  **17 discretion -- if there is some sort of safe**  **18 harbor where, if people are reporting conduct,**  **19 let's say, to the Department, that they**  **20 wouldn't, then, be liable for a sale to that**  **21 person. Or something along those lines where**  **22 we create incentives for behavior up and down** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the chain to get the information to the**  **2 Department which, as you said, will weed the**  **3 good from the bad. Because that is the whole**  **4 purpose of an audit as well, is to get the**  **5 information to the Department.**  **6 But, if you don't have the**  **7 infrastructure and you are creating this**  **8 entire new system on a business model that**  **9 doesn't operate that way now, that is**  **10 extremely difficult. But, if we can find a**  **11 way to incentivize behavior that can easily**  **12 occur at low cost, that will get the people**  **13 who are doing the right thing, who may have**  **14 those additional costs because they are doing**  **15 the right thing, some sort of incentive to get**  **16 that information to the Department, so that it**  **17 can act on the people who aren't. I think**  **18 that is kind of what we had discussed and what**  **19 we would like to explore.**  **20 MR. EISNER: Harvey?**  **21 MEMBER SACHS: This is Harvey**  **22 Sachs.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Amy, you said some things that**  **2 made my ears perk up to ceiling level. But I**  **3 also got a little bit confused. I mean, I**  **4 like the idea of, you put as "incentives"; I**  **5 would put it as things which tend to be self**  **6 executing or self-enforcing.**  **7 But I think we are still hearing**  **8 "safe harbor" used in two different contexts.**  **9 And maybe you can expand a little bit about**  **10 how you meant that term.**  **11 MEMBER SHEPHERD: Well, what I**  **12 would mean by a "safe harbor" is that, if we**  **13 can incentivize certain behaviors such that**  **14 the Department would say, if a manufacturer**  **15 does these things, if a manufacturer has a**  **16 system for, you know, identifying this**  **17 information or does report this information to**  **18 the DOE, that, then, that somehow gets**  **19 factored into any decisions that the DOE may**  **20 take as to enforcement. So, we are trying to**  **21 create an incentive for people to provide**  **22 information about violators to the Department.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER SACHS: Okay. So, let me**  **2 see if I can translate it into something real**  **3 with totally hypothetical numbers.**  **4 This is Harvey again.**  **5 If a manufacturer has been**  **6 scrupulous about sending an email to DOE each**  **7 time it has a suspicious request for a hundred**  **8 units, but doesn't send a note to DOE when it**  **9 gets a request for 10 units that were SEER 13**  **10 for a southern distributor, they would be**  **11 given some grace. Hey, these people were**  **12 operating in an area where 10 units might have**  **13 had a legitimate use in terms of installations**  **14 along the border.**  **15 Is that the kind of thing you are**  **16 meaning?**  **17 MEMBER SHEPHERD: No.**  **18 MEMBER SACHS: Okay. Then, I am**  **19 misunderstanding. But I think it is**  **20 important.**  **21 MEMBER SHEPHERD: Yes. No, I do.**  **22 And I am not saying I have the answer as to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 what exactly the parameters or exactly what**  **2 this looks like. But I think that what we**  **3 were trying to do is think of ways to**  **4 incentivize what people may already have the**  **5 ability to know up and down the chain and get**  **6 that information to the Department, so the**  **7 Department can act on that, and to think of**  **8 ways to encourage that behavior.**  **9 MR. EISNER: In your example, do**  **10 you distinguish between a company not knowing**  **11 that there is a violation, but suspecting**  **12 there might be, or, also, the company knowing**  **13 there is a violation, still participating, but**  **14 reporting it?**  **15 MEMBER SHEPHERD: Say that again?**  **16 MR. EISNER: When you are talking**  **17 about reporting, are you talking about**  **18 reporting -- you are a manufacturer, for**  **19 example -- are you talking about reporting a**  **20 request for delivery to Southern California?**  **21 On the fact of it, it is legitimate, but you**  **22 think they are going to use it for illegal** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 purposes? Or are you talking about a case**  **2 where you report it, even though you know it**  **3 is illegal, and you ship the product?**  **4 MEMBER SHEPHERD: Well, you don't**  **5 know it is illegal. I don't think that**  **6 analogy quite works because you don't know it**  **7 is illegal when you ship the product.**  **8 MR. EISNER: If they ask you to**  **9 ship it to the site where the homes are being**  **10 put in, do you think you can make a case you**  **11 didn't know they were going to be put in those**  **12 homes?**  **13 MEMBER SHEPHERD: Well, in that**  **14 specific, if they are given a specific**  **15 address, I mean, I don't think that is likely**  **16 at all, and I don't think that is really how**  **17 we are going to design an effective**  **18 enforcement.**  **19 We need to look at what most of**  **20 the circumstances are. So, I will go back to**  **21 the manufacturers for that.**  **22 MEMBER MEYERS: This is Karen from** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Rheem.**  **2 Very rarely for a residential HVAC**  **3 unit are the units going to be shipped direct**  **4 from the manufacturer.**  **5 MR. EISNER: I understand that. I**  **6 am using an example where you are south, the**  **7 company is south of San Diego. The**  **8 distributor is north of San Diego. The**  **9 distributor says, "Can you deliver them right**  **10 to the site where the thousand homes are going**  **11 in?"**  **12 MEMBER MEYERS: So, typically --**  **13 MR. EISNER: Does that happen?**  **14 MEMBER MEYERS: Very, very rarely,**  **15 because (a) the thousand homes aren't all**  **16 going to be ready for the HVAC unit at the**  **17 same time. So, they are going to go through**  **18 a distributor, because you are going to be**  **19 building 10 homes in this tract and 10 homes**  **20 in -- you know. And it all happens at**  **21 different times, when you install that unit.**  **22 So, very rarely would that -- in** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 fact, I can't even think -- the commercial is**  **2 a different ball game. But, for residential**  **3 units, I just don't see that happening but**  **4 maybe once in a very rare blue moon. I just**  **5 don't see that happening, shipping it to a**  **6 residential -- for residential HVAC units.**  **7 MR. HURST: We would -- we own our**  **8 own distribution. So, the short answer to**  **9 your question is, yes, it would be reasonable**  **10 for me to assume, as a manufacturer that is**  **11 also a distributor, that if I was taking 13**  **12 SEER product to an installation site in San**  **13 Diego, that a violation is about to happen.**  **14 And I would expect our sales team**  **15 to have a frank discussion with the builder to**  **16 say, "You know the federal regulation states**  **17 this." And I would think, as a manufacturer,**  **18 it would be my responsibility to report that**  **19 installing dealer.**  **20 And that is what I think we were**  **21 getting back to earlier. I wasn't talking**  **22 about bounties. I am just saying a violation** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is a violation. I don't care if happened one**  **2 time or fifty times. A violation is a**  **3 violation.**  **4 And if you are a contractor or a**  **5 distributor or a manufacturer and you are not**  **6 aware of regional standards, I don't know what**  **7 planet you have been on. I don't know what TV**  **8 you listen to or radio, but this is pretty**  **9 pervasive in the industry. I don't think**  **10 there are a lot of folks out there -- hey, if**  **11 they don't, they are going to learn real**  **12 quick, and they should learn real quick**  **13 because at some point ignorance of the law**  **14 can't carry for five years.**  **15 "You know, I am just a simple,**  **16 stupid guy, and I have been stupid a long**  **17 time." It doesn't cut it. I mean, if we are**  **18 going to have teeth to this thing, let's**  **19 enforce the law and enforce it.**  **20 MEMBER CLARK: Yes, back to the**  **21 safe harbor statement, I guess the way that I**  **22 would like to think about it is, you know,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 let's pretend like somehow, as a manufacturer,**  **2 we become aware of an installation in Southern**  **3 California that didn't comply. We don't know**  **4 the past. You know, we just found out kind of**  **5 thing.**  **6 We would hate to run into a**  **7 situation where we report it to the Department**  **8 of Energy and that leads to this just**  **9 mushrooming of activity because we talked**  **10 about this one situation, right? And so, in**  **11 some way, it seems like we need to construct**  **12 things in a way that doesn't make people think**  **13 twice -- and I am just saying as a**  **14 manufacturer; the same would be for a**  **15 distributor; the same would be for a dealer.**  **16 You would want to be able to talk about the**  **17 given situation and not necessarily talk about**  **18 your business for the past five years, right?**  **19 So, you would want to partition this situation**  **20 off a little bit somehow with the safe harbor**  **21 statement.**  **22 MEMBER MELCHI: This is Jon with** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 HARDI.**  **2 I keep wondering if there**  **3 shouldn't be some presumption -- having not**  **4 worked with DOE on these enforcement matters**  **5 before, if there is some presumption of**  **6 innocence for a contractor who installs -- you**  **7 know, if his company is reported for an**  **8 illegal install in Kentucky, and I guess to**  **9 Ray's point there, there is a hell of a lot of**  **10 difference between Ohio and Kentucky, and it**  **11 is not just the climate.**  **12 (Laughter.)**  **13 But that is just from somebody**  **14 born in Cincinnati.**  **15 (Laughter.)**  **16 But, you know, if he is turned in**  **17 by a fellow contractor or somebody else, I**  **18 think there would probably be -- is there a**  **19 presumption of innocence? And that gets to my**  **20 point earlier of exactly how would you prove**  **21 there was a violation, unless there is an**  **22 email, to Neil's point earlier, saying, "Hey,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 I want to install this in Lexington."? How**  **2 would that be proven? And is there a**  **3 presumption of innocence for that?**  **4 Maybe a little background on my**  **5 part. My grandfather was a contractor until**  **6 he quit installing systems at age 81, when my**  **7 Nana made him quit. And, you know, I am sure**  **8 he knew about all of the different**  **9 regulations, and I know he did, but maybe he**  **10 wouldn't be as prepared to deal with a DOE**  **11 inquiry as some of the manufacturers are**  **12 today.**  **13 And I think, wherever we go, we**  **14 need to think about, will that contractor have**  **15 the ability to represent themselves in an easy**  **16 manner without DOE coming directly at them in**  **17 what some may see as an overly-aggressive way?**  **18 MR. RAWALD: Right. So, what we**  **19 seem to be kind of swirling around here is**  **20 these consequences. And I think it is because**  **21 of the acknowledgment of the fact that being**  **22 deemed a routine violator would, indeed, be a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 consequence.**  **2 And so, the question is, what will**  **3 be the Department's mechanism or the science,**  **4 and what is a routine violator? And that is**  **5 the question that I guess I started with and**  **6 I want to come back to, is this determination**  **7 that someone is a routine violator, which,**  **8 then, triggers this kind of requirement that**  **9 you knowingly sold to this routine violator.**  **10 I mean, someone has to be a routine violator**  **11 in order for a manufacturer to knowingly sell**  **12 to that person. And so, how do we determine**  **13 whether or not that person is, indeed, a**  **14 routine violator?**  **15 MEMBER MELCHI: Doug, I mean, we**  **16 are, as we have discussed, we are constrained**  **17 by certain definitions. And it says**  **18 "routinely," and "routinely" is not one.**  **19 Now I think we all have an**  **20 interest in making sure that this is**  **21 compliant. But, as far as we are talking**  **22 about in this room, "routinely" is more than** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 one.**  **2 MR. EISNER: I mentioned earlier**  **3 that one approach for something like this that**  **4 could be effective is, instead of putting**  **5 numbers, so many violations in so many days**  **6 out of so many that are sold, you could list**  **7 criteria that the agency is to consider in**  **8 making a determination.**  **9 And it seems to me -- and I would**  **10 like to hear some thoughts on it after we**  **11 return from a break -- as to whether one of**  **12 the factors you will consider was whether**  **13 information provided by one of the parties to**  **14 the charge, so to speak, helped the agency**  **15 discover the violation.**  **16 So, if you are a manufacturer who**  **17 said, "You know, this guy may be violating the**  **18 rules here, and I have been selling them**  **19 equipment. And I am just finding out about**  **20 it," the agency can say, "Okay, we are not**  **21 going to charge the manufacturer here because**  **22 we wouldn't have found out about it without** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 hearing from them."**  **2 It is a factor they can consider;**  **3 they can weigh-in with everything.**  **4 Do you want to wait until after**  **5 the break?**  **6 MR. RAWALD: This is Doug.**  **7 I just want to build on something**  **8 Neil said because he said "for the Department**  **9 to determine". And so, the question is, does**  **10 there need to be a departmental determination**  **11 that someone is a routine violator? I mean,**  **12 is that something that is necessary? Does it**  **13 make sense? Does it seem to be an important**  **14 part of the process in assessing this kind of**  **15 concern?**  **16 You know, does the Department need**  **17 to determine that Company XY&Z is a routine**  **18 violator before assessing a penalty against**  **19 the manufacturer for selling to that person?**  **20 And so, I think I put that to you because we**  **21 haven't discussed that as a necessary pre**  **22 condition. And so, it may or may not be, as** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 folks want to talk about it.**  **2 MR. EISNER: Yes, and I did not**  **3 intend that to be a chart. I intended that to**  **4 be for decisions on whether to take**  **5 enforcement action.**  **6 Harvey? And then, we will take a**  **7 break.**  **8 MEMBER SACHS: This is Harvey.**  **9 I am hearing, but perhaps**  **10 extrapolating too far, that routine violator**  **11 is first signaled by the aggregation of**  **12 reports to DOE. And my own instinct is that**  **13 this reporting should be encouraged by holding**  **14 people harmless, by cash awards to**  **15 contractors, by whatever mechanisms are**  **16 appropriate.**  **17 But it is the building-up of**  **18 aggregation, aggregated data, that point**  **19 toward noncompliant installations that would**  **20 trigger the process, not because I think that**  **21 that is the only way, but I can't think of any**  **22 way that is more likely to be effective.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And I am not interested in going**  **2 after the one-offs. It is the persistent**  **3 violator. I think it is a wonderful term.**  **4 Thank you.**  **5 MR. EISNER: Let's take a break.**  **6 Come back at a quarter after 3:00.**  **7 (Whereupon, the foregoing matter**  **8 went off the record at 3:01 p.m. and went back**  **9 on the record at 3:17 p.m.)**  **10 MR. EISNER: We have Hampton**  **11 Newsome, who is going to join me upfront here,**  **12 who is willing to listen to your questions and**  **13 try to answer them, if he can, I'm sure.**  **14 MR. NEWSOME: Hampton Newsome.**  **15 Well, I keep in touch with**  **16 everybody over the phone. And it is funny**  **17 when I come to these meetings that I see all**  **18 these people that I kind of know over the**  **19 phone, but it is good to be here.**  **20 And we have moved offices**  **21 recently. So, we are only like four blocks**  **22 away. So, I can make it over here more often** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 for meetings like this. You know, I am happy**  **2 to be here and to discuss a lot of these**  **3 issues.**  **4 But a lot of them have such small**  **5 involvement with what FTC does that, you know,**  **6 I just feel like I would be taking up space at**  **7 a lot of things.**  **8 But, with this particular**  **9 situation, what I am going to do is just go**  **10 through really quickly some of the things that**  **11 the FTC is doing and just some brief thoughts**  **12 I have. And then, we can just discuss.**  **13 I understand last week there was a**  **14 lot of discussion, or maybe it was the week**  **15 before. I think I was out of the office at**  **16 the time. So, we can follow up on some of**  **17 that stuff.**  **18 But I have to say I agree with**  **19 Ray's comment that, at least for me, this is**  **20 incredibly mind-bending. I am surprised there**  **21 are not a lot of little bowls of Advil around**  **22 the table for everybody. And, you know, I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 don't envy you in trying to -- oh, there you**  **2 go. Okay.**  **3 (Laughter.)**  **4 The Advil is over here.**  **5 But, anyway, so the FTC was**  **6 charged under the statute with doing labels**  **7 for the regional standards, to communicate**  **8 regional standards to installers, industry**  **9 members, consumers, et cetera.**  **10 And as everybody knows, we issued**  **11 a Final Rule early last year that has these**  **12 unusual labels, unusual for FTC because**  **13 there's lots of information on them, maps, and**  **14 things like that, and charts, and things like**  **15 that. And I think most everybody in here**  **16 participated in one way or another in that**  **17 proceeding.**  **18 So, there were labels for furnaces**  **19 and central air. And the furnace requirements**  **20 for regional standards, because of the**  **21 settlement and what is going on with that, we**  **22 are going to have to clean up those labels and** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 create something for furnaces to update those**  **2 labels with information that doesn't have to**  **3 do with regional standards. And we sought**  **4 some comment on that process. And so, that is**  **5 something we will be working on this fall, to**  **6 just kind of clean that up.**  **7 We also published ranges for the**  **8 central air a week or two ago, but, as**  **9 probably some of you might know, we need to**  **10 send a correction notice on some of those**  **11 numbers. And that will hopefully come out in**  **12 the next couple of days. So, hold off on**  **13 those in terms of if you are doing labels.**  **14 So, that is kind of what is**  **15 happening with the FTC label. And just a**  **16 couple of things before we get into the**  **17 discussion, just my thoughts on this. And**  **18 obviously, I am just speaking for me and not**  **19 the Commission or anything like that.**  **20 The label, the element of the**  **21 label that deals with regional standards is**  **22 really there to help implementation of the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 standards and to help DOE in their program.**  **2 And in my view, it should not be -- we don't**  **3 want that label to wag the dog of this**  **4 operation. The label can be changed if the**  **5 law changes. The label can be changed if**  **6 people think that there is a problem with it**  **7 and we need to update it.**  **8 It is possible that the work that**  **9 you guys are doing might lead to a legal**  **10 scheme, an enforcement scheme, that people,**  **11 when we were doing the label, that people**  **12 didn't really, you know, weren't anticipating.**  **13 The label now assumes that this is enforced at**  **14 the installer label, and the information on**  **15 the label is really there to help the**  **16 installer and the consumer decide, well, can**  **17 I install this here. And if those rules**  **18 change, then we will need to change the label.**  **19 Now, that being said, any changes**  **20 to the label will have to be done at the speed**  **21 of rulemaking.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, we are looking at -- you know,**  **2 what we have got in place now for January is**  **3 what is in place. And I think we will all**  **4 need to live with it. And if this proceeding**  **5 results in differences and changes that we**  **6 need to look at, then we can look at the**  **7 label.**  **8 And if there are ideas, you know,**  **9 things that people are interested in changing**  **10 on the label, that can be discussed. And you**  **11 can always petition the Commission to change**  **12 the rule and that kind of thing.**  **13 My personal view is that at this**  **14 point, given the pretty weighty issues you**  **15 guys are discussing, it might make sense to**  **16 just hold off and see where we are before we**  **17 start fiddling around with the label. But,**  **18 you know, there might be different views on**  **19 that, and I might change my mind on that, too.**  **20 But that is just my thought off the cuff.**  **21 And I guess that is about all I**  **22 have. And my last point is -- I don't have my** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 glasses; I can't read it. So, if anybody has**  **2 any thoughts and wants to talk about it -- I**  **3 think I already covered it.**  **4 MR. RAWALD: And this is Doug.**  **5 And I would note that we have put**  **6 up on the screen behind Hampton the label for**  **7 split-system central air conditioners that**  **8 will be applicable on January 1st that shows**  **9 the range that we were discussing at our last**  **10 meeting.**  **11 MR. NEWSOME: Yes, and I**  **12 understand this, and I have talked with some**  **13 of you about the mini-range that we added to**  **14 the label in response to comments during the**  **15 proceeding. And before that, for decades, the**  **16 label, as everybody knows, had just one number**  **17 for these types of systems that reflected the**  **18 highest sales --**  **19 MR. RAWALD: The highest sales**  **20 volume combination.**  **21 MR. NEWSOME: -- volume, yes. And**  **22 with a little statement that said, you know,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 this will vary depending on what**  **2 coil/condenser combination is installed.**  **3 MR. EISNER: Any questions for**  **4 Hampton?**  **5 MEMBER CLARK: This is Gary Clark**  **6 from Goodman.**  **7 You know, you kind of joked about**  **8 the speed of rulemaking. I mean,**  **9 realistically, if we wanted to make a change,**  **10 you know, ballpark, how long would it take?**  **11 MR. NEWSOME: Well, we are**  **12 generally -- I think the quickest rule I ever**  **13 did was a couple of years ago on like**  **14 biodiesel or something, and we did it in like**  **15 six or seven months or something like that.**  **16 And that was painful.**  **17 And here in this case, given all**  **18 the issues that are floating around, I don't**  **19 know. I can't guarantee it. And a lot of it**  **20 depends on how complicated the issues are,**  **21 what is happening with the workload elsewhere.**  **22 So, at this point, certainly, anything we** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 would start now would be well into next year. **2 MEMBER CLARK: Yes, okay. 3 As you mentioned in the past, the**  **4 only rating that was shown was the highest 5 sales volume tested combination. And there**  **6 were complaints about that because, you know, 7 depending on what you matched up the outdoor**  **8 unit with, you could get a significantly 9 different performance, which is what you have**  **10 depicted in the new change, which we think 11 makes a lot of sense.**  **12 But the fact of the matter is 13 that, at the same time, we took away showing**  **14 what the highest tested sales volume 15 combination is.**  **16 MR. NEWSOME: Uh-hum. 17 MEMBER CLARK: So, from our**  **18 perspective at Goodman, we would be a 19 proponent of making a minor change to what is**  **20 here and adding some denotation of what we 21 think the typical efficiency for this system**  **22 is going to be, like it used to be.**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. NEWSOME: Okay.**  **2 MEMBER CLARK: So, it would be in**  **3 addition to what we have here.**  **4 MR. NEWSOME: And what is the -- I**  **5 can imagine there are several benefits to**  **6 that, but just in your view, what are we**  **7 getting out of that?**  **8 MEMBER CLARK: For instance, with**  **9 a 14 SEER, with the 13 SEER minimum in the**  **10 North and the 14 SEER minimum in the South, as**  **11 part of the regulations, one of the**  **12 requirements for a unit that is sold in the**  **13 South is that its highest sales volume tested**  **14 combination is at least 14 SEER.**  **15 MR. NEWSOME: Uh-hum.**  **16 MEMBER CLARK: And so, for**  **17 instance, on the one that we have up here**  **18 where it shows 13.0 to 14.2, it is difficult**  **19 to decide if that is a qualifier for the**  **20 South --**  **21 MR. NEWSOME: Uh-hum.**  **22 MEMBER CLARK: -- just looking at** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the label.**  **2 MR. NEWSOME: Uh-hum.**  **3 MEMBER CLARK: So, for instance,**  **4 in this example, if we had, let's say, an open**  **5 triangle at 14 SEER or some denotation on**  **6 there that the highest sales volume tested**  **7 combination was 14 SEER, then, too, the dealer**  **8 or the homeowner in the South, they would be**  **9 able to readily understand that that unit if**  **10 a qualifier for the South.**  **11 MR. NEWSOME: Okay. Well, just to**  **12 back up, to deal with my ignorance here, are**  **13 you saying that if the high sales combination,**  **14 that that is the touchstone for whether it is**  **15 installed in the South or not? Is that true?**  **16 MR. RAWALD: This is Doug.**  **17 I want to jump in because that is**  **18 not exactly where we are, and that is part of**  **19 the confusion that we are having in this**  **20 discussion.**  **21 So, there are certain units that**  **22 can be sold not as a system as replacements** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 into a current system. And those pieces that**  **2 are sold individually and to be put into an**  **3 existing system have to be able to be tested**  **4 in compliance with the regional standard. So,**  **5 those would be ones where, because high sales**  **6 volume combination is the touchstone of**  **7 testing, would have to be tested as a**  **8 combination in compliance with the standard.**  **9 When installing a system, what we**  **10 haven't said, and the question that Karen**  **11 asked this morning, and it is still an open**  **12 question, is, if it tested as a combination,**  **13 if there is a combination out there that**  **14 exists that is below 14 and a combination that**  **15 is above 14, is it okay to sell in the region?**  **16 This label presumes that it would be, right,**  **17 that as long as it is matched with coil that**  **18 is performing above 14, it I okay? But we are**  **19 telling you the condenser might be above or**  **20 below 14, depending on what coil it is matched**  **21 with.**  **22 And so, that lack of an answer to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 that question that Karen asked this morning is**  **2 somewhat part of a problem that is indicative**  **3 of what the label might be talking about here.**  **4 So, in Karen's hypothetical, if we**  **5 were to say, as a Department, "Hey, you have**  **6 to have your minimum performance be 14, no**  **7 matter what coil you are mixed with," then**  **8 this would be not usable in the Southern**  **9 Region, and it would have to be at least 14 to**  **10 something above 14.**  **11 Whereas, if we were to come out,**  **12 as a Department, and say, "No, it's okay as**  **13 long as the final installed system performs at**  **14 14 or above," then this label become somewhat**  **15 -- you would say, okay, what are we getting in**  **16 here? What is the combination that works?**  **17 MEMBER CLARK: Yes, I guess my**  **18 comments were -- this is Gary again -- I guess**  **19 my comments were based on the fact that we got**  **20 clarifying information from the Department**  **21 earlier that did not answer Karen's. So, I am**  **22 playing with the cards we have got in front of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 us right now, which would say that that unit**  **2 that we have listed up here might be a**  **3 qualifier in the South.**  **4 MR. NEWSOME: Uh-hum.**  **5 MEMBER CLARK: But, in the example**  **6 I talked about, if the highest sales volume**  **7 tested combination was shown on that label,**  **8 and if it was 14, then it would be a**  **9 qualifier. Or, conversely, if the highest**  **10 sales volume tested combination was 13, and it**  **11 was shown on that chart, we would know that it**  **12 would be a non-qualifier --**  **13 MR. NEWSOME: Okay.**  **14 MEMBER CLARK: -- based on what we**  **15 know right now.**  **16 MR. NEWSOME: Yes. And certainly,**  **17 if the rules are set up in a way that it is**  **18 the high sales volume, then that number would**  **19 be very helpful, in addition to just**  **20 identifying the thing. But, if it is not,**  **21 then you kind of lose that benefit from it.**  **22 And I think, when you are thinking** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 about these issues, this kind of brings up a**  **2 central concern for me is, as the label is set**  **3 up now, we don't want to be in a situation**  **4 where we change those numbers up top or the**  **5 way they are presented in a way that it states**  **6 or implies to people that it is illegal to put**  **7 this unit in a certain area, when, in fact,**  **8 under certain circumstances, it would be legal**  **9 to do so. You know, we kind of put a premium**  **10 on accuracy on the label.**  **11 So, that is just something to**  **12 think about, like, well, if we were trying to**  **13 fix this problem, are we creating a problem**  **14 with the label, so the label is no longer**  **15 accurate? And maybe that can be solved by**  **16 changing the label, or whatever, but it is**  **17 just something to think about.**  **18 MR. RAWALD: I guess I want to**  **19 give Karen a chance to talk. She mentioned at**  **20 the last meeting the idea of a southern label**  **21 versus a northern label. Is that still**  **22 something you think might be helpful, Karen?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER MEYERS: Yes, I think that**  **2 is certainly one approach. But I guess my**  **3 question to you, Hampton, is, how do you**  **4 determine that range? Isn't it based upon the**  **5 DOE, the way that DOE tells you that that unit**  **6 has to be rated?**  **7 MR. NEWSOME: Yes, I think so.**  **8 And I would have to check the rule. I don't**  **9 think we went into a lot of detail on it, and**  **10 it seems to be in the proceeding there wasn't**  **11 any real question. It was just, well, the**  **12 highest and lowest number, and that is what**  **13 the rule requires.**  **14 MR. RAWALD: Right, but the range**  **15 on the label is based upon the certified**  **16 combinations of various basic models the**  **17 manufacturer represents for that condensing**  **18 unit, based upon likely the use of an ARM**  **19 after testing the highest sales volume tested**  **20 combination.**  **21 So, you have your point in time**  **22 where your high sales volume tested** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 combination is and, then, you use your ARM and**  **2 you come up with a range of combinations that**  **3 you would certify based upon different coils.**  **4 And that is the range that would be on that**  **5 label.**  **6 MEMBER SACHS: Are you done,**  **7 Karen?**  **8 Hampton, this is Harvey Sachs, and**  **9 I am glad to see you in person and thanks for**  **10 coming over.**  **11 I think you may have heard by now**  **12 a couple of different things. One of them is**  **13 that this group, which was convened by the**  **14 Secretary, doesn't report to FTC at all, but**  **15 we came together in the hopes of reaching a**  **16 consensus. And what I have heard so far is**  **17 that we are not at consensus yet, but we are**  **18 working hard toward it.**  **19 But the one thing I heard two**  **20 weeks ago, when we met last, where there was**  **21 a consensus, is that your label is going to be**  **22 a key element of an effective regime for** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 explaining this to consumers, for use by**  **2 contractors, and probably for enforcement as**  **3 well.**  **4 So, in that context, you don't owe**  **5 us nothing. But let's assume we do reach a**  **6 consensus here on the time table that we have**  **7 looked at or we have committed to trying to**  **8 reach, which would be October 30th adoption by**  **9 the parent Committee.**  **10 Is that consensus likely to carry**  **11 some weight with your Commissioners to**  **12 influence something analogous to a Direct**  **13 Final Rule, or whatever, that would allow a**  **14 proceeding to make the incremental changes in**  **15 the label that might really help occur**  **16 quickly?**  **17 MR. NEWSOME: Well, you know, I**  **18 can't predict exactly what will happen as this**  **19 moves along. But, obviously, if DOE comes out**  **20 with requirements that make these labels**  **21 obsolete, inaccurate, what have you, then we**  **22 will need to look at changing the labels, and** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 in a timeframe that is consistent with the**  **2 implementation of the new enforcement regime.**  **3 So, clearly, that kind of the first issue.**  **4 If the results don't really change**  **5 the content of the label, but there are lots**  **6 of ideas about, well, the label would serve**  **7 the program much better if this information or**  **8 that information was on that, then that is**  **9 also something we would consider.**  **10 We will obviously be following**  **11 this proceeding and talking to DOE staff. And**  **12 so, we are not going to be going back over**  **13 there and just forgetting about it.**  **14 MEMBER MEYERS: So, Hampton, this**  **15 is Karen with Rheem again.**  **16 You know, I would submit to you**  **17 that that label would be illegal in the South**  **18 because the least-efficient on that range is**  **19 not 13, per the new efficiency regulations, is**  **20 not 14. So, you have a range of 13 to 24.5**  **21 would show the legal, what you are saying are**  **22 legal minimum efficiency standards. That is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 not true, though, for units sold in the South.**  **2 That range, that minimum should be 14.**  **3 MR. NEWSOME: Well, this label**  **4 applies to all products in this category. And**  **5 so, that range is accurate for all products.**  **6 Now the information here on the regional**  **7 standards in the chart explains that in some**  **8 areas that 13 is not going to cut it. So,**  **9 that is the way this label is set up.**  **10 You know, I have heard people talk**  **11 about, well, that there should be multiple**  **12 labels, or whatever. And that is something**  **13 that, as you all move along, it is something**  **14 that you can consider.**  **15 But, for now, that range applies**  **16 to all the products, and it is not meant to be**  **17 necessarily a reflection of the standards. It**  **18 is a reflection of what is on the market**  **19 there.**  **20 It happens that, you know, always**  **21 the bottom of the range generally matches what**  **22 the lowest DOE number is.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER SACHS: But just a nuance,**  **2 a product rated at less than 14 is not going**  **3 to be on the market in the South.**  **4 MR. NEWSOME: Okay.**  **5 MEMBER SACHS: And I think that is**  **6 what Karen is driving at. And I certainly**  **7 don't know where I am going to come out yet,**  **8 but I am sympathetic to this point of view**  **9 that that particular label may be quite**  **10 confusing to people who look at the bar and**  **11 don't see the fine print.**  **12 MR. NEWSOME: Uh-hum. Well, this**  **13 label, because of all the different standards**  **14 that apply here, because we are talking about**  **15 EER levels, too --**  **16 MEMBER SACHS: Yes.**  **17 MR. NEWSOME: -- in the rulemaking**  **18 the final product is a single label for this**  **19 product category. For other products, single**  **20 package and for the furnaces that are now**  **21 obsolete, because those are much more**  **22 straightforward, those standards, we were able** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 to have these kind of custom labels, like this**  **2 product, it can only be installed in these**  **3 states. And I think all of you have seen**  **4 that.**  **5 For this split-systems, because of**  **6 all of these numbers here, instead of having**  **7 eight different labels, we have this one**  **8 common label that has all the rules in one**  **9 place right there.**  **10 MEMBER SACHS: We certainly**  **11 appreciate that, and I am just trying to --**  **12 MR. NEWSOME: Yes, and I**  **13 understand the point you are raising. But**  **14 this is what was proposed during the**  **15 rulemaking and what came out of it.**  **16 MR. RAWALD: Yes, and, Hampton,**  **17 this is Doug.**  **18 So, I guess an interesting point**  **19 for the folks here might be, is there any sort**  **20 of precedent of, or would there be any**  **21 interest in, having differing labels based**  **22 upon the regions that are more akin to being** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 explicit to what the standard would be for**  **2 that region? So, a northern versus a**  **3 southeastern versus a southwestern label, to**  **4 kind of eliminate the extra information that**  **5 is on the label and make it for that**  **6 particular region.**  **7 I can't imagine what extra burden**  **8 that would create as far as trying to label**  **9 these various products before they go out, but**  **10 I just wonder, from the Commission's point of**  **11 view, if there is anything else like that.**  **12 MR. NEWSOME: Well, for the other**  **13 product categories the labels are like that.**  **14 MR. RAWALD: Yes.**  **15 MR. NEWSOME: And I can't keep all**  **16 this stuff in my head, but for furnaces we**  **17 have a label that has, if it is below a**  **18 certain level, then it has a map of the U.S.**  **19 and says, "This product cannot be" -- or "can**  **20 only be installed in these states". So, yes,**  **21 the answer is, yes, it has been done.**  **22 But, for this particular product** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 category -- and this is the only one, the**  **2 rulemaking, where we have this consolidated**  **3 label that has all the information in one**  **4 place, just because there are so many numbers**  **5 there.**  **6 MEMBER SACHS: This is Harvey.**  **7 And if I could offer a pet peeve**  **8 that I have heard from several people, it is**  **9 not a northern versus a southern label; it is**  **10 a national label versus perhaps a northern**  **11 label. It is one that can be sold anywhere**  **12 versus one that is restricted in its sales to**  **13 the Northern Region because it has a**  **14 relatively-low SEER.**  **15 MR. NEWSOME: Yes, and that is the**  **16 way it works for the other products. The**  **17 labels for products that are compliant**  **18 everywhere, there is no map or anything.**  **19 There is just a statement that says this can**  **20 be installed anywhere, or whatever. I can't**  **21 remember the details, but --**  **22 MR. RAWALD: No, Harvey, I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 appreciate that point. I think it is a very**  **2 fine distinction, and one that I am not making**  **3 when I talk. And so, I really appreciate**  **4 that.**  **5 MEMBER SACHS: I was just**  **6 disclaiming responsibility for the statement.**  **7 This was Harvey saying I picked it up from**  **8 somebody here and recycled it.**  **9 Thank you.**  **10 MR. EISNER: Any other questions,**  **11 comments?**  **12 MEMBER BALLO: This is Tim with**  **13 Earthjustice.**  **14 Just one point to follow up on,**  **15 though. Although the labels are distinct and,**  **16 as you say, they say the product can be**  **17 installed in any state, and there is another**  **18 label that says only in these states, the**  **19 range information for furnaces still starts at**  **20 80 for all products, whether they are in the**  **21 northern label or the southern label. So, I**  **22 guess we are asking for something different,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 then, for these products.**  **2 MR. NEWSOME: Okay.**  **3 MR. EISNER: Other comments?**  **4 Charlie?**  **5 MEMBER McCRUDDEN: This is Charlie**  **6 McCrudden with the Air Conditioning**  **7 Contractors of America.**  **8 You know, I realize that this**  **9 label is a tool for consumers to compare**  **10 similar products when making purchases. And**  **11 we are sort of shoehorning that into the**  **12 application of regional or the enforcement of**  **13 regional standards here.**  **14 And so, because of that, I think**  **15 legibility is so critical for the contractor**  **16 and the consumer. So, that is my plug from**  **17 the contractors' side, is that if there is a**  **18 reason to make changes to this label, if it is**  **19 possible, I think they would make these labels**  **20 much more legible and lead to greater**  **21 enforcement because I think -- and our**  **22 comments during the rulemaking process said** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 this -- you know, the homeowner can be a last**  **2 check to an illegal installation. And that**  **3 can only be accomplished if they, too, can**  **4 understand. And that is part of what we will**  **5 do, I think, with DOE outreach on the changes**  **6 that come out. I know all the manufacturers**  **7 and everyone has pledged to help understand**  **8 legibility. So, that is my plug.**  **9 MR. NEWSOME: Uh-hum. I am**  **10 curious in terms of the installer. What are**  **11 your thoughts on this label? Like how often**  **12 are they going to be referring to it? I mean,**  **13 I don't know what -- I don't have anything in**  **14 particular in mind. But, just if you see it**  **15 once, a couple of times, do you recheck it**  **16 every couple of months to make sure I remember**  **17 this? Because they are not going to be using**  **18 it in every install.**  **19 MEMBER McCRUDDEN: Well, I mean,**  **20 under your new rules, the contractor has to**  **21 provide that label.**  **22 MR. NEWSOME: That is true, to the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 consumer. But, in terms of the function, this**  **2 is the only label we have that is kind of this**  **3 dual consumer/retailer label. We don't have**  **4 any other labels that really have a lot of**  **5 information for the seller on it. And so, it**  **6 is kind of like a new carrot; it is like this**  **7 hybrid label.**  **8 And I imagine that the retailer is**  **9 not going to be looking at it every day. "Let**  **10 me check my label again."**  **11 MEMBER McCRUDDEN: Well, okay, I**  **12 will just take it. We are not using the word**  **13 "retailer".**  **14 (Laughter.)**  **15 MR. NEWSOME: Yes. Well, I know.**  **16 I use that because in this labeling program**  **17 most of the other products we are talking**  **18 about stores, you know.**  **19 MEMBER McCRUDDEN: We had about an**  **20 hour-and-a-half on --**  **21 MR. NEWSOME: Yes, and I didn't**  **22 mean to offend anybody.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER McCRUDDEN: I am not sure**  **2 how to answer the question in terms of the**  **3 contractors' behavior with this label and how**  **4 often they refer to it. And do they become**  **5 sort of inured to it over time because it is**  **6 just there and it is on every box, and do they**  **7 notice it?**  **8 But, again, going back to the**  **9 point where, under your new rules, the**  **10 contractor has to provide this label to the**  **11 customer before the purchase occurs. And that**  **12 can be satisfied by providing the**  **13 manufacturers information because, under your**  **14 rules, the manufacturers have to make that**  **15 information in their materials or on their**  **16 websites. So, based on that, I am assuming**  **17 that that purpose is being met every time.**  **18 MR. NEWSOME: Uh-hum. Okay.**  **19 MR. EISNER: Other comments,**  **20 questions? Anybody online?**  **21 (No response.)**  **22 Okay. No more. Thank you for** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 coming over.**  **2 MR. NEWSOME: All right. Well,**  **3 thanks.**  **4 MEMBER MEYERS: Sorry, I do have**  **5 one more question. You say on the label that**  **6 the system's efficiency rating depends on the**  **7 coil your contractor installs with this unit.**  **8 So, what do you mean by that? Are you talking**  **9 about a coil-only rating?**  **10 MR. NEWSOME: We are talking about**  **11 the combination of the coil and condenser, and**  **12 that language has been on there since the**  **13 eighties, I think. I don't think it is that**  **14 much different than what's --**  **15 MEMBER MEYERS: So, not the**  **16 blower?**  **17 MR. NEWSOME: I think it is the**  **18 coil/condenser combination that kind of -- I**  **19 don't know --**  **20 MR. RAWALD: Yes, it may be a**  **21 little bit too technical in here.**  **22 MR. NEWSOME: Help me out.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: So, it would be the**  **2 rating that you would certify to DOE is what**  **3 we are trying to reflect, understanding that,**  **4 of course, the blower can affect that rating.**  **5 But this is what we are getting at here. We**  **6 are talking it varies, based upon the**  **7 different parts that you may use it with. And**  **8 I think the word "coil" has been used over**  **9 time, but I do understand the distinction that**  **10 the blower may also affect the rating, uh-hum.**  **11 That is something that you guys**  **12 could point out. I guess, to Hampton's**  **13 credit, they have been using the same language**  **14 for quite a long time. So, it is something**  **15 that never was pointed out before, but maybe**  **16 we should point out in the future.**  **17 MR. NEWSOME: I mean, is this is a**  **18 relatively-new thing?**  **19 MEMBER ROCKY: No.**  **20 MR. NEWSOME: So, it has been**  **21 there forever.**  **22 MEMBER ROCKY: So, Bryan Rocky.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, I believe, if I remember**  **2 right, that language came about in discussions**  **3 related to the independent coil manufacturers.**  **4 Whereas, they cannot provide a rating on this**  **5 label, but we have to do, as the condenser**  **6 unit manufacturer. So, that, I think, was the**  **7 original text there. If you have an**  **8 independent coil, you might have a different**  **9 rating than what is on here. But it was**  **10 usually a minimum or above. It wasn't a**  **11 range, like we are talking about.**  **12 MEMBER LATTANZI: Yes, I'm sorry,**  **13 this is Matt Lattanzi.**  **14 If you go back one slide, the**  **15 language actually is different. It is quite**  **16 different. If you go back one slide, you can**  **17 see the difference.**  **18 There you go, right there. The**  **19 second bullet down.**  **20 MR. RAWALD: Right, but I think**  **21 the consistency here is that it still says**  **22 coils without recognition of the blower.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. NEWSOME: The language is**  **2 different, but it is the same message.**  **3 MR. RAWALD: Uh-hum.**  **4 MR. NEWSOME: And this is just**  **5 less words in the new one.**  **6 MEMBER LATTANZI: I'm sorry, I**  **7 think it is more specific on the old label.**  **8 MR. NEWSOME: Because of the word**  **9 "slightly"?**  **10 MEMBER LATTANZI: No. Because of**  **11 the word "combined with the most common coil".**  **12 I think, in my mind, that is the key**  **13 distinction between that label and the new**  **14 label.**  **15 MR. NEWSOME: That is because the**  **16 old label only had one number, and that was**  **17 the common coil. And the new label doesn't**  **18 have that information anymore, which was what**  **19 was proposed by industry. They wanted to**  **20 change that. So, that old language would no**  **21 longer be accurate on the label.**  **22 MEMBER LATTANZI: Okay.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. RAWALD: Are there any other**  **2 questions for Hampton?**  **3 Karim?**  **4 MR. AMRANE: This is Karim with**  **5 AHRI.**  **6 Does the label apply to one basic**  **7 model or it applies to a range of basic**  **8 models?**  **9 MR. NEWSOME: What, a single label**  **10 or?**  **11 MR. AMRANE: Yes.**  **12 MR. NEWSOME: Well, we generally**  **13 allow, if the information on the label, if the**  **14 rating applies to several different models --**  **15 and this is common across product categories,**  **16 including white goods -- the manufacturer can**  **17 provide multiple model numbers on the label,**  **18 so that it could apply to several basic**  **19 models, as long as that information on the**  **20 label is accurate for all those models.**  **21 MR. EISNER: Okay. One more**  **22 chance. Anybody else?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 (No response.)**  **2 Comments? Questions? Online?**  **3 (No response.)**  **4 Okay.**  **5 MR. NEWSOME: All right. Well,**  **6 thanks a lot.**  **7 MR. EISNER: Thank you.**  **8 MR. NEWSOME: And if anything else**  **9 comes up, just let me know.**  **10 MR. EISNER: All right. We are**  **11 back to knowingly selling.**  **12 (Laughter.)**  **13 MR. RAWALD: Knowingly violating.**  **14 MR. EISNER: Anybody get some good**  **15 ideas during the break?**  **16 (No response.)**  **17 So, we are okay with where we are?**  **18 Anybody want to tell me where we are?**  **19 (Laughter.)**  **20 MR. RAWALD: Right. So, as I**  **21 recall, Neil had posed a question to the**  **22 group, and then, I had thrown a second** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 question to the group.**  **2 And so, I guess I would be curious**  **3 to hear if there are any thoughts on the need**  **4 for the Department, as a predicate matter, to**  **5 find someone to be a routine violator before**  **6 taking the step of bringing an action against**  **7 a manufacturer for knowingly selling to that**  **8 routine violator.**  **9 As I explained -- and I want to**  **10 translate this from what we currently do to**  **11 what may be in this context -- so, in the case**  **12 of a product that is found noncompliant, what**  **13 the Department does now is we first issue a**  **14 Notice of a Noncompliance Determination. We**  **15 say, hey, we tested your refrigerator and it**  **16 didn't meet the minimum standard.**  **17 And then, we go ahead, and after**  **18 issuing that notice, we, then, follow it up**  **19 with a Notice of Proposed Civil Penalties,**  **20 saying, okay, now because you sold this**  **21 refrigerator, we are going to charge you money**  **22 for selling that bad refrigerator.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 In the corollary context here with**  **2 this particular concern that we have here --**  **3 and there is something popping up on the**  **4 window; I don't know if we can get rid of that**  **5 -- well, the question is, do we a Notice of a**  **6 Finding that someone is a regional violator or**  **7 routine violator -- excuse me -- of the**  **8 regional standard before taking action against**  **9 the manufacturer for assessing civil penalties**  **10 for knowingly selling to that routine**  **11 violator?**  **12 There is hand up in the back from**  **13 Don Surrena. I guess he wants to jump right**  **14 in.**  **15 MR. SURRENA: Don Surrena, NAHB.**  **16 If it is a routine violator, they**  **17 have done it more than once. So, until they**  **18 become routine, whatever "routine" means, then**  **19 the Department wouldn't be inclined to let the**  **20 manufacturer know that there would be a**  **21 penalty.**  **22 But the Department could let them** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 know if there was a violation of their product**  **2 use, so that the manufacturer could know who**  **3 it was that did it. That is how you would**  **4 establish routine. More than once could be**  **5 considered routine. Seven times could be**  **6 routine. It has got to be more than once to**  **7 be routine.**  **8 MR. EISNER: When you are using**  **9 that, though, part of the question is, for**  **10 enforcement purposes, not when the agency**  **11 knows it, but when the manufacturer knows it**  **12 or should have known it. So, the agency may**  **13 have reason to do an investigation. It does**  **14 the investigation and it finds out, once**  **15 again, for the past year, that this guy has**  **16 been installing these devices that are illegal**  **17 in that area, and the manufacturer should have**  **18 known it.**  **19 No prior knowledge information**  **20 published by the Department of Energy because**  **21 they didn't know about it. But, when they did**  **22 find out about it and investigate it, what if** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 they found routine violations going on all the**  **2 time? And they can also show that the**  **3 company, the manufacturer, should have known**  **4 that or did that know that?**  **5 MR. SURRENA: If the manufacturer**  **6 knowingly continued it for 100 units, that is**  **7 knowingly. If they had no knowledge of it,**  **8 they were just making the sales, then it is**  **9 not knowingly known.**  **10 MR. EISNER: Knowledge is a**  **11 requirement, but the statute I believe says**  **12 "should have known".**  **13 MR. SURRENA: I believe it says**  **14 "should have". I don't know that, but --**  **15 MR. RAWALD: And the definition of**  **16 "knowingly," it is both actual knowledge and**  **17 we could say constructive knowledge under law,**  **18 which is should have known from your standard**  **19 practice. So, we don't want manufacturers**  **20 turning a blind eye. So, that is what the**  **21 "should have known" part is. So, that is what**  **22 knowingly can be defined, as both actual** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 knowledge and should have known type of**  **2 knowledge.**  **3 MR. SURRENA: And circumstance**  **4 determines whether it was knowingly done. If**  **5 there's 100 cases of it, then an investigation**  **6 is taken to the manufacturer. If he did not**  **7 knowingly know it or shouldn't have known it,**  **8 then there is not a violation.**  **9 MEMBER SHEPHERD: So, Doug, you**  **10 are asking us whether we think that,**  **11 basically, there would never be a charge**  **12 against a manufacturer under this section**  **13 unless the Department has first issued a**  **14 Notice of Violation? Is that what you are**  **15 asking?**  **16 MR. RAWALD: I am asking you folks**  **17 if that is a necessary predicate, yes.**  **18 MEMBER SHEPHERD: Does everybody**  **19 get that?**  **20 MR. RAWALD: Uh-hum, right. And I**  **21 guess with that comes the corollary question,**  **22 which would be, is it only sales after such a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 notice would be issued or could I issue a**  **2 notice saying this person is a routine**  **3 violator, and, by the way, picking on Karen**  **4 because she is not here, "Rheem, you sold them**  **5 units now for the past year. You have been**  **6 knowingly violating that." Or do I have to**  **7 wait until after I make that notice and, then,**  **8 I can go after Rheem, to pick on Karen, with**  **9 no actual value to that statement?**  **10 MEMBER SACHS: Doug, this is**  **11 Harvey.**  **12 And us geeks would try to think**  **13 about a logic tree or a flowchart. And the**  **14 first question you asked is, once we have**  **15 identified a routine violator -- reports have**  **16 come in from somewhere and we followed them**  **17 up, and this is a routine violator -- should**  **18 we publish that information? And to me, the**  **19 answer -- and there may be counterarguments --**  **20 but the answer is a resounding yes.**  **21 I just picked up in The Washington**  **22 Post today a small news item about a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 California automobile dealer who has just been**  **2 arrested for resetting the odometers on 60,000**  **3 vehicles.**  **4 There is a naming and shaming**  **5 which happens in the marketplace. And if you**  **6 have had any sort of a quasi-due-process about**  **7 discovering that this, in fact, a routine**  **8 violator, I think the public needs to know.**  **9 MR. RAWALD: So, I think you raise**  **10 a couple of great points there. So, first of**  **11 all, in these corollary Notice of**  **12 Noncompliance Determinations that I keep**  **13 bringing us back to for manufactured products,**  **14 I would say that in my enforcement experience**  **15 some or many manufacturers actually find that**  **16 to be more of a penalty than the actual civil**  **17 penalty they pay to the government. You know,**  **18 the paying of thousands of dollars is much**  **19 less concerning to them than the public shame**  **20 of having produced or manufactured a**  **21 noncompliant product.**  **22 MEMBER SACHS: But in this case, a** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 potential violator, if I am understanding you,**  **2 is not -- the habitual, the routine violator**  **3 would be some sort of scumbag contractor.**  **4 MR. RAWALD: Well, it would be a**  **5 distributor, dealer, or contractor, as**  **6 enumerated by the statute.**  **7 MEMBER SACHS: Right.**  **8 MR. RAWALD: Uh-hum.**  **9 MEMBER SACHS: And that has at**  **10 least some fig leaf of plausible deniability**  **11 for the manufacturer.**  **12 But the point is that, in terms of**  **13 community things, in terms of community**  **14 broadcast news, stuff like this, in terms of**  **15 publicity, utility incentive programs, and a**  **16 lot of other things, identifying that bad**  **17 actor is, I would think, a pretty powerful --**  **18 MR. RAWALD: And excuse me,**  **19 Harvey. I agree with you.**  **20 MEMBER SACHS: Okay.**  **21 MR. RAWALD: Yes. I agree with**  **22 you.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER SACHS: So, then, the**  **2 question is, the next step in the logic flow**  **3 is enforcement action against the**  **4 manufacturer. And I am just trying to make**  **5 the point that, to me, that is a separate item**  **6 from the question of the initial disclosure.**  **7 MR. RAWALD: No, I am 100 percent**  **8 along the same lines of you, which is why I am**  **9 asking the question.**  **10 (Laughter.)**  **11 Do we need to have this predicate**  **12 action? I think there is some value in that.**  **13 But it is out there, put on the table. We**  **14 have no regulation regarding it. As a**  **15 question for the group, do you believe that we**  **16 should create some sort of process by which we**  **17 issue a notice saying this person is a routine**  **18 violator, thereby putting the public shame,**  **19 and also putting the manufacturers on notice,**  **20 hey, you shouldn't be playing in the sandbox**  **21 with this person because they have been a**  **22 routine violator?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. 

### 1 MR. HURST: This is John Hurst **2 with Lennox. 3 I support that. I like the idea**  **4 of the Department being the arbiter as to who 5 is a bad actor or not. And that takes the**  **6 subjectivity out of the manufacturer's hands. 7 Can you go back to the other**  **8 definition that you had up there? 9 MR. RAWALD: The previous.**  **10 MR. HURST: The previous, yes. 11 Okay. So, here's the question**  **12 then: if the Department does identify a bad 13 actor, it is now unlawful for us to sell to**  **14 that bad actor. They are, in fact, out of 15 business. That is what we are saying.**  **16 MR. RAWALD: That is my question 17 to you, folks, as members of the industry.**  **18 What would be the impact associated with a 19 finding by the Department? I can only tell**  **20 you from the manufacturers' point of view -- 21 MR. HURST: It has teeth.**  **22 MR. RAWALD: Yes.**

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. HURST: It's got teeth.**  **2 You're out of business.**  **3 MR. RAWALD: Uh-hum.**  **4 MR. HURST: Yes.**  **5 MR. EISNER: And to put them out**  **6 of business, remember, it is not the day they**  **7 say, "We are bringing an action against you."**  **8 It is the day it is upheld through all legal**  **9 challenges. That is the way I would read it.**  **10 MEMBER CLARK: Yes, that is what I**  **11 was wondering. You know, I guess I am okay**  **12 with what you are saying, as long as there is**  **13 due process, right? You know, we would hate**  **14 for the announcement to go out because there**  **15 is a thought that maybe there is an issue.**  **16 And then, as you peel back the onion, six**  **17 months later you say, "Whoops, there really**  **18 wasn't a problem." Well, for six months, it**  **19 has been a big problem for somebody, which**  **20 doesn't seem right. So, as long as we put**  **21 things in the right order, you know, it makes**  **22 sense.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER BALLO: This is Tim with**  **2 Earthjustice.**  **3 And I actually don't agree that**  **4 the manufacturer should have no liability**  **5 until there has been a finding by the**  **6 Department that there is routine violations**  **7 occurring, because that allows the**  **8 manufacturer to collude with the contractor or**  **9 the dealer or distributor, whoever, up to the**  **10 point where the Department makes a finding**  **11 and, then, say, "Oh, we're pulling back now**  **12 and we have clean hands."**  **13 MR. RAWALD: Right, and that gets**  **14 to my second question I had before, which is,**  **15 would any action against the manufacturer have**  **16 to wait until a Department finding or, if I**  **17 found someone was a routine violator, and, oh,**  **18 by the way, Company X -- and I named Karen's**  **19 company before, just out of pure convenience**  **20 -- has been dealing with that company for the**  **21 past year. So, they actually are liable for**  **22 what they have been doing. So, how do we view** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 those two operating together, I guess is my**  **2 question.**  **3 MR. HURST: This is John Hurst**  **4 from Lennox.**  **5 And, Tim, we're not that evil.**  **6 (Laughter.)**  **7 I think, as manufacturers, as I**  **8 think through that, it would be incumbent upon**  **9 me -- these are our customers, by the way,**  **10 these folks that actually buy our equipment**  **11 and, then, install it. I have no desire to**  **12 put my customers out of business. What I want**  **13 them to do is I want them to install my**  **14 product correctly, and I want it to be**  **15 compliant with the law because a homeowner,**  **16 regardless of which side of the river, if they**  **17 get a noncompliant product and they have a**  **18 warranty issue, that ultimately comes back to**  **19 me.**  **20 So, I have no vested interest, as**  **21 a manufacturer, saying a contractor cheat**  **22 installed the wrong stuff. And if I am** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 starting to see bad stuff, I am going to tell**  **2 my customer, and I am certainly going to tell**  **3 my District Manager and my Territory Manager,**  **4 "You need to get this contractor straight on**  **5 abiding by the law, because if he gets busted**  **6 or when he gets busted, he's out of business,**  **7 and that sale that you had to have last month**  **8 is gone." So, I think there is an incentive**  **9 for the manufacturer to ensure that their**  **10 customers are doing the right thing.**  **11 MEMBER MELCHI: This is Jon Melchi**  **12 with HARDI.**  **13 I want to echo what Gary said**  **14 about due process in this. If we are going to**  **15 talk about putting somebody out of business**  **16 for what may be two violations of this, it is**  **17 my assumption that every manufacturer at this**  **18 table has probably gotten a letter from you**  **19 more than twice. We are talking about, I**  **20 think, somebody's livelihood and what they do**  **21 for a living. So, I do want to make sure**  **22 that, if we are talking about making this sort** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 of information, whether it is a two strikes**  **2 and you're out, a public airing of grievances,**  **3 that all steps have been taken to make sure**  **4 that you have, indeed, proven that they**  **5 knowingly and willfully violated the standard.**  **6 Because it just seems, you know, I**  **7 think we all want strict enforcement, but just**  **8 the thought of --**  **9 MR. EISNER: I think I am hearing**  **10 two different things here. I heard, one, you**  **11 have to find the installer is a bad operator**  **12 before you can go after the manufacturer for**  **13 doing --**  **14 MEMBER MELCHI: No, and I --**  **15 MR. EISNER: And you're saying now**  **16 you have to prove the manufacturer knowingly**  **17 and willingly did something.**  **18 MEMBER MELCHI: No. No, no. No,**  **19 what I am saying is that, if you are going to**  **20 make public or make known to a manufacturer**  **21 that a contractor has routinely violated the**  **22 regional standard, that every step needs to be** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 taken properly -- and I am not clear what**  **2 those steps are today -- to ensure that that**  **3 is, indeed, the truth.**  **4 Because if you, for some reason,**  **5 put out a public list that says this guy is a**  **6 bad actor, then none of these manufacturers**  **7 will be able to sell to him. You have**  **8 effectively put him out of business. So,**  **9 everything needs to be done, all due processes**  **10 to make sure that that is, indeed, the case.**  **11 And today, I am still unclear as to how you**  **12 would prove that.**  **13 MR. RAWALD: Right. And, Jon,**  **14 this is Doug.**  **15 So, there is a blank slate as far**  **16 as what the process would be, right, because**  **17 this is a new process. So, the question is**  **18 maybe you folks -- and I am looking at you and**  **19 Charlie and also at Chuck, who would be the**  **20 ones representing people who would be affected**  **21 by such a finding -- could put together kind**  **22 of a list of the things that you think would** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 be an appropriate method of finding or**  **2 according due process before reaching such a**  **3 finding. I think that might be at least kind**  **4 of a framework of, hey, here is what we think**  **5 we need before one of our guys should be found**  **6 to be a violator. That might be helpful for**  **7 us for discussion.**  **8 MR. EISNER: Let me also raise**  **9 another question that I am having a little**  **10 trouble putting my hands around here. We**  **11 still have to define what is "routine". So,**  **12 let's keep it simple. Three violations within**  **13 six months or three violations within a year,**  **14 that is it.**  **15 So, Case No. 1, a company does a**  **16 bad installation. The company, they shouldn't**  **17 have put that in. They propose a fine. The**  **18 company pays the fine, essentially, admitting**  **19 I did bad.**  **20 A month later, the same company**  **21 pays a fine, admitting they did it a second**  **22 time. The third time rolls around. They pay** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the fine. Now they have also met the standard**  **2 for "routine" if you establish this three in**  **3 six months.**  **4 So, what is it you are asking?**  **5 You have still got to define what "routine"**  **6 is. And does "routine" automatically, when**  **7 you get to the third one, does that**  **8 automatically happen? The record is there on**  **9 the database that they have paid three fines**  **10 in six months. Therefore, they are a bad**  **11 operator.**  **12 Are you expecting, also, for DOE**  **13 to send out a letter to all manufacturers**  **14 saying, "You can't deal with this guy**  **15 anymore."?**  **16 MEMBER CLARK: So, this is Gary.**  **17 On the subject of what constitutes**  **18 "routine," I think it ought to take into**  **19 consideration how big the dealer is or what**  **20 the volume is because one or two sales for a**  **21 small dealer might constitute "routine," but**  **22 for a large dealer that is selling hundreds of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 these units every year, you know, one or two**  **2 instances might not constitute "routine".**  **3 MR. EISNER: And again, I would**  **4 ask a question. Do you want it to be**  **5 automatic, so it is very clear when it is**  **6 going to happen? So, if it is, instead of**  **7 three in six months, it is 3 percent of the**  **8 units that you have sold in six months, and**  **9 there are 2.9 percent, and the next**  **10 installation would put them over the top, so**  **11 they just don't install any more for the next**  **12 six months. Are they okay?**  **13 MEMBER BALLO: This is Tim.**  **14 I am not sure we should tailor the**  **15 regulations around the small end of the**  **16 market, I am basing it on as a percentage of**  **17 their total business, because I think the**  **18 small end of the market is going to escape**  **19 whatever we come up with.**  **20 I would be more interested in**  **21 coming up with, to the extent we want to**  **22 define "routine," which I guess I can** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 understand the desire to do so, something that**  **2 is triggered either by a certain number of**  **3 violations within a time period or a certain**  **4 total number of products. So that we are**  **5 getting after the big players that have turned**  **6 to the dark side, I guess, for lack of a**  **7 better term.**  **8 MEMBER SACHS: Neil?**  **9 MR. EISNER: Harvey?**  **10 MEMBER SACHS: This is Harvey.**  **11 And I want to rewind the tape**  **12 about two minutes and just get back on the**  **13 record to Jon's very real concerns. I think**  **14 I used, in raising this topic of "routine**  **15 violators," the term "due process". But I**  **16 think there is a lot of discussion about what**  **17 that actually means. I certainly don't mean**  **18 something analogous to criminal law. Again,**  **19 I am not an attorney, but the standard has to**  **20 be much more lax than that. This is a civil**  **21 matter.**  **22 And I am just a little bit** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 concerned that we could drag out the**  **2 disqualification of the contractor for many**  **3 years at exorbitant cost if we have a real bad**  **4 actor.**  **5 MR. EISNER: This is something for**  **6 the lawyers to look at then.**  **7 MEMBER SACHS: Yes.**  **8 MR. EISNER: Because you have all**  **9 referred to it as "putting them out of**  **10 business". That could be a constitutional**  **11 violation that would require the kind of due**  **12 process you describe perhaps.**  **13 MEMBER SACHS: We have there, if I**  **14 might comment, an assertion by Mr. Hurst, for**  **15 whom I have the greatest respect, but this is**  **16 not an established fact, either. There is**  **17 just an awful lot has got to be gone through**  **18 before we can say what the appropriate due**  **19 process is for that finding of a routine**  **20 violator.**  **21 MR. EISNER: So, was it an**  **22 established fact that Hurst was respected** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 or --**  **2 (Laughter.)**  **3 MEMBER SACHS: Yes, I think it is**  **4 an established fact that Mr. Hurst is a 13,**  **5 the lowest common denominator.**  **6 (Laughter.)**  **7 So, John, I just wanted to make**  **8 sure that I don't accept the extrapolation**  **9 from what you were suggesting; I think that is**  **10 an open issue.**  **11 Thank you, and we return now to**  **12 our regular programming.**  **13 (Laughter.)**  **14 MEMBER MEYERS: So, this is Karen**  **15 with Rheem.**  **16 So, I am still very fuzzy on this.**  **17 So, if there is a contractor who illegally**  **18 installs 10 Rheem units, how I am, as the**  **19 manufacturer, responsible for that when I**  **20 didn't sell him those units? I sold my units**  **21 to the distributor. And the contractor**  **22 installed them in an illegal region, but I** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 didn't sell them to him.**  **2 So, you're coming after me as a**  **3 manufacturer and saying, "You have to quit**  **4 doing business with him." I'm not doing**  **5 business with him.**  **6 So, I am still very fuzzy on how**  **7 this would work because I don't see -- you**  **8 know, I am missing the connection.**  **9 MR. EISNER: I think -- and again,**  **10 you have got lawyers in the room to give you**  **11 advice on that -- you wouldn't have a problem**  **12 there. If the person you are dealing with you**  **13 should have known was violating, not some**  **14 person you didn't deal with and know nothing**  **15 about that person even having your product.**  **16 So, it is knowingly sell a product to someone**  **17 you know, you deal with, that violates it.**  **18 And what you have described in**  **19 terms of the way the world works is the**  **20 manufacturer can sell to any one of those**  **21 people, the distributor, the dealer, because**  **22 you could perform all of those things.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, if you know the person or**  **2 should have known that the person is illegally**  **3 installing it, then you have got a problem.**  **4 But, if you don't, and you are selling it to**  **5 a distributor who as far as you know is doing**  **6 a perfectly-legal job --**  **7 MEMBER MEYERS: Yes. Yes, I am**  **8 selling to the distributor, but the**  **9 distributor is not installing it.**  **10 MR. EISNER: Right. So, you**  **11 probably wouldn't be in a situation, if you**  **12 are not in a situation to know what the last**  **13 person in the chain is doing, you probably**  **14 have no problem under that.**  **15 MEMBER SACHS: Karen, this is**  **16 Harvey.**  **17 And to me, this is a "Get Out of**  **18 Jail Free Card" for you.**  **19 MEMBER MEYERS: That's what I'm**  **20 reading.**  **21 MEMBER SACHS: That is why, to me,**  **22 it is very important that this finding of** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 routine violator establishes an action.**  **2 Linking that to something you should have**  **3 known is a much higher bar. So, it is going**  **4 after, to the extent DOE can do that, the**  **5 guilty, the direct actor, rather than someone**  **6 indirect.**  **7 And if there are thousands of them**  **8 going to some production builder in Kalamazoo**  **9 -- no -- in Huntsville, Alabama, it is a**  **10 different story. But that is why I wanted to**  **11 focus on that routine violator side, because**  **12 they haven't made -- what they haven't**  **13 established with Jon's perfect process that**  **14 this was a routine violator, that has not**  **15 established, as I understand this as a non**  **16 lawyer, that you bear responsibility for**  **17 should have been knowledgeable.**  **18 MR. EISNER: And again, maybe you**  **19 ought to bring in a lawyer to talk about this**  **20 or hiring --**  **21 MR. RAWALD: I'm right here.**  **22 (Laughter.)** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MR. EISNER: You are saying you**  **2 are giving it over to the lawyer.**  **3 MR. RAWALD: There are certain**  **4 Neil questions that are our initial law**  **5 questions; they are referring to law. This is**  **6 directly in my wheelhouse. So, I am clear to**  **7 talk about this.**  **8 (Laughter.)**  **9 MR. EISNER: Well, let me talk**  **10 about your situation, Karen. You sell to a**  **11 distributor. You don't know who the**  **12 distributor sells to, but you keep getting**  **13 complaints about your product being installed**  **14 improperly in Georgia. It wasn't qualified to**  **15 be sold in Georgia. Do you have some**  **16 responsibility to see if you can figure out**  **17 who is passing your product on where it is**  **18 illegally being installed? Somebody might**  **19 say, if you don't try to at least check on**  **20 that, you might have a problem.**  **21 You know it is being installed in**  **22 Georgia. You know it is your product. And** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 you can directly establish that it was a**  **2 particular distributor. I don't know, and he**  **3 is about to give us an answer.**  **4 Doug?**  **5 MR. RAWALD: Right.**  **6 MR. HUNGERFORD: Can I jump in for**  **7 a second?**  **8 MR. RAWALD: Oh, Dave Hungerford**  **9 wants to jump in, apparently.**  **10 MR. EISNER: Go ahead, Dave.**  **11 MR. HUNGERFORD: If you could drop**  **12 those microphones?**  **13 I am a little confused here.**  **14 Maybe I don't understand exactly how this**  **15 would work. But if you can presume to**  **16 identify a routine violator or a contractor**  **17 who is installing equipment that is improper**  **18 for the region, and you presume to be able to**  **19 refuse to sell to him by blackballing him in**  **20 some way, why couldn't you just put him on a**  **21 list that says, "Only sell this guy 14 SEER**  **22 units."?** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Am I oversimplifying it?**  **2 MR. RAWALD: And Dave's point is**  **3 correct, right? But the statute, what it says**  **4 is it "shall be unlawful for any manufacturer**  **5 or private labeler to knowingly sell a product**  **6 to a distributor with knowledge that entity**  **7 routinely violates any regional standard**  **8 applicable to the product."**  **9 So, it doesn't say that the**  **10 product itself has to be noncompliant with the**  **11 region. So, the statutory problem is that the**  **12 statute says selling any product. So, selling**  **13 a 25 SEER to that person, if you know they are**  **14 a routine violator, that would now be**  **15 unlawful, according to the reading of the**  **16 statute as drafted.**  **17 MR. EISNER: You are reading "the**  **18 product" to be the same as "any product"?**  **19 MR. HUNGERFORD: Yes, I see that.**  **20 I am just thinking about how to implement that**  **21 and kind of impact a Draconian action like**  **22 that would take, especially if the,** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 quote/unquote, "routine violator" were not,**  **2 you know, actively attempting to skirt the law**  **3 in some sort of unreasonable way. To be able**  **4 to say, "Sorry, we can't sell you the wrong**  **5 units" seems like the first line of**  **6 enforcement. And just a comment.**  **7 MEMBER NOLL: Can I ask a**  **8 question? So, just going back to make sure I**  **9 am thinking about this, this is the only**  **10 stated prohibited act in the statute? That**  **11 does not mean that we could not develop other**  **12 ones through this process, is that correct?**  **13 MR. RAWALD: So, the Department's**  **14 current position is that we can and have**  **15 interpreted a statutory authority to**  **16 promulgate prohibited acts in the regulations**  **17 that are not expressly drafted in the current**  **18 statute. This is the only one that is in the**  **19 statute currently.**  **20 MEMBER NOLL: Right.**  **21 MR. RAWALD: And so, we need to**  **22 understand what this one means and articulate** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 around it, but we could open for discussion**  **2 the possibility of drafting other prohibited**  **3 acts, if you felt it was so prudent.**  **4 MEMBER NOLL: So, we are stuck on**  **5 the definitions and words in this that we need**  **6 to define, but that is not saying that, moving**  **7 forward, we couldn't develop other things that**  **8 may be, as Karen has alluded to, like this**  **9 could be just a whatever. It actually in**  **10 implementation is meaningless, and we develop**  **11 other pieces that give it a different -- that**  **12 make it effective?**  **13 MR. RAWALD: I think what we are**  **14 finding is this actually has some meaning, but**  **15 in a totally different context than what**  **16 people may have thought of this morning when**  **17 you walked into the room. Because whereas we**  **18 all viewed it as this is a provision that may**  **19 charge manufacturers money, when, in fact, it**  **20 may be a thing that will cut off at the knees**  **21 contractors, dealers, and distributors who**  **22 aren't playing ball correctly.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 And so, the question is, with that**  **2 spin on it, with that turn now on the**  **3 understanding, that has changed a lot of**  **4 perspective on this. I think it is worthy of**  **5 us thinking about it. I don't think we are**  **6 stuck on it. I think it is a question of,**  **7 wow, this really has a different meaning in**  **8 practice than what we had thought. And so,**  **9 let's think this through and how we want to**  **10 properly implement it.**  **11 MR. EISNER: Is this particular**  **12 provision only enforceable by DOE? Because it**  **13 says it is unlawful, can someone else enforce**  **14 the violation of law?**  **15 MR. RAWALD: Right, the way the**  **16 statute is drafted, it is the DOE.**  **17 MR. EISNER: Just DOE?**  **18 MR. RAWALD: Uh-hum.**  **19 MEMBER McCRUDDEN: So, this is**  **20 Charlie with ACCA.**  **21 Just imagine we have something in**  **22 place. We don't really need to get into the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 details. But let's you find there is a**  **2 violation by a contractor. Is that something**  **3 that you would, then, publish, no matter what?**  **4 Does that appear on your enforcement under the**  **5 General Counsel's Office? Because you do**  **6 publish lots of violations. Do you publish**  **7 all of them?**  **8 MR. RAWALD: Right. So, the**  **9 Department's practice is every action we take**  **10 is posted publicly. And that is that we feel**  **11 it is a requirement under FOIA and certainly**  **12 the appropriate thing to do. We are spending**  **13 the taxpayers' money on these actions. So,**  **14 every action the Department takes, any notice**  **15 we issue, we do publicly post.**  **16 So, if we were to make or develop**  **17 some sort of process by which we are going to**  **18 make Notices of Finding of a routine violator**  **19 per se -- and I am just coming up with these**  **20 words now as I am here talking to you -- we**  **21 would as a practice, just like everything**  **22 else, publicly post that notice.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER McCRUDDEN: Okay, but let's**  **2 set aside the "routine violator" definition.**  **3 Let's say you have a violation by a**  **4 contractor.**  **5 MR. RAWALD: Uh-hum.**  **6 MEMBER McCRUDDEN: Would you**  **7 publish that as a standalone?**  **8 MR. RAWALD: So, if someone came**  **9 to us and said, "Hey, we know this guy had a**  **10 one-time mistake," and we go out and**  **11 investigate it, and we substantiate the one**  **12 time mistake, would we feel obligated to post**  **13 that particular thing? There is not something**  **14 that is currently in practice that is**  **15 translatable to that. So, I think that would**  **16 be open to discussion on what we think about**  **17 that.**  **18 So, it seems like folks are saying**  **19 we want to have some sort of percolation of**  **20 aggregated activity before we would have some**  **21 sort of black mark for someone. And so, I**  **22 think out of fairness to the contractor -- and** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 this is just Doug Rawald talking without any**  **2 sort of actual Department discussion on this**  **3 -- we would want to, before making that**  **4 public, have some sort of aggregate of**  **5 activity to put out there. I think that would**  **6 be at least somewhat more fair to the**  **7 individual because that one-off mistake, maybe**  **8 it is really a mistake and not worth the**  **9 actual black mark that may go along with it.**  **10 But manufacturers may want to be**  **11 put on notice if we find one problem with**  **12 someone, so they can kind of be a little wary**  **13 with what they are doing. So, I don't know**  **14 where the stakeholders are on this. So, I**  **15 want to make sure we have discussed it**  **16 fulsomely.**  **17 MEMBER McCRUDDEN: Well, and that**  **18 is what I was getting to, which is, if you**  **19 were to sort of post every violation by a**  **20 contractor or a distributor or even another**  **21 manufacturer, however you play it out, does**  **22 that become the de facto blacklist? And if it** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 is public, do, then, the manufacturers decide,**  **2 whoa, even though we may have a threshold of**  **3 three strikes and you're out, we may choose**  **4 voluntarily not to deal with this person**  **5 anymore. And so, I think we have to be very**  **6 careful how we do this.**  **7 MR. RAWALD: Right. No, I could**  **8 see, as we think this through -- and trying to**  **9 do my own logic tree, though I am not as**  **10 advanced at this as Harvey is -- I can see a**  **11 lot of collateral consequences that I want to**  **12 make sure that we fully embrace and have**  **13 thought through.**  **14 The other possibility, to flip**  **15 this on its head, right, so rather than having**  **16 a list of routine violators, we could have a**  **17 list of agreed followers, and then, you fall**  **18 off that list if you don't follow the rules.**  **19 And so, similarly, now we have a**  **20 certification database that lists all the**  **21 compliant products. So, we have a database of**  **22 all compliant contractors and installers. And** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 if you are no longer on that list, then that**  **2 is because you have been found to be someone**  **3 who committed a violation.**  **4 And so, there is some sort of**  **5 incentive to want to be on the list. And so,**  **6 people who are going to use contractors are**  **7 going to say, "Oh, I want to look at the list**  **8 to make sure that this contractor is on it."**  **9 Exactly. Akin to Angie's List --**  **10 MEMBER McCRUDDEN: Well, yet, I**  **11 mean, let me tell you, we can probably go into**  **12 the problems with Angie's List and Yelp, which**  **13 is, you know, anyone can post; anyone can make**  **14 complaints. And in those cases, it is very**  **15 public. I think with this it is a little bit**  **16 different, but --**  **17 MR. RAWALD: Right. And just to**  **18 be clear, I don't think we would ever want to**  **19 have a database that is populated by people**  **20 that were not the Department.**  **21 MEMBER McCRUDDEN: Right.**  **22 MR. RAWALD: And this is just** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 spitballing ideas. That is what we are doing**  **2 here, right? We are trying to come up with**  **3 ideas that work to make this thing happen.**  **4 But the exact opposite of a list**  **5 of bad actors would be a list of good actors**  **6 that is populated by people submitting a**  **7 certification to us saying, "I am Contractor**  **8 ABC and I swear and affirm that I will only**  **9 install compliant products." Now I am in the**  **10 DOE database. And so, I'm in the DOE database**  **11 and have sworn that I will do that. And then,**  **12 if DOE finds out that I do not do that, I fall**  **13 off the DOE database. So, that is an exact**  **14 reversal of what we are talking about.**  **15 MEMBER McCRUDDEN: Yes.**  **16 MR. RAWALD: And that is just a**  **17 different idea to kind of posit. Is that**  **18 something a little more palatable to people?**  **19 And so, I am just trying to spitball different**  **20 notions.**  **21 MEMBER MEYERS: So, this is Karen.**  **22 I actually like that idea because** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 it does a couple of things. It makes sure**  **2 that the contractor is aware of the**  **3 regulations and what he is responsible for.**  **4 I think that is key, because he is, then, very**  **5 aware of what he has to do.**  **6 And maybe something that you**  **7 couple with that is now he has to take a 10-**  **8 question survey on whatever -- (laughter) --**  **9 but make sure he understands the regulations.**  **10 MR. EISNER: All you would certify**  **11 to is that he has submitted answers to**  **12 questions and established he knows what he has**  **13 to do with respect to installing this**  **14 particular type of device. And not mean that**  **15 I have checked to make sure he has all**  **16 necessary licenses, no complaints have been**  **17 filed against him; he is not in bankruptcy or**  **18 anything like that. So, it would be a very**  **19 limited --**  **20 MEMBER MEYERS: For enforcement of**  **21 regional standards.**  **22 MR. EISNER: And you would have to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 continue to check to make sure that person is**  **2 still doing -- you know, every year or every**  **3 six months or every time period --**  **4 MR. RAWALD: And let me tease this**  **5 out because we do have a process that is**  **6 translatable, and I like to give you guys**  **7 ideas from things that we currently do, so you**  **8 understand what the Department can possibly**  **9 accomplish.**  **10 So, we would have our**  **11 certification database where manufacturers, or**  **12 third parties on their behalf, submit forms to**  **13 us saying, "Here's my product and here's how**  **14 it functions, and I swear that it complies**  **15 with the standards I'm required to."**  **16 We don't require anything further.**  **17 We take that as a boldface assertion.**  **18 However, we do audit those. So, I may**  **19 occasionally follow up on someone's form and**  **20 say, "Hey, Company X, you told me that Model**  **21 ABC is compliant and it performs at this**  **22 level. Give me your test data."** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 They give it back to me, and I do**  **2 a check on that and say, "Okay, it looks good"**  **3 or "No, it looks bad. Let me follow up now**  **4 with an investigation."**  **5 So, we could translate those**  **6 concepts into the contractor concept if you**  **7 want to explore that further. It is a**  **8 possible translatable activity.**  **9 MEMBER MELCHI: Doug, kind of a**  **10 question and a thought. This kind of reminds**  **11 me of EPA 608 certification that contractors**  **12 are required to have purchase certain**  **13 refrigerant.**  **14 MR. RAWALD: Let's assume I know**  **15 nothing about that.**  **16 MEMBER MELCHI: Okay. Each**  **17 company, contracting company, must have at**  **18 least one EPA-certified technician to be able**  **19 to purchase refrigerant from a distributor.**  **20 But that applies company-wide, one per**  **21 company, say, and not per technician.**  **22 Were you thinking this --** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER WINNINGHAM: That is**  **2 incorrect. If you are going to access the**  **3 refrigerant circuit, you have to be EPA --**  **4 MEMBER MELCHI: I said to**  **5 purchase, not service, yes.**  **6 MEMBER WINNINGHAM: But I said my**  **7 technicians, to handle that refrigerant and do**  **8 anything with it, they all have to be**  **9 certified.**  **10 MEMBER MELCHI: No, that is fine,**  **11 but I was saying "purchase" because in this**  **12 instance somebody, a contractor would be**  **13 purchasing equipment, maybe not installing,**  **14 you know, all 10 units.**  **15 Were you thinking that this**  **16 registration would be done on a company-by**  **17 company basis or on a technician-by**  **18 technician?**  **19 MR. RAWALD: I hate to repeat the**  **20 fact that I am not thinking anything.**  **21 (Laughter.)**  **22 I mean, I am coming up with** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 thoughts here in an attempt to brainstorm.**  **2 So, I haven't thought through who would be --**  **3 MEMBER MELCHI: So, yes, posing --**  **4 MR. RAWALD: Right, but it seems**  **5 like to me that we currently require**  **6 certification at a company level. So, I could**  **7 see that being that way. But if there is some**  **8 sort of belief that having a technician-level**  **9 would be more prudent, I think it is an open**  **10 question. It depends on what people think.**  **11 We are in a market where it seems**  **12 we have heard who the installers are. There**  **13 is movement of technicians into their own**  **14 companies and, then, movement of companies**  **15 back into being technicians, back and forth,**  **16 depending on how the pendulum swings.**  **17 So, is there some sort of benefit**  **18 in kind of keeping track of people at that**  **19 individual level? And I don't know. I don't**  **20 know. I am open to ideas.**  **21 MEMBER WHITE: This is Chuck White**  **22 with PHCC.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 So, from some other things that I**  **2 am involved with, certification has a very**  **3 specific definition. So, if you want to**  **4 create a list of certified contractors, who is**  **5 going to certify them? Because me writing on**  **6 a sheet of paper that I promise to do this**  **7 isn't good enough.**  **8 It sounds like you are creating**  **9 some form of a national license because, once**  **10 somebody is on that database, they are going**  **11 to point to it and say, "See, I can do this."**  **12 And when they can't do it, you said they could**  **13 because you've got them on the list.**  **14 Not every state has requirements**  **15 for that. Creating that kind of a list is a**  **16 big undertaking. You are taking on**  **17 validation, and taking people's word for it**  **18 isn't good enough.**  **19 MR. EISNER: What is a rough**  **20 estimate as to the number of people who would**  **21 fit the definition of an "installer"?**  **22 MEMBER McCRUDDEN: If you go to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 the Census, I think between the HVAC and**  **2 plumbing, heating, cooling, which is the SIC**  **3 category, is it like 200,000? Yes, it is**  **4 about 200,000.**  **5 Now, in this case, though, since**  **6 we are talking about compliant equipment, it**  **7 is unlikely you are going to see people in the**  **8 North registering because we are only talking**  **9 about --**  **10 MR. RAWALD: I would posit there**  **11 would be no value at all for this list, right,**  **12 because --**  **13 MEMBER McCRUDDEN: Right.**  **14 MR. RAWALD: -- they wouldn't be**  **15 dealing with that?**  **16 MEMBER McCRUDDEN: Because, I**  **17 mean, this is only regional standards.**  **18 (Laughter.)**  **19 MR. EISNER: What if you are a**  **20 borderline --**  **21 MEMBER McCRUDDEN: If you are on**  **22 the border, sure. I mean, if you are going to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 be finding yourself --**  **2 MR. EISNER: But, also, would**  **3 people say, "I am only going to hire someone**  **4 who is certified."? And that means I am not**  **5 going to hire the guy in the next state who**  **6 doesn't do anything -- who may come into my**  **7 state to work on other things, but I am not**  **8 going to hire him because he is not certified?**  **9 MEMBER MEYERS: So, I think**  **10 "certified" is the wrong word.**  **11 MEMBER McCRUDDEN: It is**  **12 attesting.**  **13 MEMBER MEYERS: So, it is almost**  **14 like a code of conduct. I mean, like I have**  **15 to go through these courses within my company**  **16 that say I will act accordingly to this, and**  **17 I have to take these online tests, and I have**  **18 to do them once every X number of years,**  **19 depending upon the topic.**  **20 So, I don't think you are**  **21 certifying. And I think it would be a**  **22 terrible idea to try to certify contractors.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 But it is more of a code of conduct,**  **2 acknowledgment that you understand the**  **3 standards; you will abide by the standards,**  **4 and you will conduct your business**  **5 accordingly.**  **6 And I have knowledge of what it**  **7 is. I have knowledge of what the appropriate**  **8 action is. I have knowledge of what the**  **9 consequences are, and I agree to abide by the**  **10 standards. I think it is more that.**  **11 And I think I would totally**  **12 disagree with a certified contractor, but just**  **13 someone who has taken the code-of-conduct**  **14 training on regional standards and understands**  **15 what it means and what the penalties are, and**  **16 that they will abide by them. It is as simple**  **17 as that.**  **18 MR. RAWALD: And this is Doug.**  **19 And so, we run into this all the**  **20 time with the word "certification," which I**  **21 did not acknowledge the Department uses**  **22 because it does cause confuses. But, when you** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 talk about certification in the context of the**  **2 Department, we meaning a self-certification by**  **3 the individual up there complying with it.**  **4 I am totally and completely open**  **5 to different terminology, but that is what I**  **6 mean by the term "certification," is in the**  **7 context of the Department, what we currently**  **8 do with manufacturers is manufacturers self**  **9 certify the compliance of their product.**  **10 So, what I am hearing from Chuck**  **11 is that that type of self-attestation, in**  **12 other words, oath of compliance, wouldn't**  **13 probably be good enough in his mind to --**  **14 MEMBER WHITE: Well, this is Chuck**  **15 White again.**  **16 We already deal with EPA 608**  **17 certification. If I have someone go out and**  **18 work on a system, he has to have that**  **19 certification. He has to pass the test, have**  **20 the rule, and if he doesn't and we get caught,**  **21 EPA comes and gives you a great big Christmas**  **22 fine.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 I already have to comply with SEER**  **2 requirements, AFUE requirements, a whole list**  **3 of things that we already require and we**  **4 already have to comply with. And I don't have**  **5 to get on some database and some**  **6 certification, and I am going to be in a**  **7 database because I am in the South, but I am**  **8 not in the North.**  **9 And now, we have created this**  **10 nuance that in the South you are going to have**  **11 14s, and somehow we are now no longer going to**  **12 be all good players. We are concerned about**  **13 the few people out there that are skirting all**  **14 these issues, and we are layering things on**  **15 all the people that are going to perform**  **16 exactly the way they performed December 31st**  **17 on January 2nd, but, suddenly, they have a**  **18 whole bunch of more regulations and**  **19 requirements and certifications to comply**  **20 with. So, if they screw up, you can catch**  **21 them. I fail to see how that is fair to the**  **22 legitimate actor in the industry.** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 MEMBER MELCHI: There is a bit of**  **2 a burden-of-proof question here, too, which I**  **3 think is what Chuck is talking about.**  **4 But what I would also say, though,**  **5 is that we have no idea how many people are**  **6 out there presenting themselves as**  **7 contractors. And so, that would make it**  **8 simple for someone not to carry this action**  **9 out.**  **10 In my mind, I think of, I think**  **11 someone mentioned like, you know, going on a**  **12 webinar, looking at a presentation. And DOE**  **13 creates this webinar; every contractor has to**  **14 sit and have all of its service techs sit**  **15 through this for an hour or a half-hour,**  **16 whatever it is, and then, push a button with**  **17 their name and number. And that goes**  **18 somewhere. And then, it appears on your good**  **19 contractor list.**  **20 But, if we don't know how many are**  **21 out there, we don't know how many we have**  **22 caught, captured -- I'm sorry -- in this** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 database. And so, then, we are sort of just**  **2 creating a requirement or a paperwork**  **3 requirement that doesn't really resolve the**  **4 question.**  **5 MR. RAWALD: Right. And I am**  **6 thinking about this. The value I would see of**  **7 this activity would be to the distributor and**  **8 to the manufacturer because they are able to**  **9 check who they are selling to and have that**  **10 person stated, whatever.**  **11 I am not enamored, I am not wedded**  **12 to anything. I am just putting out different**  **13 thoughts for folks.**  **14 MEMBER MEYERS: Yes, and here's**  **15 another thought. So, there is this online**  **16 website that any installer can access. He**  **17 goes through the 10 questions. He takes the**  **18 test. He earns a passing grade. He is able**  **19 to print out an acknowledgment that he took**  **20 the course. On that acknowledgment is a**  **21 number. He takes that number to the**  **22 distributor. The distributor knows that the** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 guy has been informed and is aware of the**  **2 regional standards and agrees to act**  **3 accordingly.**  **4 I mean, I think that has got**  **5 benefits all up and down the chain because the**  **6 distributor has some assurance that the person**  **7 that he is selling to has at least been**  **8 trained on what regional standards and agrees**  **9 to abide by them.**  **10 The manufacturer has a little bit**  **11 of assurance that his distributor that he is**  **12 selling to is collecting this information and**  **13 is only selling, you know, if the distributor**  **14 makes that part of his business model, only**  **15 selling to people who have this**  **16 acknowledgment.**  **17 And he has to take it once every**  **18 five years, or whatever.**  **19 MEMBER BALLO: This is Tim at**  **20 Earthjustice.**  **21 And I think there is a potential**  **22 benefit for the contractor here, too, in that** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 we could tailor reporting requirements to be**  **2 different or whatever reporting burden we are**  **3 going to require for the contractor, whatever**  **4 that is going to be could be, it could be**  **5 different depending on whether you are a**  **6 contractor that has taken that test and**  **7 promised that you are going to abide by the**  **8 rules versus if you are one that is not in the**  **9 system.**  **10 And I don't know how that would**  **11 work, but --**  **12 MR. RAWALD: Well, I don't want**  **13 the contractor folks to feel like that we are**  **14 pushing this thing that they haven't caucused**  **15 about and thought about the consequences of,**  **16 and that might be necessary to think this out**  **17 tonight, you guys.**  **18 MEMBER BALLO: Yes, I think --**  **19 MR. RAWALD: So, it is a different**  **20 game in how this works for you guys.**  **21 And also, maybe, Jon, you might**  **22 want to think about it and especially talk to** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 Steve about it tomorrow and have some thoughts**  **2 on how it would affect you guys and your role**  **3 in this.**  **4 MEMBER MELCHI: Yes, this is Jon**  **5 Melchi with HARDI.**  **6 And just initially, in doing some**  **7 thinking, you know, with the EPA cards, it is**  **8 pretty easy because it doesn't matter which**  **9 state you are selling in. You know, again, if**  **10 I am checking a card, it does provide some**  **11 level of assurance in that Louisville/Indiana**  **12 scenario. But, again, once it leaves the**  **13 store, I can't guarantee that it is not going**  **14 to Kentucky unless I am doing a ride-along.**  **15 MEMBER ROCKY: But, if the**  **16 contractor has signed off his oath, given his**  **17 oath, then at least you have that recognition,**  **18 and that it is not from complete ignorance**  **19 that he is doing that act.**  **20 MR. HURST: This is John Hurst**  **21 from Lennox.**  **22 You know, thinking about carrots** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 and sticks, maybe the burden increases kind of**  **2 in a painful way with a violator. So, a good**  **3 actor has a very low burden in terms of**  **4 reporting, but, quite frankly, if somebody is**  **5 a repeated violator, maybe the burden to**  **6 report everything that they install increases**  **7 commiserate with the amount of violations they**  **8 have committed. Just a thought.**  **9 MEMBER ELLIS: Doug, this is Ray**  **10 from LEC.**  **11 You know, what you are saying**  **12 about the good list actually makes some sense**  **13 to me. As a utility, a small utility, every**  **14 contractor that we have come on our place,**  **15 especially for installing new primary wire**  **16 underground -- I know this better than I know**  **17 HVAC (laughter) -- every contractor that digs**  **18 and installs conduit for us has to be**  **19 certified. Otherwise, we won't do the job.**  **20 That means an individual homeowner**  **21 could actually come in and we tell them how it**  **22 has to be done, and they can install it. And** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 then, we will install -- they can dig and**  **2 install the conduit, and then, we will install**  **3 the service after the fact.**  **4 And so, if manufacturers don't see**  **5 this person on the list, I'm sorry, I can't**  **6 sell you the equipment because you obviously**  **7 maybe don't know how to do it. I don't know.**  **8 It is just an idea.**  **9 MR. RAWALD: Well, again, I feel**  **10 like folks are kind of running out of steam on**  **11 this, and it definitely, I think, merits some**  **12 overnight thought. Can we come back to it**  **13 tomorrow and talk about this again?**  **14 Just for folks' scheduling**  **15 purposes, Karim volunteered to take on a nine**  **16 o'clock slot tomorrow for AHRI. So, AHRI will**  **17 be the first order of business tomorrow to go**  **18 over their certification database. So, folks**  **19 who haven't seen it before will become**  **20 familiar with it and give us a little idea of**  **21 that.**  **22 I will also be prepared to talk** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 about the DOE database in comparison to that,**  **2 so we understand the tools that we have out**  **3 there for certifications, just, once again, to**  **4 kind of arm ourselves on the information.**  **5 Jon has told me that Steve Porter**  **6 won't be in until later on. So, they are**  **7 going to be moving to one o'clock in the**  **8 after-lunchtime period to talk about the**  **9 distributors and the concerns they face.**  **10 I know that Neil had offered to**  **11 folks to have some stakeholders present. And**  **12 just so we can pull the curtain back, Carrier**  **13 had come to us at one point and said they**  **14 wanted to present something. I know, John, if**  **15 you are familiar with it, if you folks would**  **16 still be onboard with that?**  **17 MEMBER GIBBONS: Yes, we are**  **18 scheduled at 10:45.**  **19 MR. RAWALD: Okay. So, if anyone**  **20 else wants to present any idea, this is kind**  **21 of the, hey, you have an idea you want to put**  **22 before the group. We have the time. It is** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 allotted. Otherwise, we will circle back to**  **2 this conversation that we are leaving here, I**  **3 guess would be the most appropriate thing,**  **4 Neil, if that makes sense to you.**  **5 MR. EISNER: Yes.**  **6 MR. RAWALD: But, if anybody wants**  **7 to talk, please let Neil know and we can take**  **8 the time to just to air your ideas.**  **9 Once again, I can't stress enough**  **10 how much of a blank slate I have on this. I**  **11 know I said to Jon at least 12 times -- and I**  **12 don't mean to make you the bearer of that --**  **13 but, I mean, we really want to hear people's**  **14 ideas. I think it has been very helpful to me**  **15 today, a lot of the ideas that you guys have**  **16 put out there.**  **17 MR. EISNER: Okay. Anybody got**  **18 comments? Everybody comfortable with the**  **19 direction we are going in?**  **20 MEMBER SACHS: Everybody remember**  **21 where ACEEE is for tomorrow?**  **22 MR. RAWALD: Yes, Harvey, can you** 

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202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **1 tell us the exact address again?**  **2 MEMBER SACHS: The building is at**  **3 the corner of F and 14th, Northwest, and it is**  **4 on the southeast corner of that building. It**  **5 is the historical or "hysterical" National**  **6 Press Building.**  **7 (Laughter.)**  **8 We are on the sixth floor.**  **9 You may be asked to sign-in. Just**  **10 look like you know where you are going. But**  **11 there is no security or anything else except**  **12 keys for the bathroom.**  **13 (Off-the-record comments.)**  **14 MR. EISNER: We're done.**  **15 (Whereupon, at 4:41 p.m., the**  **16 meeting was adjourned, to reconvene the**  **17 following day, Wednesday, August 27, 2014.)**  **18 19**  **20 21**  **22**202-234-4433 Washington DC www.nealrgross.com Neal R. Gross and Co., Inc. **Page 379** A $15 248:4 $2250:3 $200248:4 250:1,5

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310:20 81 281:6 85,000219:14 8E-089 1:11 9NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of:

Before:

Date:

Place:

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.

----------------------- Court Reporter 424

Central A/C Regional Standards Enforcement Working Group Meeting

US DOE

08-26-14

Washington, DC