UNITED STATES OF AMRI

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DEPARTMENT OF ENERGY

WATER HEATER ENERGY EFFICIENCY STANDARDS WORKSHOP

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FRIDAY

JULY 23, 1999

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The workshop met in Room 1E-255, 1000

Independence, S.W., Washington, D.C. at 9:00 a.m.,

Douglas Brookman, Facilitator, presiding.

Present:

DOUGLAS BROOKMAN, Facilitator

ERIC LANNES, Bradford White Corporation

WILBUR HAAG, A.O. Smith Water Products

FRANK STANONIK, GAMA

GORDON STRETCH, Rheem Manufacturing Company

OTTO VAGO, State Industries, Inc.

JERRY MILLER, American Water Heater Group

GEORGE KUSTERER, Bock Water Heaters

STEVE NADEL, ACEEE

CHARLIE STEPHENS, Oregon Department of Energy

STEVE ROSENSTOCK, Edison Electric Institute

JAMES RANFONE, American Gas Association

MARK KREBS, Laclede Gas Company

ROBERT HEMPHILL, Gas Research Institute

TERRY LOGEE, DOE

MICHAEL McCABE, DOE

DAN REICHER, Assistant Secretary for Energy Efficiency

and Renewable Energy

DEBORAH MILLER, DOE

MARK SCHWARTZ, DOE

MARK MAZUR, DOE

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

2 (9:11 a.m.)

3 MR. BROOKMAN: Okay, let's start. Good

4 morning, everybody.

5 My name is Doug Brookman. I am from the

6 small company Public Solutions and I'm here to

7 facilitate the meeting today. I've had a chance to

8 work with many of you in the past. Welcome. I'm glad

9 you made it. Thanks for being here on time so we can

10 get an early start on what will be a very busy day, I

11 predict.

12 With no further ado, let me introduce

13 Assistant Secretary Dan Reicher.

14 ASSISTANT SECRETARY REICHER: Good

15 morning, everybody, on this lovely day in Washington.

16 I have a feeling that somebody can put a tank of water

17 outside and not even need gas or electricity to keep

18 it warm today. It's a mess out there.

19 Anyway, I want to welcome you to this

20 important workshop on energy efficiency standards for

21 water heaters. This is a meeting that I think I'm

22 looking forward to very much because it's going to get

23 right to the heart of some key matters that involve

24 the Department's decision making on potential

25 standards for water heaters. I look forward to the

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1 discussion. This is one of a series of workshops

2 we're doing in various standards areas and we found

3 them to be extremely useful, very substantive and

4 helpful in a way that I think that in the past we have

5 not been able to pursue these. I think we're pursuing

6 these standards in a new way that I think is going to

7 really improve the way we ultimately make a decision

8 on this important issue.

9 So with that, let me turn it back to Doug.

10 MR. BROOKMAN: Thank you. It's customary

11 at these meetings to give everyone a chance to

12 introduce him or herself. And so I'd like to proceed

13 with that. And Eric, may I start with you? Will you

14 say your name and your company affiliation. We're

15 just going to go around the room.

16 MR. LANNES: Eric Lannes, Bradford White

17 Corporation.

18 MR. HAAG: Wilbur Haag, A.O. Smith Water

19 Products Company.

20 MR. STANONIK: Frank Stanonik, Gas

21 Appliance Manufacturers Association.

22 MR. STRETCH: Gordon Stretch, Rheem

23 Manufacturing Company.

24 MR. VAGO: Otto Vago, State Industries.

25 MR. MILLER: Jerry Miller, American Water

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1 Heater Group.

2 MR. KUSTERER: George Kusterer, Bock Water

3 Heaters.

4 MR. STEPHENS: Charlie Stephens, Oregon

5 Office of Energy.

6 MR. ROSENSTOCK: Steve Rosenstock, Edison

7 Electric Institute.

8 MR. RANFONE: Jim Ranfone of the American

9 Gas Association.

10 MR. KREBS: Mark Krebs, Laclede Gas

11 Company.

12 MR. HEMPHILL: Bob Hemphill, Gas Research

13 Institute.

14 MR. PAUL: Darrell Paul.

15 MR. PRINDLE: Bill Prindle.

16 MR. LOGEE: Terry Logee, Department of

17 Energy.

18 ASSISTANT SECRETARY REICHER: Dan Reicher,

19 Department of Energy.

20 MS. PINTO: Francine Pinto, Department of

21 Energy.

22 MR. MARGOLIS: Eugene Margolis, Office of

23 General Counsel, Department of Energy.

24 MR. BARBOUR: Ed Barbour, Arthur D.

25 Little.

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1 MR. SOMASUNDARM: Sriram Somasdundaram,

2 Pacific Northwest National Laboratory.

3 MR. KRUPA: Mike Krupa, BASF Corporation.

4 MR. JOHNSTON: David Johnston, Washington

5 Gas.

6 MR. GARDNER: Brian Gardner, Department of

7 Energy.

8 MR. BRUNDAGE: Don Brundage, Southern

9 Company.

10 MR. BROOKMAN: Brenda, introduce yourself.

11 MS. JONES: I'm Brenda Edwards Jones,

12 Department of Energy.

13 MS. BELL: Sandy Bell, Department of

14 Energy.

15 MR. WILLIAMS: Ted Williams, American Gas

16 Association.

17 MR. SCHLEEDE: Glenn Schleede, Energy

18 Market and Policy Marketing Analysis.

19 MR. HAUSERMAN: Bob Hauserman, Connecticut

20 Natural Gas Corporation.

21 MR. CALDARERA: Mike Caldarera, Gas

22 Appliance Manufacturers Association.

23 MR. HOSLER: Daryl Hosler, Southern

24 California Gas Company.

25 MS. CASENTINI: Lauren Casentini, Pacific

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1 Gas and Electric Company.

2 MR. HEISS: Harold Heiss, American

3 Electric Power.

4 MS. WILKINS: Anne Wilkins, Natural

5 Resources Canada.

6 MS. TAYLOR: Glenda Taylor, Natural

7 Resources Canada.

8 MR. COSTA: Jose Costa, New England Gas

9 Association.

10 MR. WIEL: Steve Wiel, Lawrence Berkeley

11 National Laboratory.

12 MR. SHIN: David Shin, American Gas

13 Association.

14 MR. DROLL: Paul Droll, Effikal

15 International.

16 MS. HUBBARD: Elizabeth Hubbard, Effikal

17 International.

18 MS. SCHLEEG: Robin Schleeg, Department of

19 Energy.

20 MR. HOLT: John Holt, National Rural

21 Electric Cooperative Association.

22 MS. BLANCHARD: Brenda Blanchard, Piedmont

23 Natural Gas.

24 MR. CAPPS: Larry Capps, Public Service of

25 North Carolina, also representing Southern Gas

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1 Association.

2 MR. REA: Jack Rea, Oklahoma Natural Gas

3 Company.

4 MR. ECKMAN: Tom Eckman, Northwest Power

5 Planning Council.

6 MR. HEALY: Bill Healy, National Institute

7 of Standards and Technology.

8 MR. WILLIAMS: Dave Williams, Allied

9 Signal.

10 MR. STRAUSS: Brian Strauss, Allied

11 Signal.

12 MR. JACKSON: Barry Jackson, Water Heater

13 Innovations.

14 MS. McGEE: Irene McGee, Bayer

15 Corporation.

16 MR. INGOLD: Kerry Ingold, Bayer

17 Corporation.

18 MR. BROOKMAN: Did anyone not get a chance

19 to introduce themselves -- him or herself, I guess

20 that's the correct --

21 MR. WALL: Bruce Wall, Northeast Energy

22 Efficiency Partnership.

23 MR. BROOKMAN: Thank you. Anybody else?

24 I think all of you in your packets have received a

25 copy of the agenda. I'm going to go through that

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1 briefly, then deal with the other housekeeping items

2 and then we're going to go straight to work.

3 As you can see, following this

4 introductory segment, Assistant Secretary Dan Reicher

5 is going to make some opening remarks. Following

6 that, Terry Logee from the Department is going to give

7 a summary of DOE results of price efficiency, life

8 cycle costs, energy savings and moving on to

9 manufacturing impacts. We'll have a mid-morning

10 break.

11 Following the mid-morning break, around

12 about 10:30, we will begin to have discussion, focused

13 discussion hopefully, on the summary of comments. And

14 you can see five, six, seven or so bullets listed

15 there. You can read them: engineering, small water

16 heater closets, etcetera, etcetera, etcetera. We will

17 run through these specific elements for almost three

18 hours, two and a half hours. We'll take a break

19 midway through for lunch, round about noon, but we're

20 going to just try to get through as much of this as

21 completely, as efficiently as directly and quickly as

22 possible. So it's going to take some real focus for

23 us to really stay on these points and keep moving.

24 Let me emphasize as it says in the agenda,

25 lunch today, you're on your own today. At the lunch

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1 break, we'll tell you where to go that's nearby that's

2 convenient. Following finishing those seven or so

3 bulleted items, round about 2 o'clock in the

4 afternoon, you'll see on the back page of the agenda

5 four specific questions that are listed that are

6 really at the heart, I believe, of the Department's

7 interest here today. It relates to industry and other

8 persons, other interested persons comments related to

9 standard levels and recommendations that are afoot and

10 the mechanics, really, of rule making and steps to

11 take -- related to rule making. So that is the bulk

12 of the afternoon conversation, the discussion and the

13 plan presently is we'll adjourn at 4 o'clock. We've

14 got a lot on the agenda. If we don't stay basically

15 on time, we're likely to go over 4 o'clock. I'll just

16 give everybody the heads up right now. That's our

17 goal and expectation at the outset. So is everybody

18 with me on that? Okay.

19 A few minor housekeeping items. Draft

20 reports, slides and other materials are available at

21 the table with Brenda and Sandy over here at the

22 registration table. Anyone attending today's workshop

23 or anyone who submitted comments will be added to the

24 mailing list, DOE's mailing list. So you will receive

25 a listing of future mailings and notices.

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1 The Department has also posted all around

2 the room here a schedule as it relates to water

3 heaters. I hope you see the boxes that are on the

4 walls. Please take note that the comment period ends

5 August 3 for this particular workshop, that is, any

6 written comments and I know the Department invites and

7 welcomes your written comments, your expanded

8 comments, your more detailed comments in written form

9 by August 3rd.

10 In approximately two weeks, a complete

11 transcript of this meeting, plus the comments received

12 to date will be available for inspection and copying

13 at the Freedom of Information Reading Room which is

14 just down the hall here, 1E190. And for those of you

15 who would like to purchase a copy of the transcript,

16 you can talk to Jonathan, get his business card. His

17 company will supply that to you.

18 Also, you'll note here on the wall to my

19 left, the web page address for this activity, long as

20 it is, is posted over there. And let me just confirm

21 one thing. Bryan or somebody help me. It says

22 doe.gov/buildings -- is that a slash after buildings?

23 That's a slash after buildings. Okay.

24 The good news is once you put it in your

25 machine, you don't have to type it in one more time.

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1 Right? So everybody take note of the web page.

2 Virtually all of these materials and I think those of

3 you that have been working in this area for a while

4 have realized that virtually all of these materials

5 are accessible through the web page. It's a real good

6 way to access, pull down and not only the information,

7 but the modeling tools as well.

8 We are fortunate to have coffee and some

9 snacks here with us this morning. Anybody who needs

10 to find an additional snack bar, there's one on the

11 ground floor, but we're going to try and stay pretty

12 close to this area and stay on task here this morning,

13 at least until lunch.

14 There are rest rooms located at the end of

15 this hallway, down here, both for men and for women

16 and at the very other far end of the hallway over

17 there, if you're walking around in the halls of

18 Forrestal, you need to have your visitor badge on or

19 some sort of identification or someone might actually

20 stop you and try to escort you elsewhere. So please

21 do that.

22 Those of you who brought computers in with

23 you today, if you expect to walk out of here with that

24 same computer, you need to get a property pass from

25 Sandy or Brenda. They're pretty serious about

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1 security around here, so please take care of that at

2 the break or at the lunch hour.

3 All written comments and data submissions

4 will be available for public inspection. Ten copies

5 of comments or data are requested. That's ten. The

6 Department would appreciate an electronic copy of the

7 comments or data as well. The Department is using

8 Wordperfect 6.1.

9 No faxed comments will be accepted.

10 There's a new aspect to receiving comments. E-mailed

11 comments will be accepted, provided a hard copy that's

12 signed is also sent to the Department. So please do

13 send e-mails and the hard copy, signed. And those

14 should be addressed to Terry Logee at EERE, Office of

15 Codes and Standards. Or Brenda Edwards Jones.

16 Any persons thinking that they're

17 submitting materials that should be confidential,

18 please, those of you who have done this before, please

19 note that they are confidential. The Department will

20 make an independent judgment about whether they see

21 them as being confidential or not. It's a requirement

22 that they have to go through.

23 There's no smoking allowed in this room or

24 in any of these open areas. There are smoking areas

25 outside the building and I said where the rest rooms

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1 are and that's the end of the housekeeping items.

2 Did I forget anything? I think I covered

3 most of it.

4 Questions or comments on any of that, let

5 me just say something very briefly about the norms

6 that have emerged over the span of process improvement

7 and regulatory reinvention. We started off about two

8 or three years ago with ground rules and they've

9 emerged as norms for these meetings and I ask for your

10 help and indulgence to work what's emerged as the

11 standard. Please speak one at a time. Say your name

12 for the record. This proceeding will be taped and

13 transcribed and use the microphone. I'll try and

14 remind you. It's hard when you've got something to

15 say. Always remember to pull the mike in front of

16 your face. These particular mikes don't pick up much

17 unless they're right up close.

18 Please listen as an ally. What we found

19 over time is that the quality of the exchange, the

20 quality of the discussion hinges entirely on the

21 quality of the listening and I'm pleased to report

22 that in my experience over the span of the last two or

23 three years every single person in this room has

24 expanded their capacity to listen. That's a very good

25 friend. That's expanded the capacity for exchange.

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1 So let's see if we can keep on with that today.

2 I'm going to also ask that you try and be

3 concise. You can see how many of us there are in this

4 room. There's a whole lot to cover here. If people

5 wander and meander on and on, we're not going to get

6 to the points that we need to make, so please be

7 concise and share the air time.

8 I try to make it so that everybody gets a

9 chance to speak and I cue people to speak, but I also

10 try and allow for the follow on. The Department wants

11 to have the kind of exchange that provides more light

12 than heat. Sometimes that comes in the exchange back

13 and forth. So please indulge me, stick with me. If

14 I've got you cued to speak and I drop you out because

15 I forget or something, don't let me get away with it.

16 Raise your hand and keep me on track, but otherwise,

17 we'll try and keep this moving ahead as expeditiously

18 and directly as possible.

19 Questions, comments at the outset before

20 we get into it here? Okay, I see none. Let's start.

21 Thanks again for being here, so we can get going.

22 Assistant Secretary Dan Reicher.

23 ASSISTANT SECRETARY REICHER: Again, good

24 morning and welcome to you all. Today's workshop is

25 an important next step in our continuing dialogue to

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1 review the results of extensive analyses of the

2 possible impacts of standards on water heaters. This

3 information and your feedback prior to the issuance of

4 a notice of proposed rulemaking is a critical element

5 which allows the Department to make appropriate and

6 informed decisions on our standards rulemaking.

7 As many of you know, in rulemakings issued

8 before the Department adopted the appliance process

9 rule, we would gather data and conduct analyses

10 without extensive outside input and then issue our

11 findings in the notice of proposed rulemaking. We've

12 come a long way from that antiquated black box model

13 and have been at the forefront of redefining the

14 regulatory process.

15 The appliance standards analytical work

16 has, with your supportive efforts and the hard work of

17 our staff and contractors improved the information

18 available to decision makers in this important area.

19 Several months ago, the Department shared

20 detailed rulemaking schedules for water heaters and

21 our three other priority products. Let me reiterate

22 that we are committed to meet these schedules and have

23 added needed resources in order to do so and I just

24 want to highlight again the schedule in the case of

25 water heaters that are posted on the wall.

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1 Let me review these important dates with

2 you. Comments from this workshop are due on August 3,

3 1999. The proposed rule is scheduled to be published

4 on December 7 of this year. The workshop following

5 the issuance of the proposed rule is tentatively

6 scheduled for January 20th next year. Comments on the

7 proposed rule are due on February 21, 2000, and the

8 final rule is expected to be published on July 3rd,

9 next year.

10 As I mentioned earlier, today's dialogue

11 is key to informing the Department about the results

12 of the Department's analyses and what proposed rule

13 you believe they would support. The appliance

14 standards program legislation requires the Department

15 of Energy in reaching a standards decision to weigh

16 the benefits and burdens of the standard. This

17 includes considering the impacts on consumers,

18 manufacturers and the nation. We recognize there are

19 strong feelings on all sides as to whether there

20 should be standards for water heaters. We would hope

21 that all parties could reach a consensus

22 recommendation and offer it to the Department.

23 However, that is not the central purpose of today's

24 workshop.

25 The Department has not decided whether

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1 there should be further standards for water heaters.

2 The decision will be made after consultation with the

3 Department's senior management team, some of whom will

4 be here today to listen to this discussion and I want

5 to particularly recognize that we expect to be joined

6 by Mark Schwartz who is our Deputy General Counsel in

7 the energy area and Mark Mazur who is the head of our

8 Policy Office, here at the Department and they're both

9 very vital members of the overall time at DOE that's

10 looking at this issue of standards.

11 There is no specific formula for making

12 this decision. All information provided to the

13 Department today and in written comments will be

14 considered in making our final decision. The decision

15 will be made by weighing burdens as well as benefits.

16 We will consider all of the impacts, both positive and

17 negative. We will consider, for example, the range of

18 national energy savings and emission reductions likely

19 as a result of the standard. We will consider the

20 range of consumer impacts, both with respect to life

21 cycle, cost changes and payback. We will consider the

22 impacts of standards on manufacturers' viability and

23 on jobs. We will consider the effect on competition

24 among energy suppliers at the national level. The

25 range of impacts we must consider are broad and they

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1 are complex.

2 We're particularly interested in your

3 views about how to weigh the results, what standard

4 levels you believe the analysis justifies. We have a

5 recommendation from the Gas Appliance Manufacturers

6 Association that appears to be the beginning of a

7 consensus process. What should DOE do to continue

8 this dialogue?

9 The analyses we are discussing today have

10 changed significantly from previous standards analyses

11 and were developed with extended stakeholder

12 consultations. They include, for example, a range of

13 estimate for energy savings, not a single value as in

14 previous analyses. The life cycle cost analysis

15 considers a range of input values such as hours of use

16 and energy prices. The manufacturer impact analysis

17 now examines manufacturers' cash flow under two

18 scenarios. Yet even with all these new refined

19 analyses, there is often no single right answer.

20 The Department has received comments from

21 different parties that disagree as to whether these

22 analyses overestimate or underestimate the impacts.

23 The Electric Power Research Institute, GAMA and

24 Bradford White all believe that DOE has overestimated

25 the contribution of heat traps on water heater

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1 performance. The Edison Electric Institute and

2 Laclede Gas believe that our marginal energy crisis

3 are incorrect. The American Council for an Energy

4 Efficient Economy and the Oregon Energy Office

5 disagree with the American Gas Association, Gas

6 Research Institute and Battelle about the impacts of

7 high recovery efficiency of gas water heaters in the

8 venting system.

9 Manufacturers and the energy advocates

10 disagree about the availability of HCFC 245fa, an

11 insulation blowing agent replacement for HCFC 141b.

12 We are interested in better understanding

13 the market demands and the impacts of standards on

14 manufacturers. For example, if the Department were to

15 proceed with the revised standard that raises the

16 minimum standard by several percent, what can be done

17 to minimize the impact of the new standard on

18 manufacturing?

19 Additionally, what can DOE do to help the

20 industry meet the new standards in the time between

21 the final rule and the effective date of the standard?

22 I've highlighted a few of the complex

23 issues that we're here to discuss today. The

24 information that you provide to us today is critically

25 important to the decision making process. I expect

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1 that we will have a lively and stimulating exchange of

2 views. Thank you for your participation in today's

3 workshop and in helping us make an informed and

4 appropriate decision.

5 I want to particularly recognize Doug

6 Brookman who does a very excellent job as the

7 facilitator/moderator and otherwise spiritual leader

8 of this effort. I appreciate that.

9 MR. BROOKMAN: Questions, comments

10 following the Assistant Secretary's remarks?

11 Yes? Please say your name.

12 MR. RANFONE: Jim Ranfone, American Gas

13 Association. Is a copy of your opening remarks

14 available?

15 MR. BROOKMAN: They will be and they will

16 be in the complete record of this document and I

17 imagine they could also be made available. They can

18 be and they will be made available.

19 Steve Rosenstock?

20 MR. ROSENSTOCK: Steve Rosenstock, EEI.

21 It was mentioned about the GAMA proposal and I was

22 wondering if that's going to be discussed later in the

23 workshop?

24 MR. BROOKMAN: Maybe Michael McCabe or

25 Dan, someone could say, Terry, someone -- where you

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1 anticipate that might come up.

2 MR. LOGEE: That's going to occur in the

3 discussion of comments, so right near the very end.

4 MR. ROSENSTOCK: Steve Rosenstock. You'll

5 describe what the proposal was?

6 MR. LOGEE: Yes.

7 MR. ROSENSTOCK: Thank you.

8 MR. BROOKMAN: I was wondering, Terry, is

9 there anything written about the proposal that's

10 available to people to look at, since it's going to

11 happen at the end of the day they could look at at

12 lunch, for example?

13 MR. LOGEE: In the comments received, we

14 have a very -- under measured EF versus rated EF, we

15 didn't provide the exact recommendation, different

16 verbiage to describe it. Frank probably could --

17 MS. STANONIK: Frank Stanonik with GAMA.

18 To just summarize, our proposal was to the degree you

19 might be familiar with the analysis that's been

20 available from DOE, we basically suggested that DOE

21 adopt what is presented as I believe standard level 2

22 for gas and electric with the modification that in

23 both cases the requirement be reduced by 01 energy

24 factor point. And so our proposal is essentially

25 standard level 2 minus .01. And I guess if you want

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1 the detail, there are certainly copies of our comments

2 are available to whoever wants them. I'll gladly

3 provide you with a copy. They're in the reading room,

4 wherever, but that's the essence of the proposal.

5 MR. BROOKMAN: Thank you, Frank. And do

6 you have copies with you now?

7 MS. STANONIK: I have one.

8 MR. BROOKMAN: I imagine we can get a few

9 copies made?

10 MS. STANONIK: Yes.

11 MR. BROOKMAN: Okay, good. So then

12 Michael McCabe.

13 MR. McCABE: Michael McCabe. One

14 correction on what she said. It's the last item on

15 the agenda summary of comments we discussed -- if we

16 stick to the schedule is right before lunch.

17 MR. BROOKMAN: Thank you. I see it there.

18 Thank you. Thanks for the correction.

19 MR. McCABE: Last item on the summary of

20 comments.

21 MR. BROOKMAN: Which would be standards

22 recommendation which -- since this time frame runs

23 from 10:30 to 2, I don't expect we'll get there until

24 1:30, after lunch.

25 (Laughter.)

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1 I know Michael McCabe frequently takes 2

2 o'clock lunch because I've seen him out there at the

3 hot dog stand.

4 (Laughter.)

5 So then hopefully at lunch or sometime

6 prior to that Frank can make those available to those

7 that wish to look at them. Then let's proceed.

8 Terry?

9 MR. LOGEE: Good morning. I'm Terry

10 Logee. I'm the program manager for water heaters.

11 Always in hot water. That's really no pun intended.

12 I'm going to be going quickly through the engineering

13 results and the life cycle cost results, just sort of

14 reminding you what we came up with.

15 We do have one new page. It was that

16 single sheet that was passed out late on your chairs

17 on life cycle cost results, late breaking news, as it

18 were. Now I'll show it to you when I get there. It's

19 a ways down the pile yet.

20 Starting out, these are the engineering

21 results for electric water heaters and we have

22 selected design option combinations, selected from a

23 much larger list, I wouldn't say inexhaustible, but

24 fairly inexhaustible listing, yes sir?

25 MR. BROOKMAN: Sorry to interrupt. This

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1 is in your packet. And it reads Water Heater Analysis

2 Results. It's, I think, the second page in there.

3 MR. LOGEE: Thank you. So we do an

4 existing baseline combination to calibrate our model

5 and get to an EF of .86 and then we do a baseline of

6 245fa, in this case, with 245fa blown foam to get to

7 a .86 baseline recognizing that in 2003, the HCFC 141b

8 foams will be phased out. And so we've done

9 essentially two analyses here using water blown foam

10 and HFC 245fa as a blowing agent.

11 Over on the right hand side in the box, we

12 have the energy factors and then the total installed

13 cost to the consumer. For the water blown foam we

14 have selected a very similar design option

15 combinations except you'll notice there's no 2 inch

16 combination on this one because water blown foam, to

17 get to the baseline level of .86 exceeds two inches

18 cavity thickness. So we've had to exclude that one.

19 We used the Watson Simulation Model

20 calibrated to the minimum standard and then we

21 verified that against some NIST test data to determine

22 all of these energy factors. The costs were provided

23 by GAMA for many of the design options and then we

24 used consultants for those design options where GAMA

25 was unable to get enough information from enough

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1 manufacturers to provide that to us.

2 Looking at the next page, the gas results.

3 Since we have a few more design option combinations

4 the two don't fit on one page. Again, we have the HFC

5 245fa foam and the baseline levels .54. This time,

6 the baseline level also includes the flammable vapor

7 ignition resistance designs. We included a cost for

8 it, that is, and so that's why you see this large

9 increase of about $46 between the baseline for HCFC

10 141 and the baseline for 245fa.

11 Then we included in the gas water heaters

12 a 78 percent recovery efficiency, that's what the RE

13 stands for and also an 80 percent recovery efficiency.

14 If you recall, if you were here last November we did

15 a 78.5 percent. Due to comments, we changed our

16 approaches and used two different recovery efficiency

17 levels. For the 78 percent recovery efficiency, we

18 include some venting costs and Type B vent costs in

19 the installation cost part of it and for the 80

20 percent recovery efficiency, we include not only Type

21 B vent costs, but also some costs for relining masonry

22 chimneys.

23 For all of the gas fired water heater, we

24 used the tank model which was developed by GRI.

25 Again, we calibrated that to the minimum efficiency

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1 levels.

2 For the model with gas with water blown

,3 foam --

4 MR. BROOKMAN: We're now at page 4.

5 MR. LOGEE: Page 4, thank you. I'm

6 flipping through these fairly quickly, just trying to

7 draw your attention to some of the highlights. You

8 notice that there's a larger cost here, $50. That

9 again includes the flammable vapor, but also there's

10 an extra thickness of foam for the water blown foam,

11 so it costs a little more on the baseline level.

12 Then we flip quickly to page 5, the oil

13 results. The oil results are based on a spreadsheet

14 calculation. We don't have a simulation model for

15 that kind of equipment. We have again the baseline

16 with 245fa and there, we get about a $3 increment

17 because it's very similar, just a little extra foam

18 cost.

19 And as we move down the list, down the

20 list of insulations and we get to thicker insulations,

21 we've had to include costs for a burner installation

22 kit because when you go to the replacement situations

23 and you had an old one inch thick insulation, you

24 rather not throw that expensive burner away, so we

25 called around and got some prices for a burner

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1 installation kit which would have lengthened the

2 length of the last tube and the oil tube and we've

3 included those costs in the replacement situations.

4 For new tanks, of course, with a burner, we didn't

5 include those.

6 Then moving on to page 6, again the oil

7 results with water blown foam, I just wanted to draw

8 your attention now to the baseline with water blown

9 foam. It jumps by about $34 and that is because at

10 that point with the water blown foam it's so much

11 thicker. We had to include that cost of the burner

12 installation kit with our baseline. And that's all I

13 have on the engineering results.

14 What I'd like to do now is to sort of

15 shift gears and go into the life cycle costs and this

16 is what's in your package right now and it only shows

17 water blown foam over on this side. I'll get to the

18 -- I wanted to include the new page just after this,

19 but for right now I wanted to point out the design

20 option standard levels, just to review those.

21 These standard levels are selected by the

22 lowest payback from the engineering analysis, so we

23 prioritize these by the payback that we get from the

24 engineering analysis.

25 So for standard level 1 on electric, we

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1 have a heat trap, an insulated tank bottom. On

2 standard level 1 on gas, we have just heat traps, gas

3 and oil.

4 For standard level 2, we add -- we go to

5 2.5 inch insulation on electric and for gas we do the

6 75 percent recovery efficiency by a more efficient

7 flue baffle and 2 inches of insulation. And for oil,

8 we just go to 2.5 inch of insulation.

9 Standard level 3 and 4 are the same in

10 electric and there we pull out all the stops. We go

11 to 3 inch insulation and a plastic tank. So our max

12 tech version, so called.

13 In gas, standard level 3, we go to 80

14 percent recovery efficiency and add a half inch of

15 insulation. And then in oil, the standard level 3, we

16 have 78 percent recovery efficiency and improved flue

17 baffle and 3 inch insulation.

18 Standard level 4, for gas, again there

19 we're pulling out all the stops, going to a side arm

20 heater, plastic tank, 3 inch insulation and electronic

21 ignition. And likewise for oil, we go for 3 inch

22 insulation, interrupted ignition and an improved heat

23 exchanger in addition to the 78 percent recovery

24 efficiency on the flue baffle.

25 MR. BROOKMAN: Terry, we have some

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1 questions.

2 MR. LOGEE: Yes.

3 MR. BROOKMAN: I saw Steve Nadel and then

4 Steve Rosenstock.

5 MR. NADEL: Terry, as you go through trial

6 standard levels, I had a question specifically about

7 gas. In trial standard level 3 you combined 80

8 percent recovery efficiency and 2.5 inches of

9 insulation. Did you give any consideration to

10 separating those? The reason that I suggest that is

11 that if you look at your e-cal life cycle cost

12 analysis, the first one does seem to have positive

13 life cycle costs. The second one, the 2.5 inch

14 insulation does not have positive life cycle costs.

15 By combining them, you create a package that has

16 negative life cycle costs and when you separate them

17 you may have improved life cycle costs compared to

18 Option 2.

19 MR. LOGEE: Did you mean, Steve, that you

20 would want to, as I recall from your comment, you

21 wanted to apply, consider the combination of 80

22 percent recovery efficiency with 2 inch insulation, is

23 that what you're --

24 MR. NADEL: Correct, yes.

25 MR. LOGEE: -- driving at?

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1 MR. NADEL: Yes. First to 80 percent

2 recovery efficiency, and then as a next step to 2.5

3 insulation. That, at least from your analysis, is the

4 order in which of cost effectiveness.

5 MR. LOGEE: We didn't order the design

6 option combinations based on the life cycle cost

7 analysis. We used the paybacks that we got from the

8 engineering analysis to order the design option

9 combinations and those, that combination in

10 particular, didn't come out as the least, lowest cost

11 for the engineering and the engineering payback.

12 MR. BROOKMAN: I saw several people who

13 wish to follow on. Michael McCabe, then Mark Krebs

14 and I'm going to get back to you, Steve.

15 Michael McCabe?

16 MR. McCABE: Michael McCabe, DOE. Just to

17 expand on what Terry has said, in the engineering

18 analysis, the first step we did was to order design

19 options. As Terry indicated that was done by a

20 central payback.

21 Once we had the cost efficiency curve

22 developed, as you can see by looking at some of the

23 earlier slides, for example, with gas fired water

24 heaters, we had 2, 4, 6, 8, 10 different combinations

25 of design that had been evaluated. We reduced those

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1 to standard levels as we've committed in the process

2 ruled by the first efficiency level that was the most

3 efficient. That was the one that was selected. The

4 second that was selected was that which has a minimum

5 life cycle costing point. A third point that we

6 identified in the process where we were explicitly

7 looking at was a 3 year payback. I think the comments

8 that was made by a number of parties were quite

9 interesting and we will consider those, review those

10 with the standard levels, the trial levels that we

11 would evaluate for the proposed rule.

12 MR. BROOKMAN: Steve and then I'll go to

13 Mark. You want to follow on?

14 MR. NADEL: Yes.

15 MR. BROOKMAN: Briefly, and then I'm

16 coming to mark.

17 MR. NADEL: Right, I'm not seeing a reason

18 why one item would be more cost effective on payback

19 and another item on classical costs since all of these

20 have assumed same measure lives. So the order should

21 be the same.

22 I guess my question is did you do your

23 ordering on the most recent analysis or was the

24 ordering done a little earlier before you had changed

25 some of the costs and maybe in an earlier analysis,

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1 these two options may have been not caught when you

2 did your final ordering?

3 MR. LOGEE: No, as far as I'm aware, we

4 used the most recent engineering analyses.

5 MR. BROOKMAN: Steve, you are suggesting

6 this doesn't make sense.

7 MR. NADEL: I don't think it makes sense.

8 Maybe we should go over the math at a break.

9 MR. BROOKMAN: Mark Krebs?

10 MR. KREBS: Mark Krebs, Laclede Gas. In

11 the last couple of minutes, I've heard a lot about

12 life cycle costs. I've heard a lot about paybacks and

13 I just heard Michael McCabe say that they will

14 consider the differences. I really think what we

15 need, what the stakeholders need is for DOE to decide

16 what they're going to use to determine the consumer

17 effectiveness of these measures. Is it going to be

18 anything with a positive life cycle savings? Is it

19 going to be payback? What's it going to be?

20 MR. BROOKMAN: Michael McCabe.

21 MR. McCABE: Michael McCabe. I think Dan,

22 in his opening remarks had touched on that, but the

23 question that you raise, Mark, is a similar one to

24 what EEI raised in their comments, that is, to put it

25 another way, what level of consumer hurt is

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1 acceptable, where is the cutoff point?

2 As Dan had indicated in his opening

3 remarks, there is no single specific equation, a

4 factor which we use in making the determination. We

5 will take and evaluate all the results together so it

6 may very well be that for one particular rule making

7 the standard level that we had, sticking with the

8 consumer benefit example, could be for one rule

9 making.

10 When you look at what is rejected as far

11 as the standard level, there may be some benefits that

12 are very different than what would be rejected in

13 another rule making because all of the results would

14 be weighed, no single value would be a determinant.

15 MR. KREBS: To follow up on that, just for

16 a minute -- Mark Krebs, Laclede Gas -- it's kind of

17 like building a house on shifting sands versus

18 building one on bedrock. If you can define what the

19 effectiveness measure is going to be, how it's going

20 to be measured, then we know where we're going and I

21 think it will generate a lot of positive effects, if

22 we can define that. To not define it, we don't know

23 where we're going. We don't know whether or not we're

24 on shifting sands or solid ground, one rule making to

25 another and I urge DOE to define what it's going to do

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1 and maybe it should be different for either any

2 specific rule making, but at least it should be

3 defined what it's going to be.k.

4 MR. BROOKMAN: Steve Rosenstock, you're

5 next.

6 ASSISTANT SECRETARY REICHER: I just had

7 a question.

8 MR. BROOKMAN: Dan Reicher.

9 ASSISTANT SECRETARY REICHER: This is Dan

10 Reicher. You're looking, Mark, for a point, a single

11 number?

12 MR. KREBS: No, I'm looking for a

13 definition. If DOE's intent is to base minimum

14 standards, for example, on anything that has a

15 positive life cycle savings, then at least we know

16 what we're dealing with and we know what calculations

17 should be used and what the variables are. If we

18 don't know what you're going to use as the basis of

19 determining consumer cost effectiveness, it in essence

20 gives DOE free license, really, and disallows

21 stakeholders from providing comment in an effective

22 way.

23 We need to know, we need to have those

24 definitions in order to efficiently proceed and

25 provide valuable input to DOE on its recommendations.

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1 It's kind of like a shell and pea game in a sense.

2 MR. BROOKMAN: Steve Rosenstock is next.

3 MR. ROSENSTOCK: Steve Rosenstock, Edison

4 Electric Institute. A quick question about electric

5 standards level 1.

6 MR. BROOKMAN: On page?

7 MR. ROSENSTOCK: It's page 7.

8 MR. BROOKMAN: Thank you.

9 MR. ROSENSTOCK: Page 7. And also on the

10 one page handout, it's the same thing. Just looking

11 over the -- on the web, the spreadsheet analysis on

12 the web, the electric water heater life cycle costs

13 uncertainty model, they show on the cover page, on the

14 -- I'll say the default spreadsheet there, under the

15 LCC and payback tab, it shows just in terms of

16 payback, talking about ranking, it shows heat traps by

17 themselves are the payback of 0.84 for a year for that

18 one particular .1 calculation. And heat traps and

19 tank bottom insulation with 1.06 year payback. So I

20 don't know how they all came out when you did all the

21 runs, but I would assume, did the paybacks for the

22 heat traps and the tank bottom insulation always come

23 out ahead of the heat traps by themselves? I'm just

24 kind of curious as a clarification because it looked

25 like the heat traps by themselves just in terms of the

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1 payback, at least from looking at the spreadsheet, by

2 themselves had a quicker payback --

3 MR. LOGEE: Steve, we didn't consider heat

4 traps by themselves. We considered heat traps always

5 combined with insulated tank bottoms.

6 MR. ROSENSTOCK: Oh, because on all the

7 technical support document --

8 MR. LOGEE: Well, we have a limited

9 number. We don't want to do 15 different standard

10 level trials, standard levels. So we make some

11 choices and those were our choices.

12 MR. BROOKMAN: Just to confirm then what

13 you see on page 7 and the other documents you've

14 received, that listing for standard level 1, 2, that's

15 a complete description of the additional things to

16 reach that level?

17 MR. LOGEE: That's correct.

18 MR. BROOKMAN: Okay.

19 MR. ROSENSTOCK: Steve Rosenstock here.

20 MR. BROOKMAN: Final question.

21 MR. ROSENSTOCK: This reflects DOE's

22 choices in terms of the design option standard levels.

23 MR. BROOKMAN: And specifies them, I

24 think, rather clearly.

25 MR. ROSENSTOCK: Thank you.

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1 MR. BROOKMAN: Thank you.

2 MR. LOGEE: One thing -- oh, did you have

3 more questions?

4 One thing I was going to add here, oh, go

5 ahead, sorry.

6 MR. BRUNDAGE: Don Brundage, Southern

7 Company. I would respectfully disagree with Mr.

8 Krebs' comment on having a single definition. You may

9 have -- these are complex issues. You may have a

10 payback or a benefits level that has a segment of the

11 population that's severely impacted, that you would

12 need to treat differently than one where there were

13 not a large number of losers. I think these are

14 complex issues and there needs to be some flexibility

15 and judgment on the part of DOE. Thank you.

16 MR. BROOKMAN: Thank you. Terry, proceed.

17 MR. LOGEE: Okay, one other thing that I

18 should mention on these, we're showing here just sort

19 of average values and the number of percent of

20 households or people who will benefit. The actual

21 values are distributions and perhaps you are not

22 aware, but we use ranges or distributions of input

23 data as well, to generate these through a Monte Carlo

24 analysis scheme, sampling 10,000 households and we

25 have about 5,222 households from the RECS database

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1 that we plug these ranges in. There are ranges of

2 prices for fuels. There are ranges of costs of the

3 equipment and we have a usage equation that we apply

4 to each individual household to determine how much

5 water they will use and we also then generate the

6 energy levels of the -- for their usage based on the

7 design option combinations that we're looking at at

8 that point.

9 So these results are what we would say are

10 the average results and there's a tremendous amount of

11 effort and work that goes behind them and we look at

12 the distributions now as well as just these average

13 levels. That's important to keep in mind.

14 Now I'd like to turn to the handout sheet

15 because that has some later information. We were

16 requested by several commenters to include the life

17 cycle cost analysis and, in fact, the National Energy

18 Savings analysis for HFC245fa. We had not done it

19 earlier because we had a resource constraint on time

20 and money and so we didn't get to that and we had --

21 MR. BROOKMAN: This was a handout.

22 MR. LOGEE: That's right.

23 MR. BROOKMAN: I think most everybody

24 received it. We may need more copies. Do we have

25 more copies of this, Brenda? It's been distributed.

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1 It looks just as it appears on the screen.

2 MR. LOGEE: There are a couple more

3 underneath my tablet there, Jim.

4 MR. BROOKMAN: Who else? Okay.

5 MR. LOGEE: These are hot off the press,

6 so to speak. We ran these this morning. LBNL just

7 completed the final page last night. So this shows

8 the water blown life cycle cost savings and percent

9 benefitting and the 245fa or HFC245fa blowing agent

10 and the standard levels 1, 2, 3 and 4 are the same as

11 the previous page. There wasn't room to detail them

12 on this page.

13 Let's see, from -- it's clear in both

14 standards levels 1 and 2 for gas and electric in both

15 water and 245fa, we have positive savings. The

16 negative savings are in parens and in this slide

17 they're in red color. So those are negative savings

18 or you would say that those do not benefit, on

19 average, do not benefit the households on a national

20 average basis.

21 The percent benefitting ranges from fairly

22 high, almost 100 percent, not everybody though, but

23 almost 100 percent, down to well, 1 percent or even 0

24 percent in the case of the standard level 4 in oil.

25 It's interesting to note that although we get positive

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1 savings for water blown foam, we get slightly more

2 than 50 percent of the households that would benefit

3 from that. That benefit increases because of the

4 improved insulation for 245fa to 83 percent with a

5 significant increase in savings for standard level 2

6 on electric.

7 When we go to the gas water heater, we get

8 significant benefits, percent benefits in both water

9 blown and 245fa for both standard levels 1 and 2, with

10 a slight increase of $10 for the life cycle cost

11 savings. Here, the increase is smaller because the

12 difference in foam is not as large.

13 Yes, Jim?

14 MR. RANFONE: Jim Ranfone, AGA. On the

15 gas and some of the others, level 3, I'm having a

16 problem understanding on your life cycle savings of

17 $17, yet 72 percent benefit and that runs through a

18 couple of other scenarios. Can you explain how --

19 MR. LOGEE: I was just going to get to

20 that, Jim, thank you. You anticipated my remarks.

21 Okay, on standard level 3 on gas and 4, as Jim notes,

22 those are negative savings. Those are not benefits on

23 average. However, 72 percent benefit in the case of

24 water blown foam and 73 percent benefit in the case of

25 HFC245fa. If you recall earlier, I mentioned this

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1 standard level is an 80 percent recovery efficiency

2 with 2.5 inches of insulation. And earlier, I had

3 stated that at that standard level we have a

4 significant installation cost for type B vent

5 connectors and relining of masonry chimneys. Those

6 vent connectors and chimney relinings don't occur in

7 all cases. They're pretty expensive when they do hit,

8 but they don't occur in all cases. We assume 25

9 percent of the cases that would be the case.

10 I see Mark Krebs.

11 MR. KREBS: This is a prime example of why

12 we should know what you're going to use. Is it going

13 to be the majority of people benefit as economic

14 criteria? Is it going to be positive life cycle

15 savings? What's it going to be?

16 MR. BROOKMAN: Keep going, Terry.

17 MR. LOGEE: Let's see, just note that for

18 oil we only get positive savings with heat traps which

19 is standard level 1 and we get pretty good benefits.

20 It drops off very quickly as we go to standard levels

21 2, 3 and 4 with almost nobody benefitting in the case

22 of 245fa.

23 MR. LANNES: Eric Lannes, Bradford White.

24 Why does this chart conflict with the summary page 7

25 that you showed earlier?

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1 MR. LOGEE: In which way, Eric?

2 MR. LANNES: Well, standard level 2 you

3 show $32 and 16 percent which is the same with this,

4 but when you to go to standard level 3, it says $52

5 and 9 percent and it's $153 and 1 percent on the

6 summary sheet?

7 MR. LUTZ: Jim Lutz, LBL. That was a late

8 night copying error.

9 MR. LANNES: Which one is wrong?

10 MR. LUTZ: The new sheet is wrong for

11 design option 3.

12 MR. LANNES: And it should read?

13 MR. LUTZ: It should read as on page 7.

14 MR. LOGEE: That's $153 instead of $17.

15 MR. LANNES: That makes more sense.

16 Thanks for that clarification.

17 MR. LOGEE: Is the percentage also wrong

18 there, Jim, 1 percent, instead of the 9 percent?

19 MR. LUTZ: I think so.

20 MR. LOGEE: Okay.

21 MR. LUTZ: It was awfully late.

22 MR. LANNES: That's no problem. I just

23 wanted to make sure. It is significant.

24 MR. BROOKMAN: Thanks for noting that.

25 Steve Nadel.

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1 MR. NADEL: In this new chart, when you

2 define standard level 1, 2, 3, 4, are those defined in

3 terms of energy factor or are they just defined in

4 terms of design options?

5 MR. LOGEE: Those are design options.

6 MR. NADEL: Thank you.

7 MR. LOGEE: And they were sort of -- in an

8 outline way, they're shown here on page 7.

9 MR. NADEL: So from an energy factor point

10 of view, there's roughly a .02 difference in the

11 energy factor between the water blown foam levels and

12 the heat trap --

13 MR. LOGEE: Right. You can go back to the

14 engineering sheets and see what the differences are.

15 Okay, moving on to National Energy

16 Savings, you need to make a note now that these are

17 for water blown foam only. We expect to get the

18 National Energy Savings for the HFC245fa completed in

19 the next several days and we should have it on the web

20 by the end of the week, barring some electronic

21 problems that we frequently encounter. So here we

22 have three scenarios, the AEO low growth reference

23 level and high growth, AEO, referring to Annual Energy

24 Output. It's Energy Information Administration's

25 projections. They go out for 20 years and then we've

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1 pushed them out to 2030, so we chose these scenarios

2 because they bound the other economic growth

3 projections such as the Gas Research Institute's

4 projection. And so we chose them.

5 We were advised or requested by the

6 Advisory Committee to choose three economic scenarios

7 so that's what we have done. You notice that the

8 energy savings, of course, in all cases are positive

9 and significant, running perhaps from moderate here at

10 1 quad to quite large at 9.5 quads down at level 4.

11 However, the net present value, NPV, on this column is

12 only positive for standards levels 1 and 2. Going

13 negative, a fair amount at standard level 3 and a lot

14 negative at standard level 4. That kind of follows

15 along with our results from the life cycle costs where

16 we negative benefits for standard levels 3 and 4 on

17 both gas and electric.

18 Yes?

19 MR. ROSENSTOCK: Just a clarification.

20 The savings for energy savings were for 2003 to 2030,

21 that's the time frame that you're using?

22 MR. LOGEE: Yes, that's the time frame.

23 MR. ROSENSTOCK: Same for the net present

24 value, that's a cumulative number too? Steve

25 Rosenstock.

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1 MR. BROOKMAN: Thanks, Steve, thanks.

2 Mark?

3 MR. KREBS: Mark Krebs. Yet another

4 method of consumer effectiveness that we should know

5 how DOE plans, if it wants to maintain its discretion,

6 at least let us understand how it plans to rate these

7 different possibilities of consumer effectiveness.

8 MR. BROOKMAN: Would that be -- let me ask

9 the Department, if I may, would that be an aspect of

10 your description of how you arrive at the standard?

11 MR. KREBS: Are you asking me?

12 MR. BROOKMAN: No, I'm asking the

13 Department. That's the third time you've made the

14 comment, I think, and I was wanting the Department to

15 see if they can respond to it in a way --

16 MR. LOGEE: Doug, are you implying -- by

17 that, you're implying that we would weigh the life

18 cycle cost results and the national energy savings and

19 net present value results and the manufacturing impact

20 results and other things? Yes, if that's what you're

21 saying, yes, we'll be weighing all of those and other

22 considerations.

23 ASSISTANT SECRETARY REICHER: This is Dan

24 Reicher. And in the proposed rule, we will describe

25 for public comment how we weighted various factors and

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1 I think that's an important aspect. At this point, we

2 are taking it and looking at the analysis and part of

3 the decision making challenge here is, in fact, to sit

4 down and weigh all of these things and then do a good

5 job of describing how we arrived at what we ultimately

6 propose and then take comment on it. So I think

7 that's part of the process. We can't sit here today,

8 give you a ranking at any particular area, tell you

9 that there's an on/off switch with respect to a

10 decision, because there are multiple factors that have

11 to be weighed by a variety of people looking at a

12 whole host of data that some of which is still not

13 fully developed.

14 MR. BROOKMAN: Thank you.

15 MR. LOGEE: Okay, the next slide, page 9,

16 is in your packet is national water heater energy

17 consumption. This shows the amount of growth actually

18 in the energy use in the water heater sector of the

19 consumer economy and a very top line is the base case.

20 Then the next one that's almost on top of it is

21 standard level 1, moving down to standard level 4.

22 One thing that we notice, looking at the

23 slide, it's inescapable. No matter what we do with

24 these standard levels at least, we always have a rise

25 in energy use. And -- but as we look at the slide, as

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1 we go out here to about Year 2015, thereabouts, why

2 the curves straighten out. There's more bend in the

3 early years and that is because by about 2015 we've

4 pretty much replaced all of the old water heaters in

5 the marketplace with these new, more efficient

6 varieties, whether they're standard level 1, all the

7 way down to standard level 4.

8 And just looking then on the out years, at

9 the difference between the base case and standard

10 level 2, we see that there's pretty significant yearly

11 savings of perhaps about a point, two tenths of a

12 quad.

13 Yes, Frank?

14 MS. STANONIK: Terry, I think I know the

15 answer, but I guess I want to confirm it. This

16 particular chart here, each of these lines is

17 inherently has an assumption that all the water

18 heaters that are being installed are installed at the

19 standard level. They are products that are at the

20 standard level?

21 MR. LOGEE: That's right, they would meet

22 the standard level, but there are some -- let's say

23 standard level 1, there are some product that is above

24 standard level 1 and of course, we go to standard

25 level 2. So there are some products that are at

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1 standard level 2 and standard level 3, for each kind

2 of water heater.

3 As we go to standard level 2, we absorb

4 those products and we have fewer products that are at

5 the higher levels of efficiency. So finally at

6 standard level 4, there's just 100 percent.

7 MR. BROOKMAN: Michael McCabe.

8 MR. McCABE: Terry, this is Mike McCabe.

9 Do I understand you correctly that in the analysis we

10 assume a distribution of efficiency of products sold?

11 MR. LOGEE: Correct.

12 MR. McCABE: And so as the standard comes

13 into place, it's lopping off those units in that

14 distribution that did not meet the standard and moving

15 them to the standard level. So if the standard is low

16 such as standard level 1, there will be a number of

17 units that are still assumed to be sold above the

18 standard --

19 MR. LOGEE: That's correct.

20 MR. McCABE: As it moves up, that fraction

21 decreases.

22 MR. LOGEE: That's correct.

23 MS. STANONIK: All right, so you answered

24 that question. So the line really does -- I was

25 trying to figure out whether the line was, if you

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1 will, conservative or not, but in fact, the line, each

2 of these lines is an attempt to be, to the best anyone

3 can be, let's say fairly realistic in that it's an

4 assumption that there's a mix of products that

5 actually get installed and not just all products are

6 at the minimum.

7 MR. LOGEE: That's right. Okay, no more

8 questions on this one. Then let's move to projected

9 shipments slide, page 10. These shows projected

10 shipments for levels -- standard levels 1 through 4.

11 And there are four fuels on each little graph: gas,

12 being at the very top, then electric, then liquid

13 petroleum gas and then oil. Oil is just very slightly

14 above the axis line.

15 Also I want to note that to the left of

16 the line that's about 1998 with the open squares,

17 triangles, circles and diamonds, we have the

18 historical data, so we get quite a bit of wiggle in

19 the gas and electric market shares, sometimes almost

20 crossing over. They come fairly close together in the

21 1990s. Then beyond that are the projections. And

22 they don't have very much wiggle in those and they go

23 out to 2030. The projections are based on the

24 historical data and so that we didn't think these up

25 out of clear air or fuzzy air, hazy air as it is

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1 today.

2 On standard levels 1, 2 and 3, although

3 it's not too obvious on standard level 1 is this

4 little bump here in the gas and the electric line, as

5 you go out just beyond the Year 2000, probably 2003.

6 That's the point at which the new standard would

7 become effective and that bump is caused by a change

8 in market share do primarily to the change in cost of

9 the new equipment. And we have a couple of

10 constraints on what we allow to shift our fuel switch

11 in the market. We only allow fuel switching on new

12 construction, so that's probably about 20 percent of

13 the market that's in the new construction area and

14 that was based on our -- we had an ad hoc working

15 group and it was a pretty good consensus in that group

16 that replacement water heaters usually are replaced

17 with like fuels. So if someone has a gas water

18 heater, they will replace it with a gas water heater.

19 They're not likely to put in some other fuel. Or if

20 they have an electric, they're going to stay with

21 electric.

22 Mark Krebs?

23 MR. KREBS: What do you mean you're only

24 allowed fuel switching in new construction?

25 MR. LOGEE: Just exactly that. If there's

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1 a new house being built, then someone, either the

2 builder or the buyer makes a decision as to what kind

3 of fuel they're going to use for their appliances and

4 in the model, we have some discount rates that help us

5 decide that based on the price of the new equipment.

6 And we only allow it in new construction.

7 MS. STANONIK: Frank Stanonik. Again, I

8 think, Terry, what you've said, it's really not per se

9 a question of fuel switching, but perhaps a change in

10 the proportion of new construction that ends up with

11 a gas water heater or an electric water heater.

12 MR. LOGEE: Thank you, Frank.

13 MS. STANONIK: It's a change in let's say,

14 the existing pattern or existing ratio.

15 MR. LOGEE: Right, right.

16 MR. BROOKMAN: I just want to note what I

17 said before. There's a lot of better listening going

18 on as we progress here.

19 MR. LOGEE: It really is a change in

20 market share because new construction has not yet

21 chosen a fuel and presumably if there's a gas pipeline

22 in that subdivision, people are probably going to use

23 gas for water heating and gas for cooking and so

24 forth.

25 MR. BROOKMAN: Thanks for clarifying

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1 remarks.

2 MR. LOGEE: I just wanted to call your

3 attention to standard level 4. There's no bump. And

4 if you look closely enough you can see that the top

5 line for gas has sort of shifted down some and the

6 electric line as shifted up. That represents this

7 other change in the market share due to the fact that

8 the electric high level standard stays the same for 3

9 and 4 where gas gets an increased cost for that max.

10 tech design option combination.

11 Charlie Stephens?

12 MR. STEPHENS: Charlie Stephens. On what

13 basis did you make, decide on the magnitude of that

14 shift in standard level 2 and 3 where the bump occurs?

15 How did you come upon the mathematical size of that

16 shift?

17 MR. LOGEE: It depends on those

18 elasticities and the cost of the equipment which we

19 looked at in the engineering slides. If you find the

20 design options, I don't know the exact costs of the

21 equipment, but for standard level 4 with gas it gets

22 pretty much like $1,000 or something. So the cost of

23 equipment is a factor and then there's elasticities

24 that the model uses to choose between equipment based

25 on -- they're based on the elasticities.

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1 MR. STEPHENS: And the elasticities came

2 from?

3 MR. LOGEE: They were derived from making

4 the life cycle cost of any particular piece of

5 equipment equivalent to the same or similar equipment

6 with a different fuel. So they try to equivobrate the

7 prices or life cycle costs between two different kinds

8 of equipment.

9 MR. LUTZ: For the existing market.

10 MR. LOGEE: Jim?

11 MR. LUTZ: For existing costs.

12 MR. LOGEE: For the existing market.

13 MR. BROOKMAN: Name again?

14 MR. LUTZ: Jim Lutz.

15 MR. BROOKMAN: Thanks, Jim. Bill Prindle

16 is next.

17 MR. PRINDLE: Bill Prindle. I wonder how

18 you -- how the model was able to predict an increase

19 in gas market share when the data shows that the price

20 of gas equipment goes up about 20 percent where the

21 price of electric equipment goes up between 5 and 8

22 percent, depending on which insulation type you used.

23 MR. LOGEE: Bill, you have to remember

24 that 80 percent of the market is replacement market,

25 so that -- people continue to replace gas with gas

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1 water heaters. It seems to me my limited knowledge of

2 the marketplace that people prefer gas for water

3 heating also.

4 MR. BROOKMAN: Additional questions or

5 comments at this point?

6 Yes, please use the microphone.

7 MR. SHIN: David Shin, American Gas

8 Association. In looking at the spreadsheet you do

9 make some key assumptions that affect the projections

10 of shipments. I'd like for you to justify why you

11 made some of these assumptions. Number one, you

12 assume that the income elasticity for gas water

13 heaters is positive. Why did you make that

14 assumption? And number two, the implicit discount

15 rates you use the spreadsheet are quite high and these

16 implicit discount rates affect your projection of

17 shipments. Can you justify the differential between

18 the gas and the electric implicit discount rates as

19 well?

20 MR. BROOKMAN: What would you suggest to

21 be the appropriate discount rate?

22 MR. SHIN: Well, the literature discount

23 rates suggest 20 to 80 percent. I'm not exactly sure

24 what the correct one is. I'd just like the Department

25 to justify why there's such a huge differential

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1 between gas and electric.

2 MR. LOGEE: I am not going to take that

3 one on, David, because I'm not knowledgeable enough to

4 do justice to it. I think that's something that we'll

5 have to refer and get back to you with.

6 There is one comment that you made though

7 that I think we can address, and that is that we -- I

8 can't remember just what it was now.

9 MR. BROOKMAN: He asked about the

10 assumption you made. The first point you made, David?

11 MR. SHIN: Why you assumed that the income

12 elasticity for gas water heaters was positive.

13 MR. BROOKMAN: Jim McMahon, can you

14 respond to this question?

15 MR. McMAHON: Jim McMahon, Lawrence

16 Berkeley National Lab. David, the answer to the

17 question is this is based upon historical data and we

18 can provide more information about that later.

19 The second part, why the discount rates

20 are different, these are derives. It depends upon the

21 relationship of the price of the product to

22 efficiency, so it comes, in part, from the engineering

23 data and the relationship of price to efficiency is

24 different for gas and electric.

25 MR. BROOKMAN: David, I presume you can

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1 go to the Department directly and they can get you to

2 Lawrence Berkeley National Laboratory to provide you

3 that data, that information.

4 Additional questions on this point? Okay,

5 Terry, keep going.

6 MR. LOGEE: All right, we're not going to

7 make our break, are we?

8 MR. BROOKMAN: We're doing fine.

9 MR. LOGEE: Food is up here. Cumulative

10 emission reductions, just very quickly. They were

11 calculated from the NEMS EPCA model. By that, we mean

12 the NEMS model is the EIA model and we've adopted it

13 and modified it to calculate emissions for our

14 particular standard level cases, mostly the

15 modification comes in and we have to include household

16 emissions.

17 The tons are metric tons and this one is

18 a million metric tons and the K is a thousand metric

19 tons for NO, and SO2. Note that the sulphur dioxide

20 levels are only for household emissions reductions.

21 They're relatively low because utilities, the

22 utilities that save sulphur dioxide, they get credits

23 and they can trade those.

24 That's that one.

25 MR. BROOKMAN: Steve Rosenstock and then

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1 Frank.

2 MR. ROSENSTOCK: Steve Rosenstock, Edison

3 Electric Institute. I made comments for another

4 rulemaking, but is the Department going to look at

5 other emissions such as carbon monoxide or hydro

6 carbons or other emissions that are out there as well

7 because as far as I'm concerned this is -- it's

8 basically in the household and energy sector, so it's

9 kind of an incomplete analysis because, as I've said

10 before, you're not looking at the production side at

11 all, especially if there's overseas production.

12 MR. BROOKMAN: Steve, can you say briefly

13 what the benefits would be of including those others

14 in the analysis?

15 MR. ROSENSTOCK: Well, right now you're

16 just -- if you're trying to be cumulative and overall

17 the advantage is is that you're looking at all sectors

18 of the actual process of production as well as the use

19 of the equipment. Right now, you're just looking at

20 the use of the equipment. So you're forgetting

21 possibly key aspects of any sort of emissions

22 analysis, plus, you're only limiting it to three of

23 them when there's more out there.

24 MR. BROOKMAN: It would seem on its face

25 to a third party observer to do a lot more would take

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1 a lot more effort as well, so I'm wondering if this is

2 zeroing in on the major ones or whether the other ones

3 are of major constituent as well.

4 MR. ROSENSTOCK: Well, it all depends on

5 if you think those other emissions really are

6 important or not. I would say that they are. If

7 you're going to do it, do them all or -- because this

8 right now, U.S. households and U.S. energy sector,

9 when you're not looking at production site or possibly

10 overseas production, when they could be significant.

11 MR. LOGEE: Steve, what do you mean by

12 production side? Do you mean the utilities?

13 MR. ROSENSTOCK: No, production of the

14 water heaters, production of the components that make

15 up the equipment.

16 MR. LOGEE: Okay. Thank you. I was

17 confused.

18 MR. BROOKMAN: That's a useful

19 clarification.

20 Dan Reicher.

21 ASSISTANT SECRETARY REICHER: Let me just

22 ask a question because I thought you were actually

23 getting back to the source of the energy.

24 MR. ROSENSTOCK: I don't want to go there.

25 (Laughter.)

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1 ASSISTANT SECRETARY REICHER: That

2 explains the amazed look. I kept looking at your name

3 plate to see whether something had changed. But now

4 let me understand your point, going back to the

5 factory where the water heater is made.

6 MR. ROSENSTOCK: Correct.

7 ASSISTANT SECRETARY REICHER: And where

8 associated equipment is --

9 MR. ROSENSTOCK: Correct, and other

10 emissions such -- I'll say carbon monoxide associated

11 with other energy types.

12 ASSISTANT SECRETARY REICHER: Other

13 emissions, again, from the --

14 MR. ROSENSTOCK: Use and production.

15 ASSISTANT SECRETARY REICHER: Okay, so

16 it's two things? Other emissions that come from the

17 actual operation of the water heater. There's also

18 other emissions that come from the -- or all

19 emissions, I should say, that come from the

20 construction of the water heater.

21 MR. ROSENSTOCK: Correct.

22 MR. BROOKMAN: Charlie Stephens.

23 MR. STEPHENS: Charlie Stephens, Oregon

24 Office of Energy. I think someone would have to make

25 a case to DOE that there's a serious or noticeable

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1 incremental change in that, at least for the standard

2 levels that are under serious consideration and given

3 our own delving into industrial processes lately, I

4 think I'd have a hard time making that case, that at

5 least for the bottom half of the standard level case

6 that there's going to be any notable change in energy

7 emissions at the production level.

8 MR. BROOKMAN: That was useful. Thank

9 you, Charlie.

10 Mark Krebs and then I'm going to ask the

11 group to inhibit slightly, so we can get through the

12 rest of these slides.

13 Mark?

14 MR. KREBS: What Steve is talking about is

15 the embedded energy in manufacturing of the equipment

16 and that pales in comparison to the life cycle energy

17 consumed by the equipment, therefore I think it's safe

18 to simplify in this case, rather than overly

19 complicate and get lost in the minute of embedded

20 energy.

21 MR. BROOKMAN: Okay, thank you. Terry,

22 I'd like you to press on with manufacturing impact

23 analysis.

24 MR. LOGEE: Okay, let's move on with the

25 MIA, manufacturing impact analysis. Here, we used the

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1 GRIM or Government Regulatory Impact Model. It's a

2 cash flow model. I want you to note that we used

3 three regulatory scenarios and it's kind of important

4 to note that word regulatory scenarios. Base case,

5 which is as is; standards case, which is just the DOE

6 regulations, only; and a cumulative case which is all

7 regulations facing the industry. And Ed Barbour and

8 I went around to four of the five major manufacturers

9 and discussed these with them in quite detail and got

10 a number of qualitative viewpoints as well as the

11 quantitative numbers that we're going to discuss this

12 morning.

13 I might add the cumulative case includes

14 the HCFC phase out and the flammable vapor prevention

15 resistance. So the industry cash flow was estimated

16 from the GAMA data submittal and both independent

17 consultants when we didn't have GAMA cost data.

18 That's the manufacture of cost. Financial information

19 from publicly available sources and shipments, we just

20 saw from the spreadsheet developed by LBNL.

21 I'm moving a little faster here, but we'll

22 slow down now to look at the results. What we have

23 here are the results for business scenario 3 which we

24 call the manufacturer's expected cost to the

25 distributors. There were two other scenarios that we

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1 looked at, one was to maintain the value of the

2 manufacturer which would be to maintain their industry

3 net present value at $295 million and the other one

4 would be they were unable to recover their

5 investments.

6 So looking at -- in both cases, we have a

7 significant negative change in the industry net

8 present value. Yes?

9 MR. BROOKMAN: Terry, could you say it

10 again? What is business scenario 3?

11 MR. LOGEE: It's the expected cost to

12 distribute. That's what it's based on. So it assumes

13 that most of the investment will be recovered. All of

14 the variable costs, manufacturing costs will be

15 recovered, but not a total recovery of investment.

16 MR. BROOKMAN: Okay.

17 MR. LOGEE: Anyway, for all standard

18 levels in the cumulative case, we get a significant --

19 something very significant in the case of standard

20 level 4, change in the net present value of the

21 industry. With standard level 1 and the DOE's case

22 alone, very little change in the industry, but

23 beginning to get significant at standard level 2. We

24 like to show -- and that difference can be illustrated

25 a little better, perhaps in the next slide which

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1 doesn't have a page number on it. This slide shows

2 the price curves and the investments that were

3 required.

4 The price scale is -- the manufacturer

5 price scale is on the right hand side and the

6 investment scale is on the left hand side of the

7 graph. Trial standard levels 1 through 4 across the

8 bottom. For the price curves, the cumulative curve is

9 the top curve and the standard level curve is the

10 middle curve. Base case is down at the bottom.

11 There's about a $25 difference between the

12 standards case and the cumulative case in terms of

13 price. But you notice that the price for the

14 standards case at level 1 starts out very near the

15 average price and this is an average price for all

16 water heaters sold and it would be the high efficiency

17 models as well as the baseline models. As we go up in

18 standard level, why then the price is increased quite

19 dramatically.

20 The investments required are down here on

21 the bottom and roughly $100 millon investment for the

22 cumulative case and most of that investment is due to

23 the Consumer Product Safety Commission initiative for

24 flammable vapor ignition resistance. But the

25 investments get pretty significant out at standard

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1 level 2 and beyond.

2 The next slide --

3 MR. BROOKMAN: Questions on this slide?

4 There's a lot on this slide. Questions on this slide?

5 MR. LOGEE: Good. Let's move on. The

6 industry cash flow comparison of -- these are short

7 term cash flow, short term being 5 years, comparison

8 between the cumulative case and the standards case.

9 The baseline is represented here at the top with no

10 change and as you can see cash flows for standard

11 level 1 through 4 are quite negative, significantly

12 negative, starting in 2000, all the way through 2003

13 for the next three years. And the reason is that some

14 of the cumulative initiatives have already begun and

15 are fairly well along, so there's a significant

16 expenditure for some of those.

17 And they go negative by 20 million, down

18 to about 40 million, all the way to negative 150

19 million.

20 In the standards case alone, why then

21 standard levels 1 and 2 just barely -- standard level

22 1 does not go negative; standard level 2 just barely

23 ticks down below the line in 2003.

24 One more slide. This is the qualitative

25 impacts on manufacturing capacity. As I said, Ed

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1 Barbour and I went to some of the manufacturers and

2 talked with them and they were pretty confident that

3 they could standard levels 1 and 2 along with the

4 cumulative burdens of the CPSC initiative and the

5 phase out without a major impact. But as we get to

6 level 3, why then they're talking about product that

7 would be obsolete. That is the electric water heaters

8 because we're going -- we used the design option of

9 plastics tanks and so that electric water heater

10 product, steel tanks now would be obsolete. And then

11 at standard level 4 for gas water heaters, we're

12 talking about a side arm water heater which is a

13 totally different way of heating the water, external

14 to the gas water heater. So that's the product that

15 would be obsolete on standard level 4. Those standard

16 levels 3 and 4 have significant impact. That's pretty

17 obvious also from the preceding two slides.

18 That concludes --

19 MR. LANNES: Excuse me, Terry. I think

20 you're making an assumption there that that's gas and

21 electric only. Oil has a significant impact at

22 standard level 2.

23 MR. LOGEE: That's true. Thank you, Eric.

24 I was making that assumption.

25 MR. LANNES: So it's very significant --

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1 what you see under standard level 3 applies to oil at

2 earlier standard levels.

3 MR. LOGEE: That's true. Thank you, Eric.

4 MR. BROOKMAN: Eric Lannes. Frank

5 Stanonik?

6 MS. STANONIK: Frank Stanonik with GAMA.

7 Just perhaps an editorial comment. I mean I

8 understand what you've done here and this analysis

9 really, if you will, stops at Year 2004 and you

10 connected the dots because it does give you some sense

11 of what appears to go on here.

12 MR. BROOKMAN: You are referring to page

13 16?

14 MS. STANONIK: Yes, I'm sorry. I'm one

15 page back.

16 MR. BROOKMAN: Yes.

17 MS. STANONIK: But to that extent if you

18 just looked at that and if someone mistakenly assumed

19 that this line continued on in future years and I

20 understand you guys really didn't address that and I

21 guess what I'm saying is perhaps make it clear that

22 this analysis does stop in the Year 2004. My concern

23 is somebody may look at this and say well, heck, in

24 2004 everybody is back to their cash flow has become

25 positive again and in fact, in the case of let's say

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1 the gas product at the standard level 4, it looks like

2 you have a possibility of infinite positive cash flow.

3 MR. BROOKMAN: Look at the slope of that

4 line.

5 MS. STANONIK: Yes. And I realize that's

6 not what you've done and that's not clear what the

7 analysis says. I'm just concerned that not everyone

8 will necessarily understand that and you're giving us

9 the graph. I guess I'm just asking to make sure you

10 put a little words there that says wait a minute, this

11 analysis stops at 2004. We didn't look at what the

12 hell happens after that.

13 MR. BROOKMAN: It's a useful note.

14 Additional comments?

15 Yes, Steve Nadel.

16 MR. NADEL: Or question. As I understand

17 it, this analysis is all based on water blown foam.

18 My question is what happens to the analysis if people

19 were to use 245fa? Did you look into that at all and

20 if not, what would it take to look into that issue?

21 MR. LOGEE: We've only begun to consider

22 that, Steve. We're going to probably have to redo the

23 analysis with that consideration and then send it back

24 to the manufacturers to get their input.

25 MR. BROOKMAN: Additional questions or

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1 comments on these slides? Terry, does that conclude

2 your presentation?

3 MR. LOGEE: Yes, it does.

4 MR. BROOKMAN: I'm going to suggest we

5 take a break. It's now 10:30. We're going to start

6 up again at 10:45. If you're going to be walking the

7 halls of the Forestall, please wear your badge.

8 (Off the record.)

9 MR. BROOKMAN: We had a request that the

10 sound level in the room be taken up just a tad. In

11 the back -- you need a little more. We're going to

12 try to do that. We're going to get the sound folks in

13 here and bear with us, we'll try and get it taken care

14 of.

15 The next segment on the agenda is to have

16 a discussion following on a brief description of the

17 summary of comments. And you can see in your agenda

18 those elements listed, those being engineering -- I'm

19 going to ask everybody to take a seat, please.

20 Engineering, e.g., venting, heat traps, hot water

21 usage, insulation, small water heater closets, price

22 and markup, gas equipment markups, insulation costs,

23 marginal energy rates, life cycle costs, e.g., RECS

24 data, blended fuel projects, national energy savings,

25 e.g., fuel switching, measured EF versus rated EF and

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1 standards recommendations.

2 Mike McCabe, as you think about these

3 eight bullets, do you envision that they'll all take

4 about the same amount of time?

5 MR. McCABE: No.

6 MR. BROOKMAN: Which are the ones that

7 will take a lot of time, do you think?

8 MR. McCABE: I've been out of school a

9 number of years ago. I'm not ready for the test.

10 MR. BROOKMAN: I'm trying to calculate, if

11 we spend 20 minutes on each that gets us in the right

12 ballpark. So until we find a better formula, I'm

13 going to try and deal with that and that way we'll get

14 through all of it. That's the plan I'm proposing.

15 Speak now, we're doing it.

16 MR. NADEL: Doug, your first is going to

17 take quite a bit more than that.

18 MR. BROOKMAN: Okay, so that's the kind of

19 notation I wished to receive. That's helpful. Okay.

20 So then let's press on with this.

21 Michael McCabe from the Department. I

22 think you all know Michael. You're going to proceed.

23 MR. McCABE: I am going to proceed. I

24 also will rely on Terry Logee, my staff and Jim Lutz

25 from LBNL as well.

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1 Those of us with chemical engineering

2 backgrounds are somewhat limited in our ability to

3 understand some of the electronic technologies in

4 their best application.

5 As Doug is holding up the bullet, the one

6 identified is "Comments Received on the Water Heater

7 Analysis." This is by no means representative of all

8 the comments, but rather the staff's culling through

9 the comments and views as to what appeared to be

10 either comments shared by a number of people or those

11 that may have been, appeared to us to be more

12 significant than others.

13 If there are issues that have not been

14 touched on, we certainly will entertain that. We may

15 not be as prepared to discuss those today, but we

16 certainly will give it a shot.

17 Venting issues was raised by a number of

18 comments. GAMA, Battelle, Bradford White.

19 Essentially with respect to gas water heaters that the

20 recovery efficiency proposed should not be above

21 certain levels. There were different recommendations

22 made and it was tied to the fuel loss efficiency and

23 safety factors. The range that was recommended was 76

24 to 80 percent. Also Battelle had recommended that if

25 we come out with a standard that pushes the envelope

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1 that we should include in the technical support

2 document, any amendments that we would be proposing to

3 the National Fuel Gas Code, Kerry and Jim had

4 discussed this somewhat earlier today. One point

5 which they did not touch on is that the model that

6 we're using is the Watts tank now has the fuel loss

7 efficiency included as well as the recovery efficiency

8 and as you get to higher efficiencies, that the

9 difference between the two, we believe shrinks and

10 I'll look to Jim and Terry if you have any points that

11 you'd like to add at this point. I get your message

12 that you're both --

13 MR. BROOKMAN: If we could do it, I'd like

14 you to make it through this bullet. It's only four or

15 so.

16 MR. McCABE: Let's touch on one at a time.

17 MR. BROOKMAN: Okay. Questions, comments

18 related to venting? I guess one question is does this

19 brief summary capture adequately the major stream of

20 the comment? Yes?

21 MR. PAUL: Darrell Paul, Battelle. Your

22 response to 78 percent recovery efficiency is 5.5

23 percent below the Fuel Loss Efficiency limit for

24 condensation in the vent system as determined by GRI,

25 we don't agree with that. We did that work for GRI

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1 and I think we need to go back and look at the study

2 that was done in which that information was extracted

3 and put it in context.

4 First off, we developed the venting

5 guidelines for the high efficiency gas furnaces and

6 vents as a result of the improvements efficiency for

7 the last rulemaking and there was a four step process

8 that we developed for generating the new venting

9 guidelines. The first step was establishing a

10 categorization criteria and an ANSI test procedure for

11 categorizing gas furnaces. We're proposing to do the

12 same thing for water heaters.

13 The second thing is to, again, work with

14 the manufacturers and the code groups to develop

15 reasonable criteria for establishing those venting

16 guidelines and those criteria would be what's an

17 acceptable wet time limit for condensation in the vent

18 connectors in both single wall and type B vents. The

19 vertical vents, whether they're type B or masonry

20 chimneys, again you need to establish wet time limits

21 to adequately account for not only the amount of

22 condensate that's generated in getting rid of it, but

23 also the corrosion potential generated as a result of

24 the condensate.

25 Now the corrosion potential is a function

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1 of primarily the amount of wet time and the number of

2 wet-dry cycles, so it changes depending on the type of

3 appliance that is connected to the mount.

4 And then thirdly, you generate venting

5 tables and again go through the code process, working

6 with the manufacturers and the code groups to generate

7 new venting guidelines.

8 We started that process, the first step in

9 the process, the categorization step in a report

10 that's quote there. If you look at our report, what

11 it was was a scoping study in which we identified

12 possible categorization criteria and proposed an ANSI

13 test procedure. Those considerations were brought

14 before the ANSI standard committee for water heaters

15 and are currently under consideration and we're

16 working with the ANSI rules to develop the

17 categorization criteria.

18 MR. BROOKMAN: Are you saying that this is

19 not accurate what's here, or that it's much more

20 complicated than this?

21 MR. PAUL: Both.

22 MR. BROOKMAN: Okay.

23 MR. PAUL: It is not accurate. The 5.5

24 percent limit that you have up there is a

25 misinterpretation of our results and the reason I'm

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1 going through this procedure here is because the

2 second step of the process is to establish appropriate

3 wet time limits for condensation potential and growth

4 potential and we don't know what those wet time limits

5 currently are for water heaters and vents.

6 In that scoping study that we did, we

7 assumed a wet time limit of approximately 18 minutes.

8 Again, a scoping criteria. After the corrosion

9 testing would have to be done to establish what an

10 acceptable limit is, based on that 18 minute wet time

11 limit though, then we went through and said what would

12 be the impact and the impact was that if you look at

13 the current guidelines in the National Field Gas code,

14 three things would thing. First off, the maximum vent

15 capacity values would be lower because of the higher

16 efficiency. Secondly, there would be additional, not

17 recommended, introduced as a result of condensation

18 limits being put on the vent systems and as a result

19 of that study we actually said that, again, based on

20 an 18 percent -- 18 minute wet time limit, that the

21 current field gas code, you could probably go up to

22 about an 80 percent recovery efficiency and you still

23 have impacts in terms of the maximum capacity and

24 possibly some minimum capacities to limit

25 condensation, but if you're going to encompass the

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1 entire range of currently acceptable installations as

2 a result of the current guidelines in the code, you

3 could go up to 80 percent, but again that was based on

4 a 18 minute wet time capacity.

5 MR. BROOKMAN: Right. I'm sure the

6 Department would like the process that you described

7 as well as these comments in detail, submitted. So I

8 encourage you to do that.

9 MR. PAUL: Yes.

10 MR. BROOKMAN: That was useful. Thank

11 you.

12 MR. PAUL: Now one last comment --

13 MR. BROOKMAN: I want you to be very

14 brief.

15 MR. PAUL: -- and I'll be quiet. We did

16 offer to meet with Charlie Stephens and the Department

17 several months ago to review our work and provide the

18 proper interpretation of our work and I guess I'd just

19 like to keep that offer open.

20 MR. BROOKMAN: Thank you, thank you.

21 Appreciate that. Other comments? Frank Stanonik.

22 MS. STANONIK: Frank Stanonik with GAMA.

23 I feel I have to clarify a little bit our comment

24 also. Our issue really is not per se that the

25 recovery efficiency should not exceed 76 percent, but

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1 our point was in determining a minimum efficiency

2 requirement it should not be based on an assumption

3 that the recovery efficiency will have to be at least

4 78 percent in order to -- our point was that the

5 minimum shouldn't be such that it would require a

6 minimum recovery efficiency of 78 percent in order to

7 achieve the minimum standard level. Our point was

8 really to say you shouldn't push it to that level,

9 that really I guess I don't want to give the

10 impression that any product that has a recovery

11 efficiency of greater than 76 percent is somehow

12 inherently unsafe. That's not true. The real issue

13 is that if you establish a minimum that all of a

14 sudden raises that minimum, there are a lot of

15 associated, in our opinion, a lot of associated

16 problems that come with that particularly when you

17 consider the millions of existing installations that

18 are out there that are predicated on a certain

19 different level efficiency and which the common

20 practice is going to be the people in a replacement

21 installation tend to look at the water heater as a

22 drop in replacement. They don't anticipate messing

23 with the vent, if you will. They don't anticipate

24 that it even needs to be looked at and that is really

25 the heart of our issue that if we establish a minimum

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1 at a level that would assume the minimum recovery

2 efficiency has become 78 percent, that represents a

3 significant concern to the 40, 45 million existing gas

4 water heater installations that have a venting system

5 that's been sized on a different criteria.

6 MR. BROOKMAN: Okay, that's helpful. And

7 you would understand or you would anticipate, I

8 believe, that this very brief -- these few parsed

9 words that the Department has tried to summarize would

10 leave out that kind of detail. So that's helpful.

11 MS. STANONIK: Yes.

12 MR. BROOKMAN: Charlie Stephens.

13 MR. STEPHENS: I had submitted comments on

14 this earlier based on my study of the Battelle work

15 and I didn't find any particular fault with the

16 Battelle work. It seemed very straight forward and

17 thorough. The only discrepancy I found between their

18 work and what DOE's charge is here is that they were

19 developing for the most part in their work a worse

20 case situation which is not how standards are founded.

21 Now I agree that you have to take into

22 account the range of situations that you'll find in

23 the field, but based on the research, I think

24 everybody would agree that there's no problem with

25 interior chimneys. That was pretty much concluded by

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1 the studies. When we looked at exterior chimneys, the

2 study concluded that the occasional firing, if I can

3 quote, "the occasional firing of a residential water

4 heater in a common vented exterior chimney had very

5 little impact."

6 MR. BROOKMAN: On the moisture levels.

7 MR. STEPHENS: On the wet times in the

8 exterior chimney. The furnace governs flue

9 conditions.

10 When you get to whether or not you should

11 use a double wall vent for just a straight water

12 heater venting situation, the National Field Gas Code

13 does call for a Type B vent for places -- in unheated

14 spaces, unconditioned spaces. And that's not

15 conditioned on the efficiency of the water heater.

16 That's all water heaters. And if you look at the wet

17 times that come out of Battelle's research that it

18 actually makes a lot of sense. You can see the

19 differences in the wet times that they got in their

20 research.

21 Now for heated spaces or conditioned

22 spaces, even a single wall vent connector, under the

23 conditions they looked at under the typical

24 installation, not the 30 gallon, 25,000 BTU per hour

25 installation, but the 40 gallon, 35,000 BTU per hour

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1 installation with the typical vent configuration, then

2 you could, according to their charts and tables, with

3 a 3 inch or a 4 inch or a 5 inch flue or the

4 combinations thereof, go up to about an 80 percent

5 recovery efficiency or their flue loss efficiency is

6 what they were using, about 84 percent. And I've

7 looked at that data. I looked at their conclusions

8 and I said, you know, it makes sense to me, as long as

9 you stay in category 1. Then there shouldn't be a

10 problem and there should be no cost, additional cost

11 associated with venting.

12 MR. BROOKMAN: Category 1 in this case,

13 Charlie is?

14 MR. STEPHENS: Is 83 percent flue loss

15 efficiency or below.

16 In any case, 80 percent recovery

17 efficiency does not exceed the limits based on their

18 research of what might be expected to cause wet time

19 problems in the situations as I outlined them.

20 MR. BROOKMAN: Several people wish to

21 comment. Mark, I saw you first.

22 MR. KREBS: I think I can summarize this

23 very succinctly. Charlie is right that energy

24 efficiency standards are not based on worse case

25 scenarios. However, safety standards are and DOE must

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1 consider safety standards.

2 MR. BROOKMAN: Thank you. Daryl, you

3 wanted to comment also? Please, please use the

4 microphone, state your name for the record.

5 MR. HOSLER: Daryl Hosler, Southern

6 California Gas Company. Also Chairman of the ANSI

7 Z2183 Committee.

8 I just want to comment on this slide that

9 DOE should be very careful about presenting

10 information that makes it look like GRI is somehow

11 setting standards levels and picking how standards

12 levels are going to be done. There's a committee of

13 experts from across the country who are a subcommittee

14 of the ANSI Z2183 Committee who are the ones that will

15 pick what this categorization criteria will be. It is

16 true, there is a categorization criteria for furnaces

17 and boilers, but there is none for water heaters.

18 That has not been deduced yet and it's improper to say

19 that somehow that committee is going to pick recovery

20 efficiency as a driver for that. So you're putting

21 the cart ahead of the horse and implying that this is

22 the end of the line just because there is some data

23 out there on furnaces and boilers.

24 The committee has asked GRI to provide

25 data to help them make a decision. They will make

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1 that. There are hundreds of experts who will make

2 that decision. It won't be made by DOE. It won't be

3 made by ACEEE. It's going to be done by the industry

4 experts and it's a problem with you put this kind of

5 a comment up there. It makes it seems like GRI set in

6 stone what categorization criteria for water heater

7 is. So I just caution you to be careful about how you

8 make these statements.

9 MR. BROOKMAN: That's a useful

10 amplification. Darrell?

11 MR. PAUL: Yes, a couple of points.

12 Again, the standards process is an iterative process.

13 Comments are submitted to the various standards groups

14 and based on the technical information that's

15 submitted, standards are changed.

16 But it's an iterative process in the sense

17 that feedback is given. We go back and redo our

18 analysis based on the information that we get and this

19 first report that was written, again was a scoping

20 study. It was never meant to set, to provide the

21 standards for venting higher efficiency appliances and

22 that statement up there, you will not find in our

23 report, 78 percent recovery efficiency is 5.5 percent

24 below the flue loss efficiency limit. That is not in

25 our report and I would challenge the Department of

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1 Energy to find where that statement is made.

2 MR. BROOKMAN: That's the second time you

3 said it. We heard you.

4 Yes.

5 MR. KUSTERER: George Kusterer, Bock Water

6 Heaters. Again, as normal, I'm confused. I see

7 recovery efficiencies and I see Charlie mentioned flue

8 loss efficiencies and I think I brought this up at a

9 number of meetings. Recovery efficiency has nothing

10 to do with flue loss. It's one or the other. Can we

11 clarify that?

12 MR. BROOKMAN: That is, use one term

13 consistently or make sure that use is used

14 consistently where it applies?

15 MR. KUSTERER: In other words, recovery

16 efficiencies with regard to water heaters is how fast

17 it recovers water. What does that got to do with flue

18 loss?

19 MR. BROOKMAN: Okay.

20 MR. KUSTERER: Can we clarify that?

21 MR. BROOKMAN: Okay.

22 MR. KUSTERER: Because I think we're

23 talking two different subjects here. Can DOE make

24 that determination now or do we have to do that at a

25 later date?

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1 MR. McCABE: There is a loose relationship

2 between recovery efficiency and flue loss efficiency.

3 Flue loss efficiency is not a measure of efficiency

4 that DOE uses and the standard is not part of the

5 water heater standard. Recovery efficiency is one of

6 the inputs to come out with the energy factor, but we

7 are considering it in evaluating the impacts of the

8 standard and as I remarked earlier that as you change

9 recovery efficiencies, there is not a direct

10 relationship between recovery efficiency and flue loss

11 efficiency as you move up and increase your recovery

12 efficiency. The difference between the two, if you

13 would, actually is as I understand it, becomes less.

14 So we only talk about flue loss efficiency with the

15 concerns about the impacts that a particular standard

16 level would have on the house, on the consumer,

17 particularly with respect to the safety issue.

18 MR. KUSTERER: My confusion is that

19 recovery efficiency is far less damaging or with

20 regard to condensation than flue loss efficiency.

21 Flue loss efficiency is what causes the lower

22 temperatures in the flue, is what causes corrosion and

23 venting, not recovery efficiency is what causes the

24 lower temperatures in the flue is what causes

25 corrosion and venting, not recovery efficiency.

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1 MR. McCABE: You're absolutely correct.

2 MR. KUSTERER: So recovery efficiency and

3 corrosion and venting should be two separate items.

4 MR. BROOKMAN: So I hear your plea for

5 clarity on the use of these terms.

6 MR. KUSTERER: Thank you.

7 MR. BROOKMAN: Thank you. Heat traps.

8 MR. McCABE: Heat traps. A couple of

9 comments?

10 MR. BROOKMAN: Steve Nadel.

11 MR. NADEL: Right. Two comments on this

12 issue. One, a lot of it comes down to a judgment call

13 about how conservative you want to be. In the

14 Battelle study, they found in a typical installation

15 you can have flue loss efficiencies of 83, 84 percent

16 and not have problem. And then proceed to apply a

17 whole bunch of, see if we take the worse here and the

18 worse here and the worse here and the worse here nd

19 the worse here, how far do you have to go down and

20 that's by piling on about a dozen of those worse case

21 things. They can start coming up with numbers like

22 78, 80 percent and so on.

23 The question for DOE is do you want

24 something where there's no problems guaranteed across

25 100 million households in the country? That would

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1 drive you lower. Do you want -- most say if you just

2 ban gas water heaters because chances are one of them

3 is going to explode somewhere. Clearly, you need to

4 have some accessible limits.

5 MR. BROOKMAN: Steve Rosenstock, do you

6 wish to comment now?

7 (Laughter.)

8 I thought I saw your hand go in the air

9 there.

10 MR. NADEL: At least from all of the stuff

11 I've seen, from all of the data, that you are going to

12 have extremely, extremely small number of problems,

13 even when you said 80 percent and you probably can go

14 higher than that, but DOE has got to decide how safe

15 is safe enough.

16 The other comment I say is we're

17 concentrating on recovery efficiency or flue loss

18 efficiency and how they are or are not related, but

19 this happens to be given the way the modeling has been

20 done, given some of the limitations of the tank and so

21 on, it has become a proxy for efficiency issue that

22 helps determine whether the energy factor which is

23 ultimately what we're going to be regulating, may or

24 may not go up to a round up .6 range. And if you look

25 at the GAMA directory, you will see that there are

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1 hundreds of models with energy factor to the .6 and

2 above that do not start pushing 80 percent recovery

3 efficiency. It just happens to be that's the way to

4 model it in tank, but there's lots of different ways

5 that manufacturers can meet a .6, .61, .62 energy

6 factor and if they decided that they wanted a lower

7 recovery efficiency, all power to them. There's

8 hundreds of models that have done exactly that. So

9 let's not blow this issue out of proportion.

10 MR. BROOKMAN: Okay, thank you. On to

11 heat traps. Final comment from Frank and then we're

12 on to heat traps.

13 MS. STANONIK: Frank Stanonik, again, I

14 have to clarify that last point. There are not

15 hundreds of models. There may be hundreds of

16 listings, all right, but in fact, I was looking for

17 the letter because I did this analysis for Terry and

18 I wrote a letter to Terry and I don't remember

19 exactly, but my recollection was somewhere in the area

20 of 25 to 40 actual models and the energy factor was in

21 the .61, .62 range. Don't quote me because I don't

22 have the letter in front of me, but the point is that

23 I hope everybody understands that a lot of those

24 listings are simply the same model in a different

25 version. It's no different than when you go look at

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1 car models in a Ford. Model X is the same as a

2 Mercury model Y or whatever. It's the same thing. So

3 don't be -- I can't let past this idea that there's

4 hundreds of models. There are not. It's in the tens

5 of the kind he's describing.

6 MR. BROOKMAN: Steve, briefly.

7 MR. NADEL: Let me clarify. If you do the

8 count, there are 538 listings in the GAMA directory,

9 a little more than 20 percent of the total listing, so

10 I don't care whether you call it models listings,

11 whatever, it's a significant share of the market.

12 MR. BROOKMAN: On to heat traps.

13 MR. McCABE: We received comments, a

14 couple of comments on heat traps specific to

15 contribution of efficiency.

16 MR. BROOKMAN: Let me make a comment. I'd

17 like for all of you to accept that anybody who tries

18 to summary a mound of comment is going to have to do

19 some sorting, sifting and particularly reducing. All

20 of these comments in here we can acknowledge and

21 expect they're going to be short form I would think.

22 So I do think it's useful for people to come forward

23 and say this sends the wrong impression or message.

24 This is wholly wrong and that sort of thing, but I

25 wish for you to be accepting of the fact that these

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1 are condensations and aren't parsed in words to the

2 extent a full paragraph would be.

3 Michael, proceed.

4 MR. McCABE: Thank you. We received at

5 least two comments dealing with heat traps, GAMA and

6 EPRI questioning the values for the effect of metal

7 and plastic heat traps including whether or not the

8 heat traps are used the same. The plastic heat traps,

9 GAMA argues are internal units and at the same time,

10 GAMA and Bradford White have provided data and their

11 comments and those data will be considered in coming

12 up with values for the proposed rule.

13 MR. BROOKMAN: Steve Rosenstock.

14 MR. ROSENSTOCK: Steve Rosenstock, EEI.

15 Carl Hiller couldn't be here today, but he wanted me

16 to ask about -- he was concerned because in his

17 interpretation, the analysis appeared to give plastic

18 heat traps much better energy savings potential than

19 the metal heat traps and I think you'd want to know

20 that well, what is the data showing in terms of the

21 relative energy savings effectiveness of the plastic

22 versus the metal heat traps, if you're allowed to

23 share that.

24 MR. LOGEE: Sure, I actually have the data

25 here that Bradford White sent in for electric heat

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1 traps. They sent in a plus .012 and GAMA had provided

2 us earlier in their manufacturers data .013 so we're

3 considering using an average of those numbers in our

4 future and revised analysis.

5 MR. ROSENSTOCK: Clarification, was that

6 for the metal or the plastic?

7 MR. LOGEE: They didn't indicate what kind

8 of heat traps those were. I presume that these are

9 probably internal and therefore plastic heat traps,

10 but I don't know. They didn't indicate it.

11 MR. BROOKMAN: Steve.

12 MR. NADEL: He was just in terms of

13 relative performance -- I think he was really

14 interested in that sort of data.

15 MR. LOGEE: What the Department is

16 interested in, of course, is what is the performance

17 of the device. We let the manufacturers decide what

18 kind of device they're going to use. We're trying to

19 get to the better performance.

20 MR. BROOKMAN: Steve, I saw a couple of

21 manufacturers going like this, nodding in agreement.

22 Steve Nadel.

23 MR. NADEL: Terry, I was just curious,

24 what is the source of the estimates they've been using

25 thus far, are those the defaults in the tank and wat.

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1 sim. or is it something else?

2 MR. LUTZ: It was the defaults in tank.

3 MR. BROOKMAN: That was Jim. Additional

4 questions, comments, related to heat traps? Steve

5 Nadel.

6 MR. NADEL: I guess, I assume we're going

7 to get into the whole calibration issue of tanks and

8 wat. sim. later. To the extent we started adjusting

9 their inputs that may affect efforts to calibrate and

10 validate those models, we need to cycle back to that.

11 MR. BROOKMAN: Okay.

12 MR. McCABE: As Terry had indicated in our

13 life cycle cost analysis, we use a range of values as

14 far as usage, energy prices and the like. Much of

15 that information comes from the Residential Energy

16 Conservation Survey of EIA and there were comments

17 dealing with how we calculated hot water usage and

18 that the household, the average household hot water

19 usage for gas and electric, as we're using is

20 different. We received comments that we should be

21 using the same. We also received comments that there

22 are no data to support some of the values that we use

23 in our estimate where we use thermostat set point and

24 a number of other factors that are not explicitly in

25 the RECS survey. The Laclede, Battelle, AGA, all

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1 commented on one or more of these. They're correct as

2 far as the RECS data does not include all those

3 values. We did extrapolate from other work for some

4 of those values and Jim Lutz can touch on some of

5 that.

6 Also, there was a comment that the data

7 had been provided earlier in EEI and GRI studies that

8 would appear that there is no difference in the

9 average water usage for gas and electric households.

10 Given the RECS data, we still believe that

11 there is some difference. The difference has been

12 reduced for this analysis than what it had been in

13 November. The upper end of the gas level daily use

14 water consumption has dropped down slightly and the

15 electric has gone up. But we're evaluating all those

16 comments again and before we come up with the analysis

17 for the proposed rule.

18 I appreciate any extrapolation expounded

19 that you may have on your comments now.

20 MR. BROOKMAN: Darrell?

21 MR. PAUL: Darrell Paul, Battelle. Yes,

22 we had made some comments on the hot water usage model

23 and again, we don't really have a problem with the

24 range of values that you're predicting with that

25 model. We think a range of 45 to 50 gallons as an

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1 average use for a household is reasonable, so we're

2 not quibbling with absolute value.

3 But yet, when we looked at the hot water

4 usage in the spreadsheets, we found that there were

5 different coefficients used in that model for whether

6 you had a gas household or an electric household and

7 we didn't understand where some of those differences

8 came into play, so that when we -- we were under the

9 impression that the same hot water usage model was

10 being used for both the households with gas water

11 heaters and electric water heaters and when we, in

12 fact, plugged the gas household into the equation

13 that's being used for electric households, we came up

14 with values that were significantly different and we

15 didn't understand where those differences were coming

16 from. And then last of all, again, we're not

17 concerned with the absolute values per se, but we

18 understand that there's a large uncertainty in the

19 coefficients that went into this model and when you

20 quote average usages for households with electric and

21 gas water heaters to three significant digits, it

22 makes it sound like there is -- those differences in

23 the mean values are real and we contend that they're

24 not and would like the Department of Energy to at

25 least put some uncertainty limits on those values.

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1 MR. BROOKMAN: Terry Logee, do you wish to

2 respond?

3 MR. LOGEE: We realized after we got the

4 spreadsheet on the web that there were errors in the

5 coefficients between gas and electric. In the

6 scramble to get things together, why they left -- they

7 had something left over, I guess, from a previous

8 spreadsheet. So we thank you for those comments. It

9 takes lots of eyes to look through these things very

10 carefully and --

11 MR. BROOKMAN: So Terry, you would confirm

12 that the coefficients are supposed to be the same?

13 MR. LOGEE: They are supposed to be the

14 same.

15 MR. BROOKMAN: Okay, thank you.

16 MR. LOGEE: We have not rerun the model,

17 the spreadsheets yet.

18 MR. BROOKMAN: What about Darrell's

19 question about uncertainties, creating, I understood,

20 an understanding of the uncertainties.

21 MR. LOGEE: I'm not sure. We will -- we

22 can report less significant figures and we can round

23 off, I guess, the results for each individual

24 household. And we can provide an uncertainty range as

25 well. We actually have done sensitivities on the

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1 results.

2 MR. RANFONE: Jim Ranfone. Two questions.

3 Mike, you said that your reanalysis showed a lower gas

4 usage and higher electric usage. Now what are the new

5 figures that you're using?

6 MR. McCABE: That's compared to the

7 analysis that had been presented a year, six months or

8 so ago. So I think in both cases it's approximately

9 a half a gallon.

10 MR. RANFONE: So you had 49 and 44 and

11 you're saying now it's 48.5 and 44.5?

12 MR. McCABE: In that range, I'll look to

13 Jim and Terry.

14 MR. RANFONE: Second question is if you're

15 going to run -- if you're going to do a reanalysis

16 with the corrected coefficients --

17 MR. BROOKMAN: Are they already up on the

18 web? Or they will be up on the web?

19 MR. LOGEE: They aren't on the web yet.

20 They haven't had time to rerun them. I think the

21 electric came up above 45, as I recall, Jim, but the

22 gas was still around 48.5, I guess. I don't know

23 exactly.

24 MR. RANFONE: With the new coefficients?

25 MR. LOGEE: No, with the new coefficients

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1 -- no, those are not the corrected coefficients. We

2 still need to correct them.

3 MR. BROOKMAN: Additional questions,

4 comments on this?

5 MR. McCABE: Getting back to the point

6 that Doug had made that somewhat shorthands the

7 issues. There was a comment that -- really actually

8 two separate, but related comments regarding the --

9 how we've estimated water use, how we're projecting

10 water use. The question was whether or not we

11 considered the possible clothes washer standards and

12 whether or not we are considering in the future that

13 water consumption patterns will change, for example,

14 the use of more low flow shower heads and the like.

15 With respect to the water heater, clothes

16 washer standards, that is not factored into the

17 analysis. With respect to usage patterns in general,

18 we are assuming that there's going to be a constant

19 usage pattern, so we're not projecting households are

20 going to change the way they use the products in the

21 household that have an impact on hot water

22 consumption.

23 Those are questions that were raised both

24 by EEI and Battelle.

25 MR. BROOKMAN: Comments on that? Okay,

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1 Michael.

2 Darrell?

3 MR. PAUL: I do have one additional

4 comment concerning the use of the RECS data and you

5 touched on it briefly and that was the fact that the

6 RECS data base that is currently in your spreadsheet

7 models has a number of parameters that were not part

8 of the original RECS data base that have been assigned

9 to specific households and some of those parameters

10 are the water heater thermostat set point temperature

11 for that house and the RECS survey, the volume of the

12 water heater tank, whether it was a 30, 40, 50 gallon

13 tank and the average air temperature in the room in

14 which the water heater was located.

15 I guess we'd like to get some feedback and

16 there were several others that we list in our

17 comments, but we like to get some feedback as to how

18 those specific values were assigned to the RECS data.

19 I don't expect to get that now, but I would like to

20 follow up and get the information from the

21 contractors.

22 MR. BROOKMAN: Thank you, Darrell. We'll

23 make that available. As I mentioned, we have

24 extrapolated from other data sources or even to that

25 that I believe looking at Jim Lutz for the water

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1 heater size that we looked at the households and the

2 households size in RECS and tried to extrapolate that,

3 the temperature settings, the temperature in the

4 environment all came from other data sources, but

5 we'll get back to you on that one.

6 MR. BROOKMAN: Thank you. Steve

7 Rosenstock?

8 MR. ROSENSTOCK: Just a quick follow up in

9 our comments. Steve Rosenstock, EEI. Just in our

10 comments, it was my opinion or our contention that

11 because clothes washers are one of the prime uses of

12 hot water in the households that standards will have

13 a downward push on the amount of hot water used

14 regardless of field type so it was our thought that it

15 should be taken into account for the projections.

16 Thank you.

17 MR. BROOKMAN: Yes sir, please come to the

18 microphone.

19 MR. ROLF: My name is Paul Rolf from

20 Effikal. If you don't mind, I'd like somebody to

21 indulge me for about 30 seconds. My understanding is

22 a heat trap is a heat trap. It doesn't make any

23 difference whether it's a gas water heater or an

24 electric water heater. Is that correct?

25 MR. BROOKMAN: Who can answer that

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1 question?

2 MR. ROLF: I come to the microphone with

3 that in mind, but when I look at the data and I look

4 at option 1 or standard level one which is the most

5 important it seems, I see a major difference between

6 the influence of heat traps on the electric appliances

7 versus the gas appliances. Is that consistent?

8 MR. LANNES: I'm comment. Eric Lannes,

9 Bradford White. You can look at the energy factor of

10 comparable units. That will tell you why there's a

11 difference. You can have much lower standby losses on

12 an electric product versus a gas or oil products.

13 MR. ROLF: And that's where the influence

14

15 MR. LANNES: Right, so essentially you'll

16 see the differences associated with that.

17 MR. ROLF: Thanks.

18 MR. BROOKMAN: Additional questions on

19 these points before we move on? Okay.

20 MR. McCABE: We also received some

21 comments on blowing agents and again with the

22 shorthand, I'm going to expand on this and essentially

23 treat two separate comments. One is about the 245fa

24 which was discussed in Terry's comments that we are

25 expanding the analysis to include the life cycle cost

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1 and National Energy Savings Analysis for the --

2 looking at 245fa. There were also a series of

3 comments with respect to tank bottom insulation, EPRI,

4 Bradford White and GAMA, among the comments submitted,

5 comments on that. EPRI's, for example, comment as I

6 interpreted it said we've overestimated the effect of

7 the -- putting insulation on the tank bottom. Also

8 had comments from Bradford White about the lower water

9 temperature, consistent with, I think with EPRI's

10 comments, that the lower temperature of the water at

11 the bottom of the tank gives a stratification that

12 they're questionable as to what benefit the insulation

13 can have in the bottom and GAMA talked about both the

14 cost, as far as on a dollar basis and the improvement

15 in energy factor due to bottom insulation.

16 As had been discussed at the last workshop

17 and Hunter Fanney when he showed some of his pictures

18 of units that he had tested, when you looked at the

19 infrared photographs and the amount of heat that was

20 escaping from the bottom, that was what drove us to

21 look at this and we believe and I'll look to Jim Lutz

22 to expand on this, that there is a significant loss of

23 energy from the bottom of the tank.

24 Would you want to add anything to it, Jim,

25 before there are any questions or comments?

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1 MR. LOGEE: We've seem from sort of a --

2 not qualitative type of data from NIST in the

3 thermograms that most of the tanks that they test,

4 today's tanks, have a fair amount of heat coming off

5 of the base of the tanks from the -- and we don't see

6 the -- the thermograms don't show that off of the

7 jacket, just off the very bottom pan. So we think

8 that there is an improvement that can be made there

9 and I guess we can debate or argue about the amount of

10 the improvement.

11 MR. BROOKMAN: Questions or comments,

12 following up on that? Yes?

13 MR. STRAUSS: Good morning, my name is

14 Brian Strauss and I'm the marketing manager for Allied

15 Signal. We're in the blowing agent business and it's

16 been alluded to earlier today that perhaps some

17 questions would come up as to the status of 245fa and

18 It will be available on the marketplace, upon the

19 phase out of 141b in 2003, and so I'd just like to

20 address that subject today.

21 Allied Signal has been in the blowing

22 agent business for a number of years and indeed the

23 floor covering business for in excess of 40 years.

24 With respect to 245fa Allied Signal has spent

25 considerable time and effort since 1994 in the active

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1 development of 245fa. Our company has spent in the

2 order of $27 million on the development of 245fa. We

3 feel very comfortable that 245fa will be available to

4 customers in the marketplace, in advance, slightly in

5 advance of the 141b phase out. We have recently filed

6 for our pre-manufacturer notice with the Environmental

7 Protection Agency as well as seeking SNAF approval for

8 245fa as a 141b replacement. We very much anticipate

9 those approvals going through. We stay in contact

10 with EPA on those subjects. We anticipate those

11 approvals going through and so we anticipate in the

12 very near future being able to announce our intention

13 to make 245fa available in advance of the 141b phase

14 out. I'm very comfortable and it is my job, it is my

15 day to day job to manage this program. I'm very

16 comfortable that 245fa will be available in the

17 marketplace prior to the 141b phase out.

18 MR. BROOKMAN: Thank you. Can I ask you

19 a question?

20 MR. STRAUSS: Sure can.

21 MR. BROOKMAN: I know from earlier

22 workshops, I was just conferring with Michael McCabe,

23 briefly, and earlier workshops there was not only a

24 concern that the product might not be available, there

25 was also a concern that once the product was available

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1 that all known manufacturers might not be able to

2 respond to the quantity of demand.

3 MR. STRAUSS: All known manufacturers

4 meaning competitors to Allied Signal?

5 MR. BROOKMAN: That is to say those people

6 that -- I've stated that wrong. But all those people

7 that might be in the business of producing this

8 material.

9 MR. STRAUSS: Of producing floor

10 coverings?

11 MR. McCABE: As that the manufacturers

12 demand, appliance manufacturers demand could not be

13 met.

14 MR. BROOKMAN: Satisfy that demand.

15 MR. STRAUSS: Again, we have a very good

16 understanding of the marketplace today with 141b.

17 141b as a business that we are in today and we sell to

18 a number of the systems houses that provide

19 formulations to this industry. I certainly think that

20 any 245fa facility that Allied Signal constructs will

21 have ample excess capacity to support what I

22 understand to be a 3 to 4 million pound blowing agent

23 segment as represented by water heaters.

24 We do not have direct contact with water

25 heater manufacturers. Indeed, you should know that

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1 Allied's position is we're not in the water heater

2 business. So we take no position on this standard.

3 But I think what you should know is that there are

4 other segments out there that are much larger, that

5 use much more 141b and so this segment relative in our

6 business is a fairly small segment and so we would

7 anticipate any facility that Allied were to build to

8 be able to accommodate the blowing agent requirements

9 of the water heater segment in the United States.

10 MR. BROOKMAN: Thank you. Thank you.

11 Additional questions or comments?

12 MR. VAGO: I have a question. Otto Vago,

13 State Industries. The gentleman made a statement that

14 245 will be available prior to the phase out of 141b.

15 Could he give us an approximate time frame, how far

16 ahead of the phase out time?

17 MR. STRAUSS: You should know that we have

18 made 245fa previously. We have a pilot plan in

19 Buffalo, New York that we have run extensively to

20 produce 245fa. We run that pilot plan for two

21 reasons: one, to develop a commercial manufacturing

22 process to produce the molecule. We were very

23 successful in that endeavor. We have a number of

24 process patents on how to make 245fa. We believe we

25 have the best low cost process to make 245fa.

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1 Secondly, we run our pilot plan to support

2 our various customers, some of which are in this room,

3 systems houses who indeed supply you with foam

4 formulations. But we also ran that pilot plant to put

5 samples onto the market place. And so we have 245fa

6 available today. Now you wouldn't like the economics

7 because it comes out of a pilot plant that certainly

8 isn't designed to produce 245fa on a grand, economical

9 scale. With regards to a commercial facility, any

10 commercial facility ally were to build, we have

11 targeted to be on line in the middle of 2002 to allow

12 for a six month ramp up period of time between that

13 and the 1-1-2003 phase of 141b.

14 245fa, for us, is a large investment and

15 we've been very diligent and been very careful in

16 analyzing this project. It will require Allied Signal

17 to expend $75 million plus in capital to construct a

18 facility. Now we've done this before. This is our

19 business. We make a number of fluorocarbons, not only

20 for foam blowing, but for refrigeration, solvents,

21 aerosols, etcetera, etcetera and so, we know a lot

22 about this business. But to answer your question, our

23 goal in the construction of a 245fa facility would be

24 to be on line to allow for a six month ramp up period

25 prior to a 141b phase out.

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1 MR. BROOKMAN: Otto?

2 MR. VAGO: Otto Vago, State Industries.

3 My question to the foam supplier. I do understand

4 that there are some here. Is this six months enough

5 time for them to provide -- also with the foam, the

6 ultimate product that we basically use. As I

7 understood it from the gentleman, there's about six

8 months lead time that we're talking about.

9 MR. INGOLD: Kerry Ingold with Bayer

10 Corporation. Six months, we've been doing development

11 work with the 245fa systems for some time. The

12 samples have been available from Allied as he stated.

13 Six months time for production quantity trials in the

14 facilities, in my opinion, will be short. I think

15 that will be pushing the envelope and maybe some of

16 the manufacturers can expand some on the logistics of

17 that, but I think that that is going to be a somewhat

18 short time frame.

19 MR. BROOKMAN: We have several additional

20 people who wish to comment, please.

21 MR. BEAUCHAMP: Brad Beauchamp, Business

22 Manager with Stepan Company. We're also a foam

23 supplier. I would concur with Bayer that the six

24 month time frame is a rather tight time frame to be

25 able to run and execute successful plant trials to get

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1 kind of a baseline established on that.

2 I would also like to comment or it should

3 be known, it's pretty well known here that Allied

4 Signal is the only producer of 245, so there is not --

5 they are a single source for when that goes into

6 production.

7 MR. BROOKMAN: Thank you. Does Allied

8 Signal wish to comment also?

9 MR. STRAUSS: I can certainly understand

10 your question on a time line in the six month

11 availability. We have a pilot plan asset currently in

12 Buffalo that is available to support the industry

13 should we need to generate material out of that pilot

14 plant facility to support the trials. There are other

15 options that may be available to us that we are

16 working on for some sort of larger scale interim

17 supply. There's nothing definitive, but we do have an

18 asset in the ground today that produces 245fa in a

19 pilot plant basis.

20 So we want to work very closely with the

21 industry and with our customers, the systems houses

22 and in turn, with your industry, should it be

23 something you want to pursue.

24 ASSISTANT SECRETARY REICHER: Can I --

25 this is Dan Reicher -- the pilot plan is what scale

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1 relative to a --

2 MR. STRAUSS: It's a small scale.

3 ASSISTANT SECRETARY REICHER: What

4 percentage of what you'd ultimately build and put on

5 line in 2000?

6 MR. STRAUSS: I'll give you -- our pilot

7 plan is 150,000 pounds if we ran it 365 days a year.

8 It's a small scale.

9 ASSISTANT SECRETARY REICHER: I don't

10 know, what's a big --

11 MR. STRAUSS: A big plant, what we would

12 call a world class fluorocarbon scale would be in

13 excess of 30 to 60 million pounds, per year, because

14 in addition to this industry, of course, we sell

15 products to others.

16 MR. BROOKMAN: Terry Logee.

17 MR. LOGEE: I was wondering if either

18 Kerry or Brad could identify approximately -- you said

19 six months was too short. What kind of time frame

20 would you need to be able to supply the manufacturers

21 with adequate product?

22 ASSISTANT SECRETARY REICHER: Actually,

23 this is Dan Reicher, he said it was short. I didn't

24 hear that they said it was too short. I was actually

25 interested to hear what you really mean by that.

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1 MR. BROOKMAN: Go ahead and then this

2 gentleman will go next.

3 MR. INGOLD: Kerry Ingold, Bayer

4 Corporation. If you just take a look at the testing

5 that you've done for the purpose of these workshops,

6 you can understand the time frame and the involvement

7 it takes to complete a reasonable size sample, if

8 nothing else for the EF testing and I don't want to

9 speak on behalf of the manufacturers, but any design

10 changes that might be required across the board of

11 their product. So I'm mean --

12 ASSISTANT SECRETARY REICHER: Just so I'm

13 clear, this is Dan Reicher. The availability of the

14 245fa for the pilot plan, is that --

15 MR. INGOLD: Allied has made the material

16 available to us as requested to this point. If you're

17 looking at production size line trials and I don't

18 understand, I'm not fully apprised of the total demand

19 it would take say if all of the manufacturers were

20 apprising that material, I wouldn't know if they could

21 make that supply, using the pilot plant facilities, as

22 it is. I don't want to speak for Allied.

23 MR. STRAUSS: I would suggest that this is

24 something that our businesses would maybe talk about

25 off line, but I'm very comfortable with the asset we

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1 have today and I'm very comfortable with the direction

2 our 245 program is going and certainly if we need to

3 develop something in the interim, there may be options

4 that are available.

5 MR. BROOKMAN: We have another gentleman

6 waiting to speak. The comment I heard earlier that

7 I'd like to repeat was about -- you spoke mostly not

8 to the issue of scale, you spoke mostly to the issue

9 of quality, that is, doing the runs, getting the

10 product done to spec, making sure that stuff is taken

11 care of.

12 MR. BEAUCHAMP: Brad Beauchamp again with

13 Stepan. I think the time line was spoke to pretty

14 well from Bayer's standpoint. There are other factors

15 being involved in the water heater industry that

16 affect more than just the polyurethane foam that we

17 supply, so those have to be taken into account.

18 Production scale of quantities, obviously, involve

19 more than just batches being made in a lab in a water

20 heater here and there. I think Steve Nadel has

21 touched on there's many different models we have to

22 consider as we're supplying to the different

23 manufacturers and you need adequate time to be able

24 evaluate the impact of a foam and a blowing agent on

25 each individual production model.

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1 MR. BROOKMAN: That's helpful. And this

2 other gentleman, please say your name for the record.

3 MR. KRUPEL: Mike Krupel with BASF

4 Corporation and we are one of the foam suppliers also.

5 I want to remind everyone that we had a lot of

6 problems when we went from freon 11 to 141b and there

7 was quite a learning curve that went along with that

8 and it is expected that all the models need to be

9 tested pretty exclusively to see how it's going to

10 work.

11 The other concern I have is in the cost of

12 245fa as compared to 141b today.

13 MR. BROOKMAN: How would you characterize

14 those cost differences in your opinion?

15 MR. KRUPEL: The cost differences between

16 245 and 141b? I think Brian's going to approach that.

17 MR. STRAUSS: Actually freon is a trade

18 name of our competitor, DuPont.

19 MR. McCABE: Brian, this is Mike McCabe.

20 Before you answer the question because this is really

21 a two part question of which you can only deal with

22 part of it, the other -- you can deal with the cost,

23 potential cost for the 245fa. But the other half of

24 the question as I see it is the insulation material

25 itself, including the 245fa, the blown insulation.

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1 How much difference is the cost of the insulation and

2 that's not yours.

3 MR. STRAUSS: And actually to be quite

4 honest, I'm afraid I'm not going to be much help to

5 you on the issue of pricing in 245fa. I mean it's a

6 policy of Allied Signal not really to comment on

7 pricing in a public forum. And quite frankly, we

8 don't sell blowing agent to water heater

9 manufacturers. We sell blowing agent to systems

10 houses who then price their products accordingly and

11 sell it to water heater manufacturers. So I think the

12 overall price impact is one that needs to be discussed

13 between water heater manufacturers and systems houses

14 and foam formulators and people where they actually

15 directly buy their product from.

16 It's a small segment for us. We sell to

17 large segments direct. We sell to rigid board stock

18 segments direct. We sell to appliances,

19 refrigerators, freezers direct, but we don't sell

20 direct to water heaters because they enjoy a service

21 of the systems houses and so I can't really comment on

22 the cost aspect of it.

23 245fa is a more expensive molecule. The

24 5 in the number indicates a 5 fluorine molecule and by

25 nature it's more expensive to make. It requires a

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1 capital investment and so what I can say is it's more

2 expensive.

3 MR. BROOKMAN: Thank you. It seems as

4 though we're getting answers here that are indicative,

5 but I don't think we're going to get answers here that

6 are definitive. It's what's occurring to me in what's

7 just occurred. So I want us to make sure that we

8 don't spent all of our time chasing an answer we're

9 not going to get at this moment.

10 I saw Steve Nadel, I saw George and I saw

11 Otto.

12 MR. NADEL: One comment on the timing

13 issue. As I understand the DOE schedule, the standard

14 will be completed in July of 2000. Under NAECA,

15 there's at least a three year phase-in period before

16 we go into effect, so the standard would not go into

17 effect until July 2003, so there would be an extra 7

18 months to complete testing for energy factor beyond

19 the six months that was indicated previously.

20 MR. BROOKMAN: Thank you. George?

21 MR. KUSTERER: George Kusterer, Bock Water

22 Heaters. I think what we have here is a two-fold

23 problem and obviously I'm sure everybody is aware of

24 it. Number one, single source supplier. If is a very

25 big word. My father had a saying which I can't repeat

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1 on tape --

2 (Laughter.)

3 However, as a farmer, if is a very big

4 word. If we had a lot of rain, I probably won't have

5 to cut my herd this year. Unfortunately, I will. So

6 if that plant is not in operation by mid-2002 as a

7 single source supplier, I think we have a problem. I

8 think we have a big problem. The plant has not yet

9 been constructed and we're very close to that time

10 frame and a plant of that magnitude is not going to be

11 -- like in Pennsylvania, driven down the road, two

12 sides put together and we're going to start

13 production. So that's my two major concerns that I

14 think DOE needs to consider.

15 What if the plant is not in the process of

16 or is not ready for production in mid-2002 and single

17 source supplier. A lot can happen.

18 MR. BROOKMAN: Thank you. Otto.

19 MR. VAGO: Otto Vago, State Industries.

20 Once again a time frame, we heard foam suppliers are

21 telling us here, at least that six months is a

22 somewhat short time for them. At that point, we water

23 heater manufacturers haven't done any work and

24 preliminary work we may have done of 245 at that time,

25 but at that point we haven't done anything in terms of

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1 a production line of ours using that particular

2 material.

3 MR. BROOKMAN: Okay. Dan?

4 ASSISTANT SECRETARY REICHER: I just

5 wanted to be clear about something, Dan Reicher. Is

6 it six months or is it 13 months?

7 MR. LANNES: It's six months from 2003,

8 January 2003 when the phase out begins.

9 ASSISTANT SECRETARY REICHER: Okay, so

10 that's the --

11 MR. LANNES: That's completely independent

12 of your rule.

13 ASSISTANT SECRETARY REICHER: No, I

14 understand that.

15 MR. BROOKMAN: That was Eric Lannes.

16 ASSISTANT SECRETARY REICHER: No, I

17 understand that, but what's the driver -- if the

18 effective date of the rule is in July of 2003 --

19 MR. McCABE: If I can try to -- what is my

20 understanding --

21 MR. BROOKMAN: Michael McCabe.

22 MR. McCABE: -- as you comment on it is

23 that since you are using 141b now, if I understand

24 your comment, is that you're going to have to do

25 something by January 2003 without regards to what DOE

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1 does.

2 MR. STRAUSS: The Clean Air Act and EPA,

3 the EPA has mandated -- you have to stop consuming

4 141b on January 1, 2003. Now consumption is defined

5 by the EPA as production, plus imports, minus exports.

6 So if you have 141b in a storage drum on December

7 31st, you can continue to use it on January 1st.

8 MR. BROOKMAN: Okay, thank you. And I'm

9 going back to my earlier comments. I think we're

10 getting answers here that are indicative, but perhaps

11 not fully definitive and hopefully more information

12 will come forward in the comments and I don't want to

13 drag this -- I don't want to beat this to death, I

14 want to keep moving on. So you get the final comment

15 and then we're going.

16 MR. BEAUCHAMP: Brad Beauchamp again with

17 Stepan. Two questions. One would be a question for

18 Allied Signal in terms of how long it would take them

19 to produce a plant once they made the decision to go

20 ahead and the second comment is he is correct about

21 the ability or the availability of 141b. The

22 difficulty from a foam manufacturer standpoint is

23 we're not going to carry inventories of HCFC 141b if

24 there's not demand from our own customers. So whether

25 we can have it on our floor and available to people is

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1 really a moot point at this point until we know more

2 about what's available as we get close to the phase

3 out date.

4 MR. BROOKMAN: It seems like he was asking

5 you a specific answer. What was that question again?

6 MR. BEAUCHAMP: What type of time frame do

7 you anticipate going from actually throwing out the

8 golden shovel to actually being able to produce?

9 MR. STRAUSS: This is not an exact

10 science. There are multiple time lines that we can

11 adhere to, but we certainly do not see any problem

12 with making a decision and finalizing that decision

13 and being on line in the middle of 2002. As a basis

14 for comparison sake our recent plant that we built

15 five, six years ago in Guismer, Louisiana, our 134a

16 multi-products plant, we built from start, concept,

17 drawings to completion and throw the switch in 18

18 months.

19 MR. BROOKMAN: And start to completion and

20 then ramp up in production from there.

21 MR. STRAUSS: Start, completion and

22 initial ramp up phase on the back end, all in 18

23 months.

24 MR. BROOKMAN: Thank you, thank you. I

25 want to move off this subject. Michael, we're moving

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1 on.

2 For those of you that are hungry, we're

3 going to work through lunch a little bit here until we

4 catch up.

5 MR. McCABE: I am going to move the slides

6 out of order. That is the test procedure issue. It's

7 an issue that Steve Nadel raised in one of his earlier

8 comments on engineering issues.

9 In your handout I believe is the -- near

10 the end of the packet.

11 MR. KUSTERER: Page 13.

12 MR. McCABE: Page 13. Thank you, George.

13 At the last workshop there was a question with respect

14 to what efficiency was being observed in the

15 marketplace and what efficiency was coming out of the

16 wat.sim. and tank models? What DOE was going to use.

17 The National Resources Defense Council, I believe,

18 Oregon Energy Office and American Council for Energy

19 Efficient Economy all pointed out a discrepancy of

20 about -- and it's been discussed I guess earlier today

21 about an energy factor difference of about .02 for the

22 high efficiency electric water heaters.

23 Since then we have examined data from a

24 number of sources, data from GAMA certification

25 program, data from testing which is being done at the

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1 National Institute of Standards and Technology as well

2 as manufacturer data and based on that we believe that

3 the engineering analysis, the wat.sim. model is

4 correctly projected predicting energy factor and it is

5 going to be the output from that model that we are

6 using. I hope that answers the question as far as

7 what we're going to be using and why.

8 MR. BROOKMAN: Steve Nadel.

9 MR. NADEL: Two questions. I was

10 wondering if there's any data you can share with the

11 rest of us to support that conclusion in terms of test

12 data, in terms of data verifying the performance of

13 wat.sim. or tank at high efficiency levels. It sounds

14 like you're comfortable, but it would be useful to

15 provide some of that data to help other people be

16 comfortable. That's one question.

17 The second is given the fact we've had

18 this discrepancy in the past, what is DOE going to do

19 to make sure that in the future reported values are

20 true as opposed to basing a standard on a set of

21 calculations, but enforcing them based on something

22 else?

23 MR. McCABE: With respect to the last

24 question, those data are being reviewed and being

25 discussed within the Department. A position and a

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1 course of action has not been decided on yet.

2 And the same answer would generally apply

3 to the first question because some of those data given

4 how they've been collected, we are trying to determine

5 how they should be released and whether or not they

6 can be released.

7 MR. NADEL: When do you anticipate having

8 an answer or is it always going to be "trust us"?

9 MR. McCABE: Well, the check isn't in the

10 mail yet, Steve. It's a legitimate question. I wish

11 I could give you a specific answer. The answer, my

12 answer to that is I hope that it would be rather soon.

13 MR. RANFONE: Jim Ranfone. Quick question

14 on this. Is your analysis also applied to the

15 baseline units for both gas and electric?

16 MR. McCABE: The information that we

17 looked at was not as extensive for the baseline units

18 and my interpretation of some of that more limited set

19 is that when you look at the whole data set, you can -

20 - and I'm most familiar with the data on electric.

21 I'll talk about electric.

22 That when you divide it up into thirds, as

23 far as the high efficiency, mid-efficiency and low

24 efficiency cohorts, that there's different

25 performances, that the high efficiency appears to be

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1 overrated. The mid-efficiency appears to be right on

2 target and the low efficiency appears to be

3 conservatively rated, so that when you look at the

4 whole range of data, it appears that on average that

5 they appear to be on target. But if you break it

6 down, slice it and dice it.

7 MR. BROOKMAN: Steve and then --

8 MR. McCABE: Let me just -- we have --

9 it's a limited -- when you start getting away from the

10 high efficiency electric, the data set becomes smaller

11 and I would not want to extrapolate from that any

12 position the Department may take.

13 MR. BROOKMAN: Steve Rosenstock.

14 MR. ROSENSTOCK: This is again from Carl

15 Hiller's -- he would be happy to talk about it, all

16 the details about wat.sim. if he were here, but he

17 said wat.sim. can predict energy consumption of

18 electric water heaters typically within 3 to 6 percent

19 accuracy. The type of analysis represented by DOE,

20 energy factor tests the accuracy would typically be

21 around 3 to 4 percent range. So again, some of these

22 numbers are within the range of errors for wat.sims.

23 MR. BROOKMAN: Okay, thank you. Final

24 comments on this? Yes, Frank.

25 MS. STANONIK: Frank Stanonik, GAMA. Two

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1 quick comments. We've certainly commented to DOE

2 before that none of GAMA's water heater manufacturer

3 members use wat.sim. in any of their work so we really

4 don't have any experience to address to what degree it

5 is accurate or whether there may be inaccuracies.

6 Obviously, Carl Hiller has a lot of faith in it, but

7 I guess I just want to point out that the industry

8 certainly hasn't embraced it and really doesn't have

9 much experience with it.

10 The other point is recognizing all of the

11 caveats that this is a basic condensation of a lot of

12 issues and a lot of comments. I guess I'm just going

13 to say at this stage I don't know -- let me rephrase

14 that. I don't agree that there's an overrating of

15 .02. There are certainly a lot of issues involved.

16 We've heard some of them in discussions that related

17 to the insulation and all that, but I think it is

18 something that certainly we're very willing to take

19 into a dialogue and see what we really know and what

20 we don't know.

21 MR. BROOKMAN: Thank you. Other comments?

22 We're now back to page 6.

23 MR. McCABE: There were a couple of

24 comments regarding changes in the design of products

25 that may come about as a result of increased

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1 efficiency both with respect to electric and gas and

2 what I've characterized here is one that dealt with

3 the electric, that is, that if you -- the lowboy,

4 tabletop water heaters, the various designs of water

5 heaters that are limited in height or in diameter, one

6 or the other and maybe both, that as you go with

7 thicker insulation, we're going to be limited as to

8 how much larger you can make the unit and have to

9 sacrifice the internal volume to make it a smaller

10 tank. There's also an issue that was raised with

11 respect to gas water heaters that if you have to go

12 with a smaller unit, in order to satisfy the first

13 hour rating that consumers will demand will go with a

14 larger burner and larger vent and the question is

15 whether DOE has taken that into consideration.

16 With respect to some of those issues, we

17 have added installation costs as discussed here to 10

18 percent premium to cover some of the designs. That

19 does not capture all of the different issues that are

20 there. We're trying to get a better handle of what

21 the impacts are. We think by making some of the

22 changes for certain segments of the market, adding

23 costs, that we are capturing some of those impacts.

24 MR. BROOKMAN: Mark Krebs.

25 MR. KREBS: Did I hear your correctly?

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1 You said you added a 10 percent premium? Or is that

2 10 percent of the water heaters?

3 MR. LOGEE: Can I clarify that? This is

4 Terry Logee. We added installation costs in a form of

5 removing and reinstalling the door jamb on 10 percent

6 of the water heaters that were indicated in the RECS

7 data set that were inside the house. So that's the

8 cost that we added for the electrics. For the gas, we

9 added those vent costs that I had mentioned earlier.

10 MR. BROOKMAN: Additional comments or

11 questions on this point? Yes sir.

12 MR. THOMASTON: Bill Thomaston, Alabama

13 Gas. I've worked with multi-family market, both as a

14 contractor and a utility employee for better than 30

15 years and of course space has always been a problem

16 with gas equipment, particularly gas furnaces and gas

17 water heaters which are usually installed in tandem in

18 a mechanical closet. And getting the additional space

19 has always been a problem. You were very fortunate to

20 get one inch of clearance for whatever size equipment

21 was available at that time and as equipment sizes have

22 increased in diameter, small furnaces and now with

23 NAECA 1 water heaters, this has become an increasing

24 problem.

25 We recently had a major project that we

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1 had to put outdoor water heaters at because you could

2 literally not get anything in and contractors,

3 developers, owners, investors, are not willing to

4 spend the money to either have another utility closet

5 or to relocate the water heaters. So where this is

6 critical, it's more than just 10 percent critical. It

7 literally means a major structural change. The

8 particular instance I'm referring, I think, the cost

9 per unit was about $1,000. It's amazing, frankly,

10 that they went along with the project, but these are

11 the kinds of issues that we're facing and we're very

12 concerned about the next level of efficiency

13 rulemaking that this will make more and more,

14 particularly in the public housing area which as most

15 of you probably know you have very low square footage

16 per bedroom and space is absolutely critical. So this

17 is going to be a major issue as far as water heater

18 diameter is concerned.

19 MR. BROOKMAN: Thank you.

20 ASSISTANT SECRETARY REICHER: This is Dan

21 Reicher. What's the significance of going to an

22 outdoor water heater?

23 MR. THOMASTON: Well, they're rather

24 larger, somewhat unsightly. Then there's the matter

25 of protection. In this particular project, we had to

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1 even get zoning out because it was major outside

2 construction. The zoning department got involved and

3 then, of course, the expense involved with those.

4 You've got to rerun the water lines. You've got to

5 rerun the gas lines. You have to have concrete slabs

6 on and on and on. And so it's quite a major

7 construction project.

8 MR. BROOKMAN: Thank you. Additional

9 comments on this point? Frank Stanonik?

10 MS. STANONIK: Frank Stanonik with GAMA.

11 I just wanted to add something because this is an

12 issue that came up in the analysis that DOE was

13 looking for comments and so we have tried to gather a

14 better snapshot at least on electric water heater

15 issue, what percentage of product sold are the

16 lowboys, the 36 inches or less in height. I don't

17 have a final number yet. I've got enough information

18 that I can now process it, but based on just looking

19 at what I have and making some estimate, it looks like

20 this segment of the electric water heater market may

21 be as much as 20 percent of the market.

22 And that actually may link to Bill

23 Thomaston's comment about the multi-family market and

24 stuff. That is certainly one area where the

25 installation of electric water heaters perhaps is

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1 contrary to the overall national average because you

2 get into these limited space applications, you get

3 into multi-storage situations and all of a sudden, the

4 electric water heater for the builder, investor,

5 whoever, becomes a more attractive option because he

6 can't put a small one in.

7 MR. BROOKMAN: Perhaps we'll let Terry

8 follow on and then this gentleman. I can't read your

9 name tag.

10 MR. LOGEE: Very quick follow on. Frank,

11 are you going to be able, have that done so that you

12 can include that in your comments August 3rd?

13 MS. STANONIK: Unless there's some major

14 catastrophe, yes.

15 MR. BROOKMAN: Robert Hemphill.

16 MR. HEMPHILL: Robert Hemphill, Gas

17 Research Institute. Just to follow-on a little bit on

18 what Frank just said. I totally agree that something

19 that hasn't taken place to my knowledge in the process

20 to date brings up fuel switching and so far I think

21 fuel switching has tried to be forecasted based on

22 economic issues of price, if the price gets so high,

23 fuel switching will take place.

24 I think that fuel switching also needs to

25 take account of a physical constraint. If the gas

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1 water heater can't be relocated into a closet with a

2 gas furnace, then an alternative is to put in an

3 electric water heater and it might be in addition to

4 an economic basis, but a physical basis and I don't

5 think any of the analysis takes into account that

6 physical basis for fuel switching.

7 MR. BROOKMAN: Thank you. Additional

8 comments on this subject? Mark Krebs.

9 MR. KREBS: Mark Krebs, Laclede Gas. The

10 whole issue of fuel switching, Terry Logee alluded to

11 a little ad hoc effort that occurred for a short

12 duration, but it was really bad without going the

13 distance as we could go. Excuse me, yes, and Bob's

14 right, Bob Hemphill is right about this. How you look

15 at it, it's a very complex issue. It's not just

16 related to fuel prices. It's really more related, I

17 believe, to all these minuscule incremental costs that

18 have this funny way of adding up and becoming a major

19 disincentive and this whole issue in being able to

20 look at all these variables and how they interact, I

21 think, strikes at the heart of the intent of what

22 transparency and robustness is all about and the fact

23 of the matter is we have very little ability to look

24 at these things in the present forum of the

25 spreadsheets.

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1 MR. BROOKMAN: You, sir, were next.

2 MR. LEKOV: Alex Lekov. Lawrence National

3 Laboratory. This is the question, Frank, regarding

4 the 20 percent you mentioned about the installation.

5 I wondered if those percentage basically points to

6 older, inferior installations in good lowboys and

7 regular units or just lowboy type of units? My

8 understanding was that lowboys and it was mentioned in

9 some GAMA materials is around 7 percent of the market?

10 MS. STANONIK: Now I am trying to recall

11 what that previous correspondence might have been, but

12 I guess at this point the only way I can answer it is

13 based again on the question that DOE specifically

14 identified when the analysis was released or at least

15 when they announced the workshop or whatever. We

16 purposely went out and asked manufacturers strictly on

17 the basis of shipments and I would assume this is 1998

18 shipments. We asked them, okay, what percentage of

19 your product that you shipped electric water heaters

20 in this year to the best that you can determine were

21 i.e., lowboy less than 36 inches in height and that

22 was, that information that's finally come back is what

23 I saw indicates to me again, it could be as much as 20

24 percent.

25 I'm hedging because I have the raw data.

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1 What I haven't done and what I believe needs to be

2 done is I've got to realistically apply some weighting

3 to that. Ten percent for the smallest company in

4 business as opposed to 10 percent for the biggest

5 company in business. Those are really two very

6 different numbers and so there's some further analysis

7 that has to be done there, but just looking at what

8 I've got so far, when I asked the question we asked,

9 the numbers coming back it looks to me could be as

10 high as 20 percent. Like I say, I'm trying to

11 remember the previous one you're mentioning where we

12 thought maybe it was 7 and 8 and I just have to look

13 at that and what the context of that was. It does

14 appear to be a discrepancy and I don't know how to

15 answer it right now.

16 MR. LEKOV: What I knew from before was

17 that it does apply in some markets such as this type

18 of housing for places like Florida, retirement

19 communities.

20 MR. BROOKMAN: Thank you. I am going to

21 let you do the analysis and Steve Nadel, did you have

22 a question before we go on?

23 MR. NADEL: The question I was going to

24 ask, how small does the standard apply to? Does the

25 standard apply -- I know it applies to 30 gallon water

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1 heaters. Does it also apply to 20?

2 MR. LOGEE: Twenty to 120 gallons on the

3 electric water heaters.

4 MR. NADEL: Okay, so potentially there may

5 be some room to play a little bit with that lower end

6 is one way to deal with it, the lowboy issue and which

7 tend to be 20 and 30 gallons as I recall.

8 MS. STANONIK: Well, there certainly are

9 40s and there's probably a good demand for the 50

10 gallon one.

11 MR. BROOKMAN: Please follow on with your

12 comment?

13 MR. THOMASTON: Bill Thomaston with

14 Alabama Gas again. Generally, the electric

15 configuration is the short water heater in the bottom

16 of the closet and the electric air handler and/or air

17 handler strip heater in the top half of the closet.

18 It's in our area that's the dominant installation in

19 multi-family and in high density is the over-under

20 with electric. With gas it's side by side. And so

21 what is happened is furnaces have gotten wider as a

22 result of NAECA 1 and then as water heaters have

23 gotten wider, it's pushed one or the other out and

24 sometimes you have the carryover effect of possibly

25 losing both of them in a major rehab. So this is a

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1 critical issue for us.

2 MR. BROOKMAN: Thank you. Additional

3 comments on this subject?

4 I think we should go to lunch. We've

5 covered good ground this morning. Let me acquaint

6 those of you that are new in Forrestal with where you

7 might eat.

8 (Whereupon, at 12:15 p.m., the workshop

9 was recessed, to reconvene at 1:15 p.m., Friday, July

10 23, 1999.)

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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

2 (1:24 p.m.)

3 MR. BROOKMAN: Thanks to all of you for

4 getting back here on time. We've got a lot to cover,

5 and I appreciate your being timely. It's very, very

6 helpful.

7 Is Bradford Beauchamp here?

8 A couple of housekeeping items. We have

9 several copies of Dan Reicher's opening remarks for

10 those that wish to obtain a copy from Brenda and Sandy

11 over there. And also over there on the registration

12 table is GAMA's comments, and specifically the

13 proposal that they outlined this morning briefly, that

14 Frank outlined. And there is also a few copies, a

15 limited number of copies, of materials off the web

16 site. But once they're gone, I'm told they're gone,

17 so you'll have to access them yourself.

18 Are there any other housekeeping items

19 before we proceed, Sandy? Any other items before we

20 start up? I don't think so. Okay.

21 So thanks again for being back here on

22 time. Michael McCabe? We left off with price and

23 markup.

24 MR. McCABE: This is probably the one

25 comments that had -- one area that had more comments

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1 than any other. And I would correctly describe it as

2 the equipment markup, not necessarily just for gas,

3 but it was pointed out by many -- Southern, GAMA,

4 Battelle, AGA, Bradford White -- were the differences

5 in the comments. There were differences in the

6 markup.

7 Questions were raised about those and

8 specifically how low the gas water heater markup was

9 relative to the electric. I think they were comments

10 that if I were to put in my own terms I would say that

11 they were counterintuitive, that some would say that

12 it should be based on cost basing.

13 There were a number of recommendations

14 that the markups should be the same for gas and

15 electric; others saying that you cannot base the

16 markups on loss leaders.

17 We have spent a great deal of effort

18 trying to sort through this. Working with GAMA we

19 have identified cost, going to the market we've gotten

20 price, and price has always been one that's very

21 difficult to deal with because the same item, same

22 model, made by the same manufacturer, sold in two

23 different outlets, in some cases even with the same

24 store but two different units, will have different

25 prices.

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1 It appears to us, looking at the data that

2 we have, that the markups are different between -- for

3 the gas and electric water heaters. We will review

4 the comments again, but right now based on what we

5 have seen, dealing with specific -- for example, with

6 the comment that we should use in the same markup --

7 for the data we have, we do not see any basis for the

8 same markup for gas and electric. And then,

9 similarly, for the oil-fired products, we are seeing

10 substantially higher markups.

11 MR. BROOKMAN: Questions, comments on this

12 issue of markups?

13 MR. BRUNDAGE: Don Brundage, Southern

14 Company. I gave rather scathing comments on this

15 because of what seemed to be a very large difference

16 in markup in the life-cycle cost spreadsheet of 1.32

17 for electric and 2.82 for gas equipment. It appears

18 that the life-cycle cost spreadsheets were not

19 actually using the same markup as some other areas in

20 the analysis, and I'm somewhat confused about which

21 ones were actually used.

22 I know there was a comment made earlier

23 about some other aspects of the spreadsheets which had

24 not been completely updated. Is there a date that the

25 spreadsheets will be complete and consistent so that

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1 we can base our comments on that?

2 MR. BROOKMAN: Thank you for the question.

3 Let me turn to Terry or Michael or Jim. Can you

4 comment on the run, the discrepancies in those?

5 MR. LOGEE: Well, it appears -- I think

6 everyone needs to realize that the life-cycle cost

7 spreadsheet that we posted on the web is merely the

8 one that the program ended up with when it made its

9 last Monte Carlo run. And in order to get the kind of

10 numbers that we got, the average numbers that we got,

11 or get the distributions, you have to do the Monte

12 Carlo analysis.

13 You have to run the entire 10,000 runs,

14 and you have to start with the seed and the

15 appropriate statistical characteristics that we have

16 used. Otherwise, you cannot get there.

17 MR. BRUNDAGE: Okay. It was not intuitive

18 looking at that spreadsheet that it was the last run

19 of a Monte Carlo as opposed to --

20 MR. LOGEE: Right. It was --

21 MR. BRUNDAGE: -- amplifying on the other

22 results of the study.

23 MR. BROOKMAN: Thank you. Thanks for the

24 clarity. That is helpful. And so I presume that

25 those --

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1 MR. LOGEE: Now, the second part of this

2 question is: when will the, you know, new revised

3 spreadsheets be available? And that's a harder one to

4 answer. We don't have an answer for that at this

5 point.

6 MR. BROOKMAN: Can you give a rough

7 estimate?

8 MR. LOGEE: Well, I would prefer to have

9 a little time to confer with --

10 MR. BROOKMAN: Okay.

11 MR. LOGEE: Maybe I can return a little

12 later with a better estimate.

13 MR. BROOKMAN: Sure. Okay.

14 MR. McCABE: But one comment on that is

15 that the gentleman that we all -- that Terry and I

16 both report to will want it done sooner rather than

17 later.

18 MR. BROOKMAN: Thank you.

19 Bill, I saw this gentleman first.

20 MR. SHIN: David Shin, American Gas

21 Association. I actually followed the instructions --

22 MR. BROOKMAN: Excuse me. David, excuse

23 me. Yes, we got it. Go ahead.

24 MR. SHIN: I actually implemented the

25 Monte Carlo analysis to figure out what the average

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1 markup was, and the number I got was 1.79 for both gas

2 and electric. So my question to DOE is: what exactly

3 is the markup?

4 I'm assuming the mean results from the

5 simulation is a weighted average of all of the water

6 heaters. So when you say the markup is different, the

7 numbers in the spreadsheet indicate that they are the

8 same.

9 MR. McCABE: I am going to look to Jim to

10 that level of detail to answer the question. I think

11 it probably -- looking at -- it's not what I think

12 that you --

13 MR. LUTZ: It's not something I have --

14 MR. BROOKMAN: Jim Lutz, speak into the

15 microphone.

16 MR. LUTZ: I'll have to get back to you on

17 that one. Judging from the confusion here, it looks

18 like we'll have to present a much clearer explanation

19 of what we did and results that explain it much better

20 than we have.

21 MR. BROOKMAN: I saw the implication of

22 those questions crying out for footnotes.

23 MR. McCABE: Yes. I think this is more

24 than footnotes.

25 MR. BROOKMAN: That's where I thought we

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1 were going with this.

2 Darrell?

3 MR. PAUL: Yes. I guess my question is

4 related to the one that was just asked, and that --

5 rather than the average markup across all the

6 different sizes of water heaters, I believe that you

7 do know what the markup is for a given water heater

8 size, because that is an input to the program, isn't

9 it?

10 MR. LUTZ: No. The reason -- what we do,

11 we have a -- from our database, we have the retail

12 prices from calling around to a bunch of stores on the

13 different sizes of the baseline water heaters and

14 wholesale distributors.

15 So we have the retail price for, you know,

16 30-gallon electrics, 40-gallon gas, 50-gallon gas,

17 etcetera. They are under distribution. It's a

18 discrete distribution. So it's sort of bunchy, and

19 it's not a smooth distribution. It's from what data

20 we did collect.

21 We have the distribution of the

22 manufacturer's cost, which was provided by GAMA, for

23 the typical size for each water heater. We adjusted

24 that by the cost of sheet metal and foam for the

25 different sizes. So for each house, when we do the

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1 10,000-run sample, each house we sample, we pick one

2 -- say the house has a 50-gallon electric water

3 heater.

4 We pick a 50-gallon electric water heater

5 baseline price, divide that by something -- a sample

6 from GAMA's distribution, and that's the markup that

7 we used for all of the design options for that one

8 house.

9 The next house in the sample of 10,000 has

10 a different sized water heater. We picked from the

11 different size distribution, pick again from the

12 GAMA's distribution. So the markup varies by house by

13 house, trying to capture the variation that really

14 exists in the market and the variation that really

15 exists in the manufacturing.

16 Everybody is looking confused. I think I

17 may --

18 MR. PAUL: Well, I guess our concern is

19 that that's such a critical factor in the life-cycle

20 cost analysis that it's important to know, you know,

21 what those values are, an average value as a function

22 of water heater size or across all water heaters. And

23 I realize that it's a Monte Carlo technique, so it's

24 a sampling technique.

25 But if you run in your Monte Carlo, you

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1 should be able to come up with an average value that's

2 pretty consistent from run to run.

3 MR. LUTZ: Right. Right.

4 MR. BROOKMAN: Jim McMahon, do you wish to

5 follow on in this? And then you're next. Thank you.

6 MR. McMAHON: Jim McMahon, LBI. I guess

7 I just -- what Jim just described, Jim Lutz just

8 described, is the procedure that's followed. And I

9 guess I want to call your attention to the fact that

10 we are properly using the cost data as provided, and

11 the retail price data as observed in the marketplace.

12 And the market to us is a derivative.

13 It's not what's causing us to get the result; it's

14 something that comes out of comparing retail prices to

15 cost.

16 MR. BROOKMAN: One thing I took from

17 Michael McCabe's opening remarks is there is

18 significant variability surrounding this in the minds

19 of lots of different people. That's one thing I took

20 from that.

21 You're next.

22 MR. KOCH: It's Claus Koch from Union Gas.

23 I'm familiar with Monte Carlo simulations and all of

24 that. But it strikes me that ultimately you also have

25 to put your data to a sanity test. And we have some

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1 of the best experts in water heater costs right here

2 in the room. And I was wondering whether they were

3 asked whether some of those ranges, like margin --

4 1.09 markup -- is something that they would reasonably

5 expect to see in the industry.

6 In other words, I give a water heater

7 manufacturer a $10 manufacturing cost increase. Is a

8 $11 margin increase in the field a reasonable

9 expectation to see? That's what a 1.09 factor really

10 means.

11 MR. BROOKMAN: That's an interesting

12 question. Is there somebody that would wish to

13 respond to that question? Frank?

14 MR. STANONIK: Frank Stanonik with GAMA.

15 I mean, Mike briefly alluded to it. Our comments --

16 we are on record as saying that the 1.28 markup for

17 gas water heaters, from our perspective, doesn't pass

18 a -- I don't know what else to call it -- the common

19 sense test.

20 It doesn't -- it just doesn't look -- you

21 know, it doesn't make sense to me that a company could

22 be profitable at that kind of a markup for this kind

23 of a product. And --

24 MR. BROOKMAN: Even when you consider the

25 full distribution of products and averaging and some

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1 models phasing in and out, and all of that?

2 MR. STANONIK: Well, I guess realizing

3 that all of this analysis tends to revolve around

4 baseline products, I mean, I can't really answer yes

5 or no on your question because I think we are just

6 looking at it as being applied to the baseline --

7 MR. BROOKMAN: Okay.

8 MR. STANONIK: -- and whether that makes

9 sense or not.

10 But where we think the significant part of

11 the error creeps in is that while -- and I'll say it

12 again because I've said it before -- we certainly

13 applaud the attempt to go out in the market and see

14 what products sell for. But the fact is that in doing

15 that, we think that if nothing else it probably shows

16 the complexity of what products do actually sell for

17 to the consumer.

18 And in trying to get that information, we

19 suspect that DOE has, let's say, inadvertently stepped

20 into some other factors that involve the ultimate

21 retail pricing. And while the theory says, "Well, if

22 I look at the manufacturer's cost and look at what I

23 sell for, divide whatever -- I got the markup," our

24 comment was that, unfortunately, this case -- what

25 determined what the ultimate price was has other

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1 complicating factors in it that you can't apply the

2 theory, that will not really give you the markup

3 because there is too many other things involved,

4 including the possibility that some of the models that

5 they asked for at a given store, or whatever, might

6 have been models that were treated as a loss leader,

7 or whatever, get your attention price, whatever you

8 want to consider it, and that that gets factored into

9 the retailer's price, not the manufacturer's markup.

10 And it's just -- our bottom line is we

11 think that it's much too complicated in terms of what

12 the retailer decides to sell that water heater for, or

13 what the plumber decides to sell that water heater

14 for, to just simply say, "Okay. We did a survey.

15 Here is the average price, and here is the data from

16 the manufacturer's cost. One divided by the other.

17 This must be the markup."

18 In this case, we just think it didn't --

19 you know, it isn't that simple. 1.28 just is not a

20 reasonable markup.

21 MR. BROOKMAN: And going back to the

22 baseline there.

23 Yes, sir?

24 MR. KOCH: Claus Koch once more from Union

25 Gas. We were in the business of buying, until they

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1 separated our businesses, of buying about 50- to

2 80,000 water heaters a year. And our expectation was

3 if the manufacturer was required to make a $10, a $20

4 change, that would look like a $10 manufacturing cost

5 increase, we would expect the retailer -- or the

6 retail market to be something like three times that by

7 the time it finally hits the street.

8 Now, recognizing the big box stores, and

9 all of that kind of stuff, reducing that, going from

10 .28 to 300, there's a big gulf there.

11 MR. BROOKMAN: Mark, go ahead.

12 MR. KREBS: Mark Krebs, Laclede Gas. My

13 company retails and installs gas water heaters, and we

14 do a lot of it in the St. Louis area. And, you know,

15 sometimes we see loss leader sales that occur. You

16 know, their selling price is more than our, you know,

17 wholesale -- is less than our wholesale purchase

18 price.

19 And I'm just wondering if, you know,

20 anyone checked when they did this phone survey that

21 all of this is based on, you know, if maybe it wasn't

22 a week that HQ, or whoever, some large national, you

23 know, retailer, was having a special, you know, that

24 skewed the results significantly.

25 MR. BROOKMAN: Glenn Schleede? I think

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1 we're starting to double back on this issue. Glenn?

2 MR. SCHLEEDE: Glenn Schleede. Has LBL

3 ever made available to this group the details of this

4 survey or how it was conducted, the data that resulted

5 from it? Something that would permit judging how

6 representative it was when it was conducted, all that?

7 If not, why not, and will it be made available?

8 MR. LOGEE: Partial answer, Glenn, the

9 database is on the web at that address. It's called

10 a price database, or something like that. The details

11 about how the survey was conducted are -- I don't

12 believe they are part of that, but the database --

13 MR. SCHLEEDE: Can that be made available?

14 It makes a lot of difference --

15 MR. LOGEE: Yes.

16 MR. SCHLEEDE: -- how this thing was

17 conducted, and whether any validity should be

18 accredited -- accorded it.

19 MR. BROOKMAN: Robert Hemphill?

20 MR. HEMPHILL: Yes. Let me say that in

21 the background that I have that the company that I

22 work for, a large national merchandising company, we

23 saw huge problems with telephone surveys to try and

24 determine the cost to the consumer of installed goods.

25 I challenge -- I can understand what Jim McMahon is

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1 saying. This is what the data says.

2 But when the -- what the data says is

3 responded to from manufacturers saying, "That's an

4 unbelievable number," you've got to attack the

5 methodology. And I think the methodology is under

6 question here.

7 MR. BROOKMAN: Yes. Jim? Tom, I mean.

8 Tom Eckman? And then Ted Williams.

9 MR. ECKMAN: I'd like to come up and make

10 a short presentation on data that was collected from

11 actual purchases.

12 MR. BROOKMAN: Okay. We -- I want to see

13 if -- I thought there was -- hang on just a second.

14 I don't think they're quite ready for you.

15 MR. WILLIAMS: Ted Williams, American Gas

16 Association. Have we been messing around with the

17 reasonability of these markups and trying to identify

18 is there consistency between the data? I think we

19 have a fundamental application of Monte Carlo

20 technique here.

21 Monte Carlo, when you assume these random

22 distributions, that they should be random variables.

23 And given that you're looking at a house, and the

24 price of a water heater for that house, it's

25 critically dependent -- that price is -- on the cost

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1 of the underlying -- of the water heater being sold.

2 So they are not independent, random variables. And

3 it's a first order mistake in the application of a

4 Monte Carlo technique.

5 MR. BROOKMAN: Other comments on this

6 before we go to Tom?

7 Steve Nadel, did you --

8 MR. NADEL: I would like to comment on I

9 think what he's going to say. I have one thing to

10 complement that.

11 MR. BROOKMAN: Okay. I understand, Tom,

12 you have a few slides.

13 MR. ECKMAN: Yes.

14 MR. BROOKMAN: Okay.

15 MR. McCABE: I believe the slides have

16 been handed out.

17 MR. BROOKMAN: Brenda, have they not been

18 handed out, or -- you've them. Okay. You've got

19 them. Thank you.

20 Retail price? Retail prices for electric

21 water heaters, Northwest Power Planning Council.

22 MR. ECKMAN: This is the cover slide that

23 was handed out; it should have been in your chair

24 after lunch. What I'm about to report on -- since

25 1993, the city of Eugene, Oregon, which is a municipal

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1 utility, Eugene Water and Electric Board, has been

2 offering a financial incentive for the installation

3 and purchase of electric water heaters that achieve an

4 EF of 93.

5 The compilation that I've got distilled

6 here is based on 50-gallon units of capacity installed

7 between the period of 1993 to 1998 for -- in their

8 sample -- or in the sample of houses in Eugene that

9 actually did this, 5,360 water heaters.

10 These are water heaters that were

11 purchased. The numbers that are being reported are

12 what were on the invoices that were submitted to

13 document the desired rebate. So these were what

14 consumers actually paid in the store when they did the

15 deed.

16 I segmented out the data by warranty

17 period because that has an influence on price. As you

18 can see from this second chart, looking at the last

19 three years -- 1996, 1997, 1998 -- the retail price

20 and the number of units that were rebated at that

21 particular warranty period is shown.

22 The retail price in 1997 and in 1998 is

23 roughly $170 for the five-year warranty tank, and it

24 switches from over $200 to around $190 for the six25 year warranty tank, and goes substantially above that

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1 for the 10-year warranty tank.

2 So between the -- in the 1998 sample, you

3 got roughly 550 water heaters for the five-year

4 warranty, and a six-year warranty of about $175. So

5 somewhere around $170 to $190 is what an EF-93 tank is

6 selling for in Eugene, Oregon, today.

7 Now, this is the last slide. I'll skip

8 one in the interest of time. It looks at this time

9 series and it shows you what the EF-93 tank has sold

10 for in Eugene, Oregon, regardless of warranty period.

11 This aggregates five-, six-, eight-, 10-year

12 warranties, all under the same group of purchases.

13 It also indicates that -- it also supplies

14 the N or the number that were in that group purchased.

15 As time goes on, the number gets larger because the

16 program has been more successful. What's more

17 important is the market is beginning to mature. And

18 as you can see that market mature, you can see the

19 price come down.

20 Now, what's more important to note is that

21 Oregon doesn't have a sales tax. So the numbers

22 before this point in time that I showed you don't have

23 the sales tax included. These numbers have sales tax

24 equivalent to that assumed in the LBL analysis, which

25 is roughly five percent as a national average, added

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1 on to the Eugene prices. So they're a little bit

2 different than you'll see in prior pages. They also

3 are adjusted for inflation, so they're in constant

4 1998 dollars.

5 MR. BROOKMAN: So the bars --

6 MR. ECKMAN: The bars up to 1998, N-553,

7 are Eugene numbers. The three columns on the right of

8 that are various alternative scenarios, standard

9 levels that are in the LBNL price analysis.

10 If you look on -- I believe it's page 16,

11 Tables 5A and 5B in the price -- engineering price

12 assumptions under the electric water heater, these

13 numbers were taken from that table for the EF, in one

14 case with 245, EF-.907, in the case of the H20 blowing

15 agent, EF-889 and EF-899.

16 One point I want to make -- if you look in

17 those two tables at the baseline case, it's $190.

18 This case is for the EF-93 tank, and it's $195.

19 Mark, you had a --

20 MR. KREBS: I don't question your data at

21 all, Tom. All I was wondering is, you know, it kind

22 of implies that this is some kind of incentive

23 program. I was wondering if there is some rebate that

24 they were offering as well.

25 MR. ECKMAN: They were offered a rebate,

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1 but this is the invoice price prior to rebate. They

2 are given -- it varied between $35 and $50, depending

3 on the year.

4 MR. KREBS: It does have an impact.

5 MR. BROOKMAN: The ultimate consumer

6 got --

7 MR. ECKMAN: The ultimate consumer got

8 that. But this is what they paid at the store.

9 MR. KREBS: Before they got the rebate.

10 MR. ECKMAN: Before they got the rebate.

11 MR. BROOKMAN: Steve --

12 MR. ECKMAN: They couldn't get the rebate

13 until they sent in the invoice.

14 MR. BROOKMAN: Steve Rosenstock?

15 MR. ROSENSTOCK: Steve Rosenstock, EEI.

16 Do you have any information about the baseline water

17 heater incremental cost between EF-.86 and .93 that

18 you're showing?

19 MR. ECKMAN: Yes. I don't have it here.

20 It's in a database that's on this disk.

21 MR. ROSENSTOCK: It might be interesting

22 to see that versus, you know, what --

23 MR. ECKMAN: The incremental cost is

24 sizably less than the $160 to $99 increment that we're

25 seeing in this data.

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1 MR. ROSENSTOCK: Okay.

2 MR. BROOKMAN: Steve Nadel?

3 MR. NADEL: There has been a lot of talk

4 here about the markup assumption, and the markup is

5 just an artifact of the manufacturer cost supply data

6 and what's in the retail store. One possible -- it

7 could well be that the problem is not so much the

8 markup, but the problem could be with some of the

9 manufacturer supply costs -- that he has thousands of

10 price points, you've got lots of price points.

11 There's one other data source that I put

12 into the record with my last comments dealing with

13 incremental cost. There's a big study in California

14 of 288 different models, and they also found

15 substantially lower incremental cost than DOE has been

16 using. And all of this is driven off of the

17 manufacturer cost estimates.

18 So those manufacturer cost estimates could

19 be conservative, and then, you know, high, and that

20 would be entirely consistent with all of the retail

21 price information and allow for greater markups,

22 because clearly people are making money here. They're

23 not losing money.

24 MR. BROOKMAN: And now let me just state

25 -- and I think it's restating the obvious -- the

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1 Department certainly would welcome these comments, if

2 they haven't received them already, and all of these

3 data for their use.

4 Charlie, and then Frank Stanonik.

5 MR. STEPHENS: Yes. Charlie Stephens. I

6 wanted to add, too, that this data can be run by, and

7 has been run by by me, past a lot of other utilities

8 in the Northwest, and they don't disagree with the

9 numbers that we've come up with. Eugene is not

10 statistically different than most of the other markets

11 in the Pacific Northwest.

12 There will be some further number13 crunching required, but we're going to do the same

14 thing for the gas water heaters in the region. And

15 based on what I've learned just in my preliminary

16 forays into the market, the relationship between the

17 gas prices that we'll uncover won't be different than

18 for the electric ones that you've just seen.

19 It will be about the same fraction of the

20 current prices being used by DOE as the electric water

21 heater prices are a fraction of the current electric

22 prices being used.

23 MR. BROOKMAN: Thanks for that last

24 explanatory clause.

25 Frank Stanonik?

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1 MR. STANONIK: Frank Stanonik, GAMA. I've

2 just got a couple of questions, I guess to get a

3 better handle on what I'm seeing here. The receipts

4 you received -- was this, I assume, a mixture of

5 people buying from both, let's say, a major do-it6 yourself outlet and also buying it through a plumber,

7 or was it just purchasing through more of a retail

8 store?

9 MR. BROOKMAN: Tom, go ahead.

10 MR. ECKMAN: The database includes

11 primarily purchases through local hardware stores, big

12 box retail, what have you. Within the data set, there

13 are some where the utility did not get an invoice. It

14 separated out tank cost from total installation cost,

15 and they are still in the data set, so the influence

16 of the average -- if you take those out, the average

17 would drop even more, because the task -- there's a

18 10, maybe 15 percent of the sample has plumber19 installed cost in it, which ranges up to $750 for a

20 50-gallon tank.

21 MR. STANONIK: So you didn't try and

22 proportion out the unit cost versus the installation

23 cost?

24 MR. ECKMAN: No. What I was giving was

25 just the equipment cost, to the best I could.

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1 MR. STANONIK: Okay.

2 MR. ECKMAN: I didn't know where the

3 cutoff ought to be, so I didn't take and cut out any

4 of those. So it's -- you know, in the data set there

5 are prices -- as a matter of fact, the highest price

6 I have for 1998 for installed costs is $450, which is

7 what the mean price in the engineering estimate is for

8 installed cost on the EF-90 tank.

9 MR. STANONIK: Okay. What --

10 MR. ECKMAN: So, you know, we're a lot

11 apart.

12 MR. STANONIK: To the best you can guess,

13 if you can, what would you guess the proportion of the

14 electric to gas water heater market is in -- let's

15 just talk about Eugene.

16 MR. ECKMAN: Eugene is probably on the

17 order of 50/50, with gas increasing.

18 MR. STANONIK: And what is the average

19 cost of electricity in --

20 MR. ECKMAN: In Eugene?

21 MR. STANONIK: Yes.

22 MR. ECKMAN: About three and a half cents

23 residential.

24 MR. STANONIK: Okay. I guess where I was

25 going with this is that, I mean, again, this is I

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1 think -- well, this is useful information, but I would

2 certainly caution taking information like this and

3 trying to give it significant weight on a national

4 average basis.

5 I mean, I'm probably going to be a little

6 glib about this, but I really wonder if someone looked

7 at the -- to the consumer, the cost benefit of a .93

8 water heater when they're only paying three and a half

9 cents for their electricity.

10 But the other point is this information

11 also, if you really look at the numbers, and, yes,

12 there may be some trends here, but it certainly

13 indicates that there are some very other major factors

14 that affect price that appear to have no relation to

15 any kind of logic that anybody can figure out. And as

16 an example --

17 MR. ECKMAN: Well, the market works that

18 way sometimes.

19 (Laughter.)

20 MR. STANONIK: All the time. All the

21 time.

22 MR. ECKMAN: Yes. These are 5,000 plus

23 sales. People purchased this, and somebody made or

24 lost money on it. I don't know; they are still in

25 business. I am presuming that because the price is

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1 relatively constant and slightly declining over time

2 that they have discovered that this is enough money to

3 make it work.

4 Otherwise, you would see the price

5 escalating over time, because their margins aren't

6 enough at retail to sell this product.

7 MR. STANONIK: Well, as an example,

8 clearly, somebody has discovered that they certainly

9 should be charging more for a 10-year warranty

10 product. I mean, that price has gone up.

11 MR. ECKMAN: Yes, and I've had some

12 experience with that.

13 MR. STANONIK: Again, I understand. To

14 me, it seems to indicate that a lot of very

15 significant factors go into this, and we -- I still

16 think we have a -- the Pacific Northwest for electric

17 products is a fairly unique market relative to the

18 entire United States. And I would just caution, this

19 is useful information, but care has to be taken if

20 you're going to expand it to apply it to the national

21 average situation.

22 MR. ECKMAN: I want to comment on that.

23 I would assert that once the standard changes, the

24 level playing field of the market has a different set

25 of rules for the high efficiency brand market, or

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1 water heater. And so this is an illustration of a

2 mature market without a standard in place that says

3 93's are cost competitive.

4 MR. BROOKMAN: Even given the variability

5 in electricity prices.

6 MR. ECKMAN: Right. I mean, you know,

7 these are national manufacturers. They're not niche

8 market manufacturers selling into this market. They

9 are Home Depot, Sears, selling this product in there

10 at this price. You know, so far they seem to be a

11 viable entity.

12 MR. BROOKMAN: Frank, follow on, and I saw

13 Eric and then Mark.

14 MR. STANONIK: Just a quick comment, and

15 I'm getting uncomfortable because price is not

16 something I know much about. But in this market that

17 we're talking about looking at here, the minimum .86

18 electric heater was still out there.

19 If, in fact, the minimum was .92, or

20 something like that, I wouldn't be bold enough to

21 claim that what you see here is -- what you're calling

22 your mature market -- would still reflect what happens

23 when that is the only thing that can be bought.

24 MR. BROOKMAN: And, Frank, you described

25 other factors. So I'm sure the Department would

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1 welcome your comments, and others' comments, about

2 those other factors in enough detail so that they can

3 trace those other factors.

4 Eric, you were next.

5 MR. LANNES: Yes, Eric Lannes, Bradford

6 White. To Steve's comments, manufacturers must be

7 making money. What happens in a situation is we will

8 provide product to a marketplace, and if that

9 marketplace has a price that may be artificially low,

10 we may be forced to meet that artificially low price

11 in an effort to maintain market share.

12 And I think if you look at the 1998 data

13 that's what happened. In 1998, there were two

14 significant things that happened, and that's what

15 drove that price down. One, there was a significant

16 change in market share by specific manufacturers.

17 Secondly, there was a very large shift on the warranty

18 side.

19 Products that were typically five years

20 were shifting to six years, and that became the norm

21 and I think that's why you're seeing that shift in the

22 direction that you're seeing.

23 MR. BROOKMAN: Did you derive that from

24 the table?

25 MR. LANNES: I see that from the 1998 at

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1 $195 versus 1997 at $214, and a rough average

2 continuing along that way.

3 The other thing is I --

4 MR. ECKMAN: I want to caution -- remember

5 that that last data set includes warranty periods from

6 five-, six-, eight-, and 10-year warranties. If you

7 look at the five-year warranty product, it's $170.

8 MR. LANNES: I understand that. I'm

9 looking at your table here that says 1998 average for

10 five-year, $169, a six-year for $186, and that's

11 because the five-year is moving to a six-year as a

12 standard with no price change. That's why you see

13 that. And I think the 1998 data would reflect that if

14 you came back and took a look at what happens with

15 market share in that time period.

16 The other question I have for you is why,

17 in 1996, didn't you sell more 10-year heaters when

18 they're $200, and the six-year was at $201, and the

19 five-year is at $195, when you look at 1998 and you

20 see an $89 difference between five-year and 10-year?

21 MR. ECKMAN: I don't know. Ask the

22 market. I wasn't there.

23 (Laughter.)

24 MR. LANNES: That's why I questioned some

25 of the data.

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1 MR. BROOKMAN: Mark, and then Steve

2 Rosenstock.

3 MR. KREBS: One of the factors that DOE

4 should be looking at is utility rebates. The more

5 massive the rebate, you know, the more influence there

6 will be. And I know from personal experience that a

7 lot of utilities give away water heaters.

8 MR. BROOKMAN: You mean literally for

9 zero?

10 MR. KREBS: Right. They give them away.

11 MR. BROOKMAN: I see.

12 Steve Rosenstock?

13 MR. ROSENSTOCK: I would just say that

14 this could be -- again, just like everything else,

15 there is going to be a range like -- I said that

16 before. This could be used as one data set, but also

17 the fact that, you know, there was -- I don't know how

18 aggressive the incentive program was, but that might

19 also -- you know, there might be more shipping of high

20 efficiency units out there. Therefore, there is more

21 on the market. That will push the prices down because

22 of the incentive out there, if the retailers are aware

23 of it.

24 Again, I don't know what all of the

25 details were about the Eugene, Oregon, incentives, but

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1 that also might be an underlying factor.

2 MR. BROOKMAN: Tom, thanks for bringing it

3 forward.

4 This gentleman is next.

5 MR. JOHNSTON: David Johnston with

6 Washington Gas. I think one factor that hasn't been

7 discussed in this most recent round of conversation --

8 and I believe is evident in these statistics and may

9 very well be in the general study -- may be one of

10 those complicating factors that Frank referred to, was

11 the relationship between the retail price of the

12 product itself and the installed cost.

13 I think it's very -- potentially very

14 dangerous to try to separate those out as neatly as

15 has been attempted here. For instance, if you look in

16 the 1998 figures, you'll see for the EF-93's, for

17 instance, that we had an average of $186 retail price,

18 a low of $100, but a maximum of $795. And I would

19 suggest that's probably not for the tank. That's

20 probably one of those installed costs you're looking

21 at.

22 Now, the question would be: for all of

23 those -- for the rest of the 1,552 units that were

24 sold at a given price and then installed, what was

25 their installed cost?

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1 One of those things that the market does

2 is sell the product at an attractive advertised price,

3 and then make the money back up in installation. So

4 I would suggest that it is not appropriate to glibly

5 separate out the price of the product from the total

6 installed cost, which is what the consumer is actually

7 going to have to pay.

8 MR. BROOKMAN: Tom, go ahead.

9 MR. ECKMAN: Yes. We can pick any cutoff

10 you want to say, "This is tank; this is installation."

11 The database was put together parsing out where they

12 had the information to split between those where they

13 knew it was solely tank costs and where it was

14 installed costs. And, indeed, that $795 strikes me as

15 a lot more than a tank and probably includes

16 installation.

17 The question I really have is whether or

18 not the deals that are cut between the tank and how

19 much he is charged for installation vary by efficiency

20 level. Once there is a national standard, it's hard

21 for me to conceive of why that would be a

22 distinguishing characteristic at a given efficiency

23 level.

24 MR. BROOKMAN: These last few comments

25 have been especially useful because they have

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1 identified other factors, other things for the

2 Department to consider. I'd like more of those. And

3 in a moment, in fact, we should be moving on.

4 Charlie?

5 MR. STEPHENS: Charlie Stephens. I just

6 wanted to add a couple of things about how to take the

7 data. If you go to apply most of the conceptions

8 people have about influences in the marketplace,

9 you'll find they are counterintuitive in our markets.

10 In many of these markets in the Northwest, as I said

11 earlier, I could go to any market in the Northwest and

12 get numbers pretty much like this, and I have.

13 It's a widespread phenomenon because for

14 a long time we have been building that market, and it

15 comprises, in some areas, well over 50 percent of the

16 market for the higher efficiency tanks. In some

17 areas, it's less than that.

18 But I also would say that in the presence

19 of incentives it usually increases the price. It has

20 been our experience with all of our programs, and you

21 put incentives out there. The retailers tend to step

22 in and try to get a little bit of that incentive, if

23 not all of it. We're seeing it now in furnaces, but

24 it's not uncommon.

25 The other thing I would caution is we have

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1 very low electric prices, as you just heard. You

2 shouldn't have to discount an electric tank to get

3 people to buy an electric water heater in our market

4 at three and a half cents a kilowatt hour. There is

5 no reason to do that. That would be counterintuitive.

6 You should be able to raise the price in our market

7 because the operating cost is so low.

8 So if you start messing around with the

9 economics of this thing, it's not going to play out

10 well. It's just -- it's a mature marketplace at this

11 point, operating like we presume it will after the

12 standard. In fact, we think it's the closest that we

13 have to what the market will look like after the

14 standard, which is why we brought the data.

15 MR. BROOKMAN: Okay. Thank you, Charlie.

16 Other -- Steve Nadel?

17 MR. NADEL: Just to put this in a larger

18 perspective, if you look at past DOE analyses on, say,

19 clothes washer, refrigerator, estimated costs to meet

20 certain efficiency standards during a rulemaking, and

21 look at the actual price in the market afterwards,

22 there is a tendency for DOE to overestimate that price

23 increment.

24 What this data tends to imply is that we

25 may be doing the same thing here with water heaters.

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1 The DOE analysis of what the incremental cost will be

2 when it plays out in the mature market, the actual

3 incremental cost, may well be quite a bit less. And

4 all of these analyses are quite conservative in terms

5 of the winners or losers.

6 MR. BROOKMAN: Mark Krebs?

7 MR. KREBS: I'm going to go back one more

8 time to the robust and transparency issue. Obviously,

9 this is a major variable. And, you know, we need the

10 opportunity to go in there and do these what-ifs.

11 What if a utility is giving them away on one hand, and

12 on the other hand what if it is -- you know, there are

13 no subsidies, and, you know, what is happening there?

14 And these things, in conjunction, need to

15 be -- with the other variables we've been discussing,

16 you know, is the basis of what I believe the Modeling

17 Subcommittee, through the whole committee, had in mind

18 when they talked about, you know, scenario

19 engineering. We ain't there yet.

20 MR. BROOKMAN: Okay. As I reflect on the

21 conversation we just had, we have talked quite a bit

22 about price and markup. We touched on installation

23 cost. Is there more to be said about installation

24 cost? Because I think we're about ready to move on is

25 the point.

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1 MR. NADEL: I did have a question about

2 installation. Or do you want to move on?

3 Mike, do you want to present that first,

4 or is --

5 MR. McCABE: That's next.

6 MR. BROOKMAN: Okay. We have made a

7 glancing blow at it. Michael, why don't you go ahead

8 and --

9 MR. McCABE: This has been discussed; much

10 has been discussed by Terry already in his

11 presentation. And what I'm offering here is specifics

12 as to how we have tried to capture some of the costs

13 that -- for example, for the electric water heaters,

14 with the larger water heater, thicker walls.

15 In many instances, they will not be able

16 to fit into the space. They may not be able to fit

17 through the door, so we have taken -- for 10 percent

18 of the electric water heaters assumed an additional

19 cost of $160 per unit for installation. This is for

20 replacement, not for new construction.

21 Similarly, for gas, as Terry talked about,

22 for the -- modifying the venting system, 25 percent of

23 them, there is going to be an additional cost. And we

24 looked at the life-cycle cost with the -- and the

25 percent winners, and you saw the 75 percent winners,

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1 but you saw negative life-cycle cost change. And that

2 was because of this value that was being -- on the gas

3 being put into the analysis, how large it is, and how

4 much of an effect it has.

5 Terry, would you have anything that you'd

6 want to add as far as additional information on

7 installation cost?

8 MR. LOGEE: Well, not really much. We did

9 not assume that there was going to be any significant

10 amount of condensation that we would have to supply

11 some kind of condensate pump and extra plumbing to

12 take care of that. That was not added into the

13 installation cost in any of these homes.

14 MR. BROOKMAN: If I interpret that, you --

15 at this level, you thought that you would have the

16 margin, so condensate would not be an issue.

17 MR. LOGEE: Correct.

18 MR. BROOKMAN: Largely an issue.

19 Eric?

20 MR. LANNES: Eric Lannes, Bradford White.

21 There are some water heaters out there that do require

22 condensate removal. And if you haven't included that

23 in there, you should certainly take a look at that,

24 because as you force the levels up there is two issues

25 that surface -- one, condensate, and then condensate

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1 can give the wrong impression that you have a leaking

2 water heater. And, obviously, we're talking about

3 gas-type products, which can obviously drive the price

4 up, but also creates a substantial nuisance for some

5 installations.

6 And then, secondly, those products that

7 are trying to remove condensate can't, in some

8 jurisdictions, dump the condensate into a drain. And

9 they do have to remove it and remove it outside or to

10 some other means of disposal. So it may be small, but

11 it could increase as levels change. I strongly

12 suggest the Department of Energy to take that into

13 consideration.

14 MR. BROOKMAN: Steve Nadel?

15 MR. NADEL: I have a question, first, for

16 Eric, and then for Mike. When you said you have seen

17 some with condensate, has that happened at around the

18 .60 energy factor, or is that at a higher energy

19 factor level?

20 MR. LANNES: Eric Lannes again. It's

21 actually at both levels. And the higher energy factor

22 products and the lower energy factor products have two

23 condensate levels -- one that's coming out the bottom

24 of the product from combustion, and the other one in

25 the venting system itself where we have to provide

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1 relief for condensate in the venting systems.

2 A lot of times you'll see it on the

3 venting systems for power vent type products that have

4 pressure switches because you get condensate buildup

5 in the pressure switch line, and that can create some

6 problems when you look at the pressure differentials.

7 MR. BROOKMAN: Mark Krebs?

8 MR. KREBS: I think he had a second

9 question.

10 MR. BROOKMAN: Oh, I'm sorry, Steve. Go

11 ahead.

12 MR. NADEL: Question for Mike McCabe on

13 that slide. You had the figure of 25 percent of homes

14 above 5,000 heating degree days will need these

15 various corrective measures. I was curious, where did

16 those numbers come from?

17 MR. McCABE: I'm going to pass the

18 question off.

19 (Laughter.)

20 I can't answer because I don't know.

21 MR. LOGEE: Terry Logee from DOE. We had

22 data from the GRI studies, fairly old data, that said

23 75 percent of the homes would need some kind of

24 improvement in venting or some kind of improvement of

25 masonry chimneys.

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1 We also got comments from Charlie Stephens

2 he alluded to that they don't have any problems up in

3 the Northwest. And we did a -- we looked around and

4 we did some surveys, and we asked a lot of questions,

5 and we made an engineering estimate that in today's

6 marketplace we thought 25 percent was a reasonable

7 level to go to.

8 If people have data, we would appreciate

9 that. We could make an adjustment in here.

10 MR. NADEL: So this is just your educated

11 guess effectively?

12 MR. LOGEE: That is precisely correct.

13 MR. BROOKMAN: Jim, and then Mark Krebs.

14 MR. RANFONE: Jim Ranfone with AGA. Just

15 a question and a comment on the price and markup,

16 because that's such a critical issue. Is DOE -- and

17 we've had some discussion with the manufacturer saying

18 that the markups between gas and electric should be

19 the same.

20 We've had some discussion about looking at

21 and evaluating the spreadsheets and the analysis that

22 has already been done, and questioning some of the

23 methodology. Does DOE intend to stand by its response

24 that based on industry data we find the markups, the

25 1.28 and the 1.57, are you going to stand by that in

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1 your analysis as the basis for markup? Because that

2 certainly has an impact on the evaluation of the

3 design options.

4 MR. LOGEE: Jim, I don't have a precise

5 answer for you right now. I think we'll need to

6 evaluate these comments that we've received on this

7 and take another look at our data sources and the

8 spreadsheets, you know, and it's going to take a

9 little while for us to come up with some resolution to

10 this.

11 MR. BROOKMAN: Mark Krebs?

12 MR. KREBS: If you add installation to a

13 water heater, gas or electric, it's the same analysis.

14 You're going to change the geometry, probably the

15 diameter, correct?

16 MR. LOGEE: The outside diameter?

17 MR. KREBS: Yes.

18 MR. LOGEE: Yes.

19 MR. KREBS: Okay. So why do you only have

20 $160 to remove and replace door jams on 10 percent of

21 water heaters for electric and not for gas?

22 MR. LOGEE: We didn't realize that that

23 would be a problem with gas water heaters as well.

24 We've heard this morning from Bill Thomaston, I

25 believe, who said that's a problem with gas water

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1 heaters. So we'll have to consider that.

2 MR. KREBS: Okay. I guess I'm just

3 reiterating that. It's a problem.

4 MR. BROOKMAN: Thank you.

5 Additional comments on this?

6 MR. McCABE: Well, if I could follow up on

7 that as well. I think -- and Terry and Jim Lutz

8 correct me if you may differ -- one of the reasons why

9 I believe that we didn't view it as significant for

10 gas as for electric is that the size of the tank --

11 the typical tank sold for gas tank is smaller than the

12 typical electric tank. So that the geometry is such

13 that it becomes more of a factor, we thought, for

14 electric than for gas.

15 MR. LANNES: Well, that's a questionable

16 assumption, and I think the objective of all of this

17 is, you know, to minimize those kind of assumptions.

18 You know, what if it's not 10 percent? What if it's

19 20 percent of the homes that need the jam? And what

20 if it's 50 percent of the homes need chimney relinings

21 instead of 25 percent?

22 All of these things need to be looked at,

23 and they need to be looked at -- I know I keep saying

24 this again and again, but you've got to understand,

25 you know. You've got, you know, a negligible

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1 difference here, a negligible difference there, you

2 know, and you've got a whole bunch of negligible -- in

3 and of themselves they're negligible perhaps, they are

4 small, but they're multiplicative.

5 And overall, you know, it can be a very,

6 very big error that you introduce. And I think that

7 looking at the sensitivity of this stuff is really

8 required by NAHB.

9 MR. BROOKMAN: Bob Hemphill?

10 MR. HEMPHILL: I was just going to say

11 that I think the assumption that gas water heaters are

12 -- have a smaller diameter because the baseline unit

13 is a 40-gallon versus a 50-gallon electric; and,

14 hence, you don't have to take into account changes in

15 the geometry, and the costs involved are in error,

16 because the huge percentage of the installations that

17 are out there that have gas water heaters are still

18 type installations.

19 I think you'll find that the homes kind of

20 build around the water heater, furnace, and the like.

21 So if you started with a smaller water heater and you

22 make it bigger, then you do run into the geometry

23 problems with gas. That has been proven out very well

24 with the electric -- sorry, with the furnace, higher

25 efficiency furnaces getting larger.

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1 MR. KREBS: And be reminded that electric

2 water heaters don't have that big empty hole down the

3 middle of them.

4 MR. BROOKMAN: Additional comments on

5 installation topics? I think we've covered it.

6 ASSISTANT SECRETARY REICHER: I have to go

7 to a meeting that I didn't expect to have to go to at

8 the White House, and I'm going to do my best to come

9 back before this is done. Do you expect you are going

10 to go slightly beyond 4:00?

11 MR. BROOKMAN: I suspect we'll go on at

12 least until 4:00.

13 ASSISTANT SECRETARY REICHER: I apologize.

14 I will come back as soon as I can. I appreciate --

15 it's been a very good conversation, and I will return

16 as soon as I can.

17 MR. BROOKMAN: Thank you.

18 Yes, you're next.

19 MR. THOMASTON: Bill Thomaston, Alabama

20 Gas. I hate to add some complexity to this, but it

21 just dawned on me while we're having this discussion,

22 particularly in multi-family or per the codes and per

23 manufacturer's installation instructions, any

24 installation where there might be damage from water

25 must have a condensate or a drain pan installed under

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1 the water heater.

2 The question I've got is: for all of

3 those existing pans that are out there under water

4 heaters, if you increase the size of the water heater,

5 whether it's gas or electric, what do you do with the

6 existing pan? Number one. And number two, can you

7 get an adequately large pan under a larger water

8 heater, whether it's gas or electric?

9 MR. BROOKMAN: Thank you.

10 Additional comments/questions on

11 installation-related issues?

12 Michael, is there anything else, or should

13 we be moving on?

14 MR. McCABE: Let's head on.

15 MR. BROOKMAN: I think we're moving on.

16 MR. McCABE: Marginal energy rates --

17 you're not interested in this at all, are you, Steve?

18 MR. ROSENSTOCK: No.

19 MR. McCABE: There were a number of

20 questions, comments, with respect to the marginal

21 energy rates. Some of them were a misunderstanding of

22 what was being done, question as -- generally, two

23 comments from what Laclede Gas and EEI, so that the

24 figures were not calculated correctly.

25 Specifically for, Steve, your comment

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1 dealing with the Inflator 93, have you had a chance to

2 follow up on that?

3 MR. ROSENSTOCK: Steve Rosenstock. Yes,

4 I -- I haven't heard anything --

5 MR. McCABE: Okay.

6 MR. ROSENSTOCK: -- in terms of, you know,

7 why -- because I had commented before I really

8 hadn't --

9 MR. McCABE: Okay.

10 MR. ROSENSTOCK: -- heard any explanation

11 until --

12 MR. McCABE: In the life-cycle cost

13 analysis, as has been said before, we used the RECS

14 data, which included energy prices that consumers were

15 paying. From the RECS energy price information we

16 were able to calculate the consumer marginal energy

17 rate for specific years. What we did is that we then

18 took -- and these are actually using the energy prices

19 for each year for that house.

20 We then took and reduced them down to

21 constant dollars, so we used the consumer price

22 inflator/deflators in order to get it down to the

23 constant dollars. So your comment with respect to

24 Inflator 93 was in order to get it down to constant

25 dollars, but we were using the rate -- the marginal

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1 rate that the consumer was paying in that year, and

2 then reducing it down to fixed dollars.

3 MR. ROSENSTOCK: Steve Rosenstock, EEI.

4 Well, I'll say looking at the spreadsheet, the life5 cycle cost uncertainty model, it seems like you're --

6 there's an equation in here -- and it's probably the

7 same for gas or oil.

8 There is electric marginal price, which is

9 the output that seems to be used, equal to the

10 electric marginal rate that has been calculated, times

11 the Inflator 93, times the electric scaler. And the

12 electric scaler is what is actually based on the

13 prices, I guess, gathered from the Census data or

14 other calculations.

15 Like I've said before, I've had trouble

16 because it seems you're using the Inflator 93 to

17 inflate the costs of a product where that inflation

18 has not been seen in the market for that product.

19 MR. McCABE: We've got two prices that --

20 not being an economist, and chemical engineers can

21 botch a lot of things up --

22 MR. ROSENSTOCK: I don't --

23 MR. McCABE: Most of them have left, but

24 there is a few still around -- that trying to do --

25 look at what the price that has been paid in that year

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1 for the energy --

2 MR. ROSENSTOCK: Right.

3 MR. McCABE: -- but then separately we're

4 trying to take what that price is and using

5 Inflator 93 to get it down to constant dollars.

6 MR. ROSENSTOCK: Steve Rosenstock. I

7 guess, again, the problem I have is that in this

8 calculation you have the electric scaler there already

9 to bring it down. Since you're multiplying by the

10 inflator rather than dividing, you're not -- since the

11 price -- I'll just assume -- if you have a price, it

12 was $1.93 and $1.98, and you're multiplying the

13 inflator -- let's say it's 12 percent -- to say that

14 the price of that product is $1.12 when you have

15 market data that shows it was just $1. And you're

16 using that in the rest of the calculations. That I

17 kind of have a problem with.

18 MR. BROOKMAN: Say how you would suggest

19 they do it.

20 MR. ROSENSTOCK: Take out the Inflator 93

21 and just leave in the electric scaler or gas scaler,

22 because those are actually based on data that has

23 shown what has actually happened to the price of the

24 product from '93 to '98.

25 MR. BROOKMAN: Therefore, the inflator is

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1 not needed.

2 MR. ROSENSTOCK: Or divide by the inflator

3 when you get right down to it, because -- okay. Yes,

4 take the inflator out. I'm sorry.

5 MR. BROOKMAN: Let's let Jim Lutz comment

6 on this from LBNL.

7 MR. LUTZ: Jim Lutz, LBNL. Steve, the

8 inflator was to convert everything to '98 dollars.

9 That's what that was for. The scaler was -- from

10 EIA's records of average energy price in constant

11 dollars has dropped. So we have to do two things --

12 we have to convert '98 dollars and then track the

13 change in energy price in, you know, constant dollars

14 -- has dropped. So there's two things going on.

15 MR. ROSENSTOCK: Okay. I guess

16 theoretically -- maybe this is my mechanical

17 engineering mind here -- is that you're -- shouldn't

18 it be dividing by that rather than multiplying, to

19 keep it constant?

20 MR. BROOKMAN: I'm going to let the two of

21 you consider this and take this arcane discussion

22 offline.

23 MR. ROSENSTOCK: Okay.

24 MR. BROOKMAN: It's useful. But, I mean,

25 I -- you can return to this in a moment, if you like,

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1 but I'll see if -- Darrell, and we'll go to Mike.

2 MR. PAUL: Yes. I had -- our economist at

3 Battelle, Bill Sheppard, also looked at this, and he

4 was very confused about it also.

5 MR. BROOKMAN: Okay.

6 MR. PAUL: Looking at the '93 data, and

7 then scaling it up to '98 dollars, and then adjusting

8 it. What we're really interested, though, in is how

9 those marginal energy rates compare with the annual

10 energy outlook forecast. And so if DOE could give us

11 an average consumer marginal energy rate over the

12 years in which the standard would be in effect, we

13 could compare that with the annual energy outlook

14 prices, just to get an idea of how the two compare.

15 Again, we weren't comfortable with the

16 scaling up '98 dollars either and then adjusting it

17 based on the annual energy output data.

18 MR. McCABE: Our response to that, I think

19 I'll have to check -- Terry will check with LBNL. But

20 since that analysis was done on a household basis, we

21 can probably just take the results and sum them up and

22 calculate an average. I don't believe they have that

23 now, but I presume it's something that could easily be

24 done.

25 MR. BROOKMAN: We've been going a while

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1 since lunch now. We're going to take a break as soon

2 as we finish with this segment.

3 MR. SCHLEEDE: Question. Glenn Schleede.

4 Could somebody from LBNL give me a page reference or

5 a brief description of how you allocated household

6 energy costs to each appliance? Either a page number

7 or an oral.

8 MR. KREBS: I'd like to see that one, too.

9 MR. McMAHON: This is Jim McMahon from

10 LBL. We didn't do an allocation to all of the

11 appliances. Right now, we're dealing with water

12 heaters. So you're asking about the energy

13 consumption?

14 MR. SCHLEEDE: Yes.

15 MR. McMAHON: We calculated the energy

16 consumption for water heaters for each of the

17 households based upon the variables that were

18 described earlier from RECS as well as a few variables

19 that are not in RECS. And that is documented -- it's

20 in the LTC report. I'll pick one up and give you a

21 page reference in a second.

22 MR. BROOKMAN: Okay. Thank you, Jim.

23 Okay. So, Michael, in response to

24 Darrell's question, Terry can trace that down

25 hopefully and see whether -- what's possible to

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1 produce.

2 Mark Krebs?

3 MR. McCABE: Do you want to get me after

4 the break? Or do you want it now?

5 MR. BROOKMAN: No, I want to press on with

6 this. I want to finish on marginal energy rates.

7 MR. KREBS: Okay.

8 MR. BROOKMAN: And then we're going to all

9 take a break, and even have cookies.

10 MR. KREBS: Speaking, you know, for one of

11 the three people that formed the subcommittee on

12 modeling, and all of the iterations and discussions,

13 what -- you know, what we wanted, you know, in my

14 words -- and Steve Rosenstock or Charlie Stephens may

15 or may not agree -- but what we wanted to do is ensure

16 that we came up with a way that consumer savings are

17 measured in a way that's appropriate with how those

18 savings are realized, and that's by utility rate

19 structures.

20 And we have the RECS data that's 1993 that

21 we -- there is some kind of inflator adjustment. I

22 don't know what way that's going, but at the last

23 workshop meeting Jim McMahon agreed that the future,

24 you know, is probably towards a larger percentage of

25 fixed costs, like you've seen in your residential

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1 phone bill.

2 You know, long distance has gotten cheap,

3 but, you know, most of your residential phone bill now

4 is fixed cost. And maybe the same thing would apply

5 here.

6 And then I guess the question maybe to

7 Jim, you know, is that part of this inflator? Is it

8 -- you know, and how can you go in and adjust that for

9 your what-if scenario maybe?

10 MR. BROOKMAN: I will tell you that I'm

11 having a hard time following the discussion right now.

12 I want to make sure we're staying on point and

13 targeted.

14 So, Jim, tell us how we can stay on point.

15 I think we're still talking about --

16 MR. McMAHON: I would rather answer Mark's

17 question.

18 (Laughter.)

19 MR. BROOKMAN: Answer Mark's question. It

20 seems to me we're kind of spinning around here. Maybe

21 I'm missing it. Answer Mark's question first, and

22 then we'll make sure we're going where we're supposed

23 to be going.

24 MR. McMAHON: Mark, the answer to your

25 question is, no, we did not try and forecast a change

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1 in the proportion of total energy costs that will be

2 fixed projects. We just used the rate of change of

3 the average price in a project to the marginal prices.

4 MR. KREBS: Well, I guess I'm not

5 comfortable that that has captured the intent of the

6 consensus of the committee. And maybe that -- you

7 know, maybe you didn't want to. After all, DOE only

8 has to consider consensus. But I'd just -- for the

9 record, you know, it fell short in my mind, not to

10 mention the fact that, you know, it's 1993 data.

11 The data that AGA developed for gas

12 marginal energy rates was considerably newer, and, you

13 know, we went back and rechecked it, you know, because

14 after all we're talking about a 50 percent difference

15 between, you know, what your margin is and what our

16 margin is, and that's significant. I think it --

17 MR. BROOKMAN: Mark, can you say directly

18 what it is that you'd like them to do with these

19 marginal energy rates?

20 MR. KREBS: Well, I guess significantly I

21 want to try to resolve the differences between the

22 marginal energy rates that are being used now and the

23 ones that AGA generated that are several years newer.

24 MR. BROOKMAN: Okay. So do you have a

25 major consensus about the methodology that would span

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1 that gap?

2 MR. KREBS: Well, we have a 50 percent

3 disparity.

4 MR. BROOKMAN: Okay. Charlie Stephens?

5 MR. STEPHENS: Just to help Mark along

6 here, I just wanted to say that I don't think the

7 fixed cost is the issue, but the marginal rate is, if

8 the marginal rate happens to be affected by going down

9 when fixed -- when the fixed portion goes up. That is

10 a possibility.

11 It sounds to me like you could look at

12 that possibility simply by looking at a steeper slope

13 on whatever you're doing with marginal energy rates,

14 by assuming that if fixed costs go up, and at the same

15 time the marginal energy rate goes down in response to

16 that. I'm not sure that's a given, but it could

17 happen, and you could look at it by just reducing

18 marginal energy rates more as one scenario.

19 MR. KREBS: Mark Krebs again. They are

20 what-ifs. They are legitimate what-ifs. And it's

21 basically, you know, DOE is compelled under the robust

22 and transparency language of NAECA to consider these

23 things.

24 MR. BROOKMAN: Okay. Thank you for your

25 comment.

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1 Jim McMahon and Michael McCabe also have

2 a comment.

3 MR. McMAHON: Brief follow on. With

4 regard to the currency of the data, the 1993 RECS data

5 is the latest EIA data that is publicly available.

6 There was a 1997 survey. We have been inquiring with

7 EIA about when they will make that data publicly

8 available. As of last week, their best estimate is

9 end of August of this year.

10 As soon as we have that data, our

11 intention is to update our estimates of marginal

12 prices, and we will then have numbers that we can

13 compare to the AGA numbers.

14 With regard to your second issue about

15 doing the what-ifs, if you would care, either today or

16 in the comments, to specify a specific scenario, we'd

17 be happy to analyze it.

18 MR. BROOKMAN: Jim, that new RECS data, do

19 you think that will help to explain the gap that Mark

20 wants to have explained?

21 MR. McMAHON: I don't know because I don't

22 have the data.

23 MR. BROOKMAN: Okay. Thanks.

24 MR. McMAHON: We'll see.

25 MR. BROOKMAN: Michael McCabe?

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1 MR. McCABE: Jim touched on it. We're

2 going to look to use whatever data are available. The

3 approach that was used here was that which Dan Reicher

4 had described in his letter to the Advisory Committee.

5 We believe that it is flexible and that it can

6 accommodate the space conditioning or the seasonal

7 products which the -- some of the other alternatives

8 could not. But we will review it as information --

9 more information becomes available to us.

10 MR. BROOKMAN: Yes, Jim?

11 MR. RANFONE: Jim Ranfone, AGA. Quick

12 question, I guess, on the marginal energy rates. I

13 assume you're going to be using the same methodology

14 for the other products that is currently underway in

15 Delaware?

16 MR. McCABE: Similar methodology. The

17 commercial products is not based on the RECS

18 information. The central air conditioners and clothes

19 washers is essentially the same. The difference

20 between the two is that using the RECS data we can

21 split out the seasons and get heating and cooling

22 figures, so the marginal rates for the different

23 seasons. And certainly with air conditioners that's

24 a factor where it is not a factor with the clothes

25 washers and water heaters which are used year-round.

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1 MR. RANFONE: Okay. How about on gas

2 ranges under that rulemaking?

3 MR. McCABE: No.

4 MR. RANFONE: You are not using that?

5 MR. McCABE: We are not using that.

6 MR. BROOKMAN: Mark Krebs?

7 MR. KREBS: Going back to Jim, I

8 appreciate Jim's offer, you know, that he'd be willing

9 to run these scenarios. But that wasn't the deal.

10 The deal -- and I quote Dan Reicher's letter -- is DOE

11 and stakeholders will be able to easily substitute

12 alternative assumptions in the spreadsheets to examine

13 additional scenarios, as needed.

14 You know, basically, the deal was the

15 stakeholders, you know, do their scenario engineering

16 and the spreadsheet is accommodated. So what you --

17 you know, what you need to do is have this system of

18 spreadsheets designed in a way where you've got, you

19 know, a page of input, so we go to one page and all of

20 the inputs we want to play with are right there.

21 Then we choose the one we want, put in the

22 values we want, and hit "run." I mean, I know it's

23 more complicated than that, and I'm way

24 oversimplifying it. But that was effectively at least

25 what I expected.

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1 MR. BROOKMAN: Jim McMahon?

2 MR. McMAHON: Yes, I appreciate that Mark.

3 We are trying to be true to the commitment that Dan

4 Reicher made. We have provided a spreadsheet in which

5 we believe you can -- or any stakeholder can --

6 replace a single column of forecasted energy prices to

7 create whatever scenario you want.

8 But if we haven't explained it adequately,

9 if you're having trouble doing it, we'd be happy to

10 walk you through it or do it for you.

11 MR. BROOKMAN: Are you ready to move on to

12 the next -- the next comment? Michael McCabe?

13 MR. McCABE: The next comment is one that

14 I have probably mangled as I was trying to boil it

15 down to some simple language. We've somewhat covered

16 it already, but there were -- in looking -- in

17 reviewing some of the comments, there were questions

18 about, did we use a single set of energy prices? Are

19 there distribution curves, and what have you?

20 And as we touched on, we relied on the

21 RECS survey. From that we backed out marginal energy

22 rates for individual households. So when we present

23 the numbers, since we have different energy rates for

24 different households, that may have been the cause of

25 some of the confusion and also some of my confusion

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1 trying to characterize the comments.

2 MR. BROOKMAN: Steve Rosenstock?

3 MR. ROSENSTOCK: Steve Rosenstock. As an

4 electric institute, with RECS '93 data, how -- I'm

5 just maybe -- you were able to get all of this data

6 out of RECS '93, or how did you -- how were you able

7 to accomplish this with the '93 data? I'm just -- I

8 just want -- or just as a clarification.

9 MR. McMAHON: Yes, it was from '93 RECS

10 data. The original report that was on the table

11 here --

12 MR. ROSENSTOCK: Okay.

13 MR. McMAHON: -- that describes the entire

14 methodology, and if that doesn't answer your

15 questions, we'd be happy to --

16 MR. ROSENSTOCK: Okay.

17 MR. McMAHON: -- answer them.

18 MR. BROOKMAN: Thank you.

19 Other comments/questions related to the

20 distribution curves for marginal energy prices? No

21 additional comments/questions on distribution curves?

22 Okay. It's now 2:35. Let's take a break.

23 We'll start up -- at 2:50 we'll start.

24 (Whereupon, the proceedings in the

25 foregoing matter went off the record at

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1 2:35 p.m. and went back on the record at

2 2:55 p.m.)

3 MR. BROOKMAN: Okay. Take your seats.

4 First and foremost, we should probably

5 give a round of applause to Sandy and Brenda for

6 providing cookies.

7 (Applause.)

8 Second, Terry Logee, I understand the

9 Department has copied several diskettes. You don't

10 have a ton of them, but you have several of them.

11 MR. LOGEE: Yes, there are two diskettes,

12 and they relate to -- they are the spreadsheets for

13 the shipments and the national energy savings.

14 There's about 30 copies over there. And this is the

15 spreadsheet for the national energy savings that

16 actually works. The one that was posted on the web

17 site isn't actually a functional spreadsheet. It just

18 has a results level. So we'll get this posted

19 sometime next week, allowing for any electronic

20 difficulties, and so forth.

21 MR. BROOKMAN: Okay. So you have about 30

22 copies of them now.

23 MR. LOGEE: Correct.

24 MR. BROOKMAN: Brenda mentioned this to me

25 -- she suggested that no more than one person per

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1 company take the diskettes. So they will be available

2 over there.

3 Okay. Other questions or comments before

4 we proceed? Given where we are with the -- and the

5 amount of work we have to cover, I'm suggesting we're

6 on a timeline to finish more like 4:30 than 4:00, if

7 we're lucky. So I just want us to stay really focused

8 and see if we can keep plugging through this and get

9 out before the end of the day.

10 Michael McCabe? We finished marginal

11 energy rates. Are we now on life-cycle cost, RECS

12 data, blended fuel projections?

13 MR. McCABE: Yes.

14 MR. BROOKMAN: Yes, that's where we are.

15 Okay. We're on page 10 of the handout, life-cycle

16 cost analysis.

17 MR. McCABE: The first point I believe

18 that we have covered. Jim made the comment about the

19 soon expected release of the RECS '97, and that we

20 will have LB&L take a look at that as soon as it

21 becomes available.

22 The second point that is here is the

23 question that was raised by Battelle, one, EPRI

24 another, in one form or another. The question was

25 raised about RECS and the fuel type. Some have

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1 questioned the training of the surveyors to their

2 ability to discern -- to get accurately whether or not

3 the house has an electric or gas water heater.

4 Given the discussions that we've had --

5 I've had with the staff, we're familiar with it.

6 Looking at the data, there may be something there, but

7 we don't have any information to indicate if there is

8 anything, or, if there is, to what extent.

9 The RECS data, as I understand, was a

10 telephone -- included a telephone survey of the

11 households where they got questions as to fuel type

12 for the different appliances. There may be some out

13 there who don't know what they have downstairs in the

14 basement, in the garage, in the carport, in the

15 closet, wherever it is.

16 But until we see some information that

17 would indicate if there is an error, and what the

18 magnitude is, then we're just not sure how -- if it

19 can be -- how it could be incorporated into the

20 analysis.

21 The comments that EPRI had made with

22 respect to some of the additional factors that were

23 considered in the life-cycle cost variability, which

24 went beyond what is in the RECS database that

25 encouraged that -- we'll point out that they had never

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1 seen it and asked that it be something that would be

2 published in peer reviewed literature first.

3 I suspect that many -- that there are

4 going to be a number of articles that are going to

5 come out of this work at some time in the future, and

6 we would like to have your comments on the approach

7 taken. But as far as holding up until the peer review

8 can be completed, it's something that we don't have

9 that time.

10 Questions/comments on this?

11 MR. BROOKMAN: Yes, Bob Hemphill?

12 MR. HEMPHILL: Bob Hemphill, Gas Research

13 Institute. I'm just curious as to what decisions led

14 up to using the RECS data. I mean, that's a whole new

15 process, as far as I'm aware of, in the rulemaking.

16 And I think just from a gut feeling, if the data is --

17 if you're unsure of the correctness of the number of

18 even gas to electric water heaters, how can you then

19 take that kind of data and add to it and get the

20 detailed, significant figures out of it?

21 I really wonder what the process was that

22 led you to using the RECS data and how that was

23 derived as being accurate enough to indeed be the

24 basis on which you would add more data to it and still

25 come up with good results.

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1 MR. McCABE: There were a number of

2 different things which led up to this, and most of

3 them are centered around the process improvement, the

4 Advisory Committee. First, is that the Department

5 recognized that doing an analysis which focused on

6 single point estimates, that the impact on the

7 consumer is going to be X, that we know that there

8 isn't -- you know, that one consumer or that everybody

9 is the same, that there is a range of consumers, the

10 RECS data is very robust in that regard. It captures

11 that.

12 So we wanted to get away from doing the

13 single point life-cycle cost analysis, which was based

14 on national averages, because with that information we

15 could say, on average, this is the effect. But when

16 you start talking about what fraction of the

17 marketplace was going to be impacted and to what

18 extent, we were not able to capture that.

19 We were able to look at certain -- we

20 looked at certain scenarios in the past, said, "What

21 if the energy prices were 10 percent different? What

22 if the usage rates were seven percent different?"

23 What-if scenarios. But that still gave you a very --

24 a single number and hard to interpret.

25 Using RECS, we are able to get a

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1 distribution of impacts and to be able to estimate

2 better, or have a better understanding, as to what the

3 consumer impacts are.

4 RECS also has the energy price information

5 per household, which when responding to the Advisory

6 Committee's recommendation that we look at marginal

7 energy prices and look at that impact -- because it's

8 that last bit of energy saved that the -- the last bit

9 of energy paid for is where the savings is -- that we

10 tried to capture the marginal impacts.

11 The Advisory Committee made a

12 recommendation to look at removing the fixed costs,

13 and had made a specific suggestion. We had done that

14 analysis early on with I believe it was clothes

15 washers to get a sense as to what that impact would

16 be.

17 But in responding to the Advisory

18 Committee's recommendation, Dan Reicher committed us

19 to going to using the RECS data for residential

20 products because the removing fixed cost approach had

21 a problem that it gave you essentially an average --

22 annual average consumer marginal energy rate and did

23 not allow you to capture any differences between

24 seasons. Whereas, we found with RECS that we could do

25 that. So we felt that it was a better analysis than

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1 what we -- the other approach. So there are a couple

2 of different points that led us to RECS.

3 Mark, you've got a comment or question.

4 MR. KREBS: Yes. I mean, I admit I don't

5 understand, you know, everything that's in RECS. You

6 know, we've heard from some people that understand it,

7 and they have commented on some things that have been

8 added. But, you know, in order to do this correctly,

9 you've got to know the rate structures.

10 And, Jim, you know, tell me, how is it

11 done? You know, if you're doing CMER, you know,

12 you've got to know the rate structures. And I can

13 guarantee you if you call up a consumer, you won't get

14 them to give you their rate structures. They don't

15 know. So how is it done?

16 MR. BROOKMAN: Jim McMahon?

17 MR. McMAHON: How much do I have to --

18 (Laughter.)

19 MR. BROOKMAN: We always relied on your

20 brevity to date.

21 MR. McMAHON: Thank you. The answer is

22 this is not done through rate structures. We did

23 explore, other than using RECS, doing a survey to

24 capture the current rate structures across the

25 country. There are more than 3,000 utilities,

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1 counting all the munies and co-ops. Each of those has

2 some number of rate structures. And we found that

3 that was an impossible task.

4 We actually gathered rate structures for

5 about 20 percent of the customers in the country, both

6 residential and commercial. But we found that that

7 was pretty tough.

8 We looked, as an alternative, at the RECS

9 database, because RECS gathered household energy bills

10 house by house for 12 to 16 months -- 12 to 16

11 different bills -- for each of the households. And

12 what somebody at EIA came up with was that if we

13 plotted the household bill versus the energy

14 consumption, and we looked at those plots, we could

15 take the slope, change in bill as a function of change

16 in energy consumption, and that is the marginal price.

17 The rates are implicit in what you see in

18 bills from month to month. So that's what we wound up

19 doing. And as Michael correctly summarized, since we

20 have month-by-month bills in RECS, we can separate

21 winter from summer. And it's not so important for

22 this rulemaking, but for central air conditioners

23 there's a great deal of interest on the part of the

24 Department in getting rates that are applicable to air

25 conditioners. And you can't get there by taking an

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1 average price and making up a fixed charge. That's a

2 short history.

3 I don't know if you were able to pick up

4 a copy of the report, but there is a report on the

5 marginal price method that was available on the table

6 this afternoon.

7 MR. BROOKMAN: Thank you, Jim.

8 Darrell?

9 MR. PAUL: Getting back to the RECS data

10 and how you identify whether the household has a gas

11 or electric water heater, and the fact that it's a

12 telephone survey and you're talking to people on the

13 phone and asking them, "Well, do you have a gas or

14 electric water heater?" I know that, you know, most

15 people in this room know whether they have a gas or an

16 electric, but --

17 MR. McMAHON: Excuse me. I don't mean to

18 interrupt, but it was not a telephone survey. It was

19 an onsite survey.

20 MR. PAUL: Okay.

21 MR. McCABE: I thought it was an onsite,

22 supplemented by telephone.

23 MR. PAUL: Okay. Well, yes, even so, if

24 it's an onsite survey, but the -- it's my

25 understanding that the survey taker doesn't actually

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1 go down and check to see whether they have a gas or

2 electric water heater, that they rely on the responses

3 of the panel.

4 And I guess my point is that there could

5 be a significant number of people who may not know

6 whether they have a gas or an electric and may guess

7 one way or the other. And there are a significant

8 number of households that have a gas furnace but an

9 electric water heater, and that -- so just because

10 they have gas in the home doesn't mean they

11 necessarily have both a gas furnace and a gas water

12 heater.

13 I guess my question is: is the raw data

14 available for the RECS survey? And by "the raw data,"

15 I mean the actual address of the household, telephone

16 numbers. Some utilities may be able to go back and

17 check, because they have records of equipment

18 installed in various homes in various locations,

19 some --

20 MR. McCABE: Those data are not available

21 by design. Probably the only one who knows that is

22 the organization that has done the survey for EIA.

23 Glenn may add some to that, because I think Glenn

24 Schleede has examined it in great detail.

25 MR. SCHLEEDE: Not enough detail. But I

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1 think people recognize that this is 6,000 households

2 which are used by EIA to come to conclusions about

3 some 92 million households. And what's happening here

4 is you're looking at very small cells within that, and

5 this is a huge matrix.

6 And there is a huge potential for error

7 involved, and I asked Jim if he had ever done the

8 standard error calculations and make them available,

9 which he has not. But if anyone is going to bet their

10 farm on the data, you ought to understand RECS and

11 ought to get deeply involved in how the data are

12 calculated. And those data are not available, and

13 there's a lot more here that ought to be done.

14 MR. BROOKMAN: Let's let Jim follow on,

15 and then to Charlie Stephens and Frank.

16 MR. McMAHON: I'm not here to defend the

17 RECS survey, but let me try and put this in context a

18 little bit. The RECS survey was designed by the

19 Energy Information Administration with a lot of effort

20 by statisticians whose job it was to make sure it was

21 nationally representative. And they took a great deal

22 of effort to do that.

23 They have also gone back with subsamples

24 of the survey to do followups, where they actually do

25 things like Darrell suggested of checking the

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1 equipment -- I don't know what the numbers are -- but

2 probably in hundreds of households out of the

3 thousands that they did the full survey on. And they

4 found very good agreement.

5 I can't certify that there is no one who

6 responded incorrectly to the question, "What fuel do

7 you use for your water heater?" But I'm sure EIA has

8 been very careful about trying to do the best they

9 can. Any survey is likely to have -- with human

10 respondents is likely to have errors in it. And all

11 I can tell you is this is an extremely well-designed

12 careful national survey, which is not to say it

13 doesn't have any errors.

14 For the rest of the context, we have moved

15 from a methodology where we had assumptions about the

16 average values for all of these inputs to a

17 methodology that uses a national survey to capture the

18 variability among households.

19 And if you're suggesting that this is not

20 complete until there is direct house-by-house

21 compilation of data where if someone goes into the

22 house and looks at the water heater, for the 92

23 million households in the country, I don't think that

24 that's reasonable.

25 I would also remind you that every day you

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1 read in the newspaper surveys that are done by

2 telephone of several hundred to a thousand people that

3 tell you what people think in this country about any

4 issue that you want. And most of us tell those

5 stories over the water cooler, or whatever, about

6 what's going on, what popular opinion is. There are

7 a lot of politicians who rely upon this.

8 This is a better survey than that. So

9 let's just keep that in mind.

10 MR. SCHLEEDE: Glenn Schleede again. If

11 Jim will remember, one day you brought the guy in from

12 EIA that runs the survey. And the question was asked

13 about the use of the data, and he said that it's okay

14 to use it for reaching conclusions about national

15 matters, but here you're using it in very discrete

16 cells and reaching conclusions from it. And I am

17 still not sure that EIA would tell you that that is a

18 proper use of the survey --

19 MR. BROOKMAN: Charlie Stephens?

20 MR. SCHLEEDE: -- survey data.

21 MR. BROOKMAN: And then Bill -- and then

22 Frank, and Bill Prindle next.

23 MR. STEPHENS: I just wanted to be on

24 record as suggesting that the Department has gone out

25 of their way to do an extraordinary amount of work to

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1 do an awful lot better job than we've ever had before.

2 And I don't think it's productive to nitpick any

3 further on the way the data has been generated.

4 I think we know more than we've ever

5 known, and I think we know everything we need to know

6 for a national standard. There is more error in

7 probably not having the '97 data, which we've been

8 told we're going to have. And I think once that is in

9 hand, and we have the most current information we

10 have, then I think it's not productive to slow things

11 up trying to refine it further. We have a lot bigger

12 issues, I think, to resolve than that one.

13 MR. BROOKMAN: Otto, go ahead and follow

14 on.

15 MR. VAGO: Otto Vago, State Industries.

16 I concur with Charlie. I think that DOE has done an

17 excellent job. So I think that any further study in

18 this area would be just a waste of time.

19 MR. BROOKMAN: In the queue are Frank

20 Stanonik, Bill Prindle, and then Mark Krebs.

21 MR. STANONIK: Frank Stanonik with GAMA.

22 Just a quick comment. There is concern as to whether

23 or not the answers as to what kind of water heater was

24 in the house -- whether the correct answer was

25 determined or not.

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1 If, in fact, the information relative to

2 the monthly bills is still available in some form, you

3 could at least have a pretty close validation because

4 the summer bill for a residence with a gas water

5 heater is basically going to be driven by the water

6 heater. And so it would be very different than a

7 summer bill of a house that has a gas furnace and an

8 electric water heater.

9 I don't know if it's there, but that may

10 be at least a second order of --

11 MR. BROOKMAN: I thought Michael suggested

12 that, by design, that's -- well, anyway.

13 Bill Prindle?

14 MR. PRINDLE: Just a couple of comments in

15 support of the way DOE and LBL have handled the use of

16 the RECS data and the use -- and the kind of marginal

17 energy analysis they've done. RECS is definitely the

18 best methodology and data source we have. Probably

19 the closest alternative I could think of is the kind

20 of appliance saturation surveys that utilities

21 routinely do.

22 I've seen a number of them myself as a

23 consultant. And most of those are basically telephone

24 surveys. You're not going to get any better data

25 from, you know, anything that any utility would have

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1 done on its own.

2 Secondly, on marginal energy prices,

3 looking forward it is extremely inappropriate to use

4 rate structures for marginal energy cost because with

5 competitive energy markets now in place in several

6 states, and likely to be in the majority of the

7 country by the time the standard takes effect,

8 marginal energy prices are going to be all over the

9 map.

10 There are some people that are going to be

11 on time of use rates, real-time rates, flat rates.

12 You know, there is going to be virtually no way to

13 systematically predict actual marginal energy costs on

14 a per customer basis. So the way LBL is doing it now

15 is really the only way, I think, that you can

16 appropriately do it.

17 MR. BROOKMAN: Thank you.

18 Mark, and then this gentleman.

19 MR. KREBS: Listening and speaking as an

20 ally --

21 MR. BROOKMAN: Thank you.

22 MR. KREBS: -- I think we learned that.

23 I think we learned the difficulty of trying to keep up

24 the data on all of the gas and electric rates across

25 the country, you know, and I warned Dan Reicher in

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1 writing about underestimating that effort.

2 You know, maybe RECS is a necessary evil.

3 Hopefully, it's going to be improved with the 1997

4 version. But I think the problem is, you know, we

5 really don't understand it, we really don't understand

6 how these other things were added to it, and above all

7 we really don't understand the sensitivity of certain

8 assumptions, you know, and variables built into it.

9 MR. BROOKMAN: Okay.

10 MR. KREBS: And that's why, you know, that

11 when you talk about robust, and when NAECA talks about

12 robust and transparency, it talks -- it uses the words

13 "fully documented." And I appreciate the fact that

14 Jim McMahon and LBL and their staff can't be blazing

15 new trails, you know, and spreadsheets simultaneous

16 with the need to document things as well as they can.

17 But regardless, you know, it does cause --

18 it causes problems. We don't understand. And, you

19 know, I guess, you know, we need to be cautiously

20 optimistic about where this is headed, at a minimum.

21 MR. BROOKMAN: You're next. We're

22 starting to get slightly repetitive here. So I'm

23 going to get Michael ready to move on to the next

24 subject.

25 MR. KOCH: Okay. Claus Koch from --

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1 MR. BROOKMAN: Final element of this. Go

2 ahead.

3 MR. KOCH: Claus Koch from Union Gas. Let

4 me put some brackets on the accuracy of surveys. Our

5 company has recently done a survey -- one that they do

6 every few years -- a fairly detailed survey, 1,200

7 customers, asking them about their furnaces, asking

8 them about what their water heaters -- what kind of

9 water heaters, duh, duh, duh, duh, duh, duh, duh.

10 And the results came back to our department, and

11 I looked at the results and said, "That's doesn't

12 sound right." Unbeknownst to the communications

13 group, I had a database of 1.2 million water heater --

14 rental water heaters that I could go back and then

15 have somebody do some work on.

16 The results were that the survey -- fairly

17 detailed telephone survey, 1,200 people in our

18 franchise -- said 22 percent of our customers had

19 power vented water heaters. It turns out that the

20 real number was 31.6. So we're talking about a 50

21 percent higher number.

22 MR. BROOKMAN: And would you make an

23 equivalent prediction about the difference between

24 electric and gas?

25 MR. KOCH: I'll leave that to somebody

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1 else. But I will tell you that the average person has

2 no idea what they have down in their mechanical room.

3 MR. BROOKMAN: Okay. Thank you.

4 Michael, lead us on.

5 If we don't keep moving, folks, we're

6 going to be here -- I'll tell you, we're going to be

7 here late. I ask for your indulgence to be concise

8 and keep us moving ahead, because I'm going to be

9 here, I'll guarantee you. We're going to keep going

10 until we get this done.

11 MR. McCABE: The first point as far as the

12 household -- using household characteristics not found

13 in the RECS data -- we've already discussed that. I

14 don't know if there's anything else to add at this

15 point. We're going to be getting back with some

16 answers to the questions there.

17 The second one here --

18 MR. PAUL: Quick question on this one.

19 You say in the response, the second sentence there,

20 the thermostat set point and these other things were

21 calculated using climate and household heating degree

22 days. But that thermostat set point is the thermostat

23 set point of the water heater.

24 MR. McCABE: Correct.

25 MR. PAUL: So that could not be calculated

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1 based on climate or household heating degree days.

2 MR. McCABE: You are correct on that one.

3 Again, one of the problems with trying to condense

4 this into fewer words, there are a variety of data

5 sets that we used to extrapolate the different points.

6 And as far as the cold water temperature and room air

7 temperature, if I could extrapolate from those two,

8 the thermostat set point, I'll look to Jim as far

9 as --

10 MR. BROOKMAN: Do you want him to identify

11 the data set?

12 MR. McCABE: That's --

13 MR. LUTZ: We took the RECS data set.

14 They include for 1993 heating degree days at the house

15 with some error, so you can't identify the house

16 exactly. From the heating degree days, 1993, you got

17 weather data, identified which airport is the closest

18 to in the region that they identify, so we know which

19 climate zone it's in.

20 From that, we get annual average air

21 temperature. We assumed cold water inlet temperature

22 was a couple degrees above that, to give us an average

23 annual cold water inlet temperature. And then, from

24 there, we said the hot water temperature is a function

25 of cold water temperature. The colder the inlet

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1 temperature, the hotter the tank temperature is going

2 to be set at.

3 Just to balance off, we have a little bit

4 of data from CEC. And if you've got real cold inlet

5 water, when you get in the shower you would -- to make

6 it last longer, you're going to turn the thermostat

7 up, in general. There's a lot of scatter on that

8 data, so we did add a random scatter onto that to try

9 to capture the whole variation that was -- but no,

10 there isn't.

11 And if you know of -- or anybody knows of

12 a good data set on inlet water temperatures and

13 thermostat set points, we would love to see it and

14 would love to put it in.

15 MR. PAUL: Darrell Paul, Battelle. Was

16 there any difference between how you applied the

17 thermostat set point temperature for gas versus

18 electric?

19 MR. LUTZ: No. It was identical.

20 MR. BROOKMAN: Thank you.

21 Additional comments/questions on this?

22 Michael, you -- additional comments or questions?

23 MR. McCABE: An issue was raised by at

24 least three commenters about the natural gas -- what

25 appeared to be natural gas and LPG price blending.

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1 And as mentioned, the analysis was done on a per

2 household basis that was not blended. My apologies.

3 What we did is we did provide some -- we

4 poured out some summary information, where we took the

5 results, summarized them, and in doing that we added

6 LPG and natural gas results of it. It appeared from

7 the documentation that there was some blending, but it

8 was not done, and we'll be working on that

9 documentation to clarify that.

10 MR. PAUL: Just a quick clarification

11 point. Darrell Paul, Battelle. So the life-cycle

12 cost numbers that you have in the summary documents

13 here for gas are only natural gas? Or are they both

14 natural gas and propane?

15 MR. LUTZ: They are both.

16 MR. KREBS: They are blended is what

17 you're saying.

18 MR. BROOKMAN: They are both. Okay.

19 National energy savings. Oh, Frank?

20 MR. STANONIK: I'm sorry. I heard two

21 things now.

22 MR. McCABE: The calculations were done

23 for the individual fuel, and then those results were

24 summarized and presented as blended. What we'll do is

25 in the documentation correct that to make it clearer

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1 -- the results -- and split them out.

2 MR. BROOKMAN: Okay. Thanks for that

3 clarification. Does that work for everybody? Okay.

4 National energy savings. Let me queue up

5 the discussion questions which will follow. You'll

6 see them -- we're almost near the end of this

7 presentation material -- so that you're ready to

8 respond to them concisely.

9 What standard levels do you believe the

10 analysis justifies?

11 We have a recommendation from GAMA that

12 appears to be the beginning of a consensus process.

13 What should DOE do to continue this dialogue?

14 What can DOE do to help the industry meet

15 the new standards in the time between the final rule

16 and the effective date of the rulemaking, e.g. NFGC

17 and CPSC initiatives?

18 And, finally, when DOE completes this

19 rulemaking, what steps could the Department take to

20 support and increase the market demand for water

21 heaters which will exceed the new minimum standards,

22 e.g. Energy Star, FEMP executive order, etcetera?

23 Okay. That's what we're going to take up

24 when we finish with this grouping here.

25 Mark?

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1 MR. KREBS: I have a suggestion that, you

2 know, we don't even talk about that stuff until we get

3 the analysis right.

4 MR. BROOKMAN: Thank you.

5 Do you want to proceed with the rest of

6 these?

7 MR. McCABE: In Terry's presentation,

8 there was a lengthy discussion on how the analysis was

9 performed, looking at shipments projections. There

10 has been some comments raised. Bob Hemphill, for

11 example, was talking about earlier today, in looking

12 at the change in price of products and change in

13 geometry, how that may affect fuel switching. He

14 actually was getting the fuel switching. He wrote the

15 discussion this morning was really talking about

16 market share.

17 I'm not sure what we can add to that

18 discussion. These points have already been discussed.

19 I'll throw it back to the audience if there is

20 anything they would like to add to what has already

21 been covered today.

22 MR. BROOKMAN: Please.

23 MR. SHIN: I have a question about --

24 MR. BROOKMAN: David.

25 MR. SHIN: David Shin, American Gas

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1 Association. In the national energy savings results

2 spreadsheet that was released on the 14th, if you look

3 at the conversion factors that are used to convert the

4 reduction in site gas consumption with source gas

5 consumption, the conversion factors range from about

6 .78 to .81.

7 My reading of the EIA data indicates that

8 the conversion factor should be about .9. What gives?

9 MR. LUTZ: We are using .9. So I'm not

10 sure what you --

11 MR. SHIN: That's what the numbers said in

12 the spreadsheet. It's a simple calculation.

13 MR. BROOKMAN: Jim Lutz?

14 MR. LUTZ: Our intention was that they

15 should be .9, and I'll talk to you to make sure that

16 that's what we used.

17 MR. BROOKMAN: Mark Krebs?

18 MR. KREBS: Mark Krebs, Laclede Gas. You

19 know, I already discussed the fuel switching concerns.

20 But just for the record, since we're on that subject,

21 it says -- the comment here says, "It appears that

22 analysis is biased towards showing impacts on fuel

23 switching." Where did that come from? What are you

24 really saying there? What are you trying to

25 communicate, you know, that --

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1 MR. BROOKMAN: Well, this was a comment

2 from -- these were commenters.

3 MR. KREBS: Because, I mean, in my comment

4 I think I'm going -- I think my comment was that

5 you're going out of your way to minimize the fuel

6 switching debates.

7 MR. BROOKMAN: So thanks for that

8 clarification.

9 MR. KREBS: So it's doing the opposite of

10 what --

11 MR. BROOKMAN: Yes.

12 MR. KREBS: -- you know, you say here in

13 your comment on page 12.

14 MR. McCABE: I'll insert a "no" after

15 "showing."

16 MR. BROOKMAN: Okay. So that's a typo

17 there. Or that is something that should have been in

18 there.

19 So, otherwise, it might be -- it appears

20 the analysis is biased towards showing no impacts on

21 fuel switching.

22 Other comments related to that which is

23 listed here? Steve Nadel?

24 MR. NADEL: The one observation I'd make

25 is yesterday at the workshop on clothes washers there

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1 was some discussion about how survey data on how

2 consumers respond to energy savings or energy cost

3 operating savings may be overstated.

4 And I wonder whether some of that same

5 factor is going on here in this modeling, the fact

6 that, yes, you're showing more savings from the more

7 efficient gas water heaters, and you're getting a

8 pretty significant market share switch, and whether

9 those trends are overstated.

10 I would not expect the shift to be as

11 great as you're showing, and you may want to look at

12 your assumptions in this analysis in light of some of

13 the analysis and the discussion of yesterday.

14 MR. BROOKMAN: Thank you.

15 Charlie?

16 MR. STEPHENS: I just have one quick

17 question about how you derive the new construction

18 estimates for what kind of market share shifts would

19 occur.

20 MR. McMAHON: There are elasticities in

21 there which -- I'm trying to recall the exact source.

22 I was late on two days of hearings, so I can't tell

23 you. Let me get back to you on that, Charlie.

24 MR. STEPHENS: Okay. I just wanted to ask

25 if you had in your possession any data that --

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1 historical data on -- from NAHB or one of these folks

2 who can show you what the -- how fuel choices have

3 changed, or what the trends look like.

4 MR. McMAHON: Yes. I can tell you some of

5 the sources that we have. I can't exactly --

6 MR. STEPHENS: Okay.

7 MR. McMAHON: -- but there is Census data

8 on new construction --

9 MR. STEPHENS: Okay.

10 MR. McMAHON: -- that tells you the fuel

11 type. There is the American Housing Survey every

12 couple of years that tells you the fuel types. So

13 those sorts of --

14 MR. STEPHENS: So you can check against

15 that.

16 MR. McMAHON: Yes.

17 MR. STEPHENS: Okay. Good.

18 MR. BROOKMAN: Mark Krebs?

19 MR. KREBS: Again, the language here is

20 confusing. Your response on page 12 reads, "In the

21 analysis, we take current market share of water

22 heaters by fuel type and assume fuel switching may

23 occur only in new construction, and that in existing

24 households water heaters are replaced with the same

25 fuel type."

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1 Now, when you say "may occur," does that

2 mean it's condoned? What is your definition of "may"?

3 MR. BROOKMAN: I guess I -- can someone

4 operationalize that for us, or say what that implies

5 for the modeling?

6 MR. LOGEE: I think maybe it was a poor

7 choice of words, but what we were thinking of, Mark,

8 was that the discount rates and the prices, the price

9 structure of the equipment, and the installation costs

10 in the model would develop the result.

11 So it wasn't something that we plugged in

12 is going to be a certain percentage of fuel switching

13 occurring or something like that. It was left up to

14 the way the model would operate, so that's why we used

15 the word "may." I'm not sure what word we would

16 otherwise use, but with the model --

17 MR. KREBS: Mark Krebs, Laclede Gas. In

18 regards to that, you guys handed out some data that is

19 showing those plots. And interestingly, in the

20 original PDF documents, it went back to 1950, but the

21 stuff you gave us was -- only went back to 1980. So

22 if you did -- you know, if you did a linear regression

23 on those, you'd get way different results.

24 You know, I think that it would show that

25 the gap is closing and has been closing for quite some

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1 time between gas and electric water heaters, and we're

2 just about at parity right now.

3 And it is equally -- no less subjective or

4 equally objective, depending on your perspective,

5 that, you know, to the extent that one water heater

6 type increases market share, the other would fall.

7 And those things could change rapidly.

8 Very, very infrequently in life do things

9 carry on, you know, in the linear fashion. You know,

10 things happen. "Feces occurs," as us engineers like

11 to say.

12 But, you know, that's why I commented that

13 I think you've been trying to avoid the issue of fuel

14 switching rather than embracing it.

15 MR. BROOKMAN: We noted that. Okay.

16 Thank you.

17 Additional comments on national energy

18 savings? I see none. Did we do measured EF and --

19 MR. McCABE: Yes.

20 MR. BROOKMAN: -- RF?

21 MR. McCABE: Yes.

22 MR. BROOKMAN: I thought we did. Okay.

23 So then we are ready to move on to a different aspect

24 of the agenda, which are these discussion questions.

25 And hopefully some of the institutional

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1 representatives here have thought about some of these

2 questions a little bit.

3 I know the Department really wishes to

4 have your comments on these because it is going to be

5 helpful to them as they consider what to do with these

6 analyses.

7 Steve Nadel?

8 MR. NADEL: I have a question. It occurs

9 to me that at some point, perhaps now, perhaps later,

10 we should summarize what are some of the followup

11 action steps from this whole discussion to make sure

12 things don't fall between the cracks.

13 MR. BROOKMAN: I have not been writing

14 them as I have been going, but I have seen Jim taking

15 notes consistently throughout, among others. I

16 imagine we could do that. When we finish today, can

17 you -- you and Terry, the two of you, can you put your

18 heads together and create a listing? I think there

19 has been quite a few things.

20 MR. LOGEE: I'd like to beg the indulgence

21 that we do it early next week, just so we can get

22 home. These fellows have to catch a plane. They have

23 to leave at 5:00, so --

24 MR. BROOKMAN: Okay.

25 MR. LOGEE: -- we can't --

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1 MR. STANONIK: We weren't planning to stay

2 while you did it anyhow.

3 (Laughter.)

4 MR. LOGEE: Thank you for that, Frank.

5 MR. BROOKMAN: Would that be okay, Steve,

6 if they get back to you with the items?

7 MR. NADEL: I have been thinking of, you

8 know, not even five-minute summaries so things won't

9 fall between the cracks. I think it will be much more

10 time consuming --

11 MR. BROOKMAN: I would be happy to do

12 that, capture that real time. I'd be more than happy

13 to do that. Okay. And they can scan through their

14 documents.

15 The first question on the list is: what

16 standard levels do you believe the analysis justifies?

17 And GAMA this morning -- Frank Stanonik spoke to that.

18 Do you want to repeat that again, Frank?

19 MR. STANONIK: Well, if you look on

20 page 14, it does really indicate -- and in our

21 comments we were specifically relating this to the

22 baseline. And so in doing that standard level -- what

23 was identified as "standard level 2" would result in

24 a minimum energy factor of .89 for an electric water

25 heater and .58 for a gas water heater.

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1 And as it indicates here, our suggestion

2 was that we believe that the appropriate level would,

3 in fact, be .88 for an electric water heater, .57 for

4 a gas water heater. And if you're interested, I can

5 do the translation of that into a formula to cover all

6 volumes, but I'm not going to bother with it right

7 now. I've got the information.

8 But that's really -- the essence is we

9 think that standard level 2 is close to the right

10 level. Our comment was to just back off .01 on each

11 fuel type.

12 We didn't say much about oil, except the

13 fact that to us it's fairly clear that the analysis

14 shows the only thing justified on oil is standard

15 level 1, which is heat vent system.

16 MR. BROOKMAN: It's always useful to have

17 a proposal on the table. Maybe we can get some

18 comments on what is being suggested here.

19 Charlie Stephens, and then Mark Krebs.

20 MR. STEPHENS: I don't think we're going

21 to be prepared to offer a whole lot of comment on

22 number 1 and 2, because I think we have so much work

23 to do on the analysis that, quite frankly, I don't

24 known that I can guess what we think the ultimate

25 analysis would point to.

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1 MR. BROOKMAN: Would any of the rest of

2 you comment on whether this proposal seems in the

3 ballpark? I mean, kind of where the analysis seems to

4 be leading you.

5 Mark, you're next.

6 MR. KREBS: Mark Krebs, Laclede Gas. My

7 main concern is that I have to know with great detail

8 how we're going to get there. Okay? What's going to

9 happen to the geometry of the water heater, etcetera,

10 etcetera.

11 MR. BROOKMAN: Thank you. Thanks for that

12 comment.

13 Steve Rosenstock?

14 MR. ROSENSTOCK: Steve Rosenstock, EEI.

15 One of the manufacturers, small manufacturers --

16 Vaughn -- was not here, but he had expressed concern

17 about standards with the insulated tank bottom and

18 also, again, the geometry as well on his production

19 line. So I just want to throw that in there. Thanks.

20 MR. BROOKMAN: So I'm not hearing any --

21 noting that there is a lot of work to be done on the

22 analysis, and noting that geometry is very important,

23 no additional comments on what GAMA is suggesting so

24 far. And I see -- go ahead, Frank, and then I saw

25 Tom, and then Steve.

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1 MR. STANONIK: I just wanted to respond to

2 Mark's comment, because he more than likely hasn't

3 seen our complete comments. But from our judgment,

4 our knowledge, at these levels we think you avoid the

5 problem of -- I don't know what -- of a too wide water

6 heater. And we think you avoid any problems related

7 to condensation in vents for longer than you wanted

8 it, or for whatever.

9 So we think that these levels avoid

10 venting issues, and they avoid the installation issues

11 of water heaters that are either too tall or too wide.

12 MR. BROOKMAN: Go ahead. Follow on.

13 MR. KREBS: Mark Krebs, Laclede Gas. I

14 think we're willing to take it under consideration,

15 contingent upon, you know, knowing those kind of

16 details. We don't dismiss it at this point.

17 MR. BROOKMAN: Steve and Tom, Michael

18 McCabe has got a specific question. Will you let him

19 follow on with that?

20 MR. McCABE: I'd like to follow up on your

21 comment, Frank. And what I understand you to say --

22 to mean by your comment is that the level 2, as it is

23 in the DOE analysis, is right on the cusp with some

24 issues, such as geometry and safety, and that the one25 point drop provides that cushion to deal with both the

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1 safety and geometry issues. Would that be another way

2 to put it?

3 MR. BROOKMAN: While Frank is -- several

4 -- I see -- I'm not going to say that. Go ahead,

5 Frank.

6 (Laughter.)

7 MR. STANONIK: Yes.

8 MR. BROOKMAN: I was going to say, I saw

9 similar manufacturers' heads going up and down yes,

10 but that's not for the record.

11 Bill Prindle?

12 MR. PRINDLE: Yes, Bill Prindle. There

13 seems to be an implied assumption that there is only

14 one way for the industry to respond to a given energy

15 factor level, and I would like to challenge that

16 assumption.

17 The assumption seems to be that if the

18 energy factor goes to a certain level, then insulation

19 has to expand by a certain fixed number of inches, and

20 that's going to have a fixed effect on closet door

21 openings. And it seems to me that manufacturers might

22 make different decisions.

23 MR. BROOKMAN: Okay.

24 MR. PRINDLE: It might decide that because

25 average water use is declining because of things like

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1 EPACT shower head and aerator standards, they might

2 decide that, well, maybe we can shrink the tank size

3 a little bit and still fit that same product, you

4 know, in the same cabinet. I mean, I would not want

5 the audience to think that there is some sort of

6 linear fixed relationship here between an energy

7 factor and specific component designs.

8 And I don't really know anything about

9 water heater design, but I am -- I do know that

10 manufacturers can be creative. And so I just want to

11 throw that on the table.

12 MR. BROOKMAN: Steve and Tom.

13 MR. NADEL: To add some more comments on

14 the GAMA recommendation, and also where maybe we are

15 heading, I agree with Charlie that there is some

16 additional analysis needed, so it's hard to have a

17 definitive statement.

18 I would point out, though, that based on

19 my looking at the -- all of the DOE analyses,

20 including some of the more detailed life-cycle cost

21 analyses, it appeared to me that this current DOE

22 analysis finds the minimum life-cycle cost point is at

23 about .91 energy factor for electric, and at about .61

24 energy factor for gas. That is based on 245 fa.

25 I point out, then, if you look at the GAMA

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1 numbers, what it breaks down to is GAMA has the .016.

2 There's about an additional .02 factor dealing with

3 one or below and versus 245 fa. And yet there is some

4 uncertainty there. And then there is an additional

5 .01 difference because neither DOE nor GAMA considered

6 the 80 percent recovery efficiency option for gas, or

7 alternative ways to start getting a gas water heater

8 up into the .6/.61 energy factor.

9 So I'd like to see some further analysis,

10 but my inclination at this point is to look towards an

11 interim life-cycle cost point. I don't really see a

12 need for a broad .01 safety.

13 I think that venting issues are entirely

14 overblown, and we don't need a safety there. To the

15 extent there are some issues dealing with lowboy, I'd

16 like to point out a bit more about what the market

17 share of those is. If it's a small market share,

18 maybe we can consider some slightly looser standards

19 to the lowboy, but that's where the real installation

20 problem is. You know, let's start thinking creative.

21 Likewise, on the 245 fa, let's start

22 thinking creatively. I know in the case of the

23 refrigerator standard, the standard was adopted based

24 on -- assuming 245 fa, but had an out to say, "If this

25 is not proven to be available, there is a partitioning

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1 process to consider either delays or changes to the

2 standard."

3 MR. BROOKMAN: Okay.

4 MR. NADEL: So I'd say if we have some key

5 uncertainties, let's think creatively about how to

6 deal with them rather than just say, "Oh, let's take

7 the lowest thing and then add an extra safety factor."

8 MR. BROOKMAN: And I appreciate your being

9 specific in your comments.

10 Let me call your attention, everybody,

11 before we turn to Tom -- this discussion question, the

12 second one, "We have a recommendation from GAMA what

13 appears to be -- that appears to be the beginning of

14 a consensus process, or the suggestion of a consensus

15 process. What should DOE do to continue this

16 dialogue?"

17 I'd like to go in that direction by the

18 time we finish with this question.

19 Tom, you're next.

20 MR. ECKMAN: Yes, I want to address the

21 first question. I think in light -- you know, I'll be

22 a little bit parochial, but in light of the fact that

23 the data we think on incremental cost is roughly a

24 third of what we see in the DOE analysis to date, in

25 terms of incremental cost, not just absolute cost, I

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1 think it's pretty hard to argue for any particular

2 standards level based on the present analysis.

3 MR. BROOKMAN: Okay. Thank you. You are

4 confirming other people's thoughts as well.

5 Yes, sir?

6 MR. BRUNDAGE: Don Brundage, Southern

7 Company. I've read Frank's letter or comments, and it

8 looks reasonable to me. It's difficult, as we've all

9 said, to make statements on these when the numbers are

10 still changing.

11 I would disagree a little with Steve

12 Nadel's comment that it was an arbitrary drop.

13 There's a very specific reason in electric water

14 heaters that Frank has suggested dropping it by .01.

15 It's to avoid two and a half inch tank insulation.

16 And that's going to affect doorways; it's

17 going to affect fitting things into slots. And as

18 someone who personally once had to spend over $500

19 extra to replace a water heater due to code and

20 technology changes, this is something that you must --

21 even if there are a small number of losers, they will

22 lose very badly if that happens, and you need to be

23 very sensitive to that -- that you don't do something

24 that is going to cause major renovation and changes to

25 a house in order to fit a replacement water heater.

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1 MR. BROOKMAN: Eric, and then George.

2 MR. LANNES: I have a couple of comments.

3 On the oil issue, I think you'll find in the comments,

4 at least that I submitted, that I don't think there is

5 justification to change oil to any level. Just adding

6 heat traps is going to overcome the loss that you see

7 with the 141B falling out of the marketplace.

8 Secondly, with regard to the comment from

9 Mr. Prindle with regard to how creative manufacturers

10 can be, when you have 40 gallons of water you can't

11 change 40 gallons of water. So if I take a tank and

12 change it from 18 inches in diameter and make it 16

13 inches in diameter, the heater is going to get taller.

14 There is no way to redistribute that or move it

15 somewhere else.

16 And as we have seen in the data that has

17 been provided, height is a serious issue, much the

18 same as we see with a less than 36-inch product. So

19 as far as making a change to try and compensate for

20 that, it's not a matter of being creative. You can

21 only put 40 gallons in a certain area, and you can't

22 change that volume unless you try to put it under

23 pressure and that's very difficult to do.

24 The other thing is -- and I submitted my

25 comments -- the information as far as K factors that

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1 were used in the insulating materials are -- I'm not

2 going to say grossly -- there is an error in those

3 numbers and the way that they were extrapolated to the

4 tank itself.

5 Making an assumption that the K factor is

6 equivalent from the bottom to the top of the tank is

7 not correct. So as you make a change to see what

8 happens in the real world with regard to application

9 of foam, you're going to find that the size actually

10 increases over the three percent, 42 percent, that was

11 assumed by the numbers from DOE.

12 When you recalculate based on that, it

13 changes the diameter, which then also comes back, if

14 you try to keep the diameter the same, then your

15 energy factor changes. And in my comments I brought

16 that to the surface.

17 With regard to 245, you heard Allied

18 Signal this morning tell you where they are. They

19 still have not made a comment. They have not planned

20 to make a commitment. They are going through the

21 process of having the material evaluated.

22 Manufacturers cannot hold their hats on

23 that because you're talking a gas versus a liquid,

24 which is a significant change in our process. And

25 what I mean by "significant change" is our equipment

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1 will require to be updated to a point where we have to

2 replace it all because we go to a high pressure

3 system.

4 And that's not a simple change that can be

5 done within the six-month program or the concurrent

6 program they had suggested. It's a very significant

7 change, and the manufacturers have to incur not only

8 a substantial amount of cost, but there is also a

9 substantial amount of time that is necessary to make

10 the change and still to continue to have the product

11 available to the marketplace.

12 Secondly, when it comes to the materials

13 that are available out there, you have a situation of

14 the phase-in date is January 1st of the year 2003.

15 Regardless of where DOE goes, or whenever they make

16 the effective date, we still have to make a change in

17 the blowing agents prior to that. And we have to make

18 changes within our process prior to that.

19 That's not a matter of making the change

20 on December 31st, the year 2002. That change is going

21 to have to happen within the next six months if we're

22 going to make any kind of changes, and that's going to

23 tell us which direction we go. And without Allied

24 Signal making a commitment -- and they still have not

25 made a commitment -- we cannot make a decision where

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1 to go.

2 Recovery efficiency. The comments were

3 made -- 78 percent is a maximum limit. Now, to design

4 to a level you have to design to the minimum plus the

5 safety factor in there. And when the comments are

6 submitted that 78 percent is the maximum level, that's

7 a level based on -- whether it's one or 50 percent,

8 that's based on a certain safety factor that's

9 associated with the product.

10 When you start looking at litigation and

11 us sitting in court, and you see what CPSC has done

12 with regard to flammable vapors, whether it's one

13 possibility or 50 possibilities, we have to be

14 concerned with the one. And that's why we made the

15 comments with regard to 78 percent, and that is a real

16 issue and is an issue that seriously has to be

17 considered.

18 MR. BROOKMAN: Thank you. Thank you for

19 your comments.

20 George?

21 MR. KUSTERER: Eric, great minds think a

22 lot -- think alike, rather.

23 (Laughter.)

24 Well, actually both. And I would just

25 like to echo my colleague's comments. I would like to

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1 address Mr. Prindle's comments with regard to

2 manufacturers can be creative regarding efficiency

3 standards. Yes, but at what price? Not only price to

4 the consumers but also price to the manufacturers.

5 If you'll remember, or you may not

6 remember, 10 or 15 years ago there were quite a few

7 water heater manufacturers here in the United States.

8 There are very few of us left. So at what price?

9 And, again, as Eric said, you can only put

10 40 pounds in a 40-pound bag. So we have to reduce --

11 if we have to become creative, we have to reduce the

12 size of the volume of the water heaters. So,

13 therefore, you won't be able to fill your hot tub with

14 a 28-gallon water heater. Very simple.

15 And, basically, there is not really much

16 to know about water heaters. Energy in; hot water

17 out. It's very simple.

18 So I just would like to make those

19 comments. And, really, I've said this, I can't

20 remember how many times I've said this with regard to

21 the foam issue. Eric has mentioned that Allied has

22 still not made a commitment.

23 Whether he was in Washington, D.C., where

24 we don't make commitments, or whatever the case may

25 be, they are still going to be the only supplier, even

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1 though they haven't even made a commitment -- and I

2 think DOE needs to hear that over and over and over

3 again, because what if. Thank you.

4 MR. BROOKMAN: Okay. Thank you.

5 Mark Krebs? I'd like to move us towards

6 the second half of this question. What should DOE do

7 to continue this dialogue? And then move on to the

8 other two. Mark Krebs?

9 MR. KREBS: Mark Krebs, Laclede Gas. I

10 really appreciate the last two commenters, and it

11 occurred to me that if you force going to a smaller

12 water heater, you're affecting the utility of that

13 device. And that's something, according to NAHB,

14 you're not supposed to do.

15 MR. BROOKMAN: Thank you.

16 What about -- we've noted that additional

17 analysis and more information may be necessary to

18 evaluate the GAMA proposal. If it appears that the

19 analysis supports what GAMA suggests broadly, what

20 should DOE do to continue this dialogue? That's the

21 question on the sheet. If anything.

22 Yes?

23 MR. ROSENSTOCK: Steve Rosenstock, EEI.

24 I think DOE has been very open about their process.

25 And, again, with all of the communications format, I

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1 just -- you know, once the analysis is done -- redone,

2 I should say -- whatever the timeframe is, just alert

3 all of the stakeholders and, you know, either by

4 e-mail or teleconference or something, again, just to

5 speed the process, to save time. If people want to

6 comment on the revised analysis, just send them in.

7 We can't put the cart before the horse, so

8 I -- DOE has done a very good job of keeping all of

9 the stakeholders informed, to try to keep everyone

10 informed, and especially putting the revised analysis

11 on the web site as quickly as you can, and then

12 contacting people -- e-mail or phone, or whatever.

13 MR. BROOKMAN: Jim?

14 MR. RANFONE: Yes, Jim Ranfone, AGA. We

15 do need to take a stronger look at the analysis and

16 hope that we get a more complete analysis prior to

17 making any of our recommendations. One of the

18 concerns we have is that, you know, we're now looking

19 at a GAMA recommendation and are supposed to make a

20 comment on that. But the analysis that you're doing

21 today is going to impact future rulemakings.

22 And in agreement to what GAMA is

23 suggesting, without further understanding all of the

24 bases, because it's not complete, there are some

25 things that aren't even up on the web site yet --

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1 we've got a very short timeframe now. We're supposed

2 to comment on the issues by -- from this workshop by

3 August 3rd, and we don't -- I think there are some

4 things that are still coming up on the web site that

5 need to come up.

6 So our concern is that we really can't

7 comment on the proposal from GAMA until we see all of

8 the backup. This information, this analysis, the

9 methodology you're using right now, is going to be the

10 basis for future rulemakings. And if one would buy

11 off -- I'll put it in those terms -- on a

12 recommendation without justifying it, which I believe

13 the Department has to do under NAECA, it would be

14 premature from our perspective.

15 MR. BROOKMAN: Thank you.

16 Mark Krebs?

17 MR. KREBS: Mark Krebs, Laclede Gas. In

18 going back and reviewing this stuff that was put on

19 DOE's web site, the irony was not lost on me that this

20 facility on 1000 Independence Avenue, over the course

21 of the 4th of July holidays, effectively gave people

22 10 working days. Okay? That is unjust, pure and

23 simple.

24 MR. BROOKMAN: So you would like to see a

25 longer lead time for review in the future?

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1 MR. KREBS: Well, unless your intent is to

2 reduce stakeholder input, and, if it is, it's unjust.

3 MR. BROOKMAN: Okay. Thank you.

4 MR. KREBS: We have a lot to deal with

5 here, and we're trying to give it due diligence. And

6 I think that's the issue is due diligence.

7 When we talk about the GAMA reg. neg.

8 issue here, you know, when I say we need to know the

9 details, we need to know the details inclusive of NFGC

10 and CPSC.

11 MR. BROOKMAN: I'm glad you raised that

12 because that's where I'd like to direct the comment

13 going forward now. What can DOE do to help the

14 industry meet the new standards in the time between

15 the final rule and the effective date of the

16 rulemaking, the NFGC, and the Consumer Product Safety

17 Commission initiatives?

18 MR. ROSENSTOCK: Steve Rosenstock, EEI.

19 Clarification -- CPSC and NFGC initiatives, what is

20 their timeframe? You know, that might make --

21 MR. BROOKMAN: We touched on them briefly

22 this morning.

23 Terry or Michael, can you describe what

24 the time tables are for NFGC and CPSC, how it affects

25 this prospective rulemaking?

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1 MR. LOGEE: I can't say about the National

2 Fuel Gas Code. I think Daryl Hosler is much -- you

3 know, much better prepared to answer to that. As far

4 as the Consumer Product Safety Commission, I believe

5 that the ANSI committee has approved the test method

6 for whether their designs are resistant to flammable

7 vapor and ignition of flammable vapor.

8 And the next step there I think is to get

9 the final approval by the ANSI governing body of

10 whatever that is. That was supposed to occur this

11 fall or late fall. And I think that they want -- they

12 would like to see models on the marketplace by 2001.

13 MR. BROOKMAN: Can you comment further?

14 MR. HOSLER: Daryl Hosler, speaking for

15 the --

16 MR. BROOKMAN: Daryl, please move closer

17 to the mike.

18 MR. HOSLER: I thought you were going to

19 tell me to stand up.

20 (Laughter.)

21 They usually say --

22 MR. BROOKMAN: Closer to the mike, please.

23 MR. HOSLER: I was struck by this comment,

24 just to make a comment on it, that says, "What can DOE

25 do to help the industry meet the new standards?"

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1 Well, what new standards? I mean, I don't think we've

2 really agreed that there is even going to be a change

3 yet. So I'd like to point that out.

4 MR. BROOKMAN: In this application of

5 words.

6 MR. HOSLER: Yes.

7 MR. BROOKMAN: Okay.

8 MR. HOSLER: Then, the issue on the --

9 MR. BROOKMAN: Isn't the intent of this,

10 though, understood? Irrespective of --

11 MR. HOSLER: No, I think we understand it

12 after the dialogue.

13 MR. BROOKMAN: Okay. Thank you.

14 MR. HOSLER: The National Fuel Gas Code --

15 I am presuming that you mean changing to the venting

16 tables. That's a presumption that I have to make.

17 That gets very interesting because this is a very

18 complex issue, especially for water heaters which

19 aren't furnaces, which aren't boilers, and, in my

20 opinion, would require a fairly significant amount of

21 research work that has not been done yet to really

22 look at this issue.

23 The subcommittee has looked at data from

24 GRI and has not been able to make a snap decision on

25 how you should categorize water heaters because they

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1 recognize that even though it is this tank of water

2 with a burner or an electric element under it, it's a

3 little more complex than that when it actually gets

4 installed in the field out there.

5 I mean, as some comments have pointed out,

6 you can see there is complexity in this. It doesn't

7 work the same way every place you go. So DOE could

8 help, but I think you've got to first determine if you

9 want to change the venting tables. Some of the

10 proposals may not require that, so there wouldn't be

11 any work done there.

12 So that's the first thing we've got to'get

13 to is, is there really going to be a need to change

14 the venting tables?

15 And on the CPSC initiatives, so you all

16 understand, a consortium was formed by a majority of

17 water heater manufacturers who have worked with the

18 Consumer Product Safety Commission, who have a

19 proprietary agreement with the Consumer Product Safety

20 Commission on dates of when they would like to get

21 these water heaters in the field. And nobody on this

22 committee, or others, really knows what that date is.

23 That is a date that has never been given.

24 You hear lots of speculation about what

25 that date may be; anywhere from 2001 to 2003 to

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1 tomorrow, depending on what people feel they can do in

2 the markets.

3 But the one thing that they do want is to

4 have a standard to test to, and that's going to be

5 done and taken care of in the Z2183 committee. At our

6 April meeting, the committee voted to adopt a test

7 procedure in the standard for residential water

8 heaters, those water heaters 75,000 btu's and below.

9 And that decision has now been appealed by an

10 interested party.

11 So there is an appeal process that our

12 committee has. We will be responding to that appeal.

13 They will have an additional step that they can go

14 within our committee procedure, and then, if we decide

15 to move forward with the proposals, and we sent it to

16 ANSI for ultimate approval by ANSI, the other party

17 has the opportunity to appeal it at the ANSI level

18 also.

19 So it could be November/December before we

20 ever get close to knowing how ANSI is going to do

21 this. Then you have to set the implementation dates,

22 which I'm sure will be negotiated between CPSC, the

23 manufacturers, and all of those other people.

24 The committee is not a part of that

25 process. Those dates are done in another manner,

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1 other than through the ANSI committee.

2 I might also point out that the water

3 heater standard is a binational standard with Canada,

4 and it was -- that happened because of the Fair Trade

5 Agreements, recognizing the standards can be trade

6 barriers. So we, a number of years ago, started the

7 effort of combining these standards.

8 And this requirement for flammable vapor

9 ignition resistance has not been addressed by the

10 Canadian parties yet, and so it is unclear whether or

11 not they will adopt this. And that will actually

12 affect the market also, since most of these water

13 heaters are sold on both sides of the border.

14 If that's not adopted up there, or even if

15 it is and it gets appealed up there, the process could

16 go out even farther. So, and that is the consensus

17 process.

18 MR. BROOKMAN: Thank you for that

19 explanation.

20 Comments following on his comments, his

21 recommendation? His explanation, I should say.

22 The final question, if there are no more

23 responses to the issues of NFGC and CPSC, is, "When

24 DOE completes this rulemaking, what steps could the

25 Department take to support and increase the market

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1 demand for water heaters which will exceed the new

2 minimum standards, e.g. Energy Star program, FEMP

3 executive order, etcetera, etcetera?"

4 MR. McCABE: Let me add to that. Dan is

5 particularly interested in knowing if there is

6 anything that the Department can do, and it's actually

7 broader than this, both in the current environment but

8 also with any future standard, as to what we can do to

9 support the voluntary market activities, to increase

10 the demand for more efficient products.

11 The two that are mentioned here -- the

12 Energy Star -- the Department is evaluating extending

13 the Energy Star program to include water heaters. We

14 are also looking at early replacement programs for

15 some of the white goods, and whether or not that would

16 be applicable to water heaters.

17 Under the FEMP program, we're looking --

18 the Federal Energy Management Program -- looking to

19 the mass purchase or directed purchase of federal

20 agencies to the high efficiency units in order to

21 stimulate the demand and support your efforts in

22 producing more efficient products.

23 He is both interested currently, but also

24 with a new standard, what may be able to be done to

25 aid the transition to that new standard. And also

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1 after the standard -- if there's a new standard, in

2 effect, what could be done to encourage products to go

3 into the marketplace that are more efficient than

4 that. So it's -- there are a variety of issues that

5 are balled up in this.

6 I'm interested in an open discussion.

7 MR. BROOKMAN: Mark Krebs?

8 MR. KREBS: I have three specific

9 suggestions. One would be to include source

10 efficiency on the yellow sticker program. Two would

11 be to fully disclose emissions on utility bills. Do

12 you want to hear three?

13 MR. BROOKMAN: Yes. You said you had

14 three.

15 MR. KREBS: Three --

16 MR. BROOKMAN: We can come back to you if

17 you want to tease us. We'll come back to you.

18 MR. KREBS: Steve hasn't had a coronary

19 yet, so, you know, maybe I can say it's okay.

20 MR. BROOKMAN: We'll give you a few

21 moments to --

22 (Laughter.)

23 Michael McCabe I believe just broadened

24 this question slightly, in thinking and talking about

25 the Secretary's specific interest in this question.

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1 Are there others that can respond to it?

2 Steve Rosenstock?

3 MR. ROSENSTOCK: Steve Rosenstock, EEI.

4 The Department -- I think it's already in some of the

5 -- like in one of our publications, like Buying Energy

6 Efficient Products, which goes out to a lot of the

7 agencies I thought. They have already recommended

8 certain levels for water heaters, regardless of the

9 fuel type. You know, these are -- they are

10 recommended levels for buying efficient water heaters.

11 In terms of Energy Star, I wasn't sure.

12 I didn't know if Energy Star covered water heaters or

13 not.

14 MR. McCABE: Not presently.

15 MR. ROSENSTOCK: Not presently.

16 MR. McCABE: We're evaluating that.

17 MR. ROSENSTOCK: Evaluating it? Because

18 I thought it seemed like Energy Star seemed to be like

19 20 percent above the minimum efficiency. It would

20 seem to be kind of a criteria for other appliances, so

21 whether that applies to water heaters, I don't know.

22 But, you know, DOE already has all of the

23 publications on the web site, you know, the energy

24 saver web site, where you're already -- I think DOE is

25 doing a lot in terms of talking about energy

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1 efficiency of all products. And, you know, I think

2 you're doing -- right now, DOE is doing a pretty good

3 job right now. Thank you.

4 MR. BROOKMAN: Additional comments?

5 MR. RANFONE: Jim Ranfone, AGA. Just a

6 quick question. DOE is looking at making

7 recommendations for Energy Star water heaters, then,

8 is that what you said?

9 MR. McCABE: Yes. Evaluating the

10 potential to include that in the program, but no

11 decision has been made yet as to whether or not to

12 include it.

13 MR. RANFONE: and considering a certain

14 criteria, 20 percent and above, existing, or how --

15 MR. McCABE: Part of the evaluation is

16 looking at whether or not a level can be set, looking

17 at manufacturers, what they're offering, what -- if

18 the level is set at a particular level, what effect

19 that would have on the market, in particular on

20 manufacturers.

21 In the past, we have been concerned about

22 numbers of manufacturers that could participate. We

23 do not want to have a program where only one

24 manufacturer, for example, would qualify. That has

25 been in the past, so those sorts of factors are being

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1 considered by the staff who are responsible.

2 MR. RANFONE: For example -- Jim Ranfone

3 again, AGA -- only a few manufacturers made a heat

4 pump water heater. You wouldn't consider that an

5 Energy Star product because many of the manufacturers

6 don't produce it?

7 MR. McCABE: I know that factor would be

8 considered as to whether or not it would be rejected

9 on that reason or not. I don't know.

10 MR. RANFONE: Okay.

11 MR. BROOKMAN: Mark?

12 MR. KREBS: Well, having contemplated the

13 disclosure being the better part of value issue, I

14 decided I wouldn't bring up -- but rather I'd kind of

15 augment the first, because really what I'm talking

16 about is empowering consumers with good information.

17 The more you empower consumers with good information,

18 then it follows that, at least hopefully, the better

19 decisions you can make.

20 It's kind of like at DSM. Everybody knew

21 that, you know, the most cost effective DSM was

22 consumer information and education programs. But yet,

23 you know, people dwelled on trying to buy their

24 business under the guise of DSM through efficiency

25 rebates.

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1 So, you know, what I'm envisioning here is

2 really, you know, trying to make anybody capable of

3 doing -- you know, of dealing with --

4 MR. BROOKMAN: Making these product

5 decisions.

6 MR. KREBS: I mean, really open the glass

7 box is what I'm saying. Let's get serious about it.

8 MR. BROOKMAN: Okay.

9 MR. KREBS: Okay? So, I mean, with

10 computers these days, and the internet, there is a lot

11 more possible than we're even talking about. If we're

12 serious about this, let's start talking about it.

13 MR. BROOKMAN: Okay.

14 MR. KREBS: If we're serious about the

15 consumer and doing what's right for the consumer,

16 let's start doing something about this.

17 MR. BROOKMAN: Okay.

18 MR. KREBS: Thank you.

19 MR. BROOKMAN: Final comments on any of

20 these four questions? I think we have basically --

21 surprisingly, we have really gained ground in the last

22 half an hour and really got through what I thought

23 would take significantly longer.

24 Steve Nadel made the comment that he'd

25 like to see some action items and next steps. And I

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1 think that would be a worthwhile thing to do.

2 MR. LOGEE: Understand that this is a very

3 quickly drawn up list, and I'm going to try to hit

4 some of the high --

5 MR. McCABE: Terry, if I could interject

6 first. What I believe you are going to be presenting

7 is those items of -- action items that have been

8 discussed. The Department is receiving comment on the

9 material that is posted on the web until August 3rd.

10 We are going to be having to make presentations --

11 summarize it and make recommendations to management as

12 to what is and isn't necessary.

13 And given information that will be

14 submitted, that may affect the decision. So you're

15 summarizing what has been discussed here today.

16 MR. LOGEE: That's right. And so the

17 first thing is an error that was noted in the hot

18 water usage equations, and we're going to correct

19 those coefficients.

20 Then we moved to the changes to the

21 analysis. We had said we were going to add HFC 245 fa

22 to the national energy savings. We have already done

23 that for the life-cycle cost, in record time I might

24 add.

25 We will consider the space problem with

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1 the gas equipment and small closets.

2 And the other analysis item is on the heat

3 traps. We have data from GAMA and Bradford White, and

4 our intention at this point is to average that and

5 plug those coefficients into the water -- into the

6 energy equation.

7 Then we have one data item, and that is

8 from GAMA, on the market share of lowboys. And we

9 expect to see that at least in the comment.

10 And then we have several documentation

11 items. Let's see, if I can read my writing here. We

12 need to provide some documentation on the RECS

13 database, on how we've applied that and the

14 assumptions we've made, especially with regard to

15 those parts of the characteristics that weren't there,

16 as Darrell carefully pointed out to us.

17 Hot water usage will be developing the

18 explanation of that and the standard deviation for

19 that.

20 Marginal energy price and a range -- and

21 we'll be comparing -- making a comparison to the AEO

22 averages on that.

23 For the life-cycle cost, we will need to

24 do more to describe the assumptions that we made, and

25 we'll also split the LPG and natural gas out. And

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1 we'll explain or try to explain the fuel switching

2 equation or equations.

3 MR. BROOKMAN: Mark?

4 MR. KREBS: I can go for it. Okay? I

5 suggest that, you know, kind of a change in roles here

6 is -- is that we have -- our duty is to tell DOE when

7 they've achieved the objectives of Subpart C of

8 Appendix A, Section 1G, of NAECA, otherwise known as

9 10 CFR 430, which reads, "The Department seeks to use

10 qualitative and quantitative analytical methods that

11 are fully documented for the public and that product

12 results that can be explained and reproduced so that

13 the analytical underpinnings for policy decisions on

14 standards are as sound and well accepted as possible."

15 Under the guidelines in this appendix, DOE

16 will solicit input from interested parties in

17 identifying analysis data and modeling needs with

18 respect to measurement of impacts on manufacturers and

19 consumers. Okay?

20 I mean, this kind of -- this is what we've

21 been talking about all day. When it all comes down to

22 it, this is the robust and transparent requirements of

23 NAECA. And it set some pretty lofty goals that, you

24 know, I think we're moving towards, but I think we

25 really underestimated the difficulty of getting there.

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1 And I don't think we're really looking at

2 all of the alternatives. I mentioned a moment ago

3 about, you know, what is possible these days to

4 empower consumers with good information, with

5 computers and the internet.

6 And I think it really offers an

7 alternative to the path we're on, and I'd like that to

8 be, you know, an action item if possible, or at least

9 something that we can get into seriously at some point

10 in time, maybe in the advisory meeting, or whatever.

11 And then next time the framework is there.

12 We don't have to reinvent the wheel, and, you know,

13 we've got a fundamental engine for doing this stuff.

14 And that's efficient government.

15 MR. BROOKMAN: Other comments? Steve Nadel?

16 MR. NADEL: Okay. In my notes, I have

17 three other items that you didn't list, and I think at

18 least one of them you promised to do and the other two

19 I thought you were going to do.

20 The one that I have you promising to do is

21 provide information on testing of models in order to

22 help provide further information on the appropriate --

23 the accuracy of the tank and Watson model, and also

24 why the analysis results don't agree with catalog

25 ratings. You were pulling together some documentation

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1 on that.

2 Second, I believe you were going to check

3 on the trial standard levels and whether you truly

4 captured the minimum life-cycle cost point. And at

5 least from my view, it appears that you didn't.

6 And then, third, I think there is some

7 additional work looking at the cost database in light

8 of some of the figures that Tom presented, like why

9 some of the data from California, even some of the

10 data that LBL has collected, which implies low

11 markups, a lot of this will imply that some of the

12 cost estimates are going to be high. And we need to

13 look at what to do with that. Maybe we're talking a

14 sensitivity analysis with lower prices or something.

15 MR. BROOKMAN: Thank you.

16 Any other items or action items that we

17 would note that we didn't capture already? Yes?

18 MR. WILLIAMS: This isn't really an action

19 item. Ted Williams, American Gas Association. Just

20 to make you aware, we have a list of about 15 problems

21 we have identified in the spreadsheet analysis ranging

22 anywhere from errors such as incorrect cell references

23 to inconsistencies which may be explainable by

24 background documentation to the types of things Terry

25 talked about, maybe residuals from previous model

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1 runs. We identified another one at lunch, by the way.

2 So we're going to continue to look at

3 these spreadsheets with that mind. But what we also

4 need is we need more detail put up on the web,

5 particularly on the emissions spreadsheet. You know,

6 it's not -- it's provided strictly as a results table.

7 We don't know how you get those calculations done.

8 Also, we were made aware that the national

9 energy savings results page is, in fact, not the one

10 that is used to calculate the final numbers. And we

11 need a complete list of the spreadsheets up on the web

12 in order to really do a decent job of this.

13 MR. BROOKMAN: It's a very useful thing to

14 provide that detailed -- those specific comments.

15 It's -- you know, thank you for offering those.

16 ASSISTANT SECRETARY REICHER: Can I --

17 MR. BROOKMAN: Yes?

18 ASSISTANT SECRETARY REICHER: I am back,

19 but I have to, unfortunately, run again on our budget,

20 which is in some trouble right now. And I want to

21 first thank everybody for a very good meeting. I

22 apologize for the parts of the meeting that I wasn't

23 here.

24 The good news is that we do have the full

25 transcript, and so we're going to be able to study

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1 this very carefully.

2 And I think this action list will be an

3 important one, because, obviously, out of this meeting

4 has come a lot of issues and data gaps that I think we

5 need to take some time and resolve. But we will do

6 that expeditiously and stick to the schedule and keep

7 going, because I think we're making good progress. I

8 appreciate everybody's input. I thank you.

9 MR. BROOKMAN: Thank you.

10 I known that several people have to try

11 and hit the road and catch planes. I want to capture

12 any additional action items that we should at this

13 point, and then I'm going to turn it over to Terry

14 Logee and Michael McCabe to close us out.

15 I saw Steve first, Steve Nadel -- Steve

16 Rosenstock.

17 MR. ROSENSTOCK: Steve Rosenstock, EEI.

18 Just kind of a global one. Since NOPR is -- the

19 schedule is for December of 1999, maybe some sort of

20 overall goal for when everything gets posted to the

21 web, all of the changes that DOE is going to do, since

22 our comment period is now until -- from now until

23 August 3rd, if there is a way to set some sort of

24 deadline.

25 I'll say, you know, ideally before the

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1 NOPR is announced would be pretty good, because that

2 gives us at least a month and a half to look over the

3 materials before the NOPR workshop. So just if --

4 that's just a suggestion, if -- just as a stakeholder.

5 Thank you.

6 MR. BROOKMAN: Thank you.

7 Steve Nadel?

8 MR. NADEL: I just wanted to check, and

9 maybe Mike couldn't get to that, about what

10 information can be provided before we comment on

11 things versus what information can be provided post

12 comment.

13 MR. McCABE: I'm sorry. I'm awfully

14 tired. Could you try it again?

15 MR. NADEL: I know. It's been two long

16 days. In terms of the comments where it's prepared,

17 is that due date strictly on what is already

18 available, or is there additional information that

19 will be available on this stuff that we should be

20 including in our comments?

21 MR. McCABE: I would ask you, first, to

22 comment on what is out there, certainly by the

23 August 3rd date. As Terry had indicated, next week,

24 and hopefully it will be Tuesday morning, we will have

25 the NES spreadsheet on the web, so that you can

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1 include that in your comments.

2 I recognize that there will be limited

3 time. As Ted Williams had indicated, we've got a

4 number of questions. I suspect that there will be

5 others, and I would encourage you to provide comments

6 on other issues such as that as quickly as possible,

7 recognizing that you may not be able to make the

8 August 3rd deadline.

9 As analyses are completed, they will be

10 reviewed by staff here at DOE and presented to Dan.

11 And we will be adding material to the web site for all

12 of the rulemakings, and so we fully expect that

13 everything -- all of the analyses that will be used

14 and considered in any one of the rulemakings will be

15 on the web site before the proposed rule is published.

16 As to how soon before the proposed rule,

17 there are -- I can't answer that because there are a

18 variety of factors that would affect it. But we're

19 going to try and get it out as quickly as possible, so

20 that you have as much time as possible to review

21 material prior to any workshops, public hearings, or

22 what have you.

23 MR. BROOKMAN: Steve Nadel?

24 MR. NADEL: I've got two little things.

25 Given all of this, I'm wondering, since August 3rd is,

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1 I think, the middle of the week --

2 MR. McCABE: Tuesday.

3 MR. NADEL: -- some of the new data coming

4 in, does it make sense to just say August 6th might be

5 a deadline, give people the week, a little bit more

6 time to digest things, particularly some of the new

7 data, so they don't tend to dribble in. That would be

8 one.

9 And, two, to the extent new data is posted

10 after that date, could you be sending out e-mails as

11 new data is posted, so people know to look for that?

12 MR. McCABE: To the second little item,

13 yes, we will send out e-mails notifying people as to

14 what is happening. As to the first one, I cannot

15 extend the comment period as it was announced in the

16 Federal Register.

17 But I can say that our -- the Department's

18 policy is to consider all of the comments, to the

19 extent possible, even those that are submitted after

20 -- all of the comments that are received, including

21 those received after the close of the comment period,

22 will be considered to the extent possible.

23 And there is no question in my mind that

24 if comments were received on August 6th that they

25 would be fully considered.

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1 MR. BROOKMAN: Thank you.

2 Additional questions or comments? We're

3 down to describing the other action items and next

4 steps for this group.

5 Darrell?

6 MR. PAUL: Just a quick question. In

7 terms of our submitting comments, the Department of

8 Energy will take those into consideration. Will we be

9 getting any feedback on those comments? I mean, what

10 happens after August 3rd?

11 MR. McCABE: There are -- we have already

12 identified some areas where there is going to be some

13 dialogue. As to the specifics as to how it's going to

14 happen, what -- and whether or not there's going to be

15 dialogue on everything, and to what extent, I'm not

16 certain whether it's going to be -- to the extent

17 possible, I would say that we're going to do it -- try

18 to do it electronically, so as to keep the majority of

19 the people informed.

20 Then, when it comes to individual's

21 comments as to suggestions as to changes to make,

22 their questions and trying to understand it, we'll

23 deal with individuals directly and then post the

24 material to the web.

25 MR. BROOKMAN: That is, those individuals

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1 that put direct questions to you, you'll try to be

2 responding to them individually?

3 MR. McCABE: With recommendations as to

4 changes and try to understand that and see whether or

5 not it can be done.

6 MR. BROOKMAN: I see. But, for example,

7 this listing that Terry and Jim developed, and that

8 we've developed here together --

9 MR. McCABE: Most of that will be done.

10 It will then be posted on the web.

11 MR. BROOKMAN: Onto the web. Will it be

12 flagged somehow, or will it just be --

13 MR. McCABE: E-mail notices going out.

14 MR. BROOKMAN: E-mail notices, and they'll

15 be listing these things with references to where they

16 can be found, that sort of thing.

17 Mark Krebs?

18 MR. KREBS: Mark Krebs, Laclede Gas.

19 Today is July 23rd. August 3rd comments are due. You

20 know, it's the same unjust issue. Okay? It's not

21 enough time if you want quality responses. I think

22 you ought to issue an extension.

23 MR. BRUNDAGE: I would -- Mark will be

24 shocked at this, but I will concur with him on that

25 comment.

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1 Don Brundage, Southern Company. I would

2 point out that this set of comments, the three-week

3 period comment on the web materials, included a week

4 that of large portion people in this room were at

5 ASHRAE.

6 And the projected comment schedule of a

7 NOPR hearing on the 20th of January, and comments due

8 on the NOPR February 21st, also includes the February

9 ASHRAE meeting included within the comment period

10 also, which reduces by a week the usable time many of

11 us have to comment.

12 So I'm sure this is just coincidence, but

13 I wish DOE would be sensitive to that, because there

14 is only so many hours in the day. Thank you.

15 MR. BROOKMAN: Mark Krebs?

16 MR. KREBS: Mark Krebs, Laclede Gas. By

17 the way, they were at ASHRAE in another conspiracy.

18 MR. BROOKMAN: So I guess, then, I think

19 that we're drawing to the end of this day. And so let

20 me just close, before I turn it over to Terry Logee

21 and Michael McCabe, by thanking everybody for the

22 spirit of engagement and the cooperation that you have

23 extended here today.

24 One thing I would observe as a third

25 party, having participated in this for several years

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1 now, is the level of these meetings, the quality of

2 it, the level of exchange, the level of the listening

3 and discussion improves every single time. That's

4 much to your credit, not only to your individual

5 interests but your collective interests.

6 So thank you for that, and travel safely.

7 Terry Logee, it's yours.

8 MR. LOGEE: Thank you, Doug. And I'd like

9 to echo my thanks for your hard work. I apologize for

10 the limited time and the July 4th holiday included,

11 and apologize in advance for ASHRAE. Our rulemaking

12 schedule is such that we don't have a lot of -- you

13 know, we just -- we can't really take that much

14 account of those situations.

15 But I do appreciate your efforts, and

16 thank you for coming here. I have certainly learned

17 a lot, and have noted a number of ways that we can

18 improve our analysis. We endeavor to do that and get

19 the improved analyses out on the web and out to you

20 folks as soon as we can.

21 Michael?

22 MR. McCABE: You said it all. Thank you.

23 MR. BROOKMAN: Travel safely.

24 (Whereupon, at 4:29 p.m., the workshop

25 was adjourned.)

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CERTIFICATE

This is to certify that the foregoing transcript in the

matter of: WATER HEATER ENERGY EFFICIENCY

STANDARDS WORKSHOP

Before: DEPARTMENT OF ENERGY

Date: JULY 23, 1999

Place: WASHINGTON, D.C.

represents the full and complete proceedings of the

aforementioned matter, as reported and reduced to

typewriting.

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