1 

### UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

PUBLIC HEARING ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS (ENERGY CONSERVATION STANDARD FOR THREE TYPES OF CONSUMERS PRODUCTS) 

### (DOCKET NO. EE-RM-93-801) Friday 20 January 1995

The public hearingwas held in Room 1E245, 1000 Independence Ave., S.W., Washington, D.C. at 9:35 a.m., Barry P. Berlin, presiding.

PANEL MEMBERS PRESENT: BARRY P. BERLIN, Presiding Official MICHAEL J. McCABE, DOE EUGENE MARGOLIS, DOE HOWARD GRUENSPECHT, DOE

ALSO PRESENT: JOHN ANDERSON JAMES VAUGHN A. JOE CONNOR DALLAS BUTRAW ROBERT SANSOM CHARLES SAMUELS JOSEPH VAN DEN BERG

SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 

### UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

PUBLIC HEARING ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS (ENERGY CONSERVATION STANDARD FOR THREE TYPES OF CONSUMERS PRODUCTS) (DOCKET NO. EE-RM-93-801) Friday 20 January 1995 1

ThepublichearingwasheldinRoom 1E245, 1000 IndependenceAve., S.W., Washington, D.C. at 9:35 a.m., Barry P. Berlin, presiding.

PANEL MEMBERS PRESENT: BARRY P. BERLIN, Presiding Official MICHAEL J. McCABE, DOE EUGENE MARGOLIS, DOE HOWARD GRUENSPECHT, DOE

ALSO PRESENT:

(202)797-2525 JOHN ANDERSON JAMES VAUGHN A. JOE CONNOR DALLAS BUTRAW ROBERT SANSOM CHARLES SAMUELS JOSEPH VAN DEN BERG

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SPEAKER: PAGE NO. Opening Remarks by Presiding Official Barry P. Berlin 3 John Anderson, 10 Electricity Consumers Resource Council James Vaughn, 21 Vaughn Manufacturing Company A. Joe Connor, 37 The Southern Company Dallas Burtraw, 44 Resources for the Future Robert Sansom, 65 National Coal Association Charles A. Samuels, 76 Association of Home Appliance Manufacturers A. Joseph Van den Berg, 84 Edison Electric Institute

SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO;TRANSCRIPTIONS 2 A-G-E-N-D-A

SPEAKER: PAGE NO. Opening Remarks by Presiding Official Barry P. Berlin 3 John Anderson, 10 Electricity Consumers Resource Council James Vaughn, 21 Vaughn Manufacturing Company A. Joe Connor, 37 The Southern Company Dallas Burtraw, 44 Resources for the Future Robert Sansom, 65 National Coal Association Charles A. Samuels, 76 Association of Home Appliance Manufacturers A. Joseph Van den Berg, 84 Edison Electric Institute

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PRESIDING OFFICIAL BERLIN: 3

9:32 a.m. I've been 4 asked re-read the opening remarks from yesterday for 5 those who weren't here, so bear with me. 6 Good morning, welcome. I want to thank 7 you all for coming and participating in the 8 Department's Energy Conservation Program for Consumer 9 Products. I'm Barry Berlin and I'll be the presiding 10 official for this hearing. 11 The purpose of this hearing is to receive 12 oral testimony from the public on the Department's 13 supplemental advance notice of proposed rulemaking 14 regarding evaluation and consideration of the 15 environmental and energy security externalities 16 associated with different energy efficient appliance 17 standards as pUblished in the Federal Register on 18 October 7th 1994. That's quite a sentence. 19 The issue of attaching positive monetary 20 values to the environmental and energy security 21 benefits associated with amended appliance efficient 22 standards has been raised in several comments in our 23 Federal Register notices over the past few years. By 24 this supplemental advance notice in hearing, the 25 Department is beginning an investigation into whether SAG,CORP 4218 LENORE LANE. N.W. WASHINGTON. D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 3 1 P-R-O-C-E-E-D-I-N-G-S 2 9:32 a.m. 3 PRESIDING OFFICIAL BERLIN: I've been 4 asked re-read the opening remarks from yesterday for 5 those who weren't here, so bear with me. 6 Good morning, welcome. I want to thank 7 you all for coming and participating in the 8 Department'sEnergyConservationProgramfor Consumer 9 Products. I'mBarryBerlin and I'llbe the presiding 10 official for this hearing. 11 Thepurposeof this hearing is to receive 12 oral testimony from the public on the Department's 13 supplemental advance notice of proposed rulemaking 14 regarding evaluation and consideration of the 15 environmental and energy security externalities 16 associated with different energy efficient appliance 17 standards as published in the Federal Register on 18 October 7th 1994. That's quite a sentence. 19 The issue of attaching positive monetary 20 values to the environmental and energy security 21 benefits associated with amended appliance efficient 22 standards has been raised in several comments in our 23 Federal Register notices overthepast few years. By 24 this supplemental advance notice in hearing, the 25 Department isbeginningan investigationintowhether SAG,CORP 4218 LENORELANE, N.w. WASHINGTON,D

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.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS4 1 there is a sound analytical basis for attaching 2 monetary values to the Department's estimates of the 3 effects of appliance standards on the physical 4 quantities of certain emissions or on oil imports. 5 The supplemental advance notice discussed 6 a number of issues that need to be addressed and 7 developing estimates of monetary values of such 8 external affects. The Department will monetize the 9 values of such external impacts ofappliance standards 10 only if it can develope a sound analytic basis. 11 That's been in our notices in the past that we insist 12 on having a sound and legally defensible analytic 13 basis before developing a number before we even get 14 into this. If we're not able to develope a sound 15 analytic basis for driving monetary values for 16 externalities, we're goingto continueto estimatethe 17 physical impacts on the environment and energy 18 security and take these impacts into accounts in 19 determining what efficiency standard levels are 20 economically justified. 21 Comments received here today and those 22 submitted during the written comment period will 23 assist the Department in determining the feasibility 24 of pursuing this issue. The written comment period 25 for the supplemental advance notice ends February 6th SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 4 1 there is a sound analytical basis for attaching 2 monetary values to the Department's estimates of the 3 effects of appliance standards on the physical 4 quantities of certain emissions or on oil imports. 5 The supplemental advancenoticediscussed 6 a number of issues that need to be addressed and 7 developing estimates of monetary values of such 8 external affects. The Department will monetize the 9 valuesofsuchexternalimpactsofappliance standards 10 only if it can develope a sound analytic basis. 11 That's been in our notices in the past that we insist 12 on having a sound and legally defensible analytic 13 basis before developing a number before we even get 14 into this. If we're not able to develope a sound 15 analytic basis for driving monetary values for 16 externalities, we'regoingtocontinuetoestimatethe 17 physical impacts on the environment and energy 18 security and take these impacts into accounts in 19 determining what efficiency standard levels are 20 economically justified. 21 Comments received here today and those 22 submitted during the written comment period will 23 assist the Department in determining the feasibility 24 of pursuing this issue. The written comment period 25 for the supplemental advance notice ends February 6th

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.20008 VIDEO;TRANSCRIPTIONS1 1995. 5 All comments submitted on the supplemental 2 advance notice will be considered before DOE 3 establishes the proposed rule on revised energy 4 efficiency standards for central air conditioners and 5 furnaces. We mayor may not announce our final 6 decision on what we plan to do in that notice, but we 7 hope to. Comments received after the comments period 8 is closed will be considered to the fullest extent 9 possible. 10 As thepresidingofficial forthis hearing 11 I'll set forth guidelines for conducting the hearing 12 and provide other pertinent information. A complete 13 transcript of this hearing will be available for 14 inspection and copylng at the Department of Energy's 15 Freedom of Information Reading Room. Anyone wishing 16 to purchase a copy of the transcript may make 17 arrangements with the court reporter. For those of 18 you who have been in the building before, you might 19 remember the FOI reading room is just down the hall 20 from here. And for those who haven't been, be 21 informed. 22 This will not be an evidentiary or 23 judicial type of hearing. It will be conducted in 24 accordance with Section 553, Title 5, united States 25 Code, in Section 336 of the Energy Policy and SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 5 1 1995. All comments submitted on the supplemental 2 advance notice will be considered before DOE 3 establishes the proposed rule on revised energy 4 efficiency standards for central air conditioners and 5 furnaces. We mayor may not announce our final 6 decision onwhat we planto do inthat notice, but we 7 hope to. Comments received afterthe comments period 8 is closed will be considered to the fullest extent 9 possible. 10 As thepresidingofficialforthishearing 11 I'll set forth guidelines for conducting the hearing 12 and provide other pertinent information. A complete 13 transcript of this hearing will be available for 14 inspection and copylng at the Department of Energy's 15 Freedom of Information Reading Room. Anyone wishing 16 to purchase a copy of the transcript may make 17 arrangements with the court reporter. For those of 18 you who have been in the building before, you might 19 remember the FOI reading room is just down the hall 20 from here. And for those who haven't been, be 21 informed. 22 This will not be an evidentiary or 23 judicial type of hearing. It will be conducted in 24 accordance with Section 553, Title 5, united States 25 Code, in section 336 of the Energy Policy and

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.20008 VIDEO;TRANSCRIPTIONS6 1 Conservation Act as amended. 2 To provide the Department with as much 3 pertinent information and as many views as can be 4 reasonably obtained and to enable interested persons 5 to express their views, the hearing will be conducted 6 in accordance with the following procedures: 7 Speakers will be called to testify based 8 on a schedule of those people who responded to the 9 notice of this hearing. The speakers have been 10 allotted 20 minutes for their oral statements. 11 Speakers are requested to summarize the written 12 statements to the maximum extent possible. The 13 speakers who aremaking essentiallythe samepoints as 14 previously speakers, we encourage you to save time by 15 merelyreferencingtheprevious speaker's testimonyin 16 your testimony. References about similar points or 17 arguments will save us time here and will be treated 18 as fully as if the points had been developed anew. 19 This procedure was followed in an eight 20 product notice ofproposed rulemaking t hatwe had out 21 lastMarch and it worked very well. Some speakers got 22 up and merely referenced what other speakers had said 23 andwe have treated those comments just as ifthey had 24 developed them. 25 

### If time allows, anyone may make

(202) 797·2525 SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 6 1 Conservation Act as amended. 2 To provide the Department with as much 3 pertinent information and as many views as can be 4 reasonably obtained and to enable interested persons 5 to express their views, the hearingwill be conducted 6 in accordance with the following procedures: 7 Speakers will be called to testify based 8 on a schedule of those people who responded to the 9 notice of this hearing

. The speakers have been 10 allotted 20 minutes for their oral statements. 11 Speakers are requested to summarize the written 12 statements to the maximum extent possible. The 13 speakerswho aremakingessentiallythe samepoints as 14 previously speakers, we encourageyou to save time by 15 merelyreferencingtheprevious speaker'stestimonyin 16 your testimony. References about similar points or 17 arguments will save us time here and will be treated 18 as fully as if the points had been developed anew. 19 This procedure was followed in an eight 20 productnoticeofproposedrulemakingt hatwe hadout 21 lastMarch anditworkedverywell. Some speakers got 22 up andmerelyreferencedwhat other speakers had said 23 andwe havetreatedthose comments justas iftheyhad 24 developed them. 25 

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(202)797-2525 VIDEO;TRANSCRIPTIONS7 1 unscheduled oral statements after scheduled speakers 2 have delivered their statements. Persons interested 3 inmaking a statementwho have not submitted a request 4 in advance should submit their request to the 5 registration desk. 6 At the conclusion of all presentations, 7 scheduled and unscheduled, each speaker will be given 8 the opportunity to make a rebuttal statement, subject 9 to time limitations, and will be called in the order 10 in which the initial statements were made. 11 Questions will be asked onlybymembers of 12 the panel conducting the hearing. However, I will 13 afford any interested person an opportunity to 14 question speakers who have made oral presentations. 15 This opportunity will be afforded after any rebuttal 16 statements to the extent that the presiding official 17 determines that such questions likely to result in a 18 more timely and more effective resolution of the 19 issues. 20 Persons interested in making use of this 21 opportunity must submit their request shortly after 22 the completion of any rebuttal statements at the 23 registration desk. The question submitted should be 24 identified as to who is the author ofthe question and 25 to whom the question is being directed. SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 I will

(202) 797·2525 VIDEO; TRANSCRIPTIONS 7 1 unscheduled oral statements after scheduled speakers 2 have delivered their statements. Persons interested 3 inmakinga statementwho havenot submitteda request 4 in advance should submit their request to the 5 registration desk. 6 At the conclusion of all presentations, 7 scheduled andunscheduled, each speakerwill be given 8 theopportunitytomake a rebuttal statement, subject 9 to time limitations, and will be called in the order 10 in which the initial statements were made. 11 Questionswillbeaskedonlybymembersof 12 the panel conducting the hearing. However, I will 13 afford any interested person an opportunity to 14 question speakers who have made oral presentations. 15 This opportunity will be afforded after any rebuttal 16 statements to the extent that the presiding official 17 determines that such questions likely to result in a 18 more timely and more effective resolution of the 19 issues. 20 Persons interested in making use of this 21 opportunity must submit their request shortly after 22 the completion of any rebuttal statements at the 23 registration desk. The question submitted should be 24 identifiedas towho isthe authorofthequestionand 25 to whom the question is being directed.

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VIDEO;TRANSCRIPTIONS1 determine whether the question is relevant. 8 If the 2 question is allowed, I will be the one to ask it. 3 Furthermore, I'll afford any interested 4 person an opportunity to question employers of the 5 United States who have made written or oral 6 presentations with respect to disputed issues of 7 material fact. This opportunity will be afforded 8 after any rebuttal statements to the extent that I 9 determine the touch question is likely to result in a 10 more timely and effective resolution of such issues. 11 Persons interested in making use of this 12 opportunity must submit their request shortly after 13 the completion of any rebuttal statements to the 14 registration desk, and should state specific 15 justification including why the issue is one of 16 disputed fact and how the proposed question would 17 expedite its resolution. 18 The question should then be identified as 19 to who the author of the question is and to whom the 20 question is being directed. I'll determined whether 21 the question is relevant. If it's allowed, I'll ask 22 it. 23 As mentioned earlier, the close of the 24 comment period is February 6th 1995. All comments 25 received will be available for public inspection at SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 8 1 determine whether the question is relevant. If the 2 question is allowed, I will be the one to ask it. 3 Furthermore, I'll afford any interested 4 person an opportunity to question employers of the 5 united States who have made written or oral 6 presentations with respect to disputed issues of 7 material fact. This opportunity will be afforded 8 after any rebuttal statements to the extent that I 9 determine the touch question is likely to result in a 10 more timely and effective resolution of such issues. 11 Persons interested in making use of this 12 opportunity must submit their request shortly after 13 the completion of any rebuttal statements to the 14 registration desk, and should state specific 15 justification including why the issue is one of 16 disputed fact and how the proposed question would 17 expedite its resolution. 18 The question shouldthenbe identified as 19 to who the author of the question is and to whom the 20 question is being directed. I'll determined whether 21 the question is relevant. If it's allowed, I'll ask 22 it. 23 As mentioned earlier, the close of the 24 comment period is February 6th 1995. All comments 25 received will be available for public inspection at

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.20008 VIDEO;TRANSCRIPTIONS1 the DOE Freedom of Information Reading Room. 9 Such 2 comments should be addressed to the Department of 3 Energy as noted in the advance notice. Ten copies of 4 the comments are requested. In addition, we'd 5 appreciate an electronic copy of any comments that you 6 might submit, and we're currently, I believe, still 7 using Word Perfect 5.1. 8 Anyperson submittinginformationwhichhe 9 or she believes to be confidential exempt by law from 10 public disclosure should submit to the address in the 11 proposed rule one complete copy and six copies from 12 which information claimed to be confidential has been 13 deleted, and in accordance with procedures, establish 14 a 10 CFR 1004.11. The Department will make its own 15 determination as to whether or not the information 16 shall be exempt from public disclosure. In the past 17 we have received comments with confidential data and 18 we have treated it as such. 19 We appreciate the time and effortyou have 20 taken in preparing your statements. We are pleased to 21 receive your comments and opinions. 22 I would now like to introduce members of 23 the panel. I'm Barry Berlin, as I mentioned. I'm 24 from the Office of Codes and STandards, and I manage 25 the analysis thatdetermine the economic justification SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 9 1 the DOE Freedom of Information Reading Room. Such 2 comments should be addressed to the Department of 3 Energy as noted in the advance notice. Ten copies of 4 the comments are requested. In addition, we'd 5 appreciatean electroniccopyof any comments thatyou 6 might submit, and we're currently, I believe, still 7 using Word Perfect 5.1. 8 Anypersonsubmittinginformationwhichhe 9 or she believes to be confidential exempt by law from 10 public disclosure should submit to the address in the 11 proposed rule one complete copy and six copies from 12 which information claimedto be confidential has been 13 deleted, and in accordancewithprocedures, establish 14 a 10 CFR 1004.11. The Department will make its own 15 determination as to whether or not the information 16 shall be exempt from public disclosure. In the past 17 we have received comments with confidential data and 18 we have treated it as such. 19 We appreciatethetime andeffortyouhave 20 taken inpreparingyour statements. We arepleasedto 21 receive your comments and opinions. 22 I would now like to introduce members of 23 the panel. I'm Barry Berlin, as I mentioned. I'm 24 from the Office of Codes and STandards, and I manage 25 theanalysisthatdeterminetheeconomicjustification SAG, CORP 4218 LENORE LANE,NW. WASHINGTON,D

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.20008 (202)797·2525 VIDEO;TRANSCRIPTIONS10 1 for appliance efficiency standards as well as being 2**respons~ble** for the environmental assessments. 3 Michael McCabe is Director of the 4 Department's Office of Codes and Standards. 5 Not present right now from the Office of

6 Policy Planning and Program Evaluation, Howard 7 Gruenspecht is Director of the Office of Economic 8 Analysis and Competition. 9 And Mark Fredericks is from the Office of 10 Energy Demand Policy. 11 Eugene Margolis is the program attorney 12 from the Office of General Counsel. 13 At this time I'll call the first speaker. 14 For the record please state your name and who you 15 represent. I guess John Anderson is first. 16 MR. ANDERSON: Thankyou verymuch for the 17 opportunity to appear before you today. My name is 18 John Anderson and I am Executive Director of the 19 Electricity Consumers Resource Council, or ELCON. 20 ELCON is a non-profit association of large industrial 21 consumers of electricity. Although we have only 24 22 members, those 24 members represent nearly five 23 percent of all the electricity that is consumed in the 24 united States today. So we have a very significant 25 interest in issues such as this. SAG,CORP 4218 LENORE LANE. N.W. WASHINGTON. D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 10 1 for appliance efficiency standards as well as being 2 responsible for the environmental assessments. 3 Michael McCabe is Director of the 4 Department's Office of Codes and Standards. 5 Not present right now from the Office of

6 Policy Planning and Program Evaluation, Howard 7 Gruenspecht is Director of the Office of Economic 8 Analysis and Competition. 9 And MarkFredericks is fromthe Officeof 10 Energy Demand Policy. 11 Eugene Margolis is the program attorney 12 from the Office of General Counsel. 13 At this time I'll call the first speaker. 14 For the record please state your name and who you 15 represent. I guess John Anderson is first. 16 MR. ANDERSON: Thankyouverymuch forthe 17 opportunity to appear before you today. My name is 18 John Anderson and I am Executive Director of the 19 Electricity Consumers Resource Council, or ELCON. 20 ELCON is a non-profit associationof large industrial 21 consumers of electricity. Although we have only 24 22 members, those 24 members represent nearly five 23 percentof alltheelectricitythatis consumedinthe 24 united States today. So we have a very significant 25 interest in issues such as this. SAG,CORP 4218 LENORELANE

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.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS1 11 ELCON members are strong supporters of 2 energy efficiency. Now, they have invested billions 3 of dollars of their own money in equipment in 4 equipment and facilities that have resulted in 5 substantial energy efficiency improvements in their 6 manufacturing and their industrial processes. ELCON 7 member companies make these investments nd 8 expenditures because the marketplace requires them to 9 do so. Fierce global competition is an extremely 10 powerful and effective motivator to maximize the 11 efficient use of all resources, not just energy. Many 12 ELCON members also produce and market products that 13 enable other customers to use energymore efficiently. 14 Saving energy is good business. 15 Large industrial electricity consumers 16 believe that competition in free markets inherently 17 assures the most efficient use of all resources, 18 including energy. Markets, not the complex rules 19 oftenpromulgatedby government agencies, are the best 20 allocators ofresources. Industrial consumers believe 21 thatmaximizing competition in retail andwhole energy 22 markets will help all consumers efficiency use 23 resources consistentwithenvironmentalprotectionand 24 other important social objections. 25

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VIDEO; TRANSCRIPTIONS 11 1 ELeON members are strong supporters of 2 energy efficiency. NOw, they have invested billions 3 of dollars of their own money in equipment in 4 equipment and facilities that have resulted in 5 substantial energy efficiency improvements in their 6 manufacturing and their industrial processes. ELeON

7 member companies make these investments nd 8 expendituresbecausethemarketplace requires themto 9 do so. Fierce global competition is an extremely 10 powerful and effective motivator to maximize the 11 efficientuse of allresources, notjustenergy. Many 12 ELeON members also produce and market products that 13 enableothercustomerstouseenergymoreefficiently. 14 Saving energy is good business. 15 Large industrial electricity consumers 16 believe that competition in free markets inherently 17 assures the most efficient use of all resources, 18 including energy. Markets, not the complex rules 19 oftenpromulgatedbygovernmentagencies, arethebest 20 allocatorsofresources. Industrialconsumersbelieve 21 thatmaximizingcompetitioninretailandwholeenergy 22 markets will help all consumers efficiency use 23 resourcesconsistentwithenvironmentalprotectionand 24 other important social objections. 25 However,

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VIDEO;TRANSCRIPTIONS12 1 attempts to achieve the goals of energy efficiency and 2 environmentalprotectionbythe arbitrarymanipulation 3 of resource cost assumptions. This is precisely what 4 the methodology int he proposed rule will do. At 5 best, such attempts will achieve legitimate public 6 policy goals only by chance. At worst, it will result 7 in abusive government apparatus that can only lead to 8 higher social costs, including increased air 9 emissions. We believe the proposed rule is bad 10 policy, and if promulgated in final rules, would 11 create a disastrous precedent. 12 The Department should continue its review 13 of appliance efficiency standards to the extent that 14 they are cost effective to all consumers, they promote 15 competition in end-use markets and do not distort 16 these markets, and they rely on traditional economic 17 analysis for the evaluation of future levels of 18 efficiency standards. 19 The Department's proposal to develope 20 revisedefficiency standards basedonthemonetization 21 of selected environmental external costs would not 22 meet these criteria however. ELeON has long 23 questioned the efficacy of attempts to fix prices 24 based on administratively-determined adders that 25 purport to internalize externalities. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON. D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 12 1 attempts to achievethe goals of energyefficiencyand 2 environmentalprotectionbythearbitrarymanipulation 3 of resource cost assumptions. This is preciselywhat 4 the methodology int he proposed rule will do. At 5 best, such attempts will achieve legitimate public 6 policygoals onlyby chance. Atworst, itwill result 7 in abusive government apparatus that can only lead to 8 higher social costs, including increased air 9 emissions. We believe the proposed rule is bad 10 policy, and if promulgated in final rules, would 11 create a disastrous precedent. 12 The Department should continue its review 13 of appliance efficiency standards to the extent that 14 theyare costeffectiveto all consumers, theypromote 15 competition in end-use markets and do not distort 16 these markets, and they rely on traditional economic 17 analysis for the evaluation of future levels of 18 efficiency standards. 19 The Department's proposal to develope 20 revisedefficiencystandardsbasedonthemonetization 21 of selected environmental external costs would not 22 meet these criteria however. ELeON has long 23 questioned the efficacy of attempts to fix prices 24 based on administratively-determined adders that 25 purport to internalize externalities.

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.20008 VIDEO;TRANSCRIPTIONS1 13 We have published a profile on this issue 2 which was attached to our original filing last 3 February, and I urge you to review it, and I urge that 4 it be included in the record again. 5 I strongly urge the Department to reject 6 any attemptto monetize external costs associatedwith 7 atmospheric or other emissions or alleged social 8 harms. 9 There are literally unlimited numbers of 10 externalities, both positive and negative, upstream 11 and downstream. Most can neither be reasonably 12 qualified nor quantified. It is humanly impossible to 13 ascertainwhether net external costs are a positive or 14 a negative, and therefore the common presumption in 15 public policies that net external costs are zero is a 16 very reasonable assumption. 17 Implicit in the definition of 18 externalities is the need to strike a balance between 19 the costs or the benefits of the externality and the 20 costs or the benefits of the cure. The Department 21 does not propose to do this in its proposed rule. 22 Also implicit in the definition of externalities is a 23 lot of theoretical fine print that rulemakers do not 24 have the luxury to ignore. 25 For example, first, the valuation and use SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 13 1 We have published a profile on this issue 2 which was attached to our original filing last 3 February, and I urge youto reviewit, and I urge that 4 it be included in the record again. 5 I strongly urge the Department to reject 6 anyattempttomonetizeexternalcosts associatedwith 7 atmospheric or other emissions or alleged social 8 harms. 9 There are literally unlimited numbers of 10 externalities, both positive and negative, upstream 11 and downstream. Most can neither be reasonably 12 qualifiednorquantified. Itis humanlyimpossibleto 13 ascertainwhethernetexternal costs area positiveor 14 a negative, and therefore the common presumption in 15 publicpolicies that net external costs are zero is a 16 very reasonable assumption. 17 Implicit in the definition of 18 externalities is the need to strike a balance between 19 the costs or the benefits of the externality and the 20 costs or the benefits of the cure. The Department 21 does not propose to do this in its proposed rule. 22 Also implicit in the definition of externalities is a 23 lot of theoretical fine print that rulemakers do not 24 have the luxury to ignore. 25 For example, first, the valuation anduse

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.20008 VIDEO;TRANSCRIPTIONS14 1 of externalities cannot be applied in a piecemeal 2 fashion to a class of appliances, as proposed, or for 3 that matter even more broadly to any subset of the 4 economy. 5 Second, attempts to accurately quantify

6 externalities have failed miserably. The range of 7 estimates are so broad as to nullify any legitimate 8 use to policy-makers. Even the advance notice of 9 proposed rulemaking recognizes this by talking about 10 orders ofmagnitudedifferences. By carefullypicking 11 and choosing values within these broad ranges, any 12 outcome can be achieved. It is the goal seeker's 13 miracle machine. Analysts can't possibly account for 14 all relevant external costs andbenefits. The results 15 will always be dictated by some overriding political 16 agenda, which is usually to discourage the use of the 17 nation's most abundant resource, fossil fuels. 18 Third, to the extent that emissions 19 already are internalizedby laws and state regulatory 20 practices, any further consideration in the standard21 setting process will lead to double counting and 22 overlyrestrictive standards. Implicit in any attempt 23 to directly internalize externalities is the need for 24 some government agencyto set all applicable prices by 25 administrative fiat. This must follow a process In

(202) 797-2525 SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 14 1 of externalities cannot be applied in a piecemeal 2 fashion to a class of appliances, as proposed, or for 3 that matter even more broadly to any subset of the 4 economy. 5 Second, attempts to accurately quantify 6 externalities have failed miserably. The range of 7 estimates are so broad as to nullify any legitimate 8 use to policy-makers. Even the advance notice of 9 proposed rulemaking recognizes this by talking about 10 ordersofmagnitudedifferences. By carefullypicking 11 and choosing values within these broad ranges, any 12 outcome can be achieved. It is the goal seeker's 13 miraclemachine. Analysts can'tpossiblyaccount for 14 allrelevantexternalcosts andbenefits. The results 15 will always be dictated by some overridingpolitical 16 agenda, which is usually to discourage the use of the 17 nation's most abundant resource, fossil fuels. 18 Third, to the extent that emissions 19 already are internalizedby laws and stateregulatory 20 practices, any further considerationinthe standard21 setting process will lead to double counting and 22 overlyrestrictivestandards. Implicitinanyattempt 23 to directly internalizeexternalities is the need for 24 somegovernment agencyto setallapplicablepricesby 25 administrative fiat.

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.20008 VIDEO;TRANSCRIPTIONS15 1 which all marketprices are periodically reassessedto 2 determine the extent to which each externality already 3 has been over-internalized, under-internalized, 4 precisely internalized, internalized just a little 5 bit, internalized but for the wrong reasons, or never 6 internalized. This is government price controls in a 7 truly grand manner. It is the government planners 8 ultimate dream, total control of every and all 9 transactions in the economy. 10 Therefore, any attempt to recognize or 11 internalize external costs is the responsibility of 12 legislative, not regulatory bodies or executive 13 agencies. ShouldDOE continue to pursue this proposed 14 rule, we believe the Department will ultimately meet 15 the same kind of judicial reprimand that beset the 16 Massachusetts Department of Public Utilities very 17 recently. The Massachusetts Supreme Court recognized 18 that there was no one set of values and unequivocally 19 told the Massachusetts DPU that "The department is not 20 authorized to take environmental considerations into 21 account to the degree that it has." 22 There is a lack of accepted and 23 analytically and scientifically sound method for 24 monetizing external costs and benefits. Considerable 25 research has failed to yield an acceptable approach SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 15 1 which allmarketprices areperiodicallyreassessedto 2 determinetheextenttowhicheachexternalityalready 3 has been over-internalized, under-internalized, 4 precisely internalized, internalized just a little 5 bit, internalizedbut for the wrong reasons, or never 6 internalized. This is government price controls in a 7 truly grand manner. It is the government planners 8 ultimate dream, total control of every and all 9 transactions in the economy. 10 Therefore, any attempt to recognize or 11 internalize external costs is the responsibility of 12 legislative, not regulatory bodies or executive 13 agencies. ShouldDOE continuetopursuethis proposed 14 rule, we believe the Department will ultimately meet 15 the same kind of judicial reprimand that beset the 16 Massachusetts Department of Public utilities very 17 recently. TheMassachusetts Supreme Court recognized 18 that there was no one set of values and unequivocally 19 toldtheMassachusetts DPU that "Thedepartment is not 20 authorized to take environmental considerations into 21 account to the degree that it has." 22 There is a lack of accepted and 23 analytically and scientifically sound method for 24 monetizingexternal costs andbenefits. Considerable 25 research has failed to yield an acceptable approach

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.20008 VIDEO;TRANSCRIPTIONS1 even where unlimited funds are available. 16 The 2 National Acid Precipitation Assessment Program, or 3 NAPAP as we know it, was one such venture. Despite 4 spending over a half a billion of taxpayers' money to 5 try to get a handle on the acid rain externality, 6 NAPAP has been dismissedby everyone who does not like 7 the result. 8 Let's be realistic. The tremendous 9 difficulty associated with assigning monetary values 10 to human life or health, aesthetics, and quality of 11 life contributes to the fact that these are external 12 costs or benefits in the first place. Given the 13 experience of NAPAP, proponents of this concept would 14 seemingly have to bankrupt the federal government in 15 order to achieve their objectives. 16 Environmental impacts for many emissions 17 are local, region-specific, or multi-national and, 18 therefore, are not appropriate for setting simplistic 19 national efficiency standards. Complex computer 20 programs and black boxes don't make it any easier 21 either. 22 Accurate internalization requires 23 compensation for both beneficial as well as harmful 24 effects, up to the point where all marginal social 25 costs equal all marginal social benefits. Those who SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 16 1 even where unlimited funds are available. The 2 National Acid Precipitation Assessment Program, or 3 NAPAP as we know it, was one such venture. Despite 4 spendingover a half a billionof taxpayers' moneyto 5 try to get a handle on the acid rain externality, 6 NAPAP hasbeendismissedbyeveryonewho does not like 7 the result. 8 Let's be realistic. The tremendous 9 difficulty associated with assigning monetary values 10 to human life or health, aesthetics, and quality of 11 life contributes to the fact that these are external 12 costs or benefits in the first place. Given the 13 experience of NAPAP, proponents of this conceptwould 14 seemingly have to bankrupt the federal government in 15 order to achieve their objectives. 16 Environmental impacts for many emissions 17 are local, region-specific, or multi-national and, 18 therefore, arenot appropriate for setting simplistic 19 national efficiency standards. Complex computer 20 programs and black boxes don't make it any easier 21 either. 22 Accurate internalization requires 23 compensation for both beneficial as well as harmful 24 effects, up to the point where all marginal social 25 costs equal all marginal social benefits. Those who

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS17 1 receive benefits should pay for them. Those who are 2 victims of harmful effects should be compensated for 3 harm done, to the extent external impacts are not 4 remedied. The externality police cannot collect 5 compensation from entities outside their jurisdiction 6 which receive beneficial effects, nor can they 7 compensateentities outsidetheirjurisdictionwho are 8 victims of harmful effects. There is a better way. 9 Maximizing competition in retail and 10 wholesale energy markets will help energy producers, 11 appliance and equipment manufacturers, and all 12 consumers to efficientlyuseresources consistentwith 13 environmental protection. The manner in which 14 appliance efficiency standards are established should 15 take advantage of market discipline and avoid any 16 approachthatrelies on government intervention inthe 17 marketplace. 18 Ironically, it doesn't seem that the 19 Departmentsupports competitioninend-useelectricity 20 markets. The Department's recent criticisms of the 21 California Public utilities Commission's historical 22 proposalto restructurethe electric services industry 23 in that state is ample evidence in the mind-set of 24 many her in the Forrestal Building which remains old 25 fashioned central planning. SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 17 1 receive benefits should pay for them. Those who are 2 victims of harmful effects should be compensated for 3 harm done, to the extent external impacts are not 4 remedied. The externality police cannot collect 5 compensationfromentitiesoutsidetheirjurisdiction 6 which receive beneficial effects, nor can they 7 compensateentitiesoutsidetheirjurisdictionwho are 8 victims of harmful effects. There is a better way. 9 Maximizing competition in retail and 10 wholesale energy markets will help energy producers, 11 appliance and equipment manufacturers, and all 12 consumerstoefficientlyuseresourcesconsistentwith 13 environmental protection. The manner in which 14 applianceefficiencystandards areestablishedshould 15 take advantage of market discipline and avoid any 16 approachthatreliesongovernmentinterventioninthe 17 marketplace. 18 Ironically, it doesn't seem that the 19 Departmentsupportscompetitioninend-useelectricity 20 markets. The Department's recent criticisms of the 21 California Public utilities Commission's historical 22 proposaltorestructuretheelectricservicesindustry 23 in that state is ample evidence in the mind-set of 24 many her in the Forrestal Building which remains old 25 fashioned central planning.

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.20008 VIDEO;TRANSCRIPTIONS18 1 I submit a relevant quote from the CPUC's 2 April'94 order "Competitivemarkets, where they exist 3 and function reasonably well, offer a superior 4 regulatory tool when compared to command and control 5 regulation and government central planning designed 6 for an era that has passed and will not return." 7 In summary, attempts to monetize 8 environmental externalities will surely result in the 9 miss-allocation ofresources inboth the regulated and 10 competitive markets. Price signals will be distorted 11 in retail and wholesale energy markets, resulting in 12 inefficient investment decisions and consumption 13 behavior. This will force a shift in energy 14 consumption and associatedeconomic activities inways 15 that actually may increase adverse environmental 16 impacts and unduly discourage the development of 17 potentially important and more environmentally 18 acceptable appliances and technologies. Certainly 19 this 1S counterproductive to the goals of 20 environmental protection. 21 Finally, I find myself, certainly 22 surprising to many, agreeing with the Edison Electric 23 Institute. And I have in my prepared remarks a quote 24 from EEl which I urge you to reconsider. The intent 25 of the law is for DOE to promulgate simple and more SAG,CORP 4218 LENORE LANE, N.w. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 18 1 I submit a relevant quote from the CPUC's 2 April'94order "Competitivemarkets, wheretheyexist 3 and function reasonably well, offer a superior 4 regulatory tool when compared to command and control 5 regulation and government central planning designed 6 for an era that has passed and will not return." 7 In summary, attempts to monetize 8 environmental externalities will surelyresult inthe 9 miss-allocationofresources inboththeregulatedand 10 competitivemarkets. Price signals will be distorted 11 in retail and wholesale energy markets, resulting in 12 inefficient investment decisions and consumption 13 behavior. This will force a shift in energy 14 consumptionandassociatedeconomicactivities inways 15 that actually may increase adverse environmental 16 impacts and unduly discourage the development of 17 potentially important and more environmentally 18 acceptable appliances and technologies. Certainly 19 this is counterproductive to the goals of 20 environmental protection. 21 Finally, I find myself, certainly 22 surprisingto many, agreeingwith the Edison Electric 23 Institute. And I have in my prepared remarks a quote 24 from EEl which I urge you to reconsider. The intent 25 of the law is for DOE to promulgate simple and more

(202) 797-2525 SAG,CORP 4218LENORE LANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS19 1 straightforwad rules that are more conducive to 2 promoting and sustaining maximum efficiencies in the 3 competitive marketplace. The complex, burden-laden 4 approach suggestedbythe proposedrule risks imposing 5 greater distortions in the marketplace than that ones 6 the rules are attempting to correct. 7 Thankyou for the opportunity to be before 8 you today, and I'll look forward to your questions. 9 PRESIDING OFFICIAL BERLIN: Thank you for 10 your testimony. Do you see any role for the positive 11 environmental effects of appliance efficiency 12 standards, any role that they should play in 13 consideration of future appliance efficiency 14 standards? In the past what we've done is present the 15 physical quantities that are expected to occur and 16 that has been considered along with the other 17 legislative required criteria in setting efficiency 18 standards. Do you see that as justifiable. 19 MR. ANDERSON: When you say in the past 20 you have presented, which I think I understand, but 21 let me make sure. The quantities of externalities 22 that would be associated with the consumption of 23 energy from appliances and the savings from that? 24 PRESIDING OFFICIAL BERLIN: It would be 25 the expected quantities of reductions of reduced SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 19 1 straightforwad rules that are more conducive to 2 promoting and sustaining maximum efficiencies in the 3 competitive marketplace. The complex, burden-laden 4 approach suggestedbytheproposedrulerisks imposing 5 greater distortions in themarketplace than that ones 6 the rules are attempting to correct. 7 Thankyoufortheopportunitytobebefore 8 you today, and I'll look forward to your questions. 9 PRESIDING OFFICIALBERLIN: Thankyou for 10 your testimony. Do you see any role for the positive 11 environmental effects of appliance efficiency 12 standards, any role that they should play in 13 consideration of future appliance efficiency 14 standards? Inthepastwhatwe'vedone is presentthe 15 physical quantities that are expected to occur and 16 that has been considered along with the other 17 legislative required criteria in setting efficiency 18 standards. Do you see that as justifiable. 19 MR. ANDERSON: When you say in the past 20 you have presented, which I think I understand, but 21 let me make sure. The quantities of externalities 22 that would be associated with the consumption of 23 energy from appliances and the savings from that? 24 PRESIDING OFFICIAL BERLIN: It would be 25 the expected quantities of reductions of reduced

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.20008 VIDEO;TRANSCRIPTIONS20 1 emissions. 2 MR. ANDERSON: I think that there's 3 absolutely no value at all to attempt to do that. In 4 our research into monetization of externalities, the 5 numbers range allover the place. I mean sometimes 6 thousands of percent differences between the low and 7 the high. 8 PRESIDING OFFICIAL BERLIN: We understand 9 the monetization, but we're talking just about the 10 physical quantities that would be expected. 11 MR. ANDERSON: Well, I'm not even sure 12 that you can do that. Certainly ifthat's part of, if 13 what you're saying that you save a certain amount of 14 electricity it would reduce the amount of C02 that 15 goes into the atmosphere, if you can do that in any 16 kind of a precise way, a statistically relevant way, 17 I'd like to see it, but I don't know that you can do 18 that. What you're really talking about is with an 19 appliance and saving an amount of electricity. I mean 20 that's what it's based on. Then you have to go back 21 and say, what does that do to generation. 22 In each utility, at each time of the day, 23 would have a different mix of generators that are 24 actually operating, so you'd back down those. It's 25 going to be a very arbitrary kind of a process as to SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 20 1 emissions. 2 MR. ANDERSON: I think that there's 3 absolutely no value at all to attempt to do that. In 4 our research into monetization of externalities, the 5 numbers range allover the place. I mean sometimes 6 thousands of percent differences between the low and 7 the high. 8 PRESIDING OFFICIAL BERLIN: We understand 9 the monetization, but we're talking just about the 10 physical quantities that would be expected. 11 MR. ANDERSON: Well, I'm not even sure 12 thatyou cando that. Certainlyifthat's partof, if 13 what you're sayingthat you save a certain amount of 14 electricity it would reduce the amount of C02 that 15 goes into the atmosphere, if you can do that in any 16 kind of a precise way, a statistically relevant way, 17 I'd like to see it, but I don't know that you can do 18 that. What you're really talking about is with an 19 applianceand savinganamountof electricity. I mean 20 that's what it's based on. Then you have to go back 21 and say, what does that do to generation. 22 In eachutility, at eachtime of the day, 23 would have a different mix of generators that are 24 actually operating, so you'd back down those. It's 25 going to be a very arbitrary kind of a process as to

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.20008 VIDEO;TRANSCRIPTIONS1 what you pick that's backed down. 21 So, therefore, I 2 would think, I would asset that the numbers would have 3 no statistical relevance at all, and I would think 4 that it isn't worth the agency's time to try to even 5 do it. 6 PRESIDING OFFICIAL BERLIN: Thank you. I 7 have no further questions. 8 Mike? 9 10 11 12 13 sir. 14 MR. McCABE: No questions. PRESIDING OFFICIAL BERLIN: Thank you. Gene? MR. MARGOLIS: No questions. Thank you,

PRESIDING OFFICIAL BERLIN: Thank you. 15 MR. ANDERSON: Thank you for the 16 opportunity again. 17 PRESIDING OFFICIAL BERLIN: The next 18 speaker is James Vaughn. 19 MR. VAUGHN: Good morning, gentlemen. I 20 must apologize Doctor Margolis. I find it necessary 21 to read from my presentation. I want you to know that 22 I put two weeks in on this thing to get it down from 23 40 pages to ten, and the basic problem here is that 24 the memory is the second thing to go. 25 This proposal should be rejected. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 It's

(202) 797-2525 VIDEO;TRANSCRIPTIONS 21 1 what you pick that's backed down. So, therefore, I 2 wouldthink, I wouldassetthatthenumbers wouldhave 3 no statistical relevance at all, and I would think 4 that it isn't worth the agency's time to try to even 5 do it. 6 PRESIDING OFFICIAL BERLIN: Thank you. I 7 have no further questions. 8 Mike? 9 MR. McCABE: No questions. 10 PRESIDING OFFICIAL BERLIN: Thank you. 11 Gene? 12 MR. MARGOLIS: No questions. Thank you, 13 sir. 14 PRESIDING OFFICIAL BERLIN: Thank you. 15 MR. ANDERSON: Thank you for the 16 opportunity again. 17 PRESIDING OFFICIAL BERLIN: The next 18 speaker is James Vaughn. 19 MR. VAUGHN: Good morning, gentlemen. I 20 must apologize Doctor Margolis. I find it necessary 21 toread frommy presentation. I want you toknowthat 22 I put two weeks in on this thing to get it down from 23 40 pages to ten, and the basic problem here is that 24 the memory is the second thing to go. 25 This proposal should be rejected. It's

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.20008 VIDEO;TRANSCRIPTIONS22 1 not going to work, and it's going to do more harm than 2 good. It's not a sound strategy for Department of 3 Energy or for energy efficiency. The cost of the 4 externality adders or taxes will far outweigh the 5 benefits derived. The strategy cannotworkbecause it 6 treats a specific local problem on a national average 7 basis. 8 There is a spare copy over here. Would 9 you like it? You see the advantage of notes is that 10 I can up where I left off and not repeat it. 11 The impositionofnetaveragewill benefit 12 few and penalize many. The mandates proposed are 13 unfair, biased and impractical. This proposal is not 14 new, gentlemen. It's been rejected many times over 15 the years by Congress and by DOE itself. The reasons 16 for past rejections include the fact that the 17 credibility of the results became serious problem 18 concern and did not improve relationships with 19 Congress. And the conclusion was that reflecting 20 external benefits in life cycle cost methodology was 21 neither practical nor effective. 22 I think it's significant that no one else 23 in other endeavors has found a way to put 24 externalities into hard costs and make it credible. 25 DOE did in fact include externalities as SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 22 1 notgoingtowork, andit's goingto domoreharmthan 2 good. It's not a sound strategy for Department of 3 Energy or for energy efficiency. The cost of the 4 externality adders or taxes will far outweigh the 5 benefitsderived. The strategycannotworkbecauseit 6 treats a specific local problemon a national average 7 basis. 8 There is a spare copy over here. Would 9 you like it? You see the advantage of notes is that 10 I can up where I left off and not repeat it. 11 Theimpositionofnetaveragewillbenefit 12 few and penalize many. The mandates proposed are 13 unfair, biased and impractical. This proposal is not 14 new, gentlemen. It's been rejected many times over 15 the years by Congress and by DOE itself. The reasons 16 for past rejections include the fact that the 17 credibility of the results became serious problem 18 concern and did not improve relationships with 19 Congress. And the conclusion was that reflecting 20 external benefits in life cycle cost methodology was 21 neither practical nor effective. 22 I think it's significantthat no one else 23 in other endeavors has found a way to put 24 externalities into hard costs and make it credible. 25 DOE did in fact include externalities as

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.20008 VIDEO;TRANSCRIPTIONS1 part of the eight product rulemaking last year. 23 It 2 was used in a manner the same or similar as proposed 3 in the present documents. If that is an example of 4 the credibility, practicality or effectiveness ofthe 5 presentproposal, then I say it serves as a compelling 6 reason to reject this proposal andput it away for the 7 final time. 8 Anyneworamended standardis requiredto 9 achieve the maximum, dah, dah, dah, dah. The question 10 therefore is, does this proposal establish a need to 11 go beyond those established standards. The proposal 12 presents a new and expanded function for DOE. It's 13 clearly outside of the present function. In fact the 14 legal legality is open to challenge. 15 The text points out that the same or 16 similar tasks are now being performed by others. It 17 mentions that the Clean Air Act Amendments could 18 result in significant changes. It mentions that the 19 EPA is the one required to set standards to protect 20 public health. 21 There is no defense in the proposal that 22 claims the super imposition of DOE on the present 23 structure will result in improvement. Neither is 24 there a claim that DOE possesses any special talent 25 that would provide a unique ability to performbetter SAG, CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 23 1 part of the eight product rulemaking last year. It 2 was used in a manner the same or similar as proposed 3 in the present documents. If that is an example of 4 the credibility, practicalityoreffectiveness ofthe 5 presentproposal, then I sayit serves as a compelling 6 reasontorejectthisproposal andput itaway forthe 7 final time

. 8 Anyneworamendedstandardisrequiredto 9 achievethemaximum, dah, dah, dah, dah. Thequestion 10 therefore is, does this proposal establish a need to 11 go beyond those established standards. The proposal 12 presents a new and expanded function for DOE. It's 13 clearlyoutside of the present function. In fact the 14 legal legality is open to challenge. 15 The text points out that the same or 16 similar tasks are now being performed by others. It 17 mentions that the Clean Air Act Amendments could 18 result in significant changes. It mentions that the 19 EPA is the one required to set standards to protect 20 public health. 21 There is no defense in the proposal that 22 claims the super imposition of DOE on the present 23 structure will result in improvement. Neither is 24 there a claim that DOE possesses any special talent 25 thatwouldprovide a unique abilityto performbetter

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.20008 VIDEO;TRANSCRIPTIONS24 1 than EPAor others. HoweverI there's no question that 2 DOE's expanded function will duplicate and possibly 3 interfere with other programs. 4 The proposed program will not improve 5 appliance energyefficiency. Thepresent lawprovides 6 safeguards which include reviews and guidelines by 7 which judgments and criteria aremade. I find nothing 8 offered in the present proposal that provides clear 9 measurable guidelines for proper standards. 10 There is a need for clarify and for 11 consistently which is not included in the text. The 12 text seems to imply a license to use information that 13 fits the purpose and apply it in a manner that serves 14 a predetermined conclusion. DOE's past record doe not 15 defend their ability to make judgments on a fair and 16 unbiased bias. 17 There is clear evidence in the text that 18 the intention is to mitigate against and raise the 19 cost of electricity on a nationwide basis. There is 20 a clear commitment to use national average value in 21 spite of the fact that it has apparent shortcomings. 22 There is a strategy which attempts to alleviate local 23 emission problems with national energy cost adders. 24 There is clear evidence of bias and omissions that 25 support a conclusion of unfair and counterproductive SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 24 1 thanEPAorothers. HoweverI there's noquestionthat 2 DOE's expanded function will duplicate and possibly 3 interfere with other programs. 4 The proposed program will not improve 5 applianceenergyefficiency. Thepresentlawprovides 6 safeguards which include reviews and guidelines by 7 whichjudgments andcriteriaaremade. I findnothing 8 offered in the present proposal that provides clear 9 measurable guidelines for proper standards. 10 There is a need for clarify and for 11 consistently which is not included in the text. The 12 text seems to imply a license to use information that 13 fits the purpose and apply it in a manner that serves 14 a predeterminedconclusion. DOE'spastrecorddoenot 15 defend their ability to make judgments on a fair and 16 unbiased bias. 17 There is clear evidence in the text that 18 the intention is to mitigate against and raise the 19 cost of electricity on a nationwide basis. There is 20 a clear commitment to use national average value in 21 spite of the fact that it has apparent shortcomings. 22 There is a strategywhich attempts to alleviate local 23 emission problems with national energy cost adders. 24 There is clear evidence of bias and omissions that 25 support a conclusion of unfair and counterproductive

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.20008 VIDEO;TRANSCRIPTIONS25 1 strategy. 2 If standards become variable and are 3 adjusted to fit changing subjective judgments, chaos 4 will result and the whole process will become 5 unworkable. While the societal effects of fuel 6 production may need to be addressed, the appliance 7 efficiency standards are not the proper place to 8 accomplish that task. 9 This came up several times yesterday, and 10 I would emphasize that it's apparent that there is a 11 job there to do. What is not apparent is who or how. 12 Trying to judge the societal effects through the 13 appliance energy standards is analogous to spilling 14 oil on water. The two will never mix, but each will 15 foul the useful purpose of the other. 16 The basic strategy expressed in the 17 proposal fails because it does not address the 18 problem, it treats the symptoms. The fact is that 19 emissions are not caused on a net national basis. 20 They occur only locally at a site-specific chimney 21 that has a fixed address. Programs implemented at the 22 source have a clear, specific, quantifiable purpose. 23 The cost and the curative alternatives can be 24 evaluated on a factually valid basis. This is 25 infinitely more fair and more effective than the net SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 25 1 strategy. 2 If standards become variable and are 3 adjusted to fit changing subjective judgments, chaos 4 will result and the whole process will become 5 unworkable. While the societal effects of fuel 6 production may need to be addressed, the appliance 7 efficiency standards are not the proper place to 8 accomplish that task. 9 This cameup several times yesterday, and 10 I would emphasize that it's apparent that there is a 11 job there to do. What is not apparent is who or how. 12 Trying to judge the societal effects through the 13 appliance energy standards is analogous to spilling 14 oil on water. The two will never mix, but each will 15 foul the useful purpose of the other. 16 The basic strategy expressed in the 17 proposal fails because it does not address the 18 problem, it treats the symptoms. The fact is that 19 emissions are not caused on a net national basis. 20 They occur only locally at a site-specific chimney 21 thathas a fixedaddress. Programs implementedatthe 22 source have a clear, specific, quantifiable purpose. 23 The cost and the curative alternatives can be 24 evaluated on a factually valid basis. This is 25 infinitelymore fair and more effective than the net

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.20008 VIDEO;TRANSCRIPTIONS26 1 national average penalty proposed in the notice. To 2 treat emissions on a national average basis is to 3 treat them after they are in the wind. 4 Thetext oftheproposal makes nopretense 5 of fairness, equity or impartiality. There is no 6 sensitivity expressed about people who are penalized 7 in order to induce them to move their private values 8 closer to DOE's perception of social values. The text 9 says that ifenvironmental damage is increased in some 10 areas and reduced in others, only the net national 11 change is relevant. That seems to imply that if 12 people don't fit the DOE mold, and they are punished 13 thereby, so be it. The focus of the proposal is 14 clearly and heavily on subjective social value as 15 judged by DOE and private values are required to move 16 or change to conform. 17 This process is wrong. Where is it 18 written that the voters appointed DOE as the judge of 19 social values. That judgementbelongs to the Congress 20 and the voters. 21 Areading ofthe proposal will illustrate 22 that net national value will always be out of date 23 with the facts that are relevant. DOE concedes that 24 the Clean AirAct will change things. It will require 25 time to find a soundmethod of analysis, ifone can be SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 26 1 national average penalty proposed in the notice. To 2 treat emissions on a national average basis is to 3 treat them after they are in the wind. 4 Thetextoftheproposalmakesnopretense 5 of fairness, equity or impartiality. There is no 6 sensitivity expressed about people who are penalized 7 in order to induce them to move their private values 8 closerto DOE's perception of social values. The text 9 saysthatifenvironmentaldamageis increasedinsome 10 areas and reduced in others, only the net national 11 change is relevant. That seems to imply that if 12 people don't fit the DOE mold, and they are punished 13 thereby, so be it. The focus of the proposal is 14 clearly and heavily on subjective social value as 15 judgedby DOE andprivate values are required to move 16 or change to conform. 17 This process is wrong. Where is it 18 writtenthat the voters appointedDOE as the judge of 19 socialvalues. ThatjudgementbelongstotheCongress 20 and the voters. 21 Areadingoftheproposalwill illustrate 22 that net national value will always be out of date 23 with the facts that are relevant. DOE concedes that 24 theCleanAirActwill changethings. Itwill require 25 timeto find a soundmethodof analysis, ifone canbe

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.20008 VIDEO;TRANSCRIPTIONS1 found. 27 setting new appliance standards involves 2 substantial lags. It takes five to ten years after 3 implementation for appliance standards to have a 4 primary effect. Information needed to make judgments 5 is often out of date. The factors to be analyzed are 6 in a constant state of change and societal values are 7 subjectto changing conditions. Therefore, itbecomes 8 obvious that the process of analysis will always be in 9 process and never currently accurate. 10 The appliance efficiencyprogramrequires 11 future planning time and accurate specifications. 12 This proposal offers only subjective judgments about 13 irrelevant factors on a basis that lacks the present 14 credibility, let alone future reliability. 15 A review of the process used by DOE to 16 evaluate externalities is available. All those 17 considering the validity of this notice are urged to 18 review carefully the eight product rulemaking from 19 last year, including the technical support documents. 20 And evaluation of emissions of sulphur, 21 nitrogen and carbon is included. without going into 22 detail, the errors, emissions, and exaggerations are 23 beyond reasonable limits. Worst of all, the 24 information necessary to make a reasonable evaluation 25 of the facts and conclusions is not available. SAG,CORP 4218 LENORE LANE. NW. WASHINGTON. D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 27 1 found. Setting new appliance standards involves 2 substantial lags. It takes five to ten years after 3 implementation for appliance standards to have a 4 primary effect. Information needed tomake judgments 5 is often out of date. The factors tobe analyzed are 6 in a constant stateof change and societal values are 7 subjecttochangingconditions. Therefore, itbecomes 8 obviousthattheprocessof analysiswillalways bein 9 process and never currently accurate. 10 Theapplianceefficiencyprogramrequires 11 future planning time and accurate specifications. 12 This proposal offers only subjective judgments about 13 irrelevant factors on a basis that lacks the present 14 credibility, let alone future reliability. 15 A review of the process used by DOE to 16 evaluate externalities is available. All those 17 considering the validity of this notice are urged to 18 review carefully the eight product rulemaking from 19 lastyear, includingthetechnical supportdocuments. 20 And evaluation of emissions of sulphur, 21 nitrogen and carbon is included. without going into 22 detail, the errors, emissions, and exaggerations are 23 beyond reasonable limits. Worst of all, the 24 informationnecessarytomake a reasonable evaluation 25 of the facts and conclusions is not available.

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.20008 VIDEO;TRANSCRIPTIONS28 1 Therefore, there are no responses even from the 2 experts and professionals like Arthur D. Little. The 3 numbers in that analysis were very large. They were 4 expressed in quadrillions. 5 I had to go to a book and look up what 6 quadrillions was. 7 8 values However, when the realistic practical

are concerned and substituted for the 9 assumptions and the exaggerations, the truth, in my 10 opinion, is less than ten percent of the claim. 

### If 11 this is an illustration of how DOE would intend to 12 impose penalty taxes on a national basis, then the 13 social values of the DOE need to be re-examined 14 carefully. 15 This proposal clearly intends to penalize 16 the generation of electricity on a national basis. 17 This action is unjust, discriminatory and 18 counterproductive. The very electric utilities that 19 have helped us get to the present state will have 20 contributed their time and resources and effort, and 21 who incidently continue to do so, are now being 22 penalized. 23 DOEjustifies thatpenalty suggestingthat 24 an emission tax on electricity is a way for enforce 25 alignment of private decision making and DOE's SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 28 1 Therefore, there are no responses even from the 2 experts andprofessionals likeArthur D. Little. The 3 numbers in that analysis were very large. They were 4 expressed in quadrillions. 5 I had to go to a book and look up what 6 quadrillions was. 7 However, when the realistic practical 8 values are concerned and substituted for the 9 assumptions and the exaggerations, the truth, in my 10 opinion, is less than ten percent of the claim. 

### If 11 this is an illustration of how DOE would intend to 12 impose penalty taxes on a national basis, then the 13 social values of the DOE need to be re-examined 14 carefully. 15 Thisproposal clearlyintends topenalize 16 the generation of electricity on a national basis. 17 This action is unjust, discriminatory and 18 counterproductive. The very electricutilities that 19 have helped us get to the present state will have 20 contributed their time and resources and effort, and 21 who incidently continue to do so, are now being 22 penalized. 23 DOEjustifiesthatpenaltysuggestingthat 24 an emission tax on electricity is a way for enforce 25 alignment of private decision making and DOE's

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.20008 VIDEO;TRANSCRIPTIONS1 interpretation of social decision making. 29 However, 2 there is nothing on the record that gives DOE the 3 right or authority to impose their interpretation of 4 social welfare on the public and nothing in the text 5 that says that will accomplish national goals. 6 The proposal does not justify it's stated 7 purpose. It does not offer a sound basis for setting 8 appliance standards that can be written as 9 specifications and verified with test procedures. I 10 believe that's what standards are supposed to be. It 11 does not offer credible evidence that DOE has a plan 12 that will provide more benefits than burdens, or even 13 an ability to contribute something that will improve 14 the efforts of those more directly involved in that 15 work as a primary function. 16 The proposal is clearly a tax on electric 17 generation. It can be dressed in fancy terms like 18 externalities, adders or net national benefits, but 19 the plain fact is it will raise the cost of 20 electricity on a national basis. It will become 21 another federal mandate that raises taxes and shifts 22 the burden for payment to the local level. 23 If DOE has any talent at judging social 24 values, they will conclude that this is not a 25 politically correct time to impose federal mandates SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 29 1 interpretation of social decision making. However, 2 there is nothing on the record that gives DOE the 3 right or authority to impose their interpretation of 4 social welfare on the public and nothing in the text 5 that says that will accomplish national goals. 6 Theproposal does notjustifyit's stated 7 purpose. It does not offer a soundbasis for setting 8 appliance standards that can be written as 9 specifications and verified with test procedures. I 10 believe that's what standards are supposedto be. It 11 does not offer credible evidence that DOE has a plan 12 thatwillprovidemorebenefits thanburdens, or even 13 an ability to contribute something that will improve 14 the efforts of those more directly involved in that 15 work as a primary function. 16 The proposal is clearlya taxon electric 17 generation. It can be dressed in fancy terms like 18 externalities, adders or net national benefits, but 19 the plain fact is it will raise the cost of 20 electricity on a national basis. It will become 21 another federal mandate that raises taxes and shifts 22 the burden for payment to the local level. 23 If DOE has any talent at judging social 24 values, they will conclude that this is not a 25 politically correct time to impose federal mandates

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS1 that raises at the local level. 30 This proposal does 2 not deserve further consideration. 3 I listened yesterday, and I'm very glad I 4 carne yesterday, because the questions from the panel 5 were very interesting to me. As you know, I've been 6 associated with this program for some long time, even 7 longer than Mike. The questions were serious and 8 should be treated seriously. The business of how to 9 reduce electric generationhas someinterestingpieces 10 for me. I think that electric generation is not what 11 you want to reduce, it's the harmful effects of 12 electric generation, and it's necessary to separate 13 the two. 14 I hear your frustration because more is 15 beingdemanded fromyou folks in terms ofproductivity 16 for standards, but you're reaching the inevitable 17 limits of the physical science in the appliance 18 standards. Or to put that another way, you did your 19 job too well. I thinkyou should count your blessings 20 and realize that you've set a process in motion and 21 that you have done a good job. It is working. Ifyou 22 do nothing, the process will continue to improve 23 energy use. 24 Themost importantthingthatmustbedone 25 now is to avoid spoiling what's already been done. SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 30 1 that raises at the local level. This proposal does 2 not deserve further consideration. 3 I listenedyesterday, and I'mveryglad I 4 carne yesterday, because the questions from the panel 5 were very interesting to me. As you know, I've been 6 associatedwith this program for some longtime, even 7 longer than Mike. The questions were serious and 8 should be treated seriously. The business of how to 9 reduceelectricgenerationhas someinterestingpieces 10 for me. I think that electric generation is not what 11 you want to reduce, it's the harmful effects of 12 electric generation, and it's necessary to separate 13 the two. 14 I hear your frustration because more is 15 beingdemandedfromyoufolks interms ofproductivity 16 for standards, but you're reaching the inevitable 17 limits of the physical science in the appliance 18 standards. Or to put that another way, you did your 19 jobtoowell. I thinkyou shouldcountyourblessings 20 and realize that you've set a process in motion and 21 thatyouhave done a good job. It isworking. Ifyou 22 do nothing, the process will continue to improve 23 energy use. 24 Themostimportantthingthatmustbedone 25 now is to avoid spoiling what's already been done.

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. WASHINGTON,D.C.20008 VIDEO;TRANSCRIPTIONS1 Reflect carefully on what you've done right. 31 The 2 allies that you have created and the attitude changes 3 that have happened in the 25 years I've been 4 associated with this program are very valuable and 5 theyweren't createdby accident. People in the field 6 of thinking about new and better ways to do the same 7 job you want to do, and are thinking about it every 8 day, that's not an accident. Is the process all 9 right? No. You'll never hear me admit that. Are 10 things like the test procedure right? No. Do I 11 believe that the test procedures are accurate, 12 representative and impartial? No. There is clearly 13 work to do that will improve the programs. I find 14 that the work should come under three categories: 15 First of all I believe that DOE should 16 become more of a leader than a policeman. I said this 17 in my eight product testimony and I'll say it again 18 because I believe there is an important role to play. 19 Secondly, I thinkwe should stress quality 20 and not quantity. 21 Thirdly, mybest advice is communications 22 with allies in all of your process is needed. It has 23 contributed a hugh amount to the progress so far. It 24 will be absolutely required to go through the 25 difficult times ahead. Direct, personal, factual

(202) 797-2525 SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 31 1 Reflect carefully on what you've done right. The 2 allies thatyou have created andthe attitude changes 3 that have happened in the 25 years I've been 4 associated with this program are very valuable and 5 theyweren't createdbyaccident. Peopleinthefield 6 of thinking about new and better ways to do the same 7 job you want to do, and are thinking about it every 8 day, that's not an accident. Is the process all 9 right? No. You'll never hear me admit that. Are 10 things like the test procedure right? No. Do I 11 believe that the test procedures are accurate, 12 representative and impartial? No. There is clearly 13 work to do that will improve the programs. I find 14 that the work should come under three categories: 15 First of all I believe that DOE should 16 becomemore of a leaderthan a policeman. I saidthis 17 in my eight product testimony and I'll say it again 18 because I believethere is an importantroletoplay. 19 Secondly, I thinkwe shouldstressquality 20 and not quantity. 21 Thirdly, mybestadvice is communications 22 with allies in all of your process is needed. It has 23 contributed a hugh amount to the progress so far. It 24 will be absolutely required to go through the 25 difficult times ahead. Direct, personal, factual

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.20008 VIDEO;TRANSCRIPTIONS32 1 communications withthepeople involvedwith the rules 2 you have to make is the best suggestion I have to 3 make. 4 criteria six, itcertainly shouldbeused. 5 It's part of the program. It should be used with the 6 respective

-- It should report that your work is not 7 done in a vacuum. It should report that standards are 8 set in relation to a sensitivityto other factors that 9 go on the government. It should not be used to dump 10 the additional burdens on an appliance standards 11 program or anywhere else. It should not be used to 12 circumvent the rules. 13 Differentiate carefully between the 14 identification of a problem or benefit and how the 15 condition should be treated. Local problems need 16 local cures. 26 serious sites as cited by Doctor 17 Montgomery requires concentrated specific attention. 18 Somebody else hasn't done something about those, and 19 maybe there's a fine opportunity. Have you thought 20 about such a strange answer as the solution may 21 involve an increase in electricity instead of a 22 decrease? 23 If you look carefully at The Southern 24 Company's testimony in the eight product rulemaking, 25 you'll find out that one of the people that testified SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 32 1 communicationswiththepeopleinvolvedwiththerules 2 you have to make is the best suggestion I have to 3 make. 4 criteriasix, itcertainlyshouldbeused. 5 It's part of the program. It shouldbe used with the 6 respective

-- It should report that your work is not 7 done ina vacuum. It shouldreportthat standards are 8 setinrelationto a sensitivitytoother factors that 9 go on the government. It should not be used to dump 10 the additional burdens on an appliance standards 11 program or anywhere else. It should not be used to 12 circumvent the rules. 13 Differentiate carefully between the 14 identification of a problem or benefit and how the 15 condition should be treated. Local problems need 16 local cures. 26 serious sites as cited by Doctor 17 Montgomery requires concentrated specific attention. 18 Somebody else hasn't done something about those, and 19 maybe there's a fine opportunity. Have you thought 20 about such a strange answer as the solution may 21 involve an increase in electricity instead of a 22 decrease? 23 If you look carefully at The Southern 24 Company's testimony in the eight product rulemaking, 25 you'll find out that one of the people that testified

(202)797·2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON,D.C.20008 VIDEO;TRANSCRIPTIONS33 1 suggested that exactly that was necessary in order to 2 alleviate a problemin some ofthe cities down south. 3 It seems that these problems are urban 4 problems and may involve particularly the NOx 5 emissions, what we have to do is get the NOx out of a 6 concentratedurban area. Andconcentratedurban areas 7 typically have a high concentration of flues, whether 8 their gas, oil or otherwise, and since gas is the most 9 prevalent I'll pickon them, something I'mnot usedto 10 doing. 11 The other point I want to make is, beside 12 planting trees, that's a lovely idea, a beautiful 13 landscape and ithelps the carbonproblem, no question 14 about it. Maintenance of home burners, I heard it 15 said yesterday that emissions at the site are being 16 monitored, is that true? 17 PRESIDING OFFICIAL BERLIN: It's being 18 counted. When appliance standards are being imposed 19 or considered to be imposed on gas or oil or such 20 appliances, there is, to the extent there's a 21 efficiency gain, there is less consumption, and there 22 is therefore less emission of whatever would be 23 emitted at the site. And that is counted in

-- 24 MR. VAUGHN: Let me suggest, I've been 25 associated with the industry a long time and I know a SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 33 1 suggestedthat exactlythatwas necessary in orderto 2 alleviatea problemin someofthe cities down south. 3 It seems that these problems are urban 4 problems and may involve particularly the NOx 5 emissions, what we have to do is get the NOx out of a 6 concentratedurbanarea. Andconcentratedurbanareas 7 typicallyhave a high concentrationof flues, whether 8 their gas, oilorotherwise, and sincegas is themost 9 prevalent I'llpickonthem, somethingI'mnotusedto 10 doing. 11 The otherpoint I want tomake is, beside 12 planting trees, that's a lovely idea, a beautiful 13 landscapeandithelps thecarbonproblem, noquestion 14 about it. Maintenance of home burners, I heard it 15 said yesterday that emissions at the site are being 16 monitored, is that true? 17 PRESIDING OFFICIAL BERLIN: It's being 18 counted. When appliance standards are being imposed 19 or considered to be imposed on gas or oil or such 20 appliances, there is, to the extent there's a 21 efficiencygain, there is less consumption, andthere 22 is therefore less emission of whatever would be 23 emitted at the site. And that is counted in

-- 24 MR. VAUGHN: Let me suggest, I've been 25 associatedwith the industry a longtime and I know a

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.20008 VIDEO;TRANSCRIPTIONS34 1 little about those fossil burners, the fact is that 2 they're going to decline in efficiency overtime. And 3 the fact is that ifthey're properlymaintained, there 4 a much larger saving than people normally envision. 5 I won a bet at a very large gas company 6 one time because I bet them that, if they went in 7 their field and checked, they'd find out that the gas 8 units that they had installed there that were over 9 five years old were less than 40 percent efficient. 10 And they tookme up on the bet and checked it and were 11 gentlemen enough to report later that the number came 12 out 35. 13 Now, in terms ofyour energy conservation 14 and in terms ofyour emissions, have youmeasuredthat 15 difference, and if not, why not? How many of those 16 burners are there? Millions. Where are they? Urban 17 concentrated. What is the payback on the program? 18 Wonderful. What is the need? It's critical and it's 19 ongoing. 20 And it's so simple. You know, in 21 Massachusetts now they want to implement a program to 22 measure emissions and correct the emissions from 23 lawnmowers and outboards. Well, if it's been 24 successful for automobiles and it's going to be 25 imposed on lawnmowers and outboards, SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 then why

VIDEO; TRANSCRIPTIONS 34 1 little about those fossil burners, the fact is that 2 they'regoingtodeclineinefficiencyovertime. And 3 thefact isthatifthey'reproperlymaintained, there 4 a much larger savingthan people normally envision. 5 I won a bet at a very large gas company 6 one time because I bet them that, if they went in 7 their field and checked, they'd find out that the gas 8 units that they had installed there that were over 9 five years old were less than 40 percent efficient. 10 And theytookme uponthebet and checked it andwere 11 gentlemen enough to report later that the number came 12 out 35. 13 NOw, interms ofyourenergy conservation 14 andinterms ofyouremissions, haveyoumeasuredthat 15 difference, and if not, why not? How many of those 16 burners are there? Millions. Where are they? Urban 17 concentrated. What is the payback on the program? 18 Wonderful. What is the need? It's critical and it's 19 ongoing. 20 And it's so simple. You know, in 21 Massachusetts now theywant to implement a programto 22 measure emissions and correct the emissions from 23 lawnmowers and outboards. Well, if it's been 24 successful for automobiles and it's going to be 25 imposed on lawnmowers and outboards,

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.20008 then why

VIDEO;TRANSCRIPTIONS35 1 shouldn't there be a simple mandate that burners must 2 be inspected and maintained. It's such a simple 3 program, guaranteed itwill make an improvement in the 4 26 critical areas. Guaranteed! And I'll be right in 5 24 of them. 6 Gentlemen, thank you for your time. I 7 know I crab a lot, but I want to tell you that I've 8 been associated with this program for a long time and 9 I want to take pride in it, like you do. Thank you. 10 PRESIDINGOFFICIALBERLIN: Thankyou, Mr. 11 vaughn. I have no questions. 12 MR. McCABE: Thankyou, James. In 20 days 13 I guess I can say I've been associated with the 14 programten years less than you have. This will be my 15 15th anniversary. 16 17 18 MR. VAUGHN: 15. MR. McCABE: Thank you. MR. VAUGHN: Wasn'tit in Boston that you 19 and I first met when you were up there on the road 20 with standards? 21 Incidently, that answers a question that 22 one ofthe otherpanelists asked about the business of 23 net national rates. I have a very good suggestion, 24 take rates out of the program. What you can measure 25 accurately and reliably is energy factor. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 That's

(202) 797-2525 VIDEO; TRANSCRIPTIONS 35 1 shouldn'ttherebe a simplemandate thatburners must 2 be inspected and maintained. It's such a simple 3 program, guaranteeditwillmakeanimprovementinthe 4 26 critical areas. Guaranteed! And I'llbe right in 5 24 of them. 6 Gentlemen, thank you for your time. I 7 know I crab a lot, but I want to tell you that I've 8 been associatedwith this programfor a longtime and 9 I want to take pride in it, like you do. Thank you. 10 PRESIDINGOFFICIALBERLIN: Thankyou, Mr. 11 vaughn. I have no questions. 12 MR. McCABE: Thankyou, James. In 20 days 13 I guess I can say I've been associated with the 14 programtenyears less thanyouhave. This willbemy 15 15th anniversary. 16 MR. VAUGHN: 15. 17 MR. McCABE: Thank you. 18 MR. VAUGHN: Wasn'tit inBoston that you 19 and I first met when you were up there on the road 20 with standards? 21 Incidently, that answers a question that 22 oneoftheotherpanelists askedaboutthebusiness of 23 net national rates. I have a very good suggestion, 24 take rates out of the program. What you can measure 25 accurately and reliably is energy factor. That's

(202)797-2525 SAG,CORP 4218 LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS36 1 measured in the laboratory and that's real. But you 2 can't, once you put the dollars with it, you start to 3 homogenize it and then it goes astray. And then you 4 mix regions and then you mix other things into the 5 thing, and the first thing you got is hash and not 6 steak. 7 MR. McCABE: Those are some issues that we 8 have been certainly working with on the furnace room 9 test procedure rUlemaking, and it's proven to be 10 rather complicated, yes. 11 PRESIDING OFFICIAL BERLIN: Gene? 12 MR. MARGOLIS: Thank you very much for 13 your testimony, and especially for your thoughts on 14 how the program is being accomplished by DOE. I do 15 appreciate those statements. However, I would like to 16 correct Michael. 17 Michael, I think you're a better lawyer 18 than an engineer because I've been on the program 15 19 years and you've been here one year more than me, so 20 I think it's 16, not 15 for you. 21 22 23 December. MR. VAUGHN: I'm still in '94. MR. MARGOLIS: No, I completed 15 years in

24 MR. VAUGHN: The first thing you know 25 it'll be a steady job.SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 36 1 measured in the laboratory and that's real. But you 2 can't, once you put the dollars with it, you start to 3 homogenize it and then it goes astray. And then you 4 mix regions and then you mix other things into the 5 thing, and the first thing you got is hash and not 6 steak. 7 MR. McCABE: Those are some issuesthatwe 8 have been certainly working with on the furnace room 9 test procedure rulemaking, and it's proven to be 10 rather complicated, yes. 11 PRESIDING OFFICIAL BERLIN: Gene? 12 MR. MARGOLIS: Thank you very much for 13 your testimony, and especially for your thoughts on 14 how the program is being accomplished by DOE. I do 15 appreciatethose statements. However, I would liketo 16 correct Michael. 17 Michael, I think you're a better lawyer 18 than an engineer because I've been on the program 15 19 years and you've been here one year more than me, so 20 I think it's 16, not 15 for you. 21 MR. VAUGHN: I'm still in '94. 22 MR. MARGOLIS: No, I completed 15years in 23 December. 24 MR. VAUGHN: The first thing you know 25 it'll be a steady job.

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS1 37 PRESIDING OFFICIAL BERLIN: I guess there 2 are no further questions. Thank you. 3 MR. VAUGHN: Thank you. 4 PRESIDING OFFICIAL BERLIN: Mr. Connor, 5 A.J. Connor? 6 MR. CONNOR: Mr. Berlin and gentlemen, 7 good morning. Thank you for this opportunity to 8 testify before you this morning. My name is Joe 9 Connor. I'm the Vice President of Operating services 10 for Alabama Power Company, one of the operating 11 companies for The Southern Company. 12 The SouthernCompany is theparent firm of 13 several operating electrical utilities in the states 14 ofAlabama, Georgia, Florida andMississippi, serving 15 over 3.5 million customers, employing over 29,000 16 people. We have about 20 generating units with over 17 20,000 megawatts ofcapability that is coal-fired. We 18 burn approximately 25 million tons of coal a year. We 19 have a quarter of a million stockholders, and about 20 half of those are retirees. So we are obviously very 21 interested in what is going on at this hearing. 22 As requested I am not going to read my 23 submittedtestimony. Instead I would like to focus on 24 several of the issues that have emerged over the two 25 days of testimony. First, let me state that I am a SAG, CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 37 1 PRESIDING OFFICIAL BERLIN: I guess there 2 are no further questions. Thank you. 3 MR. VAUGHN: Thank you. 4 PRESIDING OFFICIAL BERLIN: Mr. Connor, 5 A.J. Connor? 6 MR. CONNOR: Mr. Berlin and gentlemen, 7 good morning. Thank you for this opportunity to 8 testify before you this morning. My name is Joe 9 Connor. I'mtheVice President of Operating Services 10 for Alabama Power Company, one of the operating 11 companies for The Southern Company. 12 The SouthernCompanyistheparentfirmof 13 several operating electrical utilities in the states 14 ofAlabama, Georgia, Florida andMississippi, serving 15 over 3.5 million customers, employing over 29,000 16 people. We have about 20 generating units with over 17 20,000megawattsofcapabilitythatis coal-fired. We 18 burnapproximately25 milliontons of coal a year. We 19 have a quarter of a million stockholders, and about 20 half of those are retirees. So we are obviouslyvery 21 interested in what is going on at this hearing. 22 As requested I am not going to read my 23 submittedtestimony. InsteadI wouldliketo focus on 24 several of the issues that have emerged over the two 25 days of testimony. First, let me state that I am a

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.20008 VIDEO; TRANSCRIPTIONS38 1 businessman and not an economist, and thus my comments 2 on the proposal will focus on the basic policy 3 question of whether externalities should be factored 4 into DOE's deliberations on appliance efficiency 5 standards. 6 Likemanyofthe others who have addressed 7 you and testified here, we believe that the 8 environmental externalities should not be factored 9 into the cost justification of revised efficiency 10 standards because the existing environmental laws 11 already impose substantial cost that result in an 12 increase in electricity prices and internalize 13 environmental impacts. 14 According to Mr. Berlin's openlng 15 statement, where DOE is currently, first estimating 16 the physical impacts on the environment and energy 17 security, and also will take into account these 18 impacts in determining which efficiency standards are 19 economically justified. One stated goal of the ANPR 20 is to determine if a new approach is justified and 21 thus, if there is a sound analytic basis for deriving 22 monetary values for monetary values for environmental 23 and national security externalities. 24 Frankly, we are concerned and uncertain 25 about what the goal is that DOE is intending to reach SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 38 1 businessmanandnotaneconomist, andthusmy comments 2 on the proposal will focus on the basic policy 3 question of whether externalities should be factored 4 into DOE's deliberations on appliance efficiency 5 standards. 6 Likemanyoftheotherswhohaveaddressed 7 you and testified here, we believe that the 8 environmental externalities should not be factored 9 into the cost justification of revised efficiency 10 standards because the existing environmental laws 11 already impose substantial cost that result in an 12 increase in electricity prices and internalize 13 environmental impacts. 14 According to Mr. Berlin's opening 15 statement, where DOE is currently, first estimating 16 the physical impacts on the environment and energy 17 security, and also will take into account these 18 impacts indeterminingwhich efficiency standards are 19 economically justified. One stated goal of the ANPR 20 is to determine if a new approach is justified and 21 thus, if there is a sound analytic basis for deriving 22 monetaryvalues formonetaryvalues for environmental 23 and national security externalities. 24 Frankly, we are concerned and uncertain 25 about what the goal is that DOE is intending to reach

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.C. 20008 VIDEO;TRANSCRIPTIONS39 1 in taking this approach. If the purpose of the ANPR 2 is to changebasic power generationpatterns to reduce 3 emissions, then we believe it ignores the broad array 4 of environmental statutes through which Congress has 5 caused the internalization of pollution cost. 6 Assuming the environmental laws passed by Congress 7 were designedto protectpublic health andwelfare, it 8 seems to us that any additional burdens imposedbyDOE 9 imply that Congress has not gone far enough in 10 protecting human health and the environment, but with 11 all due respect, we believe that suchpolicy judgement 12 has to be left and reserved to the Congress. 13 If, however, externalities are counted, 14 and I hesitate to bring that up because as I've 15 already stated we are definitely opposed to that 16 approach, but if they are to be counted, we believe 17 externalities associated with all the energy options 18 should be included. Electricity generated by coal 19 should not be singled out. DOE's published proposal 20 does not clearly indicate that the environmental 21 externalities of fuel such as natural gas, fuel oil or 22 propane will be accessed. 23 If there is any analytical basis for 24 quantifying electricity externalities, we see no 25 reason why the same basis is not applicable to other SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 39 1 in taking this approach. If the purpose of the ANPR 2 isto changebasicpowergenerationpatternstoreduce 3 emissions, thenwe believe it ignores the broad array 4 of environmental statutes through which Congress has 5 caused the internalization of pollution cost. 6 Assuming the environmental laws passed by Congress 7 weredesignedtoprotectpublichealthandwelfare, it 8 seems tous thatanyadditionalburdens imposedbyDOE 9 imply that Congress has not gone far enough in 10 protectinghuman health andthe environment, butwith 11 allduerespect, we believethat suchpolicyjudgement 12 has to be left and reserved to the Congress. 13 If, however, externalities are counted, 14 and I hesitate to bring that up because as I've 15 already stated we are definitely opposed to that 16 approach, but if they are to be counted, we believe 17 externalities associated with all the energy options 18 should be included. Electricity generated by coal 19 should not be singled out. DOE's published proposal 20 does not clearly indicate that the environmental 21 externalitiesof fuel suchas natural gas, fuel oilor 22 propane will be accessed. 23 If there is any analytical basis for 24 quantifying electricity externalities, we see no 25 reason why the same basis is not applicable to other

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.20008 VIDEO;TRANSCRIPTIONS40 1 fuels. Andfurther, ifexternalities will be counted, 2 both positive and negative externalities need to be 3 expressly rationalized into the analysis. There are 4 a number of environmental benefits of electric 5 appliance usage such as zero site emissions that need 6 to be quantified. 7 In addition, the substantial convenience 8 inherent in many electrical appliances that are not 9 available from appliances utilizing other fuels would 10 be lost ifthe efficiency standards are raised so high 11 as to price these electric appliances out of the 12 market. The resulting inefficiencies need to also be 13 considered. 14 Again, ifexternalities aretobe counted, 15 externalities at both the site and the source need to 16 be evaluated. DOE's proposal appears to focus only on 17 source externalities, that is externalities resulting 18 fromthe generationofelectricityatparticulartypes 19 ofplants which are alreadyminimizedbyenvironmental 20 regulation. 21 Webelieve site emissions mayhave justas 22 much of an impact on the environment when broadly 23 defined, and therefore the emissions from combustion 24 of fossil fuels at the point of use need to be 25 factored into any reasonable, constructed externality SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 40 1 fuels. Andfurther, ifexternalitieswillbecounted, 2 both positive and negative externalities need to be 3 expressly rationalized into the analysis. There are 4 a number of environmental benefits of electric 5 appliance usage such as zero site emissions that need 6 to be quantified. 7 In addition, the substantial convenience 8 inherent in many electrical appliances that are not 9 available from appliances utilizingotherfuels would 10 be lostiftheefficiency standards areraised sohigh 11 as to price these electric appliances out of the 12 market. The resultinginefficiencies needto alsobe 13 considered. 14 Again, ifexternalitiesaretobecounted, 15 externalities atboththe site andthe source need to 16 beevaluated. DOE'sproposalappears to focus onlyon 17 sourceexternalities, thatisexternalitiesresulting 18 fromthegenerationofelectricityatparticulartypes 19 ofplantswhicharealreadyminimizedbyenvironmental 20 regulation. 21 Webelieve siteemissionsmayhavejustas 22 much of an impact on the environment when broadly 23 defined, and therefore the emissions from combustion 24 of fossil fuels at the point of use need to be 25 factored intoanyreasonable, constructedexternality

(202)797-2525 SAG,CORP 4218LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS41 1 evaluation initiative. 2 Once again, if externalities are to be 3 counted, why would DOE stop environmental 4 externalities. The conceptofuncompensated costthat 5 is raised here, uncompensated cost posed on society 6 could be expanded beyond environmental cost. And we 7 and others would argue that there should be human 8 dimensions to DOE's consideration of externalities. 9 For example, if electrical appliances will cost more 10 as a result of increased efficiency standards which 11 have been adopted as cost justified because of 12 inclusionofexternalities, manyAmericans mayhave to 13 spend more of their money on consumer durable goods. 14 This means other segments of the economy may be 15 adversely affected, and those impacts should be 16 rationalized into the externality analysis. 17 Suppose for the moment that electricity 18 demand goes down substantially because the efforts to 19 capture more externality cost, utility employees, 20 transportation workers and miners might be put out of 21 work. There may well be impacts on the economy and on 22 families like those discussed by the witnesses 23 yesterday from North Dakota. And I would add from 24 Alabama's standpoint, the State of Alabama has 25 approximately 6,000 coal miners employed in that SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 41 1 evaluation initiative. 2 Once again, if externalities are to be 3 counted, why would DOE stop environmental 4 externalities. Theconceptofuncompensatedcostthat 5 is raised here, uncompensated cost posed on society 6 could be expanded beyond environmental cost. And we 7 and others would argue that there should be human 8 dimensions to DOE's consideration of externalities. 9 For example, if electrical appliances will cost more 10 as a result of increased efficiency standards which 11 have been adopted as cost justified because of 12 inclusionofexternalities,manyAmericansmayhaveto 13 spend more of their money on consumer durable goods. 14 This means other segments of the economy may be 15 adversely affected, and those impacts should be 16 rationalized into the externality analysis. 17 Suppose for the moment that electricity 18 demand goes down substantiallybecausethe efforts to 19 capture more externality cost, utility employees, 20 transportationworkers andminers mightbeput out of 21 work. Theremaywellbe impacts onthe economyandon 22 families like those discussed by the witnesses 23 yesterday from North Dakota. And I would add from 24 Alabama's standpoint, the State of Alabama has 25 approximately 6,000 coal miners employed in that

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.C.20008 VIDEO;TRANSCRIPTIONS42 1 state, producing about 25 million tons of coal a year, 2 so we again are very interested and very concerned 3 about that part of the proposal. 4 If there is a reasoned and analytically 5 justified basis to quantity impact of acid rain or 6 global climate change beyond Congressional efforts to 7 date, it will be necessary to quantify the impacts of 8 unemployment and disrupted family life that results 9 from the changes in energy production. 10 In closing, webelieveDOE shouldfocus on 11 the efficiency of appliances at the point ofuse. The 12 focus of its efforts should be on optimizing the 13 amount ofworkproducedper energy input into specific 14 consumer appliances. AndDOE should notwaste its own 15 scarce resources by engaging in environmental cost 16 evaluations. 17 If, however, DOE cannot be persuaded to 18 withdraw its current initiative, we believe the 19 current proposal is inherently biased against coal20 fired electricity and fails to define the concept of 21 externalities broadly enough to account for the 22 benefits of electricity use. Again, I thank you for 23 this opportunity. 24 PRESIDINGOFFICIALBERLIN: Thankyou. To 25 answerone ofyour questions, the attemptto monetize, SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 42 1 state, producingabout 25 milliontons of coal a year, 2 so we again are very interested and very concerned 3 about that part of the proposal. 4 If there is a reasoned and analytically 5 justified basis to quantity impact of acid rain or 6 global climate changebeyondCongressional efforts to 7 date, itwill be necessary to quantify the impacts of 8 unemployment and disrupted family life that results 9 from the changes in energy production. 10 Inclosing, webelieveDOE shouldfocus on 11 the efficiencyof appliances atthepointofuse. The 12 focus of its efforts should be on optimizing the 13 amountofworkproducedperenergyinputinto specific 14 consumerappliances. AndDOE shouldnotwaste itsown 15 scarce resources by engaging in environmental cost 16 evaluations. 17 If, however, DOE cannot be persuaded to 18 withdraw its current initiative, we believe the 19 current proposal is inherently biased against coal20 fired electricity and fails to define the concept of 21 externalities broadly enough to account for the 22 benefits of electricity use. Again, I thank you for 23 this opportunity. 24 PRESIDINGOFFICIALBERLIN: Thankyou. To 25 answeroneofyourquestions, theattempttomonetize,

(202)797-2525 SAG,CORP 4218LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS43 1 the purpose has solely been that in presenting the 2 information of the identified effects on appliance 3 standards we have presented some of the environmental 4 effects andthosehavepresentedinphysical qualities 5 most of the other variables that presented to the 6 decision makers have been in dollars and cents. And 7 the idea was that, if a common denominator could be 8 found, (i.e. dollars and cents) for all the variables, 9 it might make the information more useful. That has 10 been the intent of this exercise to explore, if that 11 would be, you know, if it's doable, sound analytic 12 basis. That was what the purpose of it was. 13 14 Thank you. I don't have any specific questions.

15 Michael, do you have any questions? 16 17 comment. MR. McCABE: No questions. However, one I think that you've demonstrated certainly 18 a lot better ability to make economic arguments than 19 I demonstrated to be able to simple mathematics. 20 21 MR. CONNOR: Thank you. PRESIDING OFFICIAL BERLIN: Gene? 22 MR. MARGOLIS: No questions. I'm just 23 interested in where is the headquarters of your 24 company? 25

(202) 797-2525 MR. CONNOR: The Southern Company? SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 43 1 the purpose has solely been that in presenting the 2 information of the identified effects on appliance 3 standards we havepresented some of the environmental 4 effectsandthosehavepresentedinphysicalqualities 5 most of the other variables that presented to the 6 decision makers have been in dollars and cents. And 7 the idea was that, if a common denominator could be 8 found, (i.e. dollars andcents) for allthevariables, 9 it might make the information more useful. That has 10 been the intent of this exercise to explore, if that 11 would be, you know, if it's doable, sound analytic 12 basis. That was what the purpose of it was. 13 I don't have any specific questions. 14 Thank you. 15 Michael, do you have any questions? 16 MR. McCABE: No questions. However, one 17 comment. I think that you've demonstrated certainly 18 a lot better ability to make economic arguments than 19 I demonstrated to be able to simple mathematics. 20 MR. CONNOR: Thank you. 21 PRESIDING OFFICIAL BERLIN: Gene? 22 MR. MARGOLIS: No questions. I'm just 23 interested in where is the headquarters of your 24 company? 25

(202)797-2525 MR. CONNOR: The Southern Company? SAG,CORP 4218LENORE LANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS1 44 MR. MARGOLIS : No, not Southern, Alabama. 2 MR. CONNOR: Alabama Power Company is 3 headquartered in Birmingham, Alabama. 4 5 MR. MARGOLIS: In Birmingham. PRESIDING OFFICIAL BERLIN: Howard, I 6 assume you don't have any questions? 7 Thank you very much. 8 The next speakeris Dallas Burtrawplease. 9 MR. BURTRAW: Good morning. I have 10 brought along some revised testimony from what I 11 submitted earlier this week. Is it appropriate to 12 leave it with you now? 13 14 PRESIDING OFFICIAL BERLIN: Sure. MR. BURTRAW: Over at the desk here? 15 PRESIDING OFFICIAL BERLIN: Yes. Here, 16 this is fine. Thank you. 17 MR. BURTRAW: Good morning. My name is 18 Dallas Burtraw. I'm a research fellow and economist 19 with Resources for the Future. Resources for the 20 Future is an independent non-profit, non-partisan 21 research institute focusing on environmental and 22 natural resource economics. 23 Resources for the Future and Oak Ride 24 National Laboratories recently completed a path25 breaking study on the social cost of electricity fuel SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 44 1 MR. MARGOLIS: No, not Southern, Alabama. 2 MR. CONNOR: Alabama Power Company is 3 headquartered in Birmingham, Alabama. 4 MR. MARGOLIS: In Birmingham. 5 PRESIDING OFFICIAL BERLIN: Howard, I 6 assume you don't have any questions? 7 Thank you very much. 8 ThenextspeakerisDallasBurtrawplease. 9 MR. BURTRAW: Good morning. I have 10 brought along some revised testimony from what I 11 submitted earlier this week. Is it appropriate to 12 leave it with you now? 13 PRESIDING OFFICIAL BERLIN: Sure. 14 MR. BURTRAW: Over at the desk here? 15 PRESIDING OFFICIAL BERLIN: Yes. Here, 16 this is fine. Thank you. 17 MR. BURTRAW: Good morning. My name is 18 Dallas Burtraw. I'm a research fellow and economist 19 with Resources for the Future. Resources for the 20 Future is an independent non-profit, non-partisan 21 research institute focusing on environmental and 22 natural resource economics. 23 Resources for the Future and Oak Ride 24 National Laboratories recently completed a path25 breaking studyon the social cost of electricity fuel

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.C. 20008 VIDEO;TRANSCRIPTIONS45 1 cycles thatwas fundedby the Department ofEnergy and 2 conducted in collaboration with researchers at the 3 European Union in a parallel effort. 4 Also, my colleague, Alan Krupnick, and I 5 have served on the management board for another path6 breaking study in New York State which was something 7 of a follow-on, sort of built on the shoulders of the 8 DOE study, and also was a full fuel cycle study. 9 These studies had several characteristics in common. 10 They were full fuel cycle studies, meaning that there 11 was attention paid to externalities from mining and 12 transportation of fuels through to generation. 13 14 values. Also, the focus was on site-specific That is, there were specific reference 15 environments defined and specific reference 16 technologies. And importantly the technologies that 17 are characterizedinboth ofthese studies are vintage 18 1990 technologies, that is technologies that would be 19 involved in an incremental addition to capacity, 20 rather than average technologies or dispatch of the 21 utilities resources. 22 TheDOE studywas perhaps somewhatbroader 23 in that more attention was paid to non environmental 24 externalities such as occupational health and safety 25 or employment effects. The DOE study was unique in

(202) 797-2525 SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 45 1 cyclesthatwas fundedbytheDepartmentofEnergyand 2 conducted in collaboration with researchers at the 3 European Union in a parallel effort. 4 Also, my colleague, Alan Krupnick, and I 5 have servedon themanagement board for anotherpath6 breaking study in New York State which was something 7 of a follow-on, sort of built on the shoulders of the 8 DOE study, and also was a full fuel cycle study. 9 These studies had several characteristics in common. 10 Theywere full fuel cycle studies, meaningthat there 11 was attention paid to externalities from mining and 12 transportation of fuels through to generation. 13 Also, the focus was on site-specific 14 values. That is, there were specific reference 15 environments defined and specific reference 16 technologies. And importantly the technologies that 17 arecharacterizedinbothofthese studiesarevintage 18 1990 technologies, that is technologies thatwouldbe 19 involved in an incremental addition to capacity, 20 rather than average technologies or dispatch of the 21 utilities resources. 22 TheDOE studywasperhaps somewhatbroader 23 in that more attention was paid to non environmental 24 externalities such as occupational health and safety 25 or employment effects. The DOE study was unique in

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS46 1 that one of its final products will be a computer 2 model that will allow the user to calculate 3 externalities for several reference technologies at 4 basically any geographic location in New York State. 5 The lessons from these studies have been 6 first and foremost that there will not exist one 7 simple set of values that describe externalities 8 associated with electricity generation. Rather the 9 externality estimates that have been arrived at 10 appropriately differ by location. And they differ by 11 location due to differences in geography, population 12 densities, background conditions, as well as the 13 technology in emissions that are being used. 14 And so one should not apply a test of the 15 emergence of a single set of values as a test for how 16 well these studies have preformed. There has been, 17 betweenthese studies and five other efforts funded by 18 other state public service commissions, a convergence 19 in methodology, if not a convergence in the numerical 20 estimates that that methodology produces. 21 The early studies that were done in the 22 late'80s were making use primarily of a cost of 23 control method. In the absence of any sort ofworked24 outtheory orpractical guidelines for howto estimate 25 externality damages. Since that time the DOE effort SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 46 1 that one of its final products will be a computer 2 model that will allow the user to calculate 3 externalities for several reference technologies at 4 basically any geographic location in New York State. 5 The lessons from these studies have been 6 first and foremost that there will not exist one 7 simple set of values that describe externalities 8 associated with electricity generation. Rather the 9 externality estimates that have been arrived at 10 appropriatelydifferby location. And they differby 11 location due to differences in geography, population 12 densities, background conditions, as well as the 13 technology in emissions that are being used. 14 And so one should not apply a test of the 15 emergence of a single set of values as a test for how 16 well these studies have preformed. There has been, 17 betweenthese studiesandfiveothereffortsfundedby 18 other statepublic servicecommissions, a convergence 19 inmethodology, if not a convergence in the numerical 20 estimates that that methodology produces. 21 The early studies that were done in the 22 late'80s were making use primarily of a cost of 23 controlmethod. Inthe absenceof any sortofworked24 outtheoryorpracticalguidelines forhowto estimate 25 externality damages. Since that time the DOE effort

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.20008 VIDEO;TRANSCRIPTIONS47 1 first and follow-on by a number of state efforts have 2 provided tremendous guidance in terms of how 3 externalities can be estimated in a method that's 4 consistent with scientific evidence and economic 5 theory. 6 So there has emerged a sort of body of 7 knowledge and a convergence in that body of knowledge 8 among economists at least as to what approaches should 9 be used. There actually has emerged quite a 10 convergence ofthe numerical estimates also, butthere 11 remains a healthy and appropriate divergence in what 12 estimates are in different locations. But the 13 suggestions thatthere are several orders ofmagnitude 14 difference is an exaggeration in fact when the proper 15 methodologies are used. And the fact that there 16 shouldn't be any difference at all is also a 17 misdirection. 18 The second lesson from the previous work 19 is that a tremendous amount of information has been 20 gained with regard to different pathways. Originally 21 the DOE study, the New York study looked at upwards of 22 300 potential externalities and externality pathways. 23 That is pathways linking some sort of economic 24 activity associated with mining or transportation or 25 generation to effects on consumers or producers of SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 47 1 first and follow-on by a number of state efforts have 2 provided tremendous guidance in terms of how 3 externalities can be estimated in a method that's 4 consistent with scientific evidence and economic 5 theory. 6 So there has emerged a sort of body of 7 knowledge and a convergence inthat bodyof knowledge 8 amongeconomists at leastastowhat approaches should 9 be used. There actually has emerged quite a 10 convergenceofthenumericalestimatesalso, butthere 11 remains a healthy and appropriate divergence in what 12 estimates are in different locations. But the 13 suggestionsthatthereare severalordersofmagnitude 14 difference is an exaggeration in fact when the proper 15 methodologies are used. And the fact that there 16 shouldn't be any difference at all is also a 17 misdirection. 18 The second lesson from the previous work 19 is that a tremendous amount of information has been 20 gainedwithregardto differentpathways. Originally 21 theDOE study, theNew York studylookedatupwards of 22 300potential externalities andexternalitypathways. 23 That is pathways linking some sort of economic 24 activity associated with mining or transportation or 25 generation to effects on consumers or producers of

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS48 1 third party effects. And these studies have reviewed 2 the literature in these regards and essentially one 3 can now go to the searcher and borrow a value of 4 information kindof

-- use a value ofinformation type 5 of approach to decide which pathways are going to be 6 the most important. 7 And so the burden of proof has sort of 8 shifted from where I would have advocated three years 9 ago, that everything was on the table and everything 10 should be looked at and that the burden of proof in 11 failing to include an externality was on the part of 12 the researcher to show that it was not important. I 13 thinkthat now there is a legitimate body of knowledge 14 that future state efforts or potential future DOE 15 efforts to look at externalities can assume the burden 16 of proof is shifted. And that for a number of 17 potential externality pathways, it can be presumed 18 that they are trivial, insignificant or not important 19 to the kind of final numerical results that are going 20 to be achieved. 21 Sothis points tothe first recommendation 22 that I have for you is that the damage function 23 approach or the willingness to pay approach, which is 24 the approaches that were used in these studies, are 25 appropriate and should remain the preferred

(202) 797-2525 SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 48 1 thirdpartyeffects. And these studies have reviewed 2 the literature in these regards and essentially one 3 can now go to the searcher and borrow a value of 4 informationkindof

-- usea valueofinformationtype 5 of approach to decide which pathways are going to be 6 the most important. 7 And so the burden of proof has sort of 8 shiftedfromwhere I wouldhave advocated three years 9 ago, that everything was on the table and everything 10 should be looked at and that the burden of proof in 11 failing to include an externalitywas on the part of 12 the researcher to show that it was not important. I 13 thinkthatnowthereis a legitimatebodyof knowledge 14 that future state efforts or potential future DOE 15 effortsto lookatexternalitiescanassumetheburden 16 of proof is shifted. And that for a number of 17 potential externality pathways, it can be presumed 18 thattheyare trivial, insignificant ornot important 19 to the kindof final numerical results that are going 20 to be achieved. 21 Sothispointstothefirstrecommendation 22 that I have for you is that the damage function 23 approach orthe willingness topay approach, which is 24 the approaches that were used in these studies, are 25 appropriate and

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VIDEO;TRANSCRIPTIONS49 1 methodology for DOE in thinking about externality 2 values. The alternative approaches that have been 3 discussed such as the cost of control approach, which 4 is the effort to look in lieu of any kind of damage 5 estimates, to look at the marginal cost of abatement 6 and assume that that Is a proxy for the marginal 7 benefits ofemissionreductions, thatthis is inferior 8 for several reasons, but it retains perhaps standing 9 in certain context when the damage function approach 10 is not plausible. One case in which that might apply 11 is if one presumed that there was going to emerge 12 national standards and an emissions cap for C02, in 13 which case the damage function approach might 14 excuse me, a cost of control approach might properly 15 reflect the benefits of reducing C02 emissions. 16 The second recommendation pertaining to 17 comments that were published in the October 7th 18 Federal Register is that is the emission, in terms of 19 those three pollutants that were mentioned, the 20 emissionNOxparticulatepathwaywouldbe an important 21 mistake. In the studies that have been done so far we 22 have learned that NOx particulate effects are 23 approximately equal in magnitude to NOx ozone effects 24 for externality estimates. 25

(202) 797-2525 Now, stepping back a little bit and SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 49 1 methodology for DOE in thinking about externality 2 values. The alternative approaches that have been 3 discussed such as the cost of control approach, which 4 is the effort to look in lieu of any kind of damage 5 estimates, to look at the marginal cost of abatement 6 and assume that that Is a proxy for the marginal 7 benefitsofemissionreductions, thatthisis inferior 8 for several reasons, but it retains perhaps standing 9 in certain context when the damage function approach 10 is not plausible. One case inwhich that might apply 11 is if one presumed that there was going to emerge 12 national standards and an emissions cap for C02, in 13 which case the damage function approach might 14 excuse me, a cost of control approach might properly 15 reflect the benefits of reducing C02 emissions. 16 The second recommendation pertaining to 17 comments that were published in the October 7th 18 Federal Register is that is the emission, interms of 19 those three pollutants that were mentioned, the 20 emissionNOxparticulatepathwaywouldbeanimportant 21 mistake. Inthe studiesthathavebeendone so farwe 22 have learned that NOx particulate effects are 23 approximately equal inmagnitude to NOx ozone effects 24 for externality estimates. 25

(202)797-2525 NOW, stepping back a little bit and SAG,CORP 4218 LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS50 1 talking a look at these studies, it is clear that 2 based on prior assumptions of the researchers and of 3 the academic community that the estimates that have 4 been derived so far have been small. The externality 5 values are small with regards to conventional, that is 6 excluding C02. But one must emphasize, repeatedly 7 emphasize, in statingthis with regards to application 8 to appliance standards, that these estimates pertain 9 to vintage 1990 technologies and not to the resource 10 mix that would be dispatched in the use of appliances 11 in the economy. So the values that have been found 12 pertaining to new sources are relatively small, but 13 the values that are likely to emerge with regards to 14 average resources in the utility mix are likely to be 15 several times larger than that. 16 I have attachedwithmyprevious testimony 17 the discussion paper by Alan Krupnick and myself 18 entitled "Bridging the Gap," and I request that that 19 be included with my revised comments for today. That 20 provides some guidance in terms of how we suggest one 21 could think through the epidemiology and the 22 economics, the valuation of extending social costing, 23 as it has come to be called, from the state or site24 specific level to national applications. Itwouldnot 25 be easy to do so, but there are some guidelines one SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO; TRANSCRIPTIONS 50 1 talking a look at these studies, it is clear that 2 based on prior assumptions of the researchers and of 3 the academic community that the estimates that have 4 been derived so far have been small. The externality 5 values are smallwithregardstoconventional, thatis 6 excluding C02. But one must emphasize, repeatedly 7 emphasize, instatingthiswithregardstoapplication 8 to appliance standards, that these estimates pertain 9 to vintage 1990 technologies and not to the resource 10 mix that wouldbe dispatched inthe use of appliances 11 in the economy. So the values that have been found 12 pertaining to new sources are relatively small, but 13 the values that are likely to emerge with regards to 14 average resources in the utilitymix are likelyto be 15 several times larger than that. 16 I haveattachedwithmyprevioustestimony 17 the discussion paper by Alan Krupnick and myself 18 entitled "Bridging the Gap," and I request that that 19 be includedwithmy revised comments for today. That 20 provides some guidance in terms of how we suggest one 21 could think through the epidemiology and the 22 economics, thevaluationof extending social costing, 23 as it has come to be called, from the state or site24 specificleveltonational applications. Itwouldnot 25 be easy to do so, but there are some guidelines one

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.20008 VIDEO;TRANSCRIPTIONS51 1 could follow in terms of how that might be 2 accomplished. 3 But I think that while it's not going to 4 be easy to do so for the epidemiology and the 5 valuation, itpotentially couldbe evenmore difficult 6 with regards to the emissions calculations. And a 7 variety of techniques are possible. Some ofthemwere 8 suggestedinthe Federal Register, averaging, weighted 9 averaging. One might think about monte carlo 10 techniques in order to come up with some sort of 11 profile of emissions associated with appliance use at 12 a national average level. 13 My third recommendation is that based on 14 what we've learned from the previous social cost study 15 that it is a proper research priority for DOE to think 16 about, carefully, how these kinds of averages at the 17 national level shouldbe calculated, bothwith respect 18 to epidemiology and valuation, and with respect to 19 what the emissions actually are associated with 20 appliance standards. Or rather I should say the 21 changes in emissions associatedwith the change in the 22 appliance standard including externality effects. 23 The fourth recommendation is thatbasedon 24 the previous studies and empirical experience, it's 25 very important to include upstream costs in the SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 51 1 could follow in terms of how that might be 2 accomplished. 3 But I think that while it's not going to 4 be easy to do so for the epidemiology and the 5 valuation, itpotentiallycouldbeevenmoredifficult 6 with regards to the emissions calculations. And a 7 varietyof techniques arepossible. Some ofthemwere 8 suggestedintheFederalRegister, averaging, weighted 9 averaging. One might think about monte carlo 10 techniques in order to corne up with some sort of 11 profile of emissions associatedwith appliance use at 12 a national average level. 13 My third recommendation is that based on 14 whatwe've learnedfromtheprevious social cost study 15 that it is a properresearchpriority for DOE to think 16 about, carefully, how these kinds of averages at the 17 national level shouldbecalculated, bothwithrespect 18 to epidemiology and valuation, and with respect to 19 what the emissions actually are associated with 20 appliance standards. Or rather I should say the 21 changes inemissions associatedwiththe change inthe 22 appliance standard including externality effects. 23 Thefourthrecommendationisthatbasedon 24 the previous studies and empirical experience, it's 25 very important to include upstream costs in the

(202)797-2525 SAG,CORP 4218 LENORELANE,N.w. WASHINGTON,D.C.20008 VIDEO;TRANSCRIPTIONS1 externality evaluation. 52 That is upstream costs 2 referring to mining and transportation of fuels. In 3 fact with regard to some fuels we learned that the 4 transportation of fuels can be as important as the 5 generation of electricity using those fuels in terms 6 of the environmental impacts and the valuation of 7 those impacts and their affects on third parties. 8 There are a number of other issues that 9 have emerged in previous research that I'll just take 10 a moment to touch on. One of them is emploYment 11 effects. We have found that employment effects canbe 12 important and they should be considered. The 13 methodology thatwas used in the DOE studyby Oakridge 14 National Labs and Resources for the Future wasn't an 15 opportunity cost approach where we attempted to net 16 out or attempted to think about not just the simple 17 bean-counting exercise in terms of number of jobs 18 created or taken away from the economy, but rather 19 what was the likelihood that this type of a change 20 would draw a worker from the pool of previously 21 employed or under-employed or recipient, put a worker 22 into this pool. 23 This type of approach is much closer to 24 economic theory and the way economic theory suggests 25 one should think about emploYment effects. It tends SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 52 1 externality evaluation. That is upstream costs 2 referring to mining and transportation of fuels. In 3 fact with regard to some fuels we learned that the 4 transportation of fuels can be as important as the 5 generation of electricity using those fuels in terms 6 of the environmental impacts and the valuation of 7 those impacts and their affects on third parties. 8 There are a number of other issues that 9 have emerged inprevious researchthat I'll justtake 10 a moment to touch on. One of them is employment 11 effects. We havefoundthatemploymenteffects canbe 12 important and they should be considered. The 13 methodologythatwas usedintheDOE studybyOakridge 14 National Labs and Resources for the Future wasn't an 15 opportunity cost approach where we attempted to net 16 out or attempted to think about not just the simple 17 bean-counting exercise in terms of number of jobs 18 created or taken away from the economy, but rather 19 what was the likelihood that this type of a change 20 would draw a worker from the pool of previously 21 employedorunder-employedorrecipient, put a worker 22 into this pool. 23 This type of approach is much closer to 24 economic theory and the way economic theory suggests 25 one should think about employment effects. It tends SAG,CORP 4218 LENORELANE, N.w. WASHINGTON, D.C.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS53 1 to diminish the effects significantly, but it also 2 puts the estimates onmuch firmer theoretical footing. 3 And they remain important, they remain significant in 4 order of magnitude compared to the other kinds of 5 environmental externalities that have been thought 6 about. 7 Now, I don't want to go too far in making 8 great claims about the way we did it with the 9 employments effects in the DOE study. It's not 10 adequate, but it's, I would claim, one of the best 11 that has been done anywhere so far. And there are not 12 acceptablemethods in economic theory that can justbe 13 borrowed and applied to really thinking about 14 emploYment effects in a rigorous way. 15 Secondly, in the Federal Register there 16 was some discussion ofthe federalism issue. That was 17 one and two, and that is what happens with regards to 18 efforts at the state level and then a double, another 19 layer, of efforts at the federal level by DOE in 20 thinking about appliance standards. 21 I agree with the implications or 22 conclusions in the Federal Register, that is that it 23 is appropriate for DOE to think about appliance 24 standards even if the states are thinking about 25 externality values and resource planning for two SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 53 1 to diminish the effects significantly, but it also 2 putstheestimatesonmuch firmertheoreticalfooting. 3 And theyremain important, they remain significant in 4 order of magnitude compared to the other kinds of 5 environmental externalities that have been thought 6 about. 7 Now, I don't want to go too far inmaking 8 great claims about the way we did it with the 9 employments effects in the DOE study. It's not 10 adequate, but it's, I would claim, one of the best 11 thathas beendone anywhere so far. And there are not 12 acceptablemethods ineconomictheorythat canjustbe 13 borrowed and applied to really thinking about 14 employment effects in a rigorous way. 15 Secondly, in the Federal Register there 16 was somediscussionofthe federalism issue. Thatwas 17 one and two, and that is what happens with regards to 18 efforts at the state level and then a double, another 19 layer, of efforts at the federal level by DOE in 20 thinking about appliance standards. 21 I agree with the implications or 22 conclusions in the Federal Register, that is that it 23 is appropriate for DOE to think about appliance 24 standards even if the states are thinking about 25 externality values and resource planning for two

(202)797-2525 SAG,CORP 4218LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS54 1 reasons. First of all at the state level, the focus 2 is primarily so far on resource planning rather than 3 onthe dispatch ofexistingfacilities. Resources for 4 the Future has suggested, that is simulation models 5 has suggested that the whole approach by the states 6 could be greatly improved if they were to take a 7 dispatch approach, but no state so far as really done 8 so in a comprehensive way. 9 So while the focus at the state level is 10 on additions to capacity, the focus with regards to 11 appliance standards is on the use of the resource mix 12 and utility on average. Secondly, even if the states 13 were doing dispatch instead ofplanning there remains 14 the instrument that has been used by policy makers 15 at the state level has been a shadow costing or use of 16 adders which are meant to provide a signal to the 17 utility on how to plan or preferably dispatch its 18 resource mix, but there's no revenue changing hands, 19 there's no actual charge. And consequently, there is 20 no signal made to consumers about the hidden costs 21 associated with their electricity use. 22 So there's really competing theories or 23 notions of efficiency in effect here, one of them 24 termed "Productive or technical efficiency, II which 25 suggests that for a given level demand what's the SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 54 1 reasons. First of all at the state level, the focus 2 is primarily so far on resource planning rather than 3 onthedispatchofexistingfacilities. Resources for 4 the Future has suggested, that is simulation models 5 has suggested that the whole approach by the states 6 could be greatly improved if they were to take a 7 dispatch approach, butno state so far as reallydone 8 so in a comprehensive way. 9 So while the focus at the state level is 10 on additions to capacity, the focus with regards to 11 appliance standards is on the use of the resourcemix 12 andutilityon average. Secondly, even if the states 13 were doingdispatch insteadofplanningthere remains 14 the instrument that has been usedbypolicymakers 15 atthe state levelhasbeen a shadowcostingoruse of 16 adders which are meant to provide a signal to the 17 utility on how to plan or preferably dispatch its 18 resource mix, but there's no revenue changing hands, 19 there's no actual charge. And consequently, there is 20 no signal made to consumers about the hidden costs 21 associated with their electricity use. 22 So there's really competing theories or 23 notions of efficiency in effect here, one of them 24 termed "Productive or technical efficiency, II which 25 suggests that for a given level demand what's the

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS55 1 economically efficient way to produce electricity. 2 The second is, what is the right level of demand. And 3 the attempt to think about appliance standards at the 4 federal level could still be important because of the 5 failure at the state level so far to do anything 6 that fs going to have effect on prices and consequently 7 adjustments in consumer demand. 8 Another point that was mentioned and 9 deserves further thought is the role of pre-existing 10 social regulation. In some cases this is going to 11 mean that observed third party effects should not 12 count with regards to public policy and the 13 calculation of externalities. The best case of this 14 of course is 802 trading under the Clean Air Act 15 Amendments where, ifthere is emissions cap in effect, 16 the increase in emissions from one source is more or 17 less precisely offsetby a reduction in emissions from 18 another source. And more or less the economic value 19 of the environmental impacts of those emissions are 20 also going to be offset. 21 Another case just to extend the 22 possibilities here would be if there was unlimited 23 liability, or to the extent there is strict liability 24 with fuel transportation or oil transportation site. 25 In this case there remains a probability that one will SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 55 1 economically efficient way to produce electricity. 2 The second is, what is the right level of demand. And 3 the attempt to think about appliance standards at the 4 federal level could still be important because of the 5 failure at the state level so far to do anything 6 that fs goingtohave effectonprices and consequently 7 adjustments in consumer demand. 8 Another point that was mentioned and 9 deserves further thought is the role of pre-existing 10 social regulation. In some cases this is going to 11 mean that observed third party effects should not 12 count with regards to public policy and the 13 calculation of externalities. The best case of this 14 of course is 802 trading under the Clean Air Act 15 Amendments where, ifthere is emissions capin effect, 16 the increase in emissions from one source is more or 17 lesspreciselyoffsetbya reduction inemissions from 18 another source. And more or less the economic value 19 of the environmental impacts of those emissions are 20 also going to be offset. 21 Another case just to extend the 22 possibilities here would be if there was unlimited 23 liability, or to the extent there is strict liability 24 with fuel transportation or oil transportation site. 25 Inthis casethereremains a probabilitythatonewill

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS56 1 observe an occasional oil spill, but if the oil 2 transporter has been required to be bonded or there is 3 some sort of certification to make sure that they are 4 not going to go bankrupt in the case of a spill, and 5 ifthere's bonding or insurance, then one would expect 6 in the prices of oil some reflection of the expected 7 liability associated with the occasional oil spill 8 that will still occur. In that case these damages are 9 already going to be reflected in consumer prices. 10 The issue about the distinction between 11 price and marginal cost can be very important. Rich 12 Gilbert from UC-Berkeley, currently I think at the 13 Department of Justice, has estimated that in the 14 utility grade in northern California the difference 15 between price and marginal costs directly leads to a 16 seven percent

-- has the effect equivalent to seven 17 percent of consumer welfare loss associated with 18 electricityuse. In otherwords it's very significant 19 and the effect, the indirect effect and induced 20 effect, of this failure to get prices right for 21 electricity at the margin can amplify this effect. 22 The discussion is generally correct inthe 23 Federal Register I think, although not precisely so in 24 that the real issue is whether or not the adder 25 estimates that are turned over by the scientists and SAG,CORP 4218 LENORE LANE. NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 56 1 observe an occasional oil spill, but if the oil 2 transporterhas beenrequiredtobebondedorthere is 3 some sort of certification to make sure that they are 4 not going to go bankrupt in the case of a spill, and 5 ifthere'sbondingorinsurance, thenonewouldexpect 6 in the prices of oil some reflection of the expected 7 liability associated with the occasional oil spill 8 thatwill still occur. Inthat case thesedamages are 9 already going to be reflected in consumer prices. 10 The issue about the distinction between 11 price and marginal cost can be very important. Rich 12 Gilbert from UC-Berkeley, currently I think at the 13 Department of Justice, has estimated that in the 14 utility grade in northern California the difference 15 between price and marginal costs directly leads to a 16 seven percent -- has the effect equivalent to seven 17 percent of consumer welfare loss associated with 18 electricityuse. Inotherwords it'svery significant 19 and the effect, the indirect effect and induced 20 effect, of this failure to get prices right for 21 electricity at the margin can amplify this effect. 22 Thediscussionisgenerallycorrectinthe 23 FederalRegister I think, althoughnotpreciselyso in 24 that the real issue is whether or not the adder 25 estimates that are turned over by the scientists and

(202)797-2525 SAG,CORP 4218LENORELANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS57 1 the economists that are worried about valuation of 2 externalities should be somehow adjusted for the fact 3 that there's a distinction between price and marginal 4 cost. And it's as though they are being adjusted by 5 a coefficient. Then the question is, should that 6 coefficient be greater than or less than one, not 7 greater or less than zero. 8 And finally, in the spirit of looking at 9 all externalities throughoutthe entire fuel cycle and 10 non environmental externalities as well as 11 environmental externalities, Resources for the Future 12 has recently completed an examination of the fiscal 13 benefits associated with fuel cycles and electricity 14 generation. We looked at a number of different fuel 15 cycles and it was a full fuel cycle analysis looking 16 at fiscal benefits, that is taxes paid, through 17 mining, transportation stages for fuel transport, and 18 then in generation of electricity using those fuels. 19 since different fuels, since there is 20 different laws applied to different fuels, different 21 fuels are going to, you know, be harvested, if you 22 will, in different parts of the country. There is 23 differentcapital structures associatedwiththe firms 24 involved in these efforts. One would expect that 25 there's going to be a difference in the taxes paid. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 57 1 the economists that are worried about valuation of 2 externalities shouldbe somehow adjusted for the fact 3 that there's a distinctionbetweenprice andmarginal 4 cost. And it's as though they are being adjusted by 5 a coefficient. Then the question is, should that 6 coefficient be greater than or less than one, not 7 greater or less than zero. 8 And finally, in the spirit of looking at 9 allexternalitiesthroughouttheentirefuel cycleand 10 non environmental externalities as well as 11 environmental externalities, Resources for theFuture 12 has recently completed an examination of the fiscal 13 benefits associated with fuel cycles and electricity 14 generation. We looked at a number of different fuel 15 cycles and it was a full fuel cycle analysis looking 16 at fiscal benefits, that is taxes paid, through 17 mining, transportation stages for fuel transport, and 18 then in generation of electricity using those fuels. 19 since different fuels, since there is 20 different laws applied to different fuels, different 21 fuels are going to, you know, be harvested, if you 22 will, in different parts of the country. There is 23 differentcapitalstructuresassociatedwiththefirms 24 involved in these efforts. One would expect that 25 there's going to be a difference in the taxes paid.

(202)797-2525 SAG,CORP 4218LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS58 1 And in fact that's what we find to be the case. 2 We find that, for example in comparing 3 goal and natural gas that the taxes paid per kilowatt 4 hour or in a levelized basis of levelized cost of 5 energy for electricitygeneratedwith gas, are smaller 6 than the taxes paid for electricity generated with 7 coal. And the difference in terms of these fiscal 8 benefits, interestingly enough, are about the same 9 magnitude as the estimates thathave emergedfrom some 10 of these externality estimates and opposite in sign. 11 Now, of course I reiterate that these 12 previous externality estimates have omitted C02 and 13 have been developedwith regards to only increments in 14 capacity, not with the average resourcefulness of the 15 utility. In general when looking at taxes what one 16 fines is that the more fuel-intensive the fuel cycle, 17 the less taxes that are paid, gas beingthe most fuel18 intensive fuel cycle, and renewables being the least 19 fuel-intensive. 20 So in summary, I think previous research 21 has found thatthe estimationofenvironmental impacts 22 and the valuation of those is a feasible enterprise 23 and can be conducted on a consistent basis, that is 24 that increasingly different researchers would corne to 25 the same problem and corne up with the same numbers in SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 58 1 And in fact that's what we find to be the case. 2 We find that, for example in comparing 3 goal andnatural gas that the taxes paidper kilowatt 4 hour or in a levelized basis of levelized cost of 5 energyforelectricitygeneratedwithgas, are smaller 6 than the taxes paid for electricity generated with 7 coal. And the difference in terms of these fiscal 8 benefits, interestingly enough, are about the same 9 magnitudeastheestimatesthathaveemergedfrom some 10 of these externality estimates and opposite in sign. 11 Now, of course I reiterate that these 12 previous externality estimates have omitted C02 and 13 havebeendevelopedwithregardstoonlyincrements in 14 capacity, notwiththe averageresourcefulness of the 15 utility. In general when looking at taxes what one 16 fines is that themore fuel-intensive the fuel cycle, 17 the lesstaxes that arepaid, gasbeingthemost fuel18 intensive fuel cycle, and renewables being the least 19 fuel-intensive. 20 So in summary, I think previous research 21 hasfoundthattheestimationofenvironmentalimpacts 22 and the valuation of those is a feasible enterprise 23 and can be conducted on a consistent basis, that is 24 that increasinglydifferentresearcherswould corne to 25 the same problemand corne upwith the same numbers in

(202)797-2525 SAG,CORP 4218 LENORELANE, NW. WASHINGTON,D.C.20008 VIDEO;TRANSCRIPTIONS59 1 a specific location. 2 I'm not taking a stand with regards 3 specifically to the development and application of 4 appliance standards. There's issues that are larger 5 than simply the calculation of these environmental 6 externalities. But I do assert that these 7 environmental externalities can be reliably estimated 8 and the exercise of doing so could provide very 9 valuable information to DOE in setting appliance 10 standards, and hopefully, eventually in the 11 development of incentive-based regulation for energy 12 use throughout the economy. Thank you very much. 13 PRESIDING OFFICIAL BERLIN: Thank you. I 14 think you've provided some good insights and you've 15 done some significant work in this area. It's very 16 impressive. I don't have any specific questions 17 though, thank you. 18 Michael? 19 MR. McCABE: There have been a number of 20 comments that have been made over the last day or so 21 about how this is a national problem. You've touched 22 on it as well. And one could almost infer from your 23 statements that at this point in time you don't see 24 any way that the impacts externalities effects can be 25 developed for such a national program that deals with SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 59 1 a specific location. 2 I'm not taking a stand with regards 3 specifically to the development and application of 4 appliance standards. There's issues that are larger 5 than simply the calculation of these environmental 6 externalities. But I do assert that these 7 environmental externalities canbereliablyestimated 8 and the exercise of doing so could provide very 9 valuable information to DOE in setting appliance 10 standards, and hopefully, eventually in the 11 development of incentive-based regulation for energy 12 use throughout the economy. Thank you very much. 13 PRESIDING OFFICIAL BERLIN: Thankyou. I 14 think you've provided some good insights and you've 15 done some significant work in this area. It's very 16 impressive. I don't have any specific questions 17 though, thank you. 18 Michael? 19 MR. McCABE: There have been a number of 20 comments that have been made over the last day or so 21 about how this is a national problem. You've touched 22 on it as well. And one could almost infer from your 23 statements that at this point in time you don't see 24 anyway that the impacts externalities effects canbe 25 developed for such a nationalprogramthat deals with

(202)797-2525 SAG,CORP 4218LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS60 1 products such as appliances when it is a local problem 2 at the source. Is that a correct characterization? 3 4 preclse. MR. BURTRAW: Let me try to make it more There is not currently off-the-shelf 5 estimates orevenan off-the-shelfmethodology for how 6 to think about national externality estimates that 7 would engender a consensus among practitioners. But 8 that was the case sixyears ago with regards, or seven 9 years ago, with regards to externality estimates at 10 the site-specific level where the issue then was sort 11 of how to think about the breadth of issues that are 12 involved, the breadth of potential externality 13 pathways, and the second best effects associated with 14 pre-existing regulation in the economy, etcetera, 15 etcetera. 16 And there's been tremendous advances made 17 in that literature over the last five or six or seven 18 years. So at the national level I think that it's an 19 exercise, and it's not beyond feasible. I think it's 20 is feasible to do so. But off-the-shelfestimates now 21 do not exist. I think that the costs, the marginal 22 costs, of extending the frontiers of this kind of 23 researchhavebeen fallingbecause ofit's replication 24 in various locales, particularly because of the path25 breakingwork, the DOE funded research providedin the SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 60 1 products suchas applianceswhen itis a localproblem 2 at the source. Is that a correct characterization? 3 MR. BURTRAW: Let me try to make it more 4 preclse. There is not currently off-the-shelf 5 estimatesorevenanoff-the-shelfmethodologyforhow 6 to think about national externality estimates that 7 would engender a consensus among practitioners. But 8 thatwas the case sixyears agowithregards, or seven 9 years ago, with regards to externality estimates at 10 the site-specific level where the issuethenwas sort 11 of how to think about the breadth of issues that are 12 involved, the breadth of potential externality 13 pathways, andthe secondbest effects associatedwith 14 pre-existing regulation in the economy, etcetera, 15 etcetera. 16 Andthere'sbeentremendous advancesmade 17 inthat literature over the last five or six or seven 18 years. So at the national level I think that it's an 19 exercise, and it's notbeyond feasible. I think it's 20 is feasible todo so. Butoff-the-shelfestimatesnow 21 do not exist. I think that the costs, the marginal 22 costs, of extending the frontiers of this kind of 23 researchhavebeenfallingbecauseofit'sreplication 24 invarious locales, particularlybecause of thepath25 breakingwork, theDOE fundedresearchprovidedinthe

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS61 1 first place. 2 3 4 5 6 MR. McCABE: Thank you. PRESIDING OFFICIAL BERLIN: Gene? MR. MARGOLIS: I have no questions. PRESIDING OFFICIAL BERLIN: Howard? MR. GRUENSPECHT: You raised, I guess, the 7 issues of the magnitude for the conventional 8 pollutants beingrelatively small, althoughvaryingon 9 a site-specific basis. And then you cited some of 10 the, I think Rich Gilbert's work with regard to 11 existing differences between price and marginal cost. 12 While I understand that it's a site by site issue, 13 just given the relative magnitude, say, you know, is 14 there some sense in which it's sort of not worth 15 looking at? I mean could you get into the relative 16 magnitudes a little bit more and try to address the 17 issue of, you know, yes there may be some externality 18 value that we can come up, but given that, we're then 19 bringing that into a framework or price of marginal 20 cost diverge, is there really anything that public 21 policy ought to be doing with such a thing? 22 MR. BURTRAW: Yes. This kind of question 23 makes mypalms sweat literally. The reason is thatwe 24 have learned to be very cautious with regards to any 25 kind of blanket statement about, well, how big are SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 61 1 first place. 2 MR. McCABE: Thank you. 3 PRESIDING OFFICIAL BERLIN: Gene? 4 MR. MARGOLIS: I have no questions. 5 PRESIDING OFFICIAL BERLIN: Howard? 6 MR. GRUENSPECHT: Youraised, I guess, the 7 issues of the magnitude for the conventional 8 pollutantsbeingrelativelysmall, althoughvaryingon 9 a site-specific basis. And then you cited some of 10 the, I think Rich Gilbert's work with regard to 11 existingdifferencesbetweenprice andmarginal cost. 12 While I understand that it's a site by site issue, 13 just given the relative magnitude, say, you know, is 14 there some sense in which it's sort of not worth 15 looking at? I mean could you get into the relative 16 magnitudes a little bit more and try to address the 17 issue of, you know, yes theremay be some externality 18 value thatwe can come up, but given that, we're then 19 bringing that into a framework or price of marginal 20 cost diverge, is there really anything that public 21 policy ought to be doing with such a thing? 22 MR. BURTRAW: Yes. This kind of question 23 makesmypalms sweat literally. Thereason is thatwe 24 have learned to be very cautious with regards to any 25 kind of blanket statement about, well, how big are

(202)797-2525 SAG,CORP 4218 LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS62 1 these things. 2 3 MR. GRUENSPECHT: Right. MR. BURTRAW: Because we've found them to 4 be several times bigger with regard just to the two 5 reference sites that we looked at in New Mexico and 6 Tennessee, several times different for different 7 environmental pathways. 8 But I think it might be fair to say that 9 with regards to summing all externalities associated 10 withconventionalpathways andconventionalpollutants 11 that is excluding what has been

-- it is important to 12 know what has been excluded by these studies. 13 Ecological effects have been excluded, C02 have been 14 excluded, which as you know are potentially very big. 15 What we're left with is externality estimates on the 16 environmental side of less than a cent per kilowatt 17 hour, more or less. You know, maybe seven mills per 18 kilowatt hour, maybe a tenth of that, maybe twice 19 that, but it's going to be somewhere in that range 20 with everything summed up. And that is associated 21 with

-- that might be high with regards to the results 22 ofthe New York study I think. So there you might see 23 more often than not estimates that are a little bit 24 smaller than that. 25 There are so many things to keep in mind SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 62 1 these things. 2 MR. GRUENSPECHT: Right. 3 MR. BURTRAW: Becausewe've found themto 4 be several times bigger with regard just to the two 5 reference sites that we looked at in New Mexico and 6 Tennessee, several times different for different 7 environmental pathways. 8 But I think it might be fair to say that 9 with regards to summing all externalities associated 10 withconventionalpathwaysandconventionalpollutants 11 that is excludingwhat has been

-- it is important to 12 know what has been excluded by these studies. 13 Ecological effects have been excluded, C02 have been 14 excluded, which as you know arepotentiallyverybig. 15 What we're left with is externality estimates on the 16 environmental side of less than a cent per kilowatt 17 hour, more or less. You know, maybe seven mills per 18 kilowatt hour, maybe a tenth of that, maybe twice 19 that, but it's going to be somewhere in that range 20 with everything summed up. And that is associated 21 with

-- thatmightbehighwithregards totheresults 22 oftheNew York study I think. So thereyoumight see 23 more often than not estimates that are a little bit 24 smaller than that. 25 There are so many things to keep in mind

(202)797-2525 SAG,CORP 4218LENORELANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS63 1 when just reporting an estimate, that I have to take 2 a second and qualify it further. For example, in 3 thinking about employmentbenefits, ifone is going to 4 admit them, or the fiscal benefits if one is going to 5 permit them. It's not simply the case that, you know, 6 there might be an environmental externality, but an 7 employment so the two are offsetting so you can forget 8 about it. Because the use ofthis information at this 9 juncture is not in the calculation of some sort of 10 emissions fee that's going to put our externality fee 11 even more broadly than is going to be put on a fuel 12 cycle. Rather it's putting a wedge or a shadow price 13 between the fuel cycles for planning or for dispatch 14 purposes. 15 So one has to net out the employment, the 16 difference in employment effects. I meant there is 17 employment benefits associated with fuel cycles. And 18 there is externalitydamages basicallyassociatedwith 19 all fuel cycles. So one has to bring them all into 20 the calculation and then compare them side by side and 21 see what the wedge is in terms of these social costs 22 between the different fuel cycles. 23 But to bite the bullet and get out your 24 questionwith regards to the orderofmagnitude, there 25 you have it. Now, there has been some simulation work SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 63 1 when just reporting an estimate, that I have to take 2 a second and qualify it further. For example, in 3 thinkingaboutemploymentbenefits, ifoneisgoingto 4 admit them, orthe fiscal benefits if one is goingto 5 permitthem. It'snot simplythe casethat, youknow, 6 there might be an environmental externality, but an 7 employment sothetwo areoffsettingsoyoucanforget 8 about it. Becausetheuseofthis information atthis 9 juncture is not in the calculation of some sort of 10 emissions fee that's goingto put our externality fee 11 even more broadly than is going to be put on a fuel 12 cycle. Rather it's puttinga wedge or a shadowprice 13 between the fuel cycles for planning or for dispatch 14 purposes. 15 So one has to net outthe employment, the 16 difference in employment effects. I meant there is 17 employmentbenefits associatedwith fuel cycles. And 18 thereisexternalitydamagesbasicallyassociatedwith 19 all fuel cycles. So one has to bring them all into 20 thecalculation andthencomparethemsideby sideand 21 see what the wedge is in terms of these social costs 22 between the different fuel cycles. 23 But to bite the bullet and get out your 24 questionwithregardstotheorderofmagnitude, there 25 youhave it. Now, therehasbeen some simulationwork

(202)797-2525 SAG,CORP 4218 LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS64 1 done by colleagues ofmine at Resources for the Future 2 in terms ofwhat type ofeffect this wouldhave either 3 in planning or dispatch for a prototypical mid4 Atlantic utility which reflects actually sort of a 5 it's been done, we've repeated this work a couple of 6 times, it's beendone in one case representing sort of 7 a hypothetical utility, and in another case it was 8 veryutility-specific. Andwhenexternalityestimates 9 were that small, they would not for planning 10 purposes it turns outthat really doesn't have much of 11 an effect on the utility, the wedge isn't big enough. 12 And this has also been found in New York 13 State in a recent paper written by Bob Rowe and Rick 14 Freeman, that when these externalities estimates are 15 of that order of magnitude it's not having effect. 16 But in the New York case there was no inclusion ofthe 17 fiscal effects or employment effects. And if those 18 things head in the same direction, you then could get 19 this wedge being bigger and it would have an effect. 20 Secondly, ifyou look at dispatch the RFF 21 work suggests that this sort of magnitude begins to 22 have an effect. And, if you take into account the 23 kind of externalities that are applied based on cost 24 and control method in Massachusetts, then there is a 25 very definite effect. And then further, if you take SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 64 1 donebycolleaguesofmineatResources fortheFuture 2 interms ofwhattypeofeffectthiswouldhaveeither 3 in planning or dispatch for a prototypical mid4 Atlanticutilitywhich reflects actually sort of a 5 it's been done, we've repeated this work a couple of 6 times, it'sbeendone inonecaserepresenting sortof 7 a hypothetical utility, and in another case it was 8 veryutility-specific. Andwhenexternalityestimates 9 were that small, they would not for planning 10 purposes itturns outthatreallydoesn'thavemuchof 11 an effecton the utility, thewedge isn'tbigenough. 12 And this has also been found in New York 13 State in a recent paper written by Bob Rowe and Rick 14 Freeman, that when these externalities estimates are 15 of that order of magnitude it's not having effect. 16 ButintheNew Yorkcasetherewas no inclusionofthe 17 fiscal effects or employment effects. And if those 18 things head inthe same direction, you then could get 19 this wedge being bigger and it would have an effect. 20 Secondly, ifyou look at dispatchthe RFF 21 work suggests that this sort of magnitude begins to 22 have an effect. And, if you take into account the 23 kind of externalities that are applied based on cost 24 and control method in Massachusetts, then there is a 25 very definite effect. And then further, if you take

(202)797-2525 SAG,CORP 4218 LENORELANE, NW. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS1 a look at average externalities, 65 externalities 2 associated with average resource mix rather than the 3 relatively efficient and clean resources that are 4 being added at the margin, then these estimates are 5 going to be two or three or four times larger 6 probably. 7 Somyhands are still sweating, butthat's 8 the best I can qualify it. 9 10 questions. 11 12 MR. GRUENSPECHT: I don't have any further

PRESIDING OFFICIAL BERLIN: Thank you. Robert Sansom please? 13 MR. SANSOM: Good morning. My name is 14 Robert L. Sansom. I'm testifying on behalf of the 15 National Coal Association. 16 I understand it's the panel's desire that 17 we summarize our statements ratherthan readthem, and 18 I'm sure the witnesses has the privilege of assuming 19 that you're read our detailed statements carefully. 20 First of all legal authority, I was 21 surprised to hear at yesterday's hearing somebody 22 stated that the basis is paragraph 6 of "The need for 23 national energy conservation." I can't see anything 24 that gives you the legal authority to do what you're 25 proposing to do with this advance notice. SAG,CORP 4218 LENORE LANE. NW. WASHINGTON, D.C. 20008 The

(202) 797-2525 VIDEO; TRANSCRIPTIONS 65 1 a look at average externalities, externalities 2 associated with average resource mix rather than the 3 relatively efficient and clean resources that are 4 being added at the margin, then these estimates are 5 going to be two or three or four times larger 6 probably. 7 Somyhands are still sweating, butthat's 8 the best I can qualify it. 9 MR. GRUENSPECHT: I don'thaveanyfurther 10 questions. 11 PRESIDING OFFICIAL BERLIN: Thank you. 12 Robert Sansom please? 13 MR. SANSOM: Good morning. My name is 14 Robert L. Sansom. I'm testifying on behalf of the 15 National Coal Association. 16 I understand it's thepanel's desirethat 17 we summarizeour statementsratherthanreadthem, and 18 I'm sure the witnesses has the privilege of assuming 19 that you're read our detailed statements carefully. 20 First of all legal authority, I was 21 surprised to hear at yesterday's hearing somebody 22 statedthat the basis is paragraph 6 of "The need for 23 national energy conservation." I can't see anything 24 that gives you the legal authority to do what you're 25 proposing to do with this advance notice. The

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.20008 VIDEO;TRANSCRIPTIONS66 1 rationale that somehow if you conserve energy, you 2 reduce emissions seems to me to be about analogous to 3 the rationale that, ifyou conserve energyyou promote 4 savings and therefore DOE out to go into the savings 5 and loan business. 6 My concern about your legal authority is 7 heightened by the rulemaking's description of how the 8 externality value would be applied in the appliance 9 setting process. The rulemaking suggests that there 10 will be a kitty set up, an externalities kitty, and 11 that kitty will be used to adjust the net benefits 12 evaluation in setting the appliance standard. We 13 don't know whether that kitty is $10 million, one 14 dollar, $100 million, a billion dollars, but it seems 15 to me to be just the kind of thing where a bureaucrat 16 would be requiring the discretion to tweak the 17 appliance standards quite outside the realm of the 18 intent of Congress and the specific directions you 19 have to look at life cycle cost and the other 20 considerations. 21 Theotherthingabout legal authoritythat 22 jumps out is the fact that

-- well, let me tell a 23 story. I was testifying one time before Congress for 24 CongressmanWhittenwithmyAdministratorRuckelshaus, 25 and he said with regard to environmental regulation SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 66 1 rationale that somehow if you conserve energy, you 2 reduce emissions seems to me tobe about analogous to 3 therationalethat, ifyouconserveenergyyoupromote 4 savings and therefore DOE out to go into the savings 5 and loan business. 6 My concern about your legal authority is 7 heightenedbythe rulemaking's descriptionof howthe 8 externality value would be applied in the appliance 9 settingprocess. The rulemaking suggests that there 10 will be a kitty set up, an externalities kitty, and 11 that kitty will be used to adjust the net benefits 12 evaluation in setting the appliance standard. We 13 don't know whether that kitty is $10 million, one 14 dollar, $100 million, a billiondollars, but it seems 15 tome to be just the kind of thingwhere a bureaucrat 16 would be requiring the discretion to tweak the 17 appliance standards quite outside the realm of the 18 intent of Congress and the specific directions you 19 have to look at life cycle cost and the other 20 considerations. 21 Theotherthingaboutlegalauthoritythat 22 jumps out is the fact that

-- well, let me tell a 23 story. I was testifyingone time before Congress for 24 CongressmanWhittenwithmyAdministratorRuckelshaus, 25 and he said with regard to environmental regulation

(202)797·2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS67 1 that we hadmore power than a goodman needs and a bad 2 man should have. And I submit in the environmental 3 area, you don't, the EPA does. This rulemaking 4 actually says, to my utter astonishment, that you're 5 going to duplicate EPA's actions in ambient air 6 standard setting, because you're going to look at the 7 back-up studies on your own and arrive at your own 8 conclusion of whether EPA has done this properly. 9 The rulemaking suggests that you're going 10 to predict how EPA is going to change ambient air 11 standards in the future. And then the rulemaking 12 suggests that you know something about least cost 13 compliance planning and that the compliance standards 14 will somehow have an effect on the cost of compliance 15 in meeting environmental regulations. It seems to me 16 all those are areas outside your expertise and your 17 delegated authority by the Congress, and it suggests 18 to me that you're on the wrong track. 19 Theotherthingabout legal authoritythat 20 struck me was the statement in the C02 section, that 21 even though all damage assessments from C02 were 22 speculative, which I agreed with and I think is an 23 accurate statement, but the rulemaking procedure 24 proceeds to then say that the public has shown no 25 willingness to pay for the C02 reductions, an accurate SAG, CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 67 1 thatwe hadmorepowerthan a goodman needs anda bad 2 man should have. And I submit in the environmental 3 area, you don't, the EPA does. This rulemaking 4 actually says, to my utter astonishment, that you're 5 going to duplicate EPA's actions in ambient air 6 standard setting, because you're goingto look at the 7 back-up studies on your own and arrive at your own 8 conclusion of whether EPA has done this properly. 9 Therulemaking suggests thatyou're going 10 to predict how EPA is going to change ambient air 11 standards in the future. And then the rulemaking 12 suggests that you know something about least cost 13 complianceplanningandthat the compliance standards 14 will somehowhave an effect on the cost of compliance 15 inmeetingenvironmental regulations. It seems tome 16 all those are areas outside your expertise and your 17 delegated authority by the Congress, and it suggests 18 to me that you're on the wrong track. 19 Theotherthingaboutlegalauthoritythat 20 struckme was the statement in the C02 section, that 21 even though all damage assessments from C02 were 22 speculative, which I agreed with and I think is an 23 accurate statement, but the rulemaking procedure 24 proceeds to then say that the public has shown no 25 willingnesstopayfortheC02 reductions, anaccurate

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.20008 VIDEO;TRANSCRIPTIONS68 1 statement. And then absent all that, the rulemaking 2 proceeds to point out that the President and the Vice 3 President somehow believe that while there may not be 4 short term effects of C02 reductions, there are long 5 term effects. 6 Now, as a regulator I have been faced on 7 numerous occasions with somebody from the White House 8 telling me what the President thought, and the answer 9 was always what our legal authority gave us the 10 ability to do regardless of what the President 11 thought. But I can't think that I've ever seen in the 12 rulemaking a citation of the President and Vice 13 President as an authority for what should be done. 14 I'm sure the President and Vice President know how to 15 proceed with the Congress and seek to get the 16 authority to do what they believe is right, but I 17 don't think it's appropriate rulemaking to quote them 18 as sources for externality value. 19 The second area I'd like to address 20 briefly is the lack of environmental knowledge 21 demonstrated by the rulemaking and certainly the lack 22 an analytical environmental knowledge. If you review 23 the rUlemaking, you have the feeling that you're in 24 pittsburgh in the 1960s with regard to air quality and 25 environmental quality.SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 68 1 statement. And then absent all that, the rulemaking 2 proceeds to point out thatthe President andthe Vice 3 President somehowbelieve thatwhile theremay not be 4 short term effects of C02 reductions, there are long 5 term effects. 6 Now, as a regulator I have been faced on 7 numerous occasions with somebody fromtheWhite House 8 tellingme what the President thought, and the answer 9 was always what our legal authority gave us the 10 ability to do regardless of what the President 11 thought. But I can'tthinkthat I'veever seeninthe 12 rulemaking a citation of the President and Vice 13 President as an authority for what should be done. 14 I'm sure the President andVice President knowhow to 15 proceed with the Congress and seek to get the 16 authority to do what they believe is right, but I 17 don't think it's appropriate rulemakingto quote them 18 as sources for externality value. 19 The second area I'd like to address 20 briefly is the lack of environmental knowledge 21 demonstratedbythe rulemaking and certainlythe lack 22 an analytical environmental knowledge. If you review 23 the rulemaking, you have the feeling that you're in 24 Pittsburghinthe 1960swithregardto airqualityand 25 environmental quality.

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.20008 VIDEO;TRANSCRIPTIONS1 69 I don't know how many of you have read 2 this document, this is the latest report on air 3 quality status in the united States issued by EPA. I 4 assume you all have that on your bookshelves since 5 you're now becoming environmental rulemakers. But it 6 turns out that 77 percent of the population lives in 7 areas that are in full compliance with air quality 8 standards. Therefore, if you're imposing a cost on 9 appliances, 77 percent of the people are paying the 10 cost for which they're getting no benefit. 11 Thenwhenthe rulemakingproceeds intothe 12 details ofthe environmental compliance and status and 13 attempts to develope a methodology for finding an 14 externality value, it notes correctly I think that 15 first of all it doesn't note about the percent of the 16 country where there are no externalities, but it does 17 not for the areas not in compliance that if those 18 areas are capped, emissions are capped inthose areas, 19 thatthe appliance standardwill have no environmental 20 effect because it won't change the total level of 21 emissions. 22 Then the rulemaking appears to surrender 23 to that possibility without quantifying it or 24 analyzing it and say well by the way maybe there isn't 25 any externality, but the appliance standards by SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 69 1 I don't know how many of you have read 2 this document, this is the latest report on air 3 quality status in the united States issuedbyEPA. I 4 assume you all have that on your bookshelves since 5 you're now becomingenvironmental rulemakers. But it 6 turns out that 77 percent of the population lives in 7 areas that are in full compliance with air quality 8 standards. Therefore, if you're imposing a cost on 9 appliances, 77 percent of the people are paying the 10 cost for which they're getting no benefit. 11 Thenwhentherulemakingproceedsintothe 12 detailsoftheenvironmentalcomplianceandstatus and 13 attempts to develope a methodology for finding an 14 externalityvalue, itnotes correctly I think that 15 first of all it doesn't note about the percent of the 16 countrywhere there are no externalities, but itdoes 17 not for the areas not in compliance that if those 18 areas arecapped, emissions arecappedinthoseareas, 19 thattheappliancestandardwillhavenoenvironmental 20 effect because it won't change the total level of 21 emissions. 22 Then the rulemaking appears to surrender 23 to that possibility without quantifying it or 24 analyzingitand saywellbythewaymaybethere isn't 25 any externality, but the appliance standards by

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.20008 VIDEO;TRANSCRIPTIONS70 1 reducing electricity consumption will somehow reduce 2 the cost of compliance without changing the net 3 environmental effect. And this is rank speculation. 4 There is no analysis to support this whatsoever. But 5 there is a claim somehowthat the state implementation 6 plans will be effected, and I don't think that's 7 defensible, it's just speculation. 8 I think it's been noted here today, and I 9 understand yesterday, that this national level is a 10 totally inappropriate level to engage in this kind of 11 analysis or attempted analysis or speculation. 

### If 12 there are any environmental externalities, they're 13 best addressed at highly localized levels, not at the 14 national level. And of course there are the 15 procedures in place under the environmental 16 legislation to do that. States are permitted and 17 localities are permitted to impose more stringent 18 standards than the national environmental standards 19 and national legislation. 20 Then we get to the question of how do you 21 value externalities. I think it's pretty well agreed 22 that the cost control method is intellectually unsound 23 and empirically meaningless. And I was glad to hear 24 the previous witness say more or less the same thing, 25 although he wasn't willing to totally disregard the SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 70 1 reducing electricity consumption will somehow reduce 2 the cost of compliance without changing the net 3 environmental effect. And this is rank speculation. 4 There is no analysis to support this whatsoever. But 5 thereis a claimsomehowthatthe stateimplementation 6 plans will be effected, and I don't think that's 7 defensible, it's just speculation. 8 I think it's been noted here today, and I 9 understand yesterday, that this national level is a 10 totally inappropriate level to engage in this kind of 11 analysis or attempted analysis or speculation. 

### If 12 there are any environmental externalities, they're 13 best addressed at highly localized levels, not at the 14 national level. And of course there are the 15 procedures in place under the environmental 16 legislation to do that. States are permitted and 17 localities are permitted to impose more stringent 18 standards than the national environmental standards 19 and national legislation. 20 Then we get to the question of how do you 21 value externalities. I think it's prettywell agreed 22 thatthecostcontrolmethodisintellectuallyunsound 23 and empiricallymeaningless. And I was glad to hear 24 the previous witness saymore or less the same thing, 25 although he wasn't willing to totally disregard the

(202) 797-2525 SAG,CORP 4218 LENORELANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS1 cost of control method in the case of C02. 71 I think 2 it's clearnowthat the cost of control advocates were 3 nothing more than energy tax advocates, and to the 4 extentthat yourrulemakingtakes that approach, it is 5 akin to the efforts to impose a BTU tax which have 6 been rejected. 7 On the damage analysis, DOE does not 8 really in the rulemaking attempt to do a damage 9 analysis as a basis for an externality estimate. And 10 I would note and I hope you've seen the OTA study that 11 I would recommend to you that's come out this fall 12 that effectively labels all of these fuel cycle 13 studies as subjective and analysis by assumption. 14 I know the previous witness was here to 15 thank you for studying his study and looking for 16 further studies from DOE, but I think you should read 17 the OTA study and consider the value of continuing to 18 do this sort of analysis. The previous witness 19 actually had the energy to suggest that maybe if his 20 analysis were furthered that the kinds of questions 21 you're asking in this rulemaking one day would be 22 answerable even though they weren't answerable today. 23 So what happens in the rulemaking is the 24 language proceeds to admit the cost of control method 25 doesn't give you an externality value, it fails to SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 71 1 cost of control method in the case of C02. I think 2 it's clearnowthatthe costof control advocateswere 3 nothing more than energy tax advocates, and to the 4 extentthatyourrulemakingtakesthatapproach, itis 5 akin to the efforts to impose a BTU tax which have 6 been rejected. 7 On the damage analysis, DOE does not 8 really in the rulemaking attempt to do a damage 9 analysis as a basis for an externalityestimate. And 10 I wouldnote and I hopeyou've seentheOTA studythat 11 I would recommend to you that's come out this fall 12 that effectively labels all of these fuel cycle 13 studies as subjective and analysis by assumption. 14 I know the previous witness was here to 15 thank you for studying his study and looking for 16 further studies fromDOE, but I thinkyou shouldread 17 the OTA study and considerthe value of continuingto 18 do this sort of analysis. The previous witness 19 actually had the energy to suggest that maybe if his 20 analysis were furthered that the kinds of questions 21 you're asking in this rulemaking one day would be 22 answerable eventhoughtheyweren't answerable today. 23 So what happens in the rulemaking is the 24 languageproceeds to admit the cost of controlmethod 25 doesn't give you an externality value, it fails to

(202)797-2525 SAG,CORP 4218LENORELANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS72 1 provide a damage estimate approach to any externality 2 values, and then it goes down basically to the 3 question of how do we average the monetization values 4 inthe seven states thathavemonetizedexternalities. 5 And I submit to you that this is a low point in 6 federal rulemaking. What in the world, how would one 7 average 43 states that have a zero externality value 8 with seven states, which is now six as a result of the 9 Massachusetts decision, who have monetized 10 externalities. 11 I suggest on page 13 in my testimony 12 several options which are offered really tongue-in13 cheek. You can leave the states alone and stay out of 14 it. You could take the median, the median would be 15 zero. You might think about a two-appliance strategy 16 so people who really want to impose these monetized 17 externalities on themselves can have more expensive 18 appliances, and the rest of us who don't want to 19 engage in this kind of speculation can enjoy an un20 monetized externality when we go to the store and 21 purchase. And of course obviously my recommendation 22 is that you should reject this entire approach. 23 Now, the other thing I raise in my 24 testimony that I think is important, and a lot more 25 important than externalities, are the effects of a SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 72 1 providea damage estimate approach to any externality 2 values, and then it goes down basically to the 3 question of how do we average themonetizationvalues 4 inthe sevenstatesthathavemonetizedexternalities. 5 And I submit to you that this is a low point in 6 federal rulemaking. What in the world, how would one 7 average 43 states that have a zero externality value 8 with seven states, which isnow sixas a resultof the 9 Massachusetts decision, who have monetized 10 externalities. 11 I suggest on page 13 in my testimony 12 several options which are offered really tongue-in13 cheek. You can leavethe states alone and stayout of 14 it. You could take the median, the median would be 15 zero. You might think about a two-appliance strategy 16 so people who really want to impose these monetized 17 externalities on themselves can have more expensive 18 appliances, and the rest of us who don't want to 19 engage in this kind of speculation can enjoy an un20 monetized externality when we go to the store and 21 purchase

. And of course obviously my recommendation 22 is that you should reject this entire approach. 23 Now, the other thing I raise in my 24 testimony that I think is important, and a lot more 25 important than externalities, are the effects of a

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.20008 VIDEO;TRANSCRIPTIONS73 1 more stringent appliance standards on people with low 2 income. Now, it may be, and I'll admit that I'm not 3 familiar with your record, but it seems to me, ifyou 4 raise the cost of appliances through some artificial 5 externality value that allows you to take your kitty 6 and crank up the stringency of the conservation 7 standard applicable to an appliance, that you're 8 impacting disproportionately low income people. And 9 I've got a table in there that shows how much people, 10 low income people, spend for electricity. And that 11 you should address that. 12 And I suggest at the same time that you 13 address the issue of the turnover of appliances, 14 because ifyou increase the price of appliances, then 15 you retard the turnover and then you increase the 16 emissions. And of course you also put a burden on 17 those who are unable to afford the more efficient 18 appliance. I mean if you look at the ozone problem 19 and look at the clunker cars that contribute to the 20 ozone problem, you have the same potential problem if 21 you raised the cost of appliances beyond the ability 22 of certain income groups to buy those appliances. 23 So I guess in conclusion what I would say 24 is, I certainly applaud the concept of appliance 25 standards for energy conservation purposes, and I SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 73 1 more stringent appliance standards onpeoplewith low 2 income. Now, it may be, and I'll admit that I'm not 3 familiar with your record, but it seems to me, ifyou 4 raise the cost of appliances through some artificial 5 externality value that allows you to take your kitty 6 and crank up the stringency of the conservation 7 standard applicable to an appliance, that you're 8 impacting disproportionately low income people. And 9 I've got a table in there that shows how much people, 10 low income people, spend for electricity. And that 11 you should address that. 12 And I suggest at the same time that you 13 address the issue of the turnover of appliances, 14 because ifyou increasetheprice of appliances, then 15 you retard the turnover and then you increase the 16 emissions. And of course you also put a burden on 17 those who are unable to afford the more efficient 18 appliance. I mean if you look at the ozone problem 19 and look at the clunker cars that contribute to the 20 ozoneproblem, you have the samepotential problemif 21 you raised the cost of appliances beyond the ability 22 of certain income groups to buy those appliances. 23 So I guess in conclusionwhat I would say 24 is, I certainly applaud the concept of appliance 25 standards for energy conservation purposes, and I

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.20008 VIDEO;TRANSCRIPTIONS74 1 think you are undermining your credibility and the 2 credibility of the federal government, if you engage 3 in this extracurricular activity of trying to bring 4 externality values into the legitimate appliance 5 standard-setting process. Thank you. 6 PRESIDING OFFICIAL BERLIN: Thank you. I 7 have no questions. 8 Mike? 9 10 MR. McCABE: No questions. PRESIDING OFFICIAL BERLIN: Gene? 11 MR. MARGOLIS: No questions. Thank you 12 for your testimony. 13 PRESIDING OFFICIAL BERLIN: Howard? 14 MR. GRUENSPECHT: One question. The 15 discussion of environmental issues in the context of 16 appliance standards, do youobject specificallyto the 17 development of externality values or do you object 18 more generally to the consideration of environmental 19 information in the setting of appliance standards? I 20 think it 1s been described "yesterday and earlier 21 today," that already in the technical support 22 documents that are used in support of decisions 23 regarding appliance standards there is quantitative 24 information presented about environmental 25 implications.

(202) 797-2525 SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 74 1 think you are undermining your credibility and the 2 credibility of the federal government, if you engage 3 in this extracurricular activity of trying to bring 4 externality values into the legitimate appliance 5 standard-settingprocess. Thank you. 6 PRESIDING OFFICIAL BERLIN: Thankyou. I 7 have no questions. 8 Mike? 9 MR. McCABE: No questions. 10 PRESIDING OFFICIAL BERLIN: Gene? 11 MR. MARGOLIS: No questions. Thank you 12 for your testimony. 13 PRESIDING OFFICIAL BERLIN: Howard? 14 MR. GRUENSPECHT: One question. The 15 discussion of environmental issues in the context of 16 appliancestandards, doyouobject specificallytothe 17 development of externality values or do you object 18 more generally to the consideration of environmental 19 information inthe settingof appliance standards? I 20 think it's been described "yesterday and earlier 21 today," that already in the technical support 22 documents that are used in support of decisions 23 regarding appliance standards there is quantitative 24 information 25 implications. presented about

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(202)797-2525 VIDEO;TRANSCRIPTIONS1 75 MR. SANSOM: Correct. 2 MR. GRUENSPECHT: And I wasn't sure 3 whether your argument applied specifically to 4 externality values or objection to the whole 5 considerationbecause that's the grounds of some other 6 agency. 7 MR. SANSOM: No, the only thing I 8 addressed was your advanced notice of proposed 9 rulemaking and the externality issue in that context. 10 I understand somebody did raise the issue of the 11 utility of these tonnage estimates. 12 MR. GRUENSPECHT: Right. 13 MR. SANSOM: My problem is I haven't 14 reviewed them. And I've found in the past, I mean if 15 you look at the EPA document, they have tonnage 16 estimates, and I didn't know whether the NEPA was 17 applied to you in any way which would require you to 18 do a tonnage estimate in the context of rulemaking. 19 If it does, then it seems to me that's a NEPA 20 requirement that you have to meet. I would say that 21 I haven't found tonnage estimates very useful. 22 23 MR. GRUENSPECHT: Right. MR. SANSOM: And I don't think they are 24 generally useful at a national level, but at the same 25 time, not havingexaminedhowthey're used, I wouldn't SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 75 1 MR. SANSOM: Correct. 2 MR. GRUENSPECHT: And I wasn't sure 3 whether your argument applied specifically to 4 externality values or objection to the whole 5 considerationbecausethat'sthegroundsof someother 6 agency. 7 MR. SANSOM: No, the only thing I 8 addressed was your advanced notice of proposed 9 rulemaking and the externalityissue inthat context. 10 I understand somebody did raise the issue of the 11 utility of these tonnage estimates. 12 MR. GRUENSPECHT: Right. 13 MR. SANSOM: My problem is I haven't 14 reviewed them. And I've found in the past, I mean if 15 you look at the EPA document, they have tonnage 16 estimates, and I didn't know whether the NEPA was 17 applied to you in any way which would require you to 18 do a tonnage estimate in the context of rulemaking. 19 If it does, then it seems to me that's a NEPA 20 requirement that you have to meet. I would say that 21 I haven't found tonnage estimates very useful. 22 MR. GRUENSPECHT: Right. 23 MR. SANSOM: And I don't think they are 24 generallyuseful at a national level, but at the same 25 time, nothavingexaminedhowthey'reused, I wouldn't

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.20008 VIDEO;TRANSCRIPTIONS76 1 want to go beyond that. 2 3 4 MR. GRUENSPECHT: Let me go further. MR. SANSOM: Okay. MR. GRUENSPECHT: Other than the sort of 5 the presentation due to some requirement, do you 6 believe that environmental implications, whether 7 reflected in tonnage estimates or externality values 8 can legitimately bear on the decision regarding what 9 appliance efficiency standard is to be adopted? 10 MR. SANSOM: My unstudied response would 11 be I don't think they do playa role. As I say in my 12 testimony, all emissions aren't pollution. And so 13 instinctively I am inclined to say that I don't see 14 the utility in that and I certainly don't see the 15 statutory requirement other than possibly NEPA. 16 17 MR. GRUENSPECHT: Right. MR. SANSOM: But not having examined how 18 they used, that's all I want to say. 19 PRESIDINGOFFICIALBERLIN: Thankyouvery 20 much. 21 Why don't we take a 20 minute break and 22 resume at about 11:35. 23 (Whereupon, at 11:15 a.m, a recess until 24 11:40 a.m.) 25

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VIDEO; TRANSCRIPTIONS 76 1 want to go beyond that. 2 MR. GRUENSPECHT: Let me go further. 3 MR. SANSOM: Okay. 4 MR. GRUENSPECHT: Other than the sort of 5 the presentation due to some requirement, do you 6 believe that environmental implications, whether 7 reflected in tonnage estimates or externality values 8 can legitimatelybear on the decision regarding what 9 appliance efficiency standard is to be adopted? 10 MR. SANSOM: My unstudied response would 11 be I don't think they do playa role. As I say inmy 12 testimony, all emissions aren't pollution. And so 13 instinctively I am inclined to say that I don't see 14 the utility in that and I certainly don't see the 15 statutory requirement other than possibly NEPA. 16 MR. GRUENSPECHT: Right. 17 MR. SANSOM: But not having examined how 18 they used, that's all I want to say. 19 PRESIDINGOFFICIALBERLIN: Thankyouvery 20 much. 21 Why don't we take a 20 minute break and 22 resume at about 11:35. 23 (Whereupon, at 11:15 a.m, a recess until 24 11:40 a.m.) 25

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VIDEO;TRANSCRIPTIONS77 1 speaker is Charles Samuels from AHAM. 2 MR. SAMUELS: Thank you very much. I'm 3 Charles Samuels. I serve as government's relations 4 counsel for the Association of Home Appliance 5 Manufacturers, and we appreciate the opportunity to 6 comment on this ANPR. 7 My colleague Terry Thiele from Frigidare 8 Corporation was also going to testify today. 9 Unfortunately he was unable to make it because of a 10 death in the family, but if you have any questions or 11 comments about his testimony, I'd be glad to take it 12 back to him or you should feel free to contact him 13 directly. 14 AHAM is frankly dismayed about the 15 issuance of the ANPR and we respectfully request that 16 you withdraw it as soon as possible. Obviously we're 17 primarily dismayed about the ANPR because it's a 18 blatant to boot-strap and justify more stringent 19 standards. But beyond that it shows an utter 20 disregardfortheprincipals ofreinventinggovernment 21 that Vice President Gore is attempting to impose on 22 the federal bureaucracyandthat Secretary 0'Learyhas 23 very warmly embraced. 24 TheANPRshows apreference for complexity 25 over simplicity and for diverting resources into SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 77 1 speaker is Charles Samuels from AHAM. 2 MR. SAMUELS: Thank you very much. I'm 3 Charles Samuels. I serve as government's relations 4 counsel for the Association of Home Appliance 5 Manufacturers, and we appreciate the opportunity to 6 comment on this ANPR. 7 My colleague Terry Thiele from Frigidare 8 Corporation was also going to testify today. 9 Unfortunately he was unable to make it because of a 10 death inthe family, but if you have any questions or 11 comments about his testimony, I'd be glad to take it 12 back to him or you should feel free to contact him 13 directly. 14 AHAM is frankly dismayed about the 15 issuance of the ANPR andwe respectfully request that 16 you withdraw it as soon as possible. Obviouslywe're 17 primarily dismayed about the ANPR because it's a 18 blatant to boot-strap and justify more stringent 19 standards. But beyond that it shows an utter 20 disregardfortheprincipalsofreinventinggovernment 21 that Vice President Gore is attempting to impose on 22 thefederalbureaucracyandthatSecretary0'Learyhas 23 very warmly embraced. 24 TheANPRshowsapreferenceforcomplexity 25 over simplicity and for diverting resources into

(202)797-2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS78 1 tangential andunproductiveefforts overconcentrating 2 on your core statutory activities. 3 Yesterday Secretary O'Leary testified 4 before the House Appropriations Committee and she had 5 very compelling and articulate testimony about the 6 importance of many of your missions and the efforts 7 that she's makingto streamlineprograms andmake them 8 as beneficial and cost effective as possible. This 9 ANPR undermines her position and damages her 10 credibilityand its proponents to serve her interests. 11 The ANPR would have you and the private 12 sector and other affected parties invest enormous 13 resources in a whole new undertaking for very little 14 gain. I think it's clear from the testimony over the 15 last day and a halfthat the substance andmethodology 16 of evaluating and monetizing externalities is 17 extremely unsettled even at the state utility level 18 where at least there is some direct relationship 19 betweenwhat is being attempted to be measured and the 20 activity that's being regulated unlike the situation 21 with appliance standards. So we can't understand why 22 you would attempt to factor such indirect tangential 23 and unquantifiable secondary intrutionary order 24 effects into your decision-making. 25 There was a lot of debate yesterday about SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 78 1 tangentialandunproductiveeffortsoverconcentrating 2 on your core statutory activities. 3 Yesterday Secretary O'Leary testified 4 before the HouseAppropriations Committee and she had 5 very compelling and articulate testimony about the 6 importance of many of your missions and the efforts 7 that she'smakingto streamlineprograms andmakethem 8 as beneficial and cost effective as possible. This 9 ANPR undermines her position and damages her 10 credibilityanditsproponentsto serveherinterests. 11 The ANPR would have you and the private 12 sector and other affected parties invest enormous 13 resources in a whole new undertaking for very little 14 gain. I think it's clear from the testimony over the 15 lastdayanda halfthatthe substanceandmethodology 16 of evaluating and monetizing externalities is 17 extremely unsettled even at the state utility level 18 where at least there is some direct relationship 19 betweenwhat is beingattemptedtobemeasured andthe 20 activity that's being regulated unlike the situation 21 with appliance standards. Sowe can't understandwhy 22 you would attempt to factor such indirect tangential 23 and unquantifiable secondary intrutionary order 24 effects into your decision-making. 25 Therewas a lot of debateyesterday about

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.20008 (202)797-2525 VIDEO;TRANSCRIPTIONS79 1 whetheryou had the basic authority to get involved in 2 externality analysis and apply it to appliance 3 standard decision-making, and I think a lot of 4 important issues have been raised. I don't have 5 anything to add to that legal authority debate, but 6 letme raise a separate legal question which is, think 7 through how this would work if you did make the error 8 to proceed with monetization of externalities. 9 You'll develope, you'll generate 10 fictitious numbers based on wildly speculative data, 11 you'll feed that into a pseudo-quantitative objective 12 analysis, the computer will come out with some 13 numbers, the three or four significant digits that 14 mean nothing. You'll have a new test on national 15 benefits that you'll then claim has had some effect 16 one way or another on your decision on appliance 17 standards, and you've just guaranteed that you've now 18 produced an arbitrary and capricious analysis under 19 the administrative procedure act and under NAECA that 20 can be successfully challenged not only by industry 21 but also by pro standards environmentalist groups. 22 And it's not necessary. You've got the 23 authority to make rational decisions under the 24 appliance standards program. Work on improving your 25 tools in that area that will allow you to make good SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 79 1 whetheryouhadthebasicauthoritytogetinvolvedin 2 externality analysis and apply it to appliance 3 standard decision-making, and I think a lot of 4 important issues have been raised. I don't have 5 anything to add to that legal authority debate, but 6 letme raisea separatelegalquestionwhichis, think 7 through how this wouldwork if you didmake the error 8 to proceed with monetization of externalities. 9 You'll develope, you'll generate 10 fictitious numbers based on wildly speculative data, 11 you'll feed that into a pseudo-quantitativeobjective 12 analysis, the computer will come out with some 13 numbers, the three or four significant digits that 14 mean nothing. You'll have a new test on national 15 benefits that you'll then claim has had some effect 16 one way or another on your decision on appliance 17 standards, andyou've justguaranteedthatyou've now 18 produced an arbitrary and capricious analysis under 19 the administrativeprocedure act andunderNAECA that 20 can be successfully challenged not only by industry 21 but also by pro standards environmentalist groups. 22 And it's not necessary. You've got the 23 authority to make rational decisions under the 24 appliance standards program. Work on improving your 25 tools in that area that will allow you to make good

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.20008 VIDEO;TRANSCRIPTIONS80 1 decisions without getting off on this wild goose 2 chase. 3 I wouldlike, the appliance industrywould 4 like DOE to concentrate on developing clear, 5 verifiable and representative test procedures. We'd 6 like you to concentrate on getting those test 7 procedures proposedandfinalizedbeforeyourproposed 8 energy standards that are based on those test 9 procedures. You haven't been able to do that thus 10 far. We want you to concentrate on developing 11 meaningful and verifiable engineering cost data and 12 modeling. We've worked with you on some of those 13 projects quite successfully. There's a lot more work 14 to be done in that area, that's what you should be 15 concentrating on. 16 Wewantyouto develope comprehensible and 17 valid manufacturer's impact analyses. We've very 18 pleased that you're moving toward adopting our 19 proposed government regulatory impact model. There 20 are still issues that need to be dealt with in 21 manufacturer's impact analysis. We'd like you to 22 concentrateyour resources on that, not onthis second 23 and third order significance type of analysis. 24 I think that if there are people in the 25 Department who are working on the appliance standards SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 80 1 decisions without getting off on this wild goose 2 chase. 3 I wouldlike, theapplianceindustrywould 4 like DOE to concentrate on developing clear, 5 verifiable and representative test procedures. We'd 6 like you to concentrate on getting those test 7 proceduresproposedandfinalizedbeforeyourproposed 8 energy standards that are based on those test 9 procedures. You haven't been able to do that thus 10 far. We want you to concentrate on developing 11 meaningful and verifiable engineering cost data and 12 modeling. We've worked with you on some of those 13 projects quite successfully. There's a lotmore work 14 to be done in that area, that's what you should be 15 concentrating on. 16 Wewantyoutodevelopecomprehensibleand 17 valid manufacturer's impact analyses. We've very 18 pleased that you're moving toward adopting our 19 proposed government regulatory impact model. There 20 are still issues that need to be dealt with in 21 manufacturer's impact analysis. We'd like you to 22 concentrateyourresourcesonthat, notonthis second 23 and third order significance type of analysis. 24 I think that if there are people in the 25 Departmentwho areworkingonthe appliance standards

(202)797·2525 SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS81 1 who don't find it useful or interesting or don't have 2 anything to contribute to these core elements, then 3 maybe they can find a more meaningful job somewhere 4 else other than trying to apply this exotic analysis 5 to appliance standards which are complicated and 6 difficult enough as it is. 7 I think as a generalmatterwe implore you 8 to concentrate your resources and try and prioritize 9 work on the matters that will have the most impact, 10 and try and develope expertise which will directly 11 allow appliance standards decision-making to make the 12 most sense. 13 We note grimly that among the second and 14 third order costs and negative effects that the ANPR 15 doesn't indicate any interest in. There's things like 16 lost emploYment, lostproduction, foregone investment 17 and innovation, disutility of product, and real but 18 difficult to measure environmental effects due to 19 additionaltransportationofbigger, heaviergoods, or 20 more energy that needs to be used for manufacture. 21 Ifyou want to get off on separate ANPRs, 22 why don't you issue an ANPR that looks at what the 23 impact was when freezer manufacturers and production 24 facilities went out of business in part due to the 25 impact of the last set of refrigerator standards. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 81 1 who don't find it useful or interestingor don't have 2 anything to contribute to these core elements, then 3 maybe they can find a more meaningful job somewhere 4 else other than trying to apply this exotic analysis 5 to appliance standards which are complicated and 6 difficult enough as it is. 7 I thinkas a generalmatterwe imploreyou 8 to concentrate your resources and try and prioritize 9 work on the matters that will have the most impact, 10 and try and develope expertise which will directly 11 allowappliance standards decision-makingtomakethe 12 most sense. 13 We note grimly that among the second and 14 third order costs and negative effects that the ANPR 15 doesn'tindicateanyinterestin. There'sthings like 16 lostemployment, lostproduction, foregone investment 17 and innovation, disutility of product, and real but 18 difficult to measure environmental effects due to 19 additionaltransportationofbigger, heaviergoods, or 20 more energy that needs to be used for manufacture. 21 Ifyouwant to get off on separateANPRs, 22 why don't you issue an ANPR that looks at what the 23 impact was when freezer manufacturers and production 24 facilities went out of business in part due to the 25 impact of the last set of refrigerator standards.

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.20008 VIDEO;TRANSCRIPTIONS82 1 Why don't you look at what the diversion 2 ofresources, the effect ofdiversion ofresources, is 3 on appliance manufacturers when instead of putting 4 time and money into making more innovative and 5 competitiveproducts worldwide, theyhave toputmoney 6 into meeting regulations which do not expand the 7 market or the number of units that are sold one whit. 8 Whydon't we take a look atthe cumulative 9 burden of your regulations, where the five full line 10 manufacturers have to meet sixor seven regulations at 11 a time all ofwhich are in various different stages of 12 change. 13 I mean, if you want to get into some 14 intellectually but useful separate endeavors other 15 than the regular appliance rulemaking, I think these 16 would be prime candidates. 17 What should you do now to get out of this 18 mess? Here's my recommendation, announce very 19 quickly, announce next week that you're withdrawing 20 this ANPR. This is an ANPR, not a proposed rule. You 21 don't have to send this out to a contractor to get the 22 comments summarized, you don't have to have dozens of 23 levels of approval, you don't have to have a 30 page 24 document that justifies pulling this ANPR. What I 25 recommend is that you put something in the Federal SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 82 1 Why don't you look at what the diversion 2 ofresources, theeffectofdiversionofresources, is 3 on appliance manufacturers when instead of putting 4 time and money into making more innovative and 5 competitiveproductsworldwide, theyhavetoputmoney 6 into meeting regulations which do not expand the 7 market or the number of units that are soldonewhit. 8 Whydon'twe takea lookatthecumulative 9 burden of your regulations, where the five full line 10 manufacturershavetomeet sixor sevenregulations at 11 a time allofwhich are invarious different stages of 12 change. 13 I mean, if you want to get into some 14 intellectually but useful separate endeavors other 15 than the regular appliance rulemaking, I think these 16 would be prime candidates. 17 What shouldyou do now to get out of this 18 mess? Here's my recommendation, announce very 19 quickly, announce next week that you're withdrawing 20 thisANPR. This is anANPR, not a proposedrule. You 21 don't have to sendthis outto a contractorto getthe 22 comments summarized, you don't have to have dozens of 23 levels of approval, you don't have to have a 30 page 24 document that justifies pulling this ANPR. What I 25 recommend is that you put something in the Federal

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.20008 VIDEO;TRANSCRIPTIONS83 1 Register as quickly as possible that simply states 2 that this is a controversial and a difficult issue and 3 that you simply don't have the time and resources to 4 deal with it. 5 And although I agree with many of the 6 substantive points that have been raised in the last 7 two days against the use of monetization of 8 externalities, I offer to you that you don't have to 9 accept those points, you don't have to settle those 10 points. All you have to do is determine that this is 11 just not something that makes sense in your agenda 12 givenbothyour existing limitedresources andwhat in 13 the future will be less resources, notmore resources. 14 So that would be my suggestion. 15 I think that would be, just as the 16 issuance of the ANPR was a very poor signal, the 17 Department has sort of been catching on to what's 18 happening in this country in terms of perception of 19 regulation. I think it would be a very positive 20 signal for you to act quickly and withdraw this ANPR 21 as soon as possible. I'd be happy to answer any 22 questions. 23 PRESIDING OFFICIAL BERLIN: Thank you, 24 Chuck. I have no questions. 25

(202) 797-2525 Michael? SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 83 1 Register as quickly as possible that simply states 2 thatthis is a controversial anda difficultissueand 3 that you simply don't have the time and resources to 4 deal with it. 5 And although I agree with many of the 6 substantive points that have been raised in the last 7 two days against the use of monetization of 8 externalities, I offer to you that you don't have to 9 accept those points, you don't have to settle those 10 points. All you have to do is determine that this is 11 just not something that makes sense in your agenda 12 givenbothyourexistinglimitedresources andwhat in 13 thefuturewillbe lessresources, notmoreresources. 14 So that would be my suggestion

. 15 I think that would be, just as the 16 issuance of the ANPR was a very poor signal, the 17 Department has sort of been catching on to what's 18 happening in this country in terms of perception of 19 regulation. I think it would be a very positive 20 signal for you to act quickly and withdraw this ANPR 21 as soon as possible. I'd be happy to answer any 22 questions. 23 PRESIDING OFFICIAL BERLIN: 24 Chuck. I have no questions. 25 Michael?

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.20008 Thank you,

VIDEO;TRANSCRIPTIONS1 2 3 4 5 6 MR. McCABE: No questions. PRESIDING OFFICIAL BERLIN: Gene? MR. MARGOLIS: I have no questions. PRESIDING OFFICIAL BERLIN: Howard? MR. GRUENSPECHT: No questions. PRESIDING OFFICIAL BERLIN: Thank you.84

7 The last scheduled speaker is Joseph Van 8 Den Berg from Edison Electric. 9 MR. VAN DEN BERG: If I sit on this side, 10 am I on the left side of things, and if I sit on this 11 side, am I on the right side of things today? 12 PRESIDING OFFICIAL BERLIN: It's a state 13 of mind more than a physical thing. 14 MR. VAN DEN BERG: Well, in that case I'll 15 sit over here so I'm on the good side. Thank you very 16 much for allowing me to be the last speaker of the 17 day. It's always nice. Mike tried to explain he was 18 saving the best for last, but given what I've heard 19 and I think what you have all heard I think you're 20 basically going to find that you've saved the last for 21 last as an awful lot of what I have to say you've 22 heard before. 23 I understand also that Mr. Margolis would 24 like me to read my testimony from the very beginning 25 to the very end, so let me see if I can begin. No, I SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 84 1 MR. McCABE: No questions. 2 PRESIDING OFFICIAL BERLIN: Gene? 3 MR. MARGOLIS: I have no questions. 4 PRESIDING OFFICIAL BERLIN: Howard? 5 MR. GRUENSPECHT: No questions. 6 PRESIDING OFFICIAL BERLIN: Thank you. 7 The last scheduled speaker is Joseph Van 8 Den Berg from Edison Electric. 9 MR. VAN DEN BERG: If I sit on this side, 10 am I on the left side of things, and if I sit on this 11 side, am I on the right side of things today? 12 PRESIDING OFFICIAL BERLIN: It's a state 13 of mind more than a physical thing. 14 MR. VAN DENBERG: Well, inthat case I'll 15 sitoverhere so I'monthe good side. Thankyouvery 16 much for allowing me to be the last speaker of the 17 day. It's always nice. Mike tried to explain he was 18 saving the best for last, but given what I've heard 19 and I think what you have all heard I think you're 20 basicallygoingtofindthatyou've savedthe lastfor 21 last as an awful lot of what I have to say you've 22 heard before. 23 I understand alsothatMr. Margolis would 24 like me to read my testimony from the very beginning 25 to the very end, so letme see if I can begin. No, I SAG, CORP 4218 LENORELANE, N

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.C. 20008 (202)797-2525 VIDEO;TRANSCRIPTIONS1 will be brief. 85 I'm sure that there are other things 2 that you would like to do to summarize all this great 3 testimony you've heard over the last two days. 4 I amhere on behalfof the Edison Electric 5 Institute and we are, as you know, the association of 6 investor-owned electrical utilities. We serve 99 7 percent of the customers served by the IO sector and 8 76 percent of all the customers in the united States. 9 We generate 79 percent of the electricity produced in 10 the united States, therefore we are always very 11 interested in any discussion that relates to the use 12 of energy and the use of fuels in the production of 13 electricity. 14 Let me start out by saying that 15 historically we have generally supported the approach 16 DOE has taken on appliance efficiency standards. 17 There have been times whenwe had slight disagreements 18 on the results you've come out on some of those 19 standards, but in general we have supported the 20 approach you have taken. 21 And a little different than maybe what 22 you've heardbefore, I want to congratulate you on the 23 in depth approach you took on outlining the issues 24 associated with externalities. By outlining the 18 25 points or 18 questions issues associated with SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202)797-2525 VIDEO;TRANSCRIPTIONS 85 1 will be brief. I'm sure that there are other things 2 that you would like to do to summarize all this great 3 testimony you've heard over the last two days. 4 I amhereonbehalfof theEdisonElectric 5 Institute andwe are, as you know, the association of 6 investor-owned electrical utilities. We serve 99 7 percent of the customers served by the IO sector and 8 76 percent of all the customers in the united States. 9 We generate 79 percent of the electricityproduced in 10 the united States, therefore we are always very 11 interested in any discussion that relates to the use 12 of energy and the use of fuels in the production of 13 electricity. 14 Let me start out by saying that 15 historicallywe have generally supportedthe approach 16 DOE has taken on appliance efficiency standards. 17 Therehavebeentimeswhenwe had slightdisagreements 18 on the results you've come out on some of those 19 standards, but in general we have supported the 20 approach you have taken. 21 And a little different than maybe what 22 you'veheardbefore, I wantto congratulateyouonthe 23 in depth approach you took on outlining the issues 24 associated with externalities. By outlining the 18 25 points or 18 questions issues associated with

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.20008 VIDEO;TRANSCRIPTIONS86 1 externalities, I think you provided a good basis for 2 all of us to provide you information which will 3 justify you not using externalities in the appliance 4 efficiency standards. And evenmore importantlymaybe 5 I thinkyou've done a good job of outlining the issues 6 so that all of us can provide better input to the 7 stateproceedings in the IRP activities onwhy the use 8 of externalities is inappropriate in the calculations 9 of future generation resources. 10 What I'mgoingto do is summarizewherewe 11 stand. We will in our written comments submit 12 testimony responding to each of the 18 questions in 13 much detail, but I don't think that any of us want to 14 sit here and listen to me go through economic theory 15 for the next hour and a half. If you do, I'm sure I 16 can stay around for a later time. 17 The first thing is, I guess I kind of go 18 back to the idea that if it ain't broke, don't fix it. 19 You know, NEPA defined the purpose of the appliance 20 standards was to determine and make efficient the 21 consumer's use of consumer products in the energy 22 arena, and not try to determine what generation or 23 energy source should be used to satisfy the appliance 24 needs. 25

(202) 797-2525 From what I heard about yesterday's SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 86 1 externalities, I think you provided a good basis for 2 all of us to provide you information which will 3 justify you not using externalities in the appliance 4 efficiencystandards. Andevenmore importantlymaybe 5 I thinkyou'vedone a goodjobof outliningthe issues 6 so that all of us can provide better input to the 7 stateproceedings inthe IRP activitiesonwhytheuse 8 of externalities is inappropriate inthe calculations 9 of future generation resources. 10 What I'mgoingtodois summarizewherewe 11 stand. We will in our written comments submit 12 testimony responding to each of the 18 questions in 13 much detail, but I don't thinkthat any of us want to 14 sit here and listen to me go through economic theory 15 for the next hour and a half. If you do, I'm sure I 16 can stay around for a later time. 17 The first thing is, I guess I kind of go 18 backtothe ideathatif itain'tbroke, don't fix it. 19 You know, NEPA defined the purpose of the appliance 20 standards was to determine and make efficient the 21 consumer's use of consumer products in the energy 22 arena, and not try to determine what generation or 23 energy source shouldbe usedto satisfythe appliance 24 needs. 25

(202) 797-2525 From what I heard about yesterday's SAG,CORP 4218 LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS87 1 discussionwith AGA, DOE has indicatedthey agree that 2 the use of the total fuel cycle cost analysis is not 3 appropriate and they don't really have the authority 4 to do that from a policy and labor perspective. I 5 agree, DOE should not use the total fuel cycle 6 analysis in developing standards. Congress never 7 intended for you to use the total fuel cycle cost, nor 8 for you to establish a national fuel policy through 9 the appliance standards process. To date DOE has 10 followedthe consumer-focusedapproach andbydoing so 11 ithas honoredthe congressional intent andhas served 12 the public well. 13 Inparticularbyusingthe systemyouhave 14 now, energy efficiency discriptors, based on what a 15 consumer pays for the energy, the embedded price of 16 energy and what it cost for the appliance, you have 17 developed and justified standards that are widely 18 accepted and understood by the general public and 19 manufacturers and utilities Likewise this allows you 20 to track the progress of efficiency and the consumer 21 response to the standards that you have developed. 22 Let me move now from those generic points 23 to the rulemaking itself. I heard earlier from RFF 24 that it is feasible for you to go ahead forward with 25 this process.

(202) 797·2525 When a consultant says something is SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 VIDEO; TRANSCRIPTIONS 87 1 discussionwithAGA, DOE has indicatedtheyagreethat 2 the use of the total fuel cycle cost analysis is not 3 appropriate and they don't really have the authority 4 to do that from a policy and labor perspective. I 5 agree, DOE should not use the total fuel cycle 6 analysis in developing standards. Congress never 7 intendedforyoutousethetotal fuel cycle cost, nor 8 for you to establish a national fuel policy through 9 the appliance standards process. To date DOE has 10 followedtheconsumer-focusedapproachandbydoingso 11 ithas honoredthecongressionalintentandhas served 12 the public well. 13 Inparticularbyusingthesystemyouhave 14 now, energy efficiency discriptors, based on what a 15 consumer pays for the energy, the embedded price of 16 energy and what it cost for the appliance, you have 17 developed and justified standards that are widely 18 accepted and understood by the general public and 19 manufacturers andutilities Likewisethis allows you 20 to track the progress of efficiency and the consumer 21 response to the standards that you have developed. 22 Letme move now from those genericpoints 23 to the rulemaking itself. I heard earlier from RFF 24 that it is feasible for you to go ahead forward with 25 this process.

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.20008 VIDEO;TRANSCRIPTIONS88 1 feasible, that usually means there's a lot money 2 involved in it. And I think that's probably true, you 3 could develope and consider externalities properly, 4 but to do so would expend significant resources, and 5 we believe, would result in very little, if any, 6 significant change in the stringency ofthe standards. 7 And it starts with the basic point that 8 the cost of control methodology, which has been 9 discussed elsewhere, is fatally flawed. It doesn't 10 measure the impacts of emissions on human health, nor 11 the environment. While cost control maybe easy, they 12 are not relevant in anyway inmeasuring environmental 13 damages. Therefore, you must use the damage cost 14 approach. 15 You have found out firsthand that this can 16 be a very expensive, time-consuming process from your 17 work with RFF and Oakridge. Having eight volumes of 18 material for two sites is an extensive amount of 19 material for those two sites. If you then apply that 20 we have over 2,500 generating facilities in the united 21 States, you're going to end up keeping the paper 22 companies in business for a long time. 23 But even if you were able to determine 24 what the externality values were, the amount that 25 would then be internalized for the three major SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797·2525 VIDEO; TRANSCRIPTIONS 88 1 feasible, that usually means there's a lot money 2 involvedin it. And I thinkthat'sprobablytrue, you 3 could develope and consider externalities properly, 4 but to do so would expend significant resources, and 5 we believe, would result in very little, if anyI 6 significantchangeinthe stringencyofthe standards. 7 And it starts with the basic point that 8 the cost of control methodology, which has been 9 discussed elsewhere, is fatally flawed. It doesn't 10 measure the impacts of emissions on human health, nor 11 theenvironment. While cost controlmaybe easy, they 12 arenot relevant inanywayinmeasuringenvironmental 13 damages. Therefore, you must use the damage cost 14 approach. 15 Youhavefoundoutfirsthandthatthis can 16 be a veryexpensive, time-consumingprocess fromyour 17 work with RFF and Oakridge. Having eight volumes of 18 material for two sites is an extensive amount of 19 material for those two sites. If you then apply that 20 wehaveover2,500 generatingfacilities intheunited 21 States, you're going to end up keeping the paper 22 companies in business for a long time. 23 But even if you were able to determine 24 what the externality values were, the amount that 25 would then be internalized for the three major

(202)797-2525 SAG,CORP 4218 LENORELANE, N.w. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS89 1 emissions that DOE is considering, 802, NOx and C02, 2 would be close to or equal to zero. And I agree with 3 the other statements on this, that the 1998 Clean Air 4 ActAmendmentinternalizes 802 forelectricutilities. 5 Every time a new gas furnace goes in, that is an 6 unregulated source and there isn't anything I can say 7 about that issue. EPA also does mandate that NOx 8 emissions are to be below the national ambient air 9 quality standards, so basicallyNOxdamages again from 10 the residual emissions are insignificant. 11 When it comes to C02, it is a global issue 12 with global proportions of people's view on what the 13 impacts of C02 damages are, or even if there are no 14 damages whatsoever. Because of that wide variability 15 and because the sciences of the greenhouse gas issue 16 is still in its early stages, it would be 17 inappropriate to try to put a monetary value on what 18 the damages are. Likewise, if you then, even if you 19 were able to be a value ofwhat the damages were, they 20 wouldbe basedonworldwide emissions. And the impact 21 of doing something in appliance efficiency standards 22 in the residential sector, which is a very small part 23 ofthe overall global C02 issuewouldhave very little 24 impact and would have therefore a very small number. 25 Our industry is working very hard in the SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 89 1 emissions that DOE is considering, 802, NOx and C02, 2 wouldbe close to or equal to zero. And I agree with 3 the other statements on this, that the 1998 CleanAir 4 ActAmendmentinternalizes802 forelectricutilities. 5 Every time a new gas furnace goes in, that is an 6 unregulated source and there isn't anything I can say 7 about that issue. EPA also does mandate that NOx 8 emissions are to be below the national ambient air 9 qualitystandards, sobasicallyNOxdamages againfrom 10 the residual emissions are insignificant. 11 When itcomes toC02, itis a global issue 12 with global proportions of people's view on what the 13 impacts of C02 damages are, or even if there are no 14 damages whatsoever. Because of thatwide variability 15 and because the sciences of the greenhouse gas issue 16 is still in its early stages, it would be 17 inappropriate to try to put a monetary value on what 18 the damages are. Likewise, if you then, even if you 19 were abletobe a valueofwhat the damages were, they 20 wouldbebasedonworldwideemissions. Andthe impact 21 of doing something in appliance efficiency standards 22 inthe residential sector, which is a very smallpart 23 oftheoverallglobal C02 issuewouldhaveverylittle 24 impact and would have therefore a very small number. 25 Our industry is working very hard in the

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### 1 climate challenge and climate change action plan 2 activity with DOE on voluntarily working to reduce 3 

### greenhouse gas emissions. When our resources are 4 taken away from those voluntary efforts to work on 5 mandatory responses to C02, the efficiency which can 6 result from the voluntary programs is lost. 7 Letme now go to the next question you had 8 in the supplement which was the issue of marginal 9 cost. Again, the theorybehindusingmarginal cost is 10 

### accurate. It is probably appropriate to consider 11 marginal cost when you're looking at doing appliance 12 efficiency standards. The problem again comes to the 13 same kind of problem you have on externalities, is 14 that what do you gain in doing it? 15 The determination of marginal costs and 16 marginal benefits of any given appliance in the 17 

### overall energy equation is going to be tough. And 18 then to aggregate that all into a national activity 19 would be very time-consuming and very expensive, and 20 

### the consumer would have no idea what you were talking 21 about. If they see that you've developed appliance 22 standards based on a marginal cost, which right now 23 would significantly blow what they're paying, there 24 are two things that can happen. They can go andbitch 25 at the utilities, which doesn't help us, or they are SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 90 

### 1 climate challenge and climate change action plan 2 activity with DOE on voluntarily working to reduce 3 

### greenhouse gas emissions. When our resources are 4 taken away from those voluntary efforts to work on 5 mandatory responses to C02, the efficiency which can 6 result from the voluntary programs is lost. 7 Letme now gotothenextquestionyouhad 8 in the supplement which was the issue of marginal 9 cost. Again, thetheorybehindusingmarginal costis 10 

### accurate. It is probably appropriate to consider 11 marginal cost when you're looking at doing appliance 12 efficiency standards. Theproblemagain comes tothe 13 same kind of problem you have on externalities, is 14 that what do you gain in doing it? 15 The determination of marginal costs and 16 marginal benefits of any given appliance in the 17 

### overall energy equation is going to be tough. And 18 then to aggregate that all into a national activity 19 would be very time-consuming and very expensive, and 20 

### the consumerwouldhave no ideawhat youwere talking 21 about. If they see that you've developed appliance 22 standards based on a marginal cost, which right now 23 would significantly blow what they're paying, there 24 aretwothings that canhappen. Theycango andbitch 25 at the utilities, which doesn't help us, or they are

(202)797-2525 SAG,CORP 4218LENORELANE, N.W. WASHINGTON, D.C.20008 VIDEO;TRANSCRIPTIONS91 1 going to corne to you saying you don't know what you're 2 doing because you're not basing it on what we actually 3 see. And I think that results in DOE opening itself 4 to a wide range of legal, technical, and economic 5 attacks from all sides and really wouldn't increase 6 the efficiency standards whatsoever. All it would do 7 is make you feel that you had done an accurate job of 8 determining the cost effectiveness of the standard. 9 But as long as embedded price is above the marginal 10 cost of energy, you're not going to increase the 11 stringency of the standards. 12 In closing, I have to agree with the 13 previous speaker, I think it would be good for DOE to 14 close the door on this issue as quickly as possible 15 and move on to, or moving back almost to continuing 16 with the current straightforward approach they have 17 used of using the embedded price of energy and 18 providing information on impacts of the standards in 19 the technical support document so that if someone is 20 looking at it they can tell what kind of impacts the 21 standards actually have. It all goes back to the 22 issue of, if it ain't broke, don't fix it. 23 This morning on the way in there was a 24 radio talk show and a program where they were asking 25 people to talk about car repair horror stories. SAG,CORP 4218 LENORE LANE, N.W. WASHINGTON, D.C. 20008 In

(202)797-2525 VIDEO; TRANSCRIPTIONS 91 1 goingto corne toyou sayingyoudon't knowwhat you're 2 doingbecauseyou'renotbasingitonwhatwe actually 3 see. And I think that results in DOE opening itself 4 to a wide range of legal, technical, and economic 5 attacks from all sides and really wouldn't increase 6 the efficiency standards whatsoever. All itwould do 7 is make you feel that you had done an accurate job of 8 determining the cost effectiveness of the standard. 9 But as long as embedded price is above the marginal 10 cost of energy, you're not going to increase the 11 stringency of the standards. 12 In closing, I have to agree with the 13 previous speaker, I think it would be good for DOE to 14 close the door on this issue as quickly as possible 15 and move on to, or moving back almost to continuing 16 with the current straightforward approach they have 17 used of using the embedded price of energy and 18 providing information on impacts of the standards in 19 the technical support document so that if someone is 20 looking at it they can tell what kind of impacts the 21 standards actually have. It all goes back to the 22 issue of, if it ain't broke, don't fix it. 23 This morning on the way in there was a 24 radio talk show and a program where they were asking 25 people to talk about car repair horror stories. In

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.20008 VIDEO;TRANSCRIPTIONS1 some ways I think that's what we have. 92 One woman 2 called up and said she took her pickup truck in to 3 have its, you know, six month checkup kind of thing, 4 get an oil change and that kind of thing, and they 5 carne back and saidwell, ma'am, you have $289.00 worth 6 of work that needs to be done to flush the air7 conditioning system out and recharge it with new 8 freon, and given the problem of the freon, and of 9 course this is a closed system and we have to recycle 10 it and there's a lot of cost associated with that, and 11 it would be $289.00. The only problem is the truck 12 didn't have air-conditioning. In some ways, I think 13 we have that kind of situation here. 14 We have a process that is working. 15 Throwing something like this into it to try to "fix 16 it," I think will do more damage than good. with 17 that, I'll be glad to answer any questions, and ifyou 18 don't have, I may turn around and ask you some. 19 PRESIDING OFFICIAL BERLIN: Thank you. I 20 have no questions. 21 Michael? 22 23 MR. McCABE: No questions. MR. MARGOLIS: No questions. 24 MR. GRUENSPECHT: Well, given Joe's 25 threat, I guess we'd better ask one question. SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 You

(202) 797-2525 VIDEO; TRANSCRIPTIONS 92 1 some ways I think that's what we have. One woman 2 called up and said she took her pickup truck in to 3 have its, you know, six month checkup kind of thing, 4 get an oil change and that kind of thing, and they 5 carneback and saidwell, ma'am, youhave $289.00worth 6 of work that needs to be done to flush the air7 conditioning system out and recharge it with new 8 freon, and given the problem of the freon, and of 9 course this is a closed system andwe have to recycle 10 it andthere's a lot of cost associatedwiththat, and 11 it would be $289.00. The only problem is the truck 12 didn't have air-conditioning. In some ways, I think 13 we have that kind of situation here. 14 We have a process that is working. 15 Throwing something like this into it to try to "fix 16 it," I think will do more damage than good. with 17 that, I'llbe gladto answer anyquestions, and ifyou 18 don't have, I may turn around and ask you some. 19 PRESIDING OFFICIAL BERLIN: Thankyou. I 20 have no questions. 21 Michael? 22 23 24 25 MR. McCABE: No questions. MR. MARGOLIS: No questions. MR. GRUENSPECHT: Well, given Joe's threat, I guess we'd better ask one question. You

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.20008 VIDEO;TRANSCRIPTIONS93 1 talked about closing the door on the issue and 2 referred to the previous speaker. Is that a desire to 3 delay the issue for future consideration or is that a 4 desire on your part to sort of evaluate the record and 5 come to some conclusion that closes the door on the 6 issue, because those are two different options? 7 MR. VAN DEN BERG: You're right. I have 8 to say that I think that from our perspective you will 9 getthe information inourwritten document responding 10 to the 18 points, which you can then use to close the 11 record very clearly. If you want to close the record 12 prior to it, you're not going to get a complaint from 13 me on that. 14 And that kind of goes back to a question, 15 which I will ask you, which is I think there needs to 16 be a much clearer definition of what the purpose of 17 this supplemental advanced notice of proposal 18 rulemaking is, and what you're really looking for. 19 Because I think that the commentators who have come 20 forward in the last two days have been somewhat 21 confused as to what really or why you were doing it. 22 And there was a threat to them, and that's the reason 23 they were here. If you can, while you're reviewing 24 it, be clearer on what the purpose was of developing 25 this, I think itwouldprovide guidance to everyone in SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 93 1 talked about closing the door on the issue and 2 referredtotheprevious speaker. Isthat a desireto 3 delay the issue for future consideration or is that a 4 desireonyourpartto sortof evaluatetherecordand 5 come to some conclusion that closes the door on the 6 issue, because those are two different options? 7 MR. VAN DEN BERG: You're right. I have 8 to saythat I thinkthatfromourperspectiveyouwill 9 gettheinformationinourwrittendocumentresponding 10 to the 18 points, whichyou can then use to close the 11 record very clearly. If you want to close the record 12 prior to it, you're not goingto get a complaint from 13 me on that. 14 And that kind of goes backto a question, 15 which I will askyou, which is I think there needs to 16 be a much clearer definition of what the purpose of 17 this supplemental advanced notice of proposal 18 rulemaking is, and what you're really looking for. 19 Because I think that the commentators who have come 20 forward in the last two days have been somewhat 21 confused as to what really or why you were doing it. 22 And there was a threat to them, and that's the reason 23 they were here. If you can, while you're reviewing 24 it, be clearer on what the purpose was of developing 25 this, I thinkitwouldprovideguidancetoeveryonein

(202) 797-2525 SAG,CORP 4218LENORELANE,NW. WASHINGTON,D.C.20008 VIDEO;TRANSCRIPTIONS94 1 submitting their final comments even. 2 PRESIDING OFFICIAL BERLIN: Well, as I 3 said earlier, it's a simple-minded as trying to get a 4 levelplayingfieldofinformationfordecision-makers 5 on appliance standards. Right now we have a NEPA 6 requirement to make assessments on what's likely to 7 happen with appliance standards, and we do that in 8 that we report emissions, tonnages, reductions of 9 emissions that might occur in the standards. 10 This informationispresentedtodecision11 makers along with a lot of cost and price information 12 from the NAECA requirements, and these are different 13 kinds

-- these are apples and oranges for a decision14 maker. He looks at, although there are going to be 15 these tonnages of emissions, how does that relate to 16 these dollars of life cycle cost reduction. 17 And simple-minded is just trying to get 18 everything into dollars and cost to 19 MR. VAN DEN BERG: Well, you know, that's 20 very true. But one of the differences is, is that I 21 have no real problem with you putting the number of 22 tonnage down, I mean there is always going to be 23 disagreements among that. But if you look at S02 as 24 an example, are you providing better information to 25 decision-makers by saying, if we go through and do SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 94 1 submitting their final comments even. 2 PRESIDING OFFICIAL BERLIN: Well, as I 3 said earlier, it's a simple-minded as tryingto get a 4 levelplayingfieldofinformationfordecision-makers 5 on appliance standards. Right now we have a NEPA 6 requirement to make assessments on what's likely to 7 happen with appliance standards, and we do that in 8 that we report emissions, tonnages, reductions of 9 emissions that might occur in the standards. 10 Thisinformationispresentedtodecision11 makers alongwith a lot of cost andprice information 12 from the NAECA requirements, and these are different 13 kinds

-- these are apples and oranges for a decision14 maker. He looks at, although there are going to be 15 these tonnages of emissions, how does that relate to 16 these dollars of life cycle cost reduction. 17 And simple-minded is just trying to get 18 everything into dollars and cost to 19 MR. VAN DEN BERG: Well, you know, that's 20 very true. But one of the differences is, is that I 21 have no real problem with you putting the number of 22 tonnage down, I mean there is always going to be 23 disagreements among that. But if you look at 802 as 24 an example, are you providing better information to 25 decision-makers by saying, if we go through and do

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-- let me 2 change that, in the lamp ballast sector, as a result 3 of doing something in the lamp ballast in that sector 4 we would reduce S02 by (X) amount, (X) tons, okay. 5 If you then said well I'm going to turn 6 that into a monetized internalized externality, how 7 much do I internalize, the number is zero. Because on 8 the society-widebasis there isn't anything. What you 9 have now is actually better information than you will 10 if you then expand it out, trying to be more accurate 11 using economic theory, when really what you have is an 12 engineering technical discussion, not an economic 13 theory discussion. 14 PRESIDING OFFICIAL BERLIN: Thank you. I 15 have no -- well, we've said we have no questions, so. 16 17 MR. VAN DEN BERG: Okay. PRESIDING OFFICIAL BERLIN: Do you have 18 any further questions. 19 20 21 MR. VAN DEN BERG: No, I don't. PRESIDING OFFICIAL BERLIN: Okay. I guess that's the last speaker. It's 22 time for any unscheduled speakers. Are there any 23 unscheduled speakers? No, okay. Any rebuttal 24 statements by anybody? Okay, I guess then we'll

-- I 25 thank you all for coming, and as I mentioned we'll SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 95 1 appliance sectors, in the appliance sector

-- let me 2 change that, in the lamp ballast sector, as a result 3 of doing something inthe lamp ballast inthat sector 4 we would reduce S02 by (X) amount, (X) tons, okay. 5 If you then said well I'm going to turn 6 that into a monetized internalized externality, how 7 much do I internalize, thenumber is zero. Becauseon 8 the society-widebasisthereisn'tanything. Whatyou 9 have now is actuallybetter informationthan youwill 10 if you then expand itout, tryingto be more accurate 11 usingeconomictheory, whenreallywhatyouhave is an 12 engineering technical discussion, not an economic 13 theory discussion. 14 PRESIDING OFFICIAL BERLIN: Thankyou. I 15 have no -- well, we've saidwe have no questions, so. 16 MR. VAN DEN BERG: Okay. 17 PRESIDING OFFICIAL BERLIN: Do you have 18 any further questions. 19 MR. VAN DEN BERG: No, I don't. 20 PRESIDING OFFICIAL BERLIN: Okay. 21 I guess that's the last speaker. It's 22 time for any unscheduled speakers. Are there any 23 unscheduled speakers? No, okay. Any rebuttal 24 statements by anybody? Okay, I guess then we'll

-- I 25 thank you all for coming, and as I mentioned we'll

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.20008 VIDEO;TRANSCRIPTIONS96 1 take these points under consideration, and I adjourn 2 the meeting. 3 (Whereupon, at 12:02 the proceedings in 4 the above-entitled matter were concluded.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SAG,CORP 4218 LENORE LANE, NW. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 96 1 take these points under consideration, and I adjourn 2 the meeting. 3 (Whereupon, at 12:02 the proceedings in 4 the above-entitled matter were concluded.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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This is to certify that the foregoing transcript in the matter of:

Before:

Date:

Place: Public Hearing: Energy Conservation ProgramforConsumerProducts, Docket No. EE-RM-93-801



## u.s. Department of Energy

January 20, 1995

Washington, DC

represents the full and complete proceedings of the aforementioned matter, as reported and reduced to typewriting.

SAG,CORP 4218 LENORE LANE, N.w. WASHINGTON, D.C. 20008 (202) 797-2525 VIDEO; TRANSCRIPTIONS 97 CERTIFICATE

This is to certifythat the foregoing transcript in the matter of:

Before:

Date:

Place: Public Hearing: Energy Conservation ProgramforConsumerProducts,Docket No. EE-RM-93-801



## u.s. Department of Energy

January 20, 1995

Washington, DC

represents the full and complete proceedings of the aforementioned matter, as reported and reduced to typewriting.

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