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BEFORE THE U. S. DEPARTMENT OF ENERGY OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY

- - - - - - - - - - - - - - - x In the Matter of: :
ENERGY CONSERVATION PROGRAM . FOR CONSUMER PRODUCTS: DOCKET NO. EE-RM-93-801. PROPOSED RULEMAKING REGARDING ENERGY CONSERVATION STANDARDS : FOR REFRIGERATORS, REFRIGERATORS-FREEZERS . AND FREEZERS - - - - - - - - - - - - - - - x U.S. Department of Energy Forrestal Building, Room 6E-069 1000 Independence Ave., S.W. Washington, D.C. 20585 Thursday, October 26, 1995

The above-entitled matter came on for hearing, pursuant to notice at 8:30 a.m.
APPEARANCES:
PANEL MEMBERS: MR. ED POLLOCK DR. BARRY BERLIN MR. EUGENE MARGOLIS MR. MARK FRIEDRICHS CHRISTINE A. ERVIN, Assistant Secretary, Energy Efficiency and Renewable Energy
SPEAKERS:
CHARLES SAMUELS MICHAEL THOMPSON ALLEN WILKINS HOWARD GELLER

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064 BEFORE THE U. S. DEPARTMENT OF ENERGY OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY

- - - - - - x In the Matter of: ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS: DOCKET NO.**EE-RM-93-80~.** PROPOSED RULEMAKING REGARDING ENERGY CONSERVATION STANDARDS FOR REFRIGERATORS, REFRIGERATORS-FREEZERS AND FREEZERS - - - - - - - - - - - - - - - x U.S. Department of Energy ForrestalBuilding,Room6E-069 1000 Independence Ave., S.W. Washington, D.C. 20585 Thursday, October 26, 1995

The above-entitledmatter came on for hearing, pursuant to notice at 8:30 a.m. APPEARANCES: PANEL MEMBERS: MR. ED POLLOCK DR. BARRY BERLIN MR. EUGENE MARGOLIS MR. MARK FRIEDRICHS CHRISTINE A. ERVIN, Assistant Secretary, Energy Efficiency and Renewable Energy SPEAKERS: CHARLES SAMUELS MICHAEL THOMPSON ALLEN WILKINS HOWARD GELLER EXECUTIVE COURT REPORTERS, INC. (301) 565-0064 

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# HI N D E X PAGE Opening Remarks Ed Pollock 3 Opening Statement Christine Ervin 8 Charles A. Samuels (Assoc. of Home Appliance Manufacturers 11 Michael Thompson (Whirlpool Corporation) 22 Allen Wilkins (Sub-Zero Freezer Company, 31 Inc.) Howard Geller (Natural Resources Defense 40Council/American Council for an EnergyEfficient Economy)

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 I N D E X Opening Remarks Ed Pollock Opening Statement Christine Ervin Charles A. Samuels (Assoc. of Home Appliance Manufacturers Michael Thompson (Whirlpool Corporation) Allen Wilkins (Sub-Zero Freezer Company, Inc.) Howard Geller (Natural Resources Defense Council/American Council for an EnergyEfficient Economy)

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064 3

8

11 22 31

403 1 P R O C E E D I N G S 2 [8:30 a.m.] 3 MR. POLLOCK: Good morning and welcome. I'm 4 Ed Pollock. And on behalf of the Department of 5 Energy, I'd like to thank you for taking the time to 6 participate in this public hearing concerning the 7 Department's energy conservation program for consumer 8 products. 9 The purpose of this hearing is to receive 10 oral testimony from the public on DOE's notice of 11 proposed rulemaking regarding energy conservation 12 standards for refrigerators, refrigerators-freezers and 13 freezers published in the Federal Register on July 20, 14 1995. 15 The comments received here today and those 16 submitted during the written comment period will assist 17 the Department in developing the final rule. The 18 written comment period for this rulemaking ends 19 November 2, 1995. All comments submitted on this 20 notice will be considered before DOE establishes the 21 final rule. Comments received after the comment period 22 closes will be considered to the fullest extent 23 possible. 24 As the presiding official for this hearing, I 25 will set forth the guidelines for conducting the

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(301) 565-0064 3 1 PROC E E DING S 2 [8:30 a.m.] 3 MR. POLLOCK: Goodmorning andwelcome. I'm 4 Ed Pollock. And onbehalf of the Department of 5 Energy, I'd like to thankyou for taking the time to 6 participate inthis public hearing concerning the 7 Department's energy conservationprogram for consumer 8 products. 9 The purpose of this hearing is to receive 10 oral testimony from the public on DOE's notice of 11 proposedrulemaking regarding energy conservation 12 standards for refrigerators, refrigerators-freezers and 13 freezers published inthe Federal Register on July 20, 14 1995. 15 The comments received here today and those 16 submittedduring thewrittencomment periodwill assist 17 the Department indeveloping the final rule. The 18 writtencomment period for this rulemaking ends 19 November 2, 1995. All comments submitted on this 20 notice will be consideredbefore DOE establishes the 21 final rule. Comments received after the comment period 22 closes will be consideredto the fullest extent 23 possible. 24 As the presiding official for this hearing, I 25 will set forth the guidelines for conducting the

EXECUTIVE COURT REPORTERS, INC. (301) 565-00644 1 hearing and provide other pertinent information. In 2 approximately one week a complete transcript of this 3 hearing will be available for inspection and copying at 4 the Department of Energy°s Freedom of Information 5 reading room located in Room 1E190. Anyone wishing to 6 purchase a copy of the transcript may make arrangements 7 with the Court Reporter. 8 This will not be an evidentiary or judicial 9 type of hearing. It will be conducted in accordance 10 with Section 553 of the Administrative Procedures Act, 11 5 U.S.C. Section 553, and Section 501 of the DOE 12 Organization act, 42 U.S.C. Section 7191. To provide 13 the Department with as much pertinent information and 14 as many views as can be reasonably obtained, and to 15 enable interested persons to express their views, the 16 hearing will be conducted in accordance with the 17 following procedures. 18 Speakers will be called to testify based on a 19 schedule of those people who responded to the notice of 20 this hearing. The speakers have been allotted 20 21 minutes for their oral statements as stated in the 22 Federal Register notice of July 20, 1995. Speakers are 23 requested to summarize their written statements when 24 possible. I would ask that you especially do that if 25 you are supporting comments already given by another

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 4 1 hearing andprovide otherpertinent information. In 2 approximately oneweek a complete transcript of this 3 hearing will be available for inspection and copying at 4 the Department of Energy's Freedomof Information 5 reading room located inRoom lE190. Anyone wishing to 6 purchase a copy of the transcriptmaymake arrangements 7 with the Court Reporter. 8 This will not be an evidentiary or judicial 9 type of hearing. Itwill be conducted in accordance 10 with Section 553 of theAdministrative Procedures Act, 11 5 U.S.C. Section 553, and Section 501 of the DOE 12 Organization act, 42 U.S.C. Section 7191. To provide 13 the Department with as much pertinent information and 14 as many views as canbe reasonably obtained, and to 15 enable interestedpersons to express theirviews, the 16 hearingwill be conducted in accordance with the 17 following procedures. 18 Speakers will be calledto testifybased on a 19 schedule of those peoplewho responded to the notice of 20 this hearing. The speakers have been allotted 20 21 minutes for their oral statements as stated in the 22 Federal Register notice of July 20, 1995. Speakers are 23 requestedto summarize theirwritten statements when 24 possible. I would askthat you especiallydo that if 25 you are supporting comments already given by another

EXECUTIVE COURT REPORTERS, INC. (301) 565-00645 1 speaker. 2 Since there are only four scheduled speakers, 3 anyone may make an unscheduled oral statement after all 4 scheduled speakers have delivered their statements. 5 Persons interested in making such an unscheduled 6 statement should submit their request to the 7 registration desk before the conclusion of the 8 scheduled speakers. 9 At the conclusion of all presentations, 10 scheduled and unscheduled, speakers will be given the 11 opportunity to make a rebuttal statement subject to 12 time limitations, and will be called in the order in 13 which the initial statements were made. Persons 14 interested in making such a rebuttal statement should 15 submit their request to the registration desk before 16 the conclusion of the speakers. 17 Questions will be asked only by members of 18 the panel conducting the hearing. However, I will 19 allow any interested person an opportunity to present 20 written questions to the speakers who have made oral 21 presentations. These questions will be taken after any 22 rebuttal statements subject to my determination that 23 the question is likely to result in a more timely and 24 effective resolution of the issues. 25 Persons interested in this opportunity must

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(301) 565-0064 5 1 speaker. 2 Since there are only four scheduled speakers, 3 anyone may make an unscheduled oral statement after all 4 scheduled speakers have deliveredtheir statements. 5 Persons interested inmaking such an unscheduled 6 statement should submit theirrequest to the 7 registration deskbefore the conclusion of the 8 scheduled speakers. 9 At the conclusion of all presentations, 10 scheduled and unscheduled, speakers will be given the 11 opportunitytomake a rebuttal statement subject to 12 time limitations, andwill be called inthe order in 13 which the initial statementsweremade. Persons 14 interested inmaking such a rebuttal statement should 15 submit their request to the registration deskbefore 16 the conclusion of the speakers. 17 Questions will be asked onlybymembers of 18 the panel conductingthe hearing. However, I will 19 allow any interestedperson an opportunitytopresent 20 written questions to the speakers who have made oral 21 presentations. These questions will be taken after any 22 rebuttal statements subject tomy determination that 23 the question is likelyto result in a more timely and 24 effective resolution of the issues. 25 Persons interested in this opportunitymust



### EXECUTIVE COURT REPORTERS, INC. (301) 565-00646 1 submit their written questions to the registration desk 2 shortly after the completion of any rebuttal 3 statements. There are cards at the registration desk 4 for this purpose. The questions submitted should 5 identify the author and to whom the question is 6 directed. I will determine whether the question is 7 relevant. If the question is allowed, I will ask it. 8 Furthermore, I will allow any interested 9 person an opportunity to present written questions of 10 employees of the United States who have made written or 11 oral presentations with respect to disputed issues of 12 material fact. Questions will be allowed after any 13 rebuttal statements to the extent that I determine that 14 such a question is of a disputed issue of material fact 15 and is likely to result in a more timely and effective 16 resolution of such issues. 17 Persons interested in this opportunity must 18 submit their written questions to the registration desk 19 before the completion of any rebuttal statements. They 20 should state specific justification, including why the 21 issue is one of disputed fact, and how the proposed 22 question would expedite its resolution. The question 23 submitted should identify the author and to whom the 24 question is directed. I will determine whether the 25 question is relevant. If the question is allowed, I

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 6 1 submit theirwritten questions to the registration desk 2 shortly after the completion of any rebuttal 3 statements. There are cards at the registration desk 4 for this purpose. The questions submitted should 5 identifythe author and towhom the question is 6 directed. I will determine whether the question is 7 relevant. If the question is allowed, I will ask it. 8 Furthermore, I will allow any interested 9 person an opportunityto presentwritten questions of 10 employees of the united Stateswho havemade written or 11 oral presentations with respect to disputed issues of 12 material fact. Questions will be allowed after any 13 rebuttal statements to the extent that I determine that 14 such a question is of a disputed issue of material fact 15 and is likelyto result in a more timely and effective 16 resolution of such issues. 17 Persons interested inthis opportunitymust 18 submit theirwritten questions to the registration desk 19 before the completion of any rebuttal statements. They 20 should state specific justification, includingwhy the 21 issue is one of disputed fact, and how the proposed 22 questionwould expedite its resolution. The question 23 submitted should identifythe author and towhom the 24 question is directed. I will determine whether the 25 question is relevant. If the question is allowed, I

EXECUTIVE COURT REPORTERS, INC. (301) 565-00647 1 will ask it. 2 As mentioned earlier, the close of the 3 comment period is November 2, 1995 . All written 4 comments received will be available for public 5 inspection at the DOE Freedom of Information reading
6 room, phone number (202) 586

-6020
. Written comments 7 should be addressed to the Department of Energy as 8 noted within the Federal Register notice for today's 9 hearing

. Ten copies of the comments are requested. In 10 addition, the Department would appreciate an electronic 11 copy of the comments. The Department is currently 12 using WordPerfect 5.1. No faxed comments will be 13 accepted. 14 Any person submitting information which he or 15 she believes to be confidential and exempt by law from 16 public disclosure should submit one complete copy and 17 10 copies from which information claimed to be 18 confidential has been deleted. In accordance with the 19 procedures established at 10 C.F.R. 1004.11, the 20 Department of Energy shall make its own determination 21 as to whether the information shall be exempt from 22 public disclosure. 23 In keeping with the regulations of these 24 facilities, there is no smoking allowed in this room. 25 We appreciate the time and effort you have

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 

### 1 will ask it. 2 As mentioned earlier, the close of the 3 comment period is November 2, 1995. All written 4 comments receivedwill be available for public 5 inspection at the DOE Freedomof Information reading 6 room, phone number (202) 586-6020. Written comments 7 shouldbe addressedtothe Department of Energy as 8 notedwithinthe Federal Register notice for today's 7



### 9 hearing. Ten copies of the comments are requested. In 10 addition, the Departmentwould appreciate an electronic 11 copy of the comments. The Department is currently 12 usingWordPerfect 5.1. No faxed comments will be 13 accepted. 14 Any person submitting informationwhich he or 15 she believes tobe confidential and exempt by law from 16 public disclosure should submit one complete copy and 17 10 copies fromwhich informationclaimedtobe 18 confidential has been deleted. In accordancewiththe 19 procedures established at 10 C.F.R. 1004.11, the 20 Department of Energy shall make its own determination 21 as towhether the information shall be exempt from 22 public disclosure. 23 In keepingwith the regulations of these 24 facilities, there is no smoking allowed inthis room. 25 We appreciate the time and effort you have

EXECUTIVE COURT REPORTERS, INC. (301) 565-00648 1 taken in preparing your statements and are pleased to 2 receive your comments and opinions. I would now like 3 to introduce the members of the panel. 4 Today on the panel is Eugene Margolis from 5 the General Counsel; Mark Friedrichs from Policy; and 6 Barry Berlin from the Office of Codes and Standards. 7 Before I call the first speaker, I would like 8 to introduce Christine A. Ervin, Assistant Secretary 9 for Energy Efficiency and Renewable Energy. She has 10 been following the progress of this Notice of Proposed 11 Rulemaking and would like to make an opening statement. 12 MS. ERVIN: Good morning. I'm delighted to 13 be here to make a few very brief remarks. 14 The proposed standards under discussion today 15 are the result of two years of hard work by the 16 Association of Home Appliance Manufacturers and its 17 members, the Natural Resources Defense Council, the 18 American Council for an Energy Efficient Economy, the 19 New York State Energy Office, the California Energy 20 Commission, Pacific Gas and Electric and Southern 21 California Edison. 22 These groups worked to develop a joint 23 recommendation that served as the basis for the 24 Department of Energy's proposed rule. The proposed 25 standard will result in refrigerators which use 22 to

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 8 1 taken inpreparingyour statements and are pleasedto 2 receiveyour comments and opinions. I would now like 3 to introduce the members of the panel. 4 Today on the panel is Eugene Margolis from 5 the General Counsel; MarkFriedrichs from Policy; and 6 Barry Berlin from the Office of Codes and Standards. 7 Before I call the first speaker, I would like 8 to introduce ChristineA. Ervin, Assistant Secretary 9 for EnergyEfficiency andRenewable Energy. She has 10 been following the progress of this Notice of Proposed 11 Rulemaking andwould like tomake an opening statement. 12 MS. ERVIN: Goodmorning. I'mdelighted to 13 be here tomake a fewvery brief remarks. 14 The proposed standards under discussion today 15 are the result of two years of hardworkby the 16 Association of Home ApplianceManufacturers and its 17 members, the Natural Resources Defense Council, the 18 American Council for an Energy EfficientEconomy, the 19 New York StateEnergy Office, the CaliforniaEnergy 20 Commission, Pacific Gas and Electric and Southern 21 CaliforniaEdison. 22 These groups worked to develop a joint 23 recommendation that served as the basis for the 24 Department of Energy's proposedrule. The proposed 25 standardwill result in refrigerators which use 22 to

EXECUTIVE COURT REPORTERS, INC. (301) 565-00649 1 30 percent less electricity than today's models, saving 2 consumers over $13 billion and reducing carbon 3 emissions by 5 million metric tons by 2010. 4 I applaud this effort. For those of you in 5 the audience who were part of this group, I want to 6 personally thank you for your efforts. Working 7 together to develop consensus based refrigerator 8 standards is a good example of the way manufacturers, 9 energy efficiency advocates, environmental groups and 10 consumers can help the Department create an effective 11 appliance standards setting program. 12 Since the National performance Review 13 recommendations were issued in 1993, the Department of 14 Energy has launched a variety of measures to streamline 15 and enhance our energy efficiency rulemaking 16 responsibilities. Over the last year, we have invited 17 interest group participation in the early stages of 18 development of rulemaking proposals rather than simply 19 reacting to comments after the fact. 20 Moreover, we have strongly encouraged 21 interested parties to work towards agreement based 22 proposals to minimize government prescription. 23 The refrigerator consensus is a good example 24 of how this approach can work. As many of you know, 25 this is a major departure from previous convention and

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 9 1 30 percent less electricitythan today's models, saving 2 consumers over $13 billion and reducing carbon 3 emissions by 5 millionmetric tons by 2010. 4 I applaud this effort. For those of you in 5 the audiencewho were part of this group, I want to 6 personallythank you for your efforts. Working 7 together to develop consensus basedrefrigerator 8 standards is a good example of thewaymanufacturers, 9 energy efficiency advocates, environmental groups and 10 consumers can help the Department create an effective 11 appliance standards settingprogram. 12 Since the National performance Review 13 recommendations were issued in 1993, the Department of 14 Energy has launched a variety of measures to streamline 15 and enhance our energy efficiency rulemaking 16 responsibilities. Over the lastyear, we have invited 17 interest group participation in the early stages of 18 development of rulemaking proposals rather than simply 19 reacting to comments after the fact. 20 Moreover, we have strongly encouraged 21 interestedparties towork towards agreement based 22 proposals tominimize government prescription. 23 The refrigerator consensus is a good example 24 of how this approach canwork. As many of you know, 25 this is a major departure fromprevious convention and

EXECUTIVE COURT REPORTERS, INC. (301) 565-006410 1 should significantly reduce the number of concerns that 2 have been expressed in the past. I am proud of these 3 efforts but appreciate that there is more work to be 4 done. 5 Most recently, the Department has initiated a 6 comprehensive study to explore ways to further enhance 7 the process used to develop standards. We are 8 collecting input from a representative group of 9 interested parties on how the standards program has 10 performed in the past and where improvements may be 11 made in the future. 12 Among other issues we want to explore are the 13 relationship between market-pull approaches and 14 standards, how to allow multiple technology paths and 15 how to refine estimates of manufacturer impact given 16 various levels of data made available. We need your 17 help in this effort by agreeing to be interviewed and 18 participating in the public workshops, the first 19 already scheduled for January 17, 1996. 20 Thank you to the people that worked so hard 21 to put this consensus recommendation together. This 22 effort reflects the best in innovative approaches to 23 regulation. 24 Thanks for allowing me a little time to make 25 those comments.

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(301) 565-0064 10 1 should significantlyreduce the number of concerns that 2 have been expressed inthe past. I am proud of these 3 efforts but appreciate that there is more work to be 4 done. 5 Most recently, the Department has initiated a 6 comprehensive studyto exploreways to further enhance 7 the process used to develop standards. We are 8 collectinginput from a representative group of 9 interestedparties on how the standards programhas 10 performed inthe past andwhere improvements may be 11 made inthe future. 12 Among other issues we want to explore are the 13 relationshipbetweenmarket-pull approaches and 14 standards, how to allowmultiple technologypaths and 15 how to refine estimates of manufacturer impact given 16 various levels of datamade available. We needyour 17 help inthis effortby agreeing tobe interviewed and 18 participating in the public workshops, the first 19 already scheduled for January 17, 1996. 20 Thankyou to the people thatworked so hard 21 to put this consensus recommendation together. This 22 effort reflects the best in innovative approaches to 23 regulation. 24 Thanks for allowingme a little time tomake 25 those comments.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006411 1 MR. POLLOCK: Thank you, Ms. Ervin. 2 At this time, I'd like to call the first 3 speaker. And for the record, please state your name 4 and who you represent. And I call Mr. Charles Samuels 5 of the Association of Home Appliance Manufacturers. 6 MR. SAMUELS: Thank you. I'm Charles Samuels, 7 Government Relations Counsel for the Association of 8 Home Appliance Manufacturers. First, I want to say 9 that we appreciate the comments that Secretary Ervin 10 just made. We will cooperate fully with the very 11 important and necessary internal review of DOE 12 procedures and appliance standards activities that are 13 underway and will participate in all aspects of that 14 review in which we are invited to participate. 15 I also want to make clear, however, publicly, 16 so that there's no confusion, that our participation in 17 those activities in no way prejudices our right or our 18 interest to also defend our interests and to remedy 19 disabilities in the way that DOE has conducted the 20 program and in the law itself before the Congress and 21 in the judiciary, as may be appropriate. 22 As you know, there's presently pending 23 appropriations legislation which has been adopted by 24 both the House and the Senate which prohibits federal 25 funds from being used in this fiscal year to propose or

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(301) 565-0064 11 1 MR. POLLOCK: Thankyou, Ms. Ervin. 2 At this time, I'd like to call the first 3 speaker. And for the record, please stateyour name 4 andwho you represent. And I callMr. Charles Samuels 5 of the Association of Home Appliance Manufacturers. 6 MR. SAMUELS: Thankyou. I'mCharles Samuels, 7 Government Relations Counsel for the Association of 8 Home Appliance Manufacturers. First, I want to say 9 thatwe appreciate the comments that SecretaryErvin 10 justmade. We will cooperate fully with the very 11 important and necessary internal review of DOE 12 procedures and appliance standards activities that are 13 underway andwill participate in all aspects of that 14 review inwhichwe are invitedto participate. 15 I alsowant tomake clear, however, publicly, 16 so that there's no confusion, that ourparticipation in 17 those activities in noway prejudices our right or our 18 interest to also defend our interests and to remedy 19 disabilities intheway that DOE has conducted the 20 programand inthe law itself before the Congress and 21 in the judiciary, as may be appropriate. 22 As you know, there's presentlypending 23 appropriations legislationwhich has been adoptedby 24 both the House and the Senatewhich prohibits federal 25 funds frombeing used inthis fiscal year to propose or

EXECUTIVE COURT REPORTERS, INC. (301) 565-006412 1 finalize appliance energy conservation standards. 2 Because of the pendency of this legislation and the 3 intentions clearly expressed by Congress, we do not 4 believe it is appropriate at this time for either AHAM 5 or DOE to determine whether this or any other proposed 6 standard for refrigerator-freezers should be finalized. 7 Therefore, AHAM takes no position on whether 8 the proposed rule or some variation should be 9 finalized. At the time that DOE's legislative 10 situation is clarified and it is in a legal position to 11 consider finalizing this rule, we'll provide 12 appropriate input. 13 We do believe, however, that the analysis 14 found in the Federal Register notice and the technical 15 support document is a good basis for discussion to 16 highlight a number of the serious deficiencies in the 17 DOE program, its analytical process and its use of 18 contractors. 19 We recommend that DOE use this fiscal year as 20 I believe Secretary Ervin has just outlined. And as 21 anticipated, particularly by the Senate during the 22 debate on the interior appropriations bill, to fully 23 and openly reevaluate all aspects of the energy 24 standards program. And I'd like to highlight some of 25 the most important issues that we would recommend that

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(301) 565-0064 12 1 finalize appliance energy conservation standards. 2 Because of the pendency of this legislation and the 3 intentions clearly expressedby Congress, we do not 4 believe it is appropriate at this time for eitherAHAM 5 or DOE to determine whether this or any otherproposed 6 standard for refrigerator-freezers shouldbe finalized. 7 Therefore, AHAM takes no position on whether 8 the proposedrule or some variation shouldbe 9 finalized. At the time that DOE's legislative 10 situation is clarified and it is in a legal position to 11 consider finalizing this rule, we'll provide 12 appropriate input. 13 We do believe, however, that the analysis 14 found inthe Federal Register notice and the technical 15 support document is a good basis for discussion to 16 highlight a number of the serious deficiencies inthe 17 DOE program, its analytical process and its use of 18 contractors. 19 We recommend that DOE use this fiscal year as 20 I believe SecretaryErvin has just outlined. And as 21 anticipated, particularlyby the Senate during the 22 debate on the interior appropriations bill, to fully 23 and openly reevaluate all aspects of the energy 24 standards program. And I'd like to highlight some of 25 themost important issues that we would recommend that

EXECUTIVE COURT REPORTERS, INC. (301) 565-006413 1 you thoroughly consider. 2 The joint comments that were filed with DOE 3 focused on technical and engineering issues, leaving to 4 a large extent economic issues in the hands of DOE and 5 LBL. Predictably, but unfortunately, the economic 6 analysis contained in the Federal Register notice is 7 incomplete and wrong. Assumptions and data that have 8 been challenged by us, for which we've provided 9 whatever information we can over the years, continues 10 to be used by DOE and LBL to build a fantasy analysis 11 justifying stringency of standards far beyond what is 12 reasonable, even aside from the particulars of the 13 refrigerator freezer proposal. 14 Basically, you need to commit yourself to a 15 full and fresh examination of these issues. You have 16 not done so, although we've been urging it for years. 17 For example, your energy analysis using data 18 in part derived by LBL and data in part produced by the 19 industry and other parties, indicates that the standard 20 levels that have been proposed will provide 21 approximately a three to four year payback. But this 22 is based entirely on best case scenarios and the most 23 positive data. You and LBL have entirely neglected the 24 range of data and analysis and factors that were 25 provided to you, both quantitative and qualitative

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(301) 565-0064 13 1 you thoroughly consider. 2 The joint comments thatwere filed with DOE 3 focused on technical and engineering issues, leaving to 4 a large extent economic issues inthe hands of DOE and 5 LBL. Predictably, but unfortunately, the economic 6 analysis contained inthe Federal Register notice is 7 incomplete andwrong. Assumptions and data that have 8 been challengedby us, for whichwe've provided 9 whatever informationwe can over the years, continues 10 to be usedby DOE andLBL tobuild a fantasy analysis 11 justifying stringency of standards far beyondwhat is 12 reasonable, even aside from the particulars of the 13 refrigerator freezer proposal. 14 Basically, you needto commit yourself to a 15 full and fresh examination of these issues. You have 16 not done so, althoughwe've been urging it for years. 17 For example, your energy analysis using data 18 inpart derivedby LBL and data inpart producedby the 19 industry and otherparties, indicates that the standard 20 levels that have beenproposedwill provide 21 approximately a three to four year payback. But this 22 is based entirely on best case scenarios and the most 23 positive data. You andLBL have entirely neglected the 24 range of data and analysis and factors that were 25 provided toyou, both quantitative and qualitative

EXECUTIVE COURT REPORTERS, INC. (301) 565-006414 1 which indicate that in some cases the paybacks could be 2 as long as seven to eight years for refrigerator 3 freezers and 11 to 12 years for freezers. 4 The reason that this occurred is because LBL 5 neglected, as it always does, to take into account in 6 any significant quantitative or qualitative way, cost 7 uncertainty, the range that occurs through likely 8 energy savings of untested options and reliability of 9 new technology, among other factors. 10 You recall at the ANPR hearing, Montgomery 11 Ward testified that paybacks exceeding three years 12 cannot be sold in the marketplace and are unacceptable 13 to consumers. You need to take into account in all 14 your appliance standards rulemakings the possibilities 15 that you're going to exceed three years and what are 16 the factors or the uncertainties of the considerations 17 that may cause that to occur. You don't do that. 18 Therefore, recognizing the fiercely 19 competitive marketplace, it must be understood that 20 even with respect to these particular proposed rules 21 there's a risk that either unacceptable paybacks will 22 be forced on consumers as a result of the proposed rule 23 or that manufacturers will effectively eat these costs 24 to the detriment of the viability of their business and 25 their ability to expand, innovate and increase

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(301) 565-0064 14 1 which indicate that in some cases the paybacks couldbe 2 as long as seven to eightyears for refrigerator 3 freezers and 11 to 12 years for freezers. 4 The reason that this occurred is because LBL 5 neglected, as it always does, to take into account in 6 any significant quantitative or qualitativeway, cost 7 uncertainty, the range that occurs through likely 8 energy savings of untested options and reliability of 9 newtechnology, among other factors. 10 You recall at theANPR hearing, Montgomery 11 Ward testifiedthat paybacks exceeding three years 12 cannot be sold inthe marketplace and are unacceptable 13 to consumers. You needto take into account in all 14 your appliance standards rulemakings the possibilities 15 that you're goingto exceedthree years andwhat are 16 the factors orthe uncertainties of the considerations 17 thatmay cause that to occur. You don't do that. 18 Therefore, recognizing the fiercely 19 competitivemarketplace, itmust be understood that 20 evenwith respect to these particularproposed rules 21 there's a riskthat either unacceptable paybacks will 22 be forced on consumers as a result of the proposed rule 23 orthatmanufacturers will effectively eat these costs 24 to the detriment of the viability of theirbusiness and 25 their abilityto expand, innovate and increase

EXECUTIVE COURT REPORTERS, INC. (301) 565-006415 1 employment nationally and internationally. 2 We have been encouraged over the years to 3 develop an alternative to LBL's manufacturers impact 4 model because, for some variety of reasons best known 5 by yourselves, you have felt yourselves incapable of 6 revising or developing alternative models. 7 As a consequence, we spent considerable 8 resources in developing the government regulatory 9 impact model which we felt was well received by you, 10 although clearly grudgingly by LBL. We were told that 11 our government regulatory impact model would be 12 substantially incorporated into your analysis, starting 13 with the refrigerator freezer analysis. And indeed, 14 the rhetoric in the proposed rule indicates that's the 15 case. 16 However, our consultant has evaluated how oui 17 GRIMM is actually used in this new model called the 18 MANN, Manufacturers' Analysis model or whatever it is 19 and it appears to us that although you are using 20 certain characteristics of the GRIMM that you're 21 incorporating it largely by name only while cutting the 22 heart out of its use in value. 23 Fortunately, since you've at least started 24 adopting the data categories in the GRIMM so that we 25 have some sense of what is going on in the black box,

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(301) 565-0064 15 1 employment nationally and internationally. 2 We have been encouraged overtheyears to 3 develop an alternative toLBL's manufacturers impact 4 model because, for some variety of reasons best known 5 byyourselves, you have felt yourselves incapable of 6 revising or developing alternativemodels. 7 As a consequence, we spent considerable 8 resources in developing the government regulatory 9 impact model whichwe felt was well receivedby you, 10 although clearly grudginglybyLBL. We were toldthat 11 our government regulatory impactmodel wouldbe 12 substantially incorporated intoyour analysis, starting 13 with the refrigerator freezer analysis. And indeed, 14 the rhetoric inthe proposed rule indicates that's the 15 case. 16 However, our consultant has evaluatedhow OUL 17 GRIMM is actuallyused inthis newmodel calledthe 18 MANN, Manufacturers' Analysis model orwhatever it is 19 and it appears tous that althoughyou are using 20 certaincharacteristics of the GRIMM that you're 21 incorporating it largelyby name onlywhile cutting the 22 heart out of its use invalue. 23 Fortunately, sinceyou've at least started 24 adopting the data categories inthe GRIMM so thatwe 25 have some sense of what is going on inthe blackbox,

EXECUTIVE COURT REPORTERS, INC. (301) 565-006416 1 our consultant can tell how it is that LBL is misusing 2 or mis-manipulating the model or not adopting it fully. 3 And I've attached to my statement our consultant's 4 analysis of this issue. 5 I hope that during your internal regulatory 6 review, we'll have an opportunity to explore this more 7 fully. I urge you to hire new independent economists 8 to evaluate this issue. It's certainly in many cases 9 beyond the expertise of ARAM members, which is why 10 we've hired a consultant. It's clearly beyond your 11 expertise. I don't believe you can rely on LBL as a 12 fair and neutral broker on this issue and we urge you 13 to bring in independent expertise to deal with the 14 question of whether or not the GRIMM has in fact been 15 adopted, to what extent it can be adopted, and whether 16 what you have ended up with is a useful device for 17 regulatory decisions. 18 With respect to the issue of industry cost 19 pass-through, which we've discussed for many years, 20 despite the evidence that we've repeatedly presented to 21 the contrary, your analysis continues to accept the 22 theory that all costs are pass-through and marked up, 23 so that stringent costly standards are profitable. 24 We don't know of any empirical justification 25 for what's purely an assumption. We know there are

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(301) 565-0064 16 1 our consultant can tell how it is that LBL is misusing 2 ormis-manipulating themodel or not adopting it fully. 3 And I've attached tomy statement our consultant's 4 analysis of this issue. 5 I hope that duringyour internal regulatory 6 review, we'll have an opportunityto explore this more 7 fully. I urge you to hire new independent economists 8 to evaluate this issue. It's certainly inmany cases 9 beyond the expertise of AHAM members, which is why 10 we've hired a consultant. It's clearlybeyondyour 11 expertise. I don't believe you can rely on LBL as a 12 fair and neutral broker on this issue andwe urge you 13 to bring in independent expertise to deal with the 14 question of whether or not the GRIMM has in fact been 15 adopted, towhat extent it canbe adopted, and whether 16 what you have ended upwith is a useful device for 17 regulatory decisions. 18 with respect to the issue of industry cost 19 pass-through, whichwe've discussed for many years, 20 despite the evidence thatwe've repeatedly presentedto 21 the contrary, your analysis continues to accept the 22 theory that all costs are pass-through andmarked up, 23 so that stringent costly standards are profitable. 24 We don't know of any empirical justification 25 for what's purely an assumption. We knowthere are

EXECUTIVE COURT REPORTERS, INC. (301) 565-006417 1 certainly significant problems in getting at real data. 2 But we are still awaiting you to make the effect to do 3 that and we hope that will be done during this year. 4 It's critical that you undertake, independent 5 of LBL, an empirical and theoretical analysis of this 6 issue with the participation of all interested parties. 7 With respect to the question of full 8 cumulative burden, which is an issue that's 9 specifically addressed in President Clinton's Executive 10 Order on regulatory review, but which you have ignored 11 in every rulemaking that's occurred since that 12 Executive Order has been issued, the Senate floor 13 debate on the interior appropriations bill also directs 14 you to undertake a full cumulative burden analysis, 15 particularly for full line companies , which takes into 16 account the problem of multiple DOE and other related 17 standards changing over time and applying to the same 18 companies. 19 This fiscal year is an absolutely appropriate 20 juncture for DOE to undertake that analysis using the 21 GRIMM and/or other analytical measures

. Special 22 assessments should certainly be done on the effect of 23 the standards on smaller or niche market companies. 24 You also continue to insist on focusing your 25 analysis on so-called average firms. We understand

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(301) 565-0064 17 1 certainly significantproblems in getting at real data. 2 Butwe are still awaitingyou tomake the effect to do 3 that andwe hope thatwill be done during this year. 4 It's critical that you undertake, independent 5 of LBL, an empirical andtheoretical analysis of this 6 issuewith the participationof all interestedparties. 7 with respect to the question of full 8 cumulative burden, which is an issue that's 9 specifically addressed inPresident Clinton's Executive 10 Order on regulatory review, butwhichyou have ignored 11 in every rulemaking that's occurred since that 12 Executive Order has been issued, the Senate floor 13 debate on the interior appropriations bill also directs 14 you to undertake a full cumulativeburden analysis, 15 particularly for full line companies, which takes into 16 account theproblemof multiple DOE and other related 17 standards changing overtime and applying to the same 18 companies. 19 This fiscal year is an absolutely appropriate 20 juncture for DOE to undertake that analysis using the 21 GRIMM and/or other analyticalmeasures. Special 22 assessments shouldcertainlybe done on the effect of 23 the standards on smaller or nichemarket companies. 24 You also continue to insist on focusing your 25 analysis on so-called average firms. We understand

EXECUTIVE COURT REPORTERS, INC. (301) 565-006418 1 what the reasons for that are. But as we have said 2 repeatedly, you also need to take into account the 3 effect on other firms which will, by definition, be the 4 majority of firms who are not literally average. 5 Let me address a problem that I think is both 6 substantive and procedural-and structural, which is the 7 further use of LBL as a principal DOE contractor. 8 Since I've been involved with DOE, certainly since the 9 advent of NACA, LBL has essentially done all your 10 analytical work other than test procedure work that's 11 done by NIST, and I think everyone who's involved with 12 this process recognizes that's about 90 percent of the 13 total effort. So it's critical. 14 We strongly believe that it's time that your 15 principal contractor on appliance energy standards be 16 replaced. LBL's deficiencies, which we've never 17 hesitated to point out at every opportunity. It ranged 18 from rank intellectual dishonesty, -- for example, the 19 outdated inapposite and incorrect sources cited to 20 support the proposed engineering analysis in the 21 microwave oven rule, to a refusal or grudging 22 acceptance of changes in models in which they have 23 proprietary and longstanding interest. 24 We asked you to review how and why those 25 sources were used in the microwave oven rulemaking.

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(301) 565-0064 18 1 what the reasons for that are. But as we have said 2 repeatedly, you also needto take into account the 3 effect on other firms whichwill, by definition, be the 4 majority of firms who are not literally average. 5 Letme address a problemthat I think is both 6 substantive andprocedural and structural, which is the 7 further use of LBL as a principal DOE contractor. 8 Since I've been involvedwith DOE, certainly since the 9 advent of NACA, LBL has essentiallydone all your 10 analytical work otherthan testprocedure work that's 11 done byNIST, and I think everyonewho's involvedwith 12 this process recognizes that's about 90 percent of the 13 total effort. So it's critical. 14 We stronglybelieve that it's time that your 15 principal contractor on appliance energy standards be 16 replaced. LBL's deficiencies, which we've never 17 hesitatedto point out at every opportunity. It ranged 18 from rank intellectual dishonesty, -- for example, the 19 outdated inapposite and incorrect sources citedto 20 support the proposed engineering analysis inthe 21 microwave oven rule, to a refusal or grudging 22 acceptance of changes inmodels inwhich they have 23 proprietary and longstanding interest. 24 We askedyou to reviewhow andwhy those 25 sources were used inthemicrowave oven rulemaking.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006419 1 We've never heard anything from you. I don't know if 2 this is a matter that can be undertaken by the offices 3 present on the panel today or it needs to be done by 4 the Inspector General or others at DOE or people 5 outside of DOE, but these are issues that must be 6 addressed. 7 Even where DOE has directed LBL to make 8 changes in its analysis, such in incorporation of the 9 GRIMM, as I've noted, it appears to us that LBL only 10 acts begrudgingly and makes the minimum necessary 11 changes to assuage DOE. 12 We do not have confidence that LBL acts as a 13 neutral party. We perceive it as an adversary interest 14 and I believe, frankly, they believe that we're an 15 adversary interest. That's not the appropriate role 16 for a contractor to DOE for this purpose. 17 It doesn't appear to us that you have the 18 resources to properly supervise LBL's work to ensure 19 that what policy decisions you do make are not 20 sabotaged in practice. 21 Further, we have evidence which we'll be 22 presenting to appropriate bodies, that LBL has on a 23 number of occasions acted as an advocacy group in favor 24 of appropriations, legislation or international actions 25 to foster appliance standards. This is a conflict of

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(301) 565-0064 19 1 We've never heard anything fromyou. I don't know if 2 this is a matter that canbe undertakenby the offices 3 present on the panel today or it needs to be done by 4 the Inspector General or others at DOE orpeople 5 outside of DOE, but these are issues thatmust be 6 addressed. 7 Evenwhere DOE has directedLBL tomake 8 changes in its analysis, such in incorporation of the 9 GRIMM, as I've noted, it appears tous that LBL only 10 acts begrudgingly andmakes theminimumnecessary 11 changes to assuage DOE. 12 We do not have confidence that LBL acts as a 13 neutral party. We perceive it as an adversary interest 14 and I believe, frankly, they believe that we're an 15 adversary interest. That's not the appropriate role 16 for a contractor to DOE for this purpose. 17 It doesn't appear tous thatyou have the 18 resources toproperly supervise LBL's workto ensure 19 thatwhat policy decisions you domake are not 20 sabotaged inpractice. 21 Further, we have evidence whichwe'll be 22 presentingto appropriate bodies, that LBL has on a 23 number of occasions acted as an advocacy group in favor 24 of appropriations, legislation or international actions 25 to foster appliance standards. This is a conflict of

EXECUTIVE COURT REPORTERS, INC. (301) 565-006420 1 interest whether it be a legal one or simply from an 2 ethical point of view in its role as a contractor for 3 DOE and indicates clear prejudgment as to the 4 necessity, viability and value of particular standards 5 and appliance standards in general. 6 As I said, there needs to be a review of LBL 7 lobbying and similar activities, both in the Congress, 8 the Administration and at the international level. 9 More importantly, we urge you to immediately 10 find alternative means through internal and outside 11 resources to do future energy analyses. We don't have 12 any particular view about whether it should be another 13 lab or one contractor or multiple contractors. But it 14 well past the time for LBL's stranglehold on the 15 appliance energy standards to end. 16 Let me mention a few other issues, just to 17 put them on the record. 18 Over the years we've disagreed with what we 19 believe are your incorrect view on the definition of 20 maximum technologically feasible, economic 21 justification, determination of energy savings, 22 discount rates and how utility losses are accounted for 23 under NACA. Although there have been a few occasions 24 in the last year or so where we thought that you'd 25 finally read all of NACA and were accepting the

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(301) 565-0064 20 1 interestwhether itbe a legal one or simply from an 2 ethical point of view in its role as a contractor for 3 DOE and indicates clearprejudgment as to the 4 necessity, viability and value of particular standards 5 and appliance standards in general. 6 As I said, there needs tobe a review of LBL 7 lobbying and similar activities, both inthe Congress, 8 theAdministration and at the international level. 9 More importantly, we urge you to immediately 10 find alternativemeans through internal and outside 11 resources to do future energy analyses. We don't have 12 any particularview aboutwhether it shouldbe another 13 lab or one contractor ormultiple contractors. But it 14 well past the time for LBL's stranglehold on the 15 appliance energy standards to end. 16 Letme mention a few other issues, justto 17 put themon the record. 18 Over the years we've disagreedwithwhat we 19 believe areyour incorrect view on the definition of 20 maximumtechnologically feasible, economic 21 justification, determination of energy savings, 22 discount rates and how utility losses are accounted for 23 underNACA. Although there have been a few occasions 24 inthe lastyear or sowherewe thought that you'd 25 finally read all of NACA andwere accepting the

EXECUTIVE COURT REPORTERS, INC. (301) 565-006421 1 totality of the implications of all its provisions, 2 nonetheless the proposed rule, once again, totally 3 neglects the specific so-called safe harbor provisions 4 of Section 32504. 5 I'm not going to go into detail on these 6 issues now. Our position in them are quite clear over 7 the years. The bottom line is you are still 8 misapplying the law and you're failing to fully apply 9 the criteria set forth in NACA and various Executive 10 Orders, as I referred to earlier. 11 Finally, what should be one of the most 12 important parts of your analysis is probably the 13 weakest part, which is Section 5 of the Federal 14 Register notice relating to alternative nonregulatory 15 means to achieve energy savings. As you do in every 16 Federal Register notice, you simply put in essentially 17 the same boilerplate and do not seriously contemplate 18 either in this or other rulemakings the role of 19 alternative nonregulatory means, although this is 20 required by the President's Executive Order. 21 I don't know if this is because just from a 22 policy point of view you don't think that this is a 23 serious consideration or you think the law constricts 24 you in some way. But we would hope that in your 25 internal regulatory review you will examine ways in

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(301) 565-0064 1 totality of the implications of all its provisions, 2 nonetheless the proposedrule, once again, totally 3 neglects the specific so-called safe harbor provisions 4 of Section 32504. 5 I'mnot going to go into detail on these 6 issues now. Our position inthem are quite clear over 7 the years. The bottomline is you are still 8 misapplying the law andyou're failing to fully apply 9 the criteria set forth inNACA andvarious Executive 10 Orders, as I referred to earlier. 11 Finally, what shouldbe one of the most 12 important parts of your analysis is probably the 13 weakest part, which is Section 5 of the Federal 14 Register notice relating to alternative nonregulatory 15 means to achieve energy savings. As you do in every 16 Federal Register notice, you simplyput in essentially 17 the same boilerplate and do not seriouslycontemplate 18 either inthis or other rulemakings the role of 19 alternative nonregulatorymeans, although this is 20 required by the President's Executive Order. 21 I don't know if this is because just from a 22 policy point of viewyou don't think that this is a 23 serious consideration or you thinkthe lawconstricts 24 you in some way. Butwe would hope that inyour 25 internal regulatory reviewyou will examineways in

EXECUTIVE COURT REPORTERS, INC. (301) 565-006422 1 which you can more seriously review the way that 2 approaches other than regulations can also achieve 3 significant energy savings, which is a goal that we 4 continue to share with you. 5 If I understood Secretary Ervin's comments, 6 this is one of the particular aspects of the regulatory 7 review that she noted. And if so, we're delighted and 8 are looking forward to working with you. 9 Other parts of your office, the analysis that 10 Mr. Broderick recently did on DSM programs and early 11 replacement/early retirement and golden carrot type 12 programs provides just a basketful of interesting 13 approaches that should be pursued, and we'd like to do 14 that with you. 15 That's the end of my remarks. I'd be happy 16 to answer any questions. 17 MR. POLLOCK: Thank you, Mr. Samuels. 18 Are there questions from the panel? 19 (No response.) 20 MR. POLLOCK: At this time, I would like to 21 call Mr. Michael Thompson from Whirlpool Corporation. 22 MR. THOMPSON: Good morning, gentlemen. I'm 23 Mike Thompson. I'm Director of Government Relations for 24 the Whirlpool Corporation and I'm here this morning to 25 testify on behalf of Whirlpool Corporation regarding

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(301) 565-0064 1 whichyou canmore seriously reviewtheway that 2 approaches other than regulations can also achieve 3 significant energy savings, which is a goal thatwe 4 continue to sharewithyou. 5 If I understood SecretaryErvin's comments,22

6 this is one of the particular aspects of the regulatory 7 reviewthat she noted. And if so, we're delighted and 8 are looking forward toworkingwithyou. 9 Otherparts of your office, the analysis that 10 Mr. Broderickrecently did on DSM programs and early 11 replacement/earlyretirement and golden carrot type 12 programs provides just a basketful of interesting 13 approaches that shouldbe pursued, andwe'd like to do 14 thatwithyou. 15 That's the end of my remarks. I'dbe happy 16 to answer any questions. 17 MR. POLLOCK: Thankyou, Mr. Samuels. 18 Are there questions from the panel? 19 (No response.) 20 MR. POLLOCK: At this time, I would like to 21 callMr. Michael Thompson fromWhirlpool Corporation. 22 MR. THOMPSON: Goodmorning, gentlemen. I'm 23 Mike Thompson. I'mDirector of Government Relations for 24 theWhirlpool Corporation and I'mhere this morning to 25 testify on behalf ofWhirlpool Corporation regarding

EXECUTIVE COURT REPORTERS, INC. (301) 565-006423 1 the notice of proposed rulemaking on refrigerators and 2 freezers and the minimum efficiency standards that 3 we're going to be supporting. 4 As you know, Whirlpool Corporation is a 5 global manufacturer of home appliances worldwide. 6 We're marketing in approximately 100 countries and our 7 employment is almost 40,000 people. Within North 8 America we have -- we are one of five major 9 participants in the appliance business and we employ 10 over 20,000 people. 11 The July 20th, 1995 notice of proposed 12 rulemaking impacts refrigerators that we manufacture 13 and sell in the United States. In addition, it impacts 14 refrigerators and freezers manufactured by our Mexican 15 joint venture partner, Vitromatic, which are then 16 marketed in the United States. 17 On the front end, I'd like to say that our 18 basic position concerning the DOE's notice of proposed 19 rulemaking is as follows. It's basically two points. 20 Whirlpool continues to support the joint 21 statement with accompanying standards levels which was 22 submitted by seven co-signatories, including the 23 Association of Home Appliance Manufacturers, on 24 November 14th, 1994. And secondly, Whirlpool supports 25 the federal standards levels proposed on July 20th,

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(301) 565-0064 23 1 the notice of proposed rulemaking on refrigerators and 2 freezers and the minimum efficiency standards that 3 we're goingtobe supporting. 4 As you know, Whirlpool Corporation is a 5 global manufacturer of home appliances worldwide. 6 We'remarketing in approximately 100 countries and our 7 employment is almost 40,000 people. withinNorth 8 Americawe have -- we are one of five major 9 participants inthe appliance business andwe employ 10 over 20,000 people. 11 The July 20th, 1995 notice of proposed 12 rulemaking impacts refrigerators thatwe manufacture 13 and sell inthe united States. In addition, it impacts 14 refrigerators and freezers manufacturedby our Mexican 15 jointventure partner, Vitromatic, which are then 16 marketed in the united states. 17 On the front end, I'd like to saythat our 18 basic positionconcerningthe DOE's notice of proposed 19 rulemaking is as follows. It's basicallytwo points. 20 Whirlpool continues to support the joint 21 statementwith accompanying standards levels whichwas 22 submittedby seven co-signatories, including the 23 Association of Home ApplianceManufacturers, on 24 November 14th, 1994. And secondly, Whirlpool supports 25 the federal standards levels proposed on July 20th,

EXECUTIVE COURT REPORTERS, INC. (301) 565-006424 1 1995 by DOE. 2 I'd like to say that our support for the 3 joint statement and the proposed DOE standards is 4 rooted in several basic factors. There's a lot of 5 benefits here. These factors are already well 6 documented in the joint statement and they include the 7 NACA requirements of long-term energy, environmental, 8 consumer and utility benefits to be derived by our 9 entire nation. 10 Our support is also rooted in our ethical 11 commitment to uphold the standards levels which we 12 agreed to in the joint statement and which were 13 subsequently re-proposed in this notice. 14 In supporting this NOPR, we also express 15 disagreement with AHAM's lack of public support for 16 both the original joint statement and for the 17 subsequent proposed DOE standards. AHAM, as you just 18 heard, has adopted a no position on whether the 19 proposed rule or some variation should be finalized 20 because of the pendency of federal legislation which 21 could have an impact on this rulemaking. We question 22 whether the AHAM parties to the joint statement after 23 two years and considerable time and resources spent in 24 drafting this joint statement would withdraw their 25 support for this original statement had the political

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(301) 565-0064 24 1 1995 by DOE. 2 I'd like to say that our support for the 3 joint statement andthe proposed DOE standards is 4 rooted in several basic factors. There's a lot of 5 benefits here. These factors are alreadywell 6 documented inthe joint statement andthey include the 7 NACA requirements of long-termenergy, environmental, 8 consumer and utilitybenefits tobe derivedby our 9 entire nation. 10 Our support is also rooted in our ethical 11 commitment to upholdthe standards levels whichwe 12 agreed to inthe joint statement andwhichwere 13 subsequently re-proposed inthis notice. 14 In supporting this NOPR, we also express 15 disagreement withAHAM's lack of public support for 16 both the original joint statement and for the 17 subsequent proposed DOE standards. AHAM, as you just 18 heard, has adopted a no position onwhether the 19 proposedrule or some variation shouldbe finalized 20 because of the pendency of federal legislationwhich 21 could have an impact on this rulemaking. We question 22 whether theAHAM parties to the joint statement after 23 two years and considerable time and resources spent in 24 drafting this joint statementwouldwithdrawtheir 25 support for this original statement had the political

EXECUTIVE COURT REPORTERS, INC. (301) 565-006425 1 environment on Capitol Hill not changed. 2 In addition, we have concerns that AHAM's, 3 quote, "no position," will encourage conditions that 4 will result in the backsliding of energy efficiency 5 gains already made by this industry. This is 6 especially true with this particular product category, 7 refrigerators. 8 Numerous models are now in the market which 9 are 10, 20 and even 30 percent plus beyond the federal 10 standards in place right now. As a parenthetical 11 comment, I can add that Whirlpool Corporation has 12 product in the marketplace in virtually every product 13 classification and size that are at least 10 percent 14 above the standard. Some of these efficiency 15 improvements are the results of the impetus of 16 anticipated future appliance standards levels. 17 Now at this point, I'd like to address 18 several specific issues that DOE asked us to comment on 19 in the NOPR. 20 With respect to the first item, any likely 21 adverse effects of the standards on identifiable groups 22 of consumers, one of the assumptions of the agreement 23 was to allow manufacturers to optimize energy savings 24 vis-a-vis investments. Specifically, the largest 25 energy reductions are in larger production quantity

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(301) 565-0064 25 1 environment on Capitol Hill not changed. 2 In addition, we have concerns thatAHAM's, 3 quote, "noposition," will encourage conditions that 4 will result inthe backsliding of energy efficiency 5 gains alreadymade by this industry. This is 6 especiallytruewith this particularproduct category, 7 refrigerators. 8 Numerous models are now in the market which 9 are 10, 20 and even 30 percent plus beyond the federal 10 standards inplace right now. As a parenthetical 11 comment, I can add thatWhirlpool Corporation has 12 product in the marketplace invirtually everyproduct 13 classification and size that are at least 10 percent 14 above the standard. Some of these efficiency 15 improvements are the results of the impetus of 16 anticipated future appliance standards levels. 17 Now at this point, I'd like to address 18 several specific issues that DOE asked us to comment on 19 in the NOPR. 20 with respect to the first item, any likely 21 adverse effects of the standards on identifiable groups 22 of consumers, one of the assumptions of the agreement 23 was to allowmanufacturers to optimize energy savings 24 vis-a-vis investments. Specifically, the largest 25 energy reductions are in largerproductionquantity

EXECUTIVE COURT REPORTERS, INC. (301) 565-006426 1 products. Therefore, as the parties to the agreement 2 targeted the largest energy savings at the large 3 production quantity products, this tended to mitigate 4 any adverse effects on identifiable groups of
5 consumers. 6 Through economies of scale and spreading 7 depreciation of investments over larger quantities, 8 this process inherently avoided concentrating the 9 impact of the proposed standards on any particular 10 class of refrigerators. 11 With respect to the issue of market share 12 elasticities, we don't have any comment; We do have 13 comments on usage elasticities. We agree with the DOE 14 that, unlike many other appliances, the energy 15 consumption of refrigerators and freezers is not 16 largely impacted by daily usage patterns and 17 specifically door openings and use of icemakers, et 18 cetera. 19 The next issue : The characterization of 20 prototypical firms for the manufacturer impact 21 analysis. As you also just heard, ARAM has stated that 22 the DOE fails to take into account the adverse effects23 of standards on, quote, "other firms," other non24 average firms, and that the majority of firms are not 25 average. While we agree that this may be true, we have

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(301) 565-0064 1 products. Therefore, as the parties to the agreement 2 targeted the largest energy savings at the large 3 production quantity products, this tendedtomitigate 4 any adverse effects on identifiable groups of 5 consumers. 6 Through economies of scale and spreading 7 depreciation of investments over larger quantities, 8 this process inherently avoided concentratingthe 9 impact of the proposed standards on any particular 10 class of refrigerators. 11 with respect to the issue of market share 12 elasticities, we don't have any**comment~** We do have 26

13 comments on usage elasticities. We agree with the DOE 14 that, unlikemany other appliances, the energy 15 consumption of refrigerators and freezers is not 16 largely impactedby daily usage patterns and 17 specificallydoor openings and use of icemakers, et 18 cetera. 19 The next issue: The characterization of 20 prototypical firms for the manufacturer impact 21 analysis. As you also just heard, AHAM has statedthat 22 the DOE fails to take into account the adverse effects 23 of standards on, quote, "other firms," other non24 average firms, and that themajority of firms are not 25 average. Whilewe agree that this may be true, we have

EXECUTIVE COURT REPORTERS, INC. (301) 565-006427 1 to also say that all major manufacturers of 2 refrigerators and freezers voluntarily supported this 3 original agreement dated November 14th, 1994. 4 This support is presumably based on each 5 manufacturer's conducting their own analysis of the 6 impacts of the agreement on their refrigerator 7 business. I would add, again parenthetically, that on 8 page 23 of that agreement there's a statement that says 9 this: None of the parties to this agreement believe 10 that the standards will lead to a likelihood of reduced 11 competition. 12 Therefore, we submit that further exhaustive 13 DOE evaluation of either the atypical or the 14 prototypical refrigerator manufacturer should be either 15 moot or unnecessary for this rulemaking. 16 The next issue: Efficiency forecasts for 17 these products. Considering the reduction in rebate 18 programs resulting in part from the deregulation of the 19 utility industry, we feel that there will be no 20 improvements and probably some backsliding from current 21 efficiency levels if there are no changes from the 22 existing mandatory energy efficiency standards. 23 The next issue deals with any lessening of 24 product utility resulting from incorporation of the 25 design options identified, including but not limited to

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(301) 565-0064 27 1 to also saythat all majormanufacturers of 2 refrigerators and freezers voluntarily supportedthis 3 original agreement datedNovember 14th, 1994. 4 This support is presumably based on each 5 manufacturer's conductingtheir own analysis of the 6 impacts of the agreement on their refrigerator 7 business. I would add, againparenthetically, that on 8 page 23 of that agreement there's a statement that says 9 this: None of the parties to this agreement believe 10 that the standards will leadto a likelihood of reduced 11 competition. 12 Therefore, we submit that further exhaustive 13 DOE evaluation of eitherthe atypical or the 14 prototypical refrigeratormanufacturer shouldbe either 15 moot orunnecessary for this rulemaking. 16 The next issue: Efficiency forecasts for 17 these products. Consideringthe reduction in rebate 18 programs resulting inpart from the deregulation of the 19 utility industry, we feel that there will be no 20 improvements and probably some backsliding from current 21 efficiency levels if there are no changes from the 22 existingmandatory energy efficiency standards. 23 The next issue deals with any lessening of 24 product utilityresulting from incorporation of the 25 design options identified, including but not limitedto

EXECUTIVE COURT REPORTERS, INC. (301) 565-006428 1 the addition of insulation. 2 Again, we state that manufacturers 3 voluntarily supported the original agreement. As such, 4 we assume each manufacturer has determined their own 5 past to reach the agreed upon standards. 6 In this competitive appliance industry, 7 remaining in business requires no degradation of 8 customer utility. I would come back to the basic 9 agreement. Again, page 23, says this: These standards 10 were chosen at a level that provides for no significant 11 lessening of utility or performance. 12 Therefore, we contend that implementation of 13 energy standards per the original agreement will not 14 result in any lessening of consumer utility. 15 The next issue: The effects of standards on 16 manufacturers' incentives to develop innovative 17 products and product features. 18 Standards are a key driver of innovation for 19 improved energy efficiency. Innovating for improved 20 efficiency does require resources. However, as 21 manufacturers develop and tool energy efficient 22 products, especially what we call the clean sheet 23 designs or the brand new designs, they will routinely 24 include other benefits beyond energy efficiency, such 25 as innovative features, cost reductions and quality

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(301) 565-0064 28 1 the addition of insulation. 2 Again, we state that manufacturers 3 voluntarily supportedthe original agreement. As such, 4 we assume eachmanufacturer has determined their own 5 past to reach the agreedupon standards. 6 In this competitive appliance industry, 7 remaining inbusiness requires no degradation of 8 customerutility. I would come back to the basic 9 agreement. Again, page 23, says this: These standards 10 were chosen at a level that provides for no significant 11 lessening of utility orperformance. 12 Therefore, we contendthat implementation of 13 energy standards perthe original agreement will not 14 result in any lessening of consumer utility. 15 The next issue: The effects of standards on 16 manufacturers' incentives to develop innovative 17 products and product features. 18 Standards are a key driver of innovation for 19 improved energy efficiency. Innovating for improved 20 efficiency does require resources. However, as 21 manufacturers develop and tool energy efficient 22 products, especiallywhatwe call the clean sheet 23 designs or the brand new designs, they will routinely 24 include otherbenefits beyond energy efficiency, such 25 as innovative features, cost reductions and quality



### EXECUTIVE COURT REPORTERS, INC. (301) 565-006429 1 improvements in order to maximize the return from their 2 investment. Thus, there can be feature cost and 3 quality synergies coincidental with the redesign of 4 appliances for energy efficiency reasons.
5 The next issue : The lifetime of appliances. You asked us to comment on the 19 year lifetime of 7 these products. 8 We agree with DOE's assumption of a 19 year 9 lifetime. Our only other comment is that we believe 10 there is a greater chance of earlier retirement of old, 11 inefficient refrigerators and freezers as more 12 efficient products are required by these standards. 13 One other issue: Maintenance costs and 14 failure rates. 15 To reiterate, again, all major manufacturers 16 voluntarily supported the original agreement. Thus, 17 once again, we surmise that each manufacturer 18 participants to the joint statement must have 19 determined their own paths to reach the agreed upon 20 standards. In this industry, remaining competitive 21 requires substantial testing of new components and 22 materials to assure that no increase in maintenance 23 costs or failure rates will occur. Because of this, we 24 contend that maintenance costs and failure rates will 25 not be any more likely to occur under this rulemaking

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(301) 565-0064 29 1 improvements in order tomaximize the return from their 2 investment. Thus, there canbe feature cost and 3 quality synergies coincidental with the redesign of 4 appliances for energy efficiency reasons. 5 The next issue: The lifetime of appliances. 6 You asked us to comment on the 19 year lifetime of 7 these products. 8 We agree with DOE's assumption of a 19 year 9 lifetime. Our only othercomment is thatwe believe 10 there is a greater chance of earlier retirement of old, 11 inefficientrefrigerators and freezers as more 12 efficientproducts are requiredby these standards. 13 One other issue: Maintenance costs and 14 failure rates. 15 To reiterate, again, allmajormanufacturers 16 voluntarily supportedthe original agreement. Thus, 17 once again, we surmise that eachmanufacturer 18 participants to the joint statementmust have 19 determinedtheir own paths to reach the agreed upon 20 standards. In this industry, remaining competitive 21 requires substantial testing of newcomponents and 22 materials to assure that no increase inmaintenance 23 costs or failure rates will occur. Because of this, we 24 contend that maintenance costs and failure rates will 25 not be any more likelyto occurunder this rulemaking

EXECUTIVE COURT REPORTERS, INC. (301) 565-006430 1 than under any other refrigerator freezer redesign. 2 As a last comment, the November 14th, 1994 3 submittal to the Department included cost premiums and 4 energy savings for the design options considered, and 5 that's in Attachment 2 to that submittal. I have a 6 copy of it with me. We find that the Department's 7 contractor, LBL, retained this basic information when 8 performing their analysis of the economic justification 9 for the proposed standard. We also observed that the 10 Department conclusion in favor of those level one 11 standards is absolutely consistent with the recommended 12 standards in the November 14th, 1994 submittal. 13 Therefore, we continue our support for the 14 proposed standards levels, while reserving the option 15 for further comments in the future concerning the 16 relative merits of the LBL MANN versus GRIMM economic 17 analysis. 18 In summary, I'd like to say one last time we 19 support the November 14th, 1994 joint agreement. We 20 support the July 20th, 1995 refrigerator freezer NOPR 21 and we disagree with AHAM's posture of adopting no 22 position on either the refrigerator freezer joint 23 statement or on the DOE proposed standards levels in 24 this notice of proposed rulemaking. 25 Thanks for the opportunity to comment and

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(301) 565-0064 30 1 than under any otherrefrigerator freezer redesign. 2 As a lastcomment, the November 14th, 1994 3 submittal to the Department included cost premiums and 4 energy savings for the design options considered, and 5 that's inAttachment 2 to that submittal. I have a 6 copy of itwithme. We find that the Department's 7 contractor, LBL, retained this basic informationwhen 8 performingtheir analysis of the economic justification 9 for the proposed standard. We also observedthat the 10 Department conclusion in favor of those level one 11 standards is absolutely consistentwith the recommended 12 standards inthe November 14th, 1994 submittal. 13 Therefore, we continue our support for the 14 proposed standards levels, while reserving the option 15 for further comments inthe future concerning the 16 relative merits of the LBL MANN versus GRIMM economic 17 analysis. 18 In summary, I'd like to say one last time we 19 support the November 14th, 1994 joint agreement. We 20 support the July 20th, 1995 refrigerator freezer NOPR 21 andwe disagree withAHAM's posture of adopting no 22 position on eitherthe refrigerator freezer joint 23 statement or on the DOE proposed standards levels in 24 this notice of proposed rulemaking. 25 Thanks for the opportunity to comment and

EXECUTIVE COURT REPORTERS, INC. (301) 565-006431 1 I'll be happy to entertain your questions at this time.
2 MR. POLLOCK: Thank you, Mr. Thompson. 3 Are there questions form the panel for Mr.
4 ? hompson T 5 MR. MARGOLIS: Mike, thank you very much for 6 your statement, but could you just enlighten me on what 7 is a clean sheet design? 8 MR. THOMPSON: Okay. That's a brand new -- 9 it's a redesign, a total redesign of the product. 10 MR. MARGOLIS: I see. 11 MR. THOMPSON: To include a lot of -- 12 MR. MARGOLIS: So, clean sheet. 13 MR. THOMPSON: Yes. 14 MR. MARGOLIS: Thank you. 15 MR. THOMPSON: -- features. 16 MR. POLLOCK: Thank you, Mr. Thompson. 17 At this time I'd like to call Allen Wilkins 18 from Sub-Zero Freezer Company. 19 MR. WILKINS: Good morning. Allen Wilkins, 20 Sub-Zero Freezer Company. 21 We thank you for the opportunity to comment
22 on the July 20 and September 13th Federal Register 23 notices. Today we are responding in specific to your 24 request for comments from small manufacturers and niche 25 companies. We qualify in both of these categories and

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(301) 565-0064 31 1 I'llbe happy to entertainyour questions at this time. 2 MR. POLLOCK: Thankyou, Mr. Thompson. 3 Are there questions form the panel for Mr. 4 Thompson? 5 MR. MARGOLIS: Mike, thankyou verymuch for 6 your statement, but couldyou just enlightenme onwhat 7 is a clean sheet design? 8 MR. THOMPSON: Okay. That's a brand new 9 it's a redesign, a total redesign of the product. 10 MR. MARGOLIS: I see. 11 MR. THOMPSON: To include a lot of 

### -- 12 MR. MARGOLIS: So, clean sheet. 13 MR. THOMPSON: Yes. 14 MR. MARGOLIS: Thankyou. 15 MR. THOMPSON: -- features. 16 MR. POLLOCK: Thankyou, Mr. Thompson. 17 At this time I'd like to callAllenWilkins 18 from Sub-ZeroFreezerCompany. 19 MR. WILKINS: Goodmorning. AllenWilkins, 20 Sub-Zero Freezer Company. 21 We thankyou for the opportunity to comment 22 on the July 20 and September 13thFederal Register 23 notices. Todaywe are responding in specific toyour 24 request for comments from small manufacturers and niche 25 companies. We qualify inboth of these categories and

EXECUTIVE COURT REPORTERS, INC. (301) 565-006432 1 want to elaborate on how this proposed rule affects us. 2 Sub-Zero is a small family owned company 3 located in Madison, Wisconsin and Phoenix, Arizona, 4 which employs approximately 550 people. In August of 5 this year we celebrated our 50th anniversary of being 6 in business.7 We build and sell or products for the built8 in refrigerator niche market, and, as you are aware, 9 built-in refrigerators and freezers integrate the 10 storage of food into the overall kitchen design. 11 Not only are our products able to blend into 12 the kitchen visually, some are also designed for 13 specific locations in the kitchen or specific food 14 types. The build-in market is estimated to be about 1 15 percent of the total refrigerators sold, but size does 16 not indicate that the market is without competition. 17 There are several manufacturers in this niche 18 and they range in size from the largest appliance 19 manufacturers to small companies, such as Sub-Zero. 20 I would now like to point out some of the 21 obstacles that small manufacturers like Sub-Zero have 22 had to overcome when complying with standards, such as 23 the one being discussed today. 24 First, the major increases in efficiency 25 realized in the 1980's with refrigerators are no longer

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(301) 565-0064 

### 32 1 want to elaborate on how this proposedrule affects us. 2 Sub-Zero is a small family owned company 3 located inMadison, Wisconsin and Phoenix, Arizona, 4 which employs approximately 550 people. InAugust of 5 this yearwe celebrated our 50th anniversary of being 6 inbusiness. 7 We buildand sell orproducts for the built8 inrefrigerator nichemarket, and, as you are aware, 9 built-inrefrigerators and freezers integrate the 10 storage of food intothe overall kitchen design. 11 Not only are our products able to blend into 12 the kitchenvisually, some are also designed for 13 specific locations inthe kitchen or specific food 14 types. The build-inmarket is estimatedto be about 1 15 percent of the total refrigerators sold, but size does 16 not indicatethat themarket iswithout competition. 17 There are severalmanufacturers in this niche 18 andtheyrange in size fromthe largest appliance 19 manufacturers to small companies, such as Sub-Zero. 20 I would now like topoint out some of the 21 obstacles that smallmanufacturers like Sub-Zero have 22 hadto overcomewhen complyingwith standards, such as 23 the one being discussedtoday. 24 First, themajor increases in efficiency 25 realized inthe 1980'swith refrigerators are no longer

EXECUTIVE COURT REPORTERS, INC. (301) 565-006433 1 possible. Further energy reductions will be much 2 harder to accomplish in future designs due to those 3 significant improvements in efficiency already 4 accomplished through standards of past years. 5 Component improvements will probably provide 6 some future energy reductions, but significantly more 7 engineering and investment will be required to improve 8 efficiency. Also, the risk to manufacturers of not 9 being able to meet new standards with accepted products 10 that appeal to customers at a price that they can 11 afford will continue to increase. 12 We at Sub-Zero are proud of the past 13 accomplishments of our engineering personnel in 14 improving efficiency, but we've had to supplement our 15 staff regularly with outside consultants to assist us 16 with meeting energy standards. We believe future 17 standards will require us to solicit even more 18 assistance. 19 It is important to realize that the amount of 20 effort Sub-Zero must expend in meeting standards does 21 not differ much from the major manufacturers, since the 22 number of models and styles we offer and the level of 23 technology we must utilize are very similar. The 24 process of needing to continually improve the energy 25 efficiency of our products to achieve, in effect,

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(301) 565-0064 33 1 possible. Further energyreductions will bemuch 2 harder to accomplish in future designs due to those 3 significant improvements in efficiency already 4 accomplishedthrough standards of pastyears. 5 Component improvements will probably provide 6 some future energy reductions, but significantlymore 7 engineering and investmentwill be required to improve 8 efficiency. Also, the risktomanufacturers of not 9 being able tomeet new standards with accepted products 10 that appeal to customers at a price that they can 11 afford will continue to increase. 12 We at Sub-Zero are proud of the past 13 accomplishments of our engineeringpersonnel in 14 improving efficiency, butwe've had to supplement our 15 staff regularlywith outside consultants to assist us 16 withmeeting energy standards. We believe future 17 standards will require us to solicit evenmore 18 assistance. 19 It is important to realize that the amount of 20 effort Sub-Zeromust expend inmeeting standards does 21 not differmuch fromthemajormanufacturers, since the 22 number of models and styles we offer and the level of 23 technologywe must utilize are very similar. The 24 process of needing to continually improve the energy 25 efficiency of ourproducts to achieve, in effect,



### EXECUTIVE COURT REPORTERS, INC. (301) 565-006434 1 diminishing gains, is taxing our product engineering 2 and manufacturing staff. It also limited innovation. 3 Customers are no longer offered new features, 4 benefits and utility on a regular basis since the vast 5 majority of redesign effort necessarily focuses on 6 energy alone. 7 Secondly, I'd like to discuss some specific 8 designs that are disadvantaged because they are not 9 necessarily considered in the original NACA rule. 10 We added a product line issue which is 11 composed of smaller modular units which can be located 12 throughout the home. While these are classified by DOE 13 as compacts, they are top-of-the-line, full feature, 14 self-defrost, electronic control icemakers, et cetera, 15 modules which are different from a low price manual 16 defrost compact refrigerator as a Porsche is from a 17 Volkswagen. 18 These do not fit the category that previously 19 was described as compact category. We call your 20 attention to models such as this as examples of new 21 products being demanded by the marketplace that do not 22 fit the original description and utility of small 23 compact units in NACA. And this example specifically 24 goes to the point that the proposed standard levels, 25 when using HCFC, should be less stringent than the

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(301) 565-0064 34 1 diminishing gains, is taxing ourproduct engineering 2 andmanufacturing staff. It also limited innovation. 3 Customers are no longer offered new features, 4 benefits and utility on a regularbasis since the vast 5 majority of redesign effort necessarily focuses on 6 energy alone. 7 Secondly, I'd liketo discuss some specific 8 designs that are disadvantagedbecause they are not 9 necessarily considered inthe original NACA rule. 10 We added a product line issuewhich is 11 composed of smallermodularunits which canbe located 12 throughout the home. While these are classifiedby DOE 13 as compacts, they are top-of-the-line, full feature, 14 self-defrost, electronic control icemakers, et cetera, 15 modules which are different from a lowpricemanual 16 defrost compact refrigerator as a Porsche is from a 17 Volkswagen. 18 These do not fit the categorythat previously 19 was described as compact category. We call your 20 attentiontomodels such as this as examples of new 21 products being demanded by the marketplace that do not 22 fit the original description and utility of small 23 compact units inNACA. And this example specifically 24 goes to the pointthat the proposed standard levels, 25 when using HCFC, shouldbe less stringent than the

EXECUTIVE COURT REPORTERS, INC. (301) 565-006435 1 existing '93 standards in certain cases because the 2 product configurations have changed. 3 Certainly, another impact on small 4 manufacturers is that company size dictates production 5 processes which may not be as efficient as those that 6 can be justified by larger companies. 7 We have incorporated a dual compressor system 8 on many of our products over the last 30 years. We 9 believe that the dual systems have food preservation 10 advantages and our market research reveals our 11 customers demand fully independent compartment control. 12 You are also aware of the potential energy 13 advantages made possible by the dual system, but some 14 of the advantage can be offset by lower EER's of 15 available smaller compressors. Since we are a small 16 manufacturer, our small compressors do not receive the 17 design attention by compressor manufacturers that 18 larger capacity units receive because of their larger 19 production volumes. Therefore, there's an energy 20 disadvantage with the small compressors we are forced 21 to use in our dual compressor systems. 22 Another burden on small manufacturers is that 23 the polyurethane foam systems we must use is a froth 24 system. As compared to the large volume producers, we 25 use a very expensive high through-put high pressure

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(301) 565-0064 35 1 existing '93 standards in certain cases because the 2 product configurations have changed. 3 Certainly, another impact on small 4 manufacturers is that company size dictates production 5 processes whichmay not be as efficient as those that 6 canbe justifiedby larger companies. 7 We have incorporated a dual compressor system 8 onmany of ourproducts overthe last 30 years. We 9 believe that the dual systems have food preservation 10 advantages and ourmarket research reveals our 11 customers demand fully independent compartment control. 12 You are also aware of the potential energy 13 advantages made possible by the dual system, but some 14 of the advantage canbe offsetby lowerEER's of 15 available smaller compressors. Sincewe are a small 16 manufacturer, our small compressors do not receive the 17 design attention by compressormanufacturers that 18 larger capacityunits receive because of their larger 19 productionvolumes. Therefore, there's an energy 20 disadvantage with the small compressors we are forced 21 to use in our dual compressor systems. 22 Anotherburden on smallmanufacturers is that 23 the polyurethane foam systems we must use is a froth 24 system. As compared to the largevolume producers, we 25 use a very expensive high through-put high pressure

EXECUTIVE COURT REPORTERS, INC. (301) 565-006436 1 system. The K factor achieved with froth as opposed -- 2 compared to high pressure systems is on the order of 10 3 percent less effective. It is obviously difficult to 4 make up for this substantial loss in properties of the 5 main insulation. 6 Vacuum insulation also poses too much risk 7 and drain our resources for us to seriously consider 8 its introduction in our products until it has been 9 proved by others in the field. 10 In conclusion, we are proud of the 11 contributions Sub-Zero has made to the environment and 12 the country's energy self-sufficiency in complying with 13 or exceeding DOE standards. However, we must now 14 express our opinion that DOE should reassess further 15 standards given the expected returns and the burdens 16 future standards will place on manufacturers and 17 consumers. 18 We particularly ask DOE to more seriously 19 examine the impact of its actions on small 20 manufacturers of refrigerators in the U.S. and our 21 employees. Business is difficult enough not to be 22 further burdened by efficiency improvements which hurt 23 us more than others and make it more difficult to 24 compete the marketplace. 25 I'd be glad to answer any questions.

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(301) 565-0064 36 1 system. The Kfactor achievedwith froth as opposed 2 compared to high pressure systems is on the order of 10 3 percent less effective. It is obviously difficult to 4 make up for this substantial loss in properties of the 5 main insulation. 6 Vacuum insulation alsoposes toomuch risk 7 and drain ourresources for us to seriously consider 8 its introduction in ourproducts until it has been 9 provedby others inthe field. 10 In conclusion, we are proud of the 11 contributions Sub-Zero has made to the environment and 12 the country's energy self-sufficiency incomplyingwith 13 or exceeding DOE standards. However, we must now 14 express our opinionthat DOE should reassess further 15 standards given the expectedreturns and the burdens 16 future standards will place onmanufacturers and 17 consumers. 18 We particularly ask DOE to more seriously 19 examine the impact of its actions on small 20 manufacturers of refrigerators in the U.S. and our 21 employees. Business is difficult enough not tobe 22 further burdenedby efficiency improvements which hurt 23 us more than others andmake itmore difficult to 24 compete the marketplace. 25 I'dbe gladto answer any questions.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006437 1 MR. POLLOCK: Thank you, Mr. Wilkins. 2 MR. MARGOLIS: Mr. Wilkins, thank you very 3 much for your statement. 4 You were saying you are a small manufacturer. 5 Could you tell me what your total sales are? 6 MR. WILKINS: I would like to. It is a 7 family owned business and that's not publicly 8 disclosed. 9 MR. MARGOLIS: Could I ask you this? In our 10 statute, we have a small business exemption and if I'm 11 not mistaken we use a figure of $8 million. Are you 12 above -- can you tell me -- 13 MR. WILKINS: We'd be above that. 14 MR. MARGOLIS: Okay. 15 MR. WILKINS: The way we're defining it is 16 any class business, there really are large 17 manufacturers. And 550 people, family owned, is our 18 definition of small. And it is small compared to them. 19 MR. MARGOLIS: And you make a full line, 20 usually compacts and going up to the larger sizes? 21 MR. WILKINS: That's a very good point. 22 Actually, the main categories that we're dealing with 23 as a rule are freezers, refrigerator freezers and 24 compacts. And we do make all three of those. 25 MR. MARGOLIS: Now, you mentioned in your

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(301) 565-0064 37 1 MR. POLLOCK: Thankyou, Mr. Wilkins. 2 MR. MARGOLIS: Mr. Wilkins, thankyou very 3 much for your statement. 4 You were sayingyou are a small manufacturer. 5 Couldyou tell me what your total sales are? 6 MR. WILKINS: I would like to. It is a 7 family ownedbusiness and that's not publicly 8 disclosed. 9 MR. MARGOLIS: Could I askyou this? In our 10 statute, we have a small business exemption and if I'm 11 notmistakenwe use a figure of $8 million. Are you 12 above -- canyou tellme -- 13 MR. WILKINS: We'd be above that. 14 MR. MARGOLIS: Okay. 15 MR. WILKINS: Thewaywe're defining it is 16 any class business, there really are large 17 manufacturers. And 550 people, family owned, is our 18 definition of small. And it is small compared to them. 19 MR. MARGOLIS: Andyou make a full line, 20 usually compacts and going up to the larger sizes? 21 MR. WILKINS: That's a very goodpoint. 22 Actually, the main categories thatwe're dealingwith 23 as a rule are freezers, refrigerator freezers and 24 compacts. And we domake all three of those. 25 MR. MARGOLIS: Now, you mentioned inyour

EXECUTIVE COURT REPORTERS, INC. (301) 565-006438 1 testimony about modules and you say that they are 2 located throughout the house. Could you just tell me - 3 - I mean, where would they -- I mean, I just look at 4 they're located like in the kitchen or basement. 5 MR. WILKINS: Right. 6 MR. MARGOLIS: Or if you have a -- but where 7 else would they be? 8 MR. WILKINS: Anywhere in the house. It's 9 bedrooms, media rooms, family rooms, kitchens. 10 Kitchens are the main focus, of course, but there are - 11 - in that particular product class there are other 12 places for them. 13 MR. MARGOLIS: But they're not connected one14 to the other. They're separate units that are self15 standing? I mean, being a modular unit, I mean, 16 doesn't mean that a unit in a bedroom somehow is 17 connected to the unit in the kitchen or in the family 18 room. Am I correct? 19 MR. WILKINS: That's exactly right. They're 20 independent units. And in our mind, they make up a 21 refrigeration system. So in some cases, a small module 22 would be some drawers, a freezer drawer or refrigerator 23 in this section of the kitchen but it makes up the 24 total refrigeration for the household. 25 MR. MARGOLIS: Thank you very much.

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(301) 565-0064 38 1 testimony about modules and you say that they are 2 locatedthroughout the house. Couldyou justtell me - 3 - I mean, where would they -- I mean, I just look at 4 they're located like in the kitchen orbasement. 5 MR. WILKINS: Right. 6 MR. MARGOLIS: Or if you have a -- but where 7 elsewould they be? 8 MR. WILKINS: Anywhere in the house. It's 9 bedrooms, media rooms, family rooms, kitchens. 10 Kitchens are the main focus, of course, but there are - 11

- inthat particularproduct class there are other 12 places for them. 13 MR. MARGOLIS: But they're not connected one 14 to the other. They're separate units that are self15 standing? I mean, being a modular unit, I mean, 16 doesn'tmean that a unit in a bedroom somehow is 17 connectedto the unit in the kitchen or in the family 18 room. Am I correct? 19 MR. WILKINS: That's exactly right. They're 20 independent units. And in ourmind, theymake up a 21 refrigeration system. So in some cases, a small module 22 wouldbe some drawers, a freezer drawer or refrigerator 23 in this section of the kitchen but itmakes up the 24 total refrigeration for the household. 25 MR. MARGOLIS: Thankyou verymuch.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006439 1 MR. FRIEDRICHS: I have one question. How 2 many small or niche market refrigerator manufacturers 3 are there? You're representing those manufacturers 4 sort of in a general sense. Approximately how many are 5 there and what percentage of the market do they 6 represent? 7 MR. WILKINS: I'm not representing the other 8 ones but in a general sense, I guess. The number -- 9 and I really don't know the answer to any of those 10 questions. I'm aware, I think, of four other 11 manufacturers that are in a niche business, compacts. 12 And I don't know what the percentage is. 13 MR. FRIEDRICHS: Thank you very much. 14 MR. POLLOCK: In your concluding statement, 15 you stated that the Department should reassess its 16 position before further standards. Are you referring 17 to this particular standard that has been proposed or 18 are you referring to any further standards beyond the 19 proposed standards at this date? 20 MR. WILKINS: I guess a little of both. One 21 is -- particularly this standard that is proposed. In 22 the agreement that we worked with, the HCFC in 23 particular was another level. And the way it's 24 proposed now is that the HCFC cannot go below the '93 25 standards. And what I was pointing out was that to

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(301) 565-0064 39 1 MR. FRIEDRICHS: I have one question. How 2 many small or niche market refrigerator manufacturers 3 are there? You're representing those manufacturers 4 sort of in a general sense. Approximately how many are 5 there and what percentage of the market do they 6 represent? 7 MR. WILKINS: I'mnot representing the other 8 ones but in a general sense, I guess. The number -- 9 and I really don't know the answer to any of those 10 questions. I'm aware, I think, of four other 11 manufacturers that are in a niche business, compacts. 12 And I don't know what the percentage is. 13 MR. FRIEDRICHS: Thankyou very much. 14 MR. POLLOCK: In your concluding statement, 15 you stated that the Department should reassess its 16 position before further standards. Are you referring 17 to this particular standard that has been proposed or 18 are you referring to any further standards beyond the 19 proposed standards at this date? 20 MR. WILKINS: I guess a little of both. One 21 is particularly this standard that is proposed. In 22 the agreement that we workedwith, the HCFC in 23 particularwas another level. And the way it's 24 proposed now is that the HCFC cannot go below the '93 25 standards. Andwhat I was pointing out was that to

EXECUTIVE COURT REPORTERS, INC. (301) 565-006440 1 look at those particular categories, because I think a 2 lot of these products have changed. And so to consider 3 that they -- you know, the same units, they're not. 4 MR. POLLOCK: Thank you. 5 At this time I'd like to call Mr. Howard6 Geller from the American Council for an Energy7 Efficient Economy. 8 MR. GELLER: Good morning. I'm Howard 9 Geller, the Executive Director of the American Council 10 for an Energy-Efficient Economy, testifying on behalf 11 of both ACEEE and the Natural Resources Defense 12 Council. 13 ACEEE and NRDC, along with other interests, 14 including large and small refrigerator manufacturers, 15 state representatives and utilities were co-sponsors of 16 joint comments submitted to the Department of Energy 17 November 194. These comments presented a negotiated 18 compromise position between all identified major 19 stakeholders in refrigerator standards while presenting 20 a recommendation that would meet the requirements of 21 NACA. 22 ACEEE and NRDC support the process of 23 negotiated stakeholder comments on rulemakings when 24 they are feasible. As a consequence, we believe that 25 it is essential to the process of good faith

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(301) 565-0064 40 1 look at those particularcategories, because I think a 2 lot of these products have changed. And so to consider 3 that they you know, the same units, they're not. 4 MR. POLLOCK: Thankyou. 5 At this time I'd like to callMr. Howard 6 Geller fromtheAmerican Council for an Energy7 EfficientEconomy. 8 MR. GELLER: Goodmorning. I'mHoward 9 Geller, the Executive Director of theAmerican Council 10 for an Energy-EfficientEconomy, testifying on behalf 11 of bothACEEE and the Natural Resources Defense 12 Council. 13 ACEEE andNRDC, alongwith other interests, 14 including large and small refrigeratormanufacturers, 15 staterepresentatives andutilitieswere co-sponsors of 16 joint comments submittedto the Department of Energy 17 November 194. These comments presented a negotiated 18 compromise positionbetween all identifiedmajor 19 stakeholders in refrigerator standards while presenting 20 a recommendation thatwouldmeet the requirements of 21 NACA. 22 ACEEE andNRDC support the process of 23 negotiated stakeholder comments on rulemakings when 24 they are feasible. As a consequence, we believe that 25 it is essential to the process of good faith

EXECUTIVE COURT REPORTERS, INC. (301) 565-006441 1 negotiations that participants continue to support 2 their agreements. 3 My principal comment here is to convey 4 ACEEE's and NRDC's support for the agreement we 5 submitted in the joint comments and support for the DOE 6 proposed rule. 7 As in any negotiation process, the results 8 expressed in the joint comments are a compromise. 9 ACEEE and NRDC believe that more stringent standards 10 and more savings could possibly be justified under the 11 criteria of NACA. These comments do not raise this 12 issue in the context of a decision to accept the NOPR 13 as proposed on July 20th. However, if DOE decides to 14 reopen its consideration of standards levels in 15 response to other commenters we'd present additional 16 information that we'd wish DOE to consider. 17 Standards proposed by DOE in this NOPR differ 18 from our joint comments in three respects. First, 19 there are small changes in several of the standards for 20 HCFC free products so as not to propose standards that 21 are less efficient than current standards. 22 Second, there's been a moving up of the 23 effective date for HCFC free products, again, so as not 24 to run afoul of NACA's provision prohibiting standards 25 to be rolled back.

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(301) 565-0064 41 1 negotiations that participants continue to support 2 their agreements. 3 My principal comment here is to convey 4 ACEEE's andNRDC's support for the agreement we 5 submitted in the jointcomments and support for the DOE 6 proposed rule. 7 As in any negotiationprocess, the results 8 expressed inthe joint comments are a compromise. 9 ACEEE andNRDC believe thatmore stringent standards 10 andmore savings couldpossiblybe justifiedunder the 11 criteria of NACA. These comments do not raise this 12 issue inthe context of a decision to accept the NOPR 13 as proposed on July 20th. However, if DOE decides to 14 reopen its consideration of standards levels in 15 response to othercommenters we'd present additional 16 informationthat we'dwish DOE to consider. 17 Standards proposedby DOE inthis NOPR differ 18 from our jointcomments in three respects. First, 19 there are small changes in several of the standards for 20 HCFC free products so as not topropose standards that 21 are less efficientthan current standards. 22 Second, there's been a moving up of the 23 effective date for HCFC free products, again, so as not 24 to run afoul of NACA's provisionprohibiting standards 25 tobe rolledback.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006442 1 And third, the NOPR does not restrict the 2 HCFC free standards initially to no more than five 3 percent of manufacturers' production or 10,000 units, 4 as proposed in the joint comments. 5 NRDC and ACEEE do not wish to challenge these 6 changes at the present time. While they will, on net, 7 reduce energy savings compared to exact implementation 8 of the joint comments, we believe that the energy 9 savings lost by delays in standards implementation 10 would outweigh the energy savings, should DOE be 11 convinced to conduct re-analysis and change the final 12 rule. 13 Having said this, there are a number of 14 analytical assumptions on the NOPR, which we question, 15 which we have questioned in the past and which we 16 recommend that DOE consider reviewing in future 17 rulemakings

. Given the special process that was used 18 as the basis for the proposed standards, we feel it is 19 reasonable not to press the points in this particular 20 rulemaking but we would like to see DOE address them in 21 future rulemakings, particularly any rulemakings that 22 do not involve consensus proposed standards. 23 The analysis of manufacturers' impacts is one 24 area where we have concerns with the DOE methodology, 25 particularly, the cost of capital to manufacturers,

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(301) 565-0064 42 1 And third, the NOPR does not restrict the 2 HCFC free standards initiallyto nomore than five 3 percent of manufacturers' production or 10,000 units, 4 as proposed inthe joint comments. 5 NRDC andACEEE do notwish to challenge these 6 changes at the present time. While theywill, on net, 7 reduce energy savings comparedto exact implementation 8 of the joint comments, we believe that the energy 9 savings lostby delays in standards implementation 10 would outweighthe energy savings, should DOE be 11 convincedto conduct re-analysis and change the final 12 rule. 13 Having saidthis, there are a number of 14 analytical assumptions on the NOPR, whichwe question, 15 whichwe have questioned inthe past andwhich we 16 recommendthat DOE consider reviewing in future 17 rulemakings. Given the special process thatwas used 18 as the basis for the proposed standards, we feel it is 19 reasonable not topress the points in this particular 20 rulemaking butwe would like to see DOE address them in 21 future rulemakings, particularly any rulemakings that 22 do not involve consensus proposed standards. 23 The analysis of manufacturers' impacts is one 24 areawherewe have concerns with the DOE methodology, 25 particularly, the cost of capital tomanufacturers,

EXECUTIVE COURT REPORTERS, INC. (301) 565-006443 1 assumed in the NOPR to be 12 percent. This is 2 unrealistic in our view. 3 NRDC has pointed out at length in the past 4 that the measure of real cost of capital there is 5 between 2 percent and about 5 or 6 percent. DOE should 6 base its analysis on actual data from the real world, 7 not on arbitrary targets or expectations of 8 manufacturers regarding profitability and cost of 9 capital. 10 The discount rate assumption is another area 11 where we have a concern. We have submitted extensive 12 testimony in other rulemakings concerning the technical 13 justification for real discount rates at or below 6 or 14 7 percent and the inconsistency of DOE's selected 15 discount rates with economic policy and with 16 requirements of NACA. DOE has use the weighted average 17 approach to calculating discount rates that ACEEE has 18 suggested in the past. However, in calculating the 19 discount rate for purchases financed with credit cards, 20 DOE implicitly assumes that a credit card balance will 21 be outstanding for the life of the compliance. Since 22 many consumer pay off their credit card balances 23 periodically, an assumption of a 19 year life for 24 outstanding balances is unrealistic. 25 We urge DOE to collect data on average term

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(301) 565-0064 43 1 assumed inthe NOPR tobe 12 percent. This is 2 unrealistic in ourview. 3 NRDC has pointed out at length inthe past 4 that themeasure of real cost of capital there is 5 between 2 percent and about 5 or 6 percent. DOE should 6 base its analysis on actual data from the real world, 7 not on arbitrary targets or expectations of 8 manufacturers regarding profitability and cost of 9 capital. 10 The discount rate assumption is another area 11 wherewe have a concern. We have submitted extensive 12 testimony in other rulemakings concerningthe technical 13 justification for real discount rates at orbelow 6 or 14 7 percent andthe inconsistency of DOE's selected 15 discount rates with economic policy andwith 16 requirements of NACA. DOE has use the weighted average 17 approach to calculatingdiscount rates thatACEEE has 18 suggested inthe past. However, incalculatingthe 19 discount rate for purchases financed with credit cards, 20 DOE implicitly assumes that a credit cardbalance will 21 be outstanding for the life of the compliance. Since 22 many consumer payoff their credit cardbalances 23 periodically, an assumption of a 19 year life for 24 outstandingbalances is unrealistic. 25 We urge DOE to collect data on average term

EXECUTIVE COURT REPORTERS, INC. (301) 565-006444 1 of credit card balances and use this information to 2 adjust the discount rate for credit card purchases. 3 Third is the issue of the rejection of 4 standards levels. In this particular NOPR, DOE rejects 5 the standards level because it prevents some consumers 6 from purchasing refrigerators that minimize their own 7 lifecycle costs. This rationale conflicts with the 8 principle of NACA which states that DOE must set 9 standards at the maximum level of efficiency that is 10 technologically feasible and economically justified. 11 Criterion that a standard could be rejected because it 12 prevents some consumers from minimizing their lifecycle 13 costs would at most allow only those energy savings 14 measures that are lifecycle cost effective at the 15 margin to be included as the basis of standards, even 16 of a higher level of energy savings would still be 17 economically justified for consumers as a whole. 18 Such an approach would allow DOE to set a 19 standard below the level that is most economically 20 justified. Some consumers have lower electricity 21 prices or lower usage rates for a product than others. 22 A standard set at the lifecycle cost minimum for these 23 anomalous cases would preclude economically justified 24 energy savings for most consumers and for the public as 25 a whole.

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064 44 1 of credit cardbalances anduse this information to 2 adjust the discount rate for credit cardpurchases. 3 Third is the issue of the rejection of 4 standards levels. In this particularNOPR, DOE rejects 5 the standards level because itprevents some consumers 6 frompurchasing refrigerators that minimize their own 7 lifecycle costs. This rationale conflictswith the 8 principle of NACA which states that DOE must set 9 standards at the maximum level of efficiency that is 10 technologically feasible and economicallyjustified. 11 Criterionthat a standardcouldbe rejectedbecause it 12 prevents some consumers fromminimizing their lifecycle 13 costs would at most allow only those energy savings 14 measures that are lifecycle cost effective at the 15 margin tobe included as the basis of standards, even 16 of a higher level of energy savings would stillbe 17 economicallyjustified for consumers as a whole. 18 Such an approach would allowDOE to set a 19 standardbelowthe level that ismost economically 20 justified. Some consumers have lower electricity 21 prices or lower usage rates for a product than others. 22 A standard set at the lifecycle costminimum for these 23 anomalous cases wouldpreclude economicallyjustified 24 energy savings for most consumers and for the public as 25 a whole.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006445 1 Once again, we raise this issue not to 2 challenge the current NOPR proposal, but to suggest 3 corrections to economic analysis methodology in future 4 rulemakings. 5 As I have stated, ACEEE and NRDC support the 6 development of a final rule based on the standards 7 proposed in the NOPR. However, in the event that 8 comments by other parties in this proceeding cause DOE 9 to reexamine the specific standards proposed or in the 10 event that there are substantial delays in issuing the 11 final standard for other reasons , such as a moratorium 12 imposed by the Congress

-- I lost my place. Excuse me. 13 We would like to present some recent 14 technological developments that we would like DOE to 15 consider after the moratorium is concluded or in 16 reexamination new standards levels. 17 First and foremost, new information is 18 available on the impacts of HCFC replacement. At the 19 time the separate standard for HCFC free products was 20 proposed, manufacturers believed that the likely 21 substitute for HCFC 141-B would be cyclopentane which 22 typically increases cabinet energy consumption by 23 approximately 10 percent

. Recent evidence, however, 24 suggests that a number of HFC blowing agents offer 25 promise as alternatives to HCFC 141-B, both in thermal

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 45 1 Once again, we raise this issue not to 2 challenge the currentNOPR proposal, but to suggest 3 corrections to economic analysis methodology in future 4 rulemakings. 5 As I have stated, ACEEE andNRDC support the 6 development of a final rule based on the standards 7 proposed inthe NOPR. However, inthe event that 8 comments by otherparties inthis proceedingcause DOE 9 to reexamine the specific standards proposed or inthe 10 event that there are substantial delays in issuingthe 11 final standard for other reasons, such as a moratorium 12 imposedby the Congress I lostmy place. Excuse me. 13 We would like to present some recent 14 technological developments thatwe would like DOE to 15 consider afterthe moratoriumis concluded or in 16 reexamination new standards levels. 17 First and foremost, new information is 18 available on the impacts of HCFC replacement. At the 19 time the separate standard for HCFC free products was 20 proposed, manufacturers believedthat the likely 21 substitute for HCFC 141-Bwouldbe cyclopentanewhich 22 typically increases cabinet energy consumption by 23 approximately 10 percent. Recent evidence, however, 24 suggests that a number of HFC blowing agents offer 25 promise as alternatives to HCFC 141-B, both in thermal

EXECUTIVE COURT REPORTERS, INC. (301) 565-006446 1 and energy performance. 2 For example, in tests sponsored by ARAM, the 3 performance of a refrigerator insulated with HFC 245 FA 4 foam was compared to one with a commercial HCFC 141-B 5 appliance foam. The refrigerator cabinets containing 6 the HFC blown foam consumed less than 1 percent more 7 energy on average. Similarly, at least one study on 8 another HFC blowing agent indicates that HFC 345 MFC 9 foam has a lower initial and aged K factors than HCFC 10 141-B blown foams. 11 While testing on these new HFC alternatives 12 is not complete, the results thus far are very 13 encouraging. In addition to new blowing agents, new 14 surfactant additives are being tested that offer 15 enhancements in foam density, K factor and K factor 16 aging for appliance foams. 17 Overall, these studies tend to indicate that 18 the 10 percent energy use penalty for HCFC free 19 refrigerators is very generous . In all likelihood by 20 the 2003 phase-out for HCFC 141-B in the United States, 21 alternative blowing agents will be available with no 22 energy penalty or possibly even offering a small 23 improvement in energy efficiency. 24 Given this new information, the justification 25 for a separate standard for HCFC products becomes

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 46 1 and energyperformance. 2 For example, in tests sponsoredbyAHAM, the 3 performance of a refrigerator insulatedwith HFC 245 FA 4 foamwas compared to onewith a commercial HCFC 141-B 5 appliance foam. The refrigerator cabinets containing 6 the HFC blown foam consumed less than 1 percentmore 7 energy on average. Similarly, at least one study on 8 another HFC blowing agent indicates that HFC 345 MFC 9 foam has a lower initial and aged Kfactors than HCFC 10 141-Bblown foams. 11 While testing on these new HFC alternatives 12 is not complete, the results thus far are very 13 encouraging. In addition to newblowing agents, new 14 surfactant additives are beingtestedthat offer 15 enhancements in foamdensity, Kfactor and Kfactor 16 aging for appliance foams. 17 Overall, these studies tend to indicate that 18 the 10 percent energyuse penalty for HCFC free 19 refrigerators is very generous. In all likelihoodby 20 the 2003 phase-out for HCFC 141-B in the united States, 21 alternative blowing agents will be availablewith no 22 energy penalty orpossibly even offering a small 23 improvement in energy efficiency. 24 Given this new information, the justification 25 for a separate standard for HCFC products becomes



### EXECUTIVE COURT REPORTERS, INC. (301) 565-006447 1 questionable. On the one hand, a slightly weaker 2 standard for a limited number of HCFC products is 3 useful to permit experimentation with non-optimized HFC 4 based foams in the period leading up to 2003. On the 5 other hand, since the NOPR did not include the 6 provision in the joint comments to limit the use of the 7 weaker HCFC free standard to 5 percent of 8 manufacturers' production or 10,000 units, this 9 separate HCFC free standard could allow significantly 10 greater energy use if manufacturers decide to exceed 11 the 5 percent reduction level in the period in which 12 the production ceiling would otherwise be in effect. 13 14 Furthermore, energy use of refrigerators 15 produced in 2003 and possibly several years thereafter, 16 up to nine years after publication of a final rule, can 17 be 10 percent greater than the HCFC free refrigerators 18 if the HCFC refrigerators had to meet the same 19 standards as units with HCFC based foam. 20 These problems become more acute if the final 21 rule in this proceeding is significantly delayed. If 22 DOE had published its final rule on schedule by 23 January 1, 1995, the standard for HCFC products would 24 revert to the primary standard in 2004. There would be 25 only a one-year window following the HCFC ban in which

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 1 questionable. On the one hand, a slightlyweaker 2 standard for a limitednumber of HCFC products is 47

3 useful to permit experimentationwith non-optimized HFC 4 based foams inthe period leadingup to 2003. On the 5 other hand, since the NOPR did not include the 6 provision inthe jointcomments to limit the use of the 7 weaker HCFC free standardto 5 percent of 8 manufacturers' production or 10,000 units, this 9 separate HCFC free standardcould allow significantly 10 greater energy use ifmanufacturers decide to exceed 11 the 5 percent reduction level inthe period inwhich 12 the production ceilingwould otherwise be in effect. 13 14 Furthermore, energy use of refrigerators 15 produced in 2003 and possibly several years thereafter, 16 up to nine years after pUblication of a final rule, can 17 be 10 percent greaterthan the HCFC free refrigerators 18 if the HCFC refrigerators hadtomeet the same 19 standards as units with HCFC based foam. 20 These problems become more acute i'f the final 21 rule inthis proceeding is significantly delayed. If 22 DOE had published its final rule on schedule by 23 January 1, 1995, the standard for HCFC products would 24 revert to the primary standard in 2004. There would be 25 only a one-yearwindow following the HCFC ban inwhich

EXECUTIVE COURT REPORTERS, INC. (301) 565-006448 1 the use of non-HCFC blowing agents would allow a weaker 2 standard. 3 This is short enough to be unworthy of 4 redesigning a product for higher energy use. Because 5 of DOE's delay until July in issuing the NOPR, the 6 calculus has changed
. Manufacturers have a much 7 greater incentive to design to the weaker non-HCFC 8 standard and keep producing that product for enough 9 years to make the retooling worthwhile. 10 How big a difference does this make? The 11 answer depends on when the final standard is issued. If 12 DOE can move promptly to finalize the proposed rule, 13 NRDC and ACEEE believe that on balance DOE should 14 proceed with the rule as published. However, if a 15 final rule were delayed until say January 1st, 1997, 16 then the primary standard would go into effect in the 17 year 2000 and the HCFC exemption would last until 2006. 18 Thus, many manufacturers would be tempted to redesign 19 to the weaker energy standard based on the non-HCFC 20 foams beginning perhaps in 2001 or 2002

. Four to five 21 years worth of production would occur at this lower 22 level of efficiency, presenting a serious setback to 23 the energy savings. 24 Thus, if DOE is significantly delayed in 25 publishing a final rule, we recommend reconsidering the

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 48 1 the use of non-HCFC blowing agents would allow a weaker 2 standard. 3 This is short enough tobe unworthy of 4 redesigning a product for higher energy use. Because 5 of DOE's delay until July in issuing the NOPR, the 6 calculus has changed. Manufacturers have a much 7 greater incentive to design to theweaker non-HCFC 8 standard and keep producing that product for enough 9 years tomake the retoolingworthwhile. 10 How big a difference does this make? The 11 answer depends onwhen the final standard is issued. If 12 DOE canmove promptly to finalize the proposed rule, 13 NRDC andACEEE believe that on balance DOE should 14 proceedwith the rule as published. However, if a 15 final rule were delayed until say January 1st, 1997, 16 then the primary standardwould go into effect inthe 17 year 2000 andthe HCFC exemptionwould last until 2006. 18 Thus, manymanufacturers would be tempted to redesign 19 to the weaker energy standardbased on the non-HCFC 20 foams beginningperhaps in 2001 or 2002. Four to five 21 years worth of productionwould occur at this lower 22 level of efficiency, presenting a serious setbackto 23 the energy savings. 24 Thus, if DOE is significantlydelayed in 25 publishing a final rule, we recommend reconsidering the

EXECUTIVE COURT REPORTERS, INC. (301) 565-006449 1 issue of lower standards for HCFC free products both to 2 examine the usefulness of separate standards entirely 3 and to examine whether the weaker standards for HCFC 4 free products should expire in 2003 or 2004 rather than 5 at a later date. 6 In conclusion, we support the proposed 7 standards, assuming they can be issued in final form in 8 the near future. We stand by the agreement we reached 9 about a year ago with appliance manufacturers, as 10 presented in our joint comments and we are willing to 11 accept the minor deviations from our joint proposal, 12 proposed in the NOPR, even though most of these 13 deviations weaken the standards relative to our 14 consensus proposal. 15 However, if there is a long delay before DOE 16 can issue final standards, we recommend that DOE 17 revisit the justification for a separate standard for 18 HCFC free products. 19 Thank you for the opportunity to present 20 these comments. I'd be happy to take any questions. 21 MR. POLLOCK: Thank you, Mr. Geller. 22 Questions for Mr. Geller? 23 MR. FRIEDRICHS: Yes. I have one question. 24 One of your concerns you raised was DOE's 25 consideration of the potential adverse effects of

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(301) 565-0064 49 1 issue of lower standards for HCFC free products bothto 2 examine the usefulness of separate standards entirely 3 and to examinewhether the weaker standards for HCFC 4 free products should expire in 2003 or 2004 rather than 5 at a laterdate. 6 In conclusion, we support theproposed 7 standards, assuming they canbe issued in final form in 8 the near future. We standby the agreement we reached 9 about a year ago with appliance manufacturers, as 10 presented in our jointcomments andwe arewillingto 11 accept theminor deviations from our jointproposal, 12 proposed inthe NOPR, even thoughmost of these 13 deviations weakenthe standards relative to our 14 consensus proposal. 15 However, if there is a long delaybefore DOE 16 can issue final standards, we recommendthat DOE 17 revisit the justification for a separate standard for 18 HCFC free products. 19 Thankyou for the opportunitytopresent 20 these comments. I'dbe happy to take any questions. 21 MR. POLLOCK: Thankyou, Mr. Geller. 22 Questions for Mr. Geller? 23 MR. FRIEDRICHS: Yes. I have one question. 24 One of your concerns you raisedwas DOE's 25 consideration of the potential adverse effects of

EXECUTIVE COURT REPORTERS, INC. (301) 565-006450 1 certain standard levels on some consumers. There's a 2 theme that's been raised in other comments today and 3 elsewhere about the possible consideration -- the 4 consideration of adverse effects of efficiency 5 standards on subgroups of consumers or manufacturers, 6 small manufacturers, consumers that are not 7 representative of the typical consumer but nevertheless 8 may be impacted. 9 When do you feel the Department should 10 consider or how do you think the Department should 11 consider the potential adverse effects of standards on 12 these atypical manufacturers or consumers? 13 MR. GELLER: In the case of consumers, we 14 think the provisions of NACA are very clear. That DOE 15 should set standards that are based on the highest 16 efficiency levels that are economical for consumers as 17 a whole. 18 19 MR. FRIEDRICHS: On average. MR. GELLER: On average. For consumers on 20 average, taking into account atypical consumers on both 21 sides. Consumers that would have longer paybacks as 22 well as consumers that would have shorter paybacks and 23 look at the average consumer. That's how the world 24 works. There's lots of policies that benefit some 25 parties more than others, but on average, you take

EXECUTIVE COURT REPORTERS, INC.

(301) 565-0064 50 1 certain standard levels on some consumers. There's a 2 theme that's beenraised in othercomments today and 3 elsewhere about the possible consideration -- the 4 consideration of adverse effects of efficiency 5 standards on subgroups of consumers ormanufacturers, 6 small manufacturers, consumers that are not 7 representative of the typical consumerbut nevertheless 8 may be impacted. 9 When do you feel the Department should 10 consider or how do you thinkthe Department should 11 considerthe potential adverse effects of standards on 12 these atypical manufacturers or consumers? 13 MR. GELLER: In the case of consumers, we 14 thinkthe provisions of NACA are very clear. That DOE 15 should set standards that are based on the highest 16 efficiency levels that are economical for consumers as 17 a whole. 18 MR. FRIEDRICHS: On average. 19 MR. GELLER: On average. For consumers on 20 average, taking into account atypical consumers on both 21 sides. Consumers thatwould have longerpaybacks as 22 well as consumers thatwould have shorter paybacks and 23 look at the average consumer. That's how theworld 24 works. There's lots of policies that benefit some 25 partiesmore than others, but on average, you take

EXECUTIVE COURT REPORTERS, INC. (301) 565-006451 1 actions that lead to benefits to society as a whole, 2 for consumers, for the nation as a whole. And I think 3 NACA is very clear and other history of the program is 4 very clear in directing DOE to set standards that are 5 economical for consumers as a whole. 6 In the case of manufacturers, clearly the 7 consideration of impact on small manufacturers is 8 something that should be taken into account by DOE and 9 in this case there's a necessary weighing of impacts on 10 small manufacturers, medium-sized, large manufacturers, 11 any other criteria in NACA. There must be a balancing 12 of impacts considering a full range of issues that DOE 13 is directed to consider in NACA. It's a judgment. I 14 think it's reasonable to proceed with standards with 15 there can be some additional costs on small 16 manufacturers if the other issues that DOE are 17 considering shows that there's overwhelming positive 18 impacts from the standards, given the other issues that 19 DOE's considering; benefits to the nation, saving 20 energy, benefits to the environment, benefits to 21 consumers, et cetera. 22 MR. FRIEDRICHS: Thank you. 23 MR. GELLER: Sure. 24 MR. POLLOCK: Thank you, Mr. Geller. 25 At this time we'll accept comments from

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(301) 565-0064 51 1 actions that lead to benefits to society as a whole, 2 for consumers, for the nation as a whole. And I think 3 NACA is very clear and other history of the program is 4 very clear in directing DOE to set standards that are 5 economical for consumers as a whole. 6 In the case of manufacturers, clearlythe 7 consideration of impact on small manufacturers is 8 something that shouldbe taken into account by DOE and 9 in this case there's a necessaryweighing of impacts on 10 small manufacturers, medium-sized, largemanufacturers, 11 any other criteria inNACA. Theremust be a balancing 12 of impacts considering a full range of issues that DOE 13 is directedto consider inNACA. It's a judgment. I 14 think it's reasonable to proceedwith standards with 15 there canbe some additional costs on small 16 manufacturers if the other issues that DOE are 17 considering shows that there's overwhelming positive 18 impacts from the standards, given the other issues that 19 DOE's considering; benefits to the nation, saving 20 energy, benefits to the environment, benefits to 21 consumers, et cetera. 22 23 24 25 MR. FRIEDRICHS: Thankyou. MR. GELLER: Sure. MR. POLLOCK: Thankyou, Mr. Geller. At this time we'll accept comments from

EXECUTIVE COURT REPORTERS, INC. (301) 565-006452 1 unscheduled speakers if there are any. 2 (No response.) 3 There's no one else who would like to make a 4 comment at this time? 5 (No response.) 6 Then we will accept rebuttal statements by 7 any of those who have addressed us previously. 8 (No response.) 9 No rebuttal statements? Then at this time, 10 are there questions to be addressed to any of the 11 speakers or the panel? 12 (No response.) 13 Then I guess this concludes the hearing on 14 this notice. 15 Thank you all. 16 (Whereupon, the proceedings were concluded.)
17 18 19 20 21 22 23 24 25

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064 52 

### 1 unscheduled speakers if there are any. 2 (No response.) 3 There's no one elsewho would like tomake a 4 comment at this time? 5 (No response.) 6 Thenwe will accept rebuttal statements by 7 any of thosewho have addressedus previously. 8 (No response.) 9 

### No rebuttal statements? Then at this time, 10 are there questions tobe addressedto any of the 11 speakers orthe panel? 12 (No response.) 13 Then I guess this concludes the hearing on 14 this notice. 15 Thankyou all. 16 (Whereupon, the proceedingswere concluded.) 17 18 19 20 

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### REPORTER'S CERTIFICATE

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OCTOBER 26, 1995

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## REPORTERIS 

## [ERTIFI[ATE

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## to certifythat the attcched

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