NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

1 U.S. DEPARTMENT OF ENERGY

+ + + + + PUBLIC MEETING ON STANDARDS FOR COMMERCIAL UNITARY AIR CONDITIONERS AND HEAT PUMPS

+ + + + + THURSDAY, SEPTEMBER 30, 2004

+ + + + + The meeting was held at 9:00 a.m. in Room 1E-245 of the Forrestal Building, 1000 Independence Avenue, S.W., Washington, D.C., James Raba of DOE's Building Technologies Program, presiding.

PRESENT : ASHLEY ABBOTT, Navigant Consulting, Inc. KARIM AMRANE, Air-Conditioning and Refrigeration Institute DOUG BROOKMAN, Public Solutions DON BRUNDAGE, Southern Company KATIE COUGHLIN, Lawrence Berkeley National Laboratory JIM CRAWFORD, Trane/American Standard LARRY DALE, Lawrence Berkeley National Laboratory ANDREW deLASKI, Appliance Standards Awareness Project THOMAS ECKMAN, Northwest Power and Conservation Council FEDERICO GARCIA-LOPEZ, Navigant Consulting, Inc. BARCLAY GIBBS, Navigant Consulting, Inc. BILL GOETZLER, Navigant Consulting, Inc. AARON HERZON, Nordyne, Inc. JILL HOOTMAN, The Trane Company ERIN JOHNSTON, Navigant Consulting, Inc. PATTY KAPPAZ, SENTECH, Inc. RICHARD LORD, Carrier Corporation JAMES LYONS, Energetics, Inc. ARIS MARANTAN, Navigant Consulting, Inc. MICHAEL MARTIN, California Energy Commission JAMES McMAHON, Lawrence Berkeley National Laboratory PRESENT : (cont'd)NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

2 KAREN MEYERS, Rheem Manufacturing Company DEBORAH MILLER, Air-Conditioning and Refrigeration Institute HARRY MISURIELLO, Alliance to Save Energy JAMES MULLEN, Lennox International, Inc. STEVEN NADEL, American Council for an Energy Efficient Economy HUNG PHAM, Copeland Corporation MICHAEL RIVEST, Navigant Consulting, Inc. GREG ROSENQUIST, Lawrence Berkeley National Laboratory STEVEN ROSENSTOCK, Edison Electric Institute KURT ROTH, TIAX LLC SRIRAM SOMASUNDARAM, Pacific Northwest National Laboratory CHARLES STEPHENS, Oregon Department of Energy GRAHAM STEVENS, Navigant Consulting, Inc. PETER TURNBULL, Pacific Gas and Electric Co. ROBERT VAN BUSKIRK, Lawrence Berkeley National Laboratory LAURA VAN WIE, Lawrence Berkeley National Laboratory RICHARD WHITE, Lawrence Berkeley National Laboratory DAVID WINIARSKI, Pacific Northwest National Laboratory STEPHEN YUREK, Air-Conditioning and Refrigeration Institute

DOE REPRESENTATIVES PRESENT : JAMES RABA SANDY BEALL BRYAN BERRINGER THOMAS DePRIEST MARK FRIEDRICHS SAM JOHNSON QONNIE LAUGHLIN RONALD LEWIS MICHAEL McCABE MAUREEN MURPHY CYRUS NASSERI FRANCINE PINTO BARBARA TWIGGNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

3 A-G-E-N-D-A PAGE Welcome............................................4 Introduction and Agenda Review.....................6 Rulemaking Overview...............................13 Comments from Participants........................16 Engineering Analysis..............................46 Life-Cycle Cost Analysis..........................97 National Impact Analysis.........................220 Discussion of Other Issues.......................253 NOPR Analyses and Next Steps.....................256 Final Discussions................................282 Adjourn..........................................284NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 P-R-O-C-E-E-D-I-N-G-S (9:10 a.m.) FACILITATOR BROOKMAN: Okay. Good morning, everybody. My name is Doug Brookman. I'm a consultant from a small company in Baltimore called Public Solutions, and I'll be helping to facilitate this meeting today. This is the ANOPR meeting on standards for commercial unitary air conditioners and heat pumps. We typically start off the morning with introductions. Jim Raba, would you like to make brief welcoming remarks before we do introductions? MR. RABA: I would like that very much. FACILITATOR BROOKMAN: Thank you. MR. RABA: Good morning. Welcome to the public meeting on commercial unitary air conditioners and heat pumps. The Department of Energy will present its methodology for the Advanced Notice of Proposed Rulemaking analysis and explain its plans for the analysis to support the Notice of Proposed Rulemaking. I'm Jim Raba, Project Manager for this rulemaking. Today's presenters will be Dave Winiarski from Pacific Northwest National Laboratory, Aris Marantan and Mike Rivest from Navigant Consulting, and Greg Rosenquist and Jim McMahon from Lawrence BerkeleyNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 National Laboratory. Representing the Department are -- I see at the table here at this time -- Ron Lewis, Building Technologies Program; Tom DePriest, Francine Pinto, General Counsel; and I believe we will be joined shortly by Michael McCabe, Program Manager, and Mark Friedrichs, Policy and International Affairs. Today's facilitator is the ever-popular ever-professional Doug Brookman. (Laughter.) On behalf of the Department, the Program Office, and the members of the rulemaking team, thank you for participating in this important meeting. Today's public meeting, as with all of the public meetings on rulemaking -- this is important because they need us to work together as allies to listen and discuss and understand each other's views in real time and prepare for the energy conservation win-win -- win for the stakeholders, win for America. So the Department earnestly seeks input from stakeholders on its planned methodologies, assumptions, and data sources, which will assist in developing a Notice of Proposed Rulemaking for commercial unitary air conditioners and heat pumps, the next phase in the rulemaking process.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 As the presiding official, I will set the guidelines for conducting the meeting and provide other pertinent information as needed. In order to obtain as much relevant information as reasonable, and to enable you to express your views, we'll follow the agenda right there, beginning with an overview of the DOE analyses and issues identified in the ANOPR, and then invite brief summary statements where you will have an opportunity to identify your key issues. Following that there will be a summary presentation of each analysis and a discussion of issues regarding the approaches used, pertinent factors that were considered, and a characterization of the results of the analysis. Later there will be open forum to discuss any remaining questions or issues that you have identified. Finally, there will be a summary presentation, a discussion, of planned revisions to the ANOPR analysis, including approaches and factors that will be considered as we begin the next stage of the process, the NOPR stage. In approximately two weeks a written transcript of the meeting will be available for inspection at the Department of Energy, Forrestal Building, Room 1J-018, the resource room of theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Building Technologies Program in the West Building. Anyone wishing to purchase a copy of the transcript can make arrangements with the Court Reporter. The Department will accept comments, data, and information regarding the ANOPR during and after today's public meeting, but no later than November 12, 2004. See Section IV.D, Submission of Comments, in the ANOPR for details, including the procedures for submission of information that you believe to be confidential and exempt by law from public disclosure. All written comments will otherwise be available for public inspection in the resource room of the Building Technologies Program. Please call Ms. Brenda Edwards-Jones at (202) 586-9127 for additional information about visiting the resource room. On behalf of the Department of Energy, Building Technologies Program, and the rulemaking team, I appreciate the time and effort you have taken to attend this public meeting, and encourage you to participate as much as possible, so the Department may see a full spectrum of views on the issues and to gather input on the methodologies, assumptions, and data that are pertinent. Are there any questions regarding thisNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 introductory information or today's agenda? We'll begin with the next agenda item. FACILITATOR BROOKMAN: Thank you. Thank you, Jim. It's customary to have everybody introduce him or herself, and say your name and organizational affiliation. If we could do that now. And this will not all be on the record, but it's simply a matter of courtesy. May I start with you, Richard? MR. LORD: Yes. THE COURT REPORTER: For those of you who have a mike, please use it. FACILITATOR BROOKMAN: And for these microphones you need to stick your face right in it. MR. LORD: My name is Richard Lord with Carrier Corporation. I'm also a member of the ASHRAE 90.1 Committee. FACILITATOR BROOKMAN: Thank you. MR. MULLEN: Jim Mullen, Lennox. MR. AMRANE: Karim Amrane, Air Conditioning and Refrigeration Institute. MS. MILLER: Deborah Miller, Air Conditioning and Refrigeration Institute. MR. YUREK: Steve Yurek with the AirNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Conditioning and Refrigeration Institute. MR. CRAWFORD: Jim Crawford, American Standard. MS. MEYERS: Karen Meyers, Rheem. MR. PHAM: Hung Pham, Copeland Corporation. MR. deLASKI: Andrew deLaski, Appliance Standards Awareness Project. MR. BRUNDAGE: Don Brundage, Southern Company. MR. ECKMAN: Tom Eckman, Northwest Power and Conservation Council. MR. STEPHENS: Charlie Stephens, Oregon Department of Energy. MR. MISURIELLO: Harry Misuriello, Alliance to Save Energy. MR. MARTIN: Michael Martin, California Energy Commission. MR. HERZON: Aaron Herzon, Nordyne. MS. HOOTMAN: Jill Hootman, Trane Company. MR. NADEL: Steve Nadel, American Council for an Energy Efficient Economy. MR. LEWIS: Ron Lewis, DOE. MR. RABA: Jim Raba, Department of Energy. MR. MARANTAN: Aris Marantan, NavigantNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Consulting. MR. GOETZLER: Bill Goetzler, Navigant Consulting. MR. ROTH: Kurt Roth, TIAX LLC. MR. McMAHON: Jim McMahon, Lawrence Berkeley National Lab. MR. TURNBULL: Peter Turnbull with the Pacific Gas & Electric Company. MR. WINIARSKI: Dave Winiarski, Pacific Northwest National Lab. MR. LYONS: Jamie Lyons, Energetics. MR. ROSENQUIST: Greg Rosenquist, Lawrence Berkeley National Laboratory. MS. COUGHLIN: Katie Coughlin, Lawrence Berkeley National Laboratory. MR. SOMASUNDARAM: Sriram Somasundaram, Pacific Northwest National Laboratory. MR. RIVEST: Mike Rivest, Navigant Consulting. MR. STEVENS: Graham Stevens, Navigant Consulting. MR. BERRINGER: Bryan Berringer, Department of Energy. MS. LAUGHLIN: Qonnie Laughlin, Department of Energy.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. MURPHY: Maureen Murphy, Department of Energy. MS. BEALL: Sandy Beall, Department of Energy. MR. RANNELS: Jim Rannels, Department of Energy. MR. JOHNSON: Sam Johnson, Department of Energy. MS. ABBOTT: Ashley Abbott, Navigant Consulting. MS. JOHNSTON: Erin Johnston, Navigant Consulting. MS. TWIGG: Barbara Twigg, Department of Energy. MS. KAPPAZ: Patty Kappaz with SENTECH. MS. VAN WIE: Laura Van Wie, Lawrence Berkeley National Lab. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. FACILITATOR BROOKMAN: Thank you. Did we get -- everybody get a chance to introduce him or herself? Okay. Good. Jim did a very brief review of the agenda.

I think if you did not succeed in checking in and registering at the registration table, you need to doNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that. And the registration list -- that is, the attendee list -- from this meeting will be sent out via e-mail in a few days, perhaps a week, in that range. So that's the way that we assure that you get the attendee list. Over the span of these years that we've conducted these public meetings, norms have emerged, and I'd like to ask for your consideration to make them work. Please speak one at a time. Please say your name for the record every time you speak. I'll be trying to recognize you by name and make it easy for you to remember. Please listen as an ally. Keep the focus here. I'm going to ask especially that you be concise, share the airtime. These agendas are packed, each one every day. There's a lot to cover. There's a lot of presentation, and a lot of people wish to comment, so please try and keep it very brief and focused. I'm going to be queuing people to speak. I also wish to entertain and encourage follow-on comments. That's a fairly complicated sequencing sometimes. Please make it possible for it to work, especially keep your follow-on comments as brief as possible. And don't let me drop you out of the queue.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay? So questions and comments before we actually commence? Okay. So Jim Raba is going to provide a brief overview on the rulemaking. MR. RABA: This is the public meeting for the commercial air conditioners and heat pumps rulemaking. First, a brief overview of that rulemaking. The purpose of today's public meeting is to present, describe, characterize, and clarify the Department's analyses in a technical support document and the Advanced Notice of Proposed Rulemaking. There are 20 issues that the Department is aware of related to the Department's analyses. They are presented in Section IV.E of the ANOPR and are listed on the wall chart. There will be an opportunity to discuss each of them. If you know of additional issues that need to be addressed, today is a good time to raise them. The Department wants to hear your views on the methodologies, assumptions, and data sources used for the ANOPR and invites comments and hard data that could be used to revise and improve the analyses during the NOPR stage. Later in the day we willNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 describe the analyses that will be conducted at the NOPR stage and the next steps in the rulemaking process. The Energy Policy and Conservation Act directs the Department to consider these seven factors when setting energy conservation standards. For each factor there's a corresponding analysis. Some are appropriate for the ANOPR, some later. Here's a simplified flowchart of the rulemaking process, beginning with the framework document and ending with the final rule, and then the date when the final rule will go into effect. For the ANOPR, the Department conducted three core analyses -- engineering, life-cycle cost and payback, and national impact, which include foundational supporting analyses. The market and technology assessment and screening analysis feed into the engineering analysis that, in turn, feed into the markups for price determination analysis that, along with the energy use and end-use load characterization, feed into the life cycle cost and payback period analysis that, along with the shipments analysis, feed into the national impact analysis. As the Department enters the NOPR stage,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we will consider comments on the ANOPR, make any appropriate revisions to the ANOPR analyses, identify trial standard levels, and conduct additional analyses, including manufacturer impact, utility impact, employment impact, environmental assessment, and regulatory impact. Here's a summary list of the issues addressed in the ANOPR. The Department seeks your comments on each of them and other issues that you find important and identify, along with your views, comments, and data. Each of these issues will be raised and comments invited at the appropriate time during the presentations. The next item on today's agenda opens the floor to those who wish to provide summary comments or make a brief statement for the record. Following that there will be presentations of the analyses and discussions regarding the approaches used, pertinent factors that were considered, and characterization of the results of that analysis. The time to submit written comments will remain open through November 12, 2004. Any questions? If none, the floor will be open to brief summary statements. Doug?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Okay. So I have three persons that have indicated their desire to speak in this brief summary format. And I want to see if there's anybody else that wanted to speak this morning. Harry Misuriello, Steve Nadel, and Deborah Miller are the people that I have listed as being -- as wanting to speak. Anybody else that would like to provide a summary comment? So can I start with you, Harry? Would you -- MR. MISURIELLO: Yes. Harry Misuriello from the Alliance to Save Energy. Other than noting the excellent technical job that DOE has done with the ANOPR and the technical support document, and noting that all of the candidates' standard levels seem to provide positive economic benefits, I'd like to yield my time to Steve and Deborah this morning. FACILITATOR BROOKMAN: Thank you. And, Steve and Deborah, which one of you would like to go first? Did you see that? That was a nice gesture. Both of them said, "You start." (Laughter.) MS. MILLER: We both wanted to start. (Laughter.) FACILITATOR BROOKMAN: Exactly. It was --NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. MILLER: It was in the spirit of compromise. FACILITATOR BROOKMAN: It was a nice gesture. MS. MILLER: Good morning. I would like to make a brief statement on behalf of the Air Conditioning and Refrigeration Institute, a trade association representing manufacturers of over 90 percent of North American HVAC and R equipment. For the record, my name is Deborah E. Miller, and I am Vice President for Government and International Affairs at ARI. As many of you know, our industry has for many years supported energy efficiency, producing a wide variety of energy-efficient heating, air conditioning, and refrigeration equipment for consumers to purchase. Although it has not been without political interference, we have, for the most part, supported the Department of Energy's program to promulgate balanced and fair minimum energy efficiency regulations, because we believe that one federal standard, rather than a patchwork of state standards, saves more energy, is better for the environment, and benefits both consumers and manufacturers alike.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 We welcome the Department's publication of this long-awaited Advance Notice of Proposed Rulemaking. As someone who has worked directly in the Office of Energy Efficiency and Renewable Energy and on this program, I am aware of the huge task that the Department and this staff face in promulgating minimum standards for many products beyond our own. That is why I am pleased to announce today that ARI and its members have been negotiating with the coalition of energy efficiency groups and states to develop a consensus agreement setting the next round of energy efficiency standards for air conditioning products from 65,000 to 240,000 BTU per hour, or from 5 to 20 tons. While it is not part of this rulemaking, this agreement also will cover equipment from 20 to 63 tons. Although ARI believes that the Department already has the authority to regulate very large commercial air conditioning equipment -- 20 to 63 tons -- the joint stakeholders will shortly be going to Congress to ask that language be inserted into legislation giving the Department the clear statutory authority that it believes it needs to regulate this product as well. Both sides are putting the final touchesNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and getting final approvals for this broad-based agreement, so I am not at liberty to discuss the specifics. However, we are very optimistic that the consensus agreement will be signed shortly, and we will submit it to the Department in joint comments before the end of the ANOPR comment period. The agreement has not been easy to negotiate, but it will give manufacturers the certainty needed to plan and make cost-effective investments in their manufacturing lines and products.

We, therefore, urge the Department to undertake an expedited rulemaking, so that minimum efficiency standards for products from 65,000 to 240,000 BTU/H can be finalized by the end of the year or soon thereafter. Thank you. I also wanted to add one thing. I wanted to extend my personal thank-you to Steve Nadel, who has worked with our staff directly in representing the energy efficiency groups and the states. It has not been easy for either one of us, and he has really exerted some very lively and challenging leadership that we appreciate. Thank you, Steve. FACILITATOR BROOKMAN: Thank you.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Steve Nadel, ACEEE. MR. NADEL: Okay. Thank you very much. I'm here speaking on behalf of ACEEE, but also a consortium of other energy efficiency supporters, Appliance Standards Awareness Project, the Alliance to Save Energy, the California Energy Commission, the Natural Resources Defense Council, Northeast Energy Efficiency Partnerships, and the New York State Energy Research and Development Authority. Several of those people are in the room, so they may want to add things to this. As Deborah said, we've been working hard for multiple months to -- with Deborah, her staff, and we have appreciated their constructive attitude and problem-solving as we try to work through various issues, but we are very happy that we have been able to reach agreement. We think this will result in very substantial energy savings for the country, substantial benefits for the country, as well as save an awful lot of contention here in the hearing room and in a rulemaking and allow DOE to get on with it in terms of setting these standards. The proposed standard will also make it easier for manufacturers, because it will align the effective date of theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 standard with the phaseout of HCFCs. We also wanted to thank DOE for their assistance, and particularly getting the analysis out I think helped everyone to focus. DOE did play a significant role, and we thank them for that. As Deborah said, we plan to provide joint detailed comments specifying specific recommended efficiency levels for each of the pieces of equipment, as well as the rationales that we believe -- in terms of the seven criteria in the law, and why we believe that the levels we're going to jointly recommend are the logical level that DOE should select as it follows the law. We will get these in by the 12th, and we urge DOE to look into expediting the processes to speedily adopt these -- you know, obviously getting appropriate comments from other people, but we believe this is a strong consensus and should be speedily adopted. With that, I don't know if anybody else in our coalition wants to add something. FACILITATOR BROOKMAN: Yes. Andrew deLaski. MR. deLASKI: I'm Andrew deLaski, Appliance Standards Awareness Project. I just want toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 also thank the industry for their focus on this over the past -- well, I guess it's been more than a year, it's been a couple of years. (Laughter.) And ongoing discussions to come up with a recommendation that we can submit jointly to the Department, and incorporate the other elements as well that Deborah described. And also -- and note that it's been difficult also working among the energy efficiency supporters around the country to get consensus behind a proposal from the energy efficiency and state organizations' point of view as well, and that also hope the Department can move forward in an expeditious manner with those things that are recommendations in the Department, and that other stakeholders can support that recommendation -- those recommendations as well. FACILITATOR BROOKMAN: Thank you, Andrew. MS. MILLER: So can we go home now? (Laughter.) FACILITATOR BROOKMAN: I believe other people might wish to make comments at this time. (Laughter.) Harry.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. MISURIELLO: Well, thank you. Harry Misuriello. Deborah, you'd better stick around for some more compliments this morning. On behalf of the Alliance to Save Energy, I'd like to also express our appreciation to ARI and the HVAC industry for coming up with an agreement that's going to improve electric reliability, save the nation lots of energy, improve our energy security, and all those good things that these standards are supposed to do. So thank you very much, Deborah and Steve, for helping bring this to a successful agreement. Thank you. MS. MILLER: And the manufacturers, I have to say, this is -- MR. MISURIELLO: And the industry. MS. MILLER: The manufacturers are the ones that have -- FACILITATOR BROOKMAN: Okay. MS. MILLER: Thank you. FACILITATOR BROOKMAN: And the manufacturers, as Deborah said, for reinforcing their key participation in this effort. So any other comments at this point from other persons at the table? Summary comments before we proceed with the rest of the agenda? I thinkNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 perhaps we might talk a little bit how we reconsider the agenda in light of these events. Michael Martin. MR. MARTIN: Yes. On a personal note, I welcome this agreement that the California Energy Commission has had with ARI. We've had some pretty stormy relationships in the past, and I look at this as a big step towards better cooperation in the future. FACILITATOR BROOKMAN: Thank you, Michael. Okay. Other comments from anybody at this point about how to proceed with the rest of the day? So we've already gone through the agenda, and, as you know, a huge amount of analysis and preparation for this meeting has taken place. And the Department is queued up to -- and all of you have in your packets the slides and the detailed content for the presentations today. And so the Department is prepared, with all of its supporting cast of consultants and experts, to push on through this content. And we are wondering in light of the -- what has just been revealed, how you would like to proceed. Steve Nadel, and also, then, Steve Rosenstock.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. NADEL: Okay. What I thought might make sense -- but I'd like other opinions here in this room -- is that we stick to the current agenda in terms of the general topics. But instead of DOE making a detailed presentation at the beginning of each section, we give a couple of minutes for people to leaf through the presentations and then we take questions as in, "Gee, I don't understand this one," or "Can you present the following slides?" and comments. But maybe we can save a lot of time with the presentations, because I think a lot of people here are quite familiar with the material -- FACILITATOR BROOKMAN: Okay. MR. NADEL: -- and they don't need a presentation. That would be my thought, but, still, it would give everybody in the room an opportunity to ask questions and make comments. FACILITATOR BROOKMAN: Let me just get a read. How many of you in the room would think of yourselves as being quite familiar with this material? (Laughter.) So all but about three, I would say. (Laughter.) Okay. So that's one data point.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Steve Rosenstock. Thanks for getting the mike, Steve. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. I still think I would prefer the regular format of having DOE staff going through the slides first as traditional, because, yes, we might be quite familiar, but especially for other stakeholders, to be fair, that if they didn't have as much time to review the information that -- again, it's another review for everybody. I think it would be helpful, and it does -- and it would provide time to ask the questions that some of the newer -- other stakeholders would have a chance to get some more details and provide good discussion. Thank you very much. FACILITATOR BROOKMAN: I could get some other -- I could easily imagine a third way, which tries to strike the balance between both of those alternatives -- that we would try to -- we would have the resource person putting the slides up, describing them briefly, making certain there were no questions or comments, getting that bit of affirmation, and then moving on expeditiously from there. I could imagine us striking a balance between those two.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. MILLER: Thirty seconds per slide. (Laughter.) Deborah Miller. Thirty seconds per slide. We'll cut you off. FACILITATOR BROOKMAN: Did you get that on the record? (Laughter.) Some people are so goal-oriented. Don Brundage. MR. BRUNDAGE: Don Brundage, Southern Company. I would agree with Steve. And an additional problem with this, for those of us who are having to deal with three rulemakings going on simultaneously, it becomes very difficult to take the time to go through in detail. FACILITATOR BROOKMAN: Yes. MR. BRUNDAGE: So I would appreciate -- don't do the Reader's Digest version of the -- explaining what you did. FACILITATOR BROOKMAN: You would like a more full explanation of the material, Don. MR. BRUNDAGE: Yes. FACILITATOR BROOKMAN: Michael Martin. MR. MARTIN: It's nice to know what we agreed to here, but DOE has the responsibility to showNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that they meet these DOE criteria. FACILITATOR BROOKMAN: Yes. MR. MARTIN: And I think we ought to hear about it. FACILITATOR BROOKMAN: Thank you. Thank you. And I'm certain the Department is amply aware of that. Okay. So do you wish to chime in here? Okay. When you do, you let me know. (Laughter.) Michael McCabe. MR. McCABE: Michael McCabe with the Department of Energy. I would like to congratulate all those who worked the last two years on the agreement. We're certainly excited about it. We're looking forward to it. While we have not seen it, I have gotten word about the discussions recently. Over the last couple of weeks it has gotten louder and louder and was informed that there would be a -- the consensus would be announced today. We have alerted management on the first question, and the management asked us, "What does this mean?" (Laughter.) What does it mean to the schedule? And myNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 response back to them was, "It could mean a lot, but I can't answer the question until we see the recommendations." So we're looking forward to that, but in addition to the congratulations, I would like to ask a question. Are there any topics that parties would like to add to the agenda that are not already on that we could have a -- what I would call an informal staff discussion as to some of the issues, some of the things that have made -- we may need to consider? For example, in the -- in us going forward with this rulemaking, there are certain things that we have to do, that we have to consider, that it may be worthwhile to discuss. There was a request that the Department accelerate the rulemaking, and I think even a specific statement by going to a direct final rule. While we've not had -- not sat down and discussed that with General Counsel, it would be useful to have some staff feedback on that, because if I were to ask General Counsel they would say that this rulemaking, as it's planned out with legislative authority, I would suspect that they'd say that we probably do not have the authority to go to a direct final rule, because under EPCA we are required either to adopt the standards that ASHRAE adopts or go to aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 rulemaking in accordance with the Act, the Administrative Procedures Act, which would require a proposed rule and final rule. But there may be some issues with respect to analysis that can be dealt with. There may be some things with respect to the comments that could help us that would be worthwhile to discuss. And there are probably other issues that you may want to get into, so I would ask if there are any topics that you'd want to go into at this point in time, recognizing, one, we haven't seen the proposals, so it's somewhat -- it's going to be -- you're going to be at a disadvantage offering comments. And, two, some of the questions that folks may have would be: what is the policy of the Department? What position would the Department take?

Or what is the Department's view of the law? And to get some of those, we'd have to go upstairs and talk to the politicals, and we're not -- they're not going to be available to us, so we can offer some answers to many of those questions, as far as a staff perspective, but there would not be the DOE position. In fact, most of the answers hopefully will be very close, if not identical, to what the Department's position would be. So at this point inNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 time, if there's information that we could provide, or some discussion that would help in completing the process with the understanding that would be a staff dialogue, we'd entertain them. FACILITATOR BROOKMAN: Steve. Oh, Deborah Miller is first, and then Steve Rosenstock. MS. MILLER: Okay. This is Deborah Miller from ARI. This will not change what you said, although I would urge the lawyers to be creative and the politicals to be creative. But -- and I think Steve would be okay with me saying this, that we will be submitting this as well to ASHRAE. And Karim informs me, though, that the meeting is in February, and the decision couldn't be made, obviously, until June, understand -- at the earliest, understanding that this industry on this -- on -- yes, on 90.1 is a huge part of that 90.1 Commission. So I don't think we would have that much difficulty. I never want to underestimate it, but if everyone agreed I don't think we would have that much difficulty pushing this through. That doesn't change what you just said, Michael, but I at least wanted you to know that as well. FACILITATOR BROOKMAN: Thank you for thoseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 additional details. Steve Rosenstock. MR. ROSENSTOCK: This is Steve Rosenstock, Edison Electric Institute. To follow-on to Mr. McCabe's comments, I just -- just from personal recollection for previous federal rules that were -- that we did have a negotiation process, I'm thinking in particular fluorescent lamp ballast and residential clothes washers, the results of the negotiations were announced, and there were publications and press releases. But as I recall, there were notices of proposed rules published, so that other stakeholders would have a chance to comment on them, because as -- you know, as stated, not all stakeholders who have been involved with the process were part of the negotiation. So -- and I believe that that process did work well, in the fact that, yes, there were negotiations, DOE did alter their analysis and alter -- might have changed the final -- it did have an impact on the Notice of Proposed Rule, but other stakeholders did get a chance to comment on it before it became a final rule. So I think that following the process would be better, both from a procedural basisNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as well as a process basis. Thank you. FACILITATOR BROOKMAN: Thank you. Thank you very much. Additional comments? Yes, Don Brundage. MR. BRUNDAGE: When this rulemaking was opened a couple of years ago, the way I understood the process was going to work was that DOE would proceed through with the cost-benefit analyses, and that when that was available it would provide an opportunity for ASHRAE to look at changing its standard. And I think since ASHRAE, under NAECA, is really the primary source rather than as with residential-size air conditioning, DOE is. I think it's appropriate to give ASHRAE a reasonable opportunity to modify its standard before taking direct DOE action. The other thing that -- and I don't know whether this is in the analyses or not. One of the things you run into with -- and this is more on the engineering side. One of the things you run into with increasing efficiency of equipment is often an increase in size and weight. And I would like to make sure that for things such as retrofit, replacement of units, thatNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there is not potential -- that adequate study has been made that the roofs of existing buildings can stick these things on there without potential problems. FACILITATOR BROOKMAN: Okay. Thank you. Thank you. So let's take any additional comments at this time, and particularly additions to the agenda for today that Michael requested. And then, we'll proceed with the presentation -- presentations, plural. Francine Pinto. MS. PINTO: Francine Pinto, General Counsel's Office. A couple of people have mentioned direct final rules, and just to clarify what that process is -- when you do a direct final rule, you actually publish simultaneously a NOPR and a Notice of Final Rulemaking. And you only do that in circumstances where you anticipate there will not be significant adverse comment. So what happens is you publish both simultaneously. There is still a comment period of 30 days. And if we don't get significant adverse comments, then it becomes effective as a final rule automatically in 60 days. We don't do that unless we actually think that there won't be significant adverseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 comments, but there is always a NOPR published. So that's -- that step is not skipped. FACILITATOR BROOKMAN: Thank you. MS. PINTO: It's just an abbreviated comment period. FACILITATOR BROOKMAN: Michael McCabe. MR. McCABE: Michael McCabe. A couple of questions for clarification, Francine. It is also my understanding that, one, that if -- that to go to a direct final rule, that there generally is a demonstrated need as to why a direct final rule is needed, typically schedule-drawn or schedule-driven. MS. PINTO: No. No. The basis is that you believe you have a situation that is not contentious. Now, obviously, if something happens and you get comments that indicate that there is disagreement, then that proceeding stops and you sort of -- then you go back to the regular proceeding. MR. McCABE: Second one. In the case of the EPACT language with respect to commercial products, the EPACT amendments that the commercial air conditioners fall under, there is the requirement in EPACT that we adopt the ASHRAE-specified standards unless we can determine more efficient standards that are technically feasible and economically justified.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So in January of 2001, we went to -- directly to a final rule for a number of the ASHRAE products without having a Notice of Proposed Rulemaking to accompany it. So if ASHRAE were to adopt these standards, the remarks -- the comments that you made about the direct final rule with the NOPR wouldn't apply. MS. MILLER: Excuse me. I have a question, though. FACILITATOR BROOKMAN: Deborah Miller -- MS. MILLER: This is Deborah Miller, sorry. FACILITATOR BROOKMAN: -- with a question. MS. MILLER: I have a question. I think what Francine said, though, is that there will be a comment period, number one. And, number two, most importantly, the Department has the authority to accept ASHRAE's standards, which was what in the past we had asked the Department to do, or to determine a higher standard. I will admit to you, and I think Steve will allow me to say this, it is a significantly higher standard. So you will meet those requirements, at least as far as whether -- we don't believe ASHRAE needs to see this again before the Department makesNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 its final judgment on this. Obviously, they can comment. But as I suggested, we will be submitting this to ASHRAE as well. But we don't believe that the fact that, you know, ASHRAE will be -- get this in the long run, the Department can still make a determination based upon the fact that we will provide justification as to why, according to the seven things that you need to meet, this meets those requirements and more. FACILITATOR BROOKMAN: I want to give Steve a chance to follow-on. MS. PINTO: Can I just say one thing in response? FACILITATOR BROOKMAN: Will you let him follow-on first? MS. PINTO: Sure. FACILITATOR BROOKMAN: Just so we have both sides of this on before we return to you. MR. NADEL: Actually, if she wants to respond directly, I was going to add something about some of these other comments. FACILITATOR BROOKMAN: Then, please. Francine Pinto. MS. PINTO: Well, without making any final commitments, because I am a lawyer, right?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Laughter.) I just want to be really, really clear about that. I didn't -- in my statement I didn't say anything about ASHRAE, but I believe you are correct that we would not need -- since we're already in a rulemaking process, and we are looking to going higher than what is already in ASHRAE, and we've got that already going, I don't believe we would need to wait for ASHRAE to do anything. So we could proceed however we're going to proceed. We look at your, obviously, recommendations and we see what other comments come in in the next month, and we'll go from there. And then we have to assess whether direct final rule is appropriate in this particular situation. But the comment period is built into that process. That's the key thing. MS. MILLER: Can I make a comment? FACILITATOR BROOKMAN: Deborah Miller. MS. MILLER: Deborah Miller. And I'm going to do this, and I hope Steve will understand why I'm doing this. Even if it is not a direct final rule, the Department in the past has rewritten a rule in five weeks and finalized a rule in five weeks --NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 excuse me, Steve -- for having to say that. So I know -- (Laughter.) -- that where there's a will there's a way. So whether it's a direct final rule or a NOPR, you know, if there's a will to get this thing out quickly, it can be done if management directs staff to do so. So, you know -- so, to me, that would be -- the direct final rule might be the easiest. But at the same time, DOE fully is capable, if there is management support, to get a rule out quickly and finalized. MR. NADEL: Steve Nadel, thanks for your patience. MR. NADEL: Sure. Building upon what Deborah said, I think by far the quickest route is going to be DOE either going to a NOPR or a direct final rule with comment. As a 10-year veteran of the ASHRAE 90.1 Committee, my understanding of their timelines, because even if the committee votes it out, then it goes to a whole public review and comment, I don't see any possible way ASHRAE would complete it in June of next year. The earliest I could see, even if it's totally non-contentious, is it would get voted out inNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 late September/early October in what they call "Tech Weekend." But DOE, even under its normal process, should be able to come out with a NOPR next summer, which is quicker than that. And if we are talking in the accelerated process, the DOE either direct final rule or NOPR process should be quicker than ASHRAE. We will pursue the ASHRAE process. We're not trying to go around ASHRAE. But I believe that there's a 90 percent chance that will be a slower process, not a quicker process. FACILITATOR BROOKMAN: Michael Martin. MR. MARTIN: As a fellow ASHRAE veteran, heading off tomorrow to the Tech Weekend in Atlanta, I would expand on what Steve has said, because in ASHRAE this has to go out for public comment. It has to be approved by the Project Committee first. Then, the Standard Project Liaison Subcommittee has to agree and send it out. they don't -- can't agree to that until their editor has had a go at it. Then, it goes out for public comment. Then, the committee has to look at the comments, and then they have to take another vote and it has to go back to the Standard Subcommittee. So if you get it done in a year, you'd be lucky.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Laughter.) FACILITATOR BROOKMAN: So I think this process discussion has been useful, and I'm wondering if any additional issues -- if anybody would like to raise any additional issues at this time before we proceed to the content material. Jim. Jim Mullen. MR. MULLEN: At a little bit lower level, the question is: what becomes the disposition of the technical analysis that's in place? Does it just getthrown into a drawer and pulled out the next goaround? Does it get finished or corrected or updated and then thrown into a drawer for next time? Where does it end up? FACILITATOR BROOKMAN: Ron Lewis. MR. LEWIS: We certainly don't want to throw it away. There has been a lot of work in there and thought that was done with the intent of adding some positive -- if it's just stimulating conversation, and there are other -- it's drawing out other thought. But in the NOPR stage of validating the assumptions, and all the rest, if there is a consensus decision in industry and advocate groups and states, if -- there are things that we need to do regardlessNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of whether this goes to a direct final rule or not, in the NOPR stage of considering the comments at the ANOPR stage that were submitted. And to the degree that we're all anxious to expedite this, there's nobody in DOE that wants to hold this back any longer or keep this festering here with a whole lot of anxiousness. What we would like to do is we have criteria that we have to show that -- for whatever the final rule is and the standard is. The more that we're in line with your giving us evidence and there being consensus to those things before they come to us, the more help it is to us, the less adjustment we have to make into the ANOPR analysis. That's our baseline -- the ANOPR analysis that's been done and the comments that then -- reanalysis -- the degree of reanalysis we have to do is minimized to the point it was brought up yesterday, and I believe the day before, that there are interpretations that say that DOE needs to start at max tech, for instance, and then work down, looking at why it would not be economically justified and technologically feasible. Looking at that kind of approach, to the degree that you'd give us -- in agreement that theseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 levels and the justification, starting there and saying why these higher levels, you know, are not appropriate. All those kinds of things are the analysis we have to do, and we have to search for. So in trying to speed things up, the more input that -- the things that you give us to help us to see that clearly, the less divisiveness that we see out there, it helps us, because that -- that trying to consider all the comments, which many times are in different directions, is -- causes us to dig deeper and deeper to try to make sure that we're fully looking at the picture. I don't know if that was helpful. FACILITATOR BROOKMAN: Michael McCabe. MR. McCABE: To add -- this is Michael McCabe. To add to what Ron has said, we have this rulemaking since -- under the provisions that we are pursuing, we have to make the determination that the standards are economically justified and the maximum improvement is technologically feasible. We have the seven factors in the legislation that have to be considered, and we also have to get -- one of those factors, we have to get a reading from the Department of Justice with respect to the impact on competition. We have not done aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 manufacturer impact analysis. We have a process that was built on a recommendation that had been made by ARI, GAMA, and AHAM probably 10, 15 years ago, a government regulatory impact model which looks at developing industry net present value. We don't have that information. In the discussion later today on manufacturer impact analysis, I think it would be very fruitful to focus on that, because if that's going to be done, is it going to be done at the extent presented, or are there ways that information that is necessary for us to reach a conclusion, for Justice to consider, information for them that we can just do that which is necessary. But we still have to meet the legislative requirement and make them stick. FACILITATOR BROOKMAN: Okay. Steve Nadel, and then Dr. Ron Lewis. MR. NADEL: Okay. I'm going to attempt to answer Jim's question a little bit differently from someone who is not speaking officially, but this is the fourth major agreement we've had and how it has worked in the past. I know there's a couple of questions about certain details of this analysis. Typically, what we will do is in our jointNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 comments we will liberally refer to the current analysis, quote different figures that will build upon the DOE analysis. However, we will probably note a couple of places where we might have concerns with that joint analysis, so it is part of the public record. Typically in the past, as I recall -- and, obviously, it will depend on comments from all sorts of other people, not just us -- DOE has usually not revised the analysis but has just noted in its rule that, yes, this analysis provides a firm foundation, but there were these concerns about this and this. And, therefore, we're not putting great weight on those findings. That's how it's typically done. Obviously, it all depends upon comments not just from the people in agreement but other people as well. FACILITATOR BROOKMAN: Thank you. Thanks for the shorthand. Ron Lewis. MR. LEWIS: One of the other areas where we could potentially speed things up is as we look at scheduling whether it's the manufacturer impact analyses, how we do these things and set up the schedules and plan for them, the resources and the people, the more advanced notice, and the more stuffNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that's foundational or that's been done in advance, it helps us, because we've got three ANOPRs and an SNOPR going, plus a lot of other lesser-level activities underway. So in resource planning we certainly -- if you're helping us to speed this up, we would consider that in looking at our resources and what comes first and how we're doing things, and would want to fall in line and help to speed it up. So we'll do our part there of trying to influence it. FACILITATOR BROOKMAN: So I'm eager to move on to the substantive presentation. And the final comments on -- summary comments are we've just had a significant discussion on different process avenues. So we'll proceed, then, right? And I look to Don Brundage and to Steve Rosenstock to be particularly the keepers of -- to make certain we cover the content adequately. Okay? Because we will -- because there will be a tendency for us to try and go through it expeditiously. Okay. Dave Winiarski, our first speaker on behalf of engineering analysis. MR. WINIARSKI: Hi. My name is Dave Winiarski. I'm with Pacific Northwest National Lab. I'll be introducing the engineering analysis segmentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of this discussion. I'll probably -- because of the recent news, I'll probably try to go through the presentation relatively quickly. If there's any questions, feel free to -- FACILITATOR BROOKMAN: You've got to get close, Dave. And you can look at this screen here. MR. WINIARSKI: Okay. In this segment of the discussion, we'll be talking about three separate analyses. These are the market and technology assessment, DOE screening analysis, both of which lead to the engineering analysis. I will be speaking to the first two of these. Aris Marantan of Navigant will be talking to the formal engineering analysis. The purpose of each of these analyses is discussed on this slide. The purpose of the market and technology assessment is to characterize the market for the commercial unitary equipment that's covered under this rulemaking, and to examine the available equipment efficiencies on the market and the different shipments by product classes that are also considered covered products. The screening analysis is used to identify design options that can be used to improve the efficiency level of the equipment, as well as to determine design options which should be screened outNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as inappropriate for a -- the final efficiency levels in the final rule. Finally, there is the engineering analysis, the purpose of which is to characterize the manufacturer -- manufacture, cost, and efficiency relationship for higher efficiency products and to evaluate choices between different design options that might be used to achieve higher efficiency levels. There are four issues for public comment that really are going to be opened up in this segment.

The first is DOE's approach to the current ANOPR analyses and future analyses for split systems and heat pumps and other products on the market, the treatment of this alternative refrigerant issue, which will be coming in 2010 as discussed, the use of the -- the use and presentation of the design option analysis for higher efficiency levels, and also what those maximum efficiency levels should be for this product. Finally, we'd like to get feedback on technologies that affect the part-load performance of these air conditioning products, but whose benefits are not necessarily reflected in the current rating procedure. Basically, the product classes that's covered and defined under EPCA for this product areNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 air-cooled unitary air conditioners and unitary heat pumps, air source products between 65,000 and 240,000BTUs per hour. This is basically considered singlepackage equipment with all the components in one package as well as split systems with an outdoor condenser unit and an inside evaporator section. This is broken into essentially five primary product categories. They're shown here, as well as the ASHRAE 90.1 1999 minimum efficiency levels. Those efficiency levels set the statutory baseline that DOE -- minimum levels that DOE can adopt for each product category. A brief overview of the market. There are approximately 300,000 units that are shipped -- that are in this covered product. That number is probably a little old. It's probably a little higher than that today. This is an expanding market. Of that market, the air conditioning units, both single package and split systems, account for about 90 percent of the market, heat pumps account for approximately 10 percent of the market. The chart shown at the bottom here discusses the air conditioning unit breakdown which 56 percent are in single-package year-round products. These are units of the gas heating section. TheNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 remainder of the market is equally split between single-package products that do not have a heating section or use an electric resistance heating section and split systems. The markets currently held-- the majority of the market with four -- four large manufacturers and two smaller manufacturers have some fairly significant niches. There are also some other manufacturers who play in different portions of the market. They may provide products that are designed and suited, for instance, for an industrial setting. As discussed, the year-round air conditioning product -- 56 percent of the air conditioning product, when you throw in the heat pumps, it's about 50 percent of all the covered products under this rulemaking, and so the ANOPR analysis really focused on an examination of that product. Moving on quickly, DOE did a screening analysis for this product, as it's required to. In that screening analysis, we looked at a number of different tools or mechanisms that could be used to improve the efficiency of the air conditioning equipment. I'll show those here in a second -- the ones that DOE decided to.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 It used, as the basis for looking at improved efficiency of the current rating procedure, which uses the EER of the equipment, full load EER. And it screened out the criteria that -- or screened out design options that didn't meet any of the four criteria that have been demonstrated in DOE's 1996 process rule. These are whether a design option was technically feasible, whether DOE felt that it was practical to manufacture, install, and service by the effective date of the rule, whether a design option had any adverse impact on the product's utility or availability of products within the market, and, of course, whether there's any impacts on health and safety. For the most cases, there were only really three types of design options that were not included in this -- or not passed on to the engineering analysis. Those included the use of non-HFC -- HCFC refrigerants, the use of a technology called electrodynamic heat transfer enhancement, and the use of cooper cast motors, which the Department felt were not going to be ready for prime-time. Other than that, the Department selected a suite of design options that could be used for furtherNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 consideration in the design option portion of the engineering analysis. That suite is shown here. Most of these are fairly familiar to industry members, and they're used in one form or another to improve product designs. A couple of them are less familiar. None of them are required to be used in a design option analysis. They are just technologies that were not screened out based on the process rule criteria. FACILITATOR BROOKMAN: My instinct is to stop here just briefly, scan this list, see what you think, make comments now on it, if you think it's appropriate to do so. Yes, Jim Crawford. MR. CRAWFORD: The immediately preceding discussion makes it challenging to figure out exactly the degree to which we should be commenting on this.Some of the options up there are either very wellknown and inapplicable technology or not feasible for one of a number of reasons. And, you know, I would cite things like the air-foil and backward-inclined blowers as an example. And I would just make the observation that there seems to be a notion that industry is unaware of these things. The Department has paid contractors atNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 least three times over the last 25 years to examine these, and each time the contractor has said what they were told to say, which is they are wonderful -- and they aren't -- for these applications. We're well aware of them. My company has been making backward-inclined huge fans, 8, 10 feet in diameter, for decades. There is nothing there that we are unaware of, but they are totally inapplicable from the standpoint of efficiency, noise, cost, to air conditioning products of the type under discussion. And we could go on with some of the other technologies that have been on the threshold of just revolutionizing the world now for at least a decade or two and haven't come to fruition because they don't hold the promise that their promoters would have you believe. And I'm not going to go on and on about this, but the point is I'm going to operate on the assumption that -- that things are going to happen as they ought to happen, and that is that we're going to proceed with the agreement that was outlined or discussed in the preceding section. And it's a shame that Michael has left, because -- Ron is still here -- I would emphasize -- FACILITATOR BROOKMAN: Michael is here.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CRAWFORD: Michael is here? Okay. You're hiding back there. (Laughter.) Oh, I'm sorry. My friends Steve and Michael, if I criticize anything that they -- that they said at all, it would just simply be that they are just wildly optimistic about the ASHRAE process. (Laughter.) The opportunity to get it right is here, and we can snatch defeat from the jaws of success. But I'd sure hate to see it happen. FACILITATOR BROOKMAN: Jim, of course, the Department would welcome your specific comments on which one of these technology options, the design options, doesn't work and the specifics of why, so that they can proceed with that. And not just -- MR. CRAWFORD: Micro-channel heat exchangers, air flow and backward-inclined, increased evaporator, or condenser fan diameters, and whatever they meant by "high-efficiency propeller condenser fans." Those are basically -- those four are fantasies as far as their potential to significantly impact the efficiency of these products. I might go along with deep coil -- deep coil heat exchangers have applications. The principalNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 application of a deep coil heat exchanger is not to get a more efficient, cost-effective product. It's to get a product that has a greater latent capacity, and they are outrageously expensive. Each successive row of a multi-row coil loses somewhere around 30 to 40 percent of its efficiency. So by the time you're in the third row, the efficiency of that third row is something on the order of .6 or .7 to the third power. And you rapidly realize when you get to six and eight rows that the contribution of that last row is negligible relative to its cost. And, you know -- FACILITATOR BROOKMAN: Okay. Thank you. Other comments on these design options? Okay, Dave. MR. WINIARSKI: Okay. Well, the -- walking through the design options, basically, as I said before, these are technologies that the Department felt had the potential to at least contribute to enhancing the EER or full-load efficiency of products. However, that leads us to the first issue, which is really there -- these products -- the energy use of these products is not characterized purely by full-load efficiency necessarily. There is part-loadNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 efficiency issues to contend with, and the Department invites some comment on its use of EER as the metric and how it should treat technologies that can enhance the part-load efficiency but really don't provide a significant benefit on the actual full-load EER metric. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. This also kind of reminds me of the residential rule for air conditioning and heat pump rulemaking. But, again, I don't know if the Department has had a chance to review it, but I would say if the Department could work with industry, if there's data out there about, you know, I'll say EER and part-load performance, and just any correlations, there might be some data out there that you might want to look at. I know there was some posted for residential product. Maybe there's information out there about commercial part-load information, as well as EER, and if there's any sort of trend data that might be useful for your analysis. FACILITATOR BROOKMAN: Thank you. Other comments on EER as the metric, and other part-load efficiency questions? Okay. Not atNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this time. Yes? Jim Crawford. MR. CRAWFORD: Karen is going to kick me if I talk too often here today. FACILITATOR BROOKMAN: Karen, scoot close there. (Laughter.) MR. CRAWFORD: I think we need to keep a sharp focus on the fact that EER is the metric mandated by law. FACILITATOR BROOKMAN: Thank you, Jim. Okay. MR. WINIARSKI: With that, I will turn this presentation segment over to Aris Marantan, who will discuss the engineering analysis project. MR. MARANTAN: Thank you, David. Good morning, everyone. My name is Aris Marantan. I'm with Navigant Consulting, and I'll be summarizing the Department's engineering analysis. As you can see on this slide, the engineering analysis is described by this flow diagram. It can be broken up into several discrete steps. The first step is product selection, and that includes defining equipment classes and establishing the baseline units to be evaluated. The second step is the cost modelNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 development, which includes selecting the teardown units, performing the teardowns, developing a detailed bill of materials, developing a cost model, and validating the cost model. The third step is the cost efficiencycurve development, which is the basis for the costbenefit calculations that are performed later on in the LCC portion of the ANOPR. That includes developing the manufacturer's cost efficiency curves, normalizing the curves, and aggregating the curves to an industry curve. The next step is the design option analysis, which is used to validate the cost efficiency curves at higher EER levels. That includes identifying the design options, developing the performance model, applying the cost model to the design options, validating the cost efficiency relationships. And, finally, additional analyses are conducted, which include the R-410A analysis, which compares the cost efficiency behavior of R-410A equipment to that of R-22. And, finally, incorporating stakeholder feedback in updates to the engineering analysis. Okay. This first step is productNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 selection. The Department considered 30 different products for the engineering analysis. Eighteen products were chosen for evaluation, and they are summarized here on this graph. Four units were chosen for physical teardowns, and the remaining 14 were chosen for catalog teardowns. Now, the Department, as Dave mentioned earlier, identified four product subclasses, and those are unitary air conditioners and unitary heat pumps between 65,000 and 135,000 BTUs per hour, and unitary air conditioners and unitary heat pumps between 135,000 and 240,000 BTUs per hour. The Department also chose representative capacities of 90,000 and 180,000 BTUs per hour to represent those two product classes. Those correspond to 7-1/2- and 15-ton capacities. Now, the products that were selected were selected in consultation with the manufacturers, and they represent high shipment volume products within those capacity ranges. The next step in the process is the development of the cost model. You can see here on this slide a breakdown of the components that are included in the cost model. I'll describe a few of them here.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The direct materials are included as well as direct labor. Those include manufactured materials, products -- purchased materials, fabrication labor, assembly labor, indirect materials, that sort of thing. It also includes factory expense and shipping, and those combined total up to a manufacturing cost. Also included in the cost model are corporate expenses such as profit, general expense, and sales expense, and those two combined total to a total manufacturing product cost. Now, the total product cost, in addition to distribution markups, equal the total or final consumer price. Okay. This next slide shows a summary of the cost model validation. What you see here is a summary of the cost breakdown structure for a given manufacturer. This cost breakdown structure was produced for every manufacturer of the baseline units, and represents the individual production cost for the components. Individual cost models were generated for each product analyzed and reviewed by manufacturers, and their feedback was incorporated into the cost model. The next step in the process is theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 development of the cost efficiency curves. You can see in this slide that there is a three-step process involved with this. The first step is to fit an exponential curve to each of the manufacturer's data points individually. This was done by using a method of least squares on individual manufacturer's data points and applying an exponential curve fit to those points. The second step is to translate the cost data from absolute costs to incremental costs by normalizing each of the manufacturer's individual cost efficiency curves and translating them down to the ASHRAE 90.1 1999 level. This corresponds to a 10.1 EER level for equipment between 65,000 and 135,000 BTUs per hour, and 9.5 EER for equipment between 135,000 and 240,000 BTUs per hour. The third step and the final step is to take the normalized data points and extrapolate the industry curve slightly to 12 EER. This is later verified in the design option analysis using design options. This next slide is a summary of the 7-1/2- ton cost efficiency results. As you can see here, the cost efficiency curve is represented by the blackNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 line, and you also see the upper and lower bounds of the 95 percent confidence interval. Now, the confidence interval describes the accuracy of the curve based on the scatter of data, and the Department chose a 95 percent confidence interval in this case, which means that the cost of the mean value of a sample of products will fall within this 95 percent interval. Okay. The next step in the engineering analysis the design option analysis. And, again, this is used to validate the cost efficiency curve at higher EER levels, particularly between 11-1/2 and 12 EER. And that was done primarily because there were no commercially-available products above 11-1/2 EER during the time the teardowns were performed. Now, the simulated design option points do not influence the industry cost efficiency curves. The Department didn't consider these points in the curve-fitting procedures. They primarily served as a check on the accuracy of the curve at those higher EER levels. FACILITATOR BROOKMAN: Yes. Jim Crawford. MR. CRAWFORD: Jim Crawford. I've been trying to figure out where to intervene here. And I just want to refer to Chart 12, but you don't need toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 go back to it. But we raised several issues yesterday dealing with markups, with discount rates, and I'm going to go on the assumption that we do not need to repeat all of that again today. I mean, we've got the same recorder, we've got the same department people here, we shouldn't need to reiterate all that today. The second point that I would like to make -- I realize that in looking at these charts I'm looking at just kind of heuristic information that is not real data on some of this. The suggestion of Chart 14 is a very substantial scatter between manufacturers, and there's a general tendency to think that perhaps the more expensive manufacturers are also the ones that are very small. And there are certain implications associated with not giving adequate attention to the very small manufacturer sort of thing. And when I get on to Chart 15, the point kind of comes home, because it's real easy for a layman like myself to misread that chart when I hear 95 percent confidence, but I believe I heard the words that those are the 95 percent confidence limits on the mean. They're not the 95 percent confidence limits on the population.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So the scatter suggested by Chart 14 is real, and it exists, and it is not reflected in the chart on -- is not reflected in Chart 15. That, again -- we have to be careful that the intrinsic scatter is not buried here through analytical procedures. Thank you. FACILITATOR BROOKMAN: Do you want to say why you used that statistical method? MR. MARANTAN: Well, maybe I can explain this a little better. The chart that you see on Slide 14 is just illustrative, first of all. The exact values for the manufacturer curves have not been presented, so the chart on the left is just an illustrative example of what we're seeing. So the relative scale of each of the lines is not exact in that case. For Chart 15, the 95 percent confidence interval, as Jim stated, is correct when he says that that represents the mean value of the population and not the population. FACILITATOR BROOKMAN: Other comments, please. Tom Eckman. MR. ECKMAN: Am I correct in interpreting that Chart 14 is really representing the absolute cost, and the chart on page 15 is really representingNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the difference in the -- MR. MARANTAN: That's correct. MR. ECKMAN: -- incremental cost. So we're really talking about two different scales here.

One is the representation of a slope on the same manufacturer's product lines, and the other is a representation of a comparison of the prices in absolute terms between different manufacturers. So it's not even the same -- measuring the same attribute. Is that right? MR. MARANTAN: Yes, it is. MR. CRAWFORD: But the manufacturer -- Jim Crawford. The manufacturer variability, which underlies whatever the real data on 14 look like, is gone in 15. It isn't there. FACILITATOR BROOKMAN: Okay. Jim Crawford. MR. MARANTAN: Some other questions? FACILITATOR BROOKMAN: Oh, yes. Charlie Stephens, please. MR. STEPHENS: Charlie Stephens. We've got quite a bit of experience with this stuff lately.

I've been on quite a few rooftops lately, but the variability diminishes substantially when you look at incremental costs. And we find it interesting thatNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the smallest manufacturers have the least concern about any of this, at least to the point that they have -- that they worry about their input. The other thing I'd like to agree with Jim on when it comes to markups is that, to a great extent, the pricing of a lot of this stuff in actuality in the marketplace is arbitrary, almost completely arbitrary from what we've seen. And so all you can do in analyzing this stuff is come up with some reasonable approximation from the kind of curve-fitting that's done of what a typical case might look like. It certainly doesn't cover all of the ground that we've seen. Sizing turns out to be fairly arbitrary as well, but -- (Laughter.) -- you know, we'll talk more about that later when the time comes. FACILITATOR BROOKMAN: Okay. Thank you. Steve Rosenstock. MR. ROSENSTOCK: Hi. Steve Rosenstock, EEI. Just on a little different topic, I'm not sure when these curves were created, whether it was this year or last year or two years ago, but I am kind of curious, especially for the analysis being -- that's going to be done for the NOPR is -- at least from whatNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I've read -- read in the trade press, it looks like the basic price of steel has doubled in the last two years, and the price of copper has gone up by a good 40, 45 percent. And I'm not sure about other key components that go into this equipment. But -- and, again, sorry I wasn't here yesterday or the day before that this issue came up. I am kind of curious if your model and industry input can make adjustments for the fact that, you know, the -- you know, the basic components of this equipment has gone up and, you know, the curve might be changed because of the recent -- what has happened in the last two years. Thank you. FACILITATOR BROOKMAN: Graham. MR. STEVENS: Yes, I'd like to speak to that issue. The answer is yes, it can, and we will make those adjustments. MR. ROSENSTOCK: Steve Rosenstock. Thank you. FACILITATOR BROOKMAN: Okay. Did I see one other person who wished to comment? I guess maybe not. Okay. Then, proceed. MR. MARANTAN: Okay. Continuing on Slide 17 now, this slide describes in a little moreNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 detail the design option analysis approach, and I'll just briefly summarize this. Basically, the Department's approach was to examine the condenser coil and the evaporator coil and make slight modifications to this to arrive at design targets for the design option analysis. There was also a limit -- several limiting factors that the Department considered, which are summarized under this modeling parameters chart here. Okay. Slide 18 shows a summary of the 7-1/2-ton validation of the cost efficiency curves. What we see here are the green points on top of the cost efficiency curve for 7-1/2-ton equipment. And as a summary, all of the design option points that were simulated fall within the 95 percent prediction interval. And now in this case the Department used a 95 percent prediction interval, which means that the estimated cost of any particular unit at a specific EER level is within that prediction interval, rather than the mean of a population as was described for the confidence interval. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Are you saying that that incorporates the inter-manufacturer variability?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. MARANTAN: I'm not sure what you mean by that. MR. CRAWFORD: The variability suggested by the illustrative information on Chart 14 suggests a significant manufacturer to manufacture variability. And I'm asking whether or not we're looking -- whether that factor is reflected in what you're calling these 95 percent prediction intervals. FACILITATOR BROOKMAN: Yes, please. MR. ROTH: Yes. Kurt Roth, TIAX. The answer is yes, for incremental cost on that curve. MR. CRAWFORD: Okay. FACILITATOR BROOKMAN: Thank you. Jim, do you have a follow-on? MR. CRAWFORD: Yes. Sorry. Jim Crawford, a follow-on. Maybe I'm misreading this curve, but this curve doesn't say that these are incremental costs. It says product cost. MR. MARANTAN: Delta. MR. CRAWFORD: Ah. Well, maybe I'll get the other glasses out. (Laughter.) Thank you. MR. MARANTAN: Okay. Okay. The next slide is ANOPR Issue Number 4. This is on designNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 option analysis and maximum energy efficiency levels. And the Department is requesting comments on four specific items, and I'll just read through those. The Department invites comments on the approach used to conduct the design option modeling for verifying manufacturing costs and efficiency relationship on the design options selected for estimating the manufacturing cost and efficiency relationship beyond 11-1/2 EER, other design options that the Department should consider, and alsoassumptions for evaluating a maximum technologicallyfeasible design. So with that, I'll open up the floor to comments or suggestions on those. FACILITATOR BROOKMAN: No comments on this series of questions? Yes, Tom Eckman. MR. ECKMAN: This may be jumping ahead a bit, but -- Tom Eckman, Northwest Power and Conservation Council. FACILITATOR BROOKMAN: Can you hear him okay? MR. ECKMAN: The presumption -- FACILITATOR BROOKMAN: Tom, can you get a little closer, please? MR. ECKMAN: The presumption that's doneNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in the performance evaluation for the life-cycle cost analysis assumes that the economizer cycle actually functions on a -- "flawlessly" I think is the word used. And that has not been demonstrated to be the case in the field, at least in our neck of the woods. And since economizer functionality in the northwest has a lot to do with the performance of the system, on an annual basis these two things are connected in the sense that if you're not looking at design options that improve economizer functionality, then the EER that we're getting, because we're modeling a flawless performance of the economizer, is incorrect. So I don't know exactly how to address that, given the discussions earlier about an agreement. But looking at design options that make the economizer functionality flawless as opposed to less than flawless, like maybe de-rated by 50 percent, would be something I'd be interested in seeing. FACILITATOR BROOKMAN: Thank you. Charlie, do you have a comment? Charlie Stephens. MR. STEPHENS: Yes. Charlie Stephens, Oregon Department of Energy. Just a follow-on thing to that. I'm not sure we expect that a currentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 baseline model economizer performance would be any different than the economizer performance in an upgraded, say, EER 11 system unless there was something, as Tom suggested, that -- some sort of design option that in the upgraded version, the new standard level, there was something there to make those systems more reliable. So we were looking to see if anything the Department would do would address that in particular, and, therefore, would there be any basis for modeling the performance of the base case versus the upgraded case any differently. So far I haven't seen anything that would suggest that you could do that. Am I right? MR. WINIARSKI: I think so. What I was going to suggest -- FACILITATOR BROOKMAN: Dave Winiarski. MR. WINIARSKI: Yes. Dave Winiarski, Pacific Northwest Laboratory. What I was going to suggest is to move this discussion on economizers into the section on the building system and load analysis.

The economizers, although they affect the load on the equipment, are really not a design option for looking at EER in the equipment. They in turn, instead, affect the baseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 load that the equipment is under and really have more impact on the life-cycle cost analysis. FACILITATOR BROOKMAN: Go ahead, Charlie. MR. STEPHENS: Yes. I think what we were looking at there is the fact that if you look at real buildings and their energy use, and then you make presumptions about the function of the equipment that delivers that level of energy consumption and efficiency in order to calculate an EER or where that building is operating. You may be -- if you've assumed that its economizer is operating 100 percent of the time the way it's supposed to, then maybe you have the wrong EER. MR. WINIARSKI: Right. MR. STEPHENS: Because that does affect the overall energy use of the building. And to the extent that you're starting with that and calculating a performance of the system, then you're probably off the base. MR. WINIARSKI: Right. You'd be -- MR. STEPHENS: Right. FACILITATOR BROOKMAN: Dave, get close to the mike. MR. WINIARSKI: Sorry. Dave Winiarski.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 That you may arrive at the wrong EER. That's definitely a possibility. FACILITATOR BROOKMAN: Okay. Yes, Jim Mullen. MR. MULLEN: Jim Mullen, Lennox. As long as we're on the subject, I think one of the -- FACILITATOR BROOKMAN: Jim, closer please.

These mikes are pretty dreadful, folks, I'm sorry to say. You've got to just get them right square in your face. MR. MULLEN: One of the thoughts we might carry forward to the next time we do this analysis is that probably the maintenance costs are understated if there are a lot of economizers or other things that aren't working on existing equipment. FACILITATOR BROOKMAN: Okay. Thank you. Charlie? MR. STEPHENS: Charlie Stephens. Well, maybe they're overstated. Maybe we're assuming that maintenance is happening that isn't. You know, maybe that's why they don't function. I don't know, and I don't know -- we'd have to have a basis for assuming that that's going to change. And right now our research says we don't, but maybe we can make that happen.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 But there's probably a lot of issues that we'll get into I guess in the life-cycle cost analysis. We can pick that up then. FACILITATOR BROOKMAN: Thank you. Okay. Yes, Harry. MR. MISURIELLO: Yes, Harry Misuriello with the Alliance to Save Energy. As part of the design options analysis, I was noting in the ANOPR and also in the technical support document that you did a lot of model validation, trying to model the actual performance of air conditioning units in the lab and develop a model to test the performance. And I noticed that in Table 5.8.1 in the technical support document there's a table that notes the prediction versus the testing results for these different models. And it looks as if you hit it pretty much dead on within a few percent of actual performance compared to the predicted performance. Is this the basis of evaluating the design options that you considered in this ANOPR? MR. MARANTAN: Yes, it is. One of the baseline units was sent to ITS for testing, and that's where the results come from. MR. MISURIELLO: So you took existing models off -- physical specimens and you tore themNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 down, you developed a series of models to model all aspects of the performance of those units, and then compared it to actual test results in the lab, and came up with performance that looks like it's within 2 to 3 percent of -- the actual performance was within 2 or 3 percent of the predicted performance. Is that about right? MR. MARANTAN: Yes. One of the baseline units was purchased and physically tested at ITS, and we have results for that. Subsequent to that it was torn down, and a bill of materials was created and the development of a cost model was used in conjunction with the performance data to create the curve. So yes. MR. MISURIELLO: Okay. It looks like a lot of care was taken in doing this analysis, and that the predicted results conformed well with the actual laboratory tests. Is that right? MR. MARANTAN: Yes. MR. MISURIELLO: Thank you. FACILITATOR BROOKMAN: Thank you. Richard Lord. MR. LORD: Yes. Richard Lord with Carrier. I was involved somewhat when they did some of those models and know what they did, but I'llNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 caution you that if you take a unit and you test it at a low EER, and then you try to extrapolate that data to a high EER, that you may mislead yourself. Air distribution, refrigerant distribution, all become a major factor. You're approaching the points with, you know, 11-1/2 EERs and 12 EERs of technological limits, and things become very unstable up in those regions. And you almost have to go back and retest at your extrapolated data. I'm almost concerned that, you know, you have extrapolated from 11.5 to a 12, which appears to be a linear curve, which it's not in reality. FACILITATOR BROOKMAN: Thank you. Jim, please. MR. CRAWFORD: Jim Crawford. I always look forward to an opportunity to agree with my competitors. (Laughter.) Extrapolation is a word that I shudder every time I hear it, particularly in this context. That's the way people go off a cliff. They just extrapolate the path and right on beyond the edge of the cliff. And you're in never never land, and any extrapolated data that is not underlain by well-known physical laws that justify that is totally withoutNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 merit. FACILITATOR BROOKMAN: Please. MR. GOETZLER: Just as Jim welcomes the opportunity to agree with his competitors, I welcome the opportunity to agree with Jim. (Laughter.) FACILITATOR BROOKMAN: Say your name for the record. MR. GOETZLER: We understand those limitations, and we, of course, have that feedback, and that's why we're eager to work with manufacturers on accurate modeling for products in those higher EER regions, and we began to do that. And in the future analysis, as we refine it, we'd be eager to continue to do that. So we understand those limitations. We'd like to do it right. FACILITATOR BROOKMAN: Thank you. That was Bill Goetzler. MR. GOETZLER: Oh, sorry. FACILITATOR BROOKMAN: Okay? Okay. Other comments on this slide before we move on? Let's proceed. MR. MARANTAN: Okay. Moving on, this next slide describes the last step in the engineering -- FACILITATOR BROOKMAN: One process note.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In a little bit, folks, we'll take a break, just so you're -- for those of you that are interested in knowing. MR. MARANTAN: Okay. The final step in the engineering analysis is additional analyses, and that includes the R-410A analysis. This slide describes some of the issues and concerns with R-410A. As mentioned earlier, the purpose of the R-410A analysis is to identify any substantive differences between the cost efficiency behavior of R-410A equipment and R-22 equipment. This is important because in 2010 R-22 refrigerant will be phased out of new equipment. Several potential replacement refrigerants -- it's generally agreed that the most likely candidate for replacing R-22 is R-410A. In general, the properties of R-410A are different than for R-22 including higher operating pressures. Thus, there is a requirement for modification of components within the system. It's important to keep in mind also that the important and critical parameters in this analysis are the cost differential between the baseline and the higher efficiency units, rather than the absolute costs, and whether this cost delta differs for R-410A and R-22.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay. This slide shows some of the preliminary assumptions that were used in conducting the R-410A analysis. I'll just run through these. Although the design pressures are higher, the diameter and thickness of the copper tubing remains the same in the simulations. R-410A scroll compressors are at least -- are less efficient than comparable R-22 scrolls but more efficient than low-efficiency R-22 recips. Higher heat transfer coefficients of R-410A provide for slightly lower condensing temperatures than R-22 for similar coil designs. And, finally, the evaporating temperature limits for R-410A systems are the same as those for R-22. FACILITATOR BROOKMAN: Questions on the assumptions? Charlie Stephens. MR. STEPHENS: Yes. Charlie Stephens, Oregon Department of Energy. I assume that all of these things are listed. You're assuming air conditioning. MR. MARANTAN: Yes. MR. STEPHENS: Not heat pumps. MR. MARANTAN: Yes, you're correct. MR. STEPHENS: Okay. FACILITATOR BROOKMAN: Thank you. OtherNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 questions on these assumptions listed? Yes, Richard Lord. MR. LORD: Yes, Richard Lord. Your comment on compressor efficiencies being lowered, it's actually not the compressor, it's the refrigerant. And it's well known in the industry that 410A is 6 percent less efficient than R-22. Compressor ice and tropic efficiencies actually are the same. FACILITATOR BROOKMAN: Thank you. MR. MARANTAN: Okay. This next slide shows sample results for the 7-1/2-ton R-410A analysis, and what we see here are the green points superimposed over the R-22 cost efficiency curve. And, in summary, the cost efficiency behavior of R-410A equipment is not substantially different from that of R-22, as shown by this analysis. Are there any questions on this slide? FACILITATOR BROOKMAN: Yes. Richard Lord. MR. LORD: Yes. Just kind of back on my earlier comment about extrapolation, with a 6 percent efficiency degradation ,extrapolating from 11-1/2 to 12 even becomes more exponential. And, you know, we'd contend that the curve probably is in error in that

area. FACILITATOR BROOKMAN: Would you say howNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you would address such a thing? MR. LORD: Well, with a 6 percent efficiency hit, the obvious way to compensate for that is added surface area, added material, some of the solutions that you have to resolve the problem. As you get higher up in the efficiency ranges, those costs become more exponential. So I would contend that in our data internally analyzing this shows the curve to be much more exponential. FACILITATOR BROOKMAN: Thank you. Any comments on -- yes, please, Jim Crawford. MR. CRAWFORD: Jim Crawford. Obviously, I don't have the model in front of me, but it rather looks to me like Chart 22 is, in fact, a direct conclusion of Chart 20 and not really an analysis. Chart 20 says -- it kind of looks like they followed the same trend. And you get over to Chart 22 and say, "Gee whiz, look, it follows the same trend." If that's what you put in the analysis, that's what you get out. FACILITATOR BROOKMAN: Additional comments? Yes, please. Jim Mullen. MR. MULLEN: Mr. Lord's comment reminded me that while you should not extrapolate the fans -- or the refrigeration system, the same would apply toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 fans. I think some of the higher EERs in the analysis were gained by significantly reducing the blower watts. FACILITATOR BROOKMAN: Okay. Thank you. MR. MARANTAN: Okay. The next slide is ANOPR Issue Number 2, alternative refrigerant analysis. So the Department seeks comments on data that can refine or verify the incremental cost efficiency relationship associated with R-410A systems, and the Department seeks comments on alternative refrigerants other than R-410A that the Department should consider. FACILITATOR BROOKMAN: Any alternatives that come to mind? MR. MARANTAN: Okay. Moving on, the last issue in this section is ANOPR Issue Number 1, approaches to analyses for split systems, heat pumps, and niche equipment. Here the Department invites comments on applying the cost efficiency relationships developed for single package air conditioners to split A/C systems. Secondly, the Department invites comments on the approach to address niche equipment classes, such as portable units and explosion-proof or hazardous duty units. And I'll save the last item forNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the next slide, which is explained in a little more detail. FACILITATOR BROOKMAN: Okay. Jim Crawford. MR. CRAWFORD: Jim Crawford. I really feel dumb here this morning. Could you explain to me what a portable 7-1/2-ton unit is? (Laughter.) MR. MARANTAN: Sure. It's actually a 7-1/2-ton unit that's mounted on a trailer. It's primarily used for temporary cooling. MR. CRAWFORD: That's a 7-1/2-ton unit. It -- okay. FACILITATOR BROOKMAN: Jill? MS. HOOTMAN: Jill Hootman, Trane Company.

We don't design a 7-1/2-ton unit for a portable cooling application any differently. Is it on? Now it's on. Okay. We don't design a 7-1/2-ton unit for a portable cooling application any differently, and we have a division of our company that sells portable cooling and does trailer application with generators on top of it. We make no consideration in the design for that application. So I don't think that, you know, you really have to consider that.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Thank you. Other comments on these two? We're going to save the third one. MR. MARANTAN: Okay. FACILITATOR BROOKMAN: Yes. Richard Lord. MR. LORD: Yes. Richard Lord again. Just one comment on heat pumps. Heat pumps are a much more difficult system to design. You have to worry about both the cooling and the heating operation. Chart balance is critical, and, you know, one of the obvious approaches to increase efficiency is increase condenser coil area, which can be an issue. MR. MARANTAN: Okay. Thank you. The heat pumps are actually part of the final slide here, the approaches to analyses for split system heat pumps and niche equipment. In this case, the Department presented an approach at the framework workshop, but is, again, asking for stakeholder feedback here. The Department wants to develop the heat pump relationship based on market information similar to what was done for the ASHRAE process. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. Just looking at this slide -- and, again, this language really wasn't kind of statedNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

86 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in the ANOPR. The ANOPR said looking at the -- you can look at the -- I don't want to quote the ANOPR, but it's basically looking at the analysis and looking at the ASHRAE process and input. The way it looks here on this Slide 25, it says, "DOE develops -- proposes to develop heating COP requirements as in an efficiency standard on the heat pumps on the heating side." Is that an accurate assessment? Because if it is, it's almost another rulemaking. And there was nothing in there, in the ANOPR whatsoever, about setting heating requirements for the commercial heat pump equipment. MR. MARANTAN: I'll refer that to Dave. FACILITATOR BROOKMAN: Dave Winiarski. MR. WINIARSKI: Well, I'm not going to try to usurp DOE on this one. But, basically, the Department does a rule; the rule will incorporate those heating requirements. So any rule that gets published on heat pumps will have both an EER and a COP, I believe. MR. ROSENSTOCK: But the reason I'm saying it -- is DOE looking to go above and beyond ASHRAE for the COPs? That is a very big issue. MR. WINIARSKI: If the methodology was presented here, and based on just looking at theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

87 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 curve, that would be the result. And that's what the comments -- you know, we're looking to get comments on that issue. In light of this previous discussion, I'm not sure what --MR. ROSENSTOCK: Well, then, as a followup -- I'm sorry. I'm sorry. FACILITATOR BROOKMAN: Keep going, Steve. MR. ROSENSTOCK: I'm sorry. FACILITATOR BROOKMAN: No, keep going. MR. ROSENSTOCK: As a quick follow-up, I would say, then, as a stakeholder that there should be another analysis based on the different design considerations, different engineering considerations, different life-cycle cost considerations, because -- to kind of sneak it through. And there are competitive implications as well in terms of the heat -- commercial heating market, where one piece of equipment will have higher standards than other pieces of equipment, such as furnaces and boilers -- do not have higher standards.

So there are a lot of implications if DOE, again, sets standards above and beyond ASHRAE for the COPs. FACILITATOR BROOKMAN: Don Brundage, and then Steve Nadel. MR. BRUNDAGE: If you're adding a heatingNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 mode COP requirement, don't you have to redo the test procedure for this product and open up a rulemaking for that? FACILITATOR BROOKMAN: Steve Nadel. MR. NADEL: It's my recollection that there currently is a federal COP requirement for this equipment. It originally came from 90.1 1989. It got adopted as part of federal law, so we currently have a COP requirement. And for -- be it commercial equipment or with residential equipment, when we revise the EER or SEER requirements, we also revise the appropriate metric for heating performance. Furthermore, it's my recollection that whenever this has been done there has not been a really detailed analysis just on the heating. But the primary analysis is on the cooling, and then there is looking at, for a given level of equipment that passes this cooling requirement, what's the average, or what's a reasonable COP or HSPF? That's what got done in the residential central air conditioner rulemaking. As I recall -- this is because I was on the committee at the time -- in 90.1, we developed the 1999 standard. That's what we did for heat pumps. There was not a detailed heat pump analysis, and effectively DOE is proposing they do something similarNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 here. FACILITATOR BROOKMAN: Let's let Karim follow on, and then we'll go back to you, Steve. MR. AMRANE: Karim Amrane, ARI. Yes, just to confirm that, yes, there is a COP requirement in EPACT. It followed the ARI Standard 340/360, and, yes, I think I agree with Steve. The 90.1 did the analysis based on the air conditioners, and then correlated that with COP. FACILITATOR BROOKMAN: Go ahead, Steve. MR. ROSENSTOCK: Steve Rosenstock, EEI. Again, that's a given. That was done for the residential as well as 90.1. But as I recall, for the residential I believe in the ANOPR analysis there was some showing or some indication of what the proposed -- at least for the residential, the proposed HSPF numbers that DOE was looking at in the ANOPR analysis. There is nothing in the current ANOPR analysis whatsoever about the levels that DOE was considering for the COPs for commercial heat pumps. So, again, it's just a matter of this is something, you know, that didn't seem to be even part of the ANOPR analysis that DOE was looking to go above and beyond ASHRAE 90.1 for COPs. FACILITATOR BROOKMAN: Richard, and thenNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to Charlie. MR. LORD: Yes. Just to caution you -- typically what has happened in the past, it's been to set the cooling efficiencies and then ratio the COPs up. As you raise efficiency levels, those ratios no longer really hold truth. And some of the tools that you use to get high efficiency and cooling cannot be done in heating, so it deserves more than, hey, let's just look at the ratio and say, hey, if it's 10 percent better in cooling, it's 10 percent better in heating. FACILITATOR BROOKMAN: Charlie. MR. STEPHENS: Charlie Stephens, Oregon Department of Energy. The text here on Slide 24 at the bottom says that the Department is inviting comments on addressing the energy efficiency for heat pumps in a way that's consistent with the ASHRAE methodology. Are we looking on the screen there at a visual representation of the ASHRAE methodology? Or is there some condensed version or description of what the ASHRAE methodology is? MR. WINIARSKI: Dave Winiarski, PNL. What you're looking on on the screen is basically data from the -- I think it's ARI 2003 Product Directory forNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

91 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 commercial heat pumps, and the relationship between the full-load EER and the COP for those products. MR. STEPHENS: And is that in a capsulated, visual form, what ASHRAE did for 90.1? MR. WINIARSKI: I would say not exactly. What ASHRAE was provided with was not something that showed the scatter, but basically a curve from theindustry that provided the relationship between fullload EER and COP. MR. STEPHENS: Okay. I guess what I'm trying to say here is it's going to be tough for some of us who aren't familiar with the ASHRAE methodology to make a comment on whether it's appropriate to use it again, unless we know what it was in the first place. (Laughter.) MR. WINIARSKI: The -- MR. STEPHENS: So we could use some help here on what that is. MR. WINIARSKI: I was actually involved in that process a little bit. The basic methodology that ASHRAE used was the industry supplied a curve that related full-load EER to high temperature COP. The EER economics were developed, and an EER level was chosen for that product heat pump. And then the COPNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was read off from the curve, and then that went through the ASHRAE negotiation process. But that was the first step in that process. MR. STEPHENS: When you say "the curve," was this done for each model or each combination of -- MR. WINIARSKI: This was done based on an assessment of heat pump products in the industry. So it covered a lot of products. Imagine if the -- the curve was the line on one class of equipment. MR. STEPHENS: Okay. So you did it by class, and it was aggregated data, then. MR. WINIARSKI: Right. For -- I believe there were two classes essentially, single package heat pump/air conditioners. I don't remember if split systems were included explicitly, or whether it was heat pumps together as one class. MR. STEPHENS: Okay. Well, I think I'm kind of falling with Mr. Lord down here, that maybe we need a little more data, a little more -- a little closer look at this stuff, especially at the high end, before I -- I would be comfortable settling on a number here. FACILITATOR BROOKMAN: And you're suggesting you need to know more about the ASHRAE methodology also.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEPHENS: Yes. And I'd kind of like to see some analysis and detail of what this looks like as you go up the scale for the heat pumps. I've been focusing a lot on heat pumps lately, and I find a lot of credibility in what Mr. Lord has conveyed here. FACILITATOR BROOKMAN: Michael Martin. Steve, I'm coming back to you, and Don also. MR. MARTIN: Yes. I was chair of the Mechanical Subcommittee while a lot of this was going

on. FACILITATOR BROOKMAN: Michael, you've got to get close to that mike. MR. MARTIN: Okay. I'm going to swallow it here. (Laughter.) I think you give the methodology that ASHRAE used a lot more credit than it deserves. It was a negotiation between a lot of people who didn't agree, and it was based on input that was provided by ARI a very long time ago. But it's a convoluted negotiating situation, and I don't think you can be that precise as to what the methodology was. And it's certainly not well documented. FACILITATOR BROOKMAN: Thank you.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I saw Don, and then Steve, and then Jim. MR. BRUNDAGE: I have a problem with how casually heat pump efficiency is being brought into consideration with no real obvious mention of it in meetings up to this time, because for my company it changes from an issue we're somewhat indifferent on to being a competitive issue. So I think that you need to take a very close look and independent analysis at the heating coefficient side before making any decisions on it. FACILITATOR BROOKMAN: Thank you. Steve. MR. ROSENSTOCK: Steve Rosenstock, EEI. Looking at Chart 25 -- and, again, I'm going to say I would guess that this is a pretty -- I would say a pretty accurate representation of the models and the various efficiencies out there on the market. If you look at the square and the triangle where ASHRAE 90.1 is, and then you say, "Well, if we go, well, just maybe 8 or 10 percent above those levels, that doesn't sound too bad." Well, you're above 3.40, and looking at this graph there's only one dot there. I don't know how many -- if you look above a COP of 3.4, there's one dot. I don't know how many models or manufacturers that represents, but thereNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 could be a product availability issue there, depending on where DOE decides to go. So, again -- and, again, I don't know if there is anything in the negotiation process that has dealt with this issue. It is good. There could be a lot of competitive issues out there that could have quite an impact on various heating markets. Thank you. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Jim Crawford, Trane Company. I commented earlier about extrapolation, and another evil of comparable magnitude is using regression analyses on scatter plots. This data clearly is a very widely scattered set of data. And to throw a linear regression or any other single regression on that data is absolutely ridiculous. And if any sense is to be made from that data looking for relationships -- and the data has got to be disaggregated some way or other to begin to understand what physical characteristics drive points to be on the left-hand side versus the right-hand side versus the middle. And without that, this aspect of the analysis has no merit whatsoever. Okay? FACILITATOR BROOKMAN: Don Brundage. MR. BRUNDAGE: Just a comment from theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

96 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 recently-concluded under 510 air conditioning rule. In that one, your HSPF, if I recall correctly, went from 6.6 to 7.7, about a 16 percent increase, while the cooling efficiency went from 10 to 13 to 30 percent increase. So based on what you're seeing there, I realize it's different equipment, but it's harder to get improvements in heating than it is in cooling. FACILITATOR BROOKMAN: Thank you. Richard Lord. MR. LORD: Yes. Just to back up Don's comments that, actually, as we started to design to some of those requirements, the heating has dominated.

Even though it did not go up as much, we've had to push on the heating side. One other comment, too, just to add into this -- that when you start looking at heat pumps, our industry has been changing, and the building construction is getting tighter and tighter and tighter. And what you find is the changeover temperatures are now much lower, so the amount of benefit you get in heating mode is now less. And you should look at that in your study as to what your economic benefit is going to be to the end customer. FACILITATOR BROOKMAN: Steve Nadel.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. NADEL: One other thing I'd add on this issue is as part of our consensus agreement we'll be making very specific recommendations for COP. And in general -- I don't even remember the exact numbers -- we didn't push as hard on COP I think as we pushed on EER. So this will become public shortly. (Laughter.) FACILITATOR BROOKMAN: Thank you. Dave Winiarski, do you want to add something? MR. WINIARSKI: I just wanted to add one last comment for Don, which is, if you want you can look at the chart there and look at the relative improvements in both EER and COP. And I think you'll see the same issues -- the relative improvement in COP is quite a bit less than it is in the EER. FACILITATOR BROOKMAN: Thank you. So any additional and perhaps final comments on the engineering analysis before we go to break? Then, let's go to break. It's -- we're about five minutes after 11:00. Let's resume here in this room at 11:20. I think everybody knows the coffee kiosk is now one floor down. The snack bar is not in operation. At the bottom of the escalators there is aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

98 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 coffee kiosk. The cafeteria is also open across the way. 11:20 we'll start back up. (Whereupon, the proceedings in the foregoing matter went off the record at 11:07 a.m. and went back on the record at 11:27 a.m.) FACILITATOR BROOKMAN: Please start taking your seats, folks. We'd like to begin here. So let's begin, folks. Dave Winiarski presenting Life-Cycle Cost Analysis. And also Greg Rosenquist. MR. WINIARSKI: Well, hi, again. This is Dave Winiarski, and I'll be again initiating the discussion of the life-cycle cost segment of this public meeting. Basically, in this segment we're going to discuss three separate analyses. These are the energy use and end-use load characterization analysis, the analysis for determining the markups on the equipment to the end user, and both of these will feed into DOE's life-cycle cost and payback period analysis. I will, again, speak to the energy use and end-use load characterization, and Greg Rosenquist will speak to the other two analyses.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The purpose of each of these analyses is shown on this slide. The energy use and end-use load characterization is designed to develop the electrical energy use as well as peak electrical demand characteristics for commercial buildings that use products covered under this rulemaking. And we wanted to use that to provide these characteristics for selected efficiency levels for the equipment, as well as across a diverse set of commercial buildings and climates where this equipment is used. The markup analysis is used to characterize the distribution channels from the manufacturer to the end user for these products, and from understanding those distribution channels characterize how the prices paid by customers for their products are related to the cost to the manufacturer. Both of those pieces of information feed into the life-cycle cost and payback period analyses.

The purpose of that is to develop the life-cycle cost savings for the customer for purchase of higher efficiency equipment. There are a number of issues that the Department has recognized are relevant to thisNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 section. These issues are shown on this slide. Thefirst four of these speak to the energy use and enduse load characterization. The fifth, equipment markups, is one that we've heard before, and we'll allow people to make comment on. And then, there's a number of issues that are directly related to the life-cycle cost analysis for improved efficiency levels in the equipment. I'll pause for a second and let people look through the issues list. FACILITATOR BROOKMAN: On Slide 4. MR. WINIARSKI: I'll move quickly into the energy use and end-use load characterization. The Department felt that for this particular product that there was a need for a building simulation approach in terms of assessing the energy use and the impact on electrical demand, which are important in determining the actual cost to operate these products in the commercial sector. The Department wanted to capture a broad diversity of cooling loads. These equipment are used in lots of different building types and in lots of different locations across the country. And the Department felt that to -- again, to attack the problem of the cost of electricity onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

101 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 these products that they needed to characterize in detail the impact of changes in the efficiency level of a product on the electrical energy profile for the building as well as look at the hourly and peak building electrical load impact. Those feed into the LCC analysis. Briefly, I'll talk about the simulation process. Essentially, what's done is a three-step process. In the first step, we attempt to characterize a sample of building stock that used equipment that's covered under this rulemaking. In this case, because the rulemaking -- the ANOPR effort focused on packaged equipment, we characterized the building stock in the 1995 CBECS that reported the use of packaged cooling equipment. "Packaged" in that document generally refers to single-package rooftop air conditioning equipment, and there is some discussion of how that characterization was done in the building NOPR, how the building types were selected. There is some data in CBECS that's used to characterize the building. Other data has to be developed from other sources, because CBECS is limited in the data that it can provide. But from that characterization, we build up the building models thatNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 can then be simulated using an 8,760 hours a year energy simulation tool. The tool used for this purpose is a tool known as BLAST. It's one of three tools now that have been supported in the past by the Department of Energy for doing these type of building energy analyses. Finally, these simulations are performed using BLAST, and post-process to provide hourly streams of whole building energy end-use profile. By "end use" here I'm referring to things like cooling, ventilation, lighting, plug load energy. Thoseelectrical energy streams are then sent to the lifecycle cost analysis. Because the simulation methodology is a little bit complicated, I wanted to put this slide in.

Basically, the process -- the first step of the process is we develop the characteristics for the building all with the exception of the geometry of the building, and develop a building prototype that has all of the characteristics but has this fixed geometry. That building is simulated using the BLAST model and an ASHRAE design day simulation. That design day simulation is used to establish or make an estimate of the peak cooling loads that would be onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that equipment. Once that design day run is accomplished, a certain amount of oversizing of the equipment is allowed for in the model. In this case, we chose numbers between 0 and 25 percent oversizing, based on the availability of discrete sizes of equipment models in any given manufacturer's line. The equipment that has been sized in design day is then reput back -- the sizes are put back into the simulation, and the building is then resimulated in step 2 to provide an annual energy use stream -- again, for this building with all of the characteristics except geometry looking like a specific CBECS building. A process is then used to modify the loads to reflect the actual or our belief of what would be a typical geometry for the building based on the data that we have from CBECS and other sources. That's the scaling process over in step 3. And then, finally, an hourly stream of data comes out of that streaming or that scaling process, and that stream of data is then adjusted because -- for the fraction of the building that is not cooled by packaged equipment. Earlier when I talked about theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 development of the prototypes, we pulled samples from CBECs for buildings for which at least 70 percent of the building floor space was cooled by packaged equipment. We have to be able to adjust for the remainder of that floor space in this model, so that we can look at what the impacts of a change in efficiency of covered products would have on the electrical energy use profile for the building. FACILITATOR BROOKMAN: A question? MR. WINIARSKI: Yes. FACILITATOR BROOKMAN: Please, Jim. MR. CRAWFORD: Yes. I'm kind of surprised by the nature of the building you use as your prototype. I would have expected that to be a chiller building, not a unitary building. MS. MEYERS: At least a very large unitary building. MR. CRAWFORD: If it's three stories, it begins to present problems in itself. And then, when you start breaking it up into a zillion zones, it looks more like -- certainly, it does not look like a typical unitary building. And particularly when you start looking at the distribution size of the large unitary equipment, the building is probably also too large to be typical of the family of unitaryNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 buildings. MR. WINIARSKI: If I could speak to that, I don't want to go into the details of that analysis here. Those details of the choice of building and the scaling methodology are referenced in a report that was provided to industry I think back in 1996. There are some reasons for it, but the choice of building size here is not and does not necessarily reflect that of unitary equipment. I would agree with that. FACILITATOR BROOKMAN: Charlie Stephens. Don Brundage first. MR. STEPHENS: Charlie Stephens, Oregon Department of Energy. I think that is old information. Our data in our market suggests, along with comparisons to other people's markets, which finds that ours is not all that peculiar, that packaged rooftop equipment is going more and more on top of buildings that look like this, and chilling systems are used less and less, except for the largest of buildings. We're seeing packaged rooftop stuff in places where we never really saw it 10 years ago, and that market is, we think, the growth market that's responsible for a lot of the escalation in shipments that you see that was referred to earlier. TheNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

106 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 300,000 is low. And one of the main reasons for this is because they are being used in multi-story buildings more and more. We see them on five- and six-story buildings out where we are. It's not that hard to overcome them -- the physical factors that allow you to put these things in anymore. FACILITATOR BROOKMAN: Do you have the numbers, Charlie? Do you know what the shipments would be? MR. STEPHENS: No, it's not the shipments per se. It's we participate in the design and specification of a large number of projects out where we are, because we offer tax credits for increased efficiency, and because we're consulted a lot on -- at the early stages of these buildings. And more and more we're participating in these processes. They are selecting rooftop equipment. It's just -- that's the way it's going. Schools, same way. You know, we're seeing a lot of these things that are evolving. We participate directly in the process, so we see it directly every week. FACILITATOR BROOKMAN: Okay. Don Brundage. MR. BRUNDAGE: I would agree with Jim, andNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

107 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I would also say that your sample building, while itmay be possible to do a three-, four-, five-, sixfloor building with a packaged system, you really need to pick what's more representative. If you look at single-level commercial space or one- or two-floor office space, that's where package units are. And it really doesn't have that much to do with square footage. A 200,000 square foot Wal-Mart Supercenter, which is all one story, will have a huge number of packaged rooftop units with more zones than you can count. But they're going to use packaged rooftop units. FACILITATOR BROOKMAN: Jim McMahon. MR. McMAHON: Jim McMahon from Berkeley Lab. There's a confusion here that I'd like to try and help clear up. The 15-zone, three-story prototype is the starting point for a simulation. But if you look on the right-hand side of the slide, where it says CBECS-inferred size and geometry, the buildings that are actually simulated are the ones that are taken from CBECS that use this kind of equipment. So it's dominated by smaller buildings. This is just a starting point for a prototype from which PNL scales to the appropriate building. FACILITATOR BROOKMAN: Say why that's yourNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

108 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 starting point. MR. WINIARSKI: I can explain why that's the starting point and briefly detail -- it's really a mathematical construct. You know, we're running through a simulation program. The simulation program is basically building up mathematical models of heat transfer between different spaces in the building, different zones of the building. The 15-zone, three-story prototype actually was developed originally with some of the ASHRAE work, or just slightly pre-dated that. It has -- you'll notice it's 15 zones. Basically, the idea here was for -- you have five zones per floor on the building, four perimeter zones, each with a specific orientation and a core zone on each floor. What that allows you to do is you have at least part of the building that corresponds to part of any other building out there on the market. It has a top floor, it has a bottom floor, it has a east-facing or a west-facing floor. And having all that information together allows you to take the results from essentially those zones of the building, those orientations of the building, and mathematically construct what the impact would be on a smaller or larger size building -- for instance, expand the coreNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

109 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and change the perimeter size, that type of thing. MR. BRUNDAGE: So one of your -- FACILITATOR BROOKMAN: Don Brundage. MR. BRUNDAGE: Don Brundage. So one of your component zones would be -- would it include something like upper floor, west-facing, or -- MR. WINIARSKI: Exactly. MR. BRUNDAGE: Okay. Without knowing all the details of the modeling, it just seems like a three-floor large building is going to be so different from where your predominant usage of this equipment is. But if you did such as a top floor of a building with various orientations, that should reasonably simulate what a single-floor result would be in a commercial building. So if you -- MR. WINIARSKI: Right. MR. BRUNDAGE: -- did it that way, I can see where it would be okay. MR. WINIARSKI: Right. MR. McMAHON: Don, this is Jim McMahon. That's exactly right. What you do is take the CBECS building, the specific building, look at that anddecide what part of this 15-story -- of the threestory, 15-zone prototype applies. And so you mayNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

110 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ignore the middle floor if it's a two-story, and so on. So you make it fit. MR. WINIARSKI: Right. FACILITATOR BROOKMAN: Yes, please. And your name for the record? MR. PHAM: Hung Pham, Copeland Corporation. I just have a question I hope the Department could clarify. The part I struggle the most with is a chart -- something that simply relates for a given tonnage and a given EER. What is the range of energy consumption? I just found that this -- the longest amount of details and all that stuff really boils down to that chart, and I couldn't find it anywhere. I have to plow through tons of material to get it. FACILITATOR BROOKMAN: Can you state again which chart it is? MR. PHAM: Can you plot for a given tonnage in the EER -- in this case, two classes -- 7-1/2 and 15-ton -- plot the energy consumption range for a given EER? MR. WINIARSKI: That could be done. MR. ROSENQUIST: Yes. Greg Rosenquist, Lawrence Berkeley Lab. That's provided in the LCC spreadsheet if you do a sample calculation.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

111 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Can you look for that? MR. ROSENQUIST: I also think it's provided in Chapter 6 of the TSD at the back. MR. PHAM: I know -- sorry. Hung Pham again. I know that can be done, Greg, but can -- I'm just asking because I don't know how many of us in the room have looked at that spreadsheet and actually played with it. FACILITATOR BROOKMAN: Okay. So maybe while we're continuing here, we can take a search and see if it's in the TSD. And we'll return back to you, okay? We'll look for that. Other questions on these -- well, I guess we're still on simulation methodology and moving towards the simulation inputs. MR. WINIARSKI: Right. Basically -- FACILITATOR BROOKMAN: Excuse me. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock. EEI. This might be a little premature, but I was just kind of curious if you were able to actually get some actual, you know, metered -- end-use metered data, either I'll just say from either some electric utilities or other distribution companies or EPRI orNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Primen. You know, there's a lot of end-use metering out there. I was just wondering if you had a chance to look over that data. You know, you did the simulations -- and, oh, here's some utility data that kind of shows what's -- at least on a whole building basis kind of what -- your simulation versus the actual data, just to see, you know, how -- how good the correlation was. MR. WINIARSKI: Right. I can speak to that a little bit. We have not gone through a lot of external data sources that might be available to the utilities for this. That type of information would be appreciated, if that could be brought to the Department's attention. We did do a comparison with CBECS. We'll talk about that a little later. CBECS, however, is not metered data, and we're fully cognizant of that. FACILITATOR BROOKMAN: So let me clarify.

Hung, from where I sit, it looks like Charlie just showed you the table. MR. PHAM: Yes, I just saw it now thanks to Charlie. I didn't see that page. FACILITATOR BROOKMAN: Okay. And so is that all you need at this point, or do you want the Department to try and respond to something else?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

113 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. PHAM: I think it doesn't show the variation, though. FACILITATOR BROOKMAN: Right. MR. PHAM: I think we talk about tons of buildings and tons of lightings and fan consumptions, all kinds of stuff. For a given tonnage and given EER, what is that range? That table doesn't show it. FACILITATOR BROOKMAN: I see. So you interpret what he needs to -- MR. WINIARSKI: I believe what you want is you want to essentially get a relative energy use per ton type number, and a range of how that varied across the U.S. market. MR. PHAM: Yes. I think it would be relevant to see the sensitivity, because in the end what we are talking about is the tonnage and the EER standard. And we're talking about all kinds of energy savings. I have yet to see the sensitivity between the two. We make so many assumptions, it's very hard to capture it. I think a simple chart like that might give a better feel. FACILITATOR BROOKMAN: Greg Rosenquist. MR. ROSENQUIST: Yes. I just want to say we can provide that information. It's in the LCC spreadsheet. We can't extract it in a simple way, butNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

114 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we can, again, compile it and provide that certain range of information for you. FACILITATOR BROOKMAN: Thank you. MR. PHAM: Hung Pham again. I mean, all I was trying to get a feel for is if we go for a certain ER standard, does that represent the average of the energy savings among all the buildings? Is that what we're trying to do? I'm not sure I know what the range is. FACILITATOR BROOKMAN: Okay. MR. PHAM: That's why I'm asking. FACILITATOR BROOKMAN: Okay. Can you answer that now? What the average would be in -- among the range of buildings? MR. ROSENQUIST: Again, I think it's on that page in Chapter 6 that you provided with him. And we have the LCC spreadsheet, so we could actually look at it if you really wanted to get into it now. FACILITATOR BROOKMAN: Maybe at lunch, Hung, maybe at lunch you could -- or even now you could look at it carefully and see if they need to do an additional run or provide additional information. Charlie, go ahead. MR. STEPHENS: Yes, Charlie Stephens. There is actually quite a bit of interestingNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

115 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 information right -- you know, plus or minus two pages of that page that I showed him. There's -- one of the most interesting and useful ones is the by building type, fraction of energy use, by the individual pieces of the system. You can actually see that there's quite a variation depending on the building type you're looking at. You know, between a grocery store and an office building, there are some fairly major differences there in the end-use loads and those that are served by a rooftop unit. So you'll see some pretty big differences by building type. And the problem is I think they did a great job on the analysis. You know, we've done a lot of modeling in our part of the world over the years, and I think they did a great job with the analysis. But it doesn't boil down really well to a simplification, unfortunately. And they've done their best, but I think if you want to see something that's less aggregated you'd have to back up a few steps and present it in a different type of graph than what we've arrived at, which I think -- as Greg says they can do. But what I saw made a lot of sense based on what we know. FACILITATOR BROOKMAN: Okay. Thank you.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

116 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Jim Mullen. MR. MULLEN: I was going to hold off until David made it through a couple of slides. But he's hopelessly bogged down, so I'll have -- (Laughter.) FACILITATOR BROOKMAN: I just passed the mantle of facilitator to Jim. (Laughter.) MR. MULLEN: All right. I'd like to point out that we have a very serious concern with the energy calculation and the results shown in this analysis. This I believe is probably the weakest, lowest confidence level part of this whole operation. If you look at the review of analysis in support of proposed ANOPR funded and paid for by DOE with SENTECH, on comparison of BLAST simulation methodology and CBECS estimates of energy use, I'd like to quote a sentence. It says, "Unfortunately" -- FACILITATOR BROOKMAN: Page would be? The page? MR. MULLEN: 38. FACILITATOR BROOKMAN: Thank you. MR. MULLEN: "Unfortunately, the analysis used to support the ANOPR is seriously flawed in a number of aspects, seriously calling into question theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 accuracy of energy use, customer cost, and most other aspects of the analysis." And I certainly don't portend to be an expert on building loads and building simulations and building analysis. But I think some of these people were probably fairly knowledgeable, and, therefore, I would caution that anybody that takes these numbers verbatim is probably walking on the long end of a short plank. I think Dave talked about the building loads. The part that we do know something about is equipment simulation. The equipment simulation that was in blast I believe is based on a 40-ton cylinder unloading compressor with a fixed evaporator temperature and head pressure controls that kick in at 100 or 110 degrees Fahrenheit, which is in no way representative of the equipment that's being modeled. The equipment being modeled is generally multi-compressor. It does not have head pressure controls unless it's going to operate at ambience less than 35 or 40 degrees, which is a lot lower condensing temperature than 100 or 110 F. In an easy, simple calculation that we did, I would guess that the equipment wattages per energy use is probably overstated in the range of 10 to 20 percent. The other thing that was commented inNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

118 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the SENTECH analysis is that the ventilation loads are quite aggressive for what probably exists in real practice, which, again, drives up the energy use. MR. WINIARSKI: And Jim and I have spoke on this on a number of occasions, and we appreciate -- I think the Department felt that they wanted to get as much input at the same time from many stakeholders. FACILITATOR BROOKMAN: Karim, do you wish to comment? MR. AMRANE: Yes. This is Karim Amrane with ARI. I would like to second a point made by Jim Mullen here. I think this building simulation analysis is the weakest point in this analysis, in the whole thing. So it's very important that DOE look at the comments made by the peer reviewers and try to address their concerns, because we do agree with the comments made in this report. FACILITATOR BROOKMAN: Thank you, Karim. Additional comments on this subject, since we're on it? Yes. Pham? MR. PHAM: Hung Pham again. Just one more clarification point for me, so I understand. Are we saying that a building characterization, the way we aggregate it, the energy consumption between 11 over 10 EER assumption would be 10 percent? Is that how itNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

119 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 works? Or that's not quite the relationship? MR. WINIARSKI: No. No, that's not how it works. MR. PHAM: That's what bothers me is that -- if that's not the case, then I think we are kind of having two correlation, and we set a standard on one.

That's confusing to me how we do that. I couldn't find that relationship in the charts anywhere. MR. WINIARSKI: On the -- I don't recall the actual figure number. There is a graph at the end of Chapter 6, which shows the cooling energy consumption as a function of EER. You may want to take a look at that and look at the relative change. MR. McMAHON: This is Jim McMahon. That's page 6-58. FACILITATOR BROOKMAN: Thank you. 6-58. MR. PHAM: Thank you. FACILITATOR BROOKMAN: I want to -- Steve, before we go to you, I want to see if we can close as many of these issues as we can before we move on. So, Hung, here comes 6-58 right there. Jim, do you want to follow-on while he's looking, follow-on Jim Mullen's comment? Jim Crawford speaking. MR. CRAWFORD: Jim Crawford. Yes, I justNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

120 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -- I guess I'm kind of puzzled. If I understand correctly, the Department paid SENTECH to do this review of the activity, the analytical activity, and it certainly seems to have some significant bearing on these proceedings. And I guess -- SENTECH is not here, are they? MS. KAPPAZ: I'm here, but I didn't take part in writing this. MR. CRAWFORD: Yes. Well, I guess I would maybe just express a disappointment that SENTECH is not being -- has not been called upon to make a formal presentation of their report for balancing this meeting. And I guess I would like to state it more strongly, but I'll let it go at that. FACILITATOR BROOKMAN: Thanks, Jim. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. Just for everybody's information, if you look at Figure 6.3.4 in the technical support document, it does show, based on various building types, the six that are shown here, cooling load as a percentage -- the simulated percentage of the annual energy use -- cooling load ranges from 7 to 15 -- excuse me, 16 percent from the annual energy usage. So just -- that's one little -- based on their simulation, soNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

121 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just as another one point of reference for everybody. One thing about the simulation -- and, you know, simulations are very tough, and they can be very complex. But especially with package units, and especially with multiple package units compressors, there is issue of usage and diversity factors. Even on the EER day, you have 10 package units with two compressors per package unit, if you think that all 20 compressors are working on that peak day, it isn't going to be happening. Just based on my experience with demand-side management programs, in fact, we actually had the controls on second compressors of package units on a storage facility, like a Storage USA or one of those storage facilities. And it was just amazing -- even on the hottest days that -- how many compressors were already off when the utilities sent out a signal to shut off a second compressor. So I think part of the problem -- and, again, it can't be a difficult situation -- is the fact that with the diversity factors -- and, again, I know California utilities did a lot of analysis of diversity factors of cooling equipment, it does make it a lot tougher in terms of what is the actual energy savings because of the various loadings and unloadingsNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

122 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of, you know, compressors within a package unit and then multiple compressors across the same building with different units. Thank you. FACILITATOR BROOKMAN: Charlie Stephens. MR. STEPHENS: Yes, I -- Charlie Stephens, Oregon Department of Energy. I think in responding a little bit to what Steve said, I think I made a comment earlier about sizing being random or -- (Laughter.) MR. ROSENSTOCK: Arbitrary. MR. STEPHENS: I think you'll find that compressors not being on could have something to do with oversizing factors in the marketplace, because I've watched contractors size these things. And I don't know what rules they're using, but I can tell you they don't look at the load of the building very often. So there's a lot of -- the problem I'm speaking to here is the fact that anybody who thinks that these units operate the way they're modeled in the lab or tested in the lab is deluding themselves. And the fact is, when you have to do some sort of a modeling exercise to come to a conclusion, so everybody can settle on one number for one class ofNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

123 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 equipment, you're going to have to simply this somehow. And until the industry manages to make a product that's divorced from the input of contractors who install the stuff, who design -- you know, who size the stuff and who maintain the stuff, you're forced to contend with matching actual performance if you're trying to go to a database like CBECS to see what the energy use of the buildings really are, and try to match that up with the behavior of the systems that are supposedly attached to it. There's going to be some simplification. I don't find very many problems with the way the simplifications have been done here. I think in the data we've looked at just in our own marketplace 50 percent of the economizers in the market are not functioning or not functioning the way they were intended to function. And I think the age of the installation in that ranges from about one year to about 15 years, and there doesn't seem to be a lot of correlation between how long the unit has been there and whether the economizer is functioning properly. That's just one issue. But there's lots of issues with equipmentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

124 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 actually in the field. And I don't want to see DOE get hung up on minutia as they try to parse out what the incremental performance is going to be from EER 9 to EER 10, because the differences that you're going to see between EER 9 and EER 10 on the same building are a hell of a lot smaller than the arguments we're having over whether they've correctly characterized that one building's energy use. FACILITATOR BROOKMAN: Richard Lord. MR. LORD: A couple comments that go along with this. I was kind of holding off on them, but on the equipment models, one of the things that has happened over the years is the part-load operation of our units have changed quite dramatically, you know, where we've gone from single compressors with cylinder unloading to multiple compressors. And I think the point that -- maybe it was Jim was trying to make -- was that you can -- if you base your model on this older technology for part load, that you may overstate your savings, that a lot of things that the manufacturers have done now for a given, say, 10 EER -- the part-load efficiency might be 30, 40 percent better than it was for the older unit. And, you know, unfortunately, a lot of ourNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

125 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 standards don't recognize part load. Even though there is an IPLV, it's really not a good measurement right now. And so that's one of the things just to look at. The other comment on the economizers -- I was deeply involved in that study, and it was done in California. What happened on a lot of that is -- and it's, unfortunately, the way our contractors and service people run. They disconnect economizers because it's one less thing to maintain. So you find out a lot of economizers that may have worked have just been disconnected because they don't want to worry about the maintenance. And, you know, it gets to the issues that I think ASHRAE is trying to address, and others are trying to address, is maybe some of the bigger savings that we could get in this country would come from good maintenance, not from just pushing the full load efficiency up. FACILITATOR BROOKMAN: Jim Crawford. MR. STEPHENS: Just a point of clarification. Charlie Stephens, Oregon Department of Energy. We're aware of the California study, but the study I'm referring to as our own, we're going to hear the report here on October 19th about the actualNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

126 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 results. But it -- we're not getting radically different results in our part of the world than California saw. FACILITATOR BROOKMAN: Thank you. Jim Crawford, and then Don. MR. CRAWFORD: Jim Crawford, Trane. It's a shame that ACCA isn't here to take some of the beating for all of this. (Laughter.) There has been a few statements made that are potentially misleading. Charlie has used the "random sizing" phrase here two or three times. And I understand why he says it, and I'm not going to dispute him on that. The point that I do want to make, though, is in most parts of the country a system that is sized to the EER measuring point -- 95 degrees Fahrenheit -- or to the local design condition is undersized. And that's kind of a heresy to say that. I live in a part of the country where it's not unheard of to experience temperatures that are 10 to 20 degrees above design temperature. And when you are trying to satisfy a customer, the customer doesn't want to hear, "Well, ASHRAE says so and so." The customer buys an airNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

127 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 conditioner to provide comfort in that building, just like they buy a heating system to provide comfort in that building. And if a system is running flat out with design conditions, it's undersized. FACILITATOR BROOKMAN: Don Brundage. MR. BRUNDAGE: I would agree with what Jim just said. There is legitimate reasons to slightly oversize equipment. If you didn't and it ever went off for some reason on a hot day, you'd never be able to catch up, which would be a highly undesirable result in most commercial buildings or buildings of any type. The other thing -- we've been trashing the modeling pretty good here. And I -- I haven't had a chance to dig into it enough to know how truly bad it is, but very rarely in modeling are you looking at some double-blind test to see if you can get back to the energy use of a building, not knowing what it is. Using it as you're doing it here, as a way of modeling efficiency options and the differences between the options, is a lot less tough a test than to perfectly model a building in that manner. So, yes, modeling is not perfect, but it's better than the alternatives. FACILITATOR BROOKMAN: Thank you.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

128 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Additional comments? We've spent quite a bit of time on this segment. Final comments on this section before we move on or keep going with the presentation? Okay. Let's go. MR. WINIARSKI: All right. If I can make actually one final comment, which is if there are ideas or methodologies or, in particular, suggestions for how this could be improved in the future, please don't hesitate to send them in to the Department. I mean, we're always interested in how this can be improved for, if not this effort, further follow-on efforts. FACILITATOR BROOKMAN: Yes, Harry. MR. MISURIELLO: Yes. I've been looking at building simulation models for a long time, and you're right; they're never perfect. But I think by focusing on what might be a few flaws in this process ignores the strengths of the overall effort, which is -- the results are tied into the major characteristics of the United States building stock that uses this kind of equipment. End-use metered data and accepted profiles used in analysis for standard-setting was fully incorporated in this process, looking at the ASHRAE profiles for standard-setting the ELCAP data,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

129 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and so forth. And these are strengths that tie the analysis results into actual real building stock. This is not a true design exercise. This is based on real buildings. And I guess one point I'd like to hear a little more about if we have time is about modeling. There were thousands of simulations done. Each building in the CBECS sample was modeled in some fashion to create an enormous database of results that, again, were tied to reality with the low profiles and the actual building characteristics. And I just wonder if you could just elaborate a little bit on that. MR. WINIARSKI: Well, that actually feeds a little bit into the next slide here. The next slide -- I'll go over it very briefly, and you can ask questions on particular elements of it. But I try in here to discuss sort of the sources for the inputs, and the inputs are really what drive the simulation models for buildings. There is a certain amount of information that we can get directly from the CBECS building sample. Some of this is the -- CBECS will tell us what type of building it is, they will tell us theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

130 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 floor area of the building, they'll tell us the number of floors, and they'll give us some hints about things like the wall and roof construction and the occupancy of the building, at least in terms of times of use, etcetera, number of hours per week, that type of information. That really isn't at a level that's detailed enough to actually build up the building model directly. So there are some other pieces of information that we have to infer from data that EIA CBECS has provided. For instance, CBECS doesn't tell us the location of the building. They tell us the location within, in some instances, maybe 3- or 400 miles from where it might have actually been located. That's -- so what we do is we've gone through a process to take the information that is available in CBECS in terms of the Census Division the building is in, and the climates, and try to assign those buildings using a probabilistic methodology to -- given annual weather data files that we can actually use in the simulation. Other things that are very important -- window/wall ratio in the building. That's not available in the 1995 CBECS set, and so we had to develop a distribution of window/wall ratios byNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

131 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 building type from a previous CBECS survey and then assign that to any given -- probabilistically to any given sample in the '95 set. Aspect ratio and the building use schedules to a large extent. We know the hours of operation reported in the survey, but that's about it. We don't know the hours of operation of the equipment within the building. Finally, there is types of information that are derived from completely exogenous sources. Those are things like the equipment power densities, the actual occupancy density for the building in a large number of cases, and the system oversizing factor that we had developed an assumption for for this effort. That type of data is probably developed in a fair amount of detail within the TSD. If there's particular questions, I can try to answer them up here, or I can answer them offline for anyone who is interested in how the modeling was done, how the buildings were characterized. The results from the simulation were for -- I didn't mention there were 1,033 buildings in the sample. For each of those buildings, we simulated the building at one of -- or each of 10 different possibleNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

132 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EER levels for the equipment. Again, this is for single-packaged cooling equipment only, and from that we produced the streams of hourly electrical consumption data for the building, as well as an estimate for the number of either 7-1/2-ton or 15-ton air conditioners that might be used to serve the loads in that building, at least in terms of the packaged cooling equipment loads. And that data is then fed directly into the life-cycle cost analysis effort that Greg Rosenquist will talk to. So are there any further questions? MR. LORD: Can I ask one question? MR. WINIARSKI: Yes. FACILITATOR BROOKMAN: Richard Lord. MR. LORD: Yes, Richard Lord. Dave, on the -- when you scaled the EER, did you scale the part load at the same ratio? MR. WINIARSKI: The process in terms of scaling EER looked at the -- in the 15-zone model, there are a certain -- the building is then -- those 15 zones are then collapsed to represent zones that might be served by one piece of equipment. And the EER -- or the EER at any given point, any given hour in the simulation from those -- the zones that areNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 collapsed together is weighted, given the amount of load on it. So effectively that's exactly what's done.

The part-load profiles are essentially scaled based on the loads that might be on that piece of equipment. MR. LORD: My question was more aimed at the equipment models. You know, if the EER of the unit was 10, and then you scaled it up to 11, did the part-load scale by the same 10 percent? MR. WINIARSKI: Yes, the part-loads scale directly. FACILITATOR BROOKMAN: Okay. Jim Crawford. MR. CRAWFORD: Jim Crawford. On the chart up there on the screen, what was the range of the 10 efficiency levels that you analyzed? MR. WINIARSKI: The range of the efficiency levels starts at the current baseline of 8.5 and went up to 12. MR. CRAWFORD: Thank you. MR. WINIARSKI: Okay. If there's no further questions on that, there's a number of issues that are obviously developed from this whole process.

The first of these is DOE's method for selecting a sample of buildings that it would use in thisNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

134 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 analysis. Again, the sample consisted of six particular building types that are shown here, and the sample selected was based on buildings for which at -- in effect, at least 70 percent of the floor space in the building is cooled by packaged equipment according to the CBECS survey data. That -- to give you an idea of that, this sample represents, according to CBECS at least, 73 percent of the cooling energy for packaged cooling equipment that's out there in the nation. FACILITATOR BROOKMAN: Yes. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. Just as a quick clarification, in food services is that restaurants, stand-alone restaurants, or is that grocery stores, or is it both? Just because it's -- MR. WINIARSKI: Grocery stores I believe are separate. This is restaurants, essentially. MR. ROSENSTOCK: Thank you. MR. WINIARSKI: Mr. Crawford. MR. CRAWFORD: Would you please say again what this 70 or 73 percent is, and how that corresponds to the words on the piece of paper? INEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

135 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 think I heard -- between heard and read three different interpretations. MR. WINIARSKI: The selection process looks at the fraction of the floor space that is cooled as well as the fraction of the floor space that is cooled by unitary packaged equipment. The end process of that is that the selection process basically selects buildings for which at least 70 percent of the floor space cooled -- pardon me, at least 70 percent of the floor space in the building is cooled by packaged equipment. I hope I said that correctly. MR. CRAWFORD: Well, earlier you had said something about this representing 70 percent of the cooling energy of some category of buildings, and that's why I was confused. MR. WINIARSKI: There are three numbers essentially that are discussed that are all sort of right around that 70 percent. Basically, if you look at the CBECS use, the total use for packaged cooling equipment in CBECS, this sample represents roughly 73 percent of that total packaged cooling. So there's about 27 percent of the packaged cooling that's in buildings that were not in this sample, again, according to the CBECS estimatesNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

136 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 for cooling energy. FACILITATOR BROOKMAN: Are there any additional comments on building sample selection, the process as featured there in Slide 10? MR. WINIARSKI: The second issue we've gone into a little bit of detail. I'll just present it here again. I think we've heard some of the comments. But there is a simplification in the modeling here, which is that where air-side economizers were reported in the CBECS data sample, they were assumed for that building in the model and for all of the equipment in that building in the model. Not only that, the assumption was that the equipment actually operated as it does in the simulation. In other words, it operated perfectly without failures. It was connected, and a further simplification is that it was modeled with an enthalpy control strategy which helps to maximize the benefits of the economizer. And there are other control strategies that could have been assumed. So the Department is looking -- I think we've got some comments on that. We'd like to get further comments on what methodology would be a better choice for modeling this equipment, again looking atNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

137 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 what the performance might be 10, 15 years out, essentially when the systems are on the market. And also, whether the idea of using CBECS as the data source for which buildings should have the economizers was appropriate. FACILITATOR BROOKMAN: Tom Eckman. MR. ECKMAN: I don't have a good option for modeling these, because the mode of failure really determines how well they work, and we don't know the -- we're just beginning the process of sort of understanding why they failed and whether they're full open, full shut, etcetera, etcetera. So I can't really give you much assistance there right now. I would note, however, that, you know, what this assumption does is make the economic analysis a conservative analysis, because it assumes that the refrigerant cycle is actually not being operated when the economizer is handling most of the load. So the duty cycle on the refrigerator compressor unit is less than would be the case in actuality in the field, and so that any of the economic analysis that falls from this is on the conservative side. So, you know, while it's unfortunate that they don't work from a nationalNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

138 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 energy perspective, at least for the rulemaking process, we're -- we've got a conservative assumption. MR. WINIARSKI: Right. At least in terms -- in that particular assumption, that aspect of the analysis. FACILITATOR BROOKMAN: Yes. MR. LORD: Yes, Dave, one point of reference that might help you is your typical 70 percent thing. But our data says that about 70 percent of our units get shipped with economizers. I don't know what your building model said, but you might go back and check that. FACILITATOR BROOKMAN: Okay. Richard Lord that was. Steve Nadel. MR. NADEL: Yes. You should check with -- I think it's the New Buildings Institute. They recently did a study that looked at a sample of units and how well the economizers are working in practice.

So there is some data about percentage of units in different types of categories. FACILITATOR BROOKMAN: Excellent. Thank you. Charlie Stephens. MR. STEPHENS: Yes, Charlie Stephens,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

139 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Oregon Department of Energy. That study is the one they're doing for us. I would have -- (Laughter.) The other one -- I just -- one thing I would put in here at this point is I haven't yet seen anything in what has been presented in the analysis so far that tells me that I should use a different assumption at any given EER level than I use at other EER levels, with regard to economizer, economizer functionality, and everything else. In other words, I don't see a higher likelihood that an economizer on an EER 10 unit will fail or be different in the way it behaves in the field than one on an EER 9 unit. They're essentially -- we treat them the same so far, because we haven't come up with anything that says that they're different on an incremental basis. So we just presume the same thing regardless of the EER level so far. FACILITATOR BROOKMAN: Thank you. Yes, Jim. MR. MULLEN: Jim Mullen. A follow-up on the economizer conversation, and something Dick said sort of stirred this. But there is a lot -- I don't disagree that there's a lot of data that says economizers don't work and -- or aren't working onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

140 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 equipment that's surveyed in the field. But the next piece of the puzzle that's needed is why they aren't working, and I never see that reported. I don't know if economizers are -- if they break or, to Dick's point, if somebody disconnects them because they're too much of a maintenance hassle, or what the story is. But if you've got some data coming, Charlie, will it contain some of the rationale for why they weren't working? MR. STEPHENS: That's what we're trying to get at, the failure modes and why the failure modes -- whether it was a control, whether it was linkage, whether it -- what caused the failure. MR. MULLEN: Good. I applaud your efforts. Thank you. FACILITATOR BROOKMAN: Richard. Richard Lord. MR. LORD: Richard Lord. Actually, there was another peer project that looked at the economizers, and I was involved in that one. And some of the data is in there that says why they failed, and they've tested enthalpy switches, they tested linkage, and I believe there's actually some requirements coming out as to how to make them better. MR. STEPHENS: Yes, that's --NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

141 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LORD: So it's good stuff. MR. STEPHENS: Looking at the peer research, in addition to the ones that have been in the Northwest as part of the scope, that we've got NBI. FACILITATOR BROOKMAN: Good. Okay. Other questions related to -- or comments related to economizer usage, control, strategy, and performance assumptions? And, Charlie, you and Tom will make that report available as soon as it's available. MR. STEPHENS: Yes. As soon as we have it, yes. FACILITATOR BROOKMAN: Thank you. MR. WINIARSKI: A third issue that's very relevant to these proceedings is the Department's treatment of fan energy for this equipment. Most of the equipment that's covered under this rulemaking -- and, actually, there's a certain class that isn't, but most of the equipment covered under this rulemaking incorporates the supply fan blower, both in the test procedure and in the actual piece of equipment that's put in the building. As such, that becomes sort of a covered portion of the energy use for this particular product.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

142 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And it's covered not only during the -- or it's -- the use of the fan is not only for cooling within the building but also for the heating that might go on in the building when, for instance, the operation may be a furnace that's primarily being used here. Because of the assumption the Department essentially accumulated all of the fan energy savings that might incur from a higher EER level, there was an assumption made as to what that fan energy improvement might be for those higher EER levels. And that's accrued for the energy savings analysis and passes into the life-cycle cost analysis. And the Department would like to get some comments on the assumptions for modeling fan power, whether a different approach should have been done, as well as how it's being treated in the analysis. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. Again, I have to say I really didn't look at this section, but I'm just kind of curious. I think for the fan energy usage you really need to seize it. Are they constant volume systems or variable air volumes? Their constant volume systems -- again, or if you thought there was a percentage of them asNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

143 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 they're being used. Their constant volume systems savings are zero. They're always going to -- in many cases, they're always going to, you know, put out the same CFM regardless of cooling or heating or ventilation modes, until they're turned off by an energy management system -- you know, startup versus start-down. FACILITATOR BROOKMAN: Richard Lord. Let's let him go first. MR. LORD: Actually, to add a little bit, there's a lot of -- fans aren't applied very properly.

I mean, first of all, we know ductwork is not sized right. It leaks. The other thing -- there's a study that was actually done along with the economizer where they looked at how fans are being run. And to really meet code you've got to run an indoor fan continuously to meet ventilation. Found 30 percent of them were cycling on and off, but the thermostats weren't even programmed. And so you can get different results depending on what it is, really. So it's a hard one to judge. MR. ROSENSTOCK: And, again, there is -- obviously, there is a cycling issue. It all depends on, you know, operation. But, again, are there -- how many of them are actually on, I'll say, a VAV systemNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

144 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and, you know, have some sort of control where it's actually reducing the energy output of the fan? I mean, it's one thing to obviously consider, but it could be, again, pretty small. MR. WINIARSKI: The assumption that was used in the modeling is that all of these are constant volume systems, and I suspect that that's -- most of the shipments are constant volume systems. FACILITATOR BROOKMAN: Okay. Charlie, and then Karim. MR. STEPHENS: Charlie Stephens. Yes, I just want to agree with Dick. That is pretty much the way things are in the field, and I -- but I can also say that I don't think we found in our own work any incremental difference. I don't think there's any varying of those conditions based on EER. I think, you know, you see the same thing on a wide variety of efficiency of equipment out there. And, you know, some industries have -- as Tom was pointing out to me, have -- have taken the trouble to make sure you can't do things backwards. You know, the aviation and electronics industry come to mind. But you can wire some of this stuff backwards or not turn it on or otherwise not connect it. You know, there's a lot of ways to screw theseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

145 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 things up, and we've seen them all. But it -- again, I don't think we see any variation based on EER. FACILITATOR BROOKMAN: Karim. MR. AMRANE: This is Karim Amrane, ARI. Dave, I mean, in your analysis I believe you have assumed that as the EER of the equipment increases, the fan power decreases. MR. WINIARSKI: In the energy analysis, that's the case. As the EER improves, the process used was a steady decline in fan power at the different EER levels. There was no design option analysis there. MR. AMRANE: Because the question is: how confident are you about this assumption? I mean, I think we've shared with you some data that shows that it's not -- it doesn't apply to all equipment. There is some equipment that you would guess it will happen.

But for the equipment, the improvement in inefficiency was not achieved by decreasing the -- by decreasing the fan power. MR. WINIARSKI: Right. For those who don't know, ARI did share data with us. We've also examined data out there on the market looking at product catalogs and everything. And he's exactly right. There's a huge scatter in how manufacturersNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

146 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 modify the fan power and the product at each EER level. I think what we saw from some of the data was, you know, roughly half showed a definite improvement, and sometimes a more significant improvement than we actually modeled. And others showed no improvement whatsoever. FACILITATOR BROOKMAN: Jim Mullen. MR. MULLEN: To take on what Karim has said, and what David is mentioning here, I think on my top 10 list of what we could do better in an analysis next time -- this is about number 4. I think if you look at the data there is no clear trend that lower watts go down with higher EERs. That's built into this analysis as it stands now, and it's a double whammy because you get part of it during cooling operation. But as I recall, about one in four watts charged to the cooling system are used in the ventilation mode. So essentially you're leveraging high ventilation loads and lots of lower operation to gain higher EERs in this analysis. MR. WINIARSKI: That's exactly right. FACILITATOR BROOKMAN: Other comments on fan energy consumption? Jim Crawford. MR. CRAWFORD: Yes, Jim Crawford. ThereNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

147 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was a comment made a few moments ago about the electronic industry practices and the aviation industry practices. And before you go too far with those kinds of analogies, I invite you to compare the cost or price per pound of delivered goods in our industry and in those industries. We don't get $100,000 a pound. And if we could, we could probably solve that problem. (Laughter.) FACILITATOR BROOKMAN: Okay. Final comments on fan energy consumption. We're moving on to BLAST and CBECS estimates of energy use. Slide 13 for those of you that are referring to your slides on your page. MR. WINIARSKI: This issue is discussed a little bit in the review document that was mentioned, as well as in the TSD. Basically, the simulation -- or simulated cooling energy use for the building was compared against EIA's own estimates for the same CBECS sampled building, sort of at an aggregate level. In looking at that, I believe that the BLAST modeling that was done for this showed about a 10 percent increase, or 10 percent higher cooling energy consumption, than that CBECS reported from its own modeling efforts.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

148 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Department is basically seeking some comments on the value of comparing the simulated energy -- or cooling energy use with the CBECS model results beyond what's sort of shown in the document, in the TSD, given, again, that these are both estimates, and if there are other sources that should be provided or looked into. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: This is Jim Crawford. If you have a 10 percent difference between the model and the presumably measured data, it seems that you've got to do something to adjust your model, so that you offset that. Relative to -- and this would be in terms of on average, but if your average building from one source and the other source is about the same, and the variance is about the same, the fact that building to building happens to be -- or for a given building it happens to be off by even a significant amount, who cares? What you've done is you've simulated another building. MR. WINIARSKI: Yes. And to be clear here, the CBECS end-use data at least is not -- is not metered data. It's basically from a different modeling process. FACILITATOR BROOKMAN: Okay. SteveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

149 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. Again, there is a lot of end-use data out there. There are studies -- ACEEE, some of their summer studies. There is also a database -- I think it'scalled MAISY. I think that's still around -- M-A-I-SY -- that does other -- has other either -- I'm pretty sure they received a lot of data from utilities or other sources where they put in information. There's also BOMA for office buildings. I mean, different -- there might be different trade associations, like the National Restaurant Association, there might be some information out there that might be of use to you that kind of addresses some of these issues. But, again, EPRI and Primen might also have other end-use data or end-use metering type of data that might be of use to you -- again, just a comparison. MR. WINIARSKI: As a calibration -- MR. ROSENSTOCK: Yes. MR. WINIARSKI: -- roughly -- MR. ROSENSTOCK: Absolutely. MR. WINIARSKI: -- we're in the right ball park. MR. ROSENSTOCK: Absolutely.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

150 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Thanks, Steve. Final comments on BLAST and CBECS? MR. WINIARSKI: Okay. If there are no more comments, I'll turn this over to Greg Rosenquist. FACILITATOR BROOKMAN: Do you all want to just get up and stretch? MR. ROSENQUIST: Do you want to try to get through this really quickly? (Laughter.) MR. DePRIEST: It won't happen, Greg. MR. ROSENQUIST: Well, Jim said that, you know, the first portion of this is going to be on markup, so because it was presented yesterday it's possible that we could get through it relatively quickly. MR. LEWIS: This is Ron Lewis. I just want to make sure that -- that comment was a good comment. But if there are differentials that need to be considered between yesterday and today, if there are different thoughts, we need to capture those. So I don't want to rush by this with that assumption. FACILITATOR BROOKMAN: Yes. Let's go to lunch. It's 12:35. My watch says 12:31, so -- and the cafeteria closes at 2:00. MR. ROSENSTOCK: Is this room going to beNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 locked or -- FACILITATOR BROOKMAN: This room will be locked. MR. ROSENSTOCK: Okay. FACILITATOR BROOKMAN: And so let's do resume on time at 1:30. Okay? (Whereupon, at 12:32 p.m., the proceedings in the foregoing matter recessed for lunch.) FACILITATOR BROOKMAN: So we're going to resume, and Greg Rosenquist is going to finish off with -- where are you, Greg? MR. ROSENQUIST: I'm going to start off with the markups. FACILITATOR BROOKMAN: The markups. MR. ROSENQUIST: Markups for equipment price determination. FACILITATOR BROOKMAN: And that is slide number? MR. ROSENQUIST: Number 14. FACILITATOR BROOKMAN: Thank you. MR. ROSENQUIST: Of the LLC Analysis Package. So I'm hoping I can get through this relatively quickly, like I said before, but we'll see.

So where I'm picking up is in the LLC Analysis withNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

152 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the markups for equipment price determination analysis, and the purpose is to determine customer prices based upon manufacturer prices. We use markups to transform those manufacturer prices into customer prices, and we do that by characterizing distribution channels. That is how equipment goes from the manufacturer to the customer. And we analyze different market segments, specifically the replacement market and new construction. And for those companies that are involved with the distribution of the equipment, we look at their finances or balance sheets, and we analyze their direct cost, their expenses and their profits to come up with the markups. Our inputs are firm balance sheets for trade associations representing the wholesalers, mechanical contractors, and we use U.S. Census Bureau data for general contractors. And the output are baseline incremental markups, which I'll discuss on the next couple of slides. So this slide shows you the distribution channels. And again, this is the way in which the equipment goes from the manufacturer to the customer.

And in the typical distribution channel where over 80 percent of the equipment is distributed, we have aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

153 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 manufacturer who sells it to a wholesaler, who in turn sells it to a mechanical contractor, and who in turn sells it and its installation to a general contractor, and then who finally sells it to a customer. So at each point in this distribution channel, we develop the markups to again transform that manufacturer price into a customer price. In the other distribution channel, the national account, that's for customers who purchase large amounts of equipment, and who deal directly with the manufacturer, so they can typically negotiate a lower price for the equipment relative to what they could get in the typical distribution channel. This next slide talks about the type of markups that we generate, which are these baseline and incremental markups. And both markups relate how a customer price relates to the cost of goods sold. And the cost of goods sold is how a wholesaler or contractor, what they do for -- how they cover their expenses relative to what they pay for purchasing and handling in the case of a mechanical contractor installing that equipment. It's also commonly referred to as "Direct Equipment Cost." For the baseline markups, they're used to relate the price of the cost prior to a change inNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

154 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 equipment efficiency, so we're looking at how a wholesaler contractor would cover their expenses under the situation prior to the increase in equipment efficiency. All the contractors and wholesalers expenses are covered under the situation plus profit, and we include such things as direct labor costs, which are the executive and sales personnel salaries, payroll and occupancy expenses like rent and utilities. We also include non-direct labor costs, as well, which are like advertising, insurance and depreciation. We have a situation where some portion of that wholesalers or contractors costs don't increase when the cost of goods sold increases. And so for this situation we developed these incremental markups, and again, they relate to incremental change in the customer price to the incremental change in the cost of goods sold. And again, in this situation, what we're looking at is when the cost of goods sold increases, not all of those expenses need to be covered, so we're assuming that direct labor costs that would be covered under the baseline markup are not covered in the situation of the incremental markup.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

155 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 What is included are the non-direct labor costs and the profit, so because fewer expenses are covered in the incremental markup situation, its value is always lower than in the case of the baseline markup. This gives you an example of the type of values that have been generated through our markup analysis for the typical distribution channels and the national accounts. We characterize each one of the markups with a range of values with these probability distributions, and we're also providing the average value here, so you can see the relative magnitude of each markup. Also note that you can see here that the average incremental markup value is lower than the baseline markup value. On the national account I'm just showing the average values there. They're lower than the -- the overall markup that you get in the national account is lower than the overall markup that you get in the distribution channel. And then finally I'm showing in the last table the overall weighted average markups. And this is taking into account the weighted representation of the typical distribution channels in the national account, and you see that the baseline value is 2.31,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and the incremental value is 1.56. FACILITATOR BROOKMAN: Yes, Jim Crawford. MR. CRAWFORD: Let's back up, Greg. I have certain points - I didn't think I was going to have to do this, but I guess my first question is where is manufacturer markup? MR. ROSENQUIST: Yes. This only covers the wholesaler and contractor markup, so these markups I'm talking about here are not covering the manufacturer markup. That was done in the engineering analysis. MR. CRAWFORD: Well, did I see a corresponding table? MR. ROSENQUIST: No. No. It's not provided here. For those stakeholders that were present at the Furnace and Boiler Workshop yesterday, the statement was made that there was no difference in the baseline incremental value for the manufacturer markup. It was identical, so for a change in the manufacturer cost, the same markup was used to get that into a manufacturer price. MR. CRAWFORD: And what is that number? MR. ROSENQUIST: Again, I think it's 1.23, but I'm not entirely sure. FACILITATOR BROOKMAN: Graham.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

157 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. STEVENS: One point two six. FACILITATOR BROOKMAN: Graham Stevens. MR. CRAWFORD: A 1.23 is a markup on COGS for a manufacturer, is a short road to bankruptcy. And I invite you, as I did yesterday, to look at a measure that you're not looking at, apparently, which is return on sales. And there are not very many manufacturers represented here whose total corporate annual report reflects only heating and air conditioning equipment, but there are one or two, and you will see returns on sales that suggest that if you erode the return on sales, which is what you're doing here. You're saying let's reduce return on sales for these various businesses. If you reduce the return on sales for these various businesses, you make them significantly less attractive businesses to be in. That's the first point that I would make. The second point would be to inquire why taxes appear not to be incorporated in the national account. MR. ROSENQUIST: They are. You don't see that level of disaggregation for the national account, but the way that national account markup value was arrived at was it was correlated to what you get out of a distribution channel.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

158 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CRAWFORD: So you're saying then that the markup for -- the total markup on the national account is less than 1.20 on incremental. MR. ROSENQUIST: It's 1.24. MR. CRAWFORD: No, that's including taxes. I'm saying the real markup. MR. ROSENQUIST: Oh, yes. That's correct. MR. CRAWFORD: Okay. So it isn't the 1.23 you talked about before. In this case, it's less than 1.2. MR. ROSENQUIST: Yes. When you take into account the sale taxes, yes. MR. ROSENQUIST: Well, I can't -- if I markup a product, I can't spend those sales taxes. There's a government agency standing there with their hand out waiting for that. That's not money that does me any good. And again, your markups for manufacturers are unrealistically low. And that's probably true of almost any major heavy equipment industry. FACILITATOR BROOKMAN: Additional comments. And, Jim, if it was possible to - and maybe this comes out in the NOPR analysis - to specify what the actual would be, then that would be helpful. MR. CRAWFORD: Well, I'm not going to giveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

159 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you our internal auditing results. I will tell you that if you check what I said yesterday and again today, if you check the annual reports of the major corporations present yesterday and today who are exclusively in heating and air conditioning businesses, you'll find that there are two companies with total return on sales on the order of 2 percent. Now you don't have to do very much monkeying around with markups, and that number becomes negative. FACILITATOR BROOKMAN: Additional questions, comments on this set of slides? Ron Lewis. MR. LEWIS: Jim, one of the things that I was interested in input on as well as the specific numbers, which I wanted you to re-verify in this presentation, but the steps along the way, that these are an accurate portrayal of the flow of the markups after it leaves the manufacturer. Is that an accurate description? Have they captured that? MR. CRAWFORD: I think the flow is right.

Whether the split is right between the three channels, I don't know. I think it's unfortunate that ACCA is not here because the biggest piece of the pie represented on the chart that Greg keeps wanting to move beyond - the biggest piece of the pie there is the ACCA members. I mean, we're not even on thatNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

160 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 chart. And I'm speaking without a great deal of intimate knowledge when I get into the ACCA member arena, but the basic premise of eroding return on sales, that's universal. FACILITATOR BROOKMAN: Okay. Thanks, Jim. MR. ROSENQUIST: The next slide we're going to be talking about the issue that was brought up in the NOPR regarding equipment markups. And we've had some of that discussion here, getting some input on whether or not our approach was a good one. So I guess I'm just reopening it back up to the floor to get any comments on the approach we used to develop the markups, specifically on the expenses needed to be covered in the incremental markup situation. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Jim Crawford. Just one further observation, and that is that what we're talking about relative to these products is moving from the commodity product of today to the premium product of today, and making that premium product, which currently commands a premium markup, and moving that down into the commodity class by moving the standard. So the effect is, you've turned it upside down. I mean, there's a premium markup today on those that's factored into those financial results I wasNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

161 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 talking about. And now you want to reduce that markup by about one-third. It's amazing. FACILITATOR BROOKMAN: Richard, do you want to -- no, okay. MR. ROSENQUIST: Okay. So then on to 19.

So now that we're done with markups, I'm going to get back into sort of the overall LCC analysis. And what you're seeing here is the flow chart showing all the various inputs that go into the calculation of the life cycle cost and the payback period. The first set of inputs here at the top are from the engineering analysis. This is what gives us our manufacturing price versus efficiency curve so we can develop baseline and standard level manufacturer prices. Next are the markups for equipment price determination, and we use those to transform those manufacturer prices into equipment prices to the customer. And then we couple that with the installation cost, which is essentially the labor and materials necessary to install the equipment and the cost to the customer of doing that to get the total installed cost. These bottom set of inputs have to do with the operating expense of the equipment, and the first set of inputs, energy consumption and power demand,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

162 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 come from the energy use and end-use characterization analysis. And again, as you heard earlier, these are developed for the baseline of each of the candidate standard levels. We've coupled that with electricity prices to get our annual energy expense, and then we throw in the repair cost, the maintenance cost to get the annual operating expense. Then use lifetime the discount rate, electricity price trend to get the lifetime operating expenses. When you couple that with the total installed cost, you get the life cycle cost. And the payback period for any given candidate standard level is just the change in the total installed cost divided by the change in the first year's annual operating expense relative to the baseline. Another thing I want to point out, each of these inputs are characterized with probability distributions or a large sample, so that the results we get aren't just a single value for the life cycle cost or payback period, but a distribution of results. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: I'm getting as tired of this as you folks are. We haven't had any discussion of installation costs, and I guess where we are now,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

163 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we're not likely to. You're talking about bigger, heavier equipment which will have some incremental impact on installation cost, increasing those costs. And in the new construction, it may be a modest number, may be. In the retrofit or replacement market, it could be very significant. If I have abigger footprint, and bigger -- I mean, more widelyspaced mounts, et cetera, or appreciably heavier, I'm going to have a major retrofit to do, and I don't believe that's been considered. We don't know what's been considered, what's in front of us. MR. ROSENQUIST: I'm going to get to that in another couple of slides, so I'll answer that question then. So one of the most critical inputs to the life cycle cost analysis, other than the engineering and markups, and the building simulation are the electricity prices. And we've used two approaches in our life cycle cost analysis for doing this; the first one is called the tariff-based approach, and this was the primary approach used to develop electricity prices for the LCC. It's based upon a collection of non-residential electric utility tariffs from the year 2001, and we collected 230 tariffs from 90 different utilities. And we got about a 50 percent coverage of commercial customers in theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

164 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States with that collection. The next approach is the hourly-based approach, and this was the secondary approach used in the life cycle cost analysis for developing prices. It's -- we did this basically because we wanted to try to get after what prices may exist in a deregulated electricity market. And it's based upon the scenario where customers are directly charged for the cost incurred by an electricity provider to supply energy for air conditioning. Both these approaches, the tariff-based and the hourly-based, are used to develop marginal electricity prices. And what we're doing there is we're taking our tariff and hourly cost data, coupling that with the building energy use simulation data which is providing us with the energy consumption and demand to get utility bill savings due to a particular candidate standard. Then we divide that by the electricity savings to calculate the marginal electricity price. And I'll show you in the next slide, but the national average price we get from these two approaches is approximately 10 cents a kilowatt hour for commercial unitary air conditioning. FACILITATOR BROOKMAN: Yes. Don Brundage.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

165 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. BRUNDAGE: Don Brundage. How much validation did you do on the tariff-based approach? MR. ROSENQUIST: We have our own internal process for dong that. We had several people collecting those tariffs, and then people reviewing the tariffs and how we modeled them. All that information is available through a website, so we're looking for input on how we modeled those tariffs from the stakeholders to see if what we did was correct. We believe it is. But we didn't have a peer review process, if that's what you're asking. MR. BRUNDAGE: Well, specifically on your -- I had someone review the Georgia Power Rates that you had in there, and because it failed to include a rate rider of reduction in rate since the last major rate case, it was according to this person about 15 percent higher than actual as of 2001. MR. ROSENQUIST: As of 2001. MR. BRUNDAGE: Yes. MR. ROSENQUIST: I think Katie Coughlin is going to try to address that. MS. COUGHLIN: Yes. I'm Katie Coughlin from Lawrence Berkeley Lab. We did look at that. It was actually about 8 percent on the energy only component, so it was about a 4 percent under-NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

166 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 estimation, and that's been fixed. MR. BRUNDAGE: Okay. Thank you. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. I've made several comments here and there about prices, everyone's favorite topic in here, I believe. But in terms of the hourly-based approach, and again especially even in the -- well, 2001 was kind of a chaotic year, especially in California. I don't know how heavily of those 90 utilities, how many were in the west, but especially in 2001, the summer prices due to low hydro and a whole bunch of other reasons were particularly a lot higher than they have been since then, so that might have pushed up some of those numbers, especially out west. Secondly, for those customers in deregulated market, yes, hourly prices exist, especially on the wholesale market, but as I've suggested before, especially in deregulated markets, there is a large discrepancy between the availability of wholesale hourly prices and the actual number of customers that are actually using them, and the number of suppliers that are offering them. In many cases, the suppliers will offer for electricity and others,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

167 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and even natural gas, they will tend to offer flat prices for the supply/commodity portion of the bills, so even with the wild variations in the hourly prices on the energy side, retail customers, commercial and industrial customers aren't seeing them. And I suggested this before - if you could survey those customers, commercial and industrial customers in deregulated markets that have received competitive supply, it would give you an idea in terms of the retail prices, what they're actually seeing in the marketplace. And especially in terms of blending the energy demand, th at's a whole other issue. I'll wait for at least one or two more slides to give people a break. FACILITATOR BROOKMAN: Okay. You want to respond, Greg? MR. ROSENQUIST: I was going to try to respond to that. I mean, the tariff is what we try -- is primarily used to try to capture what the customer is currently seeing in terms of what they're providing for electricity. The hourly cost analysis is -- the big trick there is taking these hourly wholesale costs and transforming them into a pricing by the customer, so in a sense this is what we're trying to get after, what might occur under a de-regulated situation aroundNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

168 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the whole country, so by no means are we trying to claim that this is the situation that customers are currently facing. The hourly cost situation, again, is sort of a construct. FACILITATOR BROOKMAN: Don, do you want in here? MR. BRUNDAGE: Yes. I have attempted in deregulated markets to try to look at costs, and it's a difficult task. And you will usually end up, because money is now going to multiple pockets instead of just to the utility, it is very easy to leave components out and under-estimate costs on this between all the different parties who receive money out a transaction, so I could sympathize that it's a difficult task, and just be careful with it. FACILITATOR BROOKMAN: Charlie, did you -- MR. STEPHENS: Charlie Stephens. Yes, I think in some markets, and I know our's is this way, a lot of what you saw in 2001 is not radically different than what you're going to see today in terms of rates that customers face. Much of the volatility that Steve referred to, which was true, was deferred. The impacts of that on rates was deferred, and we're just now this fall starting to see the corrections that resulted from a lot of the deferrals, plus and minus,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

169 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that have taken place since 2001. The result has been very small increases in rates, very small, on the order of 1 to 2 percent, which is the ultimate change that occurred over about 3 years from the deferral in utility accounts. And so we're not seeing decreases in rates, but we're not seeing radical increases in rates right now either. Whether or not that will remain the case as we look at the price of natural gas steadily rising in the future remains to be seen, because we do anticipate long-term rises in natural gas pricing; which, depending on where you live, will have varying impacts on your rates. FACILITATOR BROOKMAN: Okay. Let me know, Greg. You predicted we'd get through this quickly. MR. ROSENQUIST: Looks like I was maybe wrong. This table here shows you the type of marginal prices that we calculated from the two approaches, the tariff-based and the hourly-based, by region. And you have the handout so you can see the wide variance as you go from region to region in that marginal price, and within a particular region there's also this variation between the two approaches. Another thing I want to point out, that a big component of that marginal price are the demandNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

170 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 charges. Where in the case of the hourly percent capacity, that translates into these basically demand charges for the customer. Both approaches, though, when you take the weighted average value, come out about the same value, which is around 10 cents a kilowatt hour. FACILITATOR BROOKMAN: Comments. Yes, Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. Again for clarification, using this approach, and again when you did the run in terms of the energy savings - and I'll say in particular energy cost savings - and I'll just start with the tariff-based marginal price, for example. In New England, when you said the higher efficiency unit that you simulated saved - just to make it easy - one kilowatt hour, you assigned a value of 9.5 cents to that savings, and then used that in the economic analysis. Is that -- MR. ROSENQUIST: Yes. In simple terms on a weighted average basis, yes. MR. ROSENSTOCK: Okay. The reason - and again, I tried to -- when you blend energy charges and demand charges, you tend to miss something because especially for when I said yesterday or earlier today about diversity factors and coincidence of multipleNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

171 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 compressors and multiple package units in the same building, you can put in high efficiency compressors, but there is a diversity such that you might think you're going to get - I'll say 20 kilowatt demand savings, but because of the building dynamics and the way the compressors are going to be cycling on and off, your actual demand savings are going to be a percentage of that. And California utilities, in particular, have done what they call coincidence diversity factor savings to try to account for that issue in terms of in theory you might save 10 kilowatts, but because of coincidence diversity factors you might be saving 70 percent of that value just because of operating conditions, and just end-use metering, end-use studies, and diversity of multiple compressors. So that when you blend it and you say 9- 1/2 cents, I hesitate just because of some of the studies that I've seen in just retrofit situations where on the demand side, you're not getting 100 percent of the savings like you thought would because of all the other factors involved. On the energy side, it's a different story. MR. ROSENQUIST: Right. Let me try to reply to that. That information, the demand peak savings and the energy reductions are coming from theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

172 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 building simulation analysis, so in terms of these diversity factors you're talking about, they would have to be applied to that data before it gets processed into our utility bill calculations. MR. ROSENSTOCK: And is there any factor like that being taken into account? MR. ROSENQUIST: Go ahead. I'll let Dave Winiarski try to answer that. MR. WINIARSKI: There's no direct factor taking that into account. The process was that each of the buildings has a number of different zones. There's a piece of equipment serving each thermal zone, and the loads on that equipment are really what's determining the peaks. It's the aggregate loads on each of those equipment when they're happening, on the east, on the west side of the building, whichever, that's determining that peak load. There's no additional diversity factor. And I'm a little confused about where the diversity factor that you're talking about, what it's being based off of. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. In California utilities, it was being done as studies as part of DSM programs that says we've done end-use metering, we've done end-useNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

173 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 analysis. If you have 10 compressors on a building, 10 compressors and package units on a building, if you retrofit all those compressors without doing anything else, if you're just focusing on the air conditioning, what kind of impact, what kind of actual demand impacts are you seeing on that actual building load shape base, and you say well, in theory because of the EER calculations, you should get 2kw per compressor, 20kw in reality because one is on the east side, one is on the west side. The morning loads are higher than the afternoon loads; therefore, the first package unit works less in the afternoon than the second one, but the building peaks, the peak demand as it's calculated is in the afternoon. Therefore, on your bill, you're only getting 16 kilowatts of demand reduction on the bill, bill savings on your bill rather than the 20 kilowatts. And I know that was kind of simplified. MR. WINIARSKI: Versus the original estimate of 20 kilowatts, depending -- MR. ROSENSTOCK: Right. First there's a theoretical estimate based on just the EERs, and the kW before, kW afterwards, kW per ton. And then there's some of the, I'll say the building end-use metering, building analysis that says okay, because ofNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

174 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 all of these different conditions, and it varies building by building, climate zone by climate zone, this is what you actually get because of real-life situations. FACILITATOR BROOKMAN: Who should respond next, or who should -- should it be Jim McMahon? MR. McMAHON: Yes, let me respond. Jim McMahon, Lawrence Berkeley Lab. Steve, you've raised an important issue, and I think part of it is covered, as Dave indicated, for a particular building, we're simulating a building with a set of equipment before standards, and then the same building with a set of equipment after standards. And because it's zoned, not all the equipment is on all the time, so I think you've characterized it as if we take one piece of equipment and calculate the watt savings, and multiplythat times the whole population, we're going to overestimate the savings. And the truth is, that's not what we've done. We've taken a set of units at a building before standards and after standards, so the diversity within the building is captured. Now I think to be fair, there may be an additional diversity factor. I'm not sure whether there is or not, when we take a population of buildings, and that's something that maybe we shouldNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

175 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 consider. FACILITATOR BROOKMAN: Charlie and Harry, both. And do you wish to speak? He was in the queue first. And please, your name for the record. MR. TURNBULL: Yes. Peter Turnbull ofPacific Gas and Electric. Sorry if this is anticlimatic, but you have -- the last line for California you have under tariff-based 18.5, hourly-based 8.5? Okay. But that's what you concluded. MR. ROSENQUIST: Yes. From looking at the data, that's what we did. You have to remember for the -- I'm assuming you're raising your eyebrows about the hourly cost number? MR. TURNBULL: Right. MR. ROSENQUIST: Yes. And what we're doing again is taking that -- I'm sorry. I'll let Katie Coughlin answer that. MS. COUGHLIN: This is Katie Coughlin, LBL. The data for the hourly analysis was taken from 1999 and 2000. And in particular, for California we used the 1999 market data, so for that year the markets were fairly well behaved, and there were no wholesale price spikes. So that's why -- the hourly analysis is, to a certain extent, testing out the hypothesis that if you tried to bill people for theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

176 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 direct cost of running air conditioning, you would see a very different answer than if you used the tariffs that are currently in place in most utilities. So we did that analysis knowing that -- we're doing something very hypothetical, but we wanted to do a draft analysis and try to address that question. FACILITATOR BROOKMAN: Charlie, and then Harry. MR. STEPHENS: Charlie Stephens. The only thing that I don't know whether anybody is capturing here is that the demand rates that a building would pay are based on a ratchet, where in many cases it's the highest 15-minute demand period in a 30-day period. And that sets the demand charge, and it's much less likely that you will never see all of the compressors on the building running at the same time during any 15-minute period in a 30-day period, then the diversity factor -- than you would if you looked at any given 15-minute period. Somewhere during the month, you may have all of those things setting your demand charge for a 30-day period, and you can have all the diversity you want, but if even one 15-minute interval during the course of 30-days, all of them are running, that is your demand charge for the month in most of these tariffs.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

177 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Thank you. Harry. MR. MISURIELLO: Yes. Harry Misuriello. These phenomena dealing with diversity factors are real things, but in the model they're accounted for. Not only do you have an installed capacity for equipment, but you also have it for lights and all the other equipment in the building. And that installed capacity is scheduled every hour of the day according to an equipment profile that's been developed from end-use load data and fed in through the ASHRAE standard-setting process and so forth, so I believe that all that diversity that's being discussed has been captured in the model through the techniques of using the schedules appropriately. So it is a real phenomena, but I believe it's been addressed in the engineering analysis in the correct manner. FACILITATOR BROOKMAN: Okay. Jim Mullen, and I'll come back to you, Steve. MR. MULLEN: Yes. Two questions, or one comment and then a second comment, I guess. FACILITATOR BROOKMAN: Yes. MR. MULLEN: The first one is, I'm not sure how well it is addressed in the model because the model doesn't simulate the equipment. FACILITATOR BROOKMAN: I can't tell howNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

178 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 big this is as a factor compared to other factors. That's the question that -- MR. MULLEN: Somebody just needs to model it right and we'll find out. That's the first one. The one though is, there's a diversity that's not just because of building load, it's because of energy management systems on buildings. And I don't believe that's been accounted for in this study at all. A lot of equipment today goes on an energy management system on a building which is their way of limiting peak demand, which it's far beyond me how it all impacts this, but I'm sure it lessens the peak, and probably lessens some of these power rates. Mr. Martin's compatriots at the California Energy Commission in the Demand Response Section just put on their website an ICF Consulting Report dated June 10 th , 2004, which I think is quite interesting. They looked at 1,037 sites which represented 17 projects, which had a total load of 64 plus kilowatts. These are typical stores for this type of application, like Auto Zone, Block Buster, Dollar Tree, Linen & Things, et cetera. In 96 percent of those sites, they did something to cut off the HVAC to limit peak demand, and lighting was the other thing. And essentially, they realized a 40 percent reductionNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

179 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in demand. FACILITATOR BROOKMAN: Charlie, do you want to follow on? MR. STEPHENS: Yes. Charlie Stephens. I'd like to follow that up a little bit. Again, I agree with that, and I think we're starting to see more of that happening in the marketplace. But then again, I think what we're trying to get at here in this rulemaking is let's presume we have units on the roof being controlled by such a system that are built to today's standards, and then we'll go forward in another scenario where they're built to tomorrow's standards, 2010 standards. And I think you'll find that the increment doesn't change nearly as much as the absolute levels of all these things. I mean, you'd have to assume something different about that energy management system after standards than before in order to come out with a significant change in the incremental demand that's due to the equipment EER, I think. FACILITATOR BROOKMAN: Go ahead, follow on, then I'll come back to Steve. MR. MULLEN: Again, I totally don't understand the impact, but somebody needs to sit down and figure it out, because if the unit was off, itNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

180 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 doesn't make any difference whether it's an 8 EER or a 14 EER, the power draw is the same. The other thing is that the cost per ton to do this, or cost per kilowatt hour saved is $240 with an energy management system, as opposed to about six or seven hundred dollars going from a 10 to an 11 or 12 EER unit. And for these 1,037 sites or whatever it is, it's equivalent to changing the EER in about 16,000 10-ton units. FACILITATOR BROOKMAN: So that was Jim Mullen speaking. Don, you're next, and then back to Steve. MR. BRUNDAGE: I don't think these issues are really that important in the modeling, as long as you model it correctly, which is the same assumptions on things like load control, diversity factors, et cetera in the base case and in the post standards case. Okay. Say you've got -- you're modeling eight compressors in a building and they actually have 10, only 8 of them are running, you're still only modeling 8 of them that are running. And it gets somewhat speculative on some of the demand control stuff because that changes from year to year how much of it's in place, and et cetera. I think this may not beNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

181 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 an area of the study we need to spend this much time

on. FACILITATOR BROOKMAN: Yes. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. As a follow-on, if large percentage of the buildings do have energy management systems with demand controls, if we're looking at the demand portion of a bill and say that the building did have a demand of 100 kilowatts, and with the demand controls on the compressors it's down to 95 kilowatts, it can make a difference in terms of how many compressors you replace in terms of will you see the demand savings, or does the system -- have you already gotten the savings from the energy management system. So just in terms of modeling, there is -- I didn't really think about it. I should have thought about that factor before, but in terms of you get a high efficiency compressor, you still might not get any demand savings, so again, it comes back into the blended part of this. FACILITATOR BROOKMAN: Okay. Thank you. Who's going to respond here? Peter. MR. TURNBULL: Peter Turnbull, PGE. A slight counterpoint to that is, of course, when you doNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

182 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 demand control, you're not delivering the same amount of air conditioning to the building either, so that's -- the price thing needs to be looked at, but apples and apples would suggest you have the same amount of air conditioning to look at. FACILITATOR BROOKMAN: Okay. Ron Lewis. MR. LEWIS: Jim, the report that you were just looking at, that was for the State of California, but I wasn't sure whether the message that you were sending was because of the national accounts, whether that's typical across the nation, even though it was just California. Was that what you were -- by using the -- MR. MULLEN: Good point, Ron. The report simply was from California, and I suppose most of these stores were in California. But from Lennox' perspective, we see a lot of national accounts, to your point, adding energy management systems or putting those units on energy management systems. Jill or Jim, or somebody can comment on their business, but as you try and project forward in time, I think from where we're at today to where we were a couple of years ago, there's been a substantial increase in the use of energy management systems, and there will be in 2010 or whenever this rule takesNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

183 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 place. But the other point is to Mr. Turnbull's point, that when these things are off at peak, it also reduces the energy consumption, not just the peak demand, so the actual BTUs or kilowatts that the building took over time has probably gone down. FACILITATOR BROOKMAN: Steve, you want to follow on? MR. ROSENSTOCK: Just a quick follow on. I work with National Council as one of my roles in EEI, and basically, if there's a high percentage of them with energy management systems in California, there's going to be an equally high percentage across the country. They tend to standardize their control systems throughout the United States, so again percentages as compared to the total population, another thing to look at. FACILITATOR BROOKMAN: I'm getting mindful we're spending a tremendous amount of time on this, and there's a lot of additional content to cover. Jim Crawford. MR. CRAWFORD: Jim Crawford. Since the recorder can't see nodding heads, I just wanted to say that Tarne concurs with what Lennox and EEI are saying.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

184 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Thank you. I noticed that there were several manufacturers that seemed to be nodding their heads in agreement with at least some of this. Francine Pinto. MS. PINTO: Francine Pinto, Office of General Counsel. The question I'm left with listening to all this technical discussion which I basically don't understand is, are there specific suggestions that you can give in your written comments of how you would tweak the model to make it better. We've heard all these concerns. I would be wanting to know well, okay, what do we do differently? FACILITATOR BROOKMAN: Yes. And in your written comments, not necessarily in detail now. Harry. MR. MISURIELLO: Yes. Harry Misuriello. The larger question might be policy-related. Would you back off the level of the standard because of the presence of controls or energy management systems in facilities. And I think the answer to that is probably no, you wouldn't. So that's where I think some of this discussion could be leading, what kind of choice are you going to make about the standards level? Do you take into account the fact that some buildings have energy management systems in them as aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

185 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 reason for backing off the standards level. And I would say from a policy standpoint that's a dead end. FACILITATOR BROOKMAN: I saw Charlie first. Do you wish to speak? MR. STEPHENS: This is Charlie Stephens. As Peter suggested, when you do energy management controls on kW per ton essentially on a building, you are delivering less cooling when you do that. And typically you're letting temperature in the building float a little bit during a period where you're trying to save money. And I find it ironic that the biggest incentive you have to do that comes when you don't change the standard and you run inefficient equipment, which gives you the most kW to knock off line with an energy management control system; whereas, if you improve the efficiency of the equipment, perhaps you don't have quite as much -- in other words, you might not let the temperature float to 84. You might let it float to 82 if you're pricing is such -- you don't have that much demand on line. You're not saving that much money if you have more efficient equipment. Now I don't know how those are going to play out, but I can tell you we expect that most systems by 2010, which is an enormous distance away from now, will be delivered with the capability. AndNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

186 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 most people when offered the capability will use it to some degree, but you're still talking Delta kW here on the equipment or EMS, and the combined effect might be quite cost effective. FACILITATOR BROOKMAN: Richard Lord. MR. LORD: This is Richard Lord. One thing you might not have thought of is the typical person that's putting in an energy management system is the high tier customer. He's already buying a unit that's well above Energy Star limits, so the changes that we make in the standard aren't going to impact him anyway because he's already well above it, because those guys do energy analysis themselves. FACILITATOR BROOKMAN: Steve. I hope we can finish this off and move on here. MR. ROSENSTOCK: Steve Rosenstock, EEI. Really in terms of policy, I wasn't really addressing policy at all. It was just a matter of for the life cycle cost analysis, for the demand portion of that bill, I was just -- we were all, I think, just putting some -- trying to give information that says here's how to improve the analysis. FACILITATOR BROOKMAN: Great. Thank you. Okay. So now let's do move on. Greg. MR. ROSENQUIST: Okay. When we get to INEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

187 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 won't say our first issue, the first issue identified in the ANOPR as it pertains to the marginal price analysis. As we've been discussing, and we were talking about these electrical loads, and we're getting these from the building simulation analysis and coupling them with our tariff-based and hourly cost data to come up with customer utility bills. What we haven't done is we haven't included light industrial buildings into this analysis, and by not doing so we've implicitly assumed that those light industrial buildings have the same loads, can see the same electricity prices as the commercial buildings. So what we're seeking comment on here is whether these light industrial buildings, first of all, have substantially different loads than commercial buildings. And if they do, whether there's enough of these unitary AC shipments going to these type of buildings to warrant their inclusion into the analysis. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. In terms of shipment, I will defer to the experts at ARI in terms of where the shipments are going, the packaged units are going. In terms of electric rates, when you sayNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

188 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 light industrial buildings, I think we need a little bit more definition, because even a light industrial building might have a load of over 1,000 kilowatts because they can range anywhere from under, I'll say 500 kilowatts to over 20 megawatts, depending on the industrial facility, so it really depends. Do they have different electric loads? Absolutely. Industrial facilities have different process loads, always more motors, usually tend to have flatter loads, not the camel-hump like a lot of commercial buildings, office buildings. So yes, different electric loads and different electric prices, because some of them are going two or three shifts using more energy during the off-peak period. If you look at the EIA data, just industrial customers as a class compared to residential and commercial industrial customers, and that's combined energy and demand, always have the lowest rates. It might show -- well, EIA data might show about typical rates of about 7.8 cents per kilowatt hour for commercial customers. For industrials I didn't bring it with me. It's down in the 5 cent range, a big substantial difference. FACILITATOR BROOKMAN: Karim, do you want to follow up?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

189 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. AMRANE: Karim Amrane with ARI. I just want to refer DOE to the peer review report again. I mean that clearly shows that the impact will be significant, so I would like to urge DOE to read the report and to address this issue. FACILITATOR BROOKMAN: Okay. Thank you. Yes, Charlie Stephens. MR. STEPHENS: Charlie Stephens, quick question. When you say there's insufficient data, does that mean that you can't characterize, or you can't separate out the light industrial facilities that have commercial rooftop equipment, and therefore, understand what they are? Or once you've done that, you don't have any kind of energy use data? MR. ROSENQUIST: Both. I mean we don't know how many unitary air conditioners are going to these type of buildings. That's one. And two is that we don't have a survey like CBECS. There's MECS but it doesn't try to characterize these facilities at all, so basically don't know how to simulate them. I mean, they could be, so we don't have a good idea of what the electrical loads are in these type of buildings either, so that's why we're looking for data. FACILITATOR BROOKMAN: Dave Winiarski.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

190 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. WINIARSKI: Yes, I was going to say just as a follow on that this is one area where a large sample of metered data from an industrial or light industrial customers as best we can identify them would be very useful. FACILITATOR BROOKMAN: Okay. So please, Peter. MR. TURNBULL: Yes. Peter Turnbull, PacifIC Gas and Electric. By and large our light industrials, so to speak, are on the same rates as commercial customers. They aren't really differentiated by end-use. They're differentiated by amount of load. So if they have an air conditioner, the air conditioner responds to how hot it is. So marginally, it would seem to me, to be consistent with the commercial. FACILITATOR BROOKMAN: So your experience and your definition of light industrial differs from what Steve was saying. MR. TURNBULL: Our rates would be not differentiated by whether or not the use is industrial. FACILITATOR BROOKMAN: Right. MR. TURNBULL: It's the load, how big is the load.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

191 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENQUIST: To clarify that, the tariffs that we've collected are either residential or non-residential. They're not commercial and industrial. FACILITATOR BROOKMAN: Is that they way, Steve, your's are broken out? Are they by load or are they by usage? MR. ROSENSTOCK: For many utilities in the United States they will specifically have commercial versus industrial loads. I know in California's case that commercial and industrial are based by peak demand, up to 500 kW or 500 kW and above. But most utilities in the United States - again they might have some sort of breakout industrial load below or above a certain kW level, like 1,000 kW, but they specifically have industrial tariffs, whether light, medium, or heavy industrial. They will specify that as an industrial tariff versus a commercial tariff. FACILITATOR BROOKMAN: Okay. Dave Winiarski. MR. WINIARSKI: Just one other comment, which is that a part of the kind of built-in or implicit assumption here is that if you have an office building that is being served by unitary equipment that's on an industrial site, that it's going to haveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

192 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 a load profile similar to that of an office building in another location. One of the things that's difficult is what to do if you have a piece of unitary equipment that's actually going on the industrial portion of the industrial facility. FACILITATOR BROOKMAN: Okay. We need to keep the pace up here, folks. Jim Crawford. MR. CRAWFORD: Jim Crawford. Just a short observation, and that is that if you're going very far down this path, you need to specify a lot more clearly what you mean by light industrial. It's quite logical and many people would call our plant light industry by the nature of what goes on in the building. We've got over 1 million square feet under roof, a couple of thousand people working in that plant, and one heck of a lot of machinery. We have our own substation. We've very much on an industrial rate. It doesn't look like any of the numbers I've seen here today. FACILITATOR BROOKMAN: Okay. Let's move on to hourly-based electricity prices, slide 23. MR. ROSENQUIST: Yes. This is the next issue identified in the ANOPR for the marginal price analysis. And this again speaks to the hourly-based analysis. And again, I want to point out this was our secondary approach, not our primary approach forNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

193 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 characterizing electricity prices. We collected an extensive amount of data to do this from de-regulated regions of the country. We collected wholesale cost data, and from regulated regions we got the hourly system lambda data to do this. The big part - well, not the big part but one part of this analysis to come up with a customer price is to transform that hourly cost into a customer price, and utilities have ways to do this. They have these price models to do this. The one that we used was based on avoided cost methodologies traditionally used by utilities to characterize demand reduction programs. So what we're looking for input here on is any other price models that may exist for transforming these hourly wholesale costs, if you want to call them that, into customer prices. And the second point is we're looking for comment on whether or not the secondary approach should be pursued still. FACILITATOR BROOKMAN: Are you doing this now? MR. ROSENQUIST: Yes. FACILITATOR BROOKMAN: You are. Okay. So Steve -- Don Brundage and then Steve. MR. BRUNDAGE: I have a little concernNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

194 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 about doing this because what you're basically looking at is the equivalent of a very short-term spot market price, and it can very much get distorted with how much -- whether a market is capacity short. I don'tknow that it's a reasonable basis for setting longterm equipment standards. Maybe if you had a long track record of these prices you could average over a number of years, but I would feel more comfortable with keeping the tariff-based approach as being your primary approach here. MR. ROSENQUIST: Yes. Just one point of clarification on the load data. We collected that for a specific year, but that was then, normalized with TMY data, typical meteorological year data. So we basically tempered out the effects of weather on that load data. MR. BRUNDAGE: Weather is not the biggest factor in spot prices. You have a huge difference in spot prices where the reserves are 5 percent or 10 percent. FACILITATOR BROOKMAN: Okay. Thank you. So specific comments on whether DOE should do this in their modeling and any sources of data. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EdisonNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

195 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Electric Institute. To follow on what Don Brundage was saying - again, if you can do customer surveys in

de-regulated markets - I don't know if there's any time, but that might be one approach to take in terms of seeing what actually the customers are paying for the supply. And again, in terms of avoided cost methodologies traditionally used, just as a background, a lot of that avoided cost methodology that was used by utilities for DSM programs was the avoided cost of generation. That was the primary - in fact, usually that was the only component that policymakers and utilities were looking at for the DSM programs. Now in deregulated states you have electric distribution companies that have sold off all their generation, so their avoided cost of generation is zero because they are not responsible for the generation. So if you really want to do avoided cost methodology for New England where most of the utilities have sold off their generation, the avoided cost is zero. So just another comment. FACILITATOR BROOKMAN: Okay. Final comments on this one. Other inputs. MR. ROSENQUIST: Yes. What this slide shows here are all the other inputs necessary forNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

196 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 calculating the life cycle cost in the payback period. The first one is the installation cost, and this is the cost of the labor and materials needed to install the piece of equipment, and the price paid by the customer for that. We used R.S. Means data to come up with typical baseline installation cost for 7-1/2 ton and 15 ton units. We assumed that these costs varied in direct proportion to the equipment weight, so because the equipment varies with efficiency, that's what we found, we have our installation cost varying with efficiency, as well. On the electricity price forecast we get those from the Annual Energy Outlook. We used the 2003 version for the ANOPR analysis. What we're using these for is to get a forecast of future electricity prices. We get our tariff-based and hourly-based marginal price in 2001, and we used the AEO to get that projected price out into the future. Discount rates are used to get the present value of future operating expenses, and these are derived from estimates of the cost capital to companies that purchase unitary AC. This cost of capital is calculated from the weighted average cost of capital to the firm to obtain equity in debt financing. And we looked at a sample of 7,300 companies in order toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

197 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 do this. And the weighted average value we got was 6.1 percent real. The next input is the equipment lifetime, and here we use the ASHRAE handbook to get a 15-year median lifetime. And we constructed a survival function by using a Weibull probability distribution.

Repair costs are the costs to repair or replace components that have failed in the equipment. And we developed annual repair costs of $158 for 7-1/2 ton units, and $291 for 15 ton units. And here again, we assume an increase in direct proportion to the equipment manufacture price. And because the manufacture price increases with efficiency, we assume that the repair cost did, as well. Finally, we have the maintenance costs, and these are used to maintain the operation of the equipment. These are different than the repair costs.

And again we used R.S. Means data to do this. The R.S. Means said the maintenance costs don't differ based upon a capacity for this 3-24 ton capacity range. We came up with an annual cost of $200, and we assumed that it did not change with efficiency. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Jim Crawford. Relative to the equipment and lifetime, to say you use WeibullNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

198 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 probability distribution is almost meaningless. I mean, that's a whole family of distributions that can have any shape you want depending upon what parameters you pick. Therefore, I would ask what parameters did you pick? MR. ROSENQUIST: Yes. What I didn't say is that we used the same shape of the retirement function that we came up with for residential heat pumps. That was constructed for that residential rulemaking. MR. CRAWFORD: That being the case, that is demonstrably inappropriate, incorrect, inconsistent with all reliability theory, inconsistent with experience because it shows this stuff basically has no failures until you get out to about 12 or 15 years, and then crashes. And that just simply is not what happens, and it's a misuse of the Weibull distribution or anything else. Next question, unless you want to comment further on that. FACILITATOR BROOKMAN: Any other comments. Are these other inputs? MR. CRAWFORD: I'm on -- FACILITATOR BROOKMAN: You're going to keep going on the other inputs? MR. CRAWFORD: Sure. Yes.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

199 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Steve, please. Proceed. MR. ROSENQUIST: Well, all I can say is that we just used the only data that we had available to come up with that shape, and so that's why we used it. MR. CRAWFORD: Well, I would suggest to you that in the residential area, that the U.S. Census Bureau has data that you could have used that would have been far closer to what actually is correct. And I wouldn't be surprised that if you went into the Census Bureau data on commercial buildings, you might find equivalent information on the population versus age of equipment from which you can derive a pretty reasonable estimate of what the modality curve looks like. FACILITATOR BROOKMAN: Don, follow-on. MR. BRUNDAGE: If he's finished, it's a slightly different subject along the same lines. One thing that's different with commercial than residential is you have non-failure obsolescence with commercial being much more common. You have commercial properties being redeveloped. You have equipment being scrapped before the end of its useful life because the property is redeveloped. SomeNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 attempt to include that factor where equipment is not used to the end of its useful life would be useful for commercial, because I suspect that it's much more common to have a building torn down after 5 or 10 years and something else put there, than would be in residential. MR. CRAWFORD: Doug. FACILITATOR BROOKMAN: Yes. Go ahead. MR. CRAWFORD: I'm back now for the last point on that chart, the maintenance costs. And it says that the maintenance costs are proportional to the equipment cost - I think that's what it says. To the degree that the incremental technology applied involves things like EHD, which was mentioned earlier, but said well, we didn't really do that. Electronically commutated motors, other high tech, particularly electronic techniques - I would suggest that the cost of maintenance probably goes up to somewhere between the third and the fifth power of the incremental cost. You're dealing with a service base that doesn't like anything more complex than the relay and

a contactor, and what happens is micro electronic costs, service costs are very, very expensive. As anybody knows who's got an automobile that had toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

201 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 replace the computer on your engine, same phenomenon. FACILITATOR BROOKMAN: Thank you. Other comments on other inputs? Tom Eckman. MR. ECKMAN: One of the hazards of being involved in all three rulemakings is you look for consistency between them, and in the transformer rulemaking you were using 7.46 percent for the discount rate for commercial customers, and in this one it looks like you're using 6.1 for basically I think the same cadre of folks. MR. ROSENQUIST: My initial reply would be that was a different sample of customers, because there are different customers for commercial unitary AC as there are for transformers, but I see one of my colleagues in the back of the room who's involved with the transformer analysis, and I'll let him try to answer that question. MR. ECKMAN: I would think that most of these buildings may have a different mix of transformers, but they probably all have transformers given this equipment. MR. ROSENQUIST: This is Robert Van Buskirk. MR. Van BUSKIRK: Where did you get the mix of owners for the commercial AC? We got a mix ofNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

202 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 owners for all buildings based on CBECS data, and then used that sort of set of categories of owners to come up with the weighted cost, to come up with the discount rate for transformers. If you had a weighting depending upon whether they had package AC, then that weighting would be a different subset of the CBECS data than for the transformers case. FACILITATOR BROOKMAN: Yes, Jim. MR. ECKMAN: I'm agnostic as to which one it is. MR. ROSENQUIST: You're just looking for consistency, and the answer I want to give you is that a different weighting was used because of the different customers. FACILITATOR BROOKMAN: Okay. Jim Crawford. MR. CRAWFORD: Jim Crawford again. Picking up on Tom's point, I would suspect that the discount -- that the interest rates paid by those people who buy power transformers are lower than the interest rates paid by those people who own commercial space, which has 7-1/2 and 15 ton units on average. And so the difference that he has cited suggests well, maybe they shouldn't be the same. But the one for this ruling should be higher than the 7.4 percent toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

203 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 use in the transformer rulemaking. FACILITATOR BROOKMAN: Thank you. Yes, please, Robert. MR. VAN BUSKIRK: A point of clarification - the discount rate that Tom was referring to was for the purchasers of dry-type transformers. For the transformer rule in general, the discount rate for the liquid-immersed transformer purchasers is 4 point something percent. FACILITATOR BROOKMAN: Okay. Thanks for the clarification. Are we done with this one? Other inputs? No, a few more. Richard Lord. MR. LORD: Yes, just one comment. In there I didn't see anything in terms of other inputs and regards to the engineering and capital cost to develop new products. Where does that get factored in? MR. ROSENQUIST: I'm assuming that gets accounted for in the engineering analysis when you come up with the manufacturer price. MR. LORD: It would be incremental to what we're doing now. MS. HOOTMAN: Right. It wasn't considered. FACILITATOR BROOKMAN: Mike Rivest. ComeNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

204 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on up here. MR. RIVEST: I'm sorry. Could you repeat? You wanted to know specifically -- MR. LORD: Yes. My question is to meet these requirements would require incremental engineering, incremental capital. MR. RIVEST: Right. MR. LORD: Where does that cost get into the calculation on payback? MR. RIVEST: Right now it's incorporated in two places; in the engineering analysis we put in values based on the cost modeling. And also in the GRIM analysis we put the same numbers in the cash flow GRIM and we'll be reviewing those with you when we do the MIA. FACILITATOR BROOKMAN: Okay. Any more comments on inputs? Jim Crawford. MR. CRAWFORD: The more I hear, the less comfortable I feel, because one of the earlier charts that Jill was flipping back for, and I'm not going to dig it out right now, indicated that the cost for these various levels of this distribution chain starting with the manufacturer kind of remain constant

for office staff as the level of the efficiency increases, and this is getting very much at the heartNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

205 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the point just being raised. And so in one place we're saying the costs are constant, and then we're being told well, they'll be accounted for later. Well, zero now or zero later is still going to be the same, and it's wrong in both cases. FACILITATOR BROOKMAN: Okay. Then we're done with inputs at this point. On to forecasts of electricity prices, one of my favorite topics. MR. ROSENQUIST: Okay. I have a momentary glitch there. This is the next issue identified in the ANOPR again pertaining to the life cycle cost analysis and forecasts of electricity prices. I just want to reiterate for the ANOPR analysis we used the 2003 Annual Energy Outlook to get our future electricity prices, and we plan to use the most recent AEO for our analyses for the NOPR, so the Department is looking for comments on whether there's any other credible price forecast that could be used for NOPR analyses. FACILITATOR BROOKMAN: Did we hear about one yesterday? Charlie Stephens. MR. STEPHENS: Charlie Stephens. I have just a quick question. The most recent, do you know what that means in the case of this rulemaking and the schedule that it's on, and when you're going to have aNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

206 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 new one? MR. ROSENQUIST: I'm not going to answer that question. I'm joking though. I mean, it's up to DOE to decide its schedule, what time the analysis are done, and what AEOs are available at the time. MR. STEPHENS: So you don't have any forecast of when the next AEO forecast is actually going to become available, and how it relates to the -

- MR. ROSENQUIST: There is a hard copy published in either December or January, December of 2004/January of 2005 for the AEO 2005. MR. STEPHENS: Okay. So you could conceivably use that for your analysis here. MR. ROSENQUIST: Yes. MR. STEPHENS: Okay. FACILITATOR BROOKMAN: Any other credible sources? That's the question on the table that people would refer to or refer the Department of Energy to. I see none. Okay. Additional comments on this block? We're moving onto equipment lifetime, ANOPR Issue 11. MR. ROSENQUIST: Yes. We've already gotten some comments on this one on lifetime. Again, using that 15 year median life and creating a survival function using a Weibull probability distribution, soNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

207 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 if there's any additional comments that people have on the lifetime, I'd like to hear them. FACILITATOR BROOKMAN: Steve. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. To follow up what Don Brundage was saying earlier, there might be some Department of Commerce statistics or U.S. Census Bureau about small businesses and survival rates of small businesses, because I can't remember the statistic, but for many small businesses, and I'll just say restaurants because restaurants typically have package units, is that less than 50 percent of restaurants survive more than three years, so that's going to have a huge impact. It might be a brand new restaurant with a brand new package unit, but in three years that package unit might just be sitting there, or replaced or removed. There might be other instances where the equipment will obviously last a good 15, 20 years, but whether it's in use for 15 or 20 years, especially in terms of the economic analysis that's a different story. FACILITATOR BROOKMAN: Okay. Thank you. Comments. Don Brundage. MR. BRUNDAGE: Well, my view point is a little bit different than Steve's. You can have fiveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

208 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 restaurants go through at a particular location, and they'll probably never touch the basic mechanical systems. But you do have redevelopment and changes of land use for commercial, which is much more common than residential. So making an attempt to include a non-failure replacement factor into the data would be useful, because a lot of these equipment ends up getting scrapped for reasons other than equipment failure. FACILITATOR BROOKMAN: Okay. Do you have any source for that, Don? MR. BRUNDAGE: Not a clue. Mr. BROOKMAN: Jim Crawford. MR. CRAWFORD: Yes. I want to go back to the point that I made earlier in support of where do you get numbers. I'm not sure what the Census Bureau data has on commercial, but if we're going to say well, it must be like residential, and Don is suggesting that residential would be optimistic, and I don't disagree with what he's saying - then you can go to the Housing Survey Data in the Bureau of Standards - Census Bureau. Go to the Census Bureau on their Home Page, click on housing, and then start going through the housing surveys, and you'll find in there equipment life time, or equipment age. And from theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

209 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 equipment age, you can derive an implicit survival function. And the only assumption you've got to make is a constant population. And that's not a bad first order assumption with the magnitude of the numbers we're dealing with. And that will give you a survival curve that has at least some substance to it, rather than something that happened to be in ASHRAE handbook somewhere. FACILITATOR BROOKMAN: Okay. MR. CRAWFORD: This is government data. FACILITATOR BROOKMAN: Additional comments? Moving on to the next slide. MR. ROSENQUIST: This slide shows you an example of the LCC results, and as I mentioned before, we characterize all these inputs that go into the LCC calculation with these probability distributions, so we generate a distribution of life cycle cost results.

This is called a Frequency Chart, and to generate it we use this sampling technique called Monte Carlo Simulation. So what we're doing is sampling from these probability distributions rate to the inputs, and in this case 10,000 times performed 10,000 LCC calculations. So what you see here is, again, the result of that, and we have 10,000 calculations showing the LCC savings for this particular equipmentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

210 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 class, which is the 65-135 kBtu/h for the 11 EER candidate standard level. Specifically, this shows a range that goes from a life cycle cost increase of around $400 all the way out to a life cycle cost savings of around $3,300.

The mean value from this particular distribution is a savings of $533. And what this chart also provides you with, indicated by the blue area, are those percentage of customers who are realizing LCC savings in moving to an 11 EER candidate standard level. So we generate one of these frequency charts for every candidate standard we analyze within each equipment class. And this shows the same thing for the payback period, again the same 11 EER candidate standard level, the same equipment class, 65-135. Again, same technique, Monte Carlo Simulation gives us a range of payback results extending from just above zero out to 20 years, with a mean value of 3-1/2 years. MR. ROSENSTOCK: A quick question. FACILITATOR BROOKMAN: Steve. MR. ROSENSTOCK: Steve Rosenstock, EEI. Just looking at that payback period chart, and the chart above on page 27 you show people that have lowerNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

211 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 life cycle cost savings. The numbers are obviously more than 20, they're infinite when you think of payback because they don't payback at all. Were those taken out in the payback period results in Chart 28, or how is that -- MR. ROSENQUIST: Well, what I was going to say is that the payback is calculated on the first year's annual operating cost savings, so it doesn't factor in in the lifetime and discount rate, and those type of things. So that's why you can have a negative LCC, but a long positive payback period. MR. ROSENSTOCK: But if they have a negative first year savings? MR. ROSENQUIST: Well, you're not going to have that in this situation because always energy savings, and they're not going to be offset by the increased repair cost most likely. MR. ROSENSTOCK: Steve Rosenstock, EEI. MR. ROSENQUIST: So what you're seeing as life cycle cost is basically a total install cost increases outstripping the savings you're getting on the operating cost side. FACILITATOR BROOKMAN: Okay. Jim Crawford. MR. CRAWFORD: If a discounted cash flowNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

212 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is negative, then it's a severe misrepresentation to suggest that there is any payback, and you can define your term such that you can make it look like an apple is an orange, but it's still going to taste the same.

I mean, that's totally inappropriate to play that shell game. FACILITATOR BROOKMAN: Jim McMahon. MR. McMAHON: Jim McMahon, Berkeley Lab. I think there's a misunderstanding here. There's no shell game. The calculations are done for annual savings and equipment cost, and then these two metrics are calculated from that, so the payback is done from the first year energy savings. Since we're comparing a more efficient unit in the standards case to a less efficient unit, you always have energy savings. And it may take a long time to payback. That's just the ratio of the two numbers, but you do get a payback. Now when you do a life cycle cost, you impose a lifetime on that. Once you impose a lifetime and discount over a lifetime, it's possible that it goes negative, that you don't get the savings back within that lifetime. You might get it back two years after the lifetime, in which case the payback is longer than the lifetime. MR. CRAWFORD: Jim Crawford. One wouldNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

213 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assume it's going to be a best seller, and you should be using phraseology, I believe, that's understood by the general public. And when you talk about payback, and if they're out money over the course of the life of the equipment, there is no payback. FACILITATOR BROOKMAN: We have different definitions of payback here, it seems. Charlie Stephens. MR. STEPHENS: Yes. I don't want to beat a dead horse here, but the fact is that if the payback - simple payback, and I emphasize the word "simple", is beyond the lifetime of the equipment, it's on a Monte Carlo basis here. It's a probability distribution, and mathematically it comes out this way. Anything beyond 15 years is going to be a negative life cycle cost on the one graph, but it's a mathematical construct, and that may happen to a few people, but I wouldn't be making policy decisions on that basis. FACILITATOR BROOKMAN: Okay. So final comments on these two graphs as we move to income taxes on life cycle costs. MR. ROSENQUIST: WE're heading into the last couple of issues, at least the last couple of issues identified in the ANOPR.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

214 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: You may get a round of applause, you know. MR. ROSENQUIST: For the LCC analysis. FACILITATOR BROOKMAN: It's a good thing we buoyed him with food before lunch. MR. ROSENQUIST: So this is the effect of income taxes on LCC. And the reason why it hasn't been brought up before is because we didn't do this for the ANOPR analysis. We didn't take into account the effect of income taxes on LCC. We've done a little bit of background research into it, though, and we believe that the net impact of taxes depends on how companies' accounting methods expense the purchase cost of the equipment, and also how their accounting measures measure profitability, methods measure profitability. So what we're looking for here is that for those firms that purchase commercial unitary AC, we're looking for how

many of those firms are actually facing a net tax liability. And for those firms that do, we're looking for information on how that equipment is expensed and depreciated over time. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Jim Crawford, and I'm really out of my territory here, but I would haveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

215 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 thought that this equipment was more likely to be capitalized than expensed. FACILITATOR BROOKMAN: Jill, for the record do you want to -- MS. HOOTMAN: Jill Hootman. I would agree with most of the accounts that I've worked with, it is capitalized. FACILITATOR BROOKMAN: Yes. Richard, do you have any experience in this? Richard Lord. MR. LORD: Richard Lord. I'd go along the same line, it's typically always capitalized. FACILITATOR BROOKMAN: I'm looking for any counterpoint that may be at the other end of the room there. Yes, Harry. MR. MISURIELLO: Harry Misuriello. I'm not tax expert. FACILITATOR BROOKMAN: You're a tax expert? MR. MISURIELLO: No, no. I am no tax expert. I would just point out that there's been some recent tax legislation over the last few years, and some of it allows companies to expense things up to $100,000 in that first year, so there's a number of investments that companies can make that don't get capitalized and then depreciated, but rather they getNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

216 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 expensed. So if this is a significant issue, you might just want to call a tax accountant and ask if this category of equipment could fall into that. FACILITATOR BROOKMAN: Yes, depreciation rates. Steve first, and then back to Jim. MR. ROSENSTOCK: Steve Rosenstock, EEI. Harry is correct, there is that law for small - but it's only for small businesses as identified by the IRS. There's also a 50 percent bonus depreciation, but those tax situations are temporary. They either run out at December 31 of 2004 for the 50 percent bonus depreciation, and for the expensing, it runs out December 31 st , 2005. Whether they'll be extended, who knows, but just as an FYI. FACILITATOR BROOKMAN: Okay. Thanks, Steve. Jim. MR. CRAWFORD: Well, just the favorable treatment typically in recent years has applied more to business equipment, short-lived business equipment.

And we don't want to think of it as short-lived stuff. And right now in the larger equipment, for example, the amortization period is 39 years - chiller, 39 years. FACILITATOR BROOKMAN: That's really something. Steve Rosenstock.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

217 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENSTOCK: Again, Steve Rosenstock. Again here I forgot to mention that, because a national accounting customer asked me about it, air conditioning and heating equipment is exempt from the expensing. They do not allow it. The IRS does not allow it. FACILITATOR BROOKMAN: So then we're moving on to rebound effect. MR. ROSENQUIST: This is the last issue that's been identified in the ANOPR for the LCC. And again, the reason why you haven't seen this before is because we didn't take this into account into the ANOPR analysis. The rebound effect, it occurs when a piece of equipment is made more efficient, is used more frequently to offset the energy savings that you could get from that more efficient piece of equipment.

So, for example, maybe a customer realizes that they a more efficient piece of equipment, and thus they use it more frequently, realizing that their utility bill won't -- this will get utility bill savings relative to what they could have gotten with a less efficient piece of equipment. So what the Department is looking for here is whether there's the presence of a rebound effect for commercial unitary AC customers. And second, if it does exist, we're looking for data onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

218 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 how to calculate it. FACILITATOR BROOKMAN: Charlie Stephens first, and then Don. MR. STEPHENS: Charlie Stephens. I just want to endorse this notion that you haven't taken it into account. I would think taking it into account would be nuts. I mean, half the people in the building don't know how to take advantage of it, even if they could. They don't know how to use more air conditioning. The system is on and it works, and that's the way it's always going to be, so I don't think there's any documentation we know of in the commercial sector where you could actually document a rebound effect. And I think you'll struggle to find any. FACILITATOR BROOKMAN: Don. MR. BRUNDAGE: Agreed. FACILITATOR BROOKMAN: Agreed. Okay. Jim Crawford. MR. CRAWFORD: Jim Crawford. Agree. FACILITATOR BROOKMAN: So okay, that made that easy. MR. ROSENQUIST: That's a good way to end the analysis. FACILITATOR BROOKMAN: Richard Lord.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

219 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LORD: Just one more question for you. FACILITATOR BROOKMAN: For those of you that don't know, we've been doing this for about four days straight now. Richard. MR. LORD: On the rebound effect, did you factor into this that as you raise the efficiency level and the cost of the unit goes up, you may get a customer that may not replace a unit that would have been replaced? MR. ROSENQUIST: I take that back. No, we do take that into account when we do our shipments analysis. Okay. So we have a purchase decision model which I'll get to, which takes into account the total install cost increase, operating cost savings, and income when they factor in that decision whether to replace a unit, so we do take that into account there, not in the LCC. MR. LORD: Because I mean it really does happen, people just say I can't afford this incremental cost, and they maintain a unit at a lower efficiency. MR. ROSENQUIST: Right. FACILITATOR BROOKMAN: Okay. So are there any other issues related life cycle cost analysis before we press on? Let me note that it's fiveNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

220 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 minutes after 3, and we're going to try and push through one more block. Anybody that wants to -- I think we should just keep right on going. Anybody that needs to take a quick comfort dash down the hall, please do so, because otherwise we're going to just keep pressing ahead, I think. Okay. So Greg, you already had a round of applause. Hopefully you'll do this well again. You're up. MR. ROSENQUIST: So now it's the national impact analysis, and what I was going to say, like the engineering and LCC this is going to be a brief overview, but I don't think we've had brief overviews.

But if we do happen to go through this quickly, there's the technical support document, actually the Federal Register notice if you want more details. The national impact analysis, as you see in this flow diagram, is the last step in the ANOPR analysis. And it has two primary inputs, which are the output from our life cycle cost analysis and the output from the shipments model. The purpose is, first of all, two things; to generate national energy savings from a particular candidate standard level, and then to estimate the economic impacts as measured by the net present value for those same candidate standard levels. Again,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

221 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 because we also have to generate shipments forecasts, this is also another aspect of the national impact analysis, is to generate those shipments. These are the four issues that have been identified in the ANOPR for public comment. I don't want to go through them here because after the presentation, we'll go over each one of these issues.

So the next couple of slides will give you an example of the type of results that we generate with our national impact analysis. And what you're seeing here is an example for the 11 EER candidate standard level for the 65-135 equipment class. What we did is we summed the annual national energy savings from the assumed effective date, and for the ANOPR it was 2008, all the way out to 2035. I note you get this steady growth in the annual energy savings due to the fact that new commercial air conditioning is coming into the commercial building stock. Because the lifetime on average is 15 years or plateaus in 2023, 15 years after the assumed effective date. FACILITATOR BROOKMAN: Richard Lord, yes. MR. LORD: Richard Lord. Quick question there, on your shipments, did you assume all units were going from the lower efficiency to the higherNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

222 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 efficiency? MR. ROSENQUIST: No, we didn't look into equipment switching. Is that what -- MR. LORD: You know, there's current products today that are being shipped that are above minimum efficiency. MR. ROSENQUIST: Right. Yes, we did take that into account, and I'll get to that. And this is the example of our net present value results. And again, for the same candidate standard level, 11 EER for the same equipment class, 65-135, the top chart shows you the annual non-discounted economic impacts.

And what you see here in the blue columns are the national annual operating cost savings. And like the national energy savings, those grow at a steady rate as new air conditioning comes into the commercial building stock, and it also plateaus in the year 2023. Those light green bars are the national annual equipment cost increases, and that red line is the net impact, basically the difference between the operating cost savings and the equipment cost increase. So in this particular case, we start seeing a benefit soon after the effective date of 2008. Another thing you'll see, you probably already noted here is that we account for operatingNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

223 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 cost savings all the way up to 2065, and that's because we account for those shipments that come into the commercial building stock in the year 2035, and we keep on tracking them for their full lifetime. The bottom chart is the same thing, but discounted annual economic impact - same thing, blue column on the operating cost savings, the light green

- well, you can barely see it, is the equipment cost increases, and the net impact is the red line. Again, that discount brings it down to a present value for a particular year, and we're using a 7 percent discount rate in this example in the present year 2001. And the NPV is the difference between the sum of those national annual operating cost savings and the sum of the annual equipment cost increases. And in this case, it's almost $1 billion. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Over a 60-year period, am I understanding correctly, from now going forward? FACILITATOR BROOKMAN: Fifty. MR. CRAWFORD: So we're talking $15 million a year over the next 60 years. FACILITATOR BROOKMAN: Jim, get on the microphone. MR. ROSENQUIST: Yes. I think what Jim isNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

224 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 going to say is what that discount rate does to those annual energy savings that you're seeing out in the future, is basically brings them down to a very, very low value. MR. CRAWFORD: They never get very big. FACILITATOR BROOKMAN: Don Brundage. MR. BRUNDAGE: I was just going to point out that the only reason it goes out 60 years is to do a proper life cycle on the last unit stuck in at the end and let it wear out. It's not really the benefits over 60 years. MR. CRAWFORD: I understand that, but the fact still remains, taken out 30 years, the net present value of these savings for the people who are going to make the purchases are very, very small. FACILITATOR BROOKMAN: Let's let Jim McMahon follow on there. MR. McMAHON: Thank you, Doug. Jim McMahon, Lawrence Berkeley Lab. The reason for presenting the two graphs here is so that you can have a fair perspective. If you look at the top graph, the annual savings not discounted in the about 2030 period are about $300 million per year - that's the energy cost savings. And the equipment increase is under $100 million. I can't read the exact number fromNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

225 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this, but we have the information. When you discount at a 7 percent rate, anything 14 years from now is discounted by half, and so on. Every 14-year interval you get discounting by another half, so the things that are 25, 30, 50 years out, basically don't count very much when you add up the net present value. So it's not appropriate to take the net present value and divide it by the full time period. That doesn't give you a meaningful metric. FACILITATOR BROOKMAN: Charlie Stephens. MR. STEPHENS: Yes, Charlie Stephens. I was just going to make the observation that using a 6 or 7 percent discount rate, real discount rate, anything at 25 years out is effectively worth nothing, so there's no sense looking out that far. FACILITATOR BROOKMAN: Anything that depreciates. MR. STEPHENS: Yes. FACILITATOR BROOKMAN: Yes. Okay. Additional comments on this? Thanks for that explanation, Jim. MR. ROSENQUIST: Okay. The next slide is a very simplified flow chart of the process that we use for calculating national energy savings and the national economic impacts. Again, there are twoNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

226 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 primary inputs here, and those are the outputs from the LCC analysis, and the shipments forecast from the shipments model. From the LCC analysis, what we're taking from that are the weighted average per unit values, so we're not using a distribution here, we're using actual weighted average per unit value for things like the total installed cost, annual energy use, repair and maintenance costs and so on. The shipments model gives us the shipments forecast, that is the annual shipments out from 2008 to 2035. And coupling that with our survival function gives you the stock of commercial unitary AC, so in very simple terms, to come up with these national energy savings and national costs and impacts, we're basically taking those weighted average per unit values that we're getting from the LCC analysis, and multiplying them by the stock of commercial unitary AC that we effectively get from the shipments model. And we quantify national energy savings with quads or quadrillion btus, or 10 to the 15 th btus, and the net present value, we quantify that with billions of dollars. So this lists many of the inputs that go into the national impact analysis. The first threeNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 here, the total installed cost, the repair and maintenance cost, the annual energy use all come from the life cycle cost analysis. And as I just said, they're per unit weighted average values. We take efficiency trends to forecast each one of those out into the future, because each one of those is a function of efficiency. And we build these efficiency trends, we build them for the base case - that's the case without standards in each candidate standard level case. And we developed them from these historical shipment weight efficiencies that we've gotten from ARI for residential and commercial air conditioners. For energy prices, we're taking that weighted average tariff-based value from the life cycle cost analysis, which was 10 cents a kilowatt hour. And to get future marginal prices, like in life saver cost analysis we're using the Annual Energy Outlook to give us a price trend. And then using that to come up with a future price. And these energy prices are used to come up with the per unit annual energy cost by simply multiplying it by the per unit annual energy use. Next are the electricity site-to-source conversion factors. And those are used to convert theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

228 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 energy savings at the site to the energy at the power plant. And again, we're taking these from the Annual Energy Outlook, and they take into account generation losses; that is, the efficiency of the power plant and distribution and transmission losses; that is, the losses associated with getting that power from the power plant to the site. And we're also taking into account how the capacity mix changes over time with those conversion factors. Next we have the discount rate, and again, this is used to get the present value of those economic impacts. And Office of Management and Budget requires us to use discount rate values of 3 percent and 7 percent real, so what we're doing there is we're performing one set of economic impact calculations based upon the three percent real discount rate, and another set of economic impact calculations using the 7 percent real discount rate. And for discounting to a year, we're using a year of 2001, we're using at least that for the ANOPR analysis. FACILITATOR BROOKMAN: Don Brundage. MR. BRUNDAGE: On your shipments model, I know in the under 5-ton air conditioning there was some logic of major repair versus replacement into change in the cost of the equipment. Can you commentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

229 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on what sort of assumptions you're making on repair versus replacement scenarios, and availability of replacement parts after the standard takes into effect. MR. ROSENQUIST: I have a slide, in two more slides I get to the shipments model. Can I defer that question until then? MR. BRUNDAGE: That's fine. MR. ROSENQUIST: Okay. Thanks. This goes into showing a little bit closer inspection, just of the inputs that go into the national impact analysis, and these both come from the LCC analysis, and it's the per unit total installed cost, and the per unit annual energy consumption. Just showing here the charts, and showing you how the per unit total installed cost and per unit annual energy use change with efficiency. Of course, note that we have two curves for each equipment class. Okay. Now we get into the shipments model. And again, this is used to come up with our shipments forecast; that is, the annual shipments from our assumed effective date out to 2035. And as I mentioned before, when we couple that with the survival function, it gives us the stock of commercial unitary air conditioners.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

230 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The first set of inputs are on the commercial building data, and specifically new construction data. New construction, of course, is one of the primary drivers for new shipments so that's important. We get our forecast of new construction data from the Annual Energy Outlook. We get historical data from the Census Bureau. Stock data, historical stock data gives us the amount of floor space, commercial floor space that uses unitary AC. And we're getting that from past surveys of the commercial building energy consumption survey. And CBECS actually gives us - when I say unitary AC, I mean all unitary AC in all capacity ranges whetherit's air-cooled, water-cooled, or evaporativelycooled. Forecasted stock numbers comes from the Annual Energy Outlook. This historical saturation data that we get from the Census Bureau allows us to go back to that CBECS data and actually pick out what percentage of that floor space is dedicated to the equipment we're interested in here, which is the air-cooled 65- 240. The replacement data, which is another big driver for shipments, we're getting our survival function from the life cycle cost analysis, again the one based on the 15-year median lifetime. So what theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

231 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 shipments model does is it tracks all the stock of air conditioners by age, by vintage. And the survival function tells us when that equipment is likely to fail. Now the next part which is trying to address Don Brundage's question, which is the purchase decision data. And we have these purchase decision models within the shipments model that - and this is the part that takes into account the effect of the efficiency standard through the increase in the total installed cost, and the drop in annual operating cost.

And we also factor in the business income in these purchase decision models. And we get the total installed cost and annual operating cost from the LCC. And we get business income from past BOMA surveys. So again, this is the part of the model that accounts for the fact that when you have an increase in the price of the equipment, it'll try to forecast what that drop in shipments will be due to that increase in the cost. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. Again, I don't know what it is with commercial unitary package units. I know with other equipment that there's a lot of used equipmentNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

232 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 floating around. And if there are commercial businesses that close, sometimes the equipment from one place goes to another place, or it gets refurbished, so I don't know. Again, I know like restaurants in particular, there's a lot of used cooking equipment out there that goes around, and refrigeration equipment that gets refurbished or keeps getting reused. There might be an interesting study in terms of used equipment and what kind of impact increased prices might have on use of I'll say used package equipment out in the market. FACILITATOR BROOKMAN: Karim. MR. AMRANE: Yes, Karim Amrane with ARI. Regarding your historical shipment data, you've used census data for that. However, it is my understanding that census data looked at everything that's shipped out of the factories, whether it's intended for the domestic market or for exports. So basically, your historical data includes exports, which are irrelevant for this rulemaking. MR. ROSENQUIST: Okay. We got some historical data from ARI, and rather than jeopardize the confidentiality agreement we have with you, we just went ahead with the census data. But we did look at that date and make sure that what we have from theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

233 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 census was reasonable. There are some discrepancies, and that's probably one of the reasons for that discrepancy. FACILITATOR BROOKMAN: Jill, I don't want to put you on the spot. Did you have a response to what Steve was saying about used equipment? MS. HOOTMAN: Jill Hootman. I really don't feel that in this marketplace there is a used equipment at all. I mean, the refurbishers of restaurant equipment, there is literally businesses that do that and refurbish it and resell it. And there are no such businesses of HVAC equipment, so it pretty much gets trashed. FACILITATOR BROOKMAN: Thank you. Richard Lord. MR. LORD: Maybe to help on that, if you look at the ASHRAE 90.1 Code, replacement equipment has to meet the minimum efficiency standard, so if you're doing a renovation to a restaurant, it has to have the latest efficiency equipment on it. FACILITATOR BROOKMAN: Follow on, Charlie. MR. STEPHENS: Yes, Charlie Stephens. I was going to say, it requires a mechanical permit in a commercial building, and you can't put old equipment that doesn't meet modern standards onto the buildingNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

234 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 regardless of the fact that it's an old building and an old piece of equipment. It has to still meet modern code. Not only that, but in some cases you'd pay more to put it on the roof and install it than you would for the equipment, depending on the size, so it really doesn't make much economic sense in most cases. FACILITATOR BROOKMAN: Okay. Thank you for answering that. Other questions, comments related to the shipments model? Okay. I'm sorry, Jim. MR. CRAWFORD: I just want to take -- if we can step back one chart to 9. I wanted to get - while Greg had it - he was on the roll there, I wanted to let him go. I'm of the opinion that this chart does not reflect some of the factors that were raised earlier. I think Dick Lord made a very strong point of the fact that the -- as you get out in the 11 to 12 region, that the curve will tip upwards rather sharply, and I would say much more so than this. And if I look to the right-hand side of Chart 9, my eyeball tells me that those are straight lines, and the annual energy use is not a linear function of the

SER. So when you're on a small region non-linear curves can look pretty linear, but we need to be careful that we don't get caught in that trap. FACILITATOR BROOKMAN: Other comments onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

235 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the shipments model before we move on to maximum saturation. Let's go there next. MR. AMRANE: Going back to my questionabout the shipment data, and the packages overestimated by at least to my calculation about 20 to 30 percent, tells me that your energy savings analysis is over-estimated by 20 to 30 percent, as well. So that's significant, and that should be corrected because we have to justify energy savings in order to come up with new standards. FACILITATOR BROOKMAN: Thank you. You said you had another source, his source that you could check back with. Right? MR. ROSENQUIST: Right. And we'll talk when I get back to the office about that more specifically. FACILITATOR BROOKMAN: Okay. MR. CRAWFORD: Doug, I just want to pursue that further, just to reinforce the point that Karim has made. And further, that -- let me stick my neck out for the industry. I think that a very simple request will provide the correct data. We're not going to hide our cards here. We will provide under proper circumstances the correct data to the contractor.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

236 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. AMRANE: This is Karim Amrane again. We have already provided the correct data, so he already has it. FACILITATOR BROOKMAN: Excellent. Thank you for clarifying that, Karim. So let's move on to maximum saturation of -- oh, I missed one. Harry. MR. MISURIELLO: Excuse me. I just want to get a clarification on that. On page 926 and page 923 of the technical support document, there are forecasted shipments, and the base case is standards cases. Is this the data that's in question? MR. ROSENQUIST: That's forecasted. MR. MISURIELLO: Right. MR. ROSENQUIST: Right. We're talking about historical. So since we're using historical shipments to calibrate our model, it's an issue of what those forecasted shipments would be as a result after that calibration. MR. MISURIELLO: Okay. FACILITATOR BROOKMAN: Okay. MR. MISURIELLO: Thank you. FACILITATOR BROOKMAN: So now we're moving on to maximum saturation of commercial unitary air conditioning equipment, ANOPR Issue 12. MR. CRAWFORD: Harry, did you understandNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

237 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the distinction between the census data and how -- MR. MISURIELLO: No, I didn't get the distinction between the census data and the -- MR. CRAWFORD: Census data is going to include -- I realize I'm not on the record. FACILITATOR BROOKMAN: This is Jim Crawford speaking on the record. MR. CRAWFORD: Okay. Jim Crawford. The census data is all shipments. That includes that which goes to the domestic market, and that which goes to the export. ARI has provided and will review it if it's desired, the data which distinguishes between the two, and enumerates those separately so that we can identify that which has gone to the domestic market. MR. MISURIELLO: This is Harry Misuriello.

Clarification - and the estimate is that 30 percent of the units are exported? MR. AMRANE: Around 20 to 30 percent, there's a discrepancy -- FACILITATOR BROOKMAN: Excellent. Thanks, Karim, for that clarification. Okay. Now we're on to slide 12. MR. ROSENQUIST: Slide 11. FACILITATOR BROOKMAN: Pardon me, 11. Issue 12.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

238 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENQUIST: Issue 12. First issue identified in the ANOPR, applying the national impact analysis is this issue of maximum saturation of commercial unitary AC. Again, saturation is defined as the percent of commercial floor space with this type of equipment. And using the historical shipments and market data, current estimates are 12 percent of commercial floor spaces as cooled with unitary AC in the 65-240 kBtu/h range. For purposes of forecasting, we assumed a maximum saturation of 20 percent, which is approximately 10 percent per equipment class. So what the Department is seeking comment on is whether this maximum saturation value is reasonable. FACILITATOR BROOKMAN: Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. You say it's historical shipments market data indicate current is approximately 12 percent, and then you say maximum of 20 percent. Is there any time frame, or is that what -- I'm just kind of curious about the trend data, how you projected 20 percent at some point. MR. ROSENQUIST: It was an estimate. It was our estimate, just based upon the data that we looked at, the historical data that we looked at, and what possibly it could be, so that's why we'reNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

239 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 specifically looking for input on this number. MR. ROSENSTOCK: Steve Rosenstock again. Just maybe for clarification, and it was probably in the technical support document but 10 years ago what was the saturation, what was it in `94 versus 2004, just out of curiosity. MR. ROSENQUIST: You know, I don't have that number off the top of my head. FACILITATOR BROOKMAN: Any additional thoughts or comments, additional information or data? Yes, Tom Eckman. MR. ECKMAN: Well, this is not national data. We've within the last year completed a commercial building stock assessment -- FACILITATOR BROOKMAN: Louder, Tom. MR. ECKMAN: While this is not national data, we do have a recent survey of northwest building stock, commercial building stock, and I'll submit that. It has a survey that was done in `87, and then the same buildings were re-surveyed in 2001, and we have construction building characteristics that go along with those, so there may be some information in there in terms of the change in saturations of this type of equipment over that period of time, so it might help some calibration.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

240 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Would you speculate that your markets are like the national markets? MR. ECKMAN: I'd speculate and I'd be wrong. FACILITATOR BROOKMAN: Just curious. Okay. I just wanted comments on that maximum saturation. And we're moving on to slide 12, Issue 13, future building types. MR. ROSENQUIST: Yes, future building types. I'm using commercial unitary AC. Again as I noted earlier, new construction is a primary driver for new shipments, and we got a new construction growth projections from the AAO. And th is provides us with an average value for all commercial floor space, so we didn't take into account whether or not any particular building type that uses unitary Ac would have a stronger growth rate of using this equipment, so again we don't disaggregate by building type. We apply this new construction growth rate to all building types. So what we're wondering here is, again if there's a building type, specific building type that uses this equipment, whether or not it has a stronger growth rate, because if it does, it may affect our shipments forecast. So what we're looking for input on is whether or not we should try to takeNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

241 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 disaggregated growth rates into account, basically whether it makes any difference, whether you think it makes any difference on these forecasts. FACILITATOR BROOKMAN: Tom Eckman. MR. ECKMAN: I do note just from looking at some of the data that the "big box" retail in particular has been a huge square footage and a clear user of this equipment, and they weren't even in the 1980s building stock assessment that we did. And they dominate the new construction market in terms of retail square footage now, so it's clear that there's a differential. MR. ROSENQUIST: The other thing I haven't noted here is that in addition to those growth rates that are disaggregated by building type, and also like to know the shipments that are going to these different types, because that way we can account for it in our shipments model. FACILITATOR BROOKMAN: Richard Lord. MR. LORD: Richard Lord again. Just to comment on the big box builders, and most of those guys are buying premium efficiency units, so they're already up at the 10-1/2s and 11s-type ranges. And I'm not sure how you factor that in, because people are shifty based on rebates and things like that.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

242 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENQUIST: Yes, we don't differentiate whether or not a particular building type uses more efficient equipment than another building type. FACILITATOR BROOKMAN: Yes, Steve Rosenstock, then Jim. MR. ROSENSTOCK: Steve Rosenstock, EEI. If these are the primary movers of the growth rate, and they're already putting in the higher efficiency equipment that should have an impact on your national energy savings analysis. If they're already buying a 10-1/2 or 11, there will be -- just by numerically there has to be less -- there might be less energy savings because they're already doing it. MR. ROSENQUIST: Yes. I said that was one of the primary drivers. The other one, of course, are replacements, and that's still the predominant driver for shipments. I just wanted to give you that piece of information. FACILITATOR BROOKMAN: Steve, follow on. MR. ROSENSTOCK: Yes. Well again, just for the new construction segment, that if that's the case, and if ARI or others have data that show that for new construction the "big box" retailers are X percent of the new construction, and they're alreadyNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

243 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 buying high efficiency, it should be put into the model. Thank you. FACILITATOR BROOKMAN: Jim Crawford, and then Charlie Stephens. Go ahead, Jill. MS. HOOTMAN: Jill Hootman. I would say also that the big box retailers are on a cycle of replacement of their existing facilities, and also, they're replacing with a higher efficiency equipment.

I mean it is equally at that very same level. So they're almost, in some cases, growing at a faster rate in that than they are in their new construction. It depends on who you're talking about, but definitely big box retail, and even the smaller retailers. FACILITATOR BROOKMAN: Charlie Stephens. MR. STEPHENS: Yes, Charlie Stephens. Speaking from our own experience, it might be useful to look at who's already adopted ASHRAE 99 codes. I mean, we have, and so that is the floor right now in a lot of places wherever that's already been adopted. MR. ROSENQUIST: I just want to say the way we take that into account are in this equipment efficiency trends, so because again per unit install costs and on and on, and on are a function of efficiency. Our efficiency trends allow us toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

244 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 estimate what those costs would be then based upon efficiency. FACILITATOR BROOKMAN: Jim. He defers to Richard. MR. LORD: Richard Lord again. I guess the question is your base for the savings - was it the ASHRAE 90.9 or 90.199 level or 89 level? MR. ROSENQUIST: No. In our base case, it's actually looking at what's in the market, and what we forecast to be in the market without standards, so we have a historical shipment rate efficiency values from ARI, and then those are projected out into the future based upon that extrapolation from those historical values. So to the extent that the shipment-weighted efficiencies take into account the product that's being sold at ASHRAE 90.1 level, we take that into account. MR. LORD: Clarifying question - so you have factored in the states who have already adopted the 90.1? MR. ROSENQUIST: Yes. Implicitly, yes. FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Jim Crawford. I'm a little bit confused as to what will be the application of all this information that's been flowing out here the lastNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

245 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 several minutes. I'm guessing that the penetration rate discussion relates to your projects of the growth of the installed base over a period of time. And if I just go by my causal survey, I think that commercial space is pretty close to saturated right now. Now I'll grant you that living in Texas, my viewpoint is skewed somewhat, but you have to ask are there major categories of property that are not air conditioned today in the commercial sector where there are likely to be air conditioners sometime downstream. And we've had decades of growth reaching a saturation level, and if air conditioning is substantially saturated in the commercial sector, you're not going to see growth other than growth in square footage. FACILITATOR BROOKMAN: Jim Mullen. All set? Harry. MR. MISURIELLO: Yes, Harry Misuriello. DOE last year issued a report forecasting the future of b buildings, their use, their construction type, and that type of thing. And it's a very interesting report. The author and the name escapes me right now, but maybe I could put that in my written comments as a source for -- FACILITATOR BROOKMAN: That would be helpful. Was it EIA?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

246 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. MISURIELLO: No, it was EERE I believe. FACILITATOR BROOKMAN: Okay. Thank you. MR. MISURIELLO: A very informative report about forecasting the future of building construction use and so forth. FACILITATOR BROOKMAN: Additional comments on these two slides. We've kind of taken them together - 12 is what we left off on. Yes. No more comments there? Then on to 13. MR. ROSENQUIST: The last two issues have been put on the same slide here, and they have to deal with the candidate standard levels, and the effective date of new standards and the phase-out of R-22. Just a little bit of background. What we've done in the ANOPR analysis is looked at candidate standard levels from 10-12 EER in half EER increments. In addition to that, we actually did analyze the ASHRAE standard 90.1 1999 efficiency levels, although they assume the effective date for that one was basically immediate adoption in 2004. The Department has already identified as possible alternative standard scenarios include an effective date that would coincide, effective date of the standard that would coincide with the phase-out ofNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

247 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R-22. The second one is a possible two-tier standard, moderate increase earlier followed by a more stringent increase later. All this could be a moot point considering what we heard first thing this morning, but the Department is seeking comment on these standard scenarios, and specifically this issue of theeffective date, and whether it should coincide with R22, the phase-out of R-22. FACILITATOR BROOKMAN: Karim first. MR. AMRANE: Karim Amrane. A couple of comments. First, regarding your ASHRAE 90.1 1999 levels, and when you did your net energy savings analysis, you started in 2004. However, the impact is very specific, it gives starting date of two years after the ASHRAE effective date for products between 65-135,000 btus, and three years for product between 135-240,000 btus. So at least for the products from 65 to 135, the starting date should be 2003, because the ASHRAE effective date was October of 2001. That's something that should be corrected in the analysis. Regarding the effective date of the new standard as industry, of course, I mean as you heard this morning, I think the effective date in industry and energy efficiency is January 1 st , 2010, which makesNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

248 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sense from our point of view because it's the date where the R-22 is going to be phased out. FACILITATOR BROOKMAN: Thank you. Richard. MR. LORD: Yes, I just wanted to get back to a point I made earlier about the RND, the capital cost, the cost to do both an efficiency change and a refurbishment change are huge, trying to do them in two separate steps can be a big burden on the industry, so factor that in when you look at this. And plus, the timing associated with a typical average development cycle, 3 to 4 years with some significant time spent at that. FACILITATOR BROOKMAN: So do them together and be thoughtful about the date. Please, Jill. MS. HOOTMAN: Jill Hootman. I would concur with Mr. Lord, and I would say that as an industry we're faced with millions of tons of equipment that all have to be changed by 2010, this being one portion of them. If you look at what we have to add in product development cost and capital costs between now and 2010, it's amazing. And if you were to add incremental steps in-between there that we also have to change efficiency, it would be significant and double, triple our costs, so thoseNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

249 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 should be factored in here in the fact that they would escalate. And then they'd all drop off. FACILITATOR BROOKMAN: Okay. You're beginning to make the transition to the next phase of the presentations, which is about the stuff that's prospective than NOPR. That means your comments relate there. So additional comments? Yes, Don Brundage. MR. BRUNDAGE: This may not be strictly on the subject here, but it occurred to me when you started talking about the change out. With the 410A refrigerant, it's my understanding you can't just top it off because it's non-azerotropic. Is that the correct -- MS. HOOTMAN: It is. MR. BRUNDAGE: So you can top off, so there would not be a maintenance difference other than the price of the refrigerant going to 410A. Is that correct? Okay. FACILITATOR BROOKMAN: Thank you. Additional questions or comments related to these ANOPR Issue 3 and 15 listed on slide 13. Jim Crawford. MR. CRAWFORD: Jim Crawford, just very quickly. I would certainly encourage that we restrictNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

250 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 our thinking to single step rather than thinking about multiple tiers, one now, one later. I mean, people have been talking about times when this process started when I still had hair, and that was a long time ago. And the second point would be that the importance of timing here I think re-emphasizes the benefit to be derived from the agreement that was mentioned earlier today. We've got an opportunity to move forward, and I hope everybody can get on board and I hope everybody who's on board can stay on board. FACILITATOR BROOKMAN: Thank you. As I just cast around the room, it seems that all the manufacturers share this viewpoint, not about the prospective agreement that you announced this morning, but about these things being lined up. Okay. All right. Don Brundage. MR. BRUNDAGE: Don Brundage. It would be helpful in discussing this process to know what you agreed to that you can't tell everyone else yet, so when that information is available, I would be interested in hearing about it. But along these lines of the effective date, would the manufacturers be amenable to -- I mean, basically you're going to have to switch by 2010. Would you be amendable to an implementation date before 2010?NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

251 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Jim Crawford. MR. CRAWFORD: Not much before 2010. I think -- I believe it was Dick that said -- anyway, either Dick or Jill said about a four-year lead time, and that's per product. And the bottleneck in this is not just human resources, the bottleneck in this is the laboratory test facilities capable of doing the testing to the DOE standards for this equipment. And there's a very distinct limitation on that in the world, and it runs pretty close to saturation most of the time. And some of the larger equipment that is included in this agreement that we're not talking about would even further stress that challenge. FACILITATOR BROOKMAN: Jim Mullen. MR. MULLEN: Just a quick comment. I think 2010 is earlier than if this rulemaking concluded at a normal pace with a full implementation date. FACILITATOR BROOKMAN: Karim. MR. AMRANE: Karim Amrane, ARI. I just wanted to point out, as well, that 2008 is not realistic because we are in 2004, and if today we had to issue final rule, the rule would effective in 2008. FACILITATOR BROOKMAN: Today. MR. AMRANE: Yes.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

252 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FACILITATOR BROOKMAN: Okay. And going to the earlier request from Don Brundage, I imagine that the Department will make its email list available to you from this workshop, for example, as a distribution source should that be something people wanted to use. MR. BRUNDAGE: Don Brundage. We all know each other anyway. FACILITATOR BROOKMAN: Okay. In a matter like this, you want to make sure that no one gets left out. Okay. Michael Martin. MR. MARTIN: Yesterday we were talking about an unnamed appliance, and now we're talking about a mystery agreement. I would like to point out that it really was the intent of all parties that we would have this thing in front of you today, but it got held up in questions as to how much a commissioner can commit an unappointed commissioner who's going to replace him, and exact wording, and how we get all these manufacturers to sign one document. And it's an administrative problem, but we really did intend to have this out in front of you today. And it's a shame it's being handled as a half a secret. But I'm sure the minute we get the signatures on there, there'll be a press release. FACILITATOR BROOKMAN: So we're about toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

253 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 shift gears here and move to the prospective work; that is, the NOPR analysis in next steps, and there's also a period here prior to that listed on the agenda for discussion of other issues. Michael Martin, you said that you might like to raise one more issue. MR. MARTIN: Yes, I have one minor issue which I hope is not an issue at all, but I'm a little scared about it. At the present time, we talk about the existing standards, and the existing standards are based according to the federal law on the standard that was in effect on the 30 th of June in 1992. And DOE has been trying to update the standards to the current standards. And I learned at lunch time that the galley proofs for Federal Register were being proofread, and this was going to be published very soon. But what could conceivably happen is that having different test methods than the ones that we are aware of, we have another mystery document here. This could affect some of the meanings of some of these levels we're talking about. But I'm assured that that will get published very soon. I hope it will get published before the final date that we have to provide comments by. FACILITATOR BROOKMAN: Yes. Steve Rosenstock.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

254 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENSTOCK: Steve Rosenstock - clarification. Are you saying that the mystery document is like revised test procedures for this equipment? MR. MARTIN: It's not really a mystery document. We had extensive rulemakings several years ago, but we never got a final rule out. MR. ROSENSTOCK: So it would be a final rule for the test procedure for this class of equipment. MR. MARTIN: That is correct. MR. ROSENSTOCK: Okay. FACILITATOR BROOKMAN: Francine Pinto. MR. MARTIN: I don't think we forgot it. MR. ROSENSTOCK: You never forget anything in California. FACILITATOR BROOKMAN: Let's hear from Francine. MS. PINTO: This is Francine Pinto, General Counsel's Office. Michael is referring to the four commercial test procedures, and they have been vetted quite extensively, so they shouldn't be a mystery to all of you. And those are the documents that Michael is referring to that are now in the galley proofs doing the final proofreading, and aboutNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

255 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to be published. FACILITATOR BROOKMAN: Okay. Michael. MR. MARTIN: And I presume that they would also discuss within the Federal Register notice what effect this might have, or what the differences would be between the proposed final rule -- I guess it's not a proposed final rule, the final rule and the old standards. FACILITATOR BROOKMAN: Francine. MS. PINTO: Correct. Two of them, I can't remember which ones, will be direct final rules because there were some industry changes in the time within which these have been processed, and that will give all of you a short period of time, because we didn't think we were going to have significant adverse comment, to make any comments. So two of them will become effective in 60-days if we don't get significant adverse comment. And the other two I think are effective, what is it, 30 days? FACILITATOR BROOKMAN: Thirty days. MS. PINTO: Thirty days. FACILITATOR BROOKMAN: Srinam. MR. SOMASUNDARAM: Yes. Srinam Somasundaram. Of pertinence here is the commercial AC and heat pump test procedure rule. That is a directNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

256 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 final rule, and so we're not worried about the other three test procedures here today. And just so everybody knows, the direct final rule will adopt ARI 340/360 as the test procedure for these two classes of equipment, so no mystery. FACILITATOR BROOKMAN: Thank you for that clarification. That's helpful. So I think we're ready to move then to the final presentation here, unless anybody else has any other summary comments or any other comments they'd like to make before we start looking ahead, as it were, if necessary toward the NOPR. Steve Rosenstock. MR. ROSENSTOCK: Steve Rosenstock, EEI. Could we get a five minute break? FACILITATOR BROOKMAN: Yes, I guess we can have a five minute break. Yes, we could, but let's not do more than five. Okay? Be quick.(Whereupon, the proceedings in the aboveentitled matter went off the record at 3:55:17 p.m. and went back on the record at 3:59:58 p.m.) FACILITATOR BROOKMAN: Okay, so our next presenter is Jim McMahon. And he will be accompanied for parts of this by Mike Rivest. I would ask as a matter of courtesy, please -- hey, folks -- as a matter of courtesy, forNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

257 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 those of you that are leaving, please do it quietly so everybody else can hear the presentations well. Ready? MR. McMAHON: Yes. Thank you, Doug. Jim McMahon, Lawrence Berkeley National Lab. I'll be referring to handout entitled NOPR Analyses and Next Steps. Slide 2 is a diagram that basically shows the flow of the -- on the top, the entire rulemaking and on the bottom, the NOPR analyses, in particular. And we're going to step through each of the steps on the bottom. Starting with the first one is revise the ANOPR analyses. The ANOPR analyses included engineering analysis, life-cycle cost and payback, and national impacts analysis. And after comments are received, the Department will consider the comments that were received today and in writing and those that are received in writing by the end of the comment period. We will revise these analyses whereappropriate using more recent data. And for the lifecycle cost analysis, we will conduct the life-cycle cost subgroup analyses. And Slide 4 is the issue of the subgroups.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

258 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For this product, small businesses have been identified as a possible subgroup but we do not have annual revenues for businesses in the buildings analyzed in the life-cycle cost analyses. So we're welcoming comments on building characteristics that can be used as an indicator of annual revenues in order to identify those smaller businesses. Are there any comments or suggestions or questions at this time? Steve? MR. ROSENSTOCK: Steve Rosenstock, EEI. In terms of indicate -- are you -- you're looking for indicators of annual revenues based on building characteristic? I'm -- MR. McMAHON: Let me explain. We have the CBECS buildings, the 1,033 buildings that represent a large share of commercial buildings and that have unitary air conditions. But we have no way in the CBECS survey to identify small versus large businesses. So if it's important to identify small businesses, we're wondering if there's any indicator that is in CBECS that we could use or that, you know, you can think of that we can use in order to separate those businesses that should be a subgroup.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

259 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ROSENSTOCK: Well, again, and again I have to dig into CBECS, but again, just the -- I think CBECS does dis-aggregate by size of building, does it not? MR. McMAHON: Yes, it does. MR. ROSENSTOCK: The smaller the building the smaller the business typically, especially if there's indicators that show it's a standalone type of operation. If CBEC shows under 5,000 square feet standalone building, it's more likely than not to be a "small business". And, again, hopefully there's indicators that say what type of small business that, you know, that again -- and, again, in terms of "small business" in terms of the revenue, there might be information at the Department of Commerce, Small Business Administration, that might also help in terms of "annual revenues", annual sales. But you can look at size or also -- there's also the -- if there's, again, peak demand data, for example use, you know, five to eight watts per square foot and you think it's, you know, 25 or 50 KW peak demand, divide that by five or eight and it's, you know, other -- you get that on to the same square footage basically.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

260 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So those type of indicators you can use, at least as a first order, it might help you out. MR. McMAHON: Okay. Thank you. Any other comments? (No response.) MR. McMAHON: Seeing none, Slide 5 moves us to the next step, which is trial standard levels. Slide 6 defines these. The purpose of this step is to develop a list of standard levels from which impacts are weighed. And one of those trial standard levels would be selected as the proposed standard in the next round. The trial standard levels are created by product class so it would be different for the product classes that we're dealing with here. Potentially they may be different. And the NOPR analyses will assess the impacts for the trial standard levels, which is a composite of those developed for each of the classes. So the method is to assemble the trial standard levels from the product classes. Typically in the past, the criteria that have been used to set up trial standard levels are such things as max tech, minimum life-cycle cost, three-year payback, or something else.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

261 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So the next slide indicates that we would welcome comments about what kind of criteria should be used in order to select trial standard levels or any other comments on this topic. (No response.) MR. McMAHON: No comments? Okay. Slide 8 moves us to the next topic which is manufacturer impact analysis, Mike Rivest. MR. RIVEST: I'm Mike Rivest. I'll be performing the manufacturer impact analysis and also presenting today. I'd like you to keep in mind as I go through the slides, in the context of the negotiated rule, how we might alter this standard way that I've presented over the last couple of days. The purpose of the manufacturer impact analysis is to assess the impact on manufacturers of increasing the standard levels. And one of the very important aspects of the MIA is also to look at the cumulative burden of different regulations. It can be other regulations on these same products such as the refrigerant phaseout or it can be impacts of standards on other product lines made by the same manufacturers. One other key aspect is to look at the industry subgroups which may exist. And I'll beNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

262 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 looking towards you to help me assess if there would be a need for assessing different subgroups of manufacturers. And we have two primary tools to do the manufacturer impact analysis. One is the Government Regulatory Impact Model, or GRIM for short. And that's a discounted cash flow methodology which has been provided, in fact, by industry to DOE. And the other tool is an interview guide.

This guide has also been developed over the years over a number of MIAs that we've performed with industry, one, in particular, with ARI. The output of the MIA is obviously a chapter in the TSD, which will document the cash flow results. And also qualitatively describe some of the other impacts that may be faced by the industry. The MIA is performed into three phases and is concurrent with all aspects of the rulemaking. In Phase 1, an industry profile, that's the part of the analysis where we look at industry 10(k)s, for example, and get a feeling for the products that are being manufactured, by which manufacturers, the types of technologies employed, and the cost structure of those manufacturers. Phase 2, it consists of putting togetherNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

263 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 our two tools, the GRIM and the interview guide. To give you a status, right now we have developed a strawman GRIM for the unitary product industry. And we've also got a draft interview guide. They're not finished and the reason they're not finished is a lot of the inputs required for the GRIM are developed in the engineering analysis, for example, and in the shipments analysis.

So until those analyses are firmed up, you know the GRIM is subject to change. And when I say it's relatively ready, I mean that we have a working model that evaluates the base case impacts and we have proxies for a lot of the inputs required for the standards impacts. And those we will be validating during our interviews. Phase 3, as shown here, is the interview process. And typically these interviews, in the normal course of a rulemaking, would be performed once the ANOPR analyses have been completely updated with all the new data and based on comments received. This is just to show, as I mentioned, that the MIA is not necessarily just a step in the process.

It's a parallel path where we consider impacts on manufacturers through, you know, the entire rulemaking.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

264 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And we make sure that all information that we have is filtered into the various analyses. So, for example, development of the cost model in the engineering analysis is instrumental to understanding what the manufacturing impacts might be later on. The industry profile, as I described, is used primarily to get an understanding of manufacturer products, product lines, and typical cost structures.

The data sources are primarily public data sources such as manufacturer 10(k)s or industry reports. This is just a simplified view of the GRIM model. The key point here is that the GRIM model really integrates a lot of data from various analyses, the manufacturing costs from the engineering analysis, financial information derived in the industry profile, manufacturing prices, which are also primarily the result of the manufacturing costs, and the shipments from the national energy savings spreadsheet. The interview guide I would say has two primary functions. One is to validate the inputs that are used in the cash flow analysis so we'll review with manufacturers the engineering analysis inputs. We'll also be reviewing the shipments outputs from the NES, or inputs from the NES. We touched on this -- we talked a littleNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

265 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 bit about this earlier. One of the key drivers of impacts are the conversion costs or those first-time costs necessary to modernize or to modify the production facilities. So we'll be spending a considerable amount of time talking about your costs such as increased tooling, increased plant requirements for R&D, or product testing, for example. We do have values for those in the engineering analysis and in the GRIM but the difference here in the engineering analysis, what we're taking into account is depreciation, whereas in the cash flow analysis, it's the much more dramatic one-time costs that come in on the cash flow that we're modeling. Other topics in the MIA include the impact on employment, consolidation and competitive impacts.

We do work with DOJ and DOJ gets a copy of the interview guide. And we make sure that we incorporate the types of questions that they need to perform their own competitive -- their impact on competition analysis, which is part of the NOPR process. As you see very explicitly, we will be looking at the impact of different implementation dates on the size of the impacts.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

266 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Harry? MR. MISURIELLO: On the Department of Justice analysis, do you provide them -- I've got a couple of questions on that. MR. RIVEST: Sure. MR. MISURIELLO: How long does it take? And do they start from scratch? Or do you provide them with the basic industry information and they take it from there? MR. RIVEST: We provide them with a copy of the TSD or draft versions of the TSD. And like I mentioned earlier, they do review our interview guide.

And there are specific things that they're looking for. They're concerned about how industry -- how some players may leave the industry resulting in a greater concentration of market share. And so they're particularly concerned about what they call asymmetrical costs between manufacturers. So you may have one manufacturer who, because of a patent or because of a technology that's already in place in their plant, may have the ability to produce these new products at a lower cost than a competitor. And what that would cause is shifts in market share, for example.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

267 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So those are the types of issues that they focus on. In terms of the DOJ review, that's part of the NOPR -- it's post-NOPR? Or -- MS. PINTO: I'm trying to remember. MR. RIVEST: Yes. I think it's -- I think it runs concurrent with the comment periods of the NOPR but -- MS. PINTO: I don't recall right now. MR. RIVEST: Steve? FACILITATOR BROOKMAN: Start by saying your names for the record please. MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. I remember with the residential air conditioner and heat pump rulemaking, Department of Justice, I believe, came out with their ruling -- actually that was at least -- that the A&O procedure was anti-competitive because it was 12 for air conditioners and 13 for heat pumps. And I believe that was after the NOPR period and before the final rule. So at some point, they received some documents in that time period. Because as part of the final rule, they have to show that the Department of Justice has cleared it out. SoNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

268 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -- MR. RIVEST: That's correct. And they typically write a letter which is incorporated in the -- probably in the final rule. And they do conduct their own analysis so they'll be looking at our documents. But they'll also be interviewing manufacturers themselves. MS. PINTO: This is Francine Pinto from General Counsel. The other thing that they are often concerned with is when there's -- for the refrigerants, they're usually concerned whether there is a sole source for manufacturers or whether manufacturers have several places where they can buy the refrigerant. MR. RIVEST: That's true. MS. PINTO: So that's a piece of information we would like to have. MR. RIVEST: Did you have another question Harry? MR. MISURIELLO: No, no, thank you very much. MR. RIVEST: Okay. Once again, under the typical rulemaking, we would be finalizing the ANOPR analyses. I would be incorporating the finalized outputs and inputs into the GRIM spreadsheet.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

269 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The process would then entail getting in touch with the manufacturers. Then about a month before any interviews, I would be sending a copy of what I call the strawman GRIM and an interview guide.

Also copies of confidentiality agreements so we could put these in place before the interviews. The hope is to give you ample time to review the documents and get together with people from your various departments. It might be marketing or engineering and finance, preferably all of them, so that you can get a sense of what the issues are that we'll be asking questions on and that you can, you know, also prepare issues that you might want to share with the Department at that time. One thing that I didn't mention yesterday is frequently DOE has accompanied us on these interviews. And at times when it wasn't appropriate for them to be part of the discussion, you know, we might phase the interview as morning, afternoon, or in some cases DOE did not participate at all. And that was left entirely up to the manufacturers. Some preferred having DOE there so that DOE could hear. But as Francine, Tom -- like -- there's no possibility of setting up confidentiality agreements,NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

270 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I think, right? Any notes that you might have from these interviews would be subject to FOIA. So -- MS. PINTO: I'm not sure of the answer to that. I'm not sure -- well, I know that we're not allowed to disclosed confidential information. MR. RIVEST: Okay. MS. PINTO: So there probably is a way to do that -- MR. RIVEST: Okay. MS. PINTO: -- with DOE folks. MR. RIVEST: All right. MS. PINTO: I'm not sure we've had to do it before. But I think there probably is a way. MR. DePRIEST: This is Tom DePriest from the Office of General Counsel. There are federal statutes about disclosure of private commercial business information. And that's always a grounds for not disclosing under the Freedom of Information Act. MR. RIVEST: Okay. Great. Thanks. Jim? MR. CRAWFORD: Jim Crawford. In the past in rulemaking, it has turned out that the substance is somewhat different than the apparent practice because the period of confidentiality that DOE was prepared to commit to was so short as to be of little value.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

271 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And, therefore, we have avoided exercising confidentiality agreements with DOE. You know a period of three years, for example, in this industry is almost worthless. MR. RIVEST: Right. The last point, I reiterate, I don't, as I stand here, have a clear notion of how we might segment the industry to be able to identify those asymmetrical costs that DOJ and DOE are concerned with. So I invite any comment right now that you might have on that. And any comments that you might have further down the line. Of course, there's always the possibility that as the interviews progress and things become apparent, that we have those conversations at that time. MS. PINTO: I just want -- Francine Pinto again. Jim, I'm not sure. I'd have to go back and look at the statute. But my thought would be, and I'd have to actually go and look at the actual language, that we never -- federal employees could never disclose confidential information without being in violation of the statute or getting permission. So we have to go look at that statute and check what the language is.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

272 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CRAWFORD: Jim Crawford. Basically on financial information, we would, in effect, seek confidentiality in perpetuity because our cost structure -- MS. PINTO: Right. MR. CRAWFORD: -- today is not that dramatically different than it's going to be ten years from now. MS. PINTO: Francine again. It would just seem like the statute would probably provide for that but I think we have to look through the language. MR. CRAWFORD: That would be helpful in enabling the Department personnel to be more intimately involved in that aspect of the activity. MR. RIVEST: So that completes my presentation on the MIA. I think once again the thought I leave this room with is how might we adapt this in the context of a negotiated rule. Thank you. MR. McMAHON: Jim McMahon. Taking up on Slide 17, there are four more pieces here. We'll go through them very quickly. And the next is utility impact analysis. The purpose is to investigate the effects on utilities, in this case electric utilities, from reduced energy sales and peak load demand due toNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

273 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 potential standards. The method is to use outputs from the national impact analysis, national energy savings, in particular, but also loads savings results. As you recall, we do hourly simulations for this product, take those results and put them into the Energy Information Administration's NEMS model, and then look at the results. The results that we will report back are changes in electricity sales and price by region, change in the mix of electricity generation, if any, and change in new capacity construction. Steve? MR. ROSENSTOCK: This is Steve Rosenstock, EEI. Just again looking at the ANOPR, you know, the outputs that were shown did talk about obviously the national energy savings over so many years. I don't recall if there's been any rulemaking where you showed any sort of potential peak capacity savings or potential peak demand reduction so just as a -- again, just as a -- for an analytical -- are you trying to find those out? And then just -- because it really says, I guess, all of the previous language, it says you have to calculate the national energy savings versus theNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

274 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 national potential peak demand savings. So, you know, is that -- MR. McMAHON: There were peak impacts reported for the residential air conditioners. And our intent is to do that here also. MR. ROSENSTOCK: Okay. I just didn't see anything in the ANOPR so I just figured -- MR. McMAHON: No, it's not in the ANOPR. MR. ROSENSTOCK: Okay. MR. McMAHON: We have not done the peak impacts yet. It will be done in the next phase. MR. ROSENSTOCK: Okay. Thank you very much. MR. McMAHON: You're welcome. Slide 19, we're moving to employment impacts. The purpose of the employment impact analysis is to report net jobs created or eliminated nationally in the U.S. as a consequence of new standards. The method is to use a spreadsheet called IMBUILD. This was developed by DOE's EERE to look at building sector. It's adapted from the IMPLAN national input-output model. Changes in equipment and energy expenditures are taken from the national impactNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

275 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 analysis as inputs into IMBUILD. And direct employment impacts are taken from the manufacturer impact analysis. So the purpose of IMBUILD is to look at the other sectors. The manufacturer impact analysis will look at the impacts on the manufacturing industry of this product. But there are also other impacts on the energy sector and on other consumer purchases. So we're looking at those other sectors. The output will be the change in employment by sector as a consequence of new standards. Are there any questions or comments on the employment analysis? Yes, Harry? MR. MISURIELLO: Yes, I just had a question about what sectors are addressed with this? Are these building types or how do you -- MR. McMAHON: No, this is the national economy broken into sectors. It's just with more attention to buildings -- MR. MISURIELLO: Buildings, okay.MR. McMAHON: -- than the normal inputoutput model does because we're focusing on equipment that's effective in buildings. But it's all sectors.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

276 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So the sectors that we're likely to see impacts on are the manufacturing sector, the energy sector, and then other sectors where consumers spend the energy bill savings that they get on other products. MR. MISURIELLO: Okay. Thank you. MR. McMAHON: Seeing no further questions, we'll move to the environmental assessment. Slide 22 shows that the purpose of the environmental assessment is to report environmental impacts as a consequence of new standards including, most importantly, changes in power plant emissions. Energy savings results, again, are taken from the national impact analysis. As you can see, all of these are fully integrated. We, again, run through the EIA's NEMS model. This is done in parallel with the utility impact analysis. And the output is an estimate of the national emissions reductions of oxides of nitrogen and carbon. Steve, question? MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. I know with other rulemakings that because of SO2, that -- because of the caps and the cap in trade that you basically say there's no impact on SO2 or SOx from the rulemakings.NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

277 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 We can envision, and we're hoping to envision in the industry, that there will be certain regulations, you know, Clear Skies especially, that will have a direct impact on NOx emissions in the near

future, within the next few years that -- and there have been significant reductions in NOx anyway. But we can see a regulatory environment -- we're hoping for a regulatory environment to provide more certainty on the NOx level. That's one issue. We're hoping by 2010. Hopefully the model can take that into account as one of the variables as a sensitivity analysis. The second thing is that several states have installed their legislator renewable portfolio standards, including California and New York is about to, I believe, so other states have -- actually Texas has some renewable portfolio standards for new generation as well.So you might want to look on a state-bystate basis because that might have an impact on this part of the analysis as well. Thank you. MR. McMAHON: Thank you. Normally we expect that EIA will deal with those things so they will include any impact of those two activities into their analysis. And then we willNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

278 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just piggyback on that. We're not going to do primary analysis independent of EIA on other factors other than the standards. Don? MR. BRUNDAGE: This may not be a question you can answer but how much public input is allowed on the NEMS model? Because one of the things I see here is things like NOx emissions, the projections change almost weekly based on what utilities have announced they're going to install, what equipment. Is there a way to get information on that?

Or should we just -- that's probably just a question to direct to EIA, not to you. MR. McMAHON: Is there a way to get information on what they are going to assume for future generation, is that what you're asking? MR. BRUNDAGE: For the NEMS model on future emission reductions. MR. McMAHON: Yes, I'd refer you to EIA directly. I don't know. I'm not really familiar what their review is. They're on an annual cycle. They're in the process of generating the AEO 2005 now, which we expect to receive in December or January. MR. BRUNDAGE: Thank you. MR. McMAHON: Any other questions onNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

279 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 environmental? (No response.) MR. McMAHON: Okay, Slide 23, we're moving to the regulatory impact analysis. The purpose is to investigate the national impacts. And I want to thank Jim Crawford for pointing out an error on this slide.

You should strike the word "non-regulatory" the four times that it occurs here. National impacts due to alternatives compared with mandatory efficiency standards. The alternatives that may be considered include several non-regulatory things including a no regulation action but also possible alternative regulation approaches like prescriptive standards. So the non-regulatory cases are early replacement, tax credits on customers or manufacturers, customer rebates, voluntary efficiency targets, and government procurement. The way that we do this is to modify the national impact analysis spreadsheet to consider different scenarios, one scenario for each of the alternatives. In order to accommodate those scenarios, changes occur for several inputs. And those may include the ones listed here, energy prices, discountNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

280 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 rates, purchase prices, operating costs, and income elasticities, as well as the equipment stock data. The output looks very much like the national impact analysis output for the standards case but is presented for each of the alternatives. That will include national energy savings and net present values. And then the impact of alternatives on purchase prices and energy use will also be reported. Any questions or comments on the regulatory impact analysis? Steve? MR. ROSENSTOCK: Steve Rosenstock, Edison Electric Institute. In this case, it might be good just a quick review of how you're going to incorporate the ASHRAE 90.199 into this analysis because since, you know, it was completed in `99 and in the ASHRAE standards, they were supposed to go into effect in 2001 basically. And because of what happened with DOE, DOE didn't certify it until 2002, which also kind of -- so I am kind of curious how you're going to take the ASHRAE actions kind of into account in this case. It was a voluntary efficiency action done by -- MR. McMAHON: Right. Our intent is in our base case across the board, which here would be the noNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

281 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 new regulatory action case but it would also be the same base case that's used in the national impact analysis for comparison to the trial standard levels.

We will have a projection that attempts to take that into account. Any other questions? (No response.) MR. McMAHON: Slide 25 is a repeat of the slide that you saw as Slide No. 3 early in the day in the rulemaking overview. And it shows the seven factors that the Department considers when setting standards in the left column. And in the right column, it shows the analysis elements. Earlier in the day we described to you theANOPR results, which included results from the lifecycle cost analysis, national impacts analysis, screening and engineering analysis. And we have now described to you the other elements that will be included in the next phase, the NOPR phase, the manufacturer impacts analysis, the environmental assessment, utility impact analysis, and employment impact analysis. So I'm now going to turn the podium back over to Doug. FACILITATOR BROOKMAN: Thank you. And I'mNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

282 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 going to turn the podium back to Ron Lewis and Jim Raba. My thanks to all of you for a very productive day. And appreciate all of the lively discussion and the good humor. Back to Ron Lewis and Jim Raba. MR. LEWIS: First of all, I want to remind everybody that the final date for comments is November 12th so that's what the target is here. And I also want to relay or repeat our excitement to see the proposal that's going to come in. And we're quite anxious to see the details of the document referred to earlier in the day. So we thank everybody for attending and I'll turn it over to Jim. MR. RABA: Jim Raba, Department of Energy.

Thank you all for your participation, the lively discussion. Certainly the potential agreement that's coming down the line is very exciting. Indeed we have a lot more work to do based on the comments heard but certainly we appreciate -- I think the team especially would appreciate any data inputs or information you could provide to move this along because we need some concrete things to accomplish the tasks down the line as we're required to do. But having said that, we do appreciate soNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

283 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 much your participation. All of this good discussion, we've accomplished that -- we being the Department, and you, the stakeholders, manufacturers, utilities, advocates, others -- have accomplished really a major thing here just to have some good discussion throughout and appreciate so much the comments you've made. And we will take every one into account. I yield momentarily to Steve. MR. ROSENSTOCK: Just a quick -- sorry Steve Rosenstock, EEI, just a quick question. For written comments, electronic files -- just a couple -- difference -- for electronic files? Word documents are okay now? Because it used to be WordPerfect. We can submit filings in Word? MR. RABA: Yes. MR. ROSENSTOCK: And/or PDF? MR. RABA: Yes, I understand the answer is yes to that. MR. ROSENSTOCK: Okay. MR. RABA: WordPerfect, Word, PDF, the like. MR. ROSENSTOCK: And the second question is -- MR. RABA: And there are procedures in the ANOPR that kind of go to that. So if you have anyNEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D. C. 20005- 3701 www. nealrgross.com

284 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 questions, you may give Brenda Edwards-Jones a call at the number in the ANOPR. MR. ROSENSTOCK: And still send it care of Brenda, too? MR. RABA: Yes. MR. ROSENSTOCK: Okay. Thank you very much. MR. RABA: Was there another comment I heard coming up? Don Brundage? MR. BRUNDAGE: On a personal note, I hope Brenda is feeling better soon. MR. RABA: Thank you very much. Indeed, you all deserve a round of applause. So give yourself a round of applause. (Applause.) MR. RABA: And thank you, Mr. Facilitator, Doug Brookman, ever popular, ever professional. (Applause.) (Whereupon, the above-entitled meeting was concluded at 4:35 p.m.)