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UNITED STATES DEPARTMENT OF ENERGY PUBLIC MEETING ON PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS

U.S. Department of Energy

Room 1E-245 1000 Independence Avenue, Southwest

Washington, D.C. Monday, October 30, 2006

9:00 a.m. Participants DOUG BROOKMAN, Facilitator MOHAMMED KHAN Department of Energy ASHLEY ABBOTT Navigant Consulting, Inc. RAY ALBRECHT New York State Energy Research and Development Authority JEFF ALEXANDER PB Heat, LLC BOB BEAREGARD American Public Gas Association TIMOTHY BEGOSKE Field Controls GLENN BERGUM Honeywell BRYAN DERRINGER Department of Energy
DAVID BIXBY Gas Appliance Manufacturers Association ROBERT BOLZ Vincent R. Bolz Quality Heating Oil

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(301) 565-00642 Participants (Continued)
TERRY BRENNAN Natural Resources Canada DONALD BRUNDAGE Southern Company Services LaVONNE BURKE Gas Appliance Manufacturers Association THOMAS BUTCHER Brookhaven National Laboratory CHRISTOPHER CALAMITA, ESQ. Department of Energy EUGENIO CASTRO Fideicomiso para el Ahorro de Energia Electria MICHAEL CALDARERA National Propane Gas Association JACK CLIMP Gas Appliance Manufacturers Association EDWARD COLUCCIO, JR. ECR International KATIE COUGHLIN Lawrence Berkeley National Laboratory JIM CRAWFORD Trane/American Standard
LARRY DALE Lawrence Berkeley National Laboratory ANDREW deLASKI Appliance Standards Awareness Project DANIEL J. DEMPSEY Carrier Residential Engineering TODD DUCKWITZ Fedders Corporation

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(301) 565-00643 Participants (Continued) THOMAS ECKMAN Northwest Power and Conservation Council ISAAC ELNECAVE Northeast Energy Efficiency Partnerships, Inc. JAMES FAY North Star Energy Group MARK FRIEDRICHS Office of Policy and International Affairs U.S. Department of Energy BARCLAY GIBBS Navigant Consulting, Inc. KEITH GRAHL Rheem Manufacturing Company WILBUR L. HAAG, JR. A.O. Smith Water Products Company CHARLES HARAK, ESQ. National Consumer Law Council JEFFREY HARRIS Alliance to Save Energy AARON HERZON Nordyne PATRICK HOLLERAN Field Controls, LLC ROBERT HUANG The Cadmus Group, Inc. JOHN HUBER National Oilheat Research Alliance BRIAN ISKE Weil-McLain DIANE JAKOBS Rheem Manufacturing Company

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(301) 565-00644 Participants (Continued) LISA JONES Piper Rudnick
MARK KENDALL Burnham Hydronics KATHERINE KENNEDY, ESQ. Natural Resource Defense Council ALAN KESSLER Rheem Manufacturing Company ERIC LACEY RECA MATTHEW LATTANZI Nordyne, Inc. ALEX LEKOV Lawrence Berkeley National Laboratory DAVID LEWIS Lennox International Inc. RONALD LEWIS Department of Energy JAMES LUTZ Lawrence Berkeley National Laboratory ROBERT MAGEE Texas Furnace JOHN MANDYCK Carrier Corporation ARIS MARANTAN Navigant Consulting, Inc. MICHAEL MARTIN California Energy Commission JOSEPH MATTINGLY Gas Appliance Manufacturers Association JIM McMAHON Lawrence Berkeley National Laboratory EXECUTIVE COURT REPORTERS, INC.

(301) 565-00645 Participants (Continued) KAREN MEYERS Rheem Manufacturing Company HARRY MISURIELLO Alliance to Save Energy JAMES MULLEN Lennox International, Inc. STEVEN NADEL American Council for an Energy Efficient Economy MARK NUNN Manufactured Housing Institute FRANCINE PINTO Department of Energy GLORIA PUMPUNI Gas Appliance Manufacturers Association JAMES RANFONE American Gas Association

ALLAN REIFEL Nordyne, Inc. MIKE RIVEST Navigant Consulting, Inc. BRYAN ROCKY York Unitary Products Group DAVID RODGERS Department of Energy NEIL ROLPH Lochinvar Corporation GREGORY ROSENQUIST Lawrence Berkeley National Laboratory HARVEY SACHS American Council for an Energy Efficient Economy

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(301) 565-00646 Participants (Continued) RACHEL S. SCHMELTZ Energy Star STEVE SCHNEIDER, SR. Fedders Corporation ADAM SCHUSTER Rheem Manufacturing Company MICHAEL SHARKOZY Thermo Pride ALAN SHOWOLE National Comfort Products, Inc. GARY SIROIS American Design Associates, LLC SRIRAM SOMASUNDARAN Pacific Northwest National Laboratory MALCOLM SOUTHERN Goodman Company, LP FRANK STANONIK Gas Appliance Manufacturers Association GRAHAM STEVENS Navigant Consulting, Inc. JOHN TALBOTT Talbott Consulting RICK TEMPCHIN Edison Electric Institute RICHARD TOPPING Gas Appliance Manufacturers Association
PETER TURNBULL Pacific Gas & Electric Company
LAURA VAN WIE Lawrence Berkeley National Laboratory TED WILLIAMS American Gas Association EXECUTIVE COURT REPORTERS, INC.

(301) 565-00647 Participants (Continued) CORY WEISS Effikal International Inc. LIYING ZHOU Gas Appliance Manufacturers Association

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(301) 565-0064A G E N D A AGENDA ITEM: 8

PAGE: Welcome Doug Brookman 10 David Rodgers 10 Introduction and Agenda Review Doug Brookman 14 Rulemaking Overview Mohammed Khan 20 Brief Stakeholder Comments Jack Climp 27 Gas Appliance Manufacturers Association Joe Mattingly 28 Gas Appliance Manufacturers Association Charles Harak 32 National Consumer Law Center Mark Kendall 38 Burnham Hydronics James Ranfone 44 American Gas Association Katherine Kennedy 50 Natural Resources Defense Council John Mandyck 55 Carrier Corporation Steve Nadel 58 American Council for an Energy Efficient Economy John Huber 61 National Oilheat Research Alliance Patrick Holleran 65 Field Controls, LLC and Effikal

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(301) 565-00649 A G E N D A AGENDA ITEM: PAGE: Brief Stakeholder Comments (Continued) Andrew deLaski 68 Appliance StandardsAwarenessProject Review and Finalize Agenda Content Doug Brookman 71 Brief Stakeholder Comments (Continued) Karen Meyers on behalf of Alan Kessler 77 Rheem Manufacturing Discussion of Issues

Doug Brookman, Moderator 83 Adjourn

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1 P R O C E E D I N G S 2 9:04 a.m. 3 Welcome 4 MR. BROOKMAN: Okay. So, good morning, 5 everybody, and welcome. This is the U.S. Department of 6 Energy's Public Meeting on Proposed Energy Conservation 7 Standards for Residential Furnaces and Boilers. Let me 8 welcome you and thank you for being here on time. We 9 have a busy day. My name is Doug Brockman from Public 10 Solutions in Baltimore. 11 We are fortunate this morning to have David 12 Rodgers, who is acting Deputy Assistant Secretary for 13 Energy Efficiency and Renewable Energy. He would like 14 to make welcoming remarks. 15 Remarks by David Rodgers 16 MR. RODGERS: Good morning. Thank you very 17 much for coming. As Doug said, I'm David Rodgers. I'm 18 currently the acting Deputy Assistant Secretary for the 19 Office of Energy Efficiency and Renewable Energy. You 20 may remember just about a year ago I was the program 21 manager for the Building Technologies Program and got 22 to meet a lot of you in that capacity. So I'm very 23 pleased to see some familiar faces here as we move 24 forward with our public meeting to discuss the furnace

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(301) 565-006411 1 and boiler notice of proposed rulemaking. 2 And remembering having met many of you at our 3 November 15th scheduling meeting last year when we 4 discussed how we could get the agency back on track in 5 meeting its appliance standards obligation. 6 I'm pleased that we have gotten back on 7 track. We've published our schedule in a report to 8 Congress in January, and we are meeting all of the 9 deadlines in that published schedule and we will 10 continue to do so. And I'm very pleased and I want to 11 thank the Appliance Standards Team and Office of 12 General Counsel -- 13 (Interruption.) 14 MR. RODGERS: The Appliance Standards Program 15 is a very high priority for me and for the Department 16 and for the administration. 17 Now, the furnace and boiler rulemaking was 18 begun many years ago, as most of you know, and the 19 statutory standards that were originally established 20 for residential furnaces and boilers were set by 21 Congress, but Congress also told us that we needed to 22 determine whether or not amended standards would be 23 appropriate. And of course, Congress told us to make 24 sure that any proposed amended standards would be

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(301) 565-006412 1 technologically feasible, economically justifiable, and 2 would save significant amounts of energy. 3 So you have the benefit of our proposal, and 4 today we are going to spend a fair bit of time talking 5 about the analysis and the proposed standards. The 6 focus is on getting your comments. We in particular 7 are hoping that you would share your views on elements 8 of the proposal which might be plowing new ground, such 9 as the proposals and the considerations for waivers of 10 federal preemption. 11 We are interested in your comments on the 12 standards levels for furnaces and boilers, and we are 13 also interested in your comments on the proposed 14 consensus agreement that was submitted to the 15 Department by energy efficiency advocates and industry 16 stakeholders. We, as well, look forward to hearing 17 your views on how we can move forward expeditiously to 18 save energy while staying within all of our statutory 19 requirements. 20 On that subject, I would like to say that 21 Washington Post articles, Christian Science Monitor 22 articles not withstanding, this forum is where you get 23 to talk with us and provide your technical comments, 24 your legal comments, and without spin so that we can

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(301) 565-006413 1 figure out how to move forward meeting our statutory 2 requirements. 3 It's going to be an informal session. We 4 have our experienced facilitator Doug Brookman to help, 5 so we're going to encourage an exchange of views. We 6 will lead off with a presentation from our able team. 7 Mohammed Khan will give a presentation on how we apply 8 the statutory requirements to come up with our 9 proposal. We will also have here to help answer 10 questions Francine Pinto and Chris Calamita from our 11 Office of General Counsel. 12 However, we will not be attempting to justify 13 the proposal. Rather, we are looking to gather 14 information from you that will help us to improve and 15 enhance the analysis, to identify any factors that may 16 have been overlooked or are not accurately captured in 17 the proposed rule which could be considered in the 18 final rule. 19 We have received a significant number of 20 initial comments. We appreciate that very much, but I 21 would like to make sure that you understand that the 22 comment period does remain open until January 15th to 23 afford time for all stakeholders to develop and submit 24 final comments.

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1 We will be maintaining our published 2 schedule,and we will be publishing our final rule for 3 this rulemaking no later than September 2007. 4 So please, by all means, be candid, be open, 5 share any information that you would like to share with 6 us today. If you do feel that there is proprietary 7 information that you feel is germane to the rulemaking, 8 there are instructions in the notice of proposed 9 rulemaking on how you can submit that proprietary 10 information and request that the Department keep it 11 confidential. 12 Again, I'd like to thank everyone for taking 13 time out of your busy schedule and coming to provide 14 comments. We are anxious to move forward on this and 15 deliver a rulemaking that will save as much energy as 16 possible while meeting all of the statutory 17 requirements.Thank you very much. 18 Introduction and Agenda Review 19 Doug Brockman 20 MR. BROOKMAN: It has been our practice to 21 provide an opportunity for everybody to introduce him22 or herself, and so I'd like to do that. If you would 23 say your name, please, and your organizational 24 affiliation. I'll start with Jim and go around the

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1 table, and then loop back this way. 2 Please make sure all these mikes are turned 3 on. That means the lever is in the what position; up 4 or down? Up. The up position. So the little button 5 has got to be up. Jim, you can start. 6 (Introductions) 7 MR. BROOKMAN: Did everybody get a chance to 8 introduce him- or herself?Okay. I'm going to do a 9 very brief agenda review,and we'll proceed from there. 10 We are providing an opportunity following 11 this agenda review for Mohammed to provide a brief 12 overview of the content of this rulemaking. Following 13 Mohammed's slides, we want to provide an opportunity 14 for individuals to make brief overview remarks on the 15 issues that you think are most salient, the ones you 16 would like to raise in discussion today and focus on 17 from your perspective. 18 Following that, we will take a peek at the 19 agenda and kind of finalize the content to the extent 20 we can and kind of think about how the timing might 21 work. We'll take a break mid morning, round about 22 10:45 or so, and then we'll continue, really, for the 23 rest of the day on discussion of issues, kind of issue 24 by issue, segment by segment. We'll take lunch round

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1 about 12:30. We'll return from lunch and just keep

i 2 3 ng. go All of you I think received when you walked 4 in the door a packet of information, slides that will 5 be the PowerPoint slides that the Department and 6 supportingfolks will be flashing on the screens to 7 guide theconversation, and also a host of comments and 8 also the Federal Register notice. So I hope you'll 9 have a chance or be able to follow the content in those 10 slides aswe go along. 11 We will continue discussing these issues 12 throughoutthe remainder of the day. I guess our hope 13 and expectation is that we'll adjourn round about 4 14 o'clock today. 15 Questions and comments on the agenda before 16 we proceed? 17 (No response) 18 MR. BROOKMAN: I would ask simply for your 19 consideration what have emerged as norms for these 20 public meetings, and I would ask that you please speak 21 one at a time. Please say your name for the record. 22 This willbe a court-reported, recorded proceeding. I 23 didn't getthat quite right, did I? And I'm going to 24 be tryingto cue people individually by name. Please,

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1 every time you speak, say your name at least for the 2 d recor. 3 Please keep the focus here. Turn off your 4 cell phones. Put them on "no ring," vibrate mode, 5 whatever. And if you need to have a side bar 6 conversation with the person next to you, if it's going 7 to last more than about 20 seconds, please take it out 8 of the room so you don't distract everybody that's in 9 here. 10 I'm also going to ask that you be concise, 11 that you be focused in your comments. There's a lot to 12 be said here and a lot of people wish to say a lot, as 13 you will see. So please try and be concise. And I'm 14 also going to be cuing people to speak and wish to 15 encourage follow-on comments. So let's keep this as 16 exchange-minded as possible. So feel free to follow 17 on, and if I drop you out of the queue, don't let me 18 get away with it. Wave your hands. Find a way to get 19 back in the queue, okay? 20 That's what I'm suggesting as ground rules, 21 norms. Other thoughts, comments on that? 22 (No response) 23 MR. BROOKMAN: Pretty straightforward. We've 24 done this well for years now.

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1 Any other things that we need to cover here 2 at the outset? Yes, John. 3 MR. MANDYCK: Is there any particular order 4 that the speakers are going to go -- 5 MR. BROOKMAN: I thought I'd cover that just 6 about right now, okay? As I understand it -- any other 7 questions here at the outset? 8 (N ) o response 9 MR. BROOKMAN: As I understand it, we have 10 about seven individuals that have requested to speak 11 here at the outset. How many of you would like to make 12 brief overview remarks at the outset?Please raise 13 your hands. 14 (Show of hands) 15 MR. BROOKMAN: So a few more than seven. 16 Okay. Maybe 10-ish. I didn't have any particular 17 order in mind to be specific. I thought I'd just start 18 at some point in the table and just kind of work our 19 way around. 20 Joe? 21 MR. MATTINGLY: Could I request that maybe 22 GAMA go first, if people don't mind? Since our 23 overview remarks are sort of more generic than you 24 might --

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1 MR. BROOKMAN: That makes sense to me. With 2 no objection, we'll do it that way. Yes? Okay. So 3 let's start with GAMA. We'll move our way around the 4 table, and then we'll ask those that are sitting not at 5 the table to use one of these microphones. 6 So let's then start with brief overview 7 remarks. I'm hoping this is not the occasion to read 8 30 pages into the record for any of you. Please say 9 your name, all of you, for the record. 10 Joe, do you want to start us off, please? 11 MR. MATTINGLY: I'll introduce our president, 12 Jack Climp, first. 13 MR. CLIMP: As Joe said, my name is Jack 14 Climp. I'm the president of GAMA, the national trade 15 association of the furnace and boiler industry. I want 16 to thank Joe for giving me the opportunity to go first 17 in my very first hearing here. 18 This rulemaking is our top priority -- 19 MR. BROOKMAN: Hey, Jack? Pardon me. Two 20 things. We've got a little bit of a technical issue 21 that we're going to work out. 22 MR. CLIMP: Okay. 23 MR. BROOKMAN: This is not recording quite 24 properly. I'm going to ask Mohammed to make his

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(301) 565-006420 1 opening remarks first before I return to you because 2 we're working out a little bit of a glitch here. 3 MR. CLIMP: Sure. 4 MR. BROOKMAN: Okay. So, Mohammed, thank you 5 very much. 6 Rulemaking Overview 7 Mohammed Khan 8 MR. KHAN: Good morning, everybody. Again, 9 my name is Mohammed Khan. Sorry about that other 10 technical issue. Okay. Can you hear me okay now? 11 Very good. 12 Again, my name is Mohammed Khan. I'm the 13 project manager for the furnace and boiler rulemaking 14 effort. I want to welcome you and again thank you for 15 your attendance here today. Because we have a lot to 16 accomplish, I'm going to give a short overview of the 17 NOPR analyses, including a description of the changes 18 or updates to certain analyses as a result of the ANOPR 19 period. 20 I'm also going to summarize the issues that 21 Department of Energy would like to get additional 22 comment on and also summarize the issues that the 23 stakeholders have raised in their preliminary comments 24 to the NOPR.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006421 1 So, why don't we go ahead and begin. 2 (Interruption) 3 MR. KHAN: Let me try to fix that. 4 MR. BROOKMAN: Somehow we've lost power, but 5 we'll be back with it here in a moment. 6 (Pause) 7 MR. BROOKMAN: For the record, I think this 8 is the first time we've had two glitches at the outset 9 in a workshop like this. So hopefully, as we go along 10 the rest of the day we'll be in good shape. We've used 11 them all up at this point. 12 I'm going to ask that anybody that does speak 13 -- these microphones are not orbital. You have to get 14 your face right in those microphones to capture all 15 that information for the record. 16 And I think we're ready to go here. Mohammed 17 Khan. 18 (PowerPoint presentation) 19 MR. KHAN: Okay. Sorry about that. 20 Okay. This slide summarizes DOE's rulemaking 21 actions. In 2001, Department of Energy made available 22 a framework document to kick off the rulemaking effort. 23 In 2004, the Department published the advance notice 24 of proposed rulemaking and conducted a public meeting

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1 as well. And earlier this month we had our NOPR 2 published in the Federal Register. 3 I'd like to remind you that the comment 4 period for the NOPR ends on January 15th. The 5 Department anticipates publishing a final rule in the 6 Federal Register by September of next year. Next 7 slide, please. 8 This table lists the seven criteria set forth 9 by EPCA which the Department must consider in 10 promulgating energy conservation standards for furnaces 11 and boilers. This table also shows the specific 12 analyses that were conducted in response to each of the 13 criteria. 14 This slide depicts the major phases of the 15 rulemaking. Broken out here are the analytical 16 elements specific to the NOPR phase. What we're 17 indicating in the bottom part of the slide are the 18 specific analyses updated as a result of new 19 information or other data that the Department received 20 after the ANOPR, and I'll cover these now. Next. 21 The major update for the engineering analysis 22 was the incorporation of new prices for furnace and 23 boiler component materials. The Department used a 24 five-year average for prices and conducted a

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(301) 565-006423 1 sensitivity analysis using material prices from the 2 first quarter of 2005, when prices were 3 characteristically high. 4 Other updates to the engineering in response 5 to comments received from stakeholders included venting 6 costs, particularly for 81 percent AFUE furnaces 7 requiring double wall vents and an adjusted maintenance 8 cost to modulating furnaces. Next. 9 The LCC was revised reflecting changes or 10 updates listed here, with significant changes being 11 made to the RECS 1997 to RECS 2001. Note that the RECS 12 data is on a four-year cycle and that the RECS 2001 is 13 the most current available. 14 Similarly, the 2001 survey of consumer 15 finances used for the discount was the most current 16 data available at the time of the analysis as well. 17 Next slide, please. 18 The LCC analysis was updated to account for 19 impacts to low-income households and senior-occupied 20 homes. The Department also updated the LCC analysis to 21 account for the impact of the proposed standard to 22 households in the northern and southern regions. Next. 23 The national impact analysis included 24 shipment updates, including data from GAMA received in

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(301) 565-006424 1 2005, new housing projections based on AEO 2005, and 2 market share projections. Other improvements to the 3 national impact analysis included accounting for early 4 replacements of non-condensing units, conversions to 5 central heating, the rebound effect, and the Department 6 also included a sensitivity analysis for the AEO 2006 7 energy prices. Next, please. 8 A manufacturer impact analysis was also 9 performed, and that determined the industry net present 10 value. It quantified the impacts to manufacturers in 11 terms of employment and manufacturing capacity, and it 12 also determined the cumulative regulatory burden to 13 manufacturers. Next. 14 A utility impact analysis was also performed, 15 using the energy savings estimates from the national 16 impact analysis to characterize the impacts to 17 utilities in terms of fuel type and powerplant 18 capacity. Next, please. 19 The NOPR analysis also included an employment 20 impact analysis. The employment impact analysis uses 21 IMBUILD II to estimate the indirect employment impacts 22 and reports the employment changes by sector. Next, 23 please. 24 The environmental impact analysis provides

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(301) 565-006425 1 emissions estimates for CO2, oxides of nitrogen and 2 sulfur. This analysis uses the NEMS for determining 3 emissions associated with electricity generation and a 4 spreadsheet for the combustion products from 5 households. The Department considered the effects of 6 regulatory caps on emissions, noting that reduced 7 electricity generation does not necessarily result in 8 emissions reductions. The analysis also accounted for 9 the rebound effect, which reduced the total emissions 10 savings. Next, please. 11 The final NOPR analysis is the regulatory 12 impact analysis. The regulatory impact analysis 13 considered these non-regulatory approaches as 14 alternatives to new standards and used a modified NES 15 spreadsheet to gauge the impacts of them. Next, 16 please. 17 Okay. This slide summarizes the first three 18 issues on which the Department seeks comment. As 19 always, your input is very valuable to the Department. 20 The first item, the Department wants to know 21 more about the number and cost of condensing furnace 22 installs requiring structural changes to a dwelling. 23 The second issue concerns the accuracy of the 24 Department's assumption for the heat pump and electric

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(301) 565-006426 1 furnace market. Your feedback is needed to accurately 2 estimate the market shifts. And the third issue is 3 similar to the second but is specific to the market 4 share of condensing furnaces. Next, please. 5 An 83 percent AFUE standard for outdoor gas 6 furnaces is the fourth issue that the Department would 7 like to get comment on. The Department would like to 8 hear about feasibleness and the potential safety 9 concerns at this particular level. 10 And finally, Issue Number 5 concerns the 11 prices of warranties that may change as a result of 12 installs of higher-efficient equipment. Next slide, 13 please. 14 This is the last issue slide, and it lists 15 the issue topics the stakeholders raised in their 16 preliminary NOPR comments. They include the 17 consideration of regional standards, issues with the 18 proposed trial standard levels, and the boiler 19 consensus agreement received by ACEEE and GAMA. 20 This concludes my presentation, and I think 21 it provides a good segue to hear from the stakeholders. 22 Thank you very much. 23 MR. BROOKMAN: Let's do that. Hopefully this 24 will be properly recorded. Please start.

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(301) 565-006427 1 MR. CLIMP: Okay. Is it recording? 2 MR. BROOKMAN: I think it is doing just fine 3 now, yes. 4 Brief Stakeholder Comments 5 Comments by Jack Climp 6 Gas Appliance Manufacturers Association 7 MR. CLIMP: Once again, good morning. My 8 name is Jack Climp, and I am the president of GAMA, the 9 national trade association of the furnace and boiler 10 industries. This rulemaking is our top priority, as 11 its outcome will materially impact the future of these 12 two industries. 13 GAMA appreciates the opportunity to 14 participate in this public meeting, and I also observe 15 that a number of our member companies are here today to 16 discuss the issues as well, reflecting the seriousness 17 of the matter. 18 It is unfortunate so little time was afforded 19 interested parties to prepare for this meeting. We 20 have submitted an initial statement of our positions 21 and concerns, and we hope to provide a more robust 22 comment by the January 15th due date for final 23 comments. 24 Our general counsel, Joe Mattingly, is on my

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(301) 565-006428 1 right. He will present GAMA's initial statement on the 2 issues. He will be accompanied by our senior technical 3 advisor, Frank Stanonik. We also have with us our 4 consultant, Dick Topping. Many of you from both 5 government and industry have worked with Dick in prior 6 appliance standards rulemakings. 7 All of us look forward to a day of 8 constructive dialogue on these very serious matters. 9 So now I will turn it over to Joe Mattingly to present 10 GAMA's initial views on the Department's proposed rule. 11 Joe. 12 Comments by Joe Mattingy 13 Gas Appliance Manufacturers Association 14 MR. MATTINGLY: This is a brief summary of 15 our written statement. First, addressing the 16 negotiated boiler standards, we would urge DOE to 17 accept and adopt the consensus boiler standards we 18 submitted in July, which includes an 82 percent AFUE 19 for gas hot water boilers and certain design 20 requirements. 21 In the NOPR, DOE said that for legal reasons 22 it cannot accept this standards package because of the 23 proposed design requirements. We ask DOE to make a 24 limited exception from its legal principles in the case

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1 of a consensus standards agreement and accept this 2 proposal. If DOE cannot accept this agreement, we are 3 willing to work with DOE staff and other organizations 4 to explore alternatives for accomplishing the 5 objectives of this consensus proposal. 6 Turning to the regional standards issue,in 7 the NOPR DOE says that the agency does not have legal 8 authority to prescribe regional furnace and boiler 9 standards. We agree. The language of the federal 10 statute, EPCA, and its legislative history are clear 11 that DOE only has authority to prescribe uniform 12 national standards and not regional standards. 13 For example, the 1987 NAECA House Report on 14 HR87 states, quote, "For environmentalists, HR87 15 realizes a long-term objective of a rigorous uniform 16 standard effective in all 50 states," end quote. 17 However, despite these legal restrictions, DOE appears 18 poised to effectuate regional standards in another way: 19 by encouraging northern states to petition DOE for 20 waivers of the federal preemption either individually 21 or collectively. The NOPR improperly provides states 22 with a road map for success in petitioning DOE for a 23 waiver. 24 In our view, this rulemaking is not the place

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(301) 565-006430 1 for DOE to be promulgating interpretative rules about 2 the legal criteria states must meet to obtain a waiver 3 of federal preemption. We believe that the NOPR 4 provides a very lax and inaccurate interpretation of 5 the SPCA waiver criteria that, if implemented, would 6 undermine the very foundation of the national standards 7 program established by Congress. 8 In our view, the language in the NOPR 9 suggests that DOE has prejudged the state waiver 10 petitions it has invited states to submit. We believe 11 this is an abuse of discretion. 12 Turning to the proposed furnace standards, 13 GAMA supports the amended standards DOE has proposed 14 for non-weatherized gas furnaces, oil-fired furnaces, 15 and mobile home furnaces and their effective dates. We 16 commend DOE for taking into account and wanting to 17 avoid potential safety risks to consumers in 18 determining an appropriate amended standard level for 19 non-weatherized gas furnaces. 20 These same considerations, however, should 21 cause DOE to reconsider the 83 percent AFUE minimum 22 standard it has proposed for weatherized gas furnaces. 23 Although vent corrosion is not an issue with that 24 class of a product, the potential for corrosion and

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(301) 565-006431 1 failure of the heat exchanger due to condensation is an 2 issue. 3 We do not share DOE's confidence that any 4 health and safety concerns can be resolved by proper 5 equipment and system design and proper installation. 6 No weatherized gas furnace being sold today has an AFUE 7 above 81.5 percent. 8 And finally, turning to the proposed boiler 9 standards, GAMA supports the proposed 83 percent 10 minimum AFUE for oil-fired furnaces, but we strongly11 oppose the proposed 84 percent minimum AFUE for gas12 fired hot water boilers. The safety concerns DOE 13 recognized in its analysis of standards options for 14 non-weatherized gas furnaces also apply to gas boilers. 15 DOE of course knows that its efficiency test 16 procedures produce a 2 percent efficiency rating 17 differential between gas furnaces and gas boilers. A 18 gas boiler efficiency rating of 80 percent AFUE is 19 equivalent to a gas furnace efficiency rating of 78 20 percent AFUE. So DOE's wisdom in stopping at 80 21 percent AFUE for a new gas furnace standard should have 22 led DOE to stop at 82 percent for the new gas boiler 23 standard. 24 It appears to us that DOE has not adequately

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(301) 565-006432 1 considered the safety risks inherent in mandating an 84 2 percent minimum efficiency for all gas boiler models 3 and the cost to manufacturers and consumers of doing 4 what would be necessary to minimize such risks. 5 Thank you. This concludes GAMA's opening 6 statement. 7 MR. BROOKMAN: Thank you. Who would like to 8 go next? Yes. Your name, for the record. 9 MR. HARAK: Is this on? 10 MR. BROOKMAN: Yes. 11 MR. HARAK: My name is Charlie Harak. I'm 12 with the National Consumer Law Center. 13 MR. BROOKMAN: Let me just -- you need to get 14 these microphones right up next to your face. 15 MR. HARAK: Okay. Sorry about that. 16 MR. BROOKMAN: Thank you. 17 Comments by Charles Harak 18 National Consumer Law Center 19 MR. HARAK: I have some written comments I 20 will abbreviate. I do have extra copies if anybody 21 needs. 22 My name is Charlie Harak. I'm an attorney 23 with the National Consumer Law Center. I'm here on 24 behalf of our low-income clients, and we appreciate the

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(301) 565-006433 1 opportunity to comment. 2 Like all commenters, NCLC has its own 3 perspective. Ours derives from 35 years of advocating 4 for the interest of low-income energy consumers. In 5 recent years we were involved with central air 6 conditioning for ceilings and we've represented the 7 Mass Union of Public Housing Tenants in NRDC versus 8 Abraham. 9 We believe that DOE tends to understate the 10 benefits and overstate the cost to low-income consumers 11 when considering whether to impose higher appliance 12 standards. To the extent this is so, DOE therefore 13 improperly burdens low-income consumers with higher 14 energy bills. 15 I trust folks can hear me even though the 16 mike is not working? 17 Regarding the boiler furnace standards in 18 particular, we find it very troubling that DOE is 19 proposing a nationwide AFUE of 80 percent for gas 20 furnaces. 21 I would like to share with you the experience 22 of a young woman, Danielle P., who lives in a rental 23 apartment in Framingham, Massachusetts, and has an old, 24 inefficient furnace. She lives in a two-bedroom town

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1 house. She's out of the house most days at work and 2 her annual gas bills still run over $1,500 a year. She 3 has heard that the property owners of her property 4 development plan to replace the heating system. This 5 is a large subsidized development. 6 Danielle understands that the heating system 7 had been there since the development was built about 30 8 years ago. She is concerned that the owner will 9 install minimum efficiency furnaces -- that is, 80 10 percent under this standard -- consigning current -- to 11 another few decades of needlessly high energy 12 consumption. 13 Among her immediate neighbors are an elderly 14 couple who keep the heat very low during the winter and 15 put on lots of sweaters because they just can't afford 16 to be any warmer. 17 Danielle also works at a low-income agency in 18 Framingham, and she sees many others in her community 19 who, like Danielle, are renters and who rely on 20 property owners to choose the equipment which will be 21 installed when old systems need replacement. 22 Under the proposed 80 percent standard, 23 scores of residents in Danielle's area and hundreds of 24 thousands or perhaps millions of low-income households

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1 in northern tier states will be locked into inefficient 2 80 percent AFUE systems for decades to come even though 3 DOE's own analysis shows that 90 percent AFUE systems 4 would provide net benefits in northern tier states. 5 This leads to NCLC's second point. DOE, 6 presumably through its Office of Legal Counsel, has 7 taken the position that, quote, "The act does not 8 authorize the adoption of regional standards." That's 9 a quote from the -- 84 ANOPR. That one sentence just 10 quoted appears to comprise DOE's entire legal analysis 11 of this critical issue, at least as to the extent 12 published in the Federal Register. 13 This reading unsupported by a real legal 14 analysis results in the adoption of bad public policy. 15 Huge energy savings both to individual residential 16 consumers and to society as a whole are left on the 17 table based on a cramped reading of a definition in the 18 statute. This definition, NCLC asserts, was not 19 intended to address the important and highly 20 substantive issue of whether DOE may or should adopt a 21 -- tier standard. 22 In addition to greatly reduced energy 23 savings, DOE's reading significantly increases 24 emissions of greenhouse gases. Low-income households

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(301) 565-006436 1 in northern tier states will be left carrying even more 2 crushing energy burdens. 3 Moreover, DOE not only harms consumers by 4 denying the authority to adopt regional standards, in 5 the case of boilers and furnaces it may not -- the 6 industry that much. Manufacturers already 7 differentially ship high- and low-efficiency units at 8 high and low volume air handler space under regional 9 considerations. There is no good public policy reason 10 why DOE's standards should not similarly vary by 11 climate, and the law does not prohibit this outcome. 12 DOE's reading of the law undermines the very 13 purpose of the Energy Conservation Program for consumer 14 products. The technical and program managers for this 15 project should make it clear to legal staff that their 16 job is to get to "yes" if under any fair and reasonable 17 interpretation of the relevant statutes DOE in fact has 18 the authority to adopt a two-tier standard. At times 19 it seems that DOE is more inclined to get to "no" than 20 carry out the will of Congress. 21 And I just mention NRCC versus Harrington, 22 NRDC versus Abraham, Exception 141 of the recent EPAC 23 law, requiring DOE to report on its failures to comply 24 with deadlines.

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(301) 565-006437 1 Quite simply, DOE's managers need to find a 2 way to get to "yes" on the issue of -- standards for 3 furnaces. This will lead to far better results in 4 terms of complying with congressional intent as well as 5 in terms of reducing inefficient use of energy and 6 unnecessary emissions of greenhouse gases. 7 And this leads to my third and final point. 8 If DOE cannot find a way to get to "yes" on a two-tier 9 standard, it must implement with utmost good faith the 10 road map it has laid out under the NOPR under the 11 heading "Setting Standards for Different Regions" for 12 states that wish to seek such waivers. 13 The waiver route is by far the less 14 preferable route for states such as Massachusetts, 15 where I come from, that have adopted higher efficiency 16 standards for furnaces. But states will avail 17 themselves of this route if it becomes the only 18 available option. 19 NCLC is very concerned that the guidelines 20 and suggestions that DOE has offered regarding waivers 21 look helpful on their face but once again may lead to 22 "no" rather than "yes" if staff, and I mean legal staff 23 primarily, review those waivers and find out or 24 determine that they are not valid.

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1 NCLC encourages DOE to seriously reconsider 2 with an open mind the question of whether the law 3 allows the adoption of a two-tiered standard for 4 furnaces and to more carefully consider the dilemma 5 that low-income tenants in particular face since they 6 have no say in the furnaces that are installed to pay 7 their ensuing energy bills. 8 NCLC also will reserve its rights to offer 9 more extensive written comments by the January deadline 10 on the important legal issues. Thank you very much. 11 MR. BROOKMAN: Thank you. Several 12 individuals on this side of the table have requested to 13 speak. Do you want to go next, Mark? Mark Kendall. 14 Comments by Mark Kendall 15 Burnham Hydronics 16 MR. KENDALL: I'm Mark Kendall with Burnham 17 Hydronics. I'm currently the engineering manager 18 there. I won't read my comments; they're a little 19 long, so I'll try to be concise. They revolve around 20 two points. 21 The first point, the heading in my comments 22 says "Adopt the Negotiated Boiler Standards Agreement." 23 DOE did provide an explanation in the NOPR why you 24 didn't adopt that agreement, which I appreciate the

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(301) 565-006439 1 chance to respond to that explanation. My comment 2 provides the details. 3 But in essence, my response is very similar 4 to the comment you just heard, which is essentially 5 that the legal team's responsibility at DOE is to 6 provide the managers with advice. What does the law 7 say, how do you interpret it, what are our risks. The 8 managers are responsible for making the policy 9 decisions, taking into account the risks and the 10 benefits of that. 11 And in the central air conditioning 12 rulemaking, a similar issue came up whether to adopt a 13 design requirement for thermostatic expansion valves. 14 DOE decided to reject that at the time but not on legal 15 reasons, on policy reasons, making a very conscious 16 decision to keep the legal options open for a time in 17 the future when DOE would want to adopt such a 18 requirement. 19 And this should be one of those times. It's 20 going to be very rare that you get a rulemaking 21 decision handed to you on a silver platter, and you 22 have that opportunity here to make a lot of people 23 happy. 24 Moving on to the next topic which is included

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(301) 565-006440 1 in the negotiated standards, which was a requirement 2 for 82 percent efficiency for gas hot water boilers. 3 You heard GAMA mention this earlier. Throughout the 4 history of this rulemaking, which is probably now five 5 or six years, the industry's comments on this proposed 6 level of 84 have been very consistent. 7 Time and time again, in every comment GAMA 8 submitted, probably in every comment that industry 9 members have submitted, we've expressed our serious 10 concerns about the impact that 84 percent efficiency 11 minimum standard would have on the industry and on 12 consumers. And those arguments were very similar, if 13 not identical, to those for furnaces at 82 percent. 14 And yet in the NOPR, in rejecting 82 percent 15 for furnaces, DOE provided a very thorough explanation 16 but provided no explanation, no counter arguments, no 17 statements in any respect to justify adopting 84 in the 18 face of all of the similar concerns expressed by the 19 industry. 20 So it's difficult to decide at this point how 21 to respond to DOE. We have to speculate as to how DOE 22 could come up with an 84 for boilers, at the same time 23 rejecting an 82 for furnaces. 24 Burnham does have an 84 percent efficient

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(301) 565-006441 1 atmospheric boiler on the market similar to what DOE 2 assumed in the analysis, a tear-down cost buildup, that 3 type of thing. And the key -- and there have been at 4 times furnaces during the course of this rulemaking 5 that were very near the 82 level. 6 The question is not whether it's technically 7 possible to produce an 84 percent AFUE atmospheric 8 boiler. Of course it's technically possible. It's not 9 incredibly costly to do that. The prospects of doing 10 that as a minimum standard throughout the industry is 11 not a very expensive prospect. The motivation for 12 coming to the table and begging DOE not to adopt an 84 13 minimum is not because of any sort of industry 14 financial implications as far as the cost of the 15 product. 16 The motivation is purely based on the wisdom 17 of having no option for anybody in the country to 18 install any atmospheric gas boiler less efficient than 19 84 percent. At higher efficiencies, condensation in 20 the vent systems and the flue and the heat exchanger 21 becomes more of an issue. Sufficient draft through the 22 boiler to provide proper venting, particularly in 23 tighter homes, in homes with exterior chimneys, those 24 become more of an issue.

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1 And over time, as those types of 2 installations get to a smaller and smaller and smaller 3 percent of the population, there still needs to be at 4 least one model on the market at a lower efficiency 5 that can be installed to properly vent in those 6 applications. 7 And that's the essence of this question. It 8 is, should an 84 percent be required in every home in 9 the marketplace as a minimum, and the answer to that is 10 definitely no. You came up with the right decision in 11 furnaces. You should be consistent and apply the same 12 logic on the boiler side. 13 Also, one technical issue. DOE did decide to 14 include GAMA's estimate of Category 3 venting systems 15 at each efficiency level, and again we appreciate that 16 DOE did that. What you failed to realize is that 17 there's no need for a Category 3 vent system unless the 18 boiler is also fan-assisted. 19 So at the time GAMA provided the data with 20 current installations at 84 percent that were Category 21 3, subsumed within that was also the concept that these 22 are also fan-assisted boilers. There is a whole set of 23 costs that go into those boilers that must be 24 considered when you're also considering the venting.

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(301) 565-006443 1 There is no need for a Category 3 positive pressure 2 vent system when the boiler is atmospherically vented 3 because it only vents with a negative pressure in the 4 vent system. 5 So that is one technical issue that needs to 6 be corrected, and certainly, we will help DOE with the 7 analysis on that. 8 And we also thought of how to monetize the 9 risks because a lot of this is risk-based. How do we 10 capture in the analysis the risk of going to an 84. 11 One of the ways you can do that is to assume, which is 12 a very real possibility, that everybody in the 13 industry, rather than deciding to satisfy an 84 with 14 the lowest cost option, satisfies it with the lowest15 risk option, which is to completely transition to fan16 assist Category 3 vent systems. 17 You have all the information on the venting. 18 We will provide you with information on the fan-assist 19 portion. That should help you capture the full risk of 20 that proposition. 21 So, appreciate the opportunity to provide 22 comments, and look forward to the opportunity to talk 23 more about them in detail throughout the day. 24 MR. BROOKMAN: Thank you, Mark. Now to the

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(301) 565-006444 1 next gentleman. James Ranfone. 2 Comments by James Ranfone 3 American Gas Association 4 MR. RANFONE: Jim Ranfone with the American 5 Gas Association. We did supply an oral (sic) 6 statement, and I will not go through it in detail. I 7 do want to mention a couple things, and do plan to 8 participate in the remainder of the meeting as well as 9 submit written comments. 10 One, we appreciate DOE's providing us with 11 nine days in which to submit our written comments. 12 That was a little bit of a challenge, but we did 13 provide them and I do want to go through a few things. 14 First, I think on the weatherized -- I'm 15 sorry, the non-weatherized furnace, the 80 percent is 16 right on target. I think DOE listened. You reviewed 17 all of the technical aspects of venting. It's too bad 18 you didn't carry that over to the gas boiler, but we do 19 believe that the 80 percent is the level that should be 20 set for non-weatherized furnaces. 21 One thing I do want to mention, in 22 development of the 80 percent furnace, somebody said23 they were inefficient. I think that we call them mid24 efficiency furnaces, number one. Number two, there was

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1 a lot of effort in developing the product. The product 2 is designed to be incorporated as a replacement product 3 when it's common vented with a water heater. 4 So that, when you talk about replacing or 5 establishing a condensing furnace standard in the 6 north, one thing you need to consider is the 7 replacement market up there, which is substantial. The 8 reason furnaces are designed with what we call Category 9 1, or reduced draft technology, is so that it could be 10 directly replaced in a situation where you have a 11 furnace and boiler common venting. 12 If you go to a condensing requirement, those 13 installations which are common vented will be left with 14 either a gas water heater that has to be resized. We 15 call them orphan water heaters. That's going to cost 16 us consumers. Talk about the Massachusetts situation. 17 That's a cost that the consumer is going to have to 18 pay. They are not going to be able to run that water 19 heater on an oversized vent system. 20 That choice, or going with an electric 21 resistance water heater for providing space -- 22 providing water heating. If that's an option you want 23 to consider as energy conservation, I think we're at 24 the wrong meeting.

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(301) 565-006446 1 So keep in mind that mandating the condensing 2 furnace even regionally has impacts for the replacement 3 market. I think DOE captured that in the rulemaking. 4 The 80 percent is the right level. I lived 5 through the late '80s when we did have equipment, 6 furnaces, that were above 80, 83, 84 -- I'm talking 7 about fan-type furnaces -- 85, 86, and we learned the 8 lesson the hard way. You have a lot of vent failures. 9 The industry and the manufacturers and utilities spent 10 a lot of money and research to develop new venting 11 tables in order to accomplish what we needed, and that 12 is tables that would accept Category 1 induced-draft 13 furnaces. They're available today. 14 So there's a lot of history to this 80 15 percent, 81 percent, and why we need to maintain that 16 80 percent and that margin of safety for the new 17 products. 18 On the boiler, we think the negotiated 19 settlement deal that's been struck -- we agree with the 20 number, 82 percent, and we're happy that the bodies 21 that were involved in that, both the energy 22 conservation groups and the boiler divisions, agrees 23 that the 82 percent is the correct level. 24 We don't agree with the prescriptive

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(301) 565-006447 1 requirement, not just from the legal interpretation 2 that has been presented by DOE, and I agree with that 3 and I think I'd like to hear somebody come up with a 4 reason why that legal interpretation is not sufficient. 5 But even more importantly, first, we're 6 talking about banning standing pilots. It sounds good 7 on the surface, but there are clients out there that 8 actually operate without electricity. Gravity-type 9 boilers in certain areas of the country. You are 10 eliminating that product from the marketplace because 11 they're going to have to do something, either a -- 12 system or some other method, for providing the furnace 13 to operate. 14 Number two, we talked about mandating a 15 temperature reset. What information has been provided 16 that says that that device is going to provide 17 improvements in efficiency or reduce energy 18 consumption? The only thing I've seen in negotiated 19 study, or settlement rather, was a letter that had been 20 written from a paper from 1987. 21 It's one thing to mandate a product or 22 mandate a procedure once it's been fully explored in 23 terms of its ability to improve efficiency. What about 24 its reliability? Is it field set? There are many,

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(301) 565-006448 1 many arguments that you can make. 2 I'm not saying get rid of it, but if the 3 industry wants that added as part of their boilers, 4 then they ought to test it. Perform the reliability 5 and the safety tests and assure the customer that they 6 are going to get energy savings in that particular 7 device, not just start mandating it and saying, well, 8 this device is going to save you this energy. It needs 9 to be provided with substantiation that it's cost 10 effective and does provide energy savings that are 11 purported that it does. 12 In terms of the regional standards, we agree 13 that when -- was developed, I think everybody that was 14 involved in it -- and I was involved peripherally on 15 that -- that the reason we got into a maximum standard 16 was, first of all, for product distribution, so that 17 manufacturers could provide that product anywhere in 18 the United States. 19 The preemption aspect was hopefully very 20 strong so that we would discourage states from doing it 21 because why would we want to, you know, encourage state 22 preemption when that, again, causes disruptions in the 23 distribution system? 24 So the maximum standard provisions that were

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(301) 565-006449 1 agreed to back then and the preemption was based on the 2 industry's need to have one single distribution system 3 and not worry or cause another bureaucratic DOE 4 function of saying where you can and where you can't 5 sell a product. And I think that's captured in this 6 proposal from the Department, and I would encourage DOE 7 to continue along with that sound reason of one 8 national standard. 9 On the weatherized furnaces, the 83 percent, 10 we certainly are a little puzzled by how that came 11 about because, from what I can tell, we have never seen 12 a product that's above 82.5 or 82.6, I believe, in the 13 GAMA directory. And yet there's a proposal on the 14 table for 83 percent as the minimum. 15 Weatherized furnaces do offer a little bit 16 more of a challenge in terms of -- has to be 17 considered. We think breaking that product in a 18 separate category just doesn't make sense. We think if 19 you're going to break it out, then at least adjust the 20 number so that it's a reasonable number. 21 We have some other comments on utility 22 impacts, or lack of analysis or the need for analysis, 23 more of a definite analysis. But for that, we'll keep 24 our remarks limited this morning and continue on later

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(301) 565-006450 1 in the day. 2 MR. BROOKMAN: Thank you. Kit, do you have 3 comments? Kit Kennedy. 4 Comments by Katherine Kennedy 5 Natural Resources Defense Council 6 MS. KENNEDY: Good morning. I'm Kit Kennedy 7 with the Natural Resources Defense Council. NRDC is a 8 national environmental advocacy organization with over 9 a million members and activists nationwide. NRDC has 10 spent decades working to build and improve DOE's 11 federal appliance standards programs because of the 12 important energy, environmental, consumer, and 13 reliability benefits of appliance efficiency standards. 14 We're also active on the state level as well. 15 We're still reviewing the proposed furnace 16 and boiler rule, and will be submitting detailed 17 comments in January. So what I would like to do this 18 morning is just highlight a couple of areas where I 19 think Department of Energy has missed important 20 opportunities to save energy and has inexplicably and 21 impermissibly opted out of important opportunities to 22 save consumers money, improve the environment, and 23 reduce natural gas crisis, among many other benefits. 24 I'll start with the consensus boiler

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(301) 565-006451 1 standard, and it's brief there. I'd just like to thank 2 AMI and ACEEE and the others who negotiated the 3 consensus standard, which will have a lot of energy 4 savings and is also, I think, practical from the point 5 of view of the manufacturers. 6 The Department of Energy's very brief and 7 sort of total rejection of the consensus standard is 8 very troubling. But there is time to turn this around. 9 This is simply a proposed rule. We would urge DOE to 10 go back to legal counsels with the analysis that's been 11 provided already and that will be provided in January 12 about why the definition of standard is not the key 13 issue in interpreting the statute. As others have 14 pointed out, there are plenty of places where multiple 15 standards are used in the statute and many references 16 to standards in the plural as well as in the singular. 17 So this is one area where DOE has missed an 18 opportunity to take a consensus standard that would 19 save a lot of energy, and we urge you to go back to the 20 table and incorporate it into the final rule. 21 The second area where we think DOE has missed 22 some important opportunities is in its failure to 23 analyze the impact of strong efficiency standards in 24 terms of reducing natural gas prices. And here DOE, on

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(301) 565-006452 1 the ANOPR, was provided with comments from, among 2 others, NRDC, the American Chemistry Council, and Dow 3 Chemical, urging the Department of Energy to examine 4 the impact of a strong efficiency standard for gas 5 furnaces and lowering natural gas prices for all 6 consumers. 7 Let me tell you that NRDC and Dow don't often 8 submit joint comments together to federal agencies, but 9 energy efficiency is one area where we have important 10 mutual interests. 11 And Department of Energy, again very briefly, 12 declined to do this, simply saying it's never been done 13 in the past and it's too hard. And I would submit, and 14 we'll certainly be adding to this in our January 15 comments, that everyone in this room has a stake in 16 reducing and stabilizing natural gas prices. 17 Significant reductions in demand would do that, as well 18 as significant increases in supply, and that the 19 Department of Energy should analyze the impact of 20 standards on gas prices and factor that into its 21 decision on which standard it adopts in the end. 22 On the issue of national standards versus 23 regional standards versus state standards, I think 24 there is an opportunity for consensus here if the folks

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(301) 565-006453 1 around the table really think about where this is 2 going. NRDC, in its comments on the ANOPR, urged the 3 Department to adopt a 90 AFUE standard on a national 4 basis, and indeed the NOPR finds that for Americans as 5 a whole the TSL4 standard would have net benefits for 6 consumers for the country as a whole. 7 So that's one way to go. Another way to go 8 would be to follow the path that DOE seems to be 9 signalling, where the 20 states go ahead and file 10 petitions for waivers and, you know, maybe end up with 11 20 different efficiency standards for furnaces and 12 boilers at the state level. 13 If that's the only way that we have to go to 14 improve furnace efficiency, then NRDC and other 15 environmental and efficiency groups are prepared to go 16 from state house to state house from Augusta to 17 Anchorage, getting those standards done. But I don't 18 think that that's a result that anyone should want, not 19 the manufacturers, not the environmental community, and 20 not the Department of Energy, because it is in essence 21 walking away from an approach to efficiency standards 22 that has served us well over the years and walking away 23 from the Department of Energy's responsibility to set 24 strong national standards.

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(301) 565-006454 1 So I submit that regional standards are an 2 area where we might be able to find consensus in the 3 end. Instead of having 20 different state standards or 4 a 90 AFUE national standard that some don't want, but 5 to have the Department of Energy set regional standards 6 for northern states and southern states might be an 7 area where consensus could be found. 8 And again, the very brief explanation of why 9 regional standards are consistent with the statute 10 doesn't make sense and is, again, based on a very, very 11 cramped notion of the statute and DOE's 12 responsibilities under the statute. 13 The last issue that I'd like to flag is the 14 compliance date. And again, I think this is an area 15 where we have to really get serious and look at the 16 importance of this issue as we look at the compliance 17 date. I don't think this is acceptable to the public, 18 to Congress, to the states, to take a standard which is 19 a decade late and then put the compliance date out to 20 2015. There's no reason to -- there's no requirement 21 to do it based on the statute, and there is every 22 reason to move up the compliance date and get to a 23 standard that goes into effect and starts producing 24 energy savings in the very near future.

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(301) 565-006455 1 So again, we appreciate the work that DOE has 2 put into developing the furnace standard. We do think 3 there are a number of missed opportunities here, and 4 it's not too late to turn them around. We look forward 5 to submitting more detailed comments in January and to 6 working with all the parties at the table on this 7 important issue. 8 MR. BROOKMAN: Thank you. Do you wish to 9 make comments? No. 10 As a matter of balancing the comment, maybe 11 we could hear from a manufacturer next. John Mandyck, 12 would you like to speak? And then I'll return to you, 13 Steve. Yes. 14 Comments by John Mandyck 15 Carrier Corporation 16 MR. MANDYCK: Good morning, and thank you. 17 My name is John Mandyck, and I'm with Carrier 18 Corporation. We're the world's largest manufacturer of 19 gas furnaces. We're also a member of GAMA, and we 20 certainly associate ourselves with the GAMA comments -- 21 MR. BROOKMAN: John, you've got to get real 22 close and speak loudly, please. I'm sorry. 23 MR. MANDYCK: Okay? 24 MR. BROOKMAN: Yeah.

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1 MR. MANDYCK: We're a member of GAMA, and we 2 certainly associate ourselves with the GAMA comments, 3 particularly as it relates to regional versus federal 4 standards. 5 We commend the Department of Energy for the 6 depth and detail of the analysis that led to the NOPR, 7 and we understand there are many complicated issues 8 that will need to be sorted out over the next several 9 months. 10 I think at the beginning of the day and the 11 end of the day we sell consumer products. First and 12 foremost in our minds and our designs has to be safety 13 and reliability of those products that go into millions 14 of homes across the country. 15 So with that backdrop, I think I would say, 16 when you get to the non-weatherized proposed standard, 17 DOE got it right. The 80 percent AFUE will avoid 18 corrosion and venting problems. It will avoid some of 19 the safety problems and product issues that we've seen 20 in the past. We certainly support this level and 21 commend DOE for its analysis that arrived at this 22 level. 23 When you look at the weatherized furnaces, we 24 don't think DOE got it right here. An 83 percent AFUE

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(301) 565-006457 1 level will cause flue gas to condensate, leading to 2 drainage issues, possible roof damage. And because the 3 units are outdoors, we also have the issue of frozen 4 condensate which can lead to flue -- could block the 5 flue passages and affect the safe operation of these 6 types of furnaces. 7 Our own lab testing shows that 80 percent 8 AFUE is the max efficiency level for the safe and 9 reliable operation for a full family of products for 10 these weatherized furnaces. And we point out, as has 11 been mentioned before, there are no products in the 12 marketplace today at 83 percent, which is a significant 13 correction to DOE's analysis, which seemed to conclude 14 that there are. So we urge adoption of an 80 percent 15 AFUE level for the weatherized furnaces. 16 And our last comment today is, we disagree 17 with the Department's conclusion that condensing18 furnaces have the same maintenance cost as non19 condensing furnaces. In our experience, condensing 20 furnaces have different installation and maintenance 21 issues, which lead to different cost issues. 22 Condensing furnaces can be prone to the effects of dirt 23 buildup in vent and drain systems, as well as ice in 24 extreme weather conditions.

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(301) 565-006458 1 Most condensing furnaces have a plate-thin 2 condensing heat exchanger that is susceptible to dust 3 buildup as well, leading to different cost issues when 4 it comes to maintenance and installation. 5 So again, we thank the Department for the 6 opportunity to comment today. We look forward to 7 working with the Department on the rulemaking proposal. 8 MR. BROOKMAN: Thank you. Steve Nadel. 9 Comments by Steve Nadel 10 American Council for an Energy Efficient Economy 11 MR. NADEL: Thank you. I'm Steve Nadel with 12 the American Council for an Energy Efficient Economy. 13 I wanted to summarize a few comments. 14 First, I agree with many of the comments made 15 regarding boiler standards. We worked with GAMA and 16 others to develop a consensus agreement. This 17 consensus agreement has more than double the energy 18 savings of the standard that DOE proposes, but DOE, on 19 very narrow legalistic reasons, didn't even consider 20 it. 21 We think DOE made a mistake on the legal 22 reasons. Several previous commenters have described 23 that. We'll have additional comments on that in our 24 written comments, but we do urge DOE to take a more

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1 expansive view that the purpose of the legislation is 2 to get the maximum energy savings that are technically 3 feasible and can be economically justified, 4 particularly in the case of boilers. DOE fell woefully 5 short of this objective. 6 Second, on regional standards -- several 7 people have also talked about this -- we think the DOE 8 analysis clearly shows that condensing furnaces are 9 cost effective in the north. In fact, in many of these 10 states we now have a 50 percent market share or more, 11 indicating that in many cases consumers agree with 12 that. 13 We think it's inevitable that all the 14 northern states will eventually have condensing furnace 15 standards. We can do the state-by-state slog or we can 16 try to work something out with either DOE or with the 17 manufacturers. But we think its inevitable, and we 18 would prefer to try to work something out in the 19 context of this rulemaking. 20 One thing I would add is I noticed on the 21 train coming in there is a new article in Appliance 22 Magazine that I think the president -- chairman of GAMA 23 pointed out, that the need to work on consensus, the 24 need to avoid state-by-state solutions. We're open to

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(301) 565-006460 1 considering that, but as DOE has currently done that, 2 we are on the state-by-state slog, as Kit put it, from 3 Anchorage to Augusta. 4 Third, I wanted to raise an issue other 5 people haven't raised, which is the question of oil 6 furnaces. In this NOPR, DOE is proposing an 82 percent 7 AFUE requirement for oil furnaces. We think that is 8 based on overly high estimates of installation costs of 9 these units. We note that in the ANOPR DOE said there 10 were no extra installation costs at 83 percent. All of 11 a sudden they have substantial extra installation costs 12 at 83 percent in the NOPR. 13 There is no explanation for the change. The 14 only explanation pointed out the need to allow for even 15 higher efficiencies than in the ANOPR, but there is 16 nothing saying that all of a sudden there is some new 17 information indicating substantial extra installation 18 costs at 83 percent for oil furnaces. 19 We also note -- I guess I'll leave it at 20 that, and I ask that we have this issue put on the 21 agenda for later. We can provide some additional 22 details on it. 23 Fourth, we are concerned about the effective 24 date of the standard. DOE is proposing that for this

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(301) 565-006461 1 80 percent standard that 99 percent of existing 2 equipment needs seven years to elapse before the 3 standard takes effect. We think this is basically 4 laughable. Under NAECA, this standard was supposed to 5 go into effect several years ago. We believe DOE has 6 the discretion to adjust the effective date based on 7 how much time is legitimately needed for people to 8 prepare. 9 We note that in the process improvement rule 10 DOE did keep some wiggle room in terms of establishing 11 the effective dates, and we recommend that DOE look 12 carefully at what is needed. To say you need seven 13 years to up efficiency for 1 percent of units just 14 doesn't make sense. 15 Finally -- yeah, why don't I leave it at 16 that. 17 MR. BROOKMAN: Okay. Thank you. Who else 18 would like to go next? Please. 19 Comments by John Huber 20 National Oilheat Research Alliance 21 MR. HUBER: Hello. I'm John Huber with the 22 National Oilheat Research Alliance. As you know, the 23 oil heating industry has been a proponent of increased 24 efficiency. NORA has spent significant funds

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(301) 565-006462 1 encouraging conservation through media outreach. 2 Additionally, we have developed and delivered 3 educational resources to enable technicians to assist 4 our consumers in saving fuel. 5 NORA has also sponsored the development of 6 high efficiency boilers and furnaces. This includes, 7 for example, oil-condensing appliances which are now 8 commercially available and represent the dramatic 9 market transformation. 10 Finally, we are now working with Brookhaven 11 National Laboratory to better understand efficiency and 12 fuel consumption in a home. 13 Over the years, our industry partners have 14 complained about the AFUE standard, that it is not an 15 accurate test for boilers and that it fails to 16 correctly predict fuel usage. This standard does not 17 accommodate or encourage techniques used in the 18 industry to lower fuel use, such as control strategies. 19 As a result, the AFUE has diverged from providing a 20 realistic view of fuel consumption and does not provide 21 rewards for innovation. 22 Further, the heating oil industry often uses 23 a combined boiler that provides for both heat and 24 domestic water. AFUE does not apply to these

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1 combination units. As the shell of the house becomes 2 tighter and hot water products more prevalent, domestic 3 water becomes more important. 4 NORA has been sponsoring research to better 5 understand the actual fuel consumption of a home, 6 including both domestic water and heat. Preliminary 7 results indicate that the relationship of AFUE to 8 actual consumption is tenuous. We have found that in a 9 limited number of tests that correlation of AFUE and a 10 more complete seasonal efficiency test is between 1 and 11 10 percent. Thus, as DOE pushes a nominal AFUE rating 12 up by 3 to 4 percent, the stronger impact of the boiler 13 configuration and control strategies are not being 14 utilized, evaluated, or rewarded. 15 NORA would welcome and encourage the 16 Department to more fully integrate information about 17 energy savings strategies into its test procedures as a 18 first step towards developing new efficiency levels. 19 Finalizing this rule based on the current AFUE will 20 ensure that this standard is in place decades into the 21 future and we believe will inhibit rather than 22 encourage innovation. 23 The Department also evaluated and discussed 24 preemption and the role of the states in waivers. We

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(301) 565-006464 1 understand the sound public policy reasons for both 2 preemption and state flexibility. However, we do not 3 think that it applies in the oil heating industry. 4 There are two primary reasons for that. 5 First, the oil heating industry is much less 6 geographically diverse in its application than the 7 other fuels and is concentrated in the colder regions 8 of the country. Second, the price of oil is 9 established internationally, and the variability of oil 10 prices across the country is much less than natural gas 11 or electricity. Thus, the arguments for flexibility 12 are much less compelling. 13 Thus, in evaluating oil heating standards and 14 whether a state should be able to waive the standard, 15 the Department should look closely at the marketing of 16 oil heat. The Department suggests that a region or a 17 group of states could file such a petition. However, 18 if the New England states or New York and Pennsylvania 19 change their AFUE standards, it would essentially 20 become a national standard due to their significant 21 share of the oil heating market. 22 In inviting them to consider changing AFUE's 23 independent of DOE, the Department is abrogating its 24 responsibility to establish meaningful standards that

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(301) 565-006465

1 benefit consumers. We are confident and believe that 2 the thorough process undertaken by DOE is superior to 3 the political judgments that are likely to be made in 4 the states. 5 We will be submitting full comments by the 6 January 15th deadline. Thank you. 7 MR. BROOKMAN: Thank you. Other comments 8 here at the outset, brief overview comments. A few of 9 you -- yes, please. 10 Comments by Patrick Holleran 11 Field Controls, LLC and Effikal 12 MR. HOLLERAN: Yes, I'm Patrick Holleran, 13 president of Field Controls and Effikal. Both Field 14 Controls and Effikal are basically venting products 15 companies, and we're both members of GAMA. 16 I'm here because I strongly oppose the 84 17 percent minimum AFUE for gas boilers, and I do so for 18 several reasons. First, just from the logic of it, I 19 don't understand where gas furnaces are recommended to 20 move from 78 to 80 percent while gas boilers must move 21 from 80 to 84 percent. It seems logical to maintain 22 the historical 2 percent differential. 23 Secondly, analyzing the DOE's technical 24 document and trying to come to grips with the rationale

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(301) 565-006466

1 for 84 percent from a cost savings or energy savings 2 viewpoint, according to Table 8.45, 82 percent 3 represented a $125 savings over the life of the boiler, 4 which was represented as, on average, 17 years. 5 Eighty-four percent represented a $215 savings over the 6 life of the boiler. 7 The difference between the 82 and 84 percent 8 according to the technical document was $90 over the 9 life of the boiler. Break that down to $5.29 a year, 10 less than two cents a day. 11 And my third point strikes a chord with 12 everybody, I think, on the manufacturing side, and that 13 has to do with safety. And I'll read from statements 14 that I'll provide. 15 As a venting products company, we have a 16 great deal of experience with boiler vent 17 installations. Residential boilers are often installed 18 in older homes. Most often, the boiler is located in 19 the basement of the home and is anywhere from five to 20 15 feet from the chimney. Typically, single wall 21 galvanized pipe is used to transfer the vent gases from 22 the appliance horizontally to the chimney. Quite 23 often, this basement has been converted into a bedroom 24 or playroom.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006467 1 Replacement of an 80 percent boiler with an 2 84 percent boiler will be required in these 3 installations in the future, since 84 percent will be 4 below its AFUE available. The additional condensation 5 and corrosive acids created in these systems will form 6 in these horizontal vents, eroding the integrity of the 7 vent, draining back into the appliance, eroding the 8 heat exchangers and other components of the appliance, 9 and quickly creating unsafe conditions. 10 Eighty-four percent gas boilers will increase 11 the likelihood of CO leakage into the living space, 12 resulting in potential CO poisoning and death. 13 As a representative of the industry and 14 president of a leading venting products company, I'm 15 extremely concerned with the 84 percent AFUE minimum 16 for gas boilers. I strongly recommend adopting 82 17 percent minimum AFUE for gas boilers. This will 18 maintain the historical 2 percent differential between 19 furnaces and boilers. 20 More importantly, the dollars savings to the 21 homeowner represented by 84 percent versus 82 percent 22 is nominal. At best, $5 a year, $5.29 a year. The 23 minimal savings is not worth the additional risk to 24 human lives created by the additional condensation in

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(301) 565-006468

1 the vents. 2 MR. BROOKMAN: Thank you. It seemed as 3 though a few people that are not sitting at the table 4 wish to make opening remarks. Yes, Andrew. Andrew 5 deLaski. 6 7 8 Comments by Andrew deLaski

Appliance StandardsAwarenessProject MR. deLASKI: Andrew deLaski, Appliance 9 Standards Awareness Project. I just want to join in 10 the comments made earlier by -- can you hear me? Is 11 that working now? Okay. 12 Andrew deLaski, Appliance Standards Awareness 13 Project. I'll keep my remarks brief but also -- one of 14 the remarks made earlier by Kit Kennedy of NRDC, as 15 well as ACEEE and Charlie Harak from the National 16 Consumer Law Center. They have made the points that I 17 would make. 18 But I do want to emphasize a couple of things 19 briefly. One is that the earlier speakers have 20 emphasized several opportunities the Department has had 21 to take advantage of some large energy savings at stake 22 in this rulemaking. One would be regional standards. 23 We've already heard about that. 24 One has been the consensus agreement that

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1 we've heard about from the boiler manufacturers. We're 2 a party to that agreement, along with other 3 organizations. It's disappointing to see that 4 agreement rejected. 5 The implementation date of 2015 I think is 6 verging on the absurd for this rulemaking and one that 7 should be reconsidered. 8 I also would point out a fourth area that 9 hasn't been brought up this morning because it was not 10 -- the ANOPR phase, which was the opportunity in this 11 rulemaking to address the electricity consumption of 12 furnaces. It has been put aside at the moment. It 13 will come up at a later rulemaking, which I think is 14 appropriate, in an effort to get this rulemaking done. 15 But I think it's -- time and time again in 16 the rulemaking process we've seen opportunities to 17 address the need to save energy and it's been turned 18 aside. It's been a very frustrating process from the 19 point of view of the large energy consumption at stake 20 with this set of products and the opportunity to save 21 energy through appropriate national standards. 22 I do want to commend the Department for what 23 I think is a silver lining in the proposal, which is 24 the guidance that you prepared for states to seek

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(301) 565-006470 1 waivers from federal preemption. I think you've done 2 an admirable job of providing this guidance within the 3 constraints of the law. 4 The energy and economic benefits are 5 potentially substantial for many states, and then with 6 your guidance you've taken some of the uncertainty off 7 the table, not all of it, for these states. So we want 8 to thank you for having provided that guidance in the 9 proposal. And thanks for the opportunity to comment 10 today. 11 MR. BROOKMAN: Thank you. Additional 12 comments from anybody that hasn't had the chance yet? 13 MS. MEYERS: Doug, I'd like to go last. Alan 14 Kessler is scheduled to make our comments, and he is on 15 his way from the airport. So if there's anyone else in 16 the room who would like to do that. I mean, I have a 17 copy of his comments and can make it if we have to, but 18 he's actually on his way. 19 MR. BROOKMAN: Okay. I guess we can provide 20 an opportunity for him to speak nevertheless, provided 21 he gets here, say, before noon. 22 MS. MEYERS: He's on his way. 23 MR. BROOKMAN: Other comments, overview 24 comments here at the outset?

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(301) 565-006471 1 (No response) 2 Review and Finalize Agenda Content 3 Doug Brockman 4 MR. BROOKMAN: Okay. I see none more at this 5 point. Hopefully Alan will be here shortly. 6 I've been looking at Slides 14, 15, and 16 in 7 your packet. These are the issues, as you can see, 8 that DOE both requests comment on, Issues 1 through 5, 9 and also the issues on page 16 that have been raised by 10 different stakeholders that they wish to discuss or 11 that -- and many of you have raised them. 12 What I'm hoping that we can do here is 13 confirm our field of vision or the issues that we hope 14 to cover here today. And in addition to what's listed 15 on pages 14, 15, and 16, I think I've heard that the 16 additional issues are -- I'm not sure this is a 17 complete list, but people have raised the issue of the 18 effective date, the issue of oil furnaces and the AFUE 19 level, including installation costs, and the issue of 20 electricity consumption. 21 Andrew, I wasn't sure whether you wanted to 22 include that in this conversation or whether you want 23 to defer that one. 24 MR. deLASKI: I think it's been deferred.

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(301) 565-006472 1 MR. BROOKMAN: Okay, okay. So we'll defer 2 that for now. 3 And I was wondering if there are other issues 4 that people want to raise in the course of this meeting 5 today so we can just make a note of it and make sure we 6 cover it. Yes, Frank Stanonik. 7 MR. STANONIK: Frank Stanonik with GAMA. 8 Doug, it's really not an issue, but I can't pass up the 9 observation that in looking at the issues on which DOE 10 seeks comment, they're exclusively about furnaces. 11 They don't appear to want any -- they're not concerned 12 about any issues about boilers. I think that's a 13 little telling. 14 MR. BROOKMAN: Do you wish to say -- well, 15 when you say it's telling, be more specific. 16 MR. STANONIK: Well, we have made comments in 17 the past that unless DOE can apply -- I mean, first of 18 all, there's no question that in the furnace and boiler 19 rulemaking furnaces are the predominant product. No 20 question. 21 But we've made comments in the past that 22 unless DOE had the resources and the desire and the 23 means to apply the same rigorous analysis to boilers 24 that they did apply to furnaces that they should

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(301) 565-006473 1 restrain themselves from pushing, if you will, the 2 envelope or the requirement for efficiencies for 3 boilers because they didn't do that same thorough 4 analysis. 5 It appears to us that they've not heeded our 6 advice, and in fact you've heard the comments, and you 7 will hear more, we think they've pushed the envelope on 8 boiler AFUE even though they didn't do that rigorous 9 analysis. 10 And so, you know, again, I just couldn't pass 11 that up. Here are the issues DOE wants comments about, 12 and none of them have to do with what for some segment 13 of this rulemaking is a very significant product, 14 boilers. 15 MR. BROOKMAN: Yeah. So let me echo what we 16 heard from David Rodgers this morning and also from 17 Mohammed Khan this morning. We want to make sure -- 18 this is an opportunity for all of you to make comments 19 on the issues that you think are relevant and 20 important. All of you. So let's -- you know, as we go 21 along today, let's make sure they get covered 22 adequately. The Department is explicitly requesting 23 that kind of comment. 24 MR. CRAWFORD: Doug is so urging me to talk

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(301) 565-006474

1 and I can't resist. 2 MR. BROOKMAN: This is Jim Crawford. 3 MR. CRAWFORD: Jim Crawford at Trane. I just 4 want to simply state that the Trane Company is 100 5 percent behind the position that GAMA has outlined here 6 this morning. There's no need for me to repeat it. 7 MR. BROOKMAN: Thank you very much. Thank 8 you. 9 So I'm hoping to confirm or add to the list 10 of issues here on 14, 15, and 16. We have kind of a 11 sense of what we're all covering here today. So, any 12 additions to what's listed here and what I've mentioned 13 already? Andrew. 14 MR. deLASKI: Andrew deLaski, Appliance 15 Standards Awareness Project. I have kind of a specific 16 technical issue or question about the analysis. It has 17 to do with the assignment of condensing furnaces in the 18 base case. 19 MR. BROOKMAN: Does it fit anywhere in here? 20 MR. deLASKI: No. 21 MR. BROOKMAN: Okay. So that would be 22 analysis in the base case of what? 23 MR. deLASKI: Of the rulemaking. 24 MR. BROOKMAN: Of the rulemaking. Okay. The

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(301) 565-006475 1 larger rulemaking. So I've made a note of that. Maybe 2 as we go to break here, as we will shortly, you can 3 think about where in the flow and the sequence that 4 might fit, if it fits at all. 5 Jim Crawford again and then to Jim Ranfone. 6 MR. CRAWFORD: Jim Crawford, Trane. Just 7 perhaps to revisit the issue that was just barely 8 touched on somewhere earlier this morning, and that is 9 that we find in the NOPR the rather perverse reasoning 10 that if some northern states are showing market 11 tendencies towards the use of condensing furnaces that 12 since the market is working so well we need to regulate 13 it. That's pretty perverse thinking. 14 MR. BROOKMAN: Jim Ranfone. 15 MR. RANFONE: Doug, Jim Ranfone, American 16 Gas. I just had a question on Item 2 on issues. It 17 says, "The assumption of constant heat pump and 18 electric resistance furnace market share is over the 19 analysis period in order to calculate the possible 20 market shift effects." The question, first of all, is 21 it says electric resistance furnaces. In reading the 22 NOPR and the technical support document, it looks like 23 DOE is not considering electric resistance furnaces as 24 part of its product group.

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(301) 565-006476 1 On page 3.7 of your technical support 2 document it says, under "Electric Furnaces," "These 3 units are technically considered electric furnaces but 4 they do not meet the Energy Policy Conservation Act 5 definition of electric furnaces because the equipment 6 is not designed to be principal heating source for 7 living space of a residence. 8 My question is, there are electric resistance 9 furnaces that aren't associated with heat pumps that 10 are a primary heating function. Are they part of this 11 rulemaking or not? 12 Number two, if you're going to consider 13 weatherized combination gas electric cooling, are you 14 also considering weatherized electric -- 15 (Interruption) 16 (Brief recess) 17 MR. BROOKMAN: Just prior to the break, we 18 were looking at the issues we hoped to cover during the 19 course of the day today. We have an issue or two that 20 we wanted to add. I was wondering if anybody at the 21 break came up with anything else they want to make sure 22 we cover today that isn't listed already on pages 14, 23 15, and 16. Anything additional? 24 (No response)

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(301) 565-006477

1 MR.BROOKMAN: Okay. 2 MS.MEYERS: You want me to go ahead? 3 MR. BROOKMAN:Yeah. 4 Brief Stakeholder Comments (Continued) 5 Comments by Karen Meyers on behalf of Alan Kessler 6 Rheem Manufacturing 7 MS. MEYERS:Okay. My name is Karen Meyers. 8 I'm the manager of Industrial Relations for Rheem 9 Manufacturing, and I am making these comments in 10 conjunction with Alan Kessler, who is on his way from 11 the airport.Alan is the vice president of research 12 and development for Rheem. 13 Rheem is a major manufacturer of gas 14 furnaces, both indoor and weatherized package units, 15 and oil furnaces. Alan has over 30 years' experience 16 in the design of gas furnaces. He has served on the 17 Standards Committee of ANSI Z21 and CGA 2.3. During 18 the time he served on those committees, he helped 19 develop the GAMA and the Battelle vent categorization 20 criterion and the current BIT tables incorporated into 21 the National Fuel Gas Code, ANSI Z223. Currently, Alan 22 is on the Z21 Accredited Standards Committee for 23 Performance and Installation of Gas Burning Appliances 24 and Related Accessories.

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(301) 565-006478 1 We appreciate the opportunity to comment here 2 today. 3 Rheem supports the DOE proposal for 80 4 percent AFUE for non-weatherized furnaces. This is a 5 reasonable efficiency level that allows manufacturers 6 sufficient latitude to design cost-effective furnaces 7 that are safe and reliable for consumers. It also 8 provides consumers with products required for 9 replacement applications. 10 In the NOPR, DOE requested comments on 11 several specific items, which I will address briefly. 12 Major building structural changes are required when 13 changing from a traditional conventional 80 percent 14 Category 1 vent, which is high temperature, negative 15 pressure, metal B vent, to a 90 percent Category 4 16 vent, which is low temperature, sealed, positive 17 pressure condensing vent system made with PBC. 18 In addition, a furnace condensate drain is 19 required. Ninety-plus condensing furnaces must be 20 maintained and operated in a somewhat controlled 21 environment to prevent freezing. Common venting with 22 other appliances, multiple furnaces, and/or water 23 heaters must also be addressed. 24 In situations where these venting and

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(301) 565-006479 1 condensate issues cannot be addressed, the homeowner 2 may be forced to consider electrical resistance heat or 3 a heat pump, both of which would require a major 4 electrical service upgrade and rewirings. These 5 electrical changes can be impractical or impossible in 6 some structures. Clearly, homeowners must have access 7 to medium efficiency, 80 percent, Category 1 vented 8 furnaces for many replacement applications. 9 History has shown that consumers are willing 10 to switch to higher efficiency condensing furnaces when 11 they can be economically justified and installed in 12 their application. Thus, the market share of 13 condensing furnaces has and will continue to increase 14 over time for both new construction and replacement 15 applications where they can be installed economically 16 and cost justified. 17 The assumption of costs that heat pump and 18 electric resistance furnace market shares over the 19 analysis period is questionable. Due to the rising 20 cost of natural gas, customers are switching to all 21 electric or dual fuel heating systems in some regions 22 with low electric rates. Further, in new construction, 23 some builder developers are not making provisions for 24 natural gas, increasing the shift to all-electric

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(301) 565-006480 1 heating. 2 This is a concern, since 40 percent of this 3 incremental electrical generating capacity is being 4 produced with combustion turbines powered by natural 5 gas. Simple cycle combustion turbines are about 35 6 percent efficient, whereas combined cycle plants only 7 achieve 58 percent. This is clearly a wasteful use of 8 natural gas, as a 78 percent AFUE residential furnace 9 is more than two times as efficient as the average 10 combustion turbine, and the best, 95 percent furnaces, 11 are 65 percent more efficient than the best combined 12 cycle plants. 13 While CTs may be low capital investment 14 options for the utilities, they have high fuel costs 15 and very low efficiency. This appears to be an 16 opportunity that DOE should focus on so natural gas is 17 available for higher value home heating appliances at 18 much higher conversion efficiencies. 19 We are opposed to the proposed 83 percent 20 AFUE level for weatherized furnaces. At 83 percent 21 AFUE, a weatherized gas furnace is clearly a Category 3 22 or 4 condensing appliance, with a steady state thermal 23 efficiency of 86.3 percent, and these designs do not 24 exist. It is impossible to design safe and reliable

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(301) 565-006481 1 furnaces at this efficiency level that can be used in 2 the intended applications. 3 Inherent in the testing and rating 4 procedures, weatherized furnaces are lower in 5 efficiency than non-weatherized furnaces. The proposal 6 by the Department for a higher efficiency is clearly 7 unfounded. The highest rated efficiency of a 8 weatherized design currently is 81.5 percent, and less 9 than 10 percent of the models available are rated 10 between 80.5 and the maximum, 81.5. The feasibility of 11 weatherized gas furnaces at 83 percent AFUE is 12 unacceptable due to the safety and reliability as 13 condensation will occur in the heat exchangers as well 14 as other furnace components. 15 Category determination between non-condensing 16 and condensing occurs between 83 and 84 percent steady 17 state thermal efficiency. This translates into a 79.7 18 to 80.7 AFUE maximum for weatherized cabinets. 19 Allowing for the effects of outside fresh air, firing 20 at less than maximum input, provision for two-stage 21 applications, unit design standardization, and unit 22 production variability, the highest minimum AFUE for 23 weatherized cabinets should be between 78 and 79 24 percent.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006482 1 Lastly, it is inappropriate to provide the 2 Department with information to attempt to monetize the 3 changes in warranty costs resulting from installation 4 of products at near condensing levels. The 5 unacceptable safety and reliability of these products 6 should not be considered an option. Current furnace 7 designs are durable and long-lasting. For the 8 Department to consider something that may only last a 9 few years is irresponsible. 10 We will provide additional supporting 11 information in our written comments. Thank you for 12 your consideration. 13 MR. BROOKMAN: Thank you. While we were at 14 break, the technical folks were in here testing these 15 sound levels. Jim, will you speak into that microphone 16 and see how it sounds? 17 MR. RANFONE: Yes. Does that sound okay? 18 MR. BROOKMAN: Okay? Yeah? We'll do most of 19 them, the ones that came up quiet. John, check that 20 one there, please. 21 PARTICIPANT: Check. 22 MR. BROOKMAN: Yes, okay. And is it Jack 23 over here? What's your name, please? 24 MR. HOLLERAN: Right here?

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1 2 MR. BROOKMAN: Yes. MR. HOLLERAN: Patrick. MR. BROOKMAN: Patrick, please check that

5 MR. HOLLERAN: Check. 6 MR. BROOKMAN: Okay. So I thought the rest 7 were pretty good. Andrew, do you want to try that one? 8 I mean, pardon me. Mark. 9 PARTICIPANT: Testing. 10 MR. BROOKMAN: That's good. Okay. I think 11 the tests are okay. Okay. We're fine. Thank you. 12 Discussion of Issues 13 Doug Brockman, Moderator 14 So then let's proceed, then, with the issue 15 that DOE listed number one on page 14, which reads, 16 "The number of consumers that may be affected by 17 structural changes for installing a condensing furnace 18 and the cost magnitude of any structural changes." 19 Let's deal with issues related to that first, and then 20 we'll proceed. 21 Comments, clarifications, questions? Jim 22 Ranf one . 23 MR. RANFONE: Jim Ranfone. I thought in the 24 record there was some information provided on this.

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(301) 565-006484 1 You want additional information? It was one changing 2 out the venting systems or having to modify the venting 3 system on the number of units or installations where it 4 was common-vented. As far as the structural changes, I 5 think in the record, if you go back, there was some 6 analysis done and information provided. But I can go 7 back and look. It's probably about six, seven years 8 ago. 9 So you're asking -- I think we did provide10 information on the number of units that were common11 vented that would result in having to resize the water 12 heater vent, and then I think we did provide or there 13 was some information done by either GTI or the 14 predecessor, GRI, on structural changes. But I have to 15 take a look. 16 Is that what you were looking for? 17 MR. KHAN: Mohammed Khan, DOE. Just to be 18 clear, when we say "structural changes" we're talking 19 about, for example, tearing down a wall, relocating a 20 wall so that you can put new vent systems in for the 21 condensing type units. So for example, typically these 22 kinds of vent systems either go towards or exit towards 23 the back end of a dwelling or straight up through a 24 roof.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006485 1 So I'm not sure the level of specificity that 2 we received regarding that particular -- information on 3 the cost of that kind of home improvements, if you 4 will. 5 MR. RANFONE: Well, I can -- Jim Ranfone. I 6 can take a look and see. I thought we had some of that 7 information. You know, we had it run along a sidewall 8 vent. I don't know about complete structural changes 9 or wall. Maybe closet installations and openings and 10 those types of things. 11 MR. FRIEDRICHS: This is Mark Friedrichs. I 12 just want to try to clarify a little bit. We're 13 looking for information that is not well captured by 14 the life cycle cost analysis, where we have perhaps a 15 small but nevertheless significant portion of 16 households that might incur very high costs if we move 17 to a condensing level standard. We're trying to 18 characterize those costs better in our analysis. 19 MR. BROOKMAN: Yes, Frank. 20 MR. STANONIK: Frank Stanonik with GAMA. 21 Yeah, I just wanted to clarify. When Mohammed was 22 talking about structural changes, you are including, as 23 an example, literally punching a hole in the wall so 24 that you can take a plastic vented condensing furnace

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(301) 565-006486 1 out the side? Are you considering that a structural 2 change? 3 MR. KHAN: Mohammed Khan, DOE. That's -- 4 Frank, that's exactly what we're talking about, trying 5 to describe here. 6 MR. STANONIK: Well, we -- again, as Jim was 7 saying, I think there has been some information 8 provided, and we can try and, I guess, expand on that. 9 But my impression -- I'll leave it at that for the 10 moment, but my impression is when we're looking at 11 replacement situations most of those -- if you're 12 replacing a non-condensing with a condensing furnace, 13 most of those I think they are going to go out the side 14 wall because that's the easiest way. 15 You're building a whole new venting system. 16 That's going to be, in most cases, the least expensive 17 option, is to minimize the run of that vent system is 18 to take it out the nearest side wall, which means, 19 yeah, they're going to punch a hole in the wall. But 20 we'lltryand quantify that a little better. 21 MR. KHAN: Mohammed Khan, DOE. I'm going to 22 let Alex Lekov from LBNL elaborate a little bit on 23 this. 24 MR. LEKOV: This is just to clarify.

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(301) 565-006487 1 Actually, the cost Frank just described is already 2 included in our installation model. As has been 3 mentioned by Mohammed and Mark, essentially we are 4 looking for this maybe small number of installations 5 where you have an exceptionally high cost when 6 installing condensing furnaces, particularly in the 7 case the unit is somewhere in the middle of the house 8 and you need to put in walls, change electrical 9 installations. We are talking about this type of cost. 10 This is for the purposes of improving our engineering 11 analysis. 12 MR. BROOKMAN: Thank you. Thanks for that 13 clarification. Yes, Jim Mullen. 14 MR. MULLEN: Yeah, Jim Mullen. I don't think 15 we as manufacturers probably understand totally what's 16 in the installation model. Are there some costs in the 17 installation model now for moving walls and those 18 things, and is it a percentage? If we could get that 19 information from DOE, it would probably be easier for 20 us to try and go out and verify or comment on what's 21 already there as opposed to just trying to reinvent the 22 wheel and come up with some information that doesn't 23 fit the form that you'd like to have it in. 24 And I think Frank's point about a lot of

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(301) 565-006488 1 these units do go in side walls because it is simply 2 easier. And I've heard installers say that they would, 3 you know, rather try to find a way to drill a hole 4 through a concrete foundation than to try to find a way 5 up into the attic and out the roof. 6 MR. KHAN: Mohammed Khan, DOE. I'd like to 7 have Graham Stevens provide an answer. 8 MR. STEVENS: Graham Stevens. The 9 installation model at this point does include costs for 10 drilling through walls and so forth installing those 11 vents. In this case, for structural changes we're 12 really looking at kind of non-ordinary expenditures 13 that you might have to make in terms of new electrical 14 services or other out-of-the-ordinary costs that might 15 be incurred in certain populations. 16 MR. MULLEN: Yeah, Graham, just to kind of 17 clarify, I think we understand that. If you could help 18 us a little better with the categories that you have in 19 there and the percentages that use those categories 20 now, it would probably be easier for us to come back 21 with some data that means something to you. I'm not 22 expecting you to do it on the spot or anything like 23 that, but I'm sure you could work with LAMA to help us 24 channel our input into the best form.

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(301) 565-006489 1 MR. STEVENS: Okay. 2 MR. BROOKMAN: Is that in the TSD somewhere? 3 MR. STEVENS: Well, the installation cost 4 model is built where you have building material 5 associated with individual installation scenarios. So 6 if I have -- if there's a water heater vented in common 7 with a furnace versus not in common and so forth, each8 of those individual scenarios are costed out line-by9 line for the installation. But I'll -- we'll have to 10 work with GAMA. 11 MR. BROOKMAN: Okay. Thanks, Graham. I saw 12 Frank first, and then I'll go to Andrew. 13 MR. STANONIK: No. 14 MR. BROOKMAN: Andrew, go ahead. And then to 15 John Mandyck. 16 MR. deLASKI: My recollection is there's an 17 entire chapter of the Technical Support Document which 18 describes the installation model and that that chapter 19 does go into some detail as to the cost the Department 20 has assumed in figuring out the installation costs. 21 These costs for -- furnace typically, as we just heard, 22 involve putting up PVC pipe out of the house. These 23 costs are -- you don't usually have to move a wall to 24 put a pipe outside of the house.

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(301) 565-006490 1 This strikes me as the Department casting 2 around for additional costs for a standard you decided 3 not to propose. So I wonder what we're after here in 4 this particular question as proposed today. 5 MR. BROOKMAN: Thank you, Andrew. Yes, 6 Harvey. Harvey Sachs. 7 MR. SACHS: Harvey Sachs, ACEEE. One 8 clarification question on this. Are there large 9 classes of furnaces out there today that do not have 10 110-volt wiring for the thermostat and other functions? 11 And/or other functions, because I can't think of them. 12 And the second question is that my 13 imagination must not be working very well today because 14 the only class of housing for which I can think of 15 major structural changes possibly being required are 16 underground houses, and I'd certainly appreciate having 17 my imagination stimulated a little bit, perhaps as Jim 18 suggested. What kinds of houses are you thinking of in 19 which modern condensing furnaces, which tend to be 20 fairly compact, might require wall changes and other 21 actions to -- that would substantially increase costs? 22 Thank you. 23 MR. BROOKMAN: Thank you. Mohammed Khan. 24 MR. KHAN: Yes, Mohammed Khan, DOE. Harvey,

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(301) 565-006491 1 I'm not sure I fully heard your first question. I 2 think it had to do with something -- I think you said 3 thermostat. But let me first try to address your 4 second question. 5 Again, what we're after is really -- we're 6 trying to also try to quantify the number of these 7 scenarios or situations where these kinds of installs 8 would require a modification to the interior of the 9 dwelling, maybe not necessarily tearing down an entire 10 wall but at least punching a hole through one or more 11 and redirecting new vent pipe. 12 And so for example, in, in particular, a lot 13 of urban areas where you have a lot of row houses, you 14 certainly aren't going to go through a side wall of an 15 interior row house and through its neighbor house to 16 vent the new system. So in those particular cases, 17 you'd probably be looking to go out either the roof or 18 out of the back of the house. 19 So I think that's what the Department is 20 looking for. And if you could also, please, maybe 21 restate your first question so that we could try to 22 respond to that. 23 MR. SACHS: Thank you. Harvey Sachs again. 24 I don't want to belabor this, but in response to

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(301) 565-006492 1 Question 2 we have information from one northern state 2 which deals primarily with low- and moderate-income 3 clients in the state program and is reporting costs 4 under $1,800 installed for condensing furnaces against5 the -- what I understand to be a predominantly non6 condensing existing furnaces. So that's the furnace 7 plus its installation. Certainly these are not 100,000 8 BTU in general. 9 With respect to the first question, I can't 10 remember seeing a furnace that did not have an 11 electrical connection, in my memories, since Honeywell 12 Round Thermostat. So I'm trying to think of cases in 13 which there is not wiring at the furnace, which seemed 14 to be part of Mark's question to us. Thank you. 15 MR. BROOKMAN: Thank you. Yes. 16 MR. RANFONE: Jim Ranfone. Are you looking 17 for an area like if it doesn't have a condensate drain 18 disposal function in the vicinity of the furnace? If 19 you're going with a condensing furnace and you have to 20 deposit the condensate somewhere, it has to go through 21 a neutralizer sometimes. That kind of a feature that 22 would be included? 23 MR. KHAN: Mohammed Khan, DOE. Yeah, Jim, 24 that would also, I guess, be included in the envelope

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(301) 565-006493

1 of structural changes that we're concerned with. 2 MR. BROOKMAN: Andrew deLaski. 3 MR. deLASKI: My recollection is that -- 4 Andrew deLaski, Appliance Standards Awareness Project - 5 - that the condensate drain issue is dealt with in the 6 Technical Support Document. There is an entire 7 ventilation chapter that describes -- you guys have had 8 six years to work on the installation model, and at 9 this point you've got a model that deals with 10 condensate, that deals with side walls, that deals with 11 some going through the roof. It deals with these 12 issues. 13 So now we're casting around for additional 14 costs? You're inviting additional comment, which 15 you're going to get by January 15th. But, you know, 16 this is -- it's a really odd way to begin the 17 rulemaking, to begin this process, talking about a 18 model that you -- you've already dealt with the issues 19 that you're raising. So yeah, there may be some new 20 issues, but we'll raise them by January 15th, but let's 21 move on. 22 MR. BROOKMAN: Okay. Steve Nadel. 23 MR. NADEL: I was going to say move on. It's 24 like pulling teeth. The one other thing I'd add here

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(301) 565-006494

1 is, you have your installation cost model. Compared to 2 the one field study in Wisconsin, you're already 3 running a little bit high compared to what their actual 4 costs were. So don't look to add more costs. I think 5 you've more than adequately compensated for the cost 6 here. Let's go on to Number 2. 7 MR. BROOKMAN: Okay. So then we'll move on 8 to Number 2? Moving on to Number 2, then. Harvey

lli 9 owng on. Sachs fo 10 MR. SACHS: With all due respect to the guy 11 who signs my paycheck -- 12 (Laughter) 13 MR. SACHS: The market, in its wisdom, has 14 brought forward a device called a condensate pump, for 15 which I paid $75, including the interlock with the 16 furnace. And this guarantees that you can lift the 17 condensate all the way to the basement ceiling and 18 carry it over to a drain if there is any sanitary 19 fixture or, in many cases -- and we will not talk about 20 this publicly -- this is actually being dumped into a 21 bit of limestone in the backyard. 22 So this is not, again, something which the 23 market has responded to with structural changes, in my 24 experience.

EXECUTIVE COURT REPORTERS, INC. (301) 565-006495 1 MR. BROOKMAN: Thank you, thank you. So then 2 the suggestion is we move on to Number 2, yes? Let's 3 do that. Which reads, "The assumption of constant heat 4 pump and electric resistance furnace market shares over 5 the analysis period in order to calculate the possible 6 market shift effects of non-weatherized gas furnace 7 energy conservation standards on NES and NPV. 8 Can you get that one up there? 9 Comments? Comments on that question. The 10 Department seeks your comment on that. Yes, Andrew 11 deLaski. 12 MR. deLASKI: Just a clarifying question. 13 Are you asking about the relative share of heat pumps 14 versus electric resistance in the electric share of the 15 market? 16 MR. KHAN: Mohammed Khan, DOE. I will let 17 Alex Lekov respond to that. 18 MR. LEKOV: Let me find the question. So the 19 Department utilizes a market shift model when we have 20 an increase of the cost of the gas furnaces and there 21 is an anticipation that those units will be replaced 22 with electric heating. Now, electric heating could be 23 electric resistance or heat pumps, and here is the 24 question. We have one single source, which is American

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(301) 565-006496 1 Household Survey 2003, which tells us that electric 2 resistance are 46 percent, heat pumps are 54 percent 3 possible of the total electricity equipment. 4 So the Department asks the stakeholders to 5 tell us,is this correct? Are there any other sources? 6 MR. BROOKMAN: Andrew deLaski. 7 MR. deLASKI: So, just to, again, follow up, 8 the question is in those households in your model you 9 predict that some portion of households would shift to 10 electric heat in the scenario where you set a standard. 11 And the question is at what rate do they shift to heat 12 pumps versus shift to electric resistance. 13 It strikes me that it's the heat pump that is 14 in competition for the most part, but we'll certainly 15 respond to you in more detail by January 15th. 16 MR. BROOKMAN: Thank you. Yes, please. 17 Frank Stanonik. 18 MR. STANONIK: Frank Stanonik with LAMA. I 19 think I appreciate the question a little bit. I'm not 20 sure it's as simple as characterized because certainly 21 in I think it's called an air conditioning-dominant 22 area of the country you could probably expect that if 23 they do switch they're going to go to a heat pump. But 24 conversely, in a let's call it cold weather climate, I

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(301) 565-006497 1 think that would be a very dubious assumption, that if 2 they do switch away from a fossil fuel that they're 3 going to go to a heat pump. 4 Just a whole different situation relative to 5 the air conditioning needs. And if they don't have 6 significant air conditioning needs, the cheapest 7 solution will be that electric furnace. And we can all 8 discuss whether that's energy-conserving or not. 9 But I think -- I understand the question. 10 We'll try to provide some answer to it now that I've 11 got a sense of what you're looking at. 12 MR. BROOKMAN: Okay. Thank you. Tom Eckman. 13 MR. EC Tom Eckman, Northwest Power and 14 Conservation Council. Two pieces of information that 15 bear on this, I think. We just completed a new 16 construction survey, and the split between gas and heat 17 pumps is about 87 percent gas forced air, and the 18 remainder are heat pumps. Virtually no new 19 construction forced air furnaces that are electric. 20 The other relevant fact, I suspect, is that 21 it would be a good thing on a source energy basis if 22 the new heat pump did replace the 80 percent AFUE 23 furnace. Given the heat rate of new combined cycle 24 turbines, source energy is going to be better served if

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(301) 565-006498

1 we have heat pumps rather than forced air furnaces that 2 only have 80 percent AFUE. So either way, I'm okay. 3 MR. BROOKMAN: Your experience is in the 4 northwest? 5 MR. ECKMAN: Yes, and we have relatively low 6 electric rates. So if there are going to be electric 7 furnaces in the marketplace, I suspect we'd be a test 8 case. And we just don't see them. 9 MR. BROOKMAN: Thanks, Tom. 10 MR. REIFEL: One other data source I suggest 11 you look at is RECS and other surveys looking at what 12 percentage of new homes have air conditioners. 13 Clearly, if they have an air conditioner, the low-cost 14 option then is going to be just adding the reversing 15 valve and going with the heat pump. 16 My recollection from memory is we're talking 17 somewhere in the 75, 78 percent range of new 18 construction has air conditioning. So I would expect 19 the proportion that would have electric resistance has 20 switched to being down quite a bit, particularly if 21 we're talking in northern states, where the condensing 22 is most likely. That's where the electric rates tend 23 to be high and the energy use is very high and there's 24 very little electric resistance going on in the

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(301) 565-006499

1 northern states. 2 MR. BROOKMAN: Thank you. Jim, did you have 3 an issue related to Number 2? I made a note. 4 MR. RANFONE: No, just a clarification on 5 whether or not electric resistance furnaces are 6 included in this rulemaking. Are they a product class 7 or aren't they? I'm not sure, based on what I saw in 8 the Technical Support Document. 9 The reason I'm asking that is on the 10 weatherized, if you go with the weatherized, do you 11 include jacket walls or don't you. That drops down 12 your efficiencies from, you know, alleged 100 percent 13 down to something different. And should there be a 14 separate product class. 15 MR. KHAN: Mohammed Khan, DOE. To answer 16 your first question, electric furnaces versus -- are 17 not included because they're assumed to be 100 percent 18 efficient. 19 Regarding the weatherized or outdoor units, 20 that product class was not suggested as a product class 21 for consideration under the different comment periods 22 that we had prior to the NOPR phase. So we did 23 consider it. 24 MR. BROOKMAN: Jim Ranfone.

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(301) 565-0064100

1 MR. RANFONE: Jim Ranf one. You're saying 2 electric furnaces are not part of this rulemaking, but 3 are they part of the DOE -- I mean, they are included 4 in the appliance labeling and test procedure. So -- 5 but they're not part of this rulemaking. I just want 6 clarification on that. 7 MR. KHAN: Neither one are. 8 MR. RANFONE: Neither -- I'm sorry. 9 MR. KHAN: Neither one of the product classes 10 are. 11 MR. RANFONE: Okay. I'll go off line. I'm 12 not clear on this. 13 MR. BROOKMAN: Okay. So then, we'll move on 14 to Question 3 as listed here. "The assumption of 15 constant condensing furnace market share over the 16 analysis period in the base case forecast in order to17 calculate the annual unit energy consumption of non18 weatherized gas furnaces." Questions or comments on 19 this issue. Frank Stanonik. 20 MR. STANONIK: Frank Stanonik with GAMA. 21 Again, first I guess a clarification because what I'm 22 remembering, which may be wrong, but what I'm 23 remembering is I read the Federal Register notice and 24 some of the documents is that there's actually an

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(301) 565-0064101 1 assumption of some progressive growth of the condensing 2 furnace market share. 3 So I'm a little confused by the assumption of 4 a constant condensing furnace market share. Didn't DOE 5 assume in fact some historical growth as we've seen in 6 the last 10, 15 years? 7 MR. KHAN: Mohammed Khan, DOE. I'll allow 8 Alex Lekov to elaborate on the assumptions that the 9 Department made regarding that. 10 MR. LEKOV: Basically, we used -- the 11 Department used the GAMA submission of shipments of 12 furnaces of different efficiency which they submitted 13 in 2004. In the model, the shipments of condensing 14 furnaces were correlated with the energy prices. If 15 you look at the chart, it's pretty clear over the 16 periods that the shipments of condensing furnaces 17 correspond very well to the energy price signal. 18 If you look at the periods 1990 to 2000, flat 19 prices, flat shipment. Period after that, the next 20 three, four years, energy prices up, furnaces up. 21 Therefore, the Department made the assumption that the 22 shipments of condensing furnaces will follow with the 23 natural gas price trends. 24 So what's happened is our basic point was 31

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(301) 565-0064102 1 percent condensing furnace shipments, which LAMA 2 provided to us in 2003. We expanded the trend and 3 found that at that point the known maximum of the 4 prices is several years later, which we ended up with 5 35.6 percent shipment. At that point, further, toward 6 2015, we assume that this price will stay constant. So 7 this is the Department's question. Is this question 8 reasonable or not. 9 Just note that if you look at the actual 10 trend, the energy prices are going down. The 11 Department assumed no, shipments are not going down. 12 They will stay flat because there is an assumption that 13 the consumers will continue to keep at this level. 14 MR. EROOKMAN: Steve Nadel. 15 MR. NADEL: Yes. I mean, I think the 16 Department is correct that the market share of 17 condensing furnaces will depend in significant part on 18 what the price of gas is. I assume, and I'd like you 19 to confirm this, that you'll be re-running the analysis 20 with the AEO 2007 prices, which are due out shortly. I 21 don't know what those are going to say, but that it 22 needs to be related. 23 The market share of condensing has grown in 24 recent years, as has the price. If the Department,

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(301) 565-0064103 1 because of its own internal modeling, is saying prices 2 will decline or not go up, then you need to be 3 internally consistent and follow what the price says. 4 You can't just deviate from it. I mean, we have some 5 questions of people I know about the Department's 6 pricing, but you do need to be consistent with your 7 pricing in projecting market share for high efficiency 8 options. 9 MR. BROOKMAN: Frank Stanonik, go ahead. 10 MR. STANONIK: Fred Stanonik with GAMA. 11 Alex, if I understood you, and I guess I missed a 12 point, you're saying after 2015 this analysis assumes 13 that the condensing furnace market share stays at 35 14 percent? 15 MR. LEKOV: (Inaudible) 16 MR. STANONIK: Can I clarify? 17 MR. BROOKMAN: Go ahead. 18 MR. STANONIK: And in part that's because you 19 assume that the price of gas remains steady at that 20 point and it doesn't rise. The two are linked. 21 MR. LEKOV: In reality, the AEO '05 and '06 - 22 23 MR. BROOKMAN: Alex, use the microphone. So 24 that was Steve Nadel, and here comes Alex again. Go

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(301) 565-0064104

1 ahead, Alex. 2 MR. LEKOV: Just to supplement what the 3 comment is, in reality the -- if you look at the 4 forecast '05 and '06, it's true that the prices are 5 going down. The Department -- I would like to 6 emphasize this. The Department decided not to go down 7 on the shipments. We're keeping them constant. 8 MR. BROOKMAN: Okay. So, Frank. Frank 9 Stanonik. 10 MR. STANONIK: Frank Stanonik with GAMA. The 11 one thing that comes to mind here -- and again we will 12 certainly try and, before January, elaborate a little 13 bit on it -- is I think certainly as you're looking at 14 2015 and beyond, you would now have -- we would now 15 have a fairly significant installed base of old 16 condensing furnaces. 17 And so I'm not sure that that assumption 18 captures what would then I would expect by then to be a 19 fairly robust replacement market because once somebody 20 has installed a condensing furnace I can't imagine that 21 when it finally does wear out, even if the prices are 22 low, they're going to in fact revert to a lower 23 efficiency product because they've got to -- then they 24 would pay for a new venting system.

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(301) 565-0064105 1 So I guess we need to review the analysis 2 because I'm not sure that I would agree that it's going 3 to be constant. I think I would expect it still might 4 continue to grow. 5 MR. BROOKMAN: Jim Mullen. 6 MR. MULLEN: I agree with what Frank is 7 saying. I think there is a replacement market issue 8 that may have been missed in here, and we need to make 9 sure it's correctly factored in. 10 But, a question for Alex. I'm confused. 11 What is the baseline that GAMA gave DOE in the latest 12 set of data for penetration of condensing furnaces? Is 13 it 35 percent? 14 MR. LEKOV: Thirty-one percent. 15 MR. MULLEN: Thirty-one percent. And your 16 assumption for 2015 is what percentage? 17 MR. LEKOV: 35.6. 18 MR. MULLEN: Thirty-five, almost 36 percent. 19 So you're looking at a small increase rather than 20 staying flat? 21 MR. LEKOV: Again, it's a trend that follows 22 energy practice. You could see the chart in the TSD. 23 Basically, we assume that the peak of the gas prices is 24 around 2005, and so this extension of the time reflects

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(301) 565-0064106 1 35.6. It's just equation modeling. And from that 2 point on there is no data. What we see in the AEO 3 forecast is down. And we stop here and say the 4 shipments do not go down, they stay flat. 5 MR. BROOKMAN: Frank Stanonik. 6 MR. STANONIK: Frank Stanonik with GAMA. 7 Just one comment. Again, I mean, the analysis was done 8 with the best information available at the time. But 9 in fact in 2005 our statistics indicate that the market 10 share of condensing furnaces was 34.5 percent. So the 11 35 percent number, regardless if it's constant or not, 12 may be low. 13 MR. BROOKMAN: Okay. Thank you. 14 15 16 Additional comments on this issue? (No response) MR. BROOKMAN: Okay. On to Number 4. "The 17 feasibility and safety of weatherized gas furnaces at 18 Trial Standard Level 2 (83 percent AFUE) due to 19 possible condensation in the heat exchanger." We heard 20 a lot of comment on this at the outset, so let's 21 continue on with that now. 22 Yes, Jim Mullen. 23 MR. MULLEN: Jim Mullen, Lennox. Since we 24 did not make an opening statement, I would like to make

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(301) 565-0064107

1 it clear that we believe that the 83 number is too -- 2 considerably too high and that to run an 83 percent 3 AFUE with a reasonable set of design parameters, you're 4 probably talking about steady state efficiencies in the 5 range of 85 or 86 percent. That's not palatable with 6 the materials that are included in the analysis. 7 We'll be providing further information in our 8 comments stating that we believe the level is probably 9 more practically set at 80 AFUE. 10 MR. BROOKMAN: Thank you. We've already 11 heard from GAMA on this subject. Other comments from 12 manufacturers or persons that are not in the business 13 of manufacturing? Steve Nadel. 14 MR. NADEL: We haven't looked into this issue 15 yet, so we will be looking at it and probably 16 commenting later. 17 MR. BROOKMAN: Thanks very much for offering 18 that. That's helpful. Jim Crawford. 19 MR. CRAWFORD: Jim Crawford, Trane. I just 20 want to say that Lennox just read off our script. We 21 agree totally. 22 (Laughter) 23 MR. BROOKMAN: So, additional comments on 24 Question Number 4 related to the Level 2 or 83 percent

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(301) 565-0064108

1 AFUE standard for weatherized gas furnaces? 2 (No response) 3 MR. BROOKMAN: I see no additional. Okay. 4 So then, we're going to keep moving on here. Number 5 5 reads, "Information that would allow the Department to 6 monetize changes in warranty costs resulting from the 7 installation of products at near condensing levels." 8 Jim Crawford. 9 MR. CRAWFORD: Jim Crawford, Trane. Just to 10 make the observation that I don't believe the 11 manufacturers can discuss that in this room. I don't 12 believe the manufacturers can discuss that in the 13 presence of each other. We're talking about cost of 14 operations. 15 MR. BROOKMAN: Thank you. This does relate 16 to manufacturer impact analysis. Frank Stanonik. 17 MR. STANONIK: Frank Stanonik with GAMA. I 18 -- following up on my earlier observation, I guess I 19 would want to point out in this one specifically, 20 especially at the 84 percent AFUE level for boilers, 21 that this question also needs to be looked at for that 22 level of efficiency for boilers. 23 I mean, you know, that's something 24 manufacturers will have to look at or, as Mark has

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(301) 565-0064109 1 suggested, you know, they will appropriately minimize 2 their risk versus -- when it comes to risk or cost, 3 they're going to minimize their risk. But I think this 4 factor also would apply -- this question does also 5 apply to that 84 percent level for boilers. 6 MR. BROOKMAN: Thank you. Joe Mattingly. 7 MR. MATTINGLY: Well, I just wanted to 8 commend Jim Crawford for abiding by our antitrust 9 protections in our trade association. He's absolutely 10 right. I couldn't imagine anybody that would actually 11 have these costs on their fingertips anyway, but we 12 would never allow discussion of that among competitors. 13 MR. BROOKMAN: Thank you. Thanks for that. 14 Okay. So then, I'm going to move on to the 15 next set of issues, which are shown on Slide 16 of your 16 packet. We began this morning hearing from people 17 surrounding their concerns about waiver of federal 18 preemption and regional standards, so let's talk about 19 that one first. 20 MR. HOLLERAN: Excuse me. 21 MR. BROOKMAN: Yes. 22 MR. HOLLERAN: Patrick Holleran with Field 23 Controls again. We're a venting products manufacturer. 24 I just want to clarify that on these last two pages we

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(301) 565-0064110 1 covered there's nothing specifically addressing 2 boilers. And I want to make clear that that needs to 3 be addressed. Both Four and Five need to be addressed 4 for boilers as well. 5 I think in Number 5 it seems to me you're 6 looking for information about venting costs. When you 7 go to start to get to condensing levels at 84 percent 8 with boilers and/or 83 percent with weatherized 9 furnaces, whatever that is, you need to be looking at 10 different types of venting products that are 11 significantly priced differently. And some of that 12 information can be obtained and provided. 13 MR. BROOKMAN: So, in addition to those 14 venting issues, are there issues you want to raise with 15 respect to Four or Five as they relate to boilers? 16 MR. HOLLERAN: I think that both need to be 17 stated in respect to boilers as well. Number 4, the 18 feasibility and safety of -- 19 MR. BROOKMAN: Okay. We gotcha. Yeah. 20 Okay. Thank you. And I'm hoping that those of you 21 that will chime in with your issues if you think the 22 issue or the question is characterized too narrowly as 23 we go along here. 24 So now we're on to waiver of federal

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(301) 565-0064111 1 preemption. Joe Mattingly. 2 MR. MATTINGLY: As we said in our opening 3 statement, we're not sure this is the right forum for 4 this because nobody has petitioned for exemption from 5 federal preemption certainly in this area. That is 6 really the proper forum for having a discussion. 7 But, two things. We would say that the 8 waiver criteria -- it's supposed to be difficult to get 9 a waiver of federal preemption, and for DOE to suggest 10 that 20 out of 50 states have an inside track or are 11 halfway to showing that they're somehow unusual 12 relative to the nation as a whole, to me, undermines 13 the whole theory of a national standards program that 14 we've set up a long time ago. 15 Other comment. Under the waiver criteria, a 16 showing that the market is accomplishing much or most 17 of the energy savings, that's a reason -- I think as 18 Jim Crawford alluded to before, that's a reason why a 19 state-centered isn't justified, not a reason why it 20 would be. Again, if the market is working, there's no 21 need to regulate it. Certainly no compelling case to 22 regulate it. 23 MR. BROOKMAN: Thank you. Steve Nadel. 24 MR. NADEL: I would like to join in with what

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(301) 565-0064112 1 Andrew deLaski said before, to thank the Department in 2 providing some guidance on how states can proceed. As 3 the Department knows, three states have already passed 4 legislation calling for -- three northern states -- 5 calling for condensing standards, so this will help 6 them as they prepare their petitions. They still have 7 to meet the underlying legal criteria. I think 8 everybody understands that. But I think this is 9 helpful. 10 And I forgot my second point, which I'll come 11 back to. 12 MR. BROOKMAN: Please. 13 MR. BRUNDAGE: Don Brundage, Southern 14 Company. The way the NAECA law is written in some ways 15 is not optimal. There are times where criteria 16 different than the national standard might make sense, 17 but it is what it is. And if you're in Anchorage, 18 Alaska, you have to put in a SEER13 air conditioner 19 which probably has about a century payback. It's -- 20 the law is what it is, and I think we need to not have 21 this sort of length of preemption that is being talked 22 about today. Thank you. 23 MR. BROOKMAN: Thank you. Jim Crawford. 24 MR. CRAWFORD: Jim Crawford, Trane. Just

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(301) 565-0064113 1 make kind of a twofold observation. Although there is 2 a significant difference of opinion in the room as to 3 whether or not DOE has done a good thing or a bad thing 4 in providing this form of guidance to end-run NAECA, 5 there doesn't seem to be any doubt in the room that 6 that is the consensus of exactly what DOE has done in 7 the NOPR. It is an end-run. 8 MR. BROOKMAN: Thank you. Several people 9 wish to respond. Kit, do you want to let -- do you 10 want to respond to that one, or should I go to Andrew 11 first? 12 MS. KENNEDY: Go to Andrew first. 13 MR. deLASKI: I'll just respectfully disagree 14 with Jim's supposed consensus. I think we should avoid 15 speaking for each other in this room. I think that 16 there is no consensus that DOE has done an end-run 17 around NAECA. DOE has provided guidance within the 18 constraints of the law. 19 The law -- as Joe pointed out, there will be 20 forums in which we can discuss waivers. There is a 21 process under NAECA for states to apply for waivers. 22 DOE has provided useful guidance for how states can 23 begin to address those questions. It is by no means a 24 foregone conclusion that DOE will grant waivers if

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(301) 565-0064114 1 states provide -- make such applications. 2 It is a -- it is part of NAECA that there is 3 a process for states to apply for waivers, and you 4 can't rewrite the law, as a couple people have pointed 5 out. That process stands there. You have three states 6 who have begun the process, or will be soon, and I 7 suspect there will be others coming in their wake. 8 MR. BROOKMAN: Kit Kennedy. 9 MS. KENNEDY: Just to respond to Joe's 10 comment, the word "difficult" doesn't appear in the 11 statute when it talks about the preemption waiver 12 process. The showing that a state needs to make to get 13 a waiver of preemption is circumstances that are 14 unusual and compelling, and it may be that if the 15 outcome of the DOE process is the outcome proposed here 16 that there will be at least 20 states who can make that 17 showing. 18 I think, you know, going to Trane's point, I 19 don't think DOE is making an end-run around NAECA. I 20 do think by having the process of going to the states 21 be -- you know, be so prominently featured in the rule 22 that DOE is going to the third-best option. The best 23 option is to have a strong national standard. And 24 again, if NAECA is about national standards made on the

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(301) 565-0064115 1 basis of national criteria, then TSL4 is the right 2 answer because there are positive benefits for American 3 consumers as a whole under DOE's analysis, which we 4 think doesn't go far enough to look at the benefits of 5 the rule. 6 What DOE is doing on the regional standards 7 front is saying, well, we can't do regional standards 8 but we'll sort of look at regional standards in 9 figuring out what the national rule is. And that, I 10 think, is really doing an end-run around NAECA. 11 We either have national standards where we 12 look at the nation as a whole or we have some other 13 process. And if we're going to have national 14 standards, then we have to look at consumer benefits on 15 a national level and not do the sort of regional 16 winners and losers analysis. That calls for a regional 17 standard, which, going back to our earlier comments, we 18 think DOE absolutely has the authority to do. 19 The third-best option, just from the point of 20 view of the resources in this room and the outcomes in 21 this room, would be to go on a state-by-state basis. 22 It's allowed under NAECA. The waiver process is there, 23 and DOE isn't suggesting any change to the waiver 24 process. They're just providing some guidance, I

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(301) 565-0064116 1 think, on what it means. 2 But for all of us in this room I think to go 3 back to a process where we're duking this issue out in 4 20 different states is moving backward rather than 5 forward from a policy perspective. So again, I think 6 if people are looking for consensus, then regional 7 standards is the place to look. 8 MR. BROOKMAN: Please. Is it Charles? 9 Charles. 10 MR. HARAK: Charlie Harak, National Consumer 11 Law Center. The Department of Energy's own data shows 12 that there are clear economic benefits in the northern 13 states to a higher standard. Obviously, anything that 14 reduces energy consumption also provides environmental 15 benefits everywhere. 16 So DOE has a policy choice to try to get 17 what's clearly the best policy outcome. I concur in 18 Kit's sentiments that there are different routes that 19 are better or worse to get there, but it's actually a 20 good thing that the Department of Energy at least has 21 provided some guidance to those of us who haven't 22 really seen what the waiver process is like as to what 23 might be necessary to get a waiver approved. 24 And also, NCLC will certainly be submitting

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(301) 565-0064117 1 lengthier comments on the legal question about whether 2 the Department can directly take this policy problem on 3 and solve it by a two-tiered standard. And we'll be 4 looking more closely whether the national standard 5 should be higher across the country. 6 So NCLC agrees with NRDC's comments that this 7 really is the third-best option, and it's certainly a 8 good thing that at least that option is on the table 9 and there is more explicit guidance for states that 10 really -- if they look at the statute, there's very 11 little guidance about how to do this. The guidance is 12 very helpful. 13 MR. BROOKMAN: Thank you. Additional 14 comments on this subject? Federal preemption and 15 regional standards. Yes, Steve Nadel. 16 MR. NADEL: I remember my other point. 17 MR. BROOKMAN: Yes. 18 MR. NADEL: Which is, the current market 19 share is a double-edged sword. On the one hand, a 20 relatively high market share shows that the impacts on 21 the market would not be as large because there are many 22 providers in a given state providing this equipment and 23 that are used to installing it. On the other hand, the 24 higher the market share, the less the savings are.

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(301) 565-0064118

1 Obviously,a state is going to have to show what the 2 savings are in the context of their energy plan. 3 But in most of these cold weather states now 4 we're talking somewhere around a 50 percent market 5 share, which means 50 percent of people are not doing 6 it. So I think in general there will be significant 7 savings.But this will be something that can be 8 debated as part of these petitions going forward. 9 MR. BROOKMAN: Okay. Thank you, thank you. 10 So then I think we're going to move on to the next item 11 on the list, which we've heard some things about 12 already. Proposed trial standard level. 13 Do you want to elaborate on this? 14 Mohammed Khan. 15 MR. KHAN: Mohammed Khan, DOE. I think that 16 was meant really to generally state questions or 17 concerns for all of the trial standard levels that 18 appear in TSL2. It sounds like we've pretty much 19 already heard a lot of comments on that,so. 20 MR. BROOKMAN: Yeah. I thought we've heard 21 quite a bit. Other, additional comments,supplemental 22 comments? Steve Nadel. 23 MR. NADEL: I do have some comments on the 24 trial standard level for oil furnaces. Should I bring

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(301) 565-0064119 1 that up here or would you rather me wait a couple 2 minutes for that item? 3 MR. BROOKMAN: Bring it up here. 4 MR. NADEL: Okay. I think, as I mentioned in 5 my opening remarks, we have concerns about how DOE 6 determined the installation cost for oil furnaces. My 7 first question, if you can clarify it, is in the ANOPR 8 DOE showed no incremental installation cost to go from 9 82 to 83 percent AFUE. In the NOPR, all of a sudden it 10 had some relatively large costs. And I was curious 11 what the change was, what information the Department 12 has to indicate that a significant portion of oil 13 furnaces at 83 percent will need this very high tech 14 stainless steel liner at that level. 15 MR. BROOKMAN: Graham. Please, a microphone. 16 MR. STEVENS: Graham Stevens. The -- after 17 the ANOPR, we consulted with Brookhaven National Labs 18 and tried to find out more information about 19 populations of oil furnaces that needed those stainless 20 steel vent systems. And from that research was those 21 new results. 22 MR. NADEL: Can the Department provide any 23 information? There's nothing that I could find in the 24 TSD on this, and now we have two sentences in the

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(301) 565-0064120 1 hearing record. Can you provide some additional 2 information in the next week or so on what this 3 information was so we can comment on it? We and all 4 the other parties. 5 MR. STEVENS: Sure. 6 MR. NADEL: Okay. 7 MR. BROOKMAN: Okay. Thank you, thank you. 8 Yes. Keep going, Steve, while he's coming forward. 9 MR. NADEL: Okay. I have a few other things 10 maybe I'll address before Harvey gets there. A second 11 comment is, the Department chose effectively -- the 12 Department decided I think it was at 86 percent that 13 100 percent of the furnaces will need this high tech14 stainless steel liner and it used a straight line ramp15 up. I was curious if the Department has any 16 information indicating that it is a straight line as 17 opposed to a modest -- it might be more of a curved 18 line where a modest efficiency level or lower 19 proportion. At the last step obviously a lot more 20 people will be keyed into that. 21 I was wondering, does the Department have any 22 information indicating that a straight as opposed to a 23 curved line is a more appropriate representation of 24 this?

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1 MR. BROOKMAN: Graham, please. And loudly, 2 please. 3 MR. STEVENS: That relates directly to the 4 other information we just talked about, so I'd like to 5 defer to getting back to you on that in the next week. 6 MR. BROOKMAN: Harvey, you wanted to be next. 7 MR. NADEL: I have one more, but okay. 8 MR. BROOKMAN: Go ahead. 9 MR. NADEL: Who's going? 10 MR. BROOKMAN: Go ahead. Steve. 11 MR. NADEL: The final question I had on this 12 issue; has the Department considered as part of its 13 analysis of condensation in oil furnaces and the cost 14 the fact that diesel fuel is now moving toward low 15 sulfur content and this is likely to affect the sulfur 16 content of Number 2 fuel oil? Because a large chunk of 17 the extra cost is based on going to the special, extra 18 high tech stainless steel because of the sulfur content 19 of fuels. Is this being considered? 20 MR. BROOKMAN: Graham. On the record, 21 please. 22 (Laughter) 23 MR. STEVENS: I guess not -- certainly the 24 extra sulfur content in fuels necessitating the

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(301) 565-0064122 1 stainless steel -- much more expensive stainless steel 2 certainly was included. In regards to how the change 3 in the sulfur -- I think from a manufacturer's point of 4 view, if there's any sulfur content you're going to get 5 some sulfuric acid in there and to be safe you would 6 still use the higher -- the more expensive stainless 7 steel. That's only my initial impression at this 8 point, so I'm going to, again, have to get back to you 9 on that as far as more in-depth thought on that. 10 MR. NADEL: That would be useful, because 11 here we're talking new furnaces and particularly if 12 we're talking 2015, what is the sulfur content going to 13 be and is this something we're being overly cautious 14 about. 15 MR. SACHS: That's precisely where I would 16 like to head. 17 MR. BROOKMAN: Harvey Sachs. 18 MR. SACHS: Harvey Sachs from ACEEE. I want 19 to commend NORA for its research funding to Brookhaven 20 National Lab to look at some of these things. What we 21 do know is that we will be down from 500 PPM, or 22 whatever the current number is, to 10 PPM for diesel 23 fuel in 2010, which is five years in advance of the 24 proposed rulemaking effective date.

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(301) 565-0064123 1 We do know that PM 2.5, the particulates 2 issue, that small particles is very well correlated 3 with sulfur content in diesel and sulfur content in oil 4 heating equipment. We would expect there to be a fair 5 amount of emphasis in the regions which predominantly 6 use oil heat and which are predominantly out of 7 compliance on PM 10, as well as having some SOx 8 problems as I recall. We would expect at least that 9 the policy option of regulating oil heat fuel under 10 Clean Air Act would be undertaken and would feel it 11 remiss by the Department not to include the impact of 12 low sulfur fuel on oil equipment. 13 The other thing that I wanted to mention is 14 perhaps a counterpoint to the reach questions from 15 Mohammed and Mark about exceptional installation costs. 16 It's just a reminder that AFUE, as I understand it -- 17 I'm sure Jim Crawford will correct me if I'm wrong or 18 if he thinks I'm wrong -- does not include the extra 19 energy costs of the induced draft in natural draft 20 equipment. 21 And this is largely, except in California and 22 Florida, largely equipment that is located within the 23 interior space. It is drawing even during the off 24 cycle and as temperature contrasts between inside and

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(301) 565-0064124 1 outside. It's drawing heated indoor air out through 2 the draft diverter. And this is not insignificant. 3 And if we're looking for broadening the 4 envelope of costs to be analyzed, this would seem to 5 have at least as much justification as -- the venting 6 problems of underground equipment. Thank you. 7 MR. BROOKMAN: Thank you. Steve, did you 8 have an additional comment? 9 MR. NADEL: No, not on oil furnaces. 10 MR. BROOKMAN: Thank you. John. 11 MR. HUBER: I'll make some comments on the 12 sulfur issue and the heating oil, and I'll supply some 13 information to the Department of Energy that we've done 14 as to -- 15 MR. BROOKMAN: Your name, please, John. 16 MR. HUBER: Pardon? 17 MR. BROOKMAN: Your name, please. 18 MR. HUBER: Oh, I'm sorry. John Huber with 19 NORA. But we will supply some information to DOE on 20 kind of the overall sulfur standards going around the 21 world. You know, we've looked at that issue carefully 22 as to whether the standards will be changing either 23 voluntarily as the fuel becomes more available. 24 And I think, as we've all seen in the energy

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(301) 565-0064125 1 markets, there has been some true dynamics in pricing 2 both in oil and natural gas over the last five years 3 where we have looked at a steady state differential 4 between low sulfur and high sulfur as a penny and a 5 penny and a half over the last decade. But that 6 differential, I believe, is in the 14- to 20-cent range 7 now. Now, whether that will close if we have more 8 stability in the oil markets is, you know, something 9 that we may see over the next coming years, but it's 10 very difficult to predict, you know, with any certainty 11 or any engagement as those things change. 12 But we'll provide additional information, but 13 I don't think we can prognosticate whether those 14 differentials will close, which would make more of a 15 low sulfur standard go in, or lower sulfur fuels. 16 MR. BROOKMAN: Thank you. Yes, Graham. 17 MR. STEVENS: I would just like to state that 18 the Department obviously would like any information 19 stakeholders have on this issue. 20 MR. BROOKMAN: Yes. Jim Mullen. 21 MR. MULLEN: I'd like to make a general 22 comment on the oil furnace market, not from any -- from23 our manufacturing perspective but just as an industry24 wide issue.

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064126 1 I think the number of oil furnaces sold per 2 year are 100,000 or less, and it's a declining market. 3 And as such, I would think that any major engineering 4 effort is difficult. Ensuring redesign, tooling, 5 whatever, is difficult because of the small return and 6 the small number of furnaces to capture a return on. 7 The second issue that I would raise is that 8 it's easy to talk about oil furnaces like you can -- 9 like efficiency is -- has no other effect as it would 10 on a gas furnace, or almost no other effect other than 11 condensation or the sulfur load. But in fact, as a lot 12 of oil furnaces have their efficiencies pushed higher, 13 what's happened is the excess air for combustion is 14 being reduced such that the C02s are higher and they 15 run closer to the point that they generate smoke, which 16 is vernacular as being something or other. 17 And in terms of a heat exchange in a furnace, 18 it doesn't get serviced properly for probably annually. 19 It's a heat exchanger full of soot that somebody needs 20 to dig out. And the next time somebody does service it 21 is when they have a no-heat call. 22 But the point is that it's easy to talk about 23 pushing oil efficiencies higher, but there is a 24 realistic side to this thing that means that if you're

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(301) 565-0064127 1 going to push them higher, they are going to need more 2 maintenance and I don't think that's probably included 3 in the cost of this, and you should anticipate more 4 failure to deliver heating when required and probably 5 larger maintenance bills when it's required. 6 MR. BROOKMAN: Thank you. I'll summarize. 7 He says maintenance costs will be higher. 8 MR. BOLZ: Bob Bolz. I have a small marker 9 in Pennsylvania. Maintenance costs will be higher 10 what? 11 MR. MULLEN: My point was that as 12 efficiencies -- this is Jim Mullen. As efficiencies 13 get pushed higher, oftentimes the excess air is reduced 14 and you run closer to the point of making particulate 15 in the heat exchanger. And therefore the maintenance 16 costs probably are not the same as you push 17 efficiencies of the units up. 18 MR. BOLZ: I believe you're wrong there. 19 With the newer burners we don't have near the 20 particulate problems that we did. I believe we're just 21 about at the area with combustion. It's on the gross 22 stack temperature that the change is. On any unit, as 23 the efficiency goes higher the reliability gets worse. 24 And one of the things I think that has to be

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(301) 565-0064128 1 considered here is what's good for the customer. One 2 of the people here sit here and talk about the 3 customer. My own customers, I know for a fact that as 4 the complexity and the expense of the unit goes up, my 5 customers are not the high-income customers. They will 6 keep that equipment longer. 7 One of the things that you have to factor in 8 is, if you make the equipment too complex and too 9 expensive, we're going to have less people changing out 10 the units that need to be changed out, and there's 11 where the problem is. 12 The new equipment on the wheel does not have 13 the particulate bit and the maintenance is down on the 14 new equipment, and I think if you look at the 15 Brookhaven facts from that, you'll see that's quite a 16 big change and the maintenance is not as high. 17 MR. BROOKMAN: Thank you. Steve Nadel. 18 MR. NADEL: Yeah. I mean, I certainly agree 19 that we need to look at the cost. They're factoring 20 into the analysis the incremental cost to go from 82 to 21 83. I know there's stuff at 86 percent. We're not 22 talking about that. It's just, where does installation 23 cost start getting higher. 24 The one other comment I wanted to make, I

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(301) 565-0064129 1 realize, is Energy Star. EPA has just raised their -- 2 actually, just lowered their Energy Star requirements 3 for oil furnaces down to the same 83 percent, as I 4 recall. Rachel Schmeltz is here. She can comment that 5 they didn't find adverse problems at 83 percent, which 6 is why they're going with that level. 7 MR. BOLZ: Eighty-three percent we don't have 8 a problem. Bob Bolz. 9 MR. BROOKMAN: Thank you. Say it again. 10 MR. BOLZ: At 83 percent I know no furnaces 11 that are having problems. That would do it. 12 One other thing on the boilers while I'm 13 thinking about it. Are you looking at just hydronic or 14 hydronic and steam on the efficiency? We have a large 15 installed base of steam, especially New York, New 16 Jersey, and you're not going to get the same -- Burnham 17 can probably answer this fairly well -- same 18 efficiencies off a steam system as you are a hydronic. 19 You've got to really look at limiting the availability 20 and the number of units. 21 I think one of the problems that I really 22 have is, from the contractor level, if you limit the 23 number of options, you're going to limit what my 24 customer has. And there's options that are available

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(301) 565-0064130 1 to the customer that make a lot more sense than just 2 efficiency. 3 MR. BROOKMAN: Thanks for that comment. 4 Thank you. Jim Crawford. 5 MR. CRAWFORD: A couple points. Back to the 6 discussion of corrosion. I think Frank kind of touched 7 on that early on, and the unfortunate past history 8 where we did not use -- as an industry did not use some 9 of the more exotic stainless steels and had some 10 significant problems as a result of it. 11 So as we move toward -- in the corrosive 12 direction, whether we're talking about the composition 13 of the fuel or we're talking about the temperature of 14 the flue gases, we're going to see pushing not to the 15 pedestrian stainless steels that we are familiar with 16 in consumerville but you're into some pretty exotic and 17 costly stainless steels. Totally different item. 18 As was observed, we haven't talked much about 19 boilers, and I know next to nothing about them but let 20 me speak about them just a little bit anyway. 21 (Laughter) 22 MR. CRAWFORD: The folks with whom I've 23 spoken who do know something about them have simply 24 observed that the 83 and 84 numbers for the oil-fired

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(301) 565-0064131 1 boilers and the gas-fired burners -- boilers seem to be 2 backwards. So that -- I think DOE needs to step back 3 and look at those numbers because everyone I've talked 4 to in the industry says the same thing on that: the 5 numbers are backwards. 6 MR. BROOKMAN: Okay. Thank you. Additional 7 comments? Mark Kendall. 8 MR. KENDALL: A few comments on some -- Mark 9 Kendall with Burnham. A few comments on some things 10 people have said. On the comment about excess air with 11 oil burners, certainly one of the things you can do to 12 increase the efficiency -- the combustion efficiency of 13 a product is to reduce the amount of excess air. And 14 in an oil-fired product, the limit that you reach, the 15 more you reduce the excess air is the smoke generated. 16 So the manufacturer wants to be very careful17 that when the product leaves the plant it's very clean18 burning, and continuing to reduce excess air to try to 19 achieve that level makes it more and more level that 20 that's not going to occur and there is going to be 21 dirty installations. So certainly smoke in an oil 22 burner is the limit. In the gas burner the limit 23 becomes more carbon monoxide, and you can continue to 24 reduce levels until you reach that point.

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(301) 565-0064132

1 And that transitions a little bit to a 2 comment I failed to make earlier about 84 percent for 3 boilers. If you check the availability of product at 4 that level and really look at what those -- how those 5 boilers are constructed, you will find, I believe, that 6 no one has a full product line at 84 percent, that it's 7 only a partial product line, which I believe is also 8 one of DOE's rationales for eliminating 81 percent from 9 the furnace category, that there wasn't a full product 10 line at that level. 11 You also see that there are some European 12 manufacturers that provide boilers at that level that 13 are atmospheric, and if you look at the construction, 14 you'll see that they're completely different from the 15 construction that DOE assumed in the tear-down 16 analysis, and we would expect that the cost -- there 17 would be a difference in cost as well to achieve those 18 two levels. 19 Steam; no one from DOE responded on that. I 20 believe DOE's proposal on steam boilers is to leave 21 that level where it is at 75 percent. They provided a 22 few reasons for that. One is that they didn't do any 23 analysis, really. It's a low sales volume product. It 24 didn't justify a lot of DOE's time, so they left it

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(301) 565-0064133 1 where it is, which is, you know, a logical way to do 2 that. 3 However, the negotiated agreement between the 4 manufacturers and the applicants did move steam up but 5 left it at two percentage points lower than the water 6 version. So on the market today steam -- I don't know 7 if there is a steam boiler sold at 75. Steam boilers 8 tend to be up in the 78, 79, 80 percent range, and 9 that's because they also function as water boilers. 10 And it could be that you could see a future 11 where there's such a difference between the efficiency 12 level set for water boilers and the one set for steam 13 boilers that there would now be two products on the 14 market, a 75 percent steam, which doesn't exist today, 15 and then an 82 percent, hopefully, hot water boiler 16 that doesn't provide a steam service. 17 And for those customers in the area where 18 steam is a major part of their market, it is 19 unfortunate to not have any analysis to really judge 20 the costs and benefits of leaving steam at 75 rather 21 than bumping its efficiency up similar to what the hot 22 water is going to. 23 MR. BROOKMAN: Thank you. 24 MR. KHAN: Mohammed Khan, DOE. Just to

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(301) 565-0064134 1 follow on to that and also provide a response earlier 2 rather, regarding whether or not we're considering 3 steam, the Department is only proposing a new standard 4 for oil-fired hot water boilers. Again, that was at 83 5 AFUE. And the reason that Mark had just mentioned 6 about the low number of shipments is the reason why the 7 Department is not considering the standard. 8 MR. BROOKMAN: Additional questions and 9 comments? We've heard a lot so far on proposed trial 10 standard levels, plural. Now would be the time to make 11 additional comments or supplemental comments to what 12 has been said already. Tom Eckman. 13 MR. ECKMAN: Tom Eckman, Northwest Power and 14 Conservation Council. We don't have a huge dog in this 15 race, but sitting here reading Table 37 that shows the 16 net present value of Trial Standard Level 4 being seven 17 times higher than Trial Standard 2 and life cycle costs 18 being 30 times better in terms of savings, and the 19 energy savings being roughly four times that of Trial 20 Standard Level 2, it seems a bit humble to wait 'til 21 2015 to get even the small number, let alone reach for 22 the higher number. 23 MR. BROOKMAN: What's the page number, Tom? 24 MR. ECKMAN: That's Table B7 -- 37, 59252.

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(301) 565-0064135

1 MR.BROOKMAN: Thank you. In the Federal 2 Register notice. Thank you. 3 Other comments on these trial standard 4 levels? 5 (No response) 6 MR. BROOKMAN: Okay. So then we've moving on 7 to what has been called the negotiated agreement, or a 8 consensus agreement. Maybe someone could just start 9 off by giving me just two minutes, for those that 10 aren't familiar with this negotiated agreement, what 11 happened here. 12 MR. deLASKI: The Department can begin. 13 (L ht) auger 14 MR. BROOKMAN: If the Department choose to, 15 but I see a couple people are standing by ready. Joe 16 Mattingly. 17 MR.MATTINGLY: This is Joe Mattingly. I 18 think I mind discussing what the proposal is. As far 19 as what happened, I don't think that's appropriate. 20 MR. BROOKMAN:Okay. Just -- so then, 21 describe what's here as a negotiated agreement. 22 MR.MATTINGLY: Mark Kendall can probably do 23 the best job of it. 24 MR.KENDALL: All right. The terms of the

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(301) 565-0064136 1 agreement as they relate to the regulation aspect. 2 There are four product classes. There are gas and oil, 3 hot water and steam boilers. So that's the four 4 variations there. For gas hot water, we propose 82 5 percent AFUE; gas steam, 80 percent; oil hot water, 84 6 percent; oil steam, 82 percent. 7 With those there are some design requirements 8 that we also proposed. For gas hot water, we proposed 9 a ban on standing gas pilots. We also proposed a 10 mandatory requirement which we called outdoor reset, 11 which doesn't necessarily have to be outdoor. The way 12 we defined this device is it would be an automatic 13 device that would lower the supply water temperature of 14 the boiler when the hot -- the high temperature water 15 isn't needed to meet the heating load in the space. 16 So unlike -- it's a type of I don't want to 17 say a modulating technology, but it actually causes the 18 boiler to -- the average water temperature in the 19 heating system over the year to be lower than if the 20 boiler were allowed to fire all the way up to the 21 highest temperature it could go and then shut off. 22 Those lower temperatures in the system also, over the 23 course of a year, save energy. 24 Temperature reset is a broadly applied

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(301) 565-0064137 1 technology today. We mandated that in a more generic 2 fashion than specifically calling out outdoor reset, 3 and you have to read the definition to see that. 4 For gas steam, it doesn't make sense to reset 5 the temperature on a steam boiler. You have to provide 6 it in 212-plus no matter what's going on in the space, 7 so that only contains the standing gas pilot then. 8 Oil hot water, these are power burners. They 9 don't have standing pilots, so we only mandated the -- 10 proposed to mandate the outdoor reset. And with oil 11 steam there are no proposed design requirements 12 associated with that. 13 We also proposed that all these changes go 14 into effect five years after the date of publication of 15 the final rule. 16 The agreement also talks about revising the 17 AFUE test procedure, however that happens after this 18 new -- after the final rule is adopted so as not to 19 hold up the final rule. And then there's some other 20 terms in there which don't bear on the regulation. 21 MR. BROOKMAN: Thank you. Steve Nadel. 22 MR. NADEL: He gave a good summary of it. We 23 think it's a good proposal. As I said, it will save 24 twice as much energy, and we'd like to explore ways for

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(301) 565-0064138

1 it to move forward. 2 MR. BROOKMAN: Thank you. Other comments on 3 what Mark has described? 4 MR. RANFONE: Jim Ranfone, AGA. I stated 5 this morning I have some concerns about the temperature 6 reset and the issue of verification, whether or not 7 it's going to save energy or not. I don't see how the 8 Department could mandate through this rulemaking at the 9 -- by consensus agreement of those organizations if 10 there's no technical or economic information provided. 11 If the manufacturers and the others that were involved 12 in the consensus agreement want to do that on their 13 own, I don't -- you know, that's their prerogative. 14 But legally, I don't know how DOE can adopt a 15 prescriptive requirement, and even that goes for the 16 standard pilot one, based on, you know, an agreement 17 between some organizations. I would encourage them, 18 and I certainly appreciate the effort they put forth 19 here, but the proper way to do this is -- test 20 procedure. Let's make sure the customer is getting 21 what the customer -- what the AFUE number is. Without 22 that, I would say that the consensus agreement for the 23 prescriptive requirements is not in the best interest 24 of the consumer because there is no verification.

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(301) 565-0064139 1 On the 82 percent, I would assume, and I do 2 support that, that the parties involved were agreeing 3 with the 82 percent based on the concerns already 4 expressed about longevity and potential for premature 5 corrosion. So I would suggest that you adopt the 82 6 percent as the minimum for gas boilers and back off 7 from the prescriptive requirements. 8 I don't know if that goes hand in hand with 9 the consensus agreement. I would suggest to you if the 10 parties involved, at least from maybe the environmental 11 side, do they have the same concerns at the 84 percent 12 and that's why they agreed to the 82 percent. 13 MR. BROOKMAN: Which of you would like to go 14 first? Steve Nadel. 15 MR. NADEL: Okay. Jim, you raised two 16 questions as I see it. One, documentation on the cost 17 and savings. Yeah, there is quite a bit of information 18 available. If you would like to see it or for the 19 record, we submitted a little bit but there's 20 definitely a lot more. We are confident that this is 21 highly cost effective and significant savings. Our 22 estimate, and it's conservative, is it will more than 23 double the savings compared to what the Department has 24 proposed.

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064140 1 The other comment you said is, well, 82, 84, 2 controls. This was a delicate compromise. The 3 industry really wanted the 82 percent. We were trying 4 to look for creative ways to get at least as much 5 energy savings. So the controls are an integral part 6 of the agreement. We cannot support an 82 percent 7 without the controls. But it was a compromise to work 8 with their concerns for safety and our desire to get 9 energy savings. 10 And I'd point out this is also in line with 11 what the fellow from NORA said, that there's a lot of 12 opportunities for savings in controls, and we're trying 13 to get at some of those in order to find a creative 14 solution to get the energy savings while satisfying the 15 manufacturers' concern for, you know, large safety 16 margins. 17 MR. BROOKMAN: Thank you. Andrew deLaski. 18 MR. deLASKI: I guess I just want to make a 19 couple of points. One is that I think the 20 manufacturers deserve a lot of credit for coming 21 together on this. The hydronics section of GAMA I 22 think represents, Frank, the 32 manufacturers. It's a 23 large number of manufacturers. 24 MR. STANONIK: Around 30.

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(301) 565-0064141

1 MR. deLASKI: Right. So I think it's a 2 notable accomplishment for GAMA to come into an 3 agreement with NRDC, ACEEE, my organization, and the 4 Alliance to Save Energy to come up with this proposal 5 to the Department. 6 The Department has gone to great lengths over 7 the last several years to encourage these sorts of 8 processes. The agreement -- there was a proposal on 9 ballasts, clothes washers. There have been several 10 over the years -- refrigerators, other products -- that 11 became the basis for DOE rules. 12 I think another notable feature of it is that 13 the manufacturers and the applicant can go to Congress 14 with a reasonable date as well, 2012 rather than this 15 2015 concept, which again I think is a crazy concept 16 that we have to wait eight years to do these standards 17 into effect. 18 So it's a notable accomplishment to have this 19 set for the Department. I think Mark used the phrase 20 earlier of the "silver platter." I think it's an apt 21 one. So it's frustrating to have the Department then, 22 you know, get the proposal back in its hand, although 23 I'm heartened here today that at least it's on the list 24 of things to discuss. So that to me says that there's

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(301) 565-0064142 1 some opening there and some willingness to reconsider 2 what's been put into the proposal. 3 I also am very concerned about the chilling 4 effect that this sort of decision on the part of the 5 Department, if it's not reversed, has for future 6 agreements. The Department has put a lot of -- a lot 7 of stock in the concept of groups to get together and 8 come up with proposals that meet needs of manufacturers 9 in need of energy savings, that that's something that 10 should be given special weight. And that seems to be - 11 - there seems to be some backsliding on that concept 12 here. So I think we can urge the Department to 13 reconsider where it's ended up on this so far. 14 MR. BROOKMAN: Thank you. Jim Ranf one. 15 MR. RANFONE: Jim Ranf one. Just a quick 16 question. In not supporting the 84 percent, the 17 manufacturers are concerned about the safety margin but 18 the conservation groups don't believe there is a safety 19 problem at 84 percent; is that what I heard? That's 20 why you would mandate 84 -- agree with the 84? 21 MR. BROOKMAN: Steve Nadel. 22 MR. NADEL: We made an agreement that 23 balanced interests. The manufacturers asked for a very 24 large safety margin. It may be larger -- probably

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(301) 565-0064143 1 larger than we would normally agree to, but we agreed 2 to that in exchange for the control requirements that 3 will make the savings up. So we think the -- 4 certainly, we were extremely generous on the safety as 5 part of this agreement and we cannot support an 82 6 percent absent the control requirements. 7 MR. BROOKMAN: Thank you. Yes. 8 MR. MATTINGLY: This is Joe Mattingly. It 9 was a delicate negotiation. You run the risk -- just 10 this discussion runs the risk of people making 11 statements beyond what's totally necessary that will be 12 totally counterproductive to this. So I think we 13 should be careful. 14 MR. BROOKMAN: I haven't heard from counsel. 15 So then -- yes, Andrew or Steve, either one. I think 16 we've just about covered this one, I think, maybe. So, 17 additional comments and particularly new information 18 that we haven't covered yet. 19 MR. NADEL: I was going to ask a question of 20 the Department. If it can be demonstrated that the 21 Department has the legal authority and that this is 22 cost effective, can the Department go forward and issue 23 this in the final rule, or the fact that you basically 24 barely mention this in the NOPR cause problems even if

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(301) 565-0064144

1 we could meet those other two hurdles? 2 MR. CALAMITA: This is Chris Calamita, 3 Department of Energy. I don't think we can give a yes 4 or no answer to that necessarily right now. We gave 5 our response for why we saw we didn't have the legal 6 authority, so we would ask that -- we would have to 7 first overcome that hurdle so we would -- if you're 8 going to be commenting on that, we feel that that would 9 have to be addressed first. 10 Secondly, you mentioned that, you know, some 11 data had been provided but not all the data that was 12 available or that was used in coming up with these 13 levels. We would have to look at that and see was 14 there at least enough data provided publicly for us to 15 go ahead with this in the final rule or would it be a 16 situation where there wasn't even enough on the table 17 to get comments on that at that time. 18 So not knowing exactly what level of data is 19 currently available, it's something we have to take a 20 look at. 21 MR. BROOKMAN: Final comments on this 22 negotiated agreement? Yes. 23 MR. HOLLERAN: Again, this is Patrick 24 Holleran, and I just wanted to reiterate, if the 82

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(301) 565-0064145 1 percent with the prescriptive remedies was deemed not 2 legal or DOE backed off on the consensus, we need to 3 just look at the difference between 82 and 84 percent. 4 Basically, the DOE documentation shows a $5 a 5 year savings between 82 and 84 percent. And again I 6 want to reiterate the risks associated with a couple 7 pennies a day versus the risk of lives at stake 8 ultimately with bad vent systems. 9 So I think we want to come to a consensus 10 that is safe, at the highest safe level, which I again 11 recommend 82 percent. 12 MR. BROOKMAN: Thank you, thank you. Harvey 13 Sachs. 14 MR. SACHS: Harvey Sachs, ACEEE. I'm just 15 looking for a little bit of clarification from counsel 16 for DOE because I'm not sure I captured the meaning. 17 Again, I'm not a lawyer so some things are challenging 18 to me. 19 What I understood to be stated was that the 20 consensus agreement was illegal but if we provide much 21 more data on the savings associated it might become 22 legal. 23 (Laughter) 24 MR. CALAMITA: Chris Calamita, Department of

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(301) 565-0064146 1 Energy. To clarify, that's not what I said. I 2 apologize if that's what came across. I said the first 3 obstacle would have to be -- there would have to be a 4 showing that the consensus agreement was legal. As we 5 stated in the NOPR, we don't see the authority to do 6 standards as presented in the consensus agreement. 7 And then if that hurdle were overcome, I'm 8 not saying it is, but if it were, then we would have to 9 consider the amount of data that was made available and 10 whether or not there was enough information in the NOPR 11 and enough information made publicly available for us 12 to go with something in a final rule. 13 So it's two separate issues, first one being 14 the legal hurdle. 15 MR. SACHS: Thank you. That does help. 16 MR. BROOKMAN: Harvey Sachs. 17 MR. SACHS: This is Harvey Sachs. Now my 18 interpretation of what you've just said is if you want 19 to do a whole lot of work in a lost cause, we invite 20 you to. 21 MR. CALAMITA: Chris Calamita, Department of 22 Energy. We were, I think, clear on what our position 23 is on our authority. As commenters provide different 24 perspectives, we will respond to that and expand upon

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(301) 565-0064147 1 our discussion as necessary. But I think it was fairly 2 clear in the NOPR what our initial thoughts were on our 3 authority, and that was we do not have it. 4 MR. BROOKMAN: Thank you. 5 MR. SACHS: Thank you. 6 MR. BROOKMAN: Andrew. 7 MR. deLASKI: Just my own closing remarks on 8 this is that I think it's a good agreement. It will 9 save a lot of natural gas, it will save a lot of money, 10 and I hope that not only the stakeholders who were 11 originally party to this but AGA, as the representative 12 of the gas utilities. This is the fuel we're talking 13 about saving, is AGA's fuel. Again, we'll provide more 14 information, Jim, on the benefits here of the other 15 technologies and hope that it's something that AGA can 16 get behind as well in the future. 17 MR. RANFONE: Thank you very much, but I 18 think since we're in a DOE rulemaking I'd prefer that - 19 - well, I'll take your information and review it, but I 20 do think the public needs to take a look at this 21 information and have the opportunity to see it because 22 I don't want some prescriptive requirement to go into 23 federal law that hasn't been completely analyzed and 24 given the full due process and public review and

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(301) 565-0064148 1 scrutiny that it deserves and has to be under the 2 rulemaking. 3 MR. BROOKMAN: That last comment from Jim 4 Ranf one. Are you done? 5 MR. deLASKI: Yeah. We'll submit additional 6 information for the record. 7 MR. BROOKMAN: Thank you, Andrew. Thank you. 8 Okay. Yeah, Jim Crawford. 9 MR. CRAWFORD: Jim Crawford, Trane. Kind of 10 speaking from the sidelines on this issue, it would 11 seem to me that there might be a difference between an 12 agency having the authority to direct and the authority 13 to accept what really amounts to a voluntary agreement 14 on the part of industry to incorporate certain features 15 which, by the way, will save energy. 16 And that's all on that topic. 17 MR. BROOKMAN: Okay. Thank you, thank you. 18 I think, then, the last issue that I've got on my list 19 as I look at what I've written down in addition to what 20 the Department has put in its slides, effective date. 21 I think perhaps this is the last issue. If there's 22 another one, we'll take it up. 23 So, and of course, the effective date was one 24 of the things that was raised in the last series of

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(301) 565-0064149 1 comments. So, questions, comments related to the 2 effective date or what's been also termed the 3 compliance date. Steve Nadel. 4 MR. NADEL: I mean, regarding boilers, we 5 stand behind our consensus agreement on that. The 6 question is for furnaces, particularly gas furnaces, 7 whether seven or eight years is truly needed in order 8 to raise AFUE from 78 to 80 percent for the 1 percent 9 of the market, if I understand correctly, that doesn't 10 presently meet this standard. 11 I guess I would ask industry whether it truly 12 needs seven or eight years for this change, and I would 13 ask DOE if it has looked at the language in the process 14 rule that gives us some flexibility on whether -- if 15 not, whether it can look at that. 16 MR. BROOKMAN: I see Joe Mattingly. 17 MR. MATTINGLY: GAMA represents a number of 18 different products subject to DOE regulation, and to 19 us, the -- and we understand DOE is, you know, behind 20 schedule on some things. But to us, we believe that 21 the effective dates -- you know, the lead times and the 22 times between standards effective dates were part and 23 parcel of the original agreement that led to NAECA. 24 And we're very concerned that if you start being

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(301) 565-0064150 1 cavalier with effective dates and, again, times between 2 standards effective dates, we've given up the bargain 3 we thought we had in the first place. 4 So it's really as much a case of not heeding 5 the statutory effective dates that can affect a lot of 6 products besides just these ones. 7 MR. BROOKMAN: Thank you. Kit Kennedy. 8 MS. KENNEDY: The provision of Section 6295 9 that deals with furnaces doesn't require a seven- or 10 eight-year effective date between adoption of the rule 11 and compliance. There is -- it was contemplated in the 12 statute that the rule would come out 10 years ago. It 13 was contemplated that the compliance date would be a 14 particular year after that, but there is nothing in 15 NAECA which requires that. 16 We've seen the Department in other instances, 17 including the central air conditioner rule, come up 18 with a compliance date which is significantly shorter 19 than the date in the statute for -- the gap between the 20 date in the statute for adoption of the rule and the 21 date in the statute for the compliance date. 22 So the original SEER13 rule issued in 2001 23 had a 2006 compliance date. When the Department took 24 it down to SEER12 in 2002, that still had a 2006

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(301) 565-0064151 1 compliance date. When the court decision came out 2 bringing it back to SEER13 in 2004, there was still a 3 2006 compliance date. 4 So the consequences of delay are harmful for 5 everyone, for consumers, for environmental groups, and 6 potentially for manufacturers, too. And when you have 7 a rule that's so, so late, you can't simply say, okay, 8 the relative gap between the time for adoption of the 9 rule in the statute and the effective date in the 10 statute is X so we have to stick with X. The 11 Department needs to -- in order to get those energy 12 savings, needs to adjust the compliance date to reality 13 and to what has happened so that consumers can get the 14 benefit of the savings in some semblance of a timely 15 way. 16 So I think the issue does go back to what 17 Steve raised, which is, you know, why do you need seven 18 or eight years to come into compliance with a standard 19 that most models already meet. 20 MR. MATTINGLY: Joe Mattingly again. We had 21 this issue with water heaters, you know, a few years 22 ago. And on your schedule for next year you've got 23 water heaters again and you've got direct heating 24 equipment, and predictively -- I'll tell you what -- is

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(301) 565-0064152 1 going to be arguing for lesser, you know, shorter 2 effective dates no matter what the standard level might 3 be. 4 I just don't want to go down that road, you 5 know. It's precedent-setting. 6 MR. BROOKMAN: Okay. Yes, Steve Nadel. 7 MR. NADEL: The one thing I'd point out 8 relative to Joe's last comment is in the case of water 9 heaters and direct heating equipment a three-year lead 10 time is provided. In this case, DOE's interpretation 11 is eight years. 12 We're fine with three years. We're not 13 trying to shorten it unduly. But we think given the -- 14 what is going to be needed for manufacturers, eight 15 years is, you know, unduly generous. 16 MR. BROOKMAN: Final comments on the 17 effective date issue? 18 (No response) 19 MR. BROOKMAN: So that, based on what I've 20 heard so far, is everything that I have on my list. 21 Are there any issues that we haven't covered yet that 22 anybody would like to bring up at this time? Jim 23 Crawford. 24 MR. CRAWFORD: Jim Crawford, Trane. I want

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(301) 565-0064153

1 to return to an issue that I believe Jim Mullen 2 mentioned earlier, and that was in order to meet say an 3 83 percent on a given product in terms of the AFUE you 4 may need to have an 85 percent or maybe even a little 5 bit more in steady state, which may be what's 6 determining the condensation. 7 Our designers have also raised the issue that 8 in order to make any number with legal certainty that 9 you're meeting the DOE requirements on the percent of 10 product that has to be above that level and dealing 11 with the natural variability, you have -- your 12 distribution has to be skewed upwards from the 13 threshold. 14 So if we go to, say, an 85 percent steady 15 state, that means that the outliers on the up side may 16 be 86 or 87 percent. And so this has got to be taken 17 into consideration by the manufacturers in selecting 18 their materials and in all the design considerations to 19 maximize the safety of that product. Very important 20 consideration. 21 MR. BROOKMAN: Thank you. Andrew deLaski. 22 MR. deLASKI: Doug, I had an issue that I 23 raised earlier at the outset about sales or the 24 allocation of condensing furnaces in the baseline.

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(301) 565-0064154 1 MR. BROOKMAN: Okay. Yes, I thought we had 2 covered it, but go right ahead, please. 3 MR. deLASKI: Okay. This is an issue which I 4 think is a mistake in DOE's analysis. If not, you can 5 tell me why not. The concern I have is that the 6 Department has -- it appears to me the Department has, 7 in the base case, there's 35 percent of units, or 36.4 8 percent of units that you assume to be condensing 9 furnaces. It appears to me that you've allocated them 10 all to the very, very coldest houses. 11 And if you look at Table V.1, the evidence of 12 this is in Table V.1, which -- of the proposal, which 13 is on page 59253. This is Non-Regulatory Alternatives 14 to the Standards, and I suppose what it really is is 15 non-federal regulatory because -- state regulatory 16 options in terms of regional standards or regional 17 application of the standard. 18 At the bottom it shows the regional 19 performance -- the total energy savings in quads for 20 regional performance standards for non-weatherized gas 21 furnaces for states more than 5,000 heating degree 22 days. It says the savings would be 1.725. Below that 23 it shows the savings would be, for states with more24 than 6,000 heating degree days, that you only get twoEXECUTIVE COURT REPORTERS, INC.

(301) 565-0064155 1 tenths of applied, which to me seems to be a very 2 strange result. 3 And when I read the TSD to understand why is 4 this result coming up, there is a statement in the TSD 5 that the Department -- I'm quoting from page 8-19 of 6 the TSD -- "assigned a condensing furnace to the 35 7 percent of housing units with the highest number of 8 heating degree days since households in colder climates 9 are most likely to purchase a condensing furnace." 10 What this tells me is that you're assuming 11 everyone in Minnesota gets a condensing furnace in the 12 base case, whereas the market today in Minnesota I 13 believe is on the order of 60 percent, 50 or 60 percent 14 condensing. So, am I reading this right, or am I -- 15 how have you allocated who gets the condensing -- these 16 35 percent of condensing furnaces? 17 MR. BROOKMAN: Alex, yes. 18 MR. LEKOV: Alex Lekov. Essentially, here 19 we're talking about the distribution of efficiency 20 within the condensing range because it's not just 90 21 percent, if you have 92 percent and further up to 96. 22 And there is a short statement in the TSD which says 23 that we essentially are looking at the heating degree 24 days.

EXECUTIVE COURT REPORTERS, INC. (301) 565-0064156 1 So what's happening is, as you go north, we 2 assigned more of those 96 percent furnaces. So 3 essentially, the model is probably -- this is what it 4 does. Above 6,000 degree days, you have most of those 5 96 percent are above 90 percent furnaces. Therefore, 6 this impacts the economic results. 7 Am I sufficiently clear? 8 MR. BROOKMAN: Steve Nadel. 9 MR. NADEL: Steve Nadel. You're saying the 10 model determines this. So Andrew gave an example of, 11 in Minnesota, do you assume every home has condensing 12 furnaces 90 percent or more in the model, or do you 13 assume 60 but in that 60 they're a little more likely 14 to use a 96 than -- 15 MR. LEKOV: This is a better understanding, 16 yes. 17 MR. NADEL: And then I guess my question 18 would be, how come the savings is so much dramatically 19 lower for 6,000 heating degree days than 5,000? Yes, I 20 understand there are less homes. Yes, I understand 21 that there's a higher market share in the very coldest 22 climates. But the drop-off is so precipitous that it 23 implies some problem with the analysis. Unless you 24 have some explanation.

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(301) 565-0064157 1 MR. LEKOV: Basically, again, what I could 2 say at this level is that as you to higherdegrees 3 there is -- it's more likely that a house will 4 encounter -- their baseline furnace will be higher 5 efficiency. Therefore, I had 6,000 degree days -- that 6 is a large fraction of furnaces above -- at 90 percent 7 or above. And as a result, the opportunities for 8 energy savings are much less. 9 MR. deLASKI: I guess I just continue to -- 10 MR. BROOKMAN: Andrew deLaski. 11 MR. deLASKI: There's got to be a mistake 12 here because if you look at the states here that 13 according to the Department's NOPR are in this 14 category, are Alaska, Colorado, Connecticut, Idaho, 15 Illinois, Iowa, Maine, Massachusetts, Michigan, 16 Minnesota, Nebraska, New Hampshire, New York, North 17 Dakota, South Dakota, Utah, Vermont, Wisconsin, 18 Wyoming, are greatly susceptible to heating degree 19 days, according to this document. 20 So it's striking to me that you're only 21 getting two-tenths of applied savings in those states. 22 MR. LEKOV: I could -- we could provide the 23 details state by stateassessmentof this if this will 24 help you to understand -- better to understand why this

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(301) 565-0064158 1 is happening. 2 MR. BROOKMAN: Steve Nadel. 3 MR. NAIDEL: Yes, that would be helpful. 4 Because as I recall, there's only seven or eight states 5 that get added between 5,000 and 6,000 heating degree 6 days, but you're saying most of the savings are in the7 six or seven states. So if we could get that state-by8 state data for the homes -- for all the states above 9 5,000 heating degrees, that will help us to better 10 understand what you're doing and whether that's correct 11 or whether some errors are being made. 12 MR. BROOKMAN: Harvey Sachs. I think we're 13 moving on toward the end. Harvey. 14 MR. SACHS: Alex, this is Harvey Sachs, 15 ACEEE. My sense of things is that as you move up from 16 90 toward 96 percent, first of all, the number of 17 models and presumably sales goes down rather rapidly. 18 So we've got a very strange distribution function 19 there. 20 My sense is, further, then that the 21 condensing models above 90 percent are generally sold 22 as premium models on features for which the energy 23 efficiency gain is symbolic rather than being a major 24 driver of the sale. I could be wrong, but I'm just

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(301) 565-0064159 1 suggesting that this seems to be a rather conjectural 2 basis and wondering how come we perhaps didn't use the 3 published state fractions from 2000 of condensing 4 furnaces that are available. 5 MR. BROOKMAN: So maybe, those of you that 6 have detailed questions like this, can meet with Alex 7 immediately following the meeting and explore these 8 things. Alex, you can provide additional content on 9 this? 10 MR. LEKOV: Definitely. 11 MR. BROOKMAN: Okay. So I think that's all 12 the issues. Steve Nadel. 13 MR. NADEL: Yeah. I'm wondering whether, 14 rather than trying to have a huddle now, Alex 15 volunteered to provide some data. 16 MR. BROOKMAN: Sure. 17 MR. NADEL: Why don't you provide that data? 18 That will allow us to better refine the questions and 19 see how big of an issue this appears to be. So, is 20 that something the Department can agree to provide? 21 MR. CALAMITA: This is Chris Calamita, 22 Department of Energy. We'll have to take a look and -- 23 because any day that we're going to provide we're going 24 to want to provide publicly to all stakeholders and

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(301) 565-0064160 1 make available. We're going to have to figure out the 2 best forum to be able to do that in. 3 And I think there's -- some of the other -- 4 we offered up data earlier. We'll have to make the 5 same considerations, how we can be able to provide this 6 to everybody so that it's made public and to what 7 extent was it, you know, originally either in the TSD 8 or somehow embedded in the TSD and make it clearer. 9 MR. BROOKMAV: Steve Nadel. 10 MR. NADEL: Yes. I would point out that long 11 precedent, most recently with the transformer rule, 12 where issues that come up, the Department sends out an 13 e-mail to everybody on its list, everybody here, 14 everybody who has ever expressed interest in this 15 rulemaking, indicating that this data is now posted. I 16 would hope that you would do that so that everybody 17 here and everybody that's ever commented on this over 18 the last 10 years could look at it and comment. 19 MR. CALAMITA: Chris Calamita, DOE again. 20 Yeah, we know -- we recognize that we've done that in 21 the past. I just -- may not just be for you but for 22 others in the room who are not familiar with our past 23 practices in addressing this. 24 MR. BROOKMAN: Thank you. Okay. So I'll

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(301) 565-0064161 1 just say thanks to all of you. I will turn it back to 2 the Department of Energy for closing remarks. For my 3 part, I'd just say I appreciate the spirit of 4 cooperative exchange here in the room today. Thanks 5 very much for that. 6 Back to Mohammed. 7 MR. KHAN: Mohammed Khan, DOE. Again, I'd 8 like to appreciate -- express our appreciation for your 9 attendance. We certainly have heard a good exchange of 10 comments and ideas and things that we ought to give 11 further consideration to. All of those comments have 12 been duly noted and we will fully give consideration to 13 each and every one of them. 14 And we hope to be able to work out the issue 15 about the information or actually data exchange. 16 Perhaps we could do something like posting it on the 17 Web or hopefully, you know, we won't have to go with a 18 supplemental NOPR or anything like that. 19 So again, we appreciate everything, and we 20 hope to move along with the final rule as quickly and 21 swiftly as possible. Thank you. 22 (Whereupon, at 12:38 p.m., the meeting was 23 concluded.) 24

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1 REPORTER'S CERTIFICATE 2 3 This is to certify that the attached 4 proceedings before: 5 UNITED STATES DEPARTMENT OF ENERGY 6 In the Matter of: 7 PUBLIC MEETING ON PROPOSED ENERGY CONSERVATION 8 STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS 9 were held as herein appears and that this is the 10 original transcript thereof for the file of the 11 Department, Commission, Board, Administrative Law Judge 12 or the Agency. 13 Further, I am neither counsel for or related 14 to any party to the above proceedings. 15 16 17 18 Official Reporter 19 Dated: November 7, 2006

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301-565-0064