1

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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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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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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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

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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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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

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Participants (Continued)

CORY WEISS

Effikal International Inc.

LIYING ZHOU

Gas Appliance Manufacturers Association

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A 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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A G E N D A

AGENDA ITEM: PAGE:

Brief Stakeholder Comments (Continued)

Andrew deLaski 68

Appliance Standards Awareness Project

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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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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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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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 12:3 0. We'll return from lunch and just keep

2 i

3

go ng.

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 supporting folks will be flashing on the screens to

7 guide the conversation, 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 as we go along.

11 We will continue discussing these issues

12 throughout the remainder of the day. I guess our hope

13 and expect ation 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 considerat ion what have emerged as norms for these

20 public mee tings, and I would ask that you please speak

21 one at a t ime. Please say your name for the record.

22 This will be a court-reported, recorded proceeding. I

23 didn't get that quite right, did I? And I'm going to

24 be trying to cue people individually by name. Please,

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1 every time you speak, say your name at least for the

2 record .

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 (No 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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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.

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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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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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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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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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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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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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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 Matting y

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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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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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 strongly

11 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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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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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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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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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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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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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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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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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 lowest

15 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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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 said

23 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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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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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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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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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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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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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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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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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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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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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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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 condensing

18 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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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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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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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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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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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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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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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.

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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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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 Standards Awareness Project

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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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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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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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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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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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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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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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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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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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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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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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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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.

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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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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 provide

10 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.

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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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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'll try and 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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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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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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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, each

8 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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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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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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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 against

5 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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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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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

9 Sachs fo ll owi ng on.

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.

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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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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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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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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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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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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 to

17 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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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 tech

14 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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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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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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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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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 -- from

23 our manufacturing perspective but just as an industry24 wide issue.

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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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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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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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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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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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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 careful

17 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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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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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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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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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 (Laughter )

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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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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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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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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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.

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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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 more

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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.

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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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1 MR. LEKOV: Basically, again, what I could

2 say at this level is that as you to higher degrees

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 state assessment of this if this will

24 help you to understand -- better to understand why this

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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 the

7 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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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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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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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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