NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 1

UNITED STATES OF AMERICA

+ + + + + DEPARTMENT OF ENERGY

+ + + + + ENERGY EFFICIENCY AND RENEWA BLE ENERGY OFFICE OF BUILDING TECHNOLOGIES

+ + + + + PRELIMINARY ANALYSIS PUBLIC MEETING FOR RESIDENTIAL CENTRA L AIR CONDITIONERS & HEAT PUMPS

+ + + + + WEDNESDAY MAY 5, 2010

+ + + + +NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 2

T A B L E O F C O N T E N T S Introducti ons............................... 3 Opening Re marks............................ 13 Rulemaking Overview........................ 23 Enforcemen t Plan........................... 35 Adjourn................................... 221NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 3

P R O C E E D I N G S 1 (time not provided) 2 MR. BROOKMAN: Okay. So good 3 morning everybody and we lcome. This is the 4 U.S. Department of En ergy's Preliminary 5 Analysis Public Meeti ng for Residential 6 Central Air Cond itioners and Heat Pumps. 7 My name is Doug Brookman from 8 Public Solutions in Baltimore. Appreciate you 9 all being here on time so we can get a good 10 start on this day. T he Department is making 11 every effort to make these meetings efficient 12 and shorter. And so I appreciate you being 13 here on time. That will help with this. 14 We're going to start off by doing 15 introductions around t he room. And then I'm 16 going to do an agenda review and then we'll 17 proceed. We'll start here and we'll go around 18 the table. An d then around the perimeter. 19 Please say your name and 20 organizational affiliation. 21 MR. GEE: Talbot Gee, Heating, Air 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 4

Conditioning, a nd Refrigeration Distributors 1 International. 2 MR. ECKMAN: Tom Eckman, Northwest 3 Power & Conserva tion Council. 4 MS. TROMBLEY -McCANN: Molly 5 Trombley-McCann, Energy Solutions for PG&E. 6 MR. STANGA: Mark Stanga for Daikin 7 Industries. 8 MS. HOWARD: Kate Howard, Natural 9 Resources Defe nse Council. 10 PARTICIPANT: Tim Ballo, 11 Earthjustice. 12 MR. ROSENSTOCK: Steve Rosenstock, 13 Edison Electr ic Institute. 14 MR. BRESHAW: Jim Breshaw 15 (phonetic), Ingers oll Rand Trane. 16 MR. MANDYCK: Jo hn Mandyck, Carrier 17 Corporation. 18 MR. NICHOLS: Je ff Nichols, Johnson 19 Controls. 20 MS. MEYERS: Ka ren Meyers, Rheem. 21 DR. KIRIM AMRANE: Kirim Amrane, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 5

Air Conditioning, Heati ng, and Refrigeration 1 International. 2 MR. SACHS: Harvey Sachs, American 3 Council for an Energy -Efficient Economy. 4 MR. BRUNDADGE: Don Brundadge, 5 Southern Company. 6 MS. TIEDEMAN: Jennifer Tiedeman, 7 DOE, Office of General Counsel. 8 MS. KOHL: Betsy Kohl, DOE GC. 9 MR. Cymbalsky: John Cymbalsky, DOE 10 Appliance Standards. 11 MR. WES ANDERSON: Wes Anderson, 12 DOE Appliance Standards. 13

MR MILLARD: Matt Mi llard, Navigant 14 Consulting. 15 MR. WEBER: Coll in Weber, Navigant 16 Consulting. 17

MR. CARMICHAEL: Rob Carmichael, 18 Navigant Consulting. 19 MR. ROSENQUIST: Greg Rosenquist, 20 Lawrence Berkeley Na tional Laboratory. 21NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 6

MR. SENTINO: Glen Sentino 1 (phonetic), Naviga nt Consulting. 2 MR. ANDERSON: Eric Anderson, 3 Pacific Northw est National Laboratory. 4 MR. WINIARSKI: David Winiarski, 5 Pacific Northw est National Laboratory. 6 MR. SCOTT: Michael Scott, Pacific 7 Northwest Nation al Laboratory. 8 MS. WILLIAMS ON: Jennifer 9 Williamson, Pacific Northwest National 10 Laboratory. 11 MR. SMALL: Te rry Small, Mortex 12 Products, Inc. 13 MR. CARR: Chr is Carr (phonetic), 14 Lennox International. 15 MS. MAUER: Joanna Mauer, Appliance 16 Standards Awar eness Project. 17 MR. RAYMOND: Michael Raymond, DOE 18 Appliance Standards. 19 MR. KHAN: Mo hammed Khan, DOE. 20 MR. LEKOV: Alex Lekov, Lawrence 21 Berkeley Nation al Laboratory. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 7

MR. INDIG: Ha rry Indig, DOE. 1 MR. JAMES: Bri an James (phonetic), 2 Southern California Edison. 3 MR. HARRIS: Jeff Harris, Alliance 4 to Save Energy. 5 MR. COMSTOCK: Owen Comstock, 6 Energy Informatio n Administration. 7 MR. BROOKMAN: Ok ay. Thanks to all 8 of you. Did everybo dy get a chance to 9 introduce him or herself? Good. 10 I think all of you registered or 11 should have regist ered at the front desk as 12 you entered the Department of Energy today. 13 And so the Department will supply at the end 14 of the day, perhaps more like one o'clock 15 today, a listing of all those present. 16 And we don't have a court reporter 17 present today. We're going to be creating an 18 audio recording of this that will then be 19 transcribed as the De partment's official 20 record of this meeting. 21 So it is all the more important 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 8

that we use the microphones today when we 1 speak. We need to real ly be disciplined about 2 that today. So I'm goin g to try and hold that 3 as a standard. 4 John, would you like to make 5 welcoming remarks? 6 MR. John Cymbalsky: Sure. As Doug 7 just mentioned, since we don't have a court 8 reporter, it's probably pretty important, too, 9 to submit written comments. So in case the 10 audio doesn't work out too good, we have the 11 written commen t as well. 12 And also we've had a big push, at 13 least on my part, to make these meetings more 14 focused and more time effi cient for everybody. 15 I know we're all busy and I thin k our time is 16 best served if we could keep the comments and 17 our presentations more focused. 18 And so with that , I would ask if 19 you make a comment, you don't need to make it 20 more than once. I think last week we were 21 able to do the fluoresc ent ballast, both the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 9

test procedures and the standards in one day. 1 Seventy percent of the attendees 2 had positive feedback from doing that. And I 3 think one of t he things I notice d as we went 4 along if someone didn 't have a comment on our 5 comment box, there was one person in 6 particular who felt th at he had to make a 7 comment. And most of his co mments started 8 with “I said this before but....” If we could 9 avoid that, I th ink we could be all the more 10 efficient. 11 So with that, we lcome. And let's 12 have an effi cient meeting. 13 MR. BROOKMAN: Thank you. Always 14 strive for that. 15 I think all of you received a 16 packet as you regi stered. In th at was a copy 17 of the agenda, the Federal Register notice, 18 and also the focal point for today's meeting, 19 which are these PowerPoint slides. I hope all 20 of you have a copy of that. 21 If you'll take a quick peek at the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 10

agenda, I'm just goin g to run through this 1 briefly. 2 Following this ag enda review, we're 3 going to have brief op ening remarks by Wes 4 Anderson. And there is an opportunity for 5 anybody that wishes to do so to make very 6 brief summary remarks about key issues and 7 concerns that th ey might have. 8 Following that we'll have a 9 rulemaking overview, regional standards 10 background, consensus ag reement, and combined 11 rulemaking presentation, followed by an 12 opportunity for comment for all of you. And 13 then a market and te chnology assessment, 14 screening analys is, and engineer ing analysis. 15 We'll take a br eak mid-morning. 16 Following the mid-morning break; 17 markups for equipment price determ ination, 18 energy use characteriza tion, life-cycle cost 19 and payback peri od analysis. 20 And then following those 21 presentations fo llowed by opportunity for 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 11

discussion and fo llow up, shipments analysis, 1 national impact analysis, and then preliminary 2 manufacturing analysis, next steps, and 3 closing. 4 There's typi cally another 5 opportunity at the end of the meeting for you 6 to make any additional comments you feel you 7 would like to make to inf orm the Department's 8 process. 9 As you can see, you're looking at 10 the agenda, we intend to finish today around 11 about 12:30 or so. So we'r e going to do 12 everything to try a nd adhere to that time 13 frame. A few pe ople have already told me they 14 have early afternoon meet ings. So we'll do as 15 best we can. 16 That's the overview on the agenda. 17 Questions and comm ents on that? 18 (No response.) 19 MR. BROOKMAN: I see none. So I'd 20 ask for your consideratio n. Please speak one 21 at a time. And toda y it is especially 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 12

necessary to speak into the microphone. The 1 little green LED light is on an d if it's not 2 on, just leave it on if you're going to speak 3 a lot. 4 Please say your name for the 5 record. There will be a complete transcript 6 of this meeting made avai lable. And it will 7 be posted on the EERE website in the span of 8 say a week or te n days or so. 9 I'm going to be queuing people as 10 best I can by name to speak. I also wish to 11 encourage fo llow on. 12 Are we all set? Yes? 13 Wes, speak to th is gentleman. I 14 also wish to encourage follow-on remarks. 15 Sometimes it is very he lpful to have the back 16 and forth or supportive comments based on the 17 original commenter's ideas. 18 So please say yo ur name each time 19 you speak. You don' t need to say your 20 organizational affiliat ion, just your name. 21 And please be concise. Share the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 13

air time. There is a lo t to be said on this 1 subject matter if you keep the focus here 2 during the course of the meeting today. 3 Please turn off your cells phones 4 or turn them on silent mode. If you need to 5 have a sidebar conversation with the person 6 next to you, we'll understand if you take it 7 out of the room, okay? That will be just 8 fine. And it will ke ep it focused here. 9 So that's the over view. Questions 10 or comments befo re we proceed? 11 (No response.) 12 MR. BROOKMAN: Okay. Then let's 13 follow on. We need Wes. 14 Wes, you're up . Wes Anderson. 15 MR. WES ANDERSON: Hello everyone. 16 I'm sorry for the dela y. I'm We s Anderson 17 with the Departme nt of Energy. 18 And this slide is here -- I'm here 19 to introduce where we are in the process. 20 We've had the fr amework and currently this is 21 the preliminary analysis publ ic meeting. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 14

And we're here to get your oral 1 comments and wr itten comments on the Federal 2 Register notice, technical support document, 3 and analytical spre adsheets that will be 4 presented today. And we will be requesting 5 data inputs from ma nufacturers and other 6 interested parties. Th e data inputs is -- 7 emphasis on data inputs from manufacturers. 8 And the issue bo xes look like this. 9 Everyone should be familiar with. So in the 10 Notice of Public Meeting and Availability of 11 Preliminary Technical Support document, the 12 NOPM (phonetic), DOE welcomes comment. 13 Throughout this presentation, 14 specific issues will be raised for discussion 15 on slides such as this with identifying item 16 numbers correspond ing to those in the 17 Executive Summary. Nonetheless, comments 18 concerning any part of the document or 19 presentation are welc ome at this time. 20 For your submission of comments, we 21 would -- please follow these rules -- the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 15

first three bullet points on this overhead -- 1 to have the title of the rule, Energy 2 Conservation Standards for Resident CAC and 3 Heat Pumps, docket number, and th e regulatory 4 identificati on number. 5 And emails through this -- the 6 email address and to Br enda Edwards for postal 7 mails going through the Forrestal and 8 personal carriers to th e 950 L'Enfant address. 9 The comment period closes May 10th. 10 At this time, we'd like to get 11 opening remarks. 12 MR. BROOKMAN: An opportunity for 13 brief summary remarks about issues and 14 concerns tha t you might have here at the 15 outset. 16 It looks like Harvey Sachs is 17 ready. 18 MR. SACHS: Wes, this is Harvey 19 Sachs at ACEEE. 20 And I'm appalled that the 21 Department would propo se to close the public 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 16

comments three busine ss days after this 1 meeting. 2 MR. WES ANDERS ON: Thank you. 3 Other comments he re at the outset? 4 Don Brundage? 5 MR. BRUNDAGE: I agree with Mr. 6 Sachs. If we knew this wa s going to -- if the 7 proposed settle ment was going to be accepted, 8 it doesn't take real long to write I endorse 9 the proposed settlement. 10 But we have to assume it is going 11 to go through NOPR. And this is a very 12 important phase. 13 If it is going to go through that 14 process, we need to dig into the details to 15 provide meaningf ul input to the Department. 16 And five calendar day s, three business days, 17 is just not acceptable. 18 Thank you. 19 MR. BROOKMAN: So how much would 20 you suggest the Department tr y to supply? 21 MR. BRUNDADGE: Two weeks would be 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 17

a lot better. 1 MR. BROOKMAN: Okay. Thank you. 2 Steven Rosenstock? 3 MR. ROSENSTOCK: Steve Rosenstock, 4 Edison Electric Institute. We've also come 5 out in favor of the consensus ag reement. 6 And for our previ ous commen ts that 7 we made for the furna ce rulemaking rules, it 8 was basically kind of a -- I'll say a 9 bifurcated comment saying we endorsed the 10 agreement but since we ha d no idea if DOE was 11 going to accept it, we made comments as if it 12 was going to go throu gh the full rulemaking 13 process. 14 We find ourselves in the same 15 situation toda y where we do endorse the 16 agreement but we have to assume that lacking 17 further input fr om the Department of Energy, 18 we have to assume it's going to go through a 19 full rulemaking proc ess, a full detailed 20 rulemaking process. 21 So, again, we're going to only get 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 18

kind of a, you know, split comments at this 1 point from the Edison Electric Institute. 2 It would be help ful, again, if the 3 Department was able to say number one, has the 4 Department made a decision or, number two, 5 provide a timeline to sta keholders as to when 6 they are going to ma ke a final decision. 7 As I recall, the Department was 8 presented with this la st October so that was 9 over six months ago. And it would -- I think 10 it would be helpful to everybody just to get 11 an indication if it is a yes or a no with a 12 consensus agreement so we really know -- can 13 really provide the comme nts the Department is 14 looking for. 15 MR. BROOKMAN: Thank you. 16 MR. ROSENSTOCK: Thank you very 17 much. 18 MS. TROMBLEY-M cCANN: Molly. 19 MR. BROOKMAN: Molly, please. 20 MS. TROMBLEY -McCANN: Molly 21 Trombley-McCann. I just wanted to echo what 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 19

Harvey, and Don, and Stev e have just said in 1 terms of timing. Thr ee business days is 2 completely impo ssible for us. 3 And in additio n, it would be 4 helpful to have a time line not just for a 5 decision on the consen sus agreement but also 6 for a decision on whether or not this will be 7 a combined rulemaking with furnaces and 8 furnace fans. 9 MR. BROOKMAN: Good comments. 10 Karim? 11 DR. AMRANE: Well, I have a more 12 formal statement to make. First of all, I 13 concur with Harvey and others as far as the 14 comment period. I think it is totally 15 inappropriate to give just three business days 16 for stakeholders to provide comments. 17 But having said that, I would like 18 to speak in favor, of cour se, of the consensus 19 agreement. As you all know, AHRI is a 20 signatory of the consen sus agreement that was 21 reached between HRI and several leading energy 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 20

efficiency organizati ons last October. 1 And of course, as a signatory, we 2 strongly support the agreement and we urge the 3 Department of Energy to adopt it in a direct 4 final rule and without delay. 5 We believe that the agreement has 6 several benefits inclu ding an accelerated 7 effective date. What we 're proposing here for 8 central air conditioning and heat pump will 9 take effect in January of 2015, which is a 10 year and a half ahead of the standard that 11 will take effect if DO E goes through the 12 normal rulemaking process. 13 In addition, it will provide a 14 significant amount of energy savings. We are 15 estimating that the combined furnace and 16 central air conditi oning and heat pump 17 standard will save abo ut three quads of 18 primary energy by 2030. And this is very 19 significant. 20 In addition, it will basically 21 reduce about 18 mil lion metric ton of CO2 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 21

equivalent by the year 2030. 1 It will have a lot of economic 2 benefits to consumers. We are estimating the 3 net economic savin gs will be about 13 billion 4 dollars by the year 2030. 5 Now the Department of Energy has 6 encouraged stakeholders in the past to 7 consider informal dis cussions which could 8 result in a consen sus agreement. Furthermore, 9 Congress in 2007 amended t he Energy 10 Conservation -- the Energy Policy and 11 Conservation A ct to expedite rulemaking 12 process by authorizing DOE to issue direct 13 final rules, establi shing new energy 14 conservation standards up on receipt of joint 15 stakeholder proposals. 16 The consensus agreement satisfies 17 the criteria of the l aw and the process 18 improvement rule. Cons equently, again we urge 19 the Department to issue direct final rule, 20 adopting the consensus agreement as soon as 21 possible. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 22

In the event that DOE cannot 1 conduct a direct fi nal rule, we would 2 recommend that DOE ado pt the agreement in an 3 expedited rulema king process. 4 Thank you. 5 MR. BROOKMAN: Thank you. Thank 6 you. 7 Other comments he re at the outset? 8 (No response.) 9 MR. BROOKMAN: No additional 10 comments? Okay. 11 Then let's proceed with Harvey 12 Sachs. 13 MR. SACHS: Harv ey Sachs, ACEEE. 14 It goes without saying but it must 15 be said that as a signat ory to the consensus 16 agreement, we endorse it fully. And I'm sure 17 that in that statement, I would be speaking 18 for the other si gnatories who are here just to 19 save time. 20 MR. BROOKMAN: Thank you. 21 And the Departme nt, I think, is 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 23

well aware of who the signat ories are. 1 MR. SACHS: I guess we should then 2 ask if there is any signatory that wishes to 3 recant. 4 (Laughter.) 5 PARTICIPANT: I'm sorry. Was that 6 recant or repent. 7 MR. BROOKMAN: Okay. So then no 8 additional comm ents, we're go ing to proceed 9 with the program and have a rulemaking 10 overview with Wes Anderson. 11 MR. WES ANDERSON: We were brought 12 here to -- based on the requirements of the 13 U.S. Code 42 6295 (d) (3)(A) and (B). The 14 first review was done -- was completed in 15 August of 2004 with techni cal amendment -- the 16 publication of a techni cal amendment. And the 17 standard was determined in `01 as to be 13 18 SEER. 19 Today, the second edition of this, 20 the rulemaking will consti tute a second review 21 for the amendment and th e energy conservation 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 24

standard. 1 Also pursuant to this, there was a 2 consent decree which requ ires us to publish a 3 final rule by June 30 th, 2011, with an 4 effective date of five years hence. DOE is 5 looking for comment on the impact of the 6 effective date occurr ing during the peak 7 selling season for the regional central air 8 conditioners and heat pumps rule. 9 MR. BROOKMAN: You can see the 10 comment box there. We won't repeat it. 11 Comments related to this question? 12 Yes, John Mandyck? 13 MR. MANDYCK: John Mandyck with 14 Carrier. 15 As a manufactur er and distributor 16 of residential central air co nditioners and 17 heat pump, I can conf irm that a mi d-season 18 implementation date would be very disruptive 19 to the marketplace, which is why Carrier is a 20 signatory to the con sensus agreeme nt because 21 we established that date as January 2015 to 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 25

avoid, in part, part of the distribution mess 1 and manufacturing comp lexity that would occur 2 with a mid-season im plementation date. 3 Thank you. 4 MR. BROOKMAN: Thank you. And 5 thanks for the specific ity surrounding your 6 proposed date. 7 Talbot? 8 MR. GEE: Yes, Talbot Gee with 9 HARDI. I'd con cur that the mi d-season would 10 be a special problem, especially noting the 11 complexity and the add itional components 12 necessary to launch the more efficient 13 equipment. 14 You'd be essentially creating 15 multiple demand curves, mu ltiple safe ty stocks 16 in the middle of th e cooling season. It would 17 be a real problem. 18 MR. BROOKMAN: Okay. Thank you. 19 Are there other manufacturers that 20 wish to comment on this point? 21 Yes, please? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 26

MR. NICHOLS: On ly to reinforce -- 1 MR. BROOKMAN: Please say your 2 name, Jeff. 3 MR. NICHOLS: Jeff Nichols. Only 4 to reinforce John Ma ndyck's comm ents -- 5 MR. BROOKMAN: Thanks, Jeff. 6 MR. NICHOLS: -- that it is very 7 disruptive. 8 MR. BROOKMAN : Yes, Tim? 9 MR. BALIWORTH: Tim Ballo 10 (phonetic) , Justice. 11 Just wanted to state that I believe 12 the Department's interp retation that it has to 13 do an effective date five years after 14 publication is incorrect. If th e Department 15 wants to adopt the stan dards in the consensus 16 agreement, there is cer tainly flexibi lity in 17 the statute for th em to do that. 18 And even if the Department rejects 19 those levels, there is ample flexibility in 20 the statute. The Depa rtment actually had to 21 deal with the ef fective date in 2006 and we're 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 27

now four years past th at. That's the date 1 that really matters, no t the five implicit 2 years of lead time. 3 MR. BROOKMAN: Tim, in your written 4 comments, you'll provi de some cita tions and 5 the like. 6 MR. BALIWO RTH: Okay. 7 MR. BROOKMAN: Yes, please? 8 MS. HOWARD: Th is is Kate Howard 9 from the Natural Resources Defen se Council. 10 I'd just like to echo Ti m's concerns. And we 11 will be following up wi th comments on that 12 point, written comm ents. Thank you. 13 MR. BROOKMAN: Thank you. 14 Additional comme nts on this first 15 box before we move on? 16 MR. WES ANDERSON: Actually, since 17 we're recording this, I wa s hoping that people 18 could maybe slow down a little b it because 19 we're going to have to transcribe this from a 20 recording and speak -- get closer to the 21 microphone becaus e I'm having trouble hearing 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 28

some of the comments at th is point at this 1 lectern. 2 MR. BROOKMAN: Okay. Thanks, Wes, 3 okay. 4 Additional comments before we move 5 on? 6 (No response.) 7 MR. BROOKMAN: Okay. 8 MR. WES ANDERS ON: That's it? 9 MR. BROOKMAN: Yes. 10 MR. WES ANDERSON: The Energy 11 Independence and Security Act 2007, which is 12 effectively referred to as EISA 2007, issued 13 three bullet points. Giv e an overview of what 14 EISA has imposed on DOE. 15 If they incorpor ate standby and off 16 mode for a final rule published -- any final 17 rule published after Ju ly 1, 2010, permits DOE 18 to establish up to two regional standards in 19 addition to its na tional standard. 20 And also DOE must consider the 21 impacts on the distri bution channel, the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 29

consumer, manufacturer s, other marketing 1 participants incl uding the product 2 distributors, dealer s, contractors, and 3 installers. 4 DOE seeks comment on the energy 5 consumption of components duri ng off mode and 6 the potential to reduce the energy consumption 7 of these components. 8 DOE also seeks comment on the 9 possibility of se parate standards for off mode 10 energy consumption. 11 MR. BROOKMAN: Two issues related 12 to off mode. 13 Steve Rosenstock? 14 MR. ROSENSTOCK: Steve Rosenstock, 15 Edison Electr ic Institute. 16 I thought for central air 17 conditioners and heat pumps that the test 18 procedures alread y incorporate the off mode 19 energy usage. So we don't see a need for any 20 separate standard since it is already 21 incorporated into the an nual energy efficiency 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 30

metric. 1 Thank you. 2 MR. BROOKMAN: Thank you. 3 Karim? 4 DR. AMRANE: Ka rim Amrane and I 5 will concur with wh at Steve just sa id. I urge 6 DOE to review the test procedures because we 7 believe that it is al ready accounted in the 8 SEER calculations. 9 MR. BROOKMAN: Okay. Thanks. 10 Other comments on these two issues? 11 (No response.) 12 MR. BROOKMAN: No additional 13 comments? 14 (No response.) 15 MR. WES ANDERSON: Further 16 clarification of what EISA requires of DOE for 17 the establishment of regional stan dards, two 18 regional stan dards, in addi tion to a base 19 national standard. The boundaries are -- of 20 geographical regions mu st include contiguous 21 states. Individual stat es cannot be bisected 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 31

by the boundaries. 1 The establishm ent of additional 2 regional standards must result in significant 3 energy savings. And the establishment of any 4 additional regional standard must be 5 economically justified. 6 This is DOE's interpretation of a 7 proposed regional layo ut with the rest of the 8 country in green, hot, humid, hot, dry in the 9 southwest, and hot, humid in the southeast. 10 We've listed the stat es in the subsequent 11 table for mo re detail. 12 DOE seeks comment from interested 13 parties regarding DOE 's regional definitions 14 for analysis of region al standards generally 15 used. 16 MR. BROOKMAN: Molly? 17 MS. TROMBLEY -McCANN: Molly 18 Trombley-McCann. 19 I just wanted to take a moment to 20 plead the case of large states such as 21 California who have cl imates that range from 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 32

less than 1,000 heating degree days to over 1 5,000 heating degree days. 2 The requiremen t for our state to be 3 in only one climate zo ne and not to split 4 states between clima te zones is not very 5 effective for efficiency in a state such as 6 California. 7 This is one of the reasons that 8 we're a supporter of the consens us agreement. 9 It includes req uirements for disclosure of 10 performance points that allow utilities and 11 other programs to set in dividual requ irements 12 within the sta te through efficiency rebates 13 and other progra ms that this st andard cannot 14 effectivel y address. 15 So I just wanted to put that out 16 there. 17 MR. BROOKMAN: Okay. Thank you. 18 Don Brundadge? 19 MR. BRUNDADGE: Don Brundadge, 20 Southern Company. 21 This is a different set of regions 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 33

than in the consensus agreement. And I think 1 I would prefer the consensus agreement 2 boundaries to what's here. 3 Thank you. 4 MR. BROOKMAN: Thank you. 5 Yes, Karim? 6 DR. AMRANE: Ka rim Amrane, AHRI. 7 Yes, I mean it looks like DOE is 8 using different regions that what is in the 9 consensus agreement. I guess I'm asking the 10 question to DOE is DOE looking at the 11 consensus agreement and has DOE studied the 12

consensus agreement? 13 MR. BROOKMAN: Wes? 14 MR. WES ANDERSON: Yes. We'll get 15 to that point in the ne xt couple of slides. 16 MR. BROOKMAN: Okay. 17 Andrew deLaski? 18 MR. deLASKI: What was the 19 criteria? How did you develop the -- 20 MR. WES ANDERSON: This is about -- 21 we generally -- the bo undary is arou nd 5,000 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 34

heating degree days an d population base. 1 We'll get into more detail later in the 2 presentation with th e specific analysis. 3 So -- but if you want to -- can you 4 hold your questi on until then? 5 MR. deLASKI: I guess I would 6 respond that I believe, Karim, correc t me if 7 I'm wrong, but the ba sis for the agreement 8 criteria was al so 5,000 heating degree days. 9 So it would be he lpful to get to the bottom of 10 that at some point. 11 MR. BROOKMAN: We're going to 12 proceed with this. 13 Do you have a shor t answer, Dave? 14 Find the microphone, Dave, Dave Winiarski. 15 MR. WINIARSKI: Dave Winiarski, 16 Pacific Northwest National Lab. 17 Yes, I will addr ess that. But 18 roughly the boun daries are close to 4,500. 19 MR. BROOKMAN: It's slightly 20 different, okay. 21 So then we'll address this in 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 35

greater detail as we're going along. 1 Additional comments on this -- 2 these regions as establi shed -- as proposed by 3 the Department? 4 (No response.) 5 MR. BROOKMAN: Okay, Wes. 6 MR. WES ANDERSON: Okay. Now we 7 will start discussion on enforcement plan by 8 Rob Carmichael. 9 MR. BROOKMAN: Robert Carmichael. 10 MR. CARMICHAEL: Thanks, Wes. 11 My name is Rob Carmichael. I'm 12 with Navigant Consulting. 13 I'm going to br iefly go over two 14 items with you today. The first are just 15 talking about the consid erations related to 16 regional standards en forcement. And the 17 second is an overvi ew of our preliminary 18 analysis of the impac ts on the distribution 19 chain due to regi onal standards. 20 But first here's the statutory 21 obligations related to regional standards 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 36

enforcement. So simply put, EISA requires DOE 1 to start an enforcement plan rulemaking within 2 90 days of establishing -- or issuing a final 3 rule that establishes regional standards. And 4 DOE must complete that enforcement rulemaking 5 within 15 months. 6 And so DOE has not yet determined 7 an enforcement pl an but does beli eve that an 8 effective enforcement pl an would include some 9 of the following elements that are shown on 10 this slide, including lab eling, enforcement 11 through building codes, fi nes for noncompliant 12 installations, warranty or product 13 registration, consumer education, and other 14 competitively-dr iven enforcement mechanisms. 15 MR. BROOKMAN: Don Brundadge? 16 MR. BRUNDADGE: If this is not the 17 right place to bring this up, I can defer it. 18 I asked back in the fu rnace hearings a few 19 weeks ago for so me clarification on building 20 codes on what st ates could and could not due 21 on restricting the us e of NAECA products. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 37

It comes up a lot in the south 1 where a product may be poorly suited for a 2 hot, humid climate but ha s a good SEER. And 3 states, in particular there has been some 4 discussions in Florida, don't think they have 5 the right to restrict any NAECA-approved 6 products from being used. 7 Is there any clarification that we 8 can get on that? 9 MR. BROOKMAN: We s? Wes Anderson? 10 MR. WES ANDERSON: Wes Anderson, 11 DOE. 12 Please, can you put that in writing 13 in your official comments to us so that we can 14 officially respond to that? 15 MR. deLASKI: Okay. Well, I had 16 asked at the furnace hearing for general 17 counsel to try to be prepar ed for this when we 18 got to this meeting so we could go ahead. 19 It's really inde pendent of this 20 rulemaking because I think it is more of an 21 issue coming up with pe ople adopting the 2009 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 38

IECC, which drasti cally increases the 1 insulation leve ls and changes in the south the 2 latent sensible lo ad on equipment. 3 It's something that needed now and 4 not when this rulemaki ng is put in place. 5 MR. BROOKMAN: Betsy Kohl? 6 MS. KOHL: Yes, I'm sorry, Betsy 7 Kohl, DOE General Counsel's Office. 8 So it's really hard not knowing -- 9 MR. BROOKMAN: Betsy, get closer 10 please. 11 MS. KOHL: It's really hard not 12 knowing the specifics of yo ur question because 13 the provisions in EP CA on preemption, 14 particularly those de aling with building 15 codes, are very complicated. 16 So if you do ha ve something that 17 you can submit in writing, if it is separate 18 from this comment proc ess, we can take a 19 closer look. 20 MR. deLASKI: Okay. Thank you. 21 MR. BROOKMAN: Thank you. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 39

Yes, Steve Rosenstock? 1 MR. ROSENSTOCK: Steve Rosenstock, 2 Edison Electr ic Institute. 3 I guess the other thing in terms of 4 building codes is that you're -- there are 5 timing issues in th at building codes are 6 updated every three ye ars. And then under 7 federal law, DOE is supposed to do a 8 determination. 9 And then states have up to two 10 years to update their codes to match or exceed 11 the newly dete rmined national code. 12 So, you know, if IECC comes out 13 with their code in 201 2, and DOE does their 14 determination in the fo llowing year- they're 15 supposed to do it with in one year- and then 16 states have two years, it might not be until 17 2015 until many states adopt the 2012 codes, 18 which may or m ay not have the new efficiency 19 levels. 20 So there is a time lag issue with 21 relying on building codes in terms of an 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 40

enforcement mechanism for new national or 1 regional appliance ef ficiency standards. 2 Also the fact that many states when 3 they have home rule, different cities or 4 counties can adopt different levels if they 5 wanted to. 6 So -- thank you. 7 MR. BROOKMAN: Thank you. 8 John Mandyck? 9 MR. MANDYCK: John Mandyck with 10 Carrier. 11 I'd like to make a comment on the 12 labeling item on the sl ide, which we think is 13 the least effective of all of the enforcement 14 mechanisms. 15 The AHRI directo ry has some 600,000 16 combinations in it. And this comes from a 17 personal experience where I put an addition on 18 to my house last year and the system or my 19 condensing unit arrived with a 15 SEER hang 20 tag but it was being installed with a high 21 efficiency indoor furna ce with a variable 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 41

speed fan, which combin ed together achieved a 1 16 SEER official rating. 2 And so it is im possible to label 3 products because syste ms are matched and they 4 are shipped differentl y. And sometimes they 5 are not even shipped by the same manufacturer. 6 So labeling would have to account 7 for the fact that there are 600,000 8 combinations whic h achieve an of ficial rating 9 within the AHRI direct ory and would be nearly 10 impossible to do. 11 MR. BROOKMAN: Wo uld you suggest an 12 alternative to the Department? 13 MR. MANDYCK: Well, we would 14 suggest that we look at all the other issues 15 on the chart, including enforcement at the 16 local level by buildin g inspectors. But I 17 guess my point today is that labeli ng should 18 either be removed from the chart or should be 19 the least preferable method because of its 20 complexity and almo st impossibility. 21 MR. BROOKMAN: Thank you. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 42

Talbot? 1 MR. GEE: Well, Talbot Gee with 2 HARDI Air Cond itioning Distributors. 3 I would agree with John's comments. 4 And we've seen this just even with efficiency 5 programs where you have to require that you 6 can certify that it is a properly installed 7 matched system to achie ve an incentive, which 8 requires additional do cumentation that any 9 single label on a piece of product wouldn't 10 have achieved. 11 I'd also point out that there is a 12 few things here we agai n bring up that we did 13 during the furnace ru lemaking, that the 14 warranty registrati on as an enforcement 15 mechanism is probably not feasib le because 16 some states have consumer protection laws that 17 would prevent any t ype of mandate tied to 18 warranty registrations. 19 In general, fo r the wholesale 20 distributor community, product registration, 21 period, is not that effective. Most 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 43

homeowners don't return that type of 1 information. And it would be very, very 2 costly for industry to try to do that. 3 I would point on the consumer 4 education on regional standards is not an 5 enforcement mechanism, especially if it is in 6 absence of an actual enforcement mechanism 7 that might be in the mark etplace, which drives 8 down to the last point. 9 Reiterate again that competitively 10 driven enforcemen t works if there is actually 11 an enforcement body that you would report to. 12 And so far we've not had a real positive 13 experience. 14 If we take, fo r example, EPA -- 15 (tape change, some audio missing) 16 PARTICIPANT: -- in the cold 17 climates and in the warmer states because the 18 BIN temperature effect on the heat pump is 19 fairly significan t in that dist ribution. And 20 the northern tier is re ally differen t than in 21 the southern tier. And so the performance is 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 44

really differen t for the same ARI or AHRI 1 rating in climate zone 4, which is where it 2 gets rated. 3 So we don't get the same 4 performance, so metimes bette r, sometimes 5 worse, than that rating. And we really need 6 to do the simulation mode l or BIN temperature 7 approach to that to get the righ t answer. 8 MR. WINIARSKI: Okay. I'd like to 9 talk to that maybe in another slide or two. 10 MR. BROOKMAN: Steve Rosenstock? 11 MR. ROSENSTOCK: Steve Rosenstock 12 EEI. 13 And I think following up with Don 14 Brundadge, if -- and may be if there is a trend 15 in replacements towards I'll say more hybrid 16 systems where a centr al air conditioner is 17 replaced with an air so urce heat pump along 18 with the fossil fuel he ating system as a back19 up (inaudible) or just preferenced during the 20 really cold weather, that is going to have an 21 impact on th e analysis. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 45

Especially if more and more 1 households are do ing that, that definitely has 2 an impact on the life cycle cost analysis for 3 the heat pumps. 4 Thank you. 5 MR. BROOKMAN: Thank you. 6 MR. WINIARSKI: So this is a basic 7 diagram of the simplified residen tial energy 8 use calculation. Over in the top lefthand 9 side, we start with REC S. Along the left row 10 there, we use the age of the household and, 11 where reported, the age of the air conditioner 12 or heat pump in RECS. 13 We use AHRI aver age shipment SEER 14 ratings to generate an estimated SEER for each 15 particular househ old observation. 16 And then, as was alluded to in the 17 discussion, the re is a basic sc aling process 18 where we take the stock unit energy 19 consumption and multiple it by the ratio of 20 the SEER estimate f or the stock to the SEER 21 estimate for a particular standa rd level that 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 46

we're intere sted in. 1 We do that for a baseline analysis, 2 baseline being a 13-SEER product that was used 3 in the engineering analys is at least for those 4 classes where that 's appropriate. We also do 5 it for each standard level that DOE is 6 analyzing off to the right. 7 We also, because we recognize that 8 there is going to be a distribution of 9 products sold into the market at different 10 SEER levels, we develop for each household a a 11 general distribu tion of SEERs for the market 12 and then for each ho usehold, we randomly 13 sample from that di stribution to estimate the 14 SEERs for the market baseline . And I'll talk 15 about that in a little bit. 16 The commercial process is a little 17 more complicated but esse ntially we start with 18 a small office building model. We used a 19 reference building or a benchmark building 20 that was developed by DO E. It's about a 5,500 21 square foot single- story small office 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 47

building. It kind of lo oks like that picture 1 on the right. 2 We simulated with 237 typical 3 meteorological year locations . That's the 4 TMY2 set. And we simula ted for each product 5 class four different ef ficiency leve ls, a 13, 6 a 14, a 16, and whatever is the max tech level 7 for that particul ar product class. 8 And we actually simulated the coil 9 only and the blower coil products, pretending 10 that they're two separate produc t classes for 11 this analysis. 12 Simulation was do ne in EnergyPlus. 13 And from each si mulation in each climate zone, 14 we extract out the hour ly annual cooling, 15 heating, and fan use fr om the simulation as 16 well as the pe ak sizing that was established 17 in EnergyPlus fo r that product. 18 And then we normalized the average 19 energy use or average co oling, heating, and 20 fan energy use for th e building to reflect 21 that for a three-ton air conditioning unit so 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 48

that we can fit it with the rest of the 1 analysis work that's being done on the 2 residential side. 3 And, again, we develop a market 4 baseline distribution and a standard level 5 distribution because we explicitly simulated 6 the 13 SEER that comes directly out of the 7 analysis as the ba seline energy use 8 distribution. 9 MR. BROOKMAN: Steve Rosenstock? 10 MR. ROSENSTOCK: Steve Rosenstock, 11 Edison Electr ic Institute. 12 In this case, again obviously 13 depending on what part of the country you're 14 in, you just basically kind of took a zone 15 approach that you said well, in the north it 16 might be two units of three tons each but in 17 the south it might be four units three tons 18 each, somethin g like that? 19 MR. WINIARSKI: No, actually the 20 way it works is in the simulation, you have to 21 -- when you set up the input deck for the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 49

building model, you ha ve to define the zones 1 and the system s directly. 2 So the small office building model 3 is assumed to have five zones, four perimeters 4 and a core zone approp riate to this -- roughly 5 appropriate to this size buildi ng. And then 6 as the unit moves around the country, for each 7 weather tape that you use, it will develop a 8 different sizing of equipment for that. 9 So you'll end up with, for instance 10 in the south maybe it will be -- I'm going to 11 throw out a number here -- like 12 tons and 12 maybe in the north it will be ten tons. 13 MR. ROSENSTOCK : But, again, Steve 14 Rosenstock, EEI, thank s. But following up on 15 that in terms of -- but you still -- the model 16 assumed that -- again, just to kind of match 17 it -- you didn't assume one ten-ton unit or 18 one 12-ton un it did you? 19 MR. WINIARSKI: No . What you would 20 end up with, if it is sized for -- you've got 21 five units in there, okay. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 50

MR. ROSENSTOCK: It's five units, 1 thank you. 2 MR. WINIARSKI: Yes, there's five 3 units. And we just no rmalize it down to a 4 single three-ton unit. 5 MR. BROOKMAN: (Inaudible)? 6 MR. BRUNDAGE: In the northern 7 tier, how was the heat pump sized? 8 MR. WINIARSKI: Heat pump sized on 9 cooling. 10 MR. BRUNDAGE: Good. Thank you 11 very much. Just aski ng. Wrong but just 12 asking. 13 MR. WINIARSKI: Yes. 14 MR. BROOKMAN: John Mandyck? 15 MR. MANDYCK: Harvey, stay calm. 16 MR. BROOKMAN: Let's let Harvey 17 follow on. Harv ey, go ahead. 18 MR. SACHS: I'm conscious that Ron 19 Lewis is not here. B ut I'll stil l try to be 20 polite. 21 I guess I really don't understand 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 51

why it would be looking at northern heat pumps 1 being sized for cool ing rather than for 2 heating. That's the major load and that's 3 what I'm buying the equipment for. 4 And the consequences in terms of 5 total energy use are ra ther extraord inary if I 6 buy it sized f or cooling. And I did learn to 7 think about high bill complaints. 8 MR. WINIARSKI: Ye s. But to follow 9 up, you know, esse ntially on the cooling side, 10 the heat pump, the comp ressor is effectively 11 sized so that it ca n meet the cooling 12 requirements for the building and operation 13 around the country. 14 Where that co mpressor cannot 15 provide the amount of heat under design load 16 conditions, elec tric resistance backup was 17 assumed. 18 MR. SACHS: I'm sorry. Is that the 19 recommended standard practice I would find, 20 for example, in an AC CA manual for serving 21 customer needs? I ca n't believe that best 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 52

practices in this indust ry are still to size a 1 Seattle heat pump fo r the cooling load. 2 PARTICIPANT: Ri ght. Seattle has 3 300 heating degree hours -- hours. Not days. 4 Sizing a heat -- you ge t a one-ton heat pump 5 in these zones instead of a three- or four6 ton, which is -- 7 MR. SACHS: This is a heat pump and 8 air conditione r framework, isn't it? 9 PARTICIPANT: No , it's preliminary. 10 PARTICIPANT: I' m sorry. It is a - 11

- 12 PARTICIPAN T: If we do the 13 consensus agreem ent, we bypass this problem. 14 (Laughter.) 15 PARTICIPANT: And if we don't, I 16 would recommend suggest ing comments on what is 17 the appropriate sizi ng mechanism for heat 18 pumps across the U.S. 19 PARTICIPANT: I want to back up. 20 You said 300 ho urs cooling -- 21 PARTICIPANT: Cooling load -- 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 53

PARTICIPANT: Thank you. 1 PARTICIPANT: -- cooling degree 2 hours. 3 MR. BROOKMAN: John Mandyck? 4 MR. MANDYCK: John Mandyck with 5 Carrier. 6 I have several questions regarding 7 the simulate d levels. 8 MR. WINIARSKI: Yes. 9 MR. MANDYCK: The first one is what 10 was max tech that you evaluated for central 11 air conditioners? 12 MR. WINIARSKI: What was max tech? 13 Was it -- 22, I think for the blow er coil. 14 MR. MANDYCK: Okay. Did you use 15 the same four simula ted points for your 16 residential an alysis, too? 17 MR. WINIARSKI: We did not simulate 18 the residential analysis. That was done using 19 the RECS data. 20 MR. MANDYCK: Okay. Great. 21 And then on thi s, I'm curious as to 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 54

why you went from 13, 14 and then jumped to 1 16. Does that mean that 15 SEER is not 2 considered a possible standard if you don't 3 accept the consen sus agreement? 4 MR. WINIARSKI: No, no, that's not 5 what it means. Basi cally in using the 6 EnergyPlus, we ha d lots of levels to simulate. 7 And there are a lot of simulations involved 8 here. 9 So what we did is we simulated 10 these four levels for each product. Between 11 those levels, the energy use is inte rpolated. 12 And I'll go into that in the next slide if 13 that's all right. 14 MR. BROOKMAN: Go to the next 15 slide. 16 Harvey? 17 MR. SACHS: Harv ey Sachs, ACEEE. 18 I guess I am surprised and stunned 19 is probably not too strong a word that if I 20 look back at slides li ke 45 on the markups, 21 we're going to extraordinary me asures to get 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 55

estimates to the third decimal. 1 And then when I look at how we're 2 looking -- setting up ou r models, setting up 3 our fundamental assump tions, it sounds like 4 we're not looking at climate zone-specific 5 HSPFs, we're not sizing for heat ing load in 6 northern climates for heat pumps, and these 7 are things that are on the other side of the 8 decimal place. 9 And it just is a very surprising 10 thing that we're so ve ry, very careful about 11 some things. Bu t at the level of the common 12 sense engineering, un derstanding what a 13 practitioner would be ex pected to do, it seems 14 as though we're missing some things that might 15 be pretty important. 16 MR. BROOKMAN: Okay. Thank you. 17 Keep going. 18 MR. WINIARSKI: Okay. So, again, 19 we had to make -- for anyone who has been 20 involved or listened to people talk about how 21 you actually do a si mulation model, we've got 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 56

to make some assumption s, starting with the 1 fact that once we have the building model 2 described, we need to come up with a way to 3 effectively inp ut what corresponds to a SEER 4 or a HSPF level that's being developed in the 5 engineering analysis to get that information 6 actually into the simulation. 7 So to start with in that process, 8 there was a mult i-step process. The first was 9 converting the SEER and HSPF ratings, which 10 cannot be directly simulat ed, to what we call 11 a full load EER. It's a 95-degree EER and a 12 COP at 47 de grees heating. 13 That process utilized a paper 14 that's been written by a couple of researchers 15 who looked at AHRI da ta and developed this 16 particular curve you see in the right-hand 17 corner, relating SEER and EER. 18 Yes? 19 MR. SACHS: Harv ey Sachs, ACEEE. 20 I'm not familiar with the Wassmer21 Brandemuehl curve. But it has been our 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 57

experience with a l ot of other curves, 1 Henderson, for ex ample, that there is a break 2 and we see two dif ferent families at 3 intermediate SEER values depending on whether 4 we have a step-modulating or other modulating 5 compressor so that EER has a different slope 6 with SEER for a single-s tage unit than it has 7 for a modula ting unit. 8 And without some measure of 9 variance, I just can't believe this curve is 10 looking like this quasi -linear relationship 11 with the nearest spread. It just doesn't make 12 sense from looking at data. 13 You're missing the story, I think. 14 MR. BROOKMAN: Okay. Do you want 15 to respond to that? 16 MR. WINIARSKI: Oh, sorry, I 17 thought Steve ha d his hand up. 18 There are a couple of curves you do 19 get that type of relati onship. One of the 20 issues, in particular , with the commercial 21 building assumptions and the modeling of 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 58

commercial buildings is exactly how you handle 1 the fan power, whether, in fact, the fan is 2 allowed to essentially go to a lower fan speed 3 or not in the modeling. 4 MR. SACHS: I 'm sorry. I'm not 5 talking about the fan. I'm talking about the 6 compressor. The fan is sue we haven't gotten 7 to yet. At SEER 14, 15, and perhaps 8 manufacturers can fill in, whether it goes up 9 to 16 or not, I can use either a two speed or 10 inverter technology or a single speed. 11 And my SEER/EER relationship is 12 very different depending on which of those 13 compressor choi ces I've made. That's not 14 reflected in this curve. 15 MR. WINIARSKI: No r, in fact, is it 16 clearly reflected in the standard that DOE 17 would publish. DOE will publish -- if it 18 publishes a SEER, it do es not explicitly say 19 single speed or two-spe ed equipment. This is 20 reflection sort of a number of products that 21 were available on the market. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 59

MR. SACHS: But this reflects the 1 analysis because the en ergy use at different 2 temperature bins will depend on which one of 3 these units you're using in your model 4 equipment. May be I'm missing something but I 5 think I'm on soli d ground here. 6 MR. BROOKMAN: Harvey, maybe you 7 could send it in detailed comments. 8 MR. SACHS: We published this 9 several years ago in our analysis of regional 10 standards. 11 MR. BROOKMAN: Don Brundadge. 12 MR. BRUNDADGE: I'm just amazed I'm 13 agreeing with Harvey so much today. 14 (Laughter.) 15 MR. SACHS: I'm sorry, Don. 16 PARTICIPANT: It's proximity. 17 MR. BRUNDADGE: I think if you just 18 did SEER 16 and max tech as dual or variable 19 speed, it would solve a lot of these problems. 20 The curve you've got here looks to me like you 21 are assuming single speed all the way up 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 60

through SEER 20. 1 You need to have a change when you 2 switch the technologies. And that's probably 3 going to happen around SEER 16. And you are 4 going to get a very di fferently looking EER 5 slope on variable speed comp ressors. 6 Thank you. 7 MR. BROOKMAN: Thank you. 8 Steve Rosenstock? 9 MR. ROSENSTOCK: Steve Rosenstock, 10 EEI. 11 And I will also agree with Harvey 12 and Don. Hopefully they don't faint over 13 there. 14 But I also have to say the impact 15 of using this nice li near curve where 16 everything -- EER always go up with SEER -- is 17 that especially on th e commercial side, that 18 regardless of what's actually happ ening with 19 EER, that energy use alwa ys goes down and peak 20 demand always goes down. 21 And, therefore, your economic 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 61

analysis always looks better when that's not 1 always going to be the ca se based on a lot of 2 the testimony th at's been hear d earlier today. 3 So I understand why you're doing 4 this. But I think ther e's better methods. 5 Number one, in ter ms of the EER levels already 6 assigned to those unit s. You don't have to 7 convert the EER if the EER is already -- there 8 is a published EER already. There's no need 9 for conversion. Use the actual number in 10 terms of some of simulation. 11 And, again, it's probably 12 bifurcated at t he higher levels in terms of 13 very low EERs and pret ty high EERs. But, 14 again, using this will distort the eventual 15 energy and life cycle cos ts and energy savings 16 analysis. 17 Thank you. 18 MR. BROOKMAN: Okay. Thank you. 19 Harvey? 20 MR. SACHS: It's a little bit 21 digressive but there's a piece of equipment in 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 62

the hall manufactured by an outfit named 1 Shortridge. I'd like to see the hands of 2 anyone in this ro om who has us ed such a piece 3 of equipment. Thank you. 4 It's a fundament piece of equipment 5 for balancing the flow from air registers, one 6 with which every contractor should be 7 familiar. And it's relev ant to the kinds of 8 experience people ha ve for doing these 9 analyses. 10 Thank you. End of rant. I'm 11 sorry. 12 MR. BROOKMAN: Thank you. 13 Jim? 14 MR. BRESHAW: Jim Breshaw. 15 I've just got to state that this -- 16 assuming this is EER at 95, these don't look 17 appropriate if you go dig into the AHRI 18 directory. I don't think you'll find 14, 15 19 EERs on most of these equipment. It just 20 doesn't look right to me. 21 MR. BROOKMAN: Molly? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 63

MS. TROMBLEY-McC ANN: Having dug 1 into the AHRI dire ctory about a week ago, this 2 does not look to me at al l. So, you know, I'm 3 not sure what the sourc es were for the paper. 4 And I should probably look up the paper and 5 figure out, you know, what they were doing. 6 But based on what's on the AHRI directory 7 right now, this does not look accurate. 8 MR. BROOKMAN: Thank you. It's in 9 the TSD, Dave, is it not? 10 MR. WINIARSK I: The paper? 11 MR. BROOKMAN: Your citations. 12 MR. WINIARSKI: Oh, yes, yes, 13 that's in the TSD. This is actually a fairly 14 well-known paper for th ose who need to look at 15 it. 16 One of the things we can do is we 17 can propose to show th is along with results 18 from the AHRI direct ory in comparison. 19 MR. BROOKMAN: We need to keep 20 moving along here, folks. 21 Jeff first. An d then to Andrew. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 64

PARTICIPANT: Ju st, you know, to 1 reinforce some of the ot her statements. If 2 you are analyzing di fferent compressor 3 technologies, you ha ve to take into account 4 the fact that they are go ing to be different. 5 Single stage is going to give you one EER at a 6 16 SEER. And a two stage is go ing to give you 7 a different EER in a 16 SEER. 8 At the same SE ER level, they're 9 going to be different bec ause the technologies 10 are different. And that will have to be taken 11 into account. 12 MR. BROOKMAN: Okay. 13 Andrew? 14 MR. deLASKI: So just to follow on 15 this thread, just to agree that, you know, 16 clearly this is going to impact the LCC. It's 17 going to impact the NES. And, you know, these 18 are the fundamental parameters of the 19 rulemaking. 20 It is also going effect the utility 21 impact analysis. And in central air 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 65

conditioners, peak de mand impacts is a 1 critical concern for th is docket. And, you 2 know, my recollection of the last docket is, 3 you know, we saw huge energy savings for -- 4 peak savings from the last central air 5 conditioner standard. 6 But that the Department in the last 7 docket concluded that over SEER 13 or 14, the 8 relationship between SE ER and EER broke down. 9 And it strikes me that, you know, 10 in a market where you look at the market today 11 and what Molly has observed -- just said now 12 that she doesn't see a real relationship over 13 SEER 14 is that, you kn ow, that relationship 14 may very well become more clear once a 15 standard is set and as the market migrates to 16 the lowest cost compliance path. 17 And if that results in higher EER, 18 than, you know, what's mo deled is that we will 19 have undermined the goal of the sa vings. So I 20 think this really needs to be sorted out in a 21 way that reflects wh at is the low cost 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 66

compliance path. 1 MR. BROOKMAN: Ok ay. So thanks for 2 all those comments. 3 Take final comments. You see a 4 series of assumptions listed here and some of 5 which have been addresse d. I'm not sure they 6 all have. Final comm ents on the assumptions 7 listed on slide 50. 8 Yes, Jim? 9 PARTICIPANT: On the static 10 pressure, is that the external static pressure 11 that the blower system sees? Does that 12 include the coil pres sure drops as well? 13 MR. WINIARSKI: I was going to 14 clarify that. The st atic pressure that you 15 see there is used in th e conversion between a 16 -- effectively what the si mulation model needs 17 is it separates out the fan from the 18 condensing unit. 19 And so in order to come up with an 20 effective cooli ng COP and heating COP for the 21 condensing unit, you have to extract out the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 67

fan, you have to extract out the fan power at 1 test conditions. 2 At test conditio ns, we estimated 3 that a typical static pre ssure -- total static 4 pressure for the system was around this 1.1 5 inches. The actual bu ilding model when it's 6 run, it's closer to, I think, 1.5 inches. 7 PARTICIPANT: And you're assuming 8 this is for residential eq uipment applied in a 9 commercial building? 10 MR. WINIARSKI: Exactly. A very 11 small commerci al building. 12 PARTICIPANT: But if you look 13 through our application guide, you won't find 14 any equipment that's ra ted above an inch. So 15 I'm not sure h ow you could get an inch, inch 16 and a half. 17 MR. WINIARSKI: That's external 18 static, right? 19 PARTICIPANT: I th ought that's what 20 you just said but -- 21 MR. WINIARSKI: Oh, yes, that's 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 68

what I'm saying. So this here is the total 1 static pressure. 2 PARTICIPANT: This includes the 3 pressure drop across t he coil and the filter 4 and the internal losses of the ai r handler? 5 MR. WINIARSKI: Yes, the whole 6 thing. 7 PARTICIPANT: Okay. 8 MR. WINIARSKI: Yes. 9 MR. BROOKMAN: Okay. Jeff? 10 PARTICIPANT: One last question. 11 On the fan efficiency of .58 and .65, I assume 12 that's .58 for 13 and .65 for 14 is what 13 you're modeling? 14 MR. WINIARSKI: No. The fan 15 efficiency, the effici ency of the actual fan 16 itself, you know, br ake horsepower-type 17 efficiency is assu med to be .58 -- 18 PARTICIPANT: Okay. 19 MR. WINIARSKI: -- the blower motor 20

-- 21 PARTICIPANT: I'm sorry. I 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 69

apologize. I missed that. 1 MR. WINIARSKI: Yes. 2 MR. BROOKMAN: Okay. 3 Harvey Sachs? 4 MR. SACHS: First of all, thank you 5 for using the total st atic pressure and for 6 using realistic values instead of the rating 7 method values. I guess I'm not at all 8 confident that these motor efficie ncies or 9 combined efficiencies ar e realistic at these 10 high ASPs for resi dential eq uipment. 11 MR. BROOKMAN: Okay. 12 Tom Eckman? 13 MR. ECKMAN: On the presumption 14 that we move to a simu lation of the heat pump 15 on residential as well as on commercial, I 16 think -- and we ta ke at least some look at 17 inverteribbon driven technology, I think 18 picking a single poi nt COP temperature is 19 probably wrong in tr ying to fit a curve 20 through that becau se inverter-driven 21 technology has a wholly different performance 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 70

curve as temperatur es go down relative to 1 other tech nologies. 2 And so if that's evaluated on the 3 heat pump side, we ne ed to look at the 4 performance curves wi th that technology 5 embedded in the system versus the non-inverter 6 driven compressor s because they perform quite 7 differently at lower temperatur es relative to 8 the standard rating po ints that we have right 9 now available. 10 MR. WINIARSKI: For what it's 11 worth, let me re spond to that. 12 I believe that the simulation tool, 13 EnergyPlus, allows fo r a single and a double 14 stage model. Esse ntially there are 15 performance curves that handle how the COP or 16 condensing unit effi ciency varies as a 17 function of indoor w et bulb, outdoor dry bulb 18 temperature. Al l these things. 19 And so there's only a limited 20 selection of curves cu rrently avai lable in 21 EnergyPlus to do that. I don't think inverter 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 71

is one of them. Just a general comment. 1 MR. ECKMAN: That would be a 2 limitation for evaluating that technology then 3 I gather. 4 MR. BROOKMAN: Thanks, Tom. 5 Okay, yes, Molly? 6 MS. TROMBLEY-McCAN N: I just kind 7 of wanted to su m up here in terms of as a 8 representative of a utility. The SEER rating 9 as it is currently designed is based on the 10 performance at 82 degrees. 11 And as you push harder to get a 12 better SEER rating, yo u prioritize performance 13 at those lower temperatures over performance 14 at much higher temperatures. 15 What you end up se eing, at least in 16 my experience with the equipment that's on the 17 market, is that for a ve ry high SEER, the EER 18 at 95 and above actually goes down compared to 19 lower SEER. 20 And the reasons this is such an 21 important issue for us is because that means 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 72

that peak performanc e goes down as you 1 nominally incr ease the effi ciency of the 2 equipment. 3 For utilities in hot, dry areas 4 that have really high peak loads, this is 5 potentially catastrophi c. And it is one of 6 the reasons that we a re so emphatic about not 7 using SEER as the only or even any ef ficiency 8 metric in hot, dry regions. 9 So if this curve is wrong, you 10 could potentiall y miss extrem ely important 11 impacts to utilities and also to consumers. 12 So it's not just that we're ni tpicking about 13 whose study is right. It's really important. 14 MR. BROOKMAN: Okay. Thanks for 15 that summary. That's helpful. 16 Karim? 17 DR. AMRANE: Ka rim Amrane, AHRI. 18 Just a comment here. I mean we're 19 talking about what, se ven percent of the 20 market here, for commerc ial building s? So I'm 21 not sure -- we're spen ding a lot of time on 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 73

this but I don't think at the e nd of the day 1 it's going to ma ke a lot of diff erence in the 2 analysis. That's my personal opinion. 3 MR. BROOKMAN: Thank you. 4 Don Brundadge? But we do need to 5 keep moving along or we'll be here all 6 afternoon. 7 MR. BRUNDADGE: Yes. I agree it's 8 only seven percent. But part of th e reason I 9 think we're spending so much time is we'd 10 really like something more similar to this 11 done on the residential side because for all 12 the flaws, this is still a better approach 13 than what you're do ing on residential. 14 Thank you. 15 MR. BROOKMAN: Great. 16 Harvey? 17 MR. SACHS: Harv ey Sachs, ACEEE. 18 And, again, Mr. Brundadge took 19 words out of my mouth. I'll quit -- there was 20 something else I wanted to say but he took the 21 words out of my mouth on the first piece. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 74

MR. BROOKMAN: Ok ay. Thank you. 1 Then we're going to move on then. 2 MR. WINIARSKI: Okay. So this is 3 essentially an es timate of the market baseline 4 efficiency distributio ns for each product 5 class. In the past, I think in past 6 rulemakings this data was made available by 7 the industry. It was not available for this 8 rulemaking so D OE had to make so me estimate 9 for what the distribu tions looked like. 10 Essentially the distributions are 11 built around first esta blishing SEER bins off 12 to the left, the SEER bins that -- at the 13 center point for the most part, the bins have 14 one of the design effi ciency levels from the 15 engineering analysis. 16 We then took some data, some 17 industry trade press data that essentially 18 suggested in the market in 2007, I believe, 19 how much of the market was in say 13 to 14 20 SEER, 14 to 15, 15 to 16 SEER. And I think 17 21 and above is another group. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 75

And then we developed distributions 1 such that using that data, using the 2 characteristic efficiencies for the bins, we 3 could come up with weigh ted average SEERs that 4 matched the weighted aver age statistical data 5 that ARI had in 2007. 6 These -- so the values on the 7 bottom basicall y reflect the AHRI -- pardon 8 me, in 2007, we noticed on of the interesting 9 things -- I think one of the product classes, 10 single packaged AIR CONDITIONERS, I think the 11 2007 data actually suggested that the shipment 12 weighted average effi ciency was below 13. 13 I think that reflects -- I'm not 14 quite clear what that all reflects but we 15 adjusted for that for the 2008 data and then 16 developed the distribu tion shown here. 17 Basically we would like any type of comment 18 from the industry on whether these 19 distributions look about right. 20 MR. BROOKMAN: Steve Rosenstock? 21 MR. ROSENSTOCK: Steve Rosenstock, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 76

EEI. 1 Just a quick ques tion. Again, this 2 is going -- looking at if there's any data for 3 2009 in terms of the impact of th e federal tax 4 credits because for those they were either -- 5 I think they were 15 or 16 depending on the 6 technology, 15 for heat pumps and 16 for 7 central air co nditioners. 8 So, again, I don't know how 9 recently you want to lo ok but there might have 10 been -- those tax cred its in effect for 2009 11 and 2010 might have had an impact on some of 12 this distribution. 13 And I know the re are proposals to 14 extend the tax credits for several years. I 15 know that some just came up recently. 16 Thank you. 17 MR. BROOKMAN: Talbot? 18 MR. GEE: Well, ye s, this is Talbot 19 with HARDI. 20 And I think it is a good point to 21 consider what impact that may have had. And 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 77

we talked about this a lot in our initial 1 comments that I would recommend that there 2 actually be an added analysis of the impact of 3 efficiency progra ms on all of th e deployment 4 of these products beca use first of all, if you 5 are going to say that okay, the mix has 6 shifted to more high efficiency pr oducts but 7 then you find that it is 90 percent due to 8 some sort of an efficiency incentive, then I 9 don't believe that jus tifies an increase in 10 the minimum stan dard because if you increase 11 the minimum standard, you are thereby probably 12 undermining those effic iency programs, which 13 may not exist in the long run. 14 So in other word s, you could hurt 15 the product shift going forward. Now, again, 16 we even said in our c omments, we're not 17 experts in efficiency programs but we know 18 that there is some cost ef fectiveness that has 19 to be established in those things. 20 And we think it would be well worth 21 the DOE's time in this rulemaking and frankly 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 78

other ones that apply to incentivized products 1 to thoroughly st udy the impact of efficiency 2 standards on any type of energy efficiency 3 incentive program be it utility, state, 4 federal. 5 But also not falling into the trap 6 to think because heavily incentiv ized products 7 may have shifted a li ttle bit of market shares 8 that it therefore justif ies that it would be 9 an easy jump to just ra ise the standard to 10 that level or on e close to it. 11 MR. BROOKMAN: Okay. Thank you. 12 Don? 13 MR. BRUNDADGE: A general comment 14 on data over t he last few year s. These have 15 not been normal times. You've had near 16 Depression era ty pe conditions in 2008. You 17 had a lot of incentives and tax credits thrown 18 at things over the last year or two. 19 It may be that rather than 20 automatically us ing the most recent data you 21 need to consider the se impacts and make 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 79

adjustments or drop ba ck to earlier data. 1 I mean we don't want to make long2 term projections going forward based on the 3 roller coaster of the last couple of years and 4 where your snapshot ha ppened to grab it. 5 Thank you. 6 MR. WINIARSKI: If I can make two 7 other comments. One, on e of the issues is 8 obviously 2006, the 13-S EER rule went in so 9 there is not a lot of ea rlier data to rely on 10 for something like that. 11 The other issue I want to bring 12 forth is, again, we established these 13 distributions for 20 08 based on the data that 14 we were able to come up with. These actually 15 also form the distri butions in the LCC 16 analysis that Mike Sco tt will address earlier 17 -- or will address in a little bit. 18 So they've essentially been held 19 flat for that period fr om today through the 20 start of the rule. 21 MR. BROOKMAN: Andrew deLaski? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 80

MR. deLASKI: Dave, a question for 1 clarification. 2 MR. WINIARSKI: Yes? 3 MR. deLASKI: So in your table -- 4 let's go back to the pr ior slide. In your 5 table, you're showing th at you're estimating 6 about half the product s are in that second 7 bin, which is 13.25 to 13.57. And I'm 8 wondering what you are observing or what you 9 are finding. 10 Is it that -- yo u know, in shooting 11 to meet the standard, ma ybe the manufacturers 12 can answer this better than you or I'm sure 13 they can -- but maybe th ey can't but maybe 14 they will -- but are manufacturers shooting 15 for a higher SEER to be assured of meeting the 16 standard or is th is market driven? 17 You know why are we observing half 18 the market -- you know, because there are 19 costs in being a little bit more efficient. 20 And we're seeing half the market go to that 21 level that's a little bit higher than the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 81

standard. 1 MR. WINIARSKI: Okay. I can speak 2 to the process used f or developing this, we 3 had to come up or we at tempted to come up with 4 distributions that w ould actually get us to 5 those weighted average SEER numbers that we 6 had with the AHRI data. 7 And it was diff icult using the 8 limited trade press d ata we had. And, in 9 fact, in some cases -- in the case of the 10 split system AIR COND ITION, given, you know, 11 this limited accuracy of the trade press data 12 which basically said, you know, we know we 13 have X percent of the mark et at between 14 and 14 15 to, you know, one significan t digit. 15 All right. So they'll say it's 16 like ten percent. W e, in fact, couldn't 17 achieve that weighted average SEER of 13.77 18 without assuming that a significant fraction 19 were slightly above 13. 20 So, you know , that was our 21 analytical process. We certainly welcome data 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 82

from the industry on, as you pointed out, 1 whether they shoot for a little hi gher than 2 13. 3 MR. BROOKMAN: Karim? 4 DR. AMRANE: Ka rim Amrane, AHRI. 5 We don't capture, as far as 6 statistics, we don't capture SEER by the .25 7 or .5. I mean it's either -- by bins from 13 8 to 14, 14 to 15, that's how we capture the 9 data. 10 So we have no -- at least at AHRI, 11 we cannot estimate, you know, what is the 12 percentage at 13.25. 13 MR. BROOKMAN: Molly? 14 MS. TROMBLEY -McCANN: Molly 15 Trombley-McCann. 16 As a clarificatio n, you were trying 17 to match 13.77, which wa s the AHRI weighted 18 SEER based on mo del availability? 19 MR. WINIARSKI: That's shipment. 20 MS. TROMBLEY -McCANN: That's 21 shipment weighted, okay. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 83

MR. BROOKMAN: Andrew? 1 MR. deLASKI: Just to make sure I 2 understand the me thodology here. 3 The weighted av erage SEERs in the 4 bottom of the ta ble are what AHRI provided to 5 you? 6 MR. WINIARSKI: 7 MR. SACHS: That's correct. 8 MR. deLASKI: Okay. 9 MR. BROOKMAN: Thank you, Andrew. 10 Dave, keep going. 11 MR. WINIARSKI: Yes. Okay, we 12 talked a little bit abo ut the standard regions 13 that were developed for this analysis. Those 14 standard regions were ac tually developed prior 15 to the consensu s agreement. 16 Here is the map that Wes showed you 17 earlier. I want to talk a little bit about 18 how they were developed. 19 Essentially we looked at the 20 cooling load hours map th at has been available 21 from AHRI for years now. A picture of it is 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 84

off to the right. 1 Essentially wi th the assumption 2 that the standard SEER rating is based on 3 about 1,000 cooling load hours, you can think 4 that a hotter climate would be those with 5 greater than 1,000 co oling load hours. 6 That 1,000 cooli ng load hour line 7 is here. You can see it kind of squiggles up 8 in the country. It goes up -- it take some of 9 Kentucky, it goes below Virginia. 10 What we actual ly did is we looked 11 at that issue, we look ed at the relative 12 humidity from a bunch of weather data for I 13 think it was 1,000 si tes, the TMY3 data. 14 During those cooling load hours, we 15 looked at cooling degree day data in terms of 16 establishing that. An d we also considered the 17 EISA requirements for co ntiguous regions and 18 whole states with in each region. 19 When you get, as was alluded to 20 earlier, when you ge t out to the western 21 states, there are huge variations in cooling 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 85

degree days. It 's really hard to characterize 1 anything as necessaril y hot from a geographic 2 perspective. A nd you can see th at kind of the 3 cooling load hour map, the compressed lines 4 off to the left here around California and 5 into Arizona. 6 So we took a lot of this into 7 account in trying to come up with a boundary 8 for our map that I showed you earlier. Really 9 the differences here between this and the 10 consensus region are I think you've got -- the 11 states of Virgin ia, Kentucky, Delaware, and 12 Maryland in this analys is were put into the 13 rest of the country, the northern region. I 14 think the consen sus agreement puts those into 15 the southern region. 16 And as we were developing this, we 17 also consulted with peop le with the furnace 18 rulemaking trying to establish where we 19 thought OPRI ORI (pho netic) would be the 20 benefits to improving furnace sta ndards or 21 improving the air condit ioning standards in 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 86

trying to establish this initial map. 1 Let's see here. We talked about 2 the wide variation in temperatures. The 3 regions in this map, obviously one of the 4 issues is that the RECS data is aggregated at 5 the census division le vel. And any climate 6 map we use will force us to divide that data. 7 So we have to allocate certain RECS 8 observations to one side or the other of a 9 boundary. 10 And in addition, the DOE, an 11 appendix of the PS E talks about the 12 development of a po ssible SEER hot, dry 13 metric, a separa te metric for the hot, dry 14 region. That hasn't be en proposed. We have 15 done the analysis. That we're looking really 16 toward feedback on whet her that is a viable 17 approach. 18 MR. BROOKMAN: So you can see the 19 comment box there. The Department seeks 20 comment on introduction of regional SEER, the 21 use of bin method, and the calculation of 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 87

cooling load a nd hours, bins fo r determining 1 the regional SEER and also the use of SEER for 2 establishing cooling ef ficiency standards in 3 hot, dry region of the country. 4 Let's take comments on these. 5 Steve Rosenstock? 6 MR. ROSENSTOCK: Steve Rosenstock, 7 Edison Electr ic Institute. 8 Again, I didn't re ad Appendix 7C. 9 You'll have to forgive me here. 10 In terms of the SEER hot, dry 11 metric, is DOE looking at basically a separate 12 test procedure fo r that part of t he country? 13 And if so, if yo u're looking at a SEER HD and 14 the numbers are differen t, would you have to 15 redo some of this analysis as well if the SEER 16 HD results are, yo u know, different. 17 It's, you know, the rest of the 18 country it's 14 SEER but under the SEER HD 19 metric, it's 13.5. I me an I'm just trying to 20 think of the implicat ions of this in terms of, 21 you know, number one changing the test 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 88

procedure, and then nu mber two, redoing this 1 analysis based on the new metric for that part 2 of the country. 3 MR. BROOKMAN: Molly, you want to 4 go ahead? 5 MS. TROMBLEY -McCANN: No. 6 MR. BROOKMAN: Okay. Then Karim? 7 Oh, Dave, go ahead. 8 MR. WINIARSKI: I was going to let 9 Wes answer something. 10 (Laughter.) 11 MR. WES ANDERSON: No, I was going 12 to say the test proced ures currently being 13 rewritten now -- this is Wes, DOE, and there 14 will be a public meeting on that to address 15 any issues. So any re ference, we can't really 16 speak to the test proc edure right now until 17 it's signed by the Secretary. It's going to 18 be -- 19 MR. ROSENSTOCK: This is Steven 20 Rosenstock. Than k you very much. 21 But, again, if -- and, again, I 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 89

don't know if you're looking at a separate 1 test procedure for the hot, humid climates, 2 which in a way makes m ore sense, but then 3 again, if these new te st procedures are 4 established, this could have quit e the impact 5 on numbers in this. And it would have to 6 impact the candidat e standard levels. 7 If you're doing a separate test 8 procedure, you'd have a whole new set of 9 numbers I would guess. And that would change 10 a lot of the -- possibly change the economics 11 and it changes everyt hing in terms of an 12 efficiency standard. 13 MR. BROOKMAN: Harvey Sachs? 14 MR. SACHS: Harv ey Sachs, ACEEE. 15 To my mind as an advocate, trying 16 to think about putting myself in the other 17 guy's shoes, it makes no sense at all to have 18 a different regional boundary for air 19 conditioning versus he ating products, if 20 nothing else because the heat pump bridges 21 that gap. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 90

So my question is whether the 1 Department and its contractors sat down and 2 did at least a back of the envelope 3 calculation on the 4,500 bases it has 4 presented versus the 5, 000 versus a 4,000 or a 5 5,500. I mean we certain ly spent a gr eat deal 6 of effort in the development of the consensus 7 agreement thinking a bout what made sense in 8 terms of energy savi ngs and the market. 9 So I'm curious about the process 10 that led to the 4,500 lin e as opposed to a 11 5,000. 12 MR. WINIARSKI: Well, going back to 13 the development, 4,500 is roughly an outcome. 14 It's not the input to developing this process. 15 So bear that in mind. 16 The other thing I want to say is 17 that if you consider the issues that DOE had 18 to deal with, as you mo ve that line farther 19 south and you are con sidering regional 20 standards, obviou sly you start to get hotter 21 and hotter climates and the SEER level that 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 91

can be cost justifie d obviously goes up. 1 As you move the line -- and at the 2 expense of on the furna ce side, if you -- and 3 DOE was considering consistent bo undaries when 4 we looked at this, the furnace efficiency that 5 you justify is now fo r warmer climates and 6 appears to be going down. 7 So there is a choice here in terms 8 of what -- there is an effective outline. I 9 will say that when we lo oked at it from an LCC 10 analysis on air condit ioners and heat pumps, 11 that change is very, very minor in the 12 resulting posi tive LCC. 13 MR. SACHS: But, Dave, my 14 underlying questi on was trying to get inside 15 your all's process. Did you and the furnace 16 guys talk together about where the line ought 17 to be? 18 MR. WINIARSKI: Yes. We have 19 meetings about that. 20 MR. SACHS: Thank you. 21 I have another st atement if I might 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 92

and that's an apology. I believe that our 1 publication was the first to pr opose a SEER 2 sub HD for the hot, dry climate. This was to 3 be based on using bi n hour distributions 4 appropriate. And, in fa ct, the economic value 5 of the electricit y used at high temperatures 6 as (inaudible) bin hour distributions. 7 We did that and I assume you did as 8 well on the assu mption that t he Department's 9 theology would no t allow using dual metrics. 10 We've heard this morni ng from Kate and I 11 believe from Tim as well, that there is good 12 precedent for us ing both an EER and a SEER. 13 And there will be a great deal more discussion 14 of that. 15 And partly in support of the 16 consensus, I want to say that to me SEER sub 17 HD hides so much and is so awkward, in part in 18 the terms that Ste ve has suggested for 19 marketing, that it is a really bad third 20 choice if we can't do the right thing. 21 MR. BROOKMAN: Okay. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 93

MR. SACHS: Thank you. 1 MR. BROOKMAN: Thank you. 2 Let's go to Karim first. 3 DR. AMRANE: Ka rim Amrane, AHRI. 4 I'd like to ag ree with Harvey. 5 (Laughter.) 6 MR. SACHS: I'm becoming a frame of 7 reference. 8 DR. AMRANE: An d I think if you 9 look at the consensus agre ement, you know, we 10 came up with an EER metric as well for the 11 southwest and to address this hot and dry 12 climate issue. So I thin k it is taken care of 13 in the consensus agreemen t. And that's why 14 DOE should be adopting it. 15 MR. BROOKMAN: Thank you. 16 Let's go to Kate and then to Molly. 17 MS. HOWARD: Da ve, in your opinion, 18 what is the differen ce? Or what is the 19 advantage I suppose? Or actually just could 20 you compare SEER HD to EER. What do you -- 21 you know, I'm a lawyer. I don't understand 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 94

the technical stuff as well as many of the 1 others in the room. 2 But I'm just wondering in your mind 3 what you feel is the rela tive difference or if 4 you could offer a quick comparison, that would 5 be great. Thank you. 6 MR. WINIARSKI: Yes. I can speak 7 to that a little quick. 8 Appendix 7C describes the 9 methodology. The metho dology was based on bin 10 hour data for -- I beli eve we used 20 KMY 11 sites that we had popu lation weights for that 12 covered I think it was like 98 percent of the 13 population of that region. 14 It is heavily weighted by 15 California, as you mig ht guess. And the 16 result, we essentially used a load line that 17 looked very similar. In other words, assuming 18 that cooling starts at 65 degrees and sort of 19 -- and moves up from th ere for t he climates 20 within that region. 21 The result is a slightly different 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 95

bin hour distribution. It tends to be more 1 heavily weighted both on the cooling or the 2 lower part of the scale in terms of 3 temperature as we ll as on the hi gher. So it 4 is kind of a flatter load profile versus the 5 current SEER profile te nds to be more mounded 6 around 82 degrees. 7 MS. HOWARD: I' m more concerned 8 about the differ ence between SEER HD and EER 9 than SEER HD and SEER. 10 MR. WINIARSKI: Right, right. 11 MS. HOWARD: Okay. Thanks. 12 MR. WINIARSKI: So the SEER HD that 13 was discussed here, ba sically one of the 14 outcomes was that the weighted ave rage cooling 15 temperature, outdoor te mperature, isn't that 16 much different than t he 82 degrees that you 17 come up with the curr ent bin hour method. 18 So you really don't capture that 19 high end performance that you get with EER or 20 even, you know, if yo u were looking for 21 specific temperature ra tings for eq uipment. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 96

MR. BROOKMAN: Molly. And then 1 back to Harvey. 2 MS. TROMBLEY-McCANN: So first I 3 want to say thank you bec ause we did submit 4 comments in the fram ework stag e strongly 5 advocating for a SEER HD. And you are 6 responding to us. An d I appreciate that. 7 And I'm sorry but now I'm going to 8 tell you that I want you to do something 9 really different. 10 (Laughter.) 11 MS. TROMBLEY-McCANN: So I do want 12 to acknowledge that th is was something we 13 asked for. But as H arvey said, it was 14 something we asked for on the assumption that 15 we couldn't get what we really wanted. 16 And what we really want is specific 17 information about perfo rmance at specific 18 temperature points ab out 90 degrees. So for 19 me the biggest differen ce between a SEER value 20 and an EER value is that SEER is a seasonal 21 average. It does n ot give you information 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 97

about a specific performance at a specific 1 temperature. 2 And, you know, av erages, while very 3 useful especial ly for things like statewide 4 standards, cannot give you information about 5 performance in individual climat e areas. So 6 one of the reasons that more inform ation, in 7 terms of like an EER as well as a SEER, is 8 helpful for us is that it helps us to unpack 9 how is that un it actually perf orming at each 10 of the different temperat ure points because in 11 reality, performa nce of an air conditioner is 12 a curve that varies wi th outdoor temperature 13 continuously. So it is not a single value. 14 So for us, as a state, being able 15 to have access to more information so that we 16 can set incentive programs in other 17 requirements that are individually climate18 specific is really helpful. 19 So that's one of the reaso ns that a 20 SEER and an EER is pref erable and also one of 21 the reasons that for us the consensus 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 98

agreement is very imp ortant because it 1 includes a provision th at manufact urers will 2 disclose performa nce at a number of different 3 temperature poin ts, which is ve ry helpful for 4

us. 5 MR. BROOKMAN: Thank you. 6 Harvey? 7 MR. SACHS: Harvey Sachs. If you 8 steal from one person, it's plagiarism. If 9 you steal from 20 , it's research. 10 One of the diagrams in our initial 11 paper on regional stan dards was shamelessly 12 taken from earlier work by Horowitz and 13 others. But it shows that the cost of air 14 conditioning seasonal energy -- that 30 15 percent -- 35 percent of the cost of seasonal 16 air conditioning ener gy in the hot, dry 17 climate is characterist ically at temperatures 18 above 95, both becau se EER falls off so 19 quickly and because of the value of high 20 temperature electr icity to capacity 21 constrained utilities. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 99

So simply say that SEER HD is 1 shifted a few degrees, say to 87 instead of 2 82, fails to capture th e enormous importance 3 of that relative ly small number of very high 4 valued hours when the air conditioners are not 5 working as well when th e temperature is above 6 95 degrees. 7 This is a major conceptual defect 8 in a simple shift with a modest min 9 displacement, which is what I'm hearing not 10 having read 7C in any detail yet. 11 Thank you. 12 MR. BROOKMAN: Thank you. 13 I'm thinking we're starting to get 14 redundant here. And I' m also thinking that 15 we're going to have to pause for lunch pretty 16

soon. 17 Don? 18 MR. BRUNDADGE: Well, just a quick 19 comment on this. I th ink given that you've 20 got EER in the cons ensus agreement and 21 assuming that you find a way to stick EER in 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 100

the hot, dry states in an eventual rule, 1 whether the consensus agreement h appens or 2 not, I think the main value of SE ER HD in the 3 western utilitie s, correct me on this, is to 4 provide an estimate of energy use for 5 consumers. It's more so mething that ought to 6 appear on the yell ow label rather than be part 7 of the standard if you are going to actually 8 require EER. 9 MR. BROOKMAN: Okay. 10 MR. BRUNDADGE: I think it does 11 have value though. 12 MR. BROOKMAN: Let's take final 13 comments on this comment box because we're 14 almost at a paus ing point here. 15 Final comments on this before we 16 move on? 17 (No response.) 18 MR. BROOKMAN: Okay. 19 MR. WINIARSKI: Ok ay. And the last 20 slide is just some results here by efficiency 21 level for the en ergy use in each climate. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 101

As you can see, ho t and humid tends 1 to have more energy use both at the baseline 2 when you compare it to the other climates 3 compared to -- do wn at the high er efficiency 4 levels, the same trend exists. 5 One of the interesting things is 6 that the hot, dry number is actually fairly 7 close to the national nu mber, maybe slightly 8 below that, the national being for the nation 9 as a whole. Rest of co untry is relatively low 10 here. 11 This is for one product cl ass. The 12 results for the other pr oduct classes are in 13 the TSD. 14 And that's it. 15 MR. BROOKMAN: Comments on this 16 table? 17 Harvey Sachs? 18 MR. SACHS: Harvey Sachs. 19 Thank you very mu ch for this table. 20 And, again, I believe this is RECS based? 21 MR. WINIARSKI: This includes the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 102

results of both the residential and the 1 commercial modeling. 2 MR. SACHS: But so it is RECS 3 dominated. What I feel the need to emphasize, 4 although the util ity representatives can do it 5 much better than I, is that the hot, dry 6 climates tend, in most cases, to be climates 7 with fairly large downhill swings. 8 So some people are moderating their 9 air conditioning use wi th evening cooling from 10 ambient. And, again, the key issue in the 11 hot, dry climates is the consumption of 12 electricity at the same time that everybody 13 else wants it, in the afternoon. 14 It's not just the total kilowatt 15 hours. And this is why Californ ia has gone to 16 the extraordinarily com plex and sophisticated 17 time-dependent valuat ion methods that have 18 been used so extensive ly there for screening 19

resources. 20 This is a simplif ication that is 21 instructive but it is ha rdly complete in terms 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 103

of the economic analysis. 1 MR. BROOKMAN: Thank you. 2 Steve Rosenstock? 3 MR. ROSENSTOCK: Steve Rosenstock, 4 EEI. 5 I guess -- and, again, it falls 6 into that fact is, you kn ow, especially at the 7 higher SEER level, we don 't know where EER is 8 going. And then for so me of those climates, 9 you know, it looks li ke a constant energy 10 reduction. 11 As you go up the SEER level, you 12 are always getting li ke a certain percentage 13 of energy usage reductio n. And personally I 14 don't believe that's th e case, especially in 15 either the hot, dry or the hot, humid climates 16 where, you know, you are going to be so well 17 above some of the -- I just -- I don't see 18 that relationship. 19 Just seeing, again, it looks like 20 it is a perfect line going downhill. And I 21 just don't see it, especially in some of the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 104

hot, dry climates, espe cially if the EERs go 1 down as SE ERs go up. 2 Thank you. 3 MR. BROOKMAN: Okay. Thank you. 4 Final comments on this table? 5 (No response.) 6 MR. BROOKMAN: Okay. We're at a 7 break point. And ba sed on the agenda, as 8 written, we're almost an hour behind schedule. 9 And we probably have at least -- probably 10 close to another hour to complete this 11 content. 12 So I'm going to suggest we take a 13 break for lunch. It's now 12:2 5. It's hard 14 to do lunch in less th an an hour in this 15 building. So I'd like to -- 16 PARTICIPANT: Is it not possible to 17 wage on John? 18 MR. BROOKMAN : To what? 19 PARTICIPANT: To wage John. 20 MR. BROOKMAN: I think it's 21 possible if people are up for it. If they 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 105

want to keep pressing on, we can keep pressing 1 on. How many people would like to keep 2 pressing on? That's th e majority of the room. 3 How many of you will be seriously 4 discomforted if we do press on? Okay, let's 5 try it then. Okay? 6 And if anybody needs a comfort 7 break, you can le ave and come back quickly. 8 Let's press on. 9 MR. SCOTT: Okay, Mike Scott again. 10 Life cycle cos t, payback period 11 analysis. When you get to this stage, having 12 heard all of the discussion beforehand, you 13 wonder why am I even here talking about 14 numbers. But I' ll go ahead and go through it. 15 MR. BROOKMAN: Do it quickly. 16 MR. SCOTT: I will do. 17 Okay. So what we're going to be 18 talking about here, very briefly I hope, is a 19 discussion methodology. Those of you who have 20 been involved in more tha n one rulemaking, 21 we're doing it basically the same -- pretty 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 106

much the same wa y we always do. 1 Life cycle cost equals the product 2 installed price; that is including 3 installation. It includes the annual energy, 4 maintenance, and repair costs associated with 5 the equipment. And an ything that happens 6 after the first year is discounted to a 7 particular base year. 8 The analysis is done from a 9 consumer perspective, using consumer discount 10 rates, not federal rates. 11 It's done with an Excel 12 spreadsheet. It is implemented in uncertainty 13 mode using a Mon te Carlo implemen tation tool, 14 which is a way of saying that we sample from 15 distributions f or the values th at we do for 16 any particular run. 17 We do 10,000 runs through the 18 spreadsheet and report the summary statistics. 19 In addition, we do do a simple 20 payback period, the numb er of years required 21 to offset any differe nces in the product 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 107

installed price from in creases in efficiency 1 that are gained from changes in the annual 2 operating costs. 3 The Monte Carlo analysis, as I said 4 before, allows DOE to consider end user 5 variability and variabili ty across regions, 6 and to conduct sens itivity analysis. 7 Energy use, as yo u've seen from the 8 residential anal ysis in part icular, varies 9 across individual s because we were using the 10 RECS data. There are variations in 11 installation repa ir and installation costs -- 12 I'm sorry, repair an d maintenanc e costs. 13 We, in these analyses, select 14 either from the commercial or residential body 15 of data for individual observatio ns. We 16 correlate inputs whe re necessary. For 17 example, electr icity price and sector would 18 correlate as well as lo cation and electricity 19 price. 20 The results wind up being 21 distributions of life cycle cost and payback 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 108

period by product class, region, and 1 efficiency level. 2 The flowchart that you see in your 3 packet corresponds to wh at I just told you. 4 Factors that vary by region, we've 5 already talked about this a little bit, 6 markups, especially sales taxes, i nstallation 7 costs, electricity cons umption for cooling and 8 heating, electricity prices. 9 The factors th at vary over time 10 include electrici ty prices and we're talking 11 about this in real terms, that is in constant 12 year dollars. We don't have the other costs 13 varying over time, not in real terms anyway. 14 What factors va ry by individual 15 consumer? Well, the pr oduct efficiency will, 16 particularly in the market baseline 17 distribution. Dave was showing you what those 18 were in the prel iminary analysis, the market 19 baseline, energy consumpt ion therefore varies. 20 Product lifetime vari es by individual. 21 Observation, we sample the product 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 109

lifetime for any particul ar observation from a 1 distribution that all ows for equipment to 2 progressively fail at longer and longer 3 lifetime periods. 4 Discount rates va ry by individual. 5 Those are, again, samp led. And electricity 6 prices observed by an individual vary by 7 individual. Peo ple have differen t changes of 8 being located in partic ular utility service 9

areas. 10 The electricity prices, the 11 residential, in view of the time available, 12 I'm going to just simp ly refer you to Chapter 13 8 of the technical suppo rt document and a copy 14 of the appendices ther e, B and C, to get a 15 sense of the detail that was gone into in 16 order to basically come up with marginal 17 prices for el ectricity at the time the 18 electricity is saved. 19 Those are based on electricity 20 tariffs from 90 utiliti es across the country. 21 The difference -- th ere is an important 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 110

difference between t he residential and the 1 commercial. For resi dential, we did not use 2 time of use tariffs. The re are no ma ndatory 3 time of use tariffs at the time we did the 4 analysis at least for re sidential customers. 5 That may have changed sinc e. And that may be 6 updated. 7 The market penetration, at least in 8 the data we were lookin g at for residential 9 customers taking advant age of volunta rily time 10 of use tariffs was less than one percent of 11 residential cust omers, deemed to be small. 12 And there was no significant 13 difference on average between the default 14 price -- or default ma rginal tariff and what 15 you would have go tten had you used time of use 16 prices at the po ints of time that the savings 17 occurred, where the ki lowatt hour savings 18 occurred. And that's in one of t he appendices 19 to the document. 20 Yes, sir? 21 MR. SACHS: Harv ey Sachs, ACEEE. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 111

And I really want to object to this 1 approach. The Department of Energy, 2 headquartered in this building, is trying to 3 steer tens of billions of dollars into the 4 Smart Grid. 5 The mostly likely expression of the 6 Smart Grid for a reside ntial consumer will be 7 ubiquitous residential tariffs, residential 8 time of use tariffs. 9 Mr. Brundadge is shaking his head 10 affirmativel y on that. 11 For the Departme nt, for this time 12 period, to not at le ast simulate what that 13 would look like in terms of costs for 14 customers, well, I guess if you're not doing 15 EER, you don't care. 16 But this is just penny wise, pound 17 foolish. And it is just totally unrealistic 18 in terms of the directi on of public policy 19 that is being impleme nted today over the 20 period in which this set of standards would be 21 in force. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 112

I'm sorry. I' ll try to be nice. 1 But it just stuns me. 2 MR. BROOKMAN: That's okay. You've 3 been articulate. 4 Molly? 5 MS. TROMBLEY-McC ANN: For all the 6 reasons that Harvey just cited, I don't think 7 any of those three bull ets will be true in 8 2015 when these standar ds go into effect. I 9 think time of use ta riffs are going to be 10 present and important in the impact of this 11 standard. And you should analyze it. 12 MR. BROOKMAN: Thank you. 13 So the Department would benefit 14 from your thought proces ses, your projections 15 about how this might happen be cause they are 16 going to have to rely on something to -- if 17 they do projections, th ey're going to have to 18 rely on something to do that analysis. 19 Don Brundadge? 20 MR. BRUNDADGE: The only comment I 21 would add to this is yes, not using time of 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 113

use is not a good appr oach. But it's all 1 built on a house of sand with the RECS data. 2 And I'm not really clear on whether 3 the reason they're doing this -- and you could 4 respond to it -- is because RECS doesn't 5 register time of use so you can 't use RECS and 6 do time of use with it. Is that why you're 7 going in this ap proach is you can't use RECS 8 data in this way? 9 MR. BROOKMAN: Greg? 10 MR. ROSENQUIST: Greg Rosenquist 11 from LBNL. 12 You know we looked at the time of 13 use tariffs and to se e what sort of impact 14 they would have on electr icity prices. And it 15 does vary wide ly by region. 16 On a national average, it doesn't 17 change that much co mpared to the default 18 tariffs. But, again, places li ke California, 19 the time of use ta riff is higher. 20 And in places -- there's actually 21 60 percent of the utilit ies of the sa mple that 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 114

we had actually offered voluntary time of use 1 tariffs. And in many of those regions, the 2 actual time of use tariff was lower than the 3 default tariff price. 4 So we did an analysis to see -- to 5 do that comparis on and determined based upon 6 that analysis, it was worthwhile at that point 7 only to procee d with the defa ult tariffs. 8 PARTICIPANT: I think one of my 9 comments, and I m ay disagree with my 10 colleagues on this is given that you are 11 dealing with RE CS, which is ba ckward-looking 12 data and a relatively sma ller percentage of 13 customers were on time of use tariffs at the 14 time your data was collec ted, then in that 15 case, for using this ba ckward-looking data, 16 not time of use might be a reasonable 17 assumption. 18 But you need to find some way to 19 adjust it for forward looking. 20 MR. BROOKMAN: Steve Rosenstock? 21 MR. ROSENSTOCK: Steve Rosenstock, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 115

EEI. 1 Just to follow on to Mr. Brundadge. 2 Again, forward lookin g for -- again, just 3 thinking about the future as more smart meters 4 get in place, I believe some estimates say by 5 2019, there will be at least 58 million 6 electric smart meters deployed in the United 7 States, the analysis is going to be quite 8 widely variable. 9 And again, this is looking forward, 10 the Department is going to have to realize 11 that there are pr obably going to be default 12 rates with varying price s. But also there 13 could be multiple rates that the customers can 14 choose from. 15 Instead of just having a default 16 rate and a time use rate, there could multiple 17 choices for those custom ers depending on their 18 situation, depend ing on the type of equipment 19 they are using, depending on how aggressive 20 they want to be in te rms of either demand 21 response or ener gy efficiency. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 116

It's probably go ing to make the 1 analysis much harde r. But, again, going 2 forward, that is going to be the situation. 3 And especially with se asonal equipme nt, that's 4 going to make things ev en more interesting. 5 Thank you. 6 MR. BROOKMAN: Other comments on 7 these electricity pricing issues? 8 (No response.) 9 MR. BROOKMAN: Okay, let's go. 10 MR. SCOTT: Okay . The good news on 11 the commercial side, we did use time of use 12 rates. 13 (Applause.) 14 MR. SCOTT: And that included 15 demand charges, block ra tes, seasonal rates, 16 and any mandatory time of use rates where they 17 exist. So, again, the voluntary ones weren't 18 in there. 19 All right. I offer this with some 20 trepidation. The regional av erages of 21 residential annual av erage and seasonal 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 117

marginal prices, this is intended as an 1 indicator only because what we're really doing 2 is in each individual ca se, in the case of 3 RECS, or in th e case of each individual 4 building, you know, on the commercial side, 5 we're actually using what ever price applies at 6 the appropriate hour of the year, you know, 7 given the cons traints that we've already 8 talked about, for energy savings. 9 So what these really are is the 10 difference in energy -- difference in annual 11 energy bill divided by the difference in 12 energy savings. 13 MR. BROOKMAN: Steve Rosenstock? 14 MR. ROSENSTOCK: Steve Rosenstock, 15 Edison Electr ic Institute. 16 And, again, having not dug through 17 this part of the techni cal support document 18 yet, in terms of some of these -- again, 19 because in the previous slide it was talking 20 about you got da ta from 90 utilities on their 21 tariffs. I'll assume that's bo th residential 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 118

and commercial. 1 But now with RECS, you had the 2 1,854 data points for air conditioners and 339 3 for heat pumps. I'm go ing to assume you tried 4 to match those 1,854 wi th the 90 utilities 5 where you could and the 339 with the 90. And 6 then you came up with these values. 7 Is that -- am I correct in that's 8 how the approach was do ne? Because then I 9 have a follow-up question. 10 MR. SCOTT: That 's roughly it, yes. 11 MR. BROOKMAN: Greg Rosenquist. 12 MR. SCOTT: Yes, mapping the 13 utilities -- 14 MR. ROSENS TOCK: Okay. 15 MR. SCOTT: -- to each one of the 16 RECS households. 17 MR. ROSENSTOCK: So, again -- and 18 again as a follow up, then I'm not exactly 19 sure why -- and I'll sa y especially in July -- 20 the marginal prices wo uld be different for air 21 conditioners and heat pumps since they have 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 119

the same operation un less it's just a matter 1 of the weighting of just the shee r numbers of 2 air conditioners. Ther e's 1,854 -- 1,800 air 3 conditioners with 90 ut ilities versus 339 heat 4 pumps and 30 utilities. And that's the reason 5 for the differen ce in these ma rginal prices? 6 MR. SCOTT: It's due to the 7 location of the heat pumps, all right? 8 MR. ROSENS TOCK: Okay. 9 MR. SCOTT: So -- 10 MR. ROSENSTOCK: Because, again, 11 when you think about it, the tariff for air 12 conditioners and heat pumps are no t going to 13 be different in the summertime. So -- and, 14 again, this will effect the impact. Now in 15 some cases, it helps and in other cases it 16 might hurt. 17 But, again, look ing at the July 18 marginal price, using the July marginal price 19 for the air conditione r, July marginal price 20 for the heat pumps would not be totally 21 inaccurate I would say bec ause the tariffs are 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 120

going to be the same. 1 MR. BROOKMAN: Steve Rosenstock 2 back to Greg. 3 MR. ROSENSTOCK: Yes, for a 4 household that's locat ed in the same place 5 with the same utility, right, it's going to 6 see the same marginal price regardless of 7 whether it is an air co nditioner or a heat 8

pump. 9 What you're seei ng here are these 10 weighted average number s, right, based upon 11 where those air conditioners and heat pumps 12 are located. So as a re sult then you come up 13 with a different we ighted aver age price, 14 again, based upon where those air conditioners 15 are mostly located and based upon where most 16 of those heat pu mps are located. 17 So it just so happens for air 18 conditioners, you know, where they are located 19 results in a higher we ighted average marginal 20 price than where the he at pumps are located. 21 MR. ECKMAN: Ri ght. Because the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 121

heat pumps are in the northern tier and -- 1 MR. BROOKMAN: Tom Eckman. 2 MR. ECKMAN: Tom Eckman -- the heat 3 pumps are in the northern tier or in southeast 4 and the air condit ioners, by and large, are in 5 California. 6 MR. ROSENQUIST: Yes, but Steve is 7 looking specif ically at the hot, dry region, 8 right? But it is th e same sort of idea. 9 MR. BROOKMAN: Okay. And so that 10 was Tom and then back to Greg Rosenquist. 11 Tom Eckman? 12 MR. ECKMAN: Yes, I know this is a 13 limitation of the RECS dat a but the de ployment 14 of air conditioning and h eat pump as we go 15 forward in time may or may not match the 16 current geographical di stribution of that 17 equipment. 18 And so I don' t know how you deal 19 with it. But clearly looking at some trends 20 in terms of where the population is employing 21 those devices rather than just a point in 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 122

time, so maybe looking backwards to the prior 1 RECS to see whet her there is a growth in the 2 application of those te chnologies in various 3 regions to see whether you could adjust on a 4 going-forward basis becau se right now you've 5 got a single point in time estimate of where 6 heat pumps are being used and where air 7 conditioning is being used and the rates 8 associated with those. 9 And I'm not quite certain that that 10 long-term trend or that current picture 11 matches where the long-term trend of 12 population growth and system -- 13 MR. BROOKMAN: Greg Rosenquist. 14 MR. ROSENQUIST: Right. For the 15 purposes of th e LCC analysis, what you are 16 saying is true. But we tried to capture that 17 to some extent in the national impact analysis 18 which will be described later because we're 19 doing things at th e regional level. 20 MR. ECKMAN: Can you-- 21 MR. ROSENQUIST: And so, you know 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 123

construction start s, for example, and 1 saturations of equipment in those starts will 2 change over time based upon the data that we 3 had. 4 MR. ECKMAN: Is there any way -- 5 this is Tom Eckman -- is there any way to 6 connect the dots between the NES and the life 7 cycle costs so that you get consistent 8 treatment? 9 MR. ROSENQUIST: The way the life 10 cost analysis is structu red, you know, it is a 11 hypothetical where ever y single house hold or 12 commercial buil ding gets its equipment 13 replaced in the year that the standard becomes 14 effective, which is, y ou know -- it gives you 15 a close approximation of what you might get 16 from the NIA but not ex actly. So in short, 17

no. 18 MR. BROOKMAN: Thanks, Greg. 19 Andrew deLaski? 20 MR. deLASKI: This is a follow on 21 on prices and I had to step out so I hope I'm 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 124

not hitting on a poin t that was already 1 covered. 2 But, Greg, I recall from the last 3 analysis for the 20 01 final rule that the 4 Department found on that docket th at marginal 5 prices were lower than average prices. And 6 what I'm seeing here is that, you know, by and 7 large marginal prices are now hi gher than 8 average prices at least f or the national as a 9 whole, which I th ink is kind of what we would 10 expect given the trans- electricity pricing. 11 But I'm still cu rious about what's 12 happening, for exampl e, in the hot, humid 13 region where we see ma rginal prices lower than 14 average prices. Wh at's driving that? 15 MR. BROOKMAN: Greg Rosenquist? 16 MR. ROSENQUIST: Yes, hi. Some of 17 those tariffs still have declin ing block 18 rates. That was certainly the case ten years 19 ago. I think that trend is reversing itself. 20 Maybe Don or some oth er company can add to 21 that. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 125

But that's mostly the case there 1 that as you use more energy, you are actually 2 charged less. 3 MR. deLASKI: For residential. 4 MR. ROSENQUIST: For residential. 5 MR. BRUNDADGE: Don Brundadge. 6 That -- I can't speak for the whole southeast 7 -- in our companies, you tend to have higher 8 prices for higher energy use in the summer and 9 lower prices for higher energy use in the 10 winter. 11 One of the maj or differences 12 between hot, humid and some of the other 13 regions is many of our ar eas have nine or ten 14 months of the year significant air 15 conditioning usage. So you do have 16 significant air conditio ning usage during off 17 peak times. And that ma y be why you have this 18 marginal less than average issue. 19 In a place like Florida, you are 20 going to have over ha lf the air conditioning 21 energy use is go ing to be not in the summer 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 126

season. 1 MR. BROOKMAN: Ok ay. So let's keep 2 moving on. 3 Final comments or questions with 4 respect to average an d seasonal marginal 5 prices before we keep going. 6 (No response.) 7 MR. SCOTT: Okay. All right. The 8 equivalent chart here fo r commercial is a 9 little bit different. We've got it on a 10 census division basis. 11 And the other thing that we've done 12 here is rather th an look at a si ngle change in 13 energy use, we're loo king here at energy 14 consumption varying by SEE R level. And so we 15 also have the effe ctive marginal price varying 16 by SEER level as well as location. 17 There is a scaling factor reported 18 in the right-hand side of the column. It was 19 deemed that because we had a relatively small 20 number of commerci al customers as opposed to 21 residential customers, the -- correct me if 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 127

I'm wrong here, Greg -- the effort in updated 1 the commercial prices for the number of 2 utilities and t he number of tariffs concerned 3 made it sort of un workable to update 4 everything from 2004 to 2008 dollars directly. 5 So what we did was we applied a 6 correction factor to the 2004 prices in order 7 to have appropriat e prices, correct? 8 MR. BROOKMAN: He's nodding. 9 Andrew? 10 MR. deLASKI: Mike, can you explain 11 why prices vary by SEER? 12 MR. SCOTT: N ot as well as Dave 13

can. 14 MR. BROOKMAN: Dave Winiarski? 15 Find a microphone, Dave . Dave Winiarski. 16 MR. WINIARSKI: Yes, I can try to 17 explain that. 18 Essentially the simulation model 19 made certain assumptio ns for what was assumed 20 in a 13, a 14 SEER, a 16 SEER, and the max 21 tech. And so basical ly what we actually 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 128

recorded out of the si mulations were the 1 hourly loads. 2 Those were converted into annual 3 bills, taking into account all of the 4 different tariff struct ures that were used. 5 Then when the effective marginal 6 prices here are effect ively dividing the 7 annual bill by the energy savings to come up 8 with an effective ma rginal price, and 9 depending on whether you achieve that by 10 improving, for instan ce, a higher EER 11 effecting maybe the peaks a little bit or 12 whether the major gain in efficiency was due 13 to fan changes, that reflects itself in slight 14 variations in the marginal pricing. 15 MR. BROOKMAN: Doug? 16 PARTICIPANT: (Inaudible.) 17 MR. WINIARSKI: Yes. Within a 18 given census divisi on within those 19 observations, I think, and between 14 and like 20 19, you see a coup le big drops. 21 PARTICIPANT: The disconnect of 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 129

what you said is that this is connecting back 1 to your assumption, for example, about what 2 the EER is for a given region. 3 MR. WINIARSKI: Exactly. And the 4 actual commercial mo deling assumptions. 5 PARTICIPANT: Then your 6 relationship (inaudible) 7 MR. WINIARSKI: It's actually not 8 that linear when you lo ok at it. But yes, 9 it's that curve. 10 MR. BROOKMAN: Tom Eckman and then 11 to Steve. 12 MR. ECKMAN: That was my point. I 13 think that we have the same concern that 14 Harvey and others raised about the linearity 15 or the high correlatio n -- I won't call it 16 linear -- but the high correlation between 17 improving SEER and EER. 18 And the fact that it may or may not 19 be the case. So this may or ma y not turn to 20 be in practice what the consumer sees because 21 they don't get the EER benefit that is being 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 130

forecast here. 1 MR. BROOKMAN: Steve Rosenstock? 2 MR. ROSENSTOCK: Steve Rosenstock, 3 Edison Electr ic Institute. 4 In terms of so me of the numbers, 5 were you using some of th e CEBECS data for -- 6 as a starting poin t for some of these -- for 7 some of the costs? 8 I know you were using utility 9 tariffs but, again, just as a backstop to kind 10 of see what kind of, yo u know, what kind of 11 numbers you're getting for some of the costs, 12 the actual cooling costs? 13 MR. SCOTT: I don't think we've 14 compared any of these back to the CBECS for 15 any given region. Yo u could look at it -- 16 you'd have to look at the actual whole 17 building energy use and CBECS doesn't record 18 it marginally. 19 MR. ROSENSTOCK: Okay. And the 20 second thing I want to sa y -- and I said this 21 ten years ago -- the approach, the annual bill 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 131

savings divided by the energy savings to get 1 the marginal costs for co mmercial customers is 2 not really appropriate for the fact of, you 3 know, demand charges fo r commercial customers 4 can be ten, to 30, to 40 percent of their 5 bill. 6 And with SEER EER curve, if EERs go 7 down, that means the pe ak demands are actually 8 going to go up. Th at means that your bill 9 savings are going to be a lot less than what 10 you are probably projecti ng in the simulation. 11 I'm not sure exactly how it effects 12 your marginal prices but it would be a very 13 significant impact on the life cycle cost 14 analysis and on thes e marginal prices. 15 I guess I am a little baffled, 16 again, that -- ag ain, I'd have to look at the 17 model -- that all the marginal prices go up as 18 you go to SEER 19 beca use I would guess with 19 the curve that we've seen , it would always -- 20 I would assume the ma rginal prices would go 21 down. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 132

I'm surprised th ere is that kind of 1 trend. Again, I'd have to look at all the 2 data and everything. And I also, you know, 3 especially when you say someth ing like 32 4 cents per kilowatt hour, in census division 5 one, it's SEER 14 . I'm not exac tly sure. I 6 know prices are hi gh in New England. 7 But, again, it is a matter of you 8 are mixing and matchi ng energy and demand and 9 you are getting a number that is not really 10 reflective of wh at the customer is really 11 seeing or paying. 12 MR. BROOKMAN: Dave Winiarski, 13 please let's everybody say your name before 14 you speak. 15 MR. WINIARSKI: Yes, Dave 16 Winiarski. 17 And, again, in responding to that, 18 these are effective or back-c alculated 19 marginal prices. Th ey are actually not used 20 in the analysis. 21 The analysis re lies on the actual 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 133

energy bills' sa vings going between levels for 1 the building. So to th e extent th at you can 2 compare these margin al prices with say the 3 last block on the tarif f, it's not the same 4 thing. 5 MR. ROSENSTOCK: That does help. 6 But, again, the way it's presented, it makes 7 it appear that that is the number that 's being 8 used in terms of some of the analysis. That 9 helps a lot. That really does help a lot. 10 But, again, the way it is 11 presented, it makes it seem like that's what 12 you are using in te rms of how you are 13 calculating the savings and eventually going 14 into the life cycle cost analysis. So it's 15 presentation. 16 MR. BROOKMAN: Ha rvey Sachs. Let's 17 leave that microphone turned on. Harvey 18 Sachs? 19 MR. SACHS: This one or that one? 20 MR. BROOKMAN: Both of them. 21 MR. SACHS: Harv ey Sachs, ACEEE. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 134

I'm very impressed with the 1 sophistication of th is analysis for the 2 relatively small number of commercial 3 buildings in the analysis. 4 On the other ha nd -- and the 5 scaling factor seems to be a reasonable 6 approach. I don't know if it's right. And I 7 sure would like to get -- a physical 8 explanation would he lp me understand why in 9 most of the cases, there's not a linear trend 10 at all but a minimum at SEER 16 with higher 11 reported margin al prices at both SEER 14 and 12 SEER 19. 13 And that seems to be true for both 14 heat pumps and central ai r conditioners. I'm 15 just not getting it. 16 MR. BROOKMAN: Dave Winiarski. 17 MR. WINIARSKI: Yes, I think 18 actually a large portion of that goes back to 19 those assumptions built into actually how you 20 model the equipment. 21 In general, between 13 and 14, the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 135

savings come from im proving the condenser 1 performance because we held the fan power 2 assumption constant. 3 As you move between 14 and 16, you 4 are moving to get to thos e higher SEER values 5 by improving t he fan efficien cy, going to an 6 ECM motor, which has an impact on energy 7 savings throughout the year because the fan is 8 running all the time in a commercial building. 9 But actually it doesn 't have that big impact 10 on the peak mo nthly demand. 11 MR. SACHS: Wait a minute, Dave. 12 This is Harvey Sachs again. 13 You just said something really 14 important. You said t he fan is running all 15 the time. 16 But this is resi dential equipment 17 used commercially. Th is is not commercial 18 equipment equipped potentially with 19 ventilation capa bilities and economizers. 20 MR. WINIARSKI: That is true. It 21 is running to provide circulation air in the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 136

building. 1 MR. SACHS: I do not believe that 2 that -- I think we need some empirical data to 3 show that that's the p redominant mode of 4 operation in these very small commercial 5 buildings that are running residential 6 equipment. 7 Thank you. 8 MR. BROOKMAN: Thank you. 9 Final comments on this segment? 10 (No response.) 11 MR. BROOKMAN: Let's keep going. 12 MR. SCOTT: Okay. Price escalation 13 is, as in previo us rulemakings, is based on 14 the annual energy ou tlook, high, low, and 15 reference cases. The information is also in 16 the chapter. 17 The -- it's actu ally not displaying 18 very well on the screen . I just noticed that. 19 In any event, we have a significant 20 amount of spread between the cases. And we 21 will update this for annual energy outlook 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 137

2010 at the NOPR stage. 1 Repair, maintenance, and 2 installation cost s, major repair s, we based 3 that on a base system co mpressor repl acement. 4 We found data in a series of websites, 5 primarily in the literatu re showing a range of 6 costs anywhere from 700 to 1,500 dollars for a 7 base system compre ssor replacement. 8 We assumed that the probability of 9 replacing the compressor sometime during the 10 lifetime of the overall system would be 0.5. 11 That is there wo uld be a change of doing it, 12 on average, once. 13 We increased the cost of the 14 compressor replac ement with the index of the 15 product price, that is with the efficiency 16 level. 17 We varied it regi onally. And we 18 annualized it so th at we basically had an 19 annualized averag e repair cost that we could 20 apply. 21 Annual maintenanc e costs, we found 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 138

numbers up to 120 dolla rs for a full-service 1 contract on a residential system. We needed a 2 lower bound. We put in an assumed value of 20 3 dollars. This also -- all of this also 4 increased with product price or efficiency 5 level and varied regionally. 6 And finally, we were cognizant of 7 the fact that in stallation costs likely varied 8 between product classes so we had those from 9 RSMeans database. And we also were able to 10 vary it regionally based on RSMeans, primarily 11 because labor costs varied by region. 12 We did do a bit of reality check 13 here, a small amount of verification about 14 whether installation costs would vary with 15 efficiency level. An d our contacts said that 16 except for perhaps very high efficiency units, 17 they did not. 18 So, we're seeking additional data 19 on maintenance installa tion repair costs. 20 It's pretty sketch y at the moment. 21 And we would li ke to know how they 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 139

might vary with the effi ciency level. And we 1 also are seeking comments on any additional 2 sources that could be considered for those 3 costs. 4 MR. BROOKMAN: John Mandyck? 5 MR. MANDYCK: John Mandyck with 6 Carrier. 7 On your last point on installation 8 costs by efficiency leve l, I think you need to 9 dig further into that from a size perspective 10 because if you start to mo ve from a one-man to 11 a two-man job simply because of the size of 12 the unit to move it and to physically adapt to 13 it, obviously that will impact inst allation 14 costs. 15 MR. BROOKMAN: Thank you. 16 Tom Eckman? 17 MR. ECKMAN: Tom Eckman. 18 This is a question for Greg, I 19 think, perhaps. 20 In the life cycle cost analysis, 21 since it is a Monte Car lo simulation, is there 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 140

a correlation betwee n the probability of 1 expending money for re placement during the 2 life cycle and the annual maintenance contract 3 cost? 4 MR. ROSENQUIST: No, we don't have 5 one in there right now. 6 MR. ECKMAN: Well, it seems to me 7 if you've got an annual ma intenance contract 8 cost running 120 dollars, your unit better not 9 fail. 10 MR. BROOKMAN: Okay. Thank you. 11 Harvey Sacks? 12 MR. ECKMAN: I think there is a 13 correlation. 14 MR. SACHS: I apologize for having 15 missed on slide 64, the electricity price. My 16 memory is that EI A has been pretty effective 17 at looking at ca rbon containment cost impacts 18 and strategies. Agai n, it has been a DOE 19 policy issue. 20 And the question is that these are 21 low growth reference an d high growth but they 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 141

don't seem to have any policy scenarios that 1 would impact electric ity prices in the out 2 years when this has been part of national 3 policy discussions. 4 PARTICIPANT: Ma ybe I can ask our 5 EIA representative if he's still here as to 6 what carbon -- carbon containment, is that 7 what you asked about? Or other major 8 policies? 9 MR. BROOKMAN: He's not here, the 10 one that was here earlier. 11 MR. SACHS: Well, again, the 12 question is not to EIA but it is to the 13 Department in ter ms of whether th ese analyses 14 include policy cases that reflect active 15 legislative consideration and active policy 16 activities. Not that these would drive but 17 these are alternative s that help bound the 18 reality. 19 MR. BROOKMAN: Thank you. 20 Get close. 21 MS. KOHL: This is Betsy Kohl from 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 142

DOE. 1 When you are talking about 2 legislative initiatives, are you talking about 3 proposed -- I mean we do n't really consider -- 4 we don't consider prop osed legisl ation draft 5 legislation in our analyses because it is 6 speculative whet her or in what form it would 7 be passed. 8 MR. BROOKMAN: Harvey Sachs. 9 MR. SACHS: Thank you, Betsy. This 10 is Harvey Sachs. And I very much appreciate 11 that. 12 But if I'm consid ering electricity 13 prices, and let's just assume for a moment 14 that EIA did consider some scenarios for 15 future electric ity prices -- 16 MR. ROSENQUIST: Not in their 17 reference case or low and high growth case. 18 MR. SACHS: Bu t in a policy case, 19 didn't they? 20 MR. ROSENQUIST: Well, they've 21 analyzed, yo u know -- 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 143

MR. BROOKMAN: That's Greg 1 Rosenquist speaking. 2 MR. ROSENQUIST: I'm sorry. This 3 is Greg Rosenqui st from LBNL. 4 They have anal yzed like, for 5 example, Lieberman and Warner (pho netic) in 6 the past. And they d id try to get after the 7 effect of carbon legislation on electricity 8 prices. 9 MR. SACHS: So this would seem to 10 be a boundary value on the Department's 11 analyses. It is a policy scenario. 12 But to exclude it as a forcing 13 factor on possible excur sions of electricity 14 prices seems to be to be, again, very, very 15 good about detail b ut occasionally missing 16 some very large influenc es that have some 17 probability of having effect. 18 MR. BROOKMAN: Don Brundadge. 19 MR. BRUNDADGE: I'm very familiar 20 with annual energy outlook assumptions. And 21 there are a bunch of is sues like that. But 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 144

they are consistent. 1 If it hasn't been issued into law 2 and it hasn't be en issued as a fi nal rule by 3 DOE, it is not count ed, which implicitly 4 assumes no new efficien cy standards to be 5 issued from now until th e end of time and no 6 carbon legislat ion. That's a baseline to 7 operate off of. 8 But at the same time, you're not 9 going to see t he efficiency effects of lower 10 growth from efficiency sta ndards. There are a 11 lot of other effects in here. 12 And I don't kn ow if we need to 13 spend a lot of time on it because AEO is what 14 it is. 15 MR. BROOKMAN: I'm eager to move 16 back to repair maintenance inst allation costs 17 on slide 65. 18 Steve Rosenstock? 19 MR. ROSENSTOCK: Yes, actually 20 slide 65 -- and slide actually 66, I was going 21 to go ahead for you ac tually to Item 5. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 145

MR. BROOKMAN : Keep going. 1 MR. ROSENSTOCK: Because it was 2 asking about comments on impact of increased 3 efficiency standards on end user decisions 4 about whether to replac e existing installed 5 units. 6 I do know looking up numbers is 7 that I know especially in the area of heat 8 pumps, a shipment is according to AHRI and 9 Appliance Magazine, ha ve dropped every year 10 since 2005 -- 2.13 mill ion in 2005 down to 11 1.642 million in 2009, again based on industry 12 data. 13 And I wanted to take the year -- 14 talk about the fact that, again, I was talking 15 data before the big rece ssion, okay, so how 16 much of that was the economy, ho w much of that 17 was consumer choice? 18 I'm not sure. Bu t when you see that 19 specific trend over fi ve years, including 20 times of good ec onomic times and not so good 21 economic times, it migh t be that a certain 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 146

percentage of consumer s are deciding to repair 1 and replace longer -- repair rather than 2 replace. 3 So yes, repair co sts might go up. 4 But consumers are choosi ng that over higher 5 initial costs of a new unit. 6 MR. BROOKMAN: Don Brundadge. 7 MR. BRUNDADGE: I think those are 8 valid considerations. But I think there is an 9 item you don't have a box for that is much 10 more important than that . And that's that 11 your installed base of air conditioning and 12 heat pump equipment is almost entirely R22 13 equipment. 14 And with the ph ase out of R22, 15 there will be a limit ed amount avai lable for 16 serving between now a nd 2020. There will be 17 no new virgin st ocks available for servicing 18 after 2020. And it real ly desperately needs a 19 separate study of the impact on that because 20 you are going to see, I think after 2015, 21 significantly faster re placement based on the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 147

equipment. 1 I'm not sure EPA has really come 2 out with all the regulations yet on how they 3 are going to handle some of these things. I'm 4 not sure you can even do a major replacement 5 under their new rule and stick R22 into a 6 compressor that is made after 2010. 7 MR. BROOKMAN: Okay. 8 MR. BRUNDADGE: It needs to -- it 9 really -- a lot of the things we've been 10 talking about today are sort of nitpicking. 11 This is huge. An d it really ne eds a separate 12 study because I think you are going to see 13 much faster replacemen t of the R22 units. 14 MR. BROOKMAN: You're next. Please 15 say your name. 16 MR. BEETON: Warren Beeton 17 (phonetic) wi th Emerson. 18 Just two comments or questions. 19 One is the repair cost fo r compressors. We're 20 trying to valida te your numbers here. They 21 look about right. But I think another 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 148

consideration ought to be that if the 1 percentage of mo dulated equipment increases, 2 which it will, to a higher efficiency 3 standard, the repairs will be more complicated 4 and more expensive. 5 So that is a -- we'll try to 6 provide some input on that. But that's a 7 factor. 8 MR. BROOKMAN: You started off by 9 saying you th ink these numbers -- you're 10 trying to validate these numbers. 11 MR. BEETON: I' m trying to validate 12 the 700 to 1,500 dollar number. But also 13 expect that nu mber to grow. 14 MR. BROOKMAN: Okay. How much? 15 MR. BEETON: We'll have to get back 16 to you. 17 MR. BROOKMAN: Okay. 18 MR. BEETON: The other question we 19 have, I don't kn ow if it fits in here but in 20 the prior effici ency analysis several years 21 ago, there was attention not paid to the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 149

refrigeran t issue. 1 I'm assuming th at DOE has elected 2 not to look at any scenarios where 410A would 3 be phased out and some other alternatives 4 would be phased in in the time pe riod due to 5 Cap and Trade or legi slation. Is that 6 correct? 7 MR. BROOKMAN: Matt? 8 MR. MILLARD: Yes, this is Matt 9 Millard with Navi gant Consulting. 10 We have considered looking at that. 11 But the response that we received from 12 industry -- we considered looking at it as a 13 sensitivity but the respo nse that we received 14 from industry is that they don 't really know 15 where the next step is. And so it is very 16 difficult for us to assess those impacts 17 without really knowin g the path forward. 18 PARTICIPANT: Nor do they describe 19 the phase out. 20 PARTICIPANT: Excuse me? 21 MR. MILLARD: Yes, well the phase 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 150

out, yes. 1 MR. BROOKMAN: Okay. 2 Harvey Sachs? 3 MR. SACHS: Harv ey Sachs, ACEEE. 4 Very quickly, I think what you're 5 hearing in a number of respects here is a 6 critique that the Depar tment is doing lots and 7 lots of very detailed analyses with 8 continuously variable things like the LCC. 9 And what we're not seeing is the 10 potential that would be revealed in some 11 scenario analysis. We 're not seeing that 12 perhaps lower probab ility, perhaps not, 13 impacts the very lar ge discontinuities like 14 the refrigerant phase out, like the potential 15 of a carbon pr ice that would be enormously 16 important to the policymakers who have to make 17 these decisions. 18 And I think that is a critique that 19 effects a lot of these analyses. 20 MR. BROOKMAN: John Mandyck? 21 MR. MANDYCK: Well, back on the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 151

refrigerant issues. Th is is John Mandyck from 1 Carrier. 2 It is possible to model the 3 legislation that exists today. So you can 4 take Waxman Markey, understand where the 5 reduction curve is, and understand that there 6 will be shortage of refrigerant at the time 7 that these standards go into effect, which 8 actually require more re frigerant to be used. 9 Higher SEER equipment is larger 10 equipment with la rger coils that requires more 11 refrigerant charge. And so you have an 12 intersection that is occurring here with 13 public policie s where you ha ve climate 14 policies that are going to restrict the use of 15 HFCs and efficiency policies that are going to 16 demand the greater use of HFCs at the same 17 time. 18 And it is cr itical in this 19 analysis, assuming t he Department dispenses 20 with the consensus agreement, that you 21 understand the im pact on cost of refrigerant 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 152

because it is definit ely related to this 1 rulemaking. 2 MR. BROOKMAN: Ok ay. Thank you. 3 We've now heard that several times. 4 MR. BEETON: Ju st a quick follow 5 up. Not only that -- 6 MR. BROOKMAN: Sa y your name again. 7 MR. BEETON: Warren Beeton with 8 Emerson. 9 The cost of tho se many additional 10 pounds of refrigerant could be much, much 11 higher than what is paid today. So there is 12 going to be a leveraged effect p otentially 13 from Cap and Trade an d higher efficiency 14 standards and costs. 15 MR. BROOKMAN: I hope the comments 16 will be nove l now, Don. 17 MR. BRUNDADGE: One additional 18 follow up on that. Ev en if you proceed to 19 accept the consensus ag reement, you really 20 need to do the study on R 22 and accelerated 21 phase out because that will hugely impact your 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 153

quads of energy savin gs if you have shorter 1 lifetime for that exis ting equipment and it 2 gets replaced faster. 3 Thank you. 4 MR. BROOKMAN: Thank you. 5 On to discount rates. 6 MR. SCOTT: Okay . Discount rates, 7 the residential rates us ed again come from a 8 distribution, the real rates. That is 9 inflation adjusted rate s, based on borrowing 10 costs and opportunity costs for household 11 investments. 12 There are a numb er of instruments 13 ranging all the way fro m credit cards to 14 potentially sales of parts of one's assets in 15 order to replace exist ing units. Typically 16 with a new construction situation, we would 17 expect the equipment to be included in the 18 mortgage value of the house. And, therefore, 19 it would be subject to the mortgage, average 20 mortgage interest rate. 21 The averages for those two 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 154

distributions are shown there on the slide, 1 4.8 percent as a mix of things for existing 2 homeowners and three pe rcent average when 3 included in the mortgage. 4 For commercial entities, the real 5 rates, we based it on a weighted average cost 6 of capital reported f or 1,700 companies in the 7 U.S. Those rates are -- it's quite a broad 8 distribution as you might expect. 9 And the average real rate is shown 10 on the screen at 5.66 pe rcent average. I 11 believe that was the be ginning of last year. 12 So those are the -- that's what 13 used for discount rates. 14 For lifetimes, there was some 15 fairly detailed analysi s done of m anufacturing 16 shipments data that we received matched to the 17 American Housing Survey stock data over time. 18 And then finally matche d against responses on 19 the Residential Energy Consumption Survey on 20 the age of the household's central air 21 conditioner. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 155

MR. BROOKMAN: Steve Rosenstock? 1 MR. ROSENSTOCK: Sorry, going back 2 to slide 67 on th e discount rates. 3 MR. SCOTT: Sure. 4 MR. ROSENSTOCK: Especially on the 5 residential side it says based on borrowing 6 costs and opportunity costs for household 7 investments. 8 MR. SCOTT: Right. 9 MR. ROSENSTOCK: On the new -- I 10 can -- you're basi cally -- for a homeowner, if 11 you are assuming inflation is three percent, 12 that the average -- it's really about 7.8 13 percent is either th e borrowing costs or 14 opportunity cost in te rms of some of these 15 decisions. 16 And, again, we've had these 17 discussions many times. And that just seems 18 to be on the low side, especially in these 19 days of much ti ghter credits. 20 And especially there is such a -- 21 if you have a great cred it rating, yes, you 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 156

might get certain low borr owing costs. But if 1 your credit rating is le ss than perfect or 2 stellar, your borrowi ng costs up quite 3 dramatically, well above th ese numbers. 4 MR. BROOKMAN: John Mandyck. 5 MR. MANDYCK: John Mandyck from 6 Carrier. 7 The question is is the 4.8 percent 8 for existing homeowners based on like a home 9 improvement loan? 10 MR. SCOTT: No completely. Go 11 ahead, Greg. 12 MR. ROSENQUIST: Greg Rosenquist. 13 Portfolio. It's based upon data from the 14 Bureau of Economic Analysis’ Survey of 15 Consumer Finances. So it is many, many 16 respondents or ma ny, many survey records that 17 show basically what home owners are doing in 18 terms of borrowing mone y or saving money. 19 So this analysis reflects the fact 20 that some homeowners are using credit cards or 21 using home equity lines of credit or are 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 157

taking money out of savi ngs or bonds or mutual 1 funds. So that's what this 4.8 percent 2 represents. It 's the weighted average of all 3 that mix. 4 MR. MANDYCK: Then I guess I would 5 just echo as a follow on that I think it is 6 very low as well because if you think about it 7 in this market, three-qu arters of the sales 8 are for replacement ap plications, many of 9 those of which are unplanned. 10 And so if a con sumer is going to 11 finance that, I question whether they have the 12 time to go to a bank , fill out a loan 13 application or cr edit extension. 14 I believe the mo re common way that 15 this would be financed is under a credit card, 16 which is going to have a much higher cost of 17 borrowing th an this. 18 MR. BROOKMAN: Okay. Thank you. 19 So then let's proceed. 20 MR. SCOTT: Okay. I was in the 21 middle of talking about the life time of the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 158

equipment. We' ve taken these three sets of 1 data and matched th em in order to pick up -- 2 to essentially fix surviv al functions, both on 3 air conditioners and he at pumps, and the 4 weighted average or the average lifetime of an 5 air conditioner doing that was 19.01, 19 6 years. And for a heat pump, something 7 slightly less, about 16.2 years say. And 8 that's what was used in the analysis. 9 The details, agai n, are available 10 in the technical support document. 11 Do you have questions on that? You 12 can send them in and we'll wrap this up. 13 MR. BROOKMAN: Let's roll on to the 14 next one. 15 MR. SACHS: Yes, a very quick 16 comment. Harvey Sachs, referencin g slide 68. 17 Again, I think this is a perfectly 18 reasonable pair of survi val curves under a 19 business as usu al model. But we have to think 20 about a scenario model if we're going to think 21 about the effe cts of the R22 phase out. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 159

MR. BROOKMAN: Right. Okay. I 1 think the Department heard that. It's a 2 question of what they can do. 3 PARTICIPANT: (Inaudible.) 4 MR. BROOKMAN: Okay -- whichever 5 one -- which one would be best. 6 MR. SCOTT: Act ually I'm having a 7 sidebar discussi on here with Do ug. What you 8 see on the screen here is the preliminary 9 results for the life cy cle costs and payback 10 period. 11 This is for the geography that we 12 used in our study. We 've actually run, in 13 effect, our numbers again st the geography used 14 in the consensus agre ement. So if you'd 15 rather look at that, we can do that. Or we 16 can look at both of them. It's a matter of 17 time and your interest. 18 MR. BROOKMAN: Are there 19 significant di fferences? 20 MR. SCOTT: No. 21 MR. BROOKMAN: Then let's look at 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 160

the consensus. 1 MR. WES ANDERSON: This is Wes 2 Anderson with Depa rtment of Energy. 3 Given that the consensus agreement 4 has not been accepted by DOE -- we have 5 received it but we have not made a decision on 6 it so I think we need to stick with the -- 7 MR. SCOTT: Okay. 8 MR. WES ANDERSON: -- current 9 analysis as we ha ve it presented. 10 MR. BROOKMAN: So we're sticking 11 with 69. 12 PARTICIPANT: All right. 13 MR. BROOKMAN: And you can see it 14 is a lot of data. Just a brief overview, 15 Mike. 16 MR. SCOTT: Yes. I'll just try to 17 characterize what they're seeing here. And 18 then I'll depart from the stage. 19 Okay. So what we have here is -- 20 as you might imagine, we've got life cycle 21 cost savings associated with every level for 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 161

every location for each produ ct class. And we 1 tried to come up with a way to summarize that. 2 And so what we've hit on here is 3 the -- we're reporting the highest SEER and 4 corresponding HSPF for which the mean LCC 5 savings were positive if you replace the 6 market base air condit ioners or market base 7 heat pumps with the one at this level. 8 And we're also showing the 9 corresponding median payback in years. 10 So, for example, with the national 11 standard, that is not a regional standard, the 12 highest split sy stem air conditioner coil only 13 LCC reported wa s for 13.5 SEER, that's the 14 highest efficiency fo r which the LCC was 15 positive. 16 For the hot, hum id area, it was 15. 17 For hot, dry, 14.5. An d for rest of country, 18 13, if you had regional standards. So that's 19 the way to read that. 20 MR. BROOKMAN: Mike, let's receive 21 comments on this. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 162

Steve Rosenstock? 1 MR. ROSENSTOCK: Steve Rosenstock, 2 Edison Electr ic Institute. 3 Again, this is -- it is a very 4 informative table. But one thing that, again, 5 would be kind of -- it would be interesting 6 for a lot of stakeholde rs and I'm sure it is 7 in the technical supp ort document, is the 8 values where the life cycle co st savings are 9 maximized. 10 You know this says where they're 11 positive. So they could be, you know, plus 12 two dollars or somethi ng. And that could be 13 well, that's the highest where it got, you 14 know, at least a litt le bit of positive for 15 these classes. 16 But it is also of more interest to 17 see where the maximum values are and the 18 corresponding mean payb ack. Again, but this 19 is still very instructiv e and very informative 20 in terms of ho w the numbers -- 21 MR. BROOKMAN: Ye s, Harvey Sachs. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 163

MR. SACHS: Harvey Sachs. 1 Again, the qualificatio n that slide 2 69 is still based on th e fundamental Wassmer3 Brandemuehl EER versus SEER assumptions of 4 slide 50. 5 MR. SCOTT: Yes. 6 MR. SACHS: So it's just as good. 7 MR. SCOTT: Just as good. 8 MR. SACHS: Thank you. 9 MR. SCOTT: By th e way, if you want 10 the detail on all the LCC analyses, those are 11 in the technical suppo rt document so you can 12 look at which one had the maximum in each 13

case. 14 MR. BROOKMAN: Jeff? 15 PARTICIPANT: A nd you explain the 16 significant differenc e between the split 17 system heat pump and everything else? And 18 it's showing, I assume , 19.5 SEER and 10.3 19 HSPF nationally? 20 MR. SCOTT: Why it shows up the way 21 it does? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 164

PARTICIPANT: Ye s. Why is it, you 1 know, an order of magni tude different than 2 everything else. 3 MR. SCOTT: Well, it is the 4 consequence of where those hea t pumps were 5 located I believe was pa rt of it. Dave and I 6 had a discussion about that last night. He 7 had looked at it in a li ttle more detail than 8 I did for that piece of it. 9 MR. BROOKMAN: Let's hear from 10 Dave. 11 MR. WINIARSKI: Yes, so the 12 question, I guess, is why the split system 13 heat pumps look like they are significantly 14 more cost effectiv e at these high efficiency 15 levels. 16 There's really two reasons. The 17 first one is in the an alysis of the heat pumps 18 and in the cost curves for the heat pumps, it 19 assumes that you are re placing the indoor 20 handling unit at t he same time you are 21 replacing the co ndensing unit. So you get 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 165

some of thos e benefits. 1 So it looks like the split system 2 AIR CONDITIONER blower coil curve in terms of 3 what is actually being replaced in the 4 analysis. 5 And then, of course, you are 6 getting the benefits fo r the improvements on 7 the heating side. And to the effect that that 8 saves energy that is ab ove and beyond what the 9 AIR CONDITIO NER saves. 10 MR. BROOKMAN: Jim? 11 MR. BRESHAW: Jim Breshaw. 12 It looks like y ou are saying to get 13 a 10.3, you have to have a 19.5. And -- it 14 looks like HSPF imp rovements are driving a lot 15 of the payback. And you don't have to have a 16 19.5 to get a 10 .3 necessarily. That need to 17 be divided out some way or another. 18 MR. BROOKMAN: Dave Winiarski? 19 MR. WINIARSKI: Yes. That has to 20 do with the engineeri ng curves that are 21 generated where the SEER values from those 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 166

engineering curves a re correlated with the 1 HSPF values that are ty pical for that product. 2 So you are absolutely right. They 3 don't reflect that fact that a SEER of 19.5 4 could have a variat ion in the HSPF. 5 The other aspect that I want to 6 bring up real quickly is when you lo ok at the 7 distribution of the RECS observ ations, you'll 8 find that -- I'll get the numbers approximate 9 here -- that t he -- I think 50 percent of the 10 air conditioners are in stalled in the northern 11 part of that U.S. map. 12 With heat pumps, I think it is 13 closer to about 38 percent. So when you look 14 at the nation as a whole, the heat pumps tend 15 to be clustered more in the southern region. 16 And that effects what is cost effective 17 nationally. 18 MR. BROOKMAN: Let's keep going 19 folks. We've mo ving on to ship ments analysis 20 and national impact analysis with Greg 21 Rosenquist. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 167

MR. ROSENQUIST: Yes -- 1 MR. WES ANDERSON: This is Wes, 2 DOE. 3 Just before we left that chart, we 4 have the consensus agr eement analysi s included 5 in the background informa tion. So if you want 6 to see it, you ca n look at it. 7 MR. BROOKMA N: In the backup 8 slides. 9 MR. WES ANDERSON : In the backup 10 slides. 11 MR. BROOKMAN: Yes. Thank you, 12 Wes. 13 Okay, Greg. 14 MR. ROSENQUIST: Okay. Thanks. 15 Again, I'm Gregory Rose nquist from Lawrence 16 Berkeley Nation al Laboratory. 17 I'll be carrying you through the 18 next two steps of the analyses that were 19 conducted for the pr eliminary analysis 20 rulemaking stage. Th at's the shipments 21 analysis and the nation al impact analysis. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 168

First, discuss ing the shipments 1 analysis, its purpose is to estimate central 2 air conditioner and heat pumps shipments under 3 the base case -- that 's the case without 4 standards -- in each of the standards cases 5 that were considered. 6 The method reli es on developing a 7 shipments model that uses an accounting 8 methodology to track the shipme nts of central 9 air conditioners and heat pumps in the 10 residential and commercial buil ding sectors. 11 The total product stock is 12 disaggregated according to product class and 13 you've seen th e product classes described 14 earlier in this present ation. I want to 15 emphasize that split system central air 16 conditioners were divid ed into blower coil 17 units and coil only units. 18 This is disaggregated according to 19 market sector, whethe r it is residential 20 housing or commercial buildings. And it is 21 also disaggregat ed according to the repair 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 169

status, whether it is a normal repair or an 1 extended repair. And I'll talk about the 2 extended repairs a little bit later. 3 Each market se ctor is further 4 disaggregated in to three produc t channels. 5 One, new construction, two, existi ng owners, 6 that's where replacemen ts go, and three, new 7 owners, that's existing buildings that don't 8 already own the piec e of equipment. 9 Each channel is modeled to respond 10 to new efficiency standards differently. For 11 the new construction ma rket, it was assumed 12 that they would not be affected by any 13 standards increases. In other words, the base 14 case shipments for new construction would be 15 equivalent to the standards ca se shipments. 16 For existing owners, standards were 17 assumed to affect the repair versus 18 replacement decision for some consumers. That 19 is, some consumers would decide to do an 20 extended repair rather than re placement the 21 equipment when it failed. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 170

And then finall y, for new owners, 1 it was assumed that stan dards would affect the 2 purchase decision fo r some consumers. For 3 central air condit ioner owners, it was assumed 4 that some consumers wou ld purchase a room air 5 conditioner instea d of a central air 6 conditioner. And for heat pu mp owners, they 7 would chose to purchase a combination warm air 8 electric furnace and a central air 9 conditioner. 10 Now there are many, many inputs to 11 this shipments analysis. I'll try to go over 12 them quickly here. 13 First and foremost are the 14 historical shipments. These are used to build 15 up the stock of centr al air conditioning and 16 heat pump equipment in both the residential 17 and commercial building sect ors. This 18 shipments data was pr ovided by AHRI and it 19 spanned the pe riod of 1972 to 2007. 20 Split system central air 21 conditioners were divided into blower coil and 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 171

coil only units. It wa s assumed that 90 1 percent of annual ship ments went to coil only 2 units. And then t he remaining te n percent to 3 blower coil. 4 And then it w as also assumed, as 5 you've heard before, th at 93 percent of annual 6 shipments went to the residential sector while 7 the remaining seven percent went to the 8 commercial sector. 9 The key input for determining 10 replacement shipments is the product lifetime 11 or survival function. And the shipments 12 analysis used the same survival function as 13 was developed in the life cycle costs and 14 payback period analysis. 15 For new construct ion shipments, the 16 key inputs are new construction starts and the 17 saturation of equipment in that new 18 construction. For residential and commercial 19 building starts, that came from the annual 20 energy outlook. 21 The 2009 versi on was used for the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 172

preliminary analysis. We'll update that for 1 the next phase of the rulemaking. 2 The residential saturations were 3 developed from the cens us's characteristics of 4 new housing. And comm ercial saturations were 5 developed from DOE's co mmercial building 6 energy consumption survey. 7 New owner shipments, at least 8 historical values, w ere developed from the 9 difference betw een the sum of the replacement 10 shipments and new const ruction shipments and 11 historical shipments. Tha t is when you add up 12 the replacement shipments and ne w construction 13 shipments, they don't add up to the hi storical 14 shipments. And so that residual was 15 attributed to ne w owner purchases. 16 To forecast this out into the 17 future, the average value of the 1990 to 2007 18 time period was averaged and fixed for future 19 years. 20 The decision model to figure out 21 how new owners and ex isting owners would be 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 173

affected by new standard s; the key input there 1 was the purchase price elasticity. This, 2 again, forecast s how standard s are going to 3 impact shipments under these standa rds cases. 4 The elasticity wa s developed from 5 primarily data for the home appliance market 6 after looking at how ne w owner historical 7 central air conditioner and heat pump 8 purchases correlated wi th purchase prices 9 through the purchase pr ice index, operating 10 costs through the use of the shipment weighted 11 efficiencies from AHRI , and househ old income. 12 This particular purchase price 13 elasticity showed that the purchase price 14 effects, in fact, domina te that rather than 15 operating costs or hous ehold income. And the 16 model also assumed th at over time consumers 17 become less sensit ive to that pu rchase price 18 and that was determin ed from literature for 19 how consumers purchase automobiles. 20 Now the shipments model first of 21 all was developed for the nation as a whole. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 174

But as we've heard, we've have to develop 1 shipments at a re gional level. And this was 2 done by DOE, basically, by regionalizing all 3 the various inputs that go into the shipments 4 model. 5 This includes per until total 6 installed costs, per unit product operating 7 costs, historical shipmen ts, new construction 8 starts in stock, an d new construc tion product 9 saturations. 10 MR. WES ANDERSON: Greg, I'm sorry 11 to break your flow. 12 MR. ROSENQUIST: Yes? 13 MR. WES ANDERSON: But this 14 announcement -- I just want to make this 15 announcement before ev erybody leav es, this 16 doesn't have to do with h is presentation. I'm 17 Wes, DOE. 18 Unfortunately this morning we had 19 problems with the court reporter not showing 20 up. So we had to try to supplement that a 21 tape recording in the back. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 175

Unfortunately t he individual once 1 he left the room, the reco rder was unpl ugged. 2 So consequently -- 3 PARTICIPANT: Is it EnergyStar? 4 MR. WES ANDERSON: I'm sorry. So 5 consequently I wa nt to reiterate that written 6 comments really need to be submitted. I want 7 to harp on that. 8 And I want to let everybody know, 9 we'll send out an email and post it on the web 10 page as well when the transcript is finally 11 ready. 12 PARTICIPANT: Wes, earlier we heard 13 from individuals that were wanting to have 14 more than the ti me that you stat ed before the 15 comments were due. Ca n you respon d to that? 16 MR. WES ANDERSON: Yes, we are 17 looking to extend the com ment period for you. 18 That paperwork is going through the system 19 now. And I will also notify ev eryone by email 20 and put it on the webpage for the extension. 21 But there will be an extension. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 176

But please try to get your comments 1 in as soon as possibl e because t he overall 2 comment period was 45 days . And it is sort of 3 limited at this point. And we want to go 4 ahead and start with ou r analysis. And we 5 can't really do that un til the comment period 6 is officially over. 7 So we will exte nd it probably to 8 the end of the follow ing week or something 9 like that. So you do have time to get your 10 comments together. 11 PARTICIPANT: All right. Thank 12 you. 13 MR. BROOKMAN: We're going to 14 continue with th e presentation. 15 I will note that Brenda is starting 16 to hand out the photocopies of individual's 17 business cards so you've got a record of who 18 is here. 19 Keep going, Greg. 20 PARTICIPANT: Excuse me, 21 clarification? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 177

MR. BROOKMAN: Yes, please, Harvey 1 Sachs. 2 MR. SACHS: Thank you, Wes. I 3 appreciate this. This is Harvey Sachs. 4 But I don't unde rstand. What are 5 we going to construct a transcript from if the 6 tape stopped? 7 MR. WES ANDERSON: We have -- there 8 will be a gap and we'll le t you know what that 9 -- right now it is pretty significant for the 10 morning. But officially I don't know how long 11 the gap is. But sign ificant parts of the 12 morning discussion was not recorded . We'll 13 have to see. 14 MR. SACHS: Second question as long 15 as we're at this proc ess digressio n. When 16 will we know whether or not the consensus is 17 going to be acce pted as opposed to continuing 18 this process? 19 MR. WES ANDERS ON: Wes at DOE. 20 I cannot answer that at this point 21 but we will -- 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 178

MR. BROOKMAN: St eve Rosenstock, go 1 ahead. 2 MR. ROSENSTOCK: Did Wes have 3 something more to say? I didn't want to 4 interrupt. I'm sorry. 5 MR. WES ANDERS ON: I'm done. 6 Thanks. 7 MR. ROSENSTOCK: Steve Rosenstock, 8 EEI. 9 In terms of shipments, I'm just 10 kind of curious. Have y ou looked back on what 11 the projections were f or the last rulemaking 12 in terms of what the ship ments were going to 13 be post-2006? And how the projections 14 differed from the reality? A nd I discussed 15 heat pumps. 16 And I'm sure -- I'm just kind of 17 curious how that -- how -- if you had a chance 18 to look back in terms of impacts because 19 obviously you'r e, you know, you're doing these 20 models and I'm just kind of curious. 21 What was the -- if you had a chance 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 179

to look, what was t he percentage you 1 projected, X mill ion per year, and the actual 2 was X million. And, you know, just doing kind 3 of a looking back and seeing how accurate the 4 model was pr eviously. 5 MR. ROSENQUIST: Haven't done that. 6 Haven't done that retrospective. 7 MR. ROSENSTOCK: Thank you. 8 MR. BROOKMAN: Greg, let's keep 9 moving. 10 MR. ROSENQUIST: Okay. What I was 11 saying before is th at many of the inputs were 12 regionalized in order to de velop this regional 13 model to get sh ipments down to the hot and 14 dry, hot-humid, and the rest of country 15 regions. 16 Two of those inputs do not vary by 17 region over the produ ct lifetimes and the 18 relative purchase price elas ticities. 19 For the variable s that do vary by 20 region, starting wi th the per unit total 21 installed cos ts and per unit product operating 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 180

costs, those come from the life cycle costs 1 and payback peri od analysis. 2 To allocate shipments to the three 3 regions, allocation factors were developed 4 through a trial and er ror process, by figuring 5 out or calculating the stock for each of the 6 three regions and comp aring it to historical 7 values from the Amer ican Housing Survey. 8 And those charts to the right here 9 demonstrate that. The blue lines are the 10 calculated values. The red lines are the 11 values from the American Housing Survey. And 12 I actually can't read the print that well on 13 my screen here. But I believe this is hot14 dry, this is hot-humi d, this is rest of 15 country, and this is the total U.S. 16 So the regional model does a fairly 17 good job at matching those historical 18 saturations. 19 For regional new construction 20 starts, that was -- tho se are developed from a 21 combination of the AEO which provide things at 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 181

the census division lev el in combin ation with 1 population factors to ag gregate that up to the 2 three climatic regions. 3 For regional new construction 4 saturations for the resid ential sec tor, that 5 was developed through a combination of the 6 characteristics of ne w housing data, which 7 provides it at the cens us region level, in 8 combination with these population fac tors to 9 aggregate that up to the regi onal level. 10 And for the commercial sector, 11 combination of CBECS da ta, which provides 12 saturations at the census division level, in 13 combination with popula tion factor s, which are 14 used to get these saturations at the regional 15 level. 16 MR. BROOKMAN: Don Brundadge? 17 MR. BRUNDADGE: Just to comment -- 18 repeat a comment from ear lier. The potential 19 early replacement due to R22 phase out will 20 have a huge potential impact on the shipments 21 analysis. And I highly recommend you look at 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 182

that in detail. 1 MR. BROOKMAN: Thank you. 2 Additional commen ts on the regional 3 model? 4 MR. WES ANDERSON: This is Wes at 5 DOE. 6 If you have any insight on how to 7 glean that informatio n from a public available 8 information or if you -- however you can 9 access those projections, it would be helpful 10 to submit that. 11 MR. BROOKMAN: So on to shipments 12 results. 13 MR. ROSENQUIST: And these 14 shipments resul ts are for one pa rticular case 15 of central air conditione rs split systems coil 16 only units. 17 And so this top figure shows the 18 base case shipments, that is the case without 19 standards. And you see the total figure there 20 going up to over -- ar ound five -- I think 21 five-and-a-half million shipme nts by 2046. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 183

It's divided up into the three 1 regions by color. The red represents the hot2 dry region. The orange, the hot-humid region. 3 And the blue, the rest of the country. 4 And each one of those regions, in 5 turn, is divided up in to the three product 6 channels, new constructi on, replacements, and 7 new owners. The biggest swath there is for 8 replacements. The smallest swath is for new 9

owners. 10 Then these figures on the bottom 11 show how standards actu ally impact these base 12 case shipments. And looking at the case here 13 of 16.5 SEER, it 's divided into these three 14 product channels, replacements, new owner, and 15 new construction. 16 So we can see how the standards 17 impact shipment s in each one of these product 18 channels. Starting wi th replacements -- I 19 don't know if you can se e it in your handout 20 there -- but there is a slight decrease in 21 shipments under th e standards case. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 184

There is a slight decrease 1 represented by this do tted line from the 2 standards in the year that the standards 3 become effective. 4 And that's due to the fact, again, 5 for replacements, that some consumers are 6 choosing to do an exten ded repair rather than 7 a replacement. But that effect diminishes out 8 over time as consumers be come less sensitive 9 to that purchase price increase. 10 So overall the re isn't a terribly 11 large effect due the st andard on replacement 12 shipments. And the sa me can be said for new 13 owner shipment s as well. 14 There is a slight drop in the year 15 that the standards take effect due to the fact 16 that some consumers are purchasing room air 17 conditioners inste ad of central air 18 conditioners. But it isn't all that great. 19 And in new construction, as I said 20 before, the assumption there is that this 21 particular product channel would be 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 185

unaffected. 1 MR. BROOKMAN: Steve Rosenstock? 2 MR. ROSENSTOCK: Steve Rosenstock, 3 EEI. 4 I guess the hando ut wasn't synching 5 because on our slides he re it says 22 SEER. 6 MR. ROSENQUIST: Right, right, that 7 correction was made. 8 MR. ROSENSTOCK: Okay. Thank you. 9 Okay. 10 Again, I have to say again based on 11 the past experience ov er the last five years, 12 I can't believe that th e impact would not be 13 even bigger. 14 When you talk about 16.5 SEER, 15 which is another jump, you know, it's a 27 16 percent increase over the current standard, 17 that it would ha ve an almost minimal impact 18 that the market would just go -- and that's 19 just so -- if the last few years can be 20 believed based on what's happened to 21 shipments, I just find that very surprising. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 186

I'm just very surprised at the -- 1 again, I don't know how -- it just looks like 2 a very, very minimal im pact. And I'm just 3 surprised. 4 Thank you. 5 MR. BROOKMAN: Don Brundadge? 6 MR. BRUNDADGE: I would agree -- 7 Don Brundadge -- I would agree especially on 8 the rest of country. I mean in hot-humid and 9 hot-dry, you can' t sell a house without an air 10 conditioner. 11 But in rest of country where it is 12 considered to be more of an option, to have 13 almost no impact from a higher standards, it 14 just doesn't seem right to me and it doesn't 15 seem consistent with what happened when you 16 went from SEER 10 to SEER 13 a few years ago, 17 which I'm not su re any of the manufacturers 18 much are still here but they saw some 19 significant drop in shipments. 20 Thank you. 21 MR. BROOKMAN: Okay. Thank you. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 187

MR. ROSENSTOCK: Also, again, this 1 is Steve Rosenstock. 2 Again, there is -- again follow up 3 the substitution effect in terms of, you know, 4 room air conditioners re placing central air 5 conditioners. That is, especially in the 6 northern parts of the country, there might 7 have been some consumers who did that as well. 8 So that's another possibil ity in terms of this 9 shipment analysis that should be considered. 10 Thank you. 11 MR. ROSENQUIST: Okay, well, we'll 12 forge ahead no w into the national impact 13 analysis. And its purp ose is to determine the 14 national energy savi ngs and the national 15 economic impac ts, either a burden or a 16 benefit, from thes e various standards. 17 And this first flow diagram shows 18 how the national energy savings are 19 calculated. It star ts out with the shipments 20 analysis, which prov ides both base case and 21 standards case projec tions of shipments. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 188

Those shipments, again, are used to 1 build up a stock of ce ntral air conditioning 2 and heat pump eq uipment. And then when that 3 is coupled with the per unit annual energy use 4 values from the li fe cycle cost analysis, it 5 allows the determinat ion of the national 6 annual energy cons umption for each year of the 7 forecast period out from 2016 all the way out 8 to 2046. This is done for both the base case 9 and the stan dards case. 10 To determine national energy 11 savings, the ann ual values are cu mulated into 12 a single value for bo th the base case and the 13 standards case. 14 Site-to-source energy conversion 15 factors are applied to convert that site 16 energy savings into so urce energy savings. 17 And the difference between the base and 18 standards case provides the national energy 19 savings. 20 This next flow di agram prov ides the 21 calculation process fo r determining the net 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 189

present value, which is the measure of the 1 economic impact, either a benefit or a burden, 2 to the nation. 3 Again, it star ts out with the 4 shipments analysis, which provides both base 5 case and standards case projections of 6 shipments, which again are used to build up 7 the stock of central air conditioning and heat 8 pump equipment. 9 And then taking per unit energy 10 costs and per unit main tenance repair costs 11 and per unit product -- or total installed 12 cost from the life cycle cost analysis, that's 13 used to develop nati onal energy costs, 14 national maintenan ce and repair costs, 15 national product cost s annually over the 16 entire forecast period from 20 16 to 2046. 17 This is done for both, again, the base case 18 and the stan dards case. 19 The operating co st savings is the 20 difference betw een the cumula tive values of 21 energy and repair -- maintenance and repair 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 190

costs for the base case compared to the 1 cumulative energy maint enance and rep air costs 2 from the standards case. 3 And the total pr oduct cost increase 4 is the same thing but on the product cost 5 side, again taking that difference between the 6 standards case an d the base case. 7 Discount rates are applied to both 8 the operating cost sa vings and the total 9 product cost increase s to bring that to a 10 present value. And if the operating cost 11 savings are greater th an the product cost 12 increases, you have a net benefit to the 13 country. 14 If it is the oth er way around where 15 the cost increases are greater than the cost 16 savings, then you have a burden to the country 17 from the particular standard. 18 So there are, agai n, several inputs 19 to the national impact analysis . The first 20 set of inputs, the per unit total installed 21 cost, per unit repair and main tenance costs, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 191

per unit annual energy use come from the life 1 cycle cost and paybac k period analysis. 2 All of these per unit values are 3 dependent upon ef ficiency. So the next set of 4 inputs, the base case and standards case 5 forecasted efficienci es, are important to 6 develop. 7 For the base case efficiency 8 distributions, that was descri bed earlier by 9 Dave Winiarski in the energy use analysis. So 10 I'll be showing that again for a particular 11 product class. 12 The standards case efficiencies in 13 the year that the stan dards become effective 14 in 2016 was determined through the use of a 15 roll-up scenario. And then efficiencies over 16 time were forecast ed by looking at historical 17 trends in efficiency. 18 Electricity pr ices, again, were 19 taken from the life cy cle costs and payback 20 period analysis , using the marg inal prices for 21 both the residential and commercial building 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 192

sectors. 1 Future energy prices were forecasts 2 using the price trends from the annual energy 3 outlook. 4 Electricity site-to-source 5 conversion factors are used to convert that 6 site savings into sour ce savings. They're 7 also called marginal he at rates. They are 8 taken from the national energy modeling system 9 or NEMS. And NEMS is used to generate the 10 annual energy outlook. 11 These factors or heat rates account 12 for the loss es due to generation, 13 distribution, an d transmission. 14 Discount rates are used to bring 15 back these costs -- the se cost increases and 16 operating cost savin gs -- to a present value 17 as I said before. Se ven percent and three 18 percent real values are used based upon 19 guidelines from the Office of Management and 20 Budget. These are diff erent discount rates 21 than are used from the life cycles costs and 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 193

payback period analysis. 1 And they are discounted to a 2 present year. And for the preliminary 3 analysis, the pres ent year was chosen as 2009. 4 MR. BROOKMAN: Tom Eckman? 5 MR. ECKMAN: Tom Eckman. 6 I'll add my stand ard postscript to 7 the national impact anal ysis. How many plants 8 are we going to avoid? And what are the costs 9 of avoiding those plants? Because this is 10 really a capacity -driven savings. 11 And is that monet ary cost of plant 12 avoidance in the analy sis in terms of net 13 present value? 14 MR. ROSENQUIST: Not currently. 15 MR. ECKMAN: Is it going to be? 16 MR. ROSENQUIST: It will be taken 17 under consideration by DOE. Whether or not 18 will be determined. 19 MR. ECKMAN: I mean the reason 20 we're doing this is to av oid plant. Why don't 21 we calculate the cost of plant avoidance and 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 194

include it in the analysis? 1 MR. BROOKMAN: Thank you. 2 Additional comments? 3 (No response.) 4 MR. ROSENQUIST: Okay. As I said 5 before, it is important to determine these 6 base case and standards case efficiencies 7 because the inputs from the LCC analysis are 8 all dependent upon them. 9 And this table shows you the 10 example of how these distributions of 11 efficiencies were generated for the year that 12 standards become effect ive for split system 13 air conditioners co il only units. 14 The base case efficiency 15 distribution is what yo u've seen earlier in 16 Dave Winiarski's pres entation in the energy 17 use section. That results in a shipment 18 weighted efficiency of 13.65 SEER. 19 And then you can see how the roll 20 up scenario effects th ese distributions. 21 Looking at standards ca se three, which is 14.5 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 195

SEER, you can see that all products below that 1 standard level are rolled up to 14.5. And 2 then all the market above that standard level 3 is unaffected. 4 So you can see the shipment weight 5 efficiency levels for all the different 6 standards ca ses here. 7 Now it is also important -- 8 MR. BROOKMAN: Don Brundadge? 9 MR. BRUNDADGE: I don't think it's 10 -- Don Brundadge -- I don't think it is 11 reasonable to assume ef ficiencies are going to 12 stay frozen from 20 08 to 2016. T here has been 13 a huge increase in util ity incenti ve programs 14 for higher efficiency units. You've had 15 stimulus programs. You 've had lots of other 16 things. 17 And I think in real life, there's 18 some increase in the shipment weighted 19 efficiency betwee n 2008 and 2016. 20 MR. BROOKMAN: Thank you. 21 Andrew deLaski? 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 196

MR. deLASKI: And just to follow up 1 on Don's point. You know I also think that in 2 2016 that those programs don't disappear so 3 that there would need to be a distribution 4 past 2016 that wo uld reflect -- now, course, 5 this depends somewhat wh at the standard level 6 ultimately is chosen. If you chose, you know, 7 a lower standard, then you'd have more of a 8 distribution abov e that. The higher you go, 9 the harder it is to have a distribution. 10 So I think the analysis has to be 11 somewhat flexib le to reflect how a different 12 standard might impact the distribution post 13 the standard. And I thin k the way it has been 14 done in the past, in tim es has been to do 15 scenarios, a roll up and a ship sc enario. And 16 I think that is an appropriate approach. 17 MR. ROSENQUIST: Yes, this next 18 slide sort of speaks to your point, Andrew, 19 about how these distrib utions change over 20 time. 21 This graph, this chart shows for 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 197

the case of split air conditioner coil-only 1 units how the shipmen t weight efficiencies 2 change over time fo r the base case in each of 3 the standa rds cases. 4 So -- 5 MR. SACHS: Gr eg? Excuse me. 6 MR. ROSENQUIST: Yes? 7 MR. SACHS: This is Harvey Sachs 8 again. Could we go back one? And could you 9 just walk me through, for example, row three? 10 I'm confused and it's past my nap time. 11 MR. ROSENQUIST: Okay. So actually 12 you want to look at column three, not row 13 three, column three. 14 So column three is the distribution 15 for standards case three or the standards case 16 of 14.5 SEER minimum. So that product below 17 that standard level of 14.5 is rolled up to 18 14.5. So -- 19 MR. SACHS: Okay . Now it's clear. 20 Thank you. 21 MR. ROSENQ UIST: Okay. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 198

MR. SACHS: I just had the row-wise 1 mind, I guess. Thank you. 2 MR. ROSENQ UIST: Okay. 3 MR. deLASKI: So, if I could 4 continue, this is Andrew deLaski again, so I'm 5 having trouble, you kn ow, reconciling this 6 table with the table th at Dave showed earlier, 7 which showed that prod ucts didn't tend, in the 8 base case, to cluster around exactly the SEER 9 that was set but ra ther he showed a 10 distribution between 13 and 14 SEER in the 11 current ma rketplace. 12 MR. ROSENQUIST: Right. 13 MR. deLASKI: So it just strikes me 14 that if that exists toda y, and I know there is 15 a question as to whethe r it does or not, but 16 if that's your base case assumption, I think 17 you need to carry that through to your 18 standards case assumption -- 19 MR. ROSENQUIST: Right. 20 MR. deLASKI: -- where you can see 21 that same kind of reaction in the marketplace, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 199

which is why I asked the question earlier, you 1 know, are manufa cturers overshooting a little 2 bit to certain of meeting the standard because 3 if they're doing that today, th en they'll do 4 it in the future. 5 MR. ROSENQUIST: Yes. The analysis 6 here assumes that in th e year that standards 7 become effectiv e, you have a roll up. But 8 what this chart tries to display is that after 9 2016, you continue to hav e an increase in the 10 shipment weight efficiency. And that is you 11 continue to ha ve more produc ts being sold 12 beyond that mi nimum standard. 13 So the way I'm looking at it, it's 14 like do a roll up in the year that standards 15 become effectiv e. And then after that you 16 gradually increase that efficiency trendwhere 17 the distribution in creases in time. 18 MR. deLASKI: Okay. 19 MR. ROSENQUIST: And so that's what 20 the analysis did. An d that's what this slide 21 demonstrates is that ov er time, after 2016, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 200

the analysis assumed that there would be 1 efficiency grow th in the base case equivalent 2 to what was seen be tween 1992 and 2005. 3 MR. deLASKI: So thank you because 4 we've been asking for that for a long time. 5 On that second point, though, I 6 think we still haven't captured this other 7 effect that I'm concern ed about, which is, you 8 know, if we have a base case that -- even in 9 the base year are we capturing how 10 manufacturers co mply with th e standards. 11 I think what we're seeing in the 12 base case assumptio n is that they are 13 complying by goin g about the stan dard by more 14 than we would have expected. 15 MR. ROSENQUIST: Right. And this 16 shipment weighted effi ciency trend through 17 every year after 2016 re flects that as well. 18 MR. deLASKI: Okay. 19 MR. ROSENQUIST: There is still -- 20 I mean it's basical ly stemming off that 21 initial base case effici ency distribution, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 201

right? So -- 1 MR. deLASK I: Thanks. 2 MR. BROOKMAN: Steve Rosenstock? 3 MR. ROSENSTOCK: Steve Rosenstock, 4 Edison Electr ic Institute. 5 I mentioned this last time but in 6 terms of impacts, we sa w in 2005, there was a 7 surge of production of below 13 SEER units. 8 And those were shipped out and sold well after 9 January 2006 in th e United States. 10 And those effects, those SEER -- 11 I'll say SEER 10, SEER 11 units might have 12 been sold through 2008 or even 2009 for all we 13 know. 14 So that had an impact obviously on 15 the national energy sa vings as people were -- 16 because they were produc ed before the deadline 17 but sold after the deadline, people were still 18 able to purchase them in the market as 19 replacements or fo r new cons truction. 20 And, again, it looks like, again, 21 that that, you know, I think it -- I don't 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 202

know if it happened in 1992 but I think there 1 is that possibil ity where, again, a surge of 2 units at the lowest cost are produced to be 3 sold, distributed, y ou know, warehoused 4 afterwards. 5 And at least for the first few 6 years, that is go ing to have an impact on the 7 national ener gy savings. 8 I'm not exactly sure how to model 9 it but I think we have, you know, basically 10 there were two signif icant, you know, 11 increases in the standa rds -- I'll say 1992 12 and then 2006. I think we have so me history 13 in terms of what exactly h appened and how long 14 those sub-new ef ficiency levels we re sold in 15 the market and had an impact. 16 Thank you. 17 MR. SACHS: Six months. 18 MR. deLASKI: Six months? 19 MR. SACHS: Harvey Sachs. Six 20 months, okay. 21 MR. deLASKI: I've a couple of 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 203

years myself, but -- 1 MR. BROOKMAN: Okay. 2 MR. ROSENQUIST: So to continue on 3 with this chart, I wanted to also talk about 4 the standards case effic iency trends. They 5 have a very similar growth to the base case 6 efficiency tren d but it's actu ally slightly 7 lower. 8 That's because under the standards 9 case situation, the per unit total installed 10 cost between the base case and the standards 11 case was held co nstant. So actually each one 12 of these standards case efficiency trends 13 slightly decreases over time relative to the 14 base case efficiency trend. 15 Of course, these tr ends continue in 16 time until they hit th e max tech level of 17 16.5, at which point they flatten out because 18 the assumption is that you can't go beyond the 19 max tech level. 20 This next chart shows just an 21 example of what the na tional total installed 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 204

costs look like and th e national operating 1 cost savings look like for a particular 2 standards case fo r a particular product class. 3 So it's 14 SEER for a split system coil only 4 units. 5 The purple bars represent the total 6 installed costs to the nation on an annual 7 basis. Those are represented as a negative. 8 The green bars are the operating 9 cost savings. Those are expressed as a 10 positive. The red li ne shows the net. 11 The analysis accounts for all 12 shipments coming in to the stock up to the end 13 of the forecast period -- up to 2046. That's 14 why you continue to see operating cost savings 15 out to 2080 is because we're accounting for 16 the operating cost savings for all those years 17 that were installed befo re 2046 until they 18 die. 19 And then finally, the last slide in 20 the national impact analysis is just an 21 example of the type of en ergy savings and NPV 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 205

results you get for a particul ar product 1 class. And this one, aga in, is split system 2 central air co nditioners. 3 Showing national regional savings 4 here, the graph on the left is for coil only 5 units. The grap h on the right is for blower 6 coil units. The scales are identic al even 7 though you may not be able to read them. They 8 go from zero to 3.5 quads. Again, this is 9 cumulative over th e forecast period. 10 In the scale, on the X-axis are the 11 particular standards ca ses. For coil only 12 units, again, the max tech is 16.5 but it kept 13 the same scale as for blower coil units just 14 so you can easily compare things. 15 And you can see that because 90 16 percent of shipments are assumed to go to coil 17 only units, most of the energy savings comes 18 from the coil only units. 19 The bottom two graphs show the 20 national and regio nal NPVs. Agai n, the figure 21 on the left is fo r coil only. The figure on 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 206

the right is fo r blower coil. 1 These have diff erent scales on the 2 Y-axis. So they'r e not equivalent. 3 For coil only un its, none of the 4 standards cases produce a benefit to the 5 country either at the national or regional 6 level. There is a slight difference there for 7 the blower coil units. For the hot-humid and 8 hot-dry regions, there is a slight benefit 9 going out to around 18 SEER for hot-humid and 10 around 16, 16.5 SE ER for hot-dry. 11 So if you don' t have any more 12 questions, I'll turn it over to Matt Millard 13 to talk about the prel iminary manufacturing 14 impact analysis. 15 MR. deLASKI: I did have one 16 question. 17 MR. ROSENQ UIST: Okay. 18 MR. deLASKI: I was surprised 19 because I noticed what you just said, that for 20 that example th ere was no -- the NPV was 21 negative yet the LCC was positive. And I 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 207

couldn't reconcile tho se in the ti me that I 1 had. And I wond er if you have been able to. 2 MR. BROOKMAN: That was Andrew 3 deLaski. An d now Greg. 4 MR. ROSENQUIST: Right, right. I 5 think there were some positives at 13.5 SEER 6 for example, under the coil only unit 7 condition. And I can only explai n that by the 8 fact that when we are fo recasting things out 9 over time, also in addition with these 10 efficiency trends, that drops down -- what you 11 would see as a positi ve LCC at 13.5 to a 12 negative in the NIA. 13 MR. deLASKI: Right. I mean it 14 just strikes me that they are both pretty 15 close, around ze ro, I guess is what I would 16 conclude is that -- 17 MR. ROSENQUIST: Yes, that's really 18 it. 19 MR. deLASKI: -- those numbers are 20 basically zero -- 21 MR. ROSENQUIST: Right. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 208

MR. deLASKI: -- for all 1 statistical purposes. 2 MR. ROSENQUIST: Yes, for the coil 3 only units. For the bl ower coil, again, you 4 can get higher in th e southern regions. 5 MR. deLASKI: Got it. Okay. 6 Thanks. 7 MR. MILLARD: Hello. My name is 8 Matt Millard again. An d I will be discussing 9 the preliminary MIA an d some of the next steps 10 after the prelim inary analysis. 11 Here you can see that, as I 12 mentioned earlier, the preliminary 13 manufacturer impact -- or the manufacturer 14 impact analysis is fed by t he engineering 15 analysis. So the purpo se of the manufacturer 16 impact analysis is to identify the impacts of 17 energy conservati on standards on 18 manufacturers. 19 And this is done through three 20 phases. In the first phase, DOE creates an 21 industry profile to cha racterize the industry 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 209

and identify importa nt issues that will 1 require cons ideration. 2 In the second phase, DOE will 3 prepare a cash flow mo del and an interview 4 questionnaire to gui de discussions with 5 manufacturers. 6 And then in the third phase, these 7 actual discussions will occur with 8 manufacturers a nd DOE will asse ss the impacts 9 on those manufacturers, both quantitatively 10 through the government regulatory imp act model 11 and also qualitatively by looking at impacts 12 on competition, manufac turing capacity, 13 employment, and re gulatory burden. 14 So following the framework 15 document, DOE conduc ted some preliminary 16 manufacturer impact ana lysis interviews with 17 manufacturers. And you can see some of the 18 issues that came up wher e, which are fairly 19 standard at the early phase involving impacts 20 on profitability regardi ng increased standards 21 and how these co uld cut into pr ofit margins, 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 210

conversion costs, and that relationship to the 1 diminishing retu rns on consumer s, issues with 2 product innovation and ho w increased equipment 3 costs will -- or the co st to remodel equipment 4 to meet the current stan dard, would take away 5 from the developmen t of new products. 6 And cumulative regulatory burdens 7 and an example of one of those would be the 8 new regulations that we re being worked on by 9 DOE for residential furnaces as well as 10 international standards. 11 So at this point, we'd like to 12 request comment on t he possible impact of 13 increased effici ency standards on domestic 14 manufacturers. 15 MR. BROOKMAN: Harvey Sachs. 16 MR. SACHS: Harv ey Sachs, ACEEE. 17 Two notes, one of them is I think 18 the record should reflect that the 19 manufacturers h ad another meeting. And there 20 are no manufact urers in the meeting for the 21 manufacturer impact ana lysis phase. And I 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 211

think that should be in the record. 1 If I'm wrong, would any 2 manufacturers present please correct me. 3 (No response.) 4 MR. SACHS: Thank you. 5 And the second thing is to note 6 that these concerns have all been implicitly 7 addressed in the consens us agreement, that 8 among other thing s, the phasing of the 9 furnaces and air co nditioner/ heat pump 10 standards implem entations in the consensus 11 agreement reflects all of the concerns raised 12 by the manufactur ers to the extent that they 13 felt they should be considered. 14 And I think they would have wanted 15 to make that point if they were here. 16 MR. BROOKMAN: Okay. Thank you. 17 And, Dave, everybody has 18 demonstrated that they are on the record. 19 Everybody is on the record. 20 PARTICIPANT: If we signed it, we 21 signed it. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 212

MR. BROOKMAN: Let me see, Tim? 1 MR. BALORWORTH : Tim Ballo, 2 Earthjustice. 3 Just to raise some thing that we've 4 raised before but as I still haven't yet 5 gotten an answer on it, just to raise it 6 again. 7 Manufacturers of air conditioners 8 and heat pumps, a lot of them also produce 9 furnaces. So if there is some substitution 10 that occurs as th e result of an increase in a 11 standard, it is not necessarily going to be a 12 completely adverse impact on those 13 manufacturers. 14 MR. BROOKMAN: Okay. Thank you. 15 Steve Rosenstock? 16 MR. ROSENSTOCK: I'm Steve 17 Rosenstock, EE I, again. 18 Kind of looking back, I'm kind of 19 curious, the last round of standards, I'm kind 20 of curious if there is some record about the 21 impact of the la st jump in standards on the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 213

air conditioning and he at pump manufacturers 1 in terms of jobs and everything and/or 2 especially just -- or loss of domestic jobs -- 3 and/or production moved overseas. I'm just 4 kind of curious if th ere is any data out 5 there. 6 MR. MILLARD: We have received some 7 very limited data from manufacturers. And 8 we're trying to look forward with this 9 standard as opposed to loo king backwards. But 10 we received the same co mment from a lot of 11 manufacturers as far as looking at the impacts 12 of the last standard and how it compares to 13 what was expected. So we can look into that. 14 MR. ROSENSTOCK: Okay. Just a 15 quick question. If you had some of that -- a 16 quick follow up, we re there job losses 17 associated with the last standard ? Domestic 18 job losses? 19 PARTICIPANT: Constantin (inaudible) 20 of Navigant Consulting. 21 I think the answer is very 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 214

difficult -- it is a very difficult answer 1 because you are look ing at a wonderful 2 confluence between an economic meltdown and 3 the standard at the same time. 4 So I think ev en if you are a 5 manufacturer, to disagg regate the two events 6 from each other would be nearly impossible. 7 But I mean obviously we would have to wait for 8 manufacturers to give us their own individual 9

answers. 10 MR. ROSENSTOCK: Steve Rosenstock, 11 EEI. 12 The meltdown really started, 13 according the Na tional Econom ic Council, in 14 late 2007. And the standard took effect in 15 January 2006. So -- and the standard was 16 basically finalized in 2004 after all the 17 things. So -- 18 PARTICIPAN T: Right. 19 MR. ROSENSTOCK: -- you know, there 20 is some disaggrega tion in my view. 21 PARTICIPANT: We ll, I would tend to 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 215

agree with you if you had a complete depletion 1 of existing pre-2006 stoc k in the time coming 2 up to the meltdown. 3 And I think the meltdown started 4 well before, you know, the late 2007. I think 5 it is just more a matter of, you know, how do 6 you disaggregate the tw o events from each 7 other. 8 MR. ROSENSTOCK: For new 9 construction, I ag ree with, yes. 10 MR. BROOKMAN: Harvey Sachs? 11 MR. SACHS: Harv ey Sachs, ACEEE. 12 And I take umbrag e at the remark 13 that was just made in this proceeding that we 14 try to look forward i nstead of back. The 15 historical record on the impacts of energy 16 efficiency ratings is there. 17 It's been treated in the referee 18 literature to some exte nt. And several times 19 today I've heard the remark from different 20 people that it appears as th ough this 21 framework, this point we'r e at today has been 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 216

developed without looking back at prior DOE 1 rulemakings. 2 And it is disturb ing because there 3 is much to be learned fr om what was said then, 4 from the data that were developed then, and 5 what was learned in th e subsequent years. 6 And if we're never going to 7 calibrate, we'll have -- if we do the same 8 thing over and over again, we're going to get 9 the same results. 10 MR. BROOKMAN: Yes. Co nstantin? 11 PARTICIPANT: A nd if I can respond 12 to that, I think one of the issues that you 13 would have to consider in that context would 14 be that the technology has not marched on, 15 that things ha ven't changed. 16 And, you know, co pper prices aren't 17 where they are -- where th ey were or where we 18 projected them to be. And neither are energy 19 prices. 20 So the notion that , you know, back 21 then we had perfect information looking 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 217

forward and we should com pare that information 1 that we used to what actu ally happen ed and so 2 on and so forth may or may not be po ssible, in 3 fact, because so many factors, envir onmental 4 factors have changed. 5 MR. SACHS: Co nstantin, this is 6 Harvey Sachs. 7 I'm sorry, I really was -- I was 8 trying to be brief and wa s not more explicit. 9 I'm not referring to the issue that Mr. 10 Rosenstock has ra ised about disentangling the 11 post-2006. I'm talking about references to 12 the rather abundant re cord from the prior 13 rulemaking. It's a much broader issue. 14 MR. BROOKMAN: Harvey, we've heard 15 that several times today. So thank you for 16 bringing that back to us. 17 Let's have the final slide. And 18 then we're going to talk about how people can 19 submit their comments. 20 MR. MILLARD: Okay. So in going 21 forward, we will be mov ing on to t he NOPR, the 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 218

Notice of Proposed Rulem aking. And in the 1 NOPR, we will revise our analyses for the 2 preliminary analysis based on the comments 3 that we receive and a ny new data that we may 4

come across as we ll as -- I won't go through 5 and name off the remai ning analyses but there 6 will be a variety of additional analyses 7 conducted fo r the NOPR. 8 MR. BROOKMAN: In your packet, 9 you'll see this final slide. 10 Wes? 11 MR. WES ANDERS ON: Wes at DOE. 12 We went over th is earlier in the 13 presentation. So I won't re peat it. 14 However, I would like to emphasize 15 that even though the co mment period was posted 16 in the Federal Register as May 10th, we are 17 considering extending it. However, I would 18 ask you to still get in yo ur comments as soon 19 as possible. 20 MR. BROOKMAN: And there is one 21 more element. Please fil l out the ev aluation 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 219

form. It's al so our tradit ion in these 1 meeting to provide an opportunity for final 2 comments on things that would be novel, things 3 that haven't been said already that might need 4 to be said no w, that we haven't covered 5 already today. 6 So any additional and final 7 comments before we adjourn? 8 Steve Rosenstock? 9 MR. ROSENSTOCK: Steve Rosenstock, 10 Edison Electr ic Institute. 11 A lot have been covered. And I 12 just was actually looking through the 13 background sl ides again. 14 And there is, again, the 15 monetization of emissions reductions. We said 16 this during the furnace rulemaking. We'd like 17 to reiterate again. We're concerned about 18 this social co st of carbon. 19 I know it had developed via 20 interagency review. I 'm concerned about how 21 it is going to be used in current and future 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 220

rulemakings. 1 I'm also worried about how it is 2 going to be used in terms of justifying new 3 rulemakings and also th e impact of double 4 counting if there are regulations on carbon 5 emissions, that th ere is a very high 6 likelihood of double counting the benefits 7 because a lot of the cost s of carbon reduction 8 will be built into energy rates, whether it's 9 gas or electric or fu el oil, et cetera. 10 Thank you. 11 MR. BROOKMAN: Thank you. 12 Other final comments that we 13 haven't covere d already? 14 MR. WES ANDERSON: One last point. 15 Please make sure you submit your comments due 16 to the technical diffic ulties we had this 17 morning. 18 And I would personally like to 19 thank you for co ming out. And th ank those who 20 stuck through this ful l presentatio n without 21 the benefit of a lunch break. 22NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com 221

So thank you for your comments and 1 also -- I'm sorry, I want to just emphasize 2 that we need to get ever ything in writing, you 3 know. And th ere will be an email and 4 something posted on the webpage to notify 5 those who ar e not here. 6 Thank you. 7 (Whereupon, the above-entitled 8 meeting was concluded.) 9

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CERTIFICATE

MATTER: PRELIMINARY A]\TALYSIS PTIBLIC MEET]NG

FOR RESIDENTTAI CENTRAL AIR CONDITIONERS & HEAT PUMPS

DATE: MAY 5, 2010

f hereby cert,ify that the attached Lranscript.ion of pages 1 to 22I incl-usive is t,he correct,ed version of the t.ranscript,ion for t,he publ-ic meeting dated May 5, 2010 and is t,o the best of my belief and abilit.y a true, accuraLe, and compl-ete record based on edits made by the Department of Energy of the above referenced proceedings as cont.ained on the provided audio recording. 

# GNEAL R. GROSS COURT REPORTERS

AND TMNSCRIBERS 1323 RHODE ISI.ANDAVE.,

N.W. WASH|NGTON,

D.C. 20005-3701 (202)2344433 www.nearrgross.c0m