Date: October 16, 2014

Case: Central Air Conditioner Regional Standards Enforcement Working

Group

11.010

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Central Air Conditioner Regional Standards Enforcement Working Group

October 16, 2014

Page I

UNITED STATES DEPARTMENT OF ENERGY

CENTRAL AIR CONDITIONER REGIONAL STANDARDS

ENFORCEMENT WORKING GROUP

PUBLIC MEETING

THURSDAY, OCTOBER 16, 2014

FORRESTAL BUILDING, ROOM 8E-089

1000 INDEPENDENCE AVENUE, SW

WASHINGTON, D.C.

Group Members/Participants

Neil Eisner, Meeting Facilitator

Doug Rawald, U.S. Department of Energy, Office of the

General Counsel

Karen Myers, Rheem Manufacturing Company

John Hurst, Lennox International

Keith Young, National Rural Electric Cooperative

Association

Gary Fernstrom, California Investor Owned Utilities

Aniruddh Roy, Goodman Manufacturing Company LP

Charles White, Plumbing, Heating-Cooling

Contractors National Association

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1 John Gibbons, Carrier Corporation

2 Bryan Rocky, Johnson Controls

3 Matthew Lattanzi, Nordyne

4 Harvey Sachs, American Council for an Energy

5 Efficient Economy

6 Steve Porter, Johnstone Supply

7 Jordan Doria, Ingersoll Rand

8 Amy Shepherd, Air-Conditioning, Heating,

9 Refrigeration Institute

10 Charles McCrudden, Air-Conditioning Contractors of

11 America

12 Elizabeth Noll, Natural Resources Defense Council

13 Timothy Ballo, Earth Justice

14 Jonathan Melchi, Heating Air Conditioning &

15 Refrigeration Distributors International

16 Laura Degitz, Navigant

17 Eric Stas, U.S. Department of Energy, Office of the

18 General Counsel

19 Karim Amrane -- Air Conditioning, Heating &

20 Refrigeration Institute

21 David Hungerford -- ASRAC/California Energy

22 Commission

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PROCEEDINGS

MR. EISNER: So can we get started. I

think we have got a number of issues to go through

today, probably the first rule we can start off on is

prohibited acts because that's where we left off last

night.

MR. RAWALD: If I could jump in, Neil. So

at Karen's request I did push a lot of buttons last

evening on the question of the consensus we had

regarding November 30th, 2015 for implementation of

distributors record retention and after much coaxing

the Department will be willing to not object to that

date so we consider it to be unanimous so we want to

do that.

MR. FERNSTROM: So Doug, this is Gary you

must have not only pushed the buttons but turned the

dials too.

MR. EISNER: Okay that will eliminate one

of the issues that was on my list. Okay Tim.

MR. BALLO: So actually I think I sort of

-- we hear from Doug if there is any change in what I

thought I heard yesterday.

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1 MR. RAWALD: Right, so I want to make

2 very clear what I said yesterday because I may not

3 have been clear. So the Department will not propose

4 a prohibited act unless it's put forward as part of

5 the package here with the group. So that's

6 something we would do, we of course would listen to

7 public comment as far as the comment period. The

8 problem is that if you were to propose a prohibited

9 act what I think would happen is that we would have

10 to re-propose a rule with the prohibited act in it.

11 There's not going to be any -- we are

12 negotiating the package here so we are not going to

13 propose a different package than what we negotiate

14 here unless we fail the negotiation. I guess that's

1 5 kind of where we are.

16 MR. BALLO: So you won't have to re-propose a

17 prohibited act if you seek comment on the issue of

18 whether a prohibited act or additional prohibited

19 acts are warranted.

20 MR. RAWALD: Right, we are not going to

21 seek comment on any facts that come out of the group.

22 So we will seek comment on the things that are

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1 proposed by the group unless we are dissenting from

2 the vote but we are not going to, unless the group

3 agrees to have DOE propose comment on a prohibited

4 act, we are not going to do that.

5 So we require the group to agree to

6 propose and receive comment on a prohibited act for

7 us to put in the rule.

8 MR. EISNER: Are you saying that what if

9 the group here agrees today unanimously to support

10 language in the preamble saying something along the

11 lines of we have not added any prohibited acts but we

12 seek public comment on it.

1 3 MR. RAWALD: Right then we would do that.

14 But we need group consensus on the issue for us to

15 propose it. We're not going to do it in the vacuum.

16 MR. BALLO: But, I mean, I guess that's the

17 position I have to ask for then because that's the

18 only way we can, I think, sign on to a term sheet you

19 know, otherwise it puts us in the position of kind-of

20 essentially walking away from prohibited acts to sign

21 on to the term sheet.

22 MR. F'ERNSTROM: So this is Gary. While

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1 folks are contemplating this I would just like to

2 make an observation. Earlier in our meeting

3 somebody sort of described how motivation to comply

4 with rules works and as I recall the description they

5 said most folks would look at the likelihood of

6 getting caught and the severity of the penalty.

7 What comes to my mind is driving down the freeway

8 wishing I could be in the commute lane.

9 So I'm in a hurry and I'm stuck in

10 traffic. Cars are whizzing by in the commute lane

11 so there's a sign that says minimum penalty $271.00

12 and I think to myself well I probably won't get

13 caught but I see people getting caught, pulled over

14 to the side from time to time and if I do, $271.00 is

15 a lot. Now it doesn't say 2 years in jail. If it

16 said 2 years in jail I suspect the judge would be

17 reluctant to levy that penalty on me for a first

18 violation or maybe a second violation because it's so

19 severe.

20 So that's kind of the situation we are in

21 here. The likelihood of getting caught is pretty

22 low because it has to be someone reporting it, most

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I likely. Then DOE has to find a knowing and routine

2 violation and then you're caught and the penalty is

3 like being cut off, it's enormous so it makes it a

4 very, very high hurdle that anyone is actually going

5 to get penalized.

6 It seems to me to be a very untenable

7 outcome to result in a really good motivation for

8 compliance. Not that all the people in this room

9 aren't honest and would comply anyway but I don't

10 think we can assume that everybody is going to be

11 honorable and compliant.

12 R. RAWALD: This is Doug and I guess

13 that was offered by Dave Hungerford and repeated by

14 Jordan at an earlier meeting, that analysis. And

15 I've always thought it a little too simplistic in our

16 case because I think we have to also consider the

17 ease with which someone can actually transgress, which

18 we have increased the burden, or the difficulty to

19 transgress, to this point by a number of the things

20 that we have done here in the group. And also the

21 actual benefit of transgressing and so I'm not sure

22 the margin is there for the folks that would be

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1 trying to put a non-compliant product in an area

2 that's supposed to be -- for them to go to a great

3 length at the risk of the possible loss of all their

4 business from their ultimate supplier.

5 So I think there are a few more variables

6 at play here. That being said, I'm in the

7 enforcement business. We bring prohibited acts

8 against companies every day. I can tell you that

9 prohibited acts do have an impact on behavior.

10 People do things at the risk of civil penalties that

II they otherwise would not have done. I can agree

12 with that so companies otherwise would not have cared

13 about complying with DOE are more compliant today

14 because of the fact thatthey have either faced civil

15 penalty or they saw their buddy pay a civil penalty

16 and they don't want to pay one.

17 So there is certainly at least some

18 anecdotal evidence supporting the fact that a civil

19 penalty can help curb behavior. The question I

20 think that the advocates have to feel comfortable

21 with is, do we think there's enough here or do we not

22 and if we don't and we think a prohibited act is

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1 consequence of installing air conditioners that are

2 below an efficiency standard.

3 I think that's going to be a very, I don't

4 want to say political hot potato, but I see a lot of

5 reasons why it could be problematic, why there could

6 be repercussions for DOE to pull that trigger. And

7 so I think it to be understandable that the

8 Department be unwilling to use that authority except

9 in a particularly egregious case and that's why I

10 think we need something in between nothing and

II cutting off the hand of the thief.

12 So to me that is essential to an effective

13 enforcement regime.

14 MR. FERNSTROM: So Tim let me follow up,

15 this is Gary. I handed out to the group earlier and

16 have in front of me on my computer now the results of

17 4 different California compliance impact valuations

18 that the California Energy Commission did and PG&E

19 summarized for them.

20 And I'm looking at the federal sector,

21 reading across the 2010-12 impact evaluation

22 the 2011 and the 2007 evaluations and the average

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1 compliance for federal majors in California was 67%.

2 So yet it appears to me like DOE has entered into

3 this process with a sort of business as usual

4 approach and I'm happy to put this up on the screen

5 if anyone would like to see it but I came into this

6 process with the idea that we would reach a pretty

7 high level of compliance and I don't think 67% is

8 very good.

9 If you look at the energy saving impact of

10 moving from say 67% to 90 or 95%, there are a lot of

11 positive energy associated with additional savings

12 that could be had if compliance was better so I don't

13 know whether DOE has its own score card but looking

14 at these 4 evaluations that the CEC did, as I recall `€

15 from school 67% was pretty close to a failing grade

16 and I don't -- I had better expectation out of the

17 outcome of this work than what it looks like we are

18 going to wind up at.

19 MS. SHEPHERD: This is Amy Shepherd from

20 AHRI. I really don't think that we can make a

21 conclusion about this particular enforcement plan

22 based on that sample and I think there's a difference

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I in compliance among different products, in different

2 regions and so forth so I just have to push back on

3 that. I don't think that's a conclusion that's fair

4 to reach.

5 I do agree with Tim that I'm also very

6 troubled by the current set-up that we have which is

7 it's all or nothing. It's, it's you are good or if

8 you have any violation, if you are a routine violator

9 for any reason at all we will cut off all of your

10 product, including the very product that we want to

11 be installing so I do agree that there's something --

12 there should be something in between. I think

13 that something in between and this is a little bit

14 of a titillator so I won't go too long on it but I

15 think the something in between should be that DOE has

16 the flexibility to either cut people off from the 13

17 SEER or if it is particularly bad, to cut them off for

18 the higher efficiency equipment but only for those

19 products subject to regional standards, we can talk

20 about that later.

21 But I think that something like that would

22 give DOE more tools in its arsenal especially given

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1 the fact that there's going to be a lot of confusion

2 over the next couple of years as we have this

3 guidance period and I think that it doesn't take away

4 from DOE's ultimate ability to do something severe

5 when it's warranted, but it doesn't mandate that DOE

6 do that in every single case.

7 MR. FERNSTROM: Amy, I would like to

8 follow up and agree with you that yes the results of

9 these 4 studies, does indeed vary by sector and in

10 fact it's broken out by sector so the average for

11 HVAC which is the federally regulated measure was

12 71%.

13 MR. MCCRUDDEN: So Gary, this is Charlie,

14 are you saying that people are installing illegal

15 products or are they not filing permits?

16 MR. FERNSTROM: This was an appliance

17 standards study. I can't speak to the details of

18 what was deemed to be a violation but either it was

19 not in the data base as the law in California requires

20 or it was not installed in compliance with the

21 federal and state appliance regulations.

22 MR. MCCRUDDEN: Ok, ok and that's where

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I'll push back because there's no installation at the

2 federal level requirement.

3 MR. RAWALD: Right no. I think it's

4 looked at for a manufacturer level, the data we

5 looked at it because --

6 MR. FERNSTROM: This was an appliance

7 standard study, not a building standard study so

8 whatever is required in the California Appliance

9 Standards is what is in question here.

10 MS. SHEPHERD: This is Amy Shepherd, but

11 even so I still think it's a leap to say so the

12 solution to that is that you cut off supply for the

1 3 efficient product that you want installed in the area

14 in all cases. That's going to be our solution to

15 this perceived problem and I just -- I don't think

16 that that makes sense. I don't think that's

17 necessary for an effective enforcement plan.

18 An effective enforcement plan would stop

19 the conduct that shouldn't be happening and if it is

20 serious and you need a deterrent you would have the

21 ability to go above that and to restrict the supply

22 to this person or to this entity of the more

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1 efficient equipment as well and I think certainly

2

given the fact that we have also talked about a look

3

back period, I mean let's see whether or not what we

4

can come up with that gives maybe DOE that

5 flexibility, does it work?

6

If it doesn't work and DOE finds that it

7

has a lot of these cases and there isn't a deterrent

8

effect then maybe we can talk about okay this isn't

9

addressing the issue, we need something more. But

10 to assume with no experience in this particular

11 situation with regional standards that we have got to

12 have the ultimate solution from the get-go I think is

13 not supported.

14 MR. FERNSTROM: Don't get me wrong, I'm

15 not advocating for the ultimate solution only, I'm

16 advocating for a range of solutions where the penalty

17 might be more consistent with the crime.

18 MS. SHEPHERD: Yeah that's fair and --

19 that's a fair point so I guess I agree with the

20 general principal although I realize that we are

21 talking about something -- I've taken us on a tangent

^

2

sorry.

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I MR. EISNER: Harvey?

2 MR. SACHS: This is Harvey and what's

3 sinking in to me from weeks of these discussions is

4 there's a shared concern from all the different

5 perspectives about the -- about too much, possible

6 too much reliance on the nuclear option, the death

7 penalty. There's a shared concern for wanting

8 intermediates and I am just starting to think whether

9 we can build on that consensus to at least have the

10 preamble say that there is a lot of concern about the

11 all or nothing and the group wants DOE to have the

12 freedom to consider intermediates which might include

13 restriction of the products for which a routine

14 violator is prohibited from selling.

15 It might include additional prohibited

16 acts but that the remaining work does involve

17 thinking about intermediate steps. Now that's just

18 what's bubbling up in my void filled brain right now

19 but I think focusing on what the problem is perhaps

20 mentioning a couple of solutions might be a way out

21 of this conundrum.

22 MR. RAWALD: So Harvey if I hear you,

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1 this is Doug, what you are saying is propose to the

2 public hey we've thought of these things and what do

you folks think of the different ideas, but here's

4 the plan I put forward which has these binary options

5 but does the public have any thoughts or can they

6 offer any comments about -- on possible gradations

7 that would include a prohibited act or a narrowing of

8 the scope of products that would be as Amy as

9 discussed.

10 MR. SACHS: Well Doug this is Harvey, as

11 usual you summarize it better than I stated and think

12 that's a reflection of where this group really is.

13 MR. RAWALD: Well is there any desire in

14 the group to try to come to a resolution as a group

15 as opposed to leaving it to the public or how do

16 people feel about that. I mean we have had some

17 discussion on prohibited acts and it seems like

18 people are possibly at a loggerhead especially with the

19 distributor one but I mean do we want to try to

20 re-approach that again or do we want -- what do we

21 want to do here?

22 MR. WHITE: This is Chuck White and I

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I don't think it's a secret how I feel about it. So

2 looking at if there's a violation DOE is going to

3 call me up and say there's a problem with this

4 installation and whether we do a prohibited act or

5 whether we do the "death penalty" it all starts with

6 that in the scenario we have.

7 So there is a middle step. I have a

8 violation as a contractor I have the option of

9 remediating this issue at my expense and not have the

10 death penalty. So I have that option. So are we

11 saying you would like a prohibited act option that

12 would give me the chance to pay $200.00 let's say and

13 it all goes away and we leave the air conditioner as

14 it is? I don't think that's really a goal that you

15 want.

16 Are we saying you want $200.00 and I have

17 to remediate? I really have a hard time with that

18 one that I get the double duty so we do have some

19 intermediate things that we can do. Having said all

20 of that, it is not DOE's job to inspect installations.

21 The people that inspect installations are the AHJ's,

22 the Authorities Having Jurisdiction and I am really

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1 uninterested in compliance rates of inspections and

2 permit polls and from whatever state in the union.

3 That's a different problem. And if your state has a

4 problem with that you need to work on that, but

5 trying to make DOE be the building inspector for the

6 entire country is not going to happen. I don't

7 think Doug has the horses for that. So we don't

8 have that piece of this at the table, I've maintained

9 that for a while.

10 And as a contractor, when I do an

11 installation the building department comes and they

12 look at my installation and they say yes you did a

13 fine job, no you didn't do a fine job and if I didn't

14 do a fine job I have to fix it or they are not going

15 to give an occupancy permit and part of that fine job

16 is things are installed to standards and comply with

17 codes.

18 MR. FERNSTROM: So this is Gary. I

19 think we are tending to confuse the building

20 standards or building code requirements with the

21 appliance standards here. The building codes when

22 you do air conditioning require a lot of things that

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1 go beyond whether the condensing unit, the coil, the

2 fan are compliant with federal compliant standard

3 regulations or not.

4 So we are not trying to make Doug the

5 building inspector for the entire country, we are

6 just trying to feel confident that Doug is going to

7 have a means available to him to assure that the

8 minimum appliance standards requirements are being

9 met, that's vastly short of being sure that every

10 building code requirement is met on every

11 installation. These are two quite different things.

12 MR. DORIA: This is Jordan and I just

13 want to comment on the study. Slide 25 shows which

14 measures were covered by the studies and the studies

15 did not cover central air conditioners in any case.

16 So they covered a lot of things, but not central air

17 conditioners what we are talking about here, so the

18 numbers the 67 -- they have no bearing here as far as

1 9 I'm concerned.

20 MR. RAWALD: This is Doug so I'm going to

21 veer away from the study and back to what Chuck said.

22 He offered a very interesting point that I don't

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1 think we have really thought about in this context,

2 which is we can view the remediation option as a

3 voluntarily payment of a small penalty.

4 The company is choosing to pay this little

5 penalty by replacing the unit and avoid the ultimate

6 consequence. That's in essence what they are doing

7 and actually I would argue the replacement of a unit

8 in a home is probably more vastly expensive than

9 $200.00 given the time and the money spent in the

10 replacement.

11 So it's actually possibly a more effective

12 stick and easier for me to enforce in that if someone

13 doesn't pay me $200.00 what do I have to do -- I have

14 to go to a local court of jurisdiction, I have to fly

1

5 out there, I have to bring a case against a

16 contractor for $200.00. I can tell you with all

17 certitude that if I have 1,000 contractors each with

18 $200.00 penalties it is going to be very difficult

19 for me to fly to district courts around the country

20 to enforce $200.00 cases and justify to the

21 government that I'm spending thousands of dollars to

22 enforce $200.00 penalties. But if I am able to

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I bring to the

2 government the idea of hey the company is going to

3 voluntarily pay this little penalty through

4 replacement of a non-compliant unit therefore

5 improving energy efficiency for the country, that's

6 going to be more palatable to people I think and so I

7 like that way of looking at this and I think it's

8 very helpful to look at it that way, from my point of

9 view as I sit here right now.

10 MR. BALLO: I think flying around the

11 country, the idea that you would do that is a red

12 herring. I mean here it is ---- you are going to have

13 the ability to settle for something in addition to

14 remediation. Now let me respond to the point that

15 what we are doing is getting away from remediation.

16 Where I see the value to a civil penalty

17 is something in addition to remediation, not

18 necessarily for the first violation. The first

19 violation maybe you do just remediate. Now you come

20 back with a second violation. At this point this

21 contractor maybe is looking at potentially being

22 declared a routine violator.

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If that's the option at some point for

2 some set of contractors, they are going to make the

3 determination that fine it's cheaper to print a sign

4 and change my name and go into business as another

5 entity. The civil penalty would just be another tool

6 for DOE to consider using, it wouldn't have to be

7 used in every case that it could be a fine levied in

8 addition to remediation, something short of the

9 nuclear option which is ineffective in two respects

10 which I don't think we've discussed both of them but

11 it is ineffective in that it can be hard to levy

12 against a large entity because of the severe

13 repercussions.

14 It can be hard to levy against a smaller

15 entity because of essentially no repercussion because

16 the entity can sort of just morph into something

17 else.

18 MR. FERNSTROM: So this is Gary. I would

19 like to respond to Jordan's comment. Jordan is

20 correct, none of these studies covered residential

21 split system air conditioning. I was making the

22 observation with respect to what the norm is for DOE

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1 not this particular measure specifically.

2 MR. DENNIS: This is Keith Dennis. We've

3 been briefing our legal team on the updates since the

4 first slides with the prohibited acts and we also

5 have an issue where we don't think that DOE has the

6 authority to add prohibited acts and you know, we

7 are prepared to look at the legal case but as far as

8 finishing today, I don't think that we can vote for

9 additional prohibited acts or even the implication

10 that DOE has authority to add prohibited acts for

11 entities other than manufacturers, so that's our ---

12 just so everyone knows.

13 MR. BALLO: So you would vote against

14 taking comment on the issue?

15 MR. DENNIS: I think we can take comment

16 on the issue but we couldn't imply that that's an

17 authority that we say they have as a group because I

18 don't think that that's necessarily for us to decide.

19 You know you can't shut down comment on anything, I

20 think everyone has the right to comment on anything

21 they want. I think the comments are a great part of

22 the process. MR. RAWALD: Right but I guess

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1 the line

2 that I said the Department is going to draw was the

3 Department will not put out for comment anything this

4 group has not asked the public to comment on. So what

5 Tim has come to the group and said hey it looks like

6 we are not going to be able to agree on this

7 prohibited act issue, can you guys give me something

8 to live here with which is let's put out to the

9 public hey the advocates think that the prohibited

10 acts would be helpful, what does the public think and

11 have the public comment on that, on the Department's

12 possibility of adding a prohibited act whether that

13 would be helpful or not. And he said, Tim I guess, he

14 was asking would you be able to vote for that if

15 that was put forward, the premise.

16 MR. DENNIS: I think we would also have

17 to have included in there that there are members of

18 the group who think that it is not within --

19 MR. RAWALD: Yeah, absolutely we would

20 reflect both sides of the issue.

21 MR. DENNIS: If that's what it comes to I

22 would probably have to call someone, but --

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1 MR. MCCRUDDEN: This is Charlie with

2 ACCA. Doug you did a very good job I think on the

3 point about the intermediate step that is remediation

4 and the costs to the contractor. And just let me

5 add something about the prohibited act comment. In

6 many ways the death penalty or the nuclear option is

7 a very severe deterrent and it's one that we haven't

8 as contractors sort of said let's take this out.

9 And I say that because we want some

14 protection because there will be routine violators

t1 and we want to get rid of them just as much as DOE

12 does, just as much as I think everyone at this table

13 does and so I think we are almost creating this false

14 choice between nuclear option and nothing.

15 There is this in between and it is the

16 remediation and it is going to be severe. We have

17 pushed back at our request that nuclear option,

18 because if you remember at the beginning we were

19 thinking oh my God, you're there or you're not. I

20 think there's plenty of off-ramps to either taking

21 your -- removing a violation, removing yourself from

22 the routine violator list, I hope we can talk a

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1 little bit later about sort of some other steps that

2 I think other folks are interested in because I think

3 that's also real important but there is an

4 intermediate space and so let's not overlook that.

5 MR. DORIA: This is Jordan I think

6 Charlie did a good job of characterizing that there

7 certainly is a middle ground. Just to offer an

8 opinion on what I think Tim's asking for, which is

9 really just the ability to put out to the public that

10 there was no agreement on this point and that there

11 should be the opportunity to comment.

12 I'm of the opinion that that's very

13 reasonable and I think to raise Keith's point excuse

14 me that both sides should certainly be reflected if

15 we are trying to capture something in the preamble

16 I'm fully in agreement but to me there is no reason

17 why this can't be something that goes out simply for

18 more comment. The Department's position is clear,

19 the group's position is clear. As I understand it

20 this is really about saying can we all agree on what

21 is actually happening in the room.

22 So I'm struggling to see why we shouldn't

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1 accept that point.

2 MR. RAWALD: Right I guess the question

3 really is, is there anyone who would object, barring

4 Tim having some time to draft the language that we

5 would all agree to, the concept of putting out in our

6 rule will the DOE ask for comment on whether they

7 think additional prohibited acts would be helpful to

8 creating an effective enforcement plan and then

9 reflecting the kind of varied opinions that we have

10 here in the group, would anyone object to asking that

11 question?

12 MR. WHITE: I'd think about it.

13 MR. RAWALD: Ok, and that's Chuck White,

14 so you are not near a microphone there.

15 MR. DENNIS: And this is Keith. I'm going

16 to try to contact some people as well.

17 MR. EISNER: Do you want to do that now

18 or do you just want to think about it while we go

1 9 through other issues?

20 MR. RAWALD: Can we break and then maybe

21 Tim can put together some language that the room can

22 see, I know he has things put together all ready so

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I we can kind of look at that and see what everyone

2 things about it.

3 MR. EISNER: Do you have more than just we

4 seek comment, do you have the arguments on both

5 sides.

6 MR. BALLO: I don't know if --

7 MR. EISNER: Okay, we can take a break, do

8 you want to share that by making copies or putting it

9 up on the screen, okay. All right how much time

I0 would you like, the usual 10 minutes? All right,

11 why don't we take 10 minutes.

12 ( OFF THE RECORD AT 9:41 AM)

13 ( ON THE RECORD AT 10:30 AM)

1

4 MR. EISNER: All right can we get back

15 together? Is anybody ready to report on -- does

16 anybody have anything to report or should we just

17 look at the slide and start talking about the

18 language? All right.

1 9 MR. BALLO: I think we should look at the

2

0 slide.

21 MR. WHITE: Well this is Chuck White,

22 speaking for Keith. He placed a call but did not get a

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response yet so he is still waiting for some guidance

on his end. Speaking for myself, I'm disinclined to

support the position but, it is not cast in stone

yet.

MR. LATTANZI: Chuck on this matter, are

you referring to your position on whether or not to

allow comments?

MR. WHITE: Yes.

MR. EISNER: Is there anything you would

like to have addressed with respect to your concerns?

Do you have questions?

MR. WHITE: No.

MR. PORTER: This is Steve Porter, can we

see the language that was submitted is that it right

there? Is it printed into this document? Oh okay.

MR. EISNER: No it is not, this document

is a copy of what was circulated last night.

MR. PORTER: Okay, thank you. n

PARTICIPANT: Is that any better?

MR. EISNER: Let's everybody read the

screen.

PARTICIPANT: Can I ask you to scroll

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1 down.

2 MR. DORIA: This is Jordan, I think one

3 thing that I think might need to be added potentially

4 at the end of the -- I guess basically the second

5 paragraph that begins regarding -- could be something

6 to the effect of not only do certain parties not

7 agree that DOE needs this to implement an effective

8 enforcement regime, or even just that DOE committed

9 not to take enforcement against distributors.

10 I understood that some believe it's a

11 question as to whether or not DOE has the authority

12 to do so, so sort of it can be counterbalanced to the

13 earlier statement that the advocates are stating that

14 the Department does, others don't hold that opinion.

15 MR. DENNIS: And I would like to add this,

16 this is Keith, we would probably want to add a

17 paragraph about why this rule has been very effective

18 as a manufacturer based standard at point of

19 manufacture and why this goes down a path that we

20 think is not only counterproductive for this effort

21 but also for the broader rule.

22 MR. DORIA: Keith, this is Jordan. I have a

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1 real problem with that and I heard you say that early

2 in the process and I guess I would say I agree with

3 you that we liked a date of sale, data of manufacture

4 national standard right but you simply cannot have

5 any other approach to this when you move away from a

6 date of a manufacturer based prohibition to a

7 prohibition on install, so I will not support language

8 to that effect.

9 MR. BALLO: This is Tim, I apologize. I

10 had initially drafted this as presenting the legal

11 authority argument on both sides and it was so long.

12 I meant to take it out on both sides and I only took

13 it out on the opposing parties side, sorry about

14 that. So if you want we could take it out of both

15 or put it in both, it doesn't matter to me.

16 MR. EISNER: Is there comments?

17 MR. PORTER: Not to, not that I support

18 this yet. I'm kind of with Chuck on where we're at on

19 that and I want to think about it some more but there

20 isn't any language in that I saw

21 the lets the public know that also that if they buy

22 one they would be caught in there, the installer they

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I in effect become a contractor and would be subject to

2 this -- all these penalties as well.

3 MR. DORIA: So this is Jordan I think the

4 comment on that -- I think that as I understood from

5 our discussion yesterday, I think that belongs in the

6 portion of the preamble that gets to what our

7 definitions actually mean and to whom do they apply

8 and sort of talking through those different actors

9 and just making clear sort of in -- for the general

10 public language that's used to not just sort of this

11 legal piece, so if we would include that, there at

1

2 least that would make sense to me.

13 MR. DENNIS: And this is a question for

14 Doug from Keith. Have there been prohibited acts on

15 anyone other than manufacturers historically on --

16 MR. RAWALD: Right so I think I

17 addressed this several times -- so there's -- under

18 430 I'm sorry 429102 we have all of our prohibited acts.

19 I laid them out for you guys in the second meeting.

20 There is one prohibited act the DOE has that

21 involves distributors and retailers regarding the use

22 of a light bulb or type attachment.

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1 There's another statutory prohibited act

2 that goes to the FTC that also involves distributors

3 and retailers. The rest of the prohibited acts are

4 targeted at manufacturers and private labelers so

5 there aren't any -- that squarely address dealers

6 or contractors as we would have them laid out here.

7 1 think the argument Gary Fernstrom put

8 forward earlier on in this group is that some people

9 would view installers and dealers to meet the EPCA

10 definition of manufacturer based upon the fact that

11 EPCA defines manufacturer to be produce, assemble,

12 manufacture or import but that is highly debatable

13 obviously for the group.

14 So to squarely answer your question

15 there's only one prohibited act under DOE's

16 regulations that name a party that's not a

17 manufacturer or private labeler.

18 MR. DENNIS: And we just had an Office of

19 Hearing Appeals decision from the other day that says

20 that Steffes Corporation who assembles water heater

21 is not a manufacturer so that argument is that you

22 are saying is contrary to what the Office of Hearing

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I and Appeals --

2 MR. RAWALD: Yeah, I don't know that

3 opinion that you are talking about so I would have to

4 take a look at it so I appreciate your bringing it to

5 my attention now, maybe you can give me a copy of

6 that so I can read it and I'll be smart enough to

7 answer it.

8 MR. SACHS: Keith, this is Harvey. That

9 decision is being appealed by Steffes -- I have their

10 appeal.

11 MR. DENNIS: They were denied the appeal

12 -- they were told they weren't able to appeal because

13 they don't have standing because they are not a

14 manufacturer in the response letter from Office of

15 Hearing and Appeals. They are as a courtesy taking

16 a re-hearing, we'll know in a couple of days how that

12 goes, but they had basically said they are not a

18 manufacturer, they don't have the right to appeal,

1 9 they don't have standing and I can show you

20 documents, they sent it certified.

21 MR. SACHS: Thank you. I'm glad to know

22 that catch 22 is alive.

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I MR. DENNIS: Not only that they can't

2 appeal it because they didn't do an Order because

3 they dismissed it because they are not a

4 manufacturer, so ditto. And this just goes to why

5 this is the most important issue for is, this has

6 broader implications for other parts of the work that

7 occurs in standards and saying that we are going to

8 have prohibited acts on completely new classes

9 because this group decides that it is absolutely

10 necessary to do enforcement throughout I really

11 actually think we all agree on is going down a path

12 that we just don't need to go, it's increasing the

13 scope at a cost that is not understood for you know,

1

4 we have other solutions, other tools here, we have

i5 subpoena power, we have the ability for the nuclear

16 option, we have the ability to dial back the nuclear

17 option, we've had a lot of concessions but expanding

18 the scope of authority which I you know, I'm not sure

19 exactly what the purpose of that is but I don't think

20 it's necessary in order to get what we need for

21 enforcement.

22 MR. BALLO: So what you just said. I think

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1 would make a great you know, cut and paste for your

2 comments, but I don't see how the taking -- agreeing

3 to take comment on the issue forecloses you from

4 raising any of those arguments later.

5 MR. DENNIS: Right and I would agree that

6 this language is also a great cut and paste for your

7 comments. It looks like comments that you would

8 submit on something so I think this would be a great

9 comment document and we can submit our comments as

10 well.

11 MR. BALLO: This is deciding whether or not

12 there is going to be comment.

13 MR. DENNIS: I think that we could address

14 whether this is going to be -- whether or not there

15 is going to be comments with this simple sentence it

16 says there will be comments.

17 MR. RAWALD: I guess the position of the

18 Department, and this is Doug, is that we are not going

19 to ask for comment on the issue unless this group

20 says that we should ask for comment on the issue so

21 Tim is trying to craft language that would be

22 acceptable to the group that would allow the Department

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1 to ask for comment and then tee up the issue for

2 NRECA or others to say DOE we think you are off

3 your gourd you don't have authority for this you

4 can't do it and for the advocates to come back and

5 say as they did in the initial round of comments

6 here, DOE has authority, here's why they do and

7 here's why we think you should do it.

8 So he wants to be able to open the door

9 and I think there's a concern that if we don't ask

10 for comments there will be no comments given, because

11 there won't be any actual ask for them and so he

12 wants to say, hey Department ask for commenting in

13 your rule-making.

14 MR. BALLO: I also think this language is

15 important to provide ASRAC some clarification of why

16 we are asking for comment because just simply saying

17 that we ask the DOE to seek comment on this issue I

18 don't think either way explains to ASRAC because I

19 think we are obligated to, why we would have that

20 unusual outcome of asking the DOE to seek comment on

21 it.

22 MR. DENNIS: Right but you have laid out

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I here a lot more than just asking for comments, you

2 have 4 recommendations that are your you know, that

3 would be your comments. So it seems like you are

4 not asking for comment, it seems like you are putting

5 comments into the preamble.

6 MR. BALLO: Well I think that's maybe a

7 fair point and if it would be helpful to eliminate

8 the before example prohibited acts and just have some

9 other language that solely deals with the public

10 comment issue I would be open to that.

11 MR. WHITE: Doug this is Chuck White, so

12 just for my simple contractor mind clarify for me.

13 If someone voluntarily submitted comments regarding

14 this, even if you didn't ask for them, would you pay

15 attention to them or would you drop them in the

16 circular file?

17 MR. RAWALD: That's an interesting

18 question and I'm not the right person to answer that

19 so I will have to talk to Laurie about the way that

20 we officially do that because we do get non-sequitur

21 comments. The concern is that from a rule-making

22 point of view you want the public all to have an

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1 ability to respond equitably to the issue from both

2 sides, or all 4, 5 sides of the issue and so by

3 putting it out for comment, you are allowing to have

4 kind of dueling commentary and if I had just one

5 non-sequitur comment that has no response I can't

6 really weigh it verses the other opinion.

7 So the value in asking for comment is that

8 I then get the solicitation of the differing opinions

9 and allows me really to weigh that fruitfully and come

10 to an appropriate analytical conclusion. But I can

11 get you an answer of how we treat regular comments or

12 not secular but I can't -- that's the kind of thought

13 process behind it.

1

4 MR. EISNER: I can try to elaborate a

15 little bit on that. There is a concept in

16 administrative law with respect to rule-making as to

17 whether you have adequately apprised the public of

18 the scope of the notice, that is will comments be

19 accepted on other issues and to what extent.

20 So if the public, and the court if somebody

21 challenges this, says I did not think you were

22 looking for comments on whether or not there should

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I be other prohibited acts and didn't provide comments,

2 the agency might have to do an additional rule-making

3 to include this requirement.

4 If it makes it clear in the preamble that

5 it is willing to consider comments on this then there

6 should not be any dispute, they should not have to go

7 to another supplemental notice of proposed

8 rule-making or a new proposed rule in order to add

9 that to the final. Does everybody understand that?

1 0 It's a difficult issue for agencies in rule-making

11 and they try to make sure they do it in the most

12 efficient way possible so if they are considering

13 other possibilities or want to hear about other

14 possibilities they often times try to make it clear

15 in the document that they are doing that.

16 MR. RAWALD: And Eric is luckily our

17 rulemaking attorney for us all here and he pointed out

1$ to me that the use of my term non-sequitur is probably

19 not the most appropriate so he would prefer to look

20 at it as whether the question is germane or not and

21 if the comment is germane then we would typically

22 address it, if it is not germane to the comment, to

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1 the actual substance of the notice then we would not

2 necessarily address it, though we may on occasion.

3 I'm not certain of our past practice.

4 MR. PORTER: So this is Steve Porter.

5 Neil, did I understand you correctly so if we ask for

6 comments on additional prohibited acts that then

7 based on the comments that the Department of Energy

8 could put in a prohibited act without an additional

9 rule-making hearing?

10 MR. EISNER: If you make it clear that

11 that is one of the things that you want to consider

12 you should not have a problem adding it to the final

13 rule in terms of whether you adequately apprised

14 that, that doesn't mean that you have a basis for

15 doing it but at least you've given an adequate notice

16 that you are considering that, so the court would not

17 rule that was clearly not in the scope of the notice.

18 People could not have anticipated that.

19 That doesn't mean that they then have a

20 basis for doing it, it also doesn't mean that you

21 can't say that we want to review this before it is

22 put into a final rule, you view the subgroup. So in

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1 other words in case you are worried that all of a

2 sudden there will be a final rule on this where you

3 didn't expect it, you have a right to say in the

4 document we would like to be asked if any significant

5 changes are made at the final rule stage.

6 MR. PORTER: Thank you.

7 MR. EISNER: And again you can avoid some

8 of the concerns in the room by making this more

9 general and just simply saying this nuclear option

10 concerns some of the members of the group, all of the

11 members of the group --

12 MR. RAWALD: Neil, if I could interrupt you

13 real quick, people keep using the nuclear option. I

14 don't believe it's the nuclear option, please don't

15 use the language. I know some of the folks here are

16 trying to use it pejoratively but hopefully, as a

17 facilitator, you would not use that language.

18 MR. EISNER: Message received, I'm just

19 trying to use the summary statement rather than

20 repeating it. If you want to make it clearthat you

21 would like to hear comment on whether other proposals

22 are out there for how you can have something in

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I between the options that you have now on the table,

2 the public we would like to receive comment on that.

3 You could give examples of what you are

4 talking about, you could just ask for something in

5 general. You could say and I'm not saying whether

6 you even get into the question of do you have the

7 authority, you can talk about whether or not assuming

8 or if they have the authority or whether they should

9 seek the authority to impose other prohibitive acts.

10 Again, you have a range, you don't have to

11 think of yourself as being limited if you want to

12 work something out here you can do more, you can do

13 less.

14 MR. DENNIS: This is Keith, I have two

15 comments. First, I mean I think the preferred

16 method would be to do something along what Amy's

17 saying and fix whatever problem we see with the

18 nuclear option and get to a place where we are not

19 adding prohibited acts and new classes of -- new

20 classes of businesses in order to meet a very short

21 term and specific goal with, with frankly fairly

22 limited potential impacts to harm, given the

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1 incremental cost over where we are in terms of energy

2 savings.

3 Especially for a program that's worked so

4 well as a point of manufacture standard for years.

5 I think Harvey said one time you know -- I think

6 Harvey has a fish tank that's a water heater or he at

7 least put an axe in one, we don't want to make him a

8 criminal for doing that because once a water heater

9 or a product is manufactured, like a light bulb,

10 that's where it becomes legal or illegal and if you

11 start saying things like this, like if I screw in a

12 light bulb at my house, I'm breaking the law, it's

13 just a huge expansion of a story that we are not at

14 all comfortable with.

15 And I understand it's just in this

16 particular spot, it's an air conditioner but it

17 complicates, I mean I've been working on this stuff

18 for two years and it just complicates things on so

19 many aspects when we start going down this road of

20 away from the manufacturer. So we would like to

21 reign it in -- we think the prohibited act

22 specifically talks about the manufacturer.

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Expanding it is beyond what we believe

2 Congress contemplated. They said we want to stop

3 people from installing incorrectly and the way to do

4 that is to look at the manufacturer, like we always

5 look at the manufacturer.

6 It's a mistake to go down the

7 other road. I think we would have to talk about that

8 mistake if we are going to talk about the benefits in

9 order to balance it out. There's a lot of detail up

1 0 there that I don't think we need to negotiate what

11 needs to be in this preamble. If we want to ask for

12 comments, we can talk about quickly asking for

13 comments, quickly putting you know a sentence on both

14 sides, I think even that's kind of a mistake.

15 But putting up 4 prohibited acts that you

16 know were complicit and you know I just don't see --

17 I know that you have offered something else.

18 MR. SACHS: Keith if you are done, this is

19 Harvey and first of all since I'm accused of fish

20 bowl even though I live in one, the graphic in

21 question was a picture of an axe planted in the side

22 of an obsolete atmospheric gas water heater. I have

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I used that to draw attention to that one issue.

2 The more substantive thing is trying to

3 clarify some things. In my opinion Tim's slide was

4 helpful in clarifying our thoughts among ourselves as

5 advocates. Since it's preparation there have been

6 some discussions in the back room and elsewhere and I

7 think what we are asking for now as advocates, and I

8 think others in the room are quite sympathetic, is a

9 preamble that says something in effect you know we

10 need to learn more by comments on issues.

11 There are probably two of them, one of

12 which is prohibited acts. I do not accept the

13 relevance that prohibitions on manufacturers so long

14 as demonstrated their advocacy because we have never

15 before had something that had to be enforced on

16 parameters other than date of manufacture. It's a

17 different class of things and we are all stumbling to

18 try to figure out what the right response is but I

19 rather emphatically reject the assertion that the

20 experience in the past when date of manufacture has

21 been the only relevant parameter is applicable to

22 this situation.

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1 MR. DENNIS: Thanks Harvey and I would

2 concur that we are trying to figure out a solution.

3 I tend to think that there is a solution that we can

4 work with that we have been working on without this.

5 We've all come to that conclusion and whether or not

6 we ask for comments, you know it's good to know the

7 history of how this was drafted so. And I

8 appreciate what you are saying.

9 The past is not a good indicator of the

10 future but I think expansion of authority is a very

11 tenuous thing that we should do very, very cautiously

12 if at all when we have other options that we have

13 been talking about which is the manufacturer can cut

14 off sales to people, we can do all kinds of things,

15 but I think expanding authority beyond what was

16 explicitly told by Congress is a mistake.

17 MR. SACHS: This is Harvey. My focus has

18 been on the question of whether the cost of

19 potentially expanding might be off-set by increasing

20 the pallet and the progressive nature of the

21 sanctions. I don't have an answer. I don't think

22 we are going to resolve it but this is why it is

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1 pretty important to me to have place holder language

2 that seeks public comment on this issue as DOE does

3 its rule-making, so we have that as a place holder

4 that allows DOE to warn all parties that might be

5 interested that this is something that we have

6 wrestled with.

7 MR. DORIA: So I was just going to say if

8 we can maybe, just a suggestion to try to move this

9 ahead. If we were simply to eliminate the 4

10 enumerated points and, I mean, because I think that the

11 first sentence basically restates in sort of general

12 terms what the first 4 go into detail on. So I think

13 the spirit of it is there and I think that therefore

14 public comment on should there be other prohibited

15 acts or other parties and at the end of that, the

16 beginning regarding, just add in that final sentence

17 something stating that other parties question whether

18 or not DOE has the authority to create prohibited

19 acts for other parties.

20 MR. DENNIS: I think that there's a lot of

21 -- I mean we are defining little groups among us, we

22 are doing a lot of stuff in this. I mean I don't

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1 see and there's things that you know, do we explain

2 to people the difference between a violation you know

3 and a prohibited act?

4 They are not going to have all the

5 background so is there a way to just simply do this

6 in like a sentence or two? Just the group, not

7 advocates and other people, the groups had a lot of

8 discussion on what are prohibitive acts. They

9 disagreed whether there was authority and whether

10 there was value and DOE solicits comment on it. I

11 mean, why do we have to have all this other stuff

12 that's kind of not as important or you know,

13 characterizes the whole thing in certain ways.

14 Defines who advocates are and

15 non-advocates, some people might just say oh I'm an

16 advocate, I'm an efficiency -- I'm an efficiency

17 advocate you know, why am I not included. I don't

18 believe that, so that's not fair.

19 MR. RAWALD: Right I think you point is

20 fair, Keith. Perhaps the best way to go because

21 there seems to be at least some language issue would

22 be for us to -- for a couple of the advocates that

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1 are not you, to work with you over the course of

2 lunch to come up with some language that would be

3 acceptable on both sides, because you seem to be more

4 than polarly opposed and then possibly bring it back

5 to the group.

6 What I do want to note is that it is not

7 typical that our Department asks people to comment on

8 our legal authority, we certainly could note in the

9 comment that people are disagreeing about the extent

10 of having authority, but we don't typically say to

11 the world do we have legal authority to do this. We

12 assert it or we don't and people comment on our legal

13 authority quite often and I'm sure they will in this

14 case, but we don't solicit, usually, in our proposal

15 do we have the authority to do such.

16 That being said I think it might be more

17 productive for us to interact that way rather than

18 trying to wordsmith here with Laura on the board

19 because this seems to be -- it never seems to get to

20 where we want to get to when we do that.

21 MR. WHITE: Doug, Chuck White, can I ask

22 kind of a clarification or a follow through? So we

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I asked for comments and DOE receives comments and

2 decides, gee we think from the comments it is a good

3 idea, we'll have a prohibited act. What's our recourse

4 after that? Do we have in this negotiated setting

5 we can talk about that but once we get out of this

6 and you are past the comment period, I guess I'm

7 asking do we have the ability to come back and say

8 that's not what we want or if you decide to do it

9 after this fact, it's just going to happen.

10 MR. RAWALD: Right this is Doug and this

11 gets back to the question I raised yesterday which is

12 you know, we are all -- some people here are going to

13 agree to a package because this doesn't include the

14 prohibited acts and so you wouldn't agree to the

15 package if suddenly we added prohibited acts to it, so

16 would we be negotiating in good faith if we suddenly

17 threw that in there at the end of the day and that's

18 a tricky question and I can be sympathetic with that.

19 So in our typical practice when we add

20 regulatory language that hadn't been proposed before

21 we usually had a supplemental notice to get further

22 comment on that but I don't know if that's an

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1 administrative law requirement or not and so I would

2 need Neil or Eric to opine about the legal

3 requirements of that.

4 As a standing rule once a rule has been

5 promulgated the folks that are affected have 30 days

6 to challenge that rule in court. There's always a

7 recourse of some sort, but I understand why that

8 would be less than ideal for a contractor who may

9 have no knowledge of the rule-making process so, but

10 I will defer to the lawyers to talk about what would

11 actually be legally required if we were to take such

12 comment and what can we do with it.

1 3 MR. WHITE: Before you do that, let me

14 follow up with a comment. If it's apparent that we

15 don't want this but then we open the door and then we

16 end up getting it anyway that's unpalatable to all

17 those people standing behind me, behind this chair.

18 MR. RAWALD: No, I completely understand

19 that position.

20 MR. EISNER: Let me speak to that briefly

21 again. If they had given adequate notice to apprise

22 the public that they might put a prohibited act in

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the final rule, they don't have a problem with what

2 is referred to as scope of the notice issues. That

3 doesn't mean they have the authority to do it. That

4 doesn't mean that it was a reason-decision to do it

5 but and I have to look at the ground rules a little

6

bit more closely, there may be some provision in here

7 about what happens after the comment period closes

8 and the Department starts to review the comments.

9 And one of the things that may have been

10 an earlier regulatory negotiation was a statement

11 from the working group that if significant changes

12 are made at the final stage, the group will be asked

13 to consider those either informally over the phone or

14 at a meeting like this. So that again is something

15 if you think it is important you can ask for

16 specifically on this issue or just in general.

17 That doesn't necessarily mean again that

18 the Department or ASRAC may agree with that. If

1 9 that is something you consider and I think my

20 recollection is there is something in the working

21 group ground rules that we developed at the beginning

22 of these sessions that spoke to that particular

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matter, whether you have the right before the final

2 rule is issued to be consulted.

3 Yeah, I'm sorry Doug ass pointed it out

4 and I'll read it to you because I don't know if you

5 all have it. The working group members request DOE

6 to provide a comment summary of the comments received

7 in response to the published notice of proposed

8 rule-making to the working group so that the working

9 group may provide its recommendations on what, if

10 any, changes to the proposed rule are warranted based

11 on these comments to the ASRAC prior to issuance of a

12 final rule.

13 So you basically reserve the right to do

1

4

that. And again my experience with negotiated

15 rule-making both here as a facilitator and what

16 happened after the one I worked on and I think an

17 earlier one the DOE did as well as my work at DOT and

18 experience with other agencies is there rarely are

1 9 significant changes made at the final stage if the

20 group works as effectively as this one has.

21 This is a remaining issue that you may

22 want to run by everybody what they are going to do,

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I at least on this issue.

2 MR. PORTER: Yeah until I --- Steve Porter,

3 until I saw, would see the final language of what Tim

4 may come up with I wouldn't be comfortable with

5 anything that allows a prohibited act to be added

6 without an additional rule-making hearing.

7 MR. EISNER: And under this paragraph I

8 think you would get the opportunity to look at that.

9 MR. PORTER: You think?

10 MR. EISNER: Well again.

I1 MR. PORTER: That's my -- it's seems

12 MR. EISNER: Let me put it to you this way

13 in terms of what I think. Whether or not anything is

14 put in the preamble along these lines, the public may

15 comment on it. DOE may make a decision that it has

16 both noted the problem with the process as well as

17 their authority to do this and then they decide at

18 the final rule stage. They want to do it based on

19 the comments they received.

20 So you are not necessarily changing the

21 balance of power here, you are just putting something

22 in the preamble. Again there is this statement here

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1 that they are supposed to come back, that this

2 working group members request that DOE provide this.

3 MR. RAWALD: But I think that what we are

4 hearing is that we are creating uncertainty for these

5 guys because they are negotiating something here and

6 it's going to be settled and that somewhere there

7 could be this other thing added which could have a

8 large impact and which they wouldn't have a

9 sufficient role in because nothing is being guaranteed

10 to them that they would have a sufficient role in

11 saying well I withdraw from the entire negotiation at

12 that point.

13 And so I don't think that they want to be

14 put in that position. I hear that concern, Steve.

15 MR. PORTER: I mean it's just you know

16 that changes all the things that we have talked

17 about, everything that we have talked about over all

18 these days.

19 MR. DENNIS: I highly doubt that I'm going

20 to be able to sign off on something that would allow

21 for prohibited acts without a supplemental notice of

22 proposed rule-making.

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MR. BALLO: That is in my view the purpose

2 of putting an additional slide in the deck on this

3 issue so if we don't have that ability I'm not sure

4 that we can sign the term sheet either.

5 MR. RAWALD: Right so Tim what you are

6 saying is the goal of soliciting comment would be to

7 allow the Department to add a prohibited act absent

8 the negotiation to the actual final package once it

9 went out.

10 MR. BALLO: Exactly.

11 MR. EISNER: Let me stress something here.

12 The Department by law is required to consider

13 comments it receives. It is a given that they have

14 the authority within limits to make changes to the

15 final rule. The Department has committed to the

16 working group rules and they have said we will send

17 around a summary of the comments and we can discuss

18 the comments, we can have meetings.

19 All I'm saying is I may not be here, you

20 may not be here. None of the people from DOE that

21 are here right now may be here when they get to that

22 final rules change. That doesn't mean that the new

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I people should not comply with this and do what they

2 said they would do, just no one in the room, just

3 like you can't make commitment to what you agree to

4 at the final rule stage, they may not even be here to

5 raise the issues that's all I'm trying to advise you

6 of not that it wouldn't happen.

7 It's hard to imagine that DOE wouldn't say,

a well we committed to do a summary and submit and

9 circulate that summary.

10 MR. DENNIS: I think the stated purpose of

11 putting in something here so that the rule could

12 potentially be changed without a supplemental

13 rule-making based on a couple of people's position is

14 not fair to the process. I think that if we want to

I5 solicit -- there needs to be comments on this and we

16 need to discuss this and we want prohibited acts, we

17 can discuss it now if we wanted.

18 If we get tons of comments there needs to

19 be prohibited acts, we can get the summaries and

20 discuss it and put out a supplemental notice of

21 proposed rule-making but I'll tell you when you put

22 out the ability to skirt a supplemental notice of

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1 proposed rule-making, you never know what will happen

2 with the Department, whether or not Doug wants it to

3 or not.

4 Somebody might say this is the end of the

5 administration we can expand authority to

6 contractors, we will do it. Doug, sorry your

7 opinion doesn't matter. I've been there so I think

8 that we are trying to skirt the process or trying to

9 you know -- the process here is not to skip a step

10 based on putting in an extra couple sentences here.

11 We either think we should have them or we don't.

12 MR. EISNER: I think it's time to take a

13 break and caucus a little bit and talk about some of

14 these issues because I think some of you are

15 misunderstanding what can happen and what cannot

16 happen and what may be done, so I would like to take a

17 break and I'd like to talk to you, I'd like to talk

18 to Keith, I'd like to talk to Tim, maybe together to

19 make sure everybody understands everything. You

20 guys make the decisions. I just want to make sure

21 you understand what's going on here.

22 Anybody is welcome to join us if they want

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1 but I would like to have some informal back and forth

2

so if we can take the usual 10 minutes?

3 (OFF THE RECORD AT 11:07 AM)

4 (ON THE RECORD AT 1:08 PM)

5 MR. EISNER: All right can we get started?

6 See if any of the multiple caucuses resulted in

7 anything we should talk about.

8 MR. BALLO: So this is Tim. Let me give

9 a report of where we are at and if I get anything

10 wrong please correct me. I think we are willing to

11 look at language that does not specifically call for

12 comment on the issue, that only recognizes the

13 disagreement on this issue. So with that said, that

14 does not apply to all of us so we potentially could

15 lose a vote or two against the term sheet going in

1

6 that direction.

17 But to the extent that it's important for

18 you all and for the distributors to not specifically

19 seek comment on that issue, that's what most of the

20 members of the efficiency caucus would do.

21 MR. DENNIS: This is Keith. We had an ad

22 hoc discussion at lunch. I don't think that we are

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1 necessarily a caucus. We had three pieces of

2 language that we put together, two pieces of language

3 I think, because I don't want to speak for anyone

4 that at least one party --

'.E

5 MR. PORTER: Read --

6 MR. DENNIS: Right, okay should I just

7 read this --

8 MR. PORTER: Yeah read --

9 MR. DENNIS: Sure so we had --- I'll read

10 all three because I think that only stay silent is

11 what I think Chuck's position is. Then we had the

12 working group could not come to consensus on whether

13 to include prohibited acts which I think is what you

14 are saying.

15 And we had -- the working group had

16 significant discussion on whether to include

17 additional prohibited acts, ultimately the group did

18 not recommend including additional prohibitive acts.

19 So that's -- those are the three that we had

20 discussed. I don't know where everyone stands but I

21 think at least we are in the -- we are fragmented on

22 where we would sit with all three of those. So I

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don't know if you want to put those up.

It's basically --

MS. DEGITZ: The first one was stay

silent?

MR. DENNIS: The first one is stay silent.

Second one is could not come to a consensus, and the

third is that we had a discussion and ultimately did

not recommend including -- stay silent is put nothing

in the document.

MR. EISNER: So the second one is what you

are saying is similar to what --

MR. DENNIS: It sounds similar, I mean

they --

MR. EISNER: Okay, are there comments or

thoughts?

PARTICIPANT: Can you restate those?

MR. DENNIS: Sure, I'll just read them.

So nothing is one, the working group could not come

to a consensus on whether to include additional

prohibited acts is two. The working group had

significant discussion on whether to include

additional prohibited acts. Ultimately the group

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1 did not recommend including additional prohibited

2 acts and ultimately did not recommend including

3 additional -- yep.

4 MR. EISNER: Any comments, reactions?

5 MS. MEYERS: Where does this go, where is

6 this information?

7 MR. EISNER: It will go in the preamble I

8 believe.

9 MS. MEYERS: Preamble?

10 MR. MCCRUDDEN: Yes, so the question then

11 this is I think a good question because I don't know

12 if this goes on a slide that we would then strangely

13 vote whether or not we could find consensus or

14 whether we couldn't find consensus or this is part of

15 the cover letter to the ASRAC full committee but I

16 don't know if it's something that would go in the

17 preamble because I don't know if that's sort of too

18 late.

19 MR. RAWALD: So just so you have an idea

20 of how we do these when we get this working group

21 recommendations is when we write the rule, it will say

22 the working group recommended the following and we'll

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I describe it. So if the group wanted to as a

2 consensus have it say, we could have the working

3 group could not come to a consensus on whether

4 including -- that could be a sentence in the

5 preamble, we could have that.

6 So if that's what you guys wanted to have it say.

7 MS. NOLL: This is Elizabeth. My concern

8 with number one and if others disagree with this I

9 would love to hear feedback, is that staying silent

10 on the issue would then mean that I am agreeing to a

11 complete enforcement plan that I believe to be

12 incomplete. Is that a fair -- but yeah, so I believe

13 it to be incomplete -- staying silent means that I am

14 agreeing that this is complete and in fact is not.

15 So number two, the working group could not

16 come to a consensus to me at least leaves that on the

17 table for future opportunity of comment to make a

18 case for why we believed we couldn't come to

19 consensus and we believed it was incomplete.

20 And then number three, a slight concern

21 with the language ultimately did not recommend

22 because again I don't think we want to recommend

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1 anything or the absence of -- we are not making a

2 recommendation, because we are not, we can't agree on

3 what the issue would be.

4 MR. RAWALD: This is Doug, it's almost

5 like from Elizabeth's point of view you want to

6 combine number two with the first half of number

7 three and the working group had significant

8 discussion on whether or not to include additional

9 prohibitive acts and ultimately could not come to a

10 consensus on whether to add additional prohibitive

11 acts.

12 MR. EISNER: So the way Doug suggested

13 combining the two of them, would anybody object to

14 that and if so why?

15 MR. HUNGERFORD: This is David. Is the

16 implication that this language would substitute for

17 anything in the paragraphs above that were originally

18 proposed?

19 PARTICIPANT: Yes, all of it.

20 MR. EISNER: I think it is being suggested

21 that it would replace the language that Tim put up

22 this morning.

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1 MR. HUNGERFORD: I'm a little troubled by

2 the lack of representation of the substance of the

3 issue.

4 MR. EISNER: I'm sorry can you say that

5 over again?

6 MR. HUNGERFORD: I said I'm troubled by

7 the fact that this sparks language that does not

8 characterize the nature of the disagreement in a

9 substantive way. It just says couldn't reach

10 agreement but people decided to not hold up consensus

11 which by definition is achieving consensus and I

12 think it sort of mischaracterizes the place where the

13 group is right now. I think the group right now is

14 that there is a significant number of people who

15 strongly disagree with the conclusion that there

16 should be no prohibited acts on other parties other

17 than the manufacturers, and there may be others in

18 the group who would -- would go along with that to

19 achieve consensus and so I'm troubled to push it all

20 the way to the margin like that.

21 I think it needs to be represented to

22 ASRAC and to the public at large as strongly as the

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I group actually feels about it. I think that's

2 appropriate to characterize the nature of this

3 dispute to ASRAC rather than leave it sort of

4 varying.

5 MR. EISNER: So you would for example

6 suggest adding a phrase in the middle of the sentence

7 about strong disagreements on both sides and

8 ultimately could not come to a consensus?

9 MR. RAWALD: I think actually what he

10 would like --

11 MR. HtJNGERFORD : No.

12 MR. RAWALD: I'm sorry, substantive

13 discussion of what this disagreement is based on.

14 MR. EISNER: But how much?

15 MR. HUNGERFORD: That's correct,

16 substantive discussion.

17 MR. FERNSTROM: This is Gary. So if we are

18 looking for folk's opinions or a position on this

19 I'll weigh in and I agree with David that the

20 situation ought to be characterized in the term sheet

21 for ASRAC and I could go along with number two if I

22 were confident that California had enforcement

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1 authority. If I thought California's appliance

2 standard enforcement capability were pre-empted by

3 the Department of Energy, then I would be reluctant

4 to agree with number two.

5 MS. MEYERS: Gary, this is Karen so you are

6 going to have to walk me through that again.

7 MR. FERNSTROM: All right, so David might

8 speak to this better than me but from what I know the

9 California Energy Commission has an appliance

10 standards enforcement rule-making underway. The

11 maximum penalty for which allowed by the legislature

12 is $2,500.00 per violation. And violations can

1 3 consist of failure to report to the CEC data base

14 where reporting is required or by failing to meet the

15 terms and conditions of the appliance regulations in

16 California.

17 The way this connects to the federal

18 regulations is Title 20 restates the federal

19 regulations so it has the section on federally

20 regulated appliances where it simply restates the

21 federal regulation and adds on state regulated

22 appliances for where it states the regulations for those

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I things independently regulated by California.

2 The enforcement rule-making is being

3 conducted to try and help the Energy Commission

4 determine how they will conduct enforcement and

5 utilize this authority granted by the legislature and

6 the question here is whether in the case of federally

7 regulated appliances California, by virtue of the

8 fact that it restates those regulations in its Title

9 20 regulations, can exercise its enforcement

10 authority or whether that authority would be

11 pre-empted by the DOE enforcement regulation.

12 MS. SHEPHERD: I don't want to get too

13 sidetracked, but that issue is already in the

14 California rules because, if they don't, it

15 specifically says that the federal rules are adopted

16 as California rules only if the federal rules are

17 found invalid or if there is a waiver granted, so

18 that issue is already there and that is how it is

19 structured, so I think we do need to talk about state

20 enforcement and that might be a better place to talk

21 about it there but I just wanted to clarify that

22 point.

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1 MR. FERNSTROM: Amy I'm not sure I

2 understood your clarification.

3 MS. SHEPHERD: So in Title 20 where it

4 sets -- it talks about federal standards it says,

5 this is what it says in the rule -- the federal

6 standards are adopted as California standards if the

7 federal standards are found to be invalid or there is

8 a waiver granted and that's because they can't

9 directly adopt the current regime of federal

10 standards into the California law.

11 So they are using -- they are saying they

12 have to be there but then they are carved out. Again

1 3 this goes down a rabbit hole but I think we can

14 discuss it when we discuss, I don't want to sidetrack

15 this discussion too much but I just wanted to clarify

16 exactly the current state. I know it's confusing

17 but that's the way they are structured.

is MR. RAWALD: I want to make sure I

19 understand what Gary's point is because I think I'm

20 -- so look I think what I am hearing Gary saying is

21 California has its own civil penalty authority and we

22 want to make sure that if this group doesn't put

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I forward a civil penalty authority over these

2 violations but we find in the state of California

3 that someone commits a violation of these regional

4 standards, we can still assess our own civil penalty

5 against them because we have our own structure there

6 and that this group's activity wouldn't pre-empt us

7 from doing that.

8 MR. FERNSTROM: That's the exact question

9 but I think Amy brings an interesting point to the

10 table about the relationship in general and that is

11 the specific manner in which the federal regulations

12 are covered by California. I was not aware of that.

13 It sounds to me like a good discussion for the

14 attorneys to have.

15 MR. DORIA: So this is Jordan, if I can do

16 this as a clarifying question on the language on the

17 screen. It was my understanding that the language

18 here, the intent was to include it in the preamble,

19 is that correct?

20 MR. EISNER: It is my understanding if the

21 group recommends that it be included in the preamble,

22 it would be included in the Preamble. In doing the

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1 preamble, it is a question about whether DOE would do

2 it on its own to say something about this issue

3 because it was such a significant issue in the

4 proceedings and that I don't know.

5 MR. RAWALD: Well I think Jordan is asking

6 the authors of the language if they meant it to be in

7 the preamble or simply just to be communicated to

8 ASRAC.

9 MR. DENNIS: You know from our group, we

10 didn't discuss it. I think that we were just

II throwing out ideas. Again we don't have any

12 specific alignment together, so this was just for

13 discussion.

14 MR. EISNER: Yes, and would you still

15 expect something to be in the preamble or not?

16 MR. BALLO: I think that would be our

17 preference, yes.

18 MR. WHITE: Those of us that advocate

19 staying silent could go anywhere.

20 MR. PORTER: Yeah, this is Steve Porter.

21 I'm ok with it in the preamble.

22 MR. DORIS: So, this is Jordan again. So

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t if that's the case, just putting it out there that's

2 the case and if it's the language as written in four

3 could the issue of additional -- I mean it seems to

4 me that the cover letter that goes to ASRAC is the

5 place for that additional context, not the preamble.

6 MR. DENNIS: You know I think that

7 additional context gets into a situation where we are

8 all looking at how much detail does each party get,

9 what different views do we get, how do we

10 characterize each other and I think the appropriate

11 place for that is probably in everyone's individual

12 comments because we could go on for a long time about

13 how we think federal authority could be a slippery

14 slope to DOE eventually saying who can screw in a

15 light bulb and whether that was really intended by

16 Congress who should install their expansion of

17 authority.

18 I know what they are trying to do. They

19 are trying to get people not to install it and they

20 are in the wrong spot. And I think we are tasked

21 here to work within the confines of what they said --

22 what their traditional role is and we can talk about

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whether there's a way to do that or not until we turn

2 blue. I don't think that you know, creating that

3 language here is going to be productive.

4 That's just saying we disagreed there was

5 a hearty debate, we couldn't agree on it. And leave

6 it to everyone to discuss what their position is and

7 not characterize other people's positions.

8 MS. NOLL: So I guess I have a question in

9 terms of how it's framed. The working group has had

10 a number of meetings, we have agreed on a number of

11 items. These are the items that we agreed on there

12 was a hearty debate on prohibitive acts, that was an

13 item that was not agreed on. So kind of going back

14 to the complete versus incomplete, it's clear that we

15 are presenting to you what we believe there is

16 unanimous consent around and what we believe should

17 be included in the enforcement.

18 MR. DENNIS: Yeah and I think everyone

19 else's opinion will be in the transcript and

20 everything like that. I think that's a good -- that

21 characterizes what I think is kind of going on.

22 MR. FERNSTROM: This is Gary but then if

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1 we don't have the opportunity to comment, we will

2 never be able to express our position or why we

3 weren't able to reach agreement on this issue.

4 MR. BALLO: So, so just to be clear we'll

5 -- any party will have the opportunity to comment on

6 the issue. The restriction I think, relative to

7 what we were talking about earlier is that DOE would

8 not in the preamble specifically seek comment on this

9 issue.

10 MR. FERNSTROM: Thank you. And this is

11 Gary and I might carry that thought one step further.

12 So if DOE is not specifically seeking comment on

13 this issue they might be very well inclined to just

14 ignore any comments.

15 MR. BALLO: Doug should answer this one.

16 DOE has an obligation to respond but they don't

17 necessarily have an obligation to. Let me leave that

18 to Doug.

19 MR. RAWALD: We consider all comment as

20 long as they are germane, there's no other word to

21 put out there. So if I received a comment that was

22 completely not related to the rule in any way, shape

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1 or form but merely about say my appearance, we would

2 not consider it. But anything germane to the rule

3 we will consider and certainly a comment about the

4 prohibited acts would be germane, given the fact

5 that we have had a lengthy discussion.

6 Anyone reviewing the record would see the

7 amount of time that we have had on this so we would

8 consider it.

9 MR. FERNSTROM: Okay thank you.

10 MR. SACHS: This is Harvey. Gary, your

tt comments could be submitted on the first day the

12 comment period is open and call for comments.

13 MR. FERNSTROM: Okay well it seems to me

14 that having the capability to provide comments is

15 just about as good as DOE requesting them.

16 MR. EISNER: Any other comments?

17 Thoughts?

18 MR. RAWALD: Well I know Dave had a, Dave

19 Hungerford, not Dave Winningham, I know he's looking

20 at me like not me -- so Dave Hungerford talked about

21 substantive ideas I don't know if Dave has had some

22 time to think about substantive language he would

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1 like to add, having heard Keith's concerns with that

2 possible endeavor?

3 MR. HUNGERFORD: I have and I guess can

4 you guys hear me okay?

5 MR. EISNER: Yes.

6 MR. HUNGERFORD: Okay, something

7 relatively simple that says that --- and I don't know

8 how you would write this but one from group -- some

9 of the members believe that a lack of a prohibitive

10 act for parties other than the manufacturers will not

11 constitute an effective enforcement regime whereas

12 others believe that the regime as presented will be

13 effective at achieving compliance, something to that

14 effect, the critical words being effective or not

15 effective.

16 MR. DENNIS: This is Keith are we going to

17 start adding to this? Because I would also add lack

18 of prohibitive acts other than the manufacturers

19 would not -- I would add that a creation of

20 prohibitive acts on parties other than manufacturers

21 would be outside the scope of DOE's legal authority,

22 would be beyond their traditional role in under EPCA

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1 and would be I don't know, we'd have to go -- we'd

2 have to continue to work on it in another work group

3 but I have some stuff to add to that.

4 MR. MCCRUDDEN: So this is Charlie with

5 ACCA, before we get going on this I don't think we

6 want to start to write this anything more than the

7 facts of the situation which are we had significant

8 discussion on whether to include additional

9 prohibitive acts and we did not come to a consensus.

10

11 If we start to sort of put in our own

12 ideas about why then we are just starting the

13 rule-making process on this page and I think let's

14 take care of that in the comments.

15 MR. PORTER: This is Steve Porter, I agree

16 T mean that will take forever and that's what the

17 comments are for. Everybody gets to comment as we

18 just discussed and you can write all that in and have

19 everybody write in what we want to have written in.

20 Let's put the facts in and then let the comment

21 period take care of it. I'm fine with that.

22 MR. EISNER: Would it satisfy --

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I MR. PORTER: And I'm fine with it in the

2 preamble.

3 MR. EISNER: Would it satisfy to have a

4 very brief statement with a reference to the

5 transcripts of those discussions that are referred to

6 in the docket? Just simply say see the docket for

7 expansion?

8 MR. RAWALD: So what we traditionally do,

9 we just cite to a particular page of the docket so if

10 that would suffice it would be a lot of work on our

11 part to narrow down those pages, but we could in the

12 preamble say see these relevant pages for the

13 discussion.

14 MS. DEGITZ: For the commercial

15 certification working group we also specify look at

16 these days for conversation so that would be another

17 option. We could say for additional discussions by

18 the working group look at this meeting.

19 MR. EISNER: Again what we are talking

20 about is picking. The working group had significant

21 discussions on whether to include additional acts,

22 ultimately did not recommend including those acts. See

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I X in the transcript for further elaboration.

2 MR. BALLO: Personally I like the idea of

3 just citing to today's transcript because I think we

4 have gotten all the arguments on both sides out there

5 so

6 MR. EISNER: Would that satisfy?

7 MR. RAWALD: It's easier for me and Laura.

8 MR. EISNER: But that is in fact.

9 MR. HUNGERFORD: Okay I could go with that

10 but I would prefer the language say did not reach

>> consensus rather than ultimately decided not to

12 include that or whatever what was just stated.

13 MR. EISNER: Did not come to consensus on

14 whether to include.

15 MR. RAWALD: Right so David would you

16 prefer number 2 or number 4? And this is Doug, I

17 like number 4 because it signals the hint that there

18 is something to look at in the transcript whereas

19 number 2 doesn't really tell you there's something to

20 look at, so that's why I like number 4. It says

21 hey if you go to the transcript you are going to see

22 some real vigorous debate about this, so that's why I

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1 like it.

2 MR. HUNGERFORD: 4 would be the best from

3 my perspective if we included the reference which you

4 suggest.

5 MR. EISNER: Does anybody object to 4 with

6 a new sentence being added referring to today's

7 transcript in the docket? Objections?

8 MR. WHITE: Tentatively I'm going to

9 reserve for a little bit.

10 MR. EISNER: How much is a little bit?

II Will we know before we do this?

12 MR. WHITE: At our next break I'll make

13 a phone call.

14 MS. MEYERS: Let's break.

15 PARTICIPANT: Yeah, let's break, let's get

16 this baby --

17 MR. RAWALD: Well are there any other

18 objections to this? I mean is there anybody else

19 objecting to it besides Chuck possibly?

20 MR. PORTER: This is Steve Porter. We

21 had a well you can't call it a caucus so we'll call

22 it a really good lunch.

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1 MR. RAWALD: You were at the DOE

2 cafeteria.

3 MR. PORTER: Absolutely.

4 MR. RAWALD: That's a limited notion.

5 MR. PORTER: That was awesome it took me

6 back to my Navy days. The you know, everybody's

7 concern on our side is just about that slippery slope

8 of you know, regulatory action and where DOE'S

9 authority is and you know I don't think this changes

10 any of that and the fact that this is a public

11 transcript anyway Chuck and they can look at it any

12 time anyway so I mean just pointing them at it lets

13 everybody know we all did our jobs I guess and that's

14 part of this too and doesn't defer any debate and

15 people should be allowed to make comments on it.

16 But we all know where we stand and if this

17 ends up what actions we have to take so I'm fine with

18 this and I'm fine with it in the preamble.

19 MR. RAWALD: Is that number 4, Steve?

20 MR. PORTER: Yes.

21 MR. RAWALD: Okay.

22 MS. NOLL: So I'm going to make the plea

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I that Karen made yesterday. This is incredibly

2 important to the advocates I think. None of us at

3 this table actually know the outcome of this

4 enforcement plan and how effective it will be and we

5 are all here trying to pull together what we think is

6 going to be as effective as possible but there is,

7 you know, a lot of if, ands or buts that are included

8 in that.

9 I think with respect to the mechanisms

10 that we've considered, we've all done it with a

11 perspective that we don't want to put any undue

12 burden on those that are good actors, so we really

13 have focused on what can we do and what can we put in

14 place that only penalizes the bad actors and not the

15 good actors.

16 And I think that is where I continue to

17 come from and that if we find this important plan to

18 be ineffective then a prohibitive act might actually

19 get at that point, but would concede to the fact that

20 we can't agree to it today and we don't know where

21 this is going to end up so to preserve that right and

22 to preserve the right to comment on that is important

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1 to a complete and effective enforcement plan.

2 MR. EISNER: Anybody else want to say

3 anything before we break? Okay, we are ready to give

4 you some time, the usual 10 minutes.

5 (OFF THE RECORD AT 1:38 PM)

6 (ON THE RECORD AT 2:00 PM)

7 MR. EISNER: Can we reconvene?

8 MR. WHITE: So this is Chuck White.

9 After some consideration and some consultation I am

10 still going to vote no on this. That -- I don't

11 think anybody else is going to join me but that's

12 okay, I don't mind being the lone wolf. We have some

13 concerns about what will happen should prohibited

14 acts come back that we would not necessarily have

15 input or I know we would have a comment period. I

16 know we have some concerns about that and for the

17 record I would like to say we don't support that.

18 MR. EISNER: Any other comments any

19 thoughts?

20 MR. SACHS: Just a question, this is

21 Harvey. I very much appreciate where you are coming

22 from Chuck, the question is whether we actually will

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1 be voting on preamble language as opposed to things

2 in the term sheet?

3 MR. EISNER: My understanding, clarify me

4 if I'm wrong, this would be preamble language,

5 referring people to the docket.

6 MR. SACHS: I'm sorry?

7 MR. EISNER: This would be preamble

8 language, that's my understanding.

9 MR. SACHS: The question is whether it's a

10 preamble language that's voted by this group or just

11 sort of acquiesced? Do we vote on the preamble?

12 MR. EISNER: You are voting on a

13 recommendation that this sentence be added to the

14 Preamble.

15 MR. RAWALD: I guess the way I understand

16 this is the term on the term sheet would be included

17 in the Preamble in this language in simple terms.

18 MR. EISNER: We had talked about that, I

19 don't think we necessarily voted specifically it

20 might be a bullet here and there on a slide with the

21 same thing.

22 Okay does anybody else have anything they want to say

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I on this? So we are talking about this language,

2 other than Chuck's noted objection does anybody else

3 object to this language?

4 All right so we show 1 negative vote which

5 means this language is going to go to ASRAC with a

6 recommendation that it be added to the preamble.

7 MR. BALLO: This is too much -- I just

8 wanted to make the point I mentioned earlier that I

9 don't object to this language. I do not yet know

10 how everyone in my caucus is going to vote on the

11 whole term sheet, partially as a result of this

12 language so I just wanted to flag that.

13 MR. EISNER: All right according to -- all

14 right according to my notes I would think now is the

15 time to go through a few slides to make sure we've

16 made final decisions on them and the first one we

17 should probably look at the plain copy, I believe is

18 Slide 24, Routine Violator. We have had extensive

19 discussions, I think changes have been made, does

20 anybody want to raise any issues or should we take a

21 vote? Slide 24 Routine Violator and by the way the

22 prior language tell me if people want to handle it

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I differently.

2 I think we would put it in the back that's

3 you know the easiest thing for you Doug, put it in

4 the back the language there that we agreed should be

5 in the preamble. We could add it to the slide on

6 violators, it might be clearer if it is just a

7 separate one.

8 MR. RAWALD: The vote we just had? Amy

9 -- Laura teed up its own slide, so it's its own

10 slide.

ii MR. EISNER: Okay everybody is comfortable

12 with that. All right, Routine Violator does anybody

13 object to this recommendation?

14 MR. RAWALD: Yeah, I'm a little confused

15 because we had this, well it says unanimous the slide

16 before I don't know what this suddenly has no vote on

17 it.

I8 MR. EISNER: I think we added or discussed

19 something yesterday, it doesn't say it now.

20 MS. DEGITZ: It goes to the next slide.

21 MR. RAWALD: Okay, right so nothing has

22 changed on this slide, it is a question of whether or

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1 not we are adding the language on the slide.

2 MR. EISNER: I'm sorry yeah, it's the

3 continued page, but it is the routine violation so

4 it's the in determining language that's new.

5 MR. RAWALD: Right and so I went back to

6 the Department last night I said that I would and

7 this is the Department's proffer of a different

8 version than we would be comfortable with which gives

9 flexibility to the Department to look at the various

1 0 business entities or not the business entities but

11 the various parts of the business.

12 MR. PORTER: So you took out the word

13 shall and put in may? I can't see the language you

14 struck out, oh it's there I'm sorry.

15 MR. RAWALD: Right so it was take out

16 "shall", add "may", take out "accordingly shall", and

17 then "if so would", take out "business entities", and

18 take out "shall", and add "would". So this is meant

19 to give DOE flexibility to look at each case based on

20 the facts of the case.

21 MS. SHEPHERD: This is Amy Shepherd and so

22 why would this -- do we not want this to be something

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I that they are always required to do, just to

2 consider?

3 MR. RAWALD: So we want to maximize

4 flexibility at the Department on this situation.

5 MR. PORTER: Doug, what about changing

6 "may" to "would".

7 MR. RAWALD: Yeah, I can ask the question,

8 I just have to ask several people on this so give me

9 all of your thoughts so I can ask them all at once.

10 MS. MEYERS: So the way I read this, you

11 may or may not have to consider whether it was

12 limited in scope or location which is a lot different

13 than changing that "shall" to "may" puts a whole new

14 context on this for me.

1 5 MR. PORTER: Karen if he changed "may" to

16 "would" consider does that help? Is that a middle

17 ground there or not?

18 MS. SHEPHERD: Okay so I think we've had

19 some conversations that relate to this issue but

20 specifically to manufacturer-owned distributions,

21 that's why we are having this flurry of like side

22 conversations to figure out how they relate to each

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1 other.

2 So I think that we can go through this

3 issue now but one thing that we just discussed is

4 that we have sort of identified the issues that we

5 have outstanding and there are these issues, there's

6 this issue, there's also I think what was open was

7 the response, the initial response period time. We

S have the product definition issue that we wanted to

9 discuss and we have the state issue.

10 Another issue that we have thought about

11 and talked about is for manufacturers. Whether or

12 not we need to clarify the extent of manufacturer

1 3 liability with regards to factory-owned distribution

14 and whether it should be covered as an additional

15 manufacturer's own distribution prohibited act.

16 So in terms of that we would also want to

17 address something I think that's very similar to this

18 in the scope. But those are big issues and I think

19 we want to be thoughtful about them so we sort of

20

came to the conclusion that that seems to be what's

21 still on the table that we should recognize that and

22 have another meeting as much as I hate to say it,

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I maybe ask for a two—week extension as to that period

2 or just schedule another meeting in two weeks to make }

3 sure that we have time to think about these issues

4 and hopefully resolve them all at that point.

5 And so I bring it up now because I think

6 this is going to -- this will relate I think a little

7 bit to that issue we discussed of the manufacturer

8 distribution.

9 MR. EISNER: Maybe. David Hungerford do you

JO have any idea on whether ASRAC would accept a two

II week request for extension?

12 MR. RAWALD: I think I have no idea, I

13 would presume yes if we tell them that we are making

14 progress, that's been pretty much the practice but

15 David can comment.

16 MR. HUNGERFORD: I think -- I'm not sure

17 whether ASRAC would have a say about that, that's

18 more of a DOE issue.

19 MR. RAWALD: Well ASRAC gave us the

20 deadline to be October, so we would have to go and

21 tell ASRAC we want more time for the allocation that

22 they gave us.

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1 MR. HUNGERFORD: Well I guess I'm thinking

2 of the practical matter that it would take two weeks

3 to get an ASRAC meeting together in order to consider

4 it.

5 MR. RAWALD: Yeah, but I think they can

6 decide through emailing, the manufactured housing

7 which is going on the same at this date they asked

8 for an extra month and got it without much

9 difficulty. I don't think that would be a problem so

10 I think we should schedule the meeting.

11 MR. HUNGERFORD: Okay yeah.

12 MR. RAWALD: And I'll ask the question.

13 MR. HUNGERFORD: Honestly if this group

14 needs that extra time to hammer out those extra

I5 details I can't imagine that ASRAC would say no.

16 They want a document to come out of this. We want a

17 result to come out of this sub-committee I'm sorry,

18 this working group and so if that requires extra time

19 and we have been diligent in pursuing an outcome and

20 we are close, I can't imagine that ASRAC would say

21 no.

22 MR. EISNER: Is everybody comfortable with

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asking for an extension because I had understood at

the beginning of this process we were worried about

the January 1st date I think it is for the rules

taking effect.

MR. WHITE: Does it mean we have to have

another meeting?

MR. EISNER: So everybody wants to check

their calendar?

MR. HUNGERF'ORD: Do we have a date in

mind?

MR. EISNER: Well if we were talking two

weeks from today it would be the 29th and 30th of

October.

MR. ROCKY: So this is Bryan from Johnson

Controls. I think at this point the request is for

an extension of either 15 or 30 days, it can be

decided what we want to do so that this committee can

get together one more time after having a few days to

provide -- get significant information on some of

these points from our management teams and customers

and other people so we come back one more time for

one day or two days and finish this out with these

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three or four things that are left hanging.

2 So I'm not worrying about setting what

3 date we do this, just we agree that we need to ask

4 for an extension or do we think we are going to get

5 done in the next two hours.

6 MR. RAWALD: Right so I think that we

7 should assume the extension will be granted and let's

8 schedule the meeting and then because I think it's

9 going to be granted.

10 MS. NOLL: Could we develop a scope of

11 what we want to ask the extension for to limit our

12 conversation to the remaining items?

13

MS. SHEPHERD: Oh right now -- yeah it was

14 what I just mentioned. So okay, I see what you are

15 saying, okay.

16 MS. NOLL: Draw the boundaries.

17

MS. SHEPHERD: Yeah before we have to act

18 that makes sense. Okay I think we have that we were

19 just on the Routine Violator Slide. I'm not sure

20 what slide the 3 day, 5 day -- I was not in the room

21 the last time we discussed this but the response

22 period -- the initial -- manufacturer liability. So

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I I don't know what you want to call that the 3 or

2 whatever day window or 5 day window.

3 Well it's not so much the right to appeal

4 but it's that response time.

5 MS. MEYERS: It's for that 3 business

6 days.

7 MS.SHEPHERD: Before you have to act.

8 It's actually on the manufacturer liability slide

9 sorry. I have an old one, okay I'm sorry. I must

10 have the oldest version. I have it right here -- oh

11 well then there you go hence the confusion.

12 The product definition is what do you call

13 it state enforcement? And then under for

14 manufacturer liability for manufacturer's own

15 distribution and I guess it would be prohibited act?

16 I'm just trying to make it really short.

17 MS. MEYERS: And then a final review of

i8 all the slides so that we really understand what we

19 have in the term sheet.

20 MR. ROCKY: This is Bryan, I'm sorry to

21 bring this one up at this point but if we are going

22 to have another discussion which I think we're headed

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1 toward, there's one more item which is on Slide 33,

2 the Product Determined Non-Compliant. I've been

3 informed in an email just in the late few minutes

4 that the first bullet and I don't know if you can get

5 to that point Laura Slide 33. Product Determined

6 Non-Compliant.

7 Okay if you go to the first bullet on that

8 Slide 33 it talks about -- yes exactly so that bullet

9 talks about a model that fails a regional state -

10 standard. The issue is the "in all certified

11 combinations". The process today for a

12 non-compliance to the national standard is that

13 particular system rating is generated or is

14 determined to be non-compliant, does not remove all

15 of the other certified combinations of that basic

16 model.

17 MR. RAWALD: Right SEER 14, and this is

18 Doug, so I acknowledge that difference because it is

19 different. The reason for it is because we have

20 established this threshold as SEER 14 being the least

2

1 efficient combination and now suddenly you have the

22 least efficient combination that's below 14 so that

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1 condensing unit in any combination should not have

2 been installed in the South based upon that

3 assessment of what SEER 14 is.

4 MR. ROCKY: If the failure Doug of that

5 base unit is the issue that the unit fails, right.

6 So we are saying the same thing. If the loose coil

7 rating fails the 14 SEER now all combinations of that

8 unit are not going to be allowed in that region. My

9 question is that doesn't say that it is the base

10 highest sales volume tested combination.

11 If I have a combination of an outdoor unit

12 that fails, the interpretation from my engineering

13 person is that means every model in that family is

14 now a failure.

15 MR. RAWALD: Right--John Hurst-- 14 SEER

16 MR. ROCKY: Not just -- it's the

17 difference if it is the base unit or just any model

18 failure is the question.

19 MR. RAWALD: Right and if you go back to

20 our 14 SEER slide. We haven't said that's the

21 highest sales volume -- that's the least efficient

22 combination so there are possibilities that

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1 manufacturer's may have a combination that is less

2 efficient than the highest sales volume combination.

3 Now John Hurst has told me before that in his

4 opinion the least efficient should be the highest

5 sales volume because that's the one you are going to

6 see the most of because it's the least efficient

7 combination but what we would determine, is if through

8 testing we have a combination with your condensing

9 unit that is now below 14, that's going to be the

10 least efficient combination hopefully, or all the

11 other ones are really problematic, right folks?

12 So -- but that's going to now transgress

13 the line that we have created here so that's based

14 upon how we defined 14 Seer we are seeing all those

15 combinations knocked out. Now we can talk about

16 whether we feel that's okay but that seems to be the

17 way to stay true to our admonition that the least

18 efficient combination is the 14 SEER.

19 1 heard the word caucus from Karen so ---

20 MR. SACHS: This is Harvey and rather than

21 caucus now since we are going to have an interlude of

22 a couple weeks, could we just add this to the list of

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1 things that need to be resolved? Would that be okay

2 Bryan?

3 MR. ROCKY: It is with me I mean we are

4 going to have a discussion about it and it may come

5 back that it's a non-issue but the verbiage as stated

6 is an issue and I need to have some discussion on it

7 so and I'm just concerned about it.

8 MR. SACHS: I'm just --

9 MR. ROCKY: Harvey I'm absolutely fine

10 that we put that on the meeting extension issue list

11 and hopefully well before then we can have some

12 clarification that takes care of it and we don't have

13 to discuss it.

14 MR. DORIA: This is Jordan, just a minor

15 point I think for bullet for the Manufacturer

i 6 Liability. I think what we are saying is the one other

17 piece we want to add is the question of whether or

18 not there will be a prohibitive act for manufacturer

19 owned distribution.

20 Again just to be clear when it goes to

21 ASRAC that's the only reason.

1 22 MR. EISNER: Okay anybody got anything

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1

else?

2 MR. SACHS: If we have the complete list I

3 have one little two minute item that doesn't need to

4 be postponed because I think it's just a misprint.

5 MR. RAWALD: Before we get to that is

6 everybody happy with this list? Does anybody want

7 me to add sub-issues so it's clear or all you all

8 clear on what's going to be talked about at the next

9 meeting?

10 Okay so meeting date can everybody meet

11 two weeks from today, the 29th and the 30th of

12 October?

13 You are going to send someone else who can

14 adequately represent you?

15 MR. ROY: The 29th does not work for me,

16 there's a DOE public meeting on PTACs and PTHPs,

17 yeah those dates work.

18 MR. DORIA: Do we -- this is Jordan do we

19 think it is going to be a two day meeting?

20 MR. EISNER: I thought this week's meeting

21 was going to be a one day meeting.

22 MR. RAWALD: With 7 issues it seems as if

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1 it is going to be two days, we have to plan for two

2 days at this point.

3 MR. DORIA: I can tell. you I cannot do the

4 31st but maybe I can --

5 MR. MELCHI: This is John with HARDI. Would

6 the first week of November be more palatable?

7 MR. FERNSTROM: So this is Gary, I can't

8 make it in October either. But I could in November.

9 MS. MEYERS: November 3rd and 4th? Oh

10 you can't do that one.

11 MR. PORTER: Don't forget I mean we need

12 to have something now for people because it's January

13 okay. I'm not saying that I'm saying could we keep

14 it as close to this date as possible so that we can

15 this done.

16 PARTICIPANT: We can't even get to a

17 meeting in two hours.

18 Mr. PORTER: I'm not saying that. I know

19 exactly this is January.

20 MR. NOLL: What about October 23rd and

21 24th, that's one week?

22 PARTICIPANTS SPEAKING WITHOUT MICS: Next

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1 week?

2 Next week -- no.

3 What about the 30th?

4 Doug?

5 We could do tomorrow.

6 I can't do it tomorrow.

7 I have a condo and a mattress. There are

8 a lot of people that live here we can always buddy

9

up.

10 MS. MEYERS: So a lot of these issues I'm

11 going to have to go back for the meeting extension, I

12 really -- tomorrow won't work for me because I need a

13 lot of input.

1

4 MR. EISNER: More than a 10 minute caucus?

1 5 MS. MEYERS: Well I was going to caucus on

16 bullet 5 or 6 but...

1 7 MR. EISNER: Either we -- I don't know are

1S we going to have trouble getting to consensus?

19 MR. PORTER: I think the fact that we

20 delayed here in the next two weeks we need to figure

21 out a meeting date one way or the other in the next

22 two weeks so we can get this thing out by January.

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1 We get assurance to the industry on inventory issues

2 that are out there for the distributor's inventory

3 issues are still an issue.

4 MR. FERNSTROM: This is Gary. It sounds

5 like there are a lot of complicated conflicts so

6 maybe we could take it a week at a time and have a

7 show of hands of those that can't make it and that

8 way we would be pretty quickly able to identify which

9 is the most favorable week.

10 MR. RAWALD: Yeah and if there's a Tuesday

11 that works for everyone I can call in and I won't be

12 here so and I can have someone else from DOE here so

13 don't let me stop you from using a Tuesday if Tuesday

14 works for everyone.

15 MR. NOLL: So let's start with the 23rd

16 and 24th next week. How many can come? Thursday -

17 Friday next week.

18 MR. EISNER: I have a problem on the 23rd.

19 MR. NOLL: Who cannot come the 23rd and

20 24th?

21 MR. HUNGERFORD: Well the 23rd and 24th

22 are a Thursday and Friday.

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1 Yeah. So if you were talking about Wednesday and

2 Thursday I can't come on the 22nd.

3 MR. NOLL: No I'm actually talking about

4 the 23rd and 24th Thursday and Friday.

S MR. HUNGERFORD: Well I can't come to any

6 of them but I can call in on Thursday and Friday.

7 MR. NOLL: So 1, 2, 3, 4. The 29th is the

8 DOE meeting, the PTAC meeting. The 30th and 31st?

9 A show of hands who cannot come? 4. Just the 31st?

10 MR. ROY: How about the 27th and 28th

11 early in the week? Monday and Tuesday?

12 MR. HUNGERFORD: I can't participate the

13 27th.

14 MR. NOLL: Raise hands for the 27th and

15 28th of those who cannot participate? Post-dated.

16 The 3rd and the 4th? Oh that's a bad one. I cannot.

17 There's a lot that can't do that day - that's a

18 Thursday and Friday.

19 MR. BALLO: The 6th and 7th I think you

20 lose all the efficiency group so you might want to

21 consider that many manufacturers --

22 MS. MEYERS: I really think we can get

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1 this done in one day and I think that we are having a

2 lot of problem because I think we are trying to set a

3 two day meeting so you know I think we commit to one

4 day, we may be in here at 10 o'clock at night but if we

5 could commit to a one-day meeting I mean would

6 everyone agree to that? I really think we are going

7 to be able to get it done in one day.

8 MR. BALLO: If there's a possibility of

9 running long then we might not want to have it at DOE

10 because I think don't you all have to get us at --

11 MS. MEYERS: 6:00 P.M. I will get a

12 conference room, Rheem will be happy to pay for a

13 conference room at a hotel.

14 PARTICIPANT: What if we started earlier

15 in the morning?

16 MS. MEYERS: If that's allowed. So are

17 you suggesting October 30th? Does that seem to

18 be--

19 PARTICIPANT: What was the day?

20 PARTICIPANT: 30th.

21 MS. MEYERS: For a one day meeting?

22 PARTICIPANT: I can do that.

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1 PARTICIPANT: I'm sorry how many cannot

2 come on --

3 MR. NOLL: October 30th?

4 PARTICIPANT: Perfect.

5 MR. NOLL: The 23rd? 29th? PTAC

6 meeting. The 23rd a week from today raise your hand

7 if you cannot attend? One week from today? The

8 23rd a show of hands, it's the best so far.

9 MR. HUNGERFORD: And I will affirm that I

10 can attend the 23rd.

f,.. 11 MR. NOLL: That's 3 cannot.

12 PARTICIPANT: What about the 22nd?

13 PARTICIPANT: Yeah how about the 22nd DOE

14 meeting 21st? That's the ---

15 MR. FERNSTROM: Let me put in a request

16 for the 23rd since it looked like it had the fewest

17 number of people that can't make it.

18 PARTICIPANT: 21st.

19 MR. FERNSTROM: Is Neil a must be here?

20 Okay. 21st? I can do the 21st.

21 MS. SHEPHERD: I would prefer not to do it

22 that early because I think the one thing that we can

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1 do is maybe draft up some sample language and maybe

2 have you know run it past folks that we think might

3 have a particular issue to get it prepared for a

4 meeting which would make the meeting go a lot faster

5 and that doesn't give much turn-around time for that.

6 MR. EISNER: Well, if we think it is one

7 day how many people would consider a weekend? We

8 might have no conflicts then other than family?

9 MR. FERNSTROM: Let's go back to Steve's

10 question, how many people cannot make it on the 24th?

11 Okay I'm seeing one hand raised.

12 MR. SACHS: I cannot make it the 24th.

13 MR. FERNSTROM: Harvey so two hands cannot

14 make it on the 24th. Can you send delegates?

15 MR. LATTANZI: Yeah I could possibly send

16 an alternative or actually I might be able to call in

17 that day but it is unlikely I would be here.

18 MR. FERNSTROM: I can't make it on the

19 27th. The 24th folks is my birthday.

20 PARTICIPANT: You are turning 75 that day?

21 MR. FERNSTROM: I'll be turning 70 but if

22 we don't get this done I'll get older quicker.

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1 MS. MEYERS: How about November 5th?

2 MR. FERNSTROM: I can do the 5th.

3 PARTICIPANT: I can't do the 5th either.

4 PARTICIPANT: How about the 7th?

5 MR. FERNSTROM: Let's go back to the 24th.

6 MR. LATTANZI: I think it's just me and you

7 pal so we ought to --

8 MR. SACHS: Get our act together?

9 MR. LATTANZI: We need to acquiesce.

10 MR. SACHS: I'll be in Dublin on my way to

11 Paris.

12 MR. FERNSTROM: So Harvey I think we --

13 MR. SACHS: I'm going to have to get a

14 proxy any time between the 23rd and November 10th.

15 MR. FERNSTROM: But I think we know pretty

16 well where you stand on this and I think we can

17 probably adequately represent you.

18 MR. SACH: You need another dummy to

19 vote.

20 MR. FERNSTROM: Exactly.

21 MR. NOLL: I would like to say Harvey --

22 MR. SACHS: The 6th and 7th I have got all

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my meetings so I'm not really available until the

2 10th of November. Don't worry about me.

3 MR. FERNSTROM: This is Gary, the 24th is

41 going once, it's going twice, it is sold starting at

5 8:00.

6 PARTICIPANT: Starting at 8:00.

7 MR. RAWALD: 8:00

8 MR. FERNSTROM: Well that would --

9 MR. HUNGERFORD: That's 4 AM my time.

10 MR. FERNSTROM: I was going to say that

11 would be okay with me, Steve, if you supply the

12 coffee.

13 MR. EISNER: So October 24th, 8 AM, maybe 7.

14 Okay, 8 AM.

15 MR. LATTANZI: I'll be on the phone which

16 is fine or I'll have a proxy but that's a Friday good

17 luck with you folks booking flights, you are going

18 home Saturday morning.

19 MR. RAWALD: Is there anything else to

20 discuss today?

21 MR. EISNER: I think there is. Harvey

22 can you go on your mic, you said you had an issue?

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Harvey? You said you had an issue you thought you

2 could discuss.

3 MR. SACHS: Quickly Doug, this is Harvey

4 and this is real easy. The assumption is line 22

5 all residential equipment is installed in residences

6 and if we could just change a couple of words it

7 would acknowledge that there is a lot of single faced

S small split systems and other in buildings that are

9 not residential.

10 So on line 2 just remove the word "home"

11 from "homeowner" and in the third major bullet the

12 first line where it says "residence" just change it

13 to "building".

14 MR. RAWALD: So the word building is

15 tricky because we have a concern about multi-unit

16 buildings and so we arrived on residence because we

17 wanted it to be one residence.

18 MR. SACHS: I'm prepared for you I have a

19 plan B which was location. But that may also assume

20 multi-family.

21 MR. RAWALD: What we don't want is a guy

22 who has installed 25 in a building or a location.

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MR. SACHS: Location can be read as

2 apartment number.

3 MS. MEYERS: Can we take out the words in

4 one residence?

5 MR. RAWALD: And do what?

6 MS. MEYERS: If non-compliant installation

7 is remediated before DOE makes a finding. I don't

8 know why we have the words in --

9 MR. RAWARDS: Because it's a reward, it's

10 a reward for the guy who makes a mistake. So the

11 person makes a one-time mistake, gets no finding of a

1

2 violation at all, it's completely non-existent. So

13 if the person makes one mistaken, they are able to go

14 in there and fix that mistake and there's no finding

15 about them and when we close the case there's no

16 public record at all.

17 A guy who has installed it in multiple

18 places but fixes it, there's a finding of violation

19 but then the person went out and fixed it.

20 MS. MEYERS: Okay so here's my second.

21 If a singular non-compliant installation is

22 remediated before DOE makes a finding?

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1 PARTICIPANT: Sold!

2 MR. MCCRUDDEN: Well actually on that one

3 I think we kept it this way because what if you have

4 two systems on one house.

5 MR. RAWALD: Yeah, because the question

6 came up for the McMansion as John Hurst called them

7 so we have 2 or 3 zones and they are all

8 non-compliant.

9 MS. MEYERS: Sorry.

10 MR. EISNER: Residence or similar

11 structure or?

12 MS. SHEPHERD: Harvey can you restate what

13 your concern was?

14 MR. SACHS: This is Harvey. My concern

15 is that a non-trivial number of residential air

16 conditioners are installed in locations that are

17 non-residential.

18 MS. SHEPHERD: Okay I have a third, how

19 about if a non-compliant installation in one

20 installation is remediated, it's not very pretty

21 English but does it get to22 MR. RAWALD: How about one residence or a

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1 parenthetical or equivalent?

2 MR. SACHS: That's cool. I'm really

3 trying to be easy but I just don't want to exclude.

4 MR. RAWALD: That's why we want you here

5 Harvey, we don't want you to send an alternate, we

6 like you. And just for the above, we changed

7 "homeowner" to "owner" that's a term we used with the

S contractor was end user can we just make it say "end

9 user" here, okay.

10 MR. EISNER: Does anybody object to any of

11 these changes?

12 MR. FERNSTROM: Thank you Harvey that's a

13 really important point.

14 MR. EISNER: Okay, Harvey amendment passed

15 unanimously. We'll go on, that's all Harvey had it

16 is only 20 to 3 do we want to spend time on some of

17 these other issues to make sure we finish this in one

18 day? All right where is the issue slide? Okay

19 which ones should we start with?

20 PARTICIPANTS: Yes.

21 Mr. EISNER: All right where's the issue's

22 slide.

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1 MS. SHEPHERD: I was -- so I think we can

2 go back to the slide to get started with on Routine

3 Violation. I don't know that we would want to

4 necessarily because as I mentioned it is I think

5 related to the issue we want to discuss with

6 manufacturer owned distribution which I don't think

7 we will get to today so I don't know that we

8 necessarily would want to vote on it but I think we

9 can talk about it and see where we are.

10 So I guess my concern or my question with

11 the change that was made is that I don't really see

12 what the burden is for saying that DOE it has to just

13 consider it. They can consider it and determine that

14 it doesn't warrant any further action and so they are

15 not going to narrow the scope at all or they can

16 consider it and decide that it is but I guess that's

17 the question that I have as to what the reason would

18 be that there would be no reason -- that's not going

19 to be clear.

20 What the basis would be that DOE would not

21 want to consider these factors.

22 MR. RAWALD: Right, so I've given you the

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l DOE response so what you are asking about is centered

2 on this first replacement of "shall" with "may" and

3 you want me to go back to the Department and say

4 listen shall consider basically says that you have

5 discretion so why are we trying to make it even more

6 seemingly amorphous?

7 MS. SHEPHERD: Well no, yes and I think

8 it's a valid this that you should consider. I mean

9 to say may consider because we don't want to say

1 0 shall is saying we don't want to have to consider

11 whether or not this is discrete in its location, that

12 just doesn't make sense to me.

13 MR. RAWALD: Okay right and I understand

14 your point so I will bring that back, any other

15 comments on the DOE proposed responsive language

16 besides that one word change?

17 MR. EISNER: If we add to the list who is

18 going to do what, Doug is going to check on this on

l9 this word for example, is that easy for you to do so

20 everybody knows that they have got.

21 MS. SHEPHERD: And just for clarification

22 the deletion of business entities, was there a reason

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of particular concern for that?

MR. RAWALD: Yeah so in my discussions

with people the last very short bit that we have had

was there was a complete understanding of the idea of

the location issue and how that works, the business

entity there was less sympathy because it's all the

same mother ship and there was less traction for the

Department to understand why that would be different.

You gave the example I think that Jordan

had provided Ingersoll Rand residential versus

commercial which would-be I think what we were

getting at here with that as opposed to Ingersoll

Rand, St. Louis or Ingersoll Rand, Wyoming so that

was easier for me to sell to people that makes a

difference so if that was the reaction of the folks I

talked to.

MS. SHEPHERD: I don't have any other

concerns but again I don't necessarily want to vote

on this until we have the other discussion but I

think barring anything else -- so I think if we could

just not leave it open unless anybody has any comment

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1 but can kind of consider it done, I think that works.

2 MR. RAWALD: Okay so the request that I am

3 taking to the Department is can you turn "may" to

4 "shall" or "would" if that is palatable as Steve

5 Porter offered as an alternative the Department would

6 consider so or shall consider, I don't think it

7 matters really but I want to make sure I get it all

8 clear.

9 MR. EISNER: Okay nothing else on this

10 slide back to the issue slide.

11 MS. NOLL: So I have a quick question.

12 On Slide 23 we added additional language. A party

13 may remediate by replacement of non-compliant or

14 demonstrate to the Department's satisfaction

15 attempted replacement of non-compliant units and this

16 was in an effort to add --

17 MR. RAWALD: It's to give the Department

18 flexibility in a case where somebody has tried their

19 best to get something replaced but just can't due to

20 the fact that the homeowner or the end user is not

21 allowing them to enter the property and won't allow

22 someone else they are paying to enter the property

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I and just don't want to have anything to do with

2 changing the system at this point.

3 They are content with what they have and

4 the company has tried their hardest and the

5 Department could say hey you've done everything you

6 could, we are going to go ahead and give you a pass

7 here because you did everything else that you needed

8 to do.

9 MS. NOLL: Right and then Slide 25 we are

I0 adding additional flexibility to consider for the

11 Department to consider the location specific.

12 MR. RAWALD: So specific to that company

13 so once again if Ingersoll Rand, St. Louis, I had to

f4 use Jordan as an example because he put it forward is

15 the one transgressing should Ingersoll Rand, Atlanta

16 be the one dealing with the problem or could we just

17 say Ingersoll Rand, St. Louis is the routine

18 violator.

19 MS. SHEPHERD: So we are adding additional

20 flexibility to the routine violator definition in

21 doing so under both of those additions.

22 MR. RAWALD: To the scope or the finding

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I of the routine violator and once again it's not a

2 requirement, the Department can of course say

3 Ingersoll Rand at large but what the manufacturer

4 asked was would we consider narrowing that if we

5 think it's appropriate given that all the

6 transgressions are in one place.

7 MS. SHEPHERD: Okay, thank you. Actually

8 I had a follow-up question on that slide. I think

9 that one thing that we have discussed is that there

10 isn't -- as this is drafted right now there won't be

11 any available product to remediate with. I think i®

12 that that's something that we could address through

13 the product definition but if not then I would ask

14 Doug whether he could perhaps include some language

15 or guidance as to what that would look like?

16 We briefly mentioned it yesterday that it

17 would be some sort of communication to a manufacturer

18 or whoever to tell them that it's okay to sell to

19 somebody who is trying to remediate.

20 MR. EISNER: You were going to ask for

21 information to match the serial numbers as I recall.

22 PARTICIPANT: No, that's different.

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MR. RAWALD: That's post remediation we

2 are going to collect the serial number and go back to

3 the manufacturer and say make sure there was no

4 actual warranty claim on the one that we replaced so

5 the manufacturer feels good that they weren't duped

6 into paying further remediation of somebody that

7 should be paying for it themselves so Amy's question

8 is we don't have it described here the process by

9 which someone trying to remediate would get to the

10 unit to remediate with.

ii And so how would they get to that and so

12 that's a very fair question and so what I had

13 described is well they can come to the Department and

14 say that hey we are trying to obtain a 14 SEER

15 product to go ahead and remediate and then we would

16 facilitate that contact with the manufacturer. We

17 haven't described that at all here and how to do that

18 so Amy is asking if we can do that if I understand

19 correctly.

20 MS. SHEPHERD: But Chuck just pointed out

21 we are on the wrong slide, it would actually be on

22 the Routine Violator slide, but yeah.

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I MR. EISNER: Could it be handled through

2 language that they would simply come to DOE and DOE

3 would establish the process by which they were going

4 to insure the product was being replaced? You would

5 tell the individual what he or she had to do. Is

6 that possible?

7 MR. RAWALD: You're asking me?

8 MR. EISNER: Yeah.

9 MR. RAWALD: I thought you said the

10 question was Amy.

ii MR. EISNER: No, no I was saying when you

12 have found them to be a violator and they say they

13 want to remediate you need verification that they

14 have in fact used the SEER 14 you are going to let

i5 them get to install in lieu of the one they put in

16 illegally so can the rule just be written so that as

17 part of your action as the enforcer, you tell them

18 what they have to do to prove to you that they have

19 replaced it.

20 MS. SHEPHERD: I didn't hear the question.

21 MR. RAWALD: The question is not proof of

22 replacement it is how to obtain a unit for

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1 replacement.

2 MR. EISNER: Well you give them permission

3 to sell the product.

4 MS. SHEPHERD: I think he's got a point is

5 that it's on both ends right so you are saying ok,

6 somewhere you have to get the product and so they get

7 the product and then are you going to ask them also

9 to say okay, did you actually install it where you

9 said you were as opposed to just getting it I don't

10 know selling it to them.

11 MR. RAWALD: Rights that makes sense. So the

12 question is it sounds like you want me to put

13 together some language there to add to this.

14 MS. SHEPHERD: Yes, as I said I think that

15 if we had a different definition of product this

16 could take care of itself because that equipment

17 would be out there we wouldn't have to go through all

18 this right, Doug? But in lieu of that then we need

19 to have something else.

20 MR. RAWALD: Right so I can work on that

21 for the next meeting.

22 MR. EISNER: All right.

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1 PARTICIPANT: You're an optimist.

2 MR. PORTER: Did we agree or do we need to

3 put the language in there about we are going to

4 follow the recall process on that, it would be our

5 guideline for whether somebody did the right thing or

6 not? Or had gone through enough processes which is

7 I mailed, I've called, I mean when do you stop. I

8 don't understand the stop on it.

9 MS. SHEPHERD: It's a different issue

10 right? I think he is used to be talking about when

11 you are trying to remediate you are talking about

12 that right?

13 MR. RAWALD: Right, we haven't described

14 fulsomely what it would be and I don't mind this

15 group saying well what do we think is required to

16 show the DOE satisfaction that you have done that?

17 We have simply given DOE discretion to decide if

18 that's something that ---- and I like having discretion --

19 but if the group wants to take away my discretion

20 then the group is at the discretion to do so.

21 MR. EISNER: Okay anything else on this

22 issue? I'm going to go back to the Issue Slide.

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1 What else -- what would be appropriate to talk about

2 next? Should we go to product definition now?

3 MS. DEGITZ: You a -- or 3 day?

4 MS. SHEPHERD: Okay so I think we can

5 start with the product definition question. So as

6 you all know, we don't agree with the view the

7 Department has about the scope of the product

8 definition and whether it includes products subject

9 to a national standard. I don't think we have to

10 get into that because one thing that Doug said is

11 that the Department can determine the scope of its

12 enforcement plan within what it believes its

1 3 authority is so I think that's really what we are

14 talking about here.

15 And I think that as I have said in other

16 meetings you know our view is that the ultimate

17 purpose of this rule is to stop the installation of

18 non-compliant equipment and promote the installation

19 of high-efficiency equipment and we have a concern

20 that the way we are drafting this and the way that we

21 are going for I guess I'll call it the "ultimate"

22 option even though I would view it in its nuclear

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1

sense.

2 But we will call it the ultimate option.

3 So the ultimate option is its' kind of perverse to me

4 because its restricting the availability of the very

5 equipment that we want to install so we were thinking

6 of something to address and issue that Tim and I had

7 briefly discussed as well which is this idea that you

8 have something in between that ultimate option and

9 nothing. .

10 And so what we were going to consider was

1

1 whether or not there would be a way to say okay if

12 you have a routine violation we are going to start

13 with a 13 -- a ban on 13 SEER units and if the

14 Department found that there was a particulars problem

15 or that it was egregious or there was more deterrent

16 needed that they could go then to the higher

17 efficiency equipment.

18 I've not really had much thought about

19 exactly what the threshold for that would be but just

20 the idea that if you can just fix it, you just fix it

21 and if you can't just fix it, then you go to something

22 more, so that's the basic premise and then as part of

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1 that we also very strongly feel that it should be

2 limited to the product that was set forth in our

3 ground rules for this negotiation which is the

4 products that are subject to the regional standards.

5 It's not going to be -- it wouldn't be

6 applicable to the national products and I think that

7 if you had that two tier system inclusive of all the

8 other things that we have in this package, including

9 the labeling that the manufacturers are doing,

10 including the 14 SEER guidance, that that is an

11 effective plan and I think that we also feel that if

12 you know we have talked a little bit about prohibited

13 acts and having a look back. You know we don't have

14 to start with the ultimate option when we don't know

15 exactly what we are dealing with.

16 If we instituted this, DOE would have the

17 flexibility to do that where it thought necessary but

18 it wouldn't have to do that in every single case and

19 the key thing here for manufacturers is for a

20 distributor that has been found to be a routine

21 violator, they may be a routine violator but if you

22 have the ultimate action imposed on them on every

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1 time and every case you are impacting the sales of

2 the manufacturer to that distributor.

3 The manufacturer did nothing wrong and

4 that's the primary concern, so we are trying to --

5 instead of having such a broad scope of the

6 enforcement, we are trying to tailor it more so that

7 you minimize that impact to parties that have no

8 culpability in this but you still are able to enforce

9 the rule.

10 MR. EISNER: Any reactions?

11 MS. MEYERS: A successful term sheet is

12 predicated on the Department's answer.

13 MS. NOLL: This is Elizabeth. Just

14 reacting to what Amy said, I think I agree with

15 everything that you said but I would also argue that

16 that's already baked in to some of the language that

17 we provided in granting the Department flexibility to

18 consider the scope and flexibility which they

19 determine routine violation and --

20 MS. SHEPHERD: I would actually just say

21 yes let's have them use those same factors for this

22 decision right so, I absolutely agree. So they go

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1 through this whole process and they gauge the scope

2 and the severity of what has happened and they get to

3 the end of the it and they have -- they may be able

4 to through the language that we proposed, limit to

5 the location but they have one choice. They have

6 one choice.

7 Regardless of whether they were on the

8 fence about it or we should do this or whether it was

9 so egregious. You are going to treat that person

10 that was at the lower end of the severity the exact

11 same way as you are going to treat the completely

12 willful, knowledgeable, culpable, evil bad actor and

13 so that's the problem is they will still have that

14 ability to use the ultimate solution for that bad

15 person but they would have flexibility to adjust for

16 everything in between.

17 And they could rely on the factors that

18 they have already looked at, they already know so it

19 shouldn`t be a significant burden to the Department

20 to make that flexible decision based on the facts

21 they already have.

22 MR. RAWALD: I do want to clarify

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something you said that we still have the ability of

2 the ultimate solution but you don't want us to have

3 the ultimate solution as talked about this morning.

4 The ultimate solution in your mind would be no sales

5 of split systems or single package. That would be the

6 ultimate, so it would be quite the ultimate that we

7 have right now is that right?

8 MS. MEYERS: That is correct.

9 MR. RAWALD: Go ahead Karen.

10 MS. MEYERS: That's probably 75% of the

11 market.

12 MR. RAWALD: No, I'm not -- I'm just

13 making sure because we have been using terms here I

14 just want to make sure we are being -- everyone

15 understands what we are saying. So what I hear in

16 Amy's proposal and she mentioned this to me yesterday

17 and I thought this through and I want to make sure

18 that's how I see it.

19 Rather than binary outcome which is now

20 either there are violations, or you have now reached

21 the threshold of routine violator we can now say

22 routine violator who is not egregious versus routine

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1 violator, who is a really bad routine violator.

2 So adding some more process here in some

3 way because now the Department is going to have to

4 parcel out how bad the routine violator really is.

5 Will that make it easier for us to find routine

6 violations in the first place? Maybe or maybe not

7 but it does add some more process here so we have the

8 routine violator and then we have the really bad

9 routine violator, however we want to term that so

10 there's two tracks here of routine violation.

11 So that's something to consider it's not

12 really what the prohibited act as described had,

13 right, the prohibited act says the manufacturer can't

14 sell product to a contractor, dealer or distributor

15 who routinely violates the thing so now I'm adding

16 into that through some more level of gradation which

17 hasn't been discussed from a legal point of view on

18 our part, whether we can do such. Nor has it been

19 discussed from a policy point of view whether it's a

20 very good idea but I will take the idea back and

21 discuss it over the week until next week.

22 The other piece of that is the kind of

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I layer of how do we want to look at product. As I

2 mentioned before we can narrow the scope of our

3 enforcement authority such that we could say well we

4 are going to charge manufacturers for selling our

5 products that are actually in these two product

6 classes as opposed to the entire seven classes of

7 products that I laid out in 430.32(c), so Amy's three

8 options as I see them or the three options the two

9 that Amy has offered and the third that we have

10 offered would be: narrowing the class or product to

It just those two product classes that don't meet the

12 standard.

13 Anything in those two product classes, the

14 product classes being split central air conditioner

15 and single package and anything under the big heading

16 of product under 430.32(c) so what I could tell you is

17 the Department has already told me there is no

18 interest, no interest in the first option. So I

19 could possibly go back to the Department with the

20 second option and I told this to Amy yesterday which

21 is okay let's limit what we are going to charge to

22 sell products and manufacturers to is selling those

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1 splits in the single package regardless of SEER value

2 or EER value to those people that we know are known

3 violators.

4 I can go back to the Department with that.

5 I can go back to the Department with the first but I

6 can tell you what the reaction will be. I have

7 already had this conversation twice but I will go --

8 but the second one if the group came to a consensus

9 saying this is what we think makes sense then I could

10 bring that back and say this is a very powerful

11 incentive and I can do my best to coax people as I

12 have done before, make a difference here.

13 If the group comes to a consensus and they

14 all think that it should be the first one that's fine

15 too, it's going to be a lot harder for me to get the

16 traction I think I need but I am kind of just letting

17 you read the tea leaves about what I am dealing with

18 here. So that's where we are, so I think two

19 issues. One, do we as a group want to create two

20 tracks of routine violators? And two, where do we

21 want to fall out with the term product with those

22 three options as I have described them.

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MS. SHEPHERD: I actually, Doug I have to

2 push back a little bit on this two track idea --

3 MR. RAWALD: So this is Doug, okay.

4 MS. SHEPHERD: Because you have

5 enforcement guidelines right now and you go through

6 all of your enforcement guidelines and the bevy of

7 things that can happen and you judge the severity of

8 it but you don't classify violators now as severe and

9 non-severe or some gradation in between. You are

10 using your discretion to determine the appropriate

11 scope of the enforcement action. I really don't see

12 how this is any different, especially because I would

13 suggest that you use the exact same seven, however

14 many factors we have, you are going to be sitting on

15 that information anyway.

16 I don't really see how you are going to

17 have to go out and get additional information. You

18 will already have it and all we are saying is that

19 you address the scope to fit that, particularly given

20 here what you are talking about is restricting

21 compliant, efficient equipment in every single case.

22 And then the other thing that I would say

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1 is I just want to remind everybody this is not a

2 radical departure in terms of the product class

3 because when we started this process we had ground

4 rules and these are the specific products that we

5 said in the ground rule document we were talking

6 about.

7 And we started this process and we started

8 the manufacturer labeling suggestion and idea and we

9 started the 14 SEER Guidance all under that

10 understanding. And I understand that we got

11 additional clarification from the Department as we

12 moved through the process that altered that in some

13 ways. I'm not saying completely, but I'm just

14 saying that I really think that we should stick to

15 that original scope when we are talking about the

16 consequences of violations of regional standards.

17 MR. RAWALD: So this is Doug and I do want

18 to tease out this idea on the routine violator. The

19 reason why I see this as creating two different

20 tracks is because the manufacturer is going to face

21 two different consequences right so in the

22 non-egregious routine violator they are going to be

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1 allowed to sell over 14 SEER Product to the person.

2 In the case of the egregious violator they

3 are not going to be allowed to sell any of the split

4 systems or the single packages as you have presented the

5 idea. I have to in my notice to make sure the

6 manufacturer knows what they can and can't sell, say

7 whether this is going to be an egregious violator or

8 not egregious violator so they know what they can and

9 can't sell and what they would be facing consequences

10 for selling to the person.

11 So we are going to have to make an

12 election to say they are a routine violator or an

13 egregious routine violator or whatever term we have,

14 there's going to be a different track. Now I agree

15 that I will have all the information before me but it

16 is a different process. I mean, I am going to have to

17 make a decision and right now what we are saying is

18 we are deciding between violator and routine

1 9 violator.

20 Everyone should be aware that there's

21 going to be a third bucket. There's going to be

22 non-routine violator, a routine violator and an

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1 egregious routine violator so there will be another

2 track to this and that's of note I think to be aware

3 of where we are systematically in order for us to

4 accomplish that.

5 Because a manufacturer had to be put on

6 notice what kind of violator this person is so they

7 know what range of products they can sell that

8 person. In my opinion, I'm trying to help you guys

9 out here to understand what you are dealing with.

10 MS. SHEPHERD: I think that's true, but I

11 think that's reality. There aren't just

12 non-violators or particularly egregious violators,

13 that's why I think this is appropriate because there

14 is going to be a range of activity and so that's why

15 I think that's appropriate but I take your point.

16 MR. RAWALD: Right and I'm dealing with a

17 statute which told me manufacturers can't sell to

18 routine violators so I have to look at the legality

19 of that too with my legal folks, we haven't looked at

20 the issue from that way.

21 MR. BALLO: This is Tim, just to give the

22 efficiency advocates perspective on this I think we

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1 generally agree in principal with AHRI that we would

2 like to have some more flexibility built into the

3 system to recognize that some routine violators are

4 worse than others.

5 1 don't think we necessarily agree that

6 DOE's authority encompasses the fines for the sales

7 of products that reach the full extent of the 430.32(c)

8 definition of central AC. The other thing I just

9 wanted to flag is I don't know we are united on this

10 because I think David Hungerford expressed some

11 concerns about this approach when we were caucusing

12 earlier so I don't know if David wants to speak up

13 about this now or just see where it goes and we can

14 see next meeting.

15 MR. EISNER: David, did you hear Tim's

16 question essentially?

17 MR. HUNGERFORD: Can you repeat it please?

18 MR. BALLO: David, I was just flagging for

19 the group that you had expressed some concerns

20 earlier today about the possibility of changing the

21 scope of the products for which a manufacturer could Z

22 be penalized from selling to a routine violator to

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something less than everything that is encompassed }

2 within the term central air conditioner in the term

3 in the CFR.

4 Now I didn't know if you, having heard

5 AHRI's proposal, if you still had concerns about

6 restricting the scope of what DOE would be penalizing

7 in at least some circumstances.

8 MR. HUNGERFORD: I think the current

9 language that I am seeing on the screen looks okay.

10 I mean the punishment is for the action not the

11 product itself and the action is violating a standard

12 and so the punishment should be to the organization

13 and it should -- the violation should be identified

14 as such for potential punishment. I'm inclined to

15 say that the action has a big consequence and that's

16 where I prefer to land in order to prevent the

17 violator to make it serious enough to make it

18 everyone, including the good actors -- including the

19 bad actors rather -- make sure that they don't

20 violate it but I guess I'm willing to sit back on

21 that a little bit and say because we are talking

22 about central air conditioner standards that we can

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I keep it there and not include heat pumps and water

2 heaters or whatever.

3 MR. RAWALD: Right, and it would only be

4 heat pumps the thing that we are talking about and if

5 we are carving out the heat pumps then I think the

6 space constrained was the other option there 430.32(c)

7 so Tim, what's that?

8 PARTICIPANT: High velocity.

9 MR. RAWALD: High velocity.

10 MS. MEYERS: And rooftop units.

11 MR. RAWALD: Okay so --

12 MR. RAWALD: Okay so Tim what I want to

13 hear from the advocates perspective is do you think

14 it would be enough of a stick if it were just option

15 A as I described. You can't sell them anything that

16 would be a non-compliant unit in the region or do you

17 want it to be all space constrained or not all,

18 excuse me, single packaged and split systems?

19 MR. BALLO: My view is in some

20 circumstances it may be the case that prohibiting

21 only the sale of 13 SEER units is an adequate penalty

22 for the degree of evil that has been exhibited by the

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1 routine violator and in some circumstances there may

2 be some you know, nasty conspiracy schemes out there

3 that in my wanton disregard for the regulations that

4 make it equitable for that entity not to receive any

5 product, whether it's a heat pump, space constrained,

6 small duct, high velocity, whatever it is encompassed

7 with a central air conditioner.

8 I'd want DOE to have that flexibility to

9 go from the least painful to you know -- we don't use

10 the term nuclear anymore but the most severe

11 consequences.

12 MR. RAWALD: So Tim would you be

13 describing three different options?

1

4 MR. BALLO: I don't necessarily view this

15 as you get one then you get to the other then you get

16 to the third, it's I think the punishment needs to

17 fit the crime and --

18 MR. RAWALD: Right but do you only have

19 three different levels of responses? You can't sell

20 them below 14, you can't sell them splits and single

21 package or you can't sell them anything that would be

22 a central air conditioner under 430.32(c)?

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1 MR. BALLO: I would support all three.

2 MR. RAWALD: Okay.

3 MR. PORTER: Steve Porter. You are going

4 to check for the legality of this, right? They have

5 and do you feel that -- Doug have you checked out I

6 mean you can literally if they don't the violation --

7 the product that is in violation or doesn't meet code

8 to be the only product you cut off you think that

9 legally you can stop selling them every HVAC piece of

10 equipment?

11 MR. RAWALD: So let's -- what we have

12 discussed and this is so it is understood. So the

13 context is what does the term product mean in as far

14 as what can a manufacturer pay civil penalties for

15 selling to somebody who is a routine violator and

16 looking at that question the term product as used in

17 the statute we have determined to be -- the way we

1 8 view the term product across the board in all of our

19 -- consistent with how we do it to be the product as

20 defined in the statute the CFR which includes all the

21 product classes of a central air conditioner and heat

22 pump as defined in 430.32(c) which are 7 product

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1 classes.

2 So it goes beyond just the two product

3 classes we are discussing here, which are split system

4 central air conditioners and single package central

5 air conditioners, so we do feel comfortable with that

6 legal interpretation. Now as I have described, I can

7 go back to the Department and push them to try and

8 narrow the discretion which we would actually enforce

9 the penalties for folks who are selling products that

10 we otherwise would deem to be part of that category

11 to just the narrow categories as Amy has described

1 2 them or the most narrow category and so I will try to

13 do that based upon the feedback of this group.

14 MR. BALLO: To me, it doesn't seem that

15 different from you know, your normal civil penalty

16 authority is $200.00 you don't charge every violator

17 $200.00. You might do $100.00 for some you might do

18 $50.00 for others.

19 MR. RAWALD: Right, no I do get that so

20 the difference here is not in what civil penalties we

21 are going to charge the manufacturer because I think

22 there will be difference cases where we charge the

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I manufacturer different amounts based on a lot of

2 factual scenarios. The question is making sure the

3 manufacturer is adequately put on notice as to what

4 kind of person they are dealing with so they would

5 know in a situation as Amy described what products

6 they could sell to the person without fear of having

7 DOE assess any civil penalties against them.

8 MS. MEYERS: This is Karen with Rheem and

9 to pull my opinion is that to pull products into the

10 scope of the enforcement of air conditioning products

tl subject to regional standards that are not part of

12 that scope doesn't make any sense to me. The

13 manufacturers have given a lot during this

14 negotiation. We have got the 14 SEER definition --

15 that makes it almost impossible. We are putting a

16 label on the unit and now to penalize us because

17 somebody was a routine violator and we can't sell

18 them products that meet a national standard and it's

19 part of this enforcement of regional standards, I'm

20 sorry that is way beyond what was my understanding of

21 the intent of this negotiated rule-making.

22 We are now talking about heat pumps and

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1 split and packaged heat pumps and gas electric units

2 and small duct high velocity units, you are going to

penalize the sale of those units and they are not

4 even included, they don't even have a regional

5 standard applicable to them. That is you know, that

6 is just insane, that is absolutely -- what?

MR. MCCRUDDEN: It's ridiculous.

8 MS. MEYERS: It's ridiculous, it is, it is

9 ridiculous because it should not even be included in

10 the scope of these discussions, they are beyond what

11 we are trying to enforce and you know that I think if

12 we had understood that from day 1, you know, to me if

13 that is the way that it is going to be then

14 everything is going to be back on the table.

15 MR. GIBBONS: And this is John from

16 Carrier, we agree with Karen.

17 MR. FERNSTROM: So this is Gary. You

18 know we talked this morning about the structure of

19 penalties as it relates to encouraging compliant

20 behavior and the penalties that we are talking about

21 here are for bad behavior are not against the

22 equipment, they are against the entity that exercised

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I the bad behavior.

2 So we can't charge $200.00 because we

3 don't want this to be a prohibited act. It sounds

4 like Monopoly to me you can pass Go you don't have to

5 pay $200.00 and we don't want a penalty so severe as

6 to put this business out of business either. You

7 know what are we left with? It's going to be hard

8 to find these violators in the first place because

9 it's kind of all based on reports from the field of

10 violation which I don't have a lot of confidence in.

11 When we find them we've got to show that

12 they are routine violators and they were knowing

13 violators and then there's a whole bunch of

14 limitations on what can be done. I don't agree with

15 your interpretation of this severe penalty is

16 penalizing the equipment or energy efficiency at all.

17 I see it as a penalty against the entity that has

18 been a routine and knowing violator.

1 9 MS. MEYERS: So Gary, this is Karen. To

20 respond to that it does penalize me because no I have

21 lost sales on products that are not part of this

22 enforcement. So not only me, but every manufacturer

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1 in the room can no longer sell to that entity that

2 might have put in 3 13 SEER units incorrectly. We

3 can't sell them any residential HVAC units.

4 MR. FERNSTROM: Okay, Karen.

5 MS. MEYERS: So that hurts me,

6 particularly if it happens to be a distributor that

7 is found to be routine or a really large

8 dealer/contractor.

9 MR. FERNSTROM: Okay Karen, so I don't

10 disagree that the manufacturer ought not to be

11 penalized for the bad behavior of distributors. I

12 agree with you on that point but my presumption is if

13 you lose this bad behaving distributor, you just as

14 well be rid of them and find yourself another

15 distributor so in the long-run your sales aren't

16 going to be damaged, they might in fact be improved

17 by somebody that's behaving better.

18 In the short-run, yeah I agree with you,

19 your sales will be affected but that's not an entity

20 that you ought to want to be doing business with

21 anyway, regardless of what the products are.

22 MR. GIBBONS: Gary this is John, these

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1 distributors, I'm trying to be polite here, they just

2 don't grow on trees. They are not prevalent as much

3 as people may think you can say well it might lend

4 itself for an opportunity for somebody else but they

5 are pretty much all contractually obligated to buy

6 from an individual manufacturer so it kind of limits

7 our ability to continue to sell in there if we have

8 to shut somebody down substantially in some cases.

9 So it's just a very, very punitive act.

10 MR. FERNSTROM: Okay, John so I understand

11 that. You know you have contractual arrangements

12 with distributors in certain areas and if you lose a

13 distributor you are not just going to go to another

14 distributor because they have got a contractual 4'

15 arrangement with somebody else. But you know, I

16 would like to suggest that if Carrier lost their

17 distributor in the San Francisco Bay area, probably

18 someone else would step in to fill the gap.

19 MR. RAWALD: So the concern is, let's just

20 look at this from a very basic level. The option

21 that's been offered, the most basic easy option is

22 you can't sell the person who is only a routine

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1 violator products by which their installation would

2 be a violation. Well if I'm a contractor operating

3 in California and I'm only supposed to be installing

4 things that are compliant and I manage to install

5 stuff that is non-compliant and now I'm told all I'm

6 going to get is compliant product, what really have I

7 risked? I risked nothing.

8 And the punishment is I get to keep doing

9 what I am supposed to be doing in the first place so

10 I stuck my neck out, I profited and now I'm told by

11 DOE all you can buy in the future is compliant

12 product. How is that a sanction at all? There is no

13 sanction there and there's no incentive to remediate

14 because why would I fix the bad ones because I'm

15 still going to be able to get good ones and sell them

16 to my customers.

17 So you have got to look at it from that

18 point of view. What is the actual penalty at all if

19 that's the solution?

20 MR. SHEPHERD: Doug, there's no limitation

21 on DOE not to say there's something more. Yeah I

22 mean we are not saying DOE is prohibited and only can

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offer 13 that's just an option you have so I mean and

2 yes I think that there are -- there is sort of the

3 issue of the gradation and then there's the question

4 of whether that the top ultimate solution has the

5 non-regional standard product in it.

6 But in terms of just an option, if you

7 look at that person and you think they are like yeah

8 whatever I'm not troubled by your enforcement action

9 then you have some leverage there still with the

10 tiered or a judgmental option. Nothing is being

11 taken away.

12 MR. BALLO: This is Tim and I think where

13 I vision the prohibition on 13's being effective

14 would be for that distributor or contractor, who

15 operates in the border region essentially take away

16 half his business.

17 MR. RAWALD: I'm really curious to hear

18 from Chuck and Charlie.

1 9 MR. MCCRUDDEN: This is Charlie. And Tim

20 said one thing I would say and again what you said

21 before you've got to find a violation to get to a

22 routine violation so the contractor you described

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1 there has committed a violation and you know either

2 takes the violator status by not remediating and if

3 it's the lone one well I guess that's one situation.

4 But again we go back to the point where

5 they are going to rise to, and this is for the

6 contractors, they are going to rise to that routine

7 violator situation right away. Then they have got

8 the other off-ramps that they have. They could

9 remediate to give them something off that routine

10 violator list and then there is all that I -- I did a

11 little flow chart last night and there's all the

12 permutation with the 3 day and what they can sell.

13 Their other option is to not get

14 themselves off the routine violator list and now

15 nobody can sell to them and that is the ultimate

16 solution case that I want to see, you know. So again

17 T keep stressing, I still think there are

18 intermediate sort of penalties that, you know, on

19 remediation and potentially on not being able to be

20 sold to as being deemed a routine violator.

21 MR. RAWALD: So it sounds to me like you

22 would not support the premise that the product be

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I limited only to non-compliant product because --

2 MR. MCCRUDDEN: No, I'm not foreclosing on

3 that because I get this gradation argument which is

4 you know you have authority to consider or look at

5 financial penalties right now and you do. I mean,

6 I've seen your enforcement actions, some people you

7 charge this, some people you charge that, and it just

$ seems to me that that should be open to you now and

9 it's the ultimate fairness of you know, being not

10 allowed to buy the 7 products just is arbitrary and

11 really ridiculous.

12 MR. RAWALD: Listen you guys, it's not

13 arbitrary. It's consistent to what we have done

14 across the board. I understand why everyone is

15 upset about it, I do and I mentioned it two weeks ago

16 now so everyone could know where we are. I

17 understand that. It's not ridiculous and I'm afraid

18 if we went to court they would say it's a reasonable

19 interpretation under Chevron.

20 So I understand why it's offensive to you

21 in a lot of ways and you can use whatever terms you

22 like, but it is the Department's reasonable

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1 interpretation of legal authority from Congress and

2 the words come from Congress so I'm going to -- but I

3 don't want to dwell on that. What I really want to

4 focus on is what is the actual effect if I tell a

5 manufacturer you are a routine violator or dealer or

6 a contractor, you are a routine violator and so you

7 can't buy any more non-compliant product?

8 What is their incentive to remediate?

9 Why would they remediate? Why would they ever

10 remediate if the fact of the matter is the only

11 outcome is I can no longer buy non-compliant product.

12 MS. SHEPHERD: That's not why the only

13 outcome, why do you keep saying that? You have the

i4 option if you look at that, if you choose to -- if

15 you are like -- you see these violations and you are

16 like none of them are just kind of a mistake or

17 whatever if they missed Charlie's off-ramps whatever,

18 if you don't want to use this you don't have to.

19 You can do it so I don't understand why you keep

20 going back to that argument that like nothing is

21 going to happen.

22 If that's the way you feel and if you

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start this and you find that okay well we'll see by

2 starting with 13 just banning 13 and nobody cares and

3 you have a bunch of violations you can ramp it up or

4 you can start with it ramped up, so that's I guess

5 what is to me I just don't see the Department's issue

6 with having more flexibility or taking nothing off

7 the top end but kind of we have to leave that other

8 piece aside but if --- assuming that we are just

9 talking about this product, just having this

JO flexibility I just don't understand how that takes

11 away from what you have.

12 MS. MEYERS: And here's another

13 perspective and I have to admit I'm mainly looking at

14 it as if an independent or a factory-owned

15 distributor is found to be a violator then that means

16 that that distributor can no longer even buy.

17 Manufacturers can no longer sell him heat pumps, why?

I8 Why can't we sell him heat pumps? It wasn't even

19 you know, they can't be in violation so you know I

20 mean -- I think it's different when you kind of look

21 at it from a much broader level.

22 So if I have a branch in St. Louis and I'm

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1 the one that's going to get the fine so you know, so

2 why can't Rheem or Carrier or Lennox whoever, sell

3 this distributor heat pumps?

4 MR. LATTANZI: I'd like to chime in real

5 quick, okay. Well I wanted to address Doug's comment

6 about a lack of incentive to remediate. I believe

7 if you are a distributor on a border state and you

8 take away 13 SEER for example, you could be taking

9 away a significant portion of a distributor's

10 business.

11 And I think there is an incentive to

12 remediate. Same thing for a contractor -- if we

13 believe the likelihood of violations is on the

14 border-states, which I do to a large degree they are

15 going to want that equipment and taking it away puts

16 them at a significant competitive disadvantage in the

17 marketplace.

18 MR. HURST: I would also add, John Hurst

19 from Lennox, I would also add that we discussed the

20 distribution networks where we have 13 SEER Product

21 going into the South to be redistributed. I would

22 presume that if this happens we would no longer be

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I able to ship that product to that location and we

2 would have to rewire our distribution network if that

3 particular distribution facility shut off.

4 Now to your earlier point on the rogue

5 dealer in California, you do have other things you

6 can do.

7 MR. ROCKY: This is Bryan. Thank you for

8 the opportunity to finally say something. So I

9 think Doug as we are going back on this, the

10 difference on the non-complying verses complying

11 product was really about the border-states and I

12 think it's well defined. Someone who can sell both

13 sells the 13 where they shouldn't, you cut them off

14 that is going to be a significant penalty.

15 If you are talking about someone who is

16 only selling 14 SEER and above we are not saying you

17 know that you can't sell them 13 because you are not

18 going to sell them 13 but maybe then there's a

19 definition point that says you can't sell them 14

20 SEER Product in Texas because they are a violator

21 under these rules and they have been importing

22 product so maybe there's a definition that says all

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I right we can only sell you 16 SEER Product until you

2 remediate and get yourself off the violation

3 whatever.

4 The point I started -- want to make

5 initially was I'm going to come back to the analogy

6 of speeding tickets. It's against the law to speed.

7 Whatever enforcement agency is going to give you

8 that ticket, they have the opportunity to do several

9 different things, up to and including taking away

10 your license and throwing your butt in jail.

11 I just want to make sure that you have

12 that same ability and flexibility to write a warning

13 ticket, give a fine, take a license, or throw

14 somebody in jail. So I think that's the discussion

15 of the graduated penalty or progressive penalty

16 discussion. It doesn't mean you can't do the worst

17 to all but you have the ability to do something in

18 between, I think that's where we are headed with the

19 discussion on prohibiting a sale of certain product

20 categories or materials to a contractor or

21 distributor.

22 MR. RAWALD: Bryan, I think that you may

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I want to go and talk to Tim because I think he was

2 trying to achieve that by adding prohibited acts to

3 the situation.

4 MR. FERNSTROM: Yeah, this is Gary, that's

5 the very thing we were after was a progression.

6 PARTICIPANT: Nice job, Doug.

7 MR. FERNSTROM: More severe consequences

8 but somehow the prohibited act, the $200 penalty is

9 off the table as one of those steps. So that being

10 the case, I'm not inclined to want to lessen my

11 support for the most severe penalty which is putting

12 the distributor out of business. If the offense is

13 so routine and so knowing and so egregious that that

14 penalty is deemed to be merited by DOE.

15 PARTICIPANT: The state of California.

16 MR. HURST: What's that? Go ahead Steve,

17 Bryan, I'm sorry I didn't see it earlier if I stepped

18 on you.

19 PARTICIPANT: So why not have the penalty

20 put him out of business, why not it just be that if

21 that what effectively it does and then you don't

22 have the delineation of product, just put them out of

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1 business.

2 MR. FERNSTROM: If we re-termed it such

3 that that was the consequence, the harm to the

4 manufacturer that Karen was concerned about still

5 occurs. You know, right?

6 MS. MEYERS: I'm going to go back to the

7 point that we should not be the enforcement plan

8 should only apply to products subject to regional

9 standards. I am open to whether it's just 13 or all

10 split systems and packaged AC whatever the efficiency

11 level. I think that's cutting off your nose to

12 spite your face type of action because I don't know

13 why we wouldn't want to sell somebody who routinely

14 violates and has been found to be a routine violator

15 16 SEER equipment, to me that seems to be in

16 everyone's best interest.

17 We are getting a higher efficiency. It's

18 the only thing they can buy so it's the only thing

19 they are going to sell that seems to be part of the

20 goals that we want to achieve, you know, but if that

21 is what it takes to get an agreement, I mean I'll

22 consider it. I don't think it's very smart. And

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1 it seems to be counter-productive to what you know we

2 all do through the DOE rule-making process but I you

3 know, to not be able to sell somebody a 5 ton rooftop

4 that is not subject to regional standards because he

5 installed a 13 SEER split system unit you know,

6 should not be part of the scope of these discussions

7 and that was in our ground rules and that's what we

8 agreed on and that's why distributors came up with

9 the label and why we insisted on the 14 SEER

10 definition that's going to make it very difficult to

11 even have any violations in this rule because it's

12 going to be so tightly controlled.

13 But at this point you know you are telling

14 me that I can't sell my distributor that may buy 5

15 million dollars-worth of equipment from me, anything.

16 I am going to lose 5 million dollars-worth of sales

17 to this distributor because he routinely violated on

18 3 or 4 13 SEER installations. This is going beyond

19 I think what I thought we were going to be getting

20 into in these negotiations.

21 MR. RAWALD: Harvey, real quick if I could

22 point out two things, one is that I don't know enough

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1 about this equipment to say what a five ton rooftop

2 is -- is that a 430.32(c) residential central air

3 conditioner because that's not a term I'm

4 familiar with.

5 So the second, you could always say to

6 your distributor, hey I don't want to cut you off can

7 you fix those three units and replace them with

8 product that is compliant please and they do it and

9 then you can sell to them again, so why is that not

10 the option you guys would want? Wouldn't you want

11 to have your company that you deal with and you love

12 so much and you want to keep selling do the right

13 thing by the customer, replace the product they put

14 in wrong and everyone is happy and energy efficiency

15 is achieved and the world is a better place, why is

16 that a problem?

17 MS. SHEPHERD: Because you can't force

18 them to do it, it's another partner with their own

1 9 independent will and sorry this is Amy Shepherd and

20 this is the fundamental problem I think is that you

21 are talking about good -- you are talking about

22 people who did not do anything culpable, the

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1 manufacturers and then you are saying well you know

2 you just go force them to be good people and then you

3 won't lose your sales and that's I think the

4 fundamental unfairness.

5 I mean yeah you could encourage them but

6 if they are not going to do it then because the way

7 the rule would be structured that's it.

8 MR. RAWALD: Listen guys we can't have it

9 all ways. Congress put the prohibited act on the

10 manufacturers. I heard from Steve Porter before

11 earlier in these meetings that he wants the

12 manufacturers to control compliance, now I hear the

13 manufacturers say through Aniruddh Roy we don't want

14 to be responsible for insuring compliance. Hold on

15 a second, Amy I want to finish this point because to

16 me and my mind is blown right now.

17 I'm sitting here thinking the way to make

18 sure the folks are doing the right thing is by the

19 manufacturer saying do the right thing or we won't

20 sell to you, how is that bad for the environment?

21 For the energy efficiency that we are trying to

22 achieve -- I am confused by that notion.

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1 S. SHEPHERD: Because you are not talking

2 about the equipment that violates the standard. You

3 are talking about one equipment that is highly

4 efficient so it has nothing to do with any violation

5 they had. If they were selling that highly

6 efficient equipment they wouldn't have had a

7 violation so you are not talking about the problem

8 equipment and secondly you are talking about

9 something that is subject to a national scope.

10 And manufacturers do have liability if

11 they know that they are violating and they sell and

12 they have their penalties and they will be cut off

13 from that equipment. But what I guess also I don't

14 understand is the whole purpose of these rules, the

15 whole purpose of higher standards is to get higher

16 efficiency equipment out in the market and have

17 people install it and we are creating an enforcement

18 rule that does the opposite of that and is hoping

19 that maybe if we have huge bad examples, then

20 everyone will stop selling the 13 but just the way it

21 is drafted now, there's no scope for any adjustment.

22 MR. SACHS: Let me jump in. Hearing the

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1 passion, this is Harvey -- on all parties and I of

2 course never showed passion about anything so I can

3 recognize it. I want to go back to an early point

4 that Karen made and that is I'm not at all sure that

5

there is round the table a very full understanding of

6 product in the sense the DOE feels that it's encoded

7 as opposed to the subset of these regional products.

8 And the reason I want to come back to that

9 sort of heuristically or pedagogically or whatever it

10 is to think about it from a contractor's perspective

11 of substitutability that if I can't sell any split

12 system or packaged air conditioner, what is it I can

13 push on my customer so I'm still making money instead

14 of losing the sale?

15 MR. PORTER: Keep the old unit alive

16 longer.

17 MR. SACHS: Okay. Keep the old unit

18 alive. I certainly am going to have a hard time

19 pushing that customer over to a small diameter high

20 velocity unit. If he's got a duct system in his

21 basement or in his attic, I'm going to have a hard

22 time pushing him over to a package system that wants

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1 to be installed on the roof. It's possible to put

2 in the side yard and look ugly but what I'm trying to

3 get at is if I really only control the regional, what

4 are the potential loopholes that a contractor in this

5 case could still use to make the sale and continue on

6 his merry way.

7 Because I can think about some of the

8 things he couldn't push that customer to but let's

9 really think about it in terms of contractor

10 economics.

11 MR. PORTER: This is Steve Porter. So if

12 I'm a distributor in the North border region or not

13 on a border region and I have 13 SEER Equipment and

14 you cut me off on the 13 SEER Equipment, that's a

15 really huge hit, right? I mean because in that

16 market I can sell that all legally so if you decide

17 because I've sold it illegally a number of times or

18 supported a bad actor for a number of times

19 routinely, I get just cut off on that, that's

20 devastating since that's a lion's share of the

21 market.

22 If I'm in the South and I'm selling 13

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1 SEER Equipment illegally down into the South, I would

2 be cut off on that equipment, and I might not be able

3 to purchase that equipment so I would no longer be

4 able to perform that act and especially if I had sold

5 into the North and I was in a border region I could

6 be impacted greatly so either way you get the result

7 that you want by just cutting them off on the illegal

8 product.

9 MR. RAWALD: Well in the second scenario

1 0 what is the incentive of the Southern contractor to

11 remediate the bad installs?

12 MR. PORTER: What is that for the

13 contractor remediate if he is on the list right?

14 MR. RAWALD: If he's down South?

15 MR. PORTER: Right.

16 MR. RAWALD: And he's installed product

17 non-compliant and he no longer can --

18 MR. PORTER: And he's on the list and so

19 nobody else can sell him right?

20 MR. RAWALD: Assuming this scenario is you

21 can't sell him non-compliant product anymore, what is

22 his incentive to remediate the non-complying

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I installations?

2 MR. PORTER: That he would still be on the

3 list as a bad actor that can mean it's against him in

4 the marketplace by every other contractor.

5 MR. RAWALD: The consequence is he can't

6 get non-complaint product, he can still get compliant

7 product with the region. Why would he care that

S he's on the list?

9 MR. PORTER: And going down Harvey's road

10 which is what do you want him out there doing then?

11 Do you want him to continue to figure out a way

12 around that problem or do you want him to continue to

13 service equipment that is old that should be replaced

14 but he can't access legal high-efficiency product to

15 install and he keeps older units alive longer and the

16 homeowner gets what kind of benefit out of that?

17 MR. RAWALD: Right, you've answered my

18 question with a question but what I have heard from

19 the advocates is the big issue for them is

20 remediation and I agree from the Department's point

21 of view remediation is actually good because it helps

22 with the quads of energy savings which is the goal of

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I the rule and if the stick that I'm wielding against

2 the contractor down South is you no longer will. get

3 the product that you shouldn't have been getting in

4 the first place, what is their incentive to go back

5 and fix the installations that were bad? Is there

6 any incentive at all or are they going to say well

7 that's a wash. I made some money so now I'm going

8 to do the right thing.

9 PARTICIANT: I think that Doug, that

10 incentive if I've sold as a distributor right I'm

11 going to get my 13 SEER cut off as well right?

12 MR. RAWALD: That's not necessarily true,

13 to get to the distributor is harder right, so the 2

14 distributor has to either be shown to actually been

15 knowingly involved with the contractor so they have

16 to be part of this in some way or they have to have

17 been told, hey that person is routinely someone they

18 shouldn't sell to and they keep selling to these

19 people that are routine violators.

20 PARTICIPANT: Doesn't that build up the

21 routine for both the distributor and the manufacturer

22 should it happen again so I think you are missing the

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1 point which I think where Karen's at -- you will

2 figure a way to remediate that issue for those

3 home-owners. I mean we wouldn't wait around because

4 doesn't that just build into your bank of issues?

5 MR. RAWALD: I don't see it as the

6 distributor's issue and I don't see why the

7 distributor would put money on the line for the

8 contractor who they are not going to deal with

9 anymore if that's the option. Why would you go out

10 and fix the contractor's installs if you weren't

11 responsible for them?

12 So my question really is for the down

13 South contractor who the penalty is you can no longer

14 get what you shouldn't have been getting in the first

15 place, what is his incentive to remediate and I'm not

16 hearing your response. Is there incentive for him

17 to remediate?

18 MS. NOLL: This is Elizabeth. I guess I

19 would like to just reiterate a point that Tim made

20 earlier I think that you know it sounds to me like

21 some of the examples that we have discussed here

22 flexibility is important because it actually sounds

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1 like in the border states where you sell both to

2 North and South, being able to acquire 13 is

3 important so you would be more incentivized in that

4 area to remediate to get to be able to sell 13 again

5 but I do think on the other end of it where to John's

6 given point that you know -- we are talking about

7 wanton disregard for the law and somebody that

8 actually putting -- restricting them so severely is

9 the best course that that actually is still -- needs

10 to be a path the Department could pursue.

11 And I think that you know the task that we

12 have all been tasked with is to develop an effective

13 enforcement plan for enforcing central air

14 conditioning package systems and if that means

15 cutting them off from all product is the only way to

16 effectively enforce this rule, then that is how you

17 get at cutting them off from all product from that

18 product class.

19 It's not that it's not subject to regional

20 standard, it's an effective enforcement plan, it is

21 necessary to be able to wield that tool should it

22 ever become required and let's hope that that never

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I is the case. Because that's what I've heard from

2 everybody here in all of our conversation is that

3 will never be the case because we are all good actors

4 and we are all going to do the right thing.

5 MR. WHITE: This is Chuck White. So what

6 do you get when you put lipstick on a pig? You get

7 a pig. There's no real good solution but I would

S suggest considering a contractor has done the wrong

9 thing. He's been found out he's got to do

10 something. I want to remediate because I want to

11 stay in business so could the DOE say your penalty

12 for 30 days, 60 days, 15 minutes, whatever you want

13 you could only buy SEER 14 equipment that solves this

14 I got to go get permission, I'm allowing you to buy

15 the 14 equipment for X amount of time provided you

16 make this remediation and you, you know, get on

17 board, swear an oath, keep doing the right thing,

18 we're good.

19 If you don't remediate then we step up.

20 Now you can't buy split systems and I know there are

21 areas in the country where they don't sell a lot of

22 split systems but I don't think there's many and most

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1 contractors if you take away split systems, that's a

2 crippling portion of their business.

3 And then we still won't go with it, now

4 you cut them off from everything. So I don't know I

5 have some other thoughts but I am not really gelled

6 on them completely. Are there loopholes? Sure,

7 probably but the easiest thing for a contractor to

8 do, there's two scenarios. They come out we have a

9 problem I'm going to fix your unit. I can't buy

10 equipment I can fix your unit for X. Well Mr. or

11 Mrs. Homeowner is going to get on the phone and call

12 the next phone number on the list and get a price

13 from them on a new system compared to what you are

14 doing.

is So I might sell the fix but most likely if

16 I can't buy the equipment, the next guy in the

17 phonebook is going to sell the equipment and maybe I

18 was buying Karen's equipment and the next guy on the

19 phonebook is buying John's, I don't know but it is a

20 possible solution as we are going to do this appeal

21 process, we are going to allow mediation, we can step

22 in this enforcement knowing that you could still say

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I you are a really bad guy, you have been thumbing your

2 nose at this whole process all along its obvious,

3 we're cutting you off right off the bat.

4 I mean I think you still have that

sledgehammer you can put in your pocket and I don't

6 know how you craft the words to that, maybe I have

7 created more trouble for everybody.

MR. RAWALD: No, Chuck, I hear that. I

9 feel like we've already got that because the one-time

10 violator is not a routine violator. The two-time

11 violator is probably not a routine violator. We are

12 talking about someone who is routinely violating, fi

13 that word has a dictionary definition that is going

14 to require often and it is going to require you know,

15 a pattern of conduct.

16 It's not going to be a one or two time

1

7 thing or it's going to be one guy who did a hundred

18 units and that's clearly a routine violator. So the

19 question is to me so if I have a routine violator

20 now, what is his incentive going to be to rernediate

21 that point because he's gone past the point of being

22 a violator. The violator may want to remediate because

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they don't want to be a routine violator, I get that,

but the routine violator if the only thing that they

now I'm focusing in on this least extreme option

because that's the one I have to be able to explain

to the Department who is going to put me to the rack

here over the next week to explain to them why we

would ever want to adopt this and so I'm really

pressing you guys for an answer because you guys are

killing me but it's important because I'm going to be

killed later on. So it's good for me to go through

this twice, I like that, its very good for my karma.

So the point is as I'm sitting here I need

to be able to explain to them what is going to be the

incentive for a routine violator to ever remediate if

the consequences of a routine violation is simply you

can't get non-compliant product.

A non-border state person, a down South

person.

PARTICIPANT: Let me just say something real

quick.

MR. MCCRUDDEN: Doug, this is Charlie with

ACCA. I recognize the gap that you have seen here

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1 and I think that part of it is -- part of it is that

2 the sort of lack of precision or the fact that we

3 don't have a perfect system creates distributors and

4 contractors differently and I think that's where this

5 may land and it sounds like we want to caucus on this

6 so I don't have the answer to your question which was

7 what is the incentive because I have to think about

8 it so.

9 MR. RAWALD: We'll see you all on the

10 23rd.

I1 MR. EISNER: Take 10 minutes.

I

12 (OFF THE RECORD AT 3:49 PM)

13 (ON THE RECORD AT 4:15 PM)

14 MR. HURST: So Doug, John Hurst from

15 Lennox. We came to the conclusion in there that we

16 were all tired. We were all hearing and saying

17 different things and the conversation kind of

18 wandered so I think what we want to do is come back

19 in two weeks, is that when we are coming back --

20 whenever, whenever we are back here.

21 We clearly understand your concern with a

22 down-state contractor. We collectively believe we

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1 can resolve that issue. We don't want to give

2 specific examples right now. We don't want you to

3 go back and ask and take your beating because we

4 think we can resolve this issue but we want to put it

5 on paper and come back with a solution. Amy, would you

6 add anything to that?

7 MS. SHEPHERD: The only thing that I would

S add is that you know we will definitely try and do

9 that so you would have some time before the meeting,

10 we are not going to try and do it before. And again

11 what we are driving at which I think we did get lost

12 because we are tired is that you know, I think you

13 can put these in kind of two different categories.

14 One should the Department have discretion

15 or is it a kind of on and off thing and two, the

16 inclusion of the other products which I think that we

17 can -- I think we need to sit down as John said and

18 map it out in clarity. But those are kind of our

19 driving concerns.

20 MR. SACHS: Amy and John, this is Harvey.

21 You are all able to work up this language I would

22 turn into a pumpkin on the 23rd and would love to

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1 have a chance to feed it back to whoever could be the

2 other delegate for ACEEE.

3 MR. HURST: Amy, should we say what we are

4 not saying? Well I mean the example, if we want to

5 use the example of what we are not advocating, what

6 we thought we were advocating.

7 MS. NOLL: I think everyone wants to go

8 home, John. I actually think this has helped because

9 you are putting us in a very awkward position because

10 I think that on the one hand I am incredibly open to

11 the idea of the Department having flexibility and

12 discretion. As to the severity of the punishment, I

13 don't think that we are as open to removing

14 discretion from the Department's tool box.

15 MR. HURST: And that's not what we are

16 saying.

17 MS. SHEPHERD: No, no, no, no, no. I

18 mean well --

19 MS. NOLL: The definition of product, so I

20 think there are two issues. We will need to decide

21 the definition of product right, so that's something

22 that we will need to decide. But once, let's assume

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1 -- assuming whatever that definition may be there's

2 also I think a very separate question of whether the

3 Department, okay we have the product, do they have

4 discretion or is it all that product, or 13 SEER or

5 something less, does that make sense?

6 MS. SHEPHERD: I mean so I think there are

7 two there's the question of whether it's the ultimate

8 solution or nothing and I think there's a related but

9 I think you can look at it somewhat separately as

10 like okay so what's the ultimate solution going to

11 encompass and so I think that that's what we are

12 trying to -- but we are not -- I don't think that

13 they are inextricably linked I think that there is

14 still room within -- I think we view it as even with

15 the definition of product that we have in the ground

16 rules that if that is all given the nature of the

17 sales in the South, Southwest that that still would

18 be effective, so.

19 MS. MEYERS: And the solution that we are

20 looking for is the solution that we have all agreed

21 that we want and that is for problem installations to

22 be remediated, that's what we want. That's what we

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want. The ultimate solution is not to put people out

2 of jobs, it's to get those bad installations out and

3 I think we can get there but we --- there's a lot.

4 MR. RAWALD: We'll let you guys have the

5 time to work, that's fine.

6 Then we will wait to hear more, is there

7 anything else that you want to engage in then today

or are we done with today because everyone seems

9 mentally tapped out?

10 MR. HURST: How about those Cowboys!

11 MR. SACHS: Chairman I move --

12 MS. NOLL: Before we wrap up here though I

13 guess the one -- can we have some -- can somebody be

14 tasked with developing some stuff around the state

15 enforcements so that the people have an opportunity

16 to understand what the issue is and reflect on it?

17 Because I, quite honestly, we haven't discussed this

18 and I'm not as familiar and it might take up an

19 entire day's worth of conversation.

20 And we have people in our offices that

21 work on state stuff.

22 MS. SHEPHERD: Sure I can submit something

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1 now if that would be helpful. So the issue that we

2 have is in the section that added regional standards,

3 there's two specific provisions that talk about

4

incorporation by states of regional standards and

5 then it says the states can enforce them in federal

6 court.

7 And so the issue that we have is when that

8 says regional standards, what is it that states can

9 incorporate? And our view would be that whatever we

10 come out of this meeting with is what states can

11 incorporation. We are seeking some clarity about

12 that because if for example a state were to say no

13 the only thing that standard refers to is just the

14 efficiency level but we could have different

15 definitions of product, we could have different

16 definitions of violation, we can have different, all

17 these things that are not in the -- in the

18 enforcement plan for the federal standards then I

19 think that's what we want to have a discussion around

20 because we don't think that that's what this language

21 meant and all of this language is within the Section

22 of EPCA that deals with the standard itself, so

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that's the issue.

2 And I'm happy to have some other

3 conversations with -- yeah sure.

4 MR. RAWALD: Yeah and the citation that

5 Amy is referring to is 42 USC 6295(o)(6)(G)(ii) and then

6 it would be so 42 USC 6295(o) (6) (G) (ii) and then (4) (V)

7 PARTICIPANT: Incorporation by states and

(

S localities and state enforcement.

9 MR. RAWALD: Right and those provisions

10 read the following: A state or locality may

11 incorporate any federal or regional standard in the

12 state or local building codes or state appliance

13 standards and then five is state enforcement. A

14 state agency may seek enforcement of a federal

15 regional standard in a federal court of competent

16 jurisdiction, which I think is the more concerning one

17 to Amy at this point.

18 MR. WINNINGHAM: Doug, this is Dave

19 Winningham, one final request, can we get the updated

20 slide pack emailed out?

21 MR. SACHS: Amy, this is Harvey and I guess

22 what I hope you all would do on federal standards is

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1

respond. My sense is that we have some unique

2 situations which starts with the CA and has 10% of

3 the population but I am not aware of much state

4 enforcement activity that would potentially diverge

5 other than California.

6 So my sense has been and sort of a null

7 hypothesis that so far what we've done in state

8 enforcement has been working and I really want to

9 understand why or if it should change.

10 MR. RAWALD: I don't think she's aware of

how we would change it. She's aware that the states

12 have the ability to do their own thing by the statute

13 and so we want to make sure the states, if they are

14 going to do something, they are bound by what we have

15 decided here or else they can go and create their own

16 body of law absent our whole effort here for the last

17 14 days, that's Amy's concern.

f8 MR. FERNSTROM: Well and this is Gary and

19 my concern is that what we've done here is going to

20 wind up being a giant abyss and barring the states

21 from finding a more effective method might not be

22 good.

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ability 9:4 13:4

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absence 66:1

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absolutely 25:19

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abyss 182:20

AC 138:8 159:10

ACCA 26:2 79:5

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accept 28:1 47:12

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acceptable 37:22

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accepted 40:19

access 167:14

accomplish 137:4

accord 9:4

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allocation 92:21

allow 30:7 37:22

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allowing 40:3

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America 2:11

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amorphous 116:6

amount 77:7

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anticipated 42:18

anybody 29:15,16

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appliance 13:16,21

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appliances 69:20,22

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applicable 47:21

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apply 33:7 61:14

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appreciate 35:4

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apprise 53:21

apprised 40:17

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area 8:1 14:13

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argument 32:11

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arrangements

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arsenal 12:22

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assess 72:4 144:7

assessment 98:3

associated 11:11

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assurance 104:1

assure 20:7

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atmospheric 46:22

attachment 33:22

attempted 118:15

attend 107:7,10

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attorneys 72:14

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Salto 2:13 3:20

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basic 97:15 126:22

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basically 31:4 35:17

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basis 42:14,20

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bat 173:3

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bearing 20:18

beating 176:3

beginning 26:18

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begins 31:5

behaving 147:13,17

behavior 8:9,19

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believes 125:12

belongs 33:5

benefit 7:21 167:16

benefits 46:8

best 50:20 82:2

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better 11:12,16

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bevy 134:6

beyond 20:1 46:1

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binary 17:4 130:19

birthday 108:19

bit 12:13 27:1 40:15

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blue 75:2

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body 182:16

booking 110:17

border 150:15

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bound 182:14

boundaries 95:16

bowl 46:20

box 177:14

brain 16:18

branch 154:22

break 28:20 29:7

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brief 80:4

briefing 24:3

briefly 53:20

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bring 8:7 21:15

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